D.R. Horton (DHI) 8 Nov 182018 Q4 Earnings call transcript

Company Profile

Participants

Jessica L. Hansen	D.R. Horton, Inc.
David V. Auld	D.R. Horton, Inc.
Michael J. Murray	D.R. Horton, Inc.
Bill W. Wheat	D.R. Horton, Inc.
Carl E. Reichardt	BTIG LLC
Stephen East	Wells Fargo Securities LLC
John Lovallo	Bank of America Merrill Lynch
Stephen Kim	Evercore ISI
Eric Bosshard	Cleveland Research Co. LLC
Alan Ratner	Zelman & Associates
Susan Maklari	Credit Suisse Securities (NYSE:USA) LLC
Michael Jason Rehaut	JPMorgan Securities LLC
Ryan Tomasello	Keefe, Bruyette & Woods, Inc.
Soham Bhonsle	Susquehanna Financial Group LLLP

Call transcript

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Operator

Good morning, and welcome to D.R. Horton, America's Builder, the largest builder in the United States Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. to Vice conference for President like host to D.R. now Hansen, Jessica of would turn over the your I Investor Relations Horton. Thank you.

You begin. may

Jessica L. Hansen

to and and our you, good Welcome our Thank morning. fourth XXXX fiscal call quarter financial results. to discuss

may today's statements by Securities get Private that Act Reform defined comments call we constitute include Before of the Litigation started, forward-looking as XXXX.

forward-looking such that statements any or revise reasonable update assumptions, materially no assurance any actual Although available will Horton on different. based to D.R. call not publicly there on of are based D.R. All Horton upon statements. information the undertake forward-looking statements are Horton does to believes this be outcomes any and not D.R. obligation is conference date

on your Section this News Investor Relations include data active and our selling Presentations will stratification home to to & material D.R. our operations. brand data XX-Q, gross updated contained our inventory, Exchange performance Additional be website week. previously information return call, mortgage at on sales on morning's information also with the changes our on investor.drhorton.com quarterly are file the Events about in on filed on earnings Horton's post we site includes our release XX-K next Securities and report the we supplementary changes issues in to in on updated supplementary reference. margins, most Form plan our recent for of price which and Form report and our to is data The under released both that found communities This stratification After annual lead homebuilding XX-K Commission. and can could

and turn David over to Auld, will our CEO. President I call the Now,

David V. Auld

good Thank morning. you, Jessica, and

Chief and I'm addition and Operating this be Executive Chief Officer. Executive pleased Officer; President Vice call by In Vice on Bill President and Mike Financial our Murray, our Wheat, Jessica, joined to to

million to quarter on revenue, and the XX.X%. the improved D.R. our strong. Our $X.X for margin XX% to pre-tax Horton Pre-tax of year increased points income operating $XXX fourth team finished basis billion XXX

we delivered $XX.X shared better the XX% the on year, original year, an or consolidated $X.X to closed or XX,XXX billion of For in We we year. XX% the beginning revenues. guidance with fiscal of increasing of billion results pre-tax with at increase line X,XXX income over homes the year, this last than XXXX homes

points the margin to consolidated Our year on XX.X% XXX return for homebuilding points basis pre-tax and to basis improved inventory improved our XX.X%. XXX

new prices higher both and which with product brands. for homes homes positioning our most multiple the some period operating flow leverage was increased our rising across affordable to in during flows Sales homebuilding has a for reflect homes, across from annual price rates to existing of teams, operational revenues demand in affordability several moderation and the footprint, of years, consecutive have These doubled. our cash and operations billion geographic $X when XXXX, generating of scale across ability fourth our coupled of broad Our impacted points. resulted interest our our over positive particularly cash year have Horton's at markets offer our strength D.R. results past

However, across financing of all we homes continue good limited a markets. And demand economic remain to fundamentals supply at affordable our availability see and solid. prices and

changes and as current demand our market, with pleased adjust necessary. current are will the conditions and we and We product market meet to future offerings in positioning to

supply growth, With financial support of lots optioned we growing continue inventory sheet generating share, consolidating to as Mike? and our while maintaining a and we that profits includes a and owned homes XXXX. both and well-positioned an began flexible market is position. focus pre-tax cash future XX,XXX to balance conservative returns and strategic in flows Our strong are revenue ample

Michael J. Murray

compared share, XX% a tax to increased per included assets. a million its for share diluted valuation income or quarter allowance per reversal in fourth the the portion to of benefit deferred $X.XX quarter Net $XX.X tax income quarter. million fourth on the prior-year million of Forestar's $X.XX Net to of for $XXX $XXX diluted due or the

increased consolidated $XXX to in $XXX Our from income to million. quarter million $XXX fourth $XXX homebuilding XX% XX% pre-tax increased from million. income million And pre-tax the

As the previously homes from closed $X.X X% home year-ago fourth reported, on quarter quarter. homes increased billion our sales XX,XXX XX,XXX in billion $X up to on revenues closed,

up ago. rate year Our fourth backlog from XX% conversion XX%, quarter the for was a

size closed, X% keep closing average from prior our average was quarter our due affordable. the mix our in for year, price the decrease a reflects Bill? $XXX,XXX, homes homes which X% Our down geographic and to of the primarily to efforts

Bill W. Wheat

increased also homes sold during previously the to quarter XX% As quarter value decline from on in a average net active The fourth number XX,XXX the orders the selling increased of of billion. year-ago sales homes to the in communities. $X.X reported, XX% X% our quarter

rate orders cancellation quarter XX%. X% and $XXX,XXX, sales decreased Our our sales on average to net was Jessica? price fourth

Jessica L. Hansen

XX basis was average lower margin home profit third gross accounting. on reducing slightly or raising incentives, selling excess the the XX.X%, points of price. from quarter to points of was Our up the XX declined from sales due prior-year in sales was our XX increasing costs, costs, the points from increases, to the in from by primarily from Homes and revenue from cost basis in than quarter. purchase quarter, basis was of basis increase margin year-over-year fourth XXX gross less was less margin average homes sales basis due impact defect cost construction more XX XX.X% warranty and in interest points points the prices gross

to positioning to pre-tax We closings a because and our achieving pace profit start, returns of product and absorptions highest sales, both focus in communities, consistent maximize the margins. our targeted each with right on the continue returns of drives

product as well fluctuations XX% this due XX%, potential as fiscal gross to gross fiscal from to sales geographic impact the accounting. home be mix, in XXXX relative We margin by our the Our strength primarily margins of season. spring and cost determined interest will quarterly warranty, expect the XXXX home with litigation, to range from range selling and outside of currently sales purchase

We will as in the comes quarter, update visibility spring Bill? have year we expectations and as to better necessary focus. the each full our

Bill W. Wheat

In X.X%, quarter, points revenues down XX expense of as quarter. the fourth a the was basis percentage homebuilding prior-year from SG&A

For X.X%, the full year, in homebuilding improved SG&A basis compared X.X% points to XX to XXXX.

supports of SG&A, expect As increased in leverage and our improved SG&A our to growth infrastructure the on we further our revenues controlling leverage We remain ensuring costs. fixed focused our adequately while our our Jessica? XXXX. overhead

Jessica L. Hansen

fourth and million quarter Financial $XX.X services pre-tax was operating the income the margin was pre-tax XX.X%. in

our revenues, Mortgage for million originating operation handled margin. company's of operating DHI million loans mortgage homes mortgage the pre-tax XX%. with XX.X% average of homebuyers. originations income an volume. of score ratio pre-tax and on homebuilding the quarter during $XXX quarter representing $XXX mortgage a company financing the For an average FHA the year, closed our financial services XX% our and our to loan-to-value XX% of and loan FICO was related of by Borrowers' loans had XX% VA for this of accounted XXX company's

entry-level from mortgage First-time prior-year closings up offering by homes focus buyers. on for XX% Mike? our our handled continued the homebuyers XX% the reflecting represented in affordable of quarter, company,

Michael J. Murray

last homes us unsold, of in XX% our we a ended year. putting which to which to more XX,XXX inventory We position total total very X,XXX year have of ago, with the inventory Compared were XX,XXX slightly in strong start homes completed is were homes XXXX. year in from down

was $XXX quarter development lots million replenish to homebuilding and in and of fourth and finished billion, investments land, $XXX land Our lots, development. for which $X totaled million was land

the in year, invested lots, billion David? For we and development. $X.X land

David V. Auld

progress are land XXX,XXX good our lots, to our and number while XX,XXX total are our current we option and over with the when and controlled or of which XX,XXX At will owned flat are are contracts. of on portfolio XX% we lots XX% making increasing lot through or XXX,XXX pipeline our lots be next few them. of the option XX, portion of and owned our XXX,XXX increase finished lots maintaining owned land finished of September levels. and lot are of We purchase consisted our can option lots believe years, continue or relatively option

by option from our across We have developers with to to country expanding the expansion platform. relationships our XX,XXX continuing plan lot ago. lot we the position our by and And option increased further support increase manufacturing of lot national year lots lots a Forestar's

portfolio well-positioned lot and advantage. Mike? a balanced strong is Our competitive

Michael J. Murray

agreement XX,XXX two Forestar, lots, are of September with our of in lots states. between a approximately the subsidiary a X,XXX operating company owned are publicly to subject is majority-owned traded lot contract now residential which XX XX of master first in companies. Horton, controlled under under D.R. and or right Forestar our Forestar's offer XX,XXX finished. XX, supply development markets At

of revenue million delivered and months X,XXX September the lots $XXX XX. ended generated Forestar for XX

on with prior expectations what are for Forestar growth calls. shared Our consistent we've

to Forestar's revenue grow still million to annual deliveries XXXX. to $XXX $XXX on track million generating XX,XXX of in approximately fiscal lots,

We profitable are expect be at These results. pre-tax Forestar's Forestar to margins expectations of future for with XX%. least consistently standalone

Forestar its structure operational support capital platform to its in is and plans. growth making progress steady building significant

$XXX a is During the now self-registration which completed the facility three-year million effective. statement, unsecured quarter, Forestar credit and the obtained of bank filing

XXXX to plans access long-term to capital growth. the provide markets in capital still fiscal additional Forestar for

capital current its planned to lot deliveries and XXXX sufficient XXXX are lot liquidity, growth in However, base Forestar's revenues. fiscal and position support and

growing with ratio operational and for relationship Horton D.R. or long-term excited of Forestar's will debt-to-capital D.R. the lot returns. value less. the of shareholders. and access our Horton alignment and create Forestar's from a efficiency Forestar is operating Forestar increasing advancing Bill? We're over and homebuilding separately to capitalized about targeting positions long-term this and both D.R. is enhancing our option strategy Horton's platform XX% net

Bill W. Wheat

$X.X our capacity homebuilding billion, revolving billion credit available $X.X homebuilding liquidity $X.X cash and of billion facility. of September XX, consisting unrestricted our of totaled on At

from a fiscal notes was from likely and balance maturity. billion improved will public homebuilding $XXX million XXXX, homebuilding of flow ago that of a March outstanding in at notes $X.X to leverage points at total which repay cash of we have XX.X%. XXX Our senior mature we basis our year The year-end

and from consolidated for flow the $XXX fourth during $XXX full Our the was cash million operations year. million quarter

Excluding cash totaled Fiscal operations fiscal XXXX million billion. target. $XXX cash exceeding from homebuilding our XXXX $XXX million, from Forestar, flow was our flow $X operations publicly-stated

year XXXX, quarterly for XXXX. authorization ago of with we our the And repurchased shares for $XX.XX. our value financial in per we million to X.X position to and our million fiscal to fiscal XX% share. expect currently by shareholders to fiscal our $XXX pay per directors We and XXXX approximately increased repurchase million. David? our is dividends stock paid for of XX% book board of million. share cash outlook of the dividend remaining $X.XX year We and $XX.X quarter, cash equity of During $XXX dividends increased stock $X approximately a September on balance Based our shareholders' billion from ended common $XX.X million

David V. Auld

Our opportunistic approach and focuses flexible, on balanced disciplined. capital being

Our our liquidity, balance and the to enhance utilize sheet's growth our the increasing strength, to of flexibility. And earnings position long-term value company. plan are flow generation cash strong we

top through to our priorities our in acquisitions, Our to cash market return reduce flow and homebuilding capital repurchases. and consolidate share business debt strategic and by are investing homebuilding shareholders share dividends

As $XXX of million to last and across actively have Jessica? we purpose country few next we homebuilding expect this call, on we $XXX been select million for acquisitions deploy the mentioned still capital over our the quarters. pursuing to

Jessica L. Hansen

will quarter Looking homes XX,XXX of first be $X.X billion $X.X for and and consolidated XXXX, consolidated in of We XX.X%. of pre-tax we between the forward XX,XXX our in range to a billion homes. XX.X% revenues first that margin the expect quarter range to anticipate our be closed to

pre-tax results full-year Due quarter at the to we this guidance by only fiscal margin will season. conditions, revenue, market providing be significantly recent are spring uncertainty first selling XXXX time. and impacted on based closings, Our

However, subject we double-digit season. in to spring are well-positioned fiscal the growth strength XXXX the of deliver selling to

We We flat count we outstanding of count share income the for XXXX the quarter with XX% have an of XXXX share strength. end visibility outstanding will approximately expectations better update to and our XXXX. we tax end each our be rate at fiscal will forecast the our as at expect fiscal still of

operations from in at David? We also least fiscal $X flow billion of to generate expect homebuilding cash XXXX.

David V. Auld

$X team the In homebuilding us across and operations. billion XX% platform the of our grow our from allowed and operating our generating to profit flow of revenues pre-tax is cash while strength closing, country XX%

XX.X%. points We on improved inventory annual XXX by return basis to our also homebuilding

profits market focused flexible flows pre-tax and are consolidating We while position. share, growing while and maintaining cash revenue returns our both a generating strong financial on

entire our D.R. the lot team with so to across outstanding affordable share, on the concludes across you growing do congratulate to and well-positioned and market the your geographic our hard are industry-leading importantly in operations We We working together brands, balance largest offering Horton multiple We country. and XXth consecutive footprint, year and forward position, sheet, remarks. builder product for experienced and attractive by conservative team land most broad our prepared thank to as our our accomplishments. look States work volume in This the we improving United XXXX. finished continue

will questions. host We now

Operator

the comes from BTIG. Please proceed question. first question of line Reichardt Our Carl with your with

Carl E. Reichardt

Good you on little talk to about your COGS Good if to covering – cetera weather I bit XQ and morning all. ask of you. SG&A? impact a to of hurricanes the fixed portion wanted your the that impacted et

Bill W. Wheat

hurricanes Yeah. closings. there September in Certainly, our the some was impact on from

our say a our of that, quarter. came-in plans the guided for we had of leverage our closings and at primary SG&A we our SG&A reason impacted, reasons, why that's why bit revenue fall on is short than time would One and line, we pre-reported the any the I higher our on

Jessica L. Hansen

fixed And so gross hurricanes. cost the not our the have goods of in margin we impacted don't any was costs by actually

Carl E. Reichardt

So just SG&A.

then And so QX, were what your Thanks. looking of guidance little terms Okay. bit we a in for for. below

that you a in as prices? of rates expectations your So that your looking there prices they're that's also quarter. that and incentive not you higher backlog of look and reaction are activity just or to buying can with out you see softer and the talk having Is about some of whether moved had incentive so that a down a then, little this you higher goes prices your you seen you a into or drop what when planning orders just consumer of you've sort you're bit more and really an elastic than And by function conversion feelings an lower they sort environment elastic, to have is or incentives thought? delays sort

David V. Auld

conditions really five David. last have been is weeks choppy. Market the This four, over pretty

we consistency the the flag-to-flag of kind at level seen grown haven't expect. We to that have

that So kind market maybe get the momentum of you when slipping sense a you little are are, from you. the size is we a to

for You number double-digits. takes us to hard the driving have time a it sales grow of

we So I'd believe well we tell say, I now. good are where can as Expectation-wise, QX, as picture have positioned we we're giving right you ever you, a of I are been.

in the see double-digit, Our plans have we'll operators to there out field happens. what produce and

it's have I at in we've Given some we're a quarters right little kind in think bit release and kind market we the been any few of going guidance where year. – come had had because of of great spring, the at But all to it now, and to quarter. a a very given then fell short

our of want there number here. part maybe can't So we conservative nature it's up out own put to a We hit. don't

Bill W. Wheat

still quarter. incentive incentives fourth historically. From in were from than Carl. been a lower very they third closings, quarter the Year-over-year, incentives slight the had to saw In fourth the an sequential in tick-up the fourth we at quarter level a standpoint, quarter

maximize to in will be returns some to cases, or As working to giving said, in incentive David we're move increase community. choppy we that. pace maintain by pace some we'll as as if forward, improve return, environment, a we're community-by-community, doing more And

still to a points, housing here bit. generally, very at from so, do price choppy you That's expect in And from affordable our environment incentives would demographics, in margin for is expectations from QX. the guidance tick-up fundamentals fundamentals in our little But reflected economy, the believe we especially then, for solid.

great but our And realistically were spring for right to spring spring. positioning, We don't season, to visibility so, the a the feeling we position the now have not selling yet.

our flexibility here a maintaining why that's terms because don't we're just visibility of forward have guidance, bit yet. in we so, And that of

Carl E. Reichardt

guys. much, so Thanks right. All

Operator

with question with Wells line your East from Please question. Fargo. proceed of Stephen next the Our comes

Stephen East

you, good Thank morning. and

you better. could various becoming on more to little buy? just by at little But Carl's what price sticker detail orders, you incentives a problematic And more bit following Are more you're if seeing Just qualification there? the decision entry-level you getting or working, entry-level a was question are wondering that mentioned I bit. people they on make I'm you if a the would? shock to And categories, at on that give bit seeing the guess are it us product is

Michael J. Murray

a is October, buyer Good too in and and little see affordable morning, flags, huge to It's time as choppy. changing of good a environment – those stretched it's I not we're our are kind our points, $XXX,XXX been media a to than mortgage bit higher it at levels. closings to Anecdotally, demand. reset we Incentives price point rate about bit and have to good the that hard has conditions. Stephen. That really nationally. us, of some only so But would say read less of coming some point a much. affordably continue traffic probably been not that heavy in probably the the price for from taking price little third of above positioning of seeing

months. back behind But with midterms really hopeful that that is next Cowboys are over we'll not get forward. going out because the a moving of can We but fans necessarily, to itself people off. and three the to lot on their and Bowl, us we're season be lives, when selling kicks focus get play Super the the excited because we're that's And to typically

really as now, right to it's see. choppy, we're And And we we think been so, that's going said. what

Jessica L. Hansen

but further $XXX,XXX market, generally have West. $XXX,XXX, dynamics, $XXX,XXX, see the we it, West submarkets call But under price sales on Carolinas, house put the point the really across if And a to generally up market. speaking, market ground very under a different under demand. can very you varies in very still from the to robust Florida speaking The speaking price generally into for again Texas once

price flags we getting behind are come So those are market opened those some of on of lot legs that focused a on have points. we to the new

Stephen East

really a those you over been any And then, growth. had haven't lot. the lines, years; along Okay. it's all last three community growth absorption Thanks

that year double-digit improve pivoting I type look to to me to as entry-level, still of But rates. growth that You're going community some also. you which forward toward your it will in got reach like absorptions and you've get XXXX, looks assume this XXXX growth

Just it what all I you about are am way? and expecting the right thinking there,

Michael J. Murray

are than been or count at months. exactly more two are for for to in growing our And slightly past XX the running frankly right. exactly got We One, planning faster dynamics thinking we've expected. absorption stable be You – communities about play. we probably community

through we longer frankly, than And of new we to out the communities challenges And anticipated realities and try us taken to ones faster we at the ones getting so, through we longer open communities that to then, business are are the But approvals it's we selling we were to face continue development. plan communities and that And and to face adjust our taking had it get faster. through has probably reflect closing clips planning, the get in us anticipated. than open. respond open to

a So in counts and it's of We see stabilize things counts. community up two function XXXX. trend community would on expect the to

Jessica L. Hansen

to is our position mentioned And we up XX,XXX option happen. ago. it's lot lot a to that David have the show going lots year from

the that direction time. So over is come will communities the

David V. Auld

the did community we And, count and just couldn't get last believe year growing communities we Stephen, really be online. would

the plan is that certainly in for So XXXX.

Stephen East

a Thanks Okay. lot.

Operator

from of questions. John comes the proceed question line your Bank Lovallo with of America. next Please with Our

John Lovallo

And you acquisitions, light that a competitors be of from it I I And the smaller you to it potential asset like Are do seems a wouldn't willingness thesis. straying David, would it's table come now? you for the taking necessarily deals. of type acquisitions, guess if that some tuck-in kind of question. be Thank they correct? guys. you guess Is mentioned. seeing Hey, terms in pursue for my greater secondarily,

David V. Auld

much going a you're pretty what have been to doing. we of think continuation I see

interested bring very culture We into to the and are these the in company. companies ability our

us I think big closed deals great good very within to you companies, probably were can that a I the deals, right that the on So heavy a don't culture. our make well lot very, of lot now. will deals very People good tell fit company. sense

can see them we we'll So get done. if

Bill W. Wheat

John...

John Lovallo

ahead. go Yeah, Okay.

Bill W. Wheat

on more that today, inconsistency to potential see for talking been buyers. a market. extent some have sellers we with is the probably quite potential in are to one time ones you would expect going with forward more some – that We of and willingness little we've that some there would tell I'll is the forward. for to that some Willingness we're buyers Yeah. working a time. close see quite sell going expect or the bit But

David V. Auld

some cultural been Bill mentioned the are talking really we've quite serious to time. for these guys fit. about We

from we typical right we So and a the what years it now. we're working is on close deals on to start two time the when courtship probably

John Lovallo

Okay.

David V. Auld

We're alter, okay? not going to rush to the

John Lovallo

more becoming part Is using it asset Forestar to the – or is it become light just strategies shift away be? from of

David V. Auld

do in that In with This No. with has new platform consolidation. market a instances fits in right market. this – a a getting to couple

Michael J. Murray

our more platform market, in existing us places invest to Growing giving Forestar. with

David V. Auld

no. No,

option with track on self-developed on our trying lot lots. are We reliant and growth, land less overall to become

not change. going to that's So,

John Lovallo

following maybe And up then on Okay. just that.

potential equity to it don't but market is volatility bit really In affected of raise? obviously, mentioned it. mean raise does time And pretty of capital, well Has the the you that a been views terms best that there's, like Forestar, out has pulled capitalized, stock you in know but on need feel of raise Forestar Forestar's capital here. I and timing I your the

comments on would any appreciated. that So be

Bill W. Wheat

this it lot a subject balance very the Forestar. effort assets This sold of platform of year, year been raised would past public for equity very building and the any John. as of in here lot some structure course over a and capital Forestar – to and is market credit on so a of sheet capital acquisition, capacity capital Had timing. legacy banks' very the the provides $XXX date Forestar lot the has a pleased either along, on it to with made of at the the cash flexibility have be at has XX, been still their standpoint, capital still in of there And to – is. All September, year, liquid fortunately, at the progress the liquid, on plans the markets, position begin debt conditions significant Sure, million at was last facility raising or well, their getting positioning.

is And to the has on dependent the of the plan as all raise capital timing in we in when market position be that like been windows best are. fiscal feel be working Forestar to XXXX along. will

Fortunately, Forestar without been in today to capital. is with fiscal good about a very capital, additional XXXX position position the drive targets lot we've their XXXX with growth that raising and talking their for

likely their plan But However, is both part is the the you, would debt recently. equity debt But is the and right does do long-term with now. equity to markets to you still it where equity been to agree need were if time given XXXX. go-to-market the plan. Forestar are they plan raise when just we today of don't to market definitely raise we favorable If and market, the capital best fiscal were don't have we to in include equity; when still it today, I for go-to-market for capital go conditions and need

John Lovallo

guys. Thanks Okay.

Operator

proceed Our your question line Please the comes with of ISI. question. next Kim Evercore with Stephen from

Stephen Kim

a job lot, Thanks the Good guys. Yeah. quarter. in

ask to spring until give the guide the uncertainty the know market bit about about the to and guide. season. talked I selling not you little full-year wait wanted to the wanting in your decision and Just a

regard, that your wanted in so, And XQ to guide. ask about I

XX%. that to guidance the be could could You pre-tax outside that for range. would given XQ, seem talked you your gross range. outside In be about XX% But margin, said gave there quarter year you pre-tax of go of like next you where a the volatility might it us margin full-year

your would below margin that what the And I or that so, about want to right. for make it the gross thinking at XQ about? margin of range? kind XX% that be that we're just in should Is sure belief Is be thinking we

Jessica L. Hansen

that we Steve. dramatic of consolidated would be XX% look from XX% at XX% being a today. pretty a margin thought No, range profit move that to we And range. are where incorporated our pre-tax When

our we from do the we we know the don't the wouldn't that move of like is in for see year. gross we we quarter-to-quarter. as look margins gross choppiness margin we ultimately level year But expect until move will what So spring, full believe throughout

slightly give wider quarter a say, wanted we ago. two than to a or band So we what gave,

Stephen Kim

encouraging. sense about kind then just Yeah. asset land allocation Thanks XX% wondering this relates, – for options, spend, the running market I so of In give was year, they about prices and environment the the your typically here question particular, what Okay. was now? of year, that they're at the clarity. of then a decisions. second your the six be takedown And Or constitute the sort to it to expect Are first fiscal price generally, in typically option? similarly That's to hold are I'm give year. market's we time purchase you your of of curious more you going, and this negotiated percent set given in put and up the a quarter season to right the in and this And options? us sort good deposits your past to a the should how land strike respect for to rev the months fixed sort where if can until heads of on Again, spend bit wait selling on in fiscal your of And accordingly. uncertainty the with you market decision also, aggregate spring be flexible? going

David V. Auld

is Let me – this David.

it now, belief October double-digit when broad numbers even start possibilities becomes the putting seen growth. is see XXXX. are to to positioning. for that to going to in speak And meaningless Right land continuing continue there. in growth that personal – out far we the What so and of range position spend together, we so my it's double-digit we've put me it's to so we're Let lighted,

QX are and that continue good So, we're way have and our we to to – position any that. going going look I year is to to at a believe

turns spring, if – giving choppiness now, we're into every now the continues not our curtail. then But yes, or seeing into up get that going right the this to when Now on today, we spend, worse, gets year. is we're significantly land spend

Jessica L. Hansen

to December October any slowest is time make the in of year. ever October. don't drastic always We the seasonally business decisions

And so the make what we plan we see and decisions. before like want big looks any spring to business wait really

Michael J. Murray

every And struck a option entered at those until will the pretty with to X% takedowns. pricing, achieved there in then based maybe initial running it's some for earns time That's lots the pricing purchase small start with a is the are to initial from about aggregate the the believe rare there your in all of question maybe option Oftentimes, taken the minority down. the deposit into, fixed-rate prices that these as the house. today money are adjustment is there's takedown contracts option an Not case, remaining generally opening sometimes is I escalator price price. or typically, days. upon

a a lot So purchase a that's – that's collection sort of lot contracts. again of and of

are those kind what's averages, guiding but of that's us. and out there generalizations some So

Stephen Kim

remaining include these Thanks. Mike purchase just be of price deposit X%? got you you another that down already you've X% said so put and to then clear,

Michael J. Murray

That's so the deposit... we have, – on No. X% what have is we put

David V. Auld

Total at-risk.

Michael J. Murray

lot future of the businesses. ...or

Stephen Kim

Perfect. Perfect, it. got got Okay, it.

Michael J. Murray

Sorry.

Stephen Kim

no. confusion. much, very you Thank guys. was No, my No, that

Michael J. Murray

you. Thank

Operator

line next Company. question Bosshard the Eric comes your Research Our with proceed Please of from Cleveland with question.

Eric Bosshard

in bit what business piece business you're the your points. sounds seen changed of two-thirds little that more and the anything point Would like upper-third seeing? heard within more strength the your upper business the has indeed the two-thirds commentary of market? if you've you're that's of if I And about Thank your demand love that's under. softened the entry price demand the about in then to talking of in a price that's It of $XXX,XXX you. hear and color

David V. Auld

over you interest qualified. valuations can getting out ago, less. would rates at time house, is income years when house just markets. issues I difficult having that a buyers good more our take think – long they we're go in been $XXX,XXX get at today. like they debt what have And seems for afford – when so could a they can of think that nicer than so most people much to the higher-price But housing that buyer maybe seeing a two and you points the It impact a look

under at far not the there's much $XXX,XXX, going So, as out on. market. there in of sticker any is of process kind just demand And that shock very as there

Michael J. Murray

Supply.

supply. much not So

David V. Auld

there's Yes. much supply. is the – there, Not Supply. not much demand

demand more there than may it still afford affordability, there can So, that are by than restricted are is out even there there though be buyers product.

Jessica L. Hansen

buyers. the availability for financing supply. issue really the It not is And those is

line our see And our compared slightly Express our scores just improve right our value continue on to that loan We quarter down in of company on XXX. those average. even to almost risen today, actually utilize to XXX our mortgage average company cumulative continue is buyers ticked at credit this company to with metrics XX, their our to FICO to

there. price So not the those points financing on is homes ground for just There's for those buyers.

Michael J. Murray

that's seeing we're more the there higher points certainly, relative And supply is demand to there. the at available price

to products it's At bringing and to the buyers on price points the the have choice are an first-time homebuyer. those opening homes. whether process, that sales focused where the affordable more is homes more where there we're new communities flags other So support existing market. mortgage or and That's process established

too, closing homebuyers. I mortgage were, company's think half this about last of quarter our first-time

And hit out so out years it, in and very ready And time market. to where start coming career. a the with have we're the call may for your are school point them seeing into home not pleased coming their into they've ownership. And They, they of buyer we're XX sales offices. to that XXXX, is lives excited in the come school greatest now. there what we're of really They see

Eric Bosshard

seeing your out. the just upper-third directly. demand figure what business? me also bit seen So your business, you're ask of you change question Is in in That's a I'm trying piece that of to guess I entry a in let more first-time little the change the the or

Bill W. Wheat

weakness. we points. as of then, upper-end. generally seeing it's four, last any the the been lower weeks, have an said, at five, six been where That's not And at we that's demand David necessarily primarily in say indicator but change Primarily choppy, price would

David V. Auld

maybe a point, And they amount every has over reality answer relatively at a the X,XXX, house, house. buy same and period of rates an want months – expectation at short directly. been a still seen where X,XXX came their a this increase looking ago But still time that little could they're There's house. for time, adjustment we've this more X,XXX square-foot They had three maybe a square-foot in in expectation Today, realign. $XXX,XXX they a price need time. person there an of that to the house. or The below payment, X,XXX, four to

again, So very, the very limited. alternatives are

a demand pace. create choppiness does and a to going create the consistence I'm trying they're to less guess if maybe house, sales buy So is is there I That it does say. it

Bill W. Wheat

that that market, select they're expect sure as to really And the see. homes, of smaller to is down Every core that make house floor affordable buyer it's a market. smaller comes that positioning plans buyer or our what positioning we us going plan every to that positioning. we in at that's to floor for means offer community, our So that payment more it

we fact, quarter. this that started seeing In

closed Our quarter average square this footage our on down homes X%. was

buyer we're had there's to expectations. for that their positioning to make ourselves that And home sure that has reset a so

Eric Bosshard

That's helpful. Thank you.

Michael J. Murray

Thank you.

Operator

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

Alan Ratner

morning. Good guys. Hey,

previously, So, business obviously, of years, of you mentioned those a few sales been thrives model you closings. pace start, and last consistent. consistent it your really very In when all have have

mentioned the adjust start the continues, if So, on for you at David, is, that choppiness now, for I Because do double-digit front XXXX. sales still what right actually point pace? you question growth you're optimistic the guess,

sooner choppy? or that it also not potentially adjust So is months to you it your are start the happen until than pace, few spring where really next could the if start

David V. Auld

to We week, week by project. project really look at sales do to week

saw That's So I we couple especially have can we've bought election, says, a of early your that about Not April lot. But the to in wait again, we we won't far seen, yes, year. expectation made last see sure or seen so market to in answer this have question, till thing surprise December. Jessica the any after we same to not years XXXX me. in. weeks far. that six started five And not XXX% am tell would is sales this We're it you, so like But year. adjustments spring not going I adjust My the pickup our start.

Michael J. Murray

end also fiscal X,XXX unsold, of had is actually than And, the which we homes September to that less completed out we like Alan, XXXX. I'd were had at that ending point

to community level community-to-community, and they the do positioning market I every for on still So projects teams at the a staying still are great XXXX. to starts. to of believe monitoring their taking continuing are our the execute have closely, sales we're mean for against happening top markets what look in watch in are pace week-to-week, adjust job sales believe seeing at that. and the looking and we sub and we we in of very at community we inputs it is we working the that. They plan have But and positioned

Jessica L. Hansen

that's Division there. Presidents That's on more make they're starts the ground basis sure the are what seeing to they're demand a and out demand consistent day-to-day the sales either is in right to adjusting starting communities our we're homes going the week-to-week And communities. the meet more and in where putting robust on or

Alan Ratner

appreciate I Got all color. it. that

David V. Auld

lot about at lot a on price. right talk the the the We home right right

So...

Alan Ratner

it. Got

Okay, thank you for that.

could. I if question, second So

today. the like Just obviously well. other market from We've there's more as in bit heard a it little builders turmoil seems

somewhere range. digit guys been a think cost the rate inflation running low-single at You have I in

inflation I softness here to have down. been you're a several Obviously, there? going? where the those next how But in see quarters you relief given situation demand? is it starting Are could over guess as any trades, with So having conversations the come cost your actually slow lumbers

Michael J. Murray

seeing be Alan. we'll think that I

I deliveries quarter alleviate see will or bit a late of first a bit, labor seeing pressures become has lumber perhaps potentially. and moderate construction. And think as a the others which some And little think their adjust headwind has what tailwind will be a for market lumber, I certainly deliveries, be quarter probably think quarter I we of we a been into tight been third the bit starts. our cost see – will that late second then, second quarter, third quarter we'll labor

Alan Ratner

Thanks, guys. it. Got

Operator

seeing from with seeing what question. the a Credit Good talk My Our with you. you're competitive to in Maklari are setup rate them adjust some sense to the Susan morning. the a thinking in about around next Suisse maybe comes spring? of your perspective Suisse. at question similar on - few Thank the Susan last peers? is Maklari Credit question from your LLC of they you Securities been just line Please can (USA) of first into Or weeks? going the Are how proceed private what's you

Michael J. Murray

And allocation some seeing change your your about Securities there demand especially thinking you're we're how order market LLC more margin their individual a of this generally, But what also rather talking one generalize is share activity? thinking private than others. Okay. available buyer. and or repurchase to market generally is lot entry-level other and to house-to-house-to-house, is Credit and bit maybe focus that homebuilder product building of with typically returns. market that's given the builders, kind homes They from relates homes generally then, and any readily changes they private focused Susan a on not Suisse capital in the any of providing about. maybe to Maklari any hard focus It's (USA) is - to to Their for the so on conditions are to more respond to as slower it building builders

Bill W. Wheat

pay We've taken return really grow business and the repurchases. ample balanced to have shareholders flexibility provide through we debt approach. and Thus well liquidity our to dividends and as our share as down to our far, still continue

be authorization we But the opportunistic and in do potential to so share as our room increase increasing flat repurchases this and opportunistic. outstanding year. our We well our least incrementally offset more have incrementally price our than at to no opportunities balance flat, there expect to our be have well. we our will have this opportunities we creep, share been other will share year repurchases, our as count share they them With so share room alongside we further or keep

Jessica L. Hansen

in And comments that to said do this LLC (USA) lower believe advantage, Securities business pressures the in as Thank March. us Maklari maturity Susan cost reduce competitive are really to continue we just plan scripted Okay. that interest to $XXX you. pay our debt as margin. million the debt more offset costs to our Suisse - Credit we one down that's in help gross We our and continue tailwind

Operator

of Rehaut line question proceed next with Michael your with the Our question. JPMorgan. comes Please from

Michael Jason Rehaut

everyone. for detail. morning, all Good Thanks. And the thanks

community and about are Are with is of X% But the of say. per quarter a kind down choppy. you first pace, I running. and reduction should a we little to all And that X% about dealing the kind in I And sales mid-single-digit takes growth appreciate, the it choppiness obviously be mid-single-digit or the at up similar But a given order growth of to growth order of, obviously, of don't think bit perhaps talked for quarter? to obviously while in the presume Looking amount range were in get to range? Should growth the October guidance to orders believe builders in you range choppiness. be that and and the count thinking market, that been it be been an October? thinking we I in the guide type low closings might there's

Jessica L. Hansen

Yeah.

that's fair I Mike. think

and choppiness business said, albeit our the points. month as one plan, as are comment into we specifically behind call seen we on several this And we've said As demand we price we the year. said, don't to continue only times at we about the our the see fall we've sales. guide affordable But on good

continue consolidate to industry the to and to whatever that that closings one-month share. far. is year positioned into well that, yeah, the there you very market behind with our the would continue we're out guidance But tell out go So we're sell so plan to

Michael Jason Rehaut

off the sounds terms cash pretty appreciate adjustments where or as terms in of to, inventory though quarter as needed. like the way or terms turning. it smaller that let's the price for your aggressive We still flow price, margin adjustments and in to given this and about just any the point, expecting making nature say, of is get holding being XX% XX% turnover think and to incentives strategy? I adjustments adjustments were to more being was anymore obviously type in that. expect leader you're comes of on incentive a still I able to we're At as together? seasonally, No, But last year aggressive a cycle, more the guess of you market Okay. of it pretty in spring still to right guys of strong kind to wholesale types adjustments aggressive wouldn't of any that. probably the following obviously occur pricing the this I type mean, of

Michael J. Murray

our right fiscal one-month think year. into Mike. you're We're I

we are with The seasonal was slowest occurring period We a in time, the the of are crazy. seasonal dealing the time. lot of media that up in saw buyers that historically also the And time, dealt slowest period of that with. rates of period interest move buyers coverage

one make have. not price each will returns those going to of communities, But for so, at as upon so community based us significant before best far. is Jessica decisions. any drives we to are and going we're we any help And the – we combination those – the strategy business this year every the monitor said pace the operating step continue make decisions market the is same small to What into

selling the it's range, those determine Our fiscal given XXXX margins that's in what margins the being. largely up end to we've going spring season

that's the positioning done and in spring positions have homes and sales fiscal and have of terms the pleased going out. we the very that's with out their the comes to teams, be in are the in XXXX building lot and the where we inventory So teams and to construction care going determine execution customer against

David V. Auld

we today. know than in We're know more January a going lot to

Michael Jason Rehaut

you. Thank Great.

Michael J. Murray

Thank you, Mike.

Operator

question line comes of from Please proceed question. next your with KBW. with Jade Our the Rahmani

Ryan Tomasello

Tomasello on Ryan actually is for this morning, Jade. Good

results this where wondering I year? in direct your market? XXXX wouldn't a and expect given sales internal And home growth for to housing new overall, industry of to as see if for Do the expect have an correlation the growth overall you read to the was Just overall internal next targets? be you you market your the forecast obviously, starts be

Jessica L. Hansen

And into the seems on most of people clearly, for our staff the honestly be economist it looking very fit research all the utilize are We But have on SG&A favorable to the budget on the don't footing. are. of we're line an very at coverage our economy nicely. good doesn't probably We that bank economist. same things, demographics

be as we see would price it points. we really next year, the affordable so in at there believe particularly growth And could today, industry

D.R. to, growth growth builders should whole. we that I yes, that ultimately houses So, market need we'll that. the And expect if right-priced think industry as would on we the as in meet whatever putting is conditions. would outpace But the a Horton are There adjust to ground. be

Ryan Tomasello

seeing fit I And then land you competition or year increased the follow-up or slowdown you're Okay. the this changes to purchase any land terms of last was year And if base? seeing market that pricing? in as to terms in the what of your there and then buyer we're any a any the given changes adjust product you wondering see in of earlier mix risk impairments as in

Michael J. Murray

not have not or In are seeing change valuations where risk today. alarmed of on any market of talk spite We're land to based we certainly much choppy, of kind conditions where about projects. any market relative still sort we're been. impairment in of we expect the our on recent purchases them conditions And impairments we don't being

Ryan Tomasello

Thanks for that color. Okay.

Operator

your comes of next the question. with SIG. proceed Our from Please Micenko question Jack with line

Soham Bhonsle

to X%. I speak what the those decreases particular percentage home that this? on guys. price by think morning, seeing remarks, Soham a is in prepared decrease in? good you're point Hey, for portfolio is Bhonsle This this on morning. Mike, the you you Jack actually maybe are In your touched there Can coming of And size

Michael J. Murray

know of those front they in price where Jessica's have are driven me know stratification through. flipping brand or – in by exactly don't I I

we that brand. of number that's In kind but brand back within our don't it whole portfolio the of the Horton the we'll is aggregate and the it's the majority where if share it here have of to you. is Express be across to So thing to going reflective D.R. lion give try the

the smaller our movement. making any with tolerances are then those a as overall what some of to it been smaller what's driving of little line and that's average part come has selections buyers gravitate be starting those bit – going kind So to And to in – are an believe homes. payments, we average buyers we've down houses

Jessica L. Hansen

Yeah. The decline X% year-over-year footage a metrics. was square

slightly which So been this to while of less now along need in declined to buy rise, I by rates do me. be interest with across house, people QX saying little sequential brands all who isn't QX versus apples-to-apples And that buy house. brand but would right square-footage sequentially, front for or what we've four a our a just our want have as

Bill W. Wheat

component more of with would it. combined the be bit that a of So would a a little towards mix more shift as first-time well buying smaller generally house be buyers other

Soham Bhonsle

you That your flow Right. there first just the expenditures Or believe, then there? thoughts for And and how Is the going quarter, make approaching on maybe time. out that started statement multifamily then to you breaking forward? are call this cash guys noticed something sense. I out in market

Bill W. Wheat

internally, of years – We've process really X.X that we've multifamily starting have different to owned. we the We've I the build the last know to operations done out think of You in this our land a X homebuilding capability it times. already on mentioned been communities. couple for

zoned two it's four construction our past house, and to with so on complete. build made synergistic And for that Currently, substantially projects partials a projects the multifamily. have But capabilities have we were developed of good those sold that. we we've business we that typically very In are very business. the under progress homebuilding actively in

is sale right which now. actually marketed of One for being

And in that a sales more grow along but well coming growing. some slowly there bit is it So way. we we've for the see year expect to assets of – building been internally, to the would that it and begin as

and begins out call felt it cash like we would in small our to component presentation, be grow flow our business a bit, is of a So a that terms cash of just our move. that to as prudent

everyone that can So see.

that You cash. better of visibility to have portion our

Jessica L. Hansen

cash a previously been think number, accurately has in so be what people since been small, free do, calculate And more is PP&E. able most which flow it's it I to

get So free clean. out PP&E it keep to we flow of to cash wanted

Soham Bhonsle

a to internally business have guys you to target a get of that certain sort there point? Is

Bill W. Wheat

our have projects synergistic our year. planned to the six growing, with value land advantages build but got that some long-term. with have something we we've that side the projects as for start homebuilding do business a believe to there's shareholders incrementally and business the material going, on create coming that the It's business it's very again our to natural side, on And and relationships our the over we we synergies in can

Soham Bhonsle

Okay, thank you.

Jessica L. Hansen

Thank you.

Operator

over we due would have to of gentlemen, turn our callback to time for David the and Ladies And session. the to end reached closing I like remarks. Auld constraints question-and-answer

David V. Auld

speaking appreciate everyone's dinner. on We and to for you just we and Mr. last your first night time shirt, to a And work incredible in Devon. share hard delivering and want Horton you the Horton outstanding team. Executive day. quarter Don to to the call in awarded to again you, continued Thank great results. for this only, thank forward you. you his Horton our purple insiders an at XXXX. thank focus And Have January today look entire And know Group, D.R.

Operator

teleconference. This concludes today's

time. at your your Thank now for participation. this lines may you You disconnect

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