Good morning, and welcome to Taylor Morrison's First Quarter 2020 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded.I would now like to introduce Mr.

Jason Lenderman, Vice President, Investor Relations and Treasury..

Thank you and welcome everyone to Taylor Morrison's first quarter 2020 earnings conference call. With me today are Sheryl Palmer, Chairman and Chief Executive Officer; and Dave Cone, Executive Vice President and Chief Financial Officer. Sheryl will begin the call with an overview of our business performance and our strategic priorities.

Dave will take you through a financial review of our results.

Then Sheryl will conclude with the outlook of the business, after which, we'll be happy to take your questions.Before I turn the call over to Sheryl, let me remind you that today's call, including the question-and-answer session, includes forward-looking statements that are subject to the safe harbor statement for forward-looking information that you'll find in today's news release.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.These risks and uncertainties include, but are not limited to, those factors identified in the release and in our filings with the Securities and Exchange Commission, and we do not undertake any obligation to update our forward-looking statements.Now, let me turn the call over to Sheryl Palmer..

Thank you, Jason and good morning everyone. We appreciate you joining us today. Before we get started, I want to send my thoughts out to each of you with hope that you and yours have managed to stay healthy during this global health crisis.

The COVID-19 pandemic has impacted every corner of the world and Taylor Morrison is just one of the countless organizations navigating its way to the other side of it.Despite the uncertainty and challenges associated with the economic shutdown beginning in March, we are quite pleased with the financial performance that we achieved during the first quarter.

Although we will highlight the most relevant data points of our results, our focus will be on the go-forward impacts of our current environment.Even now in early May, the landscape certainly looks a lot different than since a national emergency was declared nearly seven weeks ago when we transitioned a majority of our team members to a work-from-home status.

The company finished Q1 with sales orders of 3,466, which was up approximately 33% from the prior-year quarter.This represented a sales pace per community for the quarter of 3.1, which was also up nearly 35% from the sales pace of 2.3 in the first quarter of 2019.

Consistent with most of the industry, our sales orders in the first two months of the year started extremely strong, with January sales up 46% and a pace of 3.2.February sales were up 64%, with the pace increasing to 3.5 and continuing into the first half of March.

However, the last 10 days of March were slower with the deceleration in the sales pace to 2.5, as our team in the broader market adjusted to our new reality.While we're pleased with our first quarter results, what I'm most encouraged to see is the momentum we built in April, where we saw week-over-week improvement throughout the month in both gross and net sales.Specifically, the number of gross sales in the last week of the month were more than two and a half times the number of sales in the first week, while the number of net sales, given the reduction and cancellations was nearly five times the sales recorded in the first week.During the quarter, we had an average community count of 378, recognizing we only had seven weeks included with William Lyon communities.

The cancellation rate for the quarter held relatively steady at 13.8% versus 13.3% during the first quarter for 2019. The rate was about 10% in January and February and year to date through April is at 17%.Closings for the quarter came in at 2,761, which was up more than 42% versus the first quarter of 2019.

We saw less of initial impact from COVID-19 in our closings, with our results for March also up more than 42% year-over-year.We ended the quarter with our largest backlog yet with 6,565 homes in backlog and a sales value of 3.1 billion.

As we started to see restrictions being put in place to flatten the curve, we moved very quickly to address our backlog and understand which of our buyers had any potential risk.We'll talk more about the mortgage environment later.

But having an industry-leading team of seasoned mortgage professionals in-house, the Taylor Morrison Home Funding has been critical during this time.At Taylor Morrison, we pride ourselves on our ability to consistently execute in our market, and I'm amazed and truly appreciative for how our teams across the country have been able to pivot so quickly.

And I'd like to take a few minutes to walk you through some of the more meaningful shifts we've made as an organization in response to the pandemic.To help us successfully navigate through this process, we immediately created a COVID-19 task force, comprised of the company's senior corporate and field leaders.

Upon creation of the task force, the team at each morning to discuss the permanent information for the day and make the necessary decisions to strategically guide our business.The experience and diversity of skill sets represented has allowed us to effectively assess the rapidly changing internal and external parameters and proactively plan and respond.With the spread of COIVD-19, there hasn't been a single part of our business that hasn't had to change in some capacity to adapt.

When we transitioned to a work-from-home platform in mid-March, we made our sales centers and model homes available by appointment only and staffed our construction sites with skeleton crews appropriately following social distancing orders.As the economy now begins to slowly reopen and find its new footing, we remain as focused as ever on the core elements that anchored our team members together long before the onset of this crisis; performance, culture, and proactive QA communications.When I look at our salesforce and the 180 degree turn they've made to conduct their business completely virtually, is quite impressive.

We've now seen triple-digit sales conducted entirely virtually, meaning no prior physical interaction with that homebuyer whatsoever.While this decision to operate strictly under a by appointment-only model limited the amount of people in our communities at any given time, it hasn't dampened the creativity and proactive outreach of our sales team.During our customers' greatest time of need, our sales team was available, calling to check in on their well-being and their families, sharing pictures and videos of their construction progress, and financing their new home; answering any questions regarding the mortgage environment and any changes that could impact their closing.While market activity, traffic and sales are all showing up differently, we've begun to see a positive shift in consumer sentiment overall and a pickup in traffic and sales week over week for the last four weeks.It's worth sharing that we've been conducting surveys of all first-time registrants on our website since the week stay-at-home orders were enacted to help us understand the impacts of COVID-19 among potential buyers.Consistently, people have been visiting the website with plans to make a future purchase and to understand available inventory with 30%, specifically looking for move-in ready home.Most importantly, 74% of visitors have shared that their decision to purchase has not been impacted by COVID-19, and that's up from about 55% a few weeks ago.

And many of those that have indicated an impact simply suggest a slight pause as they seek to understand the overall market conditions and mortgage environment.By geography, the west appears to be the hardest hit with the stricter stay-at-home orders in California and the Pacific Northwest.

As discussed on our fourth quarter call, we unveiled a new company website in October of 2019, which couldn't have been better timed.The forward-thinking features, allowing customers to complete more of the shopping experience online became increasingly important amid the COVID-19 shelter-in-place restrictions.And while transforming the customer experience even further through our new website in 2020 was always in the plan, the need to do so drastically -- was drastically expedited.With our new website already boasting a more digital retail experience, we were able to quickly pull on our capabilities and elevate our website to serve as an extension for our sales team.We created a dedicated virtual tours-landing page, making it possible for shoppers to experience visiting a Taylor Morrison model or community without having to walk out their front door, and we even made it easier than ever to schedule a virtual or in-person appointment.Just three weeks into the shelter-in-place orders, we saw our website engagement begin to increase again, week over week, and in most instances, with much higher conversion rates.We are excited that we've seen more than 1,500 appointments scheduled within the past four weeks through our new online scheduling feature, a first of its kind in our industry.While website visitors can schedule in-person or virtual appointments, which makes up more than 85% of reappointment.

They can also schedule time specifically to complete and sign their contract.In fact, more than 20% of our April net sales were completely virtual.

As you are all aware, residential homebuilding was deemed an essential service across most of our markets from the very beginning, allowing us to continue having trades on our job sites.Fortunately, to-date, we have been able to avoid any significant supply chain issues.

Depending on the specific product, there's about three to six months of supply in the market, and most of our key vendors have been able to sustain operations despite any current or prior restrictions.We have many mitigating measures in place to ensure that no single product will disrupt our construction processes and timelines.

From a production standpoint, the biggest hurdle we've had to work through are some of the changes and municipalities have implemented.Although many municipalities are working through social distancing standards to still supply permits and complete inspections, albeit sometimes on a slower timeline, there are some that have been forced to get more creative to keep local construction moving.As buyers move toward closing their home, our title company, Inspired Title Services, has adopted a practice we refer to as curbside closings, whereby a notary delivers the closing package at a safe distance and witnesses signatures from outside the buyer's vehicle window.Today, all of our closings are handled using alternative methods to ensure the safety of our team and our customers.

Closings are expedited using our e-closing process, where we provide the vast majority of documents electronically days before the actual settlement date.The combination of e-closing and curbside offerings is making a positive impact on our customers' experience.

And as the industry and states adopt e-close as a standard, we expect that our innovative practices will become part of our new normal, allowing our customers to close on their home in a safe, convenient, and efficient way.One area of Taylor Morrison that didn't need any adjusting when the pandemic unfolded was our philosophy around transparent, timely communications with our workforce.

In fact, we doubled down on it as the cornerstone of our crisis management strategy.When we launched our daily stand-up huddles in July of 2019, as part of our quest to create a differentiated customer experience, we did so hoping they would help us become better at communicating and collaborating to better serve our customers.And they have also proven to be a key tool in ensuring that our William Lyon integration efforts remain on track.

It's really difficult for me to imagine how we could have completed any of the integration work.Sold or closed any William Lyon Homes in this environment, appreciating that the pandemic impacts happen just over 30 days after the transaction closing without having our huddles in place.But now the huddles are our lifeline, and we were extremely fortunate to have had so much practice communicating daily and in real time, especially as our workforce was forced to physically disconnect through social distancing.All of that said, I'm happy to share that even though these -- through these challenging times, we continue to make progress with the integration of William Lyon.

We completed town hall meetings pre and then immediately post-closing with all team members to begin the onboarding and integration process.

Of course, we then had to reprioritize some items given the current environment, but major systems and processes continue to be transitioned.We were also able to complete the renegotiation and implementation of all of our national and regional contracts, which has benefited both legacy brands more than initially anticipated.From a financing and accounting perspective, we've reconciled accounting policies and mapped all accounts to ensure a timely and accurate closing of the books on an ongoing basis.

We've also been able to add the William Lyon communities to many of our key operating reports that track sales, margin and construction cycle times.The William Lyon divisions are also up to speed on our investment committee processes for current and future land deals, and our risk management team has updated all of our policies to account for the new combined business.Although we've made progress on many fronts, there are some items that have been impacted.

For example, in-person training has been transitioned to virtual training sessions until we can bring teams from across divisions together again.This was particularly challenging initially in our virtual selling environment, as the legacy business had not started down that path across their company.

The other area that has been more difficult to advance as quickly as we like, are the new non-overlapping markets in the portfolio.Unfortunately, these markets have had added pressures with Seattle deeming construction as a nonessential business and Las Vegas being uniquely shut down with a peak in unemployment.We are encouraged that last week, construction was able to resume in Seattle, albeit with some exceptionally strict protocols.

Assuming a normalized environment, we remain confident in achieving the $80 million annualized synergy levels previously discussed for 2021.With that said, I couldn't be prouder of the work that the teams have put in since the close of the acquisition and specifically since the onset of the COVID-related work restrictions to ensure that the critical integration work continues to be executed with a great deal of focus and energy.Lastly, before turning the call over to Dave, let me spend just a moment on the benefit from the sheer diversity and strength of our consumers and product offerings.

Through a number of our acquisitions, we've expanded our presence in entry level the last few years, and it's been an important piece of our product strategy, even as we've maintained strong positions across other consumer groups with our family, move up and lifestyle community buyers.As we've shared before, our first-time buyer is more of a professional entry level buyer, and as a result, tends to be better qualified and may have a better chance of weathering some of the current volatility.

As I mentioned earlier, we have seen different actions by different consumer cohorts.The first time move-up buyer has represented the most consistent behaviors across all markets with steady sales and low cancellations, followed by first-time buyers.

The first-time buyer has been the most active on the sales front, but the most volatile in the backlog.And at the most affordable price points, the most challenged in this new credit environment.

COVID has impacted the timing of the 55-plus lifestyle buyer, as these are the least-likely consumers to complete the entire process virtually and the consumer that has been asked to be sure to stay home during these last many weeks.We know we won't be immune to cancellations given the current uncertainties and its impact to consumer sentiment, but after spending a considerable amount of time understanding the position of our homeowners and backlog, we believe that we're well positioned to close these homes through the year.Similar to our prior acquisitions, we have taken a very aggressive stance in cleaning the backlog and COVID only increased that urgency for us.

We have a strong backlog with average deposits near 7% of purchase price, illustrating that our customers have put forth a serious financial commitment toward closing their new home.

I believe Taylor Morrison and our industry is prepared to weather this storm as today's environment is very different than the financial crisis.Inventory levels for new and resell homes were extremely low prior to COVID-19 and remain low today.

And although we're seeing a surge in forbearance claims, homeowners today have sizable equity in their homes and the demographics support continued household formation over time as we work through the reopening of America and people begin to get back to work.With that, I'll turn the call over to Dave for the detailed financial review..

Thanks Sheryl and hello everyone. Before I get into my normal financial review, I'd like to take a minute to address our strong liquidity position as this is a focus for every business in today's environment.We ended the quarter with about $750 million in total available liquidity.

Over $500 million of that was from cash on hand and the remaining difference was from available capacity on our $800 million corporate revolver.We did have $485 million in borrowings on the revolver at quarter end.

But as you can tell, much of that has been held in cash on our balance sheet, as we borrowed $250 million in the middle of March at the onset of COVID-19 to ensure an abundant liquidity for daily operations.Our net debt-to-capital ratio at the end of the quarter was 46.8%.

Given our planned reduction in land and development spend over the next several quarters, which I will touch on in a moment, we anticipate Q1 to be the peak of our net debt-to-cap ratio for the year, as we monetize our backlog and begin to pay down our revolver balance.Lastly, we have no senior notes maturities until 2023.

As Sheryl mentioned, we've exerted great effort to maintain our backlog and to pull-through every closing we can.

We also implemented additional controls on how we spend our cash.As we announced a few weeks ago, all named Executive Officers have voluntarily reduced their base salaries by 25%, and we'll defer those payments through the duration of the COVID-19 restrictions.Additionally, substantially all members of senior corporate management and division presidents have decided to take the same temporary pay deferral and the board of directors have deferred their cash retainers for the current quarter.

While these compensation adjustments have helped in the short term, we are evaluating our go-forward workforce structure as well.We are limiting all non-essential cash expenditures, including, but not limited to, working with land sellers and developers and our internal development teams on approximately $320 million of land and development spend which pushed out or reduced payments on over 8,000 lots.

These partners understand the impact of the current environment and, in most cases, are more than willing to work with us.We have also been quite discerning on any new land acquisitions and have increased scrutiny on the next phase of development dollars to limit expenditures and extend time line where appropriate.With respect to vertical WIP, we've implemented a revised cadence on all new home starts, both inventory and sold homes to assure greater certainty on closing performance.We have always had a stringent prequalifying process at the time of sale for our homebuyers, but we have added a requalification process at the time of home start to ensure continued viability.Turning back to the results for the quarter.

Net income was $70 million, and diluted earnings per share was $0.57 when adjusted for expenses related to the William Lyon Homes acquisition.

Including the acquisition expenses, we reported a net loss of $31 million and diluted loss per share of $0.26 on a GAAP basis.Total revenues for the quarter were 1.35 billion, including homebuilding revenues of more than $1.26 billion.

Homebuilding revenues were up more than 40% from the prior year.For the quarter, GAAP home closings gross margin was 15.4%, inclusive of capitalized interest and purchase accounting.

The impact from purchase accounting adjustments during the quarter was about 220 basis points.We anticipate the Q2 purchase accounting impact to be at or slightly below Q1, recognizing that it will be a full quarter impact of legacy William Lyon operations and then should moderate through the year.

Also, we had a focused effort on selling through finished spec inventory from legacy William Lyon, which pressured margins during the quarter.We anticipate margins increasing closer to our pre-acquisition levels as we move through the second half of the year working through purchase accounting, finished spec inventory, and realizing purchasing and construction synergies.Moving to financial services, we generated approximately $28 million in revenue for the quarter and more than $11 million in gross profit when adjusted for the impact from William Lyon.

Our mortgage company capture rate for the quarter came in at 75% compared to 69% during the first quarter of 2019.We are pleased with the capture rate as our legacy Taylor Morrison and William Lyon financial services team have come together, both quickly and efficiently.

Our April backlog capture rate for the new combined business is at 86%.We transferred the William Lyon book of business to our platform, and the team members are now licensed under Taylor Morrison Home Funding.

We look forward to enhancing our efficiencies as our mortgage operation also moves forward as one brand.SG&A as a percentage of home closings revenue was 10.8%, representing 70 basis points of leverage over the same quarter last year.

The leverage was driven by increased scale, as well as strong market conditions we experienced ahead of the COVID-19 pandemic.Adjusted EBT margin was 7%. In Q1, we had approximately $123 million of purchase accounting and one-time expenses related to the William Lyon Homes acquisition.

This represents the majority of the acquisition expense but we will continue to see additional expenses over the next few quarters as we continue to integrate the business.Income tax was less than $1 million, as tax expense attributable to core operations was largely offset by certain deductible one-time expenses from the William Lyon acquisition and the benefit of energy credits.During the quarter, we spent over $300 million in land purchases and development.

At the end of the quarter, we had approximately 75,000 lots owned and controlled. The percentage of lots owned was just under 74% with the remainder under control.

This is down from almost 80% at year-end, as we positively benefited from the lower percentage of owned land that William Lyon carried.On average, our land bank had approximately 5.3 years of supply, of which 3.9 years were owned at quarter end based on a trailing 12 months of closings, including a full-year impact of the William Lyon acquisition.Total specs at quarter end were 2,694, of which 655 were completed or about 1.7 per community.

This is up from about 1.1 finished specs per community at year-end, but the majority of that increase was anticipated as part of the acquisition as William Lyon operated with a higher percentage of inventory homes.Although some of the increased cancellations from COVID-19 will result in additional specs, we and the industry more broadly were fortunate to be operating with a limited inventory supply when the pandemic started.With that said, we are focusing some incentive dollars toward moving our completed inventory homes.

Through Taylor Morrison Home Funding, we are currently offering to pay all closing costs on an inventory home with a closing date before June 30, and we'll pay 1% toward a lower interest rate.We believe reducing cash out-of-pocket to assist customers with their financing is a prudent use of our incentive dollars and a compelling value to keep moving inventory homes.Near the end of February, we announced a new $100 million share repurchase authorization from our Board.

The authorization was substantially exhausted during the quarter, as we bought 5.4 million shares for just over $90 million.We ceased repurchasing stock as the pandemic developed so we could focus on liquidity, but we will continue to evaluate the opportunity to repurchase stock as a key part of our capital allocation framework in the future.We also want to provide an update on the continued progress of our build-to-rent strategy.

Currently, we have two projects in Phoenix under development with construction activity planned for late this summer and early fall, with occupancy in early Q1 2021.We recently closed on a credit facility for the first project, which aids the capital efficiency of the BTR model.

The team is also actively managing a pipeline of projects in Phoenix and Dallas with lease activity for our subsequent projects in late 2021 and 2022.Charlotte and Florida projects are under review but slightly behind Dallas, given the realities of Christopher stay-at-home orders.

We have been encouraged as we track the performance of the current Christopher Todd Communities despite the impact from COVID-19 rent forbearance to many multifamily assets that are resulting from renter job losses.To-date, the Christopher Todd Communities have held up better than the overall multifamily market as these single-family lifestyle communities provide a true detached lifestyle and possess, on average, higher income renters than typical multifamily apartments.We strongly believe this asset class is meaningfully underserved and provides opportunity through the market recovery and beyond as we hear buoyancy in the investment arena as well.As Sheryl mentioned, we're encouraged by our efforts to continue to secure our backlog, but due to the uncertainty surrounding the current environment, we are unable to provide guidance on what we think the second quarter or full year might look like.We have always prided ourselves on the level of transparency and information we're willing to provide, but at this time, it's just too difficult to predict, with accuracy, given the impacts of COVID-19.Thanks and I'll now turn the call back over to Sheryl..

Thank you, Dave. So, before we move into Q&A, I'd like to turn to a few national local market updates, beginning with what we're seeing in the mortgage interest rate environment.

Although rates have remained at historical lows, there has been extreme volatility in the market, in general.Luckily for us, we have one of the most tenured and experienced teams in the homebuilder mortgage industry that has helped us strategically and creatively navigate the erratic interest rate environment.Initially, rates moved higher as strong refinance demand quickly overwhelmed the industry's capacity to meet demand.

However, while capacity has somewhat adjusted, credit and economic uncertainty has since added new pressure to lenders as the mortgage market attempts to price for the new higher risk environment.And amid the rapid changing environment, we empowered our mortgage loan consultant to quickly help our customers secure the lowest rate and provide formal mortgage approvals before credit tightening could affect their qualifications.

Within days of shelter-in-place orders, our outstanding March projected closings were locked in.And by the end of March, nearly half of our April projected closings were secured.

This is important because when a customer locks their interest rate, certainty around closing is significantly higher, as now the lender is able to provide a formal approval giving the customer certainty of payment in terms and also reaffirms the customer's commitment to the transaction.During these unique times, we have seen this as the single most important customer affirmation in the process.

This strategy strengthened the visibility into our backlog and provided confidence about closing dates.

We continue to see strong lock activity with our projected closings for May, secured with historically low interest rates in June well on its way.Taylor Morrison Home Funding has been a key part of our business for a long time and allows us to assess the strength of our customers' financial situation and ability to consummate their home purchase.This has always been vital to our business, but never more than it is today, given the impact of the government's forbearance plan and rising delinquency rates on the broader mortgage industry.

As these dynamics continue to unfold, we expect continued disruption.However, at Taylor Morrison, our platform gives us the ability to navigate these headwinds, while ensuring we can continue to serve our homebuyers with attractive and convenient financing options.Historically, we've strategically chosen not to retain servicing of our mortgages.

So, the company does not have the forbearance servicing financial burden that other mortgage companies are currently facing.However, we have quickly pivoted in response to the contraction in sub-servicer availability and chose to engage in loan servicing for a portion of our loans that we originate going forward.This decision alleviates the overlay challenges that have constricted credit availability across the industry and importantly, illustrates the nimbleness and strength of our mortgage platform that allows Taylor Morrison to provide strong mortgage options for our homebuyers.One last point worth mentioning is that although an incredible amount of work went into innovating our business operations seemingly overnight for the current virtual environment, we expect these innovations to serve us well beyond these challenging days, a silver lining in tough times.We also know a second wave of tremendous work is upon us as the economy begins to reopen, and we blend our new virtual wins and innovation into our normal business operations.We have documented our plan to generally align with how the President's three-phase approach will work for our business, and we stand ready to get to a fully reopened state on a market-by-market basis.

In fact, that work has already begun in Texas and Georgia and the Florida market, who led the nation in reopening.While transitioning is going to be hard work for all companies, Taylor Morrison included, we do feel comfortable that we've positioned ourselves to move as quickly as possible, given the size of the business, our daily communication and the decisions we've made to preserve liquidity.One of the lesser talked about challenges when it comes to reopening businesses will be how we delicately handle the anxiety from team members and customers alike, who are fearful about reentering back into society.

A focus on health and wellness is one of the core tenets of our culture, and we have a long history of caring deeply about the health of our communities.As a result, a significant part of our plan to fully reopen includes aiding our customers, team members and trade in ensuring they are healthy on all levels and feel safe.During these difficult times, it was really nice to receive some good news a couple of weeks ago when we found out that Taylor Morrison was named Builder Magazine's 2020 Builder of the Year by Hanley Wood and Meyers Research.There were many achievements that elevated Taylor Morrison to the top for this award, but a few key reasons they noted were our talent, trust and litany of M&A milestones, but more importantly, for the compassion and customer care we infuse into every interaction.This award is a nice reminder of how our organization continues to be perceived and I'm truly honored to receive the distinction, knowing wholeheartedly, we accomplished it with so much passion across our entire organization.

I'm very proud of the Taylor Morrison team members for this achievement, and I look so forward to celebrating with all of them as soon as we can.So, before wrapping, I would like to acknowledge how incredible it was to watch the entire homebuilding industry come together to collectively support the communities and cities that we build in.As the PPE shortage came to light in certain parts of the country, team members gathered masks, face shields and goggles, industry-related organizations, like HomeAid also stepped up and served as a conduit to aggregate these supplies and get them delivered to the places where they have the largest impact, primarily the medical community.While we're normally seen as competitors, it's times like these that make you take a step back and realize there are things outside of the industry that can bring us all together to support a common cause, much bigger than any of us.I always end our calls with an enormous thank you to our teams across the organization.

I also don't want to forget our trade and business partners as well. They all deserve that recognition now more than ever. It's a true honor to lead such a selfless and caring organization.

Their innovation in times of crisis and the relentless pursuit of doing the right thing for all of our customers both internal and external is inspiring.And lastly, but certainly not least, a special thank you to the front line of Americans across medical and emergency and service industries that have worked tirelessly through this global healthcare crisis.With that, I'd like to open the call to questions.

Operator, please provide our participants with instructions..

[Operator instructions]Our first question comes from the line of Jack Micenko with SIG. Your line is open, please go ahead..

Hi, good morning. And I hope everybody's well and Sheryl, thanks for the increased detail on operations and that sort of thing. A number of -- you gave us a lot of color on sales pace in April and net versus -- or not sales pace rather, order trends and activity. Can you -- is it possible -- I know you integrated William Lyon Homes recently.

Is it possible to give us an apples-to-apples on what April activity was versus a year ago on a sort of a same-store basis?.

Yes, interestingly enough, Jack, I don't have the numbers split because we integrated all the communities and obviously, all the overlapping market.

But what I would tell you is if you go back to 2019, you'll see that through the year as our sales success ramped up, we closed out of a number of communities.So when I look at the compare of communities from the end of Q1 2019 to the end of Q1 2020, the good and the bad is there was not a real difference.

There was only an average of six communities' difference because of our closeouts last year and our ramp-up moves through this year. So, you don't really have to peel them apart because candidly, the numbers quarter-over -- year-over-quarter are pretty similar. So, the pace is up, and that's what really mattered..

Okay. Okay. And then Dave, without giving guidance, obviously, when the visibility is limited for everybody, you did speak with some confidence around the margin improvement in the back half of the year.So, I guess the question there is, I would assume or it sounds like a lot of that is already maybe in the bag, so to speak.

What kind of incentive environment are you looking for in that improvement scenario? How much of the purchase accounting kind of burns through -- kind of help us understand in that statement.

How much of that is what you can control versus what you can't control?.

Right, Jack. Great question. First of all, let's say, purchase accounting. That's the biggest driver. And when we talk about overall margin improvement in the back half, we're really about burning through that purchase accounting.

You saw the number, about 220 basis points in Q1.I mentioned that we're going to see something similar to that in Q2 as we work through the WIP inventory. But then that should start to moderate in the second half of the year.So that will be the big driver.

You look at several things; you mentioned incentives, but also for the cost environment in there. Costs from an input standpoint, many of those are down relative to where they were.

So, that should help as we move forward.When we look at just the kind of underlying business, we are leveraging AV, as the margins are coming in line with our overall business.

So, we're through all that integration work on the AV side.I think where we have -- the headwinds, obviously, are any kind of discounting our incentives based on the market conditions that we're seeing out there right now.

Going into kind of this time period, for Q1 deliveries, our incentives were down year-over-year, as well as down sequentially from Q4.Now, this quite possibly could increase in Q2 as we battle through the current market conditions.

We'll take a similar approach to what we've done when we saw other previous slowdowns.But right now, we're spending a lot of time kind of repackaging our incentives to keep them refresh and drive some urgency as well.

And then of course, we'll have some incentives as we work through finished spec inventory as we stay focused on turning the assets as well..

I think one interesting point to add on is, as Dave said, our incentives were down year-over-year sequentially. About half our sales have been spec homes, and about half our sales have been out front to be built. Our incentives are focused on quick closings.

So, even with that, it's been interesting to me to watch the amount of kind of future business that's coming in the door today..

I'd probably just -- I think the known for all of us, probably the biggest factor going forward is just going to be the lasting impact of COVID-19 and how long this will disrupt the economy, but we'll just play through that as it comes..

Okay.

So, it sounds like there is some expectation incentive -- increased incentives in that broader view, though, right?.

Jack, I think it's hard to say. When I look today, we are seeing some increased incentives out in the market. I'd say where there -- where folks have a lot of inventory. I think it's been responsible. It's generally on quick closes. But we have seen some increased incentives in the market. I think we've stayed relatively disciplined.

But when you're head-to-head, you're going to move the inventory.But like I said, even with those incentives, we're seeing about half the sales come without incentives because they're on to-be-built where the consumer gets to pick a lot and make all their own selections. The incentives that were used to-date aren't actually on top of incentives.

They've really been just targeting the incentives on the credit opportunity that Dave discussed..

Okay. Thanks. And good luck..

Thank you..

Thank you and our next question comes from the line of Ivy Zelman with Zelman & Associates. Your line is open, please go ahead..

Thank you and good morning guys. Appreciate all the excellent insights, and I know how tough it must be in this environment. But kudos to you on the website and the virtual sales. So, first, let me just understand, Sheryl, did you say you guys are servicing now or are you servicing with a sub-servicer? Just want to clarify..

No, no. Ivy, absolutely. Like I said, we've taken -- looking at the exposure that got brought into the industry, we absolutely have had to make some shifts.

So, we're using aggregators who -- and co-issue servicers, so that we're not as impacted by the correspondent lending channels.And I think Ivy, you know all the reasons this has happened, but to ensure our ability to execute the best mortgage experience for our customer without getting those, what I would call, very disruptive overlays we've seen in pricing issue.Today, we're selling to Fannie and Freddie because we think that's been our best execution and providing pricing advantages.

And before the crisis, we were selling all of our loans volume to aggregators, servicing released was most often our best execution.But now we've been able to open that service loans and utilize a sub-servicer, which I think is a -- given TMHF increased optionality and allows us to better leverage the risk and profitability advantages with minimal disruption..

No, I understand why you did it and makes sense.

Could you break down the products in terms of mortgage type? How much is conventional versus government versus jumbo?.

Yes, absolutely. I think it's interesting. We haven't seen any real shift over many, many quarters. But right now, if I look at Q1 2020 about 81% with conventional, about 8% FHA. That's up from 6% last year, but that makes sense with the added units with William Lyon. 8% VA and only 4% jumbo, which is way down from close to 9% last year..

Got it. And while you provided very good detail around the change from beginning of April to the end of April, you really didn't say just flat out what the year-over-year decline was like other builders have provided.

So, is there a reason that you're not telling us?.

No, there's not a reason. I would tell you that year-over-year, it's about 30%. But I look at the gross sales and the net sales.

When I look at the total net, the net is down about 30% because, as I said, we really took an aggressive stance in cleansing our backlog, started that in early mid-February with the acquisition, just to make sure we clean that up and then obviously continued forward with COVID.

When I look at the growth sales, I'm quite pleased, but I'm happy to cleanse our backlog, which gives us a net about 30% down year-over-year..

Great. And it's relative to the industry, that's kind of a little bit better middle to better than average, I'd say, with respect to what we've heard so far. Within your backlog, the move-up buyer likely has a home to sell, and selling homes right now is difficult.

Do you have concern? Or do you feel the deposits are big enough? Can you just give us some color around those buyers that have a home to sell and backlog?.

So, as I said, Ivy, we are -- we scrub our backlog and are very proactive to understand where our customers are and the ones that have a home to sell, home to close.

I think last time I looked at the -- a couple of weeks ago, I think it was about 6% or 7%, had a contingency in the backlog.And as, I believe, Dave mentioned in our prepared remarks, we're taking a second look at our backlog before we begin construction.

And we want to make sure we have full visibility if we're considering starting a new home for a customer.Nothing is 100% Ivy, but I think it absolutely reduces our risk. And I think we've demonstrated over time, with our very low can rate, the tight controls we have in our backlog.So, I feel pretty good.

Part of the TMHF process has also been tracking all COVID-related risks, on furloughs, and job losses, and pay cuts. So, we've been paying very close attention and have a pretty rigorous process in place on the backlog.

And I said -- like I said, got very aggressive.I guess, lastly, what I share is when I look at the progress in our can rate over the last, oh, my goodness, four, five, six weeks, it would have started six weeks ago at something like 50%. And this past week, it's single-digits.

So, I think we're getting back to a pretty normalized place on the backlog..

Fantastic. Good -- very impressive. Could you -- lastly for me, and then I'll get back in queue. Just in terms of your stock being hit so hard, has a lot to do with the old adage of Houston exposure and with the energy prices. So, maybe just go around the horn a little bit. Obviously, you're in Vegas.

You said -- where you can provide sort of the market color, where you're seeing the greatest impact as opposed to where you're seeing outperformance, would be helpful..

You bet, Ivy. I mean Texas; I think you have a few different things going on. Austin, has continued remarkably strong. I mean with an integration on their plate, with, I would say, very conservative stay-at-home protocols. I believe last week, Austin had our highest both growth and net sales in the company, not something I would have expected.

So, just very strong.I would say even though we've reopened the state of Austin and we entered into -- excuse me, we entered the state of Texas and entered into Phase 1 of our back-to-work. I think the markets are all responding a little different. Austin probably remains the most conservative as far as just how the consumer is viewing things.

Dallas, I would say, middle of the road. And Houston, kind of COVID, they didn't stay-at-home during the COVID stay-at-home, and they're not staying at home now.Interesting about Houston specifically, Ivy, like you said, we're in a -- I think the just crisis, in general, is and the oil pressures, in general, very different than what we saw last time.

It'd be hard to say it's not creating additional headwinds in the market. But there are certainly a number of new facts that I think you have to look at to put it all in appropriate context.The market's changed dramatically since we were wholly reliant on oil and gas.

I mean I think if we look at the Houston workforce, it's something like 1.2%, is reliant on -- and certainly, there's lots of ancillary roles.When I look at Taylor Morrison and compare us from 2014, Houston represented about 23% of our total community count. That's dropped to less than half of that. So our volume is very different.

When I look at our balance sheet, it's a very low percentage.And probably more important than ever, anything is, we're just continuing to write deals there even through these last three, four weeks, beyond -- to my surprise. It's holding up surprisingly well.

Kans are kind of in the same place the rest of the country is it's kind of the middle of the road for us.Atlanta, and if I go to Georgia, doing pretty well. I mean that's where we really do serve that first-time buyer, lowest can rate in the company, actually, the southeast overall has been very low. We've opened Georgia as well.

And I'd say, as I look at the more affordable positions in Atlanta, they're doing quite well.The in-town business, a little slower to come back. But we started to see some real movement there in the last 10 days, great website traffic there. I'll skip around a bit, but if I go kind of to the west, California, also a bit.

The markets are behaving very differently. SoCal is probably where we've been the most consistent. Sales still doing well in the Inland Empire. We're seeing good traction at the lower price points. Resales have really been coming off the market there.

So, inventories are very low, I think, in both new and resale.The Irvine buyer has probably been the quietest to return, the more ethnic buyer. The higher price point has been moving the slowest there.

But all-in-all, I'd say it's been pretty consistent over the last two, three weeks.And when I look at our price point in Southern California, I look at our closing ASP, and I look at our backlog ASP, under $600,000, that's close to half of what it was a couple of years ago. I think everyone knows the bay has probably had the most restrictive orders.

We are starting in the last 10 days to really see some traction there.If I move to the PAC Northwest, Seattle, I put in the same category as the bay, the most restricted construction nonessential. We've just reopened. But even with that reopening, very prescriptive, the public is slow, I think, to get back there.

A fair amount of inventory that we'll be working through.I contrast that to Portland, probably COVID what, I mean, it's been amazing that every part of that market feels unaffected, solid sales, very normal, not just across, I think homebuilding, but most of businesses in Portland.If I go to Arizona, continues to be very solid.

Obviously, everyone knew that was -- that market had our some of our highest paces across the country pre-COVID. I'd say that continues strong. Margins continue strong. Governor just announced it's going into Phase 1 of opening.

We have not made the decision that just happened this week to reopen in Arizona, but that will be happening very quickly.Colorado, big integration market for us, much more affordable price points than in the past, they're doing really well. And then I'll wrap-up with Florida. As I mentioned on the call, active adults, it's been interesting.

Probably some of the most engaged consumers, but the slowest actually come to appointments or to actually get out of their home and not the most virtual, but also where we've seen very, very low can rate. So, I hope that helps us a little around the world..

Absolutely. Thank you so much. Good luck..

Thank you..

Thank you and our next question comes from the line of Michael Rehaut with JPMorgan. Your line is open, please go ahead..

Thanks very much. Good morning everyone. I hope everyone's safe and healthy. First question, I guess, just circling back, Sheryl, appreciate the down 30 for April. But I think what was really the most important part of that is, as you described in the press release, in your prepared remarks, was around the improvement that you saw during the month.

You also noted that your sales rate or your sales pace was around 2.5 during the last, I guess, 10 days of March.I was curious and obviously, typically, you wouldn't expect to -- or we wouldn't ask a week by week, just given the volatility, in general, and the inconsistency week to week.But I was just kind of hoping on the back half of April, as things perhaps started to stabilize a little bit, where that sales pace, that net sales pace ended up that could obviously kind of take out some of the noise that you saw in the first half of the month?.

Yes, I don't have the pace by week, Michael, in front of me. I don't know if you do, Dave. But when I get to the last one week or two, Michael, it's certainly not going to be the pace of what we saw in January, February.

But I would tell you it's more akin of the historic business when you're on appointment-only in some parts of the country completely closed, I'm just really encouraged by the paces we've seen..

Yes, I mean to Sheryl's point, Michael, if you look at like February, if you were to kind of extrapolate week by week, we're probably out of four and end of March.

And then the last two weeks of March, kind of early April, that was one.And then as we kind of got to mid-April through the rest of April, again, extrapolating week by week, you're probably a two-plus building throughout the weeks..

Yes..

Okay. Yes. That kind of makes sense.

I guess secondly, the comments around mortgage tightening at points and some of the moves that you've done on the servicing side or working with sub-servicers, just wanted to delve into both of those aspects a little bit.On the tightening or the lending standards, if you can give us a sense kind of how that's affected, what portion of potential buyers that you have out there? You kind of mentioned that you have 8% FHA, another 8% VA and then a little bit jumbo.But even on the conventional product, just trying to get a sense of how you feel, in general, if it's kind of shrunk your buyer pool at all.

What type of impact that's had on what kind of rough percentage of your buyers?And secondly, just to be clear, on the sub-servicer moves that you've made, whether or not that has any type that -- whether or not those actions or alliances or partnerships have any type of servicing risk that comes back on to Taylor Morrison itself or the home lending company?.

Okay. There's a lot packed in there, but let me give it a shot, Michael.

I mean TMHF has had a real -- a strong group of aggregators with long-standing relationships that I think have allowed us to leverage and maximize our product offerings with really best execution.As you know, we're also approved with Fannie and Freddie as the Fannie and Freddie lender, which means we can sell our loans directly to the agencies rather than going through third-party aggregators.And that's really important for us, as it allows us to avoid some of the overlays you're referring to that they've imposed, given, I think, the disruption that we've seen in the servicing market.So, as a result, TMHF has really been able to mitigate much of the credit tightening for our own customers, no matter which category you're talking about.

We're seeing most lenders and aggregators raise their minimum credit scores to anywhere from 640 to 660 in the FHA space and jumbo, probably around 700 with 20% down.I'm pleased we're still able to qualify customers at our 640 credit score, although the pricing that's available today does reflect the risk at those lower FICO scores.

We reacted to the environment by opening our ability to retain the servicing on a portion of the loans where the servicing market has either dried up or become what we'd call irrational on the pricing side, that's why we did it.It gives us the ability to continue to serve these customers while avoiding the credit tightening that the broader markets are experiencing.

FHA, when I look at our book, has been most impacted, as we said.And about 10% of our past was FHA. When I look at their credit scores today, our closed in the quarter FHA buyers were like at a 696. Our backlog is, I believe, at 709 for first-time buyers.

So, we're in a really good place.Once again, with jumbo, even though Jumbo is also in non-QM programs have probably been equally or more impacted.

The relationships that TMHF has with different mortgage product providers has really not in any way hampered our ability.Our sub-servicer is Dovenmuehle, Michael, very strong respected servicer because of when we are now just beginning the servicing; we don't have any of that prior liabilities that others have had.

We also have a very stringent process in helping the consumer understand what forbearance is, what we have to do before we close the loan. So, I really don't see -- I see any downside risk very limited, if any..

Thank you..

Thank you..

Thank you and our next question comes from the line of Jay McCanless with Wedbush. Your line is open, please go ahead..

Hey good morning. Thanks for taking my questions.

The first one I had is, could you give us what the community count was, the actual count at the end of the quarter? And then also maybe what your split is now in the community count between first time move-up and active adult?.

The ending count is 410. And then the breakout between type, I don't have that..

I don't think we have it by community. We could pull that, we don't have that with us today..

Okay. I will follow-up later on..

What I would share is a third of our buyers generally are that first-time buyer. And when I look at total units, I don't have it by community count. 20%-some, 20%, that's 50%-plus, depends if you're talking age-restricted communities or serving that buyer. So, the ratios haven't moved very much..

It's good to hear. And then just staying on the active adult. If, I think, I heard your comments correctly, Sheryl, that the cans aren't moving up but the traffic isn't really coming back.

I mean has that changed since we moved into May or is that buyer still pretty tentative?And I know you talked about that in terms of Florida, but you guys also have some active adult in North Carolina, as well as Arizona.

Are you seeing the same responses from that active adult customer in all those different states or is it mostly just a Florida issue?.

No, they are -- it's a great question. They're behaving a little different. Like in Houston, interestingly enough, we've actually seen quite a pickup in our active adult buyer in the last couple of weeks.I think in Florida, we've seen -- if I look at Naples, for example, we've seen -- that's a very discretionary buyer.

I would say that was really hard hit at the beginning, that's a second homebuyer. We're seeing some pickup in activity there. Sarasota, we're seeing the sales pick up week over week.But like I said, this is a buyer that needs to kind of feel and touch.

They're generally not -- they're going to be a very small percentage of that virtual buyer that goes online, makes an appointment to do a virtual tour.And then from there, we'll do everything through virtual.

We're even about to -- we'll be introducing -- sorry, I'm going to take a sidebar on yet because it's another area I don't think this fire will take advantage of.We'll be introducing a lot reservation system online where you can actually go in and reserve a lot, mostly on inventory to start, and then we'll move it to the rest of the product offerings from there.

But this isn't a buyer that will play quite as much in that space.So, as Florida reopened and given what we've seen in the last two weeks, I'm encouraged, and they've stayed very engaged. I think that's what's most encouraging.

Our salespeople are talking to them every day, setting up appointments to chat, and now we're starting to see them come into the sales offices..

That's great. Thanks for taking my questions..

Of course..

Thank you and our next question comes from the line of Mike Dahl with RBC Capital Markets. Your line is open, please go ahead..

Hi, thanks for taking my questions. One more on the mortgage side. It seems like you guys have been fairly proactive and then your words rigorous around scrubbing the backlog.

I just wanted to ask for a little more detail there.Can you actually kind of just walk us through what that process has been? What percentage if you have of your backlog that's scheduled to close over the three -- the next three months or in 2Q.

Just -- have you been able to actively verify employment income still there, qualifications are still there.And Sheryl, sorry, this is multipart, but I think you talked about the rate lock, which is really interesting.

But one of the things that I think we've all heard is lenders are requiring reverification at the closing table, some of these things.So, any color you have on, have there been any instances where you've gotten those rate locks, then by the time you get to the closing table, the deal still falls through because of qualification changes?.

Yes. I know it's a great question.

And we spent a lot of time talking about that upfront when we were, like I said, very proactive on really delegating the authority to our frontline, our loan consultants, not to say, okay If we need to do this to make sure we get the rate to a place that the consumer is more comfortable because what's happened with guidelines.That rate lock has really assisted us.

I'm looking for the number real quickly. But I think that our lock pull-through is somewhere in the low 90% range.

So, interestingly enough, Michael, even though it's an emotional commitment, we are not losing those buyers once we lock which why -- like I said, why we think it's such an important part really understanding the backlog.We do obviously go through a confirmation process before we lock, and you're absolutely right, we have to do it three days before.

But we are pulling those buyers through. It's been an integral part of our process.So, April is behind us. May is locked. June, I think last time I left, we were in the probably 30% to 40% range. So we're continuing to get ahead of that. Maybe actually, over the last few days, 58%, sorry, my most recent report.

So, I feel good about the next 90 days and we're still selling specs for the quarter, Michael..

Okay, great. That's helpful. And my second question, obviously, there's been some concern within the investment community just around the timing of the William Lyon close relative to then a precipitous drop in home builder valuations.You guys didn't have any impairment, this quarter, not surprising, so early on.

But can you give us any more color on just as you kind of close the deal and then subsequent to the COVID issues as you've kind of reevaluated or walk us through what you've done to get comfort around the William Lyon land values post us entering into this downturn?.

Sure. You can imagine, Michael, you're not the first one to ask that question. So, we have had a lot of time to really dig through the assets over these last couple of many weeks. And I'd tell you, we have the same level of conviction around this transaction as we did when we came to an agreement last summer.This wasn't a short-term play for us.

And although I could have not, in my wildest dream, imagined or planned for a pandemic in that we would 30 due after the closing, send people to work from home, as I said in my prepared remarks.We haven't missed a step in the integration, and that includes really understanding the land bank.

So, when I look at the deal, the strategy hasn't changed for us. We added some really good long-term markets to the portfolio. We added good assets to the portfolio.We added scale in Austin, Denver and Southern California, and it's a great consumer complement.

We will, as we get reopen, continue to dive into the individual assets and put it through the same process we put all of the Taylor Morrison assets through.We'll continue to pull on the synergies. As we said in the prepared remarks, we feel confident on the $80 million.

And I think as we continue to scale up the business, we'll continue to see the enhancements.When you do a -- when a business like this is for sale, you have work to do. That's why we bought the business around book. We've built a great muscle in fixing the -- or creating the opportunities in the businesses.

These assets are going to be with us well beyond COVID, and we're going to optimize their performance. We feel good about it..

And the ancillary benefits, as Sheryl said, around scale. I mean you're seeing what that's helping to do on the SG&A line.

Our backlog has remained strong, relatively intact.And like other folks, we're focused on building up cash, getting that liquidity and the combined business and what we're able to generate from a cash flow perspective, is actually really strong, and you saw our net debt-to-cap ratio. It's ahead of where we thought it would be.

So, yes, the timing is tough, sure. But when we look at the longer play, we're still very excited about the William Lyon transaction..

And sorry, I think I'm going to throw one more thing on top.

Dave talked in his prepared remarks about the great work the team has done on looking at the deals that were coming through the pipeline, I would say two-thirds of the deals that have come through our investment committee, have had some changes made to it and those have generally been around deferring dollars.On average, we've deferred takedowns on average about 150 days on about $300 million.

A good chunk of that is William Lyon. And so that gives us more time, Michael, to really get under the skin. A lot of that is those landing deals that they had to really work with those land sellers to be able to optimize those assets..

Okay. Thanks. That's really helpful..

Thank you and our next question comes from the line of Matthew Bouley with Barclays. Your line is open, please go ahead..

Hey, good morning. Thanks for all the detail today. Hope you guys are well. Sheryl, I wanted to ask about the 20% of sales that are coming through virtually in April. I guess, number one, presumably, that's more weighted to spec product. And number two, if there is some traditional to-be-built in there.

I guess what are those customers that are closing virtually? What are they doing with the design features and options and upgrades through that process? Thank you..

Yes. No, great question. We're excited about it. It's just -- it's the beginning of, I think, where this goes, allowing our customers to interact with us in a way that they prefer to. It's a direct line to our sales team, where they can go in, set up an appointment online. And they have a laundry list of ways that they can interact with us.

It's through a virtual tour. They can set up an appointment to do a tour.They can set up an appointment online to talk with the salesperson to come in and have an in-person appointment to write a contract or to do option selections.

It's interesting, about 80% to 85% of the appointments that have been made online have been to make an appointment to come in and meet with the salesperson.So, most customers still prefer to ultimately get face-to-face with a sales team member, but I think there's something about this more personal touch.

It's this private exclusive kind of opportunity for them.This is going to continue to evolve when we are fully open, allowing our customers to kind of self-service the way they want to work with us in the way that they're shopping for other things.Like I said, we'll be introducing our lot holds where they can make a deposit online. So, I'm excited.

But that 20% of those sales, those were folks that created an online appointment.They had never been in our -- had any contact with the company before that. They made an online appointment. They went through it virtually and then we did a contract with them virtually, and they never came and saw a model in-person.

I think a year ago, nobody could have imagined that would happen in certainly at these numbers..

That's great color, yes..

And the last thing, as I think forward and the real opportunity is the co-broke. Imagine what the future opportunity that is for the industry and the business if not everyone's represented at the same levels we've seen with brokers..

Yes. No, it is a very interesting dynamic. And then, I guess, shifting gears on the construction side. Have you sensed any changes around the construction process? I know this has happened so quickly.

And I guess it's got to be market specific, but just with social distancing on the job sites, perhaps any incremental move toward off-site manufacturing or perhaps going forward, would you think this accelerates some of those trends?.

It's a great question. I'd say, first, as we look out there we've seen, obviously, changes out in the field. We haven't seen it come much in the way of impacting the cycle times as of yet, but obviously, COVID-19 is still fairly recent.

So, we're watching that closely when it comes to trades and I'd say municipalities as well.I don't know from an off-site standpoint I think our position is still the same. There is opportunities ahead that will impact the industry going forward. This may help further that along. But again, this is all just so recent.

I don't think we've seen any great strides or changes in that short term. But this, just like it did with virtual sales, could add maybe another layer of progression to the industry over time..

Health and safety, in general, has been -- I think I saw a stat, not too long ago, that construction was one of the safest or had the best members when you looked at COVID cases.

The safe distancing has actually been pretty easy to execute in the field, and our trades have done a tremendous job with it.But the trades have remained where they fit with a few exceptions, on-site and very productive. In fact, I think in some areas, we've actually seen improvement in cycle-times.

And as Dave said, I think some of the other work will be a little bit more on the margin. We're continuing to be involved, but it hasn't been the focus the last six, eight weeks..

Got it. Thanks again for all the details. Hope everyone stays well..

Thank you and the same with you..

Thank you and our last question comes from the line of Alex Barron with Housing Research. Your line is open, please go ahead..

Yes, thanks for taking my question. I know this has gone on a while. Hope you guys well. I just wanted to ask about the transaction costs.

Did you guys pretty much book them all this quarter or is -- can we expect anything else for next quarter?.

We had about $86 million in the quarter. What we've said previously is it's probably going to be around $100 million. I think you'll see a chunk of that probably in the second and third quarter, but then we'll obviously dissipate after that..

Okay, great. Thanks and stay safe..

Thank you..

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to Sheryl Palmer for any closing remarks..

Thank you, operator and thank you all for joining us for our Q1 call. Thanks for hanging with us. I know it's a long call; we wanted to make sure you had all the information. Stay well, stay safe and we will talk to you next quarter..

Ladies and gentlemen, this concludes today's conference. You may all disconnect..