D.R. Horton (DHI) 7 Nov 232023 Q4 Earnings call transcript

Company Profile

Participants

Jessica Hansen	executive
David Auld	executive
Paul Romanowski	executive
Michael Murray	executive
Bill Wheat	executive
John Lovallo	analyst
Stephen Kim	analyst
Joseph Ahlersmeyer	analyst
Carl Reichardt	analyst
Michael Rehaut	analyst
Matthew Bouley	analyst
Alan Ratner	analyst
Anthony Pettinari	analyst
Kenneth Zener	analyst
Susan Maklari	analyst
Rafe Jadrosich	analyst
Jade Rahmani	analyst
Michael Dahl	analyst

Call transcript

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Operator

Good morning, and welcome to the Fourth Quarter 2023 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.

Jessica Hansen

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

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

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

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

to over Chair. Auld, Now turn the I will call our Vice Executive David

David Auld

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

that was October. first on I'd to Paul CEO well-deserved about his promotion of results, talk to the our like we When effective congratulate

for have preparing internally quite time. some this We been for transition

as will actively the of our the company positioning Directors. future, involved and leadership still I Vice for of Board We Chair throughout be Executive are

individuals has his been He division remains leader Paul executive support with a executive, our and is group. place has successful and the throughout leadership. of region the same proven Our team in who

finished team solid D.R. highlighted our of share. on quarter results, to earnings The the by fourth a year diluted Now Horton results. with per $X.XX

on to was increase income of with pretax revenues XX.X%. X% a a $X in consolidated billion, Our billion pretax profit margin $XX.X

per revenues X% For million, consolidated $X.X homebuilding $XX.X operations. We our the pretax with was in XX.X%. year a increase XX,XXX billion this margin a diluted $XX.XX our a year, and rental to in on pretax closed and of homes share was earnings record and apartments income profit

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

our quarter. XX.X% equity Our homebuilding continued return high was on XX% XX.X%. sales the prior from net year on pressures, increased was for inventory and return mortgage Despite year the orders inflationary and our rates

As favorable. limited a result of both price housing is affordable new at demand supporting demographics remain and existing homes and points

each focused We supplying meet more to cycle both our in improvements consolidating returns inventory on positioning in are and demand, the of share capital points at times efficiency maximizing with availability affordable are while improve housing communities capacity our turns. labor homebuyer our and by materials, us homes to market price of decreasing

and are and positions experienced produce generate strong consistent offerings, capital strong well with operators, product flows positioned and affordable liquidity supply cash flexible We to returns. our lot

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

Paul Romanowski

of billion quarter. fiscal XX% $XX.XX billion. per the net XXXX. in decreased And Net share revenues of to income consolidated X% decreased to quarter diluted X% year, for $XX.X billion revenues billion. quarter per decreased the to year for $X.XX $XX.X fourth on XX% to on $XX.XX the for fiscal income $X.X diluted in $X.XX $X.X the for Earnings share to of share Earnings per compared year compared XXXX decreased the to prior

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

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

Michael Murray

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

rate XX% XX% year in and from from XX%, sequentially Our cancellation the prior the up down was for quarter quarter.

sequentially active of number selling average orders communities and of was quarter price The prior Our up year. X% the XX% up net X% up and sequentially reducing X% down our sales the to year fourth better affordability the where have in mortgage adjust average possible from $XXX,XXX, we homes from homebuyers. conditions to rates, and our incentives size our of quarter. for market increased prior use To higher of and the provide changing are was

higher a in continue XXXX, rate fiscal utilizing particularly in interest We rate expect level environment. of buydowns incentives to current the

factors. sales significantly rates mortgage can and by be volumes economic other in affected Our changes

will continue we demand inventory maintain to and share. sales and to market aggregate meet sufficient start However, Bill? homes

Bill Wheat

to our gross in was from home margin sequentially June points September slight were up square brick the profit Our lower revenues on and and and sales margin the costs increased the The lot home fourth in On average June basis sequentially, the XXX quarter increase X.X% foot increase in reflects gross XX.X%, foot price a costs decreased sales homes our sales from closed X.X% basis, while on up revenues square rig sticking during per quarter. stick X%. cost per quarter.

incentive homebuilding in we in higher to quarter fourth rates, address the volatility our mentioned, to XXXX increases to lower incentives a expect mortgage have level in and on Due help gross of first to affordability. recent margins the fiscal Mike compared Jessica? expect recent be we costs quarter. sales, our in increased As to offering continue

Jessica Hansen

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

up basis For SG&A was homebuilding from fiscal X.X% revenues, of XXXX. XX year, the points

business. control will platform that our to our We ensuring Paul? continue SG&A our adequately supports while

Paul Romanowski

X% homes X,XXX XX were ago XX,XXX unsold, XX,XXX the X% We with September a started down sequentially. inventory, of June homes our from quarter, down the which and We in total completed. year XX,XXX the in X% were ended quarter. from September of homes down year at

the the closed we chain. supply homes construction the a cycle For improvements quarter, time quarter, by our decreased in in reflecting month from third fourth

homes and We to and on inventory and improvements we times inventory XXXX. cycle continue conditions, manage expect will pace further turns starch Mike? market based housing in in and our our fiscal

Michael Murray

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

efficient lot Our key to flexible is a capital strong and position. portfolio competitive our

investments development and in land fourth $X.X X% billion, homebuilding Our totaled up lots, sequentially. quarter

land finished land for million of $XXX for $X.X million lots $XXX development for and Our current quarter investments consisted acquisition. billion

our development in XXXX. billion, up totaled the X% lots, For year, investments homebuilding fiscal land from Paul? and $X

Paul Romanowski

operations rental of billion revenues million on In from generated the X,XXX $XXX of pretax multifamily the sale of rental fourth and $X.X homes our income rental units. X,XXX quarter, single-family

of homes our generated $XXX million and billion income rental revenues single-family X,XXX rental year, multifamily sale full $X.X the operations of units. For the pretax from X,XXX on rental of

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

rise XXXX. expanding unit not are do the our we of profits in both markets. in generated -- platform multifamily Bill? XXXX. rental to in and Our we in the the fiscal more interest providing maturing the capital uncertainty this fiscal expect as for year in and and across increases rates volatility significant markets, separate projects, have Based rental XXXX closings is on Due and fiscal pipeline for more revenues closings current guidance to our rental than in operations

Bill Wheat

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

the full delivered a For margin lines, XX,XXX Forestar of revenues generating XX.X%. profit of million income with and $X.X billion year, of $XXX pretax pretax

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

Forestar of had net approximately billion X.X%. at a year-end $X ratio liquidity debt-to-capital of with

homebuilding next the with share balance few in positioned and Mike? supply of to lot Horton. strong uniquely D.R. years, finished on consolidate its is relationship to Forestar shortage market with lots the capitalize and over significant the sheet, industry

Michael Murray

fourth revenues, profit of of margin million Services in earned the $XXX Financial on $XX of in pretax million a quarter XX.X%. resulting income pretax

For million revenues, pretax of of in million on XX.X%. $XXX earned of financial resulting the $XXX income margin services a year, pretax profit

of virtually loan mortgage company mortgage our to originations by our for company's During buyers. our all closed quarter, and operations, the related XX% financing of homes handled fourth our homebuilding the

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

company XX% first-time the of The our quarter. buyers closings represented this Bill? mortgage handled home by

Bill Wheat

and operating cash opportunistic and flexible disciplined, produce is approach capital consistent growth to platform our and balanced returns, support Our flow.

which maintain to flexibility sheet strong significant with provides balance with leverage conditions. continue market to to and adjust changing We us low a liquidity,

by our $X.X was During fiscal billion, homebuilding billion. by cash XXXX, provided our operations and cash was operations $X.X provided consolidated

Over of facilities. with of homebuilding September billion $X.X our billion $X.X notes had and debt fiscal consolidated of XXXX. liquidity, this generated billion September X totaled flow. and of repaid XX the credit available $X.X of years, at quarter, billion million operations consisting We capacity no note $X.X cash our cash billion have past on XX, senior our $XXX in maturities we At senior $X.X of

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

XX.X%. return year, on was our the equity For

dividends count and year-end. replacing shares billion previous During up stock, for for authorization. we Directors of for common In financial billion, board our a dividends for our our during $XXX flow, the quarter, repurchase year, And million quarter. to quarterly of also by of million X.X the the by share. dividend Board reduced Jessica? during XX.X common share our the prior the our XX% strong of October, repurchased which shares cash $X.XX X% outstanding million $XX the million to per repurchased cash Based We of total year. authorized of stock million we increased our cash $X.X position $XXX paid of on paid our from $X.X

Jessica Hansen

$X.X markets forward that our market uncertainty to expect homebuilding to fiscal billion, $X.X by may to homes to to persist significantly conditions the business. conditions quarter of economic In XX,XXX to impact capital and $XX,XXX look we closed the we As our generate continued general range and the our of challenging revenues first of expect mortgage regarding rates, operations XXXX, be with homes. quarter, billion in December consolidated currently we

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

We are both consolidating and well in home positioned operations. share our market to continue rental building

pricing services price to returns. fiscal margins and by XXXX homebuilding, and our and our businesses balancing Forestar Our the conditions, and will by in rental, meet closings pace market financial be volume, to determined market efforts maximize home

For XX% be in XX,XXX the approximately the revenues to fiscal XXXX, closed the for to consolidated in We tax income and billion billion homebuilding homes. XXXX $XX homes range generate range full $XX fiscal of of expect XX,XXX year to by we our to to forecast of XX.X%. an rate of operations

of generate operations. $X billion cash expect our to approximately flow from homebuilding We

of in to addition billion count to We outstanding $XXX approximately to plan around stock our our of common also continue repurchase payments share $X.X dividend reducing million.

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

David Auld

industry-leading footprint geographic closing, market and share our and markets. results experienced across broad position teams, reflect In XXX our

maintain to strong and balance to provide conditions and while long-term returning approach share. value through investing of to both repurchases. significant loan dividends flexibility aggregating market capital and our financial market leverage plan enhance share liquidity We to consistently company, our the continue meet capital sheet, to the changing Our disciplined with us shareholders

to largest consecutive United XXnd we team Horton to the and Good families States, focus to our as our during you D.R. the American strongest XXXX. for and provide We and work. forward opportunities builder in operations improve and efforts. to just completed the year year entire look our homeownership working more Thank together your

the represent It earnings past my on an Executive team's you our has remarkable last With Thank my for Vice transition prepared Horton will this to been be privilege the a and call. This to public again. report D.R. years. honor concludes all and Chair, remarks. XX efforts

We will now host questions.

Operator

poll hold gentlemen, while we questions. for [Operator and Ladies now you. the Thank for is floor open Instructions] questions. a moment Please

John from from And is morning UBS. Lovallo first question this coming the

John Lovallo

First question above, is just seems what use believe, the was your Despite in of us expectations, of to cost a incentives work your in XX.X% gross help and like on greater of versus quarter I well mean gross and margin on XX%. the of above through higher of I margin quarter just XX.X%. perhaps kind even the Can incentives. a takes expectations? puts you some that the

Bill Wheat

John. Sure,

The year, had in second more we half of environment. the stability the rate little a fiscal relative

were and in QX. to able incentives really QX And so we off level our

had then that traction also sales benefits of improvement did tick costs. in fourth little we biggest one our We a of was price up really, continued lumber in quarter. just to the bit average tad price And a allowed then the see

down so the and And our stick homes quarter. came overall in costs on our brick

rise in the of the rates margin recent in some in we term. We that's incentives, benefits do realized we're the QX, the use guiding within basically down but more of why for had supported QX. majority interest gross benefit think in cost and that the near And number we increase that

John Lovallo

helpful, sticking with then And That's Okay. gross Bill. maybe margin.

of As going forward the there, we it to a there's incentives higher I again, like be first the look little cost. to implied If we bit about quarter, think and mean XX.X%. sequential the in that's maybe decline into sounds XX.X% higher

that benefit the What puts be margin? in that and mentioned should of takes the are might other You through. sort we that consider lumber sequential

Michael Murray

it John. think I up summed you well, pretty

last weeks that a don't was I bit higher week, of sell forward rates quarter. we last rapid with helpful, moderation week homes incentives quarter a through or which during And interest the the do make I number so, but little rise think. think trend, closed we coming of doesn't X in see X the a the in significant we

the for in our think of the fourth quarter. I quarter, closings XX% were sold

of it the a business through. we're real-time indication as pretty margins So at in comes

Operator

is Stephen Kim next coming from Your question from Evercore.

Stephen Kim

results. good the on Congratulations

to interesting be benefited guide from next year. a much sense for of -- process you you, you how $X I in is inventory? gave get well, gave to You billion work think in a wanted an flow cash going for homebuilding do that by in a reduction

Bill Wheat

able our are times. cycle improved with We

some and improved see assumption seeing that we inventory year will turns, further are is times in turns. next We our inventory improvement and cycle

are we operate So to inventory. relatively a lower level of able with homebuilding

guiding also a volume we're However, to increase.

but be decrease And expect in faster. homes so we and to it do I absolute expect our necessarily inventory, don't an turning

the that's So definitely cash a to contributing flow. factor

Stephen Kim

okay. an But That's in reduction actual Okay. WIP helpful. levels, not the

assets? So a guess, that really that that coming means be from income the it's and I maybe reduction Would in fair? land

Bill Wheat

our terms Or in an assets. just of our improvement land

that's from turns. primarily yes, So from the profits improved resulting

Stephen Kim

Nice.

being the Okay. And in was orders is quarter rate a And give at let's Could to used for that say, sense in if were taken then sort buydowns. we second rate the of us question What look average your you is average rate would quarter, September for actually average be? what your to customers. your what related today. for,

Paul Romanowski

stay at the quarter, given rate bit roughly a that quite move which any on and [ government to of right conventional market but FHA can and we're X.XX, an about And is ] through X.XX we point offering today, loans the points rate today. in below XXX average X below on X.X The X.XX, in range time. tend to

Stephen Kim

And are people what that actually most is using?

Paul Romanowski

some buy-down. our rate used XX% with closings total of About form of a are

of incentive successful we have down. and of been big monthly most so through to buy the form of And rate homeownership a has impact that percentage cost some seen

Stephen Kim

underpinning mortgages? know people rate you're the your the of what rate are And do actual what buy kinds across just using, cutting of the in buy-downs form closings sorry, down, that XX% that was that clarify, to saying average some of of you all

Paul Romanowski

I'm going probably range. in X-ish say the to

Operator

is from Your Joe coming from next question Deutsche Bank. Ahlersmeyer

Joseph Ahlersmeyer

so this for to bit executing visibility those on wanted a about year. turns year the the also maybe Congrats to here. full little I well appreciate effort give further. talk just the I inventory

that's level. you an guidance and above I Your inventory for guys. Xx know something for suggests on homes your current important threshold closing

starts also to but XXXX, gear of half, make that the maybe in that again Just like Xx wondering of guidance you back sort look while closing next what for couple growth that deliver maintaining over up the quarters in the target. then on sure

starts the could how Just look?

Jessica Hansen

Sure. Thanks, Joe.

exit search gradually, the move down spring Our deliver and year 'XX. but 'XX grow subject increase ourselves to the strength into quarter-to-quarter starts conditions a as market bit sequentially, our we we as to our everything the expect tick on about base that little obviously to is to would throughout to to of the to also guidance case position talked then and we've position that

want to make capabilities. it's we by is So do what our community we're we're community working sustainable. sure as improve to starts, our market-by-market, And production that increasing

why that's happen you're throughout it the to just So see gradually going year.

Joseph Ahlersmeyer

Understood.

thinking headwinds return profitability inventory where of think incentives, settle side basis if do we land high the that here Okay. your normalizing, the Could actually that realistic? that you from maybe can on And about from sort see a settle production on But been then Is out the efficiency. tailwinds course. has out trailing in of and got on XXs? you've

Bill Wheat

Well, we Yes, the we finished on land business, with inventory our as underwrite our we goal purchasing that's can. the our as lots as running we're our our that would homebuilding deals way the in focus on keep business return many to be way and can. deals, as high focus

with for are. And definitely, margins so is XXs a gross us. to It high mid- good fluctuate does where level

but that XXs we've to we mid- peak gross off of level coming striving high is year, saw achieve. margins down last definitely the we're So been to of some a

Operator

coming is BTIG. next question Carl Your from Reichardt from

Carl Reichardt

couple mix are year, And you I'm or in Congratulations, the Congratulations, terms for anticipating of from large interested But much a where my percentage the one the you you really the it? David. might markets of of What acquisitions like Joe come particularly only questions. stole points? deliveries geography to want in some next define next of you of markets that, year do however you've are alteration Paul. done. all in builder, guide think at price looking smaller

Michael Murray

deliveries that we're recent the to but rotation see introduction quarter can But probably think will where cycle entrants. times market, to Again, on good see we a and maintain in approvals. just by we going or of stratified that smaller breakdown smaller municipality of gotten fewer plans homes we've footprints to expect our to by us I starts, Don't a market size is home to of affordability, the allow homes have -- at we more get do given to to roll deliver a lot out any compressed inventory construction going continue process carried end date. probably with

Jessica Hansen

And aligns updated we this all that pretty as with ] answer our investor to I slide to our operate dominant in with make the usually let market we're share not then presentation, people did in. know it a lot to doesn't post of and data. we of call. perfectly question, sure post but We going dramatically work do Zonda markets want internal [ Carl, -- your do our We've the

now top those, instead where just U.S. XX rank the reporting on of about so XXX. all And in housing we markets talking we're and

#X, we're will out more give in into top XX it in markets of whether we're we so are insight top And where terms XXX the of today. you X, some

essentially were just all the markets last top entered night through and year are we X they last XX Only within have [ we not too]. those that and in went

then quickly XX certainly work top on very we expect #X. continue X becoming move to up the would top So into and be to and

plug that that hadn't want but on kind put market So it there. answer I share out data fact we geographic incremental mix, of gave did we historically doesn't the to

Carl Reichardt

XXXX. there, portion taking know That's investor projects you're there's rental on have becoming obviously great. asset occupancy? the just business perspective the sheet. some guiding and it not of as you're a both in It's balance family, a bigger lot but guess of an up stabilized the classes. single that and then capital, From a on I both is PTI And how institutional follow-up, fared also Obviously, multifamily come chasing appetite I would for spreads in selling

from those customers. I'm of curious sort So you're just what seeing

Paul Romanowski

Yes.

We seeing investors institutional are the that Carl, from strong still out interest, there. are

the process seeing As spreads move supplier margin great to through to single-family going grow be in. through this mentioned, continuing still the still higher as rental come to our you and move in And dominant feel position have consistent multifamily activity. we're and rates, we but in of a of we platform. some gross I the see markets are volatility

Operator

Mike. Your from next Mike JPMorgan. question coming is Rehaut from

Michael Rehaut

I below the curious It your shoot bit down maybe I'm up the everyone. move for wanted like growth obviously, mistaken. of what a morning, a for if And I'm 'XX like high X%. a not fiscal typically the moment seems Good closings that's you is X% a function Also, year-over-year. of of guidance just that's little focus maybe over backdrop to single-digit recent to in backlog range, kind with XX% in if current rates. still on

Just environment, you kind all timing maybe a equal? single-digit current about of think XXXX, wondering the returning if there's maybe gap a little is given backlog, the something else in should bit we given to rate guys that here of high

Jessica Hansen

question, Yes. No, Mike. great

expected XX% growth, going about about positioning ourselves you to We and is or the we're always We company. hear us position do it. how talk typically minus talk plus for

'XX assume at a 'XX high our at typical better little for though Xx look we're already and than closing, fiscal you our guide that does bit how turn, end. it actually the If exiting housing

So X.XXx X.XXx guide. our to be would

necessarily not we've as 'XX. demand. that's falloff in sit we very in realistic with improvement were terms sales a the throughout up be it's November, with that the what we're success to fiscal our so a that our Obviously, And for to big consider of we'll And have continue expectation publicly today. here that incorporating But times. that deliver closing able visibility cycle about we in to talk we seen for have in in It's already year, what able strong. we if

cycle a times. in more function And so the inventory it's houses our in of we have

Michael Rehaut

to sense. were I'm sorry, Makes something, add Paul? going you

Michael Murray

Mike. This is

is very strong lot that with on following right is position that our now. Just

a XX,XXX meet that outlook year into that in we lots are fiscal there's demand. accelerate we And at last portfolio, and of more spike our are this or the we stepped coming great saw to -- that market the any year, own increased unfold able that the will be starts portion and controlled see as we the into finished, Coming 'XX, for obviously -- have we to We a year little delivered 'XX against about rate year at gave concerned 'XX, end fiscal the and the 'XX time. the saw up and and a in we're 'XX backdrop. team

So the positioning year, grow always are to to and that for level. but in grow in a conservatism double-digit desire -- have

Michael Rehaut

Right. wanted back. I guess also circle just to

and mentioned well regard but as had your I has price say, bricks, year-over-year basis? with as appreciation construction inflation to You offset, just a and amount a something the 'XX lot would that been expect not sticks to that of and to gross fiscal is more maintain require how quarter margins? where Is broadly, that on some maybe accelerating, let's current lot based do cost quarter sticks guess, And just And trends? fourth that X% inflation. for to -- you play first in on out your bricks,

Bill Wheat

been, Mike, of lower have seeing lumber sticks the costs. couple of and we've last benefit been quarters bricks, the

other still in we modest categories, construction the costs, seeing most However, inflation. vertical cost across are

X.X% brick foot were costs So lot XX%. on stick costs basis in our down and our basis. a on square But a quarter, were per year-over-year the up

costs. seeing our we're lot So inflation in more

'XX, and some moves still cost costs and our fiscal development categories. other expect we would land to inflation into continue to modest stick to see brick would think I forward and through inflation expect as look lot inflation we some as that we see the in of still so continues in -- And

move see some in But we expect think some from. we may benefit costs been we overall, some inflation. to that costs to as lumber we moderate show has expect see moderation 'XX, There -- recent through still I

rates, price appreciation. with as recent expecting in the not current any price far volatility and the rate we're environment, the As rise appreciation

talked Our are And probably higher year. incentives already using pressure of into expect the of the little prices. as part a base we've case going downward we first on bit about, would

we Now we can we'll rate go as environment Strength we what change. market so market get in see into the adjust spring, the further as and can on of depending change the the year. into

Jessica Hansen

just about mix, that's Carl a And here average asked sales point good terms our price. of reported in geographic but

issues We in to our our affordability to in the remarks, of to prepared are we continuing shift, floor more as said smaller more market. plans address and

on could we price solely just mix. a function have product downward some So that's pressure of

Operator

is from question from coming next Bouley Your Matthew Barclays.

Matthew Bouley

you're So in all reacting quickly of interest two, on rate volatility how of mean, past and one. interest thinking rates? is first I'm that That's number weeks, just pace seasonality kind any quarter? color orders I just one, I you October pace sales guess, the November, rate sales given into And these about doing number own the, your of here in Number of moves are curious. you're course, buy-downs, what several rate given with finding these sort numbing to

Paul Romanowski

Yes.

As our we been rates both buyers rate stable for up we're to a hold they to consistently couple the with you able in into incentives, weeks, afford. are there. people fluctuations see what fluctuations settle of But through they that time time when pleased don't interest of can of sales, in have with traffic down our convert we period we've but the going you pretty October. And seen until you see but pause kind the any reality rates, our we've out forecast on ability to over we've into rates, in of sales we sales on know, certainly with far report last the that and moves see thus had

Jessica Hansen

also we're going of And year. into the seasonally slowest time the

you spring. continuing houses in adjustments going ourselves continue drastic unfolds market to and to but sales start slowest typically how so to get the are plan, making December to and going holidays, our focus going to months and November meeting new to So spring the as the we're the the on and wait sure we're make into a that see business we're not

Matthew Bouley

Got it.

Okay. color. you're top line then the guiding 'XX. rental side, secondly, in I know And the That's on really not helpful

rising in be be, multifamily a year-over-year. lot supply You did think of coming I would would said, Clearly, that mention there is units online. you

think side be those What next can in and year? broadly. the the around multifamily unit margin say sales margins the multifamily might what you I of you on world expecting

Michael Murray

serves. see to how I cap given probably up really cognizant decision just is of done rates when margins marketplace, supply available rates compress a there a a team what will a the submarkets ahead And specific was in bit both think in to job of multifamily come to great question those if project much supply at and from is come that a The made that, out we us our of of perspective. move the on we given us interest behind projects submarket with have has looking those the sales project tend up. forward and

about line pretty feel We're to we seeing lease-ups our environment. still being able into rental demand good properties in healthy with in deliver So a good expectations.

So we're very encouraged by that.

Operator

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

Alan Ratner

to off, First transition. congrats good and the and luck with Paul David,

starting the a good guess inflecting comments you and inflation right on think stick the and to us through now. offering that I also margin on a year. costs most after the of my listened and lot some maybe we is your questions rate the offering to are cost puts again sustainability and accelerate -- industry of topic buydowns I takes brick and this hear question through being higher I guide And Second, of that and the are I get on guys the you,

basis at that for healthy where harder points. it your down buying rate but look margin that becomes threshold XXX you point today, And what is where point a it's a continue you? to obviously, there Is very XXX,

Michael Murray

And conversation Alan, of It's we've it, focused pace We're across a stick buy-downs, that little and some part the the and seen a pressure come have give as down, it's on going and cost. sides price rates, commodities relief relief of delivery offer. the continually. usual, have return be in nice some pretty brick well other on cost, but spectrum as should prices that bit mix a And had we fuel we deal us the that we broad price but operate to the cost just with. incentives of neighborhoods, to the going as a environment while of of

So in primary margins. give-and-take returns. it's star guiding a And the on our focus and constant is cost the

Jessica Hansen

in QX, which strong into going margins year. is expected we're but room very in gross that [ healthy ] XX.X% returns. with decline last at market gross that healthy can a we gives and say we and we're some our margin the achieved below And coming still very post very us the year to off But are still a peaks it's meet start, QX, maximize returns the and to that

Alan Ratner

Makes The sense. very is certainly Jessica. point healthy, Absolutely. starting

So appreciate I that.

credit the that On the general. and love Second availability capital take builders to I share. a and certainly use access I hand, to and ability tailwind in your your think question, to nice one to just thoughts on balance public there's market liquidity would hear given sheet to

credit bank are credit yesterday, trades and land certainly their Fed your other are to continued developers on report and hand, point your there dependent businesses of the On headlines your and well. availability dependent suppliers obviously fund on as to probably tightening the out

to And side, suppliers any So in channel starting on of from a tightening? and as developers, are and come flip trades are result you stress your conversations seeing of credit with the any opportunities you throughout the indications that? see

Paul Romanowski

I less we bit markets, in rates a our have capital to those open lot from and plan feel processes. got some like to our vendors, with opportunities, a builders. but create good communications we're think suppliers to the will through our we've some and they continue like going been in headwinds work our developers trades see it see anytime capitalized and flux, you And from

Operator

next coming is from Anthony Citi. Your from question Pettinari

Anthony Pettinari

buyers Are you're any move-up I'm if meaningfully David shifts and entire there what sort the kind type just you're buyers. you're and buyer buyers you market different for of offerings? target positioned Congratulations outperforming seeing affordable best first-time on I'm buyers? move longer to rates. specific seeing more to if Are -- wondering is your fairly there's wondering, higher to affordable. weather understanding of offering seeing of as Paul. more a a to mix strategic I'm your making down wondering transition the

Michael Murray

But a median after can position to little homes the more. find financial the their to smaller relative some in way [ I improve through introducing the so changed that big driver we can rate of to product the and is to things on bit but Reamenitizing homes buyers they we closing, do afford ] their affordability that people continuing and And also a price obviously think letting are buydowns, that's it's payment hit for for footprints. when work been our focused has monthly point perhaps income a affordability. primarily the place process. deliver a family's us, that a And budget.

Jessica Hansen

already at a continue of so They're half in over like not they're for what's the interest need really share. rental on we're homebuyers to market rent business a because still those our buyer. to we so stay live. rates, going looking the with first-time some happening to market don't if They being own And that competitive capture home, market discretionary homebuyer a place with versus despite buy we can front, opportunities. buyers

Anthony Pettinari

the more now not just detailed then are think I the rate months wondering just 'XX the XX you higher experience with are the guidance could volatile X%? talk Just kind and you rates with something you very versus what to rates consumer? with year on giving down? near can outlook success I of you through this Is buy the it confidence environment. detailed you managing Mike we contrast different seeing ago? of full said, Or year, That's of following now provide how to about picture, time Okay. something mortgage where helpful. And guess elected last is up give big very for

Michael Murray

supply very months our were times ago, were X cycle we facing elongated. XX issues. We to still and chain challenges the solve think I big production were trying

was down time interaction manner. finish had that rates for exactly because a we And rate buy also only a determining in So deliver. going cost-effective homes time hard a we forward are the buy-down can with of what and big process amount to certain

able rate uncertainty you with increases, the to rates. but and the some those the through on being start deliver has months, a facing buy-down would the XX environment. able past really when touched the team that we delivered homes over so then year. strong second Yes, point And to And manage and into pinpoint been we have

Operator

Zener next Partners. Seaport from is Research Ken coming from Your question

Kenneth Zener

could to if a CEOs, X we back here. like bridge step just take I'd to

XX at going call on to So ago, be congratulations David, the was it's that years got about and margins. it the you time,

with the shortly focusing into about great on guys came time been product. talked it's comments, a XX% X [ guidance margins David, down Don margin, to pulled at you asset turns. XX-XX-XX so turns, on recall, Express, 'XX, So and when thereafter gross 'XX ] great. gross as And you Don's consistent we all obviously,

it's and Now, chance Paul, you Simple. on exposure fingerprints first CEO's I question. your rise why XX my that certainly That's markets. tie give your top a prior to perhaps want to Could your give on comment in well, you into comments those different today to on this. comments -- non-top

Paul Romanowski

that's team last Well, the I is the at think table year we a -- the the was that team table quarter prior several. last and at

to continue strength on, across us we this great going And community geographic We not provide we've leadership. have and a community. position supply our our have in and expand a markets. focus aligned of continue to those as for have as on that the company, footprint a is group, continued returns leadership we division and And are with benefit just expanded from which the by to now wider regional but we area to

really the unique play, operation stamped a fingerprint we and need on footprint something or put we we team executing that good So every version good short have is we and where playbook great a are strong are. a I about to because the and feel in different don't day. feel a on

David Auld

and Everything years a first-time opportunities And history. go to been pretty going the standard from little And And in think, The back operations stronger. to through goal low-cost and to for of we've a the has I done today. margin Ken awakening of is a made create bit get you everything industry is provider 'XX position stay to home. homebuyers the be much then created to of [ asked that little the in XX-year try the an bit off 'XX, company Q&A. a this those -- 'XX, better ] company to transition housing, affordable return and discipline

returns, about I think and is quarter calls forcing changing. that's deleveraging of building -- don't houses quarter. their the on gain restrictions everybody listen ground, of and -- the that You a builder talking are that the flow, and the what the pipeline. matured, the market builders the consolidation after putting I after quarter market after things quarter those by share the other public, cash industry national has land discipline industry capital, to on allowing derisking see difficulty lots difficulty on to The all And of share --

So component to improvements even simplifying our making product, project, of internal driving focus it increases individual to is be there. price project going continues first-time the to as to efficiency, continue homebuyer housing to the by overall be availability

that's And If That's the I every sustainable, not it said ] something leave somebody Everything we move So we sustainable. think [ bowl day. trace on. we it's do. about our and goal. all in think about earlier,

that's will I. this team, differently transparent. mean So do sustainable, than built I I Paul I and and don't do. taller than that see mean consistent I scalable, changing. our things that's alignment throughout he's company,

good down It's position positioned. very the well a Never we're coming been [indiscernible]. company in. the ladder. the good as thing about I That's feel

Kenneth Zener

And see of you're... I not is can was I Yes. videos. some sorry. YouTube that Paul would taller. watching on I everybody I'm say focused returns I you. was guess as

taking focused expand closings? from top your about your X/X more [ are non is like the is towards geared So finished of you're coming closings that those markets, on fair which your are ] for comments XX% returns, And mix that to you XX I'd of options on if basis a lots? down of finished, your

Jessica Hansen

developed your So the or that we're we're developed party. question, for lot by of closing part third a the houses today, fiscal of to a over on this first XX% year past

to we would country expect a So finished you industry recall, professionals the are because take across they XX% minimum we is down likely as kind hundreds cases, that have in of do. the -- of for a at practices land what that very good of lot

land So third-party we'll land, under they'll negotiate seller, with the contract find go it developer. a out, source go and put it then the

that bring of some identified we XX% stuff the we the our has lots finished it. today And going buying skew? not, of third it a other expect from it maybe party. versus terms of not the lot cases, you markets be in on to a balance in develop do By that and So to will who's more sheet, where we're then that time

Paul Romanowski

don't Ken. I that No, to skew, expect

as developer derisk We reduction a partnerships in the we to continue pipeline. we build would you'll developed I rise, in time, our not our our expect number and over continue buy lock of to a fully lots markets. all see that sheet And balance

Kenneth Zener

Thank much. you, very David. Thank you

David Auld

Thank support I the the you, appreciate Ken. years. through

Operator

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

Susan Maklari

is question be high there Is about something goal? around should Any past we how a for to talked in thoughts in on thinking the about that growth. XXXX? range mid- still first count the community My as you reasonable single-digit that

Jessica Hansen

quite some think a time basis, absorption 'XX, we of I at look out we've communities driven expect we now. yes, increased On fiscal So, of would as a for year-over-year our lot

community and now growth expand And so just footprint. we're count incremental continuing coming of shifting to to that some from our

we'll if pretty count to necessary. single guide community So obviously we on the We I a think specifically reason. communities the mid- throughout to move because year just assumption are think there a many moving is that hard and a pieces offline, predict base I high case. but coming good It's do so update reasonable for as don't base that's to case

Susan Maklari

is over did go just in terms mean you're How what That's cash you here? past of Okay. the could thinking $X.X priorities? that talk you about of back forward the to what's Can allocation $X business driving helpful. from versus buying about as And year. capital of that you're confidence? generation this the next billion billion which stock then guiding in year, you up And the that

Bill Wheat

shares over time. Sure, Sue. over repurchase the and time to been consistently grow that It's ours of goal

see this so our That's and a is that to us certainty have to confidence And able than into guide visibility as increased growth we in more being in to more flow specifically generate say, in 'XX. around just that I'd And given step little ability in fiscal the the we another past. progression. a little business, cash

we deliver ago, quickly we said Mike earlier, actually how our about concerned year a were homes. and As could production capacity

We have today. certainty more around that

more our us so around that, And gives flow. with cash visibility that

to shareholders important repurchases, are so distributions And capital our of our of an allocation. part dividends,

share to billion million as billion $XXX homebuilding important of flow going another allocation. repurchase, of very obviously dividends, going so we're that's our that to of capital And cash $X.X to part guiding $X with a

Operator

Your Bank America. next question is coming from from of Jadrosich Rafe

Rafe Jadrosich

follow as near just something up should term? the we lot that's the Is of rate fourth on be cost year-over-year go into fiscal on higher comments wanted there I the we XX% driving is to outlook, that quarter. in the expecting that up run Or sort XXXX?

Bill Wheat

regulations bit run all That number prices in requirements The themselves It it's higher. been it. development government which reflects whether land current costs of over that, from and a inflecting development. time our time permits that then obviously, the things. a and lines as with significant costs in has dramatically, well associated is inflation rate. also includes costs lengthened seen It we've have Obviously, have several with to, adds and incrementally. time costs there years development as along of infrastructure increased the lengthening But the

all of across a inflation shortage really our lots there's there on for markets builders the market well. getting developed. still in strong So been lots pretty And of has there as out

brick time. over we and rate, run see I And in 'XX. as current is we go in see we cost costs visibility still probably our our going moderation to than might stronger think do to so inflation whether that's we expect stick our to other that whether inflation lot accelerate or further but have that, some don't

Rafe Jadrosich

in demand if just then I just there weaker, that how this you handle at like of what do higher. this Is -- where on you've do Like level sell earlier, signs [indiscernible] are or just are coming could investments in down. capital different a the environment? handle continue to that you there pull you And invested how at is outlook, you mentioned some there? about cost the retail rents in And you rates would rental back? is rate of rate environments? that think helpful. And rental you How mean incremental as That's -- current

Paul Romanowski

we sell continue it closely, and on Yes, look we with don't market to is is. watching just intend and our the be as that hang We demand homes, And stabilized in to we stuff continue -- what we increase like to balance closely, pricing assets. at we sheet. what to are the and market watch significantly

positioned intend feel We we to So the feel flow this in quarters so, to in market. indicating through that's closely choppiness good it the adjust our about out good about be see platform demand the that but we'll as some and still grow and there. why coming margins we the platform to accordingly. we're do we But continue position watch and and may

Michael Murray

is a of parcels. a the a a We've now that significant partner value side, be sellers. user better us going a residential we a for better land multifamily strategic developer. time developer The and into the for land done of being very as long to platform development for become multifamily good buyer land And

strategically, We're do. in. And responsive business, to so to that going stay going with a and scale but what be continue will we we're it's business opportunistic conditions to market to we

Operator

coming KBW. question from from next Jade is Your Rahmani

Jade Rahmani

secondly, that taking sure was incentive? could term this buyers percentage stated your the of earlier, are And what Not of are taking full get down? if rate or percentage the down some mortgage kind you buy buy but interest

Paul Romanowski

XX-year of almost type buy-down buy-down. I buyers of some about specific It's our all fair and chunk rate those. Yes. of don't utilizing XX% a are have our numbers, permanent

Jade Rahmani

talk development your that business, rates purchases cap rental you the achieve? of the ballpark a to assets of acquisition could exit are that rates cap or to On rough looking

Michael Murray

it's what made the rate the vary acquisition. be and board, was we at of to market the time the interest across going Sort significantly by environment

with So out. it's cost the come from to the of lot hard relevant even there's than to assumptions different a down expectations like a made the pin X rental prove over of life that range. side, Because actuals many or it project, rate cap any and we

and fortunately, so up in well the executing some results. execution teams really picking been by those on And projects we've projects, able see and strong shown to and that's the good

in that decided working keep to number of at me we a rate ballpark did hard go you for the and deal it's was cap when But time pro it. to what give forward try a on to going just to we with direction. we're forma a a And

Paul Romanowski

rental our stretching sure we the for-sale driven position so and making and about we expectations a have as underwriting those our that underwriting aren't it our conservative that all for good in rent, business of guidelines it we that And potentially and been a as well lowest for rates feel to interest very single-family on environment. operators as by are for cap

Operator

Dahl Mike question coming is our Capital from And final RBC morning this Markets. from

Michael Dahl

Paul, is pressure to you're is bit appreciate margin, Or expectations on the Congrats, that mix, contemplating It margins, full -- the magnitude low margin pieces than thinking fair? I beyond follow-up I qualitative you're obviously, ask not maybe bracing you sounds of the of just for David. on Is it a any pressure giving order not around some XQ? further you're beyond added margins about incentives, moving declines can and but outright returns, like downward the about and for a guidance wanted costs. help there congrats, potential little you're some with that that us other of price, some comments XQ. around of price

Jessica Hansen

conditions. weather market we give which Sure. function because what front do always to wouldn't we may is again not to to never continue or out. to adjust financial margin full we're to word position position bracing find year whether market likely downside. to we whatever a in mean going We're in a market week is and Mike, upside do going I a we're meet a do, us, probably feel we're it's I the use of and for. that in the of very And like conditions, in week really guide. We strong

year spring full haven't and the obviously. gross we for our terms land the margins, margin in which driver seen where year we biggest the And of yet, is of

happens ourselves a looking So do moving on spring. lot if to not that's house there business. same lot at in pressure, as where have do time. we're just into we a ability adjust market. a a also downward in our and home perfectly we'll components in structure cost structure, we pieces that you the what price in house alluded other not adjust then of market our are real the cost have going reduce a not price adjust and going sit typical and to to But But of to, the time We prices dependent vacuum more downward go the be find be there to our

exit good. rate to the So in we earlier, Like very from said I year returns. XX.X% looks continue starting weather whatever QX where to like feel we're and a to maximize

David Auld

And execute to have Mike, [indiscernible]. we'll never from that product on. supply I pretty been lot X years I'm a last We've location, gained think through and the X positioned efficiency optimistic continue or

good given catastrophic 'XX think a going to year some I be is So a of event. lack

the cost a this never just positioned -- as business, that ultimately, it's efficient company are at we been And and it's we than we lower So -- most best better can have houses do produce about to who are drive returns. in right now. the the

Michael Dahl

is be the ops. billion homebuilding it's from then point. strong unique this to No, $X cycle, relatedly, also just Yes. in the starting Yes. And flow continuing cash certainly cash a strength in

had you multifamily, For some kind flow current know business? bridge some through to actually do you true the still Or big already rentals thinking potential we're the of environment, about of number, your that rental terms construction, when you've cash or ops trying from should offsets offsets down last that articulated I of majority of years, homebuilding on accelerated operations, you've assets. given under what flow In other free cash? to other that be will a of anything the from have in backlog of couple cash from or the but multifamily a free think we to parts

Bill Wheat

multifamily. deals our of did growing, higher comment we expect and deliveries we earlier, As is multifamily on pipeline

conditions that to to do fiscal side So not. but will or do uncertain grow 'XX. the that I It's in expect in our investments going rental and as multifamily offset show where whether to on is the Mike environment expect some -- side, think, multifamily single-family we're earlier, I evaluating market the an rate as Paul increase and on side. commented is, of The

Michael Murray

lot a development optionality those the in points of we projects. And various within the phases build-to-rent of portfolio, have at

construction the time real in we homes, rent at those development, or to not on respond on As point we're product, we to start vertical as that almost lease, ready long sale can and take asset. and to what go so decide a plan, we start go we go with then the or duration to market rent go risk do to is

Operator

This would Paul I remarks. closing you. now does the session. to hand today's Romanowski Thank floor to for conclude back Q&A like

Paul Romanowski

his the forward our Thank would you, in appreciate first results. Tom. leadership, guidance to and We on thank to to quarter look everyone's throughout share like today and I my support speaking again January David call career. you with for time

success. CEO, Our company tenure produced continued remarkable has his results during as for and he positioned has us

XXXX. Horton To efforts fiscal thank the in your for incredible team, D.R. you

XXXX. accomplish new together everything into we heading and to forward will well look I fiscal are in year, the We positioned

Operator

This Thank conference you. does call. conclude today's

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

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