D.R. Horton (DHI) 24 Jan 232023 Q1 Earnings call transcript

Company Profile

Participants

Jessica Hansen	Vice President, Investor Relations
David Auld	President & Chief Executive Officer
Mike Murray	Executive Vice President & Co-Chief Operating Officer
Paul Romanowski	Executive Vice President & Co-Chief Operating Officer
Bill Wheat	Executive Vice President & Chief Financial Officer
Carl Reichardt	BTIG
Matthew Bouley	Barclays
John Lovallo	UBS
Stephen Kim	Evercore ISI
Mike Rehaut	JPMorgan
Truman Patterson	Wolfe Research
Eric Bosshard	Cleveland Research
Anthony Pettinari	Citi
Buck Horne	Raymond James
Alan Ratner	Zelman & Associates
Mike Dahl	RBC Capital Markets
Jay McCanless	Wedbush
Rafe Jadrosich	Bank of America

Call transcript

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Operator

Good morning, and welcome to the First Quarter 2023 Earnings Conference Call for D.R. Horton, America’s Builder, the largest builder in the United States. There will be an opportunity to ask questions on today’s call. [Operator Instructions] During today’s Q&A, we ask that participants limit themselves to one question and one follow-up.

I will now turn the call over to Jessica Hansen, Vice President of Investor Relations for D.R. Horton.

Jessica Hansen

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

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

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

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

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

David Auld

Bill morning. Officer. good our Thank Financial you, and to Murray joined also Executive be this Chief am Jessica, and Vice and call Paul our Wheat, I Co-Chief Executive Officers; and Operating pleased Romanowski, on President and Mike by Vice Presidents

per delivered a share. Horton team quarter, by of The first diluted D.R. highlighted earnings solid $X.XX

on Our XX.X%. pre-tax increase margin in consolidated X% revenue a a billion, profit pre-tax was with of $X.X income

housing our year. same June today, due and was more and to December than XX,XXX high inventory challenges months on uncertainty. XX.X%. Beginning equity in coupled sold the seen for in what through is closed demand for the homes general XX,XXX XX we seasonally still return over in slowest by period ended Our inflation on XXst significant continuing have moderation mortgage pressures, affordability with of and and was XX.X% typically return caused trailing the a these the consolidated we economic rise in rates, homes XXXX homebuilding the Despite quarter

increased We activity first January. seen sales few in of weeks have the

persist rates both supply the and new at economic favorable. and homes While time, limited, demographics demand uncertainty price a points may higher supporting for remained resale some mortgage of and the housing remains portable

We challenging market well-positioned conditions our the are creative and flexible offerings, supply relationships. supplier navigate current affordable operators, experienced lot with to product great

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

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

Mike Murray

per quarter. Earnings compared diluted $X.XX for million, to year for on billion. $XXX.X first a fiscal income XXXX $X.XX per to the in decreased prior quarter increase share the revenues Net to the in to consolidated quarter $X.X XX% of share XX% X% decreased

closed Our first on on billion were year. sales closed compared XX,XXX in homes to prior $X.X XX,XXX quarter home billion, homes the $X.X

was Paul? quarter the quarter X% $XXX,XXX, down up and the prior Our for sequentially. X% average closing price from year

Paul Romanowski

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

elevated XX%, typical. was down quarter from but XX% first the for rate still our from sequentially, cancellation Our

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

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

quarter. the was $XXX,XXX, in orders X% down sales price year prior average the The sales quarter from of net first

where necessary and We other buy-downs incentives inventory to communities, drive the home to on optimize and we our and rate locks to traffic prices returns are offer to continuing investments. are mortgage our interest reducing

Our second the completed and significantly compared net and expect trends, current levels sale. its of our market we quarter on based sales homes selling inventory of conditions season, strength first sales Bill? quarter seasonal depend currently as the second available higher to quarter spring historical on orders will volume for in the of

Bill Wheat

during were our a costs first September Our costs higher home construction along sales on gross sales incurred and sequentially, stick-and-brick foot with per from revenues in square lock home September from gross expectations profit we in margin and XXX XXXX, quarter. basis, the was sequentially was down the margin flat. home line X% decrease were in X% increased to revenues basis December foot with sales incentives increased reflects the The XX.X%, our down reductions. and quarter points square price cost On per

our price to home expect margin and second average both XXXX. sales We in sales our fiscal quarter further decrease gross for

and to our continuing starts. are with on We construction home reduce to suppliers work trade our partners new costs

on not costs to expect fiscal closed We from Jessica? much are in do these lower we XXXX. benefit see efforts, making homes in progress but

Jessica Hansen

In percentage was quarter as expenses from revenues the SG&A the in prior the X.X%, X% year. homebuilding from a of and expense year XX increased up quarter, first homebuilding same by our SG&A points last basis

We ensuring are this controlling while market our business. during our platform SG&A supports Paul? adequately our transition

Paul Romanowski

homes completed. and were the a our quarter homes were of X% starts down inventory, year-ago XX,XXX the X,XXX home December XX,XXX of our down quarter unsold, increased in XX,XXX ended sequentially. with slightly which from and last homes at from XX% We to XX

to towards focused With our more sale, housing increase in completed of inventory We sold mix for turnover. normal expect our not homes back same closed our levels. we improving available and homes historical are on the quarter

days quarter, to reflects supply chain few time For fully lingering a cycle our this issues. we fourth construction compared by which quarter, increased closed homes

in to some improve expect seeing recently However, have we that times we we and stabilization fiscal times on are cycle the XXXX. during cycle homes started

evaluate to our pace and market continue and homes and start current based will adjust Mike? inventory We demand on conditions.

Mike Murray

contracts. XXX,XXX XX% lots, which of were of lot owned and consisted purchase approximately home controlled building position XXst Our through at XX% December were

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

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

managing We lots, investments our on and are land, land actively in conditions. development market based current

purchase quarter, related incurred impairments $X.X million costs due During homebuilding land $XX.X the contracts. and off our and wrote segment of million option diligence and deposits of to lot inventory

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

quarter lots, sequentially. XX% XX% up down $X.X Our totaled land, development first from building quarter investments billion, and in prior home year the and

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

Bill Wheat

of sales income Financial The quarter was primarily rate a increased on homebuyers conditions, due revenues $XX.X a in the gains conversion of quarter quarter. of on XX.X%. competitive by $XXX with during million was services profitability lower pre-tax million pre-tax business December lower lots to of our and profit the interest and financial this first volume services mortgages, lower

expect to full lower our XXXX services than profit the to quarter, fiscal financial of than We pre-tax the be XXXX. first margin year fiscal higher but for

operations from to and homes XX% homebuyers. XX% quarter, related mortgage building to originations loan home of for buyer closed first financing handled company's our the our the mortgage company During

with accounted score an ratio an this of average originating and loans DHI loan-to-value the quarter Mortgage VA of average FICO mortgage are XX% company's X.X and of FHA for had loans XX%. volume. Borrowers

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

Mike Murray

pre-tax units, revenues Our XXX earning generated rental single-family of first million. multi-family sale rental and rental from operations the million quarter $XXX $XXX income homes during the XXX of of

$X.X approximately of Our which rental of properties multi-family at rental $X December property XXst inventory included and $X.X properties. billion was single-family rental billion, billion

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

quarter, in fewer no rental and currently second rental multifamily we the to sales the For than first single-family homes expect close quarter.

Paul?

Paul Romanowski

$XXX.X residential lots lot development on X,XXX revenues reported $XX.X first of total the majority-owned Forestar, company quarter. of income pre-tax and million for sold our million

Forestar's to owned with $XXX D.R. our under XX,XXX lots. a Forestar's from purchased XXst lots lots Forestar. were of Horton. to quarter right of subject at million of the December XX% was owned lot first controlled offer first in are and contract or finished position

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

well-positioned challenging lot market capitalization, current and strong with the Bill? meet supply is its conditions Horton. to relationship Forestar with D.R.

Bill Wheat

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

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

of $X capacity year, we and million. billion homebuilding provided homebuilding first cash of our $XXX.X $X homebuilding At provided $X unrestricted by the was our our of facility. months XXst, revolving cash three available liquidity, million, of operations on homebuilding of consisting During billion had and operations was $XXX.X the consolidated December cash billion by credit

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

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

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

equity was our trailing the XX XX.X%. ended return For months December, on

$XX.X in we dividends as at last dividend quarter, February. cash quarterly to Board be and same of the declared the paid million a paid quarter our level During has

for $XXX.X million common we During stock X.X quarter, the repurchased shares of million. Jessica?

Jessica Hansen

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

standard guidance the We are spring conditions so for early specific as year selling to is second still housing of during are guidance know our providing height practice, the quarter what the the is yet. market too it not will providing be for detailed but full season, we

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

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

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

Our higher goal XXXX. XXXX slightly than fiscal remains or consolidated fiscal to generate in revenues

The low expect from realistic down revenues and to from year our we decline which XXXX percentage, end revenues current expectations of is are range actions a is that unchanged taking. full the consolidated year-over-year, by includes given last our quarter. environment fiscal will mid-teens of pricing it However,

income an We approximately the XX.X% forecast year rate tax of for to

XX%.

We generate a and basis to homebuilding flow cash fiscal increased XXXX on compared XXXX. expect in consolidated operations from to our fiscal

our as year with investment this opportunities. on plan during of share and cash similar at repurchase repurchases liquidity, We count a last also the dollar to year dependent amount shares market reduce volume our flow, to conditions our

notes XXXX, We have leverage senior which remainder are balance the cash. our We David? consistently currently we to to flow operations, rental conservative preparing core $XXX dividend of priorities of million repurchasing maintaining from and fiscal liquidity, matured that utilization increased cash among homebuilding an homebuilding continue our plan strong paying repay during and our shares. operations, to

David Auld

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

to low sheet, strong changing and provide with flexibility share. and in effectively operate conditions liquidity economic Our us leverage aggregating market balance significant continue financial

We dividends maintain which the a on through approach enhance the capital both disciplined shareholders repurchases long-term value to capital basis. returning our share to of includes plan investing to consistent to our and company,

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

providing to continue homeownership positioned improving our well incredibly opportunities in to families. more operations are American We

our concludes remarks. This prepared

host We now will questions.

Operator

floor for is your live. [Operator coming questions. Carl, you. from question Reichardt Instructions] And Thank is the is first BTIG. from open line now The Carl

go ahead. may You

Carl Reichardt

inventory, inventory. morning, Thanks. I unsold about Good just to everybody. ask want

the that So of you've inventory now about unsold. two-thirds is got

yet? should supply price little which is to a when that because for want first go I ready the it's you chain necessarily be be optimistic get I that the ready or product and because I about sure, normally, so back you've should move looked, my That's perhaps allowing in normalizing spring to think inventory haven't to make half you got question. went we we just is or more pessimistic to

David Auld

better very inventory our And to about last to the Well, optimistic. cost three, and Carl know, you align deliver. I'm ability as through We you sales good demand feel inventory quarters know, four always we through our position. the limited

position consider and our we're inventory what We positioned quarter. feel I good again, in normalized about more heading would a this are very position into and where now

Mike Murray

little front a But Normally spring spec normal we'd coming good our feel the into selling XX% really be now season, about of we right for what heavier have than us demand. ratio. in

Carl Reichardt

post-COVID four years saw now of of lot so, benefited smaller count pandemic. you And I obviously XXX markets and entering the amount about market I a markets think Okay. And or a then were the ago, demand, all -- looking XX we're at was say a fair by about lot. post that's you that

talk over the last potentially that six of smaller especially, that is some what wave tertiary city Now the new, the crested, are performing call the I about can course you months? of the markets how

Are or back little than beginning then major seen some we've large more they the return the to to that markets to competitors, wane better guys. Thanks a of growth is office that less cities? now

Paul Romanowski

that competition in Carl, secondary more certainly entered a strong these the those secondary with markets that we've and markets. markets we markets for to and moving secondary seen us We glad progression mobile all with in saw people newer been we've the limited the markets them well making push happy performing pandemic them. a due to

David Auld

we before to a control in SG&A Carl. to able the pandemic, very else it incrementally ability markets. the anybody comes Yeah and back what and to deliver small add do. out competitive well ultimately, advantage did is to Even there houses the And

So, part be to continue a our program part a to think you're that program. going our been and see of I of that's

Carl Reichardt

Thanks, David.

Operator

And Bouley Matthew is from Barclays. line your is Matthew, the from coming next live. Thank you. question

Matthew Bouley

at but fiscal for you see construction were to Morning close environment, I'm on through I on you think everyone. not homes expecting perhaps side heard much ask Thank the the paraphrasing about cost making questions. the to say as taking the XXXX? progress I cost some you that benefit but top Want construction

seeing your peers of of benefits have the already some cost quantified, of side. be the they some sort on might construction Obviously

you curious share can here? if ability you. little market just out guys as as think about, So, parse press a aggregate you on that your sort bit we Thank to of costs

Mike Murray

partners bit have occurred, really successful little up prolonged show we've from in a but our our working more it cost. with from takes that just the price of the with of changes the while trade tailwind end the been lumber actually front gotten times. in especially certainly And build for cost those We've lowering a lot a reductions on to recently closing,

it's pipeline. calendar cost structures through just function the a new working the those So, of

the in XXXX year in see started largely, a in we deliveries the So, cost of especially different fiscal were environment. first half XXXX

Jessica Hansen

lumber prices the up throughout as typically And go we move spring.

starts lumber headwind lumber are from benefit if cost today, seasonality those would a home reductions to. actually the on that a seeing alluded be we're typical we holds, seeing Mike although So against just that new

Matthew Bouley

following Got Okay. And you. that the up for Thank color. around you environment. then second one, just pricing

your I guys strategies on the here. would peers spring, you you've the leading get we the into versus aggressively As of pricing to might pace side react see different builders some enacted, expect I ground I versus more that argue as around we on some have -- perhaps been seen first, pricing guess, And guess.

and around side your So expectations are what and your ground we the are to that? now Thank spring, the through competition would right you expect on lower the into see pricing or leg on reductions seeing price margin another all you. you what as get perhaps and

David Auld

addressed a balance along with our incentives, still community adjusting drive by that price the buy-downs, rate have we're looking returns incentives community We for. of with to financial

by lead As into that market we to happy drive community. seeing some to the spring enter season, absorptions to the selling the continue we're we'll adjust with we're as and starts seasonality

Matthew Bouley

All good right. Thank luck. you very much, and

Operator

the line Lovallo And is from coming you. UBS. next John Thank live. is your question from John,

John Lovallo

guys, thanks for morning taking questions. Good and my

of relative first you year-over-year? first how elaborate activity, one mentioned and bit can January sequentially on few that December? were weeks you weeks it maybe frame saw just first The a of to in January incentives And few the is or the maybe little increased

Jessica Hansen

Yeah.

about to that in terms we do call of the the sales. seasonality normal QX we on So talked from see to expect move QX

the see say seasonality, to sales what few about orders. activity QX we saw could would happen the January to this normal weeks QX confidence a spring, still net in we gave which early sales early say be so typically XX% And what's of but terms from terms is indicator. ultimately in up it positive was us increased going to that the of first too in to of It

We only quarter, in the us a it’s slight confidence doesn't a see our net also in give a in helps well, increased sales orders which which cancellation but a improvement rate versus weeks, slight January also as make we've an did improvement, to say seen of level few QX. QX

John Lovallo

like debt. expectations. we dividends, paying flow it's just seems to back Got talk it. And down could stock, then pretty in going It be you're helpful. I cash robust $XXX That's paying million maybe mean here. buying about

flow rental cash for maybe your be? might for expectations So what expectation and just the investment

David Auld

expect XXXX inventory We saw from flow our versus Yeah, our down fiscal step slightly cash fiscal still in quarter. increased homebuilding we operations this XXXX.

into in increasing adjusting we spring move will and start our market We what as to that pace then be see the we demand.

generation see still not to So robust same cash. may quarter, do continue expect we see of we pace as to did in first the but our we cash

we're take to to going homebuilding deploying business. to foremost next that rental business then continue the balanced the to And approach our of first

market revenues in evaluating We number see increase move for not do we through a fiscal that while a this but substantial because the a we will investments to quite we're increase growth business assets and year, guiding year, increase level expect that as significant still we evaluating the of we're in the see business. still inventory XXXX our yet rental in there to specific in

continue we to will dividends continue pay And past to that, and then repurchase shares.

dollar which a XXXX. last share for as greater year, repurchases of billion $X repurchase shares similar expect volume to would than indicate We fiscal at

and we're we the capital flow cash. just currently, million February, debt that leverage in from mature with XXXX, while not. along to we're pleased our whether front, off cash. those evaluate million But of preparing finally, fiscal level, on with million from And preparing August. overall balance in way $XXX expectations, to given have notes XXX the And determine XXX environment But refinance those in to do sheet we'll maturities very then pay we cash senior the pay or to to markets right obviously, now, want our

John Lovallo

Great. helpful. you. Thank Very

Operator

And from coming Stephen, Stephen line question Evercore live. from ISI. the is you. Kim next Thank your is

Stephen Kim

Lots wanted though. Matt's Thanks Great. I I much, negotiations, good very information. on, think, of the to up follow question regarding guys. cost

you benefit could had wondering third product to little least think was process or that fiscal or repositioning by your you that I maybe longer then last was volunteered to And costs quarter starting benefit I if – a you or think quarter, see taking sort the certainly you him, and sort were separate of labor at your your increase. that that suggested not of whether from in comments just to lumber assuming to going were the sort from the your of answer you is negotiations. product mentioned on I also

And in where get halfway are an how I a sort conservatively just like lumber? it Are it -- wanted assumption see was sense, much much of go you year. you of back you might or to to of assuming might how modeling increase just an last

you're Just lumber, give that knowing for yet, what a obviously. outlook us know don't in your sense for incorporating you

David Auld

higher, would season, cost which the seeing back that some normalized normal we taking with on environment, and if the in cost see would drive know. lumber demand conservative don't spring -- offset And like-for-like prices seasonal looking are the seasonality, a a we importantly, lumber spring reductions. fact increase efforts Most stance do of probably we've we're coming we -- seasonally that expect the through do selling in to made some at

material affordable home to out, to to We have out a benefit reflected going of little help homes, for homes terms it's more product take -- smaller system get in product that to today's new but environment, through that like-for-like the while should starts are been a able cost new in more a increase, move starts that way.

Stephen Kim

a I hear there. number didn't

I to didn't think getting write number hear I a a number. was down. I ready

just a of us sort Yes. increase. or sense give might to way sort want of back much thinking like You how lumber of the

David Auld

that not to approach go for just in our that have our have deliveries don't I'm seasonally at spring. We We're tends on going probably a conservative to And number, the Steve, predicting. cost a lumber up the and sorry. good year. We're an later sense that's a taking impact in

Bill Wheat

market. there It does returning some the normalcy feel like Stephen, is to

stay you fighting Absolutely, the year, happened what last and are. like we commodity are that so Are But price go back be guidance? XX go at lumber look go our back? going we we in months? conservative And may Yes. up, – same. may the pre-pandemic get during you Yes. to get may costs our inflated down,

Stephen Kim

lumber think in that I bit. that And No lot up regards lots lot count, little because your take if complaints up goes a of -- we'll noticed owned numbers count here. I say it. I'll your In normalization, to of went numbers

I in it preceding declined, quarters quarter-on-quarter, last think had that. two the believe, I

a So, two see cost do or lots? I'm Just at a supply might that, are from are further owned will like actually what be, least or give we the you -- reduction year units? in us -- preceding for to sense lots that in quarters here, your you more in your not -- might number but try actual absolute number feel you of think sorry, increase last sorry, in like your last curious, the do -- lot you owned

David Auld

Yes, Stephen.

position We continuing lot relationships, -- have on built a that and lot graph. with to we're get and the hard have we those that we've the hard still worked for it's the to developer relationships

increase marginally and down our season expect we expect as to a of this that to And to the increase XXXX. continue so don't through owned our and total market. lot count rest of lot we see we and with But to of -- spring go that selling through what the we depend numbers, owned a on supply expect percentage some will percent see and potentially as fiscal

Jessica Hansen

finished is is our reference, XX,XXX which again, only lots. a lots as roughly XX%, percentage And owned

position perspective, So, continue ourselves community-by-community. from finished lot which forward we're oversupplied by a no is to to what means trying we're

Stephen Kim

Got much guys. you. so Thanks

Operator

your coming line is live. Mike is JPMorgan. Thank from Rehaut Mike from The next you. question

Mike Rehaut

just circle improvement you versus an comments. basis could to in decline my XX% back That in only order for demand down just a trend XX% everyone. that to on see typical and orders Thanks. straightforward the of we're that that to if I increased roughly first Good of your would saw some recent Thanks Obviously, and mentioned XQ more January, weeks questions. few imply a morning wanted you XQ. activity year-over-year. taking take

I'm know So, -- kind hard or and curious given around how a thinking that's should I But if if you be we about haven't things? of range. that's guidance directionally,

also saw of And during that to of give a you kind continuation in past this if saw in could January I December during perhaps color point trend improvement trends first was around a the January, your quarter? any you you change in improvement around that the was also if curious intra-quarter that quarter,

Jessica Hansen

quarter, we on the the the Mike, is year. as seasonally I mentioned December during quarter you would slowest the as say of call, know,

of felt we first weeks we So, pleased whole see as lot and of that the color, generally move December, happens about we've weeks. based what would we with seen monthly through to give first in conditions don't generally what expect we're typically talking that January, these we a we warranted current few but don't November, is like few and and that's extrapolate market anything October, on

David Auld

result in very it year-over-year, seasonality, laid but In sequentially. would nicely the If out. sales up normal still see terms you that of down yes, do math net we that

Mike Rehaut

and construction costs the Right. a there's of And around impact secondly, there. the I questions know been couple

has quarter, part to how And you're second has June pricing gross occurred last been I the the give expecting that's could that how and you for trends basis, on a sense though much Obviously, to another of is margin pricing from guidance pretty covered today? of the year think wanted I And two? the or in further month focus down well. a also if us of net on come last much market. in big total declines.

Bill Wheat

In quarter the pricing, really, sales just terms best in and average sales net our orders that indication. price on the of is the

course, last order quarter a little believe. year, around XXX,XXX. of And, Our this XXX,XXX, net sales over is peaked I we price

you're XX% a So net in already at roughly sales decline our looking orders.

forward, demand our going margin through we've We're we're we cost assess already then pricing significant normal along but would be spring account during as spring. see the pricing month-to-month been discussing. And we look further takes that effect. that and our normal the into not some and we necessary, margin hopeful pricing recent into go going with if guide at that guide seasonality the reductions week-to-week taking gross we're to trends as But recent that

David Auld

Just to add, it a It's ground. to to undersupplied. is on the very hard the still very And put is houses. lot market build overall hard

So going deal long-term, next it the happens in got I market what a great outlook the we've think We're to quarter. with as comes.

Mike Rehaut

Great. much. Thanks so

Operator

Thank from Wolfe next Truman question Research. you. is line Patterson from is The live. coming your Truman,

Truman Patterson

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

the market land quarter-over-quarter. price just still it or to all too with land at correct starting tell? the see has first, X% on kind of Are to declines, So you actually more your is at capitulate market started to all meaningful takedown pricing with alls, early ASPs down

Bill Wheat

call, of earlier both of typically the generally, a and I it Land David to difficult still on entitled one little lot And think early as get and the is ground. Paul in increasingly Truman. the is parts it's too mentioned a stickier process. the

has trends something broad of on held And But pretty sellers. progress But situations to for our not up residual land where that are that with land yet, well. sure. we're so the anecdotally, is make there able some some

Truman Patterson

purchase? are the all at through market Okay, that. that privates, seeing all drivers just, And small kind their you you valuation a of, made the willingness of to Arkansas. given okay. And sell Thanks then a slowdown? pop-up you more Could recent walk in acquisition attractive for relatively

Bill Wheat

We again entrance market gave supply of the in in a to employment acquisition secondary say, position markets, Arkansas has want to communities, The not that growth with an market strong gave solid housing of the I Riggins couple remained a Northwest of question Yeah. a with are we and a to good limited us in -- in. that happy earlier be solid the were there us into market. but

great a us of and community It lot was for tuck-in acquisition a with good with a well-established supply.

builder so homes And inventory happy we're the market in well-respected part the us as immediate family. that progress, and to gave of in

to As similar to and things we other continue we we change margin. at how far as we tuck-in -- we and acquisitions, look had this, those where that in look have at opportunities builders but explore no broad-based would

Truman Patterson

All it. Appreciate right. all. Thank you

Operator

question your coming you. Eric, line The Eric next Bosshard is is Research. from Cleveland from Thank live.

Eric Bosshard

things. morning. Good Two

XX% there's if starts, there's in the starting this. discipline the all, curious buckets logic if I'm you're is -- of of First reduction what what or in not

change But how there's to if the trying you're where those point. reducing curious mentioned decisions something You making price to a of product fit starts. a learn bit to you're from

David Auld

of quarter are lot point trends the first to the And on fall, occurring time. increasing, decisions A the by current us up, basis the our positions our late neighborhood at starts. and our are sales that into made what of rates mortgage summer relative slow through certainly, starts within our to at led inventory down neighborhood paces, recent looking cancellations spiking in quarter, sales certainly

we'll some fashion chain and Coming time and complete into a fiscal second more this able cycle and issues supply year. feel quarter, timely them seeing to the this unsnarling, our be in into in calendar this we like – homes year improvement start

to our bit little we more trying our demand So we out starts did right match meter now. -- to sales closely are a

Bill Wheat

– industry and it's do the that around day. just entire think last is in every Eric I chase market downturn. just there lessons the a indicative I just its the believe not And mean industry, short-term, it's I think I discipline every learned of and

a to lot we're levels with -- it's inventory in So trying do demand.

next to population for to back industry, five place over you demand see it look of the houses we and long-term position the taking And at comes ultimately there that enough the years. three aren't lots the if for

Eric Bosshard

Okay. looks would path follow-on it's the forward? here is the community your per And a lift the quarter And with like the XX up. related to how pace forward of another and guess going inventory I number, you then then heads managing for supply about this, pace it do think starts be maintain or up, path down you from the

David Auld

this through in try time quarter, I pace we're that sales and be to in of those the maintain of seeing think we're starts align having our the look the to with starts shelf kind homes year as selling sell. sales going saw demand I we'll replacing to the to continue we relationship the to in think season, early available new inventory good spring with

process, our We those our inventory to mortgage are date, the turnover metrics are And of and important our Got later buyers. efficient certainly rate with housing heavily of homes also factors certainty focusing inventory getting more seeing dollars. delivery payment on for certainty in big more recovering construction returns selling back up we're inventory. our get and housing on very

Jessica Hansen

time. managed community so market everything, our completed of for our And on up community, market are piling been as by to extended operators by period excess there sitting starts that by focus local not with an have homes

Eric Bosshard

Thank you. Okay. That’s helpful.

Operator

is the Anthony you. coming Thank next live. Anthony line your And from Citi. is question from Pettinari

Anthony Pettinari

cancellation about any who talk of risk you Were even if kind are Can or fall, give trends be Is wondering canceled but may who around at of in the the still placed were morning. of there rising? of there? with cancellation maybe Just rates color can Good buyers you orders that buyers fiscal tenure cohort earlier? XQ those contracts a signed this quarter? in larger

Paul Romanowski

I moderate, contracts think backlog as and seen, cancellation more moderate rate recently. younger you've signed have trend have our that cancellation we

certainty to, Mike and spoke is date home important. rate As very of mortgage close

housing seeing as improving we turns, cancellation where our through have cycled that's rate. in reduction and So, you're I we're our inventory think

Anthony Pettinari

and normalized point, have rising just to now has your And of helpful. renegotiating that's terms rates Okay, for have down cancellations backlog, prices died that come in then or that sort down? stopped homes in of

Bill Wheat

and the we've with stabilization -- pricing seen stabilization Hopefully, going forward. incentives environment in see rate we'll

Anthony Pettinari

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

Operator

next live. is coming is Horne your Raymond you. Buck Thank line James. from question from Buck, The

Buck Horne

bit loan, or morning could sounds are with thanks. program. dive out a some guys. are popular I like in I of you're that if field, it success on buy-down the mortgage mortgage buying incentives there, more where there. below out seems the for a builders using the little wonder that the to like be of having for out Good sounds rate the lot tools down rate it fixing life market in a Hey, the you're

I'm hit work? of in of elaborate -- you margin or maybe sales? does How of wondering upfront a what terms if that you that buy-downs? you using And does mechanically rate cost mortgage as could on percentage kind are

David Auld

to ordinary an market in our to from and costs the for offer salespeople try positions. been loan. do, those The buyers conditions rate as to we quite that's are life is be a mortgage But on use something and the tie had come some program able we place for an the make Yes, sure timing toolbox do That's vary of to course depending have in. buy-downs Buck, for mortgage many that of time. rates in we've of we attractive when those quite time, you that to who time up

Buck Horne

other say the you buy-down of tool you effective Would that using at moment that's a the or level sales is incentives? some are Okay. most

David Auld

vary a realtor hands over in in our decisions a and about and what's most division going their what lot reason It's traffic to week. community-by-community to this the and agents to traffic of time make the reason tools call going we to to best to motivate incentive our to operators' with put their as and and is, attractive sales excite drive buyer communities drive a and try some

use we're there given utilized. mortgage So, drive need of that adjustment every going financing pricing to might is rate a be be be that plenty very the we out some on popular, a little been a It buy-down, back few hit out to it very mean supply Wednesdays. incentives return working it bit of pace I to homes. a heavily neighborhood. that hit back washer-dryer And to there's might might a at we're to chain incentives have a

Buck Horne

And lower Okay. strategic wondering for marketplace sales. the the rentals of on SFR those homes. like back stabilized and/or sounds slightly for I'm is quick pace one the to what of quarter-over-quarter these of like the if hold demand in days? pricing single-family homes topic and terms is the separate the that's -- And curious in just single-family Thank guidance projected sales you. rental it

David Auld

this when close be process. to We'll quarter. ready had ready of they'll It's and have sale than just completed -- this fewer and we projects just timing ready past quarter and through a

Mike Murray

up timing of quarter had few The of few XXXX a delayed were storm first fourth there. a projects from some and quarter to some closings in that the fiscal benefited close impact lined

schedule number So higher little probably the production sales is was set a that XQ up than for. original

David Auld

complete model lease-up is market business still and The so.

Jessica Hansen

of would under as the And get lots to have closings see the we we houses with here level you're over construction. and that further every along starting each still some the expect stages, time quarter, to consistent earlier become but we and in is more it choppy and

Buck Horne

guys. it. Thanks Awesome. Appreciate

Operator

Thank The from is next is question live. Alan, your & Alan you. Associates. coming Ratner from Zelman line

Alan Ratner

Hey good Thanks for guys, taking morning. my questions.

reconciling me First, guidance. just bit help orders the mid-November. well for in versus this the in were a your little what I quarter a maybe above lighter hoping bit The you results could was orders. came closings signaled versus The closings you

I you been stable, little And that thought heard cycle bit. I have relatively a even say ticked maybe up times

beginning a into it how than out drive order sales the guidance upside delivery completion stronger of guidance XQ of I'm So month you that that the to or with your sure without And closings just above were two greater completed mix you anticipating? versus did much well activity? were your backlog. as ties Was from a that homes

on little maybe I'm understand there? bit going for looking So just more what's to color a

David Auld

Yeah.

see see which today, the meet inventory times, homes shorter-term starting marginal completed to which the you're allows construction which frankly and numbers, to that is improvement of you see available us percentage our our quite in side, market, in home turns close. we As on is inventory our and to us a larger

seeing have. we're see that towards inventory basis close and so on norms, maturity and the the homes quarter, more the more we in a historical go-forward sell getting to that with we expect And back of home

Alan Ratner

it. Got

That's Okay. helpful.

as the margin Second question, kind of, related, but well. conversation tying in maybe

is look your how than on specs adjustments, where how certain bit threshold? little you it at get or a are more more XX? provide completed? your to as or a you it maybe on able than hits aggressive specs, just completed XX X,XXX pricing And you strategy level detail days those when So are a holistically? Is less look more What's differ you on more of many point do at completed price there

David Auld

definition aggressive a it's spec, final So completed, it have completed we flooring stage. generally, about pretty what's we into talk of gets a when the

from that of moving and for four-week going a that to to home to more likely side take two normal to be milestone typically, us, weeks hitting So that. four actually it's home conditions, between weeks ready for completion the probably

in have date completion or more buckets, houses passed out our if the been we have look more. at months XXX So are houses we aging many how about have we there six than that that by

this especially very that low backdrop time and is feel marketplace. have the exact right freshness inventory, with still of we existing inventory, to So comfortable of very about sale in available of spec inventory the year that home the the the

Bill Wheat

long we something we've time. building manage And closely. Obviously, been for that's very specs very a

We lot discipline have a around that. of

they move completed very selling a springs longer do that we to then season. there days, out them. completed – they will of to efforts specs if to yes, fresh age. start watch those we have than get so fresh specs still longer And the But XX we step batch ensure now, start as up get for they we And right

Alan Ratner

guys. Great. Appreciate Thanks, that.

Operator

Mike, line Mike Thank from from next you. The is live. RBC question Capital is Dahl your coming Markets.

Mike Dahl

Thanks for Great. question. my taking

up orders, what in to XQ. there's that reported look and in at to will next be margin follow one, quarter level on lot as the forward that if you margin I'm kind gross quarter a see you're just to understand not in discussion. So fiscal your guidance you uncertainty. it as just through this get of still going the first I a today, of versus of sell you're look the the wondering you at beyond backlog some timing current expecting of coming

your How cadence and lower the backlog fiscal beyond be as that? XQ, the to margin going into about off it recent Is the in some or sales on thinking market, should improvement likely color XQ? get cycle we quick any into you be barring of you still as

Bill Wheat

to QX spring encouraging early Mike, we're we we're QX some is signs be what will only margin we've reason beyond environment season, And only margins to the margin. or don't guiding the QX. know selling obviously, got The what guiding

selling at be will their conditions of what but the height know the don't we season. spring

visibility coming margins We to expect today uncertainty had our but and to our even have and and closings backlog our the in into where our are heading of the our quarter our quarter QX XX% same the it. and quarters. level sell would we to and So close pricing in some costs sales of

So there's market while this could some the in stable with rates possibility stability afternoon. of that change that we believe some mortgage

what right we're so have. And now, what we -- we get you giving

QX. So our today we to XX% what margins guidance for can for see of is XX%

upside downside risk, But don't that have it's that some QX, beat range. certainly might there. past could possible say we But simply right now. possible visibility it's not. and is both There we I would we

Jessica Hansen

do We're and going maximize the to we returns community. continue market do to need to by what meet to community

Mike Dahl

around area water press given enough. parts in Okay. Fair certain and the And in lack Arizona, around my lot second Phoenix, then in tightening water on there's some some of of permitting usage. or rights particular, the of kind of the of a question, Metro requirements been issuing the up permits

acquisition year. had your last You guys obviously Vidler

seeing permits just your I regions able of does does think of exempt what ownership some – are certain there? or Vidler the or those you're there think, have if in areas, been give refusing Are interesting do you from press you be, that's out of counties on still light to projects municipalities us Arizona. to get they I the permits for your in any your to some in a that? sense and issue outright of would the projects, Can planned projects you color

David Auld

that's that the long-term benefit these knowing but the a I part, -- facing to headwind And Arizona. certainly, strategic head going for think our to in some decision short-term, a water to positioning a the in and lot there integration our and be and we're will not yes, continue and on Well, headwinds is helped just on has mostly press been our acquisition of foreseeable water has West, throughout the these future. Vidler really

to I the change process been get has don't entitlements a It's think continues. to It through a ground local while, get a on basis. those been on there's and to get permits. for lots and significant that still the difficult

our that environment. the to about -- good on we through feel market lot the we've board there Phoenix navigate continues So, and in position great positions that got a team have we

Mike Dahl

great. Okay, Thank you.

Operator

next is Wedbush. from The your is coming you. Jay live. Thank Jay line from McCanless question

Jay McCanless

morning good everyone. Hey,

close the times, so say, So, back about in closed to and talked been that I to what pre-COVID -- or of normal Bill XQ going guess, in, percentage XX QX? XX% what looking closings. would how you have

Jessica Hansen

Jay. Sure,

in typical quarter, that. the range. A percentage, consistently we we're quarter XX% until XX% even pretty it lower or were just XX%. roughly year up the And Our in last year in were this ago, the we ago, than teens. to two high A was

in tick So, up. when normal, the reversion we that we that see to to started talk we about continue reverting quarter, expect to first to but

consistent whether So, a it's to or XX% us. actually know. XX% for closer XX% the would we be But range don't typically, to pretty XX%, XX%,

Jay McCanless

like question debt interest second you've be margin about. the down going amortized? you then to amortized Any had, to assuming billion idea talked since it's interest gross that be or less in what $X benefit might And the Okay. pay being of I

Bill Wheat

just now of and this under pay Yes, plan have That's off Jay, $XXX homebuilding do that cash. out billion with of to right year we notes $X homebuilding those to mature million of debt. we

in would our XX% not down that balance be time. interest that debt, replace that carry do the roughly would So, of paid reduce if we

for time -- XX, and probably be be term take a That interest the really basis because it benefit over down takes their fiscal move would longer XX points capitalized would margin benefit. to and carry time XXXX as primarily But probably beyond our percentage inventory. of noticed in it interest

Jay McCanless

questions. Thanks my for taking great. Okay,

Bill Wheat

Thanks Jay.

Operator

will And the is live. of Jadrosich time the today, Bank America. be Rafe, from question coming interest from in of you. your Rafe Thank line last

Rafe Jadrosich

margins have Hi, for taking terms Thanks obviously I and of side. strong year just on question. morning. been demand? in ask to you the seeing are What rental last the this good quarter. wanted And really

comes any longer hold think demand down? anticipate forward, do you you'll Just properties those going normalization of or to have if do you type

David Auld

the properties. I demand think still for we're seeing

lower reversion to to line marketplace. into to to those a to very first back core above early and see normalized in think deliveries, more coupled them and some demand benefited the rate the traditional kind realized into But slightly for a the And and communities of degree what and to we're business some we I construction closer sales we sell margins quarter the would come side, I on develop model from think sales our with to on continued our on our is see pricing project sale sold our the attractive environment a we'll margins construction be seeing mean. side. environments that expect when we cost

we is successful we've do finding and what to been land, those homes far. the very the communities people That's bringing with what best, building so

get better, So that do still business. learning, still going we but like to

Rafe Jadrosich

seeing more for quarter. one down tough market in you -- normal the on with think quarter we're fact giving a improvement housing driving what's in seasonality that of that there the end second mortgage very little a consumer get bit? after the first outlook quarter quarter in what is in Is XXXX? the the of anything demand just you're confidence at the Can the the supporting that the been then And it to back and relative you talk terms demand? to rates have in view going come happening orders about that confidence what's stronger you Is to

David Auld

improved markets good. Job continues bit. confidence credit the little be do to somewhat, stabilized I very a think consumer have growth

bad, monitor demand to product a just good less week cancellations look monitor you for week And becoming at our So to sales; signs at week. economy overall, we week we to housing. if very generalized

that when and respond to field. we're to good the more not hard see positioned we're get spring. returning every a in market, that and it's to going way to up so of day be out there And normalized And we trend optimistic happens the that's what we'll

Jessica Hansen

they Horton, of right? inventory pick us to puts other industry homes to in that be see level we're say is home to close we of Specific going construction, want the those only the that completed can because specific buyers are seeing rate. because position to of most the certainty able but we're importantly, reasons, interest up who most and not quickly those a a more do date, at, success in the stage homes today Horton, our are Yeah, have to get place behind confident what with

with our the inventory buyers that position our so we majority happy why right and is that's confident And and now. very very today, feel are of

Rafe Jadrosich

color. all the Great. I Thank appreciate you.

Operator

you. David Thank for to hand closing the off now Auld like remarks. to call I would some

David Auld

Paul. to conditions, you, go you. call results congratulations look win share team. day. April. Thank speaking in you to And the and Thank today, D.R. while appreciate a on compete with We're to entire finally, and continue changing again first time solid forward We market our to navigating second quarter quarter every everyone's producing Horton the

Operator

This conference. you. today's does conclude Thank

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

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