Earnings Call: Q4 2018

Feb 26, 2019

Hello, and welcome to the LGI Homes twenty eighteen Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference is being recorded. And I would like to introduce your host for today's call, Rachel Eden, Chief Marketing Officer. You may begin. Thank you. Welcome to the LGI Homes conference call discussing our results for the fourth quarter and full year 2018. Today's conference call will contain forward looking statements that include, among other things, statements regarding LGI's business strategy, outlook, plans, objectives and guidance for 2019. All such statements reflect current expectations. However, they do involve assumptions, estimates and other risks and uncertainties that could cause our expectations to prove to be incorrect. You should review our filings with the SEC, including our Risk Factors and Cautionary Statement about Forward Looking Statements section for a discussion of the risks, uncertainties and other factors that could cause our actual results to differ materially from those anticipated in these forward looking statements. These forward looking statements are not guarantees of future performance. You should consider these forward looking statements in light of the related risks, and you should not place undue reliance on these forward looking statements, which speak only as of the date of this conference call. Additionally, adjusted gross margin, a non GAAP financial measure, will be discussed on this call. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation of adjusted gross margin to gross margin, the most comparable measure prepared in accordance with GAAP, is included in the earnings press release that we issued this morning and in our annual report on Form 10 K for the fiscal year ended December 3138, that we expect to file with the SEC later today. This filing will be accessible on the SEC's website and in the Investors section of our website at lghomes.com. Joining me today are Eric Leeper, LGI Homes' Chief Executive Officer and Charles Mertian, the company's Chief Financial Officer. With that, I'll now turn the call over to Eric. Thank you, Rachel, and welcome to everyone on this call. We appreciate your continued interest in LGI Homes. During today's call, I will share some highlights from 2018, then Charles will follow-up to discuss our financial results in more detail. After he is done, we will conclude with comments on what we are seeing this quarter and our expectations for 2019 before we open the call for questions. At the start of 2018, we provided guidance announcing our expectations to do the following. First was to deliver more than 6,000 home closings. Second was to have 85 to 90 active communities by year end. And finally, to deliver basic earnings per share to our investors in the range of $6 to $7 all while maintaining our gross margin at or near industry leading levels between 2426% and adjusted gross margin between 25.527.5%. Today, I am pleased to announce that for 2018, we met or exceeded this guidance in all areas. As a result, this not only marks our fifth full year as a public company, but highlights our fifth consecutive year of delivering strong results to the market reaching or exceeding our guidance in every metric. Our fourth quarter provided an impressive finish to 2018 with a record breaking eighteen fifty two homes closed, highlighted by our best month in LGI history with eight eighty four homes closed in the month of December, bringing us to a record breaking total of 6,512 homes closed for the year. In 2018, we also achieved significant growth in home sales revenue, generating $1,500,000,000 and ending the year with 88 active communities. These strong results enabled us to deliver basic earnings per share of $6.89 increasing basic EPS more than 31% over the prior year. When we went public in 2013, we had one primary objective, which was to fuel our growth by replicating our business model across the country and since then we have done just that. Since our initial public offering, we have grown substantially by expanding our operations from nine markets across four states to experiencing closings in 26 markets across 16 states in just five years. As we have continued to grow, we have maintained the LGI culture, demonstrating that our unique operating model is sustainable. We believe our employees are our most vital asset and continue to make the difference. It is through the dedication and outstanding performance of our employees that we are able to leverage our systems and processes to deliver exceptional customer service to all 29,000 homebuyers over the last fifteen years and deliver what was another strong year of results for 2018. So to all of our LGI employees, we appreciate and thank you for your commitment, loyalty and hard work, which have produced another year of record setting closings. Before I turn the call over to Charles, I want to share additional highlights from the previous quarter and provide an update on the new market expansion we had during 2018 as well as provide an update on the Wynn Homes acquisition. For the fourth quarter of twenty eighteen, we averaged 7.2 closings per community per month. On a closings per community per month basis, all of our regions across the country featured strong absorptions. We closed an average of 9.2 homes in our Central Division, 7 Point 1 in the Southeast, 5 Point 8 in the West, 5 Point 7 in Florida and five point zero in the Northwest Division. For the full year 2018, we averaged 6.7 closings per community per month company wide, equaling the prior year average in the highest level we have ever experienced as a public company. 2018 once again demonstrated our ability to maintain or increase our absorption rates as we continue to expand into new markets. Over the last five years, most of our growth has been organic, but key acquisitions like Oakmont and Wynn allowed us to see immediate results. The Wynn acquisition expanded our presence in the Raleigh market, while also giving us an entry into the Wilmington market. As a result of this transaction, we acquired approximately 200 homes under construction and 4,000 owned and controlled lots, of which 85% were in the Raleigh Durham market. We are pleased with the results so far, closing 101 homes in 2018, which was in line with our guidance and expectations. Another significant highlight of 2018 was the first home closings in five new states for LGI. With the addition of Alabama, California, Nevada, Oklahoma and Oregon, we continue to expand our presence nationwide. This expansion included a tremendous start in California with our first community opening in the Sacramento market in June, closing 74 homes for the year, averaging more than 10 closings per month and also a tremendous start in the Las Vegas market with our first community closing 24 homes in our first quarter of operations. Lastly, we'd like to congratulate our teams in the DFW and Houston markets. DFW and Houston both reached new heights, closing more than 1,000 homes in each of these markets in 2018. This is the first time in company history that an LGI market has reached this milestone and deserves recognition as a truly notable achievement. Now for more detailed financial results, I will turn the call over to our Chief Financial Officer, Charles Berdeen. Thanks, Eric. Home sales revenues for the quarter were $425,200,000 based on eighteen fifty two homes closed, which represents a 5% increase over the fourth quarter of twenty seventeen. Home sales revenues for the year totaled $1,500,000,000 a 19.6% increase over the prior year. Our average sales price was $229,568 for the fourth quarter, a 4.5% year over year increase and a 3.4% decrease from the third quarter. During the fourth quarter, our central divisions, which includes Texas, Oklahoma and Minnesota, closed eight sixty five homes, a 9% increase over the seven ninety two homes closed during the fourth quarter of twenty seventeen at an average sales price of approximately $211,000 The eight sixty five closings represented approximately 47 of overall closings for the quarter. Our Southeast Division closed four forty five homes this quarter at an average sales price of approximately $207,000 across 21 communities. Average communities were up four over the prior year quarter, primarily due to the Wynn acquisition. Absorptions increased to 7.1 closings per community per month, up from 5.2 in the fourth quarter of twenty seventeen. Also during the fourth quarter, we closed two twenty eight wholesale units, 12.3% of overall closings, and 13 of our markets generating 49,000,000 in revenue at an average price of approximately $213,000 And this past year, we closed a total of four sixty six wholesale units generating $110,000,000 in revenues in our communities compared to two zero one units and 41,000,000 in revenue in the prior year. For the quarter, wholesale units impacted our overall gross margins by approximately 120 basis points and for the year by 80 basis points. We believe that our wholesale business is accretive to the overall business as operating margins are similar. Our expectation is that wholesale will be approximately 5% of our overall business in 2019. For the year, we closed 118 homes in our Terrata communities, representing less than 2% of our overall closings. And as mentioned on prior calls, we expect closings from our Terrata communities to be a limited part of our overall business continuing into 2019. Gross margin was 24.4% this quarter, similar to the same quarter last year. Our adjusted gross margin was 26.2% this quarter compared to twenty five point eight percent for the fourth quarter of twenty seventeen, a 40 basis point increase. And for the year, gross margin was 25.3% compared to 25.5% for the full year of 2017 and adjusted gross margin was 27% compared to 26.9% last year. Adjusted gross margin excludes for the fourth quarter approximately $7,200,000 of capitalized interest charged to cost of sales during the quarter representing 170 basis points, and we expect this will remain in this range for the upcoming year. Additionally, approximately $560,000 of purchase accounting adjustments related to the Wynn acquisition is excluded for the quarter. Combined selling, general and administrative expenses for the fourth quarter were 11.3% of revenues and 12% for the full year similar to 2017. As a percentage of revenues, we believe that for the full year 2019, we will continue to achieve operating leverage in our existing markets offset by initial operating costs in new markets. Overall, we expect SG and A as a percentage of revenue to be similar in 2019 compared to both 2018 and 2017. SG and A will vary quarter to quarter based on home sales revenue. We typically expect the first quarter to have the highest SG and A ratio as our first quarter generally results in the lowest closings on a per community basis during the year. Selling expenses were $29,300,000 or 6.9% of home sales revenue compared to $28,600,000 or 7.1% of home sales revenue for the fourth quarter of twenty seventeen, a 20 basis point improvement. General and administrative expenses were 4.4% of home sales revenue compared to 3.8% of home sales revenue for the fourth quarter of twenty seventeen, a 60 basis point increase primarily due to expenses related to the Wynn acquisition and additional overhead related to our geographic expansion. Pre tax income for the quarter was $56,200,000 or 13.2% of home sales revenue, a decrease of 40 basis points over the same quarter in 2017. For the year, we generated $199,100,000 in pretax net income or 13.2% of home sales revenue. Our effective tax rate for the fourth quarter was slightly higher than the previous quarter at approximately 24.1%. And we believe our annual effective tax rate for 2019 will range between 2324%. We generated net income of $42,700,000 or 10% of home sales revenue for the fourth quarter of twenty eighteen, which represents earnings per share of $1.89 per basic share and $1.72 per diluted share. For the year, we generated net income of $155,300,000 or $6.89 basic earnings per share and $6.24 diluted earnings per share. Weighted shares outstanding for calculating diluted earnings are impacted by our outstanding convertible notes. In the fourth quarter of twenty eighteen, our average stock price was $42.23 exceeding the conversion price, and therefore, the convertible notes were determined to be dilutive. This resulted in an approximate 1,600,000.0 share increase to the weighted average shares outstanding for the diluted EPS calculation for the quarter. Our convertible notes will mature in November year and therefore our 2019 basic EPS will be impacted by the conversion. Our intent is to settle the principal in cash and the premium in stock and once the conversion occurs, we would expect that diluted EPS will only be impacted by stock compensation. Fourth quarter gross orders were $17.56 and net orders were $12.64. Ending backlog for the year was six twenty four homes and the cancellation rate for the fourth quarter was 28%. And for the year, our cancellation rate was 24.2%. We ended the fourth quarter with a portfolio of approximately 51,400 owned and controlled lots. And as of December 31, approximately 28,600 or roughly 56% were owned. And of this amount, roughly $8,300 were finished vacant lots $17,400 were either raw or under development nineteen forty were completed homes, including our information centers and nine ninety were homes in process. At December 31, we had approximately $46,600,000 in cash, $1,200,000,000 of real estate inventory and total assets of $1,400,000,000 At year end, we had approximately $664,000,000 outstanding under our revolving credit facility, senior notes and convertible notes and net debt to capitalization was 48.1%. In November of twenty eighteen, we initiated a $50,000,000 share repurchase program and during the quarter we purchased 39,000 shares at an average price of $38.58 per share for a total of $1,500,000 We ended the year with 22,700,000.0 shares outstanding. At this point, I would like to turn it back over to Eric. Thanks, Charles. In summary, we had another impressive quarter and a phenomenal 2018. Let me provide some guidance and thoughts on what we are seeing for the upcoming year. The first quarter of twenty nineteen is off to a solid start with two sixty nine closings in January and we expect closings in February 2019 to be similar to last year's February results, which totaled three sixty eight closings. Based on our solid performance to date and assuming a continuation of today's housing market conditions for the remainder of this year, we offer the following guidance. As we previously announced in our January 4 press release, we expect to close between 913,800 homes in 2019. We believe throughout 2019, we will continue to grow our community count, primarily by going deeper in our existing markets and end the year between one hundred and five and one hundred and fifteen active selling communities. In addition to closings and community count guidance for 2019, we believe our average sales price for the year will continue to increase, ending 2019 with an overall average sales price between $235,000 and $245,000 Guidance for gross margin will be in the range of 23.525.5%. We expect adjusted gross margin, which excludes the effects of interest and purchase accounting, will continue to be strong, ending the year between 25.527.5%. This is the same adjusted gross margin that we guided to last year, which reflects our optimistic view of 2019. This also reflects our belief in the strength of our model and the ability to produce consistent margins. Given our home closing guidance along with an increase in average sales price, consistent gross margins and conversion of convertible notes, we believe our basic earnings per share for the full year 2019 will be in the range of $7 and 8 dollars per share. In summary, we are very pleased with our results for the fourth quarter and the full year of 2018. We believe we are poised to take advantage of continued growth opportunities in existing and new markets and that we are well positioned to continue to grow our revenues, community count and earnings, allowing LGI Homes to achieve our long term goals and objectives of market leading returns for our shareholders and continuing towards our goal of becoming a top five builder. Now I'll be happy to take your questions. Our first question comes from the line of Jay McCanless with Wedbush. Your line is open. Hey, good afternoon, everyone. So my first question, you said February is looking roughly three sixty eight closings. If I assume an 88 community count there, that puts you guys at roughly 6.3 homes per community, which is down again about 13%, fourteen %. And what right now, is it a question of price? Is it the weather that's holding you guys back? What's driving some of these negative comps that we're seeing on the per community basis? Yes, Jay, this is Eric. I can start with, not the weather holding us back for sure. And on your math, we expect the community count not to be as high as 88, it was 83 last month, maybe out of community or two in February. And I think that's in line with our guidance. The last two years, we've averaged 6.7 closings per community per month and that's the highest it's been as a public company and really strong absorption paces. And I think what we saw in the fourth quarter was good solid sales equivalent to the year before, but not quite as strong on a per community basis. So it feels like our closing range is more six to seven closings a month annualized and that feels about where we are in January and February. So similar results. And then as we add communities throughout the year and really drive that community count growth this year, we're confident we'll end up between 913,800 closings. And then on the gross margin, good job there. When you think about how many homes you guys turn in a quarter, do you believe that you guys are seeing maybe some of the savings from lumber a little bit faster than some of your competitors? Construction costs? A. J, this is Charles. I'll start and then Eric can add. So I think there's some impact to that in quarters where we do have higher absorptions. We do see some benefit and certainly our cycle time is typically shorter. But we have visibility into our pricing about as quick as anybody that we would see because we're building on a spec basis as well. What that allows us to do is help forecast out where our sales prices need to be, which is what we focus on in terms of how we're managing expected gross margins. And then the last question I had, are you guys seeing the land sellers start to take prices down a little bit and or are you seeing some competitive and not just in 4Q, but even January, February, are you guys seeing some competitive discounting from some of the other builders out there? And how are you guys responding to that? Yes, Jay, good question. First of all, from the acquisition standpoint, I would say we haven't seen a lot of discounting yet, maybe some easiness on terms. But certainly also being focused on the entry level, there's a lot of builders focused on the entry level segment right now. So we don't think the market soft enough to have a huge discount from the land sellers yet. But certainly in a softer market, if that's anyone's projection, then that will be one of the benefits that we would have being in LGI. And what was the second part of your question? Just what are you seeing from your competitors? Are you seeing more people cutting price to try and drive some volume? And how is that impacting you guys? Yes. I think it potentially could impact us on appraisals if the other builders that are in the proximity of our communities certainly cut price that can impact it through the appraisals and mortgage business. We don't really focus on what the other builders, but certainly we've been hearing of that potential in a slower market. And that's really down to a market or a community by community basis that may have some impact. But other than that, we haven't seen a lot of that. Great. Thanks for taking my questions. Thank you. Our next question comes from the line of Nishu Sood with Deutsche Bank. Your line is open. Thank you. First question, on the gross margins, the wholesale business had an 80 basis point drag, I think, on gross margins in 2018. What are we thinking about for 2019? I can imagine that as that outlet becomes more attractive on a relative basis in 2019, should we think about something like the 120 basis point drag that you had in 4Q or perhaps even something higher? Just trying to understand the drivers of the gross margins. Sure. This is Charles. So as we've since we've introduced wholesale, the percentage of wholesale business this quarter, for example, being roughly 12% of the business had 120 basis point impact. And for the year, it was roughly right around 7% to 8% of the overall business, which had an 80 basis point impact. So I think we put out there that we think wholesale is going to be around 5%. So that would be a 50 basis point impact in kind of the general range of what we would expect. Got it. Why would wholesale be a smaller part of the business in 2019 versus 2018? Is it just that you had some communities or phases that were more appropriate for wholesale in 2018 and have sold out? I would think given the market volatility, wholesale would continue to be an attractive outlet. It is Nishu. I mean, certainly the demand from the wholesale buyers will be there. Last year it was between 78%. We said 5%, but certainly one surprised us that it was similar numbers to last year. And I also think something that is relevant to this question is we're starting to see more interest from the companies buying from us to do more larger sections, do more communities and certainly we can be a player in that. But that just gives us a longer lead time. So more of a focus on 2020 closings and beyond, we're talking some of the bigger opportunities that we're looking at. Got it. Got it. And my other question was about marketing spend. In the past when there has been volatility in the market, you've had the option given your model, your sales driven model of increasing your marketing expense to keep up volume. Your marketing as a percentage of sales is actually down year over year. So just wondering how are you able to achieve that? Or is the increase in marketing spend still yet to come? Or is it just more efficient these days with the Internet and then perhaps we won't see as much of an increase? Yes. I think it's a combination of both. I think our marketing team is doing a great job. We're more efficient than we've ever been. Certainly, growing community count and getting some national scale helps in that. In fact, we had more leads last week than we had in the history of the company. We went over 9,000 leads for the first time. So that gives you an idea of how strong the demand is. Now certainly, we have more communities than we've ever had, but just a data point and a great job by our marketing team driving leads to our communities and our salespeople. And then also, Nishu, that's one of the things we talked about on the call. If the interest rates continue to go up or we needed to spend more money on marketing, that's one of the triggers that we could pull to keep our absorption paces up. But that just hasn't been the case right now. We're seeing really efficient use of our marketing dollars. Last year in 2018, we generated over 360,000 leads. So we haven't had to increase that marketing spend yet, but it's certainly something we can do and would do, but we saw demand starting to drop off. Okay. Thank you. You're welcome. Thank you. Our next question comes from the line of Michael Rehaut with JPMorgan. Your line is open. Thanks. Good afternoon, everyone. The first question I had was on the gross margins and obviously done a great job over the years of managing that to well above industry average levels. Just wanted to get a sense though as you look at from 2016, you were almost 28%, a little bit of slippage in '20 over the past year or so. Just trying to get a sense of what in your mind was the bigger driver of that slippage and kind of what frames your thought process around maybe the midpoint being slightly less than 2018, certainly nowhere near the level of contraction relative to your peers. But what have kind of been the big pluses and minuses, puts and takes that have been driving that gross margin over the last couple of years? I'm talking about on an adjusted basis, and how you see those pluses and minuses, the puts and takes this upcoming year? Right. Yes, good question. So in 2016, you're right, we were at 27.8% adjusted gross margin. In 2017 is when we introduced wholesale. So that was certainly a function in 2017 where we introduced wholesale, which had an impact on overall gross margins, but a similar operating margin. So I would say from 2016 to 2017, you had the introduction of wholesale. We also continue to expand outside our central divisions. And Texas primarily tends to still be our strongest markets in terms of how we can generate gross margins. All of our regions are very similar in gross margins, but Texas generally tends to be the strongest, which means as we expand geographically, we have a slight dilutive effect overall that would have come into play as well. And then in 2017 particularly, we spent some time on some of our quarterly calls just talking about the rapid rise of inputs, both labor and materials during 2017 and our ramp up in production were two factors in 2017. And then for 2018, we were just able to kind of stay consistent and come in at 27% based on just managing the costs and managing sales prices in order to meet our target. And then as you see 2019 kind of in that similar type of range, midpoint being 26.5%? What do you kind of see as the headwinds year over year and tailwinds, if any? Yes, this is Eric. I think when we're given our midpoint in the guidance and it's really only 50 basis points higher, I think the headwinds to gross margin this year would be pricing what our competitors are doing. And then there was also a mix component of that. We just tend to do a lot of development in Texas like Charles talked about. So our gross margins are better in Texas than overall. Our growth this year and additive to community count is primarily going to be outside of Texas. So just law of large numbers, if you will, we're bringing that average down. And then there's the mix component. We price our lots differently if we're buying finished lots compared to developing ourselves to make sure we capture that developer margin as well. So it's going to vary a little bit by 50 to 100 basis points just on the communities and whether we're developing or not. So we put a range on it. It's probably a little bit conservative on our range, but we're comfortable we're going to be in that range. Okay. So just so I understand the midpoint of the range being a little less than $20.18, the primary drivers of that you would say would be a little bit of the pricing backdrop being maybe slightly more competitive as well as geographic mix? Correct. Okay, great. Thanks very much. You bet. You're welcome. And our next question comes from the line of Stephen East with Wells Fargo. Your line is open. Thank you. Good morning, guys. Good morning. When Eric, when you look at the tax refunds that are coming back slower and are smaller, I guess I'm wondering, do you all see tax refunds drive your business in the spring? And if you typically do, are you seeing any change in what happened, what's happening so far? And then if you look at interest rates, they moved up into the fall and now they've eased. Did you see those rates affect negatively then and starting to affect positively now as you move through the spring? Yes, great question, Stephen. On the tax refunds getting back, I'm not sure if we have a good data point to gauge that other than it seems to be really strong demand in the field. So certainly hasn't been slower. So I think that's a positive in this type of year, customers getting their tax refunds back to use for down payment, pay off debt. I think that's a positive for us. And I think what we saw in the fourth quarter when interest rates spiked, we still saw strong demand, the leads coming in. But I think people, because of that monthly payment increase, started selecting smaller plans. And that was one of the things that we all thought might happen and one of the components that drove our average sales price down in the fourth quarter compared to the third quarter. So that's one of the things that we believe we noticed. It's not very clear in the data exactly that people are picking smaller plans, but that's what it suggests to us and probably not a coincidence that when interest rates went up in the quarter, our average sales price went down. And that would be something that we would think could continue to happen if interest rates went up in 2019. Got you. Okay. And then historically, you've talked a lot about a preservation of margin. So in essence, more price over pace. As you've had a little bit of a slower dynamic and you've got more competitors out there, as you look at 'nineteen, does your thought process change anywhere you maybe lean a bit more toward pace than maybe you would have in the past? No, I think we're going to stay consistent with our business model. We like to have both price versus pace. So we plan on leading the industry again in pace on a closings per community basis and being north of that six point zero closings per month and not reduced prices. We're not a fan of reducing prices in a community. Generally speaking, we think 2019 costs will continue to go up, so we'll have to raise prices gradually throughout our community to keep our gross margins consistent. But we won't be reducing prices to generate more pace like some of the other builders are talking about. Got you. Okay. If I can sneak in one more. You did your first national promo in the fourth quarter. Thoughts on how it went and whether this you do it in 2019? Yes, I think it went great. The feedback that we got, we drove a lot of extra leads to the field, didn't spend a ton of money like we talked about earlier on the call. And just at our size and scale now, we have the ability to do promotions like that to really let the renters out there in The United States know that we have available inventory and it's a good time to own. And I think that message is going to continue into 2019 and I'm sure we'll have some national events and really have a focus on sales and marketing as we always do. All right. Thank you. You're welcome. Our next question comes from the line of Paul Ricard with BTIG. Your line is open. Thanks. Hi guys. Just wrapping up on a couple of these other questions. So when you look at the slowdown in sales per community over the last few months, is that more a function of traffic or conversion of traffic as you guys look at it? Yes. Again, it's hard to say it's about a slowdown. So we think it's pretty good. It's certainly slower than our historical averages and record breaking months that we've had in the past. But the leads are strong, so it's more of a function of conversion. I mean, one of the things that we're dealing with as a company certainly is affordability as everyone has. And as our average sales prices continue to rise, it's up $70,000 approximately over 5 years ago. Affordability is something that we have to be mindful of and not as many customers qualify as they did five years ago. Now our absorptions last year did not get impacted by that because I think of all the other positive things in the economy. So I think our range of closing guidance for the year is kind of that historical average of six point zero on the low end of our range. And the high end of our range is more like the last couple of years and I think will fall somewhere in between. Okay. Thanks, Eric. And then as you expanded your number of markets, you are there's a I suppose an argument could be made while as you move to new places, you'll need new floor plans, right, and to meet those individual markets. Are you finding you're able to export the floor plans that have been so successful for you in markets like Texas over time and move them? Because I would think if you could get some positive leverage on these plans that sell well, that ought to be helpful to gross margin more quickly as you move into new markets. Yes and no. So not exactly the floor plans necessarily, Carl, but we have seen in our new markets that our traditional 1,400 to 1,600 square foot three bedroom, two bath, two car garage that's laid out similarly, is really the most popular plan and always has been and always will be. So I think when you go to a new market, we do a good job of not overthinking the architecture and just build a nice quality home and that 1,300 to 1,600 square foot is always our best seller on a 45 or 50 foot lot and just get into that market quickly and get into sales and closings. Okay, great. Thanks, Eric. Thanks, guys. You're welcome. At this time, I'd like to turn the call back over to Eric Lieber for closing remarks. Thank you, everyone, for participating on the call and your interest in LGI Homes. We look forward to sharing our achievements for 2019 throughout the year. Have a great day. Thanks, everybody. Ladies and gentlemen, that concludes today's call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.