D.R. Horton, Inc. (NYSE:DHI) Q1 2023 Earnings Call Transcript

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David Auld: Most importantly, we don’t know. And we’re taking probably a conservative stance in looking at the fact that seasonally in a normal seasonal environment, we do see lumber cost increase through the spring — and if we do — are seeing some normalized demand coming back with the spring selling season, seasonality, would expect that to drive lumber prices higher, which would offset some of the efforts we’ve made on like-for-like cost reductions. We have been able to get new product starts out, new home starts out that are more reflected to today’s environment, smaller homes, more affordable homes that should help — but in terms of a like-for-like cost benefit increase, it’s going to take a little while for that product to move through the system in a material way.

Stephen Kim: I didn’t hear a number there. I think I was getting ready to write a number down. I didn’t hear a number. You want to give us a sense or sort of like how much of the way back just sort of thinking lumber might increase. Yes.

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

Bill Wheat: It does feel Stephen, like there is some normalcy returning to the market. And so you go back pre-pandemic and you look at what happened €“ costs get inflated during the last year, 18 months? Yes. Are we fighting get that back? Yes. our commodity price like lumber may go up, may go down, may stay the same. But are we going to be conservative in our guidance? Absolutely, we are.

Stephen Kim: No complaints here. And I’ll say that if lumber goes up because of normalization, I think we’ll take it. In regards to your lot count, I noticed that your owned lot count in numbers — numbers of lots went up a little bit. I think quarter-on-quarter, it had declined, I believe, in the last two quarters preceding that. So, I’m curious, are you — or at least in the last — sorry, the last two quarters preceding that, are you — do you feel like your lot cost — sorry, your lots owned will increase from here, or do you think we might actually see a further reduction in your actual number of owned lots? Just try to give us a sense for what that number might be, not in year supply but more like in absolute units?

David Auld: Yes, Stephen. We have worked hard for the lot position that we have and the relationships that we’ve built and with those developer relationships, we’re continuing to — it’s still hard to get a lot on the graph. And so our lot count as a percentage of owned and total numbers, we expect to continue to increase — and some of that will depend on what we see with the spring selling season and through the rest of fiscal 2023. But we don’t expect that to go down and we expect to see potentially our owned lot supply as a percent increase marginally through this market.

Jessica Hansen: And as a reference, again, our owned lots finished percentage is only 32%, which is roughly 43,000 lots. So, we’re by no means oversupplied from a finished lot perspective, which is what we’re trying to continue to position ourselves forward community-by-community.

Stephen Kim: Got you. Thanks so much guys.

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

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