Good morning, welcome to the Tri Pointe Homes first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to David Lee, General Counsel. Please go ahead. Good morning, welcome to Tri Pointe Homes earnings conference call. Earlier this morning, the company released its financial results for the first quarter of 2023. Documents detailing these results, including a slide deck, are available at www.tripointhomes.com through the investors link and under the events and presentations tab. Before the call begins, I would like to remind everyone that certain statements made on this call which are not historical facts, including statements concerning future financial and operating performance are forward-looking statements that involve risks and uncertainties. The discussion of risks and uncertainties and other factors that could cause actual results to differ materially are detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements. Reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Tri Pointe's website and in its SEC filings. Hosting the call today are Doug Bauer, the company's Chief Executive Officer, Glenn Keeler, the company's Chief Financial Officer, Tom Mitchell, the company's Chief Operating Officer and President, and Linda Mamet, the company's Chief Marketing Officer. With that, I will now turn the call over to Doug. Thank you, David. Hello to everyone on today's call. During the call, we will review operating results for the first quarter, provide a market update, and reiterate our key strategic operating drivers for 2023. In addition, we will provide our second quarter and full year outlook. We are extremely pleased with the start of the year as overall market conditions have vastly improved relative to those in the final quarter of 2022. We reported outstanding results for the first quarter, where we met or exceeded all of our stated guidance. For the first quarter, we delivered 1,065 homes while generating $768 million in home sales revenue. Home sales gross margin for the quarter was 23.5%, and SG&A as a percentage of home sales revenue was 11.5%. These metrics culminated in a pre-tax income of $103 million or $0.73 of diluted earnings per share. We generated positive cash flow from operations of $136 million for the first quarter. We returned $38 million to our shareholders in the form of share repurchases. Our balance sheet remains strong as we ended the quarter with a record-low net debt to net capital ratio of 12.6% and total liquidity of $1.7 billion. While we are pleased with these first quarter financial results, more notably, we are encouraged by our ability to generate new home orders, reduce cancellations, and make significant strides in replenishing our backlog pipeline. Our key initiative going into the year was to increase our sales base with a returns-oriented focus. We achieved this through product repositioning, targeted pricing, and incentive strategies that allowed us to adjust price on a community-by-community basis to meet the needs of today's buyers. Order pace for the first quarter was 4.0 orders per community per month, which is firmly above our pre-pandemic normal levels for a first quarter and significantly higher sequentially from what we experienced in the back half of 2022. We generated 1,619 orders for the first quarter, a 265% increase sequentially from the fourth quarter of 2022, along with a cancellation rate of 10%. We also grew our community count by 17% compared to the first quarter of 2022, ending the quarter with 136 active communities, of which 64% were outside of California. Despite the well-publicized stress surrounding the banking system, the uncertainty of higher interest rates, and the dialogue on a future recession, the job market appears to remain strong, and there are no apparent reductions in credit quality or stress related to our prospective buyers. We believe there are several factors contributing to a tailwind for the home building industry. First, on the supply side, the combination of significant reduction in resale inventory compared to historical levels and the continuing slowdown in new home construction starts over the past several quarters has only increased the housing deficit. The limited resale market, which is compounded by the large number of existing homeowners not listing their homes due to low mortgage rates they have obtained, appears to be providing strong support for the new home market. According to the National Association of Home Builders, currently 1/3 of housing inventory is new construction compared to historical norms of a little more than 10%. This reduction in resale competition is likely increasing our prospective buyer pool, and we believe this factor will continue while rates remain elevated. As such, we are focused on increasing our new home starts to meet these favorable market conditions. Second, on the demand side, while the rise in mortgage rates over the past year has had significant impact on traditional monthly mortgage payments, our rate buy-down incentive strategy has been a key component in mitigating that and providing affordability for our customers. Due to the strong demand in the market, we were able to reduce incentives on new orders as the quarter progressed, and we have raised base pricing in certain communities where demand has significantly outpaced supply. The third fundamental point relates to the demand for homes from millennials and Gen Z buyers who are in or approaching their prime home buying years. According to a recent study, with 52% of millennials now owning a home, the majority of our nation's largest generation has transitioned from being renters to homeowners with a notable 64% increase in the number of millennials buying a home in the past 5 years. Consistent with these macro demographics, this cohort currently makes up 59% of Tri Pointe's buyers financing with our affiliated mortgage company. The next generation entering the home buying life stage is Gen Z, a cohort of 68 million people and only 5% smaller than the millennial population. Gen Z represents 9% of our current backlog. While these dynamics bode well for continuing demand, our focus on cost savings remains a priority, and our operating teams have made solid strides in obtaining lower costs throughout the supply chain. Our goal of a 10%-20% reduction by year-end continues to drive our efforts. We have seen positive results through the first quarter with cost down 8%-10% on average. We acknowledge there are still sticky labor constraints, we remain committed to pursuing reductions where possible. Cycle time reductions are another key initiative of our 2023 business plan as we continue to prioritize returns through higher asset turns and increased delivery volume. At the beginning of the year, we set forth a goal to reduce cycle times by four weeks on average by year-end, we are making strides towards meeting this goal. Our team is focused on expanding trade resources, improving the material procurement process, and introducing line or phase building in additional markets. Spec homes currently represent 60-65% of our total starts thus far in 2023. Through the first quarter, our cycle times have been reduced on average by more than two weeks. We are pleased with the improvements we are seeing thus far in 2023 and believe further improvements are within reach as the year progresses. Market commentary, we are pleased to report that we are witnessing well-diversified demand across all buyer segments and geographic markets. We continue to focus on affordability with 80% of our average community count coming from the Premium Entry-Level or First Move-Up buyer segments. For the quarter, 50% of our orders came from the Entry-Level segment, 33% were from the first move-up, 7% were the Second Move-Up, with the remaining 10% coming from Luxury or Active Adult. The first quarter of 2023 has been defined as a market in transition. The back half of 2022 was depressed by rapidly increasing interest rate scenario that necessitated a market correction. Builders have reacted quickly with price reductions, product repositioning, and financing incentives to stimulate demand. Beginning in early January, the consumer re-engaged and generally, new housing demand in early 2023 has been very strong. Supply and demand dynamics remain a tailwind for our industry. Now I'd like to turn the call over to Glenn to further discuss the results for the quarter and provide some insight on our outlook for 2023. Glenn? Thanks, Doug, and good morning. I'm going to highlight some of our results and key financial metrics for the first quarter and then finish my remarks with our expectations and outlook for the second quarter and full year. At times, I will be referring to certain information from our slide deck, which is posted on our website. Slide six of the earnings call deck provides some of the financial and operational highlights from our first quarter. We delivered 1,065 homes at an average selling price of $722,000, resulting in home sales revenue of approximately $768 million. Deliveries came in above the high end of our guidance range as we are able to take advantage of the strong demand environment and utilize our spec strategy to sell and deliver move-in-ready homes during the quarter. Our homebuilding gross margin percentage for the quarter was 23.5%, which was at the midpoint of our guidance range. SG&A expense as a percentage of home sales revenue came in at 11.5%, which was an improvement compared to our guidance as a result of the increase in deliveries, which gave us better leverage over our fixed cost during the quarter. We recorded 1,619 net new home orders in the first quarter on an absorption pace of 4 per community per month. Demand increased as the quarter progressed. January absorption pace was 3.1, February came in at 4, and March increased to 4.8. So far in April, we are experiencing continued strong demand, and last week we recorded 192 net orders, which was our highest weekly order number for the year and the best single week for orders since March of 2021. In terms of market color, as Doug mentioned, demand was broad-based across our geographic footprint. In the West, the overall absorption pace was 4.1, with all of our California markets performing well, along with strong results in both Washington and Nevada. Arizona started slower, but saw improvement as the quarter progressed. In the central region, overall absorption pace was 3.0, with each Texas market showing positive momentum. Colorado is a market that is still finding its footing, but we have seen an increase in demand recently. In the East, absorption pace was 5.7, led by significant demand in Charlotte, but also strong results in Raleigh and the D.C. Metro area. Turning to communities, we continue to focus on our community count growth and are on target to open between 70 and 80 new communities for the full year of 2023, of which we have opened 18 in the first quarter. This will result in strong community count growth for the full year of 2023. We are in a solid land position with approximately 32,000 lots under control, which provide the foundation for volume growth both for the next several years while we continue to actively pursue new acquisition opportunities to fuel future growth. Looking at the balance sheet and cash flow, we ended the quarter with approximately $1.7 billion of liquidity, consisting of $966 million of cash on hand and $691 million available under our unsecured revolving credit facility. Our debt-to-capital ratio was 32.5%, and our net debt to net capital ratio was 12.6%, both record lows for Tri Pointe. For the first quarter, we generated $136 million of positive cash flow from operations while investing $260 million in land and land development. We repurchased 1.6 million shares during the quarter at an average price per share of $23.87, for a total aggregate dollar spend of $38 million. I'd like to summarize our outlook for the second quarter. We anticipate delivering between 900 and 1,000 homes at an average sales price between $720,000 and $730,000. We expect home-building gross margin percentage to be in the range of 22%- 23% for the second quarter and anticipate SG&A expense as a percentage of home sales revenue to be in the range of 12%- 13%. Lastly, we estimate our effective tax rate for the second quarter to be in the range of 26%- 27%. For the full year, we are updating our guidance to a range of deliveries between 4,500 homes- 5,000 homes at an average sales price between $690,000- $700,000. With that, I will turn the call back over to Doug for some closing remarks. Thank you, Glenn. Our strategic focus on driving increased orders, cost reductions, and returns will enable us to capitalize on market opportunities that exist. With this strategic focus in mind, we remain optimistic about the industry's strong long-term fundamentals, and we are confident that Tri Pointe is well positioned to grow and succeed. I'd also like to thank all of our team members for their excellent work in building our passionate culture. It is because of you that Tri Pointe Homes has been recognized as one of the 2023 Fortune 100 Best Companies to Work For. We consider ourselves to be in the life-changing business for our customers and equally for our team members who make it all happen, putting our values and mission into action and delivering outstanding experience. With that, I'll turn the call back to the operator for any questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Stephen Kim with Evercore ISI. Please go ahead. Thanks very much, guys. Congratulations on the good results. Wanted to talk to you a little bit about your average price. Can you give us a little insight into kind of how the average price of your orders, you know, has trended over the past few months? I know that that's not a number we typically talk about, but I'm wondering whether or not you've seen it trending down or up in the last few months. Hey, Stephen, it's Glenn. Well, like we said on the call, we've been able to lower incentives and raise base pricing on some communities, and so from that perspective, the ASP, you know, has gone up. Overall, throughout the course of this year, as we've discussed in the past, you're gonna see our ASP go down as there's a higher mix of, more attainably priced product coming from our newer, growth divisions like Charlotte, Raleigh, and Dallas-Fort Worth. That's kind of the direction of price. Yeah, makes sense. When you talk about your land and your preparation rep for communities, as we either look out a year or more, we noticed that your landholdings, you know, declined both in terms of owned and optioned units. Curious as to whether or not you think the trajectory of that is going to be, you know, sort of up, flat, or down in absolute units here over the next few quarters and whether there might be, you know, a divergence, maybe with your owns might be flat or down, but your options would be up? Just trying to get a sense for how things are gonna trend. Good question. You're gonna start to see that trajectory go back up. You'll see it more, you know, in the options to start, you know, before we take it down. We are being more active in the land market as of right now as we've seen more stabilization in pricing. You'll start to see that option number go back up. Okay. The owned, what should we think about that? Well, owned will. It's just a timing issue between when you take it down and when you deliver. Overall, though, I think we're still targeting, you know, over the next couple years a more 50/50 mix of option to owned, if that's what you're asking. Mm-hmm. Okay, that's fine. Yep. Great. Your leverage is incredibly low right now relative to what I think you've sort of talked about in the past. Can you talk a little bit about your what your plans are there, how we should expect you to make investments, maybe what the deal pipeline looks like, both in terms of, you know, M&A as well as maybe some other investments, and how patient you think you'd be keeping your leverage that low? Should we, for example, be surprised if, you know, you're patient and we see a leverage at, you know, this team's rate on net debt to cap by the end of the year? Yeah. Part of it is we're looking out to next year, and we have our 2024 bonds coming due. We're putting ourselves in a position to pay those down. That will continue to be opportunistic on that, depending on how the debt market looks and what our capital needs are as we get through this year and next year. You know, our capital needs still remain the same. We're looking to invest, we're looking to grow. We're active in the land market. We don't have any M&A imminent now, but we're looking, right? There's markets that we're still interested in. Long term, we're still looking to grow and we're in a good balance sheet position to allow us to do that. Okay, great. Thanks very much, guys. Thanks, Stephen. The next question comes from Truman Patterson with Wolfe Research. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. My first one on spec versus build to order gross margins. Some of your peers have suggested that you know, the spread between the two is kind of returning to historical levels with build to order being, you know, a bit higher than spec. I'm just hoping you could give some color on what you're seeing in the market today. Yeah, Truman, this is Tom, I would tend to agree with our peer set that we are beginning to see normalization in that, build to order versus spec gross margin. Historically, it's been around 200 basis points for us. We're not quite there yet, but we do expect it to continue to normalize. Okay, perfect. You know, haven't heard a lot of discussion on the new FHFA fee structures. Could you all just kind of give your general thoughts and, you know, how it might impact your business going forward? Truman, this is Linda. We haven't really seen any big impact from that. I mean, obviously at the moment, we are still providing financing incentives to customers that can help smooth out transitions and changes like that. Okay, perfect. All right. Thank you. One thing, Truman, relative to FHA, it's only about 10% of our backlog portfolio right now. Gotcha. Okay. Okay, perfect. All right. Thank you all. The next question comes from Alan Ratner with Zelman & Associates. Please go ahead. Hey, guys. Good morning. Nice quarter, thanks for all the details so far. First on the gross margin, you know, the guidance implies a bit of a sequential dip lower. I'm just trying to figure out, is that more of a timing issue in terms of kind of the mix of deliveries and maybe, you know, more of those coming from homes that were sold late last year when pricing was still under pressure? Is that more a function of maybe that spec versus build to order SKU or any other type of mix impact from, you know, perhaps more closings coming from newer markets that probably have stronger absorptions, but maybe a little bit lower gross margin? Good question, Alan. It is a little bit of mix. There's a couple things going on there. There's... You know, first quarter had some higher margins in it from some communities that were older that were closing out, so that's part of the mix. You're right, you know, Q2 is still reflective of some deliveries that were homes that were started in the, you know, May, June timeframe that had, you know, peak lumber in them. So there is a little bit of mix related to that in Q2. Glenn, I know you're not giving guidance for the full year, but I mean, directionally speaking, as you look forward, you know, there's a lot of moving pieces. You mentioned your price is probably gonna drift lower due to mix. You do have some cost savings. Sounds like you're starting to pull back on incentives. Would you expect 2Q to be the low water mark of the year from a gross margin perspective, or are there still too many unknowns at this point to directionally guide? I think there's. You know, we wanna get through the rest of the spring selling season and see how that goes. You know, we're continuing to, you know, based on the demand, look at price and pace and balancing that. We'll update you at the next quarter with what we're seeing with margins. Okay, understood. If I could squeeze in one more maybe for Doug or Tom. You know, just on the cost side, you and others, you know, pulled back very sharply on starts in the back half of last year. You know, it's not terribly surprising to see that resulted in some cost savings. It seems like the industry is, you know, beginning to ramp up their start pace, you know, given the strong demand we've seen in the spring. Yet I think I still heard there's, you know, a hope or an expectation that you could see further cost relief here for the remainder of the year. I'm just curious if you've kind of had conversations with your trades in the last few weeks, you know, as far as what they're seeing or expecting from a cost perspective, and whether this rampant starts, you know, whether they're equipped to handle it. You know, 'cause I would imagine coming into this year, they probably had a pretty cautious outlook and maybe adjusted headcount or did other things in anticipation of a lower start pace. Yeah. Alan, this is Doug. Good question. You know, as we noted, we've had a overall goal of 10%-20%. Achieved about 8%-10% on average. We're gonna continue to pursue that. We see the greatest impact on cost improvement through some of the product repositioning and value engineering. We are, as we bring in new products, that we've, you know, we're opening quite a few new communities this year that have gone through that process and continue to do so. We have a really strong subcontractor involvement in the bidding and purchasing process. You know, we still have a goal of getting to that 20% number, but it, you know, it's gonna depend on the year and how builders continue to start and the market ramps up. Understood. All right. Appreciate it. Thanks a lot. Thanks, Alan. The next question comes from Carl Reichardt with BTIG. Please go ahead. Morning, guys. Nice to talk to you. Morning. You had, I think you said 60%-65% spec starts this quarter. I think I got that right. I'm just sort of thinking about whether or not the spec start strategy is a reflection of relatively recent market conditions that might be transitory or over time is your expectation that two-thirds of your business will be spec and one-third build to order. How do you think about that strategically as you gradually move out of California, move to the rest of the country, change your product mix up? Hi, Carl, this is Tom. Yeah, I think you're hitting on something that is more of a directional influence where we do anticipate in the future continuing to drive to that spec start model, specifically as we diversify geographically into Texas and the Carolinas. Then of course, you know, given our phase building in California, that's largely spec start driven as well. Carl, I would add. This is Doug. Tom hit it spot on. You know, it is a important thing that we're very returns focused, and so as you implement more line and phase building in some of these markets outside of California, which you're very familiar with, you can definitely improve your cycle times and your returns. You know, going forward, as Tom said, it'll continue to be about, you know, probably 65% of our business. Now, we still, depending on the stage of those homes, still can maximize our option revenue and achieve option margin. We can utilize that even with our Entry-Level Premium product. Okay. Thank you, Doug. Do you all have an inventory turn or asset turn goal relative to where you are right now? Yes, definitely, Carl, and that's something we've been focused on, and it's been historically a little bit impacted by some of the longer-term land that we inherited through the merger, which has been great for us and obviously provided strong margins. As we've worked through a lot of that, our focus now is to turn inventory over 1 time a year. We got close to that over the last couple of years, but that's continued to be a focus of us, of ours. Super. Okay, if I can squeeze one more in. I think you have not quite 14,000 lots under option contract. What percentage of those do you intend to self-develop? Yeah, Carl. Currently, self-development is the majority of our business. I'd say 70% of that is probably self-developed. Okay, great. I appreciate it, guys. Thanks so much. You're welcome. The next question comes from Mike Dahl with RBC Capital Markets. Please go ahead. Morning. Thanks for taking my questions. Just a question on the closings cadence and the guide. I mean, you know, you beat pretty handily in the quarter. Your spec starts are up, your pace comments are pretty strong. The full year guide on closings is unchanged on units. Can you just help us understand some of the puts and takes, and if that's conservatism or is there something we should be thinking about as you, as you kind of work through what was maybe a little elevated level of specs? Do you see lower backlog conversion back half of the year? Just help us understand that a little more. Good question, Mike. I think what happened in the first quarter relative to our guide was we did enter the first quarter with an elevated level of specs and move-in-ready homes. With the strong demand, we were able to sell and close those homes in the quarter. For Q2, with that guide between 900 and 1,000, some of that's just impacted by the fact that, you know, it was slower in the third and fourth quarter, and so we were coming into the quarter with a lower backlog for the second quarter. And we have a little bit less of the move-in-ready homes than we did entering in the first quarter, although we still have a healthy, you know, spec mix going into the second quarter. That's the cadence. Then the back half of the year, we're going into kind of a normal seasonality you know, cadence where you've seen in the past, where the majority of our deliveries will be in the fourth quarter due to the strong spring selling season. Got it. Okay, thank you. Mike, I would add sorry, Mike, I was just gonna add, as you see demand beginning to normalize, and we've got a much clearer picture, our starts are going to normalize as well. You know, on a comparative basis, back in Q4, we were only starting about 400 homes, and we've more than doubled that in Q1 to starting over 1,000. I think you'll begin to see that normalize now. Part of the point, Tom, being that that would be more of a 2024 impact to closings? Correct. Yeah, that's correct. Mike, this is Doug. I think part of your question was also on the guide on the closings for the year. We bumped the lower end of the range because of the demand, but it's gonna be, you know, pretty tight to go much above the upper end of the range because of the timing of new community openings, which we have quite a few between second, third, and fourth quarter. That'll feed right into 2024, as you mentioned. Got it. Okay. Makes sense. Then on the land comments, you know, I think a lot of your peers have still kind of signaled that there's a little bit of a standstill in the land market, and everyone's also kind of still been evaluating their own land books. It sounds like you're already potentially getting more active. I'm curious just what you're seeing, whether it's geographically or otherwise. You know, what's allowed you to have some success getting back in the market today? Is it just, you know, hey, you're able to underwrite today's higher pace, so more deals pencil? Have you seen sellers come off ask price and a little more narrowing of bid-ask? Maybe just, you know, a little more color on what you're seeing there. Yeah, that's a good question. it's really market specific. Now that we're feeling pricing has stabilized in certain of our markets and most of our markets actually have stabilized, we feel more confident, I mean, underwriting land deals. Land residuals are all a function of house revenue, as you know. We have an excellent land pipeline for growth in 2024 and 2025, so we're really looking for land deals that would be new communities, maybe late 2025, but for sure 2026. We're being very selective. We've got our normal underwriting standards, but we'll continue to be very disciplined, as we use a mix of margins and return metrics to look at new land deals. Okay. Thanks, Doug. Yep. The next question comes from Tyler Batory with Oppenheimer. Please go ahead. Thank you. Good morning. Just wanted to put a finer point on the price incentive commentary. Can you talk a little bit more, give, you know, some numbers around your incentive activity on orders in Q1, how that compared with Q4, and then talk about how much more you can reduce incentives the rest of the spring here? Thanks, Tyler. Yes, as we mentioned, we have been able to reduce incentives during the first quarter. We'll just have to see how that goes and what happens with interest rates from here because we wanna remain nimble and ensure that we're providing attainable monthly payments for our home buyers. Okay, great. And then in terms of the buyer segment commentary, I mean, you mentioned demand, pretty broad-based strength there across Entry-Level/ Move-Up. You know, I wanted to focus on that move-up piece a little bit more. I mean, when you look so far year to date into April with rates a little bit more stable, are you starting to see, you know, a little bit more improvement or more interest or more traffic in some of those communities? Yes, certainly. first move up was very strong as we talked about. you know, yes, we're seeing very good interest from both entry level and move-up, and our new community openings are reflective of that. We're seeing strong demand in openings for move-up communities as well as entry level. Okay. Last one for me is from a market perspective. I mean, you know, California, still a big part of the mix. You know, a lot of noise, headlines out there. Just talk a little bit more what you're seeing on the ground, sales pace, traffic, et cetera, on the last month and a half or so out there? Yeah, Tyler, good question. I think California is very misunderstood. Our results have been strong in California across all product segments and geographic regions. We're really encouraged by the depth of demand in California. I think we've proven up that, you know, there are buyers in plenty when we're offering, you know, 5%- 6% interest rates. The incentives have worked well. Our product repositioning has hit head-on. Just remember, you know, we have a focus on design and innovation and core market locations that I think has been very well-received. We expect California to continue to be strong going forward this year. Okay, great. That's all for me. Thank you. The next question comes from Jay McCanless with Wedbush. Please go ahead. Hey, good morning, everyone. Tri Pointe and several of your peers have talked about increasing starts into the spring, but I haven't heard anybody talk yet about labor availability, especially on the front end. Is that labor to drive those starts, is that coming from the private builders? Do you think you're taking meaningful share, you and the other publics are taking meaningful share from the privates right now to drive those starts? Good question, Jay. This is Tom. Certainly labor has, you know, been impacted pre-pandemic levels for sure. It continues to be a stress point for all builders. I think the publics in particular are gaining more and more market share and driving more and more of that labor to their jobs. It's improved from pandemic times, but it was a challenge pre-pandemic, and we expect that to continue. Again, we are looking to position ourselves as a builder of choice for the trades, and I think we're being very successful in that. Jay, I... this is Doug, Jay. I would... On a macro, you actually hit on a key point, and I don't think it's being felt this early, but, you know, with the banking crisis of the small regional banks, you know, for the smaller builders, which I think you're alluding to, I think it's going to be the second half of this year going into 2024, where you're going to continue to see the larger or the public builders that have plenty of capital to continue to increase market share during this, you know, effectively a credit crunch for especially the small, regional, small private builders. I'm not saying the larger privates, but, you know, builders that are doing under 500 closings a year. Well, you actually stole my second question, Doug. I was gonna ask if you'd seen the ability to start taking down some finished lot projects or maybe a little looser terms around land deals coming your way. If you just, maybe give an expanded answer there, especially as it relates to, like, opportunistic, pro-project buys or something like that. Yeah, I think it's early. You know, even if you're a small to regional builder, you're having success selling homes, right? You're generating cash flow. I think the opportunity will be felt more in the second half of this year, where even some of the smaller regional land developers in the central region and in the East region will probably find some issues in obtaining capital. Our land teams are in the market, being very disciplined, but looking for... And hopefully being opportunistic. I'm sure all our brethren are doing the same thing. Right. Then the other question I had, just ex lumber, can you talk about what you're seeing from cost trends, concrete, drywall, et cetera? Yeah, Jay, this is Tom. You know, as you know, lumber has been a key driver to our cost reductions. We are seeing reductions on other areas of our costs as well. Doug alluded to it in our prepared remarks that, you know, through value engineering on both existing and new products, we have been able to simplify and see some significant reductions there. You know, our national team is working really well on those larger scale relationships, and we're seeing some reductions from some of our big suppliers, and it's being displayed in our product offerings currently. We feel pretty good about our costs, and we're looking forward to continuing our efforts there, and hopefully we'll see some continuation of those savings. Okay. Sounds great. Thanks, guys. Thanks, Jay. The next question comes from Alex Barron with the Housing Research Center. Please go ahead. Yeah. Thanks, guys, and good job on the numbers. You know, I was in Southern California a few weeks ago, and I heard about a program the state launched, I think it was called CalHFA or AHFA or something like that, where they give buyers, like, 20% of the home payment. I was wondering to what extent you guys were able to participate and take advantage of that program. Yes. Thanks, Alex. We did take advantage of that program, but the funds did run out very quickly. Clearly there is housing demand there, when people can get additional assistance for their down payment. Was it, like, significant, or did it run out to where it really didn't amount to? In total magnitude of our orders in the first quarter, it was insignificant because there was a very short window for us to be able to take advantage of that before the funds were depleted. Got it. Okay. All right. You know, I guess towards the end of last year, there was talk among builders about reducing starts and, understandably so, but there was also expectation that for those builders who would start more specs, they would be able to, you know, capture some cost savings from subs looking for work. I'm just curious to what extent that's been achievable, or not. Alex, it's Doug. I mean, as we saw the engine, the housing engine slow down through the end of last year, going into the first quarter of this year, as we mentioned, we've achieved roughly 8%-10% in cost savings from a combination of existing programs, existing communities and new community starts. Okay. It sounds like that's, I guess, the extent of it, 'cause if things are re-accelerating, then I suppose they're looking at that. Well, no, I think. Yeah, I mean, no, I mean, as we mentioned in our prepared remarks, our goal, as we said at the beginning of the year, and it still is today, to get up to towards 20%. In certain markets, we may achieve that. You're right. I mean, as the market improves, cost and pricing, as we see, will firm up. We're seeing the most success in cost improvement when we reposition product and bring out new product for the trades to bid on. There's plenty of trades that are looking for work and bidding on and being very aggressive in their bids. That's where we're seeing the most success, in cost improvement compared to what we had underwritten a year ago. Got it. I could ask one other one. You know, let's say, hypothetically, the Fed does one more hike rate and they're done, and then something leads them to start lowering interest rates, whether it be they feel inflation is done or whether it's a crisis or whatever. I guess the question is, if rates were to go back down significantly, do you feel like the industry has capacity to handle a ramp-up in starts, or do you feel like, you know, we're just gonna go back to supply chain bottlenecks and all that stuff? My personal opinion is I think the industry does have, especially the publics will... They'll be very measured as we are increasing our starts, as Tom mentioned. I think it'll be more of a normal market condition. My own personal forecast is I don't think rates are gonna change much, unless there's a some sort of other banking or other crisis out there. I think the Fed... Inflation is very sticky, my own personal opinion is they're gonna, you know, probably see another rate increase, a modest one, and then probably stay flat. You know, hey, it's anybody's guess. This has been the most anticipated recession I've ever seen in my life, right? Correct. Okay. Yeah, just wanted to get a sense of, you know, if you felt there was an opportunity to ramp up starts and deliveries, you know, more than single digits? Yeah. I think based on demand, if demand is there, the industry has capacity to increase starts and capitalize on volumes as we've proved over the last couple years. I do believe that supply chain is being normalized and the labor environment is normalizing. We feel good about opportunities in the future for growth. All right. Great. Well, let's hope so. Thanks. Take care. Thanks, Alex. We have a follow-up from Truman Patterson with Wolfe Research. Please go ahead. Hey, just a quick follow-up. In Denver, Colorado, your orders were down about 70%. I'm just hoping you can give an update of, you know, what you're seeing on the ground there, as well as your all's kind of strategy in the market. It looks like community count dropped a little bit to about 6 communities. Is that, you know, a target area of this community count growth going forward? Absolutely, Truman. good questions, and you're right on with your assessment. A large portion of that order decline was due to lower community counts and then just selling out and being at the tag end of some communities as well. We've got new product offerings that are coming into the market this quarter, that we're very excited about, and we have seen a pickup in demand overall across the market and specifically at our new product offerings as well. Expect that to improve. Okay, gotcha. It sounds like the market on the ground, it might be a little bit more internal constraints than overall market conditions. Yeah. I think, the market lagged some of the rebound early on in Q1, but it gained footing as the quarter moved through. That coupled with our lack of offerings, I think, is why you're seeing the decline in orders for us. Yes, we'll both be seeing an improved overall market condition as well as our offerings that'll lead to better orders for us. Perfect. Thank you all for the time, and good luck in the coming quarters. Thanks, Truman. Thanks, gentlemen. All right. Thanks. we have a follow-up from Stephen Kim with Evercore ISI. Please go ahead. Yeah. Thanks a lot, guys. I know we talked about starts, and I think you said there were about 1,000, you know, maybe a little less, is what I'm calculating. You know, that was a number that kind of averaged around, I don't know, 1,700 or so, you know, post-pandemic, I believe. Was curious as to whether or not you felt like you could pretty effectively get back there, how quickly, you know, that sort of thing. Yeah, Stephen, this is Tom. You know, as we've talked about, starts are a function of demand, and we certainly have the capacity to improve starts, and we're going to balance it with our absorption paces. I think as you see Q2, you know, we will improve upon but average a little over 500 starts a month. We'll be getting closer to your 1,700 normalized number in Q2 going forward. Perfect. On a similar note, production homes per community, I think, I believe they were down to about 18 or so, a little less than 18 per community. That's that level, you were kind of running between 18 and 22, I think, pre-pandemic. But, you know, with your, with, you know, more spec building, I'm curious what level of, you know, sort of production homes per community should we be thinking, might be, you know, normal for you going forward? Stephen, we'll have to look at that. I think what you've seen historical, shouldn't be any different going forward, but a lot of that is timing of when we're getting starts out. It's not a perfect number to look at a point in time because it really depends on the timing of when that goes. Like Tom said, our whole goal is just balance, starts with demand, and that's how we look at it on a community by community basis. Okay, that's fine. All right, perfect. Thanks. Thanks much. Thanks, Stephen. Thanks, Stephen. This concludes our question and answer session. I would like to turn the conference back over to Doug Bauer for any closing remarks. Thank you, Andrew, and thank you for joining us on today's call. We look forward to updating you all on the spring selling season next quarter, and have a great weekend. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.