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Good afternoon and welcome to the Beazer Homes Earnings Conference Call for the First Quarter Ended December 31, 2023. Today's call is being recorded and a replay will be available on the company's website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's website at www.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

Thank you. Good afternoon and welcome to the Beazer Homes conference call discussing our results for the first quarter of fiscal 2024. Before we begin, you should be aware that during this call we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statements speaks only as the date the statement is made. We do not undertake any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. New factors emerge from time-to-time, and it is simply not possible to predict all such factors. Joining me is Allan Merrill, our Chairman and Chief Executive Officer. On our call today, Allan will discuss highlights from our first quarter, the current environment for new home sales, our outlook for the balance of the year and finish with an update on the progress we're making toward our multiyear goals. I'll then provide details on our first quarter results, our second quarter and full year expectations, a look at our steady book value accretion and maturity schedule and end with a review of our land activity and future community count. We will conclude with a wrap-up by Allan. After our prepared remarks, we will take questions in the time remaining. I will now turn the call over to Allan.

Thank you, Dave, thank you for joining us on our call this afternoon. Against a challenging affordability backdrop, we delivered another solidly profitable quarter, with new home orders substantially ahead of the expectations we outlined in mid-November. At that time, mortgage rates had begun to decline, but it was too soon for us to know whether the decline would be substantial enough or durable enough to improve sales paces. With the quarter now in the rear view mirror, I'm pleased to report that we experienced a meaningful improvement in demand, particularly in December, leaving us optimistic for the upcoming spring selling season. Here are a few of the highlights from our first quarter. Orders were up over 70% against an easy comp in the prior year as we generated a 50% improvement in sales pace to two sales per community per month. Our community count expanded nicely, up 14% year-over-year. Gross margins were 22.9%, driven largely by home sales made in prior quarters when mortgage rates were lower and earnings were $0.70 per share, driving book value over $36. As noted in our press release today, first quarter profitability was negatively impacted by a widely publicized cybersecurity incident, which occurred at one of our title and settlement service providers at the end of December. Although we were able to adjust closing arrangements for most buyers scheduled that week, we delayed about 40 closings until early January, shifting a modest amount of revenue and profitability into our second quarter. While the situation was very frustrating for these buyers, the incident is fully resolved and won't impact our full year results. The macro environment for new home sales remains constructive but challenging. Most parts of the economy are in reasonably good shape, with job and wage growth providing support for homebuyer demand. And the supply of both new and used homes remains at historically low levels. Those are the constructive parts. Affordability, or more precisely, the lack of it, is the challenging part. When rates got to 8% in the fall, many potential buyers either couldn't or wouldn't commit to home ownership. But as we saw in December, demand responded quite strongly to declining rates. Anticipating demand for new homes is always challenging because it is never a function of just one variable. But for now, the biggest factor remains affordability, and more specifically, mortgage rates. Our operating strategy is focused on maximizing returns at the community level, taking into account, buyer profiles and local competitive dynamics. Given the breadth of our markets and products, this results in a fairly balanced mix of pace and margin ambition, which obviously evolves with market conditions, including mortgage rates. With that said, here's how we're thinking about our results for the balance of the year. Our base case is that mortgage rates stay in the range where they are now, in the upper 6s. In this scenario, we think demand is likely to remain healthy. To maximize returns, we're targeting sales paces that are quite good but perhaps a bit lower than our historical levels. On the margin side, we'd expect some pickup toward the end of the year, as improved cycle times allow us to deliver more homes with lower incentives. If rates move down into the 5s, we'd expect a fairly robust increase in demand, leading to higher sales paces and even better opportunities to drive higher margins. The downside case would be if rates trend back toward 8%. In that case, we'd expect sluggish sales paces accompanied by a return of the incentives we offered in the fall. Whichever scenario unfolds, we've got the liquidity and land position to manage through it, and we expect to be able to generate a double digit return on equity for the fiscal year while moving toward each of the multiyear goals we introduced last year. As a reminder, these goals target growth, balance sheet strength and a differentiated product strategy. As it relates to our goal to have more than 200 active communities by the end of fiscal '26, we closed the quarter with 136 active communities, up 14% versus the prior year. By the end of the year, we expect that number to be above 155, or about 15% annual growth, and to be positioned for similar growth in both FY '25 and '26. In support of these efforts, our land spend in the quarter was almost $200 million, up 73% year-over-year, with a large portion invested in the development activities necessary to activate new communities as it relates to our balance sheet goal of having a net debt to net cap ratio below 30% by the end of fiscal '26. We completed the quarter with a ratio at 44%, down 4 points versus the prior year. Given our expectations for sales volume and profitability over the balance of the year, we expect this ratio to be in the low 30s at year-end. And finally, as it relates to our goal to have 100% of our starts zero energy ready by the end of calendar '25. We made huge progress in the first quarter with more than half our starts meeting the zero energy ready standard. By year-end this will be above 75% as we introduce our energy-efficient homes into many more communities. The idea I hope investors will take away from this call is that we are focused on generating meaningful profitability and returns this year while also making significant strides toward our multiyear goals. With that, I'll turn the call over to Dave.

Thanks, Allan. For the first quarter of fiscal year 2024, new home orders were 823, up 71% compared to the prior year. Our average sales pace was about in line with historical levels for our fiscal first quarter. We closed 743 homes, generating homebuilding revenue of $381 million with an average sales price of about $513,000. Gross margin excluding amortized interest, impairments and abandonments was 22.9%. SG&A dollars were up marginally versus the prior year better than our expectations. Adjusted EBITDA was $38 million. If the cyber event at the third-party service provider hadn't occurred, adjusted EBITDA would have exceeded $40 million. Interest amortized as a percentage of home building revenue was 2.9%. Our GAAP tax expense was about $1 million for an effective tax rate of 5.2%. Our tax rate was below our expectation, primarily related to discrete tax benefits in the quarter. Net income was $21.7 million or $0.70 per share. Our second quarter expectations are derived from the base case scenario that Allan described where mortgage rates stay about where they are now and the economic environment remains supportive. With this backdrop to maximize returns, we're targeting a sales pace around three per community per month and an ending community count of 145. We expect to close around 1,100 homes. Our ASP should be roughly $515,000. We are projecting adjusted homebuilding gross margin to be approximately 21% as the majority of the homes we expect to close in the second quarter went under contract when mortgage rates and incentives were substantially higher. SG&A as a percentage of total revenue should be approximately 12%. We expect this to result in adjusted EBITDA above $50 million. Interest amortized as a percentage of homebuilding revenue should be in the low 3s and our effective tax rate should be approximately 11% as we continue to benefit from energy efficiency tax credits. This should lead to diluted earnings per share around $0.90. Turning to our full year, we expect more than 4,700 closings, reflecting at least 10% annual growth and an ASP of about $510,000. Given our margin expectations for the second quarter, our first half gross margin should be between 21.5% and 22%. We think that's also representative of where we'll be for the full fiscal year. We anticipate margins to recover over the back half of the year as the homes with the highest incentives will have been delivered in the second quarter and third quarter. This would lead to EBITDA in the range of $260 million to $280 million and our diluted earnings per share would be at least $4.50 based on an effective tax rate of 15%. At this level, we'll generate double digit returns this year and position the business for significant growth in fiscal '25 and beyond. Achieving our target for double digit returns would lead to a book value per share of $40 or higher by the end of the fiscal year. The chart on Slide 14 shows the progress we've made thus far in growing our stockholders' equity, having more than doubled our book value since fiscal year 2020. At the same time, our DTA has become a very small percentage of our book value. As it relates to our balance sheet, we ended the quarter with $404 million of liquidity. Our net debt to cap was 43.7% and our net debt to EBITDA was 3.3 times. We ended the first quarter with about $980 million of total debt. As you can see on Slide 16, over the last few quarters, we've been spending more on both land acquisition and development as we invest in our community count growth. We expect that to continue leading to land spend for the full year of around $750 million. While we're increasing our spending to fuel growth, we're doing so while focusing on balance sheet efficiency. About 53% of our lots were held in our option at the end of the quarter. We expect to maintain our option percentage around this level even as we increase our spend. This will allow us to drive attractive returns even as we grow our community count and closings. With that, I'll turn the call back over to Allan.

Thank you, Dave. We're pleased with the results we generated in the first quarter. We adapted to a challenging operating environment and delivered solid profitability, higher new home orders and a growing community count. These results, together with a favorable outlook for the spring selling season, have us positioned to deliver strong full year results, highlighted by a double digit return on equity and even more community count growth. Looking further out, it should be very clear that we are making steady and significant progress on the multiyear goals we established last year. The achievement of these goals will represent a near doubling in the size of our company, the best balance sheet in our history, and an extraordinary level of differentiation in the homes we build. We believe that's a formula for creating a lot of shareholder value in the years ahead. Finally, I'd like to acknowledge my colleagues here at Beazer. We have a truly exceptional team, all of whom are committed to creating value for customers, partners, shareholders and each other. I could not be more proud to represent them. With that, I'll turn the call over to the operator to take us into Q&A.

[Operator Instructions] Our first question will come from Jesse Lederman with

Hi, congrats on the strong results and thanks for taking my questions.

Sure.

The first question is, seems like you've noted 2Q - fiscal 2Q gross margin seems it's likely to be the low watermark for the year, which is great. Can you talk about how your use of incentives shifted during the first quarter, and if any changes have been made yet in the second quarter and any quantification you can provide as to maybe a percentage of the sales price? Anything along those lines would be helpful. Thanks.

Sure. So it's Allan. Over the course of the first quarter. So, I mean, let's just make sure that we ground that, we're talking October, November, and December. It was tough to find the market in October and early November. We were working on temporary buy downs, permanent buy downs. But what we really found was base prices made a difference. And as rates started to come down, we saw more of a shift into permanent buy downs from the temporary buy downs. But that was really the mix that we were playing with. Of course, across 130-odd communities, the equation is a little bit different in each community. But I would tell you that base price and permanent buy downs would have been the principal changes that we made. As we rolled into January, we definitely saw an ability to reduce the dollar value associated with those buy downs because we were buying to similar rates but from a lower starting point. And we've been able to claw back bits and pieces on base price just in the last three or four weeks. So as we think about the year, we're not expecting dramatic improvement in that price incentive mix. But the homes we've sold in the last 30 days or so have a better mix of price and incentive than the homes we were selling in October, November, and the early part of December. Does that kind of give you a sense of what we were doing?

Yes. Thanks, Allan. That's very helpful. My next question is on cash flow. Looks like you used about $230 million of cash flow. I know you're pretty dedicated to continuing to develop land and acquire some new land as well. Can you talk about your cash flow expectations for the remainder of the year?

Yes. Look, Jesse, I think we talked about a little bit in the prepared remarks. We spent about $200 million on land in the quarter. Land is still the primary use of our cash flow that we're generating in the business. And as we're running land through cost of goods sold, it's still predominantly focused on land for investment. So we are doing development work, as Allan kind of mentioned in the script, looking at developing - spending money on land development and activating new communities and turning that capital. So land is still our priority in terms of our incremental cash flow generation. And we did give the guidance for the full year land spend of $750 million.

Yes, but I - that's all right. It's also important. Let's not lose context of net debt to net cap. We expect net debt to net cap will be in the low 30s by the end of the year. So we generate more cash in the fourth quarter. We use more cash in the first quarter, second quarter and third quarter relative to production and land spending. But over the course of the year, we're going to be able to grow the land position and delever just within the 12 months of the fiscal year.

Awesome. That's helpful. And then one last quick one somewhat similar. Looking at any market expansion as you're looking at in the land market, or is it more so your current footprint?

Yes, one of the things I'm really proud of, and we pivoted to a growth mindset because we got our balance sheet in order about two years ago, is that we've been able to chart a really aggressive growth strategy on a multi-year basis very organically in our existing footprint, largely serving the same buyers and building the same types of homes. So while there are always risks associated with growth, I feel pretty good about the fact that we know these markets, we know these submarkets, we know these buyer profiles, we've built these homes. So I guess a different way of answering is we're not looking at geographic expansion as a lever to achieve our growth ambitions.

Very helpful. I appreciate all the color.

Thank you, Jesse.

Thank you. Our next question comes from Julio Romero with Sidoti. Your line is open.

Thanks. Hi, good afternoon. I appreciate you guys kind of lining out the base bull and bear case for how kind of rates can affect the year. Can you maybe talk a little bit about how your sales mix might be affected in terms of younger versus older buyers and higher versus lower end features as it relates to those cases you outlined?

So I think the biggest impact is in a very high rate environment, we will sell more specs. It's - the thing that we've seen over the last year and a half or two during this tightening cycle is that when someone has a shelter need, a desire and a capability, they don't want to wait six months or eight months for a home. So the characteristic that I think I'd be most confident in predicting in kind of a higher rate environment, as we see a mix, it's a little trickier to cut that across demographics, whether it's age or other socio characteristics. Our buyers are not principally the price first buyer. There are opportunities to buy single family homes further out at lower prices. That's not really our market. So that buyer in a high-rate environment is pretty challenged and probably has an accentuated need for specs. When I look at our buyers, these - there are a good number of first-time buyers but they're patient first-time buyers. They've waited to buy the home that they wanted, that was the size they wanted, had the features that they wanted as their first home. We have an awful lot of age targeted, age qualified and otherwise empty nester buyers. I happen to love those buyers because that's a sophisticated buyer. They know a great home, right? They know that some of the things that we're doing, other people aren't doing, and they appreciate that. So I think I would think about the macro environment more affecting the spec to be built mix than the buyer profile. Our buyer profile is pretty well described by our locations and our product.

Got it. That's very helpful there. And then last quarter, you spoke about having some discretion for growth and the ability to slow things up if rates headed north again. It sounds like the possibility of you guys doing that is lower now versus maybe three months ago, not[ph] that's fair at all.

Yes. Look, I think we have optionality. There's an awful lot of what we can do or planning to do that if market conditions change. I use the analogy, and it's probably not a great one of a meteor strike. Like, if there's a meteor strike, we're going to adjust behavior, and that would relate to growth as well. But it is clearly the case that if you just think where we were in mid-November, rates had just started to roll off that 8%, and if things stayed right at that level, we might have eased up a bit. But what we saw instead was rates settled down, demand was strong. I was glad that we hadn't made any significant shifts in our growth strategy, and we remain well positioned for that 200-plus community count a couple of years from now with just steady double-digit growth. But I don't want anyone to think we're so hell-bent for weather on that growth trajectory that if conditions changed in a way that we wouldn't reconsider, obviously we would. We're stewards of capital, and if we needed to hoard some cash or change the trajectory of growth, we would. But I think we've weathered some fairly significant interest rate movements in the wrong direction, not counting on them moving in the right direction. But in this environment, I feel pretty good about the growth trajectory that we're on.

Appreciate the color. I'll pass it on. Thanks again.

Thanks, Julio.

Yes, thanks, Julio.

Thank you. Next we will hear from Alex Rygiel with B. Riley. You may proceed.

Thank you very much, and nice quarter, gentlemen. Heading into the December quarter, you thought there could be some potential for competitors heavily discounting, and you didn't really kind of want to get into that. Can you talk to us a little bit about how that fourth quarter kind of ended up playing out for you?

Yes, I mean, look, there are a number of builders whose fiscal year ends are not in September, when ours is, that are after that. And I mean, as long as I've been in this business, there has tended to be some pressure to hit volume numbers, both sales and closing in those companies. And there's nothing wrong with that. I'm not being critical of that. It's kind of part of our industry seasonality. And we anticipated that that would be the case. And it was the case. November and December, there were a lot of opportunities for folks that wanted quick move-in homes to take advantage of some pretty good discounts. We are not a spec-first builder, as you know. And so in a number of places, we weren't positioned to really compete. That was a contest we weren't entered in. So it kind of played out the way we expected. The thing we always talk to our team about is if we're in an environment, a time or an interest rate environment, or a combination of things, where there is in a submarket a big demand for a spec, and we don't have a spec, and we're not going to have a spec that's a 30 day or a 45 day close for that buyer. We've got to be really disciplined about not trying to create an inducement for a to be built that's six months or seven months out that really structurally revalues our community, right? You can't meet that particular need, and that's okay. It turns out there are a lot of buyers out there. They don't all have to be ours. And I think that's a - that's just a - it's a judgment call. It's an intelligence that we have to have in the business. There are other times where the buyer is a little less certain to be built or a spec, and their timing issues may not be as acute. We want to compete for that buyer. But if they're going to have a design center experience, they're going to get to have the benefit of our mortgage choice experience, and if they're buying a zero energy home, I'm not encouraging, and we're not often going to find ourselves competing on price for that buyer, given the other things that we do. So when the whole market gets very incentivized and very spec-oriented, we got to be a little careful. And I think that is - that was true this year. I think that will be true in the October-November time period in future years.

Good answer. And then can you identify some of the strongest and weakest markets and maybe provide some color around why this may be and how it could change.

Yes, I will. This - it's a good question, and I'm only chuckling because Dave and I were thinking about, hi, what are the things that are likely going to come up and we talk about the market. So I'll give you a couple of markets that perform well. I'll tell you a place or two that I don't think performed as well. But I have to offer, I'm not a surgeon general, but I want to offer my equivalent of a surgeon general health warning to you. And that is when we feel really good about how a market performed in a period of time, maybe we were just awesome. And conversely, if a market wasn't quite as strong for us, we maybe need to look in the mirror first. So my comments will talk about what happened to us, but we're pretty honest with ourselves about, was that a rising tide or did we really outcompete. And conversely, when things aren't great, that may have been us. And so please kind of keep that in mind. We try and be really humble about that. We had markets that performed well really across the country geographically. So it wasn't very narrowly focused. Really pleased with engagement with buyers in California, was engaged in - particularly strong in Las Vegas in the fourth quarter, calendar quarter, first quarter for us. Dallas continues to be a monster market, strong market, great job growth market, and we do very well there. And then on the East Coast, our mid-Atlantic business performed quite nicely. So I would say, across left to right or west to east, those are the markets that performed well. We did really well in Nashville, that continues to be a strong market. I would tell you we found the going a little tougher in Florida. Now our business is centered in Orlando, found that to be a pretty price competitive market, and it was a little stickier in the first quarter. So that's one that I would point to. I think the Houston market, which is also pretty price sensitive. It was fine, but it wasn't as strong as Dallas. And I think we've got a big business there. So I feel like our experience was pretty representative. Those would be two places where I think the roll-over in rates will prove to be pretty helpful in '24.

Very helpful. Thank you very much.

Thanks, Alex.

[Operator Instructions] Our next question will come from Jay McCanless with Wedbush. Your line is open.

Hi, guys, thanks for taking my questions. So the SG&A guidance for the second quarter looks like it's about 80 basis points higher than what you guys put up in the second quarter 20 - fiscal second quarter '23. I guess how much of that is those closings getting pushed to the second quarter versus costs going up for whether it's co-broker, other things, maybe if you could break that out. And then also, what cost increases are you all seeing on those SG&A lines?

Well, Jay, a couple of things. It's Dave. One, it's not really the commissions that you're talking about. That's been pretty steady for the past few quarters. What you're really seeing on the overhead line, especially next quarter, we're investing in the business for growth. There are some costs that you obviously have to incur as you expect community growth to expand as we move. And Allan kind of talked about as we move through '24, the growth that we talked about and then into '25 and '26. And certainly as we look at new community openings and getting prepared for that, there's some incremental overhead. Look, there's no doubt overheads are higher than we want them to be and they will be as a percentage lower. But it's all about getting these communities open them really well and then getting some more revenue leverage on the overhead line as we grow the business in the next couple of years.

And then can you talk about the reduction in the fiscal '24 gross margin guide? Is that mix, is that geography? What's going on with that?

Well, I think we went a little deeper in Q1 in order to find the market, and we got a - we'll close those homes in Q2 and Q3. And as I said to a previous question, we were able to change pricing and incentives as we rolled into January. So I feel pretty good about there'll be a bottoming out. But the other thing is we're going to end up with a little higher mix of specs relative to, to be built this year because part of the thing you do when you launch a new community is you seat it with five, six, seven specs. And that won't be 100% of our closings on a run rate basis won't be specs, but 100% of the initial closings will be specs. And we generally do several 100 basis points better on to be built than on specs. And that's been true as long as I've been here. So I think those two things relate. I think the flip side, and Jay, this is - it's related, and if you'll humor me for a second, one thing to keep in mind about our margins because we want to think about it relative to our own performance. I also want to put it in a little bit of a market context. Remember, as we deliver these zero energy ready homes, there's a $5,000 tax credit that we're eligible for, and we'll claim that will result in real-time cash tax savings. Now, I know that when we're talking about the business and gross margins, people's eyes glaze over a little bit when we talk about tax, but if you think about $5,000, that's equivalent to a point of margin. Now, the geography on the income statement is in the tax line, not in the gross margin. But that's one of the things that we are seeing, is we've got the benefit of a structurally lower tax rate because of the acceleration of our zero energy ready homes. So just as you're thinking about margin, make sure you think about that piece in our case as well.

Good to know. Thank you, Allan. I know you don't like talking about the current month, but anything you could give us on what pricing power looks like and what you've been able - it sounded like it got a little better in January, but just maybe directly where pricing power is now, where you feel like you can take price?

Look, I think we were able to off the strength of the momentum that we built in December, right? That was better than we expected to do. We found the market, we started pulling some levers, and some of that's on incentive, some of that is on base pricing. So as we rolled into January, we were tweaking those things, and we've been able to sustain a decent sales pace through January. I don't have January numbers, so I can't kind of get into that. I mean, the month isn't closed for us yet. But I would tell you, pretty encouraged about this spring selling season and encouraged that we'll be able to at least sustain the improvements that we have claimed. There's a chance, regardless of rates, we get a little euphoria, a little enthusiasm in the spring. We may be able to do a bit better than that, but we're not predicated in our guidance for margins that things get better from an incentive and pricing standpoint than they are right now. Does that make sense?

It does.

Okay. So that's kind of how we're thinking about the year.

And theoretically, it doesn't get better because there is still pretty intense competition, I would think, from some of your larger competitors to keep up their sales paces. Is that what you're assuming with this guide?

Yes, and I think at an even higher level. Affordability is still pretty darn challenged, right? I mean, that's a reality. It's different from three years ago, four years ago, five years ago, six years ago, 6.5, 6.75. Okay, we can talk about buy downs, but you're talking about monthly payments that are quite elevated relative to where they were a few years ago. We've always got a chart in our deck that talks about payment as a percentage of income, and that continues to be at a pretty elevated level. And I think the reality of that is one of the things that just says, let's be a bit cautious about how much better this gets given the reality of that affordability picture.

And then if we could talk about cycle time a little bit, where is that now versus maybe where it was in the September quarter and year ago?

It's significantly improved. I think year-over-year, we're about 70 days of cycle time improved. I may be off by a couple, but it's about that. I think we've still got a month to go get back relative to what I'll call, the pre-COVID period. We are not expecting that we're going to get all that back this year. I hope we do. We'll try to, but I think we've got a build cycle that we look at across 13 stages, and we've got that down right at 70 days year-over-year. And as I said, I'm - we're targeting another 20 or 30 over the next year or two.

And then the last one I have, if you could talk about input costs, both labor and materials, what trends you're seeing there and what you're expecting for at least the next couple of quarters.

Jay, it's Dave. Start me with material costs, I would tell you, and we've talked about this a little before, lumber costs have really declined since the peak in late '22. We've seen a little bit of a pickup recently, but nothing overly significant, especially because we're just starting to see for the first time, square footages in our house come down a little bit in the last couple of quarters. So it's a pretty recent trend. Again, kind of per house, maybe a little bit up, but nothing significant material side. And on the labor side, I would tell you it's pretty similar. We haven't really seen a lot of discounts on the labor side, but we haven't seen a lot of price pressure and a lot of cost pressure on the labor side. So it's been relatively benign overall with a nice tailwind from lumber offsetting some higher costs across other materials.

Look, if demand is super strong this spring. We're going to get some cost pressures, there's no question. And it'll[ph] start on the labor side. If that happens, we're going to have some pricing power. So I feel like if we're in a pro cyclic mini cycle here this spring, and I'm not predicting that, but that's sort of the case of rates come down, it gooses demand a little bit. Yes, we're going to see some cost pressures. We're going to have even more pricing power. I Am not worried about an unfavorable mix where we end up with less pricing power and more cost pressure. That doesn't seem likely over the next couple of quarters.

Do you - and I guess a lot. I got one more because you raised the point about the labor. I mean, we've heard from other builders, public and private that as multifamily construction, especially in the southeast, seems to have peaked and is on the wane, that's freeing up some labor availability. Are you guys seeing any of that yet?

Yes, there are certain trades that are crossovers. If they're doing - they're working above two or three stories, those trades don't immediately translate to our single family business. But yes, they're drywall, painting, plumbing, electrical contractors. And I agree with that. I think that there are some markets where there is some excess right now. And, so, yes, that is a factor. But there - you can appreciate this. We don't want just anybody to build our home. And so one of the things we're trying to do is make sure that we maintain our safety protocols, our quality protocols, our schedule protocols. Cost is certainly an important part of that equation, but we always put safety first. If builders or the trades aren't following our safety protocols, they can't be on our job site. And I don't ever want to compromise on that. That's number one. So yes, we can see a little benefit from that, but we're going to be careful not to go chase $0.10 a square foot if it changes the safety or the cleanliness of our job sites.

Understood. Okay. Thanks, guys.

Thanks, Jay.

Thank you. We have no further questions.

Okay, I want to thank everybody for attending our first quarter call, and we'll be back next quarter to update on how business is going. Thank you very much and talk to you soon.