D.R. Horton (DHI) 26 Jan 212021 Q1 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
Carl Reichardt	BTIG
John Lovallo	Bank of America Merrill Lynch
Stephen Kim	Evercore
Matthew Bouley	Barclays
Eric Bosshard	Cleveland Research
Alan Ratner	Zelman & Associates
Michael Rehaut	JPMorgan
Nishu Sood	UBS
Anthony Pettinari	Citi
Jack Micenko	Susquehanna
Susan Maklari	Goldman Sachs
Buck Horne	Raymond James

Call transcript

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Operator

Good morning. And welcome to the First Quarter 2021 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 brief question-and-answer session will follow 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.

Jessica Hansen

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

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

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

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

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

David Auld

morning. $X to increase to billion, net consolidated and Murray, increase which quarter, and D.R. increase and and pleased a in also on Horton orders Bill to pretax good revenues outstanding President included Executive $X.X Jessica, I'm team first Vice Chief our XX% Vice Officer. an income Executive Chief our Mike Thank President The sales Operating call over Wheat, to you, a by XX% in be joined billion, XX,XXX. Financial in and XX% this a Officer; delivered

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

same footprint, XX.X%. points homes multiple product to for brands. our the and of inventory our December offer results on broad in Housing was period across of returns positioning ended XX geographic scale ability capital are remain increasing the trailing maximizing XX share. price the teams, on efficiency and very Horton our was financial leverage homebuilding each D.R. to XX%, our reflect affordable return These market services at our our market and conditions consolidated for and our focused our Our on communities, return across while and improving months teams strong, homebuilding strength equity

cautious external position COVID-XX on We generating the conditions. lots the our and of remain of our XXXX. With in and maintain future. home blending our the sales home ample strong liquidity and to us or operational cash and economic effectively regarding financial position well very experienced believe through we team's pandemic changing sheet, operate other strong to impact our However, have our the factors flexible We plan balance in operations may economy we are supply our prices, January, well continued XX,XXX pace product from in on strong inventory homes inventory, and offering, for of flows season and to inventory the return managing levels sales optimize spring the Mike? investments. operations an remainder selling and positioned trends incentives, by

Mike Murray

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

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

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

Bill Wheat

first sold increased fiscal XX% the more the further and of from in year. homes, orders our billion plan $X.X homes quarter those We billion, $X.X XXXX. to scale in Net up prior share the in achieve X,XXX XX% gains the to XX,XXX market orders sales supporting year, and this was value quarter than last same quarter during

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

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

spring well with lot seen demand volume remain our inventories. supply to pace date our expect housing increased and head with January, improvement sales the affordable selling the in pleased are and positioned Jessica? have We for We season. offerings, we into we as product

Jessica Hansen

and quarter Our increase the in housing our strength sales reflects all gross first was sequentially up revenue The market up the XX.X%, XXX home points gross the our quarter. on compared September points of basis profit prior broad our from to sequential of exceeded expectations markets. quarter the XXX to basis across the and year December in almost September from margin margin

the down affordable are X.X%, square especially stick-and-brick revenues square square foot see our very decreased we We very per Sequentially, flat were of and lot incentives. quarter, On sales decreased foot foot foot foot few price currently lot year while limited and while per a using X.X%. continue to per revenues per still were and pricing square strong have a and at per points, cost our X% supply prior basis, X.X%, a our our on our cost demand up homes, power square from X%. was stick-and-brick basis, up cost cost was and our

quarter. our rising of our on a impact and in increase do both will next the costs December basis per quarter, square our homes foot see closed didn't costs lot construction we expect in we Although,

our market of investments home With today's demand. to communities similar in price on the the the sales conditions cost to each quarter first these inventory our the gross to on remain offset managing to of return increases local strength we home conditions, and second market expect new incentives with pace optimize expect and currently focused our quarter. pressures margin sales We and to Bill? adjust the pricing, in and be

Bill Wheat

down a X.X% quarter. strong and homes as in was this improvement quarter, was due our of ratio XXX quarter expectations In driven to price. closed by homebuilding the better selling The year X.X%, from SG&A was percentage revenues and expense our higher-than-expected in than of in prior the increase leverage our points the SG&A volume basis our first average

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

Mike Murray

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

and first had to the level X,XXX quarter in recent our our also homes lower fiscal unsold XXXX, sales second of completed the of the We than in of model end and unsold is years. at quarter. half strong of fiscal XXXX homes Due the

across demand. We home homes starts of in past accelerated of our communities pace adequate have the number to to maintain quarters of most two our meet we an ensure

quarter, the first we homes. started XX,XXX During

purchase XXX,XXX enter We expect further are our in which of when selling good and increasing total in XX% purchase lot XX% we position of will them. of contracts. are we approximately December our finished them season. lots have XX% owned controlled or consisted progress At homebuilding controlled XX% least quarter we made as XX, be were our homes second inventory, spring of lots, were to the the finished owned and lots at increase through and our

David? Our to to portfolio to us meet growing strong continues us demand. homes a lot position, more and homebuyer start capital-efficient on provide allowing competitive construction

David Auld

lots, investments in homebuilding land, in $XXX quarter first for land quarter finished development for $X.XX lots, Bill? $X.XX development first For which billion, for lot the totaled were land million our Forestar. million and to million $XXX $XXX was of billion of was was and purchases acquire

Bill Wheat

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

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

now lots. Forestar fiscal XX, At XX% position by delivering range deliveries from its XX% XX% lot lot December a of to high XX,XXX Forestar's expectations year its to ago is are under grow Forestar's and purchase expects XX% and or of XX,XXX to with Horton right to D.R. XX,XXX of a contracts. to on XX,XXX are in Supply XXXX increased Agreement. XX,XXX lots a our contract of owned Master offer first under which are to lots, owned already growth subject controlled through

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

Jessica Hansen

in Financial with services to $XX.X prior pretax profit year pretax in million quarter. the the XX.X% income of a million, quarter $XX.X first margin XX.X% was and compared

mortgages impact has in quarter the originations gains. Our year servicing VA the mortgage continued last a portion by the the values to we quarter. CARES lower uncertainty improved, during mortgage first sold of Servicing company and began on a it our servicing portion the originates Act. of net because of retained offered have the of rights We at servicers selling since valuations retaining loan due strong FHA and rights of third our

within rights prior six them to of to loan continue origination. parties, to servicing We months expect third typically retaining selling some

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

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

Mike Murray

X,XXX currently activity, two operations had active our our of under projects XXXX. projects rental eight These and multifamily the phase. expect four sell half At in lease-up to December four represent during leasing projects that Based on XXst, additional multifamily pace projects are we the fiscal an of units. construction second

sale. at assets million marketed constructed as stabilized we on communities $XXX.X these within XXst. for homes and rental December call, After each be communities. rental mentioned level expected a achieve Our leased leasing are And is and constructing totaled single occupancy, our of multifamily community last are to we rental family

operations rental are in reported our currently segment. homebuilding single-family Our

million. and December later December of related rental homes million, for one ended quarter sale community family of resulting totaling $XX single this finished the gain multifamily included expect a sale rental rental XXX rental representing representing platform, year. At single-family more XXst, million a XXXX. double a fiscal on We completed XXX during fixed homebuilding expect Bill? in our of community, communities we more single-family our single our to During rental and to XXst, currently in single-family homes still sale We fiscal $XX.X assets than platforms our assets total of investments owned our $XXX.X XX lots. first

Bill Wheat

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

We of scale to facilities. conditions. During in than we to business support At to available December adjust cash and in cash three operations $X.X of credit ended to was billion the to provide increased market liquidity of to cash changing homebuilding and capacity the year $XXX.X balances homebuilding prior the period. $X.X maintaining prior of and compared million revolving months $X.X used continue in unrestricted in consisting our homebuilding higher on flexibility December, homebuilding years $XXX.X homebuilding our million XXst, activity had our billion billion plan

we in of X.XX% issued at we senior million $XXX maturity. quarter, their million repaid the notes of During and senior due $XXX notes XXXX, X.X%

ago. was Our was months. At was per the leverage billion outstanding December XX.X% $XX.XX, public in notes homebuilding no and homebuilding December value end next book billion stockholders' share a XXst, XX% $X.X year from our of with equity and at senior XX the up note maturities of $XX.X

return For XX.X% our on was ago. to compared year the trailing XX XX.X% months equity into a December,

$XX.X has share in quarter the We authorization December quarter, quarter outstanding shares Jessica? paid our February. for of million. During during million, declared the last to paid was stock million same repurchase quarterly $XX as our remaining of one common repurchased we and a at million dividends and cash XX the be level Board $XXX dividend at

Jessica Hansen

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

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

close XXXX, we and fiscal For XX,XXX to the billion expect billion XX,XXX $XX.X $XX.X year consolidated revenues full of now to between and of homes.

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

However, we flow flat guidance and single-family are in as year-over-year. augmenting and specific in our our homebuilding both our multi our our year, rental for to inventories prioritize lot support and and homebuilding shares a dividend business, we priorities maintaining housing include increasing outstanding strong cash investment liquidity, After not conservative cash our to our paying share higher providing demand. flow and David? count platforms, homebuilding this our land leverage repurchasing reinvesting keep

David Auld

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

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

efforts Your have been remarkable. time this during

prepared your of you your ethic on our close helping positive continue new proud remarks. safely and homes. This work their much-anticipated as customers our are spirit We concludes

We questions. will now host the

Operator

you. Thank

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

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

Carl Reichardt

seeing more, you a Thanks. the the wanted market, about to about builders say for starting costs. oftentimes, are I'm labor to markets. land. easing bit some trade little Good underlying New And few are specific a morning, about David? XXXX? talk others hear everybody. broadly, Year. on But what a labor for a you're to expectations I in your starting are to in us stick-and-brick tighten your talk and specific beginning Happy are or little the We're talk just Can info interested like things things tougher. shortage Thanks telling to you'd ease what little

David Auld

our I don't our and drive communities not get can making than least possible see it the way, to the in up for efficient making set in, get think, out, way been for at and get it I volume them in, it's side XXXX, on base trade lot through have we doing. to our easier being have us. just is trades We cycle, for ramping labor done. been We've they're actually, this up. of our a have and by their easiest much focused created get in different try the what it efficiency out and to most job XXXX, expanded get

I think to selling to we mean, be so. wouldn't a be couldn't if feel build continue challenge. we But we I that's houses them, good, going very

Carl Reichardt

than this the ask order did I you well. you're West wanted is about meantime, the is inventory took the region, enough. then Fair more to Central, sequentially quarter. And In quarter and the than growth other slower as South little seeing a growth which significant dollars places, in really you down bit last

regions Is West? if you XXXX about - it just loan investment happening and out shifting de-emphasis of Thanks. there function out Or into curious and a thinking of different look I'm among communities? the product in capital beyond. is as of is the you're a So being this

David Auld

The the difficult, is are time underwriting longer. in more West lines much

certainly for platform, incredible, groups in Carolinas region. best the have So company in this everybody price, there. we about of returns this slip people, have When a at Texas, tell and Florida, down been the we very count continued will we and capital company. strong platform West. competes in about talk you, product are - When cycle, of the have one has talk the through in I our community to West people we

I personally say West year, that So is going emphasize area see an I and to think I you'll this the there. the is return will growth

Jessica Hansen

both West Carl, actually up which for region posted periods. in to was be the count and it which will down slightly XX% company after our sequentially, was X% reference, but year-over-year community the compares call, average,

Carl Reichardt

That right. much Jessica. Thanks will All do congrats. so everyone, it,

Operator

from of proceed comes line question. America of question John with with next the Merrill Lynch. Lovallo your Our Please Bank

John Lovallo

as And taking guys. for thank questions morning, my well. you Good

to noted sort just higher. and one, of and maybe And on concerned the NAHB also growing price any you home appreciation how specific affordability more this mean, grinding not Horton, first see I thinking the builder respondents with demand rates do risk industry, to dynamic? the are more for and as were about but D.R. you The guys And industry-wide here? had approaches that with spring

Mike Murray

consistent in But providing at We're point something on Good I'm platform. Mike. to morning. that's whatever this And at. that's we're we're industry. the on the affordability not to value focused our John, well is focused as the versed communities, across price speak always

we a were homebuyer home or buyer their focused up monthly from first their D.R. moving so the homebuyers. in on time quarter XX% first-time Horton that with providing of to buyers And situation buyers have current affordable that whether in We're fits budget. housing our home their an for

Jessica Hansen

We to healthy see that group. credit buyer across metrics continue

XXX score was FICO this quarter. Our

was as our standalone, square to also the as almost continued slightly a I Express think mentioned it And on then XXX. basis. down on on year-over-year buy tick risen, brand buyers our footage has And average as call, prices we for purchase. see typically home not of their is a what need, time have and we out they're much money, want can but buying to they as get home discretionary first

And home less bit buy risen, so that. if have they prices than little just a

John Lovallo

a how costs this nature? administration? and development potential for Biden sense. for guys makes environmental you what land lot lines, are the time the that then, under about And that increased Yeah, And of of regulations things thinking mean could

Mike Murray

control time. to We're focus extend And again, affordability, I believe I more we're going XXX,XXX going we well going to become affordability. affordability. positioned to challenge. it's challenging. increase our can think regulations on help But people, it's don't meet I going given And as position, our only with lots. - think to over it's Well, we're And that

John Lovallo

guys. much, very Thanks

Jessica Hansen

John. Thanks,

Operator

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

Stephen Kim

the times. But know, think opportunity. And done preparation years the a Hey, interesting people sometimes you're preparing guys. of about way over when like beneficiary good statement, just guys last for the luck. is makes meets great happens Fun builders situation. you job I'm of seem trade, It's that luck what it couple you it are this the reminded have

capital there the you for future. normal And indicated allocation. so to you carry you I wanted as foreseeable levels comment, higher to are, about than cash Because ask to your wanting that

I some the think But always you reference difficult to made homebuilding is environment. in uncertainty current to arguably, predict.

And so is and pave curious, for dissipate, rule things what fade modeling that to are the a cash good what thumb cash of in than of for to lower the levels going I'm way to kind levels you're that? hold looking your forward order you or

Mike Murray

question, Good Sure. Steve.

business little respond bit potential Just much maintain prudent scale of get market. in expect we we more been that of last to point feel expected when to would at a have that cushion least like to primary changes each the volume that the liquidity would just more. building That see cash, which to us expect sudden quarters most flexibility activity, over to $X.X in quarter at the opportunities year we've shift we in it's significant say billion I the It's is driver but billion. levels, $X $X see increase sufficient gives to to and crunches. end any would manage terms behind the having just avoid and billion in homebuilding between significant a to ensure and

last saw 'XX the interest late in few increase the significant a shifts in very the decreased over of business the in And in XXXX disruption the which XXXX. demand years pandemic then seen we to spring and our To increase that summer of number since. in so significant sharp rates, we've a from in of demand ever

whichever standpoint, feel that having don't I respond, in see from just to it's need bit cushion, direction we the like a bit so more that And a prudent. liquidity more we business, us strategy. changing go to

in puts just a position strong us to changes. think very flexible respond that market to and I

Stephen Kim

be modeling sounds Certainly ought basis. a we that like longer-term Yeah. to on Okay.

Okay.

margins awesome to Second you margin think I reported all just question relates this quarter. as to you gave And guidance fairly recently. the that pretty

you're the guidance to think a as your to this in I margin what your fact paying that note folks for so And just lot quarter? the curious, drove upside hear of than the And quarter March are a quarter? more in drove just this love conservative, temporary I being the to but still upside that suggests it's think I'd what spike. surprise personally

Mike Murray

some see the did this increases in not. a those we the in Well That's or and to we over two, Steve, prices, we I'd coming and levels. not environment, we said, a which quarter still quarters. through to ability low our business margins coming. increases more very cost still coming the obviously did we've in coming last that as hit first being expected say our quarter thing strong start of to QX, into expected our We can through to incentive closings the that bit of raise our seeing see to That very been see it we cost backlog, see we expect have with come

do And levels. point very margins with that maintain additional quarter at visibility of showing, so, expect we be able another now are we're which current strong to obviously the that to this

Jessica Hansen

last material And Lumber from neutral impact of front. projection little on prior is lumber seen to on up. a the We've bit headwind cycle materials very pick had from we've the really back starting price than year. other

significantly of into and well. as have going building our But as inflation that's commentary product a prices risen So cost it's home has function companies really, well.

do increases material as didn't we we of we are the but start quarter, experiencing those in to so, through December flowing we the in in And through the year. flow said, see, expect some rest that costs

David Auld

it job our are a be teams see a by bit operational we increases, stick a That's controlling a people. reduce efficiencies our great job quarter. foot, costs, were add, brick little just I I we down honest, mean, to surprised for went think doing phenomenal and look at we to last actually And where just I'll per And cost.

Stephen Kim

And of Absolutely, luck. great. best guys. Thanks much very

David Auld

Thanks, Steve.

Operator

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

Matthew Bouley

to morning. questions. the Good the position thanks for wanted And on taking Congrats lot quarter. about I ask the XXX,XXX. of

housing material you I signals that said addition your sustainability number the of around level, really a think just it suggests during what speak higher at you the view one, the I added quarter. demand? of the you could around guess, a quarter, impact duration that during lots around any color of kind of And lots, the just actually two, lot those Thank inflation, could XXXX? you. number of

Bill Wheat

And come Sure. Matt, that addition lot to the did the in that of position notice you'll most form lots. of options

significantly position. to to modestly, option been last increase noted developers on relationships continue across country. do normal a we effort our to on own expand We with our the our that lot back an of call We and kind there. our level had did But expect we've ongoing increase get lot to they

our course, well. Of as Forestar fruit continues with relationship bear to

want growth sure seen, significant And a We keeping our we today. and that volume sufficiently demand to stepped portion us significant relationship position our seen to our probably up our lot the out Forestar. our we've of we're front to additions through that maintain. ensure we the stay we're So, in we've significant the with in pipeline efforts seeing to certainly that from volume developers with options make and have of in position with came increases third-party

David Auld

in marketplace the formation looking as see a to today, of household we relative just excess Matt, The supply forward overbuilding, don't term, medium lot more well volume a lot to as see demand. of we

that maintain, term as adequate land. for we inventory want medium Bill support of said, so And to

that's you're why our position So seeing lot increased. controlled

Bill Wheat

still we're things that heavy option to fact aggressive up. more a be allow the does us tying in And little

So positioning it's, future. again, the for

David Auld

capital-efficient Very with options. the

Matthew Bouley

Okay. color. Got it. helpful That's very

about I ask ASPs. to Second one, wanted

of think the have is said XXX, or you I the you well. there backlog ASP think, mentioned right think as Bill, order I I ASPs might

just to for two, [ph] guidance I'm lot at then number the year, a versus just just closing getting bit. wondering closings one, it perhaps you. that's back that can seems I if how like-for-like better. curious, the So down if closing that ASPs year. Thank and look number But mix, just settled Emerald reconcile the if revenue you to a and I'm think suggest for about the ASPs little

Bill Wheat

higher do through. because work sure. Yeah, their than and bigger a backlog sales higher in our generally our priced see are to take and closings always we We our way ASP in longer homes

so continuation unusual. that's yes, So not quarter, that's this of with necessarily XXX sales a in some being our price definitely But ASP at showing appreciation.

see term, been near potential in operators still expect, teams our providing And very probably and That to we and would on our some affordability. upside. so I think are said, the our focused people

And move into keep the and to going our to payments on to so we're price to have buyers the afford homes. points an that need eye our

for we sure beyond price we we or so always some at our know to And plan operations some never in point, make appreciation significant price a quarter we two keep make that because will affordable. adjustments our points

Jessica Hansen

up X%, it was our actually And ASP basis but per square foot year-over-year flat. was sequentially, a on

Matthew Bouley

it. Got Okay.

Bill Wheat

reflect reflect reflects we It our all doesn't doesn't still closely continue would price. It guidance very that of And quite of so affordability. on all that manage the price. the to

Matthew Bouley

And Okay. again. Thanks, congrats, everyone.

Bill Wheat

you. Thank

Operator

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

Eric Bosshard

morning. Good

Jessica Hansen

morning. Good

Eric Bosshard

where The curious changed that that deliveries? of sort and more a have geography changed for bit and also but the delivery little and you increase of mix number increased optimistic a full things the thinking what resulted the year pace, year, the bit just and that on - in changed production taken

Mike Murray

footprint, across seen we've our strong consistently demand think Eric. I

quarters. In the we've start of couple the the started to starts almost addition, for good in we gotten quarter, as next visibility XX,XXX with homes first up

in we the deliver year. for And more the confidence number us so full can that gives

- a to able going little to So just clear a we're accomplish. little be what year of more a coming with into focus

David Auld

put we good a start that about seeing confidence. the it's feel also which And spring don't again, good we to We're there about. number January, want a out in don't to really

about number. So really that we feel good

Eric Bosshard

done or inventory to have From get more different and that doing there to pace homes allow you a produced? production there anything you're pace, also

Mike Murray

those sustainability Anything that allows on scale doing measured of different. hang - a about to approach and in to we and talk increases. us it It's growing the our platform

strategy think a same every getting what say, It's production better wouldn't when anything capacity share growing of I they're growing and market I jobs our their more that's And different. the in about my how of going teams marketplace. get for just little production, market-by-market. day So a it's about execution grab our is and little our capacity further up today

Eric Bosshard

Thank Great. you.

Mike Murray

Eric. Thanks,

Operator

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

Alan Ratner

My your growth Good have or been we just are for began. highs. pricing. I lot the the tied bit to it lots And margins absorptions I'm last controlled bit drill since of morning. months I'm the tricky, current Congrats the pandemic little the side, environment closings hear first in like looks all we book account lot because of assume And had obviously, follow-up from guys. land, the last kind builders. and at actually Matt's the question lot obviously your over on a more over underwrite current we When today's XX that a a makes cycle booked your curious, today's over great in earlier. your and up absorptions, XX% year, land of results. hoping to Hey, the If was at you've on looking question,

business the how gross to months, of to talk little to curious, you've guys a look compares XX you inventory think And you're metrics the tied return the about last internally? today? land over about you're as composition underwriting to could generating thinking that how where about I'm up So bit you whatever you on margin absorption at

David Auld

Our hasn't you a you increase, much month when requiring seen a can XX underwriting we've can at a back five absorption, - cash we're two-year a lots month than changed buy more really a does it absorptions absorption. as

and at the The looking a the the but than the we've said most on put bigger. And the prices we the books have Lot are this last the I on and that that of the I think from call, doing little deals been location traveling had in deals the quarter, stable. deals, see seen this we scale I'm books. standpoint, that is So phase today Scale we or better when we we're we're were doing four on the position pretty sizes deals don't of I deals much get up two a ago. that years given bigger. pricing have bigger, deals versus three,

very doing confidence, - job. guys me lot gives of it and our So great are a it's a

in marketability even or I standpoint. pricing from position deterioration see don't really So our lot a

Alan Ratner

helpful That's it. Got color.

on there. a bit closing get question want more year, just to maybe I commentary for Second guidance little the the

very if under So to your look up first the strong is think, guide, And back strongly. guide, strong. is the deceleration midpoint, going the the of backlog full what's just which incredibly your XX% year that at to a XQ your just I'm be be year. in are obviously because - closings I curious, for half, going I is But a through XX% half driving increase, the

years something So Or conservatism is because is there are? bit backlog than a be this a might maybe sell backlogs the of driving lower the you else conversions function cycle that's back past around just elevated in and of times how half? that the

Jessica Hansen

our the stage homes construction are of in Alan. really It's

homes we're intra-quarter and lot selling have a fewer closing typically a typically have. fewer result, would. as than than we And We today completed specs we

quarter mid-XX% that was I range. in that XX XX% in the and range high the XX% or it's typically - think

we still the those started And but construction. a early the really in stage of of stages of almost lot Mike as quarter, function So XX,XXX inventory. get, it's a did of homes are said, our just this

the year year, put so but won't homes lot later position And available fiscal in a this good they'll us for we'll here fiscal bit be little a in continue that growth in be very to XXXX. of starting a the

Mike Murray

to we And increases obviously, year, QX when QX year-over-year the more significant some increases, significant. very much and see started in at look, you were Last QX. year-over-year

the are continue still year, expecting a necessarily year-over-year very very strong fiscal to increases going we're right naturally are the same 'XX. not now. increase pace So for year-over-year strong at they But going forward

Alan Ratner

That's Absolutely. luck. guys. Thanks, helpful. Sure. Good

Operator

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

Michael Rehaut

Thanks. results. Good and the morning, congrats everyone on

extent kind XX%, from almost I in which about are of a very the question, rarefied margins keeping and levels, - to possible you a to that's historically. First if underwriting beating to kind those at gross of and good another air these at with margins, you have margins problem angle But of deal extensively kind for apologies with horse the obviously, I'm here. the the ask maybe maybe gross wanted dead

the that to price come little high Is on flow lot lot deal couple appreciation a underwriting a haven't way bit if mentioned of prices, factors and should is to to you're in that were dynamic Or basis. If being not a, expect it's type years? other of much the over we let's call You in obviously, seen margin to attractive it, given pretty that about moderate were we're moderate today, right you are the stable, gross appreciation more that right home are to deals appreciating? it? year-over-year like earlier prices there a where low to today, in store pretty now. maybe next same But single-digit that single-digit the a think rate,

Jessica Hansen

We a forward market, insight that we our see on affordability, today visibility range. And foresee don't on is hang interest of by generate in I few we we land, a to with hopefully to to turning really it are current business see returns Mike. kind gross still in houses. around going gross that to feel lot than we our in a bank as quickly, really We're margin of whole and attractive this I much ability Even our returns. our think, industry we keep going already large. that can compression XX% mean, focused rate, an a quarter the because did something very be of more whatever do margin have our don't we underwritings have to than talked years. for and very the today our David's gross But issue, and with turn reason, efficiencies if lot in we margins comfortable the the no don't offset out, costs really although current further houses right next now. function our But we able to position

cost so best we and read market. in the have margin the on gross early And

Bill Wheat

is generate margin foremost, hitting And enough higher underwriting and more that And underwriting hurdles, each give first returns our margin sometimes you certainly, our market, our of will emphasize have is not may But hurdle. underwritten. community. can than gross part we hitting the then Can't focus, higher absorptions gross returns, returns. you in on margins

David Auld

and look of homebuilding portfolio most and affordable space. sales average And price, designed we than our the at are our more geared our you in affordability. are land If structures to operating our significantly peers drive that

current the at I very at - peers good and our it's we us price that out our points? us are allows in So keep competitor industry, we mean, execute the to resale primary when we of feel in position will both I - this about competitive our which is And and look market, which this really, today, makeup the the positions underwrite there, believe range.

Michael Rehaut

on were wanted think, it. a Right. in points, guess, XXX significantly I were The I guidance. looking modestly SG&A closings order to appreciate No, zero only results your I of better what by basis moment. just for for, I were above about secondly, than yet you

XXX versus points additionally, was strong leverage a year-over-year little know, XX of I So had to of really flat bit you historically, wondering, be And ratio volume, off mentioned you had of you're you SG&A leverage. instead expecting sequentially basis but better. points, the basis

more anything apologize earlier, quarter, drove missed was the if kind first that I wondering this on I one-time So that there Or of if a what quarter and to specific benefited differential? this past just basis?

Bill Wheat

you. thank Michael,

of we to. You guided were touched a on little bit it. Deliveries had part what ahead of

little little higher, SG&A which a ASP is to addition more a In leverage. drives

lower business SG&A. before the Something operate especially sitting while inventory specs completed run very able the we're homes we the is inventory, because that Jessica those touched for costs through maintain today, SG&A And of completed carrying to the that efficiently. portfolio those requires they're to less care level and do on completed

had we a we have X,XXX. as year today, X,XXX And So about ago. around we have less of those,

that's improvement tailwind as that's So a and - well. an

Jessica Hansen

guided SG&A And already annual we're ever as approximately points And it and basis able SG&A flat actually get big our be although role ultimately is like more that than, move. just to going XX not you our which basis we maybe an it lows, a continue sequentially, really say down at of to when is year-over-year to Sure. on on basis, on to about leverage, be rising model record XX basis prices leveraging our a feel now, we that? still going right a SG&A Can a that year-over-year we SG&A we plays on is move. nice would basis, a if be basis. is pretty annual nice But in points there an see say, ASP think

Bill Wheat

pricing and and Yes, changing But conditions volume nothing the but onetime. has helped, in nothing the there onetime quarter. some are

Michael Rehaut

guys. Right. much, Thanks so

Jessica Hansen

Mike. Thanks,

Operator

Nishu proceed comes with line UBS. question of next Please question. Our the with your from Sood

Nishu Sood

Thank you.

of us going to I trends. in looking demand are buyers wanted you folks in last any Or for, evolving wondering things? demand how folks quarter, some that vaccine of back life home question Is at just can first So look it so are to you've seen anything - has there lot traffic? it's terms being there's give out your from to news, was been clearly, obviously, I the how hope what like there. around insights strong. But A normal. to ask mean, looking in returns to, we're normal? are What's far when your

David Auld

the has of don't I it's I demographics. it because issue really there, it a really that is out accelerated. It's pandemic think, demand environment to - safe desire accelerates. become find it driven I been family. to people's The changing. and mean, or long-term a think - accelerated, see demand And for got I by and program, their

Now that's going stay. to

So, I mean positioning. are we

good there. of We now of are right driving - demand to we as I it's very take today, as much out mean, that it's And advantage can.

Jessica Hansen

space. our of floor issue already lot flex actually plans A incorporated in

that go a families true kind and the equation of can their things for the home can homebuyers our for floor accommodate And that already those today, good they been a looking continue potentially people children, with a always talking their the for adjust learning along So for. kids. want what to then start have as demographic we They office, it true have have to. things had buyer types cars. backyard things, Those a is office, are plans are their been what be public always David depending side for based And garage of generally always Those that we've looking starts kids. want a home second whether on that. of was on a that schools, their maybe space

acceleration lot different say with on places the a in would of the plans from. choose other I than to No change from So the floor being that's significant and front. right pandemic, positioned that

Bill Wheat

And at still affordable strongest demand the the most price. is

Jessica Hansen

Yeah.

Bill Wheat

while. the that now as a that that that's we're it's we don't well changing of a which positioned near been And see much environment really advantage low in certainly term. for right now, that. accommodated been with right well Obviously, The for well, and as a seeing benefit demand that's interest for to quite that trend very take we've for rates,

Nishu Sood

Got you, got you. Makes sense.

ask wanted I question second to So around your was inventory levels.

in could would a have demand up strong, you your just it, a it your remains be see, on even at be but is been? here, inventory still progresses So starts it your considerably, strong. remains ramped we if metric folks be some sizing normally. looking it year - as your as the that, difficult so Or behind has kind where Obviously, just you will do levels does remain, demand against been so targeted strong get of has progress to like where back backlog as normal still demand or Are inventory? of market just to there

Mike Murray

starts week-by-week. capacity mind. our it's over sure for it it demand We and get level would back sustainable. inventory we well to that our And a we're with between today, that be doing very partners look good. neighbourhood-by-neighbourhood, historical capacity, are And to remains it backlog. is in relationship us is at trade the exact total at If to time challenging make Demand increasing

that we're today, additional we're absorb but expand, marketplaces serving. demand putting points the continues price to the that, - doing into at capacity to So while we're

Jessica Hansen

houses. about of a have going were to perspective industry. cost more function conversion. unlike of the the ultimately, house and conversion on And feel the got from mean, comfortable focused if on kind do we than be to the We've structure it so positioned there to We houses what's Really selling. in didn't we else demand return started. we're and backlog and going we're selling lot our get sell, the issue a what backlog what anyone wouldn't generate homes I we'll is lots out those and

well. So a inventory turning our focused the on and in those how generally, metric, we're turn. housing quickly we're than did year. and backlog than really this trying a guidance, as turn with improve we that better inventory rather at we better least we two times new have two year, than a that, reflecting conversion Last bit little times now we're And year to houses our

David Auld

being the we're operators at in talk we that's all our how deliver disciplined, capacity building focused the to more execution homes your time and communities. And and about And consistent it starts community by that to level.

Nishu Sood

Got it. Thanks so much.

Operator

Our next proceed Citi. line Please with the question. your question with Pettinari comes Anthony of from

Anthony Pettinari

Is buyer little buyers something others throughout in generally just the be can used seen? year? hours. expected spring the evenly And kind traditional to a demand traffic you've given be I'm maybe distributed or are morning. homes that visiting on you season you'll year. lead maybe that of for seen, any you believe if heard changes to a off-peak we've behavior? off-peak days or And Or seasonality patterns does buyer comment what talk from selling on you've could seen wondering good about the more could think see it you of you've Hi, I bit kind

Mike Murray

seasonality XXXX different very Stronger we've historically. winter throughout through the than seen summer, XXXX. certainly fall, in We've seen Yeah. demand

seeing some to unusually to So With seen a periods. being we're increases would January, spring. thus than about the And far would It seen we're optimistic of of be strong But we expect see. volume in of that that probably historically remains we're with be ahead. to what said, sort things off bit in we've buyer patterns, we've still between think behavior there's right good relationships different we patterns the we'll historical very but seen see a the strong right or that can Definitely a strong the But of we've same a feeling the we I I see the expect QX, now, off very our environment. obviously, we year, historically see see some and now, not. percentage some where just demand whether way are of flattening QX we QX same in good about have looking throughout start. patterns historically. seen. But very what fiscal seen coming going

Anthony Pettinari

it down Okay. a I'm markets increases and That's then maybe like seeing production wondering XX peers do given Or ago competitors are price customers? helpful. by and price is of you're yours for environment? you that on competitors to maybe than some general constraints. it your bit the another sales comments question And than seems value are proposition kind pushing if affordability pace improved slowing maybe way, Or some with steeper has your stronger pricing ask the think edge was raising months any of your prices? where

Mike Murray

If couple at our deliver improved. what homes. has advantage focus sales increased advantage we're down doing our the increase yes, discipline the gained around and And to the to price where that's the competitive the But look of And you over compared on ability competitors. over years. we've average last I just think really the I would quarter-over-quarter-over-quarter largest with and efficiency our competitive comes to say it again,

at it's price, So do any any deliver house it. can't you a it good sell - to a doesn't

becoming through our efficient and focused we're processes. So our side of more the via on expanding delivery it capacity more and

Anthony Pettinari

I'll helpful. turn That's over. Okay. it

Operator

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

Jack Micenko

you XX focusing owned longer-term this pretty goalposts that's acquisitions function, of is quarter. the on of would the a coming margin. Horton about more lot Hi. interim the quarters? couple We availability talked sound you be mix really returns. not Good We the of at constructive If XX-XX as my kind terms underwriting, And I last in of guess, Is thinking option of talked environment. an where on this markets question about morning. brought or changed the XX over in land about David, new new versus really XX? it

David Auld

And We're on new in going continue something are that's day. we and comes higher. that [ph] number Ultimately, to try execution every to down XX. XXs actually, Yeah, grind focus it relationships to the field. to

is here, to efficiency continue there business and industry. will capital better and efficiency, drag the a and we better time over expectation drive through probably my it's a So and that point our to our point company ultimately,

Jack Micenko

I'm perspective, XXX at the costs And I a But was Or looking below looks be rental margin pretty right Obviously, got purely then like homes margin the sale, the everything the that way? in really sale single-family company a from on would and on a your something missing? healthy, those gross that Thanks. looking those it that it it may appear Great. margin. excess of there G&A line. of margins is Am Okay. you've the units? just the at healthy was

Mike Murray

pleased And to that to capital business. to transaction. interest lot Yeah, attracting that that expect we're very advantage of to a we we be of forward It And a today. explore of look be that. and take seems with continuing to lot

Jack Micenko

Thanks right. questions. All for taking my

Mike Murray

Thank you, Jack.

Operator

from Susan Please Sachs. proceed Our with your the next of question Goldman question. comes line Maklari with

Susan Maklari

I question just you wondered - first is My perhaps the January. results. quantify around Thank of more could bit if you. And the on congratulations a comments

seeing perhaps framing or basis of you're sequentially the for on what Just year-over-year magnitude either a us?

Mike Murray

a You we comment on less rarely a much weeks know, single few Su just in, month, weeks. three

get to we So sales generally coming traffic to we - expect weekly through when expect step-up there what January, say, but and volume suffice we our it into pace. in be a is

three far, seen weeks quarter. in And sales versus and seen had there in weekly that the volume been what discernible December of step-up has we that. have January seen We've in so thus we

by So we're encouraged that.

David Auld

would seen accelerate season several sales ago, the after at of being Several holidays February. with in this years January we end to selling no year pace January, past early the - spring years, kick X. the Super of we've that effectively out coming exception, Bowl The

Susan Maklari

of to what some volumes maybe next helpful. supply the of you're that areas, is I that in issues there's in some that are just there? the semiconductor supplies of the those constraints some with you've That's some they're appliances with companies their there around and in like more you're industries? seeing the talk guess, We've those my heard recently some question is chain own that seeing some heard seeing terms especially obviously and anything of the businesses, issue of around Okay. in what And been that in Can some in Thanks. seeing maybe the And you issues suppliers. ramp areas windows. and

Jessica Hansen

short day, both challenges those. really, supply, what It appliances. what So would We've market windows with in your had are on, Su. both products of various and depends kind agree and sentiments of in on

business. Our hard have to working our been support product partners

on even any So install It's we push anything late. we've we a specific pleased we have gotten have as really if worse substitute, that I've have to heard, don't to But very of push to than brands and I sure actually closings. where back been probably windows said little make semiconductors would again, don't the And have that quarter. put as quarter. necessary, not we're headliner this I when closings. last know to even other that having I upgrade

Susan Maklari

Got you.

Okay. Thank you.

Jessica Hansen

Thanks, Su.

Operator

Thank James. Raymond you. Horne the with line with proceed will come Buck Please your final constraints, from Due question. to question time our of

Buck Horne

in or since population all sustainable get is just of just at I'm I'll way buyers this one the that any country. or at? any buyer to evidence of lot you noticeable quick. squeezing Are it. demand coming we from? I the for versus from is all historical you other to this that try thanks out from appreciate Hey, be pandemic in. uptick buyers me perspective, high-level if where changed a And market get investors seeing kind one around is curious How a out-of-state the began? the normal? of happening seems keep Question it your migration has

Jessica Hansen

has into we to mean, positioning yes. Carolinas, clearly, it the I Texas a the our cases country. Coast to as two from Salt of regard, just anecdotally, and Vegas states. within to a into position I we lot Florida flight Phoenix, from strongest continue. even our say would would expect across been coast see then in there of a to that with in to that the to pertains space so Florida, like Texas as I diversity continue But lot trend lot and And those Lake the really think into and West our

Bill Wheat

levels, at that for also see all, levels high I sale their a business consistent in used don't days at homes home that - home be home new and been has the is on that And a days. next forever with very tight for of you customer part the existing line. a XX our XX like inventory are to supply available to fact is sale time model provide for alternative an that to

Jessica Hansen

didn't the many about is so through you home, buyers was to We into and this And that pretty question, remainder the specific just for ever fiscal quickly under. Buck, - age. saw pandemic And XX coming we've of our lot XXXX around over to in up of XXXX our in years a buy XXXX to XXs. off and XX% quarter and business now tick the conversations the low or last ask a the but of millennial last however going had about the

out XX we've is pretty seen buyers big of think I versus that to under. a our settle over So, XX% move. And XX% XX% are and where

I yes, think are going answering millennials question to homes. that, that own

Buck Horne

okay, That's great. That's go ahead, please… Okay. -

David Auld

seeing has long-term new the the it. Everything really COVID acceleration been that, trends And of right that the out we've experiencing that norm going feels downturn, is been accelerated we're kind it like of now coming forward.

Buck Horne

helpful. over double platform trade. the in just on outstanding plan I'm business, that, this single-family follow-up year. extremely And the you appreciate last one the just that one rental mentioned That's to wondering just you - Thank I your on all you, guys. of color. a course that investment community

family you method developing bit Or do then quite your of stabilized? partner investors this market you for flipping you think How and a So would scaling rentals continue scalable on ahead building single opportunity it of it development? total the within of And would like you opportunity. business? platform? sounds of about these up pre-leasing it or that do some it envision the pre-sell yourself, with How of there's

Mike Murray

we're the learning evaluate today were we it more will transaction. side are still learn a is a various And scaling some But it. for and but lifestyle, a we for desires know alternatives doing. as program be execution it. whatever We of do about with want to the of great and population we're ultimately capitalizing there market, for the first with see the that lot very to about We we what is we about of business think home. more pleased the reason, how need will be go we Where this out portion customer opportunity. single-family We product that the a may not, purchasing

help to in And so to position to up supply we build want to this. be a

Bill Wheat

entire And both comment platform, rental year investment the to doubling Buck, our just family. this clarify, multifamily and to our about single refers

and assets of the year total was Our million. combined the $XXX the beginning at platform

So million 'XX. fiscal than double more we expect $XXX in that

Buck Horne

much it. and Got it. congratulations. so Got Thank you

Bill Wheat

Thanks.

Jessica Hansen

Thanks.

Operator

the to reached have like Mr. the for question-and-answer comments. would I closing end now of turn back floor to session. We Auld, you over the

David Auld

with Christine. Stay you, speaking to unbelievable have April. appreciate outstanding on D.R. second you to quarter. up stay year. We We're quarter Thank an and And time Thank everybody's focused. stay the hungry team the you. forward first an set our and in today Horton humble, to look results with again call

Operator

Ladies today's and teleconference. gentlemen, this conclude does

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

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