D.R. Horton (DHI) 9 Nov 222022 Q4 Earnings call transcript

Company Profile

Participants

Jessica Hansen	VP, IR
David Auld	President & CEO
Michael Murray	EVP & Co-COO
Paul Romanowski	EVP & Co-COO
Bill Wheat	EVP & CFO
Stephen Kim	Evercore ISI
Carl Reichardt	BTIG
John Lovallo	UBS
Eric Bosshard	Cleveland Research Company
Michael Rehaut	JPMorgan Chase & Co.
Susan Maklari	Goldman Sachs
Alan Ratner	Zelman & Associates
Matthew Bouley	Barclays Bank
Buck Horne	Raymond James & Associates

Call transcript

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Operator

Good morning, and welcome to the Fourth Quarter 2022 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. [Operator Instructions]. I will now turn the call over to Jessica Hansen, Vice President of Investor Relations for D.R. Horton. yours. is floor the Jessica,

Jessica Hansen

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

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

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

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

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

David Auld

Thank you, Jessica. And good morning.

billion XX% in billion. fourth in pretax a increase $X.X team Wheat, Romanowski, We The D.R. consolidated a quarter, are Bill a also Vice Chief Vice year Executive Executive increase our Paul and $X.X which to Mike finished this President Operating call Horton and included joined Financial and our to on solid the President Murray Co-Chief Officers by Officer. with revenues and income XX% and

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

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

increased and of single-family building improved diluted our XX,XXX Our year our revenues basis whole We And closed X.X% a XX.X%, record operations. to a as low. of year points share an SG&A earnings all-time was and XX% pretax profit rental to margin per this XXX our homebuilding of percentage for $XX.XX. in the

return home the consolidated year the equity our on return XX.X% inventory XX.X%. was and many was Our for. on

a strong and significant financial of Our performance broad strength footprint industry-leading of and reflects experienced the diverse market offerings. challenges during teams, product year geographic volatility our share,

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

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

per $X.X inventory on significantly doubled we this more than all homebuilding our homebuilding and share, increased time, equity. During book billion, our liquidity our leverage increasing our also while by XX% value consistently under kept and returns

with see demand buying have we rapid rise mortgage purchase. to most and During inflation In home choose forward our homes a uncertainty, their not with demand year, that made high the of in June, decision and was pause in continued through rates, many general moderation accelerated began in has housing or economic strong. for their buyers to home today. move The coupled

continue and However, the market this and uncertainty points may at resell new demographics rates for supply the transition mortgage price homes persist housing increasing. The of remained of challenging and some affordable both favorable. get demand remains supporting time more if limited could

flexible conditions we our and with product However, teams, supply relationships. to great trade well positioned market lot and offerings, experienced are affordable supplier meet changing

sheet, liquidity us strong flexibility. Our financial provide leverage balance low and

from market product operations. and increased inventory the focus flow managing old share optimize We sales market, and our will our on generate continue cash our turning pace pricing, beat incentives, increase inventory Mike? levels offerings, to homebuilding to and returns,

Michael Murray

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

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

price from quarter We the than was construction X% increased Our homes due average we during $XXX,XXX, for last and closing and year delays. slower XX% sales fourth quarter pace, expected cancellations up the fewer closed a continued up sequentially. to

Ian. South estimate we Florida home were and due approximately to addition, In from Carolina in XXX Hurricane closings September Paul? delayed that

Paul Romanowski

almost sell prior ensure with During certainty construction homes the the of for to cycle sales our mortgage to of rate the later in start home occurring to date and quarter, we better construction. no the homebuyers continued close home

in orders net to down to year fourth was decreased sales prior XX% order sales homes, $X.X net quarter our value the from billion. XX,XXX XX% Our the and

Our quarter quarter. cancellation prior was XX% to the in XX% rate compared in the XX% fourth and quarter year the third during

prior active on net of selling The was was fourth quarter net in number were remained increase, increased In our prior sales orders the X% communities continue cancellation elevated. average price from below but average sequentially from our $XXX,XXX, orders sales sales mortgage Our to the down year the prior year flat quarter. rates rate sequentially. as June up year X% X% and the from October, and levels,

down first XX% our sales As to net Bill? we quarter orders XX% year-over-year. be a approximately result, currently expect to

Bill Wheat

to our homes to X%. quarter our stick increase . The basis foot home prior revenue were the on sequentially increased from up quarter was basis, the Our cost square from basis interest in our and homebuyers revenues lot per but reflects quarter, fourth brick our and X% and from gross backlog rise sequentially square in costs quarter. incentives XX.X% points our ensure in rates. provided brick June margin fourth to rapid foot year stick third the while the XXX and points increased down On during increased closings of gross up a our in mortgage profit sales the the decrease margin X% XXX the cost and per

other traffic to and sales drive locks offering communities. affordability mortgage our interest sales and are concerns to We and to buydowns address rate incentives

adjust are prices to we adjusting market maximize our levels focus necessary. we home and to As on and incentive have to increase, base our inventory conditions turning returns, continued where

expect price sales gross home and XXXX. to levels current We fiscal in sales from average margin decrease our

result, home our a costs working are trade and and are pleased reduce starts Jessica? new with on our our construction progress. to partners we suppliers As with early

Jessica Hansen

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

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

homebuilding we supports fiscal our our from XXXX, while will our annual increase likely In SG&A at platform SG&A its of revenues our in percentage that of our SG&A continue business. homebuilding a adequately percentage expense levels. to Paul? a lowest will control and Our is history, as as current point revenues ensuring

Paul Romanowski

as construction home XX X,XXX our we homes quarter position costs appropriate of starts. XX% which X% XX,XXX to in to our homebuilding and with sequentially. We homes year we as down started a were on future were during ago homes work XX,XXX lower new number year down our the relative to the operations unsold market of inventory, quarter We fewer homes from at September ended of completed. total with an our XX,XXX this inventory began started in conditions. homes We negotiations

the a For week to homes by construction quarter, continued we reflects time closed this lingering quarter, increased which third issues. compared our supply cycle chain

to recently stabilization cycle and started, XXXX. in time see some times However, have we homes our we are in on cycle we expect fiscal improve to beginning

level our demand inventory expect of the We XXXX versus of to homes our our in the we Mike? quarter start increase fourth in adjust quarter first meet will and to fiscal and pace in pace, market. the starts

Michael Murray

which of purchase At lot XXX,XXX were XX% contracts. September and controlled position XX, our of lots, were homebuilding XX% approximately owned consisted through

Our XX% total of or lots total to September. will our June finished finished we and them. decreased position from homebuilding lots controlled by lots lot of are be when XX% our purchase owned XX,XXX are

position. is Our our and based and key lot continually all efficient a our purchases cost. of competitive portfolio and and flexible land current We underwrite expected capital home on to prices lot strong

land transition land our to We market. lot lots, and and the during in housing managing investments and are our pipeline in this development actively meet needs our

we $XX of diligence wrote related in our the option segment and homebuilding contracts terminate future. quarter, deposits land or to During to off option terminated the cost and lot million due expect

option elevated as lot fiscal level portfolio. in we our XXXX We expect remain of write-offs to our manage cost

quarter had segment impairments year. the inventory homebuilding Our the during or no

from Our XX% year fourth sequentially. billion, quarter investments and homebuilding XX% down $X.X the in lots, down prior and development land totaled quarter

$XXX to quarter current $XXX lots, Our investments Paul? consisted $XXX for million million finished and for development acquire land. of land million

Paul Romanowski

of lot company million. quarter, development majority-owned revenues and total sold million, reported of For $XX.X pretax the X,XXX $XXX.X income lots residential Forestar, fourth our

owned lot a year, revenues For pretax lots. of delivered were Horton D.R. lot the with offer. contract of under fourth position a in lots, Forestar's purchases are and billion of quarter the million full subject lots owned At profit generating Horton's September first Forestar. $XXX right $X.X Forestar's was XX,XXX XX,XXX of XX% with margin of or to controlled XX.X%. Forestar XX, D.R. from

is of from Horton of debt-to-capital XX.X%. and with had at approximately separately million Forestar ratio liquidity $XXX D.R. capitalized a net year-end

positioned supply Horton. conditions market Bill? with strong well meet is and to relationship changing a Forestar lot with capitalization, D.R.

Bill Wheat

X.X%. a in income profit pretax of million $X.X margin on $XXX services of revenue, million Financial fourth pretax with the quarter was

competitive the expected, last in discussed Also financial the in pressures as of to increased there forward due mortgage profit the and to primarily commitments due from were quarter, our significant provided this rate quarter, third on fourth rising customers rate quarter call. cost As increased to a pretax lock services locks pull during decreased rates. revenue market margin we of quarter's

revenue, the financial services For million, margin. $XXX XX.X% $XXX a was income pretax profit million pretax of on year, representing

profit be our full but year for fiscal fourth XXXX. margin the pretax financial expect than to fiscal quarter below the We of services XXXX higher

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

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

Michael Murray

sale million operations quarter. and were the from and loss be to fiscal expectations XXXX, rental had projects single-family $XXX income the homes to XXX the going due generated During that Single-family In from delayed rental into that multiple of revenues were a quarter million. buyers' fourth of homes, fourth XX of financing. and projects of our the be rental affected operations the rental single-family multifamily rental sale changes our rental the of were units expected million We markets in sold rental pretax September, and in single-family in XXX XXX generated quarter, which our of Hurricane earning closed multifamily the incurred $XXX in $XX capital were that project $XX in several million, below will results. close were totaling scheduled to due homes projects and closed delayed one our reflected Also Florida, These to October in but quarter first timing Ian. pretax

at $XXX Our single-family September $X.X inventory XX of rental multifamily rental was of rental million $X.X included which billion approximately properties billion, and properties. property

rental As our results in not a revenues reminder, are separately homes rental segment inventories. single-family homebuilding in and and reported segments closed are multifamily or operating our our included

We platform expect our as rental expands in our profits markets. generate XXXX more both increases significant revenues to across operations matures and and Bill? in fiscal

Bill Wheat

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

our a significant our We support conditions provide shareholders. to market platforms leverage our operating low ability a provide for foundation in are to to to strong to maintaining changes balance liquidity with committed during and consistent sheet firm returns and

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

significant provides changing market liquidity conditions. to flexibility Our to adjust

of and net homebuilding leverage was X.X%. cash fiscal XX.X% year-end was Our at homebuilding leverage

stockholders' senior we consolidated was was share at leverage $XXX $XXX per year this fiscal of $XX.XX XX.X%, of XX billion, mature was senior of repaid equity XX% quarter and XX.X%. September net XXXX. that million At notes up value book our leverage have Our from notes and a $XX.X XX, and million ago. cash September during We maturity was and consolidated at

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

total dividends during the million paid During $XXX.X year. we a the $XX.X dividends quarter, for million of of paid cash of

the shares common During million for of $XXX.X the repurchased X.X of million during million we quarter, total $X.X stock billion. a repurchased XX for for shares year

XX% is result, share. a down our to As quarterly count ago. share our strong per Jessica? of $X.XX our Directors dividend Based by X% a from outstanding cash financial on increased year our Board position,

Jessica Hansen

fiscal of markets continued quarter the conditions first capital mortgage impact our and the we business. to to regarding economic forward significantly general XXXX, conditions with expect look persist we that As may rates, challenging market uncertainty

are our and prices gross already have we prices we more just which sales utilizing As necessary average reducing quarter mentioned, more market completed. where quarter today's and sales first in home the in we are incentives margins than will impact the

of are for detailed generate to be but is normal. in of expect operations homebuilding We currently expectations as our $X.X the $X homes than providing XX,XXX ranges quarter standard guidance billion We in to in the due current revenues first for quarter and homes. XX,XXX December closed our consolidated our to the the wider market, billion uncertainty our our range to are to practice by

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

Looking be have further to full season, fiscal housing we will X months out from guidance know specific conditions to selling not the the have for less year are X too macro visibility yet. level we uncertainties now to during what the mentioned. into early is It due market we so spring providing XXXX,

We each can. expectations will quarter color more on give as reassess we and our

to are homebuilding aggregate operations. in We and share well rental positioned our both market

the margins improve and our by market fiscal volume, meet our Our construction to will efforts home determined times XXXX pricing inventory and costs. market closings conditions cycle turns, be and and future

generate are slightly to XXXX. XXXX revenues Our than higher is in goal consolidated fiscal that fiscal

our operations, with dependent to down and for and consistently our our cash the core operations, maintaining we to expect and operations count of increased shares conditions liquidity, by a liquidity, consistently during the to we homebuilding current XX% our cash plan homebuilding priorities flow repurchases repurchasing shares. on in percentage. fiscal low market compared potentially flow to of our We utilization reduce share increased generate end XXXX XXXX leverage of conservative from the and However, strong rate plan of continue year dividend investment fiscal range our tax to includes expectations rental our our flow, XXXX, amount mid-teens cash forecast paying XXXX an balance revenues an We consolidated fiscal to approximately from income among opportunities. David? homebuilding fiscal repurchase

David Auld

results our teams, reflect closing, experienced share, footprint and and In market industry-leading position geographic our broad diverse product offerings.

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

providing are a homeownership This during concludes American operations of year challenges returns, with have volatility, in before mortgage we were remarks. the we record we history, never year rise demand, faced closed in in XXst historic unsustainably remarkable. more completing company's our homes families efforts and by opportunities profit XXXX followed continue which our with year and and and construction operational our the in in faced to most a and improving positioned we periods challenges the in prepared States United Your Despite well XXXX. rates. to This these largest as our high market was builder

host now will questions. We

Operator

Evercore coming [Operator Kim is first Stephen from the Instructions]. And ISI. question from today

Stephen Kim

calendar for to quarter-over-quarter? starts outlook. I in you per the starts the Obviously, specifically many a how us are wanted total increase or you in performance specs your quarter, expect sense give have new all a you year? thanks finished and we pretty about environment. enter solid guys, the in ask maybe tough expecting how specs much, very an as December might year-over-year for maybe much Can information. Thanks community of or you alternatively, And to

Paul Romanowski

for inventory first into and positioned balance are look a similar goals finishing and as the maintain the XX,XXX forward to first as looking through in quarter. homes the Stephen, looking with work to the our year year quarter, we we we

So the closings quarter. starts our with that pace through first expect our keep will

Stephen Kim

Got ... you. And then

Bill Wheat

Yes.

concerned in now of current specs, that what across position normal interest are in environment communities. the buyers In in are terms with to rates That completed position Steve, some more sell a to good completed puts their specs the we're of given be. us our having about going more a

move homes with to have on ready rates schedule. a we confidence can are close their if and So lock into They quickly. that known

Stephen Kim

completed of with that comfortable you're sort That's right? of level the have So saying? is now level, you're you specs maintaining what

Bill Wheat

Yes.

Stephen Kim

relates plans communities that spring selling that to Or could are do give for I environment by lower uncertain your looking lower be line. revamped certainly the to quickly product a a environment costs. a communities be for have Is opening you're second models we comments like then what ongoing. of that's offerings currently you negotiating have understand at And something for expect or that navigating and managing us going difficult out will of say, floor to offering the going communities up. you Okay. of sense to is open, your Maybe the your season can question are able product let's least product swap managing that the us at the your new sense in give negotiation about or will cost we you're in share that open? communities really are But communities. the how offerings, to you the

Michael Murray

starting back planned that to start large, will changes be and and X take communities, those Steve, homes. those and are that our been of neighborhood communities we'll locked quarter in country, starting the X are the the through most That may product most change X recent primarily But today, specification offerings. in the more out months X it we'll a the product -- be smaller changes There across communities months. starting to to in little to our to and in on in and next by are homes first quarter. we phases of that some through start some most see levels have In roll work able continue

David Auld

a certain as release product been And with we every builder, Stephen, lines month. even offering we've that spec houses

So plus first hot like when year. running half of red the it last is was market

tendency release because house bigger and per a dollar have houses You that is the higher. your profit

price a buyers. changing point X-story when release, X,XXX they really made go Now impacting down to square community square X,XXX or more of becomes drops We the the product to the the much valuations foot which ranch, important ASP the community. without foot overall within from the the the

Stephen Kim

really That's Great. helpful.

David Auld

We that lease houses into by control which we production. will

Operator

The John from from next coming UBS. question is Lovallo

John Lovallo

quarter order Can first First seasonality. of guide one implies the us would improvement, and you just quarter-over-quarter puts sort there? takes is the of normal help buck some which with

Bill Wheat

we're to what weeks X and at our our into seeing We're just week. now looking already plans quarter. we're right really, Well, week

positioning think line what an order board we wind seasonality, got one believe happened the with in bit unusual now in I we to community with seeing month QX and our with history, where But we the right bit at last couple look So we're in pace of increasing, we're guided. little across is we've look going still we like And what you at little that rates. time in up. has books. There position that has that's feel in a been the with obviously our And if our we're count our a of unusual as just years. with that

Jessica Hansen

comfortable we've going up in process, available talk we're sales have as well, more our QX loosening to with as cycles, production of us continuing some the into along than heard along we in times, cycle our got improvement had. on the we a restrictions negligible though more about. Even later felt for lot getting you've but And further homes the further sale construction sell

John Lovallo

sense. Makes

sequentially. mix. then Great. much And the of that about like-for-like How Okay. quarter was X% pricing fourth versus in down the ASP

Bill Wheat

this at community, then we we're necessary as point, -- mean, said, I we're and it's Yes, increasing incentives like-for-like. community by where adjusting we're prices.

And change necessarily yet. I mix there's a big don't in been believe so

more from so like-for-like. And likely it's

Operator

The next Reichardt is from Carl question from BTIG. today coming

Carl Reichardt

necessary. how percentage quarter elasticity of of maybe You you cutting prices of where me unit were or Can talked where that prices are about been cuts this sense often demand. percentage what level give orders a some base a communities of base cut it's and in creating necessary

Paul Romanowski

we communities know Carl, can in area. of I get terms or specific don't by that

Those the on significant community to by base have this finding and community by are market market cuts not market. been We point.

been We and have traffic incentives the able needed focused and where financial and to, to adjust and price drive to find rate sales. on we've interest market additional

Jessica Hansen

than guide pricing down we from is new that coming throughout we so price we our we're And to phases, do incentivized reset more date, to a can has of But going communities it way. when year. the lot the mentioned, of base our heavily into in put ASP cuts. it's or shift what know than our been opening terms market And we're new as expect been to Paul base

Carl Reichardt

could of to your your get normal starting And is times bit on that for suppliers, cycle to and the cycle this a pre-pandemic little then to guess Or fiscal that at 'XX? of levels easing much sort too and trades Okay. be point? with would help working see times, in

Michael Murray

last close Anecdotally, it I and a in August, to said late He going started in talking he week. he's to was builder house a December.

pretty lot was house X about a out story, he So houses. That's that. of excited X of

Jessica Hansen

superintended employees. construction -- our equals builder And

Michael Murray

really was about He excited that.

of to by the that we're we're this have levels, later the going that be a make year little but We're want little the all be pre-pandemic think back the way year see completions. the to starts year. we there. starting where We that back of the right progress. I So bit time bit for the to It of up a pick we're to in it of progress pushing Getting we might progress October numbers got in making end through,

David Auld

in it, starts. trade I've industry I think, suppliers we've slowdown while, I the And a under the the the been across-the-board allow it material has -- translated just discipline for just in will get is them. it talked base to but of accused into today kind And about Carl, feet think disciplined, times, of will and but good I do thing. overly situation be think a being going are we get if what a to we where to stays can into optimistic we deliver back able to that be what a will XXXX and at industry house, the it's go now going sell

Carl Reichardt

Well, it starts with one house.

the So guys. color, I appreciate

Operator

Your next is Mike from question coming from Rehaut JPMorgan.

Michael Rehaut

you questions. appreciate I taking my Great.

First I'm to as the lot first works a and perhaps wanted sense your and as would and or it degree fiscal where were But of today even sense a incentives fourth of to cadence magnitude versus just the guidance. off, into what are into thinking where I months margin trying we perhaps just a progression change reflected in get about of November. the they be October being Obviously, incentives gross trend X presume of in that, through quarter of get X quarter the how is and ago? should

Bill Wheat

the high subsequent interest It step at to were quarter, quarter, Xs. of of and by in taking they've start the just were. At mortgage of a rates now And low end Xs. end the stepped into still looking And looking last end the the with the back where mid-Xs. the to quarter, -- the rates they're the in

interest downs from October. that address locks our of the to the And rates. buy lot A that. side reflect to has has interest adjusting the to try with financing payment and have been sequentially quarter the on incentives shock have been rate there through we increased so into and continued And

did We close have on scheduled increase. levels were we a backlog ensuring could close of homes lot our because to in we that to the September. focused continued So have

hold we believe did And adjustments close we that so ensure some backlog. could we price that off on to

started fold more so And a stepped we've into as commonly to in little QX. have adjustments price

market then sequential along on be the a in with And market. and the way. it forward largely it's rates what our happens will efforts So then to the depend going will what increase been meet

We community returns. and are our turn our inventory pace in community maximize order looking hit make to and to by our adjustments sales

find find And market community. so that by and we're to community the looking pace

Michael Rehaut

be answer. on next trends number of increased for with I a little surprise anything bit SG&A revenue I commissions first it stabilization. at see consolidated in if have quarter, wondering it's the not obviously, question, also there's but I'm beyond So come to that would the in should market the we SG&A the be we're to just a difficult, somewhat being how within seem softer that year? as is that obviously, part item appreciate of And the up. that, below, I great.I a environment? first quarter like guess over encouraging the broker that about know given guess around community thinking line gross broker you the But my would projecting guess not I yet second point a SG&A question, guide thoughts the second if any on that and margins

Jessica Hansen

Mike. Sure,

or builders I So separately should those things differently, say. report

broker So in are margin. commissions actually gross for us

impact guide gross for contemplated is that SG&A. in margin incentives particularly increased as on So and of an one our the not us,

Bill Wheat

with And down expected there We're coming driving revenues gain to continue and expected down bit. That's SG&A an of come with positioning our a terms SG&A overall, market of our of as in are increase percentage to off to ASPs revenues. all-time share. in still lows a ourselves

higher of exception variable resulting increase that's as moves all-time or a lows And percentage stable essentially a little of from level with profitability, in the QX. bit expected with with relatively SG&A SG&A revenues that in staying to so the with revenues spend

Operator

next question Matthew from is And Bouley the Barclays. today from coming

Matthew Bouley

on follow-up a the Just incentive side.

including I I think think you and services, I said heard you you things like say that. some were at that the , rate financial within top buydowns

X comments out look services heard financial you all for? incentive should X, on there say that you kind the is Or margin? in the that incentives I side or additional in? we around is in of I So just the gross made is -- think And all that reaching

Bill Wheat

financial There's on our both bit always of guidance depending homebuilding But our incentives sides, gross Matt, our services financing. of margins as on can some of those side for the as and nature our vary into to margin costs well on guides, for guide of incentives. the the yes, the QX going for that related level reflect both a the anticipation

Matthew Bouley

Understood.

just this portfolio? around to that your of that to you expect the abandonments expect secondly, would you the we think that you magnitude And And then of Okay. impairment you of say occur. I on mean thoughts quarter land then kind should actual own mentioned continue would just I kind -- occurred I update any increase? option to heard

Michael Murray

points, With various various developers going to the on option we'll where we're our we land agreement accommodation, with deal. and write-off with cost, working bad be as move forward reach sellers not we decision projects evaluate and a can't at an

if doesn't what the we conditions we or life option of reason have arrangement. that's the sense project, it make be will and the So market the the expect over are

but do those at So and have costs, increase we on an in move quick things, very to may look very realistic a those. we'll expectation, those accurate be we take pretty

David Auld

It's to every program, program. And efficiency in on the the of the that's accelerating approach been disciplined about how I'll when center decision it's just our capital. pause, are add, and creating we both all market land going be And economic our to now continue and we side. was and at very optionality

Jessica Hansen

a cycles, allows way still We're at broad-based of that to position mid-cycle your projecting impairment of terms for any also would remain we that That in gross different right broadly our with healthy we're impairments. our of prior margins there even which gross be guide we're us from don't look long how submarkets. financial terms completely in off impairments expect signify today, levels the margins with some to question, our along to expect we a sort In for said, flexibility do have and on balance land we But term. what it way now, do plan in some sheet forward. I the we that at to being based near the going weaker in very anything

Matthew Bouley

Makes sense.

Operator

from from Cleveland Company. is question next the the And Research Eric coming Bosshard

Eric Bosshard

things. Context, you could, if X around

a XX% XX% component First of going to and with on incentives Obviously, is pricing. of margin gross all, what's that the in XQ.

cost savings on about today side product talked changing mix. You the the or

a making you're baseline path sense that you're in is, a mix, Can margin, forward margin might understand is of bit what look things to support protect give number And the like? the the so you or to improve? gross that to terms us doing just I'm contributing of change what trying what's can little that of and gross that changes to

Paul Romanowski

Yes, Eric.

think X to to I partners out we on suppliers quarter months going in gross provide of to we the first can the to the our the trade value provided best homebuyers. the encouraging is market And we're are end in working and we our towards with as come into through to in the close What visibility cost seeing reduce with year. that those X which next to early margins. isn't homes the for

structure in the with the that expect we to So continue guided gross first we've ground we we still market, the quarter. find have cost to that the see we but like got have homes -- as to margins in

David Auld

And suffer bill through cycle we times. extended did

cost. lumber the So the And of houses will cost trade houses really started and were bear closing that high be our shortages. QX, in

double the and So high more ASP. whammy a normalized you've cost got of

Eric Bosshard

And through that, the upside is margin? is the within is relative both year -- rest that there downside the floor? can and like today, Or to gross of you comment, XQ just the

David Auld

It mean depends see basis I do. I we be see and XXX if rates, the to if capital rates optimistic increase markets about it's do going point year. what this stabilization I we very it's to interest interest to think a challenging we continue feel in quarter-to-quarter very on quarter, what -- year. can

Eric Bosshard

both for you're the just I'm risk is rent, is expectation what sense us that mentioned what you and single-family your give business curious buyers single-family of can of 'XX then secondly, a there's of you around Okay. home doing or in for And others. from if of any much how if of rent, group. buyer the homes and volatility

Michael Murray

So I homes. of is and our those our single-family sort think, $X.X communities current up class. them build asset rental sell approach institutional the of billion, then to investment business the stabilization to rental Rent typically is platform. to owners It's single-family traditional in residential single-family of about that and

Depending but more in of than choosing people they had end of probably to upon not and homes we and expect 'XX, during still go We 'XX from market 'XX. good are to that in lease, the growth demand we we communities. complete a there's growth And the to grow that's these do expect live when going still 'XX. to place they're to we conditions, see the market and needing to end live,

Operator

Alan is question Ratner from coming next The from & Zelman Associates.

Alan Ratner

for margin in the the here, made are all the guess you revenue comments in about just question, as triangulate detail far it. great Thanks I to as all we first concerned so outlook, a the goals to difficult market trying out 'XX. forecast appreciate

the and to at largely about peak look kind points ago, industry. adjustments basis margin we've consistent I of XXX with couple if across XXX think of the a your quarters the it's from net price seen guide, So XQ down I that's

you that things other price goal relief willing that of to are even for environment We're How grow term, to what, going you think margin that sensitivity recognizing slow cost there? be take the versus start target difficult. revenues the potential to low to say, of the or chase and that the How coming is low maybe could longer hit growth that some before know achieving you But could back order hold pace. that 'XX what's not too just we're your the goal? you term, that low about going price to the near year in because As or revenue to go end offset. you kind margin your in maybe have range, that

Bill Wheat

best to pricing incentives return. always We're there's what that and turning in balance. and always doing generate and Alan, the balancing versus we're what a results inventory on pace margin

that may what to and may what our in those throughout be to know to to too terms the all balance of macro be. year decisions economy uncertain general of the in early It's the environment rates, need And terms communities so we'll in exactly bring know the trying across too year. of strike terms

as willing but we're we don't what provide looking that's in in the pace. is push as may where go things, into to so to to much pricing why really margin we're around do color reality, those in And how have conditions so to where we spring can at trying need any specificity 'XX or visibility we're to might terms the what on line be or or to and of

day remains going to we march We're week be those be forward decisions to day, seen. here. think I as week to to making

Jessica Hansen

don't so at it by as then local managed push level market And blend know, dictate our you overall. or can that we It community we market returns really make community, maximizing and sure from the a is we're high level. by

Alan Ratner

guess experiencing pushed borrowing I segment, this the delays how the thought maybe projects heard quarter your in the I of costs because that would that counterparties underwriting. presumably got of out Rental I the so are appreciate there. impacts I higher couple Okay. you thoughts on hear also the that I but Florida, that a close and thought

well will, investors. new on I here, concerned growth least that widening do at the building. costs a you in given borrowing So side difficulty guess what's segment and But been the or not mean, the or inventory that to on bit you of concerned with spread how costs. about a hearing just you are I'm expect thinking certainly we're loud out has for borrowing going there's I the bid-ask if those stalemate, a underwriting rental as

there that elevated? So risk achieve what's any you sensitivity to the borrowing remain that to Is growth? costs for if

Paul Romanowski

but plenty to buyers of in that But cases, there. credit side, have buyers on our markets be our out apartment we've their in side, to to to from sizes. single-family bit and relative borrowing we to just markets complete. ability lower to rental are the market. the be they're that's needs end on market. purchase. base pause see those taking everyone a still the in got seen certainly some Alan, homes still credit single-family in rent tend that homebuyer the in buyer expect And X,XXX evaluate on side about of or the to people for from there's communities production borrow beginning that soften, a Not We and Like to the

about did that still we and into so the feel closed quarter.So... we in be to we pushed certainly And see sold communities second that quarter the expected good fourth but business,

Alan Ratner

your those And when you you and you if penciling. a deals as work construction well? are can can today, buyer buyer seeing if as those underwrite at close other math the still under In and assume you're deals look or a that words, make theoretically or completed that you're

Paul Romanowski

Yes. our underwriting. very we conservative on have been And

on we are looking as for-sale side. at the We each really of would communities those

the market underwriting. and ones outperformed ago our And so far were the year on the saw last a we performance sold through the in that we year,

and in business still that adjusts adjust terms we we in feel so the the about And have, forward. on that active the go market we as good of will position communities a

Michael Murray

projects an prior those communities 'XX. Alan, is the their had say -- more business valuation. now related sale to we're good for change a willing come markets in think, construction to their to the I delays before expectation and did were of of back We our buyer expectations we that more normalized single-family on we understatement on -- going hands and same they And to and point in get that get that experienced to stabilization. They products would in indications were of the issue, we buyer. fiscal get very the just to early a in close excited to The completion a stabilized be to interest and and full prior they're some

Alan Ratner

to sneak and necessarily one, on to turn and If capital a more here you're occupancy, of fundamentals term willing and for the community of could good good topic the markets just environment kind in of but shift apologize, strategy in to rents. looking last grow level, to on kind still then one hold to here, and your Are wait the of near this improve? assets the I borrowing where you're costs relevant really portfolio In and tough the goal you the the balance Or to here. to assets? I good the rise sheet remain these capital continue the seeing environment at not it's is but transaction stabilized

Bill Wheat

perspective capital timing Our a which to base a But in bit be stay manage timing going to flexible is generally stay be do to we the typically of in That in to generate we the some able want best if we're from to sure last a we a to when model position don't to will to assets. that But still slower a make able manage manage that return. long. sure to position sell necessary, process, business make due disruptions markets, necessary. capital the

Operator

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

Buck Horne

the was rate was if I directionally cancellation could indicate happened in you just the could I whether October quarter think than I elevated. was that in wondering fourth lower mentioned October. you was what cancellation in wondering the remained if -- rate or you higher

Jessica Hansen

the, October But quarter, volatility we month-to-month throughout high market rate specifically the for did give us so Yes. QX. see can as improvement to certainly it the teens month. call for and in have above typically anything our elevated, not it, we don't XXs, low in We to XXs compared any is low

Buck Horne

rates interest have Okay. higher we as Appreciate about terms can behaved And marched that. and buyer of quarter either just during how differences talk of the the in levels traffic any through progression interest regional of October. kind

geographies? Just buyers through are how kind behaving kind map the in of where and are things of different -- just us walk

Michael Murray

see but within see do what large majority the see that still a wanting our as challenging we And demand to see we're We've home, them in to be We them. models. that is we're that passed traffic looking our payment construction, to we and have when be the rate our in just to with meet it. afforded of interest buyer window from that affordability stage when qualified. of sometimes homes rates our lot can stabilization We a get from in in of certain is able sales there, restriction of periods sale, certainty coming process can into the that more a still lock little But stabilized people rates. selling see a get seen not the of

more important that the process accelerate window. rate production can to been the us And the for so cycle in later within times, that's lock interest we have inventoried deliver

Buck Horne

of curious, of strength Right. geographically? pockets kind I'm just

David Auld

up that same last buyers. is mean, markets market quarter -- I are buyers picked again is experienced relocate Just of it's maybe our from relocation the I think, There inflow homes. in migration geographically, evolving to I it's or think out a caught -- into is in the percentage out is, -- easy up urban taking exceeds It's formation word. the there's urban housing place of supply the get term. best that still And suburbs. the of short of the still there

tell Our 'XX. QX, efforts is and I to long focused goal our term. here 'XX stay in are and you, positioning on QX can And the for now QX,

reaction, short-term out. we're get to improve trying and develop, to out built where the continues to but so And this as we of stay do be want platform

Operator

is next The from question coming Maklari Susan from Goldman Sachs.

Susan Maklari

bit. going that My how from and if that And to Can land there progressing is talk hearing is are sellers? is any? how a market changing? question you're what And coming is changing the What is the first together. back option getting contracts you those renegotiations the you're about market as pushback some the the of of

Paul Romanowski

Yes, Susan.

proactive in and partners very terms it and expectations sellers have land realistic our moves. market with the We development of as with been

to received land that so and and to position Then where from having we deals can. So we be, just those will, everyone relatively made the those have headlines decisions keep of And and understanding make largely, to sense. options. to by been working have reading alive lots receptive extent the come with move walk the option a the Talk. that to be we're have But market place where ultimately are. our contracts of the the the and strategy. through make they have is. in they underwriting to else large, and some doesn't why in are those They understanding the well that it But to and needs have like we To shift away us with want we if that's Table

David Auld

community builder. goals our treat our to downturn, every we're our existing is that transparent. our like where they're to we're kind of our is And what we part relationships favorite that treat and we still and built them family. And pace going start And mean, today out division and are of coming They the attempt development be for understand what nation is. of are last in headed better. the I very community, the partners we expectations to every treat

So transparency how that's we communication, really and consistency audit do believe build and direct relationships. and in the you and

Susan Maklari

Yes.

can about talk capital you buybacks market think then XXXX? and how a allocation? especially as of uses are changing, about bit maybe As about thoughts Okay. is we thinking the on you And cash the different any

Bill Wheat

in balanced to how all. position provide returns our to repurchases. share dividends our home But we'll continue us to able of decisions, to into conditions. increase level, the in do to flexibility and in the continue our to be in Obviously, our XXXX. into we in shareholders, with consistency a adjusting in flexible Yes, expect operations approach at take generate and continue rental those business fiscal an a gives market terms and base even balance of more Sue, to homebuilding cash be We're help a same we'll the based in both we land increased from to more the starts and that And business with of much invest it terms approach. good, on that, to the make relative but and

Operator

David questions back Auld remarks. we morning. Thank would the this time, for I this At you. for turn time is to that to have floor like And closing all the

David Auld

family again to day. on in Thank focused, look you our another D.R. Tom. remarkable And results compete speaking for today win hungry, go with and you. humble, finally, to every Horton the time to stay We year. January. share everybody's entire appreciate and quarter the congratulations Stay you, Thank stay call first forward

Operator

gentlemen, call. conclude Thank this does today's conference you. Ladies and

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

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