Toll Brothers - Earnings Call - Q4 2020
December 8, 2020
Transcript
Speaker 0
Good morning, and welcome to the Toll Brothers Fourth Quarter Fiscal Year End Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Douglas Yearley, Chairman and Chief Executive Officer. Please go ahead.
Speaker 1
Thank you, Gary. Welcome and thank you for joining us. I hope you, your families and colleagues are staying well. 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 start, 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 impact of the COVID-nineteen pandemic and many other factors beyond our control that could significantly affect future results. Now let's begin. I will focus primarily on the current sales environment and then turn it over to Marty and Greg to address our financial results and our guidance. In these challenging times, our team delivered on all fronts in our fourth quarter, exceeding our expectations for sales, revenues, margins and earnings. I am tremendously proud of how we have adapted to a rapidly changing environment.
We are currently experiencing the strongest housing market I've seen in my thirty years at Toll Brothers, and we continue to increase prices in nearly all of our communities as we focus on driving profitability and managing growth. The strong demand began for us in mid May and has continued through today. In our fourth quarter, which ended October 31, net signed contracts of 3,407 homes and $2,740,000,000 were the highest totals for any quarter in our history, up 68% in homes and 63% in dollars compared to one year ago. In the first six weeks of our quarter through December 6, our nonbinding reservation deposits, which are a precursor to contracts, are up approximately 48% compared to one year ago. Demand has continued to be very strong in the first quarter.
In fact, this Saturday, we will raise prices nationwide for the fifth time this calendar year. Layered on top of these national increases are many more frequent community specific price increases. As we previously announced, midway through our fourth quarter, net signed contracts were up 110%. We strategically moderated the sales pace in the second half of the quarter by increasing prices in nearly all of our communities and limiting lot releases in about 15% to 20% of our communities. What this means is that for these communities, we put in place a monthly allocation of homes to sell.
We employ this strategy in some of our hottest selling communities where there is a limited finished lot supply or extended delivery times due to prior strong sales. Of course, in these communities, we have some of the best pricing power around the country. We've continued this strategy into our 2021. Our 10.8 contracts per community were our highest fourth quarter ever and the highest for any quarter in fifteen years. Our cancellation rate for the fourth quarter, fourth quarter cancellations divided by fourth quarter contracts dropped to 5.4% from 8.9% in last year's fourth quarter.
Our buyers typically provide a nonrefundable down payment of between 710% of the purchase price, which results in the lowest cancellation rate among the major builders. In fiscal year twenty twenty's fourth quarter, our traffic to deposit ratio of 9.9% and our traffic to agreement ratio of 6.7 were our second highest conversion ratios ever. Customers who visited our communities, whether in person or online, were intent on buying. We see strength in every region. Even our City Living urban high rise division, which is focused on Metro New York City, is showing some signs of improvement.
We attribute the strength in demand to a number of factors, some of which apply to the homebuilding industry in general and some of which are specific to Toll Brothers and our customers. We believe the market is on a solid foundation and has significant room to run. Historically, low interest rates are driving the new home market at all price points. We expect low rates to continue for some time. Additionally, a very tight resale market is leading more people to the new home market.
Currently, there is only two point five month supply of resale homes on the market, the lowest on record. Resale homes are moving quickly. According to Redfin, in October, a record high 35% of all resales nationwide sold above asking price. Also, there remains significant pent up demand due in part to the underproduction of new homes over the past decade as well as the impact of many millennials delaying homeownership decisions. We are finally seeing the millennial generation start to transition from renters to homeowners.
Based on the annual average rate of new home production over the past fifty years and the growth in U. S. Households, we estimate the industry has under produced nearly 6,000,000 single family homes since the start of the housing recovery in 02/2008. That's 6,000,000 fewer people that bought a home in the last decade who would have in prior decades. Even now, production is just reaching historic norms.
In addition to these positive industry trends, there are tailwinds supporting Toll Brothers' upscale market segment and build to order strategy. Since most of our customers have a home to sell, the tight resale market gives them confidence they can sell their home quickly and add an appreciated value that can then be reinvested in their new home. The job picture for our customer base is solid and improving. The work from home phenomenon is driving demand as it allows more buyers to live where they want rather than where their job previously required. Due to this phenomenon, we are seeing an increase in relocation traffic.
We also believe our more affluent customer will have greater flexibility to work remotely and is therefore out in the market looking for their ideal home. Our build to order model is particularly well suited to this moment as Americans place more importance on their homes. Our expansive, flexible floor plans provide buyers with more space for living, learning, working and entertaining. Whether it's home offices, fitness rooms, multigenerational living suites or stunning indooroutdoor living areas, we offer the features that customers desire as they personalize their homes to reflect their lifestyles. This quarter, our buyers added, on average, 22% of the delivered price or $183,000 in upgrades to their homes.
So as we look to fiscal year twenty twenty one, we believe we are well positioned for growth. With our highest year end backlog in fifteen years and continued strong demand, we expect to deliver the most homes in our history in fiscal year twenty twenty one. In addition, our longer land position is helping fuel growth. We ended fiscal year twenty twenty with three seventeen selling communities, and we expect to grow this by approximately 10% by the end of fiscal year twenty twenty one. We also expect our gross margin to improve over the course of the year as the price increases and strong sales since May are reflected in homes we deliver in the last three quarters of the fiscal year.
And we are very focused on improving ROE. Greg will speak more to this in a moment. In short, we are very pleased with our performance in 2020 and look forward to continued growth in fiscal twenty twenty one. Now let me turn it over to Marty. Thanks, Doug.
Speaker 2
In fiscal year twenty twenty's fourth quarter, we delivered 2,940 homes and generated revenues of $2,500,000,000 which were up 10% in homes and 8.9% in dollars from one year ago. The average price of homes delivered was $849,000 Delivery total exceeded our guidance, thanks in large part to great execution by our team. In addition, our backlog cancellation rate was lower than anticipated. We delivered many more spec homes than projected, and buyers were more eager than ever to close as soon as possible and move into their new homes. Fourth quarter net income was $199,300,000 or $1.55 per share diluted compared to $202,300,000 and $1.41 per share diluted one year ago.
Our fourth quarter adjusted gross margin was 24% compared to 23.9% in both the fiscal twenty twenty third quarter and one year ago. Please note that both current and prior period gross margins and SG and A expense are higher due to a reclassification in sales commissions paid to third party brokers, which were previously included in homebuilding cost of sales and are now in SG and A. All historical periods and future projections presented reflect this reclassification. This new treatment is consistent with the way we treat sales commissions paid to our internal sales force and conforms our presentation to that of the majority of our homebuilder peers. We have filed an eight ks with the SEC to detail the amount of the classification, but at a high level, it was approximately two percentage points of revenue in each of the last eight quarters.
SG and A as a percentage of revenues was 9.9% in the quarter compared to 11.1% in the same quarter one year ago. Again, both of these amounts reflect the third party broker fee reclassification I just discussed and are therefore about two percentage points higher than they otherwise would have been. The year over year reduction in SG and A is due to our efforts to streamline operations and become more efficient in ways we believe will result in permanent cost savings. We continue to focus on additional steps to further reduce SG and A. Joint venture land sales and other income was $11,200,000 during the fourth quarter compared to $48,400,000 in the 2019.
Impairments and write offs totaled $33,900,000 in the quarter. Dollars 6,800,000.0 of these impairments were from predevelopment costs on proposed projects we controlled through options that we chose not to purchase, and $18,000,000 was associated with our strategic decision to exit two markets. Looking forward, we are projecting first quarter fiscal year twenty twenty one deliveries of approximately sixteen seventy five homes with an average price of between $780,000 and $800,000 First quarter twenty twenty one delivery guidance reflects our team's delivery of about four fifty more homes than projected in our 2020. In addition, with our build to order models, buyers contract for their customized homes and we deliver those homes Therefore, to twelve months deliveries in Q1 twenty twenty one will reflect the slow sales environment we experienced in March through 2020. We expect adjusted home sales gross margin in fiscal year twenty twenty one's first quarter, with deliveries from this slow sales period to be approximately 22.4%.
This first quarter adjusted gross margin is expected to be the low point of the year. We expect interest and cost of sales to be approximately 2.5%. We expect price increases from contracts signed in our third and fourth quarters of fiscal year twenty twenty positively impact margins over the course of fiscal year twenty twenty one. And we expect adjusted home sales gross margin in fiscal year twenty twenty one to grow steadily after the first quarter and be approximately 24.1% for the full fiscal year. We expect interest in cost of sales for the full year to be approximately 2.5%.
We project first quarter SG and A as a percentage of home sales revenues to be approximately 15.8% versus sixteen point eight percent one year ago. Included in first quarter SG and A is about $11,000,000 or 80 basis points of accelerated stock compensation expense that is not expected to recur in the remainder of the year. Again, all of these amounts reflect the reclassification of third party broker fees from cost of sales to SG and A. First quarter other income, income from unconsolidated entities and land sales gross profit is expected to be approximately $25,000,000 We project a first quarter tax rate of approximately 26%. Our first quarter weighted average share count is expected to be approximately 129,500,000.0 shares.
For the full fiscal year 2021, we are projecting new home deliveries of between nine thousand six hundred and ten thousand two hundred homes with an average price of between $790,000 and $810,000 We expect approximately 60% of our deliveries to occur in our second half of the year, and we expect average delivered price to dip in the second and third quarters due to mix. We project fiscal year twenty twenty one SG and A as a percentage of home sales revenues to be approximately 12.2%. We believe there is significant unrealized profit embedded in our stabilized apartment projects. We are choosing to defer sales of these assets until markets improve. As a result, fiscal year twenty twenty one other income, income from unconsolidated entities and land sales gross profit is expected to be approximately $6,551,000,000 dollars in fiscal year twenty twenty, with this concentrated in the first and fourth quarters.
We project a full year fiscal 'twenty one tax rate of approximately 26%. Our weighted average share count for the full year is expected to be approximately 129,500,000.0 shares. Now let me turn
Speaker 1
it over to Greg.
Speaker 3
Thanks, Marty. ROE is improving and should continue to improve over time. We expect to improve our return on beginning equity in fiscal twenty twenty one by approximately three fifty basis points compared to fiscal twenty twenty. As we seek to drive improvement in our financial metrics, we continue to apply more rigorous underwriting thresholds to new land deals to achieve both a higher gross margin and a higher ROE. We are focused on controlling more land through options, land bank arrangements, joint ventures and other strategies.
We grew our owned and controlled lots to approximately 63,200 lots at fiscal year end twenty twenty compared to approximately 59,200 at fiscal year end twenty nineteen. We spent $6.00 $3,000,000 in fiscal twenty twenty on land acquisitions compared to $1,100,000,000 in fiscal twenty nineteen. So in other words, with our more capital efficient land buying strategy, we were able to acquire control of essentially the same number of high quality lots in fiscal twenty twenty as we did in fiscal twenty nineteen for about half the cash outlay. We executed land banking transactions in fiscal twenty twenty that deferred approximately $190,000,000 in land spend. We improved our option to owned land ratio at fourth quarter end to 43% optioned compared to 38% optioned at fiscal year end twenty nineteen.
We ended our fourth quarter with a very strong balance sheet. We had $3,160,000,000 of liquidity, including $1,370,000,000 of cash and $1,790,000,000 available under our $1,900,000,000 revolving bank credit facility, which we recently extended out until November 2025. We have no significant debt maturities until fiscal year twenty twenty two. At fourth quarter end, our net debt to capital ratio was 33.3% compared to thirty two point nine percent one year ago. This relatively flat net debt to capital ratio was achieved even while we repurchased approximately $634,000,000 of stock in fiscal twenty twenty.
We generated approximately $1,000,000,000 in cash flow from operations in fiscal twenty twenty. This was a record. With our strong balance sheet and focus on capital efficiency, we believe we are well positioned to continue growing our business while also improving ROE.
Speaker 1
Now let me turn it back to Doug. Thank you, Greg. Before I open it up to questions, I want to thank the entire Toll Brothers team and our trade partners for the results we produced together this quarter and in fiscal twenty twenty. This was a year like no other. It required that we think and operate in new ways.
We had to adjust to dramatically changing conditions while maintaining an unwavering focus on providing our customers with the superb quality, value and service they expect and demand from Toll Brothers. To all of you, you went the extra mile, worked harder than ever before, and truly extended yourselves to prove once again why our company is so special. I say thank you. And especially to those of you on the front lines who are responsible for selling and building our homes and communities, your resilience and commitment are inspiring. As we look forward to fiscal year twenty twenty one, with our record fourth quarter backlog, continued strong demand, community count growth, improving gross margins and our focus on improving ROE, we are well positioned for growth in fiscal year twenty twenty one and beyond.
Now, Gary, let's open it up for questions.
Speaker 0
We will now begin the question and answer Our first question is from Stephen Kim with Evercore ISI. Please go ahead.
Speaker 4
Yes. Thanks very much guys. Fighting times. Doug, I was wondering if you could talk about the difference between Toll's gross margin structure generally today versus, let's say, fifteen to twenty years ago, totally ignoring this reclassification issue. It seems to me that there's generally what three main drivers, right, prevailing home prices, construction efficiency and the value add from land acquisition.
Let's take home prices and put them to the side because everybody can make their own assumptions as to what that's going to do. So And I'd really want to look at the construction efficiency and land acquisition. I would assume you're building your homes more efficiently than you did in the past, particularly relative to the private guys you compete against. But on acquisition side, I imagine you probably have a little bit more a little less value add because of the move to affordable luxury and quicker turn land and all that. So can you help me understand how big of a drag is this move to quicker turning land net of your better efficiency?
I mean, would it be reasonable to think that the net of those two factors is like a drag of maybe a couple of 100 basis points relative to ten, fifteen years ago?
Speaker 1
Sure. I'll do my best, Steven. It's a big question. It's taken me back in time, which I enjoy doing. It's hard to keep price out of it.
I know you asked, we keep price out of it because, as you know, back in the early 2000s, there was tremendous pricing power and we were obviously able to drive margins very, very high. But on your two points, which are construction efficiency and LANDAC, Yes, we are better builders today than we were fifteen years ago. This company has matured. There's no question that we bring efficiencies. And I think you're going to see more of them as we are optimizing and rationalizing our home designs to make them much more efficient.
We're trying to curate the upgrades that our clients can have. So less is more. It's less the contract. It allows us to buy trades better when they have 10 or 15 structural changes to a home as opposed to 30 or 40. So we're spending a lot of time on home design and a rationalization process that is pretty deep into it right now.
We're starting to see the results of that. On the land acquisition side, we are certainly not tying up as many farms in the suburbs of Philadelphia or the suburbs of Washington, D. C. Or you pick the market and going through a three, four, five year approval process and coming out on the back end after the market has appreciated over that time with land that is significantly under market. We still do that.
That's part of our mix. But as we have grown geographically into many markets that have land developers that feed lots to us and where maybe the entitlement process isn't as tedious so that you don't have quite the level of gold when you come out the back end as you have in the places that we started this company and we're bigger, like the Northeast Mid Atlantic. I'm sure that has had a bit of a negative effect on the margin because we don't have as much land development profit that is flowing through. With respect to affordable luxury, quite the contrary. The gross margin coming out of affordable luxury the last few quarters is right there with our luxury business.
That market has done well. We're extremely efficient on the construction side for the reasons I gave with rationalizing plans. On the affordable luxury, we actually offer less upgrades. I think we're buying trades even better. That market has been strong.
We've seen significant pricing power. And while we underwrote some of that to a little bit lower gross margin as we've discussed because it was driving a higher ROE, because in a lot of cases the affordable luxury land could be purchased just in time. Quite the contrary, the gross margin has outperformed our underwriting and is right there with our luxury business.
Speaker 4
Yeah, that's really encouraging. So it doesn't seem like the headwind or the offset on land is all that great. Great. So given that, I'd like to delve a little bit into your comment about the strongest housing market in thirty years. You and I both go back a ways.
And certainly, that would seem to encompass the period of, you know, what we all think of as the housing bubble when times were very good. I was just you invoked Redfin, and I was just looking at their data, which is up 17% in the most recent week. Home price is up 17%. And in the last three months, that absolutely matches the apex to the highest level of price appreciation that we saw in the housing bubble. So when you say that it's strong the environment today is stronger than it was, I would assume, back then, can you give some commentary that would give us some context or perspective, things that you're seeing in the marketplace that would lead you to say that even relative to that period of time, things are stronger now?
Speaker 1
Sure. Well, Toll Brothers is very different today than we were back then. We have many more markets to look at. We have places like Boise, Idaho and Jacksonville, Florida, and we're now in Atlanta doing incredibly well. I'm not going waste your time and go around the country.
You know our business. So I have a much wider lens than I had in 'five. And what I see nationwide feels stronger and it feels better. And let's focus on the better part because by no means was my comment calling the top. I think we have a long runway.
This does not resemble the market of fifteen years ago. Mortgage money is tight. What blew up 02/1926 was very, very loose underwriting. And I've told the story of meeting the blackjack dealer in Vegas who owned three houses in 02/06. And that just can't happen today.
We don't see investors in the market. And we obviously have lots of investors back then. There's very low supply of both used and new homes. There's huge pent up demand, as I mentioned, with 6,000,000 less people buying a home in the last twelve years than it appears would have bought in the prior decades going back fifty years. And we have this millennial generation that is now becoming homeowners that is driving a lot of this activity and low interest rates that we think will be around for a long time.
So when I say it's the best market I've seen, it's because I feel so good about the sustained strength. I'm not talking about one moment in time. If you want to compare last week with Redfin's data with some week in 02/2005, I'm sure they're comparable, Steven. But I'm talking about what I'm feeling over the last six months and for all of these reasons, what I think is the sustainability of this market for a longer period of time. I do not expect 110% order growth.
I do not expect raising prices every other week. But I think we're entering a period with sustained significant order growth and solid pricing power that has a long runway for us. It. Thank you.
Speaker 0
The next question is from Truman Patterson with Wells Fargo. Please go ahead. Hi, good morning, guys.
Speaker 5
I've been getting a little feedback on the call. So first, Doug, I wanted to touch on your orders decelerated from up 110% in the first half of the quarter to up 40%. And you said you intentionally capped that growth rate through pricing, limited lot releases, etcetera. I'm hoping
Speaker 6
you can help us triangulate a little bit.
Speaker 5
One, what was pricing? What did
Speaker 4
you push pricing from the beginning of the quarter through the end
Speaker 5
of the quarter? And you said you limited lot releases in about 15%
Speaker 6
to 20% of communities.
Speaker 5
What I'm trying to understand is how much did your intentional actions create that deceleration versus we're starting to see a
Speaker 4
little bit of a low on
Speaker 5
demand, not even a bit of an organic deceleration.
Speaker 7
Can you help
Speaker 6
us triangulate into that? Sure.
Speaker 1
The move from 110% that we mentioned mid quarter to the balance of the year was primarily strategic and self induced by us. We raised prices more significantly as the quarter progressed. And I talked about in 15% to 20% of our communities, we limited the lots that are available. And the typical way it works is we'll give a community, let's say, three lots a month to sell. And when the month begins, we raise the price.
And when the month begins, they already have people they're working with because we certainly don't close the sales office by any means. We'll sell those three in the first weekend, and then they're shut back down until the next month. And then we do it again at a higher price. And that has helped moderate sales only in that 15% to 20% of the communities, which tend to be our hot communities, and they may have the biggest backlogs where the next home sold is going to be a very extended delivery. And they may also have less finished lots available where we have to get land development caught up to get more asphalt on the ground.
So there's a lot of different reasons why it happens, but that's the basic premise behind it. What I am encouraged by is that I look at these six weeks of December where we've continued the same strategy, and we mentioned 48% up in deposits, the last couple of weeks are stronger than the prior couple of weeks. So overall, can I tell you it's 100% self induced? Of course not. We headed into Thanksgiving, and now we're into December.
There has been some sticker shock out there from some clients as we've been raising prices. There's no question. But I think it is primarily self induced. On your question about incentives, we're up
Speaker 3
On price increases.
Speaker 1
I'm sorry. My apologies. The reverse of incentives. Less incentives, but the price increase is 20
Speaker 3
Been fortunate so far this year, we've been able to raise prices this calendar year for 1% price increases. Doug already just announced another one. And so in this most recent quarter, you asked about, yes, we are showing good strength. As we look across, if we try to sell approximately the same house to the same house, we are showing somewhere in that ballpark of even if we said $20,000 It's not the perfect sign because, again, we're looking for I'm not to say the exact house that's sold.
But if you're looking for a rough ballpark, hopefully, that will give you enough context on how strong the market is. I'm okay.
Speaker 8
Go ahead.
Speaker 4
No, no, go ahead, Doug.
Speaker 1
I was just gonna say that and it's important to understand that in addition to these nationwide price increases, we are also, in most cases, and most of the price increases you see are community specific based on local demand. That is the driver of most of the increases. But we are in the market where we have felt comfortable and confident that nationwide we can take the company up, and we'll have our fifth one this Saturday.
Speaker 5
Okay. Okay. So $20,000 on generally an $800,000 ASP, so kind of 2% to 3%.
Speaker 1
That was for the quarter. That's for the quarter.
Speaker 5
Right. Right. We're right. That's helpful. And your absorptions are up massively, think, over 70%.
Right? And you're still reiterating that three fifty community count target are up 10% ending 2021. But you're also discussing, you know, limiting your lot releases. You know, as we think about, your finished lot constraints, maybe even throw in labor, but also assuming that demand remains extremely robust through 2021, what do you think would be the theoretical upper limit to your order growth, assuming that you could kind of fill everybody that comes in?
Speaker 1
We have capacity. Right now, we're selling the low-thirty sales per community. Go back to Stephen Kim's time of fifteen years ago, we were in the mid to high-30s. We're more efficient. I talked about our plans becoming optimized and easier to build.
We've We've come down in price with affordable luxury. We've expanded to geographies that have more trade base. So there's absolutely capacity based on the sales environment that is put in front of us. We opened 110 new communities in 2020. Obviously, there was more sellouts than we expected due to the market.
Are projecting open between one hundred and fifty and one hundred and sixty new communities in 2021. So I'm not worried about improved lots. I'm not worried about capacity in the field in most divisions. I think our ability to continue to manage and balance price increases with controlled or manageable growth is our focus right now. And I'm proud of how we're doing with it.
Speaker 5
Okay. That is extremely helpful. And just for clarity, in 2020, I think the average absorption was right around 30 or just a touch over. You think there's no reason, there's constraints that you couldn't maybe hit mid to high 30s in an absorption rate over the next year or so?
Speaker 1
That's correct. We've done it before. Thank
Speaker 5
you. Appreciate it, guys.
Speaker 1
You're very welcome, Truman. Thanks.
Speaker 0
The next question is from Alan Ratner with Zelman and Associates. Congrats
Speaker 9
on the really strong results in this interesting environment we're in today. My first question, I was hoping to dig in on a little bit and just thinking about that
Speaker 6
for your activity.
Speaker 9
Curious if you could rank order maybe some of the bottlenecks you're seeing that are leading you to take those actions. Is it more on the land side and kind of obviously, you're expecting big community count growth through the year, but you don't want to gap out earlier in the year ahead of the spring? Or is it more on the construction side and making sure that you have some accurate not only pricing on your costs inputs, but also telling your consumers a realistic delivery date? So I'm just curious if you could rank order those bottlenecks for us.
Speaker 2
Alan, if you could repeat the first half of your question. It blitzed out there.
Speaker 9
Yeah, sure. So Marty, what I was asking about was when you think about those 15% to 20% of communities where you're intentionally slowing things down?
Speaker 2
Okay.
Speaker 9
I was hoping you could kind of rank order what the bottlenecks are that's causing you to take those actions. Is it land? Is it construction? Both?
Speaker 1
I would say number one is the size of the backlog that is leading to the delivery date on the next home sold being so far out that we need to bring it back. So if we have been so hot in a community to have a backlog that is so big where the next home sold is getting a quoted delivery date of twelve, thirteen, fourteen months, even if it's a big complicated house, we would rather get that down at that community to ten, eleven months. And that means raising the price, slowing the sales until we get a little bit caught up, where we can open things back up. That's number one. Number two would be the sales have led us to get out ahead of land development.
And while we may have plenty of lots remaining in a community, we need to get the roads in so that we have enough inventory of roads to build houses. We don't like selling a home if there's not a street in front of that lot. Because that adds one more wrinkle where not only you just have to build the house for the client, but you have to get the road in for them before you can start building the house. And there's weather delays and permitting issues and whatever else can be thrown at land development where that adds a layer of risk as to when we can really deliver that home if it's being sold without a road. So we and that's in limited cases.
Remember, entire extent of this concept of lot allocation is 15% to 20%. Most of that is driven by long backlogs. A lesser amount of that is being driven by land development needing to catch up because of faster sales.
Speaker 9
Got it. Okay. That's helpful, Doug. And I guess kind of transitioning a little bit, but somewhat related. One of the pillars or one of the legs that you were kind of highlighting in the past as an opportunity to improve your returns is obviously inventory turnover and improving cycle times.
And I think the move to affordable luxury, the idea there was that that over time could bring your company wide cycle times lower. Obviously, the environment from a labor perspective probably is a headwind near term. So how are you thinking about ROE? You mentioned improving at 300 plus basis points, but are buybacks back on the table? Are there other things you could do recognizing that perhaps cycle times is moving in the wrong direction?
Are there other things you could do to maybe accelerate that return even more so in the near term?
Speaker 1
Sure. So even in this tough market with trades being stressed and the issues that we all hear about with some materials like washing machines or windows, we're down one week in delivery and cycle time to build a home from Q3 to Q4. And affordable luxury is a bit more than thirty days faster construction cycle than our traditional luxury. And I am not only committed, of course I'm committed, it's my job, but I am seeing through our operations teams, and we proved some of this this last quarter with our tremendous results, real strength in production. And part of it is the affordable luxury line.
We brought in some new builders that come from that background, that come from more production builders. Part of it is this rationalization and optimization and curating of our plans, where less is more and the houses are simpler with less upgrades. So we are headed in the right direction. Now there will be some headwinds with the labor issues that are going to come to the industry. But I'm really pleased with not only how affordable luxury is proving to be significantly shorter, but how our core business in itself is coming down also.
Speaker 2
Other initiatives along that line, Alan, putting more land under option so we can buy it just when we need it, getting some seller financing, doing some land banking, again that gets us the land just when we need it, And in a few instances, doing some joint ventures to develop the land often with other builder partners.
Speaker 9
And Marty, I'm just curious about buybacks, if you want to make a comment on that since that has been a pretty big driver in the past.
Speaker 2
We're very pleased with our liquidity position right now. It gives us significant flexibility. Certainly buybacks, debt pay downs and dividends are all on the table or dividend increases all on the table. But our primary objective is to grow the company through land acquisitions, just as time as we can and builder acquisitions.
Speaker 9
Understood. Thanks a lot, guys. Good luck.
Speaker 0
The next question is from Michael Rehaut with JPMorgan. Please go ahead.
Speaker 6
Thanks. Good morning, everyone, and congrats on the results.
Speaker 1
Thanks, Michael. First question I had was
Speaker 6
just kind of circling back to your comments around pricing and gross margins and obviously very encouraging around the price increases that you're able to execute right now. Just wanted to make sure I understood properly some of the comments you made there. You talked about, I believe, for 1% price. And off of a base of 800,000, that would you know, you're talking about 8 you know, little over 4 you know, $30,000 as well as many on a community level as well. At the same time, you're talking about $20,000 higher for the quarter.
Am I to think about it right that perhaps one or two of those occurred outside of fiscal fourth quarter? And those are the price increases that should show up in back half 21 margins, which here, kind of back into it, would be like maybe up about 150 year over year. Is that the right way to think about in your prior comments?
Speaker 1
Yes. Several of those five. There have been five price increases this calendar year. In fact, all of them. No, there was one in the fourth quarter.
Now there's one in the first quarter. And the other ones occurred. One occurred in January when the market was hot. So the other ones have occurred before either the fourth quarter or the one we're just mentioning. But again, those national increases, first of all, they're off of base price.
And they're not they generally run, let's call it, 1% as a way of just continuing to move the company and sort of make that corporate decision. But the bigger part of this is the weekly discussions we have and decisions we make community by community to raise price. I can't emphasize enough that that's really been the driver of where we've seen most of our price increases. And we came out of the early stages of the pandemic were not good to us. We didn't have $300,000 spec inventory for the renter to trade a similar monthly payment for renting into ownership with rates.
And so in March and April through mid May, we were not seeing the results that the other big builders were speaking of for the reason I just gave. And then mid May, boy, did we see it coming. But we were careful in the beginning. Because this was new, we didn't know how long it would last. And so for May and June, we treaded.
We took the sale. And then in July, we started taking price. August, we took more price. September, we took more. And it has accelerated into the second half of the fourth quarter and now these first six weeks of Q1.
Speaker 6
Okay. Thank you for that, Doug. Appreciate it. I guess, secondly, I just wanted to circle back to cash flow generation and uses of that cash flow. How we should be thinking about 2021?
If could you just kinda review what your your operating cash flow generation was this year and, you know, how you would expect '21 to compare to that. And, again, you know, because, obviously, you know, you're gonna be doing still a lot of investment in land and rolling out, you know, growing your community count. And how, you know, with your balance sheet where it is right now from a leverage standpoint, you know, the the share count guidance looks to be roughly flat. How any share repurchase may or may not or may not play into, you know, your thoughts in the next, you know, twelve months, particularly as you had some accelerated share count repurchase or share repurchase, prior to the pandemic?
Speaker 2
Michael, we think 2021 will be another positive cash flow year, significantly positive cash flow year. Because of uncertainty in the world and the growth we're seeing, any buybacks are likely to be back ended rather than if we were to do it similar to the prior year where we did it in the front half. But as I mentioned previously, our first objective is to grow the company through land opportunities and builder opportunities. We have a bit elevated debt to cap compared to other builders. We have $420,000,000 due next February that's in the back of our mind.
And so we want to maintain flexibility to address leverage, address buybacks, but mostly to buy land and builders. Next February is 'twenty two. Yes, 'twenty two, excuse
Speaker 6
Great. Thank you.
Speaker 1
You're welcome.
Speaker 0
The next question is from Anthony Pettinari with Citi. Please go ahead.
Speaker 10
Hi, good morning.
Speaker 7
When you look at buyer urgency, are you seeing any meaningful difference in how consumers in your different regional markets are behaving or responding to COVID? I think earlier in the year, you talked about community count maybe being sixty-forty, more insulated versus more impacted by COVID. Just given cases are surging nationwide, I'm wondering if you're seeing any regional differences that are noteworthy.
Speaker 1
Early on, as we talked about, the Northeast was certainly hit harder. There was even construction shutdowns, which affected production. But on the sales side, we were almost 100% remote for a long time, and the sales centers were by appointment only or, in some cases, completely closed. Right now, is thankfully open everywhere, and we anticipate that will be the case. We have gone to by appointment only in certain sales offices around the country, but it is not affecting activity.
This is the second time for us, so we're better at virtual selling. The website has more videos, photography. The sales teams are better. We're all better at Zoom and other
Speaker 6
ways of managing our lives. And so
Speaker 1
I'm very confident that notwithstanding some tightening of COVID restrictions and some stricter stay at home orders that we're going to continue to see good activity. I can't point to anywhere right now, including California, which I know is very tight, and Pennsylvania and New Jersey, where the governors have been extremely conservative and the rules are very tight. We're still seeing really, really good activity. So I think that certainly makes us feel good. The active adult buyer, which has come back nicely, they could certainly be more cautious and maybe not venture out or certainly not get on an airplane to go to a destination active adult community for a couple of months.
So I think that's a fair assumption. We haven't seen that dip at the moment. But I would not be surprised if that side of the business was to slow down a little bit. But overall, the other thing that's very interesting with this, because people didn't travel as much for Thanksgiving, and it doesn't feel like they're going to travel as much for winter holiday vacations, and because they're home working, the traffic during the week is higher. We're not just selling homes on Saturdays and Sundays when they're off of work.
And we sold a whole bunch of homes on Thanksgiving weekend. I mean, many years ago we were closed on Black Friday. Now Black Friday is a big selling day. People are around. I think it's really changed.
I mean, there's still going to be a spring season. I think mid January to mid April is still alive and well as a new home season. But I think the highs and lows have been changed because people are staying in place a bit more. So I hope that answered it for you.
Speaker 7
No, that's very helpful. And apologies if I missed this in the remarks, but what level of land and development spend is implied in the outlook for 'twenty one? Or what degree of spending is necessary to hit your 10% community count growth goal?
Speaker 2
Anthony, we have all of that land owned or controlled right now. So it is not a significant expenditure to get that. I don't, off the top of my head, know how many of those planned openings are controlled and require a bit of spend, but we have that land in our land bank.
Speaker 3
Yes. Are currently either owned or in control for fiscal 'twenty one openings.
Speaker 7
Okay. That's helpful. I'll turn it over.
Speaker 1
Thanks.
Speaker 0
The next question is from Mike Dahl with RBC Capital Markets. Please go ahead.
Speaker 11
Hi. Thanks for taking my questions. First one, I wanted to follow-up on the again, on kind of the pricing dynamics and and just thinking about, you know, tracking kind of the all in pricing when you you consider kind of the cumulative effect, including local level and potentially even incentives or a lot premiums. I I think we've been tracking more in kinda like the mid, maybe even high single digits cumulatively over the past five, six months compared to you know, I'm not sure if the like for like number is really comparable to those numbers you were talking about earlier. But is that the ballpark that seems kind of fair to you when you think all in net like for like pricing?
Speaker 1
First, Mike, can I just ask, are we still distorted or are things better with the sound?
Speaker 11
Right now, better, but it's just a little tough. We'll ask a couple of questions.
Speaker 1
Apologies. I don't know if it's our end or if it's the conference call service. We'll sincere apologies on that. Our IT people are at least looking into our end. I'm not sure what happened.
On your question, you're in the right ballpark. We have certain divisions that have had a bit of runaway price increases. That is significantly into double digit. And we've had other divisions that are lower, 1%, two three four percent range. But high, what I'll call mid to high single digit price increases is right in the right ballpark.
Speaker 11
Okay. Thanks. Helps. My second question is going back to kind of the absorption comment and maybe this is kind of a clarification. When we think about the potential capacity to do mid-30s or high-30s on absorption as you've seen in prior cycles, I guess when I marry that with your comments about pushing price, limiting lot releases, is that actually the level of absorption that you view as optimal for today's positioning?
Or is that simply just kind of a more theoretical capacity sell that? I'm trying to understand where you'd really look to run the business versus what the theoretical would be.
Speaker 1
Sure, yeah. I answered the question in the context of whether we can do better and sell more homes and actually deliver them. I'm comfortable getting this company on average to the mid-30s. Every division is different. The size of the homes dictates that.
There are certain communities selling $2,000,000 homes where that would be difficult. There's other affordable luxury communities where we could do 40. But I am comfortable that we have the infrastructure to get up to the mid-30s. And we're managing the business accordingly.
Speaker 11
Okay, great. Thanks a lot.
Speaker 8
You're welcome.
Speaker 0
The next question is from John Lovallo with Bank of America Merrill Lynch. Please go ahead.
Speaker 7
Hi guys and thank you for taking my question as well. Starting with the base of 120 communities opened in 2020 and moving to 150 to 160 targeted this year, Is there a rule of thumb that we can think about with incremental SG and A dollars that are typically associated with each of the new communities that they come on?
Speaker 2
Well, think the first rule of thumb is many of those dollars happen nine to fifteen months before you see deliveries. As you hire a construction team and you hire a sales team that are site specific project managers, etcetera. I think the cost probably run-in the $5,000 50,000 to $75,000 a month range.
Speaker 7
Got you. That's helpful. And then maybe changing gears and thinking about capital allocation. One of the things that you mentioned a couple of times, Marty, was the potential for strategic M and A. Curious, when you do think about that strategy, are you considering potentially moving using this as a method of moving downstream in price point, perhaps buying a builder with a lower price point focus?
Speaker 1
We've evaluated those opportunities. That is certainly something that we would consider if it was the right builder in the right location and it added value to us. I think we've learned a lot about how to build affordable luxury. I mentioned bringing in construction teams and purchasing teams, which I didn't mention, but purchasing teams from bigger production homebuilders that are really good at counting every nail and every scrap of lumber that sits in a dumpster. And so I don't think we need to buy a builder to learn the business and take their expertise from their local market to our national platform.
I think we are now mature enough and have learned enough that that is not we don't need to pay a premium to do that. But if there is an opportunity to expand our business locally or regionally through an acquisition, as you described, then we would certainly take a hard look.
Speaker 11
Thank you very much,
Speaker 1
guys. You're welcome.
Speaker 0
The next question is from Susan Maklari with Goldman Sachs. Please go ahead.
Speaker 12
Thank you. Good afternoon everyone.
Speaker 3
Hi Susan.
Speaker 12
My first question is thinking about the growth in the community count that you're expecting next year. Is there any color that you can give us in terms of the cadence of expecting those 150 or so communities to come online? And anything we should be thinking about in terms of the geographic mix in there?
Speaker 1
Sure. Hold on one second, and we will get that for you. I love when your questions get into the weeds. I mean that genuinely.
Speaker 12
We're getting to that point in the call.
Speaker 1
Okay. So the cadence looks good. It's a few less in Q1. And then Q2, Q3, and Q4 are pretty even. Call it sort of a 35 to 45 range of openings per community.
The locations are spread throughout the country strategically as you would think. South and West having more as more and more people chase the sun and chase the jobs and the lifestyle. So there's less coming out of the Northeast. There's less coming out of the Mid Atlantic. Although we're now in Atlanta, which will contribute a bit down there.
And then there's quite a bit coming out of the South and the Mountain states and the West. So as I look this over, I'm not only pleased with cadence. It's not all jammed into the fourth quarter. And I'm very pleased with the geographic dispersion.
Speaker 12
Okay. All right. That's helpful. And then my next question is around there's obviously been a lot of inflation over the last couple of quarters, especially in terms of lumber pricing. Can you just maybe talk a little bit to how you are factoring that into the margin outlook and how we should be thinking about inflation generally as we look to the next year?
Speaker 1
So our costs are up $17,000 this quarter. And it's all lumber. And as big a number that is, I'm happy because for a short window, it was close to double that. Maybe not quite double that, but it was a lot more and has come down nicely. So we've been very smart.
We buy lumber as far out as we can. We have panel plants that are on rail lines where we're buying the lumber right out of the mill, Pacific Northwest and the South, brings it right in on railcar and drops it at our yard. We went to very short term contracts, all number nationwide when the prices spiked. And so I'm pleased with how well we've managed these price increases. And obviously, I'm pleased that it feels like it's beginning to come down and we hope continue to come down.
Speaker 2
Our gross margin guidance reflects price increases to date, less budgeted increases in lumber and labor. It does not have a factor for inflation of price or inflation of labor. And it also impacts the negative impact of mix driven by the Pacific Region becoming a smaller percentage of our total.
Speaker 12
Okay, got you. Thank you, guys, and good luck.
Speaker 8
Thank you.
Speaker 0
The next question is from Ken Zener with KeyBanc. Please go ahead.
Speaker 10
Good afternoon. So afternoon, everybody. My question is going to be focused on your rising cash flow, which is it's tied basically to your lower land intensity and gets offset by vertical investments. So my first question is units under construction, first backlog. Many builders report units under construction, which gives us a sense of how new your backlog is.
So I don't know if you could I don't think you've done it before, but if you could comment on how many units you have under construction. That's gonna be the first question. And then for Marty, land efficiency, if you look at it, own land, it's down about 5% year over year if you do it on a trailing, you know, supply year's supply basis. Is that a reasonable number to think about? Or I mean, is there something that could drive that more?
Or was there something unique which led to your 5% improvement this year? Thank you.
Speaker 2
Ken, I don't have a specific number for the number of our 7,800 homes in backlog that are under construction. I do know that our backlog is almost a month younger than normal based on when the sales happened this year versus the tenthirty one year end. In terms of the owned land coming down, that is part of our return on equity strategy to get a bit more efficient. I think we don't necessarily want to see the owned land go below three years of supply. And so as we put more under option and don't buy quite as much and as our volume goes up, we are making progress in our landholding efficiency.
Speaker 10
Thank you.
Speaker 0
The next question is from Jade Rahmani with KBW. Please go ahead.
Speaker 13
Thank you very much. Question I usually ask, just wanted to see if you could give an update as to how much capital is invested in each of the multifamily and city living businesses. There's been quite a few announcements on the joint venture side, And just wanted to see if you could provide an update for that.
Speaker 2
Greg, do you have that?
Speaker 3
I do. So it looks like here at year end 2020, the apartment living business, this is for our rental platform. Our investment in that business is approximating, let's call it, $770,000,000. And the good thing about that number is that we're actively spending a lot of time forming joint ventures to recoup our investment in those assets and bring them to market. So we're looking out over the next twelve to maybe twenty four months, we'll probably bring $400,000,000 back in via JV formations.
And then if we move on to our City Living platform, it looks like we have at year end 2020 somewhere around just north of 400,000,000 let's call $410,000,000 invested in that platform. And so we usually like to break that out into three categories for you, just so you have a sense of what that number means. And so our development assets are about $170,000,000 and then our land for future projects is about $200,000,000 and then our joint ventures are about $40,000,000 Hopefully, that helps.
Speaker 13
Yes, that does. And just to clarify, the numbers you gave, $770,000,000 and $410,000,000 both of those are equity capital, not gross capital inclusive of debt financing?
Speaker 3
Not inclusive of debt financing, right. That is our capital.
Speaker 13
Okay. And then just secondly, you said that spec sales came in higher than expected. I think last quarter, it was 18% to quick delivery homes. What was the percentage this quarter?
Speaker 3
For Q4 settlement, percent was spec settlements. Correct. 20% of total settlements for spec units.
Speaker 2
It was around two twenty five more spec units than in the third quarter.
Speaker 13
Okay. Thank you very much for taking the questions.
Speaker 1
You're welcome.
Speaker 0
The next question is from Jack Micenko with SIG. Please go ahead.
Speaker 1
Hi. And kind of a follow
Speaker 14
on to Jade's question. On the spec, I think you said four fifty units were pulled forward. Are you saying that two twenty five of those were spec? And then I guess my question would be, when we look forward to the 'twenty one guidance, are you contemplating a higher mix of, I guess, quick delivery or spec or however you would refer to them next year versus what we saw in fiscal 'twenty?
Speaker 1
No. We have less spec homes now because of how rapidly they have sold. So I think part of 'twenty one's story is, as we mentioned, the backlog is younger, about almost a month younger than normal because it was sold in the second half of the year after the market picked up for us in mid May. And so that makes the homes in backlog just shy of thirty days younger than a typical year. Of course, younger, mean they're not as far along in construction on average as prior years because they were sold a bit later due to the lumpiness of the year.
And we also anticipate having less spec deliveries. We will have many, but we do not expect to have that 20% we just mentioned of the very strong sales we've seen over the summer and the fall.
Speaker 14
Okay. That's helpful. I actually won't see maybe the volatility in terms of the delivery guide as much as we did this quarter. Doug, bigger question for you. Very bullish commentary you know, in the press release and, you know, we've we've we've messaged we wanna improve ROE by, I think, 350 basis points.
You know, has capital allocation around the build versus the the the rental or or or city living development change? I mean, know, it's hard to you know, you gotta plan these things through cycles given the the the the the construction timing. But, you know, is toll pivoting more towards, traditional, maybe less on the rental side? Are we
Speaker 1
hearing that? Or is it just maybe the way
Speaker 14
you fund that business is going to change on a more pronounced basis?
Speaker 1
Oh, no, you're hearing that. We have no intention right now of buying a city living property. There will come a time when that changes, but right now we're on the sidelines. We have, Greg mentioned, 200,000,000 of the City Living investment is in land, and none of that land has started. So we have what are really good high rise sites, one in Manhattan, one in Philadelphia, one in Seattle, and one in Los Angeles, that are not starting right now.
We need to get through this winter. We need to see what things look like in the spring. I am very encouraged by the last six weeks of activity in Manhattan. I'm not telling you it's back, but it is improving. We're hearing that buyers, with the talk of vaccines, are now thinking about living in New York.
We're hearing a few stories of some that reenter the suburbs that are coming back to take a look. But that doesn't mean I'm ready to start a high rise in New York, because it's very different from the farm fields. In the farm fields, when the market rolls, you can just stop building the next house down the road. In the high rise business, once you start, you're going. And you're going to the top.
So we are being very cautious both in starting those four buildings I mentioned and on the sidelines for new opportunities. On the apartment side, business is good. Our locations are good. New apartments are holding up. Our rental rates, while they're down a little bit, are hanging in there.
Our occupancy rates are up. Our delinquency rates have not moved. So overall, while the business is good, we're being cautious. They're not frozen out the way I call City Living at the moment, being frozen out. But we're being highly, highly selective on new opportunities under our apartment living platform until we have some more perspective and visibility on where the multifamily business is headed.
Speaker 2
Yes. We are asking the apartment team to producedigest what they have as quickly as they can before we look to many more future opportunities.
Speaker 1
And Marty commented in the prepared script our other income and joint venture income is guided down a bit in 'twenty one from what we talked about in prior years. And we have that income. It's in some really good stabilized apartment buildings. But we don't think right now is the time to sell those. If that time comes in the spring or the summer, we may surprise ourselves and all of you with some more other income for the year, but that's not what we're strategically planning right now.
But we don't have to go out and find that other income. It's there. It will be monetized. It's just a question of when the best time to do that is, and we don't think it's right now.
Speaker 14
The
Speaker 0
next question is from Matt Bowie with Barclays.
Speaker 10
Good afternoon. Thanks for taking the questions. I have another one on ROE. 2020, obviously, a major disruption in the spring and you halted share repurchase, but, you know, the market did accelerate and, you know, closings grew. I imagine you you mixed further to affordable luxury or I think I heard you say earlier that the return profile is accretive to ROE.
But, you know, ROE for the full year was still down. So my question is what were the biggest challenges to ROE in 2020? And as you look forward, I heard you discuss a lot of levers you're pulling. Which of these levers do you think are going to be kind of the incremental changes to ROE in 2021 relative to what was the challenge in 2020? Thank you.
Speaker 2
I think the challenge in 2020 was our gross margin, which came down from 2019 and was reflective of the sales environment that we saw twelve months prior and mix shift out of some of our really high margin California product. So that was the biggest challenge on return on equity in 2020. As we move forward, the pricing power we have is allowing us to drive volume and drive gross margin expansion that is improving our operating margin and improving our return, while at the same time we are carefully managing our equity through land acquisitions changing, product mix changing, and capital allocation.
Speaker 1
And on the land buying, which I think longer term will be the number one driver. I mean, there will certainly be stock buybacks. There will certainly be dividends issued. We will certainly have strong markets where the ROE is outsized because of pricing power and great sales. But longer term, the primary driver is an obsessive focus on underwriting land deals at a high ROE.
We call it ROI internally, return on investment is how operations works around here, a high threshold. And I'm unwavering on it. We are committed. It takes a while to turn a cruise ship. Some of these deals that we approve now that have to get some entitlements or have to get some roads in and then open a sales center and sell a home and deliver a home, that can take some time.
But it's common. And that, I think, from my perspective, will be the number one long term driver is the discipline and the focus we now have on driving ROI through the underwriting of the next piece of land bought.
Speaker 10
Got it. Okay. That's very helpful color. Second one I had was just on the closings guide. I think I heard you say earlier that 60% of deliveries will be in the second half of the year.
And I think that number is maybe a little elevated, but it's not particularly unusual relative to prior years for toll. So I'm just curious, just given what we're seeing in labor and cycle times, is the expectation that even within that, I don't know if you can get this detail, but it should be even more Q4 weighted than usual? Or is that kind of typical cadence of closings still the right way to think about it? Thank you.
Speaker 2
I think Q4 weighted is the right way to think about it, particularly based on the rapid increase in sales we just had in the existing Q4.
Speaker 14
You're welcome.
Speaker 0
The last question comes from Alex Barron with Housing Research Center. Please go ahead.
Speaker 8
Yes. Thanks, guys. Appreciate it. Good job. I wanted to sorry if I missed this, but the margin guidance in the first quarter, was that just related to the market conditions when you took those orders back in the spring?
Speaker 13
Yes.
Speaker 1
March March, April, May.
Speaker 8
Okay. Got it. And then the second question was, as you've been shifting the product mix to the more affordable luxury, have you guys been able to shorten, I guess, the delivery cycle? Because on the guidance, wouldn't appear so, but maybe I'm just missing something.
Speaker 1
Yeah. We had said earlier, Alex, that it's taking thirty days less to build the more affordable luxury homes. I hope that even gets better, but that's what the number is right now.
Speaker 8
Have there been any other offsetting factors, like taking longer to get a permit or something else?
Speaker 1
No. Actually, it's shorter because our clients don't go spend thirty days in a design studio and figure out how they can spend a couple $100,000 on Portuguese tile.
Speaker 8
Got it. Okay. Well, best of luck for 'twenty one. Thanks.
Speaker 1
Thank you. You're very welcome.
Speaker 0
This concludes our question and answer session. I would like to turn the conference back over to Douglas Yearley for any closing remarks.
Speaker 1
Gary, thank you very much. Thanks, everyone, for your interest and support. Have a wonderful holiday season. And I hope when we speak next, we're in more sensible times. Thanks all.
Take care.
Speaker 0
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.