Good morning and welcome to the Beazer Homes Earnings Conference Call for the Quarter Ended December 31, 2015. Today's call is being recorded and a replay will be available on the company's web site later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's web site at www.beazer.com. At this point, I will turn the call over to David Goldberg, Vice President and Treasurer.

Thank you, Martha. Good morning and welcome to the Beazer Homes conference call discussing our results for the first quarter of fiscal year 2016. Before we begin, you should be aware that during this call we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, which are described in our SEC filings including our Form 10-K, which may cause actual results to differ materially from our projections. Any forward-looking statements speaks only as of the date on which such statement is made, and except as required by law, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future evidence or otherwise. New factors emerge from time-to-time and it is not possible for management to predict all such factors. Joining me today are Allan Merrill, our President and Chief Executive Officer; and Bob Salomon, our Executive Vice President and Chief Financial Officer. Following our prepared remarks, we will take questions in the time remaining. I will now turn the call over to Allan.

Good morning and thank you for joining us. We are pleased to report our first quarter results, which demonstrated progress towards both our 2B-10 target, and our deleveraging goals. Specifically, we posted big increases and home closings, revenue, adjusted EBITDA, and net income, and we paid down more than $20 million in debt. Here are the details; on the profitability front, we generated $1.2 million of net income from continuing operations. We reported $25.9 million of adjusted EBITDA, up almost 60% versus the prior year. We closed 1,049 homes in the quarter, which was up almost 19%. This equated to a 51% backlog conversion ratio, as our efforts to manage labor constraints in several markets proved successful. Better than expected top line growth, led to further improvements in our operating leverage, as SG&A as a percentage of revenue, declined 270 basis points versus last year, to 13.2%. We ended the quarter with nearly $635 million of future closing and backlog, which was up about 13% versus the prior year, and provides good visibility into revenue and profit growth in the next two quarters. In line with our stated goal of reducing our financial leverage, we repurchased $23 million of our 2016 senior notes during the quarter, and another $5 million thereafter, helping us reduce the run rate of our cash interest expense by more than $2 million annually. At the same time, we had about $145 million of unrestricted cash at the end of the quarter, more than we had at this point last year. There were a couple of challenges in the quarter as well, but none that lower our expectations for profit growth and debt reduction for the full year. You will note, that we had a small reduction in new home orders, despite an increase in community…

Thanks Allan. We continue to focus on the metrics that drive the achievement of our 2B-10 plan. Although we take will evolve over time, the expectation that we will reach $2 billion, with a 10% EBITDA margin remains unchanged. I will be reviewing first quarter results in providing some visibility into our operational expectations for the second quarter, and how this relates to our 2B-10 goals. So looking at our progress today; our last 12 month revenue totaled $1.7 billion, up $270 million or 19% compared to last year. In addition, our LTM adjusted EBITDA of $154 million is up more than $25 million versus the prior year. Our first quarter absorption rate was in the range of our peer group, but a bit lower than our expectations. Allan touched on many of the issues, and as he said, we don't believe it provides a barometer for the housing market. In the second quarter, we are targeting the sales base in the low threes. Although this is down versus the prior year, we haven't viewed matching last year's pace as a critical metric in our plans. There will be a number of factors at play, including two different dynamics in Texas. Specifically, in the second quarter of fiscal 2015, our operations in Texas, which represented about 20% of our business, and a combined absorption base of more than four sales per community per month. That pace created some unusually long delivery times for homebuyers, as land development and home production struggled to keep up. This resulted in some margin deterioration elongated backlog, which was compounded by weather issues that [indiscernible] labor. That's why we raised prices and stopped selling to the future phases, the slower sales pace in Dallas. Houston, our expectation for a slower sales pace is more a…

Thanks Bob. We ended the quarter with approximately $260 million of liquidity, consisting of $145 million of unrestricted cash and $115 million of availability on a credit revolver, after adjusting for letters of credit. Taking advantage of the liquidity we generate in the quarter, we repurchased $23 million of our 2016 notes during the quarter, and an additional $5 million thereafter, above-par, but below the make-hold price. Accordingly, we have now reduced the outstanding balance of these notes to $143 million. Since September of 2015, we have repurchased approximately $30 million of our 2016 notes, which will reduce our annual cash interest expense by more than $2.4 million. Although our initial expectations were to reduce our financial leverage at a pace that corresponds to the normal seasonal cash generation of our business, we are now prepared to pay out the 2016 senior notes, at maturity, through a combination of cash generated from operations and available liquidity from our revolver. We view this strategy as more advantageous than borrowing at historically high credit spreads, and absorbing higher interest costs for the next three to five years. If market conditions improve and we have options worth paying our 2016 notes that are better aligned with our seasonality, we would consider doing so. Regardless, we are committed to retiring about $100 million of debt during 2016. With that, let me turn the call back over to Allan for his conclusion.

Thanks David. On slide 17, we have reiterated our main themes for 2016 and our accomplishments in the first quarter. We generated year-over-year EBITDA growth of almost 60%, and expect full year improvements, as we head towards 2B-10. We grew our EBITDA at a dramatically faster pace than our inventory, allowing us to improve a return on capital and finally, we implemented a plan to pay off our 2016 notes and retired over $20 million of debt, demonstrating our commitment to reduce our leverage and interest expense, as we continue to improve the health of our balance sheet. We want to thank our team for their continued diligence and resiliency. With their support, we have both the willing ness and the ability to what's necessary to reach our profitability and balance sheet objectives. With that, I will turn the call over to the operator to take us into Q&A.

Thank you, speakers. We will now begin our question-and-answer session. [Operator Instructions]. Our first question is coming from the line of Ms. Susan Berliner from JP Morgan. Ma'am, your line is open.

Hi. Good morning.

Good morning Sue.

Good morning.

So I guess, I wanted to start with Houston. If you can give us some color, I noticed your can rate was up year-over-year. So I guess starting with can rate, and just color on the market, what are you seeing in terms of price points being impacted and [indiscernible] etcetera?

Good morning Sue. I would tell you, I think the can rate was a function of not super gross sales in the quarter. There really isn't a narrative that leads back to Houston, so let me clear about that. As it relates to the color commentary in Houston, and I have seen what some others have said, there is no question that the so-called energy quarters that predominantly do North and do West have been most adversely affected. Interestingly, there are quite a few submarkets, where approximately a third of a permits are generated in Houston that are actually up year-over-year, and it really gets into where are the job drivers in that market, are they healthcare related, port related, petrochemical related? And so overall, it is easy and accurate, that there is definitely headwind in pressure on pace in Houston. It is -- I mean, bifurcated is a simplification. It's more complicated than that by location. We are definitely seeing it in prices down to that $300,000 level. Six months ago, it was affecting $500,000 and $400,000 and so, I don't think that -- we are not trying to argue that we are immune because of price points. I do think -- our strategy has been for many years, to be in slightly different locations and so looking at our map, we are more South, we are more Southeast than our peers, and frankly, that's where the jobs are. So I think it's not a reason that we won't have headwinds in Houston, but it's why I think we are pretty well positioned, all things considered. I hope that's helpful?

Yeah, that's great. And just my other question was, with regards to land spending, I know you kept the total amount the same. But I was wondering, should we be expecting that there will be a bigger component from land banking, and if so, if you could help us with that?

Yeah Sue. You are absolutely correct to assume there is going to be a bigger component of land banking, than what we had originally mapped out. But I think it's probably still too early for us to give you exact percentages. We had said 80-20 last quarter, again I think it has been a little more geared towards land banking. But we will have more visibility, as we move through the year.

Okay, great. I will get back in queue. Thank you.

Thank you.

Thank you. So our next question is coming from the line of Mr. Alan Ratner from Zelman and Associates. Sir, your line is now open.

Hey guys. Good morning. Thanks for all the information. Allan, I guess, just given the decision to focus more on deleveraging, which I think is clearly prudent, given the capital market conditions right now. It seems like, in order to get the cash balance where you want it to be, to fund the $100 million of deleveraging, you are banking on a pretty significant improvement in absorptions, in the second quarter. And I was hoping you might give us a little bit of color on what you are seeing on the ground, that gives you that comfort on guiding for that or expecting that? I don't know, if you want to quantify the improvement you saw through the quarter or January activity. But I think that, it would be helpful for us? And then I guess, the follow-up to that would be, if the spring does not turn out to be strong, or some of the weakness we have seen on Wall Street permeates into Main Street, what contingencies you have in place, to generate that cash to hit your leverage targets?

Okay. Good question. First of all, at the risk of kind of a shocking statement, we don't actually expect, certainly, on a year-over-year basis and improvement in absorption rates, we have actually guided to lower absorption rate in Q2 than we had a year ago. I think, we are more focused on the mix, specs versus 2B builds, that played out in the first quarter, as we started to adopt this, and have had real benefit for us in -- on our mid-Atlantic divisions, where sales paces were good, but we clearly were able to emphasize or shift the mix to homes that would close sooner. What gives us confidence, is that over the last three months, we have had some success doing that. We don't need a return of 2015 paces to achieve our objective. Now in part, Alan, that's also because there are other elements to the plan. We are controlling our land spending, we guided to something on the order of $100 million in each of the next two quarters. That's a bit lower than it would have been six months ago or even three months ago. We have talked about more land banking. I think we have telegraphed what our expectations are, of our asset sales. Things are held on our balance sheet, as held for sale, and what we expect to close. So I think there are enough levers within the mix of things that we are doing, as sales paces improve inherently impossible to predict or control, there are other things that are available to us, so that we are in a very comfortable position, without being in the high yield market, prior to June.

Great. I appreciate that. And then, I guess the second question I would have would be, you are maintaining the 2B-10, the targets on margin and volume are unchanged. But I think intuitively, given the strategy shift, it would seem like there would have to be some type of potential offset, assuming this becomes a longer term decision to reduce that debt and not go out and refi or raise additional capital. So what metric, when you look at that 2B-10 plan, I guess, would be most at risk, as we look out into 2017 and 2018? Should we anticipate margin pressure, because you are land banking more, or are you going to preserve the margin and potentially see lower volume, if that comes to fruition?

It’s a great question. Honestly, we try and EBITDA prepared the questions we are going to be asked, and we clearly anticipated that. The hard part of the answer is, there is a lot that's got to happen between now and the end of the year, for me to really tell you. I mean right now, when we are underwriting deals, we have not changed our underwriting criteria for gross margins, that would put us at or above the 2B-10 range. In terms of our communities, and their performance at a pace level, I don't see a reason why we have to today, accept a structural reduction in pace. We telegraphed back in November, that there would be a rising mix of both land bank and land held for future development assets. We have a chart, I think it's in the appendix this time, that really lays out. There is a margin differential associated with the mix, and that was going to impose on us this year already, kind of a 50 basis point headwind, relative to last year. So I feel like we have sort of built that in. Now in the next couple of quarters, shifting 10%, 20% of the sales, two 2B builds from what -- of the sales from 2B builds to specs, I think that's going to pull a little margin pressure into Q2 and Q3, as it did into Q1. I don't see that that is a permanent shift. I mean, that's not a long term strategy to become a spec builder. It's dealing with a situation that we have got roughly six months or five months remaining, and it was within our control. But longer term, I don't think we are telling you that the -- in fact, we are not telling you that we expect to radically change or even materially change in 2017 and beyond, the mix of specs. One of the things that's kind of hidden in plain sight is, if you watched our balance sheet over the last three or four years, our active lot number hasn't changed a lot. Our absorptions and our total deliveries have gone up. We have shrunk the quantity or the year's supply, and actually the ratio of what's controlled under option has increased over a period of time, and I think that will continue to be the case. So there are more things to managing to a deleveraging strategy, than a simple trade-off between pace and margin.

Great. Thanks a lot.

Thanks Alan.

Thank you. Our next question is coming from Mr. Michael Rehaut from JP Morgan. Sir, your line is now open.

Thanks. Good morning everyone. So, just working off of the last question and answer and appreciate obviously all the detailed thought process on this, and certainly makes a lot of sense, in terms of trying to pay off the debt, sooner than later. So just wanted to make sure that I am kind of understanding, you kind of mentioned that the spec strategy is not a long term strategy, which I think also makes sense, that it's more of a temporary strategy to generate cash in 2016. At the same time, looking at the balance sheet and the debt maturities, you do have maturity, you have a term loan in 2017, more coming due in 2018. So is this something that -- there are other steps that you intend to take to address those maturities as well, because it could seem to just be an ongoing problem, or do you think that that would be more dealt through the -- maybe pulling back on the spec from the increased activity this year, and then shifting next year or increasing -- continue to increase the land banking and other alternative financing methods?

Mike, I think that it’s a good question, and thank you for it. But I think we have to look a little bit at kind of pieces, as we move forward. There is a lot of moving parts in terms of the overall environment; what's going to happen in credit markets, what's going to happen to housing markets. It's very difficult to comment on the 2018 maturity or the 2019 maturity, other than to say that we are dealing with the 2016 maturity, we are going to put it behind us. And then want to continue to evaluate our strategy against what's happening in the macro environment in the housing market. If things were to slow down a little bit, we might generate some more cash in the business and much low land spending, that might make it easier to do with the 18 to the 19. So we are very well aware what the maturity structure looks like in front of us, and we will be very pragmatic in moving forward and continue to be proactive in adjusting our strategy. We have developed this strategy for 2016, and we will move forward as we go.

I just want to add one thing to David's response, because I agree with it. But I think Michael, the other thing to realize is, is that improving the efficiency of our assets is a longer term strategy, and we have taken land held from over $400 million to over $300 million. There is a portion of our capitalization that's clearly tied up, if you will, by assets that are generating revenue and profits. Getting Sacramento active and Natomas, and I intentionally said turning that division into a cash generator, is a big part of our strategy. We will activate other assets in the coming quarters and years, and frankly, that's something that we have had no benefit for many-any years. So as I look at into 2018 and 2019, I think that there are more things on the table and simple trade-off split with the spec ratio.

Great. And then just also following up on the -- some of the detailed regional commentary and certainly appreciate that as well, I was hoping to get, if possible, a little more sense of -- when you look at the average absorption for the quarter down 13%, you highlighted the West. But I was hoping to get some type of rough quantification of what sales pace was on a regional basis year-over-year? Just to get a better sense of really what was going on? And you had also said that you took steps throughout the quarter to improve? Maybe you can get a sense of -- on a year-over-year basis? I mean, you obviously still expect 2Q to be down year-over-year, but how did things begin and end during the quarter? So regional color quantification on the sales pace and then throughout the quarter as well?

Kind of put it in plain sight, the West had a big decel in absorption rates. It was over half a sale a month in community in the West, and that drove the outcome. Actually, the pace was up a little bit in the East, and down a little bit in the Southeast, that was more of available communities dynamic than any commentary I want to make. I think one of our markets in the southeast, I think for competitive reasons I won't name it, but one of our markets in the Southeast went from, I don't know, from four something to three something in terms of pace. So we'd have a little bit of an effect. But honestly, we were contemplating that. So I am not trying to put the elephant behind that telephone pole. The story for us in pace was in the West, and it was in the markets that we described. As I said, and I will be happy to get into a little bit of the detail. Part of it was the market, and yeah, Houston was softer than we expected. But we still had a decent sales pace there. In Dallas, we made a decision. We suffered last year enormously by selling into future phases, and then holding the backlog. You got costs creep in that backlog and you got customers that answer you, when their delivery dates are being pushed out, I don't blame them. That was a self-inflicted issue, and it was tough; because our sales team could have sold a lot more homes in Dallas, in some of our communities, where we held lots off the market, because we don't have them at a stage of land development yet, where we can predict exactly when their house is going to start…

Great to hear. Thanks very much.

Thanks Mike.

Thank you, sir. Our next question is coming from the line of Susan McClary from UBS. Ma'am, your line is open.

Thank you. Good morning.

Good morning Sue.

In terms of accelerating the spec sales, can you talk a little bit to what you are doing, to make sure that you maintain the proper levels, that perhaps certain markets doesn't get too far ahead of you? And along with that, do you think that -- as we hear more about this trend across the industry? I know a lot of your peers are kind of moving in the same direction, do you think that in certain markets, there is any chance that we could move from, perhaps a situation where you are undersupplied to being oversupplied, especially if things were to slow further?

So let me take part of that, and I think Bob will talk a little bit more about the spec strategy. I don't see right now, evidence in either the resale market, which is much larger or the new home market of building inventories. Now we are early in the spring selling season, and I certainly can't see the starts releases that all of our peers are doing. The good news about the specs is, they turn pretty quickly, and so, I am not worried about it, but I am aware of it. I definitely think, we are going to make a bit more emphasis, maybe than others, because we've got a June maturity that we are managing to, as a part of our motivation. I think, if you are on a September year-end, or an October, November, December year end, you are going to have a little different sense of timing than we have, and I don't mind being first. So I would tell you that. Just one other thing about the whole spec strategy, and Bob alluded to this, it will sound, I suspect, somewhat superficial to folks. But the reality is, when someone comes in to our community, when a buyer comes into our community, in many instances, they don't know, whether a 2B built home or a spec home is right for them. Now some have timing issues that force us back for a near term delivery. Others have designs on options and feature selections that will require a 2B build. So in part of what we do in every community. And honestly, the answer is different in every community, is how do you differentiate those homes that are available for quick delivery, if not immediate delivery, versus the ones that are to be built. And…

Yeah Sue, we have talked about this before and in answer to your question about us not getting too long specs. I still continue to control it. Our spec starts run through me. It’s a community by community discussion and decision, with your selling specs, you can get more specs. If you have communities where you haven't demonstrated the ability to sell them. Then you can continue to ask for them, you just may not get additional spec starts. So we continue to do that, and again, looking at the pricing differentials between 2B builds and specs is a very important component. In addition to sales space of how many have you sold in the last three months, specs versus 2B builds. So we really keep a tight eye on that.

Okay, thank you. Very helpful. And then you have talked about how the beginning of this year has started off pretty well. Can you just give us any details around January, and [indiscernible] together?

Yeah, January came well closer to the end of the month. And I will tell you, it's hard to know week-to-week in this business. You have a good week, a bad week, and then you got, like weather, and what was somebody else doing from our promotions standpoint. I am going to layer decidedly and admittedly a bit of an optimistic hat here for a second, because the things that have happened most recently have been pretty positive. Couple of our competitors launched their big promos and heavily promoted promotions in front of us this year, starting in January. And when they do those things, I pay them the respective, expecting that they are going to compete hard for sales at that point. Our spring promos started February 1st. We are in the middle of it beyond the spot savings. We are promoting it, and as in prior years, I expect it to be an important part of Q2 sales. What was interesting, encouraging, happy making, was that our last week of September was absolutely spectacular. Now, the whole month was very good, but that last week was really strong, and I look at that and say now, in the face of the fact that every one in our company knows that our blitz promo starts February 1st, and we were not out in promotional mode in January, and some people that we compete with, were to a post of the week that we posted at the end of January. Now its one week, all right, there are 52 of these little battles. So I always try and be balanced about it, but that's a very encouraging dynamic to have a strong week, in the week before you actually start your promo, and in the face of other people doing things, that I expect will be successful for them.

Okay. Thank you. Best of luck this year.

Thank you.

Our next question is from Sam McGovern of Credit Suisse. Sir, your line is open.

Hey guys, thanks for taking my questions. Just after the 2016 maturities are paid, if we see rates tighten later in the year, should we expect you guys to be back in the market opportunistically, both, to target other maturities that also add back the debt that you paid off?

We are going to reduce debt and reduce cash interest expense. This quarter, next quarter, and for the foreseeable future. That leaves open opportunities in the future to do refinancings. But we want to be clear, that regardless of the rate movement, we expect to have less debt at the end of the year, and less debt next year.

Great. And then just with regard to the repayment, you guys mentioned both a mix of cash and revolver draw. Can you give us a sense in terms of the mix between the two?

We are not going to give an exact sense, because it will depend. There is a lot of levers that go into cash generation during the next two quarters, and I think Allan and Bob and I have talked about the kind of different levers that we have within the business. Certainly, there will be some revolver, and we will look, kind of as we move through the end of the year, how much the revolver ended up paying back. So no specifics on that Sam, but we will see as we move through the year.

Got it. And just lastly, when you look at leverage longer term, can you remind us on your target? You mentioned debt reduction, but how much of it was going to be mix of debt reduction versus the growth of the business?

Well, we are often asked in a slightly different context. 2B-10 is terrific, what happens next, and I want to kind of tell investors, remind them, that we have tried to hide in plain sight, exactly what we want to do with the business. If you look at our proxy, maybe I am cynical, but I think that people try and do those things that they are compensated to do. And we have laid out our long term comp objectives for the senior management team, that frankly, all of our division presidents are levered to, and their three components. One is, growth in pre-tax income, one is improvement in return on assets, and the third one is, to reduce debt-to-EBITDA. And I can tell you that the target level was six, and the opportunity to get paid is at five or below. So if you think about kind of where we want to go, and where our incentives reside, we put it black and white. And I will say, it's just a little footnote on that. I think investors liked it, and the reason I say that is, we got the highest vote for our say-on-pay in the company's history, 97% or 98%. So I think, we are getting good feedback that we are focused on the right things.

Great. Thanks guys. I will pass it on.

Thanks Sam.

Thank you sir. Our next question is from Jay McCanless from Sterne Agee. Sir, your line is now open.

Good morning everyone. First question I had, on the order comp, could you talk about -- New Jersey orders were in last year's numbers, and if you strip those out, what the order comp would look like?

It's not material, Jay. There were more orders in New Jersey in Q1 of 2015 than Q1 of 2016. I think we are down to our last five homes in New Jersey actually. But in terms of the quantum of difference, I might be able to move the second number right at the decimal point with that. But that was not a material component of the decel. It really was the things that I have talked about at some lengths in the west.

Got it. And then Bob, could you repeat the guidance you gave on land sales?

Sure, Jay. We have got about $55 million on the balance sheet right now in the land held for sale. And we have said, that we expect to close about half of that between now and June 3rd [ph].

Okay, all right. And then the last question I had, with the acceleration in specs, should we expect the can rate to start moving up as well? I mean, is it -- may be not 400 basis points a differential year-over-year, but should we expect can rates to be slightly elevated? Do you guys try to press the spec strategy?

You could move it a few points. As I said about Q1, I want to be really careful. I don't think that the Q1 can rate -- really, I can tie back to that, or to Houston. I think we just didn't have the gross sales numbers that we typically have and that we expect to have, particularly in October. But look over time Jay, you are right, you have studied the industry. When you have a higher ratio of specs, you can see a slight increase. I don't think its going to be a big narrative for the year, but probably caution, would suggest a couple of points maybe right.

Jay, I would add to Allan's comments on the can rate in the quarter. We also look at can rates as a percentage of beginning backlog. If you look at it on a year-over-year basis, there was very little change. It may be 20 basis points, between first quarter last year and first quarter this year. So it really was the sales number.

Got it. Okay, great. Thanks guys.

Thank you sir. Our last question is from Alex Barron of Housing Research Center. Sir, you may proceed.

Thank you and good morning guys. I like your shift to delever, so I think that's a good move. I wanted to ask you on the gross margins, how much would you say the impact has been so far from -- in increase on labor costs year-over-year, versus an increase in land costs? Is there any way you can quantify that?

We don't break out the specifics. I can't tell you in terms of labor material costs, it wasn't that significant, in terms of the overall impact on the business and in the quarter. And on a going forward basis, kind of looking forward, we don't see we will have a significant change in the next three to six months. So not as much labor, more heavily weighted towards land costs, but again, we don't quantify the differences.

David, you say that. But we kind of do, right? Because we told investors and I have said it once on this call already, the mix this year Alex, that has more land held for future development and more land bank deals, that's essentially going to be reflected in the land component, that is a bit of a headwind year-over-year on our gross margins. So that's a piece of it?

We have always said that, we are between 20% and 25% of ASP in our land costs, and I think with that change -- as Allan just noted, its going to trend a little closer to the 25%, than maybe it had in prior years.

Got it. Any thoughts as far as shifting into more affordable products over the next couple of years? I know some other builders seem to be doing that, and you guys, I guess over the last few years, that kind of moved away from it. But I am wondering if you are changing your thoughts on that, or not yet?

Its interesting, Alex. I think they are coming to us, as opposed to us shifting. Our ASP has moved up, there is no doubt about it, and it has been important for the company. But it has been a regional story, more than it has been an in-market story, as it relates to who we are. And you go look at the major master plans, or in the markets that are highly competitive, you kind of know who is on the 70 or 80 foot lots, you kind of know who is on the 60 foot lots, and you are going to find Bs are on the 50s or the 45s or the 40s. So I don't think we have abandoned our base at all, in terms of who our buyer is. Our buyer is a little older, they are a little more affluent, they want a few more features in the home. But I don't feel any need to strategically reset the business. We are focused on those first time home buyers.

Got it. Okay. Thanks and good luck.

Thank you, sir. We have another question on the queue, and it comes from Joel Locker of FBN Securities. Sir, you may proceed.

Hi guys. Just a question on your G&A, obviously that was one of the highlights of the quarter. How do you expect that to trend going forward? I mean, it was only up about 1% year-over-year. Do you think you can actually get it down year-over-year or there are some one timers in the G&A?

Joel, it's Bob. In the quarter, we are actually down 270 basis points year-over-year. The actual spend was pretty comparable, as we control our costs. On a going forward basis, what we said earlier, was that we think that we will be flat sequentially, in Q2, but that is about --

On a percentage basis.

On a percentage basis, but that will be about 170 basis points better than the prior year. Now, dollar costs will be up, as they normally are, seasonally. But we will get additional leverage through more closings and higher ASPs.

All right. Thanks a lot guys.

Thank you, sir. And at this time, we have no further questions on the queue.

Thanks. We'd like to thank investors for participating in the call, and we look forward to talking to you and giving you an update on our results at the end of April. Thank you.