D.R. Horton (DHI) 25 Jan 192019 Q1 Earnings call transcript

Company Profile

Participants

David Auld	President and CEO
Bill Wheat	EVP and CFO
Michael Murray	EVP and COO
Jessica Hansen	VP of IR
John Lovallo	Bank of America Merrill Lynch
Stephen East	Wells Fargo
Stephen Kim	Evercore ISI
Carl Reichardt	BTIG
Alan Ratner	Zelman and Associates
Eric Bosshard	Cleveland Research Company
Nishu Sood	Deutsche Bank
Kenneth Zener	KeyBanc Capital Markets
Michael Rehaut	JPMorgan
Susan Maklari	Credit Suisse
Jade Rahmani	Keefe, Bruyette & Woods

Call transcript

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Operator

Greetings, and welcome to the First Quarter 2019 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

conference recorded. this reminder, a is being As It Jessica Relations Hansen, my pleasure for your host, to introduce Vice is now D.R. President of Investor Horton. Jessica, go ahead. please

Jessica Hansen

Thank fiscal XXXX. our Welcome results you, the good discuss for of to our to quarter first Kevin, and call morning.

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

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

to Exchange Form is XX-K, earnings This week. D.R. to next in could this Relations about After Presentations mix inventory, on post our is performance we supplementary The under that and product and investor we early and and to in your which release file on sales homebuilding site be Additional on data information home plan our Securities Horton's Commission. section margin, mortgage for issues & report reference. site News XX-Q Events the our the material changes Web active annual gross found communities, at our selling to relates call, morning's supplementary data investor.drhorton.com on operations. in can presentation with our will Investor lead filed an return contained changes

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

David Auld

Thank you, Jessica, morning. good and

solid Murray, Wheat, Officer. quarter President Chief pleased of Vice and our I'm Operating Horton a to Officer; XXXX. first Financial Mike addition Jessica, be Vice Bill to and D.R. delivered Chief joined Executive President team and The Executive In our by

revenues $XXX XX.X%. was and consolidated pre-tax $X.X was billion. income million X% Pre-tax profit increased to Our our margin

a from basis to to D.R. geographic XX.X%. homes results on across leverage affordable homebuilding our brands. year reflect inventory Horton's These improved of our trailing positioning the ability points the return across XX months, our our product strength offer broad ago our scale For XXX to teams, multiple and footprint, operational

early existing impacted at we have the for call prices in increased affordability past in resulted across higher on homes our new few our of markets the homes and sales most price over both and November, interest several rising coupled demand for months, which As has rates of discussed particularly some moderation over with last points. years,

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

versus Our the first last orders X% increased during net the quarter sales year.

down our were As our we call, indicated last from sales on October the prior year. in

month. a sales our December in sales and November improved was good However comparison

pleased positioning offerings future in are We spring as the upcoming we with market selling for product of season, adjust and necessary. to changes affordable our conditions will

that our of Our XXXX and strategic cash includes the to flexible Mike? position. sheet growth, an strong conservative a while market years. profits, generating we and With land share maintaining consolidating for supply focus lots positioned financial a revenues growing to flows returns continue and are homes, and ample of well remainder support balance future and is

Michael Murray

in million, per quarter. diluted Horton to D.R. $X.XX income for compared share, or quarter share million per Net the diluted or attributable to year $X.XX prior first increased $XXX XX% $XXX the to

and deferred tax of quarter of assets the higher year includes liabilities tax the prior primarily result effective Our the Jobs of to the Act. a Cuts company’s as a Tax due rate and remeasurement impact

was homebuilding $XXX million million. a $XXX million was ago. year pre-tax income income pre-tax consolidated million to Our quarter $XXX $XXX And for compared the versus

XX,XXX on homes XX,XXX increased quarter Our $X.X sales the homes year closed prior X% closed, in to $X.X on home million up revenues billion first quarter. from

closing of homes the with keep was average homes year average quarter, ago down the closed quarter while affordable. size price Bill? the to flat ongoing Our our our efforts essentially $XXX,XXX, X% was for reflecting our

Bill Wheat

in billion, sales to XX,XXX of year those orders X% the the the quarter and first with orders was flat homes value quarter. increased Net prior $X.X

average the selling communities of increased sequentially. Our number year X% active and quarter both from prior

the both Excluding of was sales X% builders sequentially our average quarter, during and communities increased our number the year-over-year. we flat, selling acquired net first active orders and

the year in X% the cancellation Our average The the sales to from Jessica? down year XX% XX% for sales on compared $XXX,XXX, rate net the quarter. ago price prior first quarter quarter. was was in orders quarter first

Jessica Hansen

XX%, margin quarter. accounting September XXX and the margins profit last down of basis sequential the sales majority in from less points decrease acquisitions. points basis revenue was gross down on the Our the from year a sequentially incentives our and extent due purchase was home from XX quarter gross cost first increases, higher lesser quarter pricing to first The in to power, recent

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

the less sales home gross on today’s margin gross range our the Bill? we primarily as spring the conditions, accounting. to currently the due impact selling of power the of determined sales pricing as of Our XX.X% fiscal our incentives quarter by in for will first primarily strength margin XXXX to well be year higher purchase second market season. full the be to in expect and activity of Based quarter on XX%

Bill Wheat

flat revenues efficiently SG&A focused infrastructure a opportunities quarter. We market In over the on consolidate supports adequately our remain SG&A percentage first to year our managing as homebuilding our X.X%, share quarter, while prior our long that ensuring of grow with term. the was Jessica? and expense the

Jessica Hansen

from closed the the the profit quarter slightly loan to XX.X% from up prior quarter million Financial year in quarter increased million originations first the the XX% was Financial mortgage accounted homes Borrowers' during the loans in of ratio for services margin FHA by of handled FICO D.R. our the income related originating quarter. homebuilding to services average company's score X% of Mortgage company's pre-tax XX.X%, loans loan-to-value XXX year. our volume. in XX% mortgage operations Horton of this $XX.X DHI prior with and average an financing XX%. and XX% $XX.X our pre-tax an VA for and of company for had quarter homebuyers. mortgage

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

Michael Murray

the and total quarter with first in unsold our with inventory, of were XX,XXX completed. ended homes We various XX,XXX homes XX,XXX of construction X,XXX in stages

us make in position starts the with manage community. our throughout for season at necessary selling great to sales in starts as inventory week each homes to level levels our fiscal XXXX. puts in community spring and increased the We spring our will adjustments a a each pace inventory we Our our home align

in land finished investments of was and lots, the lots, was $XXX and for homebuilding $XXX $X.X totaled million Our land land first billion, million was for quarter development. during development million for which $XXX

cash Our a underwriting on remained criteria inventory communities David? XX% and pre-tax our operational of minimum months. expectations for and annual within XX investment initial a consistent return new return at

David Auld

are lot pipeline option increased our lots which XXX,XXX our again or December of position are option XX,XXX XX% and were finished finished the when land will lots them. controlled purchase through consisted At lot We of homebuilding XXX,XXX XXX,XXX lots and total our this and owned XX% of contracts. portion owned our of XX, option XX,XXX of quarter. be or we were or

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

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

Michael Murray

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

year to compared the compared $XX.X year And million. to first the increased revenues prior $X.X prior Forestar’s to XX% the $XXX quarter. quarter income pre-tax million increased XX% million quarter, in to

During lots $XXX XXXX million to and of million XXXX. Forestar delivered to to to $XXX million fiscal in X,XXX lots generating approximately XX,XXX generating $XXX the on of million annual is its grow fiscal to in and deliveries revenue track $XXX XXX first revenue quarter, lots

We expect XX% Forestar results. to approximately margins fiscal be are consistently stand-alone for profitable with expectations of pre-tax profit These XXXX. Forestar’s by

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

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

access capital ratio the markets of growth. Forestar’s and additional long-term a to current market to debt liquidity Subject to million $XXX conditions, fiscal XX%. provide in Forestar only to plans capital of capital for XXXX

Investor will at site to the it. unique presentation encourage an review & investors the Web investor.forestar.com its presentation This Forestar’s their creation Events and to significant this at business post growth describes conclusion call. Forestar updated model value and opportunity. of We section Presentation of Bill?

Bill Wheat

$XXX our homebuilding our unrestricted of $XXX of December facility. revolving XX, At included homebuilding million million and available liquidity on cash credit capacity

for basis and XX.X%. plan XXX maturing million ago of senior year the we March, notes the liquidity The cash we outstanding notes leverage was $XXX which $X.X homebuilding Our to from repay have of and homebuilding a maturity at billion at public points quarter improved balance ratio to end of our flow. in

we the common During X.X we shares $XXX.X of $XX and of million dividends stock our cash for paid quarter, million repurchased million.

book share stock XX% was stockholders’ December year repurchase ago. Our authorization $XXX.X a and million. end $XX.XX, billion our XX, per was David? at quarter value up At equity $X.X from was remaining

David Auld

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

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

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

pursuing actively been and select enhance have to across platform. operational expand the We acquisitions our country

the acquired first Terramor We’ve In Iowa Moines builder in to Indianapolis XX builders Horton our by approximately position Columbus and market North markets. in $XXX the largest are U.S. five builder we enhanced for And Westport volume D.R. teams Homes. family. a we Homes, both the the Builders, and which acquiring million. Westport, housing Terramor purchased of Des homebuilding entered in and acquiring Jessica? operations top Raleigh, we three in top by Carolina private During quarter, we November, Classic December by Classic welcomed the

Jessica Hansen

conditions, closed we forward, Looking to market quarter the XX,XXX of second will XX,XXX in number range on of homes homes. current expect based our the be in

XX% of $X.X our expect quarter the home second we XX.X% We be sales in billion consolidated consolidated expect be profit range to to margin first in in the in to billion. stated range the pre-tax the $X.X And quarter margin of earlier, compared gross we second to second to revenues a our in resulting lower a as quarter quarter.

fiscal and not the strength time. revenues upcoming so the full determined Our guidance we for year full margins revenue margin by of this XXXX primarily be spring or will year are season, of profit at the providing

our to quarterly income the XX% of remainder expect rate We tax year. this approximately be for

continue operations to David? flow of the also XXXX. our for $X at to least year. count our share And from cash expect of We level homebuilding remainder remain with fiscal the outstanding segment relatively generate flat current we in to expect the billion

David Auld

In closing, well-established strength across long-tenured the the platforms of country. and our my reflect results operating

industry of leading builder our striving are to be market to each and America in in the our We expand leading share. markets

market consolidating cash We a growing profits on maintaining flows generating are while revenues financial focused returns strong position. and flexible and share and our

country. are importantly land across footprint, offering and product position, brands, sheet, so geographic across attractive operations multiple and our We and our to Horton thank lot growing This do throughout most continued We the with our conservative broad the their team look balance well to working for outstanding together positioned concludes entire team experienced affordable XXXX. hard We work. prepared to and remarks. D.R. continue forward our focus finished improving

now host questions. will We

Operator

Thank you.

a will [Operator question-and-answer Instructions]. be session. We conducting now

John from of Lynch. Bank question America first coming Lovallo Merrill today is Our from

Your now live. line is

John Lovallo

Thank you guys. my for taking questions. Hi,

January sales your clearly Have was the comments solid December particularly pace and pretty pullback? business given are kind Dave, on of kind environment being a trends overall November rate First seen improving question, improving to of and continuing traffic you encouraging.

David Auld

John, we have.

selling a better And better we’re the as really the Week-to-week little We’re we’ve traffic. sales, spring feeling of weeks been into couple we and last seeing better little better happy. progress season.

John Lovallo

looks confidence of and It around the what stock exactly the back obviously expressing price potentially XX of you’re but is to and That’s things than quarter as perhaps was bought this first Okay. I was read here that the to market and are hear. quarter more in wanted change, only we which seems not you first Should XXXX did it like like in guys timed. well in very bottom kind the you’ve business and strategy, in your blended the in improve? all fact looking

Bill Wheat

Bill. this John, Yes, is

I it’s our just think of strategy. a continuation

to do quarter-to-quarter to the stock of expect levels fluctuate will I on We’re as forward. quarter and program stock, maintain of expect And going to consistent I our is part down term in is. is over And when the the repurchases be this allocation we an our flexibility in but the a opportunistic opportunistic. flexible valuation position. in when view be remaining strategy. staying a our flexible long exists the consistent would be we clearly the opportunities valuation to from buy, capital we’re what level going but buyer depending want But

David Auld

a little economy of to we comes are the on John, just there numbers, in having The to out the bit, positioning overall are down that right very front trying the build growth people confident. buy. that to house and job

We working that we’re believe not a it’s this be And going on of great good housing. very believe So hard is year. that we do a demise to that.

John Lovallo

guys. Thank stuff, you. Good

Operator

Thank you.

coming is Fargo. Stephen today from Wells question next East from Our

Your is line now live.

Stephen East

morning, everybody. and you bit, David. good that Thank question first little on just Maybe following a

stepping a market buyer you that and January? in all all and ramp meeting January little look is bit better, incentives you really or the happening, on, behavior say, much not your what’s incremental and your a mind you going better, or needing little in what’s versus As December in even getting to the at peers more incentives, how of bit

David Auld

Steve, got pace I side less aggressive January. it was in traffic was the feel the the of a subdivision at in, some you that more really sale comes the incorporates the planning taking as market It door. pressure reestablished to subdivision, November in it than be me to maximize we’ve like less there December to get to incentive and targets. on and try more down a – return. really we it to in little coming a in so to advantage even that been kind but look time, traffic comes Because starts to by against hit long of closings by market plan do And

Jessica Hansen

QX, see QX. XX.X particularly we We But lower optimistic related the is the did spring the so choppiness in the because to QX the level throughout and in guide margin XX margin of we year. to move the forward what saw in find to stability that are as gross begin a for of some in to market we’ll good pace we

David Auld

– a month-over-month I know long year-over-year you a we’ve we time. can tell seen in or I seen don’t if down number haven’t

Stephen East

all right, Okay, you. got

David Auld

It a -- was tough

Stephen East

the take all public are different a We’ve that was with And only are been them guess, you market in and out one, all incentives – you end pace? I layoffs off hearing them are to you seeing on try seeing okay. market? deals differently are to you with of land the and several market Are being your on the go of And moving the aggressive and same doing you at seeing back One, to going competitors. in that them stance say all? seeing

Michael Murray

the communities now. think got anybody that have are of affordability, as now the defined that in same into buyer teams we’ve behaviors market’s in we – open well. meet us coming by say have as and product right and the the we’re the position behavior market don’t same And looking some would of competitor heard we positioned is to I our layoffs. and the I inventory as by of both it’s defined well other terms the have

that. couple a generalize hard So – it’s dealing hard pace with couple something little come land not land the that’s a coming make decisions it, your deals It’s where part right rigorously. that opportunity of back empower the their back we more a to our And seen local see Maybe around and the neighborhoods exactly drive day hear teams but It’s you to than We But gauge do measured think was have of see to we probably some we to I bit. to the on of them. around. returns deals. normal. anecdotally market very every last a question improve to

Stephen East

Okay. Thank you.

Operator

you. Thank

is from question next Evercore Stephen coming Our Kim ISI. from

Your line is live. now

Stephen Kim

very Thanks I the if a little much, I because really also what it. I to the market wanted into focused could everybody the strategically of tone guys. Again towards this I impact on, delve appreciate know that your and is on stance bit margins. and is

commentary met little that you you it to level to fourth belt little your where had the you bit, ago do. fourth to suggest so we to is until over incentives not incentives January improved you first or a calendar a a what as need under ago, maybe expecting particularly up had under things frame of quite to quarter, that bit January’s a the be the on belt. you’re need think, to a your contemplated of aggressive going had point the might or perhaps to but able when month had not firm get David, I weren’t So that quarter, quarter looking do month in you have you’re your indicated sort your

might it be remind to then it’d landscaping, to want of rate just in back things show previously of show gross sure some you have what were on that to may closing had had you relative you and have like you buy of like, of make you incentives ones which ones So could that downs sort some you show And where the So also income if I the us just in the which incentives up terms do held first statement? margin or all of that, elsewhere? up whether thinking up or costs whether do be various like actions those thought.

Jessica Hansen

the I’m that, in and on incentives sure and our we but home then margins his and shows will offer any incentive To with latter gross up David Steve, on start commentary chime in also margins. essentially sales

it revenue of whether myriad which flow those just things So impact you the be reduction, of all through looked of cost price at, sales. or any would would a

Stephen Kim

Excellent.

Thank you. Okay.

David Auld

the you, tell first would a pretty can say we performing I the better I market And maybe is quarter. as much expected, given Stephen, little

got to to – it it’s to you it. on to plan. it you than So always on on is you it create get budget, When easier the more is community maintaining get keep got is budget, Creating maintain difficult it. momentum than

So a it’s contract on happen take it. my kind higher the continues. debate politically, issues. out coming internationally. conjunction as as a XXXX as far with a of became be weren’t They expectation rates rising term it want call you things rising to fiscal if houses. it’s that lot affordability of of through the buying cost two the people easier paused people and as whatever little of market this to get big The We far spring created going is combination in And or to it’s in choppier,

So we’ve come back. the seen market

to always not. talk you if expected. more what that better it’s I’m know pretty I If than than been you was he don’t be. helps it or can tell you going tell I I But it’s to Horton Horton. optimistic he’d Don Don thought much

Jessica Hansen

early, it answer signs, the because very spring are very good. short the is early very signs early The still for is

Stephen Kim

shape thing the tax you to once them a where been hitting have to that into in home delayed do would the make had and have maybe I also that folks shutdown been actually as looking have been question that There’s lingering second and for then later some refunds while boost. And for obviously difficult margin degree. might little some on the the some hitting well you and who now. might caused get to paychecks is of you. political bit thought it to starts Thank spring resolved maybe back first pay some to this with might great. some get take on their some environment relates a that Sound spring has The

whether could think comment you in perspective if hitting tax little affected on think the a bit you on from these what a it’s see cash not be people later wondering reasonable as was flow you that the to of refunds, some a I little boost it or So year? a as bit might a of well little

Jessica Hansen

a might or it’s but on think reasonable we’re it not be I take shutdown. for really as something the to counting have relates government that expectations current

relatively low-single what a running USDA business, very digit But been business minimal the X% percentage quarter. this is that’s it’s eye we’ve for impacted and close our we’re which Fortunately on us of really day-to-day. including guidance of a been our it’s on less than generally keeping

and company employees mortgage USDA So you Maybe, of relying getting income a and different do. something our road? paycheck or types job now great as a down the a backlog the is verification than doing being be from of to our help really still have who things Could worried there’s a uptick. work But right managing to about mentioned you today, aren’t big an we’re around on but modest accordingly. other ways it that government not

David Auld

very impact got to confident it to it positive be a big to home. People in the just today. settled. a of together confidence economy look our is ability when and number about is our big the you when government’s that But part or will think adds to say, business. you effects yes, out of a a at I coming at lack kind future part confidence a work committing level, throughout shutdown all buy of the now the there if – it gets down have consumer gets And Again, to you be will which going of to uncertainty and industries. I see settled, the it of Stephen, ripple a that’s have huge part just

Stephen Kim

All great. guys. much, Thanks very right,

Operator

you. Thank

coming is question next Our Carl Reichardt from from BTIG.

Your now line live. is

Carl Reichardt

Could you maybe or markets quarter about last little the softer – I or to guys curious you and maybe most quarter the guys. the And you than strength as the to were this think. you I’d thought? morning, terms orders two or whether of are or effectively that in the from not bit across like mix now positive what in two that I your surprise markets are three plus product a same an perspective produced wondered talk three the Good feel improvement? just be trends XX

David Auld

Yes. Carl, very far still happy. as as we’re markets go, very,

I’ll concentration We assets Texas, and have surprise, Carolinas. somewhat has focused a well. very tell a the better Utah been have a Florida got market markets. see he from term market there. the in positioning lot surprise. And pleasant to of you our seemed incredibly They the be don’t the markets. been that any in company, positioned operator with long change Those of performing solid has Upside We’ve and spent markets be us continue running solid standpoint. have We’ve the time to future really.

positioned in are the better with time ever than think Chicago seen California us soft. happy well got. very going be And Chicago in both are to our there this Utah we to job year. in markets I record I’ve be I doing very for with think do So that. a year are this at company. be operators to in any continues It’s California we continues and soft. probably

have and good and So again, you them you it’s you aligned have bad get people, price markets. can markets, can product and

is market. Our any outperform to goal

to do. trying what that’s every we we up day So That’s focus on. what get

Carl Reichardt

end you Horton second curious across called quarter weakness other then out orders out of what I’m if one, that just Is stuff looking the the just repeat most you’ve is have expand asked which And the if is and the the coming I you’re affordable as when seen one I��m I’ll expressed could since then two your is work through in mix the traditional expect? strength especially brands, just you in higher the got we’d performance that maybe brand. traffic which certainly David. curious Emerald you you at Thanks, really on you’ve and set Okay. the and

Michael Murray

see did traffic. We good

spike first that of some some rate entry our in we affect of the did level I think saw buyers. the quarter

were And XX% an I was but helpful change. the then like those certainly there. of for a was there rate with buyers our deliveries buyers, So of entry-level period to adjustment bit that think moderation

provide I the think the and Horton our in our we’ve make very with it on alternatives over past buyer focused a to that. of efficiencies lot positioning in years to the been even the brand to that affordable – product relative marketplace

saw relative so Horton to in brand And probably a good performance we the Express.

Carl Reichardt

Great. lot, guys. Thanks a

Michael Murray

Thank you, Carl.

Operator

Thank you.

next question from and Alan Ratner Our is coming from Associates. Zelman

line now live. is Your

Alan Ratner

Hi, job the environment. morning. question Nice guess in guys. Good choppy margin. on I demand taking a the share

below next previously. to implied that. based get there I level where running word quarter, last Jessica, you a that move the quarter kind dramatic of for you be think to is be think margins I XX% the down this used would you might were pretty And bit a like now on you got and it sounds

price you bump which maybe take encouraging. But think you from to positive on wanted January flipside temporary the is to if a I I of this a bit where very sound So to guess is that that hit to that in your the you willing desired are you communities? rate pullback, the low that order dynamic, pace absorption about as versus in you how take target margin think pace

Jessica Hansen

returns, return first best that the so We hitting going on and continue community-by-community best a drives the we’re is based to on adjustments to just really on to community-by-community drive continue margin to focus possible level. make the return what

pre-tax the maintaining So not but particularly returns consistent and our margins we going margins. the still is think to drive production only best and do pace best sales of

better, of December were would got at low up that still weaker end October December range. end did though tell than we November I So you the and our and we expected. even November and

to margins did way you the David gross as typically once in some to consistent find your a find up best stability sales indicated. give again, we sales get But so pace that’s And that back can to margin. pace

Bill Wheat

that point a out typically roughly closings like that in I’d third better of one Alan, our also any to to in quarter. were sales quarter

calendar quarter, the very summer return we’re highest our maintain late at we the a to marketplace of every seen. level. first probably the lumber when just focus pace or and ever started large quickly of was reacting pricing closed were percentage we had community spring So early homes our with prices some our to In

cost through those against to a bit to to headwind of two pressures And were margin. when fair market homes real-time those kind pace. a time cycling a we’re things So of maintain we marking were our

see a much volatility margins conditions, in market move did And in move. dramatic the sales are deliveries rather conditions past as that we so will in so our any that reflective one quickly. rather because see in about of quarter we market But we of quarter, can talked

we going fall less more that So time starts have cost away. our see forward expensive. of expect we’re at from when closings going a lumber some to delivered was of being We’ll headwind

So stabilization that the pacing community we’re the week-to-week, we cautiously every now trends and looking should in we’re it see optimistic in margins. sales some that with at coupled the

Alan Ratner

it a Understood. think I of sales strategy in the is I the definitely benefit appreciate that model. and

look and it those sheet, a guess at land you back more at has Second to softer and does question environment in I on to your portfolio contracts. demand mix the benefits when attempt go give of the some balance ability option renegotiate landowners to some also the I point obviously but shift towards the

how level any in point? you so, any And the this being So or if those conversations markets at communities going? at are have

David Auld

market are say will every of we I level year irrespective of every is. quarter whatever at the the

do our by that and of to shares making capital that money precious very is conscious the a is and our fact being we of commodity. shareholders the Our goal value enhance for

Alan Ratner

– seem the they from right you are renegotiate for like land given receptive if fourth or bit question are seeing the standpoint calendar a quarter sellers, then, capitulate word, the or more their that don’t So I is I fourth pretty sure know you a to guess quarter softer it but still set in them David, seeing is are pricing?

David Auld

that competitors to guys The to position a it. to that and land are that most probably contracted are competitors our the are close in take put not vulnerable people our

on. – sell coming didn’t we to but not back We really are didn’t going first us sell back the somebody work with deal time, punitive with we’re say – are sellers to they a I’m punitive us coming to

Alan Ratner

it. Got

David Auld

tell – revaluations. is choppy I going you choppy. It’s where it’s a see can not huge this to you’re a market

the you positioned coming of our downturn a operations at has I us think the we’re since market. going I’m much put market last way of the position well, focus operate to started downturn, on to that – we could And the about over the industry in pretty tell out be correcting, excited scared but we’re pretty a outperform it. not not any certainly

So country. and continue the going houses across close build, drive we’re to returns to

Alan Ratner

Good right. guys. All luck,

Michael Murray

you. Thank

Jessica Hansen

Thanks.

Operator

you. Thank

today question Cleveland Bosshard Research coming from Company. next Our Eric from is

Your is line live. now

Eric Bosshard

some expand parts if XQ but that know there’s the obviously going into you’ll of in in I within year? timing margin business, more this parts recently moving and worse we bit to just into what’s the expand think than the of and how the you. Thank about in optimism I margin, gross think contraction current you’ve the on gross specifically little then second seen moving what on in quarter. a love the Would margin and the is hear you XQ gross about should year-over-year half

Bill Wheat

first Sure will in if is call what some September points. well. that December was Sequentially margin. that down supplementary of the But of that quarter the from we there, kind be basis core margin and information would we’ll gross that line the data our to our of look analysis at you quarter, you as see that post this XXX

taxes kind sequentially the lion XX. pieces, and interest And that actually points, in an quarter. sequentially our point impact On that Sequentially impact. a XX an the a of litigation the margin negative down was the basis with And negative the then that acquisitions quarter; was year-over-year share of property basis XX during was we Warranty that. accounting move XX year-over-year basis that was flat, change improvement basis of points. was improvement is point of then a as year-over-year basis the XX XX final through points. was on purchase was and basis did So piece the of you was year-over-year

we that’s in we’ve for sales activity our we QX say – well further as fiscal last recent that core work I’d thus But much seen start certainly will and of that’s kick that in we’re down still we a to we in track. what’s the that sales and into really the QX. far that tailwinds bit some we’ve our related as stabilization from the really January paced So momentum, in late start QX driving or of better the given in our meet then get and what the mainly have us should opportunity in we in a And that be activity to our then margin continue then see if QX in that optimism we’ll some back signs And it’s that stability business activity result backlog that can on indicate costs ourselves to do late some and see guide sales margins December hopefully be the some our two. QX is would to able regaining back QX cautious market on gives some current in track. and quarter see what’s to to

Eric Bosshard

that is bit know full year year XX you’re making the it continuing [ph] in guidance, of I a but up secondly, then on here? And delivery to defer still

Bill Wheat

wouldn’t it out. We rule

to providing guidance too closings be guiding into in the because not March, to April of we X% But early. Until big sales it. we’re a growth will X% We’re it’s get in QX. February, yet driver spring,

in well, inventory the And and we we have out. so as if momentum good rule deliver go wouldn’t that see to sales certainly we

David Auld

Eric, we’re that. accomplish to positioned

Operator

you. Thank Great.

Operator

you. Thank

from Our next Sood Nishu question Deutsche Bank. coming today from is

live. now is line You

Nishu Sood

can you December quarter plan just that share at pickup, offsetting go as said earlier activity thinking beyond buyback your come pick share it offset look your dilution strategy, if been on back dilution I wanted like and just the was your sounds quarter. But I it is pickup from just the how But an there you’re look dilution. was Obviously up. in the even had nice framing offsetting it to to at you. fourth a though willing a earlier Thank I comments opportunistic you to buybacks. to in your back had

going to here of you just kind basis will still continual back wanted of come is your willing dilution main to kind go offsetting be approach I to or just on that to So past it? you’re that. way that Are you a now saying

Bill Wheat

offset base continue Nishu, to to is dilution. plan term for our the longer

keeping However, flexibility remain to are opportunistic. the we

down And going that’s this so to dilution want keep share in quarter, the see our brought share flat we with with future and offset flat we count level count in slightly the would in us around point to that. repurchases comment as the quarters consistent made remaining the first buy further forward. from But we continue certainly December will our to be

Nishu Sood

about your 'XX kind How there the Got choppiness there give also there? spread how are you, continued raising be out opportunity bit on nice build the the Does probably opportunities the operations more since feel there. good affect you in and it what it still you or of demand market little affect plans of approach pause there? there? states Forestar, to in okay. number some you’ll side, portfolio And capital obviously more operating of for aggressive, to out markets maybe you a it of in your in pickup of does this does you’re on And out a does Forestar; give that –

Michael Murray

the we’re we fourth the decisions in perspective market seeing the of quarter earlier not our calendar choppiness quarter, the at any any operating experienced fourth of quarter, sales from think and Forestar. our first I impacting

each on of or side side guidelines the reflective Horton Forestar of communities of our and our current underwriting Our for the conditions. each it’s market investments whether are

Forestar’s the be broadly valuation there in seeing back broadly ability for its We what growth. objectives good to day. still condition term to its some choppiness it create as that’s about to seeing really nor is Forestar conditions feel folks we we’re growth Forestar It access and the the deals. about raise, or market extended longer in normal somewhat may incorporated for creates to to just it growth feel capital extent support other in discussions, market are conditions it’s that if ability adequate participate course dependent. business. today. But And With 'XX. and growth – their capital yet that’s But the in every regard We more of the create we’re the pulling plans has then good 'XX that market for we position in market out more dictate in capital capital. impacting growth its opportunities, not going is that obtain will So counting term current on when to largely there the

Nishu Sood

Okay, great. you. Thank

Operator

you. Thank

Markets. Capital from next Our question coming is Ken from Zener KeyBanc

now live. line Your is

Kenneth Zener

everybody. morning, Good

David Auld

Ken. Good morning,

Kenneth Zener

variety build a you’re reasons. I for So why get trying helps to of It steadily.

XX% units year-over-year, is in glad total which orders. I’m Your you’re about above highlighting up inventory, really obviously that,

I of I units range, your which of to you you, that are construction being at your closing. what that want backlog, some know on. that’s I you focus it obviously of some And to but around. XQ related you’re percentage that’s judicious spec of a I imply that’s obviously of if out ask do coming lot So to a look closing does guys want spec, lower think

about XX% what So plus differential? So in I year the you last historically actually margin have the XQ of is think orders closing. were

terms right spread spec? in margin So from we are and now of the backlog seeing what

Michael Murray

build so spec, pre-order versus a job from and spec? backlog From a

Kenneth Zener

Right.

instance definition. you’re close that that’s for in – XQ is not backlog usually plus What homes about of spec. XX% by Sort from

quarter. now? kind you homes more it units with right that I importantly you’re of to Because is you’re when and market, spread the closing meet because under highlight you into spread that the construction? say you’re sounds that’s if point but about XXX has or So that like Thank XXX talking you many both seeing what Could have basis it a you. think how do backlog

Jessica Hansen

a basis it differential a build pre-sell a XXX or spec. a call job versus between about Typically standing point

spec. the also age the it on then depends of Now

point majority more of of quarter XXX majority spec so we’re way same that could a if very of and the has margin differential. and the for it’s vast – what basis gross closing even a period we So had is differential and a the is selling completed vast timely only But about that been the you see unsold. in sitting time

Kenneth Zener

Okay.

Bill Wheat

openings last several year. our is spring about years. catch much our your comment lower would with our the our year years in stronger getting percentage a going and in homes openings, The inventory, than closings been our being projected our inventory And I’d is this starts Ken, several our better and the out. say in community really with QX I seen closings to we say QX positioning trying community had up in positioning we’ve into or of this starts

growth And really to so in drive we’re great in drive be sales, our today. able to spring inventory with position position the

Kenneth Zener

positioned despite your you’re year-over-year, better because give you’re I you’re But happy saying I count count, you’re saying you’re flat your sequentially. year-over-year but are saying clarify? if acquisitions, for when maybe that XX% guys you adjusted with community total see you guess you’re So up don’t can about community units

per now. you actually increased – want spec that’s where your intentionally you’ve your community actually units to and So be right

to You play is what were trying catch saying. up you’re

So it’s view? not in excessive your

David Auld

we positioned of houses the six the more hit to years This last the year been planned on ground coming going point out into spring the five, season four, at had of on. the plan and more to couple better having years. than houses selling we For are in any lots we last start available have

positioned are believe we be and absorptions talks with positioning, generate happy and will that I drive to when returns. think way we high able the very Bill very – we’re about So do

Jessica Hansen

of analysis lots community than year. that’s each the and finished community, by few positioned can still years. deliver a home It’s that And homes last this on better

David Auld

amount you if at but delivering price tremendous of competition demand is less is at ASP, still on And we’re a it homes look there significantly into. $XXX,XXX at $XXX,XXX points competition the some there to And higher. our is

Kenneth Zener

I if Thank is Considering it’s at at XX%? like Does pricing or that end? low how high you’re but X% have much last down end? relative everybody my you you. not which demand, think how it, if price go it like much And end make us I says pricing is guess to is do question, Right. this is at I giving that one the high off the as complicated fine could the get off

David Auld

me Let this. take

of We’re -- all other with kind looking at each

Bill Wheat

Blank look. empty

know. of go it to reflect any we business It’s Ken deliveries conditions they’re to and or house teams to adjust can for what X%, pricing And just at don’t one what price sales to What rolls of needs Y% needs we’re what of Z%, to fairly we it on that net our give house, think that’s sales kind it any at a and our necessarily is, that is see what – – us quarter. I we it our price demand look our time. then it trying the coming in be me percentage margin large me number, number the let that from the family is market homes. market one home, and the we’re a to out what and with And market those those watching for the sales one by working a margin and is delivering to meeting customers, it. on the to community. hit they’re the other contracts not in house with is is measure house And – closings. or with quarter an index that up lot, focus on what because by a globally price dynamic and this contracts margin And coming sales able buyers working and pace, are the that’s meet writing to in

our fiscal in base a the lot change quarter, So in we we saw that first level, margin. saw house level,

Kenneth Zener

you. Thank

Operator

you. Thank from next Rehaut JPMorgan. coming The is from today question Michael

live. is Your now line

Michael Rehaut

questions. morning. Thanks Good for taking Hi. my

David Auld

Good morning, Mike.

Michael Rehaut

Good morning, Dave.

trends November, the into First, I far. there bit and little just so guess detail insight more wanted a to appreciate the I get I January December,

and triangulate a mover. performance Horton if to clearly softened, you the more returns and trying was in Often consistent today kind the off underlying approach is aggressive terms your first a market because little everyone’s back what bat were meeting the of bit typically the your market go times volume with versus you as market. and think last to it’s the of I downturn,

typical than able vis-à-vis one, like in what little of underlying to wanted get market there you you accelerating and softer terms sequential been about spring January, year-over-year are terms just on feel a I pace market about to when the number put gains? being bit improvement the in So basis? that comments Do or a you’ve secondly, just a versus being And talk of is your sales growing sense, January results? of the you December good performance on seeing the talking are is fair more what the together you for of or better, actually particularly

Jessica Hansen

sequential basis. is in traditional down we year-over-year a and see So, which December, on about specific with normally Mike, January our is But sales improvement would a seasonality. what were particularly it November to be October

traditional full a both like. give were It’s we’ve January in and week just a November lot up what on too looks as January referred of seasonality on we is to to in Our still. early move basis. got December of really We’ve Then terms into what improvement year-over-year read a January week left sales. sales to

Michael Rehaut

it Okay. over last And for you in or question as terms two performed versus any of months, sense see underlying of markets? how three gain the the you the fair kind

Bill Wheat

would goal past expect we for better our years that we Mike, of every to very and over competitive grow than share. markets. performed several that’s teams continue they’re to is to And That’s the like our performance win. day underlying been market the and kind our they

Michael Rehaut

Great.

Bill Wheat

data to empirical any have don’t we that But today.

Jessica Hansen

the We’ll as coming just everyone over you reports, do weeks. like see

Michael Rehaut

lastly tailwind front, potential margin in half year land had lower rising of the see just in been stabilization you lumber. the books. that years. basis three over suspect And obviously the two, a perspective At back time same there your a would the about the on you’ve last with the perhaps still talked hoping land Right. of gross cost some buying somewhat for there’s from I to inventory

we the when base as little are the levels in that the cost back higher range and about XX else lower those new would to stabilization the bit half. even second is sales of question we of kind all That’s I offset low and back just equal at given quarter a talk response something pace So lumber a of kind land guess incentives. – real to the upcoming think stabilization, where come in has

Bill Wheat

some relief sit on and the we’ll that latter of based seen, year we’re the in and cost our stability our are half here Mike, today part should we we’ve sales get for as – the be ruling in the lumber a on trends cautiously going closings to we margin we’re of the see hopeful recent that. optimistic

In percentage as year or we’ve our two. lot of terms over relatively stay of seen last finished the our the actually cost land a overall revenues cost, consistent

to our percentage headwinds lot revenues. any say as think coming cost of would of have I So in a we terms

on I that’s community the more and community fact lot our so more basis finished that market and think of part adjusting of reflects the a we’re conditions. by that market in buying based lots current on

Michael Rehaut

Okay. we’re levels. fair? the But about of just to be clear Is coming stabilization talking is that XQ off

Bill Wheat

Yes.

And would should have on and start. sales with coming if provide we pace, terms see think I the in opportunity some in stability. to stability momentum, it good in It hopefully And that’s stability cost margins. would of relief we starts improve it. where we

David Auld

historically XX.X%. margin people. at put proud numbers Those the quarter tell through first is gone all SG&A as keep to these looking quarter I at Mike, are strong back our first and numbers. our X.X% on operating the of we’ve and that books, on I pretty incredibly people you going I’m got

Michael Murray

Yes, with returns happen we on houses. focused first returns and closing don’t are and selling us

what going that’s do. we’re so And to

improves but is margin We’re returns meet going then we as margins market. the improving well. solve what obviously to And for,

get. to we So get pace, the drive by it’s returns at we always the a balanced volume, can community hit best best community the margins generate sales can the

Michael Rehaut

it. last congrats. Like you’re said, looks definitely the and so downturn it I in like be you appreciate the here, Vanguard at to continue I

Michael Murray

Mike. Thanks,

Operator

you. Thank

from coming today Suisse. Maklari question is next Susan Our from Credit

Your live. line is now

Susan Maklari

Good Thank you. morning.

David Auld

Good morning, Susan.

Susan Maklari

with a maybe willing before the little opportunities bit that of of get has M&A out of My the you changed out we that get have softer? first there? see more some perhaps seen choppiness things is question that in appetite sellers a the to market, Are sort the

Michael Murray

little a affect the whole And bit. horizons that off think and I potentially, a take may spreads bringing bit might in of are are may so and are think fair it forward probably a better some and lot not people of going table. to get their and a markets they where in see the little we’ll engaging bid/ask they their where it want they

Susan Maklari

of raw Okay. as changes else my question in the have in that’s the any lumber you we is second labor, there? about seen through And should materials, prices year and just down of we coming terms the inputs for certainly anything then move think the there? How some

Jessica Hansen

cost then lumber headwind about already forward. of that talked other be noticeable should QX Nothing than that will but going real in we be tailwind a the more still have a

talk brick and us square a basis. our footage hear typically You about stick on costs per

was brick a year-over-year on our which foot costs about a basis, and revenues brick So Sequentially, and and revenues and margin our costs stick over stick our were were some were little behind of our were issue. X% our just up slightly up per just essentially that, square X%. flat

Susan Maklari

you. Thank Okay.

Operator

Thank you.

Jade today final Our from KBW. question is Rahmani from coming

Your line is now live.

Jade Rahmani

of investor very any as purchases opportunistic Thanks homes your Any purchases much. in moderation in change sales? the of a communities, result in

Jessica Hansen

as closely cognizant very a that of. something last that very that track big did We cycle impact cause No. we’re it’s

do keep investors. to to part sales live-in-the-house limited to on we transactions In really want investors have of and communities, focus bulk We we to our the shape. business So communities any the in don’t for-sale, that are good sales essentially individual one-off. big

Jade Rahmani

came closings from spec? the give that And of can you percentage

Jessica Hansen

Almost believe. it. range the runs quarter traditionally There’s seasonality It in very I XX% to right XX% tightly. this some XX% to

Jade Rahmani

very Thanks much.

Operator

Thank further like to any back you. turn or management floor comments. over to closing I’d the for

David Auld

to team, results. you to April our you. appreciate start second to put in for everyone’s again you Thank a continue. We us it you it, to call It’s the thank work solid your where for speaking today. Kevin. are. strong D.R. time hard we quarter forward we a to quarter And thank appreciate Thanks, first I and and to Horton We share it focus on look that expect XXXX. has the and

Operator

you. Thank today’s does conclude That teleconference.

a wonderful We day. time line You have your for this you today. may your thank disconnect at participation and

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