Toll Brothers - Earnings Call - Q2 2020
May 28, 2020
Transcript
Speaker 0
Good morning, and welcome to Toll Brothers Second Quarter Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Now I'd like to turn the conference over to Mr.
Douglas Yearley, Chairman and CEO. Please go ahead.
Speaker 1
Hi, Nick. This is Doug. Are we ready to go?
Speaker 2
Yes. Go ahead, sir.
Speaker 1
Thank you very much. Welcome and thank you for joining us today. I hope you, your families and colleagues are staying safe and healthy. With me today are Marty Connor, Chief Financial Officer Fred Cooper, Senior VP of Finance and Investor Relations Wendy Marlett, Chief Marketing Officer and Greg Ziegler, Senior VP and Treasurer. Before I begin, I ask you to read the statement on forward looking information in our earnings release and on our website.
I caution you that many statements on this call are forward looking based on assumptions about the economy, world events, housing and financial markets, the current and long term impact of the COVID nineteen pandemic, and many other factors beyond our control that could significantly affect future results. As noted in our May 6 press release, due to the uncertainty surrounding COVID-nineteen and its impact, we have withdrawn our second quarter and fiscal year twenty twenty guidance. Now let's begin. We are pleased with our performance in the second quarter. Under complex and challenging circumstances, our teams delivered nineteen twenty three homes and produced revenues of $1,520,000,000 Our second quarter adjusted gross margin of 21% and our net income of $75,700,000 or $0.59 per share diluted.
Our second quarter end backlog of 6,428 units and $5,490,000,000 was down just 1% in units and 3% in dollars. And our net signed contracts of $1,550,000,000 and eighteen eighty six units were down 22% each from one year ago. Our second quarter was essentially bifurcated by the impact of COVID nineteen. Fueled by strong demand, a healthy economy, low mortgage rates, and a limited supply of new and existing homes nationwide, our net signed contracts were up 43% through the six weeks ended March 15 compared to the prior year's same period. With approximately 40% of our selling communities and 50% of the dollar value of our backlog concentrated in highly impacted markets, including Pennsylvania, New Jersey, New York City and its suburbs, Connecticut, Massachusetts, Michigan, Metro Seattle, and California, government stay at home and business closure orders made it especially challenging to sell, construct, and deliver homes.
In these markets during this restricted period, most of our sales centers were required to be physically closed and operating virtually or open by appointment only. As a result, from March 16 through April 30, our net signed contracts declined 64% year over year. Net signed contracts declined 79% in these highly impacted markets over the same period versus 52% in our other markets. Fortunately, government restrictions have eased and sales and construction operations have resumed in almost all of our markets. While net signed contracts in the first four weeks of May were down 37% year over year, we are very encouraged by recent deposit activity.
Our deposits, which represent a leading indicator of current market demand, were up 13% over the past three weeks versus the same three week period last year. Year over year deposits from last week were the highest since 2005 on both a same store and gross basis. As a reminder, our customers first post a refundable deposit that reserves a home site and affords them time to make final decisions on architectural design and structural options to personalize their home before signing a binding contract. This process from deposit to contract typically takes about three weeks. Importantly, our recent deposit to contract conversion ratio has remained consistent with pre COVID nineteen levels.
Web traffic has also steadily improved from the lows we experienced in mid March and has returned to the same strong level of activity we enjoyed pre COVID nineteen with web traffic in this most recent week actually exceeding pre COVID levels for each week of February and March. Foot traffic through our sales centers has also increased significantly. These early trends suggest the housing market may be more resilient than anticipated just two months ago. During the lockdown, our teams quickly adapted to new operating environment and transitioned to a combination of remote ways of working, virtual communications with our customers, and safe construction practices. Our focus was on keeping our employees, trade partners, and customers safe, and our business running.
The online and community sales teams engaged home shoppers in person, by phone, and online. Design studio appointments moved forward in person and virtually. Closings continue to occur often by remote and paperless practices for customers eager to move into their new Toll Brothers homes. Through creativity and virtual tools, we were able to continue to provide the high quality home buying experience that defines our trusted brand. As we prepare for a further reopening of the economy, we continue to develop new ways of running our business to meet the many challenges presented by the pandemic and its impact on the economy.
We have learned to operate more efficiently, which will make us better now and in the future. We also intend to continue pursuing our strategy of diversifying our product mix and geographic presence with a focus on more affordable luxury home communities and expansion into higher growth Southern and Western markets. We believe this strategy will enable us to reach a larger segment of the affluent home buying market. Now let me turn it over to Marty.
Speaker 2
Thanks, Doug. Our adjusted gross margin of 21 was better than we expected this quarter. We attribute this to a combination of pre COVID-nineteen pricing power, stronger cost controls and a favorable mix of deliveries. The average delivered price of our homes in the second quarter was $789,000 compared to the midpoint of our expectations of $810,000 due primarily to more deliveries of affordable luxury homes in Idaho and delays in deliveries in higher priced markets such as California that were heavily impacted by shutdowns. Our balance sheet remains strong.
We ended our second quarter with including $741,000,000 of cash and $1,300,000,000 available under our $1,900,000,000 revolving bank credit facility, which does not mature until November 2024. The weighted average maturity of our debt is more than five years, and we have no significant debt maturities until 2022. During the quarter, we paid $0.11 in dividends and repurchased 4,300,000.0 shares of our common stock for $157,500,000 These repurchases all occurred prior to the onset of the pandemic in mid March. At the end of our fiscal second quarter, book value per share was $36.34 During the second quarter, we took a number of actions to reduce spending, maximize liquidity and maintain financial flexibility in order to deal with current challenges and be prepared for potential opportunities that may arise during the recovery. One of our initial steps in mid March was a sizable draw on our bank revolving credit facility due to initial concerns regarding potential bank liquidity and capital market accessibility.
All of this draw has been repaid as those concerns have abated and the capital markets have been open for homebuilders and many other sectors. We are very focused on converting our backlog, which should generate significant cash. Our backlog at the April stood at 6,428 homes and 5,500,000,000 providing us with good visibility on cash inflows for the next few quarters as cancellations have remained low. Another major step that we took to preserve liquidity was to significantly reduce spending on new land acquisitions and land development. We evaluated all pending land deals in our pipeline and requested additional time on deals with near term cash outlays.
Most of our sellers were receptive, although we did have one sizable deal in Virginia where we could not come to terms with the seller. We therefore wrote off $10,700,000 in sunk cost, which constituted most of our second quarter impairment charge. Land acquisition spend dropped from February to March and was essentially zero in April. Land development spend was also significantly curtailed. With 37,100 owned lots, of which 17,200 are already improved, we can and will choose to selectively invest in new land acquisitions based on local market conditions.
We believe that our attractively located land pipeline in the most desirable markets will position us for growth as the economy recovers. With our strong balance sheet, we will continue to be opportunistic as land and other growth opportunities become available. In light of the uncertainties presented by the pandemic, we also acted quickly to accelerate our efforts to improve efficiencies and rationalize overhead expenses by reducing G and A spend. These actions included, among other things, a hiring freeze and reductions to payroll through a combination of job eliminations and employee furloughs. While these decisions were difficult to make, we believe they will help our business in the near term and make us more efficient over the long term.
We anticipate that these actions will decrease overhead expenses by approximately $50,000,000 on an annualized basis going forward, and we expect to realize approximately $25,000,000 of savings over the remainder of fiscal twenty twenty. Included in our second quarter SG and A is approximately $8,000,000 in severance costs, offset by the reversal of an $8,000,000 accrual for discretionary benefit plan contributions that will not be made. We will continue to review our cost structure as we further refine operating efficiencies and as market conditions evolve. As we look to the third quarter, we expect some delivery times to remain challenged due to the several weeks of lost or limited construction activity in certain shutdown markets in our second quarter, as well as evolving construction practices. We also expect our JV land sales and other income in the next few quarters to be lower due to market conditions.
We will delay selling several of our completed apartment communities and other assets until the market for those sales improve. Nonetheless, during the second quarter, we did complete the previously contracted sale of our golf course operations, which generated approximately $13,000,000 in gains in other income. Now let me turn it over to Greg Ziegler.
Speaker 3
Thank you, Marty. We have continued to see ample mortgage availability for our customers. Approximately 20% are all cash buyers and take no mortgage, Excuse me. And only 25% take a jumbo mortgage. Our customers who take a mortgage borrow on average 70% of the home price and contribute the rest in equity.
With average FICO credit scores above 7 60, our buyers have had little trouble getting mortgages. Also, we do not retain servicing rights to these loans. Marty mentioned the size of our backlog and the cash flow it is expected to generate. Our contracts are backed on average by a nonrefundable down payment of $70,000. Obviously, this represents a significant financial commitment.
Our customers also become emotionally committed to their new home as they personalize it with structural options and interior design selections through our design studio process. Our buyers also tend to be more financially secure with better long term job prospects and accumulated wealth. We believe that these factors have contributed to our relatively low cancellation rates. As a percentage
Speaker 1
of
Speaker 3
backlog, our cancellation rate was 3.1% in our fiscal second quarter compared to 3% in the first quarter. And as a percentage of gross contracts signed was 9.7% in our second quarter versus 9.4% in the first quarter. Our apartment living business has been healthy. Across our stabilized properties, we are 96% leased. Rent collections have remained stable with April delinquencies only down 1%, above the average for January through March, and May up approximately 3% compared to the first few months of this calendar year.
We continue to have access to the capital markets for new apartment project construction debt and equity financing. In mid April, we closed on a new Toll Brothers apartment living joint venture, excuse me, to develop a two eighty nine unit rental community in Boston's Wolverne suburb. We have received various debt and equity term sheets since mid March for other projects expect and to close several additional joint ventures for apartment living projects in the 2020. Now, let me turn the call back over to Doug.
Speaker 1
Thank you, Greg. Thank you, Marty. We are encouraged by the pickup in deposits in May, but remain cautious as to the long term impact of the pandemic on the economy and the housing market. We expect to have a clearer view of the long term implications of this later this summer and fall as the economy reopens and people return to the workforce. We believe Americans now more than ever appreciate the comforts of home.
Our marketing efforts are focused on your home is your sanctuary and your home is the most important place in the world. With our trusted brand, experienced management team, diversified product offerings, strong liquidity, and high quality land holdings, we believe we are well prepared for the immediate challenges ahead. We also believe we are well positioned to take advantage of the favorable long term demographic and supply demand trends that underlie the housing industry and which we expect to continue as the economy recovers. Before opening it up to questions, I would like to thank all of our Toll Brothers team members, whether it's our operation teams who are able to deliver over 1,900 homes this quarter in extremely difficult conditions or our sales teams who guide our customers through the home buying process or the rest of the Toll Brothers family. I am so proud of how they have responded to the challenges we have faced during this time.
We have seen firsthand their creative thinking, how hard they are working, and their incredibly positive spirit. They are completely dedicated to moving our great company forward while taking care of our customers every step of the way.
Speaker 4
Nick, let's open it up to questions.
Speaker 0
Thank you. We'll now begin the question and answer session. For using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Please limit yourself to one question and one follow-up.
First question is from John Lovallo, Bank of America Merrill Lynch. Please go ahead.
Speaker 5
Thank you for taking my questions, and I hope everybody is well on the team. First question is, I think it was in the 2017, maybe in the fourth quarter, you guys got out of the business of providing kind of that nonbinding deposit results because they just weren't indicative of full quarter signed contracts. So just curious why you think that this might be a more reliable indicator now.
Speaker 1
Thanks, John. Several years ago, before that, we used to give fairly detailed information about the three or four weeks, between the end of a quarter and the earnings call. And, we recognized that it was better to just give a general commentary such as, the prior three or four weeks have been similar to the prior quarter. We feel good about, market conditions in the last few weeks. But we believe on this call for this time, the market, the investors, the analysts are looking for as much detail as we can possibly give.
And that's exactly what we've done. I think that's exactly what the other builders have done. We have tried to be fully transparent in giving you agreement information, not only pre and post COVID, by giving you agreement information for the month of May, but also giving you what we believe is the best indication of today's market that is not in any way trying to suggest that that will continue through the quarter. I cannot comment on that. But today's market over the last three weeks, our best indicator is our deposits because of the process we have described to how we take a deposit and then it converts to an agreement in about three weeks.
And by the way, I know I mentioned and it's important that our conversion ratio from deposit to agreement, has stayed the same, since March 15 as it was pre March, February, January last fall. And just I know the question will come up, that ratio runs about 65% for us.
Speaker 5
Got it. That's really helpful. And then maybe just taking a step back, so clearly uncertainty in the market and the direction of things. But in your gut, Doug, I mean, how confident are you in sort of the sustainability of the current activity? And what would you need to see to begin kind of buying land more consistently across your markets?
Speaker 1
I can't comment on, you know, what's coming, over the next few months. I am very encouraged by the last three weeks. We had a really tough geographic footprint, in terms of the markets that we are active in and how shut down they were. And it wasn't just that the government closed construction, that the government closed sales, that the government had shelter in place. It was that these markets were also hotspots so that we had a clientele that was more vigilant in staying home and being more careful.
And so as that has lifted, and the last lifting was around the May 9, the only market we have left that has not opened up constructions or sales is New York. And at least suburban New York is coming shortly. I think the city will be a little bit longer. But as that has lifted since early May, I feel a lot better than I felt in mid April than I felt in mid March because we are now seeing significant increases in traffic. Obviously, the deposits are up significantly.
I mentioned that this past week was the highest deposit number both gross and on a same store basis since 02/2005. But that's the extent to which I'm commenting. I'm not going to project forward because of the uncertainties of the market we are in, but I certainly feel very good right now based upon the last three weeks' activities as almost all of our markets have reopened.
Speaker 5
Got it. Thank you very much.
Speaker 1
You're very welcome. Thank you.
Speaker 0
Thank you. Our next question comes from Alan Ratner, Zelman and Associates. Please go ahead.
Speaker 6
Hey, guys. Good morning. Glad to hear you guys are all doing okay. And thanks for all the color you've given so far on May. Doug, I'm just curious, with that improvement you've seen in the last three weeks, can you extrapolate or expand on that a little bit more?
Just curious if there's been any kind of pricing actions that you guys took maybe at the April that would have spurred some of that activity. I know you were offering, I think, an interest rate incentive for a while, but just curious if you've taken any steps on the pricing front. And then just more broadly, are you seeing any, kind of unique nuances with where that demand is coming from? Is there a specific price point or perhaps region where activity has bounced back sharper than others? Or is it fairly widespread across the footprint?
Speaker 1
Sure, Alan. My pleasure to answer your two questions. On pricing, no, we are not incentivizing. The only special we've run is on quick delivery homes, what we call our spec homes, that will deliver by mid summer. For a while, we are offering a two ninety nine percent thirty year mortgage.
It's interesting that the rate got down to $2.99. So there was no cost to us by the end of even marketing $2.99. So that was the extent of any incentivizing anywhere. I'm actually pleased that in a couple of locations, let's call it 10 to 20 around the country, we've had some modest price increases over the last three to four weeks. A few have been new grand openings that have been very successful and others have been established communities that have a very strong demand.
But in terms of running any special to drive the last three weeks of strong activity, absolutely not. And I'm not inclined to incentivize right now at all. I don't think we need to and I don't think this is the time to do that. In terms of market strength recently, we continue to see very strong activity in Boise, Idaho, in Northern Virginia, in Orlando. Seattle was very hot before March 15, and then of course slowed dramatically because the state was shut down to both construction and sales.
And now that Seattle has reopened, that market is back to being very, very strong. So we're encouraged there. The Texas markets of Houston, Dallas and Austin are all doing very well. Denver, Colorado has been extremely strong. And then South Carolina, three new markets for us.
And Atlanta, a new market for us, have also been quite strong. So that footprint is Southeast over through Texas, The Mountain States and Seattle, think is sort of the ring I'd say has been, the strongest for us.
Speaker 6
That's really helpful, Doug. Appreciate that. And, just I guess on price point and I guess a little bit more of a strategic question. I think initially we were hearing from builders that entry level and spec products specifically was really most in demand. And anybody that kind of had to leave an apartment, they were looking for something pretty quick to move into.
So I'm curious, within your price point band, are you seeing relatively stronger activity at those more affordable offerings you do provide? And has there been any thought about maybe adding a few more specs on the ground just to kind of satisfy that demand with resale inventory as tight as it's been?
Speaker 1
Sure. So our affordable luxury business, which we've been talking about a lot, increased year over year in the second quarter, as we would have had expected for the reasons, you know, you gave. Our luxury business was flat and our what we call age targeted and empty nester, the move down market of the baby boomers was down. And we also expected that as that client was more inclined to shelter and be careful. And also some of our active adult communities are in destination locations that require travel.
And obviously there hasn't been a whole lot of travel in the last few months. So affordable is up, luxury is flat, age target and empty nester has been down. In terms of quick delivery, right now we have about 15 to 17% of our homes are, in various stages of construction, and we define a quick delivery as having come out of the ground. And, we target that quick delivery product based on understanding that it should be more heavily loaded towards affordable luxury. It should be more heavily loaded towards townhomes and attached product.
And less loaded towards empty nester and age targeted. That was even true pre COVID nineteen because we know that buyer, it being generally one of their last major home purchases, they want to customize that home. So we've always had the strategy to have less spec inventory in that niche. And we will continue I'm very comfortable with that 15 to 18 quick delivery range. It will continue to focus more on the lower priced and attached communities, as we have, you know, strategically planned it in the past.
I don't think that'll change.
Speaker 6
Appreciate it. Thanks a lot, and, good luck and stay safe.
Speaker 2
Thanks. You too. Thanks, Alan.
Speaker 0
Thank you. Next question is from Matthew Bouley, Barclays.
Speaker 2
Please go ahead.
Speaker 7
Hey, good morning. Thanks for taking the questions. I hope everyone's doing well. On the gross margin and mix, I think, Marty, you mentioned
Speaker 8
that favorable mix was part of
Speaker 7
the strength in the second quarter. I guess my question is, number one, is that a comment, I guess, on just the overall decline in the North Region closings, which obviously runs a little bit lower margin? Or is there something more specific than that? And number two, I guess should we assume that there's, I guess, a continued tailwind to gross margins in the second half perhaps for the same reason? Thank you.
Speaker 2
Well, with respect to the margin performance in the second quarter, the order in which I gave the rationales is the weighting, relatively, of the reasons. So it was price increases that we had in the past, it was cost control, and then to a much lesser extent, just some positive mix. And it's tough to get into the specifics of whether that was the North or otherwise, so, I won't. With respect to, the future, I'm sorry, but as we've noted earlier and in our release, we're just not gonna give any guidance. There are just too many variables in these uncertain times to go in that direction.
Speaker 7
Okay. Fair enough. And then I guess, secondly, I guess at a higher level, you know, you think about your exposure to these regions which have been more severely impacted by the lockdowns, there's the narrative that I'm sure we've all heard just around sort of that urban flight from some of these cities. Just curious if your sales folks have started to see any traffic from that specifically. Just anything notable or needle moving yet?
Speaker 1
Not yet. Again, you know, travel is highly restricted. We are encouraged, as I've mentioned, by significant increase in traffic and deposits, in those markets that were closed, through April.
Speaker 4
Okay, thanks. Appreciate it.
Speaker 0
You're welcome. Thank you. Thank you. Next question is from Stephen Kim, Everscore ISI. Please go ahead.
Speaker 9
Yes, thanks a lot, guys. Yeah, really encouraging commentary here. I just wanted to, right up front, address the question of deposits. Because actually a year ago you made some commentary about activity, I believe, at around this time. And you indicated that you were seeing encouraging trends on the deposits.
Then ultimately, your contracts were up for the month of May. So it doesn't look to me like your deposits faced a particularly easy comp in this first three weeks of May. So I'll just correct me if I'm wrong on that. My question related to relates to the age of your buyer. I was curious if you knew what percent roughly of your buyers are older than 60 years old?
And has this changed much in sort of the deposit activity or the contract activity that you've been seeing recently?
Speaker 1
Steven, I have three people here looking through a whole bunch of paper. Good thing we're together for this one. But I think we're probably gonna have to get back to you with the answer on the percentage that are 60. I will say that generally our active adult communities are marketed to a younger active adult. With the amenities, the healthy lifestyle, our marketing campaigns, we like to find 55 year olds that may look a little bit younger and are super healthy, and that's our clientele.
So we'll get you that number, it it is it is sorry, Greg?
Speaker 3
I I Steven, this is helpful. We we don't do it at 60. We looked at it at 50 and older. We looked at our settlements. And so for this quarter, 52% of our settlements had a buyer that was 50 or older.
And if we wanna reference it from a year ago, q two nineteen, it was 49%. So it seems relatively consistent.
Speaker 1
But there's a lot of there's a lot of families, young fifties, mid fifties that are still buying the move up house. So what's what's Steven's getting at is the true active adult empty nester market, which really starts at 55 and goes from there. But we'll I'm trying to buy time here, and I'm not getting an answer. So we'll get back to you. And in terms of your first question about the comp, yes, it's a bit of a difficult comp, particularly the May.
Last year, and for those of you who have been following Toll for a long time, you'll recall that every April for many years, we've run a national sales event. And we generally get our vendors to participate and contribute upgrades at discounts. We market the heck out of it nationwide. And that event occurred last year, 02/2019, and ran through the May. And the last week of the event is always the biggest week for deposits because people know it's expiring and they gotta get out.
This year, we suspended that event. We did not run it in April. We are contemplating when we may run it. I'm feeling pretty good about the market right now, so stay tuned. But that certainly impacted the month of April even more.
It magnified the impact of COVID-nineteen, and that impact continued pretty dramatically into the May. But since then, as I mentioned, not only did we have all of our markets reopening, but for New York, but we had, as we've mentioned, these three really strong weeks of deposits.
Speaker 9
Yeah. So, yeah, that's that's really helpful. So you didn't that 13% number is not really benefiting from a particularly, easy comp in April, if anything, had a particularly difficult comp. I guess what I'm trying get
Speaker 1
My apologies. Just just to complete it. For the month of May, to expand our three weeks from up 13% for three weeks, we are flat on deposits for the month, which goes to my commentary about the difficult comp of the first week both because we were closed in certain places and because it was up against last year's final week of our sales event.
Speaker 9
Got it. Yeah, that's really helpful. Okay. So I guess where I was trying to go with my question, in terms of calling out this dramatic difference between your contract and your deposits as well as the question on the age, is it feels to me like what people are really wrestling with with your business is are we is the higher end of the market and the market you serve, the customer you serve geographically as well as price point, has it been slower to respond but is going to eventually mirror what we are seeing elsewhere in the housing market? Or is there anything structurally different about the market and the customer you serve which would make it make your business unable to express the same kind of recovery that we've seen in many other places outside, you know, for many other builders.
And, you know, certainly this contract inflection would seem to be suggestive that you can see your markets fully participate just like every other segment of the market and geography. So let me ask a broader question to you. Is there something that you see in the marketplace and in your customer base that we need to be cognizant of that will be somewhat semi permanently impairing your ability to see the kind of recovery we would see elsewhere in the housing market?
Speaker 1
My strong answer is no. I feel very good about our business. Listen, coming right out of the March 16 or the March 14 nationwide emergency shutdown, you know, we understand that for the first month, the first six weeks, while everybody was sheltering in place, it was those that were living in an apartment who still felt comfortable with their job security that jumped at the opportunity to buy a very affordable completed new spec home. And we understand that. And we all saw that play out in the very short term.
And that's not our business. Right? That's not what we do. But our average house now is around $800,000. We are focused on more and more affordable luxury.
We are very focused on the South. We are focused on the mountain states. We are focused on the West. You can see how, you know, the West and excuse me, the mountain states in the South have held up. And our business is evolving.
We have been talking about that. I feel strongly that people are nesting, and this is not short term. There is no place like home. Home is your sanctuary today. It is the most important place in the world.
And the opportunity for us to continue to build on our brand the way we do it, offering the opportunity to customize the house through an organized upgrade process, design studio process, Not everybody has to move in in the next month or two. That absolutely occurred quickly after this pandemic for the crowd I mentioned that was in the apartments. But people are still thinking about, I want a new home, and I wanted to design it my way. And I want it to be a great value. And that's what Toll Brothers is about today.
And I love our geographic footprint. I love how we've expanded our market segments. I love our brand. And I truly believe that our business is primed to take advantage of all I've described in not just the short term as we're seeing now in May, but longer term as more and more people want to move into the new home and do it their way.
Speaker 9
Great. Yeah, that extension's going to be fun to watch. Thanks a lot, guys.
Speaker 1
Thank you, Steven.
Speaker 0
Thank you. The next question is from Michael Rehaut, JPMorgan Securities. Please go ahead.
Speaker 10
Thanks. Good morning, everyone. I hope everyone's safe and healthy out there. Yes. First question, I just wanted to circle back for a moment.
There's been a lot of focus on some of the May data points you gave, which is obviously very helpful and appreciated. And given the different levels of disclosure you've had around deposits, just want to be clear and obviously, this is somewhat forward looking, but you referred in your comments, your press release to the deposit to contract ratio remaining constant. So are we to take it that the recent strength in deposits to the extent that it continues, the 13% growth over the last few weeks, are we to take it that you are, in effect, anticipating positive order growth for the month of June based on these conversion ratios holding steady?
Speaker 1
Mike, I don't have that crystal ball. We're being fully transparent in giving you detailed data week by week. You understand our business. You understand our conversion ratios. I think we've been crystal clear on what has happened over the last three weeks.
And then I just answered Steven's question on the May. So, you know, today, we're basically flat for the month of May in outstanding deposits, and you can take it from there.
Speaker 10
Okay. Fair enough, Doug. I just you know, sorry for the direct question, but, obviously, I think there's a lot of focus on on the data points. I was trying to to to drill in a little bit there. Guess, secondly, there's also been a lot of focus around different parts of the country and spec versus build to order.
And obviously, makes a lot of sense that you guys are sticking to your knitting and and also, pivoting to to a a more moderate degree, in in different markets towards the affordable product. You know, as you look at your different markets and perhaps certain markets are showing better strength than others, is there any ability that you have to perhaps accelerate the development spend or the land spend in those markets that, you know, because of COVID-nineteen, you think might actually have some increased demand? Or, you know, is that something that you're kind of thinking about right now? Or is it more just going to be of take it as it comes and see how the things emerge over the next couple of quarters and go from there?
Speaker 2
Hey, Mike. It's Marty. Thanks for your question. In terms of specs and where we stand, I think a frame of reference as we've moved into more affordable luxury price points and certain geographies where spec building is, appropriate might be the following. A year ago, we had around 1,300 specs, and right now we have close to 1,600 specs.
So we have developed a few more specs. And as we went through the darkest days of mid March, we evaluated whether to stop specs, or continue. And candidly, we did stop for a couple weeks and then said, get at it and finish the ones that we had started. And we are selectively starting new ones, in light of the factors that you mentioned. Right.
Speaker 1
Yeah. I think early on, if we had a call late March, early April, if we had a quick delivery home that was at foundation, we kept it at foundation. If it was being framed, we at least got it to the point where it was weather tight. But then we waited. And now, fast forward to, early May, we told everyone, continue with all spec inventory that has been started, whether it's at foundation, weather tight, or whatever stage.
We certainly feel better about the market. Let's the specs rolling. And in selected locations, authority was granted with very senior level approval to build new spec inventory. But we're going to be very careful about it. It's going to be very, very market specific, and it's going to be price point specific.
Mike, one clarification. I just misspoke and I want again, we're trying to give you all the data points we can. I talked about the entire month of May with deposits being flat, and then I said outstanding deposits are flat. That is inaccurate. Outstanding deposit means anybody who is still under deposit who we are working with who has not either asked for their deposit back, which again is about 35%, or gone forward with an agreement, which is 65%.
And today, we are up 15% in outstanding deposits. And I incorrectly said we were flat.
Speaker 2
So that's the pile of deposits that future agreements will come from.
Speaker 1
That we are working with.
Speaker 8
Right.
Speaker 10
Alright. Thank you. Appreciate it.
Speaker 1
You're very welcome. Thank you.
Speaker 0
Thank you. The next question is from Mike Dahl, RBC Capital Markets. Please go ahead.
Speaker 11
Good morning. Thanks for taking my questions. A few follow ups on May. Doug, you gave the actual order agreements between split out between your highly impacted markets and the other markets from mid March through April. I was curious if you could give the same relative to the minus 37% for the total business.
Do you have the split out for your highly impacted versus other? And as part of that, maybe if I could just wrap in, you had a small acquisition in there. Just could you help us quantify what Thrive added to both orders and deposits?
Speaker 1
Sure. So let's start with now remember, the May agreements reflect generally April deposits when those highly affected markets were still closed. I can try to help you with your question, which is how do the deposits look in May from those markets that have reopened? But let me give you, what you asked and then I'll help you with the other part. From May 16 to April 30, the most highly impacted markets for agreements were New York City Living down 96%, New Jersey Suburban down 94%, it was closed, New York Suburban down 88%, it was basically closed.
California where Northern California was completely closed and LA County was closed, Orange County was somewhat open, was down 81%. Pennsylvania down 77%,
Speaker 12
closed.
Speaker 1
Now when you get into the May agreements, which we said to date are down 37%, all of those numbers improve a little bit because they reflect, call it, mid April deposits, which were certainly better than late March deposits. The late March deposits reflect the April agreements, right, if you're following the three week lag. So for example, New York City Living wasn't down the 96% I mentioned, it was down 86%. New Jersey Suburban wasn't down the 94% I mentioned for April it was down 73. California wasn't down 81, it was down 63.
Pennsylvania had a nice rebound. It was from being down 77% in April, it went to only down 42% for those agreements in May. But now let's fast forward to the deposits in May when those markets reopened. And with the exception of City Living, which has stayed closed, we are not allowed to show a unit even in a finished building in New York City. You can't get by the doorman.
The residents of the building just don't want people in the building. With that exception, all of those other markets, have clawed back more than half of those reductions in agreement activity with May deposits. Guys, did that answer it?
Speaker 2
I think it did. He had a question on Thrive as well.
Speaker 1
Go ahead, Marty.
Speaker 2
Thrive did not add any contracts in May. It had one deposit in May. There is one community open for sale associated with Thrive at this point. And remember, it closed during q two.
Speaker 11
Okay. That's really helpful. Thank you for all the color around both the deposits and the agreements. So then just a follow-up, and this isn't trying to get guidance, more just your thoughts. We're obviously in a unique period with some of with so many of your large markets having gone from kind of full shutdown to various stages of partially open.
And so even if there's been some demand destruction, you're still, you know, trying to cram in a month and a half or two months' worth of demand potentially into a shorter time period. So in your seat, I guess the question is, you know, when do you think you'll you'll have sufficient visibility on whether this is some combination of push out or pull forward versus whether this is something more sustainable?
Speaker 1
I think by midsummer. That's just that's just me. I, you know, I said it in my prepared comments that I'm very encouraged, but I'm still cautious. Is this pent up demand that came out quick, or is there something more to it? Right now, it feels like there's something more to it, but it's going to take some time to fully appreciate.
And I think the July, August, September time frame when most states have moved from red to yellow to green, and we know how many furloughs are coming back to work around the country, and we know what different parts of the economy look like, we'll all have a much better idea. So that's where my head is on it.
Speaker 2
Okay. Thanks, Doug.
Speaker 1
It is important to remember the long term importance of owning a home, and that's why I go back to the way we do it, our brand, our opportunity to give you great value, but you can design it yourself and customize it yourself. And we are going to continue to focus on our marketing campaigns that are all about your home is your sanctuary. There is such a huge nesting going on in this country. We all feel it. We're all living it.
And, once we get through this and the world is back to normal, I am really excited about where we're headed.
Speaker 0
Thank you. The next question is from Susan McLarry of Goldman Sachs. Please go ahead.
Speaker 13
Thank you. Good morning, everyone.
Speaker 2
Good morning, Susan.
Speaker 13
My first question is just around input prices. Can you talk about what you've seen there? We've obviously seen lumber spike more recently. How sustainable are you thinking that is? And how are you thinking about the outlook for some of the material?
Speaker 1
Cost has been flat. And we are hopeful that at least in the short term there will be some opportunities, to save a bit more. We'll see how that plays out long term. That of course is tied to my earlier comments about whether this is a short term increase in demand or longer term. But we have been encouraged over the last year with costs being relatively flat.
You're right, lumber is up a little bit, but labor is down a little bit. So overall, I'm I'm I'm looking at some numbers Greg just gave me. We're up for q two costs, we're up just under $2,000 a house, which for us is fairly nominal since our houses are big and, you know, a little more complicated. And as we talked about with gross margin, we were able to push the selling price of the home, you know, quite a bit more than that.
Speaker 13
Okay. That's helpful. And then, following up on that, can you just talk to any supply chain disruptions that you've seen? You Has any of that been mitigated as things have come back? And maybe especially just given how shut down some of your markets are, how should we think about the impact of that?
I know, Marty, you mentioned some delays on some fiscal third quarter deliveries in there. But can you just give us some sense of the supply chain and how things are working there?
Speaker 1
Sure. Let's start in the beginning. The permitting, pulling a building permit, getting the house started, has had some delays in some markets as building departments have closed. Now there were some workarounds with some towns that allowed us to, go digital. The inspections of the home by, building inspectors in some cases was delayed.
There was also some workarounds where we actually were able to do some Skype inspections with building inspectors. So from a municipality or governmental perspective, we have experienced some delays. And some of that in certain markets may continue a bit.
Speaker 8
We're encouraged
Speaker 2
that potentially some of those Skype inspections and some of those digital permitting may help us long term. Absolutely. So what's a bit of a cumbersome process.
Speaker 1
There's no question that we are all as an industry going to see more efficiency in permitting and inspections in closings, going to digital closings with title and mortgage companies. You know, I I didn't know that that you could notarize through DocuSign. Right? I thought you had to put yourself in front of a notary. They had to watch your signature go down.
Well, that's something that can now happen, and it's gonna be with us for a long time. So, on the material front, in certain markets, we've absolutely lost a couple of weeks here and there. We have a cabinet company in Pennsylvania that was closed for the better part of two months. They were able to manufacture their components through their kitchen cabinets, but they couldn't assemble them. They couldn't put the door on the box of the kitchen cabinet because it was two plants and the second plant was closed by government regulation.
So we all as an industry have stories like that. Thankfully, it's easing, but it will cause some stress in the shorter term, as Marty pointed out, for the next quarter because of some of the backlog that was built up that has to be worked through. Labor availability, no impact. Labor is still good. Social distancing on the job site, that will have a little bit of an impact.
We have to spread our trades out. We have to be more vigilant. Most trades are naturally spread out, but there are certain times during when the house is built, particularly when you get into the finishes, the finishing trades, where a house can get a bit crowded. We're gonna have to be a bit careful there. We may lose a little bit of time through that part of the process.
So overall, we're managing it. It's going to get better. I think the impact is more short term than long term, but it is present.
Speaker 13
Okay. Thanks for all that color and good luck with everything.
Speaker 10
Thank you. You too.
Speaker 0
Thank you. Next question is Truman Patterson of Wells Fargo. Please go ahead.
Speaker 14
Hi, good morning, guys. Thanks for taking my question. First, just wanted to follow-up on labor a little bit. Housing slowed, but it seems like it's rebounded recently. At the same time, we're seeing some mass layoffs across The U.
S. Are you actually seeing labor availability improve as workers enter from other industries? And you mentioned that your labor costs were down. I would imagine that's probably occurred in the past two to three months. Is that correct that you've been able to renegotiate the labor wage rates?
Speaker 1
Truman, the first half of your question, no, we have not seen labor move from other industries, into home building. And, labor, my reference to labor being down is over the last few months.
Speaker 14
Okay. Great. Is there any way you could put a magnitude on that?
Speaker 1
Pretty small. It's Yeah.
Speaker 15
It's it's It looks like it's
Speaker 1
under a thousand dollars a house right now.
Speaker 14
Okay. Okay. Thanks for that. And just a bigger picture question. You know, the the international Asian buyer is is one of the drivers of Coastal California demand.
I realize you guys have repositioned some of your product in California as well. So it might not 100 apply to you. But given the issues with COVID, the Chinese economy, The U. S. Economy, all these moving parts, how do you think this really plays out over the next couple of years?
Do you expect that buyer to come back to the market or really remain absent for a while?
Speaker 1
So you're right. We've repositioned ourselves in California. Most of the Asian buyers are Orange County, and we have just a smaller presence right now in Orange County. In Southern California, we sell 22% of our homes to foreign buyers. That is not Asian, but that is a lot It's of that is Asian, but it's not all Asian.
And I think over the longer term, we will be fine. I think in the short term, obviously, there are travel restrictions and other issues affecting Chinese American relations that will have an impact. Some of that was in effect before COVID. As we know, the Chinese government was tightening up on US investment. So we had felt that earlier and we had already repositioned ourselves a bit.
But yes, I think short term, it's definitely an issue, but I think longer term, we should be fine. We have learned for many, many years that Chinese love owning real estate in California and in The US. And I'm optimistic as things settle out, we will be back to fairly normal times with selling, you know, some of our homes to, primarily Chinese.
Speaker 10
Okay. Thank you.
Speaker 12
You're welcome.
Speaker 0
Thank you. The next question comes from Jack Micenko, SIG. Please go ahead.
Speaker 12
Hi, good afternoon, everybody. A couple of questions. Kind of got close to it, but I wanted to ask strategically. Do the past, I guess, two, two and a half months change your view? I mean, the company's been in transition geographically and product type wise for some time now, but wondering if the last two months maybe have made you think more about accelerating or increasing the magnitude of that shift either geographically or by product type.
Speaker 1
No, Jack. I don't think it has changed our mindset that already existed to continue to move south, move west, and diversify the product offerings with a bigger focus on affordable luxury. So I think that was in play and we will continue to execute on that strategy.
Speaker 12
Okay. And then different time, different place. I think you were talking about a 10% community count growth number this year. Curious, you know, that number is probably not gonna be achievable, but how much of the shortfall will be, you know, balance sheet conservatism and slowing growth and preserving cash? And how much of it is you can't build if you're not allowed to in the state or the local market?
And then what does that look like sort of in the out year? You know, do
Speaker 8
we do we see that kind
Speaker 12
of push out into 2021? Or because this year was was a pretty nice growth rate planned for community count. I'm just wondering how much of that is sort of the environment, how much of that is your own sort of tapping the brakes coming out of sort of mid March?
Speaker 1
Yeah. It's a good question. We had planned 32 community openings in q two, and we opened 21. And the miss of 11 was primarily associated with communities that were scheduled to open in the second half of the quarter, that we froze because of, the pandemic. The good news is we have the land.
We've started the process of getting the marketing materials ready. And the decision as to when they open will be ours in terms of how we feel about market conditions, pent up demand. We pre market through our online website concierge service many months in advance and get a very good indication of the amount of interest. And a lot of that drives our strategy on when we open. And so we're not prepared to guide right now to what the full year community count will be.
We just have to wait and see how the market conditions evolve. But we have the land and the communities ready when the market is ready.
Speaker 2
Yeah, Jack. I think communities we would have planned to open the back half of this year. There's two buckets. Those where we already own the land. So those will be, if not open this period, they'd be open a subsequent year.
Or those where we are contracted to buy finished lots and open up community. As we mentioned, many of those types of deals we put on pause until the market settles out, And we will kind of re underwrite those once we get closer to the revised timing as to whether we want to move forward or not or change the pricing of that land deal and move forward, if we can.
Speaker 12
Got it. Okay. Thanks, guys. Good luck.
Speaker 4
Thank you.
Speaker 0
Next question is from Jim McCanless, Wedbush Securities. Please go ahead.
Speaker 16
Hey, good afternoon. Thanks for taking my questions. So the deposits that you've taken so far in May, could you talk about how many of those are going to to be built homes versus quick move homes? And does that ratio compare to your historical mix on contracts?
Speaker 1
It's around 20% quick delivery, which is fairly consistent with the 15% to 18% of quick delivery inventory that we have. Again, remember when I say inventory, those aren't completed homes. Those are homes from foundation all the way through to finish. So it's tracking fairly close to the mix we have of, quick delivery versus, fill to order.
Speaker 16
I I asked that question because you were talking earlier about signs of potential demand holding up. I would have frankly thought that mix of quick delivery would have been a little bit higher. So that seems to be a positive read that your bill to orders are holding up that well. About Yeah, think that's right. What about your cycle times?
How much are you all having to push those out because of the OSHA rules, etcetera?
Speaker 1
Yeah. I I tried to answer that a few questions ago when I went through the, you know, the the permitting issues and the inspection issues and the social distancing on the job site. I mean, the good news is we're not seeing any labor issues. We're having here and there a few scattered material supply issues, but that's improving. I gave the example of the Pennsylvania Cabinet Company.
I think you know, our best guess right now is probably one to two weeks added construction cycle time because of social distancing on the job site. And maybe you add another week or two of contingency or security for any issues that may come up with permitting, inspections, or material supply. So let's just round that off to two to four weeks is what we've sort of conservatively built in as added time for construction. And that should improve over time as we get further from the closures we experienced in certain states.
Speaker 16
Got it. Yeah, thank you. I apologize for missing that. One other quick question. I was encouraged to hear you guys are not doing incentives above and beyond the $299 offer that was emailed out.
But what are you seeing from your competitors? How aggressive are you seeing across the three different buckets you outlined earlier? What kind of incentives and pricing deals are you seeing your competitors throw out there?
Speaker 1
I'm pleased with that most of our competitors are not incentivizing. I do think at a lower price point with some finished spec inventory, you know, if a house is completed, it needs to move. And I think in that environment, you may see a bit more incentivizing. But where we build, at our price point, I'm pleased that I'm not seeing much of it.
Speaker 16
Great. Thank you for taking my questions.
Speaker 1
Thank you. You're very welcome.
Speaker 0
Next question comes from Jade Rahimi, KBW. Please go ahead.
Speaker 8
Good afternoon, everyone. This is Ryan Tomasello on for Jade. Just regarding apartments and city living, you gave some color in your prepared remarks on the former, but can you speak a bit more about how you're thinking about the outlook for those businesses post the dust settling? Can you remind us how much equity you currently have allocated in each of those segments? And you mentioned you'll be closing a few apartment JVs in the second half of the year.
I was wondering how much capital that relates to and what the intention is to do with those proceeds if you expect to reinvest those back into the apartment business.
Speaker 2
Sure. I think, with respect to, the apartment business, we have around 700,000,000 invested in that business, and we hope to recoup 400,000,000 through the balance of the next twelve months or so, through JV formations. With respect to City Living, we're actually at a good time in terms of where we have investments. We have around a $170,000,000 net invested in, existing inventory, active communities. We have another 30,000,000 in our couple off balance sheet joint ventures, and then we have some land inventory for projects that we have chosen not to start in this environment.
Speaker 8
And just in terms of the outlook, particularly in City Living post this environment becoming a bit more certain, if you expect City Living demand to be a big continue to be a driver for the business?
Speaker 1
Yeah. I think short term, we're gonna be very cautious. Right now, we only have five buildings in City Living. Three are completed and the other two are nearing completion. We do have some land for future buildings where we have not started any construction.
And right now we're just sitting on the land. It's not just in New York. We have some land in Seattle and Philadelphia as two examples. So as Marty said, think we're at a good time in terms of our City Living business, which had been shrinking significantly. And in those five buildings that I mentioned, are in two are in New Jersey, Hoboken, Jersey City, and the other three are in Manhattan.
They are all positioned sort of mid market. We talked about kind of $2,000 a foot, dollars 1,800 a foot in New Jersey. They're down at $1,000 a foot. And so they had been performing fairly well for us through what we all know has been a difficult few years in New York. And short term, I think we're very realistic that it will take some time to see where New York City falls out on this.
And then longer term, I'm comforted by what I just described, was limited inventory in these five buildings that are all kind of mid market. But longer term, we will be very cautious with our expansion of city living in and around New York City until we have more clarity on where the long term market stands. Today, only about 3% of our business is in Toll Brothers City Living.
Speaker 8
Okay. And then just in terms of the land market, I was wondering if you're seeing any noticeable adjustments in prices there, positive or negative in your major markets over the past few months with the current environment.
Speaker 1
Not yet. Land sellers, Marty gave the one exception We walked away from a significant deal because we couldn't reach new terms with a land seller. But virtually every other land seller nationwide has understood and agreed to extensions, whether that be an extension of a due diligence period before deposit money goes hard or whether that be extension of closing or extension of non refundable payment that's necessary. But there really hasn't been retrading of price yet.
So I think sellers are understanding that we need more time, but they're not yet willing to talk discount on the underlying price. And they're also not yet feeling distress. We had a couple of isolated opportunities to chase some distress, but nothing of significance yet. So right now, we are just extending and amending. Wasn't that a bank term?
Speaker 2
Not a
Speaker 3
good one.
Speaker 1
Right. Right. In the old days.
Speaker 8
Extend and pretend. Thank I
Speaker 1
knew knew I didn't get it exactly right.
Speaker 0
Thank you. Next question comes from Carl Reichert of BTIG. Please go ahead.
Speaker 15
Thanks. Hi, guys. Just on buybacks, you've had a couple of peers pretty explicit about suspending buybacks. You stopped in mid March, but you sound a little more encouraged about business. The cash flow coming, the line is fine.
What's your perspective now on on where you are with share repurchases?
Speaker 1
It's still suspended. I don't think right now is you know, we we don't have enough clarity yet. As Marty went through our, you know, focus on our liquidity certainly in late March and early April. We drew the line, we repaid the line when it was clear that our banks were going to remain liquid with the help of the federal government and the Federal Reserve. But I think we'd like to continue to make sure that we have ample liquidity, a very strong balance sheet, to take advantage of land opportunities that may come along if the markets feel more pain.
And if the markets continue to improve, then we'll be carefully back in the land buying business. And then maybe at that point, we focus on buybacks. But right now, I think it's smart business to continue to suspend that initiative.
Speaker 15
Thanks, Doug. Then Marty or Doug on the cost cuts, never easy to lose teammate. Can you give us a little more detail on the on the 50,000,000 annualized, like, where that's coming from, where the reductions were staff wise, or the other things like delayed IT spend travel, where you're getting those those cuts from? Thanks.
Speaker 1
Sure. So before March 15, oh, and I think we even mentioned it a bit on our last call, we we have been focused on efficiencies, tightening up the shop, and we had already begun serious conversations about some company wide overhead cuts, employee cuts. And then when COVID nineteen hit, that conversation not only accelerated but we expanded the individuals and the initiatives. And we permanently laid off about 600 employees. We have about 5,000 employees in the company.
And we furloughed about the same number, another 600. I'd say three quarters of the 50,000,000 is associated with the layoffs, and another quarter will be associated with other initiatives, that will make us more efficient. Carl, you mentioned a few, IT, travel, but there's many other things we're focused I think division offices around the country will probably be smaller going forward as we've learned how to effectively work a bit more remotely. So there's many other initiatives like that. The cuts are permanent.
Even when the market returns, we are learning, how to be more efficient and those are permanent. And I know Marty mentioned in his comments that we're continuing to look at how we're going to become even more efficient and that may lead to more opportunities for additional overhead cuts.
Speaker 15
Thanks very much, Doug.
Speaker 1
You're very welcome, Carl. Thanks.
Speaker 0
Thank you. The next question comes from Alex Barron, Housing Research Center. Please go ahead.
Speaker 4
Hey, guys. Thanks for taking the questions. I wanted to ask about focus on but on cancellations. I imagine your cancellation rate was pretty low before the pandemic started, and I imagine that the cancellations increased in the March and April period. So I'm curious if you guys if that's the case, you know, what were some of the reasons that you got more for the cancellations?
Was it job loss related? Was it just lots of confidence, people wanting to to wait to see what happens? You know? And and in those instances, do you guys keep the money, or or do you refund it?
Speaker 1
So as we've talked about throughout this call, our increase in cancellations was very modest. We we gave the reasons why. The average down payment is $70,000. Our buyers become very emotionally attached to their home because they've customized it. And generally, our buyers are more affluent, and they have better prospects for job security, and they also have, you know, other other wealth.
So even through the 02/2011 time frame, our cancellation rate stayed much lower than other builders for those reasons I just gave. So we are encouraged. Do we keep the money? Yes, we keep the money. Short of a tragedy, I think we're a very compassionate company.
So there's always circumstances where we return the money. But we are building your home to your specifications with a lot of custom changes, and we are entitled to keep that $70,000 for that custom home. And that holds up. We have lots of experience, and, that is our position.
Speaker 4
Okay. If I could ask another one. Have you guys seen, an improvement, I guess, in the last three weeks, like lower cancellation rate, and if I could sneak another one. What what percentage of those highly impacted markets you cited, New York, New Jersey, Pennsylvania, what percentage of your business did that represent, you know, be before, I guess, this whole thing started?
Speaker 1
So the the cancellation rate is the same. And, again, I have to emphasize again, it has stayed low. And we gave that information as to the percentage. I Marty,
Speaker 2
think it was 40% of contracts and 50% of backlog.
Speaker 1
40% of communities. Communities. Communities, Excuse me. Those those highly impacted states that were that stayed closed until early May represented 40% of our communities that were open for sale and 50% of the value of our backlog.
Speaker 4
Okay. Sorry, I messed up. Okay, guys. Thanks.
Speaker 1
Oh, no problem at all. It's been a long call.
Speaker 0
This concludes our question and answer session. I'd now like to turn the conference over to Mr. Douglas Yearley for closing remarks. Please go ahead.
Speaker 1
Nick, I thank you very much. I thank everyone, for your interest and support. Have a great summer and stay well. Thank you.
Speaker 0
Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.