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

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Mike Rehaut: Thanks. Good morning everyone. Thanks for taking my questions. I just wanted to circle back to your more recent trend and demand comments. Obviously, you mentioned that the first few weeks of January, saw some increased activity and that you could see a typical 50% improvement in orders in 2Q versus 1Q. That would imply if we’re to take that just on a straightforward basis an order decline of only roughly 20% down year-over-year. So, I’m curious around if that’s kind of — and I know you haven’t given hard guidance or a range. But directionally, if that’s how we should be thinking about things? And also to this point around the improvement that you saw in January, I was curious also if you could kind of give any color around trends intra-quarter during the past first quarter, if that improvement in January was a continuation of perhaps a change in trend that you saw during your December quarter?

Jessica Hansen: I would say during the December quarter, as we mentioned on the call, as you know, Mike, is the seasonally slowest quarter of the year. So, we generally don’t extrapolate anything that happens in October, November, and December, and we don’t generally give a whole lot of monthly color, but we felt like based on current market conditions that warranted talking about the first few weeks of January, and that’s what we’re pleased with is we’ve seen what we would typically expect to see as we move through these first few weeks.

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

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

Bill Wheat: In terms of just pricing, really, our net sales orders in the quarter and the average sales price on that is the best indication. Our net sales order price this quarter is around 367,000, I believe. And, of course, we peaked last year, a little over 400,000. So you’re already looking at roughly a 10% decline in our net sales orders. And as then we look at our margin guide going forward, we’re taking recent pricing into effect. We’re hopeful that if we see some normal seasonality and normal demand during the spring that further significant pricing reductions would not be necessary, but we’re going to assess that week-to-week and month-to-month as we go through the spring. But our gross margin guide takes into account recent pricing along with the cost trends that we’ve already been discussing.

David Auld: Just to add, it is very hard to put a lot on the ground. It’s very hard to build houses. And the overall market is still undersupplied. So long-term, I think we’ve got a great outlook what happens in the next quarter. We’re going to deal with the market as it comes.

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