Greetings and welcome to Tri Pointe's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce David Lee, Investor Relations for Tri Pointe Homes. Thank you. You may begin..

Good morning and welcome to Tri Pointe Homes' earnings conference call. Earlier this morning, the company released its financial results for the fourth quarter of 2023. Documents detailing these results including a slide deck are available at www.tripointehomes.com, through the Investors link and under the Events and Presentations tab.

Before the call begins, I would like to remind everyone that certain statements made on this call which are not historical facts, including statements concerning future financial and operating performance, are forward-looking statements that involve risks and uncertainties.

The discussion of risks and uncertainties and other factors that could cause actual results to differ materially are detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements.

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

Hosting the call today are Doug Bauer, the company's Chief Executive Officer; Glenn Keeler, the company's Chief Financial Officer; Tom Mitchell, the company's Chief Operating Officer and President; and Linda Mamet, the company's Chief Marketing Officer. With that, I will now turn the call over to Doug..

Thank you, David and good morning to everyone on today's call. During the call, we will review operating results for the fourth quarter and the full year, provide a market update and discuss key operating objectives. In addition, we will provide our first quarter and full year outlook for 2024.

2023 proved to be another strong year for Tri Pointe Homes, capped off by a successful fourth quarter. We reached or exceeded the high end of all of our key operating metrics for the quarter, closing out the year with strong momentum.

During the quarter, we delivered 1,813 homes at an average sales price of $685,000, leading to home sales revenue of $1.2 billion and diluted earnings per share of $1.36. Our key -- our gross margin for the quarter was 22.9% and our SG&A expense as a percentage of homebuilding revenue was 9.3%.

We also repurchased approximately 1.8 million shares of our common stock during the fourth quarter at an average price of $27.23, for an aggregate dollar amount of $50 million. Despite the macro headwinds of inflation and volatile interest rate swings, 2023 was a strong year for our company, positioning us for further success in 2024.

For the full year 2023, we delivered 5,274 homes at an average sales price of $693,000, leading to home sales revenue of $3.7 billion. Our homebuilding gross margin was 22.3% and diluted earnings per share was $3.45. We ended the year with a book value per share of $31.52, a 12% year-over-year increase.

Fueled by a 40% rise in net new home orders in 2023, we increased our opening backlog units by 58% heading into 2024. In the fourth quarter of '23, there was a significant shift in mortgage interest rates. Initially, peaking at cycle highs in October, rates subsequently declined as market sentiment shifted.

As rates began descending in November, home buying activity increased, with December ultimately exhibiting the strongest orders of the quarter. That end of year momentum has been sustained through January and into February and we would characterize the overall demand environment as strong, demonstrated by our January absorption rate of 3.5.

In addition, we opened 70 communities in 2023, ending the year with 155 active selling communities, representing a 14% increase compared to the prior year. We anticipate that our higher community count, coupled with the ongoing strong demand will help us achieve our projected 17% year-over-year increase in deliveries in 2024.

Glenn will provide more color on our guidance during his remarks. We remain encouraged about the fundamentals of our business including household formations, strong demand from Millennials and Gen-Z buyers, a more normalized supply chain and shorter cycle times.

While each of these factors contributes to the long-term health of our industry, we are particularly optimistic about the ongoing favorable supply and demand dynamics that structurally support new home demand. In addition, the resale market remains locked in as many existing homeowners are holding mortgages far lower than current market rates.

These dynamics should continue to support the homebuilding industry with new home market share of total home sales at historical highs. The strength of our balance sheet continues to be a priority. We ended 2023 with $1.6 billion in liquidity and a net debt-to-net capital ratio of 14.6%.

We generated $195 million of cash flow from operations during 2023 and remain committed to producing positive cash flow in the future as we balance our growth initiatives while reducing debt and remaining active in our share repurchase program.

With $869 million of cash on hand at year-end, we currently plan to pay off the $450 million of senior notes that are due in June. By deleveraging, we expect to save $26 million annually in interest costs and reduce our debt-to-capital ratio by approximately to 30%.

In December, we announced that our Board of Directors approved a new $250 million share repurchase authorization, demonstrating our commitment to returning excess capital to shareholders. For the full year of 2023, we repurchased 6.3 million shares at an average price of $27.68, representing a total spend of $174 million.

Share repurchases have been a key component of our capital plan over the past several years. Slide 19 of our slide deck highlights the impact of our share repurchase program since its inception. From the end of 2015, we have reduced shares outstanding by 41% and growing our book value per share by 200%.

That equates to a 15% compounded annual growth rate in our book value per share. Our goal is to continue to increase book value per share by 10% to 15% annually through a combination of share repurchases and consistently generating strong earnings.

As a growth-oriented company, we are focused on growing scale in our existing markets and targeting new markets through organic start-ups or M&A. In our existing markets, our West region is close to targeted scale and is generating strong margins and cash flow.

Over the past few years, we have been investing heavily in our Central and East regions to grow community count and we are seeing the benefit from that investment. Over the next 2 years, we expect delivery volumes in Texas to grow over 60% compared to 2023.

In the Carolinas, we anticipate delivery volume of over 30% -- delivery volume growth of over 30% in that same period. Not only will this provide for strong top line growth but increased profitability, as our Texas and Carolina divisions are currently producing homebuilding gross margins at or above the company average.

For new market expansions, we recently announced our organic entry into Utah and we are already seeing positive momentum on the land front. We anticipate first deliveries from Utah starting in 2025. We are also actively looking for growth in the Southeast by expanding our footprint into the coastal Carolinas and Florida markets.

Another initiative that will be accretive to our long-term growth goals is with our mortgage company, Tri Pointe Connect. Effective February 1, 2024, Tri Pointe Connect became a wholly-owned subsidiary of Tri Pointe Homes, as we exercise the right to purchase the minority stake in our joint venture with loan depot [ph].

This alignment of mortgage operations with our core homebuilding business offers more flexibility in terms of the customer experience and competitive pricing and will provide increased earnings from our financial services business. Tri Pointe Connect is an integral part of our business with strong customer satisfaction and mortgage capture rate.

We continue to see strength and quality in our homebuyers and backlog financing with Tri Pointe Connect with an average annual household income of $198,000, an average FICO score of 753, 80% loan-to-value and a 40% debt-to-income ratio.

In summary, the prevailing positive macroeconomic conditions and strong housing fundamentals make us optimistic for 2024 and beyond. Given this environment, Tri Pointe is in excellent position to expand our scale in each of our markets, particularly considering our well-positioned land holdings and our experienced team members.

We are actively taking the necessary steps to capitalize on numerous growth opportunities that exist in the market today and are committed to deploying our capital into accretive long-term growth initiatives. With that, I'll turn the call over to Glenn.

Glenn?.

Thanks, Doug and good morning. I'm going to highlight some of our results and key financial metrics for the fourth quarter and then finish my remarks with our expectations and outlook for the first quarter and full year for 2024. At times, I'll be referring to certain information from our slide deck which is posted on our website.

Slide 6 of the earnings call deck provides some of the financial and operational highlights from our fourth quarter. We generated 1,078 net new home orders in the fourth quarter which was a 143% increase compared to the prior year. Our absorption pace was 2.3 homes per community per month, a 109% increase compared to the prior year.

As Doug mentioned, December was the strongest month in the fourth quarter for order activity and that momentum has carried over with a strong start in 2024. We reported 536 net new home orders in January which was a 27% increase year-over-year on a sales pace of 3.5 homes per community per month.

Demand in January was broad-based across both our markets and buyer segments and February is off to a similarly strong start. We took a disciplined approach with our use of incentives in the fourth quarter, largely targeting incentives towards completed or move-in ready homes.

Permanent rate buydowns remain a popular use of incentives for our homebuyers. Full incentives on orders in the fourth quarter were 4.8% of revenue and have trended down to 4.4% in January. For context, our historical incentive levels as a company have been in the range of 3% to 4%.

We ended the year with 155 active selling communities which was a 14% increase over the prior year. We plan to open approximately 65 new communities in 2024 and expect to close a similar number during the year. Our new community openings are weighted more heavily to the first half of the year.

So we expect to see a higher community count in the first and second quarter before leveling off in the back half of the year. Based on our strong land pipeline with approximately 32,000 owned or controlled lots, we expect to grow our 2025 ending community count by approximately 10%. Looking at the balance sheet and capital spend.

We ended the quarter with approximately $1.6 billion of liquidity, consisting of $869 million of cash on hand and $698 million available under our unsecured revolving credit facility. Our debt-to-capital ratio was 31.5% and net debt-to-net capital ratio was 14.6%.

We continue to be active in our share repurchase program, repurchasing 1.8 million shares during the quarter for a total aggregate dollar spend of $50 million. For the fourth quarter, we invested approximately $275 million in land and land development.

Going forward, we expect to spend approximately $1.2 billion to $1.5 billion annually, on land and land development to support our growth targets. I'd like to summarize our outlook for the first quarter and full year for 2024.

For the first quarter, we anticipate delivering between 1,200 and 1,400 homes at an average sales price between $645,000 and $655,000. We expect homebuilding gross margin percentage to be in the range of 22% to 23% and anticipate our SG&A expense ratio to be in the range of 12% to 13%.

Lastly, we estimate our effective tax rate for the first quarter to be approximately 26.5%. For the full year, we anticipate delivering between 6,000 and 6,300 homes which would be a 17% increase year-over-year using the midpoint of our guidance. We anticipate our average sales price on those deliveries to be between $645,000 to $655,000.

We expect homebuilding gross margin percentage to be in the range of 21.5% to 22.5% and anticipate our SG&A expense ratio to be in the range of 10.5% to 11.5%. Lastly, we estimate our effective tax rate for the year to be approximately 26.5%. With that, I will turn the call back over to Doug for closing remarks..

Thanks, Glenn. In summary, our industry remains positioned for long-term success due to the continued supply shortage and strong consumer demand we discussed earlier. At Tri Pointe, we are focused on steady growth to both the top and bottom lines, while efficiently allocating our cash to support our growth initiatives and share buybacks.

We expect this focus will continue to benefit our shareholders by increasing book value per share year-over-year. With a strong balance sheet composed of a land portfolio focused on core locations and ample liquidity, we are well positioned to meet our objectives going forward.

Finally, I want to express our gratitude to the entire Tri Pointe team for their hard work and dedication. I'm especially proud that their steadfast commitment to operational excellence led to Tri Pointe being named to the 2024 list of Fortune's World's Most Admired Companies.

This is especially gratifying is that -- those on the list are ranked and chosen by industry peers for their financial soundness, long-term investment value, innovation, ability to attract and retain top talent among many factors.

We couldn't be more prouder of this team and what that -- their talent and dedication promises for the future of our company. Now, I'd like to turn it back to -- turn the call back over to the operator for any questions..

[Operator Instructions] Our first question comes from the line of Joe Ahlersmeyer with Deutsche Bank..

Yes. The comments on the land spend, if you don't mind, maybe just going into a little more detail about where that's going to be deployed maybe from a buyer standpoint, buyer level standpoint and geographically, just a little more details on that..

Joe, it's got to be more concentrated to the Central and the East like we talked about but there's still -- and we still need to resupply the community count in the West as well. So it's fairly spread across our communities and it's about half land [ph] and half development, is that kind of spend going forward..

Okay, understood.

And does that include any potential deployment to M&A of smaller builders?.

It does not include that, no..

Okay, understood. And then just a quick follow-up, if I could. On the decision to retire the debt, maybe just a little surprising kind of in the context of deploying capital to more accretive avenues. I mean, the kind of after-tax cost of debt pretty low relative to incremental returns on your business.

So just maybe talk about why you may be taking that out? Is it difficult to refinance? I mean you could probably put it on the revolver even? Just any thoughts there?.

Yes. It's definitely not difficult to refinance. It's just where the rates are at right now are not that attractive to refinance it, especially considering we have almost $900 million of cash. And so, we always have the ability to be opportunistic and do a new debt issuance later on if rates are in a better place and we need the capital.

So as of right now, we have plenty of capital. We're going to pay them off. And then if we have different capital needs down the road, we can be opportunistic..

Our next question comes from the line of Truman Patterson with Wolfe Research..

Just wanted to run through the gross margin guidance, down, I think, about 70 bps year-over-year in '24. Could you just help us understand what's embedded in that land versus stick and brick inflation? And any thoughts on potential pricing power as we move through the year.

The pricing power portion is, I'm trying to understand you've got kind of a step down embedded in your gross margin guidance in 2Q through 4Q versus the first quarter?.

Yes, Truman, this is Doug. Our forecast -- business plan forecast is for margins to be slightly down compared to '23 but it's early and with good market conditions which we are currently seeing. We should see those margins tighten subject to cost conditions as well, obviously. But that's where we see right now. But it's -- we had a long way to go..

Yes, understood. And when I'm thinking about your oldest community count over the past couple of years, I think, is quite a bit like 40% or so. Could you just talk about your kind of targeted absorption pace? Is it still in that 3.5 range.

And I'm trying to understand if that might be kind of an upper bound limit based on labor, lot availability and anything above that, you kind of start pulling on the pricing lever a little bit harder?.

This is Doug again. There is no upper bound limit for labor supply chain. It's actually quite normal, if anything is normal in today's world. So -- but our pace, years and years and years ago, we kind of targeted 3 but our pace today target is 3.5..

Okay. Got you. And if I could just sneak one more in there. You said we're off to a good start in January and February. Just trying to understand with the pullback in rates and kind of the demand rebound that you've seen so far.

Have you all been able to reduce or pull back on incentives at all, the past several weeks? Or are you kind of taking a bit more of a wait-and-see approach not to disrupt kind of the momentum building ahead of the spring selling season..

Thank you, Truman. Good question. This is Linda. So yes, we are pulling back on incentives. In January, we were at 4.4% incentives and continuing to reduce that to under 4% month to date in February. So still seeing a good opportunity to keep a strong pace while pulling back on incentives community by community..

Our next question comes from the line of Stephen Kim with Evercore..

Appreciate all the color so far in the guidance. I wanted to ask a couple of longer-term questions. Just trying to get a sense for how you're trying -- thinking about positioning the company once the dust sort of settles here with the rate volatility over the last couple of years.

So I'm curious if you could give us a sense for longer-term goals for, let's say, community count growth and the growth in the business.

I mean, throughout a 10% number, it sounds like we're going to see in '25 because it sounds like 2024, we're going to be kind of flat by the end of the year on community count but then growing 10%, it sounds like in 2025. Wondering if that 10% is a good level that we should be thinking about for you guys for growth.

Similarly, curious if you could give us a sense of what your target is for like leverage, what you're sort of thinking longer term? And then also, what do you think the longer-term operating margin can kind of be? So kind of top line growth, leverage you want to run the business at and kind of what you think is a sustainable kind of operating margin for the company?.

Well, as far as growth, I'll take the top line, Stephen, this is Doug. We are continuing to establish operations. We are -- we announced Utah last year and I would expect to have established operations in the Florida and Coastal Carolina markets this year.

So either organically or through M&A, we're going to continue to grow top line growth in those new markets. In our existing markets, we've got 15 divisions across the country, half are close to stabilization on the West, generating strong cash flow, very good margins.

And then the Central and East continues to be our growth markets, seeing tremendous growth as I mentioned in the prepared remarks in the Texas and Carolina markets which we're very bullish on..

And Stephen, I'll take some of the others. On targeted leverage, we don't have a specific target because it will depend on the business needs.

But I think where we're at right now and then after we pay off the bonds is a good place to be, we're low 30s now on a debt to capital will be low 20s after we pay off the bonds, somewhere in that range, I think, is a good spot for us to be in..

As far as margins long term, Stephen, I mean, listen, we underwrite our land deals, 18% to the 22% range. But we do self-develop about 65% -- probably closer to 70% of our lots and when we underwrite those deals, it's typically in the low 20s, somewhere between 20% to 24%.

So if you're developing more lots, you should have a better margin profile, right? If you're buying finished lots, you're going to be on 18% margin. So that's kind of how we look at the long term..

And I know you asked -- go ahead, Stephen..

No, no, no. I don't want to interrupt you..

Okay. I know you asked about operating margin. And I think as we get more scale in the out years, you're going to see that increase to the operating margin. Our goal there is to get more leverage on our fixed costs and increase that bottom line operating margin..

Makes sense. Okay. And then -- got you. And then so....

Let me interrupt you one more time, Stephen. We're in a very -- if anything is normal, as I mentioned earlier. But our business plan is very simple. We've increased book value per share of 15% since the end of 2015. And our goal is very simple.

We're going to increase book value per share, 10% to 15% through a combination of share repurchases and strong earnings. So our focus is driving the stock price up. We just focus on book value per share because all the other extraneous discussion on multiples and everything. It really doesn't mean anything to us.

We'll trade with the group, however, they trade. We're just focused on making more money going forward and delivering a great customer experience..

Okay. Yes, that's helpful. Helpful context. I noticed that your lot option count, not your supply but the actual number of lot options you had declined for a couple of -- has not declined for 2 quarters in a row.

Curious if you could give a little context around that, where you see that going forward? And then, Glenn, what do you think is on a year supply-owned basis, a level that we should be thinking that you can run -- you intend to run the business at kind of low 3s in terms of your supply owned, is my guess?.

Yes, Stephen, good question. I think the overall lot supply that you're seeing and it's been kind of flattish over the last couple of quarters, that's just timing. We have a strong pipeline and so there's good growth in that pipeline.

But part of what you're seeing is you're seeing a decrease in some of those longer-term land holdings that are owned as we continue to work through some of those assets. And we're replacing a lot of that with more option land. So that's just the mix change there. And then going forward, we're targeting 2 to 3 years owned from a land perspective.

And it just depends on the market. There are some markets where we're under 2 and then some markets that we're closer to 3 but that's kind of the range..

Our next question comes from the line of Tyler Batory with Oppenheimer..

My first question is just strategic around market expansion, new markets. Can you just revisit your philosophy around organic market expansion compared with M&A, talk through some of the positives and negatives of those avenues. And the reason I asked, there has been a fair bit of M&A so far in the space this year.

So I'm not sure if that changes your perspective or perhaps if you have a different view on the M&A landscape today compared with the last call in the fall..

No. I mean, like I mentioned earlier, I would expect us to establish operations in Florida and the Coastal Carolinas this year, either organically or through M&A. As you can imagine, the only -- the big difference between M&A and organic is you're paying a multiple of some sort on M&A and organically, you're paying book value.

So that's really the difference. And frankly, we started organically back in 2009. So we do have a very strong playbook of growing organically. We've had tremendous success. So we'll continue down both paths..

Okay, great. And a follow-up on gross margin, just specific on the guidance in Q1. Just help us bridge where you exited in Q4 versus what you're expecting in Q1. It sounds like you're pulling back a little bit on incentives but gross margins are still going to be perhaps down.

So just trying to get a good sense of what you're expecting in terms of your outlook in Q1 specifically?.

Yes. Yes. Doug talked about it a little bit earlier but just to give a few more details. From Q4 to Q1, it's largely flat. So really strong margins in Q1. But then what you're seeing, there's a little bit of land vintage too, because we're opening new communities and closing out of older communities. So that plays a part into the full year guide.

But overall, like Doug said, it's early. And so as the spring selling season unfolds, if we can continue to see strong demand, that will have an impact on margin..

Our next question comes from the line of Jesse Lederman with Zelman & Associates..

Congrats on the strong results. At your Investor Day in May 2022, you discussed your expectations for ASP to trend lower as your business shifts from California and you start smaller homes.

Can you talk a little bit more about the latter? How has the reception been from home buyers for some of the attached and smaller product? And is that still the plan with the affordability equation becoming a bit more balanced here with rates having pulled back?.

Yes, good question, Jesse. It's definitely still part of the plan and we've executed on that plan. Even in our -- what most people would consider higher priced areas like California, we're doing a lot more attached than we used to in items like that with an eye towards affordability and pace and that's worked out well for us.

But overall, you will see our ASP trend down a little bit compared to where it's been. And some of that is just mix though, obviously, with more central and east deliveries from Texas and the Carolinas where the ASP is a little bit more affordable in those markets..

Great. That's helpful. One question on price point differentiation.

Are you seeing any particular segment stronger, weaker as the year rolls over here?.

Another good question. In the fourth quarter, we actually saw pretty consistent demand across all our segments from entry level to first move up. So overall, pretty strong margin profiles are actually fairly consistent as well. So I think all segments are working well..

And that's continued even with the strong start to the year, have you seen any segment lag or be particularly strong? Or is it pretty consistent across that?.

Pretty consistent..

Our next question comes from the line of Jay McCanless with Wedbush..

First question, could you talk about where cycle times are now? And how much further, if at all, you need to get back to pre-COVID levels?.

Good question, Jay. This is Tom. We're really pleased with the cycle time improvement as it was one of our key initiatives last year. And I'd say we're back to pre-pandemic cycle times average or template of what we're striving for is a 115-day production schedule and we're pretty close to being right on schedule.

So we may have the ability to extract a little bit more out of that as we're looking at new templates to potentially reduce cycle times even further..

Our next question comes from the line of Mike Dahl with RBC Capital Markets..

Just another follow-up on kind of the price incentive trend that's encouraging to hear that February to date has come down further, we have had a bit of an uptick in rates in Feb versus Jan. It sounds like things are still kind of strong on the ground and you're dialing back incentives.

Can you talk a little bit more to that? Do you think you've still been able to secure kind of advantaged rates and therefore, your -- you haven't seen that impact yet? Or you think as we move through the very start of the spring selling season, the demand has just been strong enough that this uptick in rates hasn't had really any impact here?.

Hi Mike, it's Doug. As we -- Linda mentioned earlier, incentives on orders in the quarter were 4.8%; in January, they're 4.4%. We have a very good supply of move-in ready homes, promoting rate buy-downs but they're typically used.

We don't use any forwards but about 86% of our orders are using some sort of financing incentive, most of it is permanent versus temporary. Another factor in our backlog at TPC, our average mortgage rate was 6.3% with using 2.1 percentage points and the -- that's our lock backlog. And in the Q4, TPC deliveries it's 6.6%.

So the beauty of higher rates is the homebuilders have the ability to pull a lot of levers to keep absorption. We had another excellent week of sales last week.

So there's this continued locked-in effect with the resale market that continues to allow the new homebuilders to increase market share of total home sales, I think it's well over 30% now which is typically 10% and my own personal forecast, I think rates are going to stay pretty much where they are, maybe trend up a little but it's an election year.

So it probably won't move much. But that's where it is right now..

Got it. Yes, that helps. So I was kind of curious about whether there was any impact from forwards in there that maybe just delayed some of the impact on kind of going back above 70% but it doesn't sound like that's the case which again is encouraging that you're able to dial back further in Feb.

I guess just segueing since you brought up the point on what your stats look like for TPC. Can you -- now that, that's wholly owned.

Can you help us level set on the -- what we should be thinking about for total contribution from finance operations this year and how that compared to kind of -- I think you still had finance profits, you had some other income.

So just -- if there's kind of an apples-to-apples comparison, we should be thinking about '24 versus '23?.

Sure, Mike, this is Glenn. So under our old model when we were a joint venture, we got 65% of the economics of those transactions. So just assuming we're going to get 100% of the economics going forward is probably a good place to start.

I think longer term, as we get more efficient in that business, we could probably even draw more economics from our financing -- financial services, mortgage companies. And we're also continuing to look at other ancillary businesses to add to that financial services area as well..

Our next question comes from the line of Alex Barrón with Housing Research Center..

Great job for the quarter and the year. My questions are around your geographic expansion into Utah and you mentioned Florida, I was just wondering if you guys can help us on timing of when we would see first orders and first deliveries in those 2 respective markets roughly..

Yes, Alex, it's Doug. We're expecting deliveries in Utah by the end of '25 and I would expect deliveries from the Florida and coastal markets in '26..

Got it. And then as far as your margin guidance, it looks like it's going to trend lower in the back half of the year versus the first quarter.

Is that because you guys increased incentives recently? Or you just -- geographic mix that's kind of trending you in that direction?.

Can you repeat that question?.

Yes. Your guidance for the margins, the gross margins said that you expect 22% to 23% in the first quarter and then 21.5% to 22.5% for the full year.

So I'm trying to understand what's causing that trend? Is it that you increased your incentives recently or it's just the geographic shift? Or is it rising land cost? Or what's driving that?.

Yes, it's mainly just land vintage closing out of some higher-margin older communities in the first part of the year. And then you're opening, like we said, 65-ish new communities this year that are a newer land vintage. So it's -- some of that is just the mix of that. But like we said earlier, it will all depend on how demand.

If demand continues the way it's going, right now, you could see some upside to margin as the year goes forward..

Okay. And then if I could ask one more. I think I heard Doug say 60% growth in Texas over 2 years and 30% in Carolinas.

Were you guys referencing deliveries versus deliveries in 2023 versus orders?.

That was correct; deliveries..

Deliveries, yes..

'23 -- versus '23 in the next 2 years..

There are no further questions in the queue. I'd like to hand the call back to Doug Bauer for closing remarks..

Well, I'd like to thank everyone for joining us today and we look forward to chatting with all of you next quarter. Have a great week. Thank you..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day..