Welcome to Lennar’s First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Alexandra Lumpkin for the reading of the forward-looking statement.

Thank you, and good morning. Today’s conference call may include forward-looking statements, including statements regarding Lennar’s business, financial condition, results of operations, cash flows, strategies, and prospects. Forward-looking statements represent only Lennar’s estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar’s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in yesterday’s press release and our SEC filings, including those under the caption Risk Factors contained in Lennar’s Annual Report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

I would like to introduce your host, Mr. Stuart Miller, Executive Chairman. Sir, you may begin.

Great. Good morning, thank you. And thank you all for joining this morning. I’m here in Miami, joined by Jon Jaffe, our Co-CEO and President; Diane Bessette, our Chief Financial Officer; David Collins, our Controller and Vice President; Bruce Gross, CEO of Lennar Financial Services; and of course, Alex, who you just heard from; and we also have Rick Beckwitt, Co-CEO and President on the line with us, and he's joining us from Colorado. As usual, I'm going to give a macro and strategic Lennar overview. After my introductory remarks, Rick's going to talk about market strength and land and community count. Jon will update on supply chain, production and construction costs. And then as usual, Diane will give a detailed financial highlights and additional guidance, and then we'll answer as many questions as we can, and we'll limit to one question and one follow-up, please. So let me begin and start by saying that we're quite pleased to announce another hard fought and well-executed quarterly performance by the associates of Lennar. Our operating results reflect both the extraordinary focus and determination of Lennar's management and operating teams, as well as the general strength in the housing market. As questions abound given geopolitical turmoil, inflationary pressures building both around the globe and domestically, and interest rates are rising, the housing market remains very strong in all of our major markets. Demand trends remain strong, as family formation continues to rise. As our team from around the country reviewed our weekly sales starts and closings on Monday for our regions and our divisions, the unanimous view was that our sales pace range in each market from strong to very strong. Buyers are seeking shelter and they are seeking shelter from inflationary pressures as scarce rentals see rents escalating and escalating housing…

Thanks Stuart. As you can tell from Stewart's opening comments, the housing market is very strong. Our team is extremely well-coordinated, and our financial results continue to benefit from a solid execution of our core operating strategies. Key to that has been rent been running and finely tuned home building machine where we carefully match homebuilding production with sales on a community-by-community basis. We have continued to strategically sell our homes later in the construction cycle to maximize sales prices and offset potential cost increases. To that end, we have slowed sales, rather than writing sales contracts when customers visit our website or welcome home centers, we are putting people on a waiting list to contact them later when we release the homes for sale. This shift in the sales process is driving higher sales prices and stronger margins. Our first quarter results prove out the success of this strategy as we achieve gross margin increases of 190 basis points year-over-year. During the first quarter, we started 4.7 homes per community, sold 4.3 homes per community, and we ended the quarter with less than 180 completed unsold homes across our entire footprint. This production, margin driven and sales focus program will continue to improve margin and lead to increase deliveries and profits in fiscal 2022. In the first quarter, new orders, deliveries, gross margins were solid in each of our operating regions. We continue to achieve price increases and saw strength in all product categories from entry level to move up and in our active adult communities. Let me give you some color on our markets. As Stuart said in his opening remarks, all of our markets are strong right now, but here's some color. Florida continues to benefit from core local demand as well as in migration from the…

Thanks, Rick. This morning, I'll discuss how our first quarter was impacted due to supply chain disruptions, inflationary impacts on construction costs and on cycle time increases, as well as our team's ability to manage through these challenges. At Lennar, we continue to deal with our fair share of disruptions. Some of the supply chain disruptions were like the ones, we faced in our fourth quarter, where we experienced intermittent disruptions affecting different trades, at different times and in different geographies. The first quarter was also different and that the Omicron spike in January dramatically impacted everything. A significant amount of labor at manufacturers, suppliers, local trade partners and our own associates was out from work. This was most severe in January and then ease rapidly in February. At times, in January, it seemed as though as much as one-half of the workforce across the industry was quarantined at home. This challenged our management, purchasing and construction teams to be extremely nimble in finding workaround solutions to the unique challenges that the Omicron spike created. Labor returned in February to the manufacturing plants and at our communities, as manufacturers and trades are now hard at work to make up for lost time. Many manufacturers have stabilized their lead times, and there are currently fewer situations of late deliveries. However, some manufacturers still have meaningful challenges ahead. The following categories are continuing to deal with significant constraints. These are electrical equipment, garage doors, HVAC condensers, flex duct and cabinets. In response to the ongoing disruptions and future unknown risk of new disruptions, our divisions are more closely managing the inventory of local trades and adding additional labor by onboarding new trade partners, while our regional and national teams stay in constant communication with manufacturers and suppliers in support of our divisions.…

Thank you, Jon, and good morning, everyone. So Stuart, Rick and Jon have provided a great deal of color regarding our homebuilding performance. So, therefore, I'm going to spend a few minutes on the results of our other business segments and our balance sheet and then provide detailed guidance for Q2 2022 and updated high-level guidance for fiscal year 2022. So starting with Financial Services. For the first quarter, our Financial Services team produced $91 million of operating earnings, slightly above the high end of our guidance. And then, when you look at the details between mortgage and title, our mortgage operating earnings were $67 million compared to $100 million in the prior year. As we've indicated for several quarters, the mortgage market has become increasingly competitive for purchase business, as refinance volumes and resale inventory has declined. As a result, secondary margins have been decreasing. This was the primary driver of our first quarter, lower secondary margins as compared to the prior year. Title operating earnings were $21 million compared to $30 million in the prior year. The prior year included a one-time $11 million gain related to the early paydown of a note receivable. Excluding this gain, earnings increased this year, primarily as a result of higher premiums driven by an increase in average sales price per transaction. And then looking at our Lennar Other segment, as Stuart indicated, for the first quarter, our Lennar Other segment had an operating loss of $403 million. This loss was primarily the result of our non-cash mark-to-market losses in our strategic technology investments which, as we indicated, totaled $395 million. As we've mentioned before, we are required to mark-to-market many of our technology investments that are publicly traded, and that valuation will fluctuate from quarter-to-quarter. And then turning to our balance…

Thank you. [Operator Instructions] Truman Patterson with Wolfe Research, you may go ahead.

Hey, good morning everyone. Thanks for taking my questions. So, first you mentioned that cycle-time extended a couple of weeks, but you increased your closings guidance and starts to remain relatively healthy. So, two-part question for me on the supply chain. Just first, you all mentioned visiting manufacturers. I'm hoping you can elaborate on some of your internal initiatives that might be giving you better access to materials, labor. And whether some of the materials that you mentioned, if there's any kind of relief in sight going forward? And then the second part, you made an interesting comment about enhancing your market position. You all gained quite a bit of share last quarter. I'm hoping you can give us kind of the lay of the land in 2022 for smaller private peers in a pretty constrained environment and your ability to continue taking share.

So let me start, and I'll hand it over to Jon in a second and say that -- as I noted, Truman, we are not just picking up steam, but we're picking up confidence and a lot of that derives from the focus on starts. It's not that the supply chain is quickly getting resolved, it's that we are putting more homes in the ground. We recognize that cycle-time is extended and with additional homes under production that are farther along, we have a larger pool to draw from as we look at closings. So, we're picking up steam and picking up confidence and being able to, in the current environment, kind of, see some visibility to what we're able to deliver. And let me just say it is -- this is not an easy migration. It is taking a lot of focus, time and attention. And I just want to say that what we're finding is that size and scale matter quite a lot. That means the way that we engage with our building partners and that builder of choice kind of mentality that we brought to the table is critical and the day-to-day engagement directly with the participants in the supply chain is becoming more and more important. When you put those pieces together, you find -- we find that we're able to have greater visibility as to how our business is migrating forward. So Jon, maybe, you'd like to indulge on that.

Yes, I think you hit a lot of the key points, Stuart. Starting with size and scale, as you mentioned, really gives us a seat at the table and the prioritization. But Truman, as you can imagine, if you sit down with CEOs and key executives of manufacturers, distributors for 4 to 6 hours, really opening up the thought process, how do we have a different approach to the products we buy, to the way that they're distributed, to joining together manufacturers and distributors to think through from the origin of the supply chain, all the way to the installation of our home. You're going to come up with a lot of interesting thoughts and ideas. And we're in the process right now of really vetting those, we'll be beta testing them and are very confident that we already see opportunities for significant improvement. And as I mentioned, it's going to give us better cost control for both us and for our trade partners and give us much more clarity as to the delivery process. And it begins a lot with our technology and our ability to give forecasting information with real clarity to our vendors, which is critically important for them as they plan how to strategically supply us.

And Rick, why don't you weigh in on market share and where we think the current supply chain programming brings us on ability to capture even greater market share.

Yes. So, there's no question we continue to gain market share on the private builders and many of the larger or mid-market public builders. This is going to continue to happen. A lot of this is driven by really access to land. Because when we have 20% to 40% market shares, the land market needs to work with us. So those land relationships are driving a lot of the gain. And then just the efficiency of our product, our Everything's Included program allows us to work much more efficiently with the supply chain and as a result of that, we're capturing more product.

Okay. Thanks for that. And you all are acknowledging the risks, but you mentioned that demand should remain strong for the foreseeable future. My question is more on the land side and higher rates outlook, etcetera. Have you seen any shifts in landowner’s willingness to option or changes in land banking terms that might push out your ability to hit that 65% option target by the end of 2022?

The short answer to that is no, there haven't been shifts in appetite or ability to option. And remember that we're focused on building a structured approach to that the option program and have been working through land structures to do that. I think, that we'll be able -- we are certainly migrating in that direction with a greater portion of our land asset option versus owned and I think it will continue in that direction.

Okay. Thank you.

Thank you. Our next caller is Mike Rehaut from JPMorgan. You may go ahead sir.

Thanks. Good morning, everyone. Thanks for taking my question. First, I just wanted to kind of go back to some of the comments you made on demand, and you very much appreciate the fact that you kind of stated in a couple of different instances in the prepared remarks about how demand remains so strong. I think, obviously, everyone is very, very much focused on any type of graduated difference. In other words, maybe, still remaining very, very strong, very robust. But any kind of changes on the edges? And what I'm referring to is, obviously, yesterday, we had an AHP survey where future sales component was down 10 points. Obviously, that's a national number and might be just truly more sentiment-driven. We also had a private builder call yesterday that we hosted where, on the margin, very, very minor and still, characterizing the market as strong as you did. The builder kind of pointed to maybe the first-time or entry-level buyer taking a little bit longer to make a decision, maybe, a very slight pickup in cancellations and even taking a slightly smaller home or a home further out to adjust to the new interest rate backdrop. So in that context, I was just curious again, on the margin, if you've seen anything across that entry-level, lower price point, if any markets stand out in that regard as well.

So Mike, I tried to be very clear in my comments. I noted that our -- earlier this week, management call, we surveyed almost exactly that question across our geographic footprint. And the answer is where that sales were ranging anywhere from strong to very strong. And I think that, that's the -- that's been the consistent answer by our divisions and our regional presidents. So that's what we've been seeing. Now, with that said, I also try to daylight in my comments that there are definitely elements in the economy that give rise to questions, and I know that some will kind of look for any evidence of kind of a change in the environment. We haven't seen it yet, and yet, we're very cognizant of inflation and inflationary pressures. Interest rates and the upward movement that is -- I can never predict interest rates, but it's seemingly all but certainly moving up, and we recognize that there are potential cross currency here. But those very crosscurrents can be arguments both for sustainable strength in the market as well as fissure in the market. In the current environment, as I noted, wages are going up, but so too are housing costs, the inflationary pressures on rental rates. This is really important as we look at first-time buyers and people coming into our welcome home centers, they're seeing significant increases in their rental rates and looking for a defense mechanism as stability measure that they can inject in their finances to at least hold steady one component of their cost structure. They can't really do much for gas prices and food, but their housing cost, they can fix with a 30-year fixed-rate mortgage. So there are cross currents out there, we have not seen to date any change in the demand patterns except towards strength, and we're watching it very carefully as you are. And we're just giving you a straight shot as we can. Across the country, it's been pretty strong.

And the only thing I'd add to that, Stuart, is sequentially, our cancellation rates actually went down. And what we're finding is that if something cancels, that home is gobbled up very quickly at a higher price than what it was put under contract. So the markets are strong and just continue to feel healthy.

And Mike, I would also add that, as we mentioned, we're very carefully controlling what we released for sale. There's clearly demand across all our markets, where if we released more homes that they would sell. And people are waiting for us to release more homes. And I’d also point out one data point, which I think just supports the current state of what we're seeing, is that our web sessions online are over 20% year-over-year and the conversion of those to leads is up almost 50%. I'm just indicating the significant interest that's out there in homeownership.

No, no. Those comments are really helpful, and I appreciate Rick and Jon, your added comments as well. It's very, very helpful. Maybe, a second question, kind of shifting to SpinCo. A lot of focus there, obviously. Just trying to get a sense, you mentioned -- kind of a two-parter here. You mentioned the land strategies component of the SpinCo that would have $4 billion to $5 billion of assets under management. Just trying to confirm if -- when you think about the SpinCo in totality, how should we think about the total amount of assets that will be taken off of Lennar's balance sheet? I assume the $4 billion to $5 billion is a part of that, but perhaps, there's incremental parts as well. And secondly, in terms of the fees that are made because, obviously, there's going to be an asset management business effectively. When you think about the fees on the multifamily, on the single-family for rent on the land strategies, how should we think about percent fees as a percent of assets under management in terms of an income stream?

So, decidedly, Mike, we haven't given enough detail for you to make those translations and we're not prepared to give that detail. In terms of the assets that are flowing from Lennar towards SpinCo, I think that it's still good math to think in terms of $5 billion to $6 billion. Some of it has already gone, migrated into assets under management that will ultimately be verticals of SpinCo. And -- but we don't have a clear translator for you at this point. But order of magnitude, from the assets that will actually be spun on the day of the spin to the assets that are being put into the SpinCo, it's in that order of magnitude. If you look at, for example -- if you look, for example, at the multifamily component. The multifamily component, year-over-year or from the end of the fourth quarter to the end of this quarter, we've gone from about $10 billion of assets under management to about $10.7 billion. I can't give you a percentage, but a sizable percentage of that increase in assets under management with actually, land and construction for multifamily that migrated into an asset -- an AUM asset management program. Relative to land, some of the land that will be in land strategies is coming from book. Some of it is coming from assets that we're purchasing that are never coming on to book. So there isn't a perfect translator. I still think that order of magnitude, we're looking in that $5 billion to $6 billion range of assets that will have migrated into that form of ownership, and you're seeing cash flow into Lennar reflective of some of that as we make the migration towards a spin-off day. In terms of the fee stream, we haven't laid out how those fee streams work, and we haven't built for the stream, yet the model of how those fees will work. But there will be that clarity as we get closer to a spin-off day.

Great. Thank you.

Thank you.

Thank you. Stephen Kim with Evercore ISI. You may go ahead.

Yeah. Thanks a lot guys. I wanted to ask you a couple of questions about the land situation. It was interesting to me that your lots owned increased pretty noticeably this quarter, sequentially. I was just curious if you could talk about that because that number had been flat for quite a while. And just, if you could put it in the context of your broader overall outlook, which would seem to be calling for a downward trajectory from the 202 you own today. And then secondly, we did an analysis where we looked at where -- how much land you either owned or controlled right before the pandemic hit, and we assume that you didn't walk away from many of your options. And if you do that and work that down from whatever closings you've done since then, I mean, you wind up with a very, very significant number of lots that I would think, are probably reflecting pre-pandemic pricing. Something on the order of prior to this quarter, 180,000 lots, and then you only delivered another 12,000 or whatever this quarter. So a very, very significant percentage of the land you have still has pre-pandemic pricing embedded in. I was curious if you could comment on whether you think that, that's an accurate statement.

Okay. So I'm going to ask Diane to lead with an answer on this one because she spends all of their time focusing and assessing over the -- and Rick to follow-up. So go ahead.

Yeah. I guess I'd say, Steve, yeah, you're right. I mean, our -- look, as I said in my comments, land purchases are -- they fluctuate quarter-to-quarter. You often see a pickup in the first quarter because our land sellers are very motivated often to transact before the calendar year is over. But I wouldn't extrapolate that. It's just lumpy, and we're really focused on just making progress year-over-year. So you are right, a little heavier this quarter, but it's just lumpy and it fluctuates.

Yeah. Diane is exactly right. A lot of that was just timing. Some of it was driven -- a lot of it was driven by potential fear of tax rate changes, given some of the talk that was going on earlier in the election cycle. People wanted to avoid paying a higher tax and transacting in 2022. It's really just timing. We're very focused on bringing that down. And with regard to your question about pre-pandemic pricing and land opportunities, you're right, and I think that's why you're seeing our margins continue to improve. And the level of land embedded on a cost percentage to be very attractive. So we're really pleased with what our land teams have done.

Yes, it would seem to suggest quite a bit of hang time here in terms of the margin opportunity, particularly with the fact that home prices are still going up. And that sort of segues to my next question. You -- we know that when you look at your average price and backlog, for instance, that that can be influenced by more shorter cycle-times for cheaper homes and longer cycle times for more expensive homes and that sort of thing. But if I look at your order price, the average price you took in orders this quarter, I would generally think that those mix shift effects should be very muted. And we noticed that your average order price was something on the order of $495,000 which was, I think it was up like 6% or something like that sequentially, which is a very, very strong number. And I was curious as to whether or not you believe that, that's a reasonable level that we could expect your closings in some quarter in the not-too-distant future could reach. I know that your guidance for closings was $472,000. It seems like it's baking in a fair amount of conservatism when you contrast it with the $495,000 you did this quarter. So, I was hoping you could comment on that?

Rick, why don’t you take it?

Well, so we're not guiding for a $495,000 ASP for the 2022. A lot of this is just mix and timing of sale and which communities we've released product from. There's no question we are seeing a very healthy sales price. We'll continue to execute on a strategy of leasing sales and small releases to maximize that price. And there is tremendous pricing power out there. But given the overall mix of communities that we have for the balance of the year going in and the product that we've started, some of those are smaller homes that we just haven't released for sale yet, that are you going to blend that price.

And Steve, just to add some color to what Rick said. We are very focused on accelerated growth in Texas. So, let me refer into that community-driven mix, it's not a timing thing. It's strategic and it's going to be ongoing as compared to the growth rate in California. The California is still growing and has a higher ASP, but Texas is growing about twice as fast, strategically, for us at a lower ASP.

Yes. Sounds good. We'll take it. Okay, thanks a lot guys.

Thank you.

Thank you. John Lovallo with UBS, you may go ahead sir.

Good afternoon guys. Thanks for taking my questions. The first one is on the delivery outlook being raised, which is obviously encouraging. Just curious, though, what the impact from the Breland acquisition any sort of back half gross margin, negative impact from purchase accounting that we should consider? And maybe, that's why there's not that second half kind of move up in margins that some would have expected.

Yes, John, very, very small. Happy to have positioned ourselves into a new market, as Rick indicated, but it's very small. The Breland add only about 1% to our delivery count for the year. So, pleased to have a new market that's very small relative to total delivery.

Got it. And then so the purchase accounting would also be very small, I'd imagine that.

Yes, that's right. Very little gross margin, as you can imagine, but again, not very impactful to total gross margin given the small volume.

Got it. Okay. And then on the SpinCo, the land strategy, it seems like you guys are leaning towards spinning it and optioning back rather than, I think, at one time, there was some talk about possibly selling it and optioning the land back. Is that sort of the final decision, do you think? And what's driving that decision to sort of spin it?

I'm not sure I'm following the question. It's spinning versus selling an optioning back? Help me out with that.

Yes, sure. So I'll try to be more clear. I thought, and correct me if I'm wrong, that there was talk at some time of potentially not spinning the land, but actually selling it where there would be cash proceeds that would be received and they could be used for various things like funding working capital, buying back stock, things of that nature. Maybe, I'm misunderstanding, but that was impression.

That is exactly what's happening is, look, we basically, in all of these areas, stood up asset management verticals. And ultimately, they will be pulled together as SpinCo. Those verticals are -- they are currently using third-party capital to acquire assets and assets that in some instances, we have on our book. In some instances, we are buying from third-parties are going into those asset management verticals currently. As the assets started on our book, that is generating cash for Lennar and being redeployed into the business as stock buyback, debt retirement or whatever the strategy is. But the SpinCo process is already in progress right now and the migration of assets to the asset management verticals is happening both for Lennar multifamily, for SFR and for land strategies. And as we pull that together, I think it will be clearer that some of the assets are coming from our book and generating cash to the core and some of them are just avoiding cash that would otherwise be spent. On the side of each of those verticals and that is happening currently as we prepare for the actual spin-off.

And maybe, John, I'll just jump in because you and I have talked about this. I think -- remember, you're absolutely right, there was going to be a contribution of land. But as Stuart mentioned, as we refined the thinking and thought that having a land lighter balance sheet, a land-light balance sheet or asset-light balance sheet for SpinCo is the better way to go. That was the migration into assets under management for all of the components, not just the multifamily and the single-family rental, which were always going to be assets under management. So, you might remember that we made that transition in the best interest of SpinCo.

Yes. And not only in the best interest of amount of time that has been taking to get SpinCo stood up, not to simply wait and then contribute and then reconfigure, we've just been doing it as we're going. Matt Zames as we've noted, has been working with us on this and has been an advocate for, let's not waste time. Let's get this going right now. If you know Matt, he's that kind of person. And so we have energized the program of converting assets into cash, turning cash into stock, buyback into debt retirement into increased inventory and increased certainty in deliveries and that's exactly what's been happening as we prepare to spend.

Got it. Thank you guys.

Okay. Why don't we do our last question?

Thank you. Alan Ratner with Zelman & Associates. You may go ahead, sir.

Hey, guys. Thanks for squeezing me in. Appreciate it.

Hey, Alan.

So there's been some data points that suggest maybe, more in a global kind of a housing market scale that recently, the strength in sales, at least on a year-over-year basis, has been driven primarily by non-primary buyers. So that would kind of be a catch-all for second home buyers, SFR investors and funds, build-to-rent, et cetera. And the actual primary buyer activity has kind of stalled a little bit, and there's probably a lot of reasons for that, and maybe, that's not representative of the new home market, specifically. But I was wondering if you could talk a little bit about the mix of your business right now that is non-primary to the extent you can quantify it? I know it's often challenging to identify all investors that might come in through the MLS, et cetera, but are you seeing any differences in trends among the primary, non-primary buyers, maybe, over the last 60, 90 days, especially since rates have started to move?

Let me start and ask Rick to see if he can dig up a statistic or two, but there hasn't really been a big change or migration away from primary buyers towards the institutional group. But what I would say is it all seems to me to be a zero-sum game. If you look at both rental properties on the multifamily side, rental properties on the single-family side and for-sale properties where people -- primary buyers are actually buying, all of them are fully occupied. And rental rates are migrating upwards at a fairly rapid click, suggesting that these are not really institutional purchases or the building of spec inventory or things like that. It's all basically primary, but done in a format that might be primary buyer owning their home or institutional buyer enabling someone to access a single-family lifestyle or just multifamily tenants. And across the board, you're seeing pretty aggressive escalation in prices because demand is strong and supply is constrained. So that's what we're seeing in our world. Rick, do you have some specifics or anything?

Yes, I would say that probably, less than 5% of the homes in the last quarter were sold to folks that either are institutional renters of product. We sold some homes to our upward America venture that we have with are other investors that Stuart talked about that has about $2 billion of committed funds for that vehicle. But it's a very small percentage, and most of what we're seeing out there are primary buyers.

Got it. All right. No, that's helpful. And thank you for the thoughts there, Stuart. I appreciate that. I guess, second one, just to kind of end the call here. So the acquisition you made at Breland, I know you kind of talked about it being fairly small in terms of contribution for the overall business. But just curious, at this stage, you talked a lot about your views on likely continuing to take share from smaller private builders, and it's clear that you guys definitely have a real operating advantage in today's difficult kind of environment. Are you seeing, perhaps -- I don't know if capitulation is the right word, but more interest from private builders looking to sell or partner up given the challenges that are out there in the market and how high is your demand right now on the M&A front, from that standpoint?

So, let me just say that, I wouldn't -- Rick, you'll jump in, in a second, I know. But let me just add, I wouldn't say that we're seeing capitulation out there. The market is strong. Demand is strong across the board. Capitulation would suggest throwing up the arms and pricing coming down, I think that pricing is robust. The bigger issue or question for us is, we've identified markets where organically, we would like to step in and participate in those markets, and where we can find a first-class established management team and basically, make an organic step into a market, but with a management team. That's a unique opportunity. Breland is clearly best of class in this part of the world. We are really enthusiastic about the operators, as well as the assets and think that we have a unique opportunity with that one. Those will be few and far between, because we're so focused on the quality, not just of the assets, but the people, as we step into new and unique markets. And Rick, do you want to add to that?

Yes. I think Stuart is exactly right. We're laser-focused on quality and professionalism, and that's exactly what the Breland opportunity brought to us. They're a great company. They are laser-focused on product that is simple to build. And one of the better parts of that opportunity was having the opportunity to create a land relationship on a go-forward basis with Louis Breland, who is an expert in finding land, entitling land, and it's just a continuation of our land strategies, business where we have that done, not on our balance sheet, but off balance sheet and controlling that pipeline. So it's very consistent with what our focus is.

Got it. And I appreciate that. And Stuart, just to clarify, I wasn't referring to capitulation on the demand side, more just the frustrations with the supply chain and how difficult that is for smaller builders in today's environment?

So I appreciate that, Alan. I don't think we've seen that yet, but earlier, the question was asked about picking up market share. This is kind of one of those markets where it kind of seems inevitable. Size and scale is working to our benefit in reconciling the supply chain. It's getting frustrating out there. We'll see what happens. We're not going to be engaging a lot of M&A as we grow our business at the large-scale side, but as we enter new markets, certainly on the table.

Great. All right, guys, thanks a lot.

All right. Very good. Thank you, everyone, for joining today, and we look forward to reporting back with our second quarter. Have a nice day.

Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.