Release Date: April 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• D.R. Horton Inc (DHI, Financial) reported solid earnings of $2.58 per diluted share for the second quarter of fiscal 2025.
• The company achieved a pre-tax profit margin of 13.8% on $7.7 billion of revenues, demonstrating strong financial performance.
• D.R. Horton Inc (DHI) maintained a low cancellation rate of 16%, indicating strong buyer commitment despite economic uncertainty.
• The company has a robust balance sheet with $5.8 billion of consolidated liquidity, providing significant financial flexibility.
• D.R. Horton Inc (DHI) increased its share repurchase authorization to $5 billion, reflecting confidence in its financial position and commitment to returning capital to shareholders.

Negative Points

• Net sales orders and home building revenues decreased by 15% in the second quarter, reflecting challenges in the housing market.
• The average closing price for homes decreased by 1% both sequentially and year over year, indicating pricing pressures.
• Homebuilding SG&A expenses increased by 4% from the previous year, impacting overall profitability.
• The gross profit margin on home sales revenues decreased by 90 basis points sequentially due to higher incentive costs.
• D.R. Horton Inc (DHI) expects incentive costs to increase further, potentially impacting future profit margins.

Q & A Highlights

Q: Can you discuss the shift in D.R. Horton's management approach, particularly regarding volume and share repurchases? A: Paul Romanowski, President and CEO, explained that the company is focusing on a return-based business model, balancing pace and price to drive returns and consistent operating cash flows. The emphasis is on maintaining significant scale while maximizing shareholder returns through share repurchases and dividends.

Q: How is D.R. Horton managing its SG&A expenses given the recent increase? A: Bill Wheat, CFO, noted that while keeping a low-cost operating model is still crucial, recent investments have expanded the company's footprint and market count. These investments are seen as necessary for long-term market share aggregation, despite current market conditions not providing the expected growth rate.

Q: What is the outlook for D.R. Horton's gross margin in the third quarter, and how do incentives play into this? A: Michael Murray, COO, stated that if incentives remain flat, the company could achieve the higher end of its gross margin target of 21% to 21.5%. However, market volatility, particularly in mortgage rates, makes precise predictions challenging.

Q: How is D.R. Horton handling potential tariff impacts on costs, particularly with suppliers? A: Paul Romanowski mentioned that while there is significant noise around tariffs, the company feels well-positioned due to its strong supplier relationships and market scale. They expect to manage costs effectively and minimize tariff impacts.

Q: What is D.R. Horton's strategy regarding community count and starts, especially in light of potential market softness? A: Jessica Hansen, SVP, explained that community count adjustments will depend on local market conditions and sales pace. The company is focused on maintaining flexibility in its lot position and will adjust community starts based on demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.