Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Eric, regarding gross margins, the midpoint of your 2025 guidance suggests only a modest decline despite starting the year lower than 2024. Are there any offsets, such as pricing or reduced incentives, that could counteract cost inflations? A: Eric Lipar, CEO: We expect gross margins to remain similar year over year despite rising costs in labor, materials, and land development. We plan to offset these through pricing adjustments and customer incentives, currently averaging $20,000 per home. Our historical range around 25% adjusted gross margin captures developer profit, even with incentives.
Q: On your 3Q call, you mentioned not expecting a slowdown in pace for 2025, yet your absorption target is lower. What has changed in your view? A: Eric Lipar, CEO: We are anticipating a slower sales pace in 2025 due to a slower start this year and higher rates. Additionally, the opening of many new communities means new sales reps and managers need time to adapt, which is a headwind for 2025 but will benefit us in future years.
Q: Could you outline the units under construction at the end of the fourth quarter? A: Charles Merdian, CFO: We had just over 4,000 total units in inventory, with about 2,500 completed, 1,360 homes in progress, and the remainder as information centers.
Q: How does the efficiency of mortgage buydowns impact demand, especially at the entry level? A: Eric Lipar, CEO: Demand remains strong, but affordability is the main challenge, especially for first-time buyers. Incentives like rate buydowns help lower monthly payments, making homes more affordable, but it's a balance between the cost of incentives and the number of qualified buyers.
Q: Regarding your guidance, which aspects do you consider most conservative? A: Eric Lipar, CEO: Our average sales price (ASP) guidance is likely the most conservative due to expected cost inflation. Our backlog ASP is higher than our guidance, and we anticipate raising prices to offset costs.
Q: Is your community expansion in 2025 weighted towards the front or back half of the year? A: Eric Lipar, CEO: Community expansion is likely more weighted towards the back half of the year, following a ramp-up to 151 communities at the end of 2024.
Q: Are you seeing any impact from layoffs in the Washington, DC area? A: Eric Lipar, CEO: Not necessarily. Our successful community in West Virginia is driving numbers, and we haven't seen significant impacts from layoffs in the DC area.
Q: How challenging is it to attract multi-family customers to your sales centers or website? A: Eric Lipar, CEO: Demand for homeownership remains, but we are spending more on marketing to attract customers. The gap between rent and mortgage payments is wider, requiring more effort to find qualified buyers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.