Good day, and welcome to the M.D.C. Holdings third quarter 2022 earnings conference call. All participants will be in 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 would now like to turn the conference over to Derek Kimmerle, Vice President and Corporate Controller. Please go ahead. Thank you. Good morning, ladies and gentlemen, and welcome to M.D.C. Holdings 2022 third quarter 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 third 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 third quarter of 2022 and provide an update on current market conditions. MDC generated net income of $144 million or $1.98 per diluted share in the third quarter of 2022. Home sales revenues increased 12% year-over-year to $1.4 billion, and home sales gross margins for the quarter were 22.7%. Excluding home impairments, home sales gross margins expanded 120 basis points year-over-year to 24.7%. Our team did an excellent job of delivering homes and backlog and maintaining price integrity in what continues to be a difficult market environment. Since our last quarterly update, mortgage rates have risen another 100 basis points, putting additional strain on new home affordability and demand in our markets. Gross orders for the third quarter came in at 1,569, which equated to an absorption pace of 2.4 homes per community per month. However, due to a spike in cancellations, our net order total for the quarter came in significantly below our expectations. We believe the combination of rising interest rates and a steady stream of negative news surrounding the future of housing and the overall economy eroded the confidence of prospective homebuyers and led them to reconsider their purchase. Another factor that contributed to the order shortfall was our strategic decision to focus on delivering homes and backlog rather than aggressively chasing sales during a typically lower seasonal period for our industry. We continue to believe that the long-term fundamentals driving new home construction remain positive and that there is a strong desire to own a home in this country. However, we expect the near-term sales environment will remain challenging until there is more clarity around the future of interest rates. In light of these industry headwinds, we have refocused our efforts on generating cash, fortifying the balance sheet, and taking cost out of the business. We ended the third quarter with $744 million in cash and cash equivalents in marketable securities, a debt-to-capital ratio of 33.2% and a net debt-to-capital ratio of 19.9%. Our controlled lot count declined 20% year-over-year as we approved virtually no new land deals during the quarter and walked away from over $11 million in option deposits and pre-acquisition costs. For the option agreements we still have in place, we have renegotiated or we are in the process of renegotiating the terms of many of those agreements. These actions, coupled with our focus on delivering homes at backlog and right-sizing our cost structure, should put us in a very strong financial position at year-end. Our leadership team has been through several housing downturns over the course of our careers, giving us a broad perspective on how to navigate difficult operating environments. Market corrections are a natural and oftentimes healthy occurrence in our industry and usually lead to market share gains for the well-capitalized builders when things do improve. We plan on being one of those builders and are positioning our company accordingly. We have no senior note maturities coming due the remainder of this decade and enough lots in the pipeline to fulfill our delivery projections through 2024, allowing us to operate from a position of strength during this period of uncertainty. Our financial strength should also give investors confidence in our ability to pay our industry-leading dividend, which currently stands at $2 per share on an annualized basis. As a result, I continue to be optimistic about long-term outlook for our company. With that, I'd like to turn the call over to David, who will provide more detail on our operating performance this quarter. Thank you, Larry, and good morning to everyone. MDC was able to deliver on its stated guidance for the third quarter by closing 2,387 homes at an average sales price of $590 and generating a home building gross margin before impairments of 24.7%. This was no small feat considering the supply chain issues, labor shortages, and municipal delays that continue to act as headwinds for our industry. Phoenix, Utah, and Sacramento produced the highest year-over-year delivery growth for our company, while Phoenix, Northern California, and Jacksonville generated the best home building gross margins. Similar to last quarter, we saw improving conditions on the front end of the construction process, but continued to experience long lead times and delays on the back end. We are working diligently with our trade vendors and suppliers to find solutions to these issues and expect to see some improvement over time as the slowdown in order activity translates into better trade availability. As Larry mentioned, we experienced softer demand and increased cancellations in the third quarter, resulting in a disappointing net order total for the period. Our monthly net order results mirrored the movement in mortgage rates, with September being our most difficult month. Cancellation activity in the second quarter was largely driven by affordability issues due to the sudden increase in mortgage rates. Cancellation activity in the third quarter seemed to be driven more by psychological factors than financial ones as a percentage of buyers who could still afford to move forward with their purchase at higher rates felt compelled to cancel. We are currently offering incentives to spur demand at our communities, including financing incentives aimed at lowering a prospective's monthly house payment. In the third quarter, incentives as a percentage of the dollar value of our gross new orders increased approximately 400 basis points year over year and 280 basis points versus the second quarter of 2022. Protecting the backlog and delivering as many homes in the fourth quarter as possible remains our primary goal for the remainder of the year. However, as we close more of our legacy backlog and open new communities ahead of the spring selling season, our focus will be the sales side of the business with an emphasis on sales pace along with rebuilding the backlog. Now, I'd like to turn the call over to Bob, who will provide more detail on our quarterly results and forward-looking guidance on some key metrics for our business. Thanks, David, and good morning, everyone. During the third quarter, we generated net income of $144.4 million or $1.98 per diluted share, representing a 1% decrease from the third quarter of 2021. Pre-tax income from our home building operations rose by $3.1 million or 2% from the third quarter of 2021 to $168.2 million. This increase was driven by home sale revenues, which rose 12% year-over-year to $1.41 billion. However, the increase was largely offset by an 80 basis point decrease in our gross margin from home sales to 22.7%. The gross margin decline was primarily due to inventory impairments of $28.4 million, impacting seven communities within our West segment and two communities within our East segment. The impairments mostly related to communities already open for sale, as well as a couple of communities scheduled for opening during the fourth quarter. Our financial services pre-tax income decreased during the third quarter of 2022 to $17.6 million. This decrease was primarily due to our mortgage operations as we have seen profitability per loan locked, sold and closed return to more historical levels with a significantly increased level of competition in the primary mortgage market. Further, within our mortgage business, we saw a decrease in the number of loans locked during the third quarter due to the higher volume of long-term interest rate locks utilized in the second quarter of 2022. The decrease in mortgage operations was partially offset by our insurance operations, which benefited from increased premium revenue within our captive insurance companies. Our tax rate decreased from 24.3%- 22.3% for the 2022 third quarter. The decrease in rate was driven by the extension of the federal energy efficient home tax credits during the quarter, which was partially offset by an increase in nondeductible executive compensation. We delivered 2,387 homes during the quarter, which represented a 1% decrease year over year, but exceeded the midpoint of our previously estimated range for the quarter of 2,200-2,500 closings. The average selling price of homes delivered during the quarter increased 13% to $590,000. This was primarily the result of price increases implemented over the past two years. Our sale to close cycle times for closed homes remained extended and are unlikely to materially improve in the fourth quarter. With that said, we believe cycle times have the potential to improve in 2023 and be a positive catalyst for closing volume longer term. We currently anticipate home deliveries for the 2022 fourth quarter of between 2,200 and 2,500 units, and we expect the average selling price of these units to be between $570,000 and $580,000. There continues to be a heightened risk of underperformance relative to our forecast this quarter due to the increased volatility of economic and industry conditions. Gross margin from home sales decreased by 80 basis points year-over-year to 22.7%. As previously mentioned, the decrease was primarily due to inventory impairments recognized during the quarter. However, increased building costs as well as an increase in incentives also contributed to the decline. Incentives on closed homes increased 130 basis points year-over-year, of which 40 basis points related to financing incentives offered through our mortgage company. The level of financing incentives will likely increase in the near term as we continue to use these incentives as a tool to address affordability concerns brought about by higher mortgage rates. Excluding inventory impairments, our gross margin from home sales improved across each of our segments, with our West segment having the highest absolute level and our East segment having the largest year-over-year increase. These improvements were driven by price increases implemented across nearly all of our communities over the past two years. We are currently expecting gross margin from home sales for the 2022 fourth quarter of between 20% and 22%, assuming no impairments or warranty adjustments. Our total dollar SG&A expense for the 2022 third quarter increased $21.3 million from the 2021 third quarter, driven by increased general and administrative expenses. This resulted in a 40 basis points increase in our SG&A expense as a percent of home sale revenues. General and administrative expenses increased $20.9 million from the prior year quarter to $80.9 million. This increase primarily resulted from an increase in stock-based compensation expense as we recognized $15 million of expense related to equity awards granted during the quarter. As Larry noted, we have taken steps to reduce our general and administrative expenses moving forward. We have seen our quarter end headcount decrease 11% from its peak earlier this year and continue to evaluate other opportunities for additional cost savings. We currently estimate that our general administrative expense for the fourth quarter of 2022 will be approximately $70 million. The dollar value of our net orders decreased 88% year-over-year to $152.8 million due to an 88% decrease in net unit orders. Net unit orders were negatively impacted by the number of cancellations during the quarter, which more than doubled from the prior year to 1,270 cancellations. Given our build to order business model, we believe it is best to analyze cancellations as a percentage of beginning backlog. In the third quarter of 2022, cancellations as a percentage of beginning backlog were 17.1% compared to the prior year quarter of 7.4% and our longer term quarterly average over the past 10 years of 13.9%. In large part, the cancellations during the quarter were from orders that occurred prior to the run-up in mortgage rates, with 59% of our third quarter cancellations coming from orders that occurred prior to March 31, 2022. As David mentioned, we also saw a higher percentage of cancellations during the third quarter from buyers who could still afford to move forward with their purchase at higher rates. This type of buyer equated to approximately 43% of cancellations during the third quarter, compared to 36% of cancellations during the quarter that were strictly due to the buyer no longer qualifying for a mortgage. In contrast, during the second quarter, the greatest percentage of cancellations was attributable to those who no longer qualified for a mortgage. Before cancellations, our gross order activity for the third quarter was down 47% year-over-year and 30% from the second quarter of 2022. About 50% of our third quarter gross order activity was spec inventory. Looking at the monthly cadence of activity, each month of the third quarter saw fewer gross orders and more cancellations than the month before, with September having the lowest number of gross orders and the highest number of cancellations for the quarter. With a few days to go, the number of gross orders and cancellations for October seem like they will be similar to the numbers we recorded in September. Looking at our average sales price of new orders, we analyzed this metric on a gross basis given the magnitude and mix of cancellation activity during the quarter. On a gross order basis, our average sales price of new orders increased approximately 4% as compared to the prior year and decreased approximately 5% as compared to the second quarter of this year. The decrease in our average selling price from the second quarter of 2022 was due to an increase in incentives as well as a decrease in base pricing for certain communities. Our active subdivision count was at 220 to end the quarter, up 8% from 203 a year ago. This increase was driven entirely by our West segment, with our East and Mountain segments both experiencing year-over-year decreases. Our Arizona and California markets saw the largest year-over-year increase in community count, adding a total of 22 net new active communities. We expect our active community count to continue to increase through the remainder of the year and into the 2023 spring selling season. We acquired 447 lots during the quarter, resulting in total land acquisition spend of $74 million, down 73% from $273 million in the 2021 third quarter. We also had $169 million of land development spend during the 2022 third quarter, up modestly from $147 million in the same quarter last year. We incurred $11.8 million of project abandonment charges, largely resulting from non-refundable deposits on land transactions that were no longer viable in the current market. This charge is in addition to the $15.5 million of project abandonment charges recognized in the second quarter. As of quarter end, we had $24.1 million in cash deposits and $5.9 million in letters of credit at risk associated with the 5,364 lots currently under option. During the third quarter, we approved just one new land deal with 12 lots for acquisition. This minimal activity, coupled with the number of projects abandoned over the last six months, resulted in a 20% year-over-year decrease in our controlled lot supply to 29,256 lots. However, we believe this supply is sufficient to meet our operating needs for several years, consistent with our philosophy of maintaining a two to three- year supply of land. With slower land acquisition activity so far this year, operating cash flow has increased to $344 million for the first nine months of 2022, compared with $86.5 million of cash used to fund operating activities for the first nine months of 2021. With cash balances increasing during the quarter, we purchased approximately $292 million of U.S. Treasury securities during the third quarter. These marketable securities have enhanced our yield, but are of a short duration, with initial maturities upon purchase of six months or less. Our work in process inventory has decreased $152 million from its peak at the end of the second quarter this year, despite an increase in our overall speculative inventory. As of September 30, we had 1,082 spec units, of which only 187 units were complete. We ended the quarter with total liquidity of $1.89 billion, with no senior note maturities until 2030 and a book value per share of $42.23. In summary, while we remain confident in the long-term growth prospects for the industry, given the underproduction of new homes over the past decade, the demand for new homes is likely to continue to experience headwinds in the near term. As I mentioned last quarter, our financial position and cash flow will remain a key focus for us, especially as the economic picture remains unclear. Delivering homes in backlog during the fourth quarter will be key to the continued improvement to balance sheet and cash flow metrics. Furthermore, as uncertainty in the market persists, we believe that our strong balance sheet and liquidity will put us in a position to pursue new land transactions with better terms and/or better pricing than has been recently available, which could be a great opportunity for our company. Our strong financial position also supports the continued payment of our quarterly dividend, which was again approved by our board at the $0.50 per share level this week, continuing our long-established record of consistent or increasing dividend payments dating back to 1994. That concludes our prepared remarks. We will now open up the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Stephen Kim at Evercore ISI. Please go ahead. Yeah, thanks very much, guys. Appreciate the color. Bob, just a housekeeping item. Do you have the inventory breakout, you know, the housing completed and under construction versus the land and land under development? If you have those, that would be helpful. But I wanted to. While you're looking that up, I also wanted to ask you about what percentage of your backlog is rate locked at this point? And what was that, you know, at the end of 2Q? I think rate locked for Q4 specifically, we're probably right around 50%. I guess overall, we're probably somewhere in the neighborhood of 40%. The prior quarter, I'll have to check on this, Steve, but I think it was closer to 30% overall. Why wouldn't those numbers, you know, why wouldn't you proactively seek to get those numbers higher? Because it just, it seems like with all the volatility and with the uncertainty in the market, that might be an effective way to sort of mitigate the effects of cancellations. Then also you mentioned a lot of the cancellations were sort of psychological, and you backed that up with some of the, with some of your commentary. Are you, in those situations, keeping the deposit, and you know, the earnest money these folks have put down? We've noticed that your earnest money percentage is kind of on the low side, and we're wondering whether you're actually looking to take more earnest money. You know, these are things that could theoretically mitigate your cancellation experience. I'm just wondering if you're pulling some of these levers. Yeah. A couple things. I'll try to answer as much as I can remember. First of all, just speaking to the interest rate lock situation, I was speaking as of September 30. I would say certainly on the interest rate lock side of things, we're focused on the ones that are closing the quickest, the ones that have the quickest cash flow, so locking those in at least a quarter ahead. We do also have longer term lock programs available for consumers if they are interested in that. The main priority is try to lock folks in that are gonna close within the coming quarter. That's one. Two, your housekeeping item. I think you were just asking about the split between WIP and land. Mm-hmm. That is in our release. It's $2.2 billion on WIP and $1.8 billion on the land account. Okay, great. For a total of $4 billion of inventory. In terms of the other items, the other thing I heard of was the deposit policy. We feel pretty comfortable about our deposit policy, but much like everything else in a changing market, we have reviewed that. We have made changes to that policy, and we continue to make some changes to that policy. It's a bit of a balance because we wanna make sure our backlog is secure. Then again, we wanna make sure that buyers feel comfortable entering into new contracts as well. Of course, we're looking at what the rest of the market is doing. Certainly, we're very focused on reviewing a lot of our practices as we continue to operate through a very volatile market. Okay. That's helpful. Appreciate that. Lastly for me is how many of your net sales would you say were dirt sales versus spec sales in the quarter? I'm not sure if we split out the net. The gross is about 50%. I guess 50% gross. Dirt net, maybe 60%. It's a little bit less meaningful on the net basis, but on a gross basis. Mm-hmm. It's about 50%, which is up from where it was in Q2, and of course, a year ago in the third quarter. The gross sales, you're saying 50% of your gross sales were dirt sales, and that share of gross sales being dirt sales is higher than it was before. No, the percentage of spec sales is higher. Okay. Gotcha. That's what I thought. Okay. Right. Okay. That makes more sense. Gotcha. Okay. Thanks very much, guys. Appreciate it. Our next question today comes from Truman Patterson at Wolfe Research. Please go ahead. Hey, good afternoon, everyone, and thanks for taking my questions. First, I was just hoping on the $28 million inventory impairment charge, hoping you could give some color there. Was it concentrated to, you know, a single land deal or, you know, multiple communities? I'm also hoping you can give color. Was it related to a specific metro or region, as well as kind of the vintage of when that land was bought? Yeah. It's a bit of a mixed bag on all fronts. I think overall, it was nine different communities. As we said on the call, two in the east, seven in the west. The two in the east were in Pennsylvania. It was actually a newer area that we were operating in. In that case, it was an area where we encountered some unexpected costs. That one's a different animal out there. Those two were in Pennsylvania. If you look out west, the biggest areas for the impairments was Phoenix and Southern California. We kind of had a little smattering elsewhere. We had one in Vegas, for example. You know, naturally in this environment, you know, we're still at pretty high levels of cost overall. Of course, we're dealing with higher levels of incentives. That tripped a couple triggers in a few areas. We did the analysis and that's the number that we came up with. You know, we made sure we were very thorough in that analysis, and we really used today's assumptions with what's going on. Yeah, that's the scoop. Vintage, again, it was different vintages. I don't have kind of one specific time to point to, but different periods of time that those were originally contracted. Okay. Thanks for that, Bob. Bob, I heard you give commentary earlier about the level of incentives in your closings. I'm hoping you could just give, you know, where third quarter order incentives or base price cuts kind of combined might have been for, you know, the third quarter and, you know, what kind of the exit rate was in September, October time period. Sure. As far as incentives go, I think for sales for the quarter overall, we were about 7%, but I think they were trending up towards 8%, as we got to the end of the quarter. As we looked at base price decreases, hang with me for one second, so I can get you a more exact number. Derek, what page is that? Base price decreases were pretty small, relatively 1%-2% range. Yeah. It was, I think, 1% or 2% overall, kind of a relatively de minimis number relative to the incentives. Okay. I can get that exactly for you. Okay. Perfect. Thanks for that, Bob. Just one final for me. Whenever we're thinking through, you know, the level of incentives, are there any, you know, markets, metros, regions to call out where, you know, you're seeing a relatively elevated level and any way you could put some numbers behind that? In terms of price decreases? You know, I would say. Yeah. Yeah, Yeah, just the level of order incentives. Probably, you're getting some in most markets. Some of the outlying areas of Phoenix might be a little bit more elevated relative to those numbers. I don't have an exact percentage for you. Yeah. That's one that I would call out. Okay. All right. Well, thank you all for your time, and good luck in the coming quarter. Thank you. Our next question today comes from Michael Rehaut with JP Morgan. Please go ahead. Hello, everyone. This is Andrew Azzi. I'm on for Mike. I just wanted to ask, could you kind of give any more color around build cycle times? Any relief that you see in the future? I know you spoke to Q4 not really materially improving. Is any more detail there? I mean, we're at, I think 303 days, on the houses that closed during the third quarter, and that's sale to close, including the time in the front end, before we start the house. We expect it's gonna be at that level or maybe even a little bit more than that, in Q4. In terms of the actual period of construction from the time we start the house to the time we finish, I don't know that we've seen a ton of relief there yet, but we expect there could be some opportunity for that in 2023, simply because there's gonna be less houses started, less working through the pipeline. I think the finish trades are still plenty busy, so we haven't really seen any relief there yet. I'm hesitant to put any quantification on it at this point, other than to say before we went through this period of time, we were just under 200 as our sale to close cycle times. This is on dirt sale houses, I should say. That's been the recent low. Certainly not saying we can necessarily get there in 2023, but we have done it in the past at much lower levels in terms of cycle time. Got it. That's helpful. I think in the prepared remarks, I heard you guys saying something about cost-cutting initiatives. I wanted to see if you could expand on that at all. Yeah. I think from our peak in terms of headcount we're down about 11%. That's as of the end of the quarter. That includes some attrition where folks left and we didn't replace the position, and then a couple situations where we reduced our staff more proactively. Got it. One more from me. Is there any change in the go-to-market strategy? Are you any less focused on entry-level or any color there? You know, we've got a pretty good spectrum of products. I would say we're still a bit more focused on the affordable realm, much as we have been over the course of the past few years. Got it. That's it from me. Thank you so much, guys. Our next question today comes from Alan Ratner with Zelman & Associates. Please go ahead. Hey, guys. Good afternoon. Thanks for taking my questions. First, revisiting the impairments for a second. Bob, do you happen to know, I guess, probably more relevant to the active communities, what type of net price adjustment triggered those impairments? You mentioned the incentives company-wide, but I'm guessing those communities might have been a bit larger. Do you have an updated figure in terms of a watchlist, in terms of communities that might not have been impaired this quarter, but you know, might have shown some potential indicators of impairments? I believe that's a figure that you and others used to disclose back in the day, and I'm guessing might be disclosed going forward here. Yeah. You know, I don't have a watchlist for you. You know, I will say clearly in this market, if we see more deterioration, we're gonna be doing the same impairment analysis at the end of the quarter. Impairments are always possible in the wake of changing industry conditions. We'll continue to do the impairment analysis every quarter and report back. In terms of the magnitude, you know, each asset I think is different in terms of what drove it. You know, in some cases, you know, I mentioned there was a couple of communities where the community wasn't even open yet, and we see the direct comps, maybe those selling spec inventory, you know, showing decreases of pretty big significance. Whether or not that is just to clear the spec inventory for their current fiscal year or if it's a longer term trend, it's hard to say whether or not the prices are gonna stick at that point. We can only kind of deal with the facts and circumstances that we have at the time when we're looking at those impairments. We took the information that was available and made the calculation. Got it. That's helpful, Bob. Second question on, you know, cancellations obviously have been increasing across the industry. You mentioned that your priority is kind of closing the backlog that you have in place and making sure that as many of those homes get to the finish line as possible. You know, your cancel rate was a bit higher than the group average, at least what we've seen so far, as a percentage of backlog. I'm curious, you know, when you think about the equation of whether you offer incentives to the buyers in backlog or discount the price further in order to keep those buyers in place versus kind of letting them walk, because you did mention a good chunk of them could still afford to move forward. It sounds like it was more of a confidence/pricing decision there. You know, where do you draw the line and what type of results have you had, you know, where you can point to reselling some of those canceled units? What is the margin, you know, and price difference look like compared to what it was originally in backlog for? Yeah. I mean, I think the most important thing is that we're communicating with those buyers that are canceling and at least take a shot at seeing if we can keep them in backlog. I think we've even gotten to the point where we want our division presidents to have conversations with every one of those consumers, whereas in the past we may have just had the sales manager or someone else have that conversation. It's a really skilled group we have of division managers out there. They're having those conversations and they're making a business decision. We've got a lot of tools out there for them to use. We've got the interest rate locks at below current market prices, which are great. In some cases, it's an increased incentive or something else, but in a lot of cases, it just comes down to payment. To the point on those who still can afford it, in a lot of cases, you know, they're just a little bit concerned in this market, and there's really not much we can do to bring them back. But we certainly keep that relationship fresh and try again when maybe things settle down a little bit. In terms of resale of specs, I would say we've had a pretty good record on that. You heard the 50% number in terms of our overall gross orders that related to specs. That's a recent high for us. We can certainly see that there's some demand out there when somebody gets that certainty of, I can get to that house, relatively quickly and I know what my payment is. I think our management teams have done a great job of getting those resold. Just on that point, though, Bob, so in the event where you are reselling it and you look at the price you've achieved, you know, does that inform any decisions going forward, perhaps in terms of maybe, you know, are you coming in lower than you would have if you would've, you know, maybe met the bidder or the buyer's price that was in backlog, or is it a situation where you're you feel like you're getting a better price than you would have if you had to kind of discount to keep that original buyer in place? I think our division managers are well aware of what the current trade is, what the current house pricing is, and how that relates to the buyer that's already in backlog. I would say they're doing a good job of kind of managing against what they think they could get post-cancellation versus what they can get before it cancels. They're taking all that into account. Got it. Okay. I know it's a tough equation to figure out here, so appreciate the thoughts. Sure. Our next question comes from Alex Barron with Housing Research Center. Please go ahead. Yeah, thank you. Yeah, Bob, I wanted to ask, I think I heard the metrics involved in the impairments, but how many communities, you know, got impaired this quarter? What, what's roughly the thing that triggers the impairment? Is it the gross margin or the operating margin? Like, you know, what is it that triggers that? It was nine communities. It's really the operating margin that you have to look at. Once you go negative, so if you go $1 negative on expected cash flow on an undiscounted basis, then you trigger an impairment, and you do discounting of the cash flows, and that's what determines what it is. Really it's on the operating level within that one community, I should say. Got it. Also, I'm not sure if I missed it or if you didn't give, do you happen to have the number of starts in the quarter? You know, philosophically speaking, how are you guys thinking about spec starts going forward? I know in the past few years you guys have been inclined to go towards build-to-order model, but some other builders are saying that there's more demand for homes that can close within 30-90 days. I'm wondering if that's changing your perspective on that. Yeah. I think those are good questions. You know, with regard to the spec start philosophy, you know, we haven't changed anything at this point. You know, I will say we have generated a lot of great cash flow and when you're in a good balance sheet position, it gives you the optionality to smart specs. For example, if you really need to, if conditions warrant. That's something that we'll continue to evaluate. But we still wanna be a place where a buyer can come for a build-to-order house too. It's a balance and we'll continue to kind of assess that as we go. As we look at just what happened in terms of starts during the quarter, I think we're at right around 910 was the number for the quarter. Got it. Okay. In terms of, again, you know, what's triggering this impairment, is it just mainly, like you said, newer communities and you're looking at comps, or are you actually cutting prices on existing homes that's getting some of these communities there? Some of it's newer communities, but some of it's older communities that just had higher costs. I mentioned the example of a couple in Pennsylvania and in the area we hadn't operated much in before, where we had some unexpected costs that we were hit with. It's different things for different communities. Certainly in some cases, it was directly related to the fact that there's some discounting going on out there, whether that's us or a competitor. You know, we take that into account and run it through the cash flows. Got it. Okay, guys. Thanks a lot. No problem. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then one. Our next question comes from Jay McCanless with Wedbush Securities. Please go ahead. Hey, thanks for taking my questions. I guess the first one, were the majority of the cancellations in the quarter customer driven or did you guys decide to proactively cancel out some people that you thought might not get to the finish line? Yeah, it's a combination because we are combing through our backlog constantly, and if we find a buyer who we just don't think is gonna make it, we'll have that conversation proactively. But as I mentioned earlier and David hit on it as well, we saw more that were in that remorse category. That's more where the buyer proactively comes back to us and says, "You know what? They really just didn't want to proceed at this point." A mixed bag. Number one being that remorse category, number two being financing. If the vintage of the cancellations were people who had signed, I think you said, Bob, before March, 31st and you're on a 300-day cycle, does that suggest that closings from 4Q 2022 to 1Q 2023 are gonna take a steeper drop than normal just because of that gap you have? Did you say 4Q 2022? 2022 into 1Q 2023. Just trying to think about. Yeah. What the volume ramifications look like on that. I mean, we put out our 2,200-2,500 range on closings for Q4. That's your best information for there. We haven't put out any guidance for Q1. But I will say, when you do get a cancellation and it dates back to, you know, Q1 or Q4 of last year, of course, that means you've got a spec that you can potentially sell and close within the quarter or maybe even into Q1. So a lot of those units will be additive to future periods even if we had to cancel them in the current period. The last question I had, not to pick apart strategy, but when you said that the majority of openings this quarter were in Arizona and California, were those more entry-level, lower affordability priced or is this land that you had to go ahead and open because it seems like you're opening more communities in some of the tougher areas? You know, I think, you know, we continue to open communities in a lot of our markets. Those two just stuck out as the ones that had the greatest increase in community count. In some cases, community count's going up a little bit more than expected because the sales rate is a little bit lower, so you have fewer closeouts. From a strategic standpoint, we've got a fairly limited supply of land. I don't think we're of the mindset that we're just gonna sit on communities. We're gonna open them as they're ready and become available. With the short land supply, we have the ability to convert to cash readily, easily, and then reinvest in the market later on when it makes sense. Yeah, that's really the strategy. We'll continue to open communities as they're ready to come online. Okay. Got it. Thanks for taking my question. Our next question comes from David Stuehr at Longfellow. Please go ahead. Thank you. You know, a few months back, your firm filed this, a rather substantial shelf registration. You've emphasized, you know, certainly on this call and on prior conference calls, you know, definitely you have solid liquidity here. There's no pressing bond maturities. I've always been kind of curious in terms of what the thought was behind that shelf filing. Were you taking a look at doing a potential acquisition at the time? If my conspiracy theory is wrong, just kind of curious in terms of, you know, once this down cycle ends, and they typically do, what your firm's viewpoint is on, industry consolidation in this space. Overall, just more color on that would be great. Thank you. Yeah. I don't think there was any particular transactional activity anticipated when we did that shelf. There's really no kind of incremental work or that much cost involved with doing five versus two versus one. It was kind of one of those things where you might as well. In terms of industry consolidation, you know, that's not one I'm smart enough to figure out. I think there's been a lot of others out there who have been a lot more acquisitive than us, and you know, there's nothing out there right now that I'm aware of that's cooking. Okay. I mean, clearly that's something that you would entertain. I mean, at some point from a strategic perspective to take a look, I would figure. Well, I think any company, public company has to look at things as they come along and do what's in the best interest of the shareholders. Okay. All right. Thank you very much. Sure thing. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. We appreciate you being on the call today, and we look forward to speaking with you again after our year closes, and we jump on our Q4 earnings call. Thank you, everyone. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.