Earnings Call: Q3 2018

Nov 6, 2018

Welcome to the LGI Homes Third Quarter twenty eighteen Conference Call. Today's call is being recorded and a replay will be available on the company's website later today at www.lgihomes.com. We have allocated an hour for prepared remarks and Q and A. At this time, I will turn the call over to Rachel Eaton, Chief Marketing Officer at LGI Homes. Mrs. Eaton, you may begin. Thank you. Welcome to the LGI Homes conference call discussing our results for the third quarter of twenty eighteen and the nine months ended September 3038. 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 2018. 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 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 quarterly report on Form 10 Q for the quarter ended September 3038, 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 Leiper, LGI Homes' Chief Executive Officer and Charles Mertian, the company's Chief Financial Officer. With that, I will 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 summarize the highlights and results from the third quarter and year to date 2018. And 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 for the fourth quarter of twenty eighteen before we open the call for questions. Before we get started, I want to recognize that tomorrow marks our fifth anniversary of LGI Homes becoming a public company. At the time of our IPO, our objective was to fuel our growth and replicate our business model across the country. In the past five years, we have expanded into more than a dozen new markets, tripled the size for our organization and seen tremendous appreciation in our stock price since our IPO at $11 per share in 2013. We have accomplished all of this and more, all while maintaining our culture and demonstrating that our unique operating model is sustainable. Another notable accomplishment for everyone on the call is that LGI Homes was recently listed number 10 on Fortune Magazine's list of 100 fastest growing companies. This list ranks performance in revenue, profit and stock returns over the past three years and we were featured among global companies like Facebook and Amazon. This is a huge achievement and I'd like to thank all of our employees for their hard work, dedication and loyalty to LGI. The third quarter of twenty eighteen was a solid quarter for LGI Homes. For the quarter, we closed sixteen oh one homes, generating approximately $380,000,000 in home sales revenue, which represents a 4% increase over the third quarter of twenty seventeen and the best third quarter for revenue in company history. We ended the third quarter with 81 active communities, which is a net increase of four over the 77 active communities that we had at the end of the third quarter last year. Absorption in the third quarter averaged 6.5 closings per community per month company wide. This was a decrease from the third quarter of last year with 7.6 closings per month, which was the highest absorption recorded in our third quarter history. In comparison, our third quarter performance since our IPO generated 5.5 closings per community in 2014, '6 point '3 in 2015 and six point zero in 2016. This quarter, our top division on a closings per community basis was the Northwest at 8.7 closings per month, followed by the Central Division at 7.9 and the Southeast Division at six point zero. Breaking it down, let us first look at highlights from our Central Division operations. Comprised of results from the Houston, San Antonio, Dallas Fort Worth, Austin and Oklahoma City markets, our Central operations generated six ninety one closings in the third quarter, representing approximately 43% of our total closings for the quarter. As mentioned earlier, the absorption rates in the Central Division was one of the strongest across all divisions, averaging 7.9 closings per community per month. Of the 57% of closings that took place outside the Central Division, a highlight of the third quarter was an increase in closings in our Northwest Division. This quarter, we closed 139 homes in this division compared to 72 homes closed in the third quarter of last year, which is an increase of 93% year over year with our active community count remaining flat. One of the primary drivers of this increase is our fast start in the state of California. Our first project in the Sacramento market closed 33 homes in the first full quarter of being open for business. This made Sacramento our number one market this quarter, averaging 11 closings per month per community with an average sales price of over $370,000 Our Southeast Division also had a strong quarter highlighted by our acquisition of Wynn Homes on August 2 for $78,000,000 The Wynn acquisition is allowing us to expand 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, moving LGI from the fifteenth largest builder in the market to within reach of the top five according to builder.com. The primary focus of our leadership team since August 2 has been integrating the Wynn employees into the LGI processes and systems, including sales and construction training and converting everyone to the LGI way. We are pleased with the results so far, closing 49 homes in the third quarter, right on track with the expected 20 to 25 closings per month that we announced on our last call. In our wholesale business, we closed 104 homes this quarter with three different investment groups generating $26,800,000 in revenue. We believe opportunities like this are accretive to our business and offer us an avenue for potential growth. With that, I'd like to turn the call over to Charles Merdan, our Chief Financial Officer for a more in-depth review of our financial results. Thanks, Eric. Home sales revenues for the quarter were $380,400,000 based on sixteen oh one homes closed, which represents a 4% increase over the third quarter of twenty seventeen. Sales prices realized from homes closed during the third quarter ranged from the $140,000 s to over $500,000 and averaged $237,582 a 12.3% year over year increase and the highest ASP in our history. The increase in average sales price year over year reflects changes in product mix, favorable pricing environment and new or replacement communities added that have higher price points. All of our divisions experienced an increase in average sales price ranging from 8.6% to 11.6%. In the third quarter by division, approximate average sales prices were $217,000 in the Central Division, 2 Hundred And 80 7 Thousand Dollars in the Southwest, 2 Hundred And 9 Thousand Dollars in the Southeast, 2 Hundred And 12 Thousand Dollars in Florida, three hundred and sixty five thousand dollars in the Northwest and $233,000 in the Midwest. Gross margin as a percentage of sales was 25.6% this quarter compared to 25.1 for the same quarter last year, a 50 basis points increase. Our adjusted gross margin was 27.4% this quarter compared to 26.5% for the third quarter of twenty seventeen, a 90 basis point increase. Adjusted gross margin excludes approximately 6,200,000 of capitalized interest charged to cost of sales during the quarter, representing 163 basis points and $850,000 of purchase accounting adjustments associated with the Wynn Homes acquisition. Combined selling, general and administrative expenses for the third quarter were 12% of home sales revenue compared to 11.3% in the prior year. Selling expenses for the quarter were $27,900,000 or 7.3% of home sales revenue compared to $26,000,000 or 7.1% of home sales revenue for the third quarter of twenty seventeen, a 20 basis point increase. The increase in selling expenses as a percentage of home sales revenues reflects additional operating expenses primarily associated with increases in advertising expenses. General and administrative expenses were 4.7% of home sales revenue compared to 4.2% for the third quarter of twenty seventeen, a 50 basis points increase. The increase in general and administrative expenses as a percentage of home sales revenues is primarily due to one time acquisition related transaction expenses associated with the acquisition of Wynn Homes. In connection with the issuance of our senior notes, we reduced the revolving commitment under our credit agreement from $750,000,000 to $450,000,000 and this quarter we recorded $3,100,000 in debt extinguishment costs related to the credit agreement. Pretax income for the quarter was $49,000,000 or 12.9% of home sales revenue. We generated net income in the quarter of $37,700,000 a 12% increase over the prior year third quarter. Net income was 9.9% of home sales revenue, the highest percentage in the third quarter as a public company and represents earnings per share of $1.66 per basic share and $1.52 per diluted share. Weighted shares outstanding for calculating diluted earnings per share diluted earnings per share are impacted by our outstanding convertible notes. In the third quarter of twenty eighteen, our average stock price was $54.97 exceeding the conversion price, and therefore the convertible notes were determined to be dilutive. This resulted in approximately 2,000,000 share increase to the weighted average shares outstanding for the diluted EPS calculation for the quarter. Third quarter gross orders were 2,157 and net orders were sixteen twenty nine similar to the second quarter. Ending backlog for the third quarter was twelve twelve homes compared to thirteen twenty eight last year and slightly up from the eleven eighty four at the end of second quarter. The total dollar value in backlog was $292,600,000 The cancellation rate for the third quarter was 24.5%. We ended the third quarter with a portfolio of approximately 53,600 owned and controlled lots, up from approximately 46,800 at the end of the second quarter, which is partly attributable to the Wynn acquisition. As of September 30, approximately $26,800 were owned and of this amount, $7,500 were finished vacant lots, 15 thousand 5 hundred were either raw or under development, 1,700 were completed homes including information centers and 2,000 were homes in process. As of September 30, we had approximately $38,000,000 in cash, approximately $1,200,000,000 of real estate inventory, consisting of $648,000,000 of land, land under development and finished lots and $540,000,000 in completed homes, homes in progress and information centers. At September 30, we had 638,800,000 in total debt outstanding under our revolving credit facility, convertible notes and senior notes, and our available borrowing capacity was approximately $100,000,000 Our gross debt to capitalization was approximately 51% and net debt to capitalization was 49%. At this point, I'd like to turn it back over to Eric. Thanks, Charles. In summary, we had another outstanding quarter. Now let me provide some thoughts on what we are seeing thus far in the fourth quarter and some guidance for the rest of 2018. As reported in our monthly press release, we closed four sixty eight homes in October, down 12% from the five thirty one closings in October of last year. The four sixty eight closings came from 83 active communities resulting in an absorption pace averaging 5.6 closings per community per month. Although this absorption pace was not as strong as last year and represent a slower sales pace in 2017, we are still seeing strong demand and based on our pipeline, we are still confident in closing more than 6,400 homes in 2018. Closings for the year through October totaled 5,128. We recognize that we will need strong results for the last two months of the year to achieve more than 6,400. We expect closings to be heavily weighted in December, which is historically our strongest month. Affordability continues to remain a focus. As mentioned in prior calls, we expect our absorption rates to normalize off the record breaking results from the prior year. Interest rates and higher prices have begun to stretch affordability. Historically, we have seen buyers in this type of environment shift down in size of homes purchased and we would expect similar results in the near term and believe we will be in a position to capitalize. As Charles mentioned, our net orders were similar in the third quarter this year compared to the second quarter and we continue to see strong demand in traffic in our information centers from renters wanting to convert to homeownership, proving that buyer interest levels are still high. As we have said all year, we are on track to end 2018 between eighty five and ninety communities, continuing to expand our footprint in our current markets and adding new ones. One of these new markets is Las Vegas, where we expect to have our first closings in November and add the year between twenty five and thirty closings, making Las Vegas another successful launch for LGI. This expansion will continue in 2019. We are on track to meet our goal of 20% to 30% community count growth next year. We are also on track to meet our average sales price guidance in 2018 between $220,000 and $230,000 and to meet our previous margin guidance. We believe we will end the year with gross margins between 24.526.5% and adjusted gross margins, which excludes the effects of interest and purchase accounting, will continue to be strong, ending the year between 2628%. Closing more than 6,400 homes with consistent margins, average sales price and SG and A leverage leads us to believe that our full year basic earnings per share will be between $6.5 and $7.25 per share. Now, I'll be happy to take your questions. And our first question comes from the line of Nishu Sood from Deutsche Bank. You may begin. Thanks. So first question I wanted to ask was just in terms of the response to the slowdown in pace. Charles, you mentioned that you have increased the rate of marketing spend. And so what is typically the flow through? When did you increase the marketing spend in response to the slowdown in sales pace? And when would that begin to show up in terms of closings normally? Yes. I mean, I'll take that Nishu. This is Eric. We started really spending the money in August as interest rates continue to rise and advertising monthly payment and really looking and appealing to the renters that are looking to get into homeownership. We increased our marketing spend to deal with higher rates, so certainly over the last ninety days or so. And I think it's also a good reminder that over the last couple of years, the demand has been so strong that we haven't spent our full marketing budget and nor have we needed to. So we think it's just getting back to more of a normalized spend when it comes to advertising and what LGI does to drive leads to our information centers more so than we're spending an excess amount over budget. Got it. Got it. Okay. And in terms of you mentioned that another response that buyers typically have when there is an affordability constraint is to shift down to a lower price model, which given your the spec oriented nature of your business would be as simple as looking at a different unit. Has that already begun to occur? Is there some response that is necessary on your part? For example, if you have a community that used to be with the starting model at 200 and the highest one at $2.50, do you now need to shift it so that to adjust for to shift what you're putting up? Or how is that going to work? And has that begun to provide some offset as well to date? Yes. I think we're already seeing that an issue. And I think a general comment is we're always looking at affordability. We're always looking at all of our core plans on a per community basis. So if we have the ability to build a smaller square footage plan, we will do that, somewhat limited based on HOA requirements, city and county requirements in some cases. But generally, we have four or five floor plans per community and the customer will have options on which one that they choose. Obviously, the customers always like the larger homes better, but they may have to select based on qualifications and where interest rates and pay may are today, they may have to elect to get into a smaller square footage plan. But even in that scenario, we are very optimistic about the business and also strongly believe that getting into a smaller square foot home and owning it is a lot better than renting. Got it. Got it. And final one, the Pacific Northwest comments are pretty notable given that that has been an area that most other builders have cited as being at the front end of the slowdown. Was it just Sacramento? How did the rest of the Pacific Northwest look? And is that start in Sacramento, which just sounds, I mean, at a fantastic rate, is that sustainable? Well, it's sustainable from a demand standpoint. And we've seen extremely strong demand in Seattle. The wholesale business has really helped out in the Northwest division as well. So we've seen strong demand up there. I think one thing that's helping us in comparison with what the other builders have talked about on their calls is our average sales price in Seattle is still in the $3.50 to 3 80 range and that's still a very affordable, very appealing price point in the Seattle market. So we're still continuing to see strong demand. Got it. Thank you. You're welcome. And our next question comes from the line of Michael Rehaut from JPMorgan. You may begin. Hi. This is Allad on for Mike. Just first, it sounds like demand is still fairly strong at your price point, but there was that about a 15% decline in absorption in 3Q. And I was just wondering if you could break out any particular regions where you're seeing some slower demand trends? Sure. This is Eric. Yes, it was slower than last year, but historically right in line with our averages. And based on the third quarter of twenty eighteen compared to the 2017, of our six divisions, three were higher and three were lower. We highlighted a few on the call, but the Northwest Division closings per community was higher this year, as well as the Southeast Division and the Midwest and then the Central, Southwest and Florida were lower than last year. So it was mixed. Okay. And those regions that had the slowdowns, were there any particular drivers that you want to call outside from some of the affordability things that you've mentioned? And in response to those things, have you found incentives or any particular type of incentives maybe helping to pay for the rate increase more helpful? And lastly, just when you look at you mentioned that December tends to have higher weighting when it comes to the closings. I was just wondering if that also included some form of incentives that you're planning on boosting some more SG and A in the 4Q or kind of what you have built into that closings guidance? Thanks. Yes. There's a few questions there. But on Florida as an example, one of the areas are slower, a lot of community by community transition and close out. And like I said, a little bit slower compared to last year, which was a record breaking quarter. It's a little bit expected with the higher rates, but certainly no big drop off in demand or what we're seeing from a marketing standpoint in any of the markets. And then as far as incentives go, we're not a big incentive type of company. We price the gross margin. So we expect our adjusted gross margins like we talked about on the call to be consistent. In fact, the first nine months of this year compared to last year, 27.3% compared to 27.4%. So another year of very consistent gross margins for LGI and we expect that to continue through the fourth quarter. Okay, great. And just lastly on the gross margins, the increase in gross margin this quarter and the strong gross margin going through, how much of that also has to do with higher mix? Being that you just mentioned the higher price community in Sacramento, how much of the gross margin is being helped by higher mix versus or maybe underlying pricing power in the market? Yes. So this is Charles. Not so much as a percentage. I mean, the higher mix or the higher price points, we underwrite to similar gross margins. So our expectations are similar, despite where the ASP may come into play. And I think this quarter, certainly from the financial gross margin aspect, was impacted by the Wynne acquisition, so relatively consistent. As Eric would say, I think our results this quarter relatively consistent or similar and that's where we would expect them to continue to be. Okay, great. Thank you. You bet. And our next question comes from the line of Stephen East from Wells Fargo. You may begin. Thanks. This is actually Paul Spilsky on for Stephen. First of all, Eric, I noticed that you guys do have a national sales promotion going on your website right now. Can you talk about the magnitude of incentive or the type that you're offering? And is that targeted to specific inventory? And on a limited basis, are it more broad based? And I'm not I can't recall, is this the first time you ever had a national sales promotion? It is the first time we've had a promotion on a national event and that is really just our marketing team really staying on the business and really coming up with new ideas on how to promote LGI across the country and drive more sales and leads to our respective communities. And we thought it was a great idea for the end of the year and make sure that we hit our 6,400 plus closings and do everything that we say we're going to do. So our marketing team is on top of the business, always looking at great ideas. The national sales event is not so much of incentive, it's really letting people know to look into homeownership and get a hold of our sales representatives that are information centers. We have finished inventory that we can move customers in by the end of the year. That's pretty unique in the homebuilding industry. We can get them in before Christmas, we can get them in before the holidays, enjoy their new house and really promoting the fact that we can make that happen and get them out of their rental situation and into their new home. Okay. Other than your press release talked about some community friction in Florida and the central regions. Is there any way to break apart maybe the lower demand? Were you seeing lower mailer responses or just overall lower traffic or decline in qualifications? Any kind of color around what happened in the quarter with respect to closings? Yes. I think it's a tough question to happen what happened in the quarter because overall, we averaged 6.5 closings per community, but they got some very positive results. So we had a lot of positive things happen in the quarter. Demand by no means is slowed down. We're still seeing strong demand. When you're dealing with higher interest rates and an average sales price that last year was $211,000 this year is $237,000 so a $26,000 increase in average sales price. Obviously, that drives the monthly payment higher, makes it more challenging for customers to qualify in the on the same home, but offset by a lot of positive things happening in the economy like job growth and wage growth, etcetera. So it's hard for us to say it's slowing because we're comparing it to the best quarter in LGI history and the best year in LGI history and just as strong of absorption as we had a few years ago with an average sales price $50,000 to $70,000 less. So we look at all the metrics, we're on top of it. Certainly, our conversion rates aren't as strong as they were last year, but overall very positive. Given the reduced affordability and the change in monthly payment, have you had to maybe alter your sales strategy or presentation that you do on sales center? Center? No, no. Our presentation to our customers is the same and it's been the same since 02/2003 and really talking about the value of homeownership and making sure the customers have a great experience. And I think for our managers and our employees and our sales team and for customers, what is different this time is over the last few years, we've had a few interest rate bumps and then they go down again and they go back up and they go down again. This time, I think we all agree interest rates are higher and we're selling thirty year fixed rates in the plus 5% range or even 5.5% range and that's going to continue. We don't believe they're going to go back down into the 4s and may likely get into the 6s and we need to be explaining that to customers. We think it's a great time to buy. Prices and interest rates are likely to continue to go higher. Okay. Thank you. Appreciate it. Thank you. And our next question comes from the line of Carl Richard from BTIG. You may begin. Thanks very much. Hi, guys. I wanted to ask Charles or Eric about the community ramp for 2019 and you've talked about the 20% to 30% growth. And when we're looking at modeling that, is that sort of a gradual growth rate through the year? Is there a back end or a front end load implied there? I think it's going to be more gradual, Carl. Throughout the year consistent 20%, thirty % based on end of the year end of the year number to end of the year number. Okay. All right. Thanks. And then, lumber prices have come in quite a bit in the last four to six months or so. And so I'm assuming that that will start to flow through and help a little bit on the cost side. Can you talk about sort of the timing of that, of how that will help you assuming that trend stays, say, flat from here? Sure. This is Charles. So I think for the most part what we're seeing in our construction budgets is that costs are being are stabilizing and anything where we're seeing an opportunity where costs are coming in, We're taking a look at our fit and finish as well, making sure that we're looking at the right product and building the right product so that we can flow that into our pricing model that we can stay mindful, if you will, of affordability. So I think what we'll see is some of those savings will get offset with some changes that we'll make in our plans. And our expectations is that we'll see moderate increases to our construction budgets. And we feel that's manageable from a pricing standpoint to maintain our adjusted gross margins in our guidance range. Okay, great. And then last question, when you look at your can rate, has the mix of those cans changed? Are you seeing still the majority of those being sort of inability to get financing? Or are you seeing more dropouts of existing orders due to other reasons? No, similar. It's still very heavily weighted towards not being able to get mortgage approval. All right. Thanks, Eric. Thanks, Charles. You're welcome. Thank you. And our next question comes from the line of Eric Barron from Housing Research. You may begin. Hello? Hello. You're on. Okay. Sorry about that. Yes, this is Alex. I had a question. Obviously, a lot of builders have been talking about affordability and that they are making moves to open more affordable communities. I'm kind of wondering if you guys have started to feel the effect of more competition and a lot of these other guys are also pretty promotional with discounts and incentives and just kind of what the plan is to compete against that? Yes, this is Eric. I'd say we haven't seen the effects of that yet. I think it's positive that all the builders are talking about getting into the entry level. That's where the demand is going to be. That's where the demographics point to. So that's a very positive sentiment towards the primary market that LGI is focused on. There are certainly places where we're competing with them to new deals to buy new deals, but with 53,000 owner controlled lots, we think we're really in good shape there. We're still focused on move in ready homes, converting renters into homeownership. I think the other builders are still have their different options and design center plans. So I think we'll keep focusing on what LGI is doing. It's worked really well so far and I think we're going to continue to grow regardless of what the other builders are focused on. Got it. And then Charles, I don't know if you had like how many homes how many orders came from Wynn this quarter, both in orders and in backlog? Sorry, I don't Alex. We don't have that in front of us. Okay. And last question, I think I heard you right. You said you had like 100 something homes sold to investors. Do you guys see that as being a larger part of your business going forward? And if you have a number for last year, did you sell any last year? Yes. We think it's going to be a good part of our business going forward, probably consistent as a percentage of where it's been. This third quarter of twenty eighteen, we closed 104 homes through our wholesale channel. In the second quarter, it was 103 and the third quarter of twenty seventeen, it was 96. So pretty consistent. Got it. Thank you so much. You're welcome. And our next question comes from the line of Jay McCanless from Wedbush. You may begin. Hey, thanks for taking my questions. The first one, I wanted to touch back on the wholesale and you guys said that Northwest wholesale played a role there. How much of your closings this quarter in the Northwest came from wholesale? Thirty one? Thirty one. 30 one closings. Charles had to look it up. 31 closings. 31. Okay, great. And then the second question, just going to touching on something you all discussed in the release about growing the community count to make up for slower absorptions or and I know I'm paraphrasing it badly. My question is why if the absorptions are slowing down, does it make sense to look at a rehash of the product to maybe take some more floor plans down to smaller sizes? Do you have to do the 20% to 30% growth in the face of what seems to be a pretty steep falloff in absorptions? Yes, I can take that, Jay. Well, first of all, I'll start with the 20% to 30% growth in community count. That's really been there all year, no matter what interest rates are doing, those are communities that are coming online that we've already planned on and agreed to. And then your severity and absorptions, similar to how we answered it before, yes, we are coming off last year being a very strong year, very strong quarter. We raised guidance three times, but at 6.5 closings per month that we just produced in the quarter and to hit our goal of 6,400 closings for the year, we're going to need to average 6.8 closings in the fourth quarter. And if we continue at that north of six closings per month pace, which we believe we can, continuing to buy deals, grow the company, continuing to expand, that's going to be great and really accretive to our shareholders. The goal is to be three times that size we are now and be a top five builder, closing six closings a month and this 20% to 30% community count growth is just the next phase of that plan. Got it. And then the other question I had and apologize if you have already touched on this. When homes, how many communities do you expect that it will contribute to that 20% to 30% growth next year? Four or five net communities additional in Raleigh. Okay. And sorry, that brings up one other question I had. Was there any storm delays for you guys getting some homes closed? Were there some closings that pushed into 4Q because of the weather? No, no weather impact with LGI. Okay, great. Thank you. Thanks. Thanks. Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Eric Leeper, CEO, for closing remarks. Thank you, everyone, for participating on today's call and for your continued interest in LGI Homes. Have a great day. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.