Release Date: March 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Could you explain the dynamics behind the backlog gross margins being around 24% and the first quarter margins being slightly below that? A: The backlog margin is indeed around 24%, primarily due to sales made in Q4 where more incentives were used to address affordability issues. Interest rates moved against us despite Fed cuts, leading to increased incentives. However, as we progress through the year, we expect margins to trend upwards slightly as sales have picked up, although incentives are still necessary to drive volume.
Q: How are you managing lot cost inflation, and what impact does it have on margins? A: Lot cost inflation is a significant factor impacting margins, eroding about 200 to 300 basis points. While vertical costs have been stable, land remains competitive and challenging. We are monitoring potential surcharges or increases from subcontractors due to tariffs and other uncertainties.
Q: Can you provide guidance on community count growth and its impact on sales pace? A: We anticipate a gradual increase in community count throughout the year, aiming to reach around 90 by year-end, up from 78. This growth should support a steady sales pace, although macroeconomic factors could influence these projections.
Q: What are the main factors affecting your gross margin outlook for 2025? A: The primary factors impacting gross margins are market conditions, particularly interest rates, which have led to increased use of incentives. Initially, we expected margins to be around 25%, but rising rates and the need for incentives have adjusted this outlook. We focus on maintaining sales pace over price to manage margins effectively.
Q: How do you plan to leverage SG&A expenses as you grow in 2025? A: SG&A was elevated in Q4 due to bonus accruals, but we expect to achieve better leverage as we grow. With our current team and infrastructure, we aim to reduce SG&A as a percentage of revenue, targeting improvements below 14% as we expand our operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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