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Text: New factors emerge from time to time and it is simply not possible to predict all such factors.
On our call today, Allan will review highlights from the second quarter, and discuss the supportive macro environment.
He'll then provide a preview for the remainder of the year and outline our expectations for growth in fiscal 2022.
I'll then provide more details and our results projections and balance sheet.
We will conclude with a wrap up by Allan.
We had an extraordinary quarter, highlighted by an unprecedented increase in our sales pace, and significant growth in our gross margin, EBITDA and net income.
At the same time, we invested for the future, grew our share of lots, controlled by options and continued to reduce debt.
In some, we had a nearly perfect balanced growth quarter, with profitability growing faster than revenue, while operating from a less leveraged and more efficient balance sheet.
Perhaps the best news is that our team is poised to translate continuing strength and market conditions into even better results in the quarters ahead.
As I'm sure you've heard, the strength in new home demand has contributed to both longer cycle times and higher construction costs.
To-date, we have successfully adapted to this environment by raising prices, limiting sales paces and extending delivery dates on sold homes.
As we work through these issues, our objectives remain the same.
We expect to create value for customers, partners, employees and shareholders by delivering great homes on time and at the margin we intended when we made the sale.
Our commitment to creating value for our stakeholders can also be seen in our recent accomplishments and goals on the ESG front as summarized on slide five.
This quarters highlights included being named an ENERGY STAR Partner of the Year for the sixth consecutive year, representing another significant step toward our goal of having every home we build Net Zero Energy Ready by 2025.
We believe the strength in the housing market will prove to be pretty durable.
And the reasons are simple, strong demographic demand, exceptionally limited supply and the recovering economy.
On the demand side, we expect many of the COVID housing norms to be persistent, namely the desire for more space, better space and outdoor space, even as we return to offices and schools, our homes have clearly taken on new roles in our lives, couple that with a great awakening of Millennials to the benefits of homeownership and the desire of many boomers to simplify, you have a recipe for depth and breadth of demand that isn't likely to disappear anytime soon.
On the supply side, the shortage of owner occupied homes we described on our call in January turns out to be even more acute than we suggested.
On that call, we conservatively estimated that the deficit was more than one million homes.
In recent weeks, Freddie Mac published a deeply research report, which demonstrated the housing shortage is closer to four million homes.
There's simply no way for our industry to accelerate entitlement, development and construction to make a serious dent in that number anytime soon.
Finally, on the economy, while there are still many COVID related challenges, there's ample evidence about job growth and wage growth, which bode well for consumer spending and housing.
In sum, our industry is in a highly advantageous position, with demographically driven demand in a recovering economy, faced with seriously constrained supply beyond 2021.
Turning now to our expectations, with our sold and already started backlog up more than 50% and continuing strength in lead and traffic trends, our visibility and confidence in fiscal 2021 results is quite high.
Dave will provide details on our outlook for the third quarter and full-year.
But I'm happy to share that we're raising our expectations again.
The headline is that we now expect full-year earnings per share to be above $3.
Looking beyond this year, our balanced growth strategy is a longer-term approach to generating shareholder value while carefully managing risk.
Over the past several years, our strategy has yielded a big jump in profitability, even bigger improvements in our returns and a meaningful reduction in debt.
And we're not done.
Well, it's too early for us to give any type of detailed guidance for next year, there are three factors that give us confidence that we can again improve profitability and returns in fiscal 2022.
First, our current backlog already contains nearly 700 homes scheduled to close in the first quarter of next year, that's more than half of our typical first quarter closings.
With our normal cycle times, most of these homes would have closed this year.
But these aren't normal times.
So instead, we have a great start on next year.
Second, community count growth is coming.
Credibly strong sales over the past six months in the depth in our community count arrived a little sooner than we previously anticipated.
But next year, the positive progression in our community count will be evident.
And remember, these communities were tied up six to 12 months ago, before the recent run-up in home prices.
And third, we'll finally see real interest savings.
We have dramatically deleveraged our balance sheet in recent years, but haven't really benefited from a reduction in interest expense in our earnings.
That's because of the timing difference between the immediate cash benefit of much lower interest costs and the non-cash GAAP expense that arises from previously capitalized interest.
Next year, we expect to realize a multimillion dollar reduction in our GAAP interest expense based on actions we have already taken.
These factors and our confidence in the industry supply and demand equation should yield another successful year for our balanced growth strategy.
Before closing, I'd like to again express our appreciation for the scientists, doctors, first responders and essential workers who saw us through what appears to be the worst of the pandemic in a position to our country to begin to recover.
Looking at the second quarter compared to the prior-year, new home orders increased approximately 12% to 1,854 as our sales pace was up more than 40% to 4.7 sales per community per month.
Homebuilding revenue increased about 12% to $547 million on 9% higher closings.
Our gross margin, excluding amortized interest, impairment and abandonment was 22.2% up approximately 140 basis points.
SG&A was down 100 basis points as a percentage of total revenue to 11% as we benefited from improved overhead leverage.
Adjusted EBITDA was $64.2 million up over 45%.
Our EBITDA margin was 11.7%, the highest second quarter level in the past 10 years.
Interest amortized as a percentage of homebuilding revenue was 4.4% down 20 basis points, and that led to net income from continuing operations of $24.6 million, yielding earnings per share of $0.81, more than double the same period last year.
With the strength of our current backlog and positive macro outlook, we're in a position to once again increase our financial expectations for fiscal 2021.
We now expect EBITDA to be up over 20% or more versus the prior-year, a significant increase from the previous guidance.
This level of improvement implies EBITDA growth of more than 10% in the second half of this year, with greater year-over-year growth expected in the third quarter.
Our full-year EBITDA guidance equates to earnings per share above $3 up from last quarter's guidance of at least $2.50.
We now expect our return on average equity for the full-year to be approximately 14%.
If you exclude our deferred tax asset, which doesn't generate profits, our ROE would be over 20%.
The current production environment is going to impact both sales and closings in the third quarter as a second quarter progressed in the face of the elongating cycle times, we deliberately slowed home sales to provide a better experience for customers and increase the value of our communities.
Many of these restrictions remain in place and as such, we anticipate new homeowners to be down 10% to 20%.
On the closing side, because of the challenging production environment, it is difficult for us to predict the timing and mix of closings between the third and fourth quarter of this year.
We're focused on delivering great homes, not maximizing third quarter closings.
Even with this caution, we still expect closings to be up in the high single digits in the third quarter year-over-year.
Our ASP should be above $400,000 for the first time ever, gross margin should be up over 100 basis points.
SG&A as a percentage of total revenue should be down at least 20 basis points.
Our interest amortized as a percentage of homebuilding revenue should be around 4% and our tax rate will be about 25%.
Combined, this should drive a sequential increase in quarterly earnings per share.
We ended the second quarter with over $600 million of liquidity more than double this point last year, with unrestricted cash in excess of $350 million and no outstanding draws in our revolver.
During the quarter, we retired approximately $10 million of our senior notes.
And with two remaining terminal repayments, we're on a clear path to achieve our goal of bringing our total debt below $1 billion by the end of fiscal 2022.
During the quarter, we spent almost $100 million on land acquisition and development.
Based on land pipeline and approvals, we expect our land spend to accelerate in the remaining quarters of fiscal 2021, resulting in over $600 million of total land spend for the year.
We also increased our option percentage in the second quarter and now control more than 45% of our active lots or options up from less than 30% in the same period last year.
We still anticipate community count troughing around 120 later this year, but we expected to grow steadily from there in fiscal 2022 as we benefit from our increased land spending.
The second quarter of fiscal 2021 was very successful for us as we maintain the momentum of the last several quarters highlighted by very strong new home orders and substantially improved margins, while also improving the efficiency of our balance sheet.
These results and continued strength in the market have enabled us to raise our expectations for the year.
Perhaps more importantly, our performance should help investors understand the longer-term opportunity for value creation embedded in our balanced growth strategy and our ESG leadership.
I'm confident that we have the people, the strategy and the resources to create durable value over the coming years.

user
compname reports q2 earnings per share of $0.81.
q2 earnings per share $0.81.
dollar value of homes in backlog as of march 31, 2021 increased 54.9% to $1,386.4 million.

assistant