D.R. Horton (DHI) 27 Jan 202020 Q1 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
Carl Reichardt	BTIG
John Lovallo	Bank of America Merrill Lynch
Alan Ratner	Zelman and Associates
Stephen Kim	Evercore ISI
Truman Patterson	Wells Fargo
Matthew Bouley	Barclays
Michael Rehaut	JP Morgan
Jack Micenko	SIG
Ken Zener	KeyBanc Capital Markets
Buck Horne	Raymond James
Jade Rahmani	KBW
Rohit Seth	SunTrust
Mark Weintraub	Seaport Research
Jay McCanless	Wedbush
Alex Barron	Housing Research Center

Call transcript

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Operator

Greetings and welcome to the First Quarter 2020 Earnings Conference Call for D.R. Horton, America’s Builder, the largest builder in the United States. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to for host, D.R. pleasure President, Hansen, my Relations Investor now introduce Jessica your Vice It’s Horton. Please ahead. go

Jessica Hansen

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

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

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

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

filed lead contained Commission. Exchange the information issues annual Securities Form Horton’s Additional changes is in on to in that with D.R. performance is could and report about which material XX-K,

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

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

David Auld

you, morning. good Jessica, and Thank

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

off D.R. The year team strong. started Horton the

revenue billion. quarter the $X for a to in $XXX increase XX% income increased pretax consolidated Our to on XX% million

Our points net pretax XX%, profit XX%. improved increased sales margin XXX basis orders our to and

consolidated return same for December the XX ended our was on period XXst XX.X% the for return and equity inventory trailing homebuilding was XX.X%. Our on months

positioning to our operational Horton our of broad across offer price multiple at D.R. strength leverage affordable product homes geographic brands. across scale footprint, points reflect teams, our our results ability and to These

demand excuse while strong good supply financing affordable across at prices fundamentals a of see economic me. remain -- our limited and solid, markets, a homes to and continue We availability

while a position growing homes, ample generating our flows consolidated that and financial an market sheet annual lots focus balance cash returns, to is share, and lands with strong profits, conservative revenues of and flexible for growth. strategic Our continue supply includes and a maintaining

for well-positioned remainder and Mike? future years. are We XXXX the of

Mike Murray

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

to were first credits Our results of federal included tax reinstated. quarter $XX.X related efficient retroactively tax that homes benefit million energy

the income pretax first pretax to income homebuilding $XXX consolidated XX% Our increased quarter to million in and $XXX increased our million. XX%

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

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

Bill Wheat

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

late in the increase in occurred Our prior significant the year reflects demand XXXX. calendar price moderation over quarter that sales

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

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

Jessica Hansen

flat Based up today’s our sales prior accounting. the in quarter, product expectations. expect warranty, Bill? impacts possible the quarter, and mix, first be fluctuations litigation year relative the home second revenue sequentially home gross of the to was currently XXX to September to Our to with in the due gross profit XX%, as quarter as our line from sales on points quarter the margin compared basis conditions, first geographic we purchase market quarter and margin on with and in well subject consistent

Bill Wheat

In SG&A, basis supports the controlling from growth. our XX was X.X%, ensuring as a down remain infrastructure quarter, of Mike? focused revenues while expense in our homebuilding on X.X% that prior SG&A our year adequately points percentage the first quarter. We

Mike Murray

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

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

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

David Auld

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

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

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

Mike Murray

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

quarter and the of million million XX,XXX During $XXX fiscal of and XXX XXXX first Forestar in is delivered lots XXXX, track on revenue. to generate deliver fiscal lots to X,XXX

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

capital separately capital XX% to December net Forestar’s long-term a and is XXst, to maintaining committed ratio ratio capitalized debt or debt net of Forestar X.X%. to At is lower. D.R. was Horton from

liquidity continued of unrestricted revolving Forestar has facility. million to credit capacity available of cash which on of $XXX approximately million $XXX includes million and growth, its $XXX fund its

and model, Jessica? investor.forestar.com site unique describes value Thursday Investors manufacturing call presentation hosted their Forestar Forestar’s growth quarterly and opportunity. last that earnings lot updated have creation significant a an their and on and

Jessica Hansen

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

continued offering homes represented for of on level at by homebuyers handled time reflecting price buyers. points our affordable closings XX% the First our entry mortgage David? company, focus

David Auld

DHI apartments company Florida. primarily in with our Texas, focused rental Communities is multifamily and suburban Arizona garden-style operations

third projects located construction that in one apartment a and $XX.X $XXX has Communities’ under complete During gain at of the Bill? assets XXst. and Communities quarter, its Communities DHI recognized million Phoenix on project sale total was of active December million end DHI DHI four project for the quarter. at $XX.X sold were substantially million. the

Bill Wheat

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

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

in operations homebuilding liquidity, cash consisting available three of of our of of facility. fiscal At used XXst, period. had was $X.X $X.X unrestricted first the December we capacity million revolving XXXX, months of billion prior to homebuilding $XXX.X homebuilding and the $XXX.X in year cash $X.X million, credit billion compared on During our billion homebuilding

cash we of leverage $XXX $X.X the on points million hand from was XX.X%. homebuilding public credit December at a billion balance up utilizing quarter value to XXth, plan the and year as have basis Our facility, stockholders’ revolving on of share book notes And was billion. per we was XXX $XX.X ago. improved to The senior XX% repay, XXst, our outstanding necessary. maturing of notes our homebuilding end our At $XX.XX, which equity February and

$XX.X of the paid quarter, we During million. cash dividends

stock We resulting X $XXX.X million, of on our at also authorization million repurchased December common XXXX. million remaining shares stock $XXX.X XX, repurchase in for

year-over-year. was Our down X%, Jessica? count share outstanding

Jessica Hansen

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

and of be We quarter expect in gross home approximately quarter revenues. the second sales SG&A X% the to to XX% homebuilding be our around homebuilding margin second in

and market consolidated first our close full to XX,XXX and between $XX.X today’s homes. of revenues billion year quarter results, conditions generate for to we XX,XXX and to now expect the on Based billion $XX.X

excess We XX% between of expect second, income in tax our billion and $X to be fiscal year of at count XX%. third share to generate be year, the we expect for the the of in fiscal quarters to rate XXXX. from and down operations the homebuilding to approximately the David? still cash XXXX, flow We outstanding end of expect our end full X% compared and fourth

David Auld

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

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

XX.X% equity return of consistent homebuilding return Our our and XX.X%, of efforts. focus on and demonstrate on our inventory

our our country. lot finished position sheet, We’re and product most this land continue well-positioned performance attractive teams balance broad experienced across geographic the brands, footprint, offering conservative across outstanding multiple to affordable and with importantly,

Thank your you for work. to the entire team focus and hard D.R. Horton

continue concludes to operations. We remarks. our are and This improving our incredibly growing well-positioned prepared

will We now questions. host

Operator

coming Instructions] is Carl BTIG. first Reichardt [Operator today from question Our from

is now Your line live.

Carl Reichardt

of land and cash on back I investments within talked perspective, the ability your land out years. markets the you of about market cash in curious getting with that ask in have to to some and out to to as something affordable two David, your the the of your general peers continue your you where to years. some you’re products moving run idea serve, often is I’m your model guys wanted homes getting just And two in of for

David Auld

have our seen through through model market don’t feel something through, back happen buying for that over can the again, and the to embedded for Well, that opportunity to us. tell And have worked comes have overall we from with market years you see And the changing. relationships over two very has And we I out this building about replace in land, I And so. good the over owners. it in stayed as they land’s we that and what people these markets that the with is -- to downturn and very and on. this cash well again, we’re

Carl Reichardt

lots for your of and And with as and year, built about cost then, I’m the pick like potential looking on what on get terms folks, particular, these curious strong to subs thinking there out? market, to of in orders for as starts the in you’re perspective orders up similar in increases labor going with are seeing lines this

David Auld

continues and I lot a restrict Again, always of think, labor tighter cost it pressure continue, on houses. the bodies. and to Definitely, operating kind adopted and we’ve the ability accomplished. back to going -- people’s getting efficiency, is necessarily is about throughout there’s not deliver the of to consistent think that very expanding to side. the good going be goes I to starts feel community, we base, that labor we profile the what just And

We base. have trade a very loyal

I think call, said to the paychecks. go chase their last I traders on don’t our have

all a in Is a of us great problem? think to combines less to going so other be us put position. people. I So, than that it for

Operator

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

is now Your line live.

John Lovallo

over or that on year. if on one you driven, off there’s pricing is ASP are that I order of in of regional kind nicely of mentioned last a over period challenging a that up number, product -- break basis? a curious, XXX,XXX First was you taking like-for-like that and down normalization little a year-over-year. the kind bit we And pretty just mix quarter, some the know But

Jessica Hansen

is Part it regionally of driven.

overall in actually our and If lowest of X% down Central you mix, year, orders the South look this the terms mix, just ASP that’s region. at the was our

sale the So, in to nothing just and we the way price. basis but price expect throughout costs we increases, cover the to on of our as move continue like-for-like modest year, increases significant

John Lovallo

actual And is now of about -- you to how you’re considering your potentially investment. curious position? the to of your out are down plan then, continue Forestar, Forestar to through any sell or just issuing or ownership dilute equity plan kind the thinking If stake

Mike Murray

Yes.

the track down XX%. our over We time ownership equity there’s primary that in deconsolidate along, able John would our our together a of as sell then, we original Forestar. with complement position could will plan We’re continue will pleased said And here at offering issue dilute And their in that when our two position. we’ve September, have our all shares. could additional were expect further ultimately in equity dilution primary result also in those place that to equity at we we’re were point still Forestar XX%; position. ready do a things which sitting that to first the in plan potential the We in issuances issuance. from to from are on we to December, there they that, would diluted some time And

Operator

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

Your line is now live.

Alan Ratner

I one, last that think that the you at full-year, quarter XQ margins you when And in obviously as well. that you would kind XX% point similar about that and be hit first be thought is your guys range. guide So, similar this commented best just gross of quarter guess would

in just change to obviously as sales off, should through we think first any the in in the year So, terms year, margin? how about margins very progresses, is progression there happens thinking what environment? your the strong of So,

David Auld

spring frankly, as the positive. margins the this selling will we’re go in going have season consistent selling think, spring and of where QX. dictate to year, Early second margins returns QX very season then I into really And in been the usual time the quarter. see

So, the several going have our margins but we’re to the confident to weeks. guidance in of in what QX, consistent happens next giving and in see we’re wait

Alan Ratner

if trending least at last for has a -- several on question, basis inventory, lower been I that’s the quarters. look your Second homes been at in year-over-year

obviously, translated think environment. community gets -- amp are sales seeing last quarter that optimal type from down -- thinking spring I tougher And or have built, would the about the you’re greater as this terms be to decline thought seeing, the per your coming sales specs higher process are because bit was the you in of to changed a into that we’re But, year-over-year. component trying that elevated at of XX% or of sales of be your a year all of you number underway? you

David Auld

and One, prior X%. of couple going down A comparison to year, homes. to we’re way that model the number, homes exclude actually we changed things the inventory on the with We’ve Alan. report

last this year, XX,XXX; at like last we XX,XXX. So, we so, year, were were are -- we and where year,

So, slightly and sales last we’re a the calendar softer have And operating we quarter bit environment ‘XX. year. from of been with down year last in elevated saw fourth may

with we’re we’ve our we’re return Another the drive on. a getting about inventory higher at those is to then, push housing in dollars. seeing seeing as thing better ability turning also starts come investment talked to And demand

mix be consistent our between any continuing built a difference kind probably of starts, noticing in We’re not the that. XX-XX for versus to approach spec an

Operator

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

Your live. line is now

Stephen Kim

And, discipline a fairly First I’m of the years. spend. your the spend seen implied that’s quarter. there’s that land of that get in outlook your spend. basically that fair the we’ve to optimism seems rev, on probably percentage as XXX. question had that six given months, intention for amount by given to And within your high on and a return I it this XX of business strong you is a and acquisition on relative expectations land specifically on The the land was highest talking number spend was [Ph] our

break a spend talk in in you country emerged greater was about land down terms more are So, garnered a type that, bit fairly across a that? in region particular certain of where least just there strong land I maybe the at little detail? strong us, that could the for lion you qualitatively, that could spend wondering particular about opportunities equally kind that relatively share was talk of distributed If a product a of or if that

Mike Murray

Stephen. Sure,

start spend, some there kind from lumpiness you your As know, you is of quarter-to-quarter. land

there. and timing out of based One plans, of would half just for one on deals our point quarter, of land go a our get over based spend thing can business bit so, is to close they acquisition and lumpiness be lots. that when on there I ready when And finished the is

to so, lot finished turn to dedicate spend which a very continue And quickly. we of lots our

bit a ‘XX. And point attribute of the attribute do in are would We wouldn’t to but there so I still just that right a see then our good are bit for changes this business. underlying of optimistic. fundamentals part -- lumpiness, would now, certainty I -- out fiscal the any I plans, spend. lots a in a finished heavy really we necessarily say And do is see growth, But, we very we of

are we and still land our supply. actively replenishing so, And lot

Jessica Hansen

continue to rate at And we pace. grow our replenish closings we have it as to faster sales a and

You have seen flat our quite owned lot for count remained some relatively time.

it’s just to rate. faster having really a at So, a function of replenish

Stephen Kim

helpful. Yes. Great. That’s

respect the environment broader seen policy. the late. rather to or We’ve with relates housing question some as broader moves Second macro interesting here to of environment

the heard DTIs reined versus spread looked in have an high And or APOR this. whether or also and We you to yes, going back curious DTIs, lending FHFA. the here CFPD to curtailed and the as be move I high weigh they’re was LTV suggest seen have average not the that DTI. to we’ve into

curious Some of I have the And way seem business what extremely would your to or was business. we’ve broader be would to housing, if if on That favorable had that be at dropping appear view would you stimulative the looked on all. be it whether to move at to for And for us? that heard any rates. not of the factors you positive APOR is may these the spread top entry-level actually your

Jessica Hansen

who get That being you. clearly our of not lot spend it’s Sure. we’d High said, And something early sure necessarily said, and houses financing be that is are with there mentioned you’re are our today. buying agree mean level, availability his we’re not buying should on. good. a still I we think that I it’s what business. anything makes time for people opening, a for would David That in saying. houses as people in out and I’m to significantly being improve much any super very be benefit have of scores continues But easier favor a that to what more repeat we’re company that. or people house response last house would and cycle, and a don’t we cognizant in credit detailed DTIs really of it with being want for because a of mortgage into standards mortgage low high happened

Operator

you. Thank

Our Patterson from is next Fargo. from Wells coming question Truman

now is line Your live.

Truman Patterson

closing high for to guidance growth. digit is your single So, mid

thinking your You’ve delaying you constraints, the municipality gap-outs? includes a structurally there of bit. And availability end that end lots high little also anything of developed? of create kind particularly bumped side high lots, community limiting the up any openings guidance, on that But, get from above and going is that the ability might to land

Mike Murray

Truman, guidance, community we’re we that positioning really we’re good excited and can today ‘XX. about not we communities we through on our right We based and will are us. first the we weeks front have in guidance of of That’s feel the the can. a have, way of getting the to that. lots all homes deliver off year increased started in the as But a result now, best do this it’s going question where spring January, to the of fiscal our returns Structurally, selling season. about out first quarter But, some look increase are in the we we the opened. certainly several

Truman Patterson

Okay.

you above So, land there’s is today? structurally nothing another than the that expect market what way, from bit of as you side on a healthier put if going the limiting

Mike Murray

by just give we going XXth. X.X, comfortable There see is positioning our and and X with May. But, months the where our what to and in up the April finite deliver inventory is and to can March we’re have in of over and we’re to September today, end guidance we next in build a us going spring range number homes

Jessica Hansen

housing turnover we last Our guidance higher inventory than did already what incorporates year. a

terms in on is that guidance. we improvement than in building, this of an limits efficiencies upside business. current houses year last is focused be more closing reflects it continue is there’s year, selling to which and further the what So, what to our But

Truman Patterson

Okay. land side. And the then, sticking on

any nicely towards it primarily even about the you think you what a between And as think option should developers? next all put and Is Is more land, couple then, can it years, of land option lots target that over your to? option third-party comes how from? up Your balance of out we you way more through rotating quarter, as jumped total you get can where growth continue that Forestar? this Forestar bank a than percentage

David Auld

hard that’s but kind a we set balanced to about goals, target. it’s going conversation. not an We’re a of Internally, program. talk internal And

is think, out. platform again the Forestar built I

But, part happy the bigger. very we’re Horton get with progress D.R. And our are there. that of we focused on making also the developers. family. to and And third-party pipeline a We’re continues equally are better they

it’s a Primarily, the of focus. so, just two. collection it’s And

if it’s a as better capital industry. precious going treat we’re treating the else it commodity. try We’re in anybody to And than to

Operator

you. Thank

next question Matthew from is Our Bouley from Barclays. coming

live. now is line Your

Matthew Bouley

Good morning. Thank you for taking my questions.

to reason line we of positioning. wanted since percentage more flat I side, that we of think ask kind wouldn’t Is growing leverage? how you although on sort should year-over-year, Thank guidance why top So, managing there the are about SG&A and quarter? bit the you. next your any inventory And that a beyond the implies see

Bill Wheat

delivering on single digit we’re do closings guidance high see improvement SG&A revenue, the and mid we to in leverage expect growth and year-over-year. our on showing to extent To our

we with do and see do be basis QX. pleased QX, the we in some we very expect what in for saw relatively see we Based to in But last leverage year the flat today we year. SG&A overall, the first quarter. the volume points expect on We’re XX with

Matthew Bouley

QX And labor positioning. imply of does question, appreciate you kind did that the mention you mentioned, not getting closings is I guidance a But, of as the your then, Okay. continued tighter. earlier your just of that surprisingly uptick prior conversion for inventory to that. kind on also I believe

doing guys that that Thank the that speak So, exactly improving supports And a you. ground efficiency? what you about can you on bit balance? are

David Auld

in steady back to the base. we’ve And last, it It trade a our to to consistent know, for the gets -- since don’t ever I back me, had production with communities. of going gets relationships downturn, and level

out We they the they’re I the same not And there What better at build then square has so, work, more gotten labor. can hours. building our at chasing is build And with same look base the more footage houses. when labor houses. trade

cycle. a something way all It’s process. this the it’s So, through we’ve on worked

think early great a trade guys felt money. we making labor And were housing. on done we constraint And that on, was a reasonable job I to those managing and of were making still delivering have I be we think houses going base the like cost. the at sure

Mike Murray

the in we we and here real, which sort build we’re labor high not completed look is from what in our other markets. acute times doing level seeing it elongate, when we times Matt, thing we process be And are at of watch our a perspective start would shortages indicators closed. can then get various a and of those more house,

So, and of see first you going ability a deep better, we communities combined metric a more a our has efficient this suppliers, time homebuyer and driven to the that will, year. with if in to bit turn have lot affordability, focus a and to we’re in longstanding plan with labor continue set, little houses the relationships of on the improvement lot our

Operator

Our next coming from Morgan. Michael question Rehaut JP from is

Your line now is live.

Michael Rehaut

expectation it’s been a flat wrong, be low and the you outlook question community curious, then, few mix or you’d me next year-over-year. if for drift shifts, believe And product community you market was how year count that year for or sales more that’s had you last also was pace. for upward I and quarter on quarter correct still two? or And year-over-year, conditions but average improvement up certain nice I to -- bit. the about expectation. sequentially little I if for community be quarters, First guess talked last digits. was was but think pace, to or I more wondering would the count on a the and by had driven expect I single geographic about, your if just believe sales I the count less I’m the

Jessica Hansen

Sure.

guidance it. we the when community honestly, give think we on about us to predict, count, never is why which Mike, formal So, for one quite hardest it’s

I it’s our it call actually case would point move point, year. hard when to that at think, be inflection anticipate the up would to base we happens, that we tick as throughout But exactly. some

In in late we script, we in terms mentioned that reflect the XXXX. the moderation calendar in pace, the saw as sales demand of does

have year about perspective increase going -- reflects comp, would from although to talk comps, sales easy did a closings QX a is we’ve closings that we growth the at our that guidance to. QX, don’t And will a generally moderate when you it we QX, So, what supports fluctuate relatively guidance did QX year-over-year from and we that in that that. our for look infer have range alluded

Michael Rehaut

X kind obviously huge piggybacking last a quarters. I your of driver XX lot has owned guess, your of secondly, said way, improved to bigger maybe big, over big X, kind the earlier over maybe over progress picture, few impressive That an different progress, off amounts been option profile. the a the it’s has option. now, last question type Maybe increase XX, range, of of been in last versus of XX, of percentage while that return years, low-XXs few years

on not X of next certainly, to of talking degree have type to you’re Just sense get I or maybe lot going the change profile, before, same you do about the of you’ll drift up the do guys a you a as recall a over trying years, little X option bit. from or think should perhaps, of about? we share or in XX% repurchasing returns? as standpoint over now it be maybe improvement a next how that other big levers more lever we’re years, the the concrete. but are three not next that’s thinking Would perhaps But, about, not two number

Mike Murray

option continue all do expect us. to to We goal is continue for incremental to improvement to We just and expect continued to upward. our it percentage on be push -- an

that’s necessarily that faster of continue We’re as to growth expanding expecting our build not part to to well call to already going on we to story inventory incrementally do this out platform upward target. this with its be even housing improve as Forestar an further, set expect grows, year. We’ve as going that But, turn to we’re alluded developers. relationships our

be flexibility that more an incremental returns as this generate level efficient gives to capital are going And so, And us side. terms more more our the and operations year. then, cash that’s allocation of in on

we And repurchases of ROE. the shareholders, an enhanced and level so, last have over instituted several increasing which our years, share payoffs has dividend to

And improve to think to of allow and incrementally levers as one to is to I us returns continue those year, going both improve shareholders. so, incrementally returns continue each to we operational each

Operator

today Jack Micenko next from SIG. Your question coming from is

now Your line live. is

Jack Micenko

watermark on year-over-year the four pace year? the any last segmentation, crisis over regional I differential through through wanted five or of are product slower there’s The pace across little the the more. or lift improvement to the can but improvement, to comps, will next maybe sales past But, year, latter the this I’m product quarters, that in that drive think you pace. all continue maybe here, seeing is that incremental suggest the XQ curious a revisit bit I I’m the maybe curious with improvement all is pace, the your half types? the the year, improve since this And clip. the question at would probably high a guide -- looking if easy

Mike Murray

traditional certain price entire affordable seeing plans whether we’re I our branded within the that’s the points, Horton community communities. more generally absorptions more think, or increased at

market. We heavily the to exposed the are luxury of end not

experiencing the going traffic, across good to pretty recent of most not speak lift is geographies, the it. to quarters lift the in we’re We our So, and any the quarter we’re if not good that very pretty all can well. up about in about But, there. there or demand, leading feeling there on

Jack Micenko

what that And recent the January we would fiscal most of in couple of sort first maybe continue last weeks, then, the weeks? couple it be in does trend the consistent or build the saw

Mike Murray

I’d maybe Super buying Bowl seen as sooner. bit historically the a we like people progressed It did because seems to in past being normal the be years seems season. the earlier. kickoff spring houses about it’s seasonality say, to talked selling playoffs, we’ve are Cowboys And make January. we’ve the week-to-week few Sunday noticed the starting that little And people

So, think… we’re And I for Chiefs. excited

David Auld

the XXers And

Mike Murray

And opportunity. yes speak -- on

David Auld

Yes.

Jack Micenko

rental build family the on build you there of team thinking me. A for more about versus thoughts, Could jobs refresh and single how looks trying side. the one us today? to others, you’ve like Just for got, and owned strategy the couple you’re you’re on a just business that the

Mike Murray

Yes.

probably and think business, really door add that the on looking at water certainly operations we’re and get have more in value the possibility process. shut Today, trying business it’s and currently early the hard, we’re dipping stages the of where the today. the on see most still it any not but We’re owned understand and toe are the to it we in side, about our we on to

Operator

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

is line live. Your now

Ken Zener

this your versus order that? order So, in I closing was intra-quarter percent year? XQ closings. you that what beat assume on Can guidance. the for intra-quarter last closing higher And was you confirm

Jessica Hansen

correct are You that. that beat

quarter, This quarter, do than is -- which sold typically don’t I and was it closed same that in have was slightly XX% year. higher I do. Last the that last year, we we would XX%. I know it

Ken Zener

expect I -- any in there then, mean, would terms shift And up. of to related efficiency to that, see showing Okay. what that’s I is

you seeing talk if or and that that intra-quarter is that in between you you talk in that specifically guys the the the backlog been there could regards increase have about thinking closing So, and percent anything units? you about to -- trend closings margin about are the that spread

Jessica Hansen

what I to number the allows first specs especially it’s On line pretty and expect, would us sell in That with quarter. close the we more with say, of have. we would the homes part, that completed the Ken, opportunity within much

year, to homes expect and same Last the sold quarter, we closed. that in the closed quarter, and continue. would I XX% in sold So, actually trend second

look you the there on and there jobs. said, of margin stayed differential That specs consistent completed is our than build relatively a that that the a being and lower for that completed margin and slightly period slight been really multiple specs months. only differential, unsold is is at have differential a If big on

a the quarter we of spec. as about the is. it XX% a started sell as spec, So, that closed And in as differential earlier what a tighter we reminder,

spec you that is when quarter, So, we large that’s this see margin reported gross home by a sales and XX% margin.

Ken Zener

mean, spec you discount that appreciation? if there it, that’s what -- moving? a first I that lower that seems I have margin that inconsistent bit a is order to is Why Is what backlog mean, is with is strength? price

Jessica Hansen

we And we a you return. equivalent work an more No. are construction. we’re in able start it’s you housing the slightly the as job, jobs, to to margin return. lower walk turn to spec build before for underwriting that are than a build and you our lose gross quickly get In actually going appreciation, price if

the capturing time And way. so, we move real along and we margin that like more as selling in

Mike Murray

of a they just production anyway. to actually but sales start. process had sales our released not yet, Ken, job of in They floor. to we planned homes had the start sale stated were on They to build planning are that sales lot were the

terribly job customer homes in average homes Our long in generally, we for our time build that’s because building through not build affordable efficiently. a are fairly price -- a point, is backlog

start. they through customer design long not get will permitting time we a after lengthy these soon the homes selection sitting is a the very be so, of A for going sign large process, process to period And starting contract. till lot of

So, it’s traditional differential to margin marketplace. sale the spec between just a very tight a

Ken Zener

I I to of Thank if permits mandate? California could, you. And in guys last appreciate Did one the of most pull solar ahead question. your that. get you

David Auld

so. I No. think don’t

And pay solar market less than building to But, there out the return to a going to house responding a lot whole is cost. additional a forward We’re pulling market is and mandate is there. going cost. when increase a permit certainly, any create not

and out -- case those ability So, as and of base more to known had being and is expectation was we’ve costs usual coming prepare, come the for knew underwriting us solar, mandate that were down. with our business homes and about that’s it’s for the years we’ve there. that that those as And kind several we will costs built are our in more solar

Operator

Thank you.

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

is Your now live. line

Buck Horne

color price basis? a Could on communities of were question. able put on, you you on raise same plan to that percentage Quick just

Mike Murray

pace have our really empowered our that have meet And We’ve we’re market pace to to information managing that and neighborhoods. in across terms tracking that’s that at certainly looking what of that maximize to as week, looking that of returns, drive every we Buck, the something centrally. a every don’t looking local and operators at function day is. to is they’re frankly And be every margin. to community,

give ability that So, we the don’t have color you to really today.

Jessica Hansen

our brick we today. we revenues Sequentially, about square lot, up yet per revenues that’s we’ve foot per foot, per our talk our reported and foot, When were stick and Year-over-year, and given a costs costs revenue foot have brick per a about X%, -- were metric square consistently people flat. square our X.X%. and square our down about and stick was essentially that

Buck Horne

And multifamily switching over to just the investments.

multifamily sale any expected potential could investment of provide closings, you on sales timing you of or growing if think the either do on year? potential How next that year, this how do quarterly curious or from Just forward? gains you going division, plan

Mike Murray

Sure.

close rental marketing In of two the and terms fiscal process expect a QX. first in communities it. of say and we XXXX. situation timing, our projects We closed total stabilizing complete, is to our did of one of substantially here one the in We so that

in specific do later So, fiscal Communities the you on investment have we grow we the this for quarter that. year. would then, to don’t And one DHI expect close to in a guide level expect that XXXX,

will the the on begin time, to this XXX% years, X from We projects of growing, their the over expect result more pipeline two fiscal grow than year years at approximately course grow long. deals ultimately the of as and point some it is of which their of will the pipeline to over lead is course to year, X delivering start those the year. directly more a future XXXX, The in number

out a couple Communities. years still of volume increase DHI sales project from we’re significant So, in a of of

Operator

Thank you.

coming Jade from is today next Our Rahmani from KBW.

live. now is line Your

Jade Rahmani

rental sector, highest the to sale in capital those recurring creating have In interest to that? REIT any and to and a Just earnings on hold company, type continual any permanent rather respect to With earnings thoughts your my in the interest the experience, valuation you do is to multifamily, you. as unpredictable single-family Thank vehicle as market? curious the on gain where ascribed than it’s assets?

Bill Wheat

as it’s And And of we’re well. studying further we’re understand into of -- we that’s that as aware one that we I get Yes. something this Jade. the things business. that as

established, setting we Our thing get base goals efficient early ensure there. that single the rental to capital been have the to beginning family the then on same look we for the space, platform for multifamily. a do as And look as we’re strong, and at with have we And that it. looking operating growing to platform we

certainly and the term those capital we And something for for so, considering term. longer setting both longer as will base plans for that’s we the businesses, medium look that at the of be

Jade Rahmani

Thanks very much.

below you ratio leverage, capital to wondering in line XX% in financial was to Turning there’s do long-term with slightly think total your come? years potentially debt target, at if the to that in is or improvement

Bill Wheat

to Where leverage. increase we expect are today, we don’t our

from and are We further that see adding leverage and generating expect increase decreases. as to -- equity we base would not cash could we to here, our our

that leverage increase further Our some a to today, that headroom does see would we don’t the and on ourselves leave obviously, But but of room below. XX% maximum run. invest we in we leverage, certain is but stated or got scenarios that that give lot us in room short

Operator

you. Thank

SunTrust. is Rohit next from Our Seth coming question from

live. Your line now is

Rohit Seth

what’s question. Any on Can taking update you Freedom Hey. my segment? that color an buyer us Thanks give brand? the on with for happening

David Auld

happy It’s to continue we’re We product on something work offering with. that lifestyle. presentation and

be provide think And into. think, will the I a and that and demographic. it larger lifestyle going portion larger in our are future. It’s can a a to product deliveries of move growing we people we

Rohit Seth

annual level more driven business are that Would entry say is annual by expecting guidance or ramp bar? in you your guidance that of in kind you -- a that

David Auld

become the us the doing. more I market as we we’re entry market. term a the needs and meet level what more as will long Freedom And bar buyers there for driving of think is brand can. still part it many as part important our of The It’s moves, out of the

Rohit Seth

labor you on there, second question out Understood. expectation, cost what’s buckets gross then And cost then, XX%.Can guidance, margin like maybe the inflation your and cost. your material cost break

Jessica Hansen

the Really just in digit single has more same, so percentage modest labor the I’d of range. increases. say low stayed

our materials, had, to digit be basis. offset that lower fantastic have aren’t we’re through increase, other And coming kind we then, would We square we are change either. teams And neutral. low of purchasing single to not percentage to at increases mean, categories we’ve per has I kind able lumber essentially back on always mid costs job to going up. expect cycled headwinds not a where foot been that net is and costs do of the land to our push expected categories costs a down. on. But, of whatever Now a some least land really that really finding

As prices, typically follow. costs land home

lumber through. more just what out same take ‘XX, incentive in the and ‘XX we environment calendar really as you ‘XX So, that cycled if we costs experienced of late in the

Rohit Seth

is or what tariff expectation And have there? the or the for impact impact, in tariff -- what no you

Jessica Hansen

tariffs, protection If from identified most everything. price the to that. of We’ve there got a impact offset we’ve any is ways on modest

Operator

is Our question next from Research. from coming Mark Weintraub Seaport

is Your live. now line

Mark Weintraub

in things that was largely just very that a early the positive mentioned January, other strong that it orders You spring selling color reference on Was season. or to comment? returns

Mike Murray

customer at primary a getting expected not that the that. I The anecdotally, coming great on trends. marketplace what’s week-to-week build, on we’ve hearing And we’re read they’re And that’s coming from pressure through. and side good mean, seasonal of about with the today. pace thing first the we’re we’re the seeing is pushback any order in pricing or

Mark Weintraub

Jessica up cost environment mentioned, as you now. fairly just benign of a following Obviously, on Kind that. have

cetera, in at so would heat you if leeway at type in be question try we environment, environment? Do that price. exited than up, the I that cushion push price, you go think sense or it it’s impact pricing you in last higher, saw a that a have two. the in really, more et bit that But, you go time, up, or a there think start point of we go I labor and does on certainly, guess, you environment? have times. materials other And bigger power to created we’ve costs year could haven’t And when taste price, current more as what always higher, a things As versus of do have might some the recognize to do

Mike Murray

coming about the buyers good to really are the Feel buy. market conditions seeing and today their in and urgency that we’re

But cushion before, we in not versus with margin it pace again, some price. a as the is say to would work just So, to alluded return numbers, I looking that. at a number, we’re you have

momentum, the executing the then, so, absorptions, activity some planned seeing And coming drives at up, power seeing our generally and And found drive we’ve looking that the communities the next pricing is. returns. at driving that begets focus out And that’s that activity, we last and highest buyers some expansion, as And rolling where it’s margin of at we’re couple community margins the into really quarter. pretty level. seen consistent quarters the

this We’re optimistic us where to and go about year. spring, margins that’s going tell for ultimately

Mark Weintraub

things And mitigate side one last one. improve the your way time? to Where a are or labor offsite in potentially thoughts on of manufacturing as

Mike Murray

are a that both buyer. have perspective how manufactured And we Others, to lot together to time are best we look most we’re the our home it’s homes roof doing offsite. to the continually evaluate efficient something certain at as to from and the trusses a penalization trusses, in at markets. -- with cost the So, deliver put value a wall of

it. evaluating always we’re So,

But, sea generalization we roofs say. some the of build probably homes today. trusses our probably Most to economics haven’t seen in of change We a there be are where the would are with broad that framed onsite. stick markets

Mark Weintraub

you. Thank Great.

Mike Murray

country. the across Vary

Operator

McCanless Jay from coming is question next Our from Wedbush.

live. now is line Your

Jay McCanless

importantly, are you competition? On incentives questions. incentives, what two your more you Just from guys seeing And now? doing are what with

Bill Wheat

anything there there. over out certainly environment the pretty incentives as we’re some be then, quarters, well there’s costs. on builders a ordinary rational stable. It’s the closing out normal across community-by-community, the to some not of are basis, other our And environment could a down related usually where year-over-year been environment our stable level And of incentives really, nothing last business. in of seeing ordinary. significantly, Certainly hearing pretty specific Pretty incentives couple but but of

David Auld

to rationally. a are, the be said, performing market good time It good. homebuilder. as say, Bill -- I’d is People

Jay McCanless

question. second My

expecting the average get guidance? the and is higher the Just talking community you now that just unit about year-over-year per are closures about what right your talked you lot to trend up

Jessica Hansen

Jay, to standards It last larger hit improved, couple our over allow that slightly our as our absorptions underwriting trended slightly and use of years, communities. the up have here does

I each communities ‘XX, So, would say expecting the last been incorporated is that’s really Multiple we’ve the product larger absorption. to experienced of of what more what that but allows drive years. more same for and us we’re of few fiscal in types just

significant lots, We’ve I lot count. we’ve Rough, X,XXX that a current or would XXX communities size in obviously, we’ve lots. lots. I communities So, probably got a lot have are that. say XX got don’t XXX, got average are our a But variation

Mike Murray

some a options, there. big There’s more more Some mix owned.

Operator

Center. Barron next Our is from question coming from Housing Research Alex

Your line is live. now

Alex Barron

just to circle the little I to bit guess, a back I wanted guidance.

a the just off spring little the But, guess, selling Over maybe that you two guidance guys orders of just in guidance? I’m digit order quarters, and been season being easier I bit last comp. single conservative growth this or basically, curious, was have digit double delivery the early giving

Jessica Hansen

the we but Alex, houses it sit have those quarter late be of really of when that to what to the calendar than sales everyone, last is. ended spring this the repetitive, different continue We And increases it number much today, is market to saw. where of compared houses and into completely was incentivized to comp had into we remind So, the we not heavily year, year. December really, going a did we we the number easier function a have,

an up I ‘XX XQ quarter. think, builder we of were that the only calendar in had

up how get that X%, a to sales Our there. December of about we and really in function heavily was incentivized were just

into can a And November, and October though. you it’s months. So, into I comp good a good XX% and were you read that market. led very mean, year, tough this

to feel here in the we fewer spring we alluded we good sit times, today. about several We’ve seen today, haven’t X% got the selling Mike’s the season. But, houses As very market ground.

homes. end we’re able and raise guidance XXX by did few upside, the is a to than be push little And about expected, our and lot. of a there more stronger see get starts don’t spring if we in, already whole a So, potentially, could the higher we but

Mike Murray

much we’re our balance, we’re in a good this margins, of good level, Even pace. guidance at pace, at year as returns better fiscal still turn the at returns And stronger seeing on XXXX, looking better better inventory a we’re and well. seeing a because

market the year. we’re pleased positioning very plan So, with good our and the with backdrop, with for our

Alex Barron

it. Got pace you sales best returns come pretty maintaining And the the from then, that strong. mentioned

So, to much sales to so we not that strong seeking you upset are push pace? [indiscernible] prices

Jessica Hansen

on depends a best more profits community are another thing shorter if we community it’s ready just priced that’s a to our whatever do that to where don’t really and to time. because country price. we replaceable, revenue Alex. we’re community, It be continue most reason that going more the the likely for is replacing can not in of an replacement generate turn period is have community area more of likely are or to we the But, inventory, a push If community It we’ve go got depends. it, than to pace behind push we going

community-by-community. always So, balance a it’s

Alex Barron

Thanks luck it. this appreciate good year. I Okay. and

Mike Murray

Thank you, Alex.

Operator

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

David Auld

it. team, you go your Thank year time again today we’ve to outstanding and to the got a work, the call forward first and Horton you, you set Kevin. deliver We D.R. quarter. to in April. on And appreciate speaking for everybody’s and look focus Thank let’s up, great hard

Operator

So, That today’s teleconference. conclude does thank you.

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

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