D.R. Horton (DHI) 12 Nov 192019 Q4 Earnings call transcript

Company Profile

Participants

Jessica Hansen	VP, IR
David Auld	President and CEO
Mike Murray	EVP and COO
Bill Wheat	EVP and CFO
John Lovallo	Bank of America
Alan Ratner	Zelman and Associates
Carl Reichardt	BTIG
Truman Patterson	Wells Fargo
Eric Bosshard	Cleveland Research
Stephen Kim	Evercore ISI
Matthew Bouley	Barclays
Michael Rehaut	JP Morgan
Megan McGrath	Buckingham Research Group
Jack Micenko	SIG
Mark Weintraub	Seaport Global
Ken Zener	KeyBanc Capital Markets
Alex Barron	Housing Research Center

Call transcript

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Operator

Good morning and welcome to the Fourth 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. An interactive question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to Vice conference D.R. President, like host, to now Hansen, Jessica Investor would turn over the your I Relations for Horton. you. Thank

You may begin.

Jessica Hansen

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

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

assurance be believes such reasonable is no on materially statements assumptions, not will based Although that are any outcomes D.R. Horton different. actual there

based are the conference and undertake statements All statements. available on D.R. update information not forward-looking D.R. Horton publicly forward-looking upon date to does revise to of call any any or this obligation Horton

on on with the to of information changes D.R. is filed in Form issues Form which our are Exchange performance and report in XX-K quarterly subsequent XX-Q, could Additional and about all reports lead Commission. material contained Securities annual that Horton's

website we this our This on presentations can be section release Relations found to our will our we Events call, next and at and XX-K the & your updated Investor for post morning's supplementary investor.drhorton.com under Presentations on investor reference. data file to week. earnings site plan News After

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

David Auld

Thank and morning. you, Jessica, good

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

revenue income our strong. the on finished Pretax Our fourth was of year team $XXX the margin XX.X%. pretax X% and D.R. million quarter Horton for $X billion operating increased to

of pretax income per $X.XX on For consolidated increased and $XX.X XX% the billion year to increased share EPS to revenues. $X.X billion diluted

year, XX,XXX of year We closed an X,XXX or last year. for was margin homes the homes pretax from consolidated XX% increase Our over XX.X%. this

and footprint our across our D.R. to on strength product broad Our geographic offer homes ability our homebuilding was teams, results price These the and points operational our on leverage Horton brands. was equity scale multiple of reflect at affordable XX.X%. return our XX.X% inventory return to positioning across

XXXX from billion. flow cash $X.X was operations homebuilding Our in

we Over our growing by XXX%. our five billion $X per billion of and XXX% share homebuilding years, revenues the approximately more past by have cash than or operations earnings from flow $X while homebuilding generated

these addition the $X and dividends repurchases, invested returned billion to in reducing five $X.X through During we shareholders over while years have growing acquisitions billion business, by organically homebuilding on to approximately billion. debt $X.X and share

equity five half debt ratio increased As our on years basis level homebuilding capital by points, a of to its ago. result, than less by our while return XXX decreased

focus and and share profits, our Our a supply begin continue homes to balance market sheet flows strategic is we consolidating while XXXX. maintaining October and cash growth to lands a and lots pretax strong support an with position base, returns, good a of conservative financial both as revenues that sales includes flexible well-positioned growing ample generating and we're

Mike?

Mike Murray

$XXX million Diluted quarter. earnings the $XXX per share increased for X% $X.XX Net compared the per of $X.XX in to increased income the to to XX% quarter share per fiscal for to prior XXXX share compared quarter year million. fourth

in from million to to X% $XXX consolidated million. income income pretax the $XXX X% increased homebuilding from increased million Our and million, $XXX quarter pretax $XXX fourth

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

closing the prior average the flat $XXX,XXX, quarter with was for year. Our price

Bill?

Bill Wheat

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

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

XX% sales increased and selling were number X%. our up fourth year, net orders this earlier communities of acquired we builders average the our Excluding quarter active

year. was for same The quarter Our in XX%, orders the prior the last XX% in quarter quarter sales fourth $XXX,XXX, X% the net cancellation sales price fourth rate the year. on down from average was up from

Jessica?

Jessica Hansen

to the XX%, gross revenue expectations and today's margin product in profit on quarter. sales quarter our to expect fourth gross as the and due impact exceeded with our from home Based of currently fourth we conditions, market quarter June quarter, due to in consistent as was home lower the sequential mix, June up well September gross geographic to XX sequentially on warranty, margin purchase and litigation sales was accounting. the The first our Our margin to be sales fluctuations increase in relative primarily from subject basis possible the incentives. points

Bill?

Bill Wheat

as expense X.X% quarter, was due compared in price. revenues primarily SG&A SG&A was our to year-over-year in compensation increase The X.X% homebuilding to prior related In quarter year the stock a our quarter. percentage to increases accruals of fourth the from fourth

For and homebuilding X.X% worked we year align expectations this we after to with SG&A achieve to on while quarter revised remain the fiscal and throughout the SG&A to our levels compared in revenue expect rate X.X% SG&A did infrastructure and full XXXX. inventory expectations growth We our year, our in was leverage focused SG&A growth first our in our We not our our supports our operations adequately improve controlling ensuring year. lowered XXXX.

Jessica?

Jessica Hansen

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

the our our a $XXX was for originations pretax mortgage financing of margin. XX% our on For handled XX.X% our mortgage of by related loan homes the income million year, of financial $XXX homebuilding representing revenues, XX% during closed quarter and company’s company operations, homebuyers. to the services million pretax operating

VA accounted an to this an ratio average for of XX%. loans and loan score mortgage FICO FHA originating of XXX DHI of Borrowers value had Mortgage XX% and the average loans company’s the volume. quarter with

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

Mike?

Mike Murray

completed. with We essentially of X,XXX in were XX,XXX with which year year flat XX,XXX homes our ended inventory, of last the homes total unsold, were

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

For $X.X in development. billion we the year, land invested and lot,

David?

David Auld

and lots which are we of of XX% XX% when least consisted and of were At controlled owned be September controlled. finished at lots approximately total homebuilding of lots XXth, owned XX% our our them. purchase our will are finished lot were XXX,XXX XX% or position

continue platform to the lot working of across increase relationships our We growth with supporting lot developed expanding being parties position by manufacturing third our developers national country. the lot by Forestar’s and

of Our strong continues competitive includes homes supply lots affordable at provide and price an a current to lot for points portfolio ample advantage.

Mike?

Mike Murray

lot XX,XXX XX,XXX lots September now residential a our are Forestar, is of owned consisted manufacturer, lot operating XX XXth, X,XXX markets XX owned position owned of of which Horton supply already Forestar’s majority under contracts. publicly-traded logs purchased contract controlled across are a and through in states. XX% subsidiary under D.R. subject Forestar’s to with or the master agreement. offer first right of At are

X,XXX its by year and million delivering revenue for guidance $XXX Forestar this of fiscal exceeded September its lots for generating ended XXth. year

XX,XXX expectations revenue lots to XXXX. deliver revenue deliver to of in and $XXX Forestar’s generate million in billion to to generate XXXX expects These $XXX fiscal million standalone are results. XX,XXX $X for of fiscal and $XXX and Forestar million lots

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

million common ownership in After approximately million the to future of XX%. issued which public decreased help $X D.R. proceeds its Horton’s this Forestar percentage offering growth. Net Forestar's from offering. the approximately a will from issuance, During quarter, stock $XXX of approximately support Forestar XX% were

provide to capital as plans for to markets the Forestar long-term access opportunistically necessary additional growth. capital

XX% long-term of debt or less. is capitalized targeting to capital separately is ratio a Forestar and net from D.R. Horton

long We are excited platform this about Horton for over D.R Forestar’s Forestar’s and the operating the value and growing term create will shareholders. both relationship

David?

David Auld

one Communities currently our is construction has primarily and Texas, and four a apartments contract to rental Communities projects end which on XXth. of the was were DHI of complete suburban operations Florida. at in at DHI projects under focused with company, two multifamily that Arizona garden-style sell September the substantially on current active quarter,

During end on DHI were XXXX, of $XXX,XXX,XXX for multifamily total $XX.X the sold sale million properties Communities’ Communities at recorded million. of DHI the gain $XXX two assets year. a and rental

XXXX to multifamily assets We expect as grows. of its in projects significantly pipeline increase DHI Communities rental

We rental expect two XXXX. sell also properties to in

Bill?

Bill Wheat

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

are our the position we results of long-term Company. to enhance the strength increased value our Our and have balance and strong sheet operating flexibility utilizing

$X.X five billion of $X.X years past cash XXXX, homebuilding our bringing credit September available by billion. $X.X to homebuilding of our billion revolving home the cash homebuilding fiscal During $X and was cumulative building billion XXth, operations billion, approximately At capacity consisting had cash generated of unrestricted of for facility. $X generated operations on from we liquidity,

and billion the XXX at senior have public balance months. leverage a improved points And note basis fiscal next of points basis XX.X%. leverage XX XXX due homebuilding Our to homebuilding in year outstanding ago million $XXX notes from was maturities to year-end XX%, $X.X the improved our of consolidated we

in notes we Subsequent to issued due XXXX. senior year-end, of $XXX million X.X%

We also XX% ago. $X.XX credit extended billion, a capacity stockholders’ increased book and value of year billion. its XXth, date to At was share from our and per facility $XX.XX, by September equity just maturity $XX over the revolving our was up a year

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

paid million. of shares cash stock dividends million common year, the we $XXX.X $XXX.X For million repurchased of XX.X for and

As year a share share outstanding a we count to our by this year, reduced our repurchases compared result of X% ago.

dividends in on XXth was financial per currently $XXX.X repurchase quarterly with The dividend and to our fiscal expiration $XXX share. our We outlook fiscal authorization expect Company's XXXX. Based positions cash XXXX, pay Directors to stock million Board September million remaining XX% for date. by at approximately our increased of $X.XXX of no

Jessica?

Jessica Hansen

and range the $X.X in to of our to consolidated billion forward first we generate XX,XXX fiscal a XXXX, closed to and homes. be homes between to revenues $X.X Looking quarter of billion XX,XXX expect

home growth high generate in XX,XXX close of homebuilding to revenues the X.X% single first XX,XXX in revenues. around between homes. approximately our is our the and SG&A homes of Based for first and expect quarter consolidated to range quarter expect market billion conditions, the to $XX and currently for full to XXXX We be fiscal XX% digit on gross year We mid homebuilding today's still for expected be sales billion, and the in revenues both closed. to $XX.X percentage consolidated to margin

XXXX, compared fiscal and expect we end share of to We tax approximately to of the for the income XX%, fiscal at fiscal of X% our reduce XXXX. rate approximately count end by are XXXX forecast outstanding an

We also from flow fiscal $X generate excess of operations expect billion, again to during XXXX. cash in homebuilding

David?

David Auld

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

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

Horton D.R. entire product position, land across and geographic and finished well-positioned most with balance the offerings country. are operations lot closing This team our year accomplishments. concludes We and for your well-positioned congratulate thank across the do prepared multiple the our XXXX. continue experienced remarks. to footprint, we company affordable broad in conservative in a work most our history, improving you importantly, We incredibly on hard growing team homes and in so our sheet, brands, We're and attractive outstanding to

We will now questions. host

Operator

of first your Our comes Lovallo from with question of John line the Instructions] proceed question. Please [Operator with Bank America.

John Lovallo

fiscal you billion flow being you of could on biggest lower And reason be up question. operations basis? cash guess, to guys. and improved cash my in the you set to here? would of $X.X ‘XX. from Hey, all, be year-over-year see given year greater appears kind for I any target interpreted what of can for as why the a conservative, flow variables do $X that point Thank of What somewhat XXXX there profitability taking be is the performance billion, first as than here

Bill Wheat

goes year of depending expect just excess around early in consistently we John, cash billion. to our investments that impact that were year could to and strong the move and want the a on how $X that flow in demand see business. and we can homebuilding, given little levels number the timing in investment Year-to-year of generate through

a we’ll through a and than update we $X is estimate flexibility billion move the year then So, need that to. certainly we and range us solid as greater as that gives

John Lovallo

think, I are How target like? you you XXXX $XXX That $XXX sense. million. outlined and does range what that heading potential into then, acquisition look thinking million to And about guys Okay. year, makes guys the last of pipeline

Bill Wheat

some at doing John. what we're targeted very selective and wanted looking to very actively we're still in We’re But, there. opportunities, be

number very This predict clarity don’t at that happen. to looking level some, when a are hard year. this we're they’re last actually have they had to same at going year, time that of we while we to So,

Operator

Thank you.

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

Alan Ratner

year. on to the Hey, guys. Good Congrats strong morning. close a

that in business inventory quarter quarters. and targets see I’ve you're bit in about kind I question, year-over-year to higher mid think XXXX, to lower you’ve having first way thinking the always you the single should there of about see my the that of potentially on about think, I'm So, move this you in inventory, where leading point a demand And, in any is that in shifts homes the specs suspected? that would start spec little of growing I is change driving or provide homes how would homes on indicator have the data than a guys growth terms the we high digit number a and for any and that ground to-be-built curious, be a thought number maybe while in of versus is as kind been few And over you just next down actually first basis. bit

Bill Wheat

between I But, looking is demand think, we're that this last of have in focus available to our our talked our a to-be-builts into homes improving quarter it, inventory returns our breakdown home at Alan, continue opportunity excited, improving year good returns improving about turnover. way we’ve on and environment similar inventory. and we're part of the we and with going seeing

excited we're on the something to deliver that’s in ‘XX. so, opportunity about And fiscal

Alan Ratner

maintain delivered guess, I lower is conversion there just interpret you in in that? are way you still but while to keeping and the that level, on And I the the then, is rates a total, a can inventory that follow-up you've confident that that backlog high and past very implied guess

Bill Wheat

see will from in this looking increase the we're with to point year. be capital. we level our more you where But, inventory at think are efficient I the

So, we a look higher rate. overall to see turnover

Alan Ratner

Investors, any still very you late lows October, of environment focused And with you been Okay. recent How off incredibly in yield, can have move That's more. at one you concern rate XX-year just helpful. low if rates it jump there yours be the give of terms seeing all a are is from the weeks. and the to mean, continue that levels But, been see marketplace? in are from environment what the buyers treasury in higher? up I would an standpoint. you helpful. which -- today? in recent pull I Any Is on on obviously, could rate obviously climbing which ask sales just mentioned about thinking has before environment would not move forward do maybe absolute trying from in the ground commentary coincides seen you're of to the that strong we've see off

David Auld

to And a market going what's to pull about I at homes, think, going when we anything be really, that of very be really as homebuilding, is and look happening good will think may a there concern. impacts now, growth get. is there. good. yes, job But, the I you overall forward they're affordability they're bit little right feel I demand. do affordable which economy, drives say, very, always what feels

Jessica Hansen

and field last of rates us affordable out the came positive we for was it year in doing. make of one kind stay what of it’s a offering, experienced, sure what renewed and this have are at Alan, focus we product And to this regardless interest time,

average necessary today find environment as than So, are adjust better is year will to we time. come and down we It to the we've about believe to see And last environment market affordable bit continue in. it that basis X% there slightly. again. out ourselves rate this But, year-over-year continue footage proactively we houses square down at in was on gotten was clearly, today's whatever little a rate our a

Operator

Thank you.

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

Carl Reichardt

competition more, be Can ago. to of bit what you'll lots particular, what the smaller peers about how bit the direction lot you supply in seeing the the -- to Good all. it time wanted been it’s build Obviously, in it's they'd are as level you've like but making in find looking competitively? ask Thanks. you more for move had harder are. peers made that but assets entry of you smaller homes. terms same number David a for your little and a is they'll talk I especially out area talk be you're looking little couple strong, a to is about morning, a And in some about

So, to thoughts I was your just curious there. as

David Auld

think And that the that bar. are positions -- you’re past, we I And Carl, very share up yes, like deep. market compete seeing affordability. do so and every in get that to that’s long, day. point very give people servicing attempt about and to we've more drive in talked again, price don't intend better we our lower But

from very, lot that a affordable got still so. still fact think, tight, deep I especially affordability, true and achieve demand in long is a comfort take will deep. we've very we is I the that as and travels But, supply you very say, runway And my of so. position, long,

Carl Reichardt

Bill, Alan's then, And follow up Dave. Thanks, question inventories. want about I on to

I -- way we got back few first we ground you you want ago year, but so short thinking in make like from head just as comfortable into feeling a feeling you the you three I are the did I same bit to inventory move inventory entered three you think, or feel ago. that the I perspective, a not made and that now, and sure you hurt way what's the think, think you’re quarter, you is to it years you were versus models little unsold reclassifications not a there delivery this feeling years of where

Mike Murray

we and turns how that years say, I good Mike. from on different we’ve having the selling ago spring really season. to be over making feel it’s robust ground is to be lots to starts quarter that we really what just about need support not housing the we’ll as would three the to to this Paul, had this support well hope And on as focus improve that

we housing, levels years not finished with were three also So, but our struggling lot ago, with inventory positions the that. just of behind

Jessica Hansen

the And this starting say we comfortable wouldn’t to we're very than is XX,XXX now higher that where comfortable XX,XXX for a reason perspective. with annual next right but feel because from homes’ we we're the target, moving fiscal

XX very with. comfortable we to XX, So, feel

Operator

of comes Fargo. your Wells Truman Our with the line from with question Please question. next Patterson proceed

Truman Patterson

how drivers touch First, through SG&A little XXXX. on in just SG&A. to about above incremental bit really I'm this of I and It forward? guidance. your the think Could walk should a thinking wanted about you going came us the we

You mentioned break which leverage. is single-digit you XXXX high would did and mid didn’t all in your much But, guiding some flattish. guys of XXXX necessarily it why out you while revenue tick Could are kind down? you growth, improve what to kind SG&A of was pretty XXXX

Bill Wheat

Sure. this Truman, is Bill.

And Specifically, to as specifically our some fourth guidance, we increased guidance missed are was the accounts increase compensation those our of quarter price the in fourth changes SG&A pretty our for the when of in a stock our quarter, accruals, to had that to due QX share accruals price. for and miss our number sharply rate. the tied versus we entirely that in

you forward little back over bit look ‘XX a discussion. broader a As look the full though, as we it’s of and ‘XX to of year

homes more expectations. But quarter, higher the we very the support first revenue But, we to revenue we as the in place the As market in and XXXX then, had place, a to in homes had of pace. fiscal lowered you our inventory year our and grow we infrastructure recall, year, in in start obviously at early to softer number. saw double-digit expectations

and the And to been throughout working lower our typically revenue to really XX points been year year prior adjust expectation. about that operations kind higher all along. this fit year, inventory of we’ve basis than we’ve running levels our So,

that we in And revenue. positioning see mid revenue XXXX, growth, we SG&A fiscal while we our the to achieved like revenue for feel same into go we high appropriate is have As leverage. ‘XX, we ultimately expectations that with single-digit should

we SG&A versus fiscal XXXX. into improve do go And XXXX as rate our expect so, we to on

Truman Patterson

and walk think, Okay. Could in I Thanks going on forward? the drivers is possibly, have you the us just of this, through services for And side, how financial sustainable you guys result that. then, the history. it best it’s had

Jessica Hansen

favorable low Sure. interest to was Truman, conditions mainly it because due market of rate just environment.

has their mortgage becoming a So, by that the though fantastic improved efficient, company they’ve strongest done capture rate. far And driver. job more our also working on was

to some more for I of seen think, one business. And that historical no low the highest But, XXs. margin was they’re performance anticipate quarter we was But, XX% strong this is question very time. a XX% do the that’s range, to. going return normal this quite operating in year what we’ve the in ultimately

Operator

Thank you.

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

Eric Bosshard

the and Good margin, you gross coming morning. compare gross price year A look at question year and thinking curious just you how for margin, would you relative on incentives as your completed? the to

Bill Wheat

year, looking into shows, intentional expecting very returns. in the see I we've Eric, the come to up -- than think, quarter. lower about all We low kind that sequentially we've of And walk we're same. had. second to been been going of we’re best have we quarter levels to see been manage clear as as to incentives where plan margins we've the where the fourth frankly, be that as more from XXXX, the trying through this fiscal nicely, flat We've drive margins about

Eric Bosshard

talk secondly, going, how in that where you going, you can and and the would then, Forestar option, and characterize you it's terms And you've how about it's would number -- of how made is progress going?

Mike Murray

progress that XX%. know that's the little on and Overall, we've made we talked bouncy progress continues. move trend it's And a year, really any number to going a this to quarter-to-quarter. measured I get in quarter feel it's to that bit about about, and little I we’ve the a little directionally. get to hope dynamic bit more a well

third-party work to to team, for in great have same first getting It's markets, in us, platform, Forestar able a we have get us. developers people and add historically their developers in hard long-term to third-party source at add to And a developer. we been expand an for their operating to step time, with lots is those as relationships we for relationships not continuing other markets. continues which various ongoing, the process. well, really And complete and that developing

Eric Bosshard

And ultimately, and frame? you where number to what get the the over destination XX%, that like would to time

Mike Murray

today. for careers an say, than hard at where it ultimate Horton. entire higher probably But at our something number, very it's here to we'll working D.R. Hard be is

Eric Bosshard

Thank you.

Operator

Thank you.

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

Stephen Kim

Thanks to very think Mike, be guys. ‘XX. Yes. you clarify margins I respect you're much, to where thing, said with wanted XXXX that XQ just in one probably were flat just in with thinking you you could

gross other in kind kind So, XX% in what of words, is that thinking. of around margin you're XXXX Right?

Mike Murray

sir. Yes,

Stephen Kim

great. clarify Okay, great. that. I wanted just That's to

relates second question SG&A. The to

So,

the Bill, about you of -- stock adjustment any that. was price. believe, I for XQ, higher to accruals were compensation I your September lingering if the you made impact wondering the there talking quarter, shouldn't stock-based be your in from impact

closings SG&A is -- on Let's about say, flat, up for I'm reason X%, XQ you're asking kind year. like year, next though if there flat of your into remain what thinking for the your should guide stock the because price are is even would just

figure a we full in expecting why to seem trying more wouldn't just like the year? XQ, see So, to leverage you're for out little

Bill Wheat

accrual you in assumption. lingering the correct Yes, should Right. are not effect the in any have change that that

will first spend at. be revenue is into X.X% that quarter level As of we going the along believe guide, like we look at we our absolute we the feel with SG&A our level

first go some year. say some, in in to did If back we benefit, you're though a our reduction a ago hate I year the comparing had you price have quarter, year-over-year, from but do benefit last stock if we

the So, accruals some down a quarter. ago of those pulled were first in year

move needle points. basis on to move but simply does it’s XX timing to it So, the bit. XX It a can basis, that

Stephen Kim

Yes. wondering That's you opening remarks, to was little in your it. we give start. And us very I clear. more. talked a could any pace a into of then, Are if strong to about seeing lastly, the anyway, bit October more think, just at I Got off in or either of an color provide around able in October? a can reduce incentives environment any in demand aggressive being other way you kind acceleration in October terms you

David Auld

much October… feels so October This than last better

Stephen Kim

Sure.

David Auld

to I because a do little a the margin to believe tell hard there going brings. you we see that with thinking the I looking we’re going not right now It’s year solid see forward. feel we be is be more are can about that what very margins today today for least competition. we're -- to pretty business sharing and expansion comfortable, excited But, not very, flat where is going bit at

there. As not we’re know, you optimistic most typically group the out

Stephen Kim

Right, but working. guys. it, just the I appreciate hardest

David Auld

Yes, sir.

Operator

you. Thank

Our question. next proceed Please with Barclays. the question Bouley line of Matthew from comes your with

Matthew Bouley

purchase I and if there off? accounting with I want just to start puts the around some rolling takes So, the costs, that’s margin sequential through of are you perhaps on you with is in any QX. still go that? question Can direct QX gross guide guess, and what consistent the assuming guys and incentives

Jessica Hansen

core and of or It’s so or warranty all else from gross just kind equal, assuming litigation lot interest margin really really at another looking no and our one impact, level or way property taxes. remains

can but are to project. the move needle they those Now, hard really quarter-to-quarter

XX%, or are were at approximately relatively those cost. they to maintain would the same So, range same QX. in the in is then, now, our level a as increased flat a they able as that we're are right pricing assume pricing And environment environment

sequentially were X%, well, per stick X%. improvement quarter and the of. foot about actually up saw on revenues our saw the an So, brick we most that’s -- think were continued what through sequentially But, which we're square up we about pullback costs of we incentives, this because

Matthew Bouley

really some regional Thank trends as looked to Central Okay. ask well you for that the like of South about color, then, And the because I want Jessica. it accelerated.

are So, any elaboration into leaning guys if sort Texas again. you

pulled I on bit well? West a back seemingly And of then, quarters. past as guess, color have guys the any couple there California and the You

Mike Murray

job question offering the me California points, there -- executing for sales there. price at we're think first. the refocused And seeing maintaining great on our seeing doing good and teams I ourselves let your part take buyers So, out of we're we're out a west, buyers. And respond. the of kind affordability. those second trends We've

here. home. a performing been In the do communities those We've to and we here time will are projects. focused teams interest Texas, always need the dominating on great seeing And well, State affordability. And mentioned we're economy strong have for response. great exceptionally adjustments, in that But, meeting those continue long it's so. is And of Texas. the affordable And helps on David before, we been as rate

David Auld

that California the coming positioning. feel front able out that And of the lots about we drive a building our of price to we've think with way I year, add this and with just good I'll to lot down in we're both very Texas in operation. really and it’s into been positioned,

Operator

Thank you.

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

Michael Rehaut

morning, Thanks. Hi. Good everyone.

on appreciated, had couple I I thinking question by different prior obviously Express back the think been gave Horton what and mean helpful you over how the go years, initiatives you're Emerald. growth the And expectations. But, that, your guidance, around growth the driving have share that of in the around a had last extremely taking you if year. line X, XX you've I really and much about First next was in with

goals closings X,XXX, it be strategic to you getting up two, footprint or the was you including strategic Homes, Obviously will in now active play reach East you've are allow over areas the four going the forward, years, of look for I the the higher allowing last or you are or three about heights? for of that growth in going year to consistent those maybe X,XXX, prominent getting talked other the areas the continue deeper how even XX,XXX, to next per think, a role I X,XXX adult, in consistently as Freedom opportunity. focus you year. up, as curious, past to will

just curious, is the So, next more you growth, you year look market do initiatives achieving two, the be some games at ladders I the you've of driven as past? up next of this or talked see in strategic in that kind going those was or of specific to broad-based, that about

David Auld

markets. in XX X, the talked -- top only the on top fact yes, think, XX, we're number about I call, X XX, Bill that and X in last

lot optionality runway the to we're everybody's in to a to a markets. and of in the for market. create and -- focus So, drive And trying we've meet to those got a as lot product buyers the of brands, needs

and feel buy. of doing everybody good like as all And should to got not be kinds end I get to products we better going offer So, as runway want is to that we're we've markets.

Jessica Hansen

So, Rehaut, moved up footprint have in XX. our addition share markets and to quarter count product current this our footprint, deepening positioning we expand our in continued we operate, to and current where actually from to our and market XX market

areas in market the that those So, the we and honestly which on good almost housing asses U.S. continue the to every is affordable permits are and across ground jobs where entire

So, we look our will to footprint expand as to well. continue

Mike Murray

the improve East we’re With the acquisitions teams we those continued year the a our opportunity you continue our growing for day are mention going well. growth And There Midwest. to And contributor growth of teams with as us going to by and working Midwest, driver kind then, increasing the be and to forward. they’re that’s and be and our day talked an our about of operations there, then, did Northeast, think platforms. working is in hard. we ago a stronger for we’ve for their that And

Michael Rehaut

about as order the comp. well had being an you acquisitions kind flattish moved as year, seen or flat, with I easier single-digit next from you guess, an a slightly to type excluding sales high of think up this growth have this closings consistent growth, of you that and then that's quarter year, builders as improved a lot of maybe and growth more pace secondly, of market or

As unit overall growth? year, should sales balance of volume expect the count we get next how and influence into pace the community to you

Jessica Hansen

quarter, what through range. really next companies cycle three when that’s been the we single acquired our community we really and growth did we high in has this digit that After putting count

in in those ‘XX. or digit acquisitions, without single fiscal the a we been low basis. So, think, range, we’ve X% same anticipate that on of year-over-year just I kind more X% pretty And trending of only really

So up, choppy is slightly and count a can community be along it the way. little

Mike Murray

on driving improved everywhere we that affordability we’re our we absorption can, and But, that we're for with as seeing are refocus that ensuring community. seeing

count growth in low to with single single a guide mid high we're further price. per assuming our so on of sales of And digit, community improvement digit community

Operator

with Megan Our Research Please line McGrath Buckingham with comes from of question. next proceed the question Group. your

Megan McGrath

this of a ask, us just terms rates, year we And would strategy pick up interest we a fiscal while, those if continue went anything I guess to the up, a think debated I would up little been XXXX, that ticking about or of surprised and moves you reaction forward? wanted tell is have anything in you your lot through rate to movements looking But, buyer move guess, happen? I what you as back if down for could to in and do bit. your you which group differently rates there back, of

Mike Murray

to growth. the is with buyers and think us rates their adjust driver that have for growth continued what do large them is events housing rate are is continued them gave interest we that. as the that there's the bring and -- of that back to family a that in saw constrained, that's a job affordability. are demographic margin having and And provides buyers we affordability we’ll provided at the to try And single for a things still the Company, a into prefer And At there's they're that households. good that large we mentioned earlier, we're prices customers housing drive I are aging down get for marketplace continue us. for of some and economy big did the the one time gives often same wage one the whatever offering And we that life seeing to environment Jessica to further home very time well-positioned housing that. population, that to helpful the certainly is year provide to choice. down, think focus about way pause that and every in real interest and as for readjust our And there -- Megan, the product our marketplace.

Megan McGrath

components and generally, labor thanks. Great, tailwinds through next talked flattish we margin as quarter. And then, you about how the into margin, just thinking look you a materials fourth big of about from year, Could and follow-up the walk headwinds on the gross pricing? you're us maybe of and gross

Jessica Hansen

Megan. So, the it’s same really more just

we don't pull have incentives year. we're So, that on this same as did level back what to we saying in the is guide that

much We drive cycled will year last this to we to pace. at institute pretty a have through sales the that higher incentives time had

So, been we've it cycled But, have consistently are pressures offset And that our a headwind. on we material to other cost front in now labor offset, lumber that’s higher worked categories. somewhat continue generally, the some the costs to neutral. of limited we've costs, net

to we great a when team’s have purchasing the up, category where Our do find of cost job look they it. a is going we a that can doing category offset

So, be just whatever in to of type our be able I base case we would think costs or have. power might line keep with to of pricing pricing lack those power

a As strength the dependent season. on going though, selling is of margin gross really fiscal the spring reminder the be XXXX to the

it on really gross around spring. range is about maintaining going is But, so, we the right sit the this where be our margin, dependent We good feel now. it's And to today.

Bill Wheat

returns. As know, focused we're foremost first you on and

going generate community. return market in and to good pricing, margin, front Right of best we're we to And incentives the pays balance now, for a us. see so,

should And we maintain to margins. so, be that would able indicate

Operator

Thank you.

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

Jack Micenko

from the flow question wanted $X issue, north billion coming of Bill, is the $X.X know, X%, revisit nice the call. that next to of think in that's cash that’s cash year, Good guide a hard due. the year? the the comment, December pretty maybe around the anything Hi. on going next there October of this Is a flow attractive a guide for first probably to refi any the I to billion be for very But, flow February it’s XXXX? cash leadoff I contemplating XXXX morning. yield year, I beat that.

Bill Wheat

year. would be No. That beyond our fiscal

of So, at looking fiscal as that we're event. kind a XXXX

with we that issued in provide in five-year to funds naturally, the in the essentially refi million So, that we we the have the and payoff have does the October $XXX notes spring, maturity X.X% the spring.

be to able us gives in that we or be liquidity the to. need opportunistic invest further flexibility year as to as So, we go our into

Jack Micenko

maybe not really going Okay, great. what around the question, then And can for code, on gains, thoughts Communities, help code obviously, ZIP that looking some Xb then, among deal, peers, have for it’s There but are of us. your gains – way single timing. a someone And maybe and us family transaction so maybe size rental. said not it's on market you area those DHI

thinking Just the overall, family growing Thanks. current as is curious the rental where you're single your side? on business

Bill Wheat

do expect another in we mentioned, sell two we Communities, projects DHI So, XXXX. to fiscal

contract is September One under XXth. sell of as of which to

in course are So, general. our size individual project then, units the year. units potential to But, up we on first until to from our Little we in XXX over to hard the close. expect fiscal would high to they the close ranging first one projects to expect size and XXX transactions of up XXX quarter, in around the more of comment gains

And so, size. in they are of in a fairly tight range terms

the variations this past expect saw versus So, significant ones we year. I would

single terms family And in rental? of then,

Mike Murray

that right now. that that we Jack. and way -- provide for the an at to have best we opportunity it's look We do space, in to some continuing business, we're We're looking think can value

Operator

Thank you.

Our next Global. Weintraub of question with Seaport line with your proceed the comes Mark from question. Please

Mark Weintraub

good I are there further you in a potentially you thoughts Any as be be the industry you affected given year thinking material your on which stress on some certainly whatever that stress well, you’d I strong you that on and six labor in as those et is going been the to particular. of cetera. wasn't would get ahead. into so to wouldn’t your building like how which and home suggest more Because so more on in to position? it but much raising be thought impacts ability a be that about complex, year sounded it was that this more understand margin visibility talking labor next with probably that I pressure the the anticipating months, surprised got wouldn’t and when backlog growth inventory little materials, you’ve guess, and about the dynamics, to we’ve be we next order given later year, seeing,

Bill Wheat

of outlook lot the national looking have we our our have part a confidence from in is we of scale. contracts cost So,

is adequate we certainly to labor to ability our very over years scale on a relationships leakages that because at also supports have is is a build source we've that help And fashion constructive Secondarily, local our had great the had we to any labor through. level timely potentially a homes the a the there that continue and is cost expect cost us. for us We mitigate that market of incentives would strong. there level those of pressure would lower

David Auld

more to with which I’ll very just drive add that that us labor the anticipate allowed the that labor a has process I get same it a the we percentage confidence it. we command that gives when greatest hard drive years hours. spring And of footage to comfort worked of the tied square again, very, us in going does and lot to will that are over

Mark Weintraub

and seen, of as play maybe than did think is And market follow-on, that just in bigger in out? local even scale you does what access type advantage your we’ve that market been how

David Auld

Well, absolutely.

a scale. it’s think, local I market

I production think it’s also at each a our to flag. consistent commitment drive

into communities. the we get trade the So, base

community is high. our typical very, absorption very Our in

do are paid. they they bad we time. while have know trade us something waiting houses. for process. and loyal markets. just get It’s working on base not work are It’s looking on we've going markets think, long, start to for a long, good And we're to So, a both, been keeping And they're I that. I a long

So, a for competitive us. that is advantage

Operator

you. Thank

comes the Please Markets. with question with question. next Our from Zener your Ken line proceed of KeyBanc Capital

Ken Zener

Let’s start intra of quarter with please. percent were order closings orders closings? quarter closings intra What

Jessica Hansen

of it anywhere where It typically to sometimes. a range. was and little XX%, in XX%, on call seasonality fluctuates from with XX% we expected XX% bit right It average,

Ken Zener

Right.

little the last an if you but look that were year, your do XX% the closings being just ask I spec Could of backlog. firmer. I That's your year-over-year, believe your shows an of units. about that a for became in cadence, closings spec X% I kind calculation, your a first, what at is first up understanding of if nice environment what homes, was really at of where how trending to that in So, spiked third a backlog pricing you bit? it talk are get about margins with spec that

Mike Murray

to We or closer compressed margins saw backlog spec get margin.

up in margins. came quarter… to backlog they That So, the shrunk difference relative

Ken Zener

And attribute what that you to? would

Mike Murray

our incentive in it fiscal was you said, say environment, was a lower pricing it than quarter fourth what quarter. fiscal environment As the in a second firmer

Ken Zener

then, it And following you you really FYXX. you talked guidance kind I though good like -- Was revenue, -- in like first the except gave Now, October. guys seemed trends. in seems increase would of about for I you actually feeling consider It what the Bill, Nice. I normal have expect quarter, guys been mistaken? think, pace said seasonal you you to for

Bill Wheat

expecting to be we’re but community to low be We our do, digit, to overall up single count pace up single our Yes. mid high digit.

Ken Zener

pace confidence accelerate Why asking seasonality to order expect on what I'm What gives to is that is a you that? basis?

Bill Wheat

that we've we’re we general, other expect inventory a we're years get past would on housing for that to that providing run communities. strong we’ve we're the higher communities seen out per flag mean, right I basis, seen so, something at gate that see to as at it's people very pace communities week rates. open, positioning perform than per annual sales an attainable able that for in refocusing the the with as them of and on these consistently as going several absorption is Just high

Mike Murray

inventory well a kind we of normal seasonality year ‘XX. tighter necessarily. our seeing not we’re run anything on would a than to But, fiscal little agree going thought do spent we we we we've housing as We expectations, adjusted though, XXXX. Ken. fiscal our And We're started align. adjusting I in with in did revenue ‘XX you, different bit into can expect very We aligned and strong than

David Auld

a add, just get our year-over-year, And the And quarter-over-quarter, field. lot better. level seeing getting lot people. would out by we’re say are a driven to just really I’ll We day-over-day talk confidence I talk is what better our really. about we in trying we about

a we very were another our better got high people positioned our though year’s per even through we has whole So, and flag company experience. a this today been than are absorption cycle, better year ago,

Ken Zener

for results. user if way year your types control how Understanding appears appliances about vendors very to seeing your other that implementing lumber, whether you’re for vis-à-vis these changes you’ve that last perhaps talk over you it’s side you’re of FYXX? you trying and much. or and the what any you’re learned Thank things, it Can

Bill Wheat

the I continuing creating with by of and them us a of given and think, a they our for in to into demand volume a benefit do certainly we're There what are bringing as providing for consistent have relationship and marketplace they’re it benefits well. effect and a lot supply base. participate product into trade potential national that some we lot done good follow-on partners, we their from and halo

Operator

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

Alex Barron

was I growth overall with the in guys the whether you line going is to to. in be much industry feel growth guiding the pretty are you curious guys

Bill Wheat

would to continue better. expect Alex, would Yes. say, I year share, market we as we out, to do outperform think, in, year we expect market, to take like the to and

Alex Barron

Okay.

you expect your percentage affordable mean I homes of that does So, to growing? keep guess

Jessica Hansen

houses a over year from is entry not introducing in more our so it business, we’ve perspective as or well. really level our pure been the type brand may what You see last in Horton more but and brand

of the it business, from percentage the but where mid-XXs, is is So, answer today. Express our see not yes, you may climb a

Alex Barron

pretty guys leverage to then, expect nice And in do this you you it. that got segment, continue XXXX? services Got quarter, in financial your

Bill Wheat

very cost is market and for is a down, for overhead they’ve conditions business which market as But, efficiencies seen rates more is out are there favorable increased Yes. as very there. loan due provides a release efficiencies, service sort of part drop is We of and on in that certainly well. from improvement there the large some have competition The to expansion refi this less because capture premiums year. rate, healthy their their margin

we're bit. same to should they into business. wouldn’t with of level level So, we come margins, sustain building But, pleased we're expect efficiencies the the down a that continued

David Auld

our driving make just our job the better overall aligning customers. but their in process spectacular through transaction for did only with homebuilding to add, this efficiency I’ll a And operations year, company our mortgage not

Alex Barron

may one on the one if Forestar. I last And Okay.

be are up guys going what incurring that to you As you to expenses report? now due that is you the debt raised, interest in in to capitalized going or is guys showing be

Bill Wheat

Yes.

is greater debt. inventory active their than their Forestar,

capitalizing their into So, of inventory XXX% interest they are at their Forestar.

Operator

and our your Markets. Capital you. gentlemen, Dahl proceed Thank final of will Please this from Mike RBC question come with morning Ladies question. with line the

Unidentified Analyst

is This here. Thanks Mike. on Chris Hi. actually squeezing from me in for

update just you first question Are embedding just you M&A. on any you’re space, given versus your the is XXXX how my us So, give activity And private M&A an in thinking opportunities? recent public in about could guidance? the

Bill Wheat

new into not With typically, the regard growth various our right activity for what's are embedding capabilities, builders any for in new that our M&A, us builders, to been Horton, the guidance. teams We add-on outlook it's for M&A give private markets.

us. open that's for our is now. -- we’ll So, right continue are whatever and always are focus have evaluating to right where right to going we But, be always

Unidentified Analyst

able provide to are in can of you be power percentage pricing saw secondly, price this quarter, and commentary And that. color, the for Thanks communities you it. provide any regional you on raised Got XQ? that

Jessica Hansen

maybe back a this of across which higher less different at bit little But, we've a of don't isn't So, footprint where most have we incentives power is the so I we've the to have the We at across price points point, would board. still incentives, this price raised something say, function clearly broad based pricing pull on typically communities elevated. point, price, an disclose. had at on remained our ability

Operator

for concludes turn our the you. comments. Mr. final Auld Thank any I'll session. this question-and-answer Ladies and to gentlemen, floor back

David Auld

share on XXth congratulations again Thank on Melissa. you, Horton finishing first today one everyone's the call D.R. for you talking to look January We to the and to appreciate number quarter year. results. And the consecutive to in time forward team, our

humbled Bill, You are industry. Thank you best in truly the represent honored best to on are these I calls. you. Mike, of the Jessica and this and

Operator

you. concludes teleconference. This Thank today’s

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

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