...@meritagehomes.com, that our statements during these two calls contain forward-looking statements. Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them. Any forward-looking statements are inherently uncertain. Our actual results may be materially different than our expectations due to a wide variety of risk factors, which we have identified and listed on this slide, as well as in our most recent filings with the Securities and Exchange Commission, specifically our 2023 annual report on Form 10-K and our Form 10-Q for the quarter ended March 31st, 2024. With us today are Philippe Lord, CEO, and Hilla Sferruzza, Executive Vice President and CFO of Meritage Homes. Stephen Kim from Evercore ISI will act as our guest host for today's conversation and will lead the Q&A. We ask that attendees submit their questions as we go in the Q&A box on your screen. In addition to his own questions, Steve will also announce your name, your firm's name, and pose your question to Philippe and Hilla throughout the conversation. We will try to address all questions pertaining to the Investor Day topics during this call. Please visit our IR website to find the Investor Day call presentation as well, which, for today's call, we expect will last about 90 minutes. We are recording this call, and a replay will be available later today. A transcript will also be available in a couple of days. I'll now turn it over to Steve to kick us off. Steve? All right. Thank you, Emily, and welcome everyone for day two of Meritage's Investor Presentation. As Emily said, I'm Stephen Kim with Evercore ISI. I've been covering the home builders for a long time, sad to say, over 30 years. But over that time, I've witnessed the home builders generally, but Meritage very specifically, grow tremendously in terms of scale, profitability, and financial strength. Today, I'm looking forward to hearing more from Philippe and Hilla about their future trajectory. In their call last month, in their first call, you'll recall that they laid out a new business strategy, with a 3-tier approach to compete more directly and effectively with resales. Today, we're gonna discuss the company's land and capital allocation strategy, and we're gonna hear them lay out some longer-term financial targets. As Emily said, there's gonna be a Q&A session after their opening remarks, so, you know, feel free to type in your questions in the box below, and I'll do my best to incorporate those into the discussion with one caveat: management is not going to answer questions related to current conditions or the commentary related to current conditions, so, either on a regional or a national basis, so please don't bother asking those kinds of questions. I know we're all excited to get started, so Philippe, I'm gonna hand it over to you to get things rolling. Thank you, Steve. As most of the attendees know, we conducted our first virtual Investor Day web call a couple of weeks ago, where we laid out the evolution of our business model. It was encouraging to hear the positive feedback from both analysts and investors afterwards, and we were pleased with the overall live participation, with more than double the attendees from our historical in-person Investor Days. Before we lay out the financial impacts of the new strategy, I just wanted to start by quickly recapping the three pillars of our strategic evolution. Our overall goal is to focus our selling efforts on the largest pool of potential home buyers, and that means we need to effectively compete against resale inventory. This is not just our focus today, as the market is still locked up with existing homeowners unwilling to part with their low-rate mortgages, but will be our strategy when product on the resale market becomes more abundant. We believe that if we can level set objections we typically hear in the new home space, customers will instinctively choose new versus used, as they do for other large ticket items like cars and appliances. So how do we ensure our homes compete well with resale homes? We've been refining our existing strategy of spec building in the entry-level and first move-up space and streamlined operations for the past several years. But now we are adding 3 new core tenants to our current process: a 60-day guarantee, the concept of move-in-ready homes, and a focus on deepening our Realtor relationships. We believe this strategic evolution will allow us to expand our market share and accelerate a growth pace while improving financial metrics long term. So what do these three new tenets actually mean? First, a 60-day guarantee means our homes should be ready to close on the same timeline as an existing home, eliminating one of the most common differentiators between the new and used home market. In fact, not only can we close every home in 60 days, we are going to guarantee it. We are going to cover our customers' out-of-pocket expense if there are delays, offering an industry-leading financial guarantee. The concept of Move-In Ready home refers to our homes being turnkey, livable from day one. Our new homeowners just need to move their furniture and belongings in, because we've included the extra items that usually require a material cash outlay in the new home space, such as ceiling fans, blinds, landscaping, and appliances like washers, dryers, and refrigerators. This is a financial peace-of-mind solution that neutralizes the concern when considering a new home purchase. Our last tenet refers to the deep value we attribute to having strong Realtor relationships. We view the homebuyer as the Realtor's customer, and the Realtor as our customer, as most potential homebuyers have engaged with their Realtor before they ever connect with us. We know and embrace the fact that Realtors are a trusted resource for potential customers, particularly the first-time homebuyers. We are leaning into our Realtor relationships and can see a scenario where we close 100% co-broke participation, paying local market rate commissions. Under the strategic evolution, we will continue to build the same affordable but upgraded Meritage entry-level and first-move product that we have been refining for the last 7-8 years... but now we will be selling those homes to buyers who want to move into the home 60 days, and typically have already engaged with a broker. So with that backdrop, let's talk about the financial impact of this shift. To meet the 60-day guarantee, we have to continue to have a 4- to 6-month supply of WIP inventory, but we will need to wait until later in the construction cycle to release homes for sale. This may cause incremental carry costs as we ensure these homes can close in a 60-day window. Although if homes still close when completed, the additional cost will be limited. To note, the monthly carry cost per completed home, such as property taxes, HOA dues, and utilities, have not changed, nor have the target months of supply of available inventory, but we are seeing a greater percentage of unsold WIP will be completed. So there will be both an increase in our balance sheet WIP and some incremental P&L costs from the additional carry expenses. To support our 60-day commitment for our customers, if we do not close within 60 days of the sales date, Meritage will reimburse our customers out-of-pocket expenses up to a certain max threshold. These expenses include hotel stays or storage, so that there's no financial burden to the buyer if the delay was due to a Meritage issue. We do anticipate to incur some incremental cost for the guarantee. Although, as the release of the inventory for sale is within our control, we believe this cost will be minimal, and will self-adjust if we see 60-day misses within a certain geography or floor plan. As an offset to the 60-day cost, we do expect the cost of our forward rate locks and other financing commitments to drop notably with our 60-day guarantee, as the maturity of these incentives will shorten materially, improving ASP on almost every home. Next, when we look at the cost structure of the Move-In Ready packages, we believe the increase in direct costs for the included features will see some benefits from our scale and relationships with our national vendors, as they will be offered in 100% of our homes. However, we do not expect the cost to come in... We do expect the cost to come in at about 50 to 100 BPS per home. We intend to offset those costs with corresponding ASP increases for a net neutral margin impact. And lastly, we know that when we bring up the last tenet, realtor relationships, some might assume a huge increase in commission expenses. Let's break down the math into two aspects, external and internal. Our percentage of co-broke has been in the mid-80% range for the past several quarters, so the incremental lift, even to the near 100%, isn't as material as it seems. Currently, without strategic relationships, we find ourselves having to increase external commissions to sell in slower market times or more challenging submarkets and communities. We believe that by more fully embracing the realtor relationship, we should experience a limitation on ad hoc BPS by offering other marketing and partnership benefits to our key realtors that are at no or low cost to Meritage, such as a pocket listing, referrals, or open house opportunities. We are still exploring what benefits are most meaningful to the third-party realtor, but we are seeing strong early success with initiatives that increase long-term volume for these partners, versus just commission rate increases on individual transactions. We intend to continue paying market rate for external commissions. Today, we average 2.5%-3%. This may change based on the longer-term impacts of the NAR settlement, but we will lean into our broker partnerships and continue to pay the market rate in all of our geographies. To more than offset the increase in external commission expenses, we anticipate long-term internal commissions would decrease. As our sales associates utilize the large network of brokers as an extension of our team, we believe each internal sales associate will be able to sell and carry more homes than they currently have in their backlog. While we expect our employees will be paid the same or more individually, their take-home pay will not be negatively impacted. The per-home commission rate should decline. The second benefit of higher per-associate high volume is being able to leverage the same employee count we have today on much higher sales volume in the future. The savings and payroll burden for the sales team, our largest employee group, will also assist in offsetting the incremental external commission cost. From a marketing perspective, we are shifting our target from home buyers to realtors under the new strategy. With this in mind, we have defined parameters for our marketing efforts versus the blanket list of all potential home buyers in our geographies that are our current targets. Given the refined focus on B2B prospecting, we anticipate spending our marketing budgets in a more efficient manner, reducing overall cost over time. Further, we can reduce project-related marketing expenses and share local advertising with the broker community. I'm now going to turn it over to Hilla, and she's going to delve a little bit deeper into our long-term financial targets. Hilla? Thanks, Philippe. So let's just recap. All in, we anticipate an improvement in top-line revenue due to lower incentive costs, which will mitigate the increase in costs related to our 60-day commitment. Our cost and revenue from the move-in-ready home additions are expected to be margin and net income neutral, and we expect to find savings in internal commissions and marketing costs to compensate for the external commission increases. Once our strategy is at a full operating run rate, our new long-term home closing gross margin target is 22.5%-23.5% due to permanent efficiencies gained and our increased scale. We have the people, the technology, and operating system in place to support this strategic evolution. The full net impact on SG&A is a positive one, which is why we are now targeting 9.5% SG&A as a percentage of home closing revenue over the next 3-4 years as we leverage our costs on improved volume. Next, I'd like to address certain key targets under our new strategy. Our backlog conversion rate has been increasing significantly over the past several quarters. When our new strategy is in full swing, we are targeting a minimum average backlog conversion of 125%. Our sales pace target remains at a floor of 4 net sales per month long term, but as we have demonstrated repeatedly over the last 4 years, we will take what the market allows us to do. Our sales pace will continue to align- our starts pace will continue to align with our sales pace. We're always going to build specs based on the volume in the market, so if the volume increases or slows, we'll adjust our spec inventory accordingly. We still aim to have 4-6 months of supply of specs on the ground, which equates to around 20 homes per store, although over time, our percentage of completed WIP should increase slightly to accommodate our 60-day guarantee. To complement the evolution of the new strategy, we expect to grow our annual units from the midpoint of our current 2024 guidance of 14,750 homes to a target of 20,000 units in the next 3-4 years, aligning with our lower SG&A target timeline. We think we can leverage our existing markets and overhead platform to reach the 20,000 units, although this new long-term target is not a stopping point for us, but merely a mile marker in our growth journey. Turning to the capital needed to operate this new strategy, our 2024 forecast and guidance were all provided with this new strategy in mind. Our convertible debt deal was also contemplated in our guidance, and the incremental cash we derived from it is part of our available sources for our land spend, dividends, and share repurchases. To touch on our land strategy, we want to be clear there's no shift to our land underwriting playbook. We are still buying land in a disciplined way, continuing to buy larger parcels in the same MSAs. As for our land financing strategy, we are comfortable with off-balance-sheet land of up to 40% as a ceiling. The land spend we have guided to for fiscal year 2024, the $2 billion-$2.5 billion, does not include the dollars for off-balance-sheet financing, which implies we expect to acquire an amount beyond that balance. We hope to be able to share additional information regarding some off-balance-sheet transactions we are working on, on our next earnings call. And with that, Steve, we can open it up for questions. Great. And just as a reminder, if you have questions, go ahead and type those in at the bottom of your screen, and we will do our best to get to them. I'm gonna start off with a couple of questions here, though. Let's talk about your growth target. You've laid out here about 20,000 or something in the next three or four years. It's kind of sounding like, kind of like a mid-teens kind of a growth rate, on average. When we think about the changes you've made, that you laid out, to sort of compete against the resale market more effectively, that's very different from what your competitors are doing, and therefore, it seems like it's a model that would allow you to gain greater scale advantages from the growth that you're planning, relative to your competitors. So does that mean that you're actually a better buyer for M&A transactions that may arise? And is this something that we should expect Meritage to lean into, inorganic growth as well as for organic? I think as we think about this strategy, the strategy is really about how we're gonna get to our growth strategy to, from where we are today to 20,000 in 3 to 4 years organically. This is an amplification of our current strategy. We believe, by competing directly with the existing home market, we're serving a larger group of buyers, which will allow us to maintain our absorption pace as the market starts to meet more of an equilibrium over time. And that's how we can get there with the land that we're buying organically, as we discussed with our balance sheet. So this is a plan to get there, with our people, with our product, and our markets, which is always plan A for Meritage Homes. That doesn't mean that we don't look at M&A. We're always looking at it. We do think that we're a good buyer because we have a clear strategy. We know exactly where we want to be and play in the market, and if we can find a strategic acquisition that allows us to achieve that growth faster, that's within strategy and within the markets that we want to be, we're, we're always looking at that, and we certainly think we, we can be a strong buyer. But we've demonstrated over the last five years that we can grow pretty fast organically. In fact, we've outgrown many of our competitors who have done M&A while we've stayed true to our organic strategy. So this strategy is built around staying true to our organic growth strategy. Okay, I think that's very helpful. And then obviously, there's many initiatives that you're simultaneously pursuing across your organization, but, you know, the saying goes, "Everyone's got a plan until they get punched in the face." So if we were to just sort of do a thought experiment, if demand were to weaken noticeably, let's say due to higher rates or the economy or something else, I'm curious how your new strategy will allow you to react differently than you might have in the past to some sort of demand shock. So, let's start with discounting. You know, I totally agree that in today's environment, certainly specs should actually command a premium, not a discount, so I applaud you for calling this out. But, you know, there's obviously a limit to how many finished specs you're gonna want to hold at the community level. So, can you talk to us about whether you have increased the threshold level, or the amount of specs, finished specs, that a community has, before you hit that discount, you know, button? Or is there some other metric that you're using to sort of calibrate your discounting actions, at the community level? ... Yeah, I'll let Hilla talk about some elements of this, but let me first say that just like our previous strategy coming out of the Great Recession, where we made the intentional decision to focus on the first-time home buyer and get affordable, the strategy was built on the fact that we thought rates were gonna go up. It took a long time before rates actually went up, and we benefited from low rates, but then as rates have risen, I think Meritage has benefited in this rising rate environment because we are offering affordable product. With this move-in-ready strategy, it's even more effective in a high-rate environment, as we have articulated previously on Earl's call, we're able to solve affordability with move-in-ready inventory very differently than when we don't. As we think about this new strategy, I would say the same thing. We expect the resale market to come back at some point. We're seeing it happen in certain markets already. Over time, existing home market is going to dethaw, and we're gonna start competing with the existing home market again, and this strategy is built for when that happens. We think we'll outperform during times where existing home market is locked up like it is, but the goal is to perform at levels that we've laid out here when the existing home market does return, if rate... If rates drop, it becomes more competitive out there, pricing elasticity becomes more restrictive. This is a strategy built on performing in that environment. As it relates to specs, you know, and this is an important concept during the previous downturn, specs were viewed as a disadvantage. But in our mind, with our operating model, we don't offer anything else but specs. So when you're offering something else in your communities, specs are a disadvantage, but when all you offer is specs, specs are actually an advantage because there's no compromise when you go into Meritage Homes, when you're buying one of our finished or move-in-ready specs. We will adjust our specs based on the macro conditions. If we see market softening or community softening, we're gonna carry four to six months of supply based on the absorptions we see in the market, and we'll adjust our inventory appropriately to meet the demand in the market. As it relates to discounts, we don't feel like we have to discount our specs any more than what other builders are gonna have to do because we don't offer anything else but specs, and if we're competing directly with resale, there should be absolutely no compromise. So we're hopeful that as we roll out this strategy, we're able to control discounting in that environment in a very different way than we have in the past, as Meritage Homes, when we were a move-up builder, and we weren't offering just specs, and maybe Hilla wants to amplify certain elements of that. Yeah, I think, I think you hit on all the key highlights. I'll just, I'll just mention a couple quick things. I think we mentioned this on the last call, but if a strategy is not one that you can lean into during a tough time, it's probably not a right strategy. So if we think that the next kind of, you know, shoe to drop is the return of the resale market, which as Philippe said, we're already noticing has is occurring in some markets, the likelihood that potential home buyers are engaged with a realtor is fairly high. Right? In the resale market, it, it's fairly common. So if you're not also embracing the same philosophy, you're probably gonna alienate a large portion of the buying population. They already have a realtor. So we think that this works very well with what is likely the next iteration in the home building cycle. As far as specs, could we unintentionally end up with more completed specs if the market slows? Well, sure, but very, very temporarily, right? Because we're constantly adjusting the volume of spec starts to what we're seeing in the marketplace. So if we're seeing that homes are not selling at that pace, we'll start a few less the following week. So we have the ability to very quickly recalibrate, and because our homes are all pre-selected interiors. Now, that doesn't mean they're all the same. It means that we have a suite of options that we can put into a home, and we're making sure that we have enough selection available to be attractive to a potential home buyer with different tastes. But that home is gonna resell at the same price as any other home because the buyer doesn't know that it's a cancellation or that it's been standing on the market, for longer, for a longer period of time. So could we end up in an unintentional situation? Yes, but for a very short amount of time, because we're gonna recalibrate every week when we're deciding which homes to start. We're looking at what's available in our pool and the sales pace. That's really helpful. I just wanna follow up on that real quick. So it sounds like you're drawing a distinction between your start strategy and your discount-starts and discounting strategy, relative to, let's say, a Lennar, right? Where Lennar has said, "We're gonna really try to not change our starts and you know, and we're trying to keep them constant. We'll use the margin as the shock absorber." It sounds like you're laying out a distinction there, right? You're gonna be reactive, you're gonna assess it weekly, and that sort of thing. I just wanna make sure I heard that right. And then as a follow-on, is this analysis going to be centralized, or is it going to be left up to the local division presidents to sort of choose to do that or not? Yeah, to start, I don't really wanna comment on what other builders are saying because, you know, they're operating in the way that they think is best for their business and their markets and their consumers. So I don't wanna speak to what I think Lennar is doing, but I will speak to what we're doing. And at the end of the day, we still are about pace. We're gonna find the pace in the market, and we're gonna solve for that pace, and there's lots of ways to do that. It's not always just price. That's why we believe the realtor strategy is a big component of that. We're definitely of the belief that we're gonna focus our efforts on realtor programs versus adjusting price to drive that pace, which is why we want to be considered in the existing home market. But at the same time, if we can't find that pace, and we have to make corrections to our operating model so that we're achieving the profitability we desire, we will adjust starts appropriately to get to where we need to go. So there might be a distinction there, but at the end of the day, we're just as focused on pace as the other folks that you are talking about, but how we get to that pace might be a little bit different than maybe what they're trying to do. Yeah, I should have clarified. When we're talking about it, it's—there's a certain volume that we need to meet, for our production schedules, right? We're getting efficiencies in scale based on certain volumes. So, if the market completely cools off due to some unintended, you know, macro event, obviously we're going to react accordingly, but if it's something locally, there's lots of other levers that we can pull to make sure that the transactions are still flowing at the pace that we need them to. As far as the decision on a local or not, or a centralized basis, home building is a local business. However, as a, you know, top five builder in the U.S., we have a responsibility to make sure there's consistency across the market. So we'll be sharing more in the future, but there's several. You know, you've heard us talk over the last couple of earnings calls that we're investing more in technology. There's some of the commentary regarding our SG&A spend over the last, maybe 18 months. There's some interesting AI solutions that we're gonna be rolling out that will assist in some of the selection process to make sure that we're optimizing what we're starting. When you are releasing homes with 60 days to close, you need to have a high level of confidence that that's the product that people want to buy. To your earlier questioning, are you gonna end up with unintended inventory? So, I think that there's gonna be more that we'll share on that in the future. It will still be within the control of the localized divisions, but with some fairly heavy-hitting corporate tools to assist them. Yeah. Our... I mean, our local leaders, they, like, live and breathe this daily. We're, we're looking at it weekly, monthly, but they're looking at their starts cadence, they're looking at their inventory buildup on a daily basis, making the adjustments necessary based on the local market conditions, what other competitors are doing, and they're best served to drive the inventory by community by community much better than we are at a centralized level. Okay, sounds good. But it sounds like you are gonna be definitely adding some central resources and things of that nature, you know, as we go forward. Yeah. Great, helpful. Absolutely. I'm gonna take a question here. We got a question from John Lovallo over at UBS, and he's basically, sort of summarizing what you said earlier, where I believe, Hilla, you laid out the fact that while you are going to be, taking on some things that might seem like they might add costs, you're also reallocating costs elsewhere. And so the, actually, the net effect on your profitability, I think you said, all the way down to the net income level, you think it's gonna be fairly neutral. And yet you've laid out a gross margin target that is, you know, lower than where you're at today, and so he was looking for some sort of a walk, as you get from where we are today, down to where you think you might settle out, in the future. Yeah, I mean, I think today's market is still a little bit off of what we would call an equilibrium market. So I think there's still a, you know, tipping of the scales a little bit more towards new home construction. I think if you look at where we have historically played when the market is in what you would call, you know, normalized conditions, 22.5%-23.5% margin would have been not a number that we would have felt comfortable articulating. So I think setting those targets as the long-term run rates in a normalized environment feels like a pretty big lift, maybe 200-300 basis points lift from what we would have said pre this strategic evolution. But yeah, I think that, that... That's a correct interpretation from John, that overall we think that there's enough puts and takes. It was very intentional what we chose, where we chose selective increases in, in relation to our strategy, where we knew we could find offsets, but over time, the volume that we'll gain will end up being net accretive, on the leveraging components of both the fixed component of gross margin, and of course, on SG&A. So an improvement versus, let's say, pre-pandemic levels or historic levels of 200-300 basis points. Could you break that down for us a little bit? Any kind of big pieces maybe that you might call out, maybe leverage might be one of them, you know, interest expense or something like that? Yeah, I mean, I think interest expense is, for sure, a big piece of it. Our current convert at 175 basis points is obviously very attractive. But for the most part, it's incremental leverage, it's additional efficiencies, it's cycle time improvements, and it's purchasing power, right? When all 20,000 homes are going to have, we have the knowledge of what we're gonna be putting into every one of those homes, we can negotiate very differently with our trade. So the combination of all of those factors should allow us to generate those higher margins. And the better leverage. Yeah, I mean, a lot of this is also our belief on how we get to an SG&A number of 9.5 or lower. There's a bunch of efficiencies that we gain as we, not only from the strategy, but also as we scale from here. ... Yeah, and so, that’s helpful to sort of think about the increase relative to, you know, the past. But it’s also, in fairness, sort of a decrease from where we are now, and you said that, “Look, we’re in a sort of an unusually attractive environment for builders.” It sounds like you’re sort of talking about maybe, you know, 200 basis points, give or take, right now, maybe some better than normal margins. As we think about what’s driving those better than normal margins or normalized margins, how would you break those down? Are there any big pieces to call out there? I mean, I think it just comes down to the fact that new home market share is at an all-time high, and has been for the better part of three years, and so we've had tremendous pricing elasticity and power in the market, which has helped us attain really strong margins on previous land that we've bought. Can you hold on to all that long term as the land markets become efficient based on what's happening in the market, and then new home market share maybe comes to a more normalized pattern? You know, I think that's the big question that we can't answer today, but if you look at the past, you know, you can predict the future, and the past is at the land market's pretty efficient. Great. That's helpful. One of the questions from Susan Maklari asks about the potential upside to gross margin. And obviously, market conditions would be part of that. And specifically with respect to ASP, that was kind of missing from your forecast. Is there a way that we can think about how ASP is likely to trend over the next 3-4 years? I mean, our goal is to continue to focus on affordability, so, you know, we're trying to buy land where we can price our product in every single one of our markets, you know, in the fours. As we've guided to in the past, we think that's the sweet spot in the market. When you look at where supply is most constrained, there's just a complete lack of affordable product in the fours. So our ASP targets are somewhere in the fours. It's obviously market by market. Sometimes we can get really close to four. In other places, like California, we can't even look at a four. But over time, we expect our ASP to stay within that range. If the market, for some reason, continues to provide pricing power, we'll take it, and there's upside there. You know, the land that we're sourcing today is still focused on pricing our product in the fours. I mean, I think we've proven since the start of COVID that if there's ASP to take, we'll take it. But from now on, we're kind of modeling normalized market increases. So as we continue to lean into the entry-level product, I don't think that we should be modeling ASP increases. Only caveat there is what we mentioned in our prepared remarks, which is the pullback in incentive cost, right? When we're locking in, you know, 60, 120, or 90 or 120 or even 180-day rate locks, whether it's off of a forward commitment or just organic for the customer on the spot, those are not cheap. When you're doing 60-day commitments, those are significantly less expensive. Obviously, if our commitment is to get every home closed in 60 days, we really don't need a commitment for longer than that on the financing objective. So hopefully, the savings that we'll gain there, you'll see that because as you guys know, we record that as a contra to revenue, so that will increase the ASP per home. So that leads. That's a pretty good segue to a question, which I think sort of underlies all this stuff, which is, you know, what kind of mortgage rate range are you envisioning when you sort of think about long-term, you know, or longer term, the progression there? Like, let's say over the next couple of years, you know, or what kind of mortgage rate range are you envisioning? Higher for longer. You know, whether they settle in below 7 or they settle in around 7, you know, our assumption is that there's a long time between there and when they get back into the 5s. So we think we're operating in some range between 6 and 7, and they'll be there for a while. Okay. Gotcha. And if they're lower grade, yeah, but, that's, that's what this strategy's been built around. That's very helpful. With respect to the SG&A, I just wanna make sure that I clean this up. I think you did a really good job here, sort of augmenting what you had said in your first day. But as we think about, external agent commissions, it sounds like, you're gonna be leaning into those relations, but I just wanna make sure we clearly define what that means. There's two main, ways, to think about the broker commission, that together add up to the total dollar spent. One of them is how many sales you do with an agent, an external agent at all, and the second part is, well, then how much on average are you paying that external agent? If I heard you right, correct me if I'm wrong, you basically said that what you pay the agent, the second part, their commission on average, you're just gonna, you're gonna do what the market dictates, you know? You're gonna, you're gonna basically meet the market. You're not gonna deliberately, permanently exceed market rates. If the market rate happens to go down, you will go down as well. I'm seeing you nodding. I'm assuming we're on the same page there. And then, you said that you were actually looking to take up your co-broke ratio. In other words, you wanna have more of your sales, you know, have an external agent, or you expect to have more of your sales. So my question is, can we go as far as to say that you actually prefer your customers to have an external agent? Are you going to deliberately try to encourage people to have an external agent, or are you simply going to take what the market delivers to you there as well? Yeah, no, you've got it right, at least on the first part. We don't expect to pay above market rate for commissions. We're gonna pay what the local market dictates. We certainly won't be looking to pay less than that. That's not part of our strategy. Our strategy is to pay the market. The second part is the key to our strategy, which is a clear intentionality around focusing and encouraging our customers to utilize the realtor service. We value that service. They help the first-time homebuyer navigate the buying process. They provide a trusted advisor to them. We found that when first-time homebuyers work with a realtor, they are more confident in their buying decision. So we are going to be intentional about this. We are gonna be intentional about this in many ways. We are gonna encourage our customers to utilize their services, but we are also going to directly market to realtors. There are a number of customers out there that realtors have that never see the new homebuilder space because those realtors would rather work in the existing home space. We want to put our arms around those folks and say, "You can sell Meritage homes just like you can sell an existing home." We've removed these barriers. We've removed these objections. The homes are move-in ready. We guarantee a 60-day move-in, and we support the realtor community. We partner with the realtor community. So we will be intentional about both of those things, and we expect, for those reasons, our co-broke to go up from where it is. It's hovering, as we said, in the mid-80s%, and success would look like 100%, frankly. That will be the goal, is 100% co-broke. For us, you have to think, first of all, the lift between mid-80s and 100 is small. It's not like we're at 60- Of course ... and we're going to 100, so the lift is not tremendous here. Will it cost us more on those individual transactions? It will, 'cause they didn't have a broker, now they have a broker. Now, we've walked through kind of the reconciliation of where we think that there are savings, however, we think that they'll be bringing us more volume that will more than offset the cost, right? So we think that- Right ... there's opportunity for us to work with them. There's two reasons why folks that can buy a new home don't. Number one, the buyer doesn't want to, and number two, the broker doesn't want to, right? So if the buyer doesn't want to, we've tried to understand what those objections are. That's the 60-day guarantee, that's the Move-In Ready package. So we've tried to address those concerns. Now, we wanna make sure that the broker doesn't kick us out of that potential set of homes that their customer is considering, and we wanna make sure that we're appropriately engaging with them and making sure that they feel like we're a partner, not an adversary in the process. Yeah. And if we've done that, the population that we're looking at is significantly wider. I think it's an important point here that, you know, you... It sounds like you don't think your SG&A down—you're gonna get SG&A leverage, right? Overall, your SG&A spend, your marketing spend, is not going to increase because of this. You may pay more to agents net-net, but you're gonna pay less in terms of direct-to-consumer and other kinds of marketing efforts, right? That's... You were trying to say that earlier, right? That this is not going to be like just an additive cost or something if you increase your co-broke ratio, correct? Yeah, there are lots of opportunities within our sales and marketing pathways outside of the realtor, where there are opportunities to offset these costs. There are efficiencies that we will gain as we lean into the realtor business. Right. There are- Yeah ... there are significant opportunities. It's also an opportunity for our sales team to, frankly, sell more homes. Often, sales teams are tethered to communities, and that restricts their ability to drive their compensation. Within this strategy, you will no longer be tethered to communities. You'll be tethered to inventory, and so there's an opportunity for our salespeople to have access to inventory and sell, sell inventory that they didn't previously have access to. And we think there's a lot of efficiencies in there. We're gonna gain, much like we've done on the construction and field overhead, we're gonna gain efficiencies on the SG&A component of our business. That's an interesting wrinkle I actually hadn't picked up. So you're gonna let your salespeople in Community A actually have access to and sell and record, and get a commission on a home in Community B? And historically, that was not something that they could do. Maybe even looking at it a little bit differently, you're not in Community A or Community B, you're in the north part of town. Everything here is your inventory. If a customer is looking, a customer, unless there's a very unique characteristic to a particular community, they wanna live in a certain market, right? If you think about how you start a home search, you're going on one of the third-party sites, and you're drawing a box around where you'd like to live, and then homes pop up that are available, right? They're not saying, "I must live on the intersection of this street and that street." So if there's other available inventory, if you want a 4-bed, 3-bath house and we don't have any ready in this community, but we have another community half a mile down the road, why not sell that one? So you're gonna be open selling within a geography versus limited to the potential of what homes were started in your particular community. You know, over the last 60 days, I think, this is what we were hinting towards, that we will be able to reduce the overall cost because our internal sales team will be able to have more homes at their disposal to sell, and they should be able to sell more homes than where our current structure is, we only sell what's in your community. Yeah, so just to clarify- Sorry, Stephen, we really want to align our sales process with the way the realtor community works. Yeah. Realtors don't only sell in one community. Very rarely, they sell within a particular geography, and so we want to align our sales process to support the Realtor community. So there's an opportunity there to gain some efficiencies, as it relates to how we set up our sales and marketing processes. It's another broker objection if you think about how do you overcome it. A third-party broker, if they're in one community, they just spent two hours walking our sales team through something, and then we didn't have the product. Now they're gonna go across the street and start the process all over again. So it's not very efficient from their perspective. So how do we follow them to where they're bringing their customer, versus having them try to fit into our mold? Okay, so that's. So So just so I'm clear, this is not like a referral fee kind of a thing. This is an actual full, they get the full, you know, share, or the full, it's as if they're literally in that community selling it, even though they're not, right? Yeah. Like, it's not a referral or- Yeah. Mm-hmm. Yeah, you got it. They can sell anywhere in all of their geographies, correct? Yeah. Okay, that's helpful. We have a question regarding inventory turns. So, Carl Reichardt from BTIG says, you know, your inventory turns running around, you know, one times a year or a little bit better, which is about consistent with the rest of the public builders and with a slightly WIP-heavier balance sheet, work in process heavier balance sheet, but the potential to move more land off balance sheet, where do you think those inventory turns go in the next three to four years? I think we've talked about this. I know that people look at WIP, but we don't look at WIP that way. We don't look at inventory that way. We look at sticks and bricks inventory, and that's turning 2.5-3 times a year, and then we look at land. In a high growth period when we're- you're securing a lot of land and getting it ready for opening, that's going to drag you down, right? We're not in an equilibrium. We're putting more land on book than what's getting transferred into into land that that can go vertical. So I think it's not not the right way to look at it. We we look at it as moving inventory and inventory in progress, and during a high-volume period, that's going to increase. So we don't have a target on the community, the land and land under development, because we're trying to secure as much land as we can, and if we can open it up sooner, we're gonna develop it quicker and get it ready to open. On the WIP, on the home inventory, our goal is- Got it ... is three turns a year. We're close, not quite there. With the, you know, 140-ish day cycles are not quite at three turns a year, but that's the goal. Yeah. Um- So then, if the way to think about it is sort of the specs thresholds that you gave us earlier, I believe what you said, Philippe, was that 4-6 months is kind of what you sort of want to see at the community level, but maybe a higher percentage of that being finished than in the past. So just to get a little bit more specific here, by my calculations, you're at 22 specs per community at the end of your last quarter, and, you know, you've been there for about 2 quarters now, and on average, you've had 19-22, call it 20% finished. I'm assuming that that goes up to about 33%, like a third of your specs be finished. Can you give us a sense for what you mean by higher finished share, and whether my 22... Like, basically, you're saying you're not gonna change your total number of specs from what you have today? Yeah, that's right. I mean, we're almost there. We've been saying that we're pretty close, and we've wanted a few more move-in-ready specs in general across the enterprise, but with our current cycle times, around 130-140 days, we're pretty much in the sweet spot, and you're right, you want to think about it this way. A third of your specs can close inter-quarter, a third of your specs are right behind those, and then a third of your specs, you're starting, right? So that 30-33% is the right number. Yeah, we've been trying to get to that number, but we're selling and closing faster than we can get there. This one, we have a target, a third is correct, but we're not sure because if the strategic shift is successful, we'll be selling them before they're complete, right? We really shouldn't have too much finished inventory. If we release for sale in 60 days, if we did our job right, they should be selling and closing concurrent with when they're ready. We really shouldn't have a ton of standing inventory. So we're ready for it. We've budgeted for it and allotted for cost offsets, assuming that it is going to increase, but if you're running the strategy correctly, you really shouldn't increase. You're just releasing them later in the cycle, but you're still closing them at the same time. We've had a couple of questions regarding, you know, regionality, and I'm gonna try to recast it. I think Paul Przybylski over at Wolfe asked one of them. I'm gonna try to recast it so it's not so much focused on current conditions, but maybe, over the next, 3-4 years, which I think is your preferred, you know, time frame. You are in, I think, maybe 10 states now or something like that? And was curious if you could give us an idea of whether you envision a footprint expansion, territorially, in what you've laid out, or whether you're gonna, simply go deeper in the markets, that you're in, and are there certain markets where you feel you're gonna be leaning into over the next 3-4 years? Yeah, great question. So I think we're in the markets we need to be to get to where we want to go based on the strategy and what we've laid out. That doesn't mean there aren't other markets that are on our radar, that if we can find a way to enter them in an efficient way, you know, we'll seize that opportunity. But we have a path to do what we've laid out here today in the markets that we currently are in. We've also often thought about as our business grew from 10 to 15, being a top 5 builder in every market was sort of the threshold to get to that 15. As we think about our go-forward strategy and going from 15 to 20, we think being a top 3 builder is really the threshold. Because we're affordable and because we're focused on specs, you look at the other builders that also do similar things, I think their goal is to be a top three builder as well. As we think about being a top three builder in all of our markets, it really sets the path for us to get to that 20,000 units. As we think about capital allocation and the distribution of our business today and where we'd like to see it go, at 20,000 units, I do think that we do want to continue to grow our East Region, and we believe Texas is a very great opportunity long term. But the Western markets that we're in also are gonna be growing along with them. But we definitely like Texas, and we definitely like the Southeast and Florida as we think about getting those business up to a greater scale, 'cause most of our Western markets we're at either four or five in most of those markets. That's helpful. Thanks for that. Can we talk about your land acquisition strategy? You've talked about using a little bit more off-balance-sheet financing. Was wondering if you could give us some maybe metrics or rules of thumb there that we can bear in mind over the next few years. When you talk about off-balance-sheet, first of all, are we talking about land banking? Because, you know, you generally like to do your own development. Is that the right way to be thinking about it, and what kind of a cost burden should we be thinking that that would, you know, weigh? How much would that weigh on your gross margins on average, would you say? Yeah, we're gonna... Uh-oh. His... Ateesh said his video lag as well. They can still hear us and stuff. They can hear me. Okay, well, it appears that management's connection froze, but apparently- Yeah, but- Okay. All right. Hey. Hey, Philippe. I'm in. Yep, I'm here. We had a small glitch, IT, but, I'm here. Let me, let me answer the question. Is that okay? That's perfect. Okay. So I apologize for that. You know, when we think about land banking, as we said in the past, we're really—we think we have the opportunity to be really strategic here. So we're not just looking at it in sort of a unilateral, vanilla, one-size-fits-all. We have a number of different relationships and partnerships out there that really afford us the opportunity to kind of play in off-balance sheet in a different way. So it's not going to be just traditional land banking, although there are folks, and we do have land out there that fits into that traditional land banking structure, where we pay, pay some type of a lift between 10%-12% for an institutional land banker to come in and take the land off our books and then roll the lots back to us over some period of time. We have a lot of deal flow that lends itself to other structures, maybe a JV, for example. We have deal flow, these larger deals, where we have really low land residuals that lend themselves to even other different structures where the burden is lower than a traditional land banking, although the structure has a different sort of risk layer to it. So we have a lot of different opportunities here. We have a couple things that are basically at the finish line, where we're gonna start putting a lot of land into those land banking structures. We don't have a target, though. We're very focused on our margin profile long term, and we just want to utilize it to the extent that we need to, to achieve our growth strategy, and keep our balance sheet in the place that, that we're comfortable with. We've laid out our Net Debt-to-Capital Ratio targets. We've talked about our liquidity targets. So we're gonna use as much Land Banking as we need to, to secure the land we need to grow to 20,000 units and keep our balance sheet where, where we're comfortable. But we're not just gonna do it just to do it, right? Just to take land off balance sheet because it fits into a land bank. The burden is very expensive, and frankly, the terms today are very un-builder friendly. You know, if you have delays, if you have development cost bust, those all land on us. We take those. And, you know, those things are still happening out there in the market. So we said we have a 40% ceiling, but we're not targeting for 40%. We're gonna do it to the extent that we need to, to secure the land we need to grow to 20,000 units. Yeah. All right, w- ... the goal, the only reason we're kind of re-engaging is because we're growing to 20,000 units, right? Because we have what we need on our own balance sheet to just kind of tread water as we've been doing for the last four or five years. So, we're gonna utilize it to help stimulate growth, not because there's an arbitrary number that we're trying to get to or it's part of our strategy to have off-balance-sheet assets. Yes, I understand that. But one area where I was, I'm a little confused is you, you brought up that maybe land banking isn't really just gonna be the main, the main tool that you're gonna be using. You're gonna be also exploring JVs and other structures. Wasn't really clear what other kinds of structures we might be conceiving. And so maybe if you could provide a little bit more color on that. And then you also made the statement that, some of these other vehicles may have a lower cost of capital, I assume. But maybe a different risk profile. And I assume what you meant by a different risk profile is that you would be willing to bear some more of the risk, did I hear that right, in exchange for the lower cost? And I assume that's because you've sourced these deals, you are comfortable owning most of them anyway, and, and that's... Just wanna make sure I'm not putting words in your mouth, but I'm understanding. You did an excellent job describing exactly how we're thinking about it. We have a lot of land where the profile of that land makes sense to put in a different structure, where the margins can take on a different risk, a sort of a risk component to it, and these deals have longer timelines, right? So, you know, a lot of the traditional land bankers, they have a set duration that the deal needs to come into the land bank and out of the land bank. We have some partners out there that are willing to look at that differently for a different yield structure. We, with the larger deals that we're buying out there and some of the deals where we're adding the entitlements and where we're really getting the entitlements done, fit into those structures much better than they would fit into a traditional land banking structure. Yeah, we've talked about this in the past. The reason why we haven't been engaged in land banking as aggressively as maybe some of our peers is because it's kind of a misnomer. It's not really a risk mitigator, because you've already fallen in love with the land, and you have such a big deposit down, you're not walking away, right? What pencils is your prettiest pieces of land. So if you're paying a lift based on risk, but you're thoroughly committed to taking down the land, is there a way to kind of turn that logic upside down and do something different? You know, maybe that's why we probably teased a little earlier than we should. It's been a couple of quarters when we said we're gonna share something, and we haven't shared something, 'cause we're working through the mechanics to see if we can create a hybrid vehicle that maybe isn't what's out there today to take advantage of off-balance sheet. But, but, capture the fact that the risk profile isn't really the same risk profile as what it was pre-Great Recession. So, stay tuned on that. We don't wanna share anything until it's inked. But we're definitely trying to kind of balance those two facts and see if there's a solution that works for both parties in the middle. That's helpful. I noticed when you gave—you were kind enough to give a certain number of metrics, you know, longer term targets, but you didn't include a commentary on cash flow or on your ideal leverage that you wanna be operating with. So I'm gonna give you the opportunity to do that here. You know, what are you thinking about in terms of normalized cash flow and normalized leverage? So normalized leverage, I think that hasn't changed for us. It's pretty hard ceiling of low 20% net debt to cap. And again, much like the land banking discussion, that is a ceiling, it's not a target. You know, we've been in single digits for quite a while now, negative sometimes. So we're not looking for that 20, but that's definitely a hard governor for us. So part of the reason we've been talking about off-balance sheet financing is that, that's something that we're always keeping in mind, right? We wanna make sure that we're not breaching that threshold, but if we find really attractive land opportunities, we don't wanna walk away. So we're gonna go ahead and pull the lever on a land banking or off-balance-sheet financing opportunity to make sure that we're maintaining that leverage. Cash flow question is a little bit more nuanced. We have been generating cash, but we also have just set a fairly aggressive growth target of 20,000 units. And as we mentioned in our prepared remarks, that's just a milestone, 'cause it's a nice round number, and it's a good rallying cry, but that's not the stopping line. It's 20,000 and then beyond, right? So for the foreseeable future, barring you know some large systemic macroeconomic event, we're in a growth trajectory, so we're planning to reinvest pretty heavily back into the business. We're super proud of being the fifth largest builder. But there is a path between us and four, right? And it's a both foot on the gas at this point. So, we're definitely not going to do anything silly or aggressive, but we're definitely looking to take the majority of our cash flow generated from operations and reinvest back into the business. Okay, I'm gonna go back to some of these changes that you've talked about, making your 60-day guarantee. You know, I think one of the things that I was curious about is how is this gonna be enforced, right? Let's say, you know, something happens, it's kind of your fault, and so, you know, are buyers gonna need to, you know, submit receipts to you? Is there a sort of just a generic dollars per day? Is it gonna be written into the contract, or is this just some sort of... Like, how is this gonna be actually implemented? ... So, I'm gonna focus on a not great time. As you guys know, there were a couple of cyber events that occurred in the mortgage and title and escrow business the last six months. Not Meritage events, but partner events. During that time, we learned some tough lessons about how to help our customers when closings don't happen on time, right? Through no fault of anyone, really. It's a third-party cyber event. So we learned how to quantify the type of expenses that are something that we're gonna bear to maintain goodwill with our customers and how to collect that data. So yes, it will be receipt-based. It will have a dollar limit. They will have to be submitted, but they will have a very, very, very quick turnaround time on reimbursement. We appreciate that the commitment to the customer is that this doesn't impact their ability to close a house or whatever it is that they wanted to buy when they move into the house, right? This isn't going to be a very prolonged timeframe with the submittal of the receipts, and they... I'll be very clear to them what receipts they can and don't qualify for. We talked about storage, we talked about hotel, moving van, pets. We get it. There's a whole host of headaches that come with not being able to move in on the day that you wanted to move into, and the last thing we'd want is for someone to not choose a home builder as a solution or choose Meritage as a solution because of that. So there will be a portal. They will be able to upload it, and the turnaround time will be very quick. But we touched about on this, but maybe not enough. This is within our control, right? So when we're saying that we're going to close your home within 60 days, we're not gonna have 60 days left of construction, and then just cross our fingers and hope there's no rain for the next 60 days. That was gonna cause an event, right? We're gonna... I don't know what the magic number is, but maybe we think it's 40 days to close, and that's what we're gonna tell you, "You have 60 days." We're gonna build in some contingencies. Even though the customer will be compensated, that's not a good place to be. We... That's a last resort option. We wanna make sure that we're being respectful of the life changes that are occurring around a move, and we're going to manage that. So that expense is somewhat within our control, again, barring something very unusual. Okay. There was a question from Jay McCanless at Wedbush. Jay, I'm gonna paraphrase your question a bit. But Jay is expressing, he's questioning whether or not your change to your sales internal sales commissions process is going to result in lower commission rates per home for your internal staff, and if so, might that not lead to more experienced agents leaving, and you experiencing some turnover? Yeah, obviously, it's something you have to pay attention to every time... anytime you change anything for any of your folks. They don't like change until they understand what's in it for them. I think when you think about our strategy specifically around our sales team, there's a lot in this for them. As we said before, they're gonna have access to more inventory and opportunity to sell more homes than they've ever sold before, and frankly, have more upside in their annual compensation because of that. So I think that once they understand the opportunity that this provides them, they're gonna realize that there's a big, big opportunity for them to go out and earn more money, even if internal commissions are adjusted appropriately, because of that opportunity to sell more homes than you otherwise would have in the previous strategy. I think it's gonna be good for retention, especially when you think about the best salespeople. The best salespeople out there are gonna love this. The minute you tell, you know, someone out there who's really good at sales that, "Hey, guess what? We now have more homes for you to sell than you did before," their eyes are gonna light up, and so we see it, we see it very differently, although, we certainly have thought about his concern. Some folks, you know, maybe they... they're not gonna love it, and maybe the strategy, they won't see it that way, and, and they, they believe that there's another opportunity that's better. But I think the really good salespeople are gonna love the opportunity that this strategy provides to them. We, we've modeled this, right? We've gone through the exercise to make sure we... We said that we don't anticipate the take-home pay for our sales teams to be any less and potentially more. So we've- Yeah ... modeled it. We made sure that this was aligned in a way, and that we've created that potential pool of homes, the geographies that they can sell, and to be large enough that they will make the same or more. Having said that, this has also been beta tested already, right? So we're not saying this and crossing our fingers and coming to 11:25, and just kind of hoping it all comes together. We've had about half of the companies already working under the strategy, right? So when we're saying that our internal, our external commission has accreted up to 85% from kind of where we were in the mid-60s%, but you haven't really seen our SG&A do anything super-duper crazy. That's because we've already had the contra from this other piece. We're not saying all the kinks are worked out, that you know it's still a new strategy, and there's gonna be a lot of learning as we implement. But we have started to test this out in multiple markets across the US, and we have a high level of confidence that the employees will not be negatively impacted. So that leads to my kind of overarching question about the Realtor. I know we spent a fair amount of time talking about it, but, and you've done a lot of research clearly, and some deep thought regarding it. At the same time... We are right on the cusp, about 2 months away from the implementation of the most radical change in the realtor commission structure that we've ever seen. And, you know, it is pretty clear to me that there's a lot of confusion about it, and that there's a certain amount of humility that we all need to have around what on earth it's actually going to do to the landscape. In that regard, I'm wondering whether or not your deep work around all of this, which is based on data from a time that may actually not be as relevant, you know, in six months, you know? Whether your strategy has embedded within it the ability to be flexible about things with respect to your strategy, such that if you see more people show up unrepresented simply because buyers no longer prefer to have an agent as much as they once did, will your strategy work, or are you putting yourself in a position where you will relatively underperform, if given this new strategy? That's what I'm trying to understand. Yeah, and you started out the question with a statement of confusion, having some humility. We're not immune to that good, sound counsel. We're gonna read the tea leaves, as we have done, you know, throughout the history of being in home building, and if there are shifts and changes that need to occur, you know, we got the wrong answer, and we need to get to the next right answer, we'll get to the next right answer. That being said, our research, and we've done a lot of it, as you've indicated, suggests to us that the realtor's not going away. They might take on a bit different version of how they're supporting and how they're getting paid, and we certainly think that will change, but we don't feel like, specifically for our customer, the realtor's gonna go away. They really value that relationship. When you think about the used home market, I also don't think that the realtor's gonna go away. When you buy a used home, having a realtor represent you, working through a building inspection, a house that has been previously lived in, there's just a comfort there, and a representation that people covet and need. The value of that may change, the price of that may change, the transparency in what you're being charged may change, but our research suggests that realtors are gonna still be a very relevant part of the housing market. But to your point, we don't know for sure, how this is all gonna play out, and just like everyone else, we'll be sitting back and studying it very, very carefully, and making sure that the decisions we're making today don't create a competitive disadvantage. We're doing this to create a competitive advantage. So I'll add just one other, you know, thought, you know, teaser. Definitely agree with Philippe. We gotta be nimble. This is unprecedented, and we're not really sure what the world's gonna look like in a couple months here. So I don't know. We'll zig when we need to zig, and zag when we need to zag. However, I would say that the fundamental services that realtors provide, that's not negated by the NAR settlement. So if you think that as a new home buyer, an entry-level buyer, we have now taken away the concern that you may have, that you now have to pay for it out of pocket. You've spent, you know, the last year trying to save for your down payment, and now all of a sudden, you got thrown a curve ball, and you don't know if maybe you also have to pay for your realtor, and you're saying, "Is this the right time? Is it not the right time? Should I engage with a realtor? Shouldn't I engage with a realtor?" And we just negated that concern for you. We said, "Don't worry, we got it. We're gonna take care of it. It's already pre, pre-contracted. Bring them in. We welcome 'em. Come on board, and it's okay." I think it actually could turn into an advantage, not a disadvantage, if you're embracing the realtor community, as a new home builder, and you have the opportunity to articulate that through, you know, a non-MLS type of service, you know, how the fee structure will work. Drew Pang- Drew Pang from Pinchot Lane asked this question, whether or not you have factored in a competitive response, where maybe competitors adopt similar programs to yours over the course of the next year or so? Would that affect your outcomes, or have you already anticipated that that might happen? You know what? We don't know what's going on inside of our competitors. We don't know how they will or will not respond when, you know, they get word of what we're doing, just like when we get word of what they're doing. But as we think about strategy, one of the core components of our strategic work, as in the past and as in the present, is we try to think about making decisions that are not easy to make. If we're just developing a strategy around easy decisions, then it's probably not a really good strategy. So we're thoughtful about, is this something that's easy to copy? Is it something that other folks can emulate very quickly? For us, it just really works, right? We're a first-time home buyer that builds specs. So when you think about being a first-time home buyer that builds specs, having a move-in-ready strategy, having turnkey homes, and focusing in on those realtor relationships makes a ton of sense for us. Does it make ton of sense for our other competitors? I don't know. They have to think those decisions through. I think, certainly, you know, it's the ultimate form of flattery if folks think that we have a good idea, and they wanna go out and do it as well. But the resale market is huge. It has a lot of. There are a lot of transactions that happen in the existing home market when the market is at equilibrium, so there's more than enough for everyone to play in if they want to play in it. I think folks will try to play it in different ways, but this is what makes sense for Meritage. I think this is very similar to when we rolled out our entry-level strategy and our spec strategy. At the beginning, everyone thought we were insane, and then eventually other people said, "This kind of works." And the folks that were successful at it were the folks that changed all the back office stuff, right? You can't just say, "I'm now going to embrace the realtor," but change nothing in how you're doing. Or, "I'm gonna have a 60-day guarantee," and not have the operational support behind it to change it. So I think if it's successful, a lot of people copy it, probably. We copy smart things that other people do also. But the commitment to get there and the timeline to get there is gonna be a little bit more difficult because all those other corporate-level commitments and changes need to come. So, you know, we hope this is a good strategy. Are we ready to re-pivot in 5-7 years when it's no longer a competitive advantage? Sure, we'll do another strategic shift at that time, but we think the timeline horizon, as Philippe mentioned, this is hard and maybe a little bit scary. It kind of is a step away from what we've always known to be true in the home building sector. So it took us a little bit of time with this objective in mind. We think that others may follow, but it'll take them a little bit of time to get all the other pieces of the puzzle put together before they can mimic it. Great. We have a question from Alan Ratner from Zelman Associates, coming back for seconds. And I'm gonna combine a question also from Jade Rahmani at KBW. It's really looking at the kind of land that you're looking to buy, the kind of communities that you're targeting to acquire and open. You've given this 4 sales per month absorption number, but there's obviously a range there, and Alan is suggesting that perhaps the upper bound is gonna be higher than it has been historically, and that that might lead you to buying larger communities and larger land parcels than you have in the past. Is that the case? And then Jade wanted to just sort of focus in on the home prices. Like, you talked about wanting to stay in the four handle, $400,000-ish kind of handle for home prices. Should we be thinking that you're looking to press a little more affordable relative to the overall price range, or are you gonna continue to target kind of that slice above the sort of the really affordable end, you know, like, as you envision these new communities? Yeah, so I think in general, I would say a lot about the way we buy land today will not change at all. Really, the land that we're sourcing, and we have sourced over the last three or four years aligns with this strategy really, really well. We've been buying larger deals. We've been focusing on affordability. We, because we want to stay connected to the existing home market, we haven't pushed further and further out, right? We have to have services and schools, and we look for quality. It's not just all about affordability for Meritage, which is why we're not, you know, going out and trying to be in the 300s. Well, you know, the 400s make sense for us, for our consumer group. So, and same thing as Hilla mentioned earlier about our underwriting criteria, our hurdles are obviously the same. The discipline's still there. They might even be a little better because we've said that we can do better long-term on our margins. But what does have to change is just the amount of land we have to buy. As we go from where we are to where we said we want to go, we're managing a much larger portfolio of land, and so, we look at land from a more portfolio view versus just one by one by one. You know, you have larger deals. You have, you know, 4- or 5-year type of deals, you have 2- to 3-year deals, and then maybe you have some base hits. And so you think about the land portfolio very differently. And then, of course, we have already talked about it, but we can't get there without land banking or off-balance-sheet financing, and so you gotta make sure that you are sourcing land that allows you to place it into an off-balance-sheet structure without, while it still meets your financial targets and et cetera. So those things are changing, but I would not tell you that where we're buying, going further out, the type of product we're looking, the size of the deals, all of that is changing at all. And then Paul Przybylski at Wolfe asks a question here with respect to the comparison with resales. Do you expect to reinvigorate your green strategy, you know, like how your homes are so much more energy efficient than existing homes and all that? Is that... That's not something that I actually heard you mention today, but maybe, is that something that you're gonna lean more into? Yeah, I mean, we try not to talk about it too much just because we've been doing it. It feels like 15 years. I still think we build the most energy-efficient home. We're the only home builder out there that does spray foam insulation across its entire footprint. We believe that that makes us a very energy-efficient product. It also allows us to build a very high-quality home. We found that those homes are also more resilient in an ever-changing climate. So that strategy, I don't know what he meant by reinvigorate it. It's been in place. We haven't changed it at all. That being said, you know, what's going on with the government as it relates to what's gonna be required to be ENERGY STAR and what is changing with code, you know, we're gonna do what's best for our consumers. And we're gonna do what's best as it relates to how we compete with existing homes. What we do today is significant and allows us to compete with the existing home market in a very relevant way, in a very different way. You can't go buy an existing home that has spray foam insulation. You have to buy a Meritage home. So, as of now, we're status quo. Are we gonna level that up in this new strategy? You know, to be determined. There's a lot of things that we don't quite understand as it relates to what the government's gonna require, and we're waiting to understand that before we decide whether we wanna lean further into this or just maintain where we're at. In our research, and in other third-party research, having a sustainable home, energy-efficient home is very important. We've already been at that threshold since 2009, so we already materially exceed what people are looking for. We think at this point, we're still very focused on being an energy-efficient builder, but the dollars probably make more sense in the move-in package. That's what the consumer told us they're looking for next, so I think that's where we're gonna be spending our money. It doesn't mean that we're not still focused on energy efficiency. It just means that the next incremental spend of cash is going to be in an area that the consumer says they value more, and again, this is the entry-level consumer, and, what out-of-pocket costs can we save them upon move-in, and that, that's really what they're focused on at this point. Yeah, that's well said. Yeah, okay. But clearly, the cost of ownership for one of your homes is just vastly greater than anything else that any of these realtors are gonna be showing their customers in the, in the used home market, that's for sure. Exactly. Okay, so, so finally, you know, the last question we have is kind of a cleanup question here, related to the, your turnkey, wanting to have, deliver a turnkey product, and I believe I heard you at the beginning of the, of the show here, Hilla, say that these are gonna be really de minimis kind of cost increases, and they really won't have... It's really not even worth breaking out specifically 'cause it's really just, not gonna influence things that much. I wanna just confirm that that's the case. And I think that you said you might raise the price just a little bit if you need to, to cover those, and the customer's not really gonna notice. So just making sure that I heard that right. Yeah, it's 50-100 basis points, so if you think about a home around $400,000, that's not a lot of money for what the cost is going to be, and then adding that to the ASP is fairly small. So it's something that they were able to add on anyway. We're just gonna have it as part of the package, so it's fairly limited in cost. I think this was a huge win just because of the scale we've built and the consistency we have across our portfolio, across the markets. We were able to go out and negotiate these incremental things that we wanted to put in our homes at really, really good price, probably something we couldn't have done, you know, five years ago. So that's why, you know, we're not overly concerned about it being a margin drag. Great. Well, that's really all the questions that I had on my end, and it looks like the queue is empty, so with that, I'll turn it over to you guys. Thanks so much for the opportunity to host you today. Yeah, no, thank you so much for hosting. You were great. Thank you everyone for being on the call and participating. We really appreciate your interest in our story and the organization, and we look forward to seeing you at our next earnings call. So thank you. Thank you, Steven. Bye.