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D.R. Horton(DHI) - 2024 Q3 - Earnings Call Transcript
DHID.R. Horton(DHI)2024-07-18 15:47
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Financial Data and Key Metrics Changes - Earnings for Q3 2024 were 4.10perdilutedshare,a54.10 per diluted share, a 5% increase from the prior year quarter [11] - Consolidated pre-tax income rose 1% to 1.8 billion, with revenues increasing 2% to 10billion,resultinginapre−taxprofitmarginof18.110 billion, resulting in a pre-tax profit margin of 18.1% [11] - Cash flow from home building operations for the nine months ended June 30 was 972 million, with consolidated cash flow of 228million[11][23]−Returnoninventoryforthetrailing12monthswas29.5228 million [11][23] - Return on inventory for the trailing 12 months was 29.5%, and return on equity was 21.5% [11][24] Business Line Data and Key Metrics Changes - Home sales revenues increased 6% to 9.2 billion, with 24,155 homes closed compared to 22,985 homes in the prior year [13] - Net sales orders for Q3 increased 1% to over 23,000 homes, with order value flat at 8.7billion[14]−Grossprofitmarginonhomesalesrevenueswas248.7 billion [14] - Gross profit margin on home sales revenues was 24%, up 80 basis points sequentially [16] - Home building SG&A expenses increased by 12% from last year, with SG&A as a percentage of revenues at 7.1% [17] Market Data and Key Metrics Changes - The average selling price of homes was approximately 380,000, with an average closing price of 382,200,up2382,200, up 2% sequentially [12][13] - The company had 42,600 homes in inventory, with 26,200 unsold homes at the end of the quarter [18] - The rental operations generated 64 million of pre-tax income on 414millionofrevenues[20]CompanyStrategyandDevelopmentDirection−Thecompanyaimstoenhancecapitalefficiencytoproduceconsistent,sustainablereturnsandincreaseconsolidatedoperatingcashflows[12]−Focusonmaintainingasufficientstartpaceandhomesininventorytomeetdemandwhileimprovingcapitalefficiency[18]−Thestrategicrelationshipwith4Star,amajority−ownedresidentiallotdevelopmentcompany,isvitalforreturns−focusedbusinessmodel[21]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatdespiteinflationandelevatedmortgagerates,homebuyerdemandremainedgoodduetolimitedsupplyofaffordablehomes[12]−Thecompanyexpectstogenerateconsolidatedrevenuesof414 million of revenues [20] Company Strategy and Development Direction - The company aims to enhance capital efficiency to produce consistent, sustainable returns and increase consolidated operating cash flows [12] - Focus on maintaining a sufficient start pace and homes in inventory to meet demand while improving capital efficiency [18] - The strategic relationship with 4 Star, a majority-owned residential lot development company, is vital for returns-focused business model [21] Management's Comments on Operating Environment and Future Outlook - Management noted that despite inflation and elevated mortgage rates, homebuyer demand remained good due to limited supply of affordable homes [12] - The company expects to generate consolidated revenues of 36.8 to 37.2billionforthefullyearoffiscal2024[27]−Anticipatedcashflowfromhomebuildingoperationsisapproximately37.2 billion for the full year of fiscal 2024 [27] - Anticipated cash flow from home building operations is approximately 3 billion for fiscal 2024, with plans for increased share repurchases and dividends [27][28] Other Important Information - The company repurchased 3 million shares for 441millionduringthequarter,withanewsharerepurchaseauthorizationtotaling441 million during the quarter, with a new share repurchase authorization totaling 4 billion [25] - The average FICO score for borrowers was 725, with first-time home buyers representing 57% of the closings [22] Q&A Session Summary Question: Absorption rates and margin focus - Management balanced price and pace to drive returns, maintaining incentives without overly focusing on sales pace [32] Question: Existing home inventory impact - Management noted that while inventory increased, it did not significantly impact sales, maintaining competitive advantages [34] Question: Inter-quarter sales and closings - Management observed choppy traffic patterns due to volatile interest rates but ended the quarter with better demand [37] Question: Cash flow and consolidated cash flow expectations - Management expects consolidated cash flow to be closer to home building cash flow levels going forward [43] Question: Lot costs and inflation expectations - Management indicated that lot costs are expected to normalize, with potential for low to mid-single-digit inflation in fiscal 2025 [79]