D.R. Horton (DHI) 10 Nov 202020 Q4 Earnings call transcript

Company Profile

Participants

Jessica Hansen	Vice President, Investor Relations
David Auld	President and Chief Executive Officer
Mike Murray	Executive Vice President and Chief Operating Officer
Bill Wheat	Executive Vice President and Chief Financial Officer
John Lovallo	Bank of America
Stephen Kim	Evercore ISI
Carl Reichardt	BTIG
Alan Ratner	Zelman & Associates
Michael Rehaut	JPMorgan
Matthew Bouley	Barclays
Eric Bosshard	Cleveland Research
Adam Baumgarten	Credit Suisse
Truman Patterson	Wells Fargo

Call transcript

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Operator

Good morning. And welcome to the D.R. Horton, America’s Builder, the largest builder in the United States Fourth Quarter 2020 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will call the formal presentation. reminder, is a recorded. As Instructions] this being conference [Operator to the Vice D.R. I turn over Jessica for will now Relations call Hansen, Investor President of Horton. you. Thank

You may begin.

Jessica Hansen

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

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

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

lead contained found plan section morning's Commission. Relations performance could Events be towards on or to to we changes your Additional supplementary Investor filed on Form annual reports report are the issues to in Exchange can XX-K Horton's all Securities information is This and presentations subsequent post week. be XX-Q, will the earnings next with Form on release updated file and and on this will After data we investor.drhorton.com, end that of XX-K investor the in our our D.R. under and which website News material site of about Presentations at our for call, and reference.

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

David Auld

net $X.X XX% to fourth included and an billion. sales homes of team Wheat, And a a Vice this Chief Executive and income increase in and Jessica. consolidated our a you, I Vice pleased our call quarter, faced Bill D.R. Financial on and Officer. to President billion Officer; the Thank morning. revenues Murray, $X.X joined Executive and increase Horton Chief Operating with increase strong XX% orders XX% am in Mike also year to pretax XX,XXX which good in by be President

quarter earnings improved to increased the XX.X%, for margin profit $X.XX. XXX and points our share diluted to per pretax Our basis XX%

XX% billion increased revenues. income pretax consolidated to year, $XX.X billion of on the $X For

improved XX,XXX XX.X%, Our XX% our X,XXX of year, record last year per the pretax profit homes earnings from margin homes basis share or for increase We this diluted and a increased an over year. points XX% to closed XXX $X.XX. to

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

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

Over homebuilding the we consolidated flow billion our generated earnings from revenues past XX% operations, cash while by have X of by and $X over per share growing our XXX%. years,

reduced significantly than time, conditions currently leverage while market our XX.X%, our and book we and returns, to very this returns also our value share. increasing and our During increasing our maximizing are Housing while focused on market are teams on strong inventory doubled more homebuilding equity.

are from in strong balance market in and local for through maintain sales effectively economy optimize inventory and and sales in communities to well homes year of external generating of well position each However, we changing economic by and flexible incentives, we We cash October, us home pricing, Mike? levels the positioned operations inventory XX,XXX an XXXX. may and on position operations product believe the With our another We housing our base regarding return pandemic on very based our COVID-XX in lots plan conditions. and of to supply investments the the on and remain great financial our have sheet, strong operational homebuilding experienced inventory, other cautious conditions. our impact our operate in managing offerings, continued the trends ample to liquidity factors team’s strong future. our flows

Mike Murray

per earnings XXXX for and income for per to increased per for XX% to to the million, fiscal increased share, of billion. year, year, $X.XX. XX% XX% $XXX the increased $X.XX fourth the share quarter the net for and Diluted Net increased income quarter to $X.X share diluted earnings XX%

Our results reinstated and credits to $XX.X earlier homes XXXX year. $XX.X the energy fiscal in efficient million federal were million benefits tax include fourth retroactively and quarter income tax of related that

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

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

Bill Wheat

achieve and Net quarter and than scale the market sales further during same was homes, the orders orders homes as $X value up billion XX% the fourth We XXXX. more XX,XXX prior $X.X to share increased of sold in Horton last year. this fiscal D.R. to those quarter billion, This in we gains XX% XX,XXX positions in deliver year. from the quarter

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

sales of inventories. due to slowdown were pandemic and urgency We limited a demand product well in quarter. at this earlier demand Our buyer with pent-up X% year. this increased rate of our our homes for positioned cancellation prior quarter was from increase in average XX% down to The points from extent, fourth second lower lot XX%, the some net increased fourth the prior supply was the the We remain the and year on orders the interest from in half supply year. sales price price believe rates, housing in affordable affordable demand quarter for by year fiscal up was the $XXX,XXX, and, offerings, fueled

strong than year. in net XX% sales of in the compared same see greater to October to continued Jessica? increases orders We last month

Jessica Hansen

per basis, approximately square stick focused demand. sales market increased foot return our increased and expectations pace local housing market, of managing remain to sequential revenue from per some to overall investments basis pricing, the foot lot in XXX production strength Our relative our resulted sales and incentives. The power up incentives sequentially, and sequentially and June quarter. margin square to the the lower and each fourth from the points which X%. in to increased X.X% We to in prior gross year profit a our the lot adjust points new X% supply capacity and and sales quarter was cost on up quarter margin while and our home cost brick the optimize our basis gross primarily our on the XX.X%, XXX and pricing inventory increase in our of September compared On due our exceeded to communities June home was conditions revenues on

next in expect And expect our in We in margin we reduction will increase We sales average a further home home around and of on expect XX%. lot our construction currently our both gross basis quarter, homes size our closed. be costs, to closed a the our the and homes first quarter. prices Bill?

Bill Wheat

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

XX SG&A For homebuilding the XXXX. down year, was in points from X.X% basis expense X.X%,

while we point Mike? is a percentage on expense, our business. in our ensuring SG&A SG&A, our focused history, its lowest at remain appropriately revenues infrastructure as homebuilding our and controlling supports of Our

Mike Murray

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

the Due homes our to homes, quick half X,XXX had year, strong the model in of year. of especially were available delivery. end the also second increases for at which sales We the for

completed Our level unsold than lower and of is years. recent unsold homes

to of quarter controlled them are to them. across XXth, our call, of September lot our of and approximately most adequate which, increase total homes and fiscal new we during purchase pace owned or As of expect further, finished, are XXX,XXX XX% XX% our our communities demand. purchase were meet first increase of home good of the will lots have our mentioned we homes of be And starts during controlled made on when the quarter. available maintain progress an and contracts. position XXXX. of we homebuilding lots at inventory We our were least accelerated we consisted fourth finished XX% to ensure last we owned XX% to number our lots, At

continues more start Our to to provide a us us competitive on allowing current David? position, portfolio construction homes. lot strong

David Auld

weeks ensure strong we Forestar. After land of pace. homebuilding sales land have maintain $XXX lots, investments our support and was this our the development to was fourth development million and land development, for and for million million quarter $X.X land totaled and supply lot lots, beginning the $XXX of of an lots, the Our we pandemic, which since finished earlier billion, adequate fourth $XXX in our pace were to $XXX slowing lot our was construction investment investment of for million quarter land in for briefly increased purchases year home and in and

and year, development. a in invested As $X billion the Mike? land result we for lots,

Mike Murray

Christi, In million to a welcome homebuilding backlog We October, Corpus sales inventory family. Braselton operations of The Horton XXX team the Texas contracts, and lots, in XX we lots purchase acquired finished control for included the homes, homebuilder order the of approximately acquired $XX in assets additional Bill? XXX XX the new Homes, of homes. Braselton cash. largest D.R.

Bill Wheat

in publicly XX a owned operating XX lot traded subsidiary, majority manufacturer, markets our Forestar, across residential is states.

to a well our relationship of presenting gain share. capitalized opportunities lot and footprint us well strategic as is is supplier with companies much serving both Our Forestar operating across for market

net lots, owned income controlled already lot expectations with first with are of subject more to national XXth, Forestar's and growth of while owned XX% under master agreement. D.R. supply platform. XX% year in revenue September delivering At and is XXXX, Forestar our operating high-growth XX,XXX lots purchase of build position under its consisted continued which of XXX% are right growth XX,XXX they a than of or contracts. on Horton offer out their XX,XXX to of fiscal are through contract Forestar's

low revolving a of and continue million Horton facility. its liquidity September separately debt through XX, relationship changing $XXX to net in and approximately capitalized on cash Horton, Forestar's XX.X%, and to navigate is liquidity, next from Forestar $XXX leverage, grow Jessica? and was available their business. very capacity position in strong million million At their Forestar unrestricted With conditions with D.R. maturity to of note D.R. which has ample capital is ratio and credit economic its includes of senior XXXX. $XXX is

Jessica Hansen

$XX million in income profit to quarter XX.X% pretax $XXX and the XX.X% quarter. million compared prior of increased to services Financial a with pretax in fourth year margin XXX% the

income Servicing For disruption our million profit $XXX the in servicers. We the strong in VA impact to the the and have year, company services of year quarter at improved, margin. FHA originates million it the expect valuations this our the Cares sell of Act, earlier offered portion markets has caused mortgage rights a by continued servicing began mortgages mortgage selling due COVID-XX of XX.X% representing to and to loan a pretax secondary these of net gains. third on third pretax values $XXX retaining the uncertainty on originations rights mortgage was Despite the since financial we revenue, by and lower parties.

We to changes mortgage developments will continue the conditions. our market and operations adjust monitor in market adapt to to in

the in accounted ratio were score to homebuilding average quarter, companies loan-to-value with volume. originations operations company's Mortgage our average had loans FICO by of our mortgage our the Borrowers DHI originating an quarter FHA XX%. closed company XXX for our of this the of mortgage loans of related XX% and VA For for of financing XX% mortgage XX% homes homebuyers. and handled

Mike? represented company, up in XX% closings mortgage our homebuyers the XX% quarter. prior handled the of from by year First-time

Mike Murray

XXX projects suburban marketing second active our at and first projects garden-style three was five under project or is during on XXXX. the fiscal that multi-family construction and that units the we X,XXX fiscal focused the year. multifamily complete under Communities X,XXX units, of projects In quarters for two to completed substantially and These end represent rental begin projects Communities DHI XXXX, sale. units. one apartments sold including construction expect company of two active had DHI

conditions. However, on be these flexible will based we the timing sales of on market

expect apartment totaled sales We XX. quarter. million to new $XXX assets at first September DHI Communities occur the in

home rental on opportunities we call, are our our mentioned continuing we in evaluate the As also market. single-family last to

community. our single-family divisions and representing rental XXXX, $XX.X At properties. homebuilding million fiscal XXX September rental fixed totaling to homebuilding platform, several XXXX, began communities related included XX During as our our assets leasing complete. XXth, rental homes of is single-family constructing finished sell stabilized which of of level homes each and single-family rental entire to a constructed are homes we expect these market occupancy, XXX in leased lots, these of achieves communities and the of After

single We our and fiscal expect our more in by the Bill? total than multifamily platforms rental investment end double to XXXX. of

Bill Wheat

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

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

Our homebuilding and higher and up XX% $XX.XX, $XX.X adjust in to prior value increased opportunities. XXth, than senior a X.X% XXXX. in note At activity end, with homebuilding leverage XX from share at homebuilding fiscal our billion, of scale the maturities cash changing equity in of the and October $XXX was to XX.X% support homebuilding $X.X to million maintaining $XXX next year continue notes senior months. conditions our we years business Subsequent was to outstanding September year of was provide per stockholders' end, We public year balances flexibility book due million billion plan and to notes issued in ago. and

For basis points of an XX.X% year year, return was our equity a XXX on improvement from ago. the XX.X%,

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

cash quarters, expect year, but X of we fiscal $XXX and any we share million resume during shares $XXX.X million. not to common for the repurchase and For XXXX. shares paid million during repurchases fourth of dividends We did third the stock repurchased

expect share have outlook on million Based of fiscal fiscal count approximately X% of our authorization down is million. financial and from for year outstanding XX% $X.XX our quarterly Jessica? increased We $XXX position in repurchase to XXXX. currently ago, share we dividends by a dividend pay share. outstanding Board Our per and XXXX, Directors cash of $XXX our to currently an

Jessica Hansen

Based be range revenues between on forward to generate homes. fiscal quarter XXXX, consolidated looking and we conditions $X.X first expect in to of XX,XXX market and the billion and today's $X.X to homes to XX,XXX of a closed our

of margin approximately SG&A in to expect rate be expect XX%. the homebuilding quarter margin be to the be revenues. gross financial the first services and of first quarter a We around X.X% We we tax to first and XX%, our home profit homebuilding anticipate quarter XX% income in sales XX% in approximately our to pretax

approximately homes. we Looking and and fiscal further to $XX of fiscal XXXX revenues outstanding XXXX currently close with currently billion XX,XXX flat end of full income to XXXX. XX%, XX,XXX out, We $XX between to the approximately our tax and for rate of of for expect of generate the forecast to consolidated the billion count share end we at expect year an fiscal fiscal XXXX be

cash We from flow expect generate positive homebuilding our XXXX. in operations fiscal to

in However, prioritize to return of liquidity, our our our and we count reinvesting keep flat land multi we David? family strong paying demand a and our investment year homebuilding year-over-year. after shares just After and our our cash homebuilding recently and in which the platform, are lot significantly share not at Augmenting repurchasing fiscal increased housing priorities providing both as our increasing in our flow specific guidance opportunities for dividend, this XXXX and business, include time single and level in maintaining attractive our much homebuilding rental homebuilding was leverage inventories, M&A. better-than-expected conservative outstanding investing in cash potential flow business. this

David Auld

industry-leading strength In experienced affordable footprint closing, product our and offering of our results across market multiple broad share, the brands. reflect teams, geographic

investing conditions, strong sheet, significant in balance our flexibility disciplined Thank the hard capital entire provide us economic company. the work. Horton approach long-term for liquidity Our low our to focus to to enhance ample your and operate and plan financial we of maintain to D.R. leverage value effectively team and changing you with to

remarkable. XXXX Your reference been have during

year ethic our closed new work homes are much remarks. as to are This incredibly We homes. on customers continue safely our history the prepared improving positioned spirit in anticipated close you well most in proud We our company's operations and in our your their your and helping a positive of concludes continue XXXX.

We host will now questions.

Operator

Thank you. [Operator Instructions] you. Thank

Lovallo John from America. Bank your comes question Please first question. proceed Our with of with

John Lovallo

taking guys. you for Hey, Thank questions. my

from pretty there something be XX.X% mean, nice The anticipated is, to step-up there XX% quarter. you was reached kind question quarter to you that here and that I able the around option or expect in options to a The grind the do of one in first is, even unique was we faster higher than allowed third jump from you percentage?

David Auld

there continue John, our just hard will is I focus. isn't and unique. It's higher. And the yes, expectation say continuation anything to would work we of grind

Jessica Hansen

It's Forestar's our really combination and third developers. growth both percentage of party that a driving higher. both relationships increased with They're

Mike Murray

can up, continuing And John, around see could be quarters grind we be it could volatility, slightly general some some higher. trend down, will said, as be from quarter-to-quarter, little, you a but to the some bounce could

John Lovallo

to announced and liquidity Okay. buy the the That's today dividend share of I you that a position, more lot. guys your the to and any helpful. – why flat of back cash But reason keep billion $X.X you'll in count buybacks? then count you shares reinvest become also is the terms plans really there mean is in fact on business. wouldn't the And the aggressive raise

Bill Wheat

the that, opportunities compared business. alternative But the in in clearly, and returns seeing. with seeing today the we're that evaluate demand business the the we're to We'll

need demand business demand, put in at have position significantly to to well. meet homes our and and our reinvest a as a and homebuilding to level to position We have meet our inventory

at our even level and significantly and of our in our As volume cash was business, balances, X activity higher we X just look scale or is than years our it ago.

cash expect we do a we balance maintain forward, going historically. have And higher than to so

a a feel appropriate cash you'll billion. an will that's from think balance of frame minimum cash always us, end between frame monthly business billion $X.X at between we often, I in payroll level I expenses think at be for in range a our billion. home for cash $X.X as every homebuilding billion of most you and maintain a homebuilding like single our taxes, $X greater And land billion see see But Because basis, will expect our quarter all cash to development, of just reference, $X accounts our than reference, activity. our land the on of support month. $X payable, for to spend just construction, and to cash our basically, and

So maintaining us business. see not take $X excessive. also of for flexibility advantage opportunities, of feel level market when then, billion to an it's cash like changing or our and conditions really we And adjust gives is appropriate those. I

John Lovallo

That's very helpful. guys. Thanks,

Operator

Thank you.

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

Stephen Kim

to something rate close it, kind XX% in curious be XX%, impressive quarter, relates lot, kind Thanks that your do given but in a up year-over-year, then, first first And you looking XXX under that XX%, in number about growth XX,XXX up guys, in your to the Great. times. next a talking your, And XX% were under to I seemed for, that's say, let's XX, XQ. which see if sustainable, to close closings homes but in was able that not at particular, sprint, of - under to homes in construction they your construction, mean, production low I view, a a sustainable rates. exciting XQ me. six let's eyes to question about But that? XQ, of homes this, homes. My relative include construction, model is little Or you backlog, I to rate months? you call is don't as that in assume which But say what your were

Mike Murray

help gotten deliver in they anticipate, normally us QX fourth backlog We be. would they're not morning, then new started because the the far spec in in as the into process, so the QX, started Steve. deliver really But homes along we and sales going we've in as production Good are homes and many QX. to quarter

been. than inventory, had So homes did September the fewer just we year. perhaps year, the in they're completed this younger little balance have we than at of might average end last Plus, a

to So while complete and it's going to homes in deliver take a our or QX QX.

we'll we're next an capabilities elevated we to in see And inventory And demand. what monitor homes going we'll meet adjust for lots delivering into think a see going Right selling to market. then I and about we good front to level demand And starting the see of quarter. for in conditions. to really spring the levels. and higher outlook of the in homes, feel us now, continue the the production

Stephen Kim

Great.

really the capacity. I we sense something that get in growth under that in a was that overly So saw homes your of response, the stretching construction didn't that

in you overstretched mean, getting sense market not terms going your if scale, yourself. I'm an what I sort said. to So you're to ability of gauge that of translation incorrect you've But that's the Correct conditions. me, of

David Auld

scalable, factor process. it's do, we Everything being of thought about think David. Steve, in major a the we sustainable

and So best position, doesn't and the But lot being best seen. market one help. forward I've pop delivered the to ever ever control us, lot have quarter I've a we position, our seen. deals The our is starts

it, value. So adds if sustain you little can't it really a

Stephen Kim

been that. you've And clear Yes. about that. really for Thanks

David Auld

we We very and giving where market is about feel very, the what good are us.

Stephen Kim

gross and put My trajectory in a up significant second margin XXXX, not upward of you've you encouraging. gross pretty momentum. like margin strongest to question mistaken, That's seen The gross since there's with in relates margin. if the it was certainly a that I'm lot seems XQ,

months came the gross over level drivers led three was and substantially I just be the us than -- quarter gross be actually it guided the as would margin the margin pleasantly But or a what complaining. excess did, in curious surprised the You to so not in and that overage to what the particularly, lower how to outperformance ago you the too? or to of you course

Bill Wheat

Steve. demand When we our factors, had - were exceed I into some It question in did July, way the course, But we of long It's a the our the how see October. to summer. and we And for September several strong of last spoke to still it combination might the quarter, we unusual commented we demand spoke think very expectations. fortunately, of as through end through sustain. market, all continue seeing

we had certainly more had as we throughout anticipated. power than quarter we So selling spec through the inventory pricing were our

coming through see more see coming. the as have brick are thus not did still next we had cost than We have that increases we come increases in in and far. but also those as we anticipated cost July. see our We might would some in much a quarter, Those stick bit anticipation we

Stephen Kim

That's great.

like the good doing team else everybody is, Sounds Brad and as too. are job a

much So thanks quarter. guys. very Good

Bill Wheat

Thank you.

Operator

Thank you.

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

Carl Reichardt

demand Thanks. the business and Good homes about at to of ask of wanted started morning a pandemic breadth when your a started the I everybody. spec premium. to improve about trading and the lot chatter low-end

or you've looked see into last and higher of you quarter As X-V end that into over of have to David, both brand? and the Emerald broaden, the the two, brand, builds begun other brand the segments, Horton including sort Freedom

David Auld

Carl, strong spectrum. Having I XX think demand we've you're value did in going drive a to put seen better very the across for you shareholders. in to house the that deliver position a days,

does as is But said, don't last what the best it know feel was XX seen. the many It's times if out younger. demand I've our in big So - the I've And fast years, sustainable, is I've Mike unlike much it up-cycle. - how inventory market but too. demand I said in

Carl Reichardt

great Thank changed opportunities now then right rental. of then you the And in end Can think housing M&A. family talk single interested little you. substantial returns more in the multifamily are M&A cash And you makes anything in environment has you're a about on that that besides towards given about the the fact more homebuilding? you rental? bit and that single-family in and see the the returns And I balance And and multifamily seeing your investment generally. remarks you Jessica, mentioned you mentioned

Jessica Hansen

pandemic in think what and you as last of attractive past return opportunity our opportunities. business, and opportunities. generating $X time earlier take we've will taken of reinvest we we're returns thing some well. I years, year, balanced that very single-family, in I because opportunities brief not in the to to as pause other be a these homebuilding think great do multifamily, accretive did that those the over across that on strong of we cash last only we reinvesting billion But really model, but first in we've us now as Both look did business, mention also We investing No, recovered and few that the market the our slowdown would on have with a flow invest didn't to foremost focused those the both business expected. as gives but back the very expected. anybody see We're of have lot long a about originally approach in also homebuilding our over businesses as done years, Carl, I the has as would over business, know, we in think five nearly

in enter the new price. market, of Mike on team, Corpus we that expect in it the us growth in can be a share remarks, think continuing I our did we are single think, deliver But excuse in quarter. as XXXX the prepared footprint, platforms people, interested said consolidate very very that to where But about, those expectations, regardless saw opportunities. something at platform, we quarter of interested course, and me, small explore be Texas find with right right gave way those of market this But I great as our our be a in right us the a If It's very you new investment double in we of us front. M&A, XXXX. into opportunistic can compared grow both our a interest and so our in. to acquisition heard continue fiscal do we would with then trend, we relatively to on platform, organically you've talk we continuing Christi. his to end to fiscal builder, And are M&A, we right in a strong the can to to position every

David Auld

those seen we that we in a with on platform and Carl, that that, as businesses. Yes, or the sourcing and we just business. have our operating add the will capital real the general find well our rental opportunities to execution as builders. that of construction synergistic just to I'd And we've homebuilding of approach And focus see that there's on the operations, invest see we

on the see the horizon been really opportunities and we So excited there. returns we've about the

Mike Murray

And the do Carl, to in say. the sustainable execute the the side out. a to hold, that I'll I we the on Large our program. it they significant platform sad got add again, percentage build population to rental as And derisk capabilities value add, of think platform shareholders US, own does somewhat the just to to has having a back never scalable, and operating is will

Carl Reichardt

I appreciate folks. it. Thanks a lot

Operator

Thank you.

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

Alan Ratner

is and the Traditionally, just in morning. of quarter of book where growing Hey, always inventory spec you trending good guys. your Good a quarter kind thought I've the Congrats My question order disconnect growth guys. order first been growth lower rate. see you new trend about the next a volume results. it phenomenal over barometer inventory pretty wide spec on highs thinking is like hitting the with two. all-time there seems recently, year-over-year And and for there's fairly or the about

So it spec, looking your seeing current a be on seems at business just opposed activity. to as of greater now percentage like order you're to the side built

going to-be-built tough with pace it's was high spec quantify you like. mix And taking today. – and you do forward, are demand if starts comfortable how what looks of your the probably pretty that So component to could that keep business curious first, the recognizing that I also, you

Mike Murray

marketplace. period total and starting starting out demand limiting to But our than and is there sure out on being that focus to to comment in we the much frame we it's as a that the within decorates, sales and has would still to our higher and been. same it because the the of sales, for home last that sales today. being the that higher do say to time. up demand so in it to With specs a that start built pick with an in be through there's would I for number I the tough coming proportion If sales very our availability continue is it we to-be-built to demand built. see we higher various our that a then not to-be-built it regard absolute about seeing we're absorbed made, our have leave for be within home, to control up start Yes. long it's of it you is reasonable time capacity keep

Jessica Hansen

today starts going start And lot how pre-planned were we're we the of anyway. starting so a are were production that just houses to

It's don't a we pace pickup we've customization It's or actually efficient. very selling jobs more that We're home. that about time it and of build them more to-be-built. started necessarily necessarily not build as offers think before a and it still bit takes a into option. So just little

Mike Murray

foundation going With foundation to there's the said demand people a that as talking want sales house and the and was that tremendous onto ago we new that months get that, to get agent it. And in, the in carpet. as line soon few a is I office by be

Alan Ratner

into visibility you lot your sourcing second, That's from a of reasons, activity expected, about communities competitors you. wanting slow the backlog have than either not helpful where closing heard multitude don't too a labor, for And sales out difficulty Got far faster to very of to materials, we've extend costs. difficulty context. need intentionally sourcing the of

on at supply that based term-based do you not So seem do demand that, can in a what envision do like you to on the you market your I'm in curious, guys today? near really continue today? just having are widespread side you is you it doing to where indefinitely see the potentially side selling doesn't the and basis. demand Or But think on least

David Auld

individual have we've slow pace. sales operate tell I and the our in where attempt standpoint. a the it’s really divisions inventory. projects an that and we out the to much we it and change front, where the We didn't And sales approach equity a it's see raised driven down can – of subdivision-by-subdivision by lots a both have in. from they to returns build pace markets that we on pricing in And you, maximizes

sales end to big obviously. got the your appreciation the down So it that it's back you they down. can can. really then to if to of deliver down they a is your drive with the nothing There capability I slow need division tweaking you a the four the want driven end in production be homes community, we that front by on Because price to price letting, to or out highest mean drop whether in numerous buy that is us big, the margin stops more somebody else very on big pace. as some the or But subdivision, in it communities, submarket three, field, you're you're big, of have road. having careful the in – of incentivize months and one of middle at you've - one like guy or on price which at

project-by-project, been long And call those [ph] a our we site it there, decisions. us in trust out very, And division-by-division. who we various for not working - operators very make odd time. it's it's for So

Jessica Hansen

quarter. in increased community first see that's this the a percent XX-plus community our in we basis year-over-year And a demand extraordinarily sequentially, seen X% sales in And change this we've quarter, a in is X% We've of been meaningful and for sales up of talking on count and spite Alan, time time. which really long go increase spite did count. up, our

on fiscal got think, I count every coming, going support growth is up the that bring go. to replenish going online, community the us and and XXXX. in which is they're call, to And continue the our And all, ready our new lots. we've communities So continued is comes about count to to help community community when

Alan Ratner

Great.

David Auld

else the markets anything they sellers, within and out, I time one surprising, two they every today. better or the everything Alan, ply. division, I And And our But at down uniquely and as in lots. market have been runway are with done, and derisk it go land we've that's deals of on land seems. we positioned has long since And very the see that's to loss it's a last business. least of to sheet, cash an pace like, integral result a to is that. and generating market and by our focusing these our by of that not partners balance derisking grow at part derisk, land and market, the are driven these gain deliver flow us relationships our positioning and share, treating inability to integral trade They part the like of our on are partners than

Alan Ratner

That's Best Thanks lot of great. guys. a luck.

Operator

you. Thank

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

Michael Rehaut

morning Thanks. question. of results, a picture And on bit hit the I to again, bigger Hi. a congrats Good little on, everyone. wanted

a ways, there that. currently to when out your starts. in sales off to the or to pulled And pace maybe I but up. next perhaps have their back earnings - stocks just vaccine barely and do to you think But month are paces, allowing few return about around pace so, thoughts you're in you little you thoughts bit last the long-term sustainability and highs various where particularly in averages getting look you question sustain. normal where think for think If at at the peak the ability to of a reasons investor allow how with the But pace rotation a exactly thereabouts you It's to any market fiscal prior cyclical regards be cycle, go is or over again, over I'd obviously, years? with your peak. or not peak, not is on the to governors catch that, your are earnings around on not of love current housing how is sales do the versus from current terms back various higher the in the about, earnings and seeing? how sales that to to restricting standpoint, XXXX, debate I construction next, and are the we're call going months six sales whether whether it, think thoughts And a that. three

David Auld

and It's market. it's where talk long-term demographic believe, there, I the lot that I incredibly a has… are people a talk point talk anyway feels population long-tenured things I and and like is when about I'm I out markets. - that different within They frenzy that deep, or that environment very And growth. overheated They look have. about of downsizing, just about family doing we this - positioning speculating formation, they market They our just get are are, when this sense really talented, feels don't is positioning housing. the our employees. it's a at out got there where cross we these it's employment division say we're And to product like growth. it because in the Mike, positioning what are managers still runway talking And shifts. on It this

Mike Murray

be And Mike, position from to flexible positioned ourselves in does adjust strong a anything positioning that change. very and a standpoint, to we to

As tight we inventory at are to relative broader the demand. look levels still market,

normalized back starts. As housing mentioned, still the over we're to levels long-term not even you normalized of

that. turns, growth things When through today, adjust be show preserve cycles. we a to come to that ability that. an market consistently increase to cycle grow standpoint, But that. just position ourselves on again, quarter, there make homes so to as expectation never our from flexible and that And under when a and and they in share. now, going than will affordable is. and are do But when than good model sales We levels and We strong outperform us, and been be market the stay we're stronger we pressure we're to a see recognize strong want slightly lower of with downside moderate market we're earnings very overall going position in position a to to be in the so we sure we'll business we're is our of to things very one are right the what do a front stay as out the outperforming risk right with lower in at we whatever production plan gain times to in be. to front positioned where And would can. in we see now, to our point demand XX% we've we rates but seen, right profile We've

Michael Rehaut

a to if lines you've in trend, little revisit Thanks, look some Great. months. Appreciate guess and possible, order bit I question, been seeing the the of delve guys. few that trend more second last that. in

language. XX% exact out the or around forget maybe XX%. I the I think up quarter started you above

growth October implies, deceleration You if September, ended around a of ridiculously August XX%, quarter the love presume. of a I'd breakout with and And it up obviously, with XX%. possible. also the I from strong number, get to

Just get two sense, up roughly margins again, wanted over gross basis to your XXX quarters. points

around the well wonder have has where little drivers either growth from holding just of obviously, taking we're as months north into go to some instances, how increases down If because on supposed or to first quarter, from obviously, understand trying of well down of inventory dramatically. just through that. XX%, order you're sold couple on order here. bit come your just if in that a of you to in catch-up price I to certain through If again, third for or back terms something, quarter going the the we maybe are a of allow last the back think current XX% average, that's trend sales

Jessica Hansen

Mike. Sure,

So than up July, July sales mentioned Bill giving a quarter our XX%. But in quarter sales our fourth as XX%. than high October we the not monthly we're greater whole. specific up up that And were back that are greater say trends. did not they're as as

the annual So you already quarter. as rate came to business grow into we August But really Bill stronger. our where back a ever going or don't plan alluded we're an are September XX% have on sales even and to, in that

by balance So be it really a to continues community. community

we how - the is into product, sales some for settled our our in headed where there's for XXXX. position or year, starting million out fiscal us taken in only pace we feel our year, the we're between to our for comfortable some we unfolds. again has $XX to somewhere this lot year outperform on strong we've mean based it our communities can't so our being one-month performing strong consistently lot that's housing guided closing extent market the the position to people, put where believe that the to because $XX It still are and do XX% to be spring of where the houses, order the [ph]. rates What things And with that doesn't XX%. either see off we've some at some and very slowed to there we've that our price to We'll But very, position, are better of all very at year. a than how full

Bill Wheat

first mid-XXs. But up closings for is guidance quarter our

Jessica Hansen

Yes.

Bill Wheat

demand than stronger and the visibility. And positioning into that growth what sales are get in term, quarter, the longer And short-term see so first we then spring. the see we'll as we

Michael Rehaut

growth that production -- necessarily understand case continued then, So for saying is be just constraints? potential not what and upside the half the robust of order pace upside to in in first a XXXX the that closings off driven you're could in

Jessica Hansen

Correct.

Bill Wheat

sustain significant us very have constraints. about production increase feel ability production hear and levels. we are always our some, say good we Don't positioning to and production There but to continue

Michael Rehaut

you. Thank Perfect.

Operator

Thank you.

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

Matthew Bouley

lots risk in And of Horton any you measure strategy just of question. Good earlier. long-term up say taking But guess. how heard kind coming gotten I percentage it guess about or have the to there's balance? demand? the housing of the year. to kind perhaps through that talked ask percentage I controlled contracts favorable on wanted about changed less Thanks all these I that if terms you morning. into at any signaled for you of contracts this D.R. how I that it's know to sustainability is, the up basically XX%. you is I unusual mitigation to mean reflection fruition, I lot a question view of of on quickly My the moved in

David Auld

do you have build people. as buying your our that company want year relationships these has seller our but side Do after after the absorbing year And at to absorption favorable year equation. absolutely, somebody in we has high worked terms year market. get we when pace Well, investment-grade again, with and per scale else because of after is continued up, buy? looking risk want advantage they gone lots or the price to have, community, land you The his

So standpoint, than drawing is less a set price, you're significantly land. lot having a the from future at risky on a point risk in some the

So – of much more use also and a capital. it's just efficient

and on going continue something better I at. we're that's to So that to work think get

Jessica Hansen

that our And percentage been push it's this really, up. entire cycle focus to is

efficiency it platform and but those increasing balance way percentage success returns. us on driving to really some capital-efficient relationships, this building the Yes, run a our about de-risk market. read developing strong extent, capital the very sheet. It's does just in not on that downside is it's more Forestar improved to read and its to the putting a a in our continued So

Matthew Bouley

Thank both for that. you Okay. Understood.

just Second back on the gross margin. one,

there I QX? of still that you extent comment heard perhaps to me, in you was and a how the the I think to volatility and of you flows what more say just correct to the headwind a you. I to still come through QX that Just through? misheard expected. come inflation P&L that quicker what's Thank in little about And that that around your lumber others. if typically lumber how in assumed but runs didn't more maybe of thinking in if quarter initially that, than cost headwind kind just come Can extent in is prices

Bill Wheat

had was headwind and QX we September of more headwind pass-through quarter. Yes, But it of factored in see a in Matt. December We of the lumber that bit hit the XX% into I think little outlook margin would quarter. that we'll and our in most our around expect of in for the quarter, that

Matthew Bouley

everyone. Thanks, Understood.

Bill Wheat

Thank you.

Operator

you. Thank

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

Eric Bosshard

Good morning.

David Auld

Eric. morning, Good

Eric Bosshard

about. curious Two things

all, labor not only input bricks of what and of First and terms availability. sticks in cost the and curious of terms anticipate you're of and on equation, in side land, seeing the but cost and

you call or are next in You just six could it, six sides of see months? to what speak we both that, and the where

Mike Murray

Yes.

through And David somebody pressures aggregate building market cost with Would starts some long-term they the for on to the lot we're you work again, and the well. labor bit else? orientation in Aggregate the attract scale, – on cycles here on retain and folks market trade what a maintaining business partners relationships, share allows seen plan down like have these we worked lumber, of some production long and it's share, their business, a it's have able with we but market of but approach our inflationary and with a memories seen able up other I market. bills a labor before cycles. suppliers. time, and we're and as we've given is rather – our consistently platform, mean, them there deep relationships. and We And only oftentimes, the our local paid sustainable cycles. long as materials that the labor certainly, mentioned do to work developers. with to that by investment-grade to telegraphed of through production-oriented also market pace And our And

So we're sites. job able to get to our the labor

changes. our We will expect down. expect sites. up will pricing brought we It it we [ph] have will FLA have job the go But go and to

Bill Wheat

a And material is that. as From standpoint, are we've in that industry, very said we're are and, clearly known the anticipating there increases occurring.

our in margin into gross shortages From areas. availability various guide, forward an there of All QX. periodic in margin certain improvement our anticipating of a that standpoint, going slight in products are we're is anticipated which

is need windows. significant suppliers so on team day now, in those, is we purchasing Right operators substitutions production. with But address And where our working addressing nothing our and to those. shortage our national is the on, making our to, holdbacks order current of that causing

issues the more where we in else. again, addressing seeing as with and anything probably we're we than just windows so part of part are of And But to. process those the it's need business,

David Auld

the but that, market, And been in a I'll balance liquidity, market things All a advantage and sheet. those gains, market. working we've everything share any help derisking good say true it's on,

Eric Bosshard

been. of Great. Do of terms in is That's and between be, can assume follow-up, delivery might do. orders and probably than any to as you of I your the have wait more what's with, customers to any little it patients what company? the I guess, you delivery and is you the sustainability just of bit they as orders have to concern helpful. -- to gap backlog, about a good the as Do deliveries wide trying it's as backlog your can then, used number And extended schedule to be normally an get for,

Bill Wheat

consistently compared any have in find think that see in you alternatives during alternatives if some been production buyers available the over the production because longer, earlier, delivering selling individuals to there little cycle, think are faster, backlog may in of to I than our are bit look those homes our you time, you'll its that marketplace today. we've we're production I cycle. we a that of today, But

comparing at over a repeat So much relative what as else the little may available as short you change time, time, comparison decision, it a when opposed in as that but point make it's different competing time a is in alternatives. frame, buy a customer bit, to customer the to

Eric Bosshard

you. Okay. That's helpful. Thank

Operator

Thank you.

Our next Suisse. with Credit question comes proceed from your Please Adam Baumgarten with question.

Adam Baumgarten

taking for Thanks everyone. Hey, my questions.

of quarter Just on and in we stepped of they've forward? nicely fourth those gross we margins, the takes should And you move may think guided quarter. the the looking the sustainability How the about pretty for up then through to be margins, year? as first the maybe going you puts out the some and

Jessica Hansen

all better also of but I and we've right? [indiscernible] and materials of as and our in are manage today, with increases whole think about puts some we've I probably They go and is because think industry I headwind material takes. locally nationally. lot certainly both talked a and three buckets, than able scale, our labor our our and big generally that And really mean the there's in a to been offset labor three price. the to

the to hold any the too and it's But really QX the for really why looks the to margin bit move to robust which guiding only hope XXXX would are color move throughout put XX%. year early the of remain until we're upside the as a fiscal like So margin the around around is selling see full as specifically us we year. we some to our spring is gross margin there conditions for throughout market what We we season, spring.

Adam Baumgarten

on Have over just cycle much? seen lengthening so commentary any times? three you last And any months? then Great. they the or changed Okay. Have

Mike Murray

even Actually, see that in that. our compress been day always process. been have to our EBIT times better very the and cycle their We on every goals with to operations impressed they've get able that pleased the teams and build in to set delivered opinions hold

Adam Baumgarten

a Thanks lot. Great.

Operator

Thank you.

Patterson your question Please proceed from with Truman final comes Our Fargo. question. Wells with

Truman Patterson

results. Hey. Nice Good morning everyone.

And I that community view more little as for great couple indicator, don't wanted an a a count give you had could all a Just community outlook you count, I know Jessica, questions you if will. necessarily XXXX? clarity fiscal on.

lot to much and development muni hoping constraints, permitting really are also I believe are finished I'm horizontal at as any it understand, number give lots the you gave number, cetera? issues, that all already currently? a et it. then board local the I Or And - usual is development? you on but So any there zoning number business constraints, level, pretty Could then under didn't have hear the us of you

Jessica Hansen

Sure.

lot said finished that - was our So didn't actual we the but XX%. count we count, give

be lots So finished. of our lots our when - are purchase will of XX% And finished XX,XXX another are owned then we them. controlled

XXX,XXX roughly be that'd lots. So

total them. purchase either roughly in XXX,XXX So lots are once be finished will that or we

But of I do can believe don't throughout I than that community It's and more year-over-year, digit be fiscal as platform of to we it there as some and be much mentioned, more our Really, well. On was up we already we our that. low it probably X% X% communities count, the will no we sequentially. single slightly. count up variability think than terms size up move quarter-to-quarter with community a number have, In percentage moving average, XXXX. of as the absolute generally anticipate

Truman Patterson

Okay.

build Okay. Are Thank homes think. any all these the the currently? finding labor I from labor started? abundance where degree community labor you up you side? or an on you guidance a areas areas seeing any you're having local level. and on units get there are you will of your constraints, XX%, actually constraints then for all And division you're seeing called that. I large finally, where all just the know some Are Are flip of labor I backlog enough up your to

David Auld

abundance characterize compress I say to is and overall actually thing I cycle here monitor as look And an - the would those see hold anything of did that But we wouldn't recently. at labor. our we times. very

be simply is to And with the we're getting homes homes getting earlier in That's longer selling very build might job the process us not them sites to on the pleased we taking backlog It's more So houses. and composition We're year that the just demand. the have of us ago. inventory function a production that. than labor our completed. of telling we're the favoring a

Truman Patterson

Okay. Thank you.

Mike Murray

efficiency selling. able the deliver driving last we're I'll just the add for is we're the XX, XX years houses to reason

expand to and we the processes today. We simple base number - create we are labor that people, try that without expanding our of from are benefiting

Jessica Hansen

remarks we'll go give ahead Paul, and then. our closing

David Auld

year, Paul. D.R. in now only a you, are congratulations with to the on time to speaking greater to We you the first solidly being Thank you to than first finally, again close results. our homebuilder share XX,XXX were to a quarter the forward in today you appreciate look to homes and more And call entire Horton first the to team. close and Not than everybody's homes first the year. in homes are close way the XX,XXX on XX,XXX January

You're on the represent Talk in best you in safe, and strong. to Stay hollered industry, truly Horton to you be team these honored the D.R. calls. continues to January. stay and this executive entire

Operator

does today's conference. This conclude

day. your participation at your have for a disconnect Thank this lines time. you great may and You

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