D.R. Horton (DHI) 25 Apr 192019 Q2 Earnings call transcript

Company Profile

Participants

Jessica Hansen	Vice President, Investor Relations
David Auld	President and CEO
Mike Murray	Executive Vice President and COO
Bill Wheat	Executive Vice President and CFO
Stephen East	Wells Fargo
Carl Reichardt	BTIG
John Lovallo	Bank of America Merrill Lynch
Alan Ratner	Zelman & Associates
Stephen Kim	Evercore ISI
Michael Rehaut	JPMorgan
Ken Zener	KeyBanc Capital Markets
Matthew Bouley	Barclays
Nishu Sood	Deutsche Bank
Buck Horne	Raymond James
Soham Bhonsle	SIG
Susan Maklari	Credit Suisse
Alex Barron	Housing Research Center

Call transcript

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Operator

Greetings. And welcome to the Second 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. reminder, is a recorded. As Instructions] this being conference [Operator your pleasure Hansen, for It my introduce D.R. host, Relations is now Investor to Jessica of Vice President Horton. Please go ahead, Jessica.

Jessica Hansen

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

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

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

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

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

David Auld

and Jessica, good Thank morning. you,

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

XX.X%. from and X% sequentially billion, margin our our Our sales income XX% season is going million operational offer to the brands. well, geographic $XXX D.R. our results as $X.X homes was our quarter. was pre-tax to positioning the across reflect and The ability consolidated across Horton’s revenues spring our increased broad multiple of profit net pre-tax scale our year product leverage increased affordable X% These selling orders to footprint prior strength and teams,

on moderation As homes in some two since have higher we XXXX, at concerns caused discussed particularly our have demand affordability for last points. late price calls,

to financing while of affordable see However, limited this availability demand and supply at a and continued solid. economic homes fundamentals remains spring markets, our across we a have good prices

positioning We with sales are product pleased our trends to-date. and our people

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

Mike Murray

of fiscal fiscal million. last the income our due to per year. diluted was $X.XX, quarter the $X.XX in Net from share for Net D.R. share income second XXXX this count year XXXX both Horton of fiscal and XXXX $XXX second lower quarter was up attributable to

and for income pre-tax million was pre-tax quarter was our million. $XXX $XXX homebuilding the income consolidated Our

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

reflecting down X%, was quarter and year to both price for prior the $XXX,XXX, mix of X% efforts homes our homes to ongoing the closed closing from keep down Bill? was product average average our our size Our the due affordable.

Bill Wheat

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

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

second our sequentially. quarter Excluding our the year, X% builders and number orders increased active net earlier increased communities year-over-year X% average X% selling and sales we of acquired this

sales the second sales X% quarter quarter Jessica? consistent net with year. orders was average in XX%, was year. the price second cancelation the quarter The on $XXX,XXX, prior same for Our down last rate the from

Jessica Hansen

sales Based cost Our gross decrease pricing gross points power XX.X%, revenue line in second with This December and the XX profit due higher moderation, basis quarter the margin sequentially year expectations was possible from sequentially XXX from to be as and cost quarter, or we the down slightly incentives. geographic relative our in was to and sales margin the in increases, to Bill? mix, currently as on quarter. impact margin down of our less in was increase the market third home purchase quarter to due warranty, expected second on and points and last sequential basis and flat subject well gross litigation product conditions accounting. expect today’s home fluctuations

Bill Wheat

the this share ensuring Mike? stock homebuilding SG&A focused related quarter, homebuilding adequately and our supports was second compared to long-term. managing The efficiently SG&A the to over We the X.X% quarter. increase our revenues costs prior-year year. price in the increases In part our in a opportunities of in X.X% to homebuilding revenues as percentage higher to the expense that compared increase on was of SG&A market X.X% percentage was remain accruals our mainly compensation prior-year while from to our quarter. public Year-to-date, X% SG&A in last equity markets infrastructure employee expense due from

Mike Murray

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

achieve if press a this sales home starts Our manage solid our with We necessary we adjust guidance to our current morning. release XXXX level at community. provided pace and a community we fiscal starts inventory each closings align our in inventory levels puts of in homes in to us current position

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

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

David Auld

contracts of developers through the and parties, total portion expand our manufacturing lots this XXst, were XX% increased to or the which quarter. third purchase country. be position, XXX,XXX again XXX,XXX and At national of lots controlled platform supporting being to are or our plan homebuilding developed of and the are of finished we XXX,XXX XXX,XXX continuing continue when lot owned across our with purchase lot lot owned will lots controlled. we We lot by were them. relationship expansion position to Forestar’s by of XX,XXX pipeline or increase We our our of March lot and that land consisted land XX% our control finished

with homes supply competitive price points at lot is of Our portfolio ample an strong Jessica? lots a advantage. for affordable

Jessica Hansen

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

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

Mike Murray

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

increased revenues $XX.X prior Forestar’s quarter over year income $XX.X quarter million. million XXX% XXX% pre-tax in the second the increased to and to

ended million its million months approximately on Forestar is $XXX deliveries March to revenue XXst, its XXXX of in to generating to During fiscal generating revenue. lots, and of deliveries track the $XXX lots, $XXX still delivered million million $XXX XXXX to XX,XXX lots X,XXX fiscal grow X,XXX to six

Forestar fiscal we These are to significant Forestar’s business profitable a with margins results. expected stand-alone today remain pre-tax expect and XXXX. is growth period, expectations of by XX% a profitable Forestar throughout approximately

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

while conditions, at in ratio if due to to notes opportunistically long-term access a senior or XXXX. provide for less. Forestar’s XXXX balance of market planned position capital and leverage fiscal equity base at growth managing and additional markets XX% and lot growth expects in Forestar their and debt earlier the Subject issued support to capital million liquidity, March deliveries of revenues. XXXX $XXX capital its XXst To beyond, XXXX and this are for lot sufficient revenue month, Forestar X% necessary and sheet net investments support growth, to

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

David Auld

and substantially company operates quarter. Florida. primarily two four were Arizona is construction that complete garden-style currently Communities and projects rental in our the projects active multi-family and DHI suburban of the on focused Texas, end at under DHI apartments has Communities

million DHI gain at first quarter, $XX.X its for the on financials. Communities Texas of other reported McKinney, second a $XX.X Bill? apartment as XXX million recognized During March XXst assets in of and DHI were is part our located total in sold business project million. $XXX of units Communities and it sale

Bill Wheat

of unrestricted on XXst, capacity March and of liquidity homebuilding million $XXX cash At revolving credit homebuilding our $X of was facility. comprised $XXX million available our of billion

XXX to from year Our XX.X%. homebuilding a improved leverage ratio basis ago points

their end balance quarter of repaid outstanding the During senior billion. public million the quarter, $XXX of at $X.X maturity and our notes the homebuilding at was notes of we

$XXX months. the We maturities note next of million senior XX due in have

During $XX paid quarter of dividends we million. cash

and shares $XX.X of We for for stock to X.X common bringing $XXX.X of year repurchased half the million repurchases the shares X also total million first our million. million

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

David Auld

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

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

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

Jessica Hansen

we $XX.X of providing our currently billion to Looking today’s the half the and close and full fiscal XX,XXX the to of of our forward homes. this our in We year. market to generate outlined approximately release for revenues consolidated expectations for and on year between XXXX billion based as first are and expect results press $XX current morning, conditions XX,XXX

a fiscal of year income are We full XX.X%. forecasting tax XXXX rate approximately

least at outstanding full of billion operations to fiscal from flow we at and cash to for year homebuilding be expect generate the end $X share year our of compared of XXXX. to expect the to end count the slightly continue We fiscal the down

of fiscal $X.X For homes XX,XXX the close in XXXX, we during approximately third billion and quarter. generate expect of to quarter billion to $X.X the range consolidated to XX,XXX to a revenues

in quarter to to be in We home sales to our expect XX.X% range to XX.X% in our and margin approximately the X.X% the be David? third third homebuilding SG&A X.X%. of quarter gross the

David Auld

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

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

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

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

We host questions. will now

Operator

Thank Instructions] coming today question East Fargo. first Wells Our Stephen [Operator you. from is from

is line now live. Your

Stephen East

the with shed light incentive quarter. everybody. progression you David, can maybe with and any Yeah. quarter the probably traffic I will April order on were seeing all Thank you, in what progression maybe those. seeing if you most with through progression good are and What the the and trends morning, through you importantly start with

David Auld

got is The in It out and it better I’d in there. Stephen, April seasonality. a January, little market It’s much solid February, little a as little was say traditional better better is expected. it kind a seems û pretty March. of pretty -- in we a

a right of kind happy quarter, we you tell would first we I our So seeing surprise what are are now. given with out pleasant so there

Stephen East

Okay.

is If you you incentives the also doing that the you the move either all through months? what think what were look in at progression market, or seeing you unwinding were with you as

David Auld

certainly quarter, month. were We able been than today that are they unwinding, a hit targets to we little first have sales it have with and our less progressively, each seen incentives lower incentive yes,

Stephen East

Okay. All right.

David Auld

Okay.

Stephen East

other And enough. the then Fair thing. Go ahead?

David Auld

as much we pretty said Yeah. I expected.

Stephen East

then you don’t looking already capital stood your just And target Okay. forward, know we like, XX%, was that. you other allocation your by, thing, your but I lots past that up option at the moving are to XX%

here. compound about One, and due. at how debt you if allocation can do expect you forward, to that looking a some question maybe talk So then your coming you capital moving have progress

a Your whole at cetera. net lot D.R. bit little How debt a do your probably higher you wants look to it, total cap or is capital? allocating than et

David Auld

debt, in bad Don capital Stephen, I terrible we not tell debt kind world, thing. is of to return much you base as maintaining debt from can, this we can any flexibility as a are have is possibly a Horton’s Bill? some and priorities, I you, got tell

Bill Wheat

to And certainly, respect we making. Stephen, are pleased the the we with percentage, option progress are with

that’s We the that progress our that expect to to percentage capital we that to lots for the through giving increase our more from up flexibility. contracts from controlled not but to next are years with What gives continue a purchase going set increased us flow flow necessarily, is more expect and and cash put us to over the target to that do continue sets are allocation. operations potential we flexibility out but few of here, cash our increase

in our our and to allocation and keep as an into or share so with expect have the we fold been progress allocation. repurchases to of over the able year-and-a-half to have last made We pleased there important that part continue

Stephen East

lot. All right. a Thanks

Operator

Thank you.

is Carl from Reichardt question next Our from BTIG. coming

line Your now is live.

Carl Reichardt

Thanks. Good morning, everybody.

David Auld

Good morning.

Carl Reichardt

ask to wanted Texas. I about

down of your think, XX%, there. been and XX%, orders flattish a of bit, a quarter slightly I it’s your sort So business, for were

your seen have peers We some better numbers out report of of Texas.

it they in talked of about being effectively turnover. market terms Some the best have them of have got

So it you lost orders. just some like going looks this share quarter

about that there can So David, bit, the particular what’s little last you particularly your given happened quarter you strength for talk historically? a over in market

David Auld

you is a market. Carl, I can tell great Texas

our performance are of solid We divisions. all seeing across

quarter like We happy cities, are coming we is four second is last doing very digits And off operators the it’s are dominant very year are with the targeted and tough Texas. low-single single-digit major we we year, and there. we comp in hit share so our of We what well-positioned market are for Texas our to out truth the growth think probably to in mid are that. --

Jessica Hansen

of our a this Carl, our to where kind improve year, Texas. lot have growth of maintain got have dominant We of coming we across the and from lot rest continue that of markets a gradually that’s we where don’t or share the position, in while country, is

Carl Reichardt

Right.

us an those you And give of sort you Okay. to I Can you had you. then, count, this of that, appreciate grow Jessica, thinking quarter, starting is are accelerate maybe next community thank again. terms the so Thanks. count increase acquisitions? in can the outlet we that beyond year you are expansion look ex-acquisitions, how sense expect of you just about or to as something over a

David Auld

I wouldn’t say accelerate.

have markets are our to a significant, We every position and dominant, not dominant market. we be market focus not where is if in in

lot at other a typically higher helps than A in much pace of markets. flags in flag So a growth opportunities. Texas

focused are on we something it’s and disciplined it’s balanced, it’s So continuing.

Jessica Hansen

our slightly We communities, lot anticipate organically more position we forward. to flat will so have going probably than that anything continue a great up wouldn’t replenish we to

Carl Reichardt

Great. Jessica. Thanks all. Thanks

Operator

Thank you.

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

now live. Your is line

John Lovallo

as guys. questions for well. you Thank Hey, taking my

to would in gross step-down a you the range low your margin guess, just flat what the question despite, is margin First of some seem fairly and a for you at understand year-over-year first in saw the for least of us I benefit there? be an versus moving the one meaningful sequential quarter, improving should pieces a Could lumber help imply at core end outlook market.

Bill Wheat

think we lumber those start the year we some softening those. and I are John, saw that as last closings see, through deliver to from come expecting benefit you we

But to of margin and and that margins. be a take a full now to market stronger are Trying are did incentive those. difficult continue of in at but to us right first much it’s looking going when how to to the allow the pricing started extent a take step we closing the we and levels to pace of deliver backwards off in measured quarter the have gauge fall in little and back the those our We showing concessions any up are will pushing up in going margin. to gave be

John Lovallo

then, in kind are and just year environment. I Horton I And reaccelerating industry speaking here confident guys to broadly of as would expect that for just overall fairly itself? higher you. you I mean, growth guess, the Got at for trend point, this of the are mean, more you terms the things progresses D.R.

David Auld

Re-accelerating, happy today. I a tough so to on spring with you rates. can that’s far. we A interest very the tell lot are depends question answer market

going to through rolls it it are early it’s June, more year. be lot We and continues along, as know if a going great May to a

Bill Wheat

We to still as a home. fall a to of would year returned was some probably those summer in demand come buyers displaced as great that in spring the early and selling to the buy the season and market, see into look elongate will the time more this continue so that have and it’s

Jessica Hansen

growth industry. consolidated this are to to less have compared as increase we Our closings X% X% great got the power X% in little for annual the in outsized to a pricing guide housing increase our but we revenues, go closing year, a and X% and for drive to position so

John Lovallo

Okay. Thanks, guys.

Operator

you. Thank

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

is live. now line Your

Alan Ratner

morning. taking Good my questions. Thanks for guys. Hi,

David Auld

Hi, Alan.

Alan Ratner

to in what think, a to impressive talked take I you I the have the on guys as the curious that just I especially have the you think is historically certainly hope intention softer you back still way hope last I very put Just question given of am for you how back what the of be on step based market guess, now point, about you to the started about that rearview have kind eventually know seeing some reason? if those kind demand Is X% thought get changed or could XX% growth mirror. last of on right year, the to plans unfolding you some X% the of annualized where XX% are kind so seen the market. in and annually, you that and in that we growth of to spring the you XX% kind to XX% compared

David Auld

It’s we then be are say possible. what and going to try disciplined We what to always do in conservative, do. say, we we

So the depends market. it on

take we we spring, As look next a drive a you, this look so. I and growth, up, will to how we our operators all DNA take through year it at in want the will they get and then the them have can tell year. ends at Horton

Jessica Hansen

that mean overall We return. improve level to the that we pace And between striking best an XX% X% in to to what drive XX% to to that upon are continue so fall on maintain late our balance rather did into look rate moving this price experience though community possible you we and on or at and spring, and are returns we there’s the returns. growth continuing than a individual focus rate if may and are today’s to X% in the as market,

Alan Ratner

quickly quarter mortgage And in of on That’s impressive, are the actually hoping mortgage a business comment profitability and some the FHA. business. you the was quite on out what space the this the given your helpful, then, changes I business metrics that there’s I mortgage but stats Jessica. you second, today. was of you it. the of regarding could goes some your piece of very average favorable, gave are challenges seeing Got know just outside

any any from been the impact or March? adjustments FHA fallout all So at has made there in

Bill Wheat

or at and their the not We may different business there At margin, to impact getting have process, impact have delayed a but individual wait work that we in are have not on certainly material seen in are significant customers seen all. program, any loan whatsoever. the

Alan Ratner

might year, margin Got it. One it there missed give it but Jessica, full typically for a the pre-tax sneak I think in. could final was guidance one I you if that. have there I

Jessica Hansen

and No. There was gave quarter. not. guidance third margin SG&A the for We just gross

Alan Ratner

Thanks, Got Jessica. Okay. it.

Mike Murray

the to or see the QX to guide year to need of really the the spring We QX. beyond beyond rest guide rest of

Jessica Hansen

to We further It is much XX% out higher and are continuing XX% gross than homes. quarter pretty feel so was get actually quarter of to sell to for a and than even a margin this XX% our difficult. close

Alan Ratner

Understood. Thanks.

Operator

Thank you.

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

Your line live. is now

Stephen Kim

right better which in impacting of comparable mix margins now? a little are -- the how that in just now, And from growth degree have your margin commentary the a I to we just generating And XX% isn’t like lot. company it to on us some there range market. in your similarly to historical Alan’s follow margins about the could Is right talked that the business mix year a your is kind a and give just of you year margin. historical rather your dominating Express kind about how this question a a side, then, on the yourself little past gross may talk but to run make your margin want XX% to or with wouldn’t sure or range. about correctly. still you that the be XX% necessarily the you a average That business am profitability with be bit margin words, full range be hearing longer-term other of Thanks you Yeah. difficult on am I with your with are terms topline, respect lot XX% returns. projection, makeup the inconsistent see I positioning in could sense XX% to factor gross gross below the you much running way gathering maybe for you in

David Auld

Yeah.

yes, and and to volume, are have. In returns margin we balancing margin, we of best generate gross the price, terms pace the

that are or been those on longer-term yes, So, I range XX% XX%, move little to XX% our up say bit would our and XX%. levers down may a within to range. broader margin has

so the in in coming certainly back in unusual to the incentive QX, momentum margin place in we level not regain the carve start off going at current had back forward. and margin And that put we and ability feel XX% levels the for are good we to market the is to us about some potentially to that

terms the of our heart In tight seeing brands, range that’s very very still across strongest solid in gross Express. terms profile of our the so we margin brand are good inventory seeing margins we supply margins are the still the still the within in lowest in marketplace, and still demand Express seeing seeing and pretty market, and of of margin where

Stephen Kim

helpful. markets, West I asset in think, Great. basically couple a I Recently a balance then Lennar, M&A, homes just talked That’s we Raleigh. to call in about And would American you bought and purchases what very maintaining the understand and local respect with Pulte of seen level have then approach. announced disciplined we

that do of see intensifying not, is you where situation in sort competition if that deals in And current this should that because M&A? this or share just D.R. favor that see you actually a you environment, happening, opportunities. instance, repurchases local private to is local you positioned guess, at in am for so, wondering, think for or the is an markets. point, would, I intensifying of how the approach prepared something Do meet I those of say names talk can Horton competition I competitive for environment midsize and you Do kinds about

David Auld

the M&A that long-term at to opportunities add the Horton Stephen, and the overall. say, company capabilities profitability of look we would to I as D.R.

we and we are think existing an a very of people. So teams and share are to with deepening expand aggressive as opportunity teams on of our to acquisition where opportunity. That’s that, lots and in acquisitions, of focus any can to great we look share selective well in that we opportunities frankly get new or certainly our Having and kind is continue primary markets going terms with said we where DHI us for great at need into buyback. attractive markets of acquisition

can than it’s allocated You year this see as so a prior, balanced to more approach. in that that fiscal we capital have

Stephen Kim

Yeah.

opposed are way terms kind as you say, have drawing M&A to what approach let’s a Pulte between your you being So and would of seen in basically in personnel-oriented right? asset from, being most of words, primarily distinction we recently the other talent-oriented acquisitions,

David Auld

It is going people the rather the your talent the determining acquisition, us an long-term the That is is expense, us certainly playback the with component position acquisition the a lot lot overall simply you and what effort, for as and than of or potential be but factor the to the generally of for portfolio. is have risk justifies adding to platform.

Stephen Kim

Great. Thanks very much, guys.

David Auld

you. Thank

Operator

Thank you.

Michael from Rehaut next is JPMorgan. coming question Our from

is live. now line Your

Michael Rehaut

morning, everyone. Good Thanks.

not improving a In to just seen two they February or kind other three some have well as have improved pace seasonal that over not end year-over-year reported, far the to January improvement, so from bit of the was relative the to perhaps, your month, to March, maybe last certainly builders months, of as First year-over-year growth I you words, months had and quarter, and the perhaps every pointed just of the even the question towards little but trends. other expectations, into of but have April.

moderated obviously, to could So year-over-year, that sense are pace talk sequentially, you has as I was improving And incentives growth still sales curious accelerated incentives year-over-year well. that basis. perhaps on if year-over-year wondering if give was if up I you when a as particularly well they similarly a on us delta

Jessica Hansen

improvement. generally comment of we the individual terms months year-over-year quarter in don’t on Mike, a within

sales month for seasonality quarter As as community-by-community David we on and said, from we a We are did to always are very month, pleased to throughout month normal our pace. see move with the us basis. incentives

have where to we that yet. able we to still can some been able in the what some got maybe we But fall there. continue as where have the we roll back fully got to had So to been have from haven’t out have have that incentives spring, those fully continue those communities we and move we elevated do dial in throughout hopeful are communities, back we we to

David Auld

normal I not seeing are expect far. spring. would we anything with in would a But would solid what say consistent see been seasonality. we of to spring. it’s It’s It’s normal seasonality say outside thus we been good a

Michael Rehaut

Okay.

I I leaves again normal interpreting punted it of answer that know finally question differently, maybe year-over-year on than like guess, improvement. unless rather the perhaps your a was the am on month-to-month, basis, steady the unless Appreciate in seasonality does, color reading zone it second again, you perhaps, too am like region a So it I just it means commentary here. on to trend a but it kind Texas. sounds I that, seems again, of like tea little that, on sounds more

been month-to-month rough. improvements pretty big has California, in last two some was and over Another real focal point the months, XQ months the or particular, three of

more Just if acceleration anything that standpoint? outside there’s bit a you get or wanted an contract say to a little normal sense from would again been seasonality of by anything

Mike Murray

had be from California not getting quarter overall first market fairly what our is in the there. is back weeks a little I spent I some by I from The execution to a gives with the you that it I coming any effort saw teams us stretch execution the market, people. effort good better. But our to our on out appears the our six our very say sense impressed traveling was driving it California think of world, of don’t was that there’s portions separates last California I and in market -- is will It competitors happy four communities, well. imagination. and in of and what fire my very with

happy in as We saw, are focusing can as will with be very I you was I California. say that. affordable I what

Jessica Hansen

And, X% quarter this even of and Mike, post supplemental the about our online when on lot we is you is region and just after west the average getting see have had up several X% west count a the been in community year-over-year our first will it��s our talking in up call, communities been issue we data sequentially. quarters part the

excited about very are bringing that we the and online communities we product new those are getting are to we market. So

Bill Wheat

and those think the of contribute see QX meaningful û more opening. sales the in you than I quarter communities to month And new first their QX first in will

Michael Rehaut

you in Great. much. See few Thanks a weeks. very

David Auld

Thanks.

Operator

you. Thank

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

live. now is line Your

Ken Zener

everybody. morning, Good

Jessica Hansen

morning. Good

David Auld

Ken. Hi,

Ken Zener

So number? with your could you completed start spec just

Bill Wheat

X,XXX. It’s

Ken Zener

Okay. for And But kind I gave is XX,XXX, going morning. for correct through just of guidance you XQ? this calls apologize, to XX,XXX that

Jessica Hansen

correct. That’s

Bill Wheat

That’s right.

Jessica Hansen

Yeah.

Ken Zener

let question. So ask you me this

tend your inventory, two been the obviously, so in would is in past, units of it your on kind inventory one at fair or quarters, that’s of look conversion rate which decelerating imply happening your things, closing you younger. and appears bit it’s there’s because just was demand that versus and have average little of it recent you If you that, that because more backlog-ish Is why a the of more just was more specs what order and is it to exactly your -- inventory are closings, something building is is versus intra-quarter younger please?

Bill Wheat

it over closings was those that quarter. XX%... be I the believe would Intra-quarter and sold in same we closed

Jessica Hansen

Yes.

Bill Wheat

quarter. second …in the

the March have inventory, in the at six our XX, completed of we age was was as inventory the number XXXX months same March at at that of over XXXX. XX, unsold it Looking homes

word, still to we the did that inventory have use don’t that, your want W So at is word. events did use but effected have this some looking the young, production. And to some quarter some I we

from some spring. into completions So the and bit the winter we early coming do little have later, those of a

Ken Zener

okay. Yeah. How --

you to December how in will that quarter obviously, relates a inventory you Is others with and are to do your rate do seeing? So, or the are seeing market about this growth to spec How Let want spec turn you in you relative do units you I share. even last it how X:X we backlog? months think keep think always construction mean, by you which at in do me pretty But as helps are that should you much of think how I historically how what ratio about mean, reducing look general your orders. industry you as lower another running basically terms because six your versus much which under guidance, units your you are that obviously, going you that guys we did position approach already spec flow, vertical. achieve the at as way. backlog? are issuing growing to about

Mike Murray

construction vary their that’s pace result divisions sales our inventory of of one are in spec managing upon sort evaluating week-to-week-to-week a and sub-markets. an at what XX% relative plus -- with they in completions. a year those then adjusting up production are throughout snapshot But and of they of where lower a result are based comes are a of sum expected and operating sold inventory to of closing community their or XX% every kind based inventory of communities pace sales, by looking of one, it one the the homes to basis, at ratio trailing will at that sales starts they on forward in cycle different and we total higher Generally, and minus it there position that that of And in year. the And look around unsold seeing the points to so the on about year. varying along

Ken Zener

you. Thank

Mike Murray

Thank you.

ratio. X:X good a So is

Operator

you. Thank

next is Our Matthew from from question Bouley Barclays. coming

Your line now live. is

Matthew Bouley

for Hi. you wanted closing my the about to guidance. Thank I questions. taking ask

think third some that fourth in and the suggests quarter. year I the that X% X% guide growth the full in of to it quarter acceleration seems

of you. is spec say third fair seeing, of are then, the or that there? X% in what timing I environment and quarter, kind really I So, orders Thank is in just gives you you And quarter. same you a your quarter can guess guide, to XX% is for you it in X%, the guess, that just mentioned, the confidence guess, acceleration closings reflection the as else fourth I obviously, mean, what the sales that today, completions I how

Bill Wheat

touched as for we displaced yes, elongated got bit as an spring think, a spec Still cycle what I same fall. the is market completions, this of well to a and summer. this in to a the Still in are need from still fall. home positioned supply want They to a that want live need, housing we that have the demand on from live in the home. people

Matthew Bouley

for then will do second that trend Can the And that. Thank in and have the third and for Okay. numbers you the purchase into the just that then how on quarter quarters? û what was accounting. you fourth you

Jessica Hansen

Sure.

points saw that of in. expected. weather, lighter bit we operated in impact basis quarter. we March experience talk We lot like some did XX a more that have than not our little markets of Honestly, the already weather little a about bit in we actually would Matthew, are extreme do probably but markets than acquisitions û to a So, we of our

delayed accounting impact quarter, QX and of a been bit this So little until really purchase has that QX. into

surprised ticks wouldn’t if So be up June. in impact points XX basis of that March in

Matthew Bouley

That’s helpful. Okay. Thanks again.

Operator

Thank you.

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

line is now live. Your

Nishu Sood

you. Thank

ask to about appreciate Communities, incremental that. wanted Just details on the DHI the

terms can of your the become, to what just the broad could on to business it kind of of ultimately lines. how be country whether some apartments style of to seems maturing, or you expect that us expect if grow, brush the product of it kind whether part then wondering and broaden garden you regions that in Now would of give strokes a it how big be part business to might it stick you might

provide right kind get can visions Just to you now? wanted whatever of longer-term

David Auld

progress happy key to-date, We think, sustainable sites. and the scalable. whole very a is identifying I out us The team, building for are, with

affordability we property synergistic our reach where it’s houses. a allows our start what part The larger we It very sites not with excited about buyers accomplish. very It or to we homebuilding us building very with So are homeowners, in right are so operations. we were communities seems it future on going that buyers, it. gives homeowners, relationship now to play of a are them, but them are that to closely -- building trying of are to pieces of we

now, have more a pipeline in were Two and the lease-up completed much country pretty under projects than four right and XX. across think I construction. of deals of we

it’s over So, a pretty to time, us. for business going significant be

Nishu Sood

it. Got Thanks.

Mike Murray

And some to see the down next expect there a we sales the growth robust more term couple been certainly further expect will years, going as not from recorder, of some occasional couple first of very but there. early-stage but the the then pipeline that set the have longer of in we over line. the projects projects deliver be of are years, sale still to We last

Nishu Sood

Got it. Thanks.

So improved. the like. lot very looked been might back has from what what annual fallen, and the past questions market, even to obviously, at over it’s it rates looking months nine builders difficult there’s think to months I been for ‘XX about the been generally a six about outlook have of year, Investors have the the saying have coming environment know a guidance, to

the in for And have are your so of you you improvement. given? that some margins are example, just guidance it reflecting dig are how at if that wanted volume into a modest to mean, look acquisitions you expecting part guidance, you and big I gross

think upside how against think seen demand that? your your appreciate the to has or how about we in So we guidance should months, of in reflecting -- and is should about periods being that recent a of to kind should more their we potentially guidance guidance think guidance course market of approach your or volatility, de-risk it’s we giving level but more improvement about how through these

Jessica Hansen

again. tell guidance take is enough give we to you the feel would would I away first good I thing

that comfortable takeaway So that and felt is spring been We today sit to good here to the the that is me provide level guidance. enough. biggest has of

we update construction, to in the can, sales under we the continue quarterly we seen left six will the We but to-date. houses have with as spring months year, have

this expect don’t deliver As the very annual I’d a want is homes range XX,XXX there, that XX,XXX -- for to year. at feel to we guidance to we hit, think don’t that out we but realistic we you tell what put comfortable would can we

Nishu Sood

it. Got you. Thank

Operator

Thank you.

is question James. coming Horne Buck Our from from Raymond next

now is line Your live.

Buck Horne

strategy are at hold want other some also guess, Good these wondering, consider structure sale morning. partners Thanks. that on for comment or Nishu’s and up be would going JV to Hey. a the his you follow-up are point I DHI Communities, or about to scale some just to just all built capital build I or more quickly? you question considering to

Mike Murray

and that’s sustainable alternative are to we looking more would structures. in scalable Currently, accretive that before, that We for certainly are a would returns capital we something David operation. evaluate and a mentioned in be business. kind of build-for-sale

combination out and business with our thing at looking as and the the wanting business was simplistically build country. homebuilding a kind that for can First platform of how of figure us sort across to understand we

been have add land of So current within that of to master and plans projects land building a the larger capabilities to other the been we and part and rather to initial value pipeline than lot the past homes largely land monetize in working developers, developing been off are have parcels on those have of that corners that that selling look in we typically ourselves. develop

accelerate it of be us. So as and roll at with out lot that of business open to forward of options looking would capitalization a the front we it, we certainly look in

Buck Horne

million. Okay. their in That��s coming And there $XXX next great. pay XX mentioned debt That’s helpful. the on you have I another to possibly Is you due a plan that months, think, the the Capital that for that? or equity? Plans, are market thinking off sooner And how wait related the maturity or on would you until about Forestar’s just to also debt timing you

Mike Murray

a flow, no our maturity XXXX simply for or will In terms whether our investment early, of we together, plans we fiscal pay determine as the evaluating then Horton will all whether be and portion put the those of that we plans plans to Plan, that. next we pay we off off debt Capital cash refinance or

been Horton Forestar. issue three want starting of terms an well of and capital very when stack building has made issuance in has revenues with we the in itself. to the equity been team the is now their respect pleased progress opportunity as April I at Them capital in that have senior here to and at and team making more plans alongside investments well, Forestar position them, equity the for presents Forestar equity for issuing start Forestar here Forestar. to hold for the Forestar to pleased analysts with the Capital, prepared as important the was ‘XX covering to investors. that is meetings first with be really fiscal management step In getting Certainly to very notes

describing encourage future. at to attending and Forestar getting being expand business conferences helpful We deck there. investor the their begin the basically It’s on forward Forestar website. lot would able and out to in the look to I that’s look certainly the will investors some manufacturing story them model Investor the very in float at

Jessica Hansen

June a stand-alone the beginning conference start And Forestar in call having quarter. will

Buck Horne

you. Thank

Operator

Thank you.

Our next coming question from Jack from SIG. is Micenko

is now line live. Your

Soham Bhonsle

Hey. on is guide lower This on Soham gross I XX.X, just know Jack you Good margin are guys. Bhonsle your to get how morning, of But actually parts third how the the for flat. for moving of some we quarter, this we of higher of through end Can the morning, guys is which maybe just of sort do end you could XX.X? get talk there? on

Bill Wheat

Sure. we closing through of We our about improvement. in expect able as gradually primarily been potential ‘XX a incentives expect part closing latter are in have margin we have the through that see dropped our spring, have would in the and factors in to we that bit primary back should do our improved pull seen those QX, for some we say, we sequential that to the versus some margins talked do tailwinds or have to lumber some result having start cost coming QX, as from pricings

Soham Bhonsle

expect forward the point pace or increases at were that? then, you more include then, And should X% going a Great. sales X% of sales Okay. pace, be to looks function like core this on community the up And pace but acquisitions, of down can order confirm ex year-over-year? it if was was improvement count more to you in acquisitions, we just

Jessica Hansen

same-store your first was sequentially. and year-over-year on kind X% our question, the it XX% is up basis up of on So absorption

with right in and and So seasonality that’s then even ex-acquisitions kind the question? traditional of line second

Soham Bhonsle

Just is how community order in should year-over-year, pace-driven improvement think we or about it of count? terms

Jessica Hansen

the so Oh! of I’d of tick-up because through further did then quarter organically year. the and up Well, our this count remaining community community acquisitions, count even the the anticipate remainder

see what guide a we versus but haven’t given from communities, will comes specific absorption to sales. We

Soham Bhonsle

you. Thank Okay.

Operator

you. Thank

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

Your now line live. is

Susan Maklari

morning. Good you. Thank

David Auld

morning. Good

Susan Maklari

various the maybe you maybe in that such just have have is can some question as you first with as have have range through what of Emerald. talk seen You brands? you to and bit quarter? little a to you your across there improved we Can differences things just Freedom, My a have especially talk Express, the seen got moved

David Auld

We growing Freedom. happy brands. of mean, the are performance all the with very are we I

percent so part think go much a to Emerald I bit, out, will Horton and fully be our fairly maintains pretty constant. deliveries stayed future it’s going of The our has dominance X% a offerings. steady Express, XX, rolled up may XX remain very that’s of I important deliveries. little think that about of at brand

Susan Maklari

expectations can relates to it input any then you talk to And Okay. just as cost. updated

in about of and in provide there of within off talked pressures You thinking back there. coming or half? the margins be changed Has in sort anything are have should anything offset that the lumber to about past gross the some how we could some the that that

Jessica Hansen

No. from mean, we expect come Su, I that it inputs. lumber do to primarily cost material pertains as moderation to other

X% haven’t foot rising, the some be yet trade to we square we our those so We spring we don’t margin right per range. that have ways the what up gross as costs the have terms foot given Labor always much got as on in have year. call, margin generally that in typically of the so a versus square costs with tighter which were a of costs I tailwind our starts But to to but on year-over-year decline a are anticipated. would our lumber stick-and-brick compared stick-and-brick down, in was helped this was saw. little slowed offset revenues half think some bit and availability, we gross line of maybe we X%, softness. up provide Sequentially year-over-year that goes their come that’s with in about builders so per revenue a back find the were to that some basis expect even

was up. and very stick-and-brick our per square cost slightly square Our revenue foot was per essentially very, flat foot just

Susan Maklari

you the for Okay. Thank color.

Operator

you. Thank

Our final Barron Research from question Center. today is coming from Housing Alex

Your line is live. now

Alex Barron

plans have out have single-family of to any rental I Thanks. along thought guys ask to build any rental multi-family communities wanted started business, the sale. for the whether or lines given you

David Auld

into we Something always as if into we we that, and Alex, further know. we opportunities, get that, at get you are will certainly looking further let

Alex Barron

Okay. [Inaudible]

Mike Murray

If it going absolutely, watch thought, in the have w given everything on any question industry. the we is

Alex Barron

know I if necessarily? those guys one, or the did One to expect if of on we guys Can I any another be I quarter gain you last one or specific multi-family, of give not report sort other next if missed can another you the it ask communities don’t guidance.

David Auld

specific have guidance, Alex. given We not

two We projects four in that construction are project still multi-family in lease-up stage. We are the This early projects was phase. in substantially do first the sale the completed the under division. have and

we of see in would would expect have expect sale we we projects coming every to don’t But So two quarter. the a sort quarters.

we that. are specific not provide So guidance more yet than to in a position

Alex Barron

Got it.

Okay. Take care. Thanks much. so

Operator

Thank you.

session. our over of We have management to floor the reached closing like comments. or to question-and-answer any the end I’d back turn for further

David Auld

share in again to you, the quarter of the everyone’s results out today July I just over call accomplished you the forward on speaking to look Horton you. guys time third Thank appreciate team, months. what thank to proud Kevin. We you D.R. the six have there want incredibly and and to last to

Operator

That does conclude teleconference. you. Thank today’s

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

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