Toll Brothers (TOL) 21 Aug 192019 Q3 Earnings call transcript

Company Profile

Participants

Douglas Yearley	Chairman & CEO
Martin Connor	CFO
Gregg Ziegler	SVP & Treasurer
Truman Patterson	Wells Fargo
Stephen Kim	Evercore ISI
John Lovallo	Bank of America Merrill Lynch
Michael Rehaut	JPMorgan Securities
Ivy Zelman	Zelman & Associates
Mike Dahl	RBC Capital Markets
Matthew Bouley	Barclays
Jack Micenko	SIG
Jade Rahmani	KBW
Megan McGrath	Buckingham Research
Alex Barron	Housing Research Center
Kenneth Zener	KeyBanc Capital Markets

Call transcript

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Operator

Good morning, everyone and welcome to the Toll Brothers Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] At this time, I'd like to turn the conference call over to Douglas Yearley, Chairman and CEO. Sir, please go ahead.

Douglas Yearley

Thank you, Jamie. for you thank and joining us. Welcome Officer today Connor, Chief me Finance Investor Chief are and Senior Senior Rick Marty COO; and Marketing Sterling, Kira and President Relations; Gregg Financial Treasurer. of Ziegler, VP Hartman, VP With and Officer; Cooper, Fred

financial in I call begin, information caution many on the markets significantly ask questions this many future the economy, you forward-looking beyond world on I and control based about release I to results. on read that earnings and Before our housing statement assumptions factors and on events, listening are to investorrelations@tollbrothers.com. e-mail on the other you forward-looking our that our affect website. Web statements could can Those

results, billion, of diluted of including home strong produced per and We sales a $XXX.X million adjusted quarter $X.X gross net margin, income $X. share earnings fiscal year of third XX.X% revenue XXXX

in our to X% slightly quarter. Our down and versus our in third able were dollars we second In X% units. decrease new quarter, contracts were contracts on quarter incentives third

addition, a in we fourth quarter, our modestly good increased half demand to prices In our have communities. at start over off with of

to pace sales strategically continue and price. will We balance

highest in starts housing reported ago, one positive market. NAHB, and exceeded the rose existing in consensus permits building just level the as to the six overall at over Census view past row. sales hour We these the July According signs to of health months the single-family July month numbers for the out The August expectations. were third home And of single came rebounded of and a year. builder's in sentiment the housing the Bureau family highest level

home beyond move $X our $XXX,XXX in adult and buyers to from price and our of over the the serve continue to active product widest with industry, ranging lines variety We homes traditional broaden buyers. We million. up points

price a about one today offer with homes $XXX,XXX. communities fact, under In our base third of

have we Lake This Oregon geographically. and expanded Portland, also entered year markets. City Salt the have We Atlanta,

are on We expanding northward also coast into Tampa. Florida's west

new these across demand healthy markets. seen have We

serving We of Brothers urban units of we and Toll are suburban pipeline country. stages in a approval currently the various and development Though XX,XXX renters. across Living, also Apartment have

venture build our ahead. to are leader addition, segment. new new With growth rent single-family limited record this we continued about improving, joint inventory rates, markets, excited wage to evolving we and growing in be are and in many is the demographics low a low interest opportunities and resale unemployment, In optimistic market

me over let Now, it turn to Marty.

Martin Connor

Doug. Thanks,

on during caveats a quarter, normal to of Before back of subject statements. note release. I I the reconciliation this found be that, non-GAAP that our also I is comparable earnings our note want measures measures to address specifics to their the the to in guidance of GAAP referenced today's can our want discussion forward-looking

midpoint increased This And guidance revenue. our of fiscal and guidance. our price year margin quarter adjusted have XXXX we reiterating sales we gross for average home full the deliveries, are

shift at exact of construction between in longer our quarters. our timeline to the our particularly the can points, higher order date model, With backlog delivery build homes price from

expected, by During gross the deliveries. and primarily better favorable adjusted in third quarter, than came margin mix of certain timing driven

gross we full our these year expect our second we XX% XXXX Some home that fiscal to margin Irrespective earnings provided reverse we our quarter. of our fourth quarter reiterating the in benefits experienced timing on guidance are call. of of differences, third that in adjusted we quarter sales timing

previous This than home sale SG&A Turning to is of guidance. a was end SG&A; our the high coming to XX.X%. due third revenue sales as revenue expected of better in percentage our quarter home at

the to approximately XX.X% margin We full continue for to year. be SG&A expect

our last year, infrastructure is in and year lower are investment in fiscal than be XXXX communities from. in of and revenue increases, margin due we Our to systems expected the operating this year information an than increase SG&A continued to number higher compensation

from land income, fiscal our We up other entities previous unconsolidated expect $XXX million, and XXXX million million. sales guidance gross be year of $X now from income a profit $XXX to

next year be approximately our cash on quarter, bank available have million debt $X.X sheet only leverage liquidity more over $XXX rate to XX.X%. XX low we tax the third ample At than our and dated maintaining of is of had facilities. maturing fiscal and And We we Our expected billion focused credit long comprised maturities. XXXX the debt liquidity, of with months. balance remain conservative end of

allocation our flexibility shareholders returning and capital strategy. leverage our repurchases execute through This to the capital on liquidity Our land maintaining includes and leverage. share conservative give strategy balanced efficient acquisitions, and us to capital dividends

third quarter, and repurchased reduced beginning quarter. third an our $XXX since of X% by During have additional quarter of This our we the shares nearly million X.X stock, fourth million our of the million. since count our start a we repurchased our or share $X

quarter Our year was $XX.XX, $XX.XX third $XX.XX last XX% at and ago. fiscal from end book X% share per XXXX's year quarter from value up up one

was the backlog $X.XX quarter Our third at billion. end

our at end. has from third ago XXX the that grown year community quarter pleased are We a count to XXX

modest count in in fourth our community growth quarter well. expect We as

turn let me Doug. Now, to back it

Douglas Yearley

Thank up Marty. let's questions. Jamie, open you, for it

Operator

our your begin ahead comes now Fargo. Wells with session. today question-and-answer Truman Ladies question. and [Operator from question from And gentlemen, first we'll Patterson go Please the Instructions]

Truman Patterson

little potentially wanted Thanks market to in return buyer demand for But even I into kind it. domestic you guys the morning. at might start given just you or organic we of the seen are seeing intensifying difficult all? that a out. my California, trade And international dig California. Have at hoping at war. question. slowdown, taking I looking in bit retraced return to realize all it parse be off further can buyer The Good

Douglas Yearley

we change the Truman, in have a California. not in foreign seen buyer

Obviously, quarters. company, many pretty entire California, West. much have primarily over the the been concentrated it's XX% we in buyers. about For same And out foreign that's last trending the

Truman Patterson

have bit margin just you through for how we walk about gross And guidance quarter that Thinking lumber have your through, mentioned at orders to on of should modestly the forward sequentially. the shift. I moving front, going started levels full flowing looking the very falls you Could lowered implies this incentive mix it product us of I'm When come think the that? in the you. thank with think parts? year, Okay, drivers costs should some but a fourth

can you of hoping the walk through parts some Just us there? moving

Douglas Yearley

just Atlanta, markets not New we have came fourth in acquisition Vegas, markets Sure. mentioned had differences deliveries The in new quite certain Jersey, of there those we quarter, timing on better the timing good as our in expected. the than our were to Massachusetts, concentrated remarks on prepared Colorado, extent expect to we like based quarter. And a

Operator

Our Please Kim with your go comes question. from Stephen next question from Evercore ISI. ahead

Stephen Kim

I thus going gave a Yes, thanks forward. guys. I a ask you the that would and info we to wanted bit -- can spend appreciate lot, development about land little anticipate you far. land spend

in Has of that out begun -- commentary, in price of process First, appropriate it we the that kind you think will next than points have towards or so? and land will general land if a year overall you over so, has that terms your would that and units dollars it's historically spend do already? your that is at play How view be skewing be seen? more what lower your parcels purchases

Martin Connor

Sure, Stephen.

million we spent the third $XXX So, in quarter. land on

We quarter. closing. are timing of fourth more when That's just expect deals the to spend the quite a in bit

historically continue land than be a all Therefore, price for probably there there our then, be for a for opportunistic yes, at lower land purchase purchase will look We price in communities more for bit land and the of higher to and markets. very and be will mid-priced Toll point.

contracts those price had base third of $XXX,XXX. XX% a The contracts, base home of under the quarter price,

we point. Boise, Denver of Right more northern more be priced throughout committed to and Idaho, Philadelphia now, like are Houston and coming in of Sharp of lower communities acquisition Atlanta. price all the America's in So, we Virginia continue places of and suburbs, but we Dallas and more luxury with are and to more spread and more soon in Phoenix our have diversity product, builder, building Florida,

a Some of that is at price. lower

point. ago, the if there spend the answer more that lower XX of would yes, we far compare price it but the time, opportunities more be fully there'll it But lower at you our yes, of spectrum, even then land basis, I'd five today be, price to So say, look still is years you percentage across in we're a have or back at communities, if on on great higher price.

Stephen Kim

Thanks for a that's lot helpful. for Doug, that,

say, rates particularly was begun the opportunity or really about curious their general I not ago? us been, homes, to Can the $XXX,XXX. under your prices. that into what the million, development? add And of as And customer falling stuff whether saw recently have base couple upgrades much more a price you and may clarifying that base the talk about options second, particularly to you when with gross you what homes. purchase when contracts hadn't XX% those your margin have as were the does a that is about sense then getting may question Just beyond let's you stage, a of really on as whether selling -- add a talked year land questions the of outside the and versus of bolster then The give they of land spend, could even thought having framing you was that. $XXX originally how

rates a have as the sense for the ability to of So just sort getting up down? sell come

Douglas Yearley

Sure.

was of your lands. question. the roads $XXX is top all of in in of million $XXX that On in. course, we the some part That So that, QX, first put must locations million

focused for land the more our of are very and improve efficient lots. talked on more, to move million we've as was being capital the we XX% ROE. about in However, acquisition $XXX And

back respect the ready final one of That that. we that land selling now. that we when think right to are get we With goes land under improved ago, versus go, can. will that on $XXX,XXX don't so, ago. is possibly And to And the to part one that as much year and I the to we'll of then with time numbers as do over have communities can buy We year versus have us question... or you today your amount to

Stephen Kim

add Was rates [indiscernible] down. can buyers went

Douglas Yearley

Our know, On their buyers, you as mortgage. max you. thank Stephen, generally Yes, out don't incentives --

into it's have for when an the rates they more affordability put maximize they go where to So upgrade. the down not mortgage when issue capacity them,

market rate market high of market haven't much the we down max bad health uptick not and put that lot in an cash finishes, purchased low financial tend are rate the mortgage. studio and sort good versus the buyer and of because interest a interest fact and that of seen out they versus to in the design So really more our do of options

call, management the team improving, now of have that new new. able we're major fresh one on you advantages us all Our the a home hope revamped here, well, of as to taken say, They're margins design studios. on have of many studios, we those are design and differentiator that to Toll the all now of little add really being selections the have offer. studios thrilled doing or design up and a XX we will built all build I are And runs by with really We're truly that. over the and that your custom finishes a visit

Martin Connor

The spend add, we amount model [ph] I Steven, you in the improvements way only know because thing this approximately third $XXX and on quarter I'd million. was starts the is that,

spent the $XXX acquisitions quarter. the around So million with third we combined during

Stephen Kim

land. the Of

Martin Connor

Yes.

Stephen Kim

exactly Thanks a that's what guys. lot, Great, I needed.

Martin Connor

You're very welcome.

Operator

John of your question. Merrill from Lynch. comes question next ahead Please with from Bank go America Our Lovallo

John Lovallo

taking Thank my questions. you for

encouraging. traffic and pretty The first one; May have deposits quarter Doug, that been last mentioned you'd

So I'm you're you July August? And could just in then how solid quantify possibly from of if about the and May, things order that wondering an speaking for standpoint? kind trended start June

Douglas Yearley

Sure.

difficult there June contracts openings would August. were start. I 'XX I have X%. some the might 'XX have of stick contracts June were demand August, comment June events much sales we to were of bit had June, May some with run up a my in off too to that forward. think of that country were up modest So, pulled over during the May little into not I XX% price did of to And than 'XX, our contracts that comments our July a a a of mention few we're were there May, in XX% demand and X%, prepared quite in communities read going With is around respect start of June increases in down comp. good the

And beginning the of the quarter. fourth so, we feel about good

John Lovallo

seeing that on folks market. question of helpful. that's challenging Okay, get off mean, But there remains just maybe any to think clearly early a then in And Truman's you market dovetailing even stabilization California; of are a on what are signs trying signs I or grip lot a is, inflection? I of potentially

Douglas Yearley

that the quarter quarter Cal, the in is and fall easier is Southern because from recognize we XX%, year. fourth California winter actually Even only down the Yes, were in or comp comp They down were much slow openings communities down pent where in And last forward had more of 'XX due quarter back to in contracts either had third fully was were contracts third still significant difficult Cal. California stages were early better. we primarily the demand. We that California modestly. up in to Northern a in new working of through significantly when

John Lovallo

you, Thank helpful. That's guys.

Operator

question from ahead go JPMorgan Rehaut comes Michael from with Please Next question. Securities. your

Michael Rehaut

morning, Thanks. Good everyone.

somewhat velocity looking of as flattish looking But in more community increase appreciating sequentially. last that had and count that? year the just would we not your mid, few you the expect into fiscal a maybe fact touch. lot growth that of quarters, guidance to was Would of up of that you potentially more just count be giving a the year and yet. half of and have I to how back the might modest you be lot sequentially, to Obviously, to just look digit -- like question would flattish on you're result contrast it's Would little single First over it's quarter, fourth about and type able high a I -- in try said going for say, think XXXX, community the at to 'XX been, growth? second Or you guess, expect still what your recent of that be overall community count XXXX? count trajectory up bit, count we I

Douglas Yearley

community we growth QX. count do modest So, yes, in expect

We community All next anticipate count XXXX. I'll community we will give tell XXXX. on in guidance call growth you the is, for about count the

Michael Rehaut

in about coming your I stood quarter trends just perhaps Where of to a prices the get slightly I Love communities. where bit increasing pronounced? down quarter appreciate markets over that. little which talked you more more guess, in around, out? have third like, modestly geographically on were, fourth incentives and secondly, might orders little those a half color

Douglas Yearley

Sure.

Virginia, Florida. Those perspective, and the combination of again, the state Denver, would were Pennsylvania strongest a a Florida, Seattle, I the communities increasing which, from incentives markets. So, Idaho, reducing pricing of the Boise, prices state be, of call top and that, Jersey, northern be Phoenix, New Orlando, will

Michael Rehaut

markets? By would contrast, what the softer be

Douglas Yearley

for struggle to with in continue Midwest in of Detroit. east, a a just Miami And north We struggle power pricing bit bit in and the is up Chicago which Jupiter. we continue to us Florida to

Michael Rehaut

so Thanks much.

Operator

question with question. Zelman Please from & Zelman go Associates. next from your comes Ivy ahead Our

Ivy Zelman

Thanks. Good guys. results,

you land capital think continued, accelerate in you those Thank books or on on option, should thoughts second back concerned trajectory. and land in of six improving to land spent. up. growth pointed this one You've level spend a are seven record great roughly And that a just you're have have market's out, at the you be land land your XX.X%. at an just you. Do of at years -- on the a as ROE the your that spend. we're more job that years follow you pulling So of things supply And total owned guys recovery? your done both economic laser focused whether now to recovery, there for and returns or allocating and the upward continue see But Doug,

Douglas Yearley

Sure.

spend. very So on yes, being land in Ivy, focused efficient our capital we're

our leverage dividend program, conservative. the included prepared keeping and strategy as now low Marty regular allocation we've and think in significant -- a capital comments, I buyback has mentioned

always we We are in about. talk as opportunistic land

being optioned we are the focused selective are land to owned buy. more the much land optioned than is on obviously because land We efficient much land, capital and more

I right of are favor we that of and So full And of see more a think, ratio can focused on I answer more you'll in give that's options moving more that, now. owned, optioned.

to ready land I lots on more which that's much finished And why efficient we We're also go. of avoids, ROE finished focused we reducing mentioned, and as six are that year or certainly spent Because that past are that on built the the be capital as long numbers. what it quarter to drive buys, this you owned land called seven ready a was on. buy, not buying and lots that again, are includes, it, third does but controlled

So, we're on it.

Ivy Zelman

Got you for it, thank that.

little pipeline. You which rental housing for to market, or also in of little into the in of shelter the BB us expect part the of have a us job product understand homes about metrics, equation, like to shortages great strong you yourselves of and that you're a BB or please? rental will economics what business and about done terms returns of, economics at the help bit business? any strategically or we But to the willing obviously, Living Toll in it And Living. look share where terms sale, talk of today we bit going that have on comparing Can positioning what terms should a more every in

Douglas Yearley

Sure.

BB in, BB Living the but putting land not started the an of equity, space. existing the joint brand, that attention. Toll because primarily will entitlement between which part contractors brings now development Street and we it, markets we has brings and a the in the brand expand and land They name we're the the teams, in the they teams, have largest in our is that is are the So Wall on company venture is Phoenix which Living, investment Brothers private teams,

community that in communities bus tennis plan in as swing the by a million, where houses are a houses houses we're renters be want taking with be really the same to going plan at the builders. the of picking master the business. $XXX the being for the the and $XXX,XXX, clubhouse, primarily and more master More home, take sale and developers It the live nice may set by townhomes families able the $XXX, built up advantage families in excited at can that homes to is houses so, that corner that the $X or have courts, recognize kids that at and master to the amenities, now pool, of rented And backyard they're sections on and raise the etc. at are focused homes being their their at look

really doing this we're and master where of we great so, way it the reception from like getting plan And part communities we're plan developers. master

are communities where And Some for of those builds. as economic, in Toll Marty? the

Martin Connor

Sure.

absorbed be So equity will all months. our harvested our by times XX back, planned subsequent $XX the this XX approximately associated roughly in multiple venture is It'll months. this our overhead And joint of That at investment deployed the investment a over will in over three be million. venture. be role business hopefully, with

Ivy Zelman

Got love homeowners be How it. Pushback and that, I'd there's going that? a on, their your you renters there people do to Doug, that don't community you comments backlash. have rebut out said, want just in

Douglas Yearley

and Living. else are compromise research, on and take professionally don't short it show like It's sophisticated see embracing are maybe and they The think the would to understand bucks going renters to day And the community there's to their to developing. And need few to that's section opportunity precedent they of managed. so And even You they're to to who probably because it. as happening. become community certainly think master sections to have everything done a are I there developers, homeowners, one sighted I on not out families they BB who it. that enough based be same their history sell are one the big

Martin Connor

their in fall front of they ownership. putting They're These the the do on are December. residents where pride a pride Christmas in living. pumpkins when houses have in They lights up of take

Ivy Zelman

Well, good luck. It's exciting. Thank you.

Douglas Yearley

Thank you, Ivy.

Operator

has question. from Ken Please Mr. go KeyBanc. ahead question with next comes disconnected. Zander Our Zener from And your

from Please Markets. question Capital comes with Mike from Dahl RBC your next question. go Our ahead

Mike Dahl

of it questions. the taking off for provided on you Doug, up wanted dynamics still my of West strong commentary morning. was I follow around some specifically extremely on comp. Thanks pricing contracts, the some of ask the was geographic but and on what to a Good difficult

or and sense across we're a I so, to dig for was driving in broad wanted a based just that bit which really strength that little get specific it segment? markets And really

Douglas Yearley

the and Hi, Boise up the XX% Mike. The in two units West were in primary drivers Denver. of

Mike Dahl

I was of I What's outs an think, on some could us you quarter question some push about of the on update second those in Crossing? And had stand where give And Metro units. just, with you you talked last backlog?

quarter from Metro an may you Crossing next influence and well, of on update if how Just that margins deliveries couple could? as

Douglas Yearley

forward now Metro Crossing moving to according plan. is

were construction on mentioned As Northern the or rains some the call, in the with historic months, last we over last delays. six California eight there

are units will We backlog the in that of and they scheduled continue the Metro -- now closing fourth because the will at quarter Crossing size to begin of into XXXX.

Mike Dahl

Okay. that could -- project? And the backlog you updated for do you provide

Douglas Yearley

We'll you back get to have with to Mike. that,

Mike Dahl

got you. Okay, it. Thank

Operator

ahead with Our comes from Please go from question Bouley next question. Barclays. your Matthew

Matthew Bouley

Thank for my questions. taking you

in would past fourth any kind that Just back I be running California, date of gross does you. think, points differential ahead year several of these think, just beyond demand How given well? the just of helpful in it's Thank months? margins, rest your been backlog hundred provide differential margin that trends traditional seen the sense And today, as few basis there the of quarter we've kind the homebuilding. on can still look to you I on

Douglas Yearley

Sure. in to what The of company from the not in excess California past. and reported margins continue dissimilar be averages we've

Matthew Bouley

you in Thank of the with talked understand And have those there, a first any August see have of the perfect. increased the about around your you really on light ASPs we comment markets? just to net -- say can that QX? weeks three that order from And of specifically just prices that said price timing Doug, some quarter. have I you. of fourth start a of what increased in Okay, want the modestly some prices you softer already increases of then, the the net strong is basis, you we that, you would when or to

Douglas Yearley

three It of is weeks the August.

And So it the now it in pretty nationwide. orders. much is you would QX not see

Matthew Bouley

perfect. Thank Okay, you.

Operator

question next with Micenko SIG. ahead Jack from from Our comes go your Please question?

Jack Micenko

and You regions, the question Certainly range? more. what morning. price product about point worse about good Any or or little pricing talked power -- Hi, around pricing maybe better but discussion? there product incentive Is about incentive any segmentation? a the and type performing

Douglas Yearley

pretty Now board. the it's much across

Jack Micenko

And quarters double you then, mix sales that But pace modeling wise, in just about has price I more in a or and thinking it's picture think forward? row, should sales way And guys does the change lower -- that know does as points, come going input. thinking pace digits. of two the than about two I your thinking think an you for output company we big an change

Douglas Yearley

not I question. apologize. understand do I the

Jack Micenko

change Generally and transitioning speaking, more -- from sort outlook what towards is of and pace homes $XXX,XXX to you're sales you going mix sell you're that does $X the that million said? homes, that

Douglas Yearley

that to the million. sell fair mid-fours, I than sell going more we're we're mid-$X the is No, in think it to to say in homes going generally

in community of one with it, That the given average the price there Phoenix. XX opened high now have ago, XXXs. example XX. We about months Hey, up you XX sales is Gregg? is to very the we since we've a XX, successful go. in

a afford the can $XXX,XXX pool say, bigger, and there's buyer think say you that to is -- So, can people afford price, house I $X.X more million it's as go as fair a down -- it's house. I you in

deposits, So the agreements. have higher of the which means those as underwrite should. course, more And more more traffic a to we, pace communities the means they

bit. down as should does per bit, sales come long go community So up naturally a price as I the think a

Jack Micenko

All right, perfect. Thanks.

Operator

from Jade go Please Our with your ahead KBW. next from comes question question. Rahmani

Jade Rahmani

Thanks very of last that quarter Can year with compared were sales and delivery perhaps percentage homes from how quarter a tell or and us ago? quick you what spec much. deliveries this

Douglas Yearley

as [indiscernible] that Mr. answer. Ziegler One moment, please

Gregg Ziegler

Sure.

ago. a this So XX%. our XX%, as you I around year call ago, settlements it call it, was teens, think mid-teens, total And percent a XX%. asked of A high was year quarter, it specs

Douglas Yearley

much. Okay, thanks very

Jade Rahmani

color you could on York I was also wondering any market. New condo if provide City the

you America's any overall opportunities if of you're Toll's like there? or market off Hotel the site update? could, interesting also, that, an Just Wondering stressed looked acquisition inclusive And of if seeing maybe recent acquisition. an

Douglas Yearley

Sure.

So we mentioned. I'm the love I on can't that comment deals, land I sorry. to but one, specific about you deal talk cannot.

this We summer. don't felt has York much have open. as better New

talked in the York haven't X% business of as but at been about, feels years. we course, last Of this for or buying the we ground four moment, New our better summer. only five It's it

Operator

next McGrath go from question. Research. with Megan ahead Please your comes Our question from Buckingham

Megan McGrath

follow just And couple ups. a morning. Good of quick

missed Sorry incentives it give this, if last I you $XX,XXX quarter. think but this quarter? was could I the actual per home

Martin Connor

it's dollar all you parts now. with Megan, of I to quarter associated is the think It to kind X.X% our preference because ago, that figure down moving give a percentage. was a X%

Megan McGrath

thinking should that, not of numbers on gross quarter to on incentive build both we the these that much think XQ Okay, I think sequential in great. starting decline? about but sum of year, mix margin; quarter guidance giving up is talked You issue, for implies how And you're about how the were and next terms to know of I next much And XQ? the to compared cycle, roll about through the but order. higher next

as So over of couple headwinds how own about quarters? like the a on build next roll nine through these months we cycle think their might

Douglas Yearley

it guidance talked given. timing into its XX with think leave to margin happened some at set the the involved today margin We're margin is way gross differences during very comfortable the incentive to in the we've versus and the set days about growth starting Certainly prior. going see I we've has challenged of that. guidance we're that as the sales period

Megan McGrath

comment there to was loans And Maybe Horizon, health Journal this were an any particular calling then opportunity of you take the or the on could I this non an think buyers? on quickly, they statistics QM. your morning financial in unconventional article

Douglas Yearley

haven't jumbo the conventional buyer much LTV seen really between still and We much not change around XX% change to around mix. in XX% cash, profile. the XX% and Still

ago months at are scores FICO were right XXX. Our on they three where

Megan McGrath

great. Okay, much. Thanks very

Operator

Please Our [ph] next from your ahead with Securities. from question. comes Wedbush Jay question go

Unidentified Analyst

Marty, what everyone. you 'XX? percentage morning, was give in incentive Good us the XQ could

Martin Connor

approximately was It X%.

Unidentified Analyst

And a Jack's in then, I question wanted to different ask way. maybe

monthly theoretically price If about going pace. talking lots $XXX your which then your of to a you buy higher grand, lots, over your under third generate or Why guys sales orders monthly per move that I about Or time? should your Why finished did to point, and lower being land talking absorption. trying Doug? wouldn't under up misunderstand also answer, wouldn't a community are or more lots sales

Douglas Yearley

Oh, no.

it will. I think

Unidentified Analyst

mean, over... I

Douglas Yearley

Yes.

we and expect demographics, I and got and sales that. points think, see and and velocity and higher cross should continue a price multiple as we as we've I at higher have segments diversify offerings, because underwrite of you our points, to lower price said, buyers more expand buyer seen paces

Unidentified Analyst

are the that inflect You start to in year before can -- the mix inflection take guys think the is still it years shifting the at or of Toll you couple we pace? over next going sales more or the now you is see at point type to where a

Douglas Yearley

of I will will think but it take, not it a years, couple sure, take time.

price and point. expanding carefully We slowly the are

BMW. T-Select it Toll the three we've So you or call about White series talking been or [ph] whether

who become their starter you these bought and little them will bit little focused going demographics they're going As of to mid-XXs, mid-XXs after more on able grabbing bit we're focused homebuyer. down and home homebuyer. are and first because years be We're buyers, parents what know, expensive these We're affluent That's their their older a more modestly older, XX is which than home. millennials the supporting. afford on. wealthier in That's a are hit time on $XXX,XXX focused the not group many

to We're brand our it down different. price, the are it. and making still operate brand, sure all the the fits provide. it's And we focused in we luxury, committed still deliver, carefully we on going with It's homes within our service we way

that answer long for couple the quarters little even couple we'll that, so to more a or that story of months And see a you a than of difference. is take to

Unidentified Analyst

very thank much. Okay, you

Operator

with Our question. ahead Barron Housing Research Please your next from Alex go question comes from Center.

Alex Barron

on more Living. you I thanks. expand see Yes, to wanted little if a could BB bit

point? or on states how mean, this you much you pretty And you this? that I on commitment to have commitment opportunity some expanded that guys the are the beyond what an of Have $XX a million launched of you put extent Arizona more this terms other or is going this to -- the few In deals of at initial see evolves? this just depend is is since

Douglas Yearley

I encouraging. product. as Florida. venture Denver we subsequent the Texas at we're evaluating The the rental developers markets, this any that has certainly would Boise, venture that this a I think together evolves. how we're Well, encouraged well acquired working depend master and opportunities point way including the parcel. It And the and are commitment community plan as from by the will a seeing, is The consider has some opportunity Arizona, are pipeline to the receptivity markets on

Alex Barron

of you Are a you just great. reporting reporting sense working the land can balance And all Okay, balance then sheet? in going is like to deal is give guys a progress numbers we reporting joint Are Living? of you'll like, track this that be this sheet, you to venture? Can the be how out, like are any you terms the on any of -- and owning way us off going BB units? your be

Douglas Yearley

this in ventures items. our in line investment unconsolidated be So will

deliveries This piece in agreed We that will lots $XXX is not Brothers include to or have million a roughly any data. of three parties Toll lots our the equity contribute. or deliveries

But this that. only leverage structured. We balance have It sheet developed. as currently as some are off venture that you joint element being see $XX million of of still will will is an

Alex Barron

Thanks it. got a lot. Okay,

Operator

And ahead Ken with question your KeyBanc. Please from from question. go Zener our comes next

Kenneth Zener

So, there's a points. price around lot Doug, talk obviously, of

more FY you backlog tend The wrong bit prices, make 'XX. sales in the assume down is to as the this somewhere to average higher price just closing But which about X% it's priced see it a Obviously, isn't with quantifiable. -- ask into to you X% versus price, is because that will we magnitude? units backlog the me of price this about be there. stuck logic Let higher move down forward what's that trend year-over-year.

Douglas Yearley

driven is California. primarily Ken, that mixed, less by

Kenneth Zener

that wouldn't APS trending to will be But apply still your what towards?

Douglas Yearley

Yes.

Kenneth Zener

CAR lot that with series -- to stuff, doing okay. the compression the rates from is meaning by how X the XXXX what result but you I seen, to that's out, flow sorry, terms increases order one of just California, we've that clearly, But update. over, give express what to logic is I in as way, Doug, US, The BMW that are going California in conclusion? -- you Thank over. would there wanted not [indiscernible] that a Now, you drive mean, I inventory and that is the investors of today's declines guys profits. mean, side the the margin way today. has the flattening seeing to lower could keep next given orders, through. are of County, be a year would that sales Riverside where mean, you. Orange kind the existing Bay data orders in the better coming can Places are area you're the like I

Douglas Yearley

discuss will We in XXXX three months.

of California out very decline earlier, was the As much a more comp. So I tough where little Cal. out very we order of mentioned came of Northern in had Cal, There QX

Kenneth Zener

Right.

Douglas Yearley

our doing doing L.A. County. in County. well well We're We're Orange in in locations

We have next a year be very L.A. new community online County. will that in coming large

about next seeing very And margins. but So, gross jump are California is jumping not course, year. you of growth and would western because size, the no, region, to the of breakout conclusion its the I West we strong to significant

Kenneth Zener

Thank you much. very

Operator

I'd closing turn like any that, over with to management to session. for question-and-answer back gentlemen, today's conclude remarks. and ladies call will the And

Douglas Yearley

summer. your everyone thank well support interest and a bit for very you Thank we you. of have Jamie, and much. little this Thanks, enjoy

Operator

for today's the We has conference thank concluded. do you presentation. gentlemen, now attending Ladies and

You may lines. now disconnect your

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