Century Communities, Inc. (CCS) Q3 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Century Communities Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Dixon, Chief Accounting Officer.

Good afternoon. We would like to thank you for joining us today for Century Communities third quarter 2018 earnings conference call. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statement. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in the forward-looking statements. Certain of these risks and uncertainties can be found under the heading Risk Factors in the company's most recently filed annual report on Form 10-K as supplemented by our other SEC filings. Our SEC filings are available at www.sec.gov and on our website at www.centurycommunities.com. The company undertakes no duty to update any forward-looking statements that are made during this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The company's 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. Management will be available after the call should you have any questions that did not get answered. Hosting the call today are Dale Francescon, Chairman and Co-Chief Executive Officer; Rob Francescon, Co-Chief Executive Officer; and David Messenger, Chief Financial Officer. With that, I will turn the call over to Dale.

Thank you, Scott. Today on the call, I will review our operating highlights and business updates. Rob will then discuss our business and markets in more detail. Afterwards, Dave will follow up with further information on our financial results, balance sheet and reaffirmed outlook for the balance of the year. Following our prepared remarks, we will open the lines for questions. During the third quarter of 2018, we continue to expand our operations and profitability, as we've generated significant year-over-year growth in our key operating metrics, including home sales revenues up 47%, net new home contracts up 66%, deliveries up 80% and backlog up 35% in value and 80% in homes. Our adjusted earnings increased 46% year-over-year to $26.1 million or $0.86 per diluted share. Additionally, we ended the quarter at a 125 actively selling communities for our Century Communities brand, a 17% year-over-year increase. We also expanded the asset-light, lower price point operations of Wade Jurney Homes into Texas, Arizona, Indiana and Ohio. These new markets are anticipated to begin generating closings in the first quarter of 2019. During the quarter, we grew home sales revenues to $552.9 million, an improvement of 47% from the prior year quarter, led by an 80% improvement in home deliveries. Third quarter net home contracts also increased 66% to 1,515 homes. In the Southeast, we experienced severe weather during September, mainly affecting our Wade Jurney Homes segment, which pushed the portion of deliveries into the fourth quarter and constrained our selling activity in the region for a period of time. Adjusted homebuilding gross margin of 21.2% was in line with our expectations and stable year-over-year, resulting in adjusted homebuilding gross profit dollars up 50%. We ended the third quarter with nearly 3,000 homes in backlog, equating to $931 million in backlog value, an increase of 35% compared to $689 million in the prior year quarter. Our average price in backlog decreased year-over-year, in line with our strategy and shift towards more entry-level buyers. This overall progress is a direct result of our diversified national homebuilding platform in attractive markets with a strong capital position to support accretive investments and our commitment to drive continual improvement in all aspects of our business. Our financial services group, which provides mortgage, title services and insurance to create a one-stop solution for our homebuyers, continue to build out its operations during the third quarter, nearly tripling its profit year-over-year to $1.7 million. We are actively providing our financial service offerings to our existing Century Communities and have recently began offering them to our Wade Jurney homebuyers. Overall, the company today is well positioned for continued success. While rising interest rates and tightening affordability have created an industry-wide deceleration in housing growth, which has continued following quarter end, underlying job and population growth still remain positive in our markets. Our higher exposure to the entry-level demographic, which we began investing in a couple years ago now comprises an increasing number of our overall closes. The strength of our corporate, regional and divisional management teams, whose collective experience has been acquired throughout many cycles, has contributed to our disciplined ability to source land, control cost and strategically deploy capital to advance Century into its top 10 national homebuilder position. Following a period of acquisitive growth over the last couple years, our focus is now on growing within our established markets, expanding our Wade Jurney Homes brand into additional targeted areas and driving efficiencies and improvements in our business. Into the fourth quarter, we are confident in our prospects to continue growing our business and enhancing returns, as we remain on track to achieve all of our full year 2018 expectations. We are also open to additional avenues to generate attractive returns, such as today's announcement of our new share repurchase program. This program will allow us to repurchase up to 4.5 million shares, which demonstrates our commitment to building value on our company and the Board's confidence in our business. Even with the backdrop of overall softening of homebuilding fundamentals, we believe our diverse geographic footprint, balanced exposure to markets with still solid fundamentals and varied product offerings with a concentrated emphasis towards the entry-level buyer will continue to supply a strong and stable base for Century, as we move into the balance of this year and look forward into 2019 and beyond. I'd now like to turn the call over to Rob to discuss our markets and business in greater detail.

Thank you, Dale, and good afternoon, everyone. Throughout our national footprint, most economic indicators remain in good condition. The average month supply across all of our markets has increased to approximately 2.7 months, well below the national average. We continue to monitor the inventory levels and sales activity within each of our markets and are prepared to tailor our local strategies accordingly. We believe our team's ability to source quality land positions on attractive terms, control cost and deploy capital opportunistically, provide a constructive framework to continue enhancing the company's operations. In the West, we increased our period-end selling communities by 70% to 17 and will open additional new communities in the fourth quarter. The Bay area remains our strongest division in the West. While we have experienced some softening of demand, each of our Western markets in the third quarter increased both net new contracts and deliveries over the same period last year. In the Mountain region, we experienced a year-over-year decline in third quarter net new contracts. While the economies of Colorado and Utah remain positive, both markets have been adversely impacted by the tightening affordability for homes. The housing market in Las Vegas at the lower price points where we primarily operate has remained relatively strong. Texas, as we also mentioned on our last call has improved for us, as evidenced by an increase in our net third quarter contracts and an almost doubling in year-over-year deliveries, driven primarily by our shift to more entry-level product. In Austin, the growing tax sector has helped the city surpassed its previous peak employment, while rebounding employment levels and higher oil prices have aided demand for our homes in Houston. In the Southeast, net new home contracts and deliveries both improved in each of our markets during the quarter, resulting in increases of 44% and 20% year-over-year respectively for the region. We closed the quarter with a strong backlog of homes in this region, which increased 32% year-over-year. Since our completion of the acquisition of Wade Jurney Homes at the end of the second quarter, we have moved quickly to broaden the geographic reach of that portion of our business. Wade Jurney Homes has a unique and highly scalable business model, which requires less capital investment and yields quicker asset turns. These attributes are made possible by a streamlined and asset-light business model, including the sale of homes through retail outlets and the Internet as opposed to model homes. As a result, we have the ability to scale Wade Jurney Homes in a quick and relatively cost-efficient manner. For example, we have already expanded Wade Jurney Homes into carefully selected areas within Texas, Arizona, Indiana and Ohio, which we anticipate will begin generating deliveries in the first quarter of next year. Following this move we now have an even broader entry-level position within existing markets not previously served. While we are cognizant of the continuing demand shift that has occurred in the second half of this year, which has resulted in increased concessions by most builders including Century, we are pleased with the progress we have made during 2018, as we grow our business and its profitability. We have taken steps to proactively move to more entry-level offerings, which now comprise over 50% of our business and growing. Some of the factors affecting housing, in general are mitigated by our specific markets, which continue to exhibit growing populations, employment and household formations. As of the third quarter, we had more than 38,000 owned and controlled lots that provide an extensive pipeline for our projected closings through 2020. Our primary focus remains on executing on attractive investment opportunities within existing markets, expanding Wade Jurney Homes in existing and new markets, maintaining consistent strength on our balance sheet and taking accretive actions to drive shareholder value, including our recently announced share repurchase program. I will now turn the call over to Dave, who will provide greater detail on our financial results and outlook.

Thank you, Rob. Third quarter results showed improvement across nearly all of our metrics, consistent with our strong performance year-to-date. Our adjusted net income grew to $26.1 million or $0.86 per diluted share, a 25% increase compared to $0.69 per diluted share in the prior year quarter. Home sales revenues increased 47% to $552.9 million compared $374.9 million in the prior year quarter. This improvement in revenues was primarily driven by an 80% increase in home deliveries to 1,746 compared to 968 homes in the prior year quarter. Consistent with our efforts to expand our offering of entry-level homes, our average selling price across our markets was $316,700 compared to $387,300 in the prior year quarter. Adjusted homebuilding gross margin percentage was 21.2% compared to 21% in the prior year quarter. Third quarter cost inflation trends were similar to what we experienced in the first half of 2018. Our national purchasing agreements across efficiencies and long-term supplier and trade relationships all continue to help mitigate the effects of these rising input costs. While some typical fluctuations due to product and geographical mix may occur from period to period, we continue to expect our quarterly adjusted gross margin for the fourth quarter of 2018 to remain in the 20% to 22% range. Given the slowing that the overall housing market is currently experiencing, we expect some degree of margin compression to occur as we enter next year. As a reminder, adjusted gross margin excludes capitalized interest and purchased accounting impacts from cost of sales. On a GAAP basis homebuilding gross margin was 16.8% as compared to 17% in the prior year quarter, largely attributable to a 220 basis point impact from purchase accounting charges. During the third quarter of 2018, we incurred $11.9 million of purchased accounting charges, of which $1.8 million pertained to the UCP and Sundquist transactions, along with $10.1 million for the Wade Jurney Homes acquisition. We expect approximately $12 million of purchase accounting adjustments to be incurred in the fourth quarter of 2018. This includes $1 million related to our final purchase accounting for the UCP acquisition, along with an estimate of $11 million for the complete acquisition of Wade Jurney Homes. We currently expect that we will have incurred all purchase price accounting adjustments related to prior acquisitions by year-end. SG&A as a percent of homebuilding revenues was 12.8% in the third quarter compared to 12.3% in the prior year quarter. The 50 basis point increase was mainly due to: one, the adoption of ASC 606 in revenue recognition, which led to a doubling of our depreciation and amortization; and two, cost incurred to support our growth, which included sales and marketing, headcount and Wade Jurney Homes integration costs. As we look at the first component of our SG&A in conjunction with our forecasted revenue expectations, we see leverage opportunities in the fourth quarter and continuing into next year. We are actively addressing initiatives to reduce SG&A as a percent of revenues. Our financial services subsidiary consisting of mortgage, title services and insurance contributed $1.7 million in pretax income with $7.7 million of revenue in the third quarter 2018 compared to $500,000 on $3 million of revenue in the prior year quarter. The business continues to scale and, as we capture more closings in the West and Wade Jurney Homes, it will produce attractive margins with a growing income stream. Now turning to our balance sheet and liquidity. As of September 30, 2018, we had total long-term debt of $1 billion with total liquidity of $401.8 million, including $47.8 million of cash and $354 million of availability on our unsecured revolver and $840.8 million of stockholders’ equity. Our leverage is higher than historical levels, however, as a direct result of funding the Wade Jurney Homes acquisition and related secured debt payoffs at the end of the second quarter along with growth across our platform. As these investments generate returns, we anticipate we will be in line with our long-term target of 50% or less. In closing, our year-to-date results put us on solid ground to achieve our objectives for the full year 2018. We are reiterating our 2018 outlooks for the deliveries to be in the range of 6,000 to 6,500 homes and home sales revenues to be in the range of $2 billion to $2.3 billion. We continue to anticipate an income tax rate, excluding discrete items, of approximately 25% for the full year 2018. With our strong capital resources, entry-level emphasis, strategic investments and new share repurchase program, we remain well positioned to enhance returns on equity and capitalize on our diversified market positions to deliver another record year of earnings. Operator, please open the lines for questions.

At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Nishu Sood, Deutsche Bank. Please proceed with your questions.

This is actually Tim Daley on for Nishu. So I guess, just…

Hi, Tim.

So I guess, the first question on the Wade Jurney expansion. So obviously, we -- thank you for the information, the details about the four new states and the kind of rollout that we expect closings in the first quarter of next year. But how should we think about, I guess, the order of magnitude, that's the impact of these new operations will have next year? I guess, just thinking about obviously, the commentary looks quite positive on the ability to scale quickly on that platform. So if we could just get some more details. That'd be helpful.

Sure. Well, Tim, so like any expansion obviously as we -- the longer we're in the market, it will continue to grow. So as we look at the first quarter, we anticipate that we'll have closings from those additional markets. And then the number of closings will grow quarter by quarter. But as we get into providing guidance for next year, we'll give you some more information on that.

Okay. And then, I guess, just on the Wade Jurney. So thinking about this quarter just kind of running the numbers it seems like the orders were down about 100 units on the Wade Jurney platform on a year-over-year basis, while closings were up about 100. How much of that, I guess, order shortfall on a year-over-year basis was due to the storm impact that you, I guess, called out earlier on the call? A - Robert Francescon Well, when we look at it, weather was obviously a significant impact for the quarter. Given the impact of the hurricanes and absent that, we would have been ahead on a year-over-year basis.

All right. Appreciate that. And then, I guess, my second question, thinking about the mortgage business. So as you ramp it up in third folding in Wade Jurney a bit more and that sort of, I guess, aspect of the business how should we think about the capture rate there? So I guess, how much -- what was the capture rate on legacy Century versus Wade Jurney in the quarter in the mortgage business? And I guess, what you guys -- what do you expect that to get to kind of thinking about next quarter and into next year? Thanks for the time.

Hey Tim, this is Dave. So I think there's a couple of things to consider on the mortgage business. So when you look at our legacy markets, where we've been rolling it out from a capture rate in the third quarter on closings, we have some divisions that are in their infancy where they're low double-digits. But then you have some divisions where it's more mature, been around from the beginning and those are then called the 75% range. So I think, as we continue to ramp that up and get every up towards that upper end in 2019, we feel good about that. When we look at the Wade Jurney business, we haven't put any numbers out there yet, but we think for 2019, we expected to have minimal impact on 2018 given that we've been rolling it out just recently. And anything, if we do any -- if we capture any ups in actual closing this quarter, it will be a de minimis to the overall operations. But we'll provide some more color and clarity for you as we give 2019 guidance.

Great, thank you for the time.

Thanks, Tim.

Our next question comes from Michael Rehaut, JPMorgan. Please proceed with your questions.

Hi, thanks. Good afternoon, everyone. First question wanted to focus on the reiteration of guidance for the year, which is pretty impressive. And obviously, most of your peers have had to reduce guidance in some shape or form. So I was just trying to drill down at the same time, you've kind of mentioned that there's been some softening in demand in some of your regions. And you also pointed to expecting some margin pressure next year, perhaps as a result. Should we be -- despite the reiteration of guidance maybe looking towards the lower end of the range in terms of closings and revenues, just trying to take into account some of the recent softness.

Hey Mike, its Dave. I think that when we look at the range, we can see a path to get to the midpoint and a variety of points along that range. And it really depends on how November and December shake out. We think we have the product on the ground. We're seeing the traffic necessary in order to hit those ranges. And so that's why we felt the need to reiterate that range and not take it down. If we thought that we were only going to inch over the bottom line, we'd probably be adjusting the range accordingly. But we think that there is enough room for us within there to hit something within that range.

Okay. It's always good to hear. I guess, the second part of that though, is when you talked about margin pressure maybe hitting into -- in 2019, are you taking and given how -- as you've noted, that you're seeing some softening in demand, all builders obviously, and some have alluded to this kind of increasing incentive during the fourth quarter to hit some numbers. Is that part of how we should then think of if you're, in some ways able to hit your pace or you see a line of sight to hit your pace and, at the same time, you're talking about margin pressure occurring that -- is there any type of associated pickup in incentives or discounts that you're starting to work into the system and that this could then have some type of impact in 2019 or even in the fourth quarter as you've alluded to?

Well, definitely we're seeing increase concessions in the marketplace. If you look at it, though, it's really a project by project basis depending on inventory on the ground in those projects and what the comp set is for that specific project. So we're looking at it very closely to that degree. With that said, though generally speaking, concessions have increased in various forms. All the usual suspects that we've seen in the past in homebuilding that is starting to show within the national footprint right now. And so with that, to hit our guidance I wouldn't say that, that's because we're just concessioning all of our homes, but there are concessions in select instances based on that particular project within the marketplace.

I appreciate that. One quick last one, if I could. Just -- I think I missed it before. You've talked about purchase accounting. Dave, can you just circle back to what that number you expect to be in the fourth quarter and, if anything for 2019?

Yes. No, we expect $12 million in the fourth quarter. And if everything comes through as expected with that $12 million, we would then have zero in 2019. We would have washed through all the purchase accounting.

Great, thanks very much.

Thanks.

Our next question comes from Thomas Maguire, Zelman & Associates. Please proceed with your questions.

Hey guys. Thanks for taking my question. Just on the buyback here, certainly understand you think it's an attractive value and good use of capital. But just with the leverage ratio where it is, how do you guys balance continuing to grow the business and buying back the stock? Is it something an either or, or something we should think of as limiting growth going forward at all or just maybe you feel like you can do both and also be investing in land in the business at the same time?

This is Dave. I think that, right now, we've got an opportunity where we still have the ability with our balance sheet to invest in both that. And as we look at expanding the Wade Jurney business requiring less capital, we've got a lot of land already tied up on our balance sheet for the legacy regions. We think that we've got enough growth going -- we've got our lots already kind of nailed down for growth in 2019 and beyond. I look at it and say, Okay. We have the opportunity to acquire our stock at a pretty attractive discount, where the returns could be fairly sensitive substantial when you look at where we're trading compared to a book value basis.

Got it, I appreciate that. But in the same vein, I guess, I understand 50% is the target, but where would you be willing to take leverage for the time being, I guess, over a shorter-term time frame?

That's something that we discuss internally daily, as we're looking at some of the opportunities for pre-buyback in terms of how we're going to grow our business and trying to manage that. But we do think that over the longer term, here over the next period of time that as our current investments in UCP, Wade Jurney, Sundquist and other acquisitions and the mortgage business start to generate returns, that coupled with a buyback, we can still get back to a -- on our target of 50%.

Got it. Thanks guys, have a great night.

Our next question comes from Alex Rygiel, B. Riley FBR. Please proceed with your questions.

Very nice quarter, gentlemen.

Thanks, Alex.

Dave, could you quantify in some metric the impacts on weather in the quarter and what's getting carried over into the fourth quarter?

No, it's difficult to say. As we talked about earlier that we think that from the sales front for the Wade Jurney area -- the Wade Jurney divisions, the sales were really negatively impacted by having a retail storefront shuttered for a period of time as the water receded. Then we did see closings push from Q3 into Q4. And then we have construction that's been impacted as well. Don't have to quantify, but we still feel confident in maintaining our overall annual guidance.

Yes. And is any of the gross margin erosion in 2019 due to a shift in product mix?

No. In 2018, I think you're talking about? No, we don't think so.

Yes. And I thought you had mentioned on the prepared remarks that gross margins could deteriorate a little bit in 2019 given the current environment. Was that correct? Or am I misunderstanding did you mean 2018?

I'm sorry. I thought you were asking about 2018 in the margins. So that when we look at margin compression has been to 2019, that's due to kind of the current environment that we're seeing today.

Fair enough. And have you seen any change in customers, buyers use on options involve premiums?

No, not specifically. I mean, we're seeing that buyers are more selective. They're taking a pause, as they adjust to the higher housing cost. And -- but in terms of options on lot premiums, it only comes into play in terms of the overall affordability of the home.

And lastly, how should we think about prioritizing land purchases versus buybacks today?

We evaluate that pretty much daily in terms of where we see a disconnect in the marketplace or whether we see an opportunity to expand the business. And so where we think that dollar is going to get some of the best returns is where we'll put it to work.

Thank you. Nice quarter.

Thanks.

Our next question comes from Jay McCanless, Wedbush. Please proceed with your questions.

Hey, good afternoon everyone. Thanks for taking my questions. Dave, first thing, a two-parter on SG&A. I guess, first, could you break out the impact of the 606 change versus the additional headcount?

Yes. So 606 and the way we did revenue recognition, you're talking about the near doubling of our depreciation. I can give you an exact number at a later time.

Okay. And then the other side of that. If we think about Wade Jurney and the business now, how should we think about a base SG&A for Wade Jurney, plus Century as we move in -- for the rest of this year and then to 2019? What should that number look like on a quarterly basis?

I think we'll have more color for you as we give our 2019. As we get into 2019, I think as we're looking to assimilate some of their proxies into ours and bring our SG&A down from the 12.8% that it is today, I think that we'll have some better clarity for you here in the quarter to where we think kind of a run rate fixed G&A number is going to be.

And then could you just talk about what sounds like some weaker sales environment in Denver and, I guess, Salt Lake City versus Vegas? We've seen some of the existing home sales numbers and Denver looked pretty weak, but Salt Lake haven't seen much there. So can you put a little more color around those three markets?

Yes. So in our Mountain region, those are three markets comprised of Colorado, Salt Lake and then Vegas. Vegas is the strongest of the three. We've done very well out of Vegas. We've shifted to lower price points in that market and that seems to be where the market is. And generally speaking, we've done that everywhere, but that certainly resonated in Vegas. When we look at Colorado, Colorado has been a stellar performer for many years. And when you look at September sales in the overall market not ours, but the overall market they were down 20% of the market year-over-year on that basis. And at the same time, listings are up about 16%. So inventory is rising as well in which you would expect that as part of this situation here. But with that said, the average month supply is still below two months in this market. And so we're still selling homes. We're just not selling them at the torrid pace that we had and torrid is maybe too strong of a word, but at the better place that we had previously. But we're still selling homes. Our urban division is doing very well that's more of an infill-type location product, and that's doing very well. But overall, Colorado still a very good market. It's just not as robust as it was. When you look at Utah, it's kind of experiencing some of the same things although we have a much smaller investment in Utah, but it's kind of experiencing the same thing. As we heard from our division President out there that some people have just felt like they're taking a pause as rates of residence and you've heard this from a variety of people, but as rates have risen, as prices have risen in that Salt Lake market people are just a little bit slower to react on their purchases. But we think, over time, that changes and comes around hopefully by the spring selling season.

So Jay, for example, in The Denver Post today, there was article on the -- talking about the housing market here and the slowdown in Denver. And it was -- the slowdown was to get back to more normal levels and I think that's pretty much what we're seeing.

Great color. And then two more quick ones. Number one, we've seen a lot in the press lately about rain in Texas. Just want to see if that had any impact on the operations during 3Q or even as -- into October. And then also, if you all can just make some broad comments about how October's orders are trending.

Yes, in terms of Texas, the range there have had some impact. And when we look at it, the -- our Texas region is on the smaller side. So from a -- from an overall basis, it doesn't have the same impact that it would have somewhere else, but there has been an issue. Then when we look at October sales trends, we're seeing more of the same. When we look at our legacy regions, they're -- they were up 11% year-over-year in October. And so it's down from the 20% that we saw them being up in the totality in the third quarter. But when we look at it, they're still up double digits on a year-over-year basis, and that's part of what gives us optimism as we look forward. We're continuing to grow, we're opening communities and we're continuing to build out within our platform.

Sounds great. Great quarter, thank you.

Thank you, Jay.

Our next question comes from Alex Barrón, Housing Research Center. Please proceed with your questions. Alex Barrón: Yes, thanks gentlemen for all the commentary. So you mentioned industry-wide slowdown. How about by price point, are you seeing any -- is the higher end slower than the lower end? Or is it pretty much all across the board roughly the same?

Yes. I mean, as a general statement, the higher end is slowed more. We're still seeing at the low price points very good demand right now. Alex Barrón: Okay, got it. And in terms of your spec strategy, obviously, Wade Jurney is pretty much all spec. How about in the Century brand, what percentage roughly of your starts are specced at the moment versus build-to-order? And how is that likely to shift if the slowdown stays a little longer than you currently expect?

Well, if the slowdown is elongated then we'll be doing less specs than we are today. I mean, we're really monitoring our spec starts based on the run rate that we're getting out of each individual subdivision. And so that's really no different than the way we have always managed our business. And so when we look at it today, we have slowed down a bit on our spec starts. We haven't eliminated them. And -- but we'll continue to monitor it on a really, subdivision by subdivision basis to be consistent with what our sales run rate is. Alex Barrón: Got it, that makes sense. And in terms of the incentives you guys are offering, what are you finding that's most helpful at the moment? Is it paid buy downs or giving -- putting extra options in the homes? Or are you cutting prices? Like, what are you guys doing that's being most helpful?

Generally speaking, we're not cutting prices. But it really depends again at the particular subdivision or market on what works. And we've got the entire group of potential concessions that we can roll out. And so depending on each individual market and or project, what's needed, that's what we'll do. And obviously, we want to do that very sparingly if we can. Alex Barrón: Got it. Okay, well, best of luck. Thank you.

Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Dale Francescon for closing remarks.

Thank you, operator. And thank you, again, to everyone for joining us on today's call. We look forward to speaking with you again next quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.