Good morning and Welcome to Taylor Morrison's First Quarter 2021 Earnings Conference Call. Currently, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations. Thank you and good morning. I am joined today by Sheryl Palmer, Chairman and Chief Executive Officer, and Dave Cone, Executive Vice President and Chief Financial Officer. Sheryl will provide an overview of our performance and strategic priorities, while Dave will share the highlights of our financial results, after which we will be happy to take your questions. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Today's call, including the question-and-answer session, includes forward-looking statements that are subject to the Safe Harbor Statement for forward-looking information that you will find in today's earnings release, which is available on the Investor Relations portion of our website. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the release and in our filings with the SEC, and we do not undertake any obligation to update our forward-looking statement. In addition, we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in the release. Now, we turn the call over to Sheryl. Thank you, Mackenzie, and good morning, everyone. I appreciate you joining us today and sincerely hope each of you and your loved ones remain healthy and safe. I am pleased to share with you our first quarter results, which reflect the initial benefits of our enhanced scale and local market depth as we continue to execute our strategic plan. We achieved a 42% increase in our monthly absorption pace to an all-time high of 4.3 net sales per community and a 320 basis point improvement in our home closings gross margin. In addition, we ended the quarter with a company record backlog of over 10,000 homes and more than 73,000 total home building lots under control, positioning us to capitalize on the strong demand momentum we are experiencing across each of our price points and markets. Most importantly, we made progress towards our operational priorities aimed at increasing our profitability and return metrics over the next several quarters. After years of strategic growth and multiple acquisitions aimed at improving our long-term return potential, we are committed to delivering financial performance reflective of the size and operational advantages we have achieved becoming a top five home builder. To that end, across the organization, our priorities are aligned to improve gross margins, increase asset efficiency, leverage our overheads, and optimize our balance sheet. On the operational front, this work encompasses everything from streamlining our floor plans and design options, optimizing our strategic selling process, reducing our cost through procurement initiatives, and leveraging our virtual sales tools. These efforts have always been key to our strategy, but there is still room to apply our best practices consistently across our newer markets to partially offset the higher land residuals and construction costs in our newly acquired community. We are following the proven roadmap we have used in other acquisition markets such as Phoenix, Atlanta, Orlando, and Charlotte, where we have successfully realized significant accretion to deliver margins at or above the company average, following similar integration efforts, and expect to achieve comparable results in our William Lyon impacted market. I am pleased that these efforts are beginning to translate into strong results as reflected in the composition of our homes and backlog that we expect will drive accelerated margin accretion in the second half of the year and into 2022. For example, to streamline and optimize our business, we eliminated over 5,000 option SKUs from our inventory in the first quarter alone and have reduced our floor plan library by over a third since we began our rationalization efforts. We have also introduced our standardized option palettes to well over 50% of our markets, further simplifying our design and construction processes. These initiatives are driving increased option penetration, higher option margins, and greater production efficiencies. In addition, our strategic selling practices have doubled lot premiums year over year on sold homes and backlog. We are also continuing to find creative ways to optimize our sales structure to drive additional bottom line accretion, the most exciting and impactful of which is our innovative suite of new virtual selling tools, which we recently expanded with the launch of a new, first-of-its-kind online home configuration and reservation system for to-be-built homes. This new tool allows our buyers to pick a home site and design a floor plan entirely online on their own terms. With lower broker representation and higher conversion rates than the company average, our virtual sales tools are enabling us to reduce realtor commission expenses, leverage our overhead, and enhance our customer experience. In total, this focus on operational excellence and balance sheet optimization is expected to drive our return on equity to the mid-teens range in 2021, followed by further expansion in 2022 and beyond before considering the anticipated benefit from more programmatic land financing vehicles. As I shared last quarter, we're exploring several opportunities that would allow us to grow our business with enhanced capital efficiency. I am pleased we advanced those discussions during the quarter and expect to share more detail in the months ahead. From a macro perspective, all indicators are pointing to continued strength in consumer demand for housing. Interest rates remain at historically low levels at approximately 3%, enhancing borrowers' purchasing power, and affordability remains favorable even when considering strong home price appreciation. In looking at the buying power of our consumers, we remain encouraged by their overall financial health and affordability metrics. In addition, we intentionally seek to serve a diverse mix of home buyers and carefully manage our balance of pace versus price, especially within our entry-level communities, to mitigate affordability risk. As you've heard me share before, we monitor the difference between the actual interest rate of our borrowers served by Taylor Morrison Home Funding versus the maximum interest rate they could have qualified for as a gauge of affordability. In the first quarter, this spread averaged over 700 basis points for our conventional borrowers and over 500 basis points for our FHA borrowers, giving us confidence in our customers' financial flexibility if and when interest rates move higher. This strong interest rate correction is a reflection of our consumer quality. Specifically, in the first quarter, our Taylor Morrison Home Funding borrowers provided an average down payment of 20%, had an average debt-to-income ratio of 36%, and an average credit score of 750. Notably, these strong credit metrics are slightly improved from a year-ago levels, despite our mortgage first-time home buyer share growing by over 1,000 basis points to a company high of 40% and our cash rate also expanding by 1,000 basis points to 85% over the same period last year. In other words, while we have increased and broadened our customer base to serve more home buyers, particularly at the entry level, we have maintained the high credit quality and consumer strength we have long enjoyed. I attribute this to our mortgage team's diligent pre-qualification of nearly all our home buyers prior to entering into a purchase agreement and the embedded value of our financial services to our customers and home building operations. Turning now to our sales success, in the first quarter, our strong activity was driven by gains across all geographies and consumer groups. There are a couple of highlights worth sharing. Among our markets, we experienced the strongest year-over-year increase in our monthly absorption pace in our Central region, which includes Texas and Colorado. This strength has been partially driven by an influx of home buyers from California, whose share of our Texas sales orders in the first quarter doubled pre-COVID levels, with acceleration throughout the quarter in California home shoppers suggesting further gains in the months ahead. Among our consumer groups, our active adult segment drove the highest year-over-year gains in net sales orders and absorption pace as this cohort is increasingly re-engaged as the vaccine rollout accelerates and strong home equity gains fuel mobility among existing homeowners. These active adult buyers are also relatively less impacted by changes in interest rates due to an above-average share of all cash transactions. Given the demographic tailwind in this segment of the market, I'm excited to share that we are expanding our signature active adult lifestyle brand, Esplanade, nationally from its home base in Florida, where we have established a reputation for distinctive resort-style living and concierge services that command a strong premium among active adult home buyers. We recently introduced the Esplanade brand to the West Coast with two new communities in California and have planned to open another in North Carolina later this year. The expansion has been well received as our Southern California community has been selling with limited releases amid strong demand since its successful grand opening in March, while our Sacramento community, slated to open in May, already has a waitlist of over 2,000 interested shoppers. The nationalization of our Esplanade brand will bring greater consistency to our active adult communities, leverage our brand awareness, and meet the needs of active lifestyle residents in our markets. With above-average gross margins partially driven by higher option take rates and lot premiums that are more than two times the company average, we expect this growth will be a long-term benefit to our overall profitability. However, today's remarkably strong housing market is not without its challenges. The supply side of our industry remains constrained by the severe deficit of trade labor, ongoing COVID-19 and weather-related disruptions affecting product manufacturers and distributors, and municipality-level delays. Our teams are navigating this environment by holding new sales to align to our starts pace, managing construction cycles, and leveraging trade relationships to ensure our business continues to run effectively. In the first quarter, our production pace of 4.1 starts per community was up more than 70% year-over-year to another company record high, and our cycle times were roughly flat year-over-year as our teams have accelerated our construction capacity despite the supply-side challenges. In addition, we are raising prices in nearly all our communities and, as mentioned, limiting releases to align with production. This disciplined approach ensures we are realizing appropriate price increases in excess of cost inflation, managing the length of our backlog, and maximizing the return potential of each asset. In closing, we're committed to taking full advantage of our competitive strengths and executing on our long-term strategic vision, which has been years in the making after six acquisitions that have equipped us with the size and team capable of generating attractive long-term returns for our shareholders. As I have said before, we believe 2021 marks an important inflection point in our multi-year journey to realize the operational and financial advantages of our significant growth, and I look forward to continuing to update you on our progress as we move forward. Now, let me turn the call over to Dave for his financial review. Thanks, Sheryl, and good morning, everyone. Turning to the details of our first quarter results, we generated net income of $98 million, or $0.75 per diluted share, compared to a net loss of $31 million, or $0.26 per diluted share, in the first quarter of 2020, which had been impacted by our acquisition of William Lyon Homes a year ago. During the quarter, our net sales orders increased 30% year-over-year to 4,492, the highest quarterly level in our company history. Our monthly absorption pace increased 42% year-over-year to 4.3 net sales orders per community, also an all-time company high. This benefited from an all-time company low cancellation rate of just 6%. As Sheryl noted, we achieved this record sales success even while the strategy is designed to meet our sales activity to align with production capacity, underscoring the resiliency of the current demand environment and the competitive strength for our product offerings. This strength continued into April as we have managed absorption into the high 3 range. This order growth, combined with our large beginning backlog, drove a 54% year-over-year increase in our ending backlog to 10,074 homes at quarter end, representing a sales value of $5.3 billion. The stronger-than-anticipated sales activity drove our average community count to 345 as accelerated community closeouts once again outpaced new community openings. This was below our prior guidance range due to a number of factors, including stronger-than-anticipated sales pace and ongoing extensions and municipality approvals. In addition, given the size of our backlog and commitment to our best-in-class customer experience, we opted to delay pre-sales in a handful of communities and wait until models are fully complete to grand open, a strategy we believe ensures optimal margin performance on new openings. As a result, in the second quarter, our average community count is anticipated to be approximately 330, and for the full year, we now expect our average community count to moderate to approximately 330 before rebounding in late 2022 and improving higher in 2023. We continue to expect to open nearly 150 new communities this year. In the first quarter, we delivered 2,821 closed homes. This was also slightly below our prior guidance range due primarily to the impact of disruptions related to the February winter storm in Texas. We are pleased that thus far in the second quarter, nearly all first-quarter effective closings have now been delivered. However, there are still lingering disruptions from the storm to the supply chain, particularly in petrochemical manufacturing, which is causing delays in plastic building components such as plumbing, landscaping, and electrical products. Including the impact of these delays on our Texas production, we expect to deliver between 3,200 and 3,400 closed homes in the second quarter. However, Texas cycle times are expected to normalize by the third quarter. As a result, we continue to anticipate a significant ramp in deliveries in the second half of the year to drive our 2021 full-year deliveries to the range of 14,500 to 15,000. This implies an 18% year-over-year increase at the midpoint and is consistent with our prior guidance range. Turning now to gross margins, our home closings gross margin was 18.6%, up 320 basis points from the first quarter of 2020, which was impacted by our acquisition of William Lyon Homes. We anticipate our second quarter home closings gross margin to be generally flat sequentially in the mid-18% range. Based on the timing of cost increases and home price gains, we expect our first half gross margin to reflect the greatest impact from lumber and other cost inflation. Based on an acceleration in margin increase in the second half of the year driven by pricing power and operational synergies as we pass the critical 18-month mark post our acquisition of William Lyon, we now anticipate our full-year 2021 home closings gross margin to improve to the low 19% range. Looking ahead, we expect further margin improvement in 2022 based on the favorable mix of our backlog and the operational efficiencies that Sheryl discussed earlier. Our SG&A as a percentage of home closings revenue was flat year-over-year at 10.8%. For the full year 2021, we continue to expect our SG&A to decline to the mid-9% range, reflecting cost leverage from the anticipated increase in our total revenue and cost synergies from our enhanced scale. In the first quarter, we invested approximately $552 million in land acquisition and development, up from $317 million in the first quarter of 2020, given the increased size of our business following our acquisition of William Lyon Homes. In 2021, we continue to expect our total land investment to be approximately $2 billion. We remain disciplined in our underwriting to acquire land where we see opportunities to drive profitable growth over the full cycle, with the land acquisitions we are approving largely expected to impact deliveries in 2023 and beyond. Our lot supply increased by approximately 3,000 lots since year-end to 72,000 total lots owned and controlled. This represented 5.8 years of total supply, of which four years was owned. As of quarter end, we controlled 32% of our lots through auctions and other arrangements, up from 28% in the first quarter of 2020 and marking the highest level since the third quarter of 2018. To minimize risk and maximize returns, we are targeting an increase in our controlled share to approximately 40% within the next two years, which we expect to achieve through evolving land financing vehicles, Sheryl noted, and other off-balance sheet structures such as joint ventures and project financing that we utilize when appropriate. Turning now to our balance sheet, we ended the quarter with $1.1 billion of total liquidity, including $393 million of cash on hand and $748 million of available capacity on our $800 million revolving credit facility, which is undrawn outside of normal quarter letters of credit. Additionally, at quarter end, our total spec inventory equaled three homes per community, nearly all of which were under construction. This was well below our normal run rate due to faster-than-normal sales conversions of our spec starts. Overall, our capital and liquidity position are in solid shape, and we will continue to manage the business within the context of our disciplined capital allocation framework. Our net debt-to-capital ratio equaled 40.1%. Based on our outlook for strong cash flow generation, we continue to expect our net debt-to-capital ratio to reach the low 3% range by year-end, followed by further improvement in 2022. Lastly, in the first quarter, we spent $38 million to repurchase 1.4 million shares. This brings our cumulative share repurchase to approximately $690 million, or 30% of our shares outstanding since 2015. At quarter end, we had $48 million remaining on our current repurchase authorization, and we will continue to utilize share buybacks opportunistically to return excess capital to our shareholders and enhance our overall returns. Now, I'll turn the call back over to Sheryl. Thank you, Dave. Two weeks ago, we published our third annual environmental, social, and governance report, which highlighted the ESG-related achievements we made in 2020 and the initiatives and priorities we are focused on for the future. At Taylor Morrison, we strongly believe that our people-centric approach to home building is foundational to our ability to generate long-term attractive returns for our shareholders. To that end, we incorporate sustainable, forward-thinking decision-making across all layers of our organization, from our land development, construction processes, people management, community engagement, and governance. Among some of the highlights I am proud to share is the progress in our exclusive relationship with the National Wildlife Federation, with whom we collaborate to preserve and protect the natural environment in our communities. To date, we have certified nearly 4,000 acres of wildlife habitats and developed plans for over 170 more protected spaces, monarch butterfly gardens, and eco-friendly playscapes across each of our divisions to foster responsible stewardship of the land we build on for generations to come. We also deepened our partnership with HomeAid America to renovate shelters in our local communities and provide housing options for our neighbors most in need. This is just one way in which we empower our team members to use our resources and talents to uplift our communities, a responsibility which became even more important in 2020 as the pandemic laid bare the housing insecurity faced by so many Americans, which is a crisis we feel uniquely charged to help address. This commitment to philanthropy recently earned us the 2021 Hearthstone Builder Humanitarian Award, which is presented annually in recognition of a lifetime commitment to bettering communities. And lastly, but certainly not least, I'm proud that we have helped pave the way for greater gender equality, and we feel similarly compelled to be a leader in representation for all races and ethnicities, starting with my own commitment to the CEO Action Pledge, a promise to advance diversity and inclusion in our organization. In closing, I'd like to offer my deepest appreciation to our team members and trade partners for their tremendous efforts and commitment to our customers and our organization. Now, I'd like to open the call to your questions. Operator, please provide our participants with instructions. Ladies and gentlemen, if you have a question or a comment at this time, please press the star then the one key on your touch-tone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. Our first question comes from Matthew Bouley from Barclays. Hi, this is Ashley Kim on for Matt today. Hi, Ashley. Hi. So just given supply chain tightness, labor inflation, lumber inflation that you mentioned in the prepared remarks, can you just talk about your estimates around cost inflation and how those have changed since giving the full-year outlook and 4Q, and then just maybe what assumptions on pricing costs you're embedding in the gross margin guide? Yeah, good morning, Ashley. I'll start on the cost side. Clearly, the focus continues to be on lumber. We're hoping to see that normalize as we move through the year with mills coming online, hopefully some potential relief if trade agreements reached. There are other pockets impacted by costs, as we've all heard, resin being one of those that's impacting cost and puts some pressure on the supply chain. As we look out, I think from a cost increase standpoint for the rest of the year, it's probably around 400 basis points, but we're working with our trade partners on labor, getting materials and supplies onto the job sites, but I do believe we're going to see prices stay ahead of cost as we move through the rest of the year as well. If, I might add to that, Ashley, because Dave's right, the biggest one that everyone's talking about is lumber. And I would tell you that the industry continues to raise the issues of lumber prices with the administration and probably members of Congress because it feels like we've been pretty slow to engage on the Canada negotiation. And I think even more concerning than that, because I do understand we're getting close in the next many weeks, but I think even more concerning, or maybe better said, the greater opportunity is if we could really respond with better domestic capacity. I mean, if you look across the border of Canada, we've seen that their mills have been kind of open at full speed since August, and we just haven't come back to full capacity yet, so I think we're all very excited about that opportunity in the months ahead. Thanks. That's helpful, Color. And then just my next one, as we get closer to the back half of 2021 and start to think of a normal sales pace given communities are running low, do you think sales pace kind of stays elevated on an absolute basis while just sequentially moving lower, kind of baking in normal seasonality? Or how are you thinking that will progress just given your start date? Yeah, no, it's a good question. I think you have to look at a couple of things. One, when you say stays elevated, right now there's a few things that are at play, right? We are, as we reported, kind of at a record pace in the first quarter. We are really managing that pace as we look forward, as we said, to align production. So I think if you want to talk about the demand side, the paces could remain quite elevated. And if you want to do a compare for us year over year, they're still tremendously elevated. But I'm going to share that we likely won't repeat this over-four pace as we look through the balance of the year, partly because of our alignment to production, partly because of some seasonality. I think in April, we're probably somewhere in the 3.7 range. I think somewhere in those high threes would be something that we would plan on compared to anything over two as we look through the balance of the year. Great. Thanks, Sheryl. I'll leave it at that. Thanks, Ashley. Our next question comes from Carl Reichardt with BTIG. Sheryl, curious, so we're looking at a community count now that looks like it's going to be kind of flattish, it sounds like, until sort of near the end of 2022. How do you expect though, since you'll be opening some and closing some, that mix to change, if at all, between different product types and different geographies? Hi, Carl. Good question. A couple of things there. I think at the most global level, when you think about the consumer groups, I don't think you'll see a dramatic change. I mean, we've seen a shift, right? We're something close to, I reported in my prepared comments, our mortgage consumers, we saw about a 40% share of first-time buyers. When I look at the first-time buyer set, we're up about 40% year over year. So I think this new structure that you can look deeply at in our investment deck is probably the overall percentage. When you look specifically to the geographic penetrations, there has definitely been some movement. You'll see in the press release, we've seen a reduction in our Central. Some of that is getting ourselves away from a finished lot business, which I would tell you Texas historically was, and really making sure we can control our own destiny and not having the chance of gapping out based on development delays by controlling our destiny. So some of that by running larger, more efficient communities is part of it. So you might see some. I'd say Texas is the place where you've seen that biggest change. But then when I look at consumers across the board, I'd say pretty much status quo. Thank you, Sheryl. And then maybe can you talk a little bit about what the land market looks like now? We've had a couple of builders say, "Well, we're seeing a bit of erratic pricing in some markets," and then others say that the business remains largely rational. I'm just curious as to your perspective on that. Thanks. Thanks, Carl. You're always going to be able to point to those one or two crazy deals. I could probably do the same, but it's probably not where I would focus my effort. I think it's about how you approach the land market. I mean, everybody's out there, given the paces that have been reported through the quarter, everyone's running into the same challenges and opportunities to bring more land on board. But I would say as we continue to stay focused on our strategy around key locations, actually, that's quite helpful because there's been a lot of movement out to the fringe. We're going to retain our strong processes and approval cadence and the way we look at deals. In fact, when I look at our land residual over the last 12 months, I would tell you that it's actually in line and in some markets a little bit lower. Obviously, that's aided by price appreciation. The biggest shift we're seeing in our land kind of acquisition efforts is we're seeing a much higher penetration of raw deals. If you don't see the same finished lots available. But even with the activity that's out there, our return margin expectations remain higher than we've seen for a number of years. Great. Thanks very much, Sheryl. Thank you, Carl. Our next question comes from Alan Ratner with Zelman & Associates. First question, I'd love to drill in a little bit on the average sales price. Huge increase this quarter, up 18% year over year. And I'm just curious, obviously, there's a lot of pricing power, but can you talk a little bit about whether any of that was impacted by mix or is a price in the mid-fives now kind of the right way to think about your business going forward? And assuming that's the case, I'm a little bit surprised maybe there's not more of that upside flowing through to gross margin in the back half of the year, just given Dave, your commentary on cost inflation kind of in that 400 basis points range. So any conversation there would be great. Thanks. Yeah, Alan, good morning. I'll start maybe with where we think ASP is going to trend to help you guys from a modeling perspective. Given the ramp-up that we have seen in ASP, we're likely going to see the 2021 ASP in the $515,000-$520,000 range, assuming pricing holds to where it is. Obviously, there's some additional pricing that we believe that's out there in the back half as we do believe it's going to stay ahead of cost. And then I can jump into the. Yeah, market margin, I guess just perhaps maybe why that's not flowing through to margin a little bit stronger, just given how much pricing is up? Yeah, I mean, there is a couple of things. I mean, we are seeing the pricing power there. If you recall that with William Lyon, we did that acquisition, the legacy margins on the William side or William Lyon side are going to be lower than what the traditional Taylor Morrison side is, just because it was a different cost structure, and we've talked a lot about the fact that it takes about 18 months to bring those margins up by working through the synergies. The synergies are in place now, but obviously, it took most of 2020 for that to get there, so many of the deliveries that we're seeing this quarter and to some extent in the second quarter are coming from those legacy William Lyon communities that we started before those synergies were in place. As we move into Q3, those deliveries will have more of the synergies in there, which will be more apparent in the margins, and those synergies should start to be fully realized in about Q4 for us. The other component of that is just our level of spec inventory, Alan. We don't have a lot relative to what we normally have. Again, we had a lot around the time of the William Lyon Homes acquisition. We sold through that pretty deeply, kind of right out of the gate, in part because of COVID, we're trying to push those through. A lot of those specs probably weren't the best specs, so we tried to be aggressive to generate the cash, and we're trying to rebuild that spec population. It's just taking some time, so we just have a reduced number of specs that we can sell and close within the year. Yeah. And I think even more pointed than that, Alan. I mean, Dave's point on the spec and the to-be-built is significant and how it's playing in your 2021 margin. So if we take you on a little, as Dave tried to take you on a little bit of a history, we closed the deal. You might recall we had something around 2,000, 2,200 Lyon specs. So when COVID happened, we shut down the spec machine. And to Dave's point, some of those were challenged specs, and we were going to make sure that we sold through those. And I would tell you, as we moved through the year, COVID probably helped that quite a bit. Also continued focus on our to-be-built part of the portfolio and the way we doubled down on making sure those buyers could make it to the closing table with everything that was happening through the first half of last year. Coming into the year with a high penetration of to-be-built backlog and then having lumber move with those prices already being contracted for, sales prices being contracted for, puts some more pressure. Obviously, as we moved into the end of the year and into the first quarter, and to Dave's point, it started building up some new spec inventory, we've deployed probably the same strategies many others have, and that is we're releasing those specs a little bit later in the construction cycle. We're making sure they get the full advantage of market pricing. But we didn't have that at the end of the year with the significant backlog that we came into 2021 with. Got it. I appreciate all of that color there. It's very helpful. If I can squeeze a second one in, Sheryl, thank you for the comments on the absorption pace and kind of helping us think through where that might normalize out at. The improvement you've had on your start pace over four a month is very positive, especially given all the labor constraints out there today, and I know there's seasonality in that, but I guess I'm a little bit curious why if you're starting over four a month right now per community and you just sold over four in the quarter, why that sales pace can't be sustained at over four a month, at least in the near term, and I'm curious, maybe land is the reason why you just don't want to burn through more communities faster, but can you comment on that? Yeah. We want to continue to align pace and start, sales pace and start. So we've hit this pace of the 4.1. I think you have a couple of factors in there, Alan. One is some seasonality of where our starts can happen. I think two, I wouldn't say land is really the governor at this point because I think where we're starting the homes, we actually have the land and inventory. But we're going to make sure that the trades can retain the pace. It is a fairly significant ramp-up. And there was one more thing I was just going to mention. So when you think about the start pace, we're trying to put specs in there as well. I'm sorry? Obviously, we're continuing to push price. Yeah. We do want to continue. That might moderate the pace a little bit as well. Yeah. And you're right, Dave. And the other thing I was going to throw out, sorry, I lost it for a second, is we're really trying to make sure, Alan, that we only keep about two months of sales not started in front of us. Many of our buyers go through the design center process. We're trying to continue to streamline that process from contract to start. If you think about our active adult buyer, and they might put somewhere in the range of 20%-25% of purchase price into the home in options. So if you were starting off specs, Alan, it would be different. But we have a little bit of an elongated front end, which we continue to try to streamline. But I'd say that's part of it as well. Gotcha. That's very helpful. All right, guys. Thanks a lot. Good luck. Thank you. Our next question comes from Michael Rehaut with J.P. Morgan. Hi. This is Maggie for Mike. First question. Hey. First question on the active adult expansion beyond Florida that you talked about. As you look into the longer term and you presumably continue that expansion into more markets, do you see any meaningful shift in your mix of buyer types, or will this more allow your active adult segment to grow in line with the rest of the business? Yeah. I think saying that it would stay generally the course, Maggie, is right. We really do like that part of the business. In the quarter, our active adult sales were up about 46%. Our pace was up about 62%. That's a little bit guided by what happened at the end of the first quarter last year with COVID, and that was the buyer that really shut down. But I would tell you that they've come back with a vengeance. In fact, they've come back with a slightly different attitude as well. Really, we see some urgency in their buying decision. I would say somewhere in that 15%-20% range of buyer mix as the business continues to grow is probably for the next couple of years about right. Got it. Thanks. And then second, I was wondering if we could get some more color just around the supply chain. I know you talked a little bit about how the Texas storms impacted the business in Texas. But as you look across the entire business, are there any other particular pressure points worth calling out? There are. And I would tell you that ebbs and flows. What is a challenge today seems to get resolved tomorrow, and a new challenge pops up. I mean, really, the labor's there. Obviously, that's the fight that it always is. We're seeing some labor pressure, but I would characterize that more or less as moderate. Some of the greatest challenges are just on allocations of supplies. So we seem to be fighting battles around drywall doors, windows. Those come with extended lead times. But it's not one thing that's overly disruptive. These things pop up. Like I said, we basically have a war room that we're managing all this stuff out of. And when problems arise, we find solutions, put them in place. And I expect that to continue throughout the year. So it is a challenge, but it's something that I feel like we can manage through. I think key to Dave's comments, Maggie, are it's so different market by market. I'll give you a couple of examples. There's an overarching one. If we were to go back, Dave, two quarters, appliances. We were trading out appliances literally across almost all of our markets because they were so backordered on washers, dryers, refrigerators. Today, that's not a problem. That was like 80% of the team's focus two quarters ago. If I go to a place like Texas, brick, which is, I mean, Texas, which is a predominantly brick market, there are certain colors of brick that you can't get. A quarter from now, that will probably be different. You have a couple of markets where drywall's on allocation. You have many markets where it's not at all. It's a little bit of a whack-a-mole game, but we manage that each market. I'd say the teams are generally doing a really nice job with it. Got it. Thank you. Thank you. Our next question comes from Jay McCanless with Wedbush. Hey. Good morning, everyone. So my first question on G&A expense this quarter, a pretty meaningful year over year and sequentially. Can you talk about that increase and what we should expect for a quarterly run rate going forward? Did you say G&A? Yeah. The G&A dollars. Yeah. Some of that, there is a little bit of timing that goes in there. I look at more as an overall SG&A leverage. We did leverage a selling expense. We didn't get the leverage on G&A just because of the lower closings. We talked about the push that we saw in Texas from the weather. Had we had that, we would have probably saw another 30 or 40 basis points of leverage overall on G&A. But we still are firm on our guidance that we're going to end up in, call it the mid-9% range, depending on where ASP comes in. It could be slightly better. But it is something that we're focused on. And one thing I'd say is the strength that we generally was on a pretty tight SG&A as a percentage of home building revenue. My second question. At the end of 2019, on a pro forma basis, between you guys and William Lyon, y'all had almost 450 communities. And now that's tracking down to 330 by the end of this year with a slow, sounds like a pretty slow growth rate to get to 2023. I guess why, from an operational or strategic perspective, do you want to keep the communities this low? And is it a lack of opportunities that you see in front of you to grow the count, or you're just not willing to go out to some of these tertiary exurban markets to try and get some more community count and a little more volume? Lots wrapped up in there, Jay. Let me give it my best shot. So no, I don't think there's a strategic effort or initiative to keep it low. I would tell you there's some places where we're going to trade off doing 30, 40, 50 unit communities for larger communities. And I mentioned that in Texas. That was certainly one market where we were reliant on a lot of developers, and we've absolutely changed that. But that's not a company initiative to keep it low. I think when you look at the total number of communities back in, like you said, 2019, and then we look at what actually came on board when we acquired William Lyon, there's a number of different ways that we count communities. I would tell you the 450 combined was probably never quite right because when we aligned it to our community, every product line is a community. We had a slight shift there. You'll probably recall from a couple of quarters ago, we also took some of the underperforming assets with William Lyon, and we made the decisions to dispose of those. What you're seeing now, Jay, is really more of a timing as we continue to regrow the business. One, because we've sold through at a 4. 2 pace, which is 50% higher than our historical pace. That burned through relatively quick. It doesn't bring any of the future ones forward. The teams are quite focused on year-over-year growth. You'll see as we move into next year, you'll see that continue to tick up with strong growth the following year. Yeah. Jay, we still plan to open nearly 150 communities this year. I mean, some of it is, as Sheryl said, selling through more quickly. Some of it is just delays in getting some new communities open, and we're focused on that. Some of that is from just municipalities and working through, but for me, the big takeaway, as Sheryl said, we're going to see growth in 2022 over 2021, but really, towards the end of 2022 and into 2023, you're going to see that inflection point where you'll see the community count grow more meaningful, so it is really timing. Then lastly, on active adult, is the older product down in Florida that you acquired from AV? Just wondering, is it selling at or better than the same pace that you're seeing for maybe some of the newer properties that you talked about in California and North Carolina? Yeah. So you're speaking, I think, specifically of one project in Florida called Solivita. I would say that's in line with the balance of our active adult communities. What we have looked at doing, Jay, is rationalizing the product line across the state. So I would say it's not even the product that I would speak to in a community like Solivita. I would tell you that when an active adult kind of makes this decision, first, they look at the lifestyle component, and then they find the house. And so we find that our consumers travel the state to look at, do they want a country club experience, which they might be able to go find in Naples? Do they want a water experience, which they can find in Sarasota? Do they want something that's more kind of in town, which you can find in Orlando? Or do you want a community that's further out and I would say kind of away from the crowd, and you can find that out in Solivita. But the reality is the penetration is pretty similar across all of those and it's really about the consumer selecting which lifestyle is right for them and then they have plenty of home style sizes to pick from. We are seeing. I don't know if it was part of the question, but I'll go ahead because I think it's interesting. We are seeing a little bit of a shift since COVID with what that buyer is looking for, and specifically on the product and I find that interesting because usually you don't hear a lot of talk around the product with the consumer and it might be because we're seeing a pickup in that Midwest, Northeastern buyer, and they want more of an outdoor experience. But we are seeing this really conscious desire to have greater outdoor spaces. That can mean large screened-in patios. That can mean outdoor kitchens. But that's probably the biggest shift we've seen in that buyer. Got it. Okay. Thank you for taking my questions. Thank you. Our next question comes from Truman Patterson with Wolfe Research. Hi. Good morning, everyone, and thanks for taking my question. First, just wanted to touch on the community count guidance again, just really trying to understand what shifted over the prior quarter for you all to update your guidance. Maybe last quarter, was it primarily the elevated absorption pace that you're now baking in? You also mentioned some local municipality constraints. Could you touch on that a little bit? Maybe how much the approval process is extending? And then finally, on the land development side, everybody's really trying to ramp up community count today as quickly as possible. Are you seeing any internal development delays as well? Sure, Truman. So on the community count, I would break down the difference. Probably 60% was accelerated sales pace, and about 40% was a delay in getting the communities open. Again, that's kind of a timing issue. So those are getting pushed to Q2. Might see a little bit Q2 into Q3 push a little bit. But when we look at where our communities are, what we have left to sell, we know that we'll probably offset some of those new community openings with some additional closeouts. But it gets us down to that 330 number. So we feel pretty good about that. It's going to stay at that run rate as we move through the next couple of quarters all the way to year-end. When you look at that 40%, Truman, I mean, delays is a big word, right? Because that could be, I mean, land delays. It's not really land delays because we knew about those when we gave our guidance. It's really about how we bring the product to market. So, for example, there might be a half dozen of those communities where we decided not to enter pre-sale, but complete the model complex, make sure it's 100% buttoned up. Because when we look at the production cadence and when we're going to start those houses, there was no reason to rush it to market. So there's a lot of things when we talk about that 40%. And I'd say the smallest piece of that would be land delays, but really just how we bring the positions to market. And you move them a month, and obviously, it changes your community count. Okay. Thanks for that. And then, Sheryl, in your prepared remarks, I didn't quite catch this, and I'm hoping if you could elaborate on it a little bit further. Question on affordability, and you were discussing your backlog and how much, I'll just say, kind of wiggle room your backlog has relative to rates before being, we'll say, unable to qualify. Yeah. I sure did, Truman. And this is a stat that I've been giving every quarter, I don't know, at least two, three, four years. And it's really fascinating because it's almost, with all the discussion that we're hearing in the marketplace and certainly on, I think, the calls this quarter, we're actually seeing a cushion that's almost at an all-time high. So it really speaks to kind of the change in the consumers. So to your point specifically, what I said is that the average cushion our conventional buyers have is about 700 basis points in range. And the FHA buyer has about 500 basis points. And as I mentioned, the overall credit profile is really improving, even though we've seen prices go up and even though we've seen an increase in our pool of first-time buyers. The other thing that I find fascinating is I would have expected that there would have been an offset with square footages, and that maybe what people were doing were buying smaller houses, but that's actually not the fact at all. Our square footages are either flat to slightly up. We're seeing that our inventory home square footages are down, which makes sense because that would be more of our more affordable first-time buyers is where we would put our inventory, but our buyers that are selecting a lot in a home site, their actual square footages are going up, and so I think the important thing here is to really put all of this in context. So you can look at that room that we have and say, "Hey, they might have 5-700 basis points." But emotionally, I don't know that if interest rates went to 7% or 8%, that wouldn't shut down the market because I think the psyche of the buyer would be quite impacted. So I try to ground myself with where is the consumer today from a year ago? And if I look at where we are from a year ago, we probably have a 30-40 basis points improvement from first quarter last year in interest rate today. And that gives the consumer somewhere around $17,000-$20,000 of more buying power. If I think about where that is today, which is somewhere 3% or under for both conventional and FHA, to the peak in the last 12 months, we're about 70-80 basis points higher, and then if you want to kind of look long-term at the affordability, the NAR's affordability index, we're actually considerably more affordable than on our long-term 20-year average, so a lot of moving parts and pieces, and absolutely, we've seen prices move, but the good news is the consumer is making some decisions that still make this a very affordable time to buy. All right. Thank you all for your time, and good luck on the upcoming quarter. Thank you. Our next question comes from Alex Rygiel with B. Riley Securities. Can you give us an update on your built-to-rent strategy? You bet. Thanks for asking the question. So we have two projects in Phoenix that have begun production. And we actually just closed on our first deal in Phoenix, which is going to be a combo deal with our traditional home building side as well as our built-to-rent. We've got our vertical construction amenities, obviously, going forward in our first projects in Phoenix. But probably most importantly, as we look at the growth of the business, we have about 20 deals at some stage from accepted LOI through contract that you'll see coming to market over the next couple of years. I think what's probably most important from a modeling standpoint is we have no real impact on the financials until we begin to sell the assets, which will likely be in late next year. You'll start to see some immaterial rental income come into the business next year. When we give next year's guidance, we'll include that. Excited about kind of the trajectory. As we said last quarter, by the end of this year, we'll have nine markets with BTR in the portfolio at one stage or another. Thank you. Thank you. Our next question comes from Tyler Batory with Janney. Good morning. Thanks for taking my questions. I appreciate all the commentary thus far here. Just one multi-part question on my end here. Just interested in your views on leverage and capital allocation in this environment. I mean, I think you've laid out an outlook with the community count ramp and the margin improvements. There should be a substantial amount of earnings power coming through the business. And you also have a very strong backdrop right now, strong demand, strong fundamentals. How much of a priority is lower leverage right now? Where would you like to see leverage move in the long term? And given the environment and your outlook over the next couple of years, how would you rank leverage against some of the other uses for your capital, cash, whether it be repurchases or really ramping up the land acquisition side of things even more from here? Yeah, Tyler, thanks for the question. First and foremost, we're return-focused. The actions that we take are designed to improve our returns, and we strive to be top quartile there over time. Leverage is important. It gets balanced with all the other opportunities that are out there. We've talked about by the end of this year, we'll be in the low 30% range from a net debt-to-cap standpoint. I expect that to drop further next year as well. What we can do around leverage is somewhat constrained just based on debt we have due. We're in a great position that we don't have any debt due till 2023. When I look at where current rates are right now, it's a little bit expensive to take those out. It gets more appealing as we move through the year. So we balance that with other investments that we make just in general, whether that be back in the business through organic growth, buying back stock, or paying down debt. So we'll continue to look at all those. We're focused on buying back stock right now, just given the limited opportunities when we look at debt, at least here in the short term. We continue to believe strongly our stock's undervalued. We have about $48 million of share repurchase authorization left. I think you will probably see us go through that maybe a bit sooner than later. And then once we're through that, we'll reassess our investment opportunities. But again, this is about driving returns for the business first and foremost. Okay. Great. I'll leave it there. Thank you for the detail. Thank you. Our next question comes from Michael Dahl with RBC Capital Markets. Thanks for fitting me in. Appreciate the color so far. My first question is in some ways a follow-up on capital allocation. But first, in terms of the community count, your previous expectation with respect to 2022 was kind of modest growth later in 2022 relative to a base of kind of 360, 365 communities. So now when you're referencing the modest growth expectation still in late 2022, is that now off the 330 base, or would you still expect that you could get something kind of closer into the 360s by year-end next year? The second part of this is I know you talk about kind of harvesting and the returns focus. But given the sales pace, community count has shifted relative to how you would have viewed things over the past year or 18 months. Has your attitude towards M&A changed at all? Is there a willingness to look at opportunities going forward? We'll start with community count. Mike, we end the year with, call it a 330. We do expect to grow that in 2022. Obviously, as the year goes on, we'll refine where we think that expectation is, but it's probably somewhere in the mid-300s. We'll see that inflection point as we get to the end of 2022. We expect to start, call it an additional wave of growth in the community count, and we'll see that move higher in 2023. And to your M&A question, Mike, I think as we said last quarter, right now we are a year into a fairly significant transformative M&A. And we're just anxious to get everyone back to work full-time, working on-site so that we can finish the cultural integration, make sure that we're seeing all the synergies pull through. So it's head down for us on getting this one done and too early to talk about anything in the future. Okay. Understood. My follow-up question, it's more around kind of the cost comments. And Dave, I'm trying to reconcile the comments around cost impacts peaking. It sounded like soon in 2Q. I didn't know if that was on an absolute basis or relative to your margins given pricing power kicking in. And then the 400 basis points, it just seems like with lumber and panels where they are today and inflation and some other things, labor, land, building materials, I know some of the other categories don't necessarily make up a ton, but they're all inflating. That sounds a little quick and low in terms of the peak and magnitude of cost inflation. Can you just elaborate a little more of that? Yeah, throughout 400 basis points, what I'm talking about is we see what's coming down the pipe from a cost perspective between now and the end of the year. It's not necessarily going to be tied to what's in our backlog. For example, in Q2, those costs are generally known. Yeah. I think, Mike, the difference is with the exposure that we had in the backlog. So when you think about kind of where we go from here, it's how we've been able to adjust price to overcome it. And so the greatest pressure, so the 4% is, to your point, Dave, it's from here, right? Right. So the greatest pressure, Mike, was really the first half where we brought in a big backlog. And when you think about the impact to the balance of the year, we actually think we're in pretty decent shape. Yeah. We are seeing advantages of our new size as well. That is helping us when we go to the table to negotiate costs as much around cost avoidance as anything else and getting folks and materials onto our site. Okay. That makes sense. That's helpful. Thank you. Thank you. Our next question comes from Deepa Raghavan with Wells Fargo Securities. Hi. Good morning. Thanks for taking the question. Good morning. Of course. Can you provide, Sheryl, can you provide any thoughts on the pricing strength and how we should think about 2022 and beyond, especially as inflation starts to ease? Is there a case to be made for continued but moderate price increases, say 1%-2% perhaps into next year, even if there is a give back on price because inflation would probably ease at that time? Yeah. It's a great question, Deepa. And I think we're all trying to understand exactly the longevity of the strength that we're seeing out in the market today. What I would tell you today is we have a supply issue in this country. And as a result of it, it's giving a great deal of pricing opportunity. As we sit here today, we continue to see those advantages and opportunities really across the board. It's very hard to say when you look six months or 12 months out and new supply comes to the marketplace, will they continue at the pace we've seen? My crystal ball would say we're going to continue in a very strong market for some time given the undersupply that we have today. But the first that will begin to moderate will be price, right? So when I look at the pricing power we've had, if I just take a quarter, Deepa, and say, on average, maybe we're seeing 2% of a quarter, do I think that's long-term sustainable? Probably not. Do I think that we'll continue to see pricing above cost? Probably so. But hard for me to estimate what exactly that will look like in 2022. Okay. That's fair. I'll probably ask you about some incremental concerns from buyers, perhaps. I mean, I appreciate the rate sensitivity you gave from your end. It's pretty statistically compelling, and I also appreciate that the migrant population or the immigrant population, sorry, is probably driving some of that price increases in some markets, but are you hearing about any incremental concerns from your local buyers, especially prices that have been trending so sharply higher, and I'm just curious. At some point in time, it needs to have an impact on demand, and the immigrant population cannot keep flowing forever, so just curious, any incremental concerns you're hearing from local buyers? That's the crux of the question. Yeah. It's a good question, Deepa, and I guess I respond in a couple of ways. First, I would say if there's noise in the system, and of course, there's always going to be some noise, right? I would tell you that that's probably at the more affordable first-time buyer, and I'm quite delighted as we look at the kind of dynamic of our first-time buyer. It's a very well-balanced balance sheet first-time buyer consumer, and so we're not feeling it tremendously, but if I look at our most affordable communities, I would say that's where we are very careful in our pricing strategy. The other thing to your point, and it's why I highlighted in my prepared comments the California migration, is in most of our markets, as we bring Californians in, and if I were to point to a market, I think like Vegas, I think we're seeing 20% of the buyers came out of California in the quarter. Their perspective of affordable is very different. So to your point, you might see that local consumer that wants to sell their house, and even though it's a really good time to sell and they've got appreciation in their home, having been in the market for so long, they're going to look at that price movement a little different. But then they're going to rely on what is it going to cost me on a monthly basis? Now go back to the statistics I shared with you from a year ago. It's still more affordable. I hope that helps. No, that's helpful. Thanks very much. You bet. Our next question comes from Ken Zener with KeyBanc. Good morning, Sheryl. Good morning, Dave. Good morning. Good morning, Ben. Appreciate you guys coming here. And I'll just have two simple questions. The first one is, can you talk about the option trends you're seeing and generally if that's more generic for you? And then the second question is a broader one, but what a year to be integrating William Lyon Homes and with all the integrations you've done. When you take a broader look at your kind of returns with just about four years of land today, what do you think is the biggest driver that you guys are going to focus on to improve your asset turns? Thank you. So I'll start with on the option side. I would say that's holding in very nicely. The margin for options overall are accretive to the home building margin. So obviously, we try to push that where we can. But I'm actually very pleased with where it's holding in, especially given the price and environment that we're seeing right now. Yeah. And if you wanted to be even more specific for you without getting into the crazy detail, I mean, year over year, we're seeing accretion, slight accretion, but accretion on a per-unit basis and as a percentage basis as our ASP continues to grow. I think a lot of that is continuing to come from our active adult buyer. We're seeing tremendous strength. And I think it goes back to the psyche I discussed earlier around this buyer. And they want what they want. They can afford what they want. They want it when they want it. And we're absolutely seeing that in the design center today. As far as the question around timing of the acquisition, I think that was one of your questions laid in there. Yeah. Really just the asset terms. Right. More specific. Yeah. I just want to make sure I can get to that question. Yeah. Yeah. Just like you guys have done an amazing job because you were given lots of operational challenges in even normal times. And you guys have done very well during these very difficult times. But as you kind of look out at the next year or two or three with your asset turns, inventory turns kind of being at that one give or take level, how do you think you might be improving those? Is it lowering the land? Is it somehow making homes faster, which is difficult? Just try to think about the capital. Do you somehow improving that term? Thank you. No, it's my fault. My fault. It's a great question, and yeah, we're always focused on asset terms. Again, our priority is driving returns, and that's key. We've talked a lot about optioning our land more so, controlling it versus owning it. We moved that up to 32%. We're targeting to get to 40% over the next, call it, two years, and with that, lightening that balance sheet will enhance the returns. We're always aspiring to reduce cycle times in production. We're looking for ways to improve that constantly, but obviously, in the market that we're in right now, where demand is so high and labor and materials are so constrained, just even holding serve is a win, I would say. That will start to ease at some point. It always does. That will just help turns later on. I think the key in what Dave's saying, Ken, is there's not a silver bullet here. When we talk about the term operational excellence, we have to be focused on all of it. Thanks for the kind words on integration because over the last two and a half, three years, we've brought in two very large companies. Getting that alignment is probably the single greatest thing we can do. Because I can sit here and talk to you about the difference in the more affordable mix, which will allow our terms to move up a bit. I can talk to you about the Canvas initiatives I mentioned in my prepared comments about simplification. We streamline that time from contract start. I can talk to you about architectural alignment, the land, as Dave talked about, more off balance sheet. All those things are going to have a play. And you're going to see the impact of all of those coming together. And that's why we always say, "Give us 18 months before you really" because the first year, you're just burning off really what they had in the pipeline in production. You didn't get to influence any of it. Now, what's going in the ground today actually has the benefit of the work that we've been doing. Until you actually turn through the land, you don't get the full benefit because I can't save my way to prosperity. It's really about cycling through the land and bringing new land in with the understanding of how you can bring it to market most efficiently. Thank you. Thank you. Our next question comes from Alex Barron with Housing Research Center. Yeah. Thanks for taking my question. I just wanted to focus on a couple of things. One was your land strategy. Seems like your options have been going up recently. I'm just trying to figure out how far you guys think that could go over the course of this year. And the second question, I think last quarter, you talked about migration from other states. Wondering if you can give an update on what you're seeing there? Sure. From a controlled land aspect, like I said, we're at 32%. We expect to move that a little bit each quarter, hopefully sequentially. We might see a couple where it stalls maybe for a quarter, but then picks back up. But that's a little bit harder to predict quarter to quarter, Alex. So we're looking more at the end of, call it, 2022, where we're aspiring to be at that 40% control level. Yeah. And I think it's important. It's not like this is a new aspiration, Alex. Remember that when we did some of these acquisitions, I'll go back to AV, that really changed our mix. And we were happy to do that because of the age and when that land had been acquired. But now we had to start working that back down. So we're just kind of back on track. As far as the migration question, probably the best stat I can share is in 2020, about 13% of our sales or closings came from out of state. In our backlog right now, that number is almost 20%. So a significant shift in migration patterns. And we're seeing the probably most noticeable increases in Arizona, Nevada, Florida, and our Texas markets. Okay. Thank you very much. Thank you. I'm not showing any further questions at this time. Thank you all for joining us today to share our Q1 results. I'm excited to talk to you again next quarter. Stay safe. Ladies and gentlemen, this has concluded today's presentation. You may now disconnect and have a wonderful day.