Greetings and welcome to the Landsea Homes Corporation Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Drew Mackintosh. Thank you, sir. You may begin..

Good morning and welcome to Landsea Homes' second quarter 2023 earnings call. Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the Federal Securities laws.

Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties which change over time. These risks and uncertainties include, but are not limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date and you should not place undue reliance on these forward-looking statements and deciding whether to invest in our securities.

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Landsea Homes' website and in its SEC filings.

Hosting the call today are John Ho, Landsea's Chief Executive Officer; Mike Forsum, President and Chief Operating Officer; and Chris Porter, Chief Financial Officer. With that, I'd like to turn the call over to John..

Good morning and thank you for joining us today as we review our second quarter results and provide an overview on our operations. Landsea Homes continue to benefit from a combination of strong industry and company-specific fundamentals, resulting in another quarter of solid profitability and healthy sales activity.

We produced net income of $4.9 million for the second quarter of 2023 or $0.12 per diluted share, thanks mainly to our strong topline results, which were driven by a home closings total that was well in excess of our previously stated guidance.

Order activity was solid throughout the quarter as we generated a sales pace of 3.3 per community per month comparable to where we were last year at this time. It continues to be a dearth of existing home inventory in our markets, which has brought an increasing number of prospective buyers to the new home market.

While this dynamic has benefited all homebuilders, we believe Landsea is uniquely positioned to capitalize on this trend, thanks to our high-performance homes, which offer the latest in home innovation and technology, setting us apart from other homebuilders, especially the existing home market.

We expect existing home inventory to remain constrained as long as rates stay elevated, keeping buyers with lower mortgage rates in their current homes. A big part of our strategy is to rapidly increase our market share in the high-growth markets we've established a presence in.

We understand that this is a business of scale and that returns and profitability are often correlated with the builder size. We have made great strides towards growing our presence in places like Phoenix and Central Florida in a short amount of time and we want to continue that momentum in these markets and elsewhere.

To that end, we decided to raise $250 million in capital through a private debt deal in July. This capital will provide us with the dry powder we need to make investments in our markets, maintain the high-growth trajectory we've demonstrated since our inception. One of the regions we view as a big opportunity for our company is Texas.

Back in March, we announced the relocation of our corporate headquarters to Dallas, signaling our commitment to the state and our intent on becoming a national homebuilder. Texas has established itself as a business-friendly state, with favorable demographics and immigration patterns.

We are excited about the prospects for our current operations in the Austin area and look forward to expanding our presence in that market and others around the state, like Dallas and Houston.

Despite Landsea's strong track record of growth and profitability, we have believed for some time that our stock valuation did not reflect the true value of our company. One of the factors we felt was causing this was a lack of flip for shares available to trade in the open market.

To alleviate this problem, we work with our largest shareholder, Landsea Green, to facilitate a secondary offering or a portion of the company's shares. In June, we went to market with this offering and was met with great enthusiasm from investors, resulting in upsizing of the transaction.

The net effect of this deal has been tremendous for our shareholders, sending our stock 30% higher in June alone and creating considerably more liquidity for investors to establish physicians. We still feel our stock is undervalued even at current levels and have been actively re-pushing shares as a result.

We bought 443,000 shares in the secondary offering for $3.3 million and purchased an additional 623,000 shares in the open market for about $5 million through the end of June. We completed the remaining piece of our share repurchase program in July for a total of just over 1.1 million shares for $10 million in the open market.

In total, we have purchased roughly 4% of our outstanding shares since March. And last week, we received board approval for an additional $10 million in capacity at our meeting. We will continue to strike a balance between a reasonable level of shares outstanding and opportunistic share repurchases throughout the remainder of the year.

As we look to the second half of the year, we believe Landsea Homes is in a great position to capitalize on the positive housing fundamentals that exist in our markets. There is a sense of urgency among homebuyers, as they realize that there are a few options available to them in the existing home market.

We feel that our high-performance homes present a very appealing and affordable option for these buyers. Pricing environment has remained firm given the supply-demand dynamics in place, and we are seeing less discounting in the market.

Supply chain issues that have impacted our industry for the last few years seem to be updating, giving us better clarity on our delivery schedules and faster inventory turns. Our balance sheet is in great shape and we have the necessary capital and liquidity to achieve our growth objectives.

For all these reasons, I'm extremely optimistic about the future of Landsea Homes. With that, I'll turn the call over to Mike, who will provide more detail on our operations this quarter.

Mike?.

Thanks, John. Market selling conditions remained favorable throughout the second quarter as we sold 565 homes, representing a 5% increase over the prior year quarter and sequentially up 13% from the first quarter.

Orders were fairly consistent in April and May, while June was a bit lower, which we attributed to the faster than expected closeout of some existing communities and our decision earlier in the year to hold off on new community openings until model complexes were finished. Additionally, we saw interest rates start to increase again in June.

Several of those new communities are now open and have been selling well. For example, since opening in March of this year, we have sold 81 homes at our Narra Hills Master-Planned Community located in the Southern California City of Montana.

We are experiencing similar pricing power across our markets as the lack of existing inventory John mentioned has definitely put a floor on pricing. We continue to utilize financing incentives such as rate locks and buy-downs to make our homes more affordable from a monthly payment standpoint.

Buyers appear to have accepted that we will be in a higher rate environment for the foreseeable future and view the ability to lock in a rate in the 5% range as a real incentive to move forward with their purchase.

All of our markets are performing well, with the exception of the core San Francisco Bay Area, which seems to be feeling the effects of the recently announced layoffs in the tech sector. We took a $4.7 million impairment in the second quarter related to our project in the Bay Area to reflect these lower and slower market conditions.

Outside of this, we remain positive about our existing positions in Northern California, and we believe there is still solid demand for new homes in the market given the lack of inventory and the high cost of rental options.

Our operations in Southern California, Arizona and Florida, all experienced strong order activity in the second quarter, and we saw that momentum carry into July. From an operational standpoint, we have shifted away from the heavy spec start strategy we employed earlier in the year to a more balanced approach.

We have seen a return of the 2-B built buyer to the marketplace now that cycle times have come down from their peak, which has allowed us to build and deliver homes in a timeframe that is more acceptable for buyers.

We are still comfortable with starting homes without a contracted place where we are more focused on selling those homes earlier in the construction process to maximize the margin opportunities associated with buyer’s customization.

We believe the worst of the supply chain issues that have disrupted our industry are behind us, and we feel that we have become a smarter and more efficient builder as a result of the adjustments we have made to overcome these obstacles. Overall, we feel really good about where our operations stand heading into the back half of the year.

We either closed, sold or started everything we need to hit our delivery goals for 2023 and feel confident in our ability to hit those targets. We have a strong and growing presence in some of the best markets in the country and a compelling product offering that differentiates us from the competition.

Our build times have come down considerably from the peak, and we expect to see further improvements from here. The void in the housing market that has resulted from the lack of existing home inventory has created a real opportunity for homebuilders and Landsea is well-positioned to take advantage of that opportunity.

Now I'd like to turn the call over to Chris, who will provide more detail on our financial results this quarter.

Chris?.

Thanks, Mike. For the second quarter, we generated $292 million in homebuilding revenue, a 17% decrease over second quarter of 2022, taking us to a total of $532 million for the first half of the year.

Second quarter revenue was impacted by a 6% year-over-year decline in deliveries and a 12% decrease in average selling price, which were largely driven by the closeout of our operations in New York.

Excluding New York, our core markets of California, Arizona and Florida achieved a 2% increase in average sale price and delivered the same number of homes as the second quarter of last year. On a sequential basis, both Arizona and Florida's ASPs were up 3% and California was up 9%.

We reported total revenue of $293 million for the second quarter compared to $369 million in the second quarter of last year. The second quarter of 2022, we generated $18 million in lot sales and other revenue primarily from bulk sales contracts that did not occur this year.

Our pre-tax income for the quarter was $7.5 million compared to $23.2 million last year. The difference in home sales revenue from New York, the inventory impairment of $4.7 million and a 230 basis point decrease in gross margin primarily related to incentives were the drivers of this change.

In the second quarter, our sales and marketing expense as a percentage of home sales revenue improved 60 basis points from second quarter of last year. Our G&A expense of $26 million was $1.1 million lower than last year, but remained elevated as a percentage of home sales revenue.

This quarter, we had some onetime charges related to capital markets transactions, along with additional relocation fees related to our corporate move to Dallas. We anticipate G&A to stay roughly at $22 million to $23 million per quarter going forward and remain committed to our overall operating efficiency improvements.

We reported GAAP home sales gross margin of 17.4% compared to 21.3% in the second quarter of 2022. As we've mentioned, during the quarter, we recorded a $4.7 million impairment on inventory that runs through cost of goods sold and represents a 160 basis point decrease in our gross margin.

Excluding this inventory impairment, our gross margin would have been 19%, which was above our guidance for the quarter.

On a fully adjusted basis, which excludes the impact of interest and cost of goods sold, real estate inventory impairments and purchase price accounting, our gross margin was 23.5% in the quarter, a decrease of 560 basis points from a year ago, but up 160 basis points sequentially from the first quarter.

As John mentioned, we are very pleased with our new order volume and the consistency produced in the quarter. New orders were 565 with an average selling price of $474,000 and a total order volume of $324 million. Orders were up 5% from a year ago and 14% sequentially from the first quarter.

We also ended the quarter with an average of 57 selling communities, up 7% from a year earlier. Throughout this year, we've remained disciplined on our land acquisitions as we assess the current market conditions and ended the quarter with just over 11,000 lots owned or controlled.

54% of these lots were under an option agreement as we continue to focus on our asset-light strategy. Our tax rate expense in the second quarter was $1.6 million, which represents an effective tax rate of 21.8%. For the year, we anticipate our effective tax rate will be in the range of 22% to 23%. Now turning to our balance sheet.

We ended the second quarter with $261 million in liquidity, $76 million in cash and cash equivalents and $185 million in availability under our revolver.

With interest rates increasing, we are managing our outstanding revolver more efficiently and reducing cash on hand where – Our tangible book value per share increased to $15.02 as of June 30, a 14% increase from June 30 of last year.

Additionally, our leverage ratios remained in line with our stated policies, ending the quarter at 40% debt to total capital, down 200 basis points from first quarter and 34% net debt to total capital, up from 31% from first quarter, reflecting our more efficient use of the revolver.

Now I'd like to provide some guidance for the third quarter and full year. This guidance is based on our best estimate as of today with current market conditions. As inflation and interest rates continue to change, their impact may affect our overall results.

We anticipate third quarter new home deliveries to be in the range of 400 to 475 units and delivery average selling prices to be in the range of 535,000 to $545,000. We anticipate GAAP home sales gross margin to remain relatively consistent with this quarter at around 19%.

For the full year 2023, we now anticipate new home deliveries to be in the range of 1,900 to 2,100 homes, up from our previous guidance and delivery average selling prices to be between $550,000 and $560,000. With that, that concludes our prepared remarks. And now, operator, we'd like to open the call up for questions..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Alex Rygiel with B. Riley Securities. Please go ahead..

Thank you. Good morning, gentlemen. John, first question is for you. Congratulations on a number of capital markets transactions here.

If you could, though, sort of talk about how it's better positioned you for accelerating growth in the future years?.

Hey, Alex. Thank you. Yes, I think one of the key things that we did this quarter, one of it is the private placement, which has got a five-year term on it, really allows us to diversify our debt capital stack with some longer-term permanent debt capital.

And then obviously diversify our balance sheet, given sort of the volatility, whether it's in banking or overall with interest rates in the market, gives us more flexibility to continue to operate a business and also the opportunity to grow if we find acquisitions and land that we can continue to buy in the markets that we're currently in.

The other thing that we did on the capital markets front was a very successful secondary offering that really helped increase the liquidity in the stock, allowed us to attract more US institutional investors in the name and really continue to allow us to tell our story.

And then -- and lastly, we actually just extended, closed on extending our revolver revolving line of credit for another year. So that goes out another three years from 2023 to 2026.

So I think we've positioned the company really well for any more market volatility that comes at us and also to capitalize on opportunities to go forward and grow the business and grow it in scale..

Very helpful. And then, Mike, you talked a little bit about a shift away from spec builds towards more to be built. Included in that was a comment about maximizing profit opportunities from buyer option selections.

Can you talk a little bit about that?.

Sure, Alex. Generally, when we're able to get our home buying prospects actually going to escrow homeowners into our design centers we have a unique ability to move them towards upgrading and customizing a home towards certain materials and levels of specs that they want and in so doing, we have a higher profit margin generally around those items.

And we can also pay a quarter. So it does two things for us. One, it even the relationship [indiscernible] escrow process with us allows us to take additional deposits into the transaction. And then accretively add revenue and profits because most of our options are 30% to 50%.

And so from that standpoint, it's one of those things that we really like to do. When you spec build, you sort of preselect many options. And what happens is that you do price up for those options, but you have a tendency to also pull back on the options and you're also very concerned about the overall price of the house and trying to move out.

So you have to be thoughtful about that. Whereas, again, we get homeowners, insurers, line centers, they're sort of unbetter in terms of how much they want to add, what they want to add as long as, again, that the mortgages should support that additional cost of the house. So, it's a good thing. It's always been a good thing.

So we like to do it, if we can..

Very helpful.

And then, Chris, any guidance on what the lot count might look like at year-end and maybe going out 12, 18 months?.

Yes, Alex, as opposed a lot count, I think, last year, at the end of the year…..

I'm sorry, I meant community count, sorry, not lot count..

Because that's where I was going to go. So we ended about 53 active selling communities on average. And we said, we'd be up 15% to 20%. It looks like it will be on the closer to the top end of that for this year and probably about 20% on an organic basis year-over-year.

So we should end about 20% higher on our community count -- average selling community count than last year..

Very helpful. Thank you. Nice quarter..

Thanks..

Our next question comes from Carl Reichardt with BTIG. Please go ahead. .

Thanks. Hi, guys. Was going to ask community count question, so thank you for that.

Chris, can you talk about when the purchase accounting will start to bleed off and not impact the margins?.

Yes -- probably be in 2024. So we put about $100 million or so a little over $100 million on when we bought the Hanover acquisition in the first quarter of 2022. We burned through about $50-ish million last year. We've gone through -- we'll go through probably about that amount this year as well.

So my guess is that it will start bleeding off completely in 2024.

Okay. Thank you for that.

And then on the line, so you're, I think, 185 in out of 675 on the line, the notes went to pay down the -- so what do you anticipate happening from a cash flow perspective in the back half of the year? And where do you expect that line to be when we get to the end of the year in terms of what's -- how much you've got paid down how much outstanding?.

Yeah. So I think we will really look at managing within the targeted leverage ratios that we've talked about. And so we've talked about being at the 40% to 45% total leverage, we ended the quarter at 40% debt to cap. And I think we'll manage the company within that.

We may ebb and flow within that range, but that would be kind of where we've committed to running the company and then kind of on a net debt to cap would be in that mid-30s level..

Okay. All right. Thank you for that. And then the bigger picture question I have is really related to returns your leverage is reasonably high for the public traded homebuilder at this moment that will change.

But on a return basis, given the high book value of return on equity is reasonably thin, so can you talk about the strategy for improving returns? And is that likely to be sort of more margin focused or more asset turn focused? How do you make the real question is, how do you get ROE higher? Thanks..

Yes, John?.

Hey, Carl, this is John. I'll answer that question first, and then I'll hand it over to Mike and Chris. So obviously, we do believe ROIC is very important. I think it's highly correlated as well to stock price as well. One of the things that we think that we're doing a very good job to date is really growing the company pretty quickly.

I think -- you look at our track record since we went public in 2021. We've really done everything we said we're going to do expand into high-growth markets like Texas and Florida and continue to grow the business of scale in these markets that we've chosen to be in.

I think the markets that we've expanded into, particularly like Texas and Florida, we do have the opportunity to turn inventory much faster. But it's also turning inventory much faster with scale as well.

Obviously, being a publicly traded company and being currently the smallest public traded company, there is a certain fixed cost that comes with running a public company. So growing the business of scale in these markets is important as well as that higher inventory turn.

So one of the things that Mike can speak to in more detail is our thoughts about growing in these markets in the second half of the year into next year, because if we can get to the scale that we want to be in these markets, I think we'll see our returns more comparable to our peers as well as we have a more diversified portfolio and then we're turning these inventories a lot faster.

Mike?.

Sure. Thanks, Carl. Look, remarkably I would just add that in terms of our inventory turns, we've been pretty excited about our cycle times coming way down from where they were last year.

In fact, one of the highlights is in Arizona, we just -- we had a cycle time of our last release that went to 5.5 months, which is literally half of what it was a year ago.

So from that standpoint, we're really seeing great improvements in getting the house started, built and closed commensurate with what we would consider to be I think, best-in-class currently in the markets in which we're operating in.

Along with that and to John's point, we are still actively looking for targets in the markets in which we're operating in and expand in markets in which we're not. And so we're having some great conversations currently with several candidates.

I think again, we're one of the builders of choice for those that are the size in which are commensurate with the Hanover or Garrett Walker acquisitions. We know how to do that. We know how to transact on that. And we know how to integrate those companies and get them online quickly to help us get that scale that John talked about..

I appreciate the content..

Yeah. And Carl, what I am….

Oh, sorry, go ahead..

No, I was going to say, and one of the things that we've talked about as well is, kind of continue to manage our G&A as well to help improve those overall profitability margins. It's something that we're continuing to focus on. Again, back to point of scale, we feel like we've got the right scale now to grow from.

We do need a scale to be a public company. And I think that you would see a nice leveraging of that current G&A once we start growing..

Great, guys, I really appreciate the help. Thanks so much..

Thanks Carl..

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

Hey. Good morning everyone. Thanks for taking my questions. I wanted to ask just about the sales pace. It was, I believe, 3.3 per month in the quarter. I know you gave some color around orders. I'm curious, I guess, number one, how did the sales pace trend through the quarter and into July and then maybe a little bit higher-level.

I don't think we have a great kind of historical set of data given you guys went public, one around a rather volatile time in housing. So could you kind of speak to -- with the communities you have today, what do you, think is the normal seasonality for sales pace in the second half of this year, relative to that $3.3 billion. Thanks guys..

Hi Matt, it's Mike. So let me try to answer that by saying that we generally like to always run our communities at roughly around a 3.0 to 3.5 net absorption rate per month. We think that, that is the right velocity in any community regardless of price point generally. And in terms of where we are.

It keeps the proper momentum to build through a community at a consistent pace. So whether the market is going up or going down, we're always trying to find the right clearing price, the proper incentives, whatever is really necessary to continue at that kind of level of pace. So that's where we are.

From that standpoint, I believe that where we are right now and what we're seeing at the community level is a good healthy sales environment. Cancellation rates have come down substantially from where they were a year prior.

We're settling in that 10% to 15% cancellation rate, against the gross absorption, which is really a healthy number traditionally. This is kind of where we would like to operate in getting in that sort of low single-digit cancellation rate probably is great, certainly, if you're above 20%, that's not where we want to be either.

So we're settling in at a nice pace growth absorptions, against cancellation rate that's getting a good solid at. At all of our communities, we're seeing good, steady pace of traffic coming through, people that are anxious and willing buyers and are not ready to transact. And so from that standpoint as well, we're very excited about that.

We saw a little bit of a tail off in June. That was probably around a couple of factors, wind a little bit of seasonality, which is what we expected. We also had sort of a gapping of some Q&As that were supposed to be coming online that.

And then we had a little bit of a, I think, some things around weather and some other things that people have been dealing with. But for the most part, it was just a bit of a lull that righted itself going into July.

So July has been strong gross and net stabilization around the cancellation rates, and we're very pleased with how things are looking this summer as we go forward around that part of our business..

Got it. Okay. Perfect. Thanks for the color. And then secondly, maybe just moving down to the gross margin. I think you guided the GAAP margin to be flat sequentially in Q3, and correct me if I'm wrong, but it did tick up nicely there in Q2 relative to the first quarter.

I think you called out some tailwinds on price and then everything you're doing around options and shifting back to be built.

So I guess what are the puts and takes? What would prevent the gross margin from continuing to rise given your guidance there?.

Yes, Matt, it's Chris. I'll take that one. I think that we're still a little cautious with the Fed movements and where interest rates tend to be. I think that we've all experienced what happens in a spike in interest rates and where incentives need to be to continue the sales momentum.

So I think that, that's probably the biggest factor that's out there is what incentives are needed. We've seen those start to abate this year. So assuming where mortgage rates continue to trend -- we think that, that's a favorable tailwind behind us. We do see some cost improvements that are starting to bleed through cost of goods sold.

And we do think that, that's a little bit of a tailwind as well. But really, the questionable factor out there is around mortgage rates and where those head and maintaining the cancellation rates that Mike has talked about and making sure that we have that right price to mortgage rate balance and get to the right payments..

Got it. Okay. That's helpful. And then lastly, just one more for you, Chris.

On the -- following the private placement and the capital markets transactions, any thoughts on how to think about capitalized interest as we get out either later this year or into next year?.

Yes. I think that effectively, Matt, there's about a 300 basis point difference delta between where our revolvers price today and where the five-year term loan is. I think that the communities that are active in selling today, it takes roughly four or five years as that kind of bleeds through overall.

So we've got what's being constructed plus then new communities that will be in there. And so we'll see that bleed out over the next three to five years, really..

All right. Well, thank you, Chris. Thanks, guys. Good luck..

Yes. Thanks, Matt..

Our next question comes from Jay McCanless with Wedbush. Please go ahead..

Hey, good morning. Thanks for taking my questions. So my first one, if you could talk about cycle time for the entire company.

That was good news on Arizona, but just trying to triangulate if you're going to get to roughly 70 communities by year-end and you're selling at a three pace, what does that look like for deliveries as we start to think about 2024?.

Hey, Jay, it's Mike. I'll take that one. I think for the most part, we are seeing a large decrease in the elongated cycle times that we had faced here over the last year or so.

As you said, the highlight has really been Arizona, which we've been excited to get that to that five month range, which is really core in that marketplace because we want to get those 2x turns per year out of there.

So we're seeing actual improvements everywhere, including Florida and Southern California is doing a great good job in terms of their cycle times. And actually, they weirdly of all places probably had the least disruption around their cycle times and with the supply chain. And so they've done a really great job.

Northern California seems to also be getting their arms around their cycle times and bringing it down substantially. Really the challenge has been that there's -- we call these sort of slice box or these electrical boxes that have been a challenge and they really impact the tax product, which what we build primarily up there in the Bay Area.

So -- but that seems to also be resolving itself. So I would say that we're ranging anywhere between that 5.5% to 8.5% say, a product types across the country, which has been which has been terrific because it was much, much higher than that prior we're seeing, as I said, look, really good improvements..

Okay. Great. Thank, Mike. And so I guess as we think about July, it sounds like whatever limiting of orders you guys did during June, those restrictions by and large, are off.

So you should think about a pace maybe in line to higher than what you're able to achieve in 2Q? Is that the right way to think about it?.

I think so. Yeah..

And then the other question I had was just around lumber cost. Lumber seems to be moving up. We really haven't seen much deflation in some of the other goods.

I guess the gross margin guide that you provided, does that include some increase, some of the in lumber effect, or when should we expect some of these higher lumber prices to be rolled into the gross margin?.

I'll let Chris probably handle some of that around the gross margin side. But you're right, lumber is going back up again. That's generally though, again, starts that we'll see closings until first quarter of next year.

So what we're hopeful -- hoping for, Jay, is that we'll continue to see lower lumber costs and frankly, lower other material costs and labor costs that were embedded in the starts that took place at the beginning of the year to roll through for the balance of the year..

Yeah. I think Mike said really well, Jay. I think that just the time it takes to embed into our cost of goods sold and by the time we close those homes, I think you'll see the benefit of that for the balance of this year and then start to pick up at the beginning of next year..

Okay. Sounds good. That’s all I had. Thank you..

Thanks, Jay..

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

Good morning, gentlemen. Yes, I was just hoping to get an update from you on your Texas operations and a couple of units left in New York? Thanks..

Hi, Alex, I'll take the New York question and then I'll hand it over to Mike. So New York, we just have two penthouse units, condo units left in our 14th Sixth Street building in Manhattan. There's a lot of construction going on there right now with the MTA.

But we think that once that's done, and then there's better access to building, we should be done with that building, and then we will no longer have any -- continue to have any sales activity in the New York area. Mike can take this question..

Sure. Really excited about what's going on for us in Texas, particularly Austin currently. We are well underway at our Anthem community in Kyle, Texas.

It's a multi-segmented multi-planning area, master planned community and we look to be going vertical with construction here in early fall as well as three other communities that we acquired over the last year that were all finished lot communities are delivering to us -- deliver to us [indiscernible] strains.

We have those coming online here, and we're going to be getting construction here in the next couple of months on two of those.

So -- we're very excited about the progress that we're making there and getting energy and looking to add to our revenue base through our operations here very soon as well as some other opportunities that we're looking at throughout Texas in general..

So it sounds like first deliveries and revenues won't come until next year? And can you guys give us some type of guidance in terms of what average price point to assume? And maybe how many closings you would expect next year, roughly speaking?.

Yes. So I think that typically, we're not giving guidance on property by property or state by state. But if you think about we will start delivering homes in Texas in the first part of next year, and then do our typical ramp up there. So you'll see a ramp through the year in 2024 on our Anthem community.

Average selling prices should be consistent with what we're seeing in Arizona and Florida and more in line with what our typical average selling price is in those communities..

Thank you very much. Good luck..

Thank you..

Thanks, Alex..

[Operator Instructions] There are no further questions at this time. So I would like to turn the floor back over to John Ho, Chief Executive Officer for closing comments..

Thank you, everyone for your time today. We're really excited about how this year has performed and looking forward to the next quarter when we speak again. Thank you..

That concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..