Welcome to the M.D.C. Holdings 2022 Q1 conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I now would like to turn the conference over to Derek Kimmerle, Vice President and Corporate Controller. Mr. Kimmerle, please go ahead. Thank you. Good morning, ladies and gentlemen, and welcome to MDC Holdings' 2022 Q1 earnings conference call. On the call with me today, I have Larry Mizel, our Executive Chairman, David Mandarich, Chief Executive Officer, and Bob Martin, Chief Financial Officer. At this time, all participants are in a listen-only mode. After finishing our prepared remarks, we will conduct a question-and-answer session, at which time we request that participants limit themselves to one question and one follow-up question. Please note that this conference is being recorded and will be available for replay. For information on how to access the replay, please visit our website at mdcholdings.com. Before turning the call over to Larry and David, it should be noted that certain statements made during this conference call, including those related to MDC's business, financial condition, results of operation, cash flows, strategies and prospects, and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties, and other factors that may cause the company's actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by the forward-looking statements. These and other factors that could impact the company's actual performance are set forth in the company's first quarter 2022 Form 10-Q, which is expected to be filed with the SEC today. It should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures. Any information required by Regulation G is posted on our website with our webcast slides. Now I will turn the call over to Mr. Mizel for his opening remarks. Good morning and thank you for joining us today as we go over our results for the Q1 of 2022, provide our thoughts on current housing market conditions, and give some insight into the future of our company. MDC Holdings reported earnings of $2.02 per diluted share for the quarter, a 34% increase over the Q1 of 2021. This substantial year-over-year increase in earnings per share was largely driven by 19% rise in home sales revenue and a 380-basis point expansion in home sales gross margins to 25.7%. Our teams did an excellent job delivering homes during the quarter in what continues to be a challenging supply chain environment as we came in near the high end of our stated guidance with new home deliveries of 2,233. Average sales price on homes closed in the quarter trended higher, rising 16% on a year-over-year basis as the combination of healthy demand and limited supply continued to provide for a favorable pricing environment at our communities. This positive industry dynamic also led to a continuation of the healthy order activity we've experienced over the last several quarters as we sold an average of 5.4 homes per community per month in the quarter. Demand was broad-based from both a geographic and pricing standpoint, with the millennial age buyer continuing to be the driving force behind our sales success. This large population of buyers has reached a prime phase in their lives when homeownership became a much higher priority, whether due to changing family dynamics, a chance to build equity, or the desire to put down roots. Another driving factor that we have witnessed in our markets is the ongoing migration from high to low-cost areas by both companies and individuals. Factors including taxes, affordability, and overall quality of life are weighing more heavily into where businesses operate, while the emergence of online and remote work capabilities have given employees more freedom to live and work from where they choose. At MDC, we have positioned our company to take advantage of these trends by investing in the markets that are benefiting from this migration and by opening communities that appeal to millennials with innovative homes at more affordable prices. We believe that the demand forces we see today are long-term in nature and will continue to support the new home market for the foreseeable future. After years of historically low mortgage rates, buyers are now being faced with higher financing costs for their prospective home purchase, as the average rate on 30-year fixed-rate mortgage has moved approximately 200 basis points since the beginning of the year. While current mortgage rates are still attractive from a long-term historical perspective, it is natural to expect that this move higher may have a near-term impact in our business as buyers adjust to this new reality. Long-term, however, we believe that the demand factors in place, coupled with a lack of supply in our markets, keep the new home construction market on a solid footing. In addition, it is important to note that while the absolute cost of owning a home has gone up with the rise in interest rates, the relative cost has stayed relatively stable given the concurrent rise in monthly rents across the country. With a strong balance sheet, a seasoned leadership team, and a product profile that is tailored to today's buyers, MDC is in a great position to build on the track record of success and to adjust whatever changing rate environment may bring. We continue to invest in the future of our company while taking a long-term risk-averse approach to the business. Confidence we have in our ability to fund our operations and operate effectively through the housing cycle is borne out by our industry-leading dividend, which yields above 5% based on recent price levels. For those investors who believe in long-term viability of the housing market and who are seeking a healthy dividend, we believe MDC is a compelling value. With that, I'd like to turn the call over to David, who will provide more details on our operations this quarter. Thank you, Larry. MDC delivered strong results in the Q1 of 2022, both in terms of profitability and order activity. I am pleased with how our teams were able to sell and close houses despite ongoing operational challenges. Supply chain issues continue to be a headwind for our industry, but they were fairly consistent with what we faced in the Q4 of 2021. We made progress in the Q1 implementing strategies and finding workarounds to combat these issues. Every day, there seems to be a new delay or product shortage that prevents us from materially improving our cycle times. As such, we are not incorporating any improvements to the current operating environment in our forecast. Despite the supply chain challenges, we continue to generate outstanding margins across our home building divisions, as strong buyer demand and low inventory levels have allowed us to raise prices ahead of cost inflation. Divisions that posted particularly strong margins in the quarter included Orlando, Las Vegas, and Riverside County. As Larry mentioned, new home demand was broad-based during the quarter, with the Mountain region posting an absorption pace of 5.6, the West region a pace of 5.5, and the East a pace of 4.8. These figures were indicative of the continued strong traffic we witnessed in our communities as well as online during the quarter. Our sales for the quarter could have been even higher if not for limitations that we imposed on many of our communities. Divisions with the best absorption paces during the quarter included Denver, Portland, and Northern California. We have continued to see good traffic levels in our communities since rates started rising a few months ago, though we have noticed that the sales process is taking a little longer. Most buyers seem to be adjusting to the higher rate environment as well and continue to be motivated to move forward with their purchase. Additionally, we have seen very little change in cancellation rates among our buyers already in backlog. As such, our general sense is that market dynamics remain healthy and the demand continues to outstrip supply, particularly in the markets that we operate. While it is unclear where rates will eventually settle out, we believe our market positioning, our more affordably priced product, and our build-to-order strategy that MDC has is in a great position to be a success with a number of interest rate scenarios. From a land acquisition standpoint, we remain diligent in our land underwriting efforts and focus on investing in markets poised for continued growth. We recently announced that we've agreed to acquire substantially all the home building assets of The Jones Company of Tennessee. We believe this transaction, combined with our organic land pipeline we have already secured in the Nashville area one year ago, has the potential to launch MDC in a leadership position in Nashville. Now I'd like to turn the call over to Bob, who will provide more detail on our results this quarter, as well as some forward-looking guidance. Bob? Thanks, David, and good morning, everyone. During the Q1, we generated net income of $148.4 million or $2.02 per diluted share, representing a 34% increase from the Q1 of 2021. Pre-tax income from our home building operations increased $75 million or 66% from the Q1 of 2021 to $188.5 million. This increase was driven by home sale revenues, which rose 19% year-over-year to $1.24 billion, as well as our gross margin from home sales, which improved by 380 basis points to 25.7%. Our financial services pre-tax income decreased to $13.4 million in the Q1 of 2022. As we have indicated for several quarters, competition in the primary mortgage market has increased as refinance volumes have declined. As a result, the gains on loans locked, sold, and closed have returned to more historical levels. Our tax rate increased from 23.3% to 26.5% for the 2022 Q1. The increase in rate was primarily due to federal energy efficient home tax credits, which have not been extended to 2022, and a decrease in the windfalls recognized upon the vesting and exercise of equity awards. We delivered 2,233 homes during the quarter, which represented a 3% increase year over year and exceeded the midpoint of our previously estimated range for the quarter of 2,000-2,300 closings. The average selling price of homes delivered during the quarter increased 16% to about $556,000. This was the result of price increases implemented over the past year, as well as a shift in the mix of our closings from Nevada to our Northern California markets. As David mentioned, supply chain disruptions and labor constraints remain a headwind to the entirety of our production process, from land development to final home inspections. While these issues did not seem to worsen during the quarter, they remain an obstacle for our teams to navigate on a daily basis. Based on what we are seeing in the field, we do not expect material or labor conditions to significantly improve in the near term. As a result, our delivery projections for the Q2 as well as the remainder of the year are based on production schedules that reflect current labor and supply chain conditions. We are currently anticipating home deliveries for the Q2 of 2022 of between 2,400 and 2,600 units, and we expect the average selling price of these units to be between $560,000 and $570,000. In addition, we are reiterating our full year guidance of between 10,500 and 11,000 home deliveries. Gross margin from home sales improved by 380 basis points year-over-year to 25.7%. Excluding the inventory impairment and warranty adjustment recorded during the quarter, our gross margin from home sales would have been nearly 26%. We experienced improved gross margin from home sales across each of our segments, with our East and West segments having the largest year-over-year increase. These improvements were driven by price increases implemented across nearly all of our communities over the past year, which have been partially offset by increased building material and labor costs. We expect to continue to produce strong gross margin from home sales based on the gross margin of our homes and backlog, as well as our continued focus on pricing. Our price increases taken during the Q1 of 2022 outpaced our rising input costs from lumber, as well as inflationary pressures on other material and labor costs. We are expecting our gross margin from home sales for the 2022 Q2 to exceed 26%, assuming no impairments or warranty adjustments. Our total dollar SG&A expense for the 2022 Q1 increased $14.3 million from the 2021 Q1, driven by increased general and administrative expenses. Our SG&A expense as a percentage of home sale revenues decreased 60 basis points year-over-year to 10.4% as we continued to drive improved overall operating leverage. General and administrative expenses increased $14.8 million from the prior year quarter to $72 million. The increase primarily resulted from an increase in salary related expenses due to higher average headcount, as well as increased bonus and stock-based compensation accruals. We currently estimate that our general and administrative expenses for the Q2 of 2022 will be approximately $75 million. Despite the increase in home sale revenues, our marketing commission expenses were little changed year-over-year, resulting in a 90 basis point improvement in these costs as a percentage of home sale revenues. As we have noted previously, we've been successful in controlling these costs given the current demand environment. The dollar value of our net orders increased 12% year-over-year to $1.84 billion, driven by a 14% increase in our average selling price. Our monthly sales absorption pace decreased slightly year-over-year to 5.4 orders per community per month. We continue to moderate sales activity through a mix of pricing and limits on the number of lots we release for sale at a given time. We limited the number of lots released in the majority of our communities during the Q1 of 2022 to better match our current pace of production. As was the case last year, these actions caused a somewhat slower pace of sales in March relative to January and February. Additionally, cancellation rates remained low during the quarter at 8.2% relative to beginning backlog and 16.7% relative to gross orders. We saw our active community count increase to 200 as of quarter end as we had 38 new communities become active during the quarter. We ended the quarter with 42 active communities in Arizona and 25 in Florida. These two states comprise our most affordable markets and benefit from in- migration from other parts of the country. California and Colorado both had 41 active communities, closely following Arizona for our highest number of active communities. In addition, we opened our first community in Austin, Texas, during the quarter, and we're pleased to experience strong demand. Community count is always challenging to forecast as it is difficult to precisely predict when communities will open and when they will close out. This challenge is made even more difficult by the current demand environment and the extended land development times we continue to experience. With that said, we expect our active community count to remain flat at approximately 200 communities during the Q2, followed by continued growth in the back half of the year. We continue to forecast double-digit% growth in our active community count from December 31st, 2021, to December 31st, 2022. We approved 2,740 lots for acquisition during the Q1 of 2022, which represented a 37% decrease from the prior year quarter. This follows several quarters of significant land acquisition approval activity, which can be seen by the 18% year-over-year increase in total lots controlled as of March 31st. In addition, we acquired 1,909 lots during the quarter, resulting in total land acquisition and development spend for the quarter of $309 million. We expect that the acquisition of the majority of the homebuilding assets of The Jones Company of Tennessee will result in the addition of approximately 1,700 controlled lots to our total lot supply. The transaction is currently expected to close near the end of the Q2 of 2022. We ended the quarter in a strong financial position, with total cash and cash equivalents of $582 million, total liquidity of over $1.7 billion, and a debt-to-capital ratio of 35.5%. We generated $118.1 million in cash from operations during the quarter and believe that we have the opportunity to generate cash flow from operations over the remainder of the year as well. We continue to prioritize our capital allocation to land investments that fit our risk-adjusted business model and to our industry-leading dividend. As a result of our disciplined approach to capital allocation and our successful execution of strategic initiatives, our pre-tax return on equity over the last twelve months increased 530 basis points year-over-year to 32.9% as of March 31st, 2022. We have been able to achieve these impressive returns while continuing to maintain one of the strongest balance sheets in the home building industry. That concludes my prepared remarks. We will now open up the line for questions. Yes, thank you. At this time, we will begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Stephen Kim with Evercore ISI. Yeah. Thanks a lot, guys. Thanks very much for all the guidance and all the commentary, I guess, very helpful. I guess the first question I had is on the issue of potential incentives as you look to your gross margin outlook. Are you factoring in the need or the likelihood that there might be any incentives that materialize at the closing table? I'm not talking about sales in 2Q, but I'm talking about homes that would close in 2Q, where maybe the rate wasn't locked. Maybe it took a little longer than you expected to deliver the home, and so the customer comes back to you and says, "You know, now I have to have a much higher rate because, you know, the delivery time was later," that sort of thing. Is that any of that incorporated in your guidance? Well, you know, I think we talked about 26% or greater gross profit margins for Q2. You know, I think we recognized that there is the need for that kind of thing from time to time. We feel pretty good about our 26%+ estimate. Well, implicitly it incorporates sort of holistically everything that you think may happen, which is encouraging. When you think about the overall strength of the entry-level market versus the move-up segment of the market, I know you've been focusing a little bit, a lot more on the entry level. There's a narrative out there that we've been hearing from folks that the entry level is actually the part that's going to get most squeezed by the rates and maybe therefore, you know, an area of greater concern. By the same token, that's also more need-based buying. Rents are skyrocketing. You know, it would seem to me that there's reasons to think that the entry-level would be remaining pretty strong. People can trade down to them. As you look at the Across your different price points, and you look at the entry-level in particular, how do you feel the entry-level is positioned for their higher rate environment? Are you taking any actions today in anticipation that there might be some disproportionate weakening at the entry-level? Steve, I think it's a great question. I believe that so far, we've seen the entry position perform very well. For us, we call it more affordable. We think that our product is really a product that can be accepted by a variety of consumers, not just entry-level, move down as well. We do build-to-order, so that tends to attract in some cases, different kind of consumers, so it's not just limited to the entry level. You know, that said, we're certainly cognizant of rising rates. We do have programs in place to try to minimize the blow from rising interest rates, long-term lock programs that we've put in place, things of that nature. We think it's manageable. We are always innovating on product, including our most popular Seasons product, to achieve new levels of affordability as well. I think that is something that's being considered actively. Yeah, that's helpful, particularly about the idea of the BTO model helping with the move-down customer. Just to clarify, when you're talking about rate lock programs and things of that nature, is the cost of those programs borne by the builder or is it borne by the customer, or is it shared? It depends. Sometimes we run it where it's exclusively the customer. Sometimes we'll run it where it's half and half, builder versus the customer. Just depends on the given month and the different promotions that we run. I think it's both. Great. That's very helpful. Okay. Thanks very much, guys. Sure thing. Thank you. The next question comes from Ivy Zelman with Zelman & Associates. Thank you, and good afternoon. Congrats on the strong results, very impressive community count growth, that many have not been able to achieve. Just thinking about your strategy now to enter new markets at this stage of the cycle, do you think there's potentially more on the horizon? Do you think the execution risk with entering a new market is less than, let's say, investing in your existing footprint? You know, Ivy, this is David. Yeah, good morning. Yeah, we think with the products that we have that and the land supply we've been able to get, new markets really are going to be fine for us. We just opened up in Austin with our Seasons product, and it was widely accepted. The build-to-order model is really pretty terrific for us. With the supply constraints and labor issues, is it more challenging, you know, to secure trades as a newer builder to the market? Just thinking about, you know, alternatively, would you continue to invest more in the existing footprint and maybe just give us a perspective because Austin's pretty frothy with respect to, you know, the overall price appreciation. Recognizing that your products had a good reception, maybe talk about like going in and how much lots right now, what you're paying up for lots. It seems like the market is one of the strongest in the country as an example. Yeah, Ivy, I can answer that. You know, what we're finding is a lot of builders in, say, the Austin market have, like, burned through a lot of their older land, and they're all coming in at kind of the same base as we are. We think our land basis is pretty similar to some of the current builders. We think our build-to-order model is really going to be pretty popular in, Does that mean you'll not be expanding more so in the existing footprint, and you'll look for other opportunities that you can continue to? Well, I think, you know, Larry and I have always been opportunistic over the last 45 years, but we look at both. This is, you know, the first time we actually expanded a few markets that we're pretty excited about to include Nashville. We feel pretty good about what we're doing. Bob, do you have anything to add? Yeah. I think you've captured it pretty well. You know, I think there's some larger markets where, you know, we're getting more cash flow in more recent quarters. Getting into some of these newer markets is really very good in terms of our current strategy of trying to make sure that we're keeping affordability in the mix. Certainly, we recognize that individual markets have appreciated significantly year-over-year, including Austin, Nashville. They still are very affordable, relative to other markets, and they're attracting a lot of jobs. Which, I think really, gives it a lot of long-term potential, even though if you're in the market, and you are just looking at that market, you'd say, "Wow, there's been a lot of appreciation." We love the long-term potential, and we think the benefits from diversifying our operations a little bit is very helpful as well. Thank you for that. Just one more from me. Just in terms of recognizing the cost inflation that we've seen on the build-to-order model, you know, you've seen pretty much everything across the board increasing labor costs. Can you quantify for us what the overall cost increases have been on an annualized basis through 1Q? Yeah, I think we're probably roughly, I guess, up 15% year-over-year. Is that? On a per foot basis. a little bit more skewed, is that more skewed to any particular part of the, you know, overall cost basket, labor versus materials? Are you- I think it's probably. factoring in more inflation for the remainder of 2022? Yeah, I think it's a little bit more on the material side and particularly lumber, I think. Mm-hmm Is contributing there, especially in our results. You know, we're going to get some volatility for the remainder of the year in terms of how lumber comes through our results. You know, I think you'll probably see it back off a little bit in Q2, but then the more recent spike in lumber will start coming through in maybe the end of Q2 and into Q3, part of Q4. There'll be some volatility up and down for the remainder of the year. Well, good luck, guys. Thank you. Thank you. Thank you. The next question comes from Michael Rehaut with J.P. Morgan. Hi, Doug Wardlaw on for Mike. You guys were talking earlier about how you implemented new strategies and workarounds for cycle times last quarter, but there were new issues arising. I was wondering if you could give further color into those issues. Last quarter you kind of referenced municipal slowdowns as had been a big hindrance, and I was wondering if there's any improvement on that front. Yeah. You know, I think it's hard to quantify any one thing. It just seems like we do make progress in one area, and then you see other things pop up. You know, it would probably be a laundry list of things that pop up across the country. If you ask one of our division presidents, I'm sure they would read you a list a mile long of things that they've dealt with. You know, the good news is, I think there's active strategies to try to make sure that we're getting ahead of it, including ordering materials earlier in the process, making sure we're diligent in terms of our permitting process. Even though we're not a spec builder, making sure we're getting the permit as early as we can in the process so that we're ready to start as soon as the sale occurs. You know, those are things that have helped us offset the surprises that come out any given day in our individual markets. Awesome. Thank you. Secondly, and I apologize if you covered this a little bit earlier, if you can kind of give a sense of how your demand and orders trended throughout the quarter, and maybe there's a month-by-month breakdown. Was there any sort of pickup or slowdown? Yeah. As we indicated in my prepared remarks, I believe March was a little less than January and February. That's similar to last year. As we go through the spring season, we implement limitations on lot releases. As we increased prices during the quarter, we saw a little bit lower activity in March relative to the first two months. Again, that is similar to what happened last year. You know, I'd also note that those increases during the Q1, price increases were about just shy of 10% from start to finish. Awesome. Thank you, guys. Thank you. The next question comes from Deepa Raghavan with Wells Fargo. Please go ahead, Ms. Raghavan. Your line's live. Hi. Hey, thanks for that. Good afternoon. Thanks for taking the time. Sorry, thanks for taking my questions. Can you talk to the M&A pipeline? You know, since then you consummated, or you will be consummating one pretty soon. Just given the macro-outlooks that are weakening and then there's this persistent supply chain issues not every builder will be able to get over, can we expect more M&A to happen? How are you thinking about your pipeline in M&A? You know, this is David. You know, I can answer it this way. From time to time over the last decade, we've looked at a lot of transactions. The last one we did was about 11 years ago, but when the Jones Company, a transaction came up, kind of checked all our boxes, build to order, very quality home builder, a leader in Nashville. We see a lot of packages that, you know, we felt pretty good about this one, that it would fit into our DNA and both on product and market. Great question. Yeah. I also note, you know, we have a great group of people at The Jones Company that really complements our existing team. Our existing team is very small because we've just gotten into the market, so it really gives us more holistic group of individuals to move our operations forward. Really exciting for the company. All right. Great. Another capital allocation question. Any interest in share buybacks here? Your dividends are obviously pretty well appreciated way of, you know, return of capital to shareholders, but can share buybacks also come into the mix as you try to create value here? Well, we have an authorization outstanding, and have for quite some time. You know, that said, we have not used it in quite some time. It's always an option that's open for us, especially with valuations on the lower side. More recently, however, as you know, we have allocated more capital towards our industry-leading dividend, including growing that dividend over the course of the past couple of years, as well as land assets, including The Jones Company coming up here, you know, currently slated to close at the end of Q2. A lot of great attractive opportunities for our capital. All right. If I can ask one, you know, quantitatively, Bob, any color on H2 cadence? I know. I mean, I'm assuming just given your BTO model, you probably have a little bit more visibility than you had last quarter. At least can you talk through some of the scenarios that can play out for margins maybe in the H2 or even if closing guide is more Q4 weighted. I mean, anything to help us, you know, to understand the puts and takes in the H2, I'd appreciate that. Yeah. I think, you know, the one variable I already talked about on the lumber side, you know, seeing that more recent spike in lumber come through in Q3. I think that's one thing to be aware of. You know, outside of that, yeah, I'll leave it at the 26%+ for Q2. We still think it's a great environment out there, solid demand. We think we've got a good shot at keeping that margin going forward into the H2. Okay. That's all. Thanks very much, and good luck. Thank you. The next question comes in Truman Patterson with Wolfe Research. Thanks. Actually, it's Paul Przybylski. Good morning. I was wondering, following on Ivy's question on the new markets, how long does it typically take for you to get a new market to scale? What volume do you need to break even and then become a meaningful contributor to the P&L? And then what would be the drag on earnings right now from all these new market entrances? I think, you know, we love to be in that 300-plus range in terms of closings. I think with the Jones acquisition, you know, that really gets us there for next year, potentially, just based upon their historical activity and the work that we've already done in the Nashville market to secure assets independent of The Jones Company of Tennessee. You know, we feel pretty good about that one getting up to scale. In terms of the drag, you know, we've got relatively small teams in each of the four new markets. Naturally, that'll change with The Jones Company of Tennessee coming on board in late Q2. I don't know that it'll be a material drag. You know, we will have in the H2 of 2022 up to 100 additional closings coming from Jones, give or take. You know, it's a bit of a moving target right now. Those will be lower on the margin spectrum, call it in the 10%-15% range, simply because we have to allocate the purchase price. I know you're well aware of that process, Paul. It'll drag margins just a teeny bit in the back half of the year. Then again, we're just talking about 100 closings or so. Okay. Switch things up a little bit. You know, you've got 20% of your business in Denver, and the Marshall Fire destroyed 1,000 homes out there, which is about 10% of annual production for the Denver market. When will those homes start to, you know, clear the EPA and insurance hurdles, et cetera, et cetera? You know, Denver has one of the more constrained labor forces in the country. Is that going to cause, you know, any kind of hiccups for you, either from elevated costs or maybe happen to slow down sales because the labor force is going to be, you know, preoccupied from that rebuild? You know, this is David, and I can answer that. It's a slow process. I mean, what they have to do to clean the site up, what they have to do with the EPA. You know, every one of those houses has a different insurance policy on it. It's a terrible thing that happened. In fact, it affected some houses that we built over 20 years ago. What we're seeing is we're seeing a lot of people that are moving into houses for rent, moving into apartments. We're seeing some of those consumers out looking to buy houses for us. It's not going to be a one-year process. It's going to take a few years to kinda work its way through the system. Okay. We shouldn't expect any kind of noticeable change in your Denever business because of this for a temporary period. Yeah, we really don't see it. Okay. All right, great. I appreciate it. Thank you. The next question comes from Jay McCanless with Wedbush Securities. Hey, thanks for taking my questions. First one, could you talk about the customer mix for the Jones Company and how that compares to MDC's current customer mix? You know, I think Jones builds a fantastic product out in Nashville. It is very compatible with our build-to-order strategy. I think their business model is really very much in line with what we do. Is it more move-up focused, entry-level? Any kind of color around that split? I would say it's a little more move-up focused than our percentage. You know, we're 65% what we call more affordable. They're probably a little bit less than that. I don't know the exact percentage because they don't necessarily categorize it the same way we do. Okay. But, um- Definitely on the move-up side. Thank you. Paul got my other question. You said probably 100 homes with about a 10%-15% gross margin, and then what the purchase accounting should roll off after 2-3 quarters. Yeah. I think as you get into 2023, you see less of that. You know, naturally, it's dependent upon how quickly houses close, you know, whether or not the closing occurs as scheduled, all those kind of things. You're a little uncertain at this point, but that's roughly the program right now that we can expect. Sure. Thanks for taking my questions. Thank you. Once again, please press star then one if you would like to ask a question. The next question comes from Alex Barron with Housing Research Center. Yeah. Thanks, gentlemen, and great job on the quarter. I wanted to ask, given that you're sticking to the build-to-order model with the interest rate uncertainty, how are you assisting your clients in locking in rates? Are they locking in at the time of purchase through an extended rate lock, or do they have to wait till 60 days out before they close? The standard program is 60 days out, but we have rolled out programs where they can do it for up to a year in advance. We have both options available depending upon the sensitivity of that consumer to the rate environment. Is that an incentive you guys are offering or is that something they have to pay on their own? It's both. Sometimes, they bear the full cost. Sometimes we'll help them out with it, you know, if we're doing a promotion or something like that. A tool in our toolbox. Got it. Also, given that you have this business model and your backlog, which pretty much covers the rest of the year, is it okay to assume that your margin that you're expecting for Q2 is going to be pretty similar for the back half of the year? You know, I think it's a reasonable assumption. You know, there's a lot going on in the market, a lot that happens to our trade base and of course, there are strains. You know, I don't want to imply that there's not any risk to that. It's probably the most reasonable estimate at this juncture. I mean, just to be on the same point. I mean, do you get to lock in most of your expenses at the time of start, or is there still some uncertainty that you're not able to lock in at the time the home starts because of the inflation and so on? I think lumber, for example, you know, until they deliver the lumber pack, you are not certain on your pricing. You know, we have various lock periods on lumber. There's that risk out there. On the back-end trades, I think you have the same potential for changes in pricing, depending upon what issues they're up against with their own labor pool, as well as materials. You know, as much as we would like to lock it in contractually, when you're dealing with local or even regional people who are your suppliers and subcontractors, you really have to work with them and make sure that they are moving forward, that they're still profitable in their endeavor. Last thing you want is for them to be upset with you and go to a different site. From a pragmatic standpoint, I think we're always in discussions with our subcontractors. We feel like we're in pretty good position nonetheless to make a good margin on our backlog in Q2 and into the H2 of the year. Okay. That was very helpful. If I could squeeze one more. You guys talked about the migration of people from the higher cost states to the lower cost states. I'm wondering if you guys have quantified that in any way, you know, percentage of sales that you're seeing that phenomenon happen. I don't think I quite caught your question from the higher cost base to the lower cost base. Yeah. Have you guys quantified what percentage of your sales that's happening? You know, people moving from California to Arizona or Texas, that kind of thing. You know, this is David. I can answer. I don't think we really quantified it, but you know, a clear example would be moving from, say, San Francisco and the Bay Area to the East Bay, where people may have moved out of a you know, attached unit, a townhouse, and moving into a single family house with either a you know, a three-car garage or a big lot. We're seeing a lot of that type of movement, which might be interstate, but some people are moving into other states. This work from home phenomenon has been really interesting. People are looking to have more affordable housing. Bob, you have something to add to that? Yeah, I was just going to say, I apologize. I didn't hear the state part of your question. Now I understand. Yeah, I think it varies state by state. Naturally, in some of your higher cost states, you have less in-migration, you know. You might only be, you know, 5%-10% from out of state. In some of your lower cost states, you know, you could be north of 20% coming from other markets. You know, a wide range of variability depending upon which state you're talking about. All right. Well, best of luck, guys. Thank you. Thank you. As that does conclude the question and answer session, I would like to return the floor to Bob Martin for any closing comments. Thank you all for being on the call, and we look forward to speaking with you again following the announcement of our Q2 earnings. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.