Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| In terms of community count, we’ve seen some really strong community count really for the first time in quite some time |
| So we’re going to continue doing what we’re in control of, which is managing to a very strong balance sheet and consolidating share and generating strong profits, returns and cash flows, and grow our book value year-in and year-out |
| And for the most part, that’s targeted towards the first time, first move up buyer and we feel pretty good about being able to meet what they need and doing it in a spec environment |
| And Paul, you were named CEO in October, and obviously, you’ve been with the company for a number of years and Horton’s been extremely successful |
| To the acquisitions of Truland and Riggins, both gave us a solid loss supply in the markets they operated in and good local knowledge |
| Unidentified Analyst I guess, from your comments, you’ve derisked the balance sheet, you’ve improved returns, you’ve had very good financial performance and operating performance over a period of a lot of volatility and it seems like the stock’s still, there’s a construct around price to book and impairments and write downs that, we’ve gone through a pretty volatile period and that really hasn’t happened |
| That being said, I mean, I think, we do believe that there should be some scale advantages today in the business with as large as we’ve gotten compared to how we historically been |
| The Board’s been increasing that each year as our profits have been strong and our cash flows have been good |
| So I do think we believe we have a benefit across the industry, because of our consistency of starts and our scale at the local level, but we would expect some continued modest cost inflation on the labor side |
| We are in a great position as a company to be able to continue to supply and scale that business where it’s needed |
| We did a little bit better than expected in our December quarter, so we did move the midpoint of our guidance for the full year up by 1,000 units to get 90,000 in the top end of the range, which equates to about a 2.1 housing turn in terms of the number of homes we start the year with versus what we close in that 12-month period, which is really right back to our normalized turnover because our cycle times have improved |
| We feel we’re better suited than anyone to supply at scale that type of product |
| We’re back to normal, which is pretty exciting considering where we had gotten to |
| So again, it’s going to create more options for them to choose from, but we still feel good about our positioning against the resale market across our footprint |
| I think, we’ve been encouraged by the early spring selling season, the signs, we’re still just on the leading edge of it, but traffic’s been consistent and demand’s been good, and I think, in line with our expectations thus far |
| A lot of that comes to either through an acquisition of someone local that gives us a good platform and lot supply, but we have become very good at going in and greenfield as well |
| So in terms of our fiscal 2023 home closings, 65% of the homes that we closed were on a lot developed by a third-party and so I think there is room for that to continue to drift higher, kind of irrespective of where the 75 ultimately goes and that’s what’s continuing to drive very, very strong returns for us is doing more and more with third-party developers |
| Unidentified Analyst Can you talk a little bit about strategy on SFR and multifamily rental and in this kind of rate environment, if that’s changed or the sort of market conditions that you’re seeing? Paul Romanowski We still feel good about the platform and our ability to scale if the market gives it to us |
| We feel very comfortable with that position, happy with our operators having driven it as high as they did |
| But it turned out very well because, as everyone in this room probably recalls, housing recovered very sharply and much quicker than I think people would have anticipated |
| As we scale and gain local scale, and as well as national scale, being a little more thoughtful and targeted in terms of what goes into our homes gives us increased purchasing power |
| And we’ll take advantage and opportunity in markets that we want to be in, but not until we have the right people in place to go execute |
| We’re working to get better on that, but right now that is what it is and so what you see for a cash balance for us at our reported period ends is actually the highest cash we run throughout the year |
| We were up about 14% in average active selling communities on a year-over-year basis at the end of December and that had stepped up from a 10% increase in the September period on a year-over-year basis |
| Jessica Hansen And I think outside of that, what we had to have to begin with outside of what some of the smaller builders have is the lot position, right? There’s still no excess supply of finished lots out in the market today and we’ve got the strongest lot position in the industry and just the balance sheet, because the capital availability to smaller privates is still relatively tight |
| No question that in the current interest rate environment and the cap rate environment, we aren’t seeing the returns that we had hoped to see as we look at the near-term, but do believe that, we have seen strong demand still from institutional buyers |
| And so we’re going to stay active in the product, watch it closely as we look at the near-term and the market will tell us how far to lean into that, but feel good about our positioning |
| Horton in terms of scaling up their business and we’re really excited to continue to build out their people and their platform |
| I think that, for us, certainly, share gains have occurred in our core markets and the markets where we already got large share |
| Yeah, if we do 2.1 times conversion on the units this year, kind of you guys have made a lot of operational improvements, just continue to improve the business, like, how -- where do you think that can go over time and is there incremental opportunity to increase that conversion next year? Paul Romanowski I think there’s incremental opportunity |
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| But I think that, an industry as a whole, the challenge we have is having a lot of supply in front of us to truly oversupply the market |
| I still think that the housing market is undersupplied |
| There certainly is that risk |
| Our ability to put homes on the grounds we’ve already spoken to is harder today than it was in the past |
| Certainly there has been a very light level of inventory across the country |
| We don’t really have a geographic area today that gives us concern or that we’ve seen move beyond what we’ve seen as far as early spring demand |
| As Paul had mentioned in the early days of COVID, I mean, there were a lot of builders that had to make a lot of choices and even let people go very quickly, and we really just paused and took a wait-and-see approach, which in hindsight, we didn’t know |
| Not just the development costs and materials, but also the time to put those lots on the ground, which again, has created more scarcity of lots, which in a scarce environment, we don’t expect to see land reduce, either from a land base or a development cost basis, short of a drop in demand |
| So I think our base case would be, although we don’t give formal guidance for community count, it’s one of the hardest things for us to predict because there’s so many moving pieces, that for another quarter or two it probably stays pretty elevated and then once we cycle through a 12-month period, we’ll still have some community count growth, but it maybe even declines to be a little bit more modest |
| So hard to say where that lands us, but you could say, we just lived through a pretty big disruption with rates going from 2% to 3% to 7% plus over a period of time and we’re still right around a 23% gross margin |
| And it’s a distraction, it can be in terms of growth and opportunity and streamlining your business, trying to integrate |
| Although we took a pause, it didn’t take long to step back into the market |
| It still runs to the challenge of getting all of those products to site, right, the house is built in place |
| Certainly during the pandemic, we saw a lot of people take a pause on positioning of their companies and lot acquisition and lot purchases |
| They’ve come down a little bit |
| It is getting harder and harder to put a lot on the ground |
| We do think it’s undersupplied and it’s hard to see an opportunity for us to go out and oversupply if just left to our own devices to just go crazy |
| It takes a lot to be a spec builder and to understand that and be willing to continue to put the homes out there as the market ebbs and flows, and so I think we’ll see constraint in the market that keeps it from being oversupplied |
| I’m just curious from your comments, it seems like that’s maybe less attractive for Horton |
| Unidentified Analyst And given resale inventory is so constricted and some builders have really leaned into spec, is there any risk maybe in any MSA that you operate in that you’re seeing maybe excess spec inventory or how do you think about that risk from an industry perspective? Yeah |
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