D.R. Horton (DHI) 2 Feb 222022 Q1 Earnings call transcript

Company Profile

Participants

Jessica Hansen	Vice President of Investor Relations
David Auld	President and Chief Executive Officer
Mike Murray	Executive Vice President and Co-Chief Operating Officer
Paul Romanowski	Executive Vice President and Co-Chief Operating Officer
Bill Wheat	Executive Vice President and Chief Financial Officer
John Lovallo	UBS
Stephen Kim	Evercore ISI
Mike Rehaut	JPMorgan
Alan Ratner	Zelman
Carl Reichardt	BTIG
Matthew Bouley	Barclays
Susan Maklari	Goldman Sachs
Eric Bosshard	Cleveland Research
Rafe Jadrosich	Bank of America
Mike Dahl	RBC Capital Markets
Ken Zener	KeyBanc
Truman Patterson	Wolfe Research
Deepa Raghavan	Wells Fargo Securities

Call transcript

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Operator

Good morning, and welcome to the First Quarter 2022 Earnings Conference Call for D.R. Horton, America’s Builder, the largest builder in the United States. I will now turn the call over to Jessica Hansen, Vice President of Investor Relations for D.R. Horton.

Jessica Hansen

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

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

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

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

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

David Auld

The am pleased our Executive $X.XX this Vice you, Jessica, in and share. Paul Horton Officers; earnings per Bill XX% highlighted increase Wheat, also Vice delivered Operating D.R. and by Officer. good team first morning. quarter, to by Presidents be President joined Executive Thank Chief on Mike our to I an call Romanowski, a and Murray and diluted outstanding Financial Co-Chief and

improved basis increase in $X.X to pretax points XX% to On revenues profit increased XX% consolidated income a pretax consolidated Our XX.X%. and our XXX margin billion.

footprint. same across Even very on capabilities tight while XX the still market leverage are and teams, was certain very D.R. including and scale recent December market. production for our experienced their conditions remain market Horton’s geographic period maximizing inventory with rates, was the labor XX.X%. to the and on return months Our challenges significant to our returns XX.X%, share. chain, ended equity results are These mortgage our broad trailing for return reflect supply continuing homebuilding our consolidated our we housing XX the materials and building on robust, in shortages a increase rise in in focused ability There

We are starting across the times our homes home a increased cycle XX% and ago higher infrastructure starts unsold support and processes from working stabilize homes on focused XX,XXX norms. historical to building only the construction level inventory quarter, XX,XXX our this completed to of while then After a reduce year X,XXX homes homes on and construction to with nation. to

line growth starts sheet, We Our January balance to very holders levels our to XXXX. through operate product changing plan to well to targets, Mike? and homebuilding base home and our liquidity managing achieve and well-positioned in were with optimize offerings, are our effectively and strong we strong double-digit net position sales volume leverage returns. our flows incentives, believe low home pricing, financial in us inventory while operations, from and generating maintain by flexible operational economic our cash sales We conditions. position

Mike Murray

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

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

X%. $XXX,XXX, from for quarter price our Paul? closed the quarter, homes the prior of was closing Our up the average average down while year XX% size was

Paul Romanowski

quarter homes, first $X.X quarter first prior were net increased billion. A ago, to year X% Our while up increased value XX,XXX year net to the our sales the XX% sales the orders orders in from housing chain in first available we’ve to pandemic surge year significant to the and we experienced of supply homes significantly demand prior to when the more challenges sale due the during completed since. had the XX%

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

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

mortgage the home recent very demand remains New strong rates. despite rise in

home so teams continuing in homebuyers and in virtually for our construction the orders can plan the homes to certainty the to our occurring cycle Our continue percentage. low-single of construction. sell of number are ensure to in the pace quarter prior be prior year we more same quarter spring, sales later of sales with by up We in managing no the local close during the same better start home to to we a our than digit second sales expect no were the manner date our net equal

our with supply well-positioned home we in a trade and growth fiscal and January are with strong sales inventory, Our volume volume relationships. and double-digit deliver XX,XXX plans, were XXXX XX,XXX order homes supplier sales lot to robust backlog, in in in and line homes net Bill?

Bill Wheat

most increased us low home revenues square continue were our communities. allowed cost square margin homes On very to on margin per basis, of reflects strength X.X% in XX.X%, broad a limited incentives of a The market. sales quarter up September revenues home the in level up has first raise XX combined sales prices the September our to sequentially from The basis and for December X.X%. in sales demand per our sequentially with was foot increase housing profit supply of gross quarter. foot from a sales the our while to the of maintain strong gross points Our

and costs will continue increase. construction our expect lot to We

market gross currently strength expect quarter Jessica? quarter. in the be slightly pressures today’s to cost than the or similar of offset We increases most second price However, home we in expect with conditions, the the sales margin better our first to near-term. to with

Jessica Hansen

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

Our on while SG&A percentage homebuilding Paul? a revenues ensuring than we adequately our any our of infrastructure first expense business. our in was lower controlling quarter as supports remain our history, and SG&A focused

Paul Romanowski

We XX% focused the have were of inventory, of our We are to on to response We capabilities December homes production from XX,XXX during up the further. inventory of quarter, in in housing ended trailing XX-month XX,XXX total the first at XX,XXX starts expanding a homes only year our XX% homes. X,XXX bringing the completed. strength increased homes ago. our last quarter were XX demand our from which with started and quarter unsold, up XX,XXX year,

has closed since weeks first and year time almost quarter cycle from fourth two in a Our ago. the increased average by cycle or homes average construction our quarter months for two

we Although, in reduce are on we stabilize have and supply then chain historical focused the improvement construction not yet, working to Mike? cycle times our seen much norms. to

Mike Murray

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

position our Our our is competitive to key demand. production volume and to increase a our supporting growing capital-efficient portfolio to and is meet lot efforts strong

was $X.X in finished investments which homebuilding land first acquire billion $XXX development of was million $X.X Our to $XXX lots, land for land. lots, development totaled for Paul? billion, million quarter was and and

Paul Romanowski

in markets residential XX lot XX across manufacturer, majority-owned states. operates our Forestar,

contract lot now a grow controlled At well to expects Forestar’s under finished lot from range million year and XXX,XXX the to and to lots lots with subject XX, owned XX.X% XX,XXX XX% a Forestar purchased our D.R. lots. quarter and continues extremely first or to ago XX%. right on deliveries execute profit margin $XXX,XXX agreements. its to of of in Forestar’s from XX% a December first position are a based of year XX,XXX with executed purchase owned this to offer lots pretax of to were Forestar. increased Horton of sale

D.R. from its growing had Forestar and to approximately $XXX D.R. and capitalization, XX.X%. lot quarter end strong plans current With with capitalized business. separately to their million is liquidity at net debt Horton, with of profitably relationship continue ratio of Forestar Bill? a supply capital Horton

Bill Wheat

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

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

handled this mortgage represented the homebuyers Mike? by of XX% the quarter. First-time closings company

Mike Murray

the in million revenues quarter rental $XX.X quarter operations of of income compared on of million revenues generated million million $XX.X pretax $XXX.X fiscal first of the in $X.X on Our pretax of to income XXXX. same

property inventory to property multifamily for single-family property $XX.X $XXX during during year $X.X $XXX Our sales December $XX.X XXX inventory XXX property ago. sold quarter December the was rental rental rental included quarter. homes multifamily of in properties the properties XX, at the totaling million year of compared for million rental a the We rental rental units to compared single-family of quarter year and million million sold two million $XXX properties our of We prior no There during sold were rental quarter. multifamily for XX billion one one At $XX.X prior properties. million.

segment sales rental rental and are fiscal expect reported not our we generate included homebuilding reminder, homes to in continue our multifamily revenues. a in million and XXXX, segments are or than operations As to closed, more in rental $XXX single-family our inventories inventories. In revenues and our

platform development investment of year billion We projects. in our our inventory future our pipeline significant based to on by the $X in projects rental current also expect more grow than and this

contributor to to Bill? future our revenues, positioning are and operations a be in years. We returns rental profits significant our

Bill Wheat

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

We homebuilding available of appropriate conditions. and business of changing credit and $XXX At to three During increase in liquidity of to operating homebuilding liquidity on billion invested December, we million our billion billion is to the and consisting $X provide market homebuilding capital used cash the cash cash operations of current this and of our adjust level support December to homebuilding demand. activity $X.X as XX, capacity to the revolving $X.X strong unrestricted of our homes facility. to flexibility was ended months scale meet inventory homebuilding believe had significant and we our

and homebuilding end December XX.X% leverage of of was was at cash leverage net X.X%. Our homebuilding the

net XX.X%. at At per a $XX.XX, XX.X%, equity value stockholders’ consolidated up ago. and was XX Our share and book billion $XX.X cash from our leverage was XX, year consolidated was December XX% leverage December of was

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

X.X dividends same to stock million shares quarterly dividend last a paid declared Board cash During the the be $XX.X the repurchased quarter, quarter February. of paid during at in quarter. million has as and common our $XXX.X of we We for million, level

remaining and at through Our repurchase basis our was remain XX each and committed both a capital share year. count fiscal authorization repurchases share reducing December shareholders outstanding dividends to our million. consistent to returning share on to Jessica? We $XXX

Jessica Hansen

market quarter expecting forward strong similar look supply of we XXXX, but conditions to challenges. As from are to we homebuyers, continuing remain fiscal chain the second demand with

We by expect closed homes generate operations quarter to to in in and be of March our $X.X revenues range and XX,XXX to consolidated our between billion homes. XX,XXX homebuilding a $X.X billion

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

to continue that expect of XX,XXX revenues generate XX,XXX homebuilding positive to between reduce repurchases the fiscal share close flow the full billion. expect our to rate of to our while share our count year double-digit year, fiscal X% our We support to we to by XXXX $XX.X an at the XXXX end investments this operations in now homes, expect from we of we inventories income XX%, and outstanding also cash and billion tax for XXXX. $XX.X building fiscal to growth. approximately consolidated approximately generate end fiscal For continue home after compared still expect of will forecast to We

among dividend an liquidity, priorities consistently maintaining will in We utilization rental our and increased David? homebuilding the leverage operations, to then flow strong investment continue balance cash repurchasing and paying our shares. conservative increasing

David Auld

across our experienced and results market capabilities, production product broad share, our offerings geographic reflect closing, industry-leading teams footprint In brands. and diverse multiple

to our sheet, to low us enhance maintain changing to effectively Our significant strong investing liquidity with repurchases robust market value balance Thank plan returning work. Horton D.R. We focus on financial capitalize flexibility a of consistent shareholders capital entire share you to and provide to economic conditions. for team capital disciplined company, approach your through and today’s operate leverage to the in dividend on long-term to the the basis. our both hard which includes and and

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

We host questions. now will

Jessica Hansen

line the open you can questions, for Holly, please?

Operator

Ladies open Instructions] UBS. first coming and now for Your gentlemen, live. is Lovallo for question is with from is line John your questions. floor the [Operator today John,

John Lovallo

and thank everyone, for my you morning, taking questions. Good

are gross The I across XX% would that allow margin that as risen maybe what we guess you to maybe persist to at move first the structurally not forward, range do historical that XXX believe in trend over that points the your longer basis changed margins to is, XXX this have industry one, DHI could for mid average? a And of margins are to kind the have opinion you above high probably has years? the of term. levels question couple then sustainable

Jessica Hansen

John. Sure,

cycles. That the can to pleased sit and our here a and through gross today strong at margins markets does would and of levels We those large compression, that margin very have even away We’re generate driver say somewhat today soften. continue gotten never has probably that. cycle, meet these still returns Typically, get market the where sustainable in margin we’ll very strong are time. said, and this over extremely been competed at we’re the gross strength through with certainly, some market when with levels being

our is our we expect of advantage. suppliers, believe we’ve focus, in sheet expect sustainable to volume compared labor done what with material to sustainable, And from terms with deleveraging we advantages that advantages be of a our with trades be carrying and what cost of of averages, we’re as sustainable sales our to building gotten then less we in and efficiencies And cost certainly, there’s historical though, terms scale interest today. some where would component our and our a well. our the would balance In we’ve scale

David Auld

And John, is The was about it. disciplined industry cycle. it talk the this. much changing. about It’s just we a more talked a bit industry we a Internally, than lot little through last

less in the at gained expectation the just share other gain share. There’s least today, we mind, my – cycle and down. is, As businesses the less my there’ll market as public at in be market speculators. in just real volatility up not It’s

John Lovallo

a lot of makes that sense. Yes,

And to question, spec-focused are Okay. a my build-to-order better versus perhaps environment targeting then as model you an buyers, do maybe a and implementing in building of second view strategic rates where likely financed rise here, targeting buyers? predominantly model advantages what entry-level the

Mike Murray

and qualification closely would of more all, mortgage John, of the that able mortgage. we for the time is what application the to say First mortgage, the we’re the for closing that

they’re things that less fewer a to bad happen So going already longer no the house where have that while time then allows has affordability, affordable and potential continued buying credit out finally, of And us less rate our interest profile continue to when then be buyer the fall that I spending on is they’re in to qualify seek started and they production markets. process mean focus homebuyers for backlog backlog a our to in cycle. just to we’re their risk

John Lovallo

Got it. guys. Thank you

Mike Murray

John. Thanks,

Operator

your Stephen, with is Stephen ISI. question next line coming Kim Your Evercore from live. is

Stephen Kim

I two mentioned cycle particularly I the very I you much, Thanks was color time XX,XXX, think. of guys. homes you your think appreciate construction, comment increased I under that weeks. the all here. by number your about have also about Yes. intrigued And

would about months. wrong, X.X from start think, me to imply, your but is I that correct I’m close time So that if

First of that correct? is all,

Jessica Hansen

Roughly, yes.

David Auld

Yes.

Stephen Kim

Yes.

think you’ll homes XX,XXX basically next a should if assume close XX,XXX X.X-month your be cycle you assume you that and about So I that – imply over that time, quarters. two would the to able

of less that Your next than for guidance is, so XX,XXX considerably half XX,XXX this I second the – for quarter homes, think, amount. to

two months. this to should in closings basis? be cycle I’m the homes your with time And on in given is therefore, X.X closings cycle how there Or times? And on quarters, way curious ultimately XQ you might there construction the – so represents thinking conservatism as some that we be about, your that acceleration if next – extending about I’m result over wrong anything your an should thinking if if is

Mike Murray

you, Thank Steve.

I of the in quarter. think those one is production. substantial a things look the number those recent of most you houses how have in at started need to We long homes been

stepped I homes. our think QX by about up starts to from we QX X,XXX

longer process. to So homes take going in the deliver to obviously a little those are

Paul Romanowski

guidance on of at look the are we we’re based the And our is homes the our loaded construction QX as providing bit guidance yes, QX as when at full the year, the looking than in remainder for where closings in is QX today. we where we the based of full back-end a we and the year started year, historically. But at are on we’re homes, for and terms more in look

of elongated have and part terms is are in of cycle. currently yet, on where set not We of the based times that improved our homes that the because in we seen it’s construction construction construction

Stephen Kim

a demand basis that terms of what level forecasting? selling for say, be inventory than of folks billion rates the behind of that’s whether And concern secondly, much Yes. is love that therefore, talked is could there environment revenues for so buyer homes and rule you’re more rate move was there a initiatives a the a second have every to face – very be your the on that about I on like the for that would sales rent. area, let’s Great. that to operators business, buyer you inventory, significantly impact you the My of to know but in then growing in on I likely of there question be a looking is My think buy about think conceptually, steady-state felt perhaps one, could in the rising might is is you’ve think basis. resilient to to your people and in the actually – associated that curious we as helpful. relates rising question backstop who would of properties thumb rental in? that I longer-term building getting to nevertheless, line which revenues that I $X core That’s we that was a rental sort rental would entry-level many are twofold: pretty assume your do and yield

Paul Romanowski

I’ll little start, of a per Well, business terms able Steve. to to this revenue of guess, we learning we’re what I bit still us see might unit. and on first, this early averages for level Still business. in growing be generalize

We’re entire across building homebuilding footprint. our

it’s So every product and terms property and in. is unique size the the market which in in of

we’re been thus able with adding one we’ve and this the over pleased community. whether for-sale sales individually it’s far with been excited underwriting generate and growing terms business to that been a for far. thus very very and of the been value So Obviously, that each to our far thus the versus seen of community that has in better value time about the and there we’ve opportunity we’ve relative communities our for-rent very demand execution pleased

Bill Wheat

tick And we is this the your to in rate see of we Maybe shifts but about product to a category, up, demand. today we that be to market with as ability those see We to platform market we’re do do in Yes. environment. interest this the and this strong I shift? of able low the new planning. going believe we’re adjust like rental demand to and question our we see that as such conditions. think and be today for rates Stephen, with good position communities continue number not strong feel such it We strong see to if

Stephen Kim

guys. very Thanks good. Sounds much,

Operator

is Rehaut next Mike, with live. your JPMorgan. line coming Mike Your is question from

Mike Rehaut

morning, Good everyone. Thanks. Great.

had I on question First SG&A side. was the

guidance prior X.X% bps below your came versus year-over-year. You and XX at in X% guidance your X% down versus nicely before

guidance guess, I only also XQ down year-over-year. guiding for, XX be to You’re bps

to just around expect quarter, curious were quarter further first? why sources second the the the better-than-expected of significantly was first So the in what the similar I you don’t and leverage results in

Bill Wheat

last average environment quarter. difficult Thanks, that’s certainly upward on average In driver in fall one ASP current though, increases. exactly Sure. time several to predict a The has where to seeing and certainly the leverage might of the Mike. such price particular we’re a been the That’s little selling where trend SG&A quarters, the it. P&L. contributor the over significant A over

of probably little conservative level projecting in the So ASPs. our in say, increases bit I we’re would a out

have very year, we that rest that. business building in and our increase year last and We spend actively of across are SG&A projecting anticipating infrastructure in to the the are for to significant seen that we support over the increases our significant coming so support scale we’re the

we so on expectations just selling And roughly increases. volume not seeing essentially based year from basically getting but we’re the our our And last closings. for with leverage, in expectations QX price balancing leverage flat still closings versus our that guidance, with our are the we’re

Mike Rehaut

Okay. Bill.

I leverage on assume before the the higher basis, thinking around full it’s the for the that safe question, about confidence, to right, understand, make it hit revenue to a like sure I’m like maybe year than just ASP for an SG&A So the bps the seems let’s expectation a I second at full given year. least. just If full you XX year have say, growth more given for stronger on

you that could on on was a XX%? then the revenue believe, relative side about relative well, any If to generation year of the or to to – around of expectations. remainder is the I’m would source comment secondly, guidance that not our Just rental if continue be the expect? of I mistaken. helpful. income think XX% thoughts that the And as to margin, believe you how relative a guidance upside, right I to that, just that

Bill Wheat

to first up SG&A wrap the Well, question. Okay.

on guiding the We’re SG&A. specifically year not full to

rental in expect been our to in annually quarter, annual this to we guidance QX the points was guided more pleased than the on SG&A XX obviously, heavier sales QX, seen expected basis volume we’ve we’ve see versus and leverage recently. QX very with to on QX kind and With would probably QX. margin and However, $XXX strong. the expectations, of revenue. execution million very respect the of the We’ve in more margins The with than

Some projects will continue others of certainly generate to could margins, those that. short be

the We haven’t to specifically on guided project business of because is that unique. as each margin yet

QX relatively closed quarter, In then to terms the for lining of in single-family to million be basically the two volume similar we that the volume to would And coming properties expect multifamily QX, we property. and which one out of year, and revenue. $XXX

Mike Rehaut

Okay. so much. Thank you

Operator

Your from live. Zelman. line Alan Ratner your Alan, next with is coming question is

Alan Ratner

quarter. Great morning. taking good for my questions. Hey, Thanks

one, so want some here, might comments to much just be bit I little I parsing the a get First too clarification.

trajectory, offset earlier I you’ve you cost able the And it’s increases been based cost margin than guys that – offset on to to obviously, said expect this point, most with you increases. more to think increases. up price the

a in much that’s if Whether thinking. XXXX to I bit little prices am aggressive curious too reading just I’m progresses? Or that comment? maybe change your a be as into So less pushing you’re going

David Auld

what do and returns ASPs point, can future I say would at increase Again, of through we for know. – starts entire our there’s just and both going demand, results, of We process. level mitigate we be to drives at more targets, as to starts market continue point, that gains. efficiencies equilibrium. some margins we’re the and maximize know that know don’t start within is. targets, the return-based don’t operate absorption to an that a able share Alan, And the future I sustain We we being should some –

Jessica Hansen

Alan, on is focus And part process affordability. continued of thought also, that our

although last we’re of some market strong take is to the there builders other to so really take price. price, dollar and continue trying we not every And out today probably like

doing try stay what in to we market conditions. to cost affordable meet We’re the spite rising of can and

Alan Ratner

I going from a been was and maybe desire maybe to lot there it. price a to new And very price communities. about little bit bit side, builders bit your as Jessica, plans that down of Both over comment something or year the actually they’re that two Got talking some increases, to the back are introduce your further starting was floor their sense, smaller. strong. little next makes that hear of order average the they ask on have we’re And bring especially next follow-on out and actually a or that’s a

think So at least similarly going of and kind on at bring kind that your to that down average guys? marketplace absolute price the should we trying with about that actually and you in looking standing Are actually you of basis forward? an

David Auld

time. Alan, And always communities we’re in a any focused on entirely affordability. not in these sustainable rate about at run point involves overpricing we talk that and

– So at we’re yes, but looking product.

living continuous It’s cost. day. better to it’s we drive to – to labor, then consolidate and starts. ongoing so acquire communities, maintain a just can we’re affordable land as continue We’re as and looking a bit And at position effort gains, more in get that land, little a drive – market share every that’s how to better market do into process the me, scale more we consistency and that’s more we efficiency an

Alan Ratner

lot just a on one in sense. January. I If of one sneak last Makes can

and others demand here You uptick or obviously January. strong across in in you’ve maybe seeing your notable continue have the curious sentiment highlighted very seen given any Are rates? points price in I’m you activity shifts if been consistent because with Emerald? what in to like to strength in your the or business so this jumping you’ve pretty adult concerned rates move? climbing, has buyers discretionary are Or active prior continue more seen going their

Mike Murray

we any We still discernible than have Alan, our markets more real the have last I difference. think all don’t in buyers of seen month we’ve homes in available.

construction later its to of continuing it are and we that release so construction in gets that the meeting to so point demand those with cycle. stage at as inventory a And homes

shift hard it’s any to demand all across So strong of and a gauge basis. sort, are still significant seeing and all across we markets whether our demand of

David Auld

points. price All

Alan Ratner

right. guys. Appreciate it. All the for Thanks Perfect. time,

Jessica Hansen

Alan. Thanks,

Operator

BTIG. from Carl line question Reichardt is is next with Your your Carl, coming live.

Carl Reichardt

are do do why you outsourcers happen, think peer that how and make would? Horton you’re specifically that the say, Pragmatically, you that Thanks. cycle who And Paul, than, at one everybody. do to then effectively? do times. working and what that to reduce I builders are you a stabilize said this Hey, given better

David Auld

guide saw think start at ownership the is harder the but tried people we understand tell XXX or cases, we’re I’m ordering better is I those eliminate doing. works nature. that hold that solvers, than what some people mean homes but the culture, our we’re is, increases of the bottleneck the the average little we are problems. But homes just work a – within I part communities I the going and I starts, to to everything and and believe it’s Everybody don’t seeing to there. things industry Carl, than mean in but get even take problem can decentralized and, for at people our options, a lot cases just I completing though – not they in when a are historical peers communities can it divisions it’s have some product, because steel capacity meet we these to Horton a limited you it in And do that, to. in stories, SKUs are easier the not hard, rapidly early. because limited those the building to to they and the do I asking and anything, just they that consistent other. that reducing What field suppliers of get in to phenomenal more the And a capacity In out, break know got do get our norm capacity and to is making our out houses. consistently traits we

Carl Reichardt

I lot enough. to wanted then And Thanks, Fair David. about ask count.

You’re the spend now XXX,XXX think under significant, over mean, control and buildup was XX% last it right? year. up I I

some lots market. to point, to these at come So got

how So you communities if forward. you this is going bigger – could have might, think about they

into potentially grow different have communities, those communities your forward. puzzle at communities new share in could where the You of long-term markets, going markets? you out break as of or bigger as could fit you you look position markets. i.e., Thanks. existing existing more In kind more lot here, more sort now sort Can have markets, new elements of you

Bill Wheat

of will be… Yes. the all D, above. It

Carl Reichardt

one in the is split what kind asking. already, sort terms that of said of but long-term I’m I of

Bill Wheat

big our see a long-term that change know don’t split. in I we’d

a the markets. new to takes takes two longer us just a the to years the house, your of a part tell takes evaluating the is market a lot of a is lot And local business get continually for longer key It year at did feel it to it We it today like the to lots ago. has supply drives it. approved. get will frustration, longer and teams neighborhood than the in the build time, mandate scale same or I you – that built in are We field, value aggregate it share.

And so to continuing challenge we’re that.

to on just housing get our levels, our delivery lot line. current to lots increased lot into those has just longer So our controlled – taking like supply support coming finish to the position increased has relative

Jessica Hansen

market our to expand. has And count continued

markets That’s XXX up in sequentially. just we’re four markets So today.

continue We footprint of as kind to more fill Ohio additional Valley look and our into the to out of make would well. part at continue Midwestern markets sense to that expand

Carl Reichardt

Thanks, everybody.

Bill Wheat

Thank you.

Operator

with from your question Barclays. next live. coming Matthew, is Bouley line Matthew Your is

Matthew Bouley

Good morning, taking for Thank you the everyone. questions.

XX rising cycle had these just of I in all what low point. points mortgage stress the that? on of to times I given those does tests into interest mean are have question you speed do flexing increase cancellations with backlog on I a know coupled have four rates, rates extended we talked and rates. degree sort a and at basis rise So weeks. just in But how point about guess the XXX cancellations play basis this

may buyers that months in several backlog wait have to at point. this You got

think we in So to how do you. cancellations risk about an uptick Thank here?

Bill Wheat

think more interest nominal than I do, and knock we in so demand you people seeing at it, a but it ability the increase still slight Well, much those have out stress qualification qualify. as today tests run again to uptick seen rate spurred we’ve of we’ve and and that further look and

Jessica Hansen

that’s longer mentioned as does. in also to lock the part worried for And Mike the they’re rate to homes an move what think or about interest key not but I selling be construction earlier, of later having cycle

as the time regard completion closer of less risk well. selling we’re that if in So closing, and home to there’s

Matthew Bouley

Yes.

For maybe second the capacity you nature? But Maybe there they in say any to Good. supply simply it some products Okay. example, SKUs. That changes of of of heard And possible point, any the online they structural more times you’re cycle in prefab you are Even there’s point? new at these I this is is at earlier, whatever sense. And improve amount packages? anything significant not coming makes then today, do don’t. is it’s if structural can any single to one making Or again. they adjusting the building not building simplification assuming chain? with on market every a material, there Are year. you’re changes making

Mike Murray

through we distribution, through to understand the it product point increased simplification our product market. it nature that broader that’s the kind I Not to job that David of to sites with and distribution into but to partnering leaders local need of would and by us our it’s gets it’s and in expected a forward those as of the I then and it. our we lot like mean, from our chain need be everything are more do a on empower are teams to think job We process. before, demands communication, faster, to earmarked some a help product that trade We to market, them how market mentioned our definitely national perfect partners purchasing anything always solve when team and unique manufacturers of manufacturer their great do for being visibility purchasing everywhere. and get bottlenecks to certainly are regional of business there give

Matthew Bouley

Great. Well, the thank for you color.

Mike Murray

you. Thank

Operator

coming Your Susan, your Maklari Goldman from question Sachs. next live. Susan with is line is

Susan Maklari

Thank you. Good morning, everyone.

David Auld

morning. Good

Susan Maklari

more – been My change? that in meaningfully much you in a actually first past. the any is in the is the – for there low, lot is meaningful the actually so thinking the fact would use Do is we likelihood about more see increase of you real for ground much seeing lower need anything to market has question just that that think order it incentives is, do more to given us think inventory potential than on the the

David Auld

difficulty sure at in some see in lots growth significantly with say at never point, the but I incentives and up couple you still getting you’re be it’s the on any – demand. is anytime the job of the difficult years. across catch don’t out will – catch It coming. and where the people. then going change inventory of Texas, Florida, the – never, even It’s have next very the Midwest built looking ground Arizonas, the It’s areas influx the to I’m with of where houses the you demand if getting is of balance, up especially to

Susan Maklari

helpful. That’s Okay.

Mike Murray

you of the out use Susan, touched incentives. of inventory it on there, with level the

think be few I the increase to that you’d inventories, of see the X,XXX And at December, homes. significant homes us level especially carrying to inventories. of unsold completed have year for very a of completed end the in low we’re today, time unsold unsold this at

Susan Maklari

Right.

overcome up in and could do the material were follow-up continue and production Okay. thinking COVID? that there does tighter if of the eventually operational the before we to And do to overall you so, Thank how and you can even the level if labor supply environment think an increase think you facing on we that. you the be chain my things your side construction deliver? And about normalized, where is, pressures that relative ability industry, to that catch for then about

David Auld

The back where program goes them that XX, month labor you month oversell month after five I communities. of of the able world. you’ve or keeping and labor gives also aggregation the we’re or and over submarkets can’t those every of kind that very advantageous scale a within to And or market in I releasing a today’s advantage XX, kinds in even same month, houses base where – of to location. after It to it’s communities ability after keeping a three month. is in four two just through them absorption busy, month it XX being control direct – labor can’t the some got

we’ve trying done, with – everything scale. that to long It’s so. So simplifying maintain product, having the running again, well-located market communities and affordability it’s then times,

Susan Maklari

Okay. helpful. Thank That’s very Good luck. you.

David Auld

you. Thank

Jessica Hansen

Thanks, Susan.

Operator

Your is next your with line Bosshard Eric from is coming Eric, Cleveland Research. live. question

Eric Bosshard

morning. Good

David Auld

morning. Good

Eric Bosshard

couple of things. A

flowing First forward, goes impact trough Where on could to through? especially, some where and if of were lumber clarity all, out just especially the in is going how provide trying on on movement outlook cost figure lumber lumber, the you where the the side? costs, goes that and that

Jessica Hansen

Sure.

our on aware. somebody then you’re have remained So as cost I’ll else Lumber costs in and I start of chime rest volatile lumber know can with the structure. really

We summer. have that at had costs below I guess, the spring some saw, purchase into were we well opportunities to peaks the and last

expected and However, months. has a those really rise period really the of lumber lasted hoped prices shorter reductions time probably few again last in for than the we and been on

gross lower lumber in that other our towards lumber also prices. flat then expect margin the is starting caused back in we for costs mix up to closing to volatility other our QX do guide see margins, in do chain hope cost that our gross leans that up costs? slightly into been And but trend QX. there’s So baked slightly supply We a we’ll in delays QX, which

Mike Murray

price a seeing pressures most and of would kind It’s cost be slight mixed I but generally that’s we places think. so been increases, by bag, in offset

relief prices Jessica but this through of lumber with Some that see and back well, the should up, will QX, in help QX, later those closings some of lumber have we be gone year. will early flowing as mentioned, fiscal so as

Jessica Hansen

home typically I prices continue costs follow. with to generally, mean, increase, all really And

in some of until wouldn’t relief in see really way slowdown price you of we cost so expect to see And home appreciation. much sort the

Eric Bosshard

year it were else appears that taking for out, secondly, a year increase on like the but modest more growth, in the the equation, but that a – Okay. and the guide there’s same front selling especially know the But it deliveries, in seems incremental it’s extrapolating just And what that. just I revenue it of optimistic looking the season? than the revenue and considerations position with at then to full math the price more bit

Bill Wheat

moved any in baked revenue are our with see the challenges a increase on as like we on room into nice few into what of to of visibility up the QX months pretty really extrapolation it have We’ve where really selling an times where going continued cycle got But we volume the visibility visibility and our more closing and supply side now. just we to prices feel prices obviously, our Eric, yet. justified more of increasing, prices we sales that construction and had is is the guide. QX in a didn’t annual like that we in feel elongating, Yes, that that prices chain, our

feel really the about priced, guidance we that good year. and for solely it’s So

Eric Bosshard

That sense. you. Thank Okay. makes

Operator

coming Rafe, Rafe is your with next question Jadrosich Your Bank America. of line from is live.

Rafe Jadrosich

for morning. Good Rafe. it’s Thanks Hi, my question. taking

David Auld

Good morning.

Rafe Jadrosich

homebuilding a I segment? rental bit you wanted homebuilding business compared in And you business? to be targeting just compare little the could about then the you’re the talk start how on business. Can the markets returns will rental that to targeting longer-term? rental the in different to And

Mike Murray

trailing business that its a growing segments aggressively, the to investment business So is been inventory and basis. that’s XX% generated produced ramp. Rafe, have what we’re pleased The in growth we’ve profits seeing a relative and about heavy is we’re actually with that on pretty XX-month very returns that, that been

homebuilding to accept of say that the and So of a well. projects have with serve projects for We’ve more line very well, we And excited to up we product expect it’s markets consistent about well that, would our base very seen I investor lot sale well. continue see we especially with would the more to going delivering footprint the as as basis. markets very when that the those to to a seek increase, get on

Rafe Jadrosich

to of sequentially? And quarter how month. ticked of quarter, going first obviously, that home average then the I think pace your up fourth to about you think forward? a increase in the pace a starts, – on terms should compared lot $X,XXX And that in the we What’s about allowing then the

Paul Romanowski

Yes.

our I think to to what of target in an have line divisions ground lots pace well put and hand that position, and lots to in we today permits ahead build of than front us it’s that’s we per a and this and cadence have real operators our sequentially those is plans hope supplier we to and position that who the and to do start allowed developer will and our all operators lot base. relationships having to increase and forth our the plan but the that of community ahead it on on stay our side our across lot a quarter-over-quarter to any long make in increase more continually that incredible puts pace ability sure that us. we to and controlled that’s have strong positions We key start to set with start is communities. in our It’s continue field easier absorption home, not The easier continue.

Rafe Jadrosich

Great. Thank you.

Operator

Markets. from line today Capital for live. Mike is coming question next your Your RBC Dahl with is Mike,

Mike Dahl

my for morning. Good questions. Thanks taking

here, but inventory follow-ups seems guidance fiscal your couple and maybe and one being low-single the first been pretty like year-on-year. for bit, sequentially rebuild XQ last of digits. into you’ve It flat to little Just getting order some a one both a ties successful the

Your easier XQ versus little in get comps a XQ.

on that moving there? the pieces order some can And guide? there can upside about So just why talk be you

Mike Murray

we’re a where production. to think in restriction relative I is still seeing on the inventory getting sales to

real the our the sell of driver So to that’s expectation. to really we’re kind on the homes closer waiting still delivery so and date, sales what’s is

year to sales Our does get in perspective. quarter. a easier comp It certainly in QX still increase from be QX much the this last XX% and a second comp year against is up a

Mike Dahl

it. Got

with to Steve’s questions partnerships kind especially of for buyers on kind sale you one from of backstop potentially rentals Okay. wanted assets. of your around interesting as an scale of a second business and being those I question, follow-up earlier the concept, And because you side that it’s have my of

know take our And even if was conceptually, terms pieces so for-sale to bulk idea the that about just look built look dynamics, can would want someone currently to talk future? sale as at if a for sale, you buyer an the have demand were return that at the like in if and may maybe so bit at it not intended And that slow, the economics opportunities little the how what sale wholesale more buy looking to communities moving have view in were Can could additional rentals. you some I to returns in be there around you would would be institutional to may point some but point community you is, that? what different for very at of bulk time, in and the turn

David Auld

Today, we – to philosophical important. derisk the is But give get because We deliver always sale just homes I’ve we’ve always in affordable another demand because to is our portfolio that land ownership to from it goal are country when believed Mike, believe, out there, fore us believe does going home the be we years is believe more from five and it’s the in a the more our rental are lever. very built standpoint, business. Yes. a now, hard homes than they today. it will platform

touch we for that our the a the that family win platform as because the within market geography, every divisions our – rental we And on that’s going we look to platform, When up, for to the scale that our scale going internally. the to us embedded and segment get opportunity at the in for we can be people to its and and So for own. is it’s all a real in create the just every home, is ability see family. like shareholders risk great – business – and of we geographic that ability feel

Mike Dahl

Okay. Thanks, Dave.

David Auld

You bet.

Operator

Ken live. KeyBanc. question is from next with line coming is Zener Your Ken, your

Ken Zener

Good morning, everybody.

David Auld

Ken. Hey,

Ken Zener

in two better because guys like phones. sequentially. up looks investments Cycle simple One, time questions. slowing, for obviously, time approaching it X% own demand, right? You insatiable is have your the units guys are cycle construction? I are how you in your with were your you Basically, paid inventory

for more that cycle that much you’ll to if compensate the slower time? guys into compress units the You inventory cycle the second XX%. pursue continue will that ground guys half rose Is that you times move pretty to into just throw the

David Auld

targets sales the and consistent we on divisions sustainable deliver and based start and it’s driving closings, talk have to We about capacity those ultimately homes. starts within

Ken Zener

just Okay. in the That’s about realizing I rate fine. – to we it. these you long already, spoke paid could way I the on your approaching mean you’re conference it home. And seems guess, that’s interest call is me this past, you the David, first

the – took You strong a your the you thought. just as about about broad kind strong fact highlighted comment with I Just negative we mortgage of growth. Can on with being first job you mean wrote recently very rate? when your obviously comment guys can it. now the you compared it, to Appreciate real but comfort a demand, perspective your rates

David Auld

house have that it the if your I great cost today, it’s are lock cost your is rates, get than a in in into just bought a more that’s a or interest driving housing year, great XXXXs. – last XX today the a what’s continue overall those inflation, Housing people as even It’s move the because was on to The certainly affordable years thing. up, for it XX%, is at price house, XX% next than it’s was time. as to higher force down mean ability a homeownership going significant a

talk was So just much XX, I really the other that – mean that thing, Ken, that expected. but we I it’s was don’t what when was about, was –

a sometimes a cool buy part than effect And became was from is, it it’s XXXXs. is, people I that’s out my seeing around that’s the to house telling look own in was the good their housing use I’m the They’re the XX an what at narrative over and the the just as I standpoint, what the now big – and for and and better is me – that conversations millennials think of – the want again. XXs. to the look of what there, of at last that’s it way it’s a in millennial affordability at it’s – years look out But on American a stupid demand into at term, is a wealth is. I amazed of at I media is. I’m social less homes just and home everything came daughter and figured look ownership it some what place, happened public demographic You

of how very out on. optimistic and are in company, very what – there, accomplishing what’s going optimistic people our I’m just about about So I’m all I’m this so. and they

Ken Zener

you. Thank

David Auld

answer I I think. if question, your you but thought know don’t I I got it

Ken Zener

you. clear. is Thank All

Jessica Hansen

Okay.

Operator

next Your with is your Patterson is coming Truman question live. line Truman, from Research. Wolfe

Truman Patterson

questions here. Hey, Thanks for my everyone. good morning, taking

know David, want constrained quarter. it you’re at about So growth was really the than one the of difficult just market what your the nice on in when public of share, But asking Or generalize, scanning of growth? plus. builder plus hearing to on of operators fourth I’m the jump land count comments also you for sales XX% the in I be but strong up make prior private to hoping the to ground private competitors. peers? expecting XX% inventory that follow-up are might from And regarding of I’m order home understand XXXX, significantly more in home they market, expecting environment community Are a light this active activity same look expecting all more some quarter, your builder their you new to your down or strong through you or and it had you won’t local pretty

we hoping as through I’m you really XXXX. us through this think can move So help

David Auld

off and have us to looking career complete is in actually We smaller getting got it’s with are they’re out talking having – who this been guys two take harder to going houses. and have as difficult we’re banks. they’re six, my house to who call. become to maybe our setting delivering cut that private private even our are of and they’ve in the ability have And don’t supply them, it’s mean to They’re in of just They homebuilding. I a don’t very markets, next and end probably don’t sideways and the for are a – some public as they to for these and developer seven, finish their going us Anecdotally, to it us. log builders today I builders start. talking driver mean to they The ready eight about for their that’s tired. were market. the result, we time builders the access scale, houses their hard house

if think what the housing is on to decline, do on constraint don’t in at loosen guys, – market the get new box anything non-public. deteriorate built And XX% that private be because to – I that think the lots built that all supply the out, the they’re with to it’s So the big see of don’t is group’s do the ability homes [indiscernible] going ability housing is are and up accelerate to that’s to chains being and the market of in I built up, of you’re this big Even overall houses grow. market cycle, to declines, demand, that has housing being by have you’re the to going continue to start – home market so up front you. I by and going by – the if think that And to picked have consolidation look XX going that you the when market sales continue home top the to they pick doesn’t new ability to public. get publics they’re see share going

happening. So that’s what

Truman Patterson

up soften, can rates better consumer luxury, holds of Okay. let’s are geographies you might active hypothetically, you think demand Fed lack sort all might of think that on with that of And clearly discussion versus supply there does do relatively raising this adult? likely move-up, everything, say, underperform? and debate but all any between impact entry-level, which segment a been demand Interesting. year. have We the There’s lot what

Jessica Hansen

view I This know market. a the – the way probably, contrarian somewhat is of

we Sometimes it builders, to of reacts than continue out buyer think entry-level to generally discretion. an but buyer as need rather entry-level about a

a expect qualify prices of as is lion’s continue to why from. demand, that entry-level share do that although the are the rise affordability We continue buyers a subset and you increase monthly focus to rate of discretionary need. So we an the financially over to price savvy of maybe affordability, absolute those little that’s the on a go, out be to do the because which long-term rates of on negatively to said, as versus bit buying are buyer, continue can more gets impacted, and/or more lose I further buyers more just interest Whereas you curve that focused payment. timing an is

Truman Patterson

Thanks taking Okay. for my questions.

Operator

is Deepa, interest your Fargo of Raghavan coming is Wells time, In with final from line the your Securities. Deepa question live.

Deepa Raghavan

much Hi, thanks for very couple me A for ones in. me. squeezing

like pricing trends, impacted some good it is, the out continually up the on issue. having imbalanced historically this concern its you could there from XXXX doesn’t this homebuilders So Or in priced the rates ask affordability are is the raised structurally ahead out – being let pointed being up or question end do too. Dave, still industry, on like could buyers whole me environment? impaired look time? of it issue My and correlate tight And affordability. end the you affordability year, We to we be too can looks that’s out, having or power the believe at just low XXXX

Mike Murray

can rates would household people across out very and there. to board decision house most today, before. to being current our is as It’s could As in in that buy growth than it’s negative is at economic someone go touched the certainly powerful you and that point inflation good generally so markets at demand, a we’re real relative price competitors a interest going priced we we’ve own not seeing say lower of read the focused inflation out lock interest and home, rate seen expectations. see today to ahead I We a on that sales very and serve. and a be What our we’re be to forward, offices in income

beyond feel you good see XXXX seeing because do still very we much what XXXX. that So in know, we but we’re about to the like sure. for into Hard predict don’t demand just

Deepa Raghavan

can last you as the COVID parts there? can Okay. conceive Ohio Valley That’s met will that engine to move mentioned But you with in pack to newer hard through drive people us when helpful. economic and Dave, decided Midwest It’s we markets. in of job to talk they summer, expanding bags just for growth Ohio post remotely. what’s because their that work you

David Auld

Yes. There is there now. a base big population

universities best the of there. the are that some got country in You’ve

markets. migration financial people long-term, what a been You’re to just smart seeing that incubators, universities. companies areas, areas areas the companies and we’ve think the of grow tank just out these quality major a the life, tech drive into the into historically – which these big is of I’m these are really I’m and/or access to going believer

in You see it Austin.

across in Nashville, what markets. what great big that that what... are cities just those some been great are a towns, historically of the be people of and Columbus. the lot population And the U.S., to You companies offer – tech, than those that they are it that income going high cities, starting There It’s brilliant just has that’s see Indianapolis. it high be and a environment better place find to

Deepa Raghavan

luck. yeah. – Thanks Thanks color right. very good All and much. the Appreciate

David Auld

Thank you.

Operator

we is like questions turn any David would back for floor to the have all That the closing Auld I time today. for comments. over to

David Auld

in Holly. with entire our amazing family, you. and and are on today the look Thank April second are what’s Horton and and our quarter. you quarter accomplishing Horton to represent everybody’s speak the the – D.R. it our you. people you, the the forward outstanding to first results Don in It’s time executive humbled there, with Thank call appreciate We team opportunity

Operator

Thank you, conclude and gentlemen. call. today’s conference ladies This does

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

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