The New Home Company's (NWHM) CEO Lawrence Webb on Q3 2016 Results - Earnings Call Transcript

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The New Home Company Inc. (NYSE:NWHM)

Q3 2016 Earnings Conference Call

November 4, 2016 12:00 pm ET

Executives

Drew Mackintosh - IR

Lawrence Webb - CEO and Chairman

John M. Stephens - CFO

Analysts

Jason - JP Morgan

Alan Ratner - Zelman Associates

Will Randow - Citi

Barry Haimes - Sage Asset Management

Alex Barron - Housing Research Center

Operator

Greetings and welcome to The New Home Company Third Quarter 2016 Earnings 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, Drew Mackintosh, Investor Relations. Thank you, Mr. Mackintosh. You may begin.

Drew Mackintosh

Good morning. Welcome to the New Home Company's earnings conference call. Earlier today, the Company released its financial results for the third quarter of 2016. Documents detailing these results are available in the Investor Relations section of the Company's Web-site at nwhm.com.

Before the call begins, I would like to remind everyone that certain statements made in the course of this call, which are not historical facts, are forward-looking statements that involve risks and uncertainties. A discussion of such risks and uncertainties and other important factors that could cause actual operating results to differ materially from those in the forward-looking statements are detailed in the Company's filings made with the SEC, including in its most recent annual report on Form 10-K and in its quarterly reports on Form 10-Q. The Company undertakes no duty to update these forward-looking statements that are made during the course of this call.

Additionally, non-GAAP financial measures may be discussed on this conference call. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through the New Home Company's Web-site and in its filings with the SEC.

Hosting the call today is Larry Webb, Chief Executive Officer, and John Stephens, the Company's Chief Financial Officer. With that, I will now turn the call over to Larry.

Lawrence Webb

Thank you, Drew, and good morning to everyone who has joined us today as we review our third quarter results and provide some color on the outlook for our business moving forward. The New Home Company made further progress towards achieving its goals in the third quarter as the Company continued to transition more of its resources to its wholly-owned business while delivering another quarter of top and bottom line growth.

As we have consistently stated, 2016 is a back-end loaded year and we are seeing this play out as the Company delivered more homes in the third quarter than in either of the previous two quarters, and stands poised for an even better fourth quarter with over $290 million in backlog value as of September 30, 2016.

Overall, the fundamentals of our business remained solid. California continues to be at the forefront of job creation in the country and the supply of unsold inventory in the state remains at low levels, with [demand and] [ph] supply of homes for sale coming in at 3.5 months as of September, according to the California Association of Realtors.

A recent survey conducted by NHB and Wells Fargo of regional builders indicated that the West region exhibited the strongest market fundamentals, and a prominent homebuilding analyst rated New Home's geographic exposure to be one of the best in publicly traded homebuilder. These statistics and research findings validate what we already know, that California and the adjacent western markets are great places to build and should remain that way for years to come.

The New Home Company has come a long ways since its IPO in early 2014. No longer are we a builder that's heavily dependent on joint ventures and fee building for the bulk of its profits. While those segments remain an important part of our Company, they have been eclipsed by our wholly-owned operations, which will increasingly become the driver of our profitability going forward. We have steadily grown this segment of the business by focusing on adding new communities that adhere to our return on equity focused underwriting standards and that fit into our consumer-driven product segmentation.

Recently, we have been expanding our product niche to include more affordable housing in an effort to diversify our portfolio and address an underserved segment of the market. While these communities will carry a lower average sales price as compared to our existing communities, they should absorb at faster pace and produce very solid returns. We are excited to open these communities in the coming quarters and look forward to their impact on our business.

With that, here's some color on our existing markets. Our two communities along the Newport Coast, Coral Crest and Coral Canyon, continue to do extremely well for us both in terms of sales activity and pricing. These home sites are truly one of a kind, located right along the coast with views of the Pacific Ocean and the surrounding landscape. We sold more homes at the higher-priced Coral Crest in the quarter at an average price of $6.2 million before options, which is up 18% from the second quarter. Given the unique nature of these communities, we are intent on maximizing the value of every lot we sell.

Our Cressa community in the Portola Springs masterplan once again turned in the best sales pace for our Company during the quarter at over four sales per month. Cressa features homes between 2,400 and 3,000 square feet and provides families with a relatively affordable option within the Irvine market. The success of this community is a strong indicator that New Home can compete in much more than just the luxury market.

Higher up in the price point spectrum, we sold a combined nine homes in our Amelia and Trevi communities in Irvine, where prices range from about $1.8 million to $2.5 million. The $1.5 million to $3 million new home market in Orange County has become increasingly competitive with the addition of more new communities within these price points. As a result, we made select pricing adjustments at Amelia and Trevi within the quarter to account for this market dynamic and saw activity pick up. Fortunately, both communities were priced at levels above profit participation thresholds. Therefore, the impact of these adjustments had a relatively modest impact on our overall margins.

In Northern California, the Bay Area continues to exhibit strong housing fundamentals in terms of job growth and available inventory, but affordability has become increasingly more challenging. Pricing in the market has remained firm for the most part, but overall order activity just softened somewhat in certain submarkets.

Our Emerson community in Santa Clara, which features homes' price starting at under $1 million, is scheduled to open later this quarter and we expect to have strong demand at this location at this price point. As with Southern California, our land acquisition focus moving forward will emphasize more affordable housing programs.

We experienced solid sales trends at our award-winning Cannery masterplan in Vegas during the quarter. Sales were particularly strong at our Heirloom product line, which starts at a lower price point but contributes an above-average gross margin to our Company.

We also opened our joint venture community, McKinley Village, in East Sacramento to great fanfare in mid-September and sold 12 homes by the end of the month. We are excited about the future of this community as well as the overall outlook of the Sacramento market.

Now I'll turn it over to John for more details on the numbers.

John M. Stephens

Thank you, Larry, and good morning. As Larry alluded to, we believe that we are well-positioned to deliver a strong fourth quarter and finish to the year. For the third quarter of 2016, the Company generated net income of $5.5 million or $0.27 per diluted share, compared to net income of $4.3 million in the prior year period. This represented a 25% year-over-year increase in net income, while pre-tax income was up 37% at $9.09 million.

The year-over-year improvement in net and pre-tax income were primarily due to 105% increase in total revenues and a 480 basis point reduction in our SG&A rate due to better operating leverage from our wholly-owned operation. The improvements were partially offset by a $3.6 million decrease in joint venture income due to lower JV home deliveries and a lower average selling price.

Home sale revenue for the quarter was up 116% to $125 million due to a 100% increase in deliveries and an 8% increase in average selling price to $2.1 million. The increase in our average selling price was heavily influenced by the delivery of 13 homes from our Fiano project in Newport Coast where our average selling price was $4.7 million. This increase was partially offset by lower price point deliveries in Northern California from our Heirloom and Chaparral communities in Davis and Sacramento combined with initial deliveries from our Cressa community in Irvine where average sales price was $1.1 million.

Based on the homes in our backlog that are scheduled to deliver in the fourth quarter, we expect our average selling price to be up sequentially by approximately 5% for the fourth quarter as compared to the third quarter and up 5% for the full year 2016 as compared to the prior year.

Our gross margin from home sales for the 2016 third quarter was 15.5%, versus 15.8% in the prior year and 12% in the 2016 second quarter. Excluding interest and cost of sales, our adjusted homebuilding gross margin percentage was 16.5% during the quarter, flat with the prior year.

The year-over-year change in gross margin was primarily the result of a mix shift in delivery and was partially offset by a 90 basis point benefit from a warranty accrual adjustment made during the 2016 third quarter. The 350 basis point sequential improvement in our gross margin from the 2016 second quarter was positively impacted by higher margins generated from our Fiano project, more deliveries from our Heirloom community in Davis and the warranty adjustment previously noted. For the full year 2016, we anticipate that our gross margins will be in the 14.0% to 14.5% range.

Our SG&A rate as a percentage of home sales revenue for the third quarter was 10.0% as compared to 14.8% in the prior year period. The year-over-year improvement was driven primarily by strong operating leverage achieved from a 116% increase in home sales revenue due to the growth in our wholly-owned business. We expect to see more SG&A leverage in the fourth quarter as we deliver our highest revenue quarter of the year, and anticipate that our full-year SG&A rate will be in the mid-10% range.

Our share of joint venture income for the third quarter was $488,000, down approximately $3.6 million as compared to the prior year period. The year-over-year decline was due primarily to an 82% decrease in JV home sales revenue, attributable to a 68% decrease in JV deliveries and a 43% decline in JV average home price. We are expecting a much larger contribution from our JV in the fourth quarter due to the timing of delivery.

Our net new orders for the fourth quarter were up 5% [to 64] [ph] homes. Order activity was stronger in Southern California as it was up 22%, while Northern California experienced a 14% decline. The average selling price per order during the quarter was $2.1 million per home, which was driven by strong demand at our Crystal Cove community. We continue to see solid demand through October at our Coral Crest community where we have still 20 of the total 27 homes with an average price in backlog of approximately $6.6 million as of October 31.

Our community count was up 30% over the prior year at 13 and our monthly sales absorption rate was 1.7 per average selling community as compared to 2.3 per month in the prior year period. We ended the quarter with $290 million of backlog, which was up 37% over last year and represented the highest dollar-value backlog in our history.

Our fee building revenues for the quarter, which includes JV management fees, was up 81% to $53 million due to increased construction activity. We view the fee building business as an attractive source of profits and returns with very little invested capital. We expect this to be a solid business for the foreseeable future, but could see slightly lower fee building revenues in 2017 due to the timing of starts and new community openings.

At the end of the quarter, we owned or controlled approximately 5,600 lots, which included approximately 1,600 lots from our wholly-owned business, 3,000 through joint venture and 1,000 in fee building lots. Of the nearly 1,600 lots owned or controlled through our wholly-owned business, approximately 60% were controlled through options or phased takedowns. Controlling a substantial portion of our lots through options and takedown structures enables us to turn our inventory quicker and be more efficient with our capital.

Moving to our balance sheet, we ended the quarter with $383 million in real estate inventory, of which $261 million or 68% represented work-in-process or completed homes, $76 million was land and $46 million was land deposit and pre-acquisition costs.

We ended the quarter with $234 million in debt and approximately $75 million in liquidity from cash and availability under our revolving credit facility. Our gross debt-to-cap ratio was 50.4% and our net debt-to-cap ratio was 45.1%. We expect our leverage to decline significantly by year-end as we generate significant cash flow in the fourth quarter.

Now I'd like to update you on our guidance for the full year 2016, as we outlined in our earnings release. We are tightening the range of our home sales revenue to $470 million to $500 million. We are increasing our fee building revenue range due to increased construction activity to $160 million to $180 million, which represents a $30 million increase on both ends of our estimate. Due to timing delays with certain JV deliveries and certain completion delays in our land JVs, we are adjusting our estimated joint venture income range to $7 million to $8 million. Lastly, we are maintaining our wholly-owned community year-end count of 13 and our JV community count of 9.

I'll now turn the call back to Larry for his concluding remarks.

Lawrence Webb

Thanks John. In summary, I am pleased with the progress that we made this quarter and remain optimistic as ever about the future of The New Home Company. In our short existence, we have developed a reputation for being a best-in-class homebuilder, both with homebuyers and land sellers. It's this reputation that allows us to participate in some of the most exclusive masterplans in the Western United States on favorable terms and creates tremendous energy around our new community openings. Our Company continues to evolve as we diversify our product portfolio to address more affordable price points, but we remain committed to being the design leader in each of the market segments in which we participate.

Finally, I want to thank all of our hard-working team members for their passion and dedication to our business. As I have said many times, it's our people that differentiate us on the competition and I'm appreciative of their efforts. Our goal was always to create a world-class enterprise and we're well on our way.

That concludes my prepared remarks and we'll be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Michael Rehaut with JP Morgan. Please proceed with your question.

Jason

It's actually Jason in for Mike. First question just on some of the pricing adjustments that you talked about in Southern California, Amelia and Trevi, just wanted to get a little bit more color on the magnitude of what those adjustments look like, and if you could also comment on what you saw across the rest of your footprint in terms of pricing and incentives? And then lastly, in terms of the options that people are adding to the homes, does that remain fairly stable and is the margin on the option been stable as well?

John M. Stephens

It's John. In terms of the pricing adjustments that were made at some of these projects, as I talked about these masterplan communities, it really depends on sort of the stage of production of the home, how far along is the home and what amount of options were put in those homes. So it could be anywhere 5% range, plus or minus, at the high end and could be a couple of percent on the lower end. It's really just dependent on kind of where we were with the production on those homes. Larry?

Lawrence Webb

Sure, I can maybe give you a little more color across the board, but first of all, even on Amelia and Trevi, they were just selected lots, it wouldn't be the entire community. And it really had a very minor impact on our margins. Throughout the organization as a whole, most of our communities have not had any incentive changes. We have a handful of projects that we've probably done some minor incentive implementations on selected lots for end-of-the-year closings, but overall it hasn't been that big a deal. And I'd say that the direction we've given you on margin is the one we've been consistent for the whole year.

John M. Stephens

And Jason, also your question on the option sales, it really is project dependent. So for example, we talked a lot about in our prepared remarks the Crystal Cove projects, obviously the very, very high-end. Those buyers really are very discretionary and they sort of want to put a lot more options in those homes. Obviously it moved down the price point not as much. So, it could be anywhere from 10% to 15% of the purchase price that they are putting in those homes. Again, as you move down price point, it could be a little bit less than that.

Lawrence Webb

And one thing that's clear is, for all of you, one of our differentiation point as a company is our design centers and the ability for people to personalize their homes. We haven't seen a shift in that. People still are attracted to that and it's not just been a selling point, it's also been one of the reasons why we have one of the lowest cancellation rates in the industry.

John M. Stephens

And then Jason, just to clarify on the projects we talked about in those masterplans where we have given some incentives on some of those homes that maybe were further along, we are sort of well into the profit participation on those. So as Larry mentioned, it didn't really have a significant impact on the overall gross margin.

Jason

Okay, great. And then just in terms of the gross margin overall, I think the range you gave for the full year is 14% to 14.5%, which implies I think about 100 basis point spread for 4Q. So my question is, given that you only have about two months left in the year, based on what you're seeing in the backlog, what would kind of get you to low versus the high end?

John M. Stephens

I think it's just a timing issue in terms of whether we delivered some of these higher-priced homes in Newport Beach. They carry a little higher margin than some of the other projects that have lower price points. So, it would just be whether or not those sort of got pulled in or not, with what sort of impact the margin at this point.

Jason

Okay, great. Thank you.

Operator

Our next question comes from the line of Alan Ratner with Zelman Associates. Please proceed with your question.

Alan Ratner

John, I was hoping to dig in a little bit on the JV guidance reduction of $3 million. I know you mentioned some timing delays there, but I was hoping you might be able to give a few more specifics as far as what exactly is causing that delay. And as you think about 2017, I know you've been deemphasizing the JV piece of the business here, but given that it seems like some of those earnings are getting pushed out to 2017, can you give us directionally any indication whether the JV profit should be higher than 2016, flat, down? Any kind of directional guidance there would be helpful. And then I have one follow-up after that. Thank you.

John M. Stephens

I would say, Alan, on the delays that we are talking about, there's a couple of communities that, one is in San Jose, it's been a very successful project called Orchard Park, condominium units, condominium flats there, where a building has been pushed in the next year. So that's a chunk of that income. Again, margins are good there, we've got good sales taste there. It's really just construction. As you know, the labor market is a little tighter up there. We also had a few closings at one of our other projects in Southern California, also a condo flat project where again those just got pushed into the first quarter.

And then I said the other piece was just on the land development side. Some of their percentage of completion, getting some of the lots, the deferral of income that we recognize on lots we've delivered, have an impact on kind of the timing of when that comes in. So looks like that will sort of push into next year.

Lawrence Webb

This is Larry. Big picture, this is a timing issue only as it sits here today. But on 2017, John, what are you projecting?

John M. Stephens

So directionally, we would expect it to be up from where we're projecting this year. Again this year, $7 million to $8 million is where we think the year will end up. We project it to be up directionally at this point.

Alan Ratner

Okay, that detail is really helpful, guys. Thank you. And then the second question, maybe more for Larry, it's kind of a bigger picture, but you guys have a tremendous land portfolio. If you look at the JV and wholly-owned business combined, you're talking about 3,000 plus lots. Yet those two businesses right now are delivering call it roughly 400 homes a year. So a ton of runway to go there and it's been a little while I guess since you've kind of provided a longer-term view, but when you look at your pipeline, how should we think about over the next few years those projects developing? I mean is there going to be a gradual ramp-up as far as communities opening as these lots get developed or is it something that we should think about, maybe it's not next year, maybe it's the year after, I don't know, but is there going to be kind of a big jump-up just because these projects all kind of hit scale, critical scale at one time?

Lawrence Webb

It's actually a great question. As many of you recall, in December last year we raised an additional $50 million of [indiscernible] investment in our Company, and at the time we explained that that was because we had so many opportunities that we didn't want to miss those. And since that time, we have taken that money and we have been pretty aggressive in the first half of this year in new projects. The majority of those projects are in the planning and entitlement areas now or maybe even a little further along.

And so, next year we clearly are going to be opening a whole series of new communities, but the real financial input on those will be 2018 and beyond, and that's just purely because of the lifecycle of how homes get developed and built in California. But overall, we feel very strongly about our land position and have a consistent pipeline moving forward that we feel good about.

John M. Stephens

Alan, I'll just add a little more color to that too. On the wholly-owned side of the business, as Larry just alluded to, we have been investing in that side of the business and we do expect our community count to grow next year. In terms of timing, it's a little more kind of Q3-Q4 weighted in terms of that growth, and we're going to obviously give a lot more color on that at our next call, at the year-end call.

And then on the JV front, as you know a lot of those lots that are controlled for the JVs are in the land development JVs and many of those lots will be sold to other third-party builders, and then obviously we would be a buyer on some of them to consume some of them, just like we did at the Cannery.

And we did open our McKinley Village community this month from a JV perspective. So you saw a little pop in our JV community count. But again, over time, over the long haul, we would expect more addition on the wholly-owned side of communities and fewer on the JV side, as we sort of work through for example McKinley Village.

Alan Ratner

Great. Thanks again. And I have a couple of others, so I'll get back in queue. Thank you.

Operator

Our next question comes from the line of Will Randow with Citigroup. Please proceed with your question.

Will Randow

Congrats on the progress and thanks for taking my questions. I guess just a couple of follow-ups there. In terms of fee building, how much room do you think there is to scale up that business or do you think you are at capacity at this point?

John M. Stephens

As I mentioned in the prepared remarks, we've seen a nice pull-forward of some of our fee revenue into 2016. We feel good about the pipeline over the next couple of years, but as I mentioned, probably a little bit of tapering next year as we sit here today. Again, a lot of that can be dictated by our fee building owner or our fee owner. And so, again, a solid business over the next few years, and the timing of when starts are and community openings, we do expect it to be a little bit lower next year or lower next year relative to what we did this year because things were pulled forward into 2016, as you can see from our revised guidance.

Will Randow

And based on that commentary, it seems like as we think to 2018 and 2019, steady-state is probably the best way to think about it?

Lawrence Webb

I would say steady – with our relationship with the Irvine Company, which has remained solid strong, as good as it could possibly be, we are internally projecting steady. And it's our perspective that that working relationship is pretty unusual in our industry. I would imagine there aren't any other public builders who have the same volume of fee business that we have. And we value that relationship and continue to maintain it.

Will Randow

And then just one follow-up, in terms of you talked about positive cash flow, can you talk about uses of cash? I would imagine possibly deleveraging which would reduce your ROE, but is it predominantly investing in the wholly-owned business or what are your thoughts there?

John M. Stephens

Yes, it's predominantly investing in the wholly-owned. So we'll see a big paydown of debt at the end of the year and then as we move into next year with all these new communities we have under contract, because remember, close to 70% or 68% of the lots that we have in our wholly-owned portfolio are through options and through those community openings we'll be reinvesting that money sort of as we move through the second and third quarter of next year.

Will Randow

Great. Thanks again, guys, and congrats again.

Operator

Our next question comes from the line of Barry Haimes from Sage Asset Management. Please proceed with your question.

Barry Haimes

Good quarter everyone. I had a question, the three new communities that opened in the quarter, did they open more towards the beginning or the end of the quarter? And then I wondered if you could just give a little color around the sort of up 5% order number versus the up 30% community count, and I wasn't clear if the JV orders are in that order number as well? So just any color you can give would be great.

John M. Stephens

The JV orders are not in that number. And in terms of what we opened during the quarter, there really was only one community, a very small community in Sherman Oaks and it was really in the back half of September when we really got it opened.

In terms of order activity, I think last year we had opened our Cannery community as well as we had our Fiano project ongoing then. So we had I would say a better absorption rate than the third quarter of last year, partly due to those two communities in particular, but really that is the sort of color I had on that. Larry, anything else you can add?

Lawrence Webb

Sure. We track our sales very, very closely, and for us, July and August were a little slower than we had hoped but they came back solidly in September and October with 30% year-over-year. In terms of overall revenue, we are significantly above previous years and we stay diligent on it. This is important to us. So, good question, Barry, and we are very much focused and feel comfortable we're heading in the right direction.

Barry Haimes

Great. Thanks for the color. Appreciate it.

Operator

Our next question comes from the line of Alex Barron with Housing Research Center. Please proceed with your question.

Alex Barron

Good job on the progress, guys. I wanted to just kind of enquire a little bit more as far as timing of which communities you expect will be opening this fourth quarter or have already opened?

John M. Stephens

We only have one community scheduled for the fourth quarter.

Alex Barron

Okay.

John M. Stephens

And that's in Northern California, Alex.

Lawrence Webb

It's our Emerson project in Santa Clara and we have a lot of very positive initial feelings about that project. It's a good market and a good price point.

Alex Barron

Got it. And then you also talked on the JV side about having nine communities open versus I think three it is right now. So are those McKinley Village or what are you guys referring to there?

Lawrence Webb

We have five at McKinley Village that we just opened in the last…

John M. Stephens

And we have eight at the end of the quarter, Alex. And again, so the five we opened at McKinley really added to the three we had previously.

Lawrence Webb

Right. So that's what it is. So, McKinley is a brand-new community, first new community in Central Sacramento in a long time, at least 10 to 15 years. If anybody gets up there, we are very proud of what we've created, it feels terrific, and we're just beginning but we've opened strong and we've gotten a lot of positive feedback.

Alex Barron

What about, as we look into next year, what's roughly the timing on some of your Orange County communities like the ones in the Rancho Mission Viejo, Brea, Marywood, when are those roughly opening?

Lawrence Webb

Most of those projects, not all of them, will be opened probably third quarter. We will – for our 2017 guidance will be very detailed for everybody, but it's a little early now, but all the projects, as I mentioned earlier, that we purchased through the first half of this year are actually proceeding on schedule, whether it's Great Park, Rancho Mission Viejo, Irvine Company in particular, were onboard and moving forward as we originally scheduled. One of the strengths of all those communities is that they are already in masterplans and they come with finished lots. So there is a lot less development risk and there is really no political risk in those projects.

Alex Barron

Okay. So it sounds like directionally the growth next year is going to be pretty solid. Okay, look forward to it. Thanks.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Alan Ratner. Please proceed with your question.

Alan Ratner

Thanks for taking the follow-up. The only question I had was, in a lot of your comments it sounds like you are looking to transition your land book towards lower price point communities and homes. You are sitting here on $2 million ASPs, similar price in backlog. Is this something that is going to be occurring over the next several years, or is there going to be a more immediate impact as far as the average price of your homes [indiscernible] lower?

Lawrence Webb

It's really, you are reading this correctly, it's really probably a three-year process. And John can talk specifically about its impact on next year, but it will be a moderate decrease next year and it really is going to be a gradual and well-planned decrease over the next three years. But go ahead, John.

John M. Stephens

Alan, and again, the lower price points, we're talking $500,000 to $750,000 price points. So it's not that low.

Lawrence Webb

We are not competing with LGI.

Alan Ratner

Got it. It's little compared to $2 million, that's for sure.

Lawrence Webb

Correct.

John M. Stephens

And as Larry indicated, it will be gradual next year. As you know, Alan, we'll still be delivering a lot of our Crystal Cove homes next year. So that will have a heavy influence on our deliveries. But it could be down 20% to 30% next year depending on sort of when these communities get opened and when we start delivering them.

Alan Ratner

Got it. Okay, very helpful as always. Thanks guys. Good luck.

Operator

We have a follow-up question from the line of Alex Barron. Please proceed with your question.

Alex Barron

I think I heard you say the Coral Crest community had an average sales price of $6.6 million. Is that just one of them or both of them is…?

John M. Stephens

No, Alex, the $6.6 million I referred to was what's in backlog at the end of October.

Lawrence Webb

For Coral Crest. We have two communities in Crystal Canyon, one is Coral Crest, the other is Coral Canyon. Coral Canyon is the lower-priced project, in roughly $3 million to $4 million range. Coral Crest is roughly $5 million to up to $9 million.

Alex Barron

So when you said you have 20 sold, you meant between both product types or just in the…?

Lawrence Webb

20 at Coral Crest which is the more expensive product, and that average sales price in backlog for Coral Crest is $6.6 million.

Alex Barron

Got it. Okay, thanks for the clarification. Take care.

Operator

There are no further questions in queue. I'd like to turn the call back over to management for closing comments.

Lawrence Webb

Thanks everybody. We appreciate your questions and very much value your support and help. We have always known that this was a back-end loaded year and we're moving forward, as we said, confident of our team and we are always there to answer your questions. So, thanks again and we'll see you in a couple of months.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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