10-QPeriod: Q2 FY2023

HORTON D R INC /DE/ Quarterly Report for Q2 Ended Mar 31, 2023

Filed April 24, 2023For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported its financial results for the quarter ending March 31, 2023. The company experienced a decrease in net income and diluted EPS compared to the prior year, reflecting a challenging macroeconomic environment with elevated inflation and interest rates. Despite these headwinds, DHI saw a significant improvement in net sales orders sequentially as the spring selling season began, indicating a rebound in demand likely driven by seasonal factors and pricing adjustments. Despite the year-over-year decline in profitability, DHI maintains a strong balance sheet and liquidity position, providing flexibility. The company's strategic focus on diverse product offerings, affordability, and efficient inventory management positions it to navigate market conditions. The rental segment showed strong revenue growth, while the financial services segment saw a decline in profitability due to a competitive mortgage market. Investors should monitor the company's ability to manage rising costs, the impact of interest rates on demand, and the ongoing strategic execution across its diverse business segments.

Financial Highlights

38 data points
Beta

Revenue

$7.97B

24.8% Gross Margin

Net Income

$949.60M

11.9% Net Margin

EPS (Diluted)

$2.73

Total Assets

$31.17B

Cash & Equivalents

$3.07B

Free Cash Flow

$612.80M

Financial Statements
Beta
Revenue$7.97B
Cost of Revenue$6.00B
Gross Profit$1.98B
SG&A Expenses$773.60M
Net Income$949.60M
EPS (Basic)$2.75
EPS (Diluted)$2.73
Shares Outstanding (Basic)342.10M
Shares Outstanding (Diluted)344.90M

Key Highlights

  • 1Net income attributable to D.R. Horton decreased by 34% to $942.2 million for the three months ended March 31, 2023, compared to $1.4 billion in the prior year period.
  • 2Diluted net income per common share decreased by 32% to $2.73 from $4.03 for the same period.
  • 3Consolidated revenues remained relatively flat at $8.0 billion for the three months ended March 31, 2023, compared to $7.99 billion in the prior year.
  • 4Home sales gross margin for homebuilding operations decreased to 21.6% from 28.9% year-over-year, indicating pressure on profitability.
  • 5Net sales orders increased by 73% sequentially from the previous quarter, suggesting improving buyer demand.
  • 6The company maintained a strong balance sheet with total equity of $20.7 billion and a debt-to-total capital ratio of 22.4% as of March 31, 2023.
  • 7Rental revenues increased to $224.1 million for the three months ended March 31, 2023, from $222.9 million in the prior year, with rental inventory growing significantly.

Frequently Asked Questions

The decrease in net income and diluted earnings per share was primarily driven by a decline in home sales gross margin, from 28.9% in the prior year's comparable period to 21.6% in the current period. This reduction in profitability was influenced by factors such as increased costs of homes closed relative to selling prices and a greater use of incentives to adapt to market conditions, including elevated inflation and mortgage interest rates.

D.R. Horton is adapting to market conditions by increasing the use of incentives, adjusting home prices, and modifying the size and offerings of its homes to improve affordability. The company is also focused on managing its inventory levels and production schedules to align with buyer demand. While supply chain disruptions have largely subsided, the company continues to monitor input costs and labor markets.

The company observed a significant sequential increase in net sales orders (up 73% from the previous quarter) as the spring selling season began, indicating improving demand. D.R. Horton believes it is well-positioned due to a limited supply of affordable housing, favorable demographics, its affordable product offerings, and strong lot supply. The company expects to continue managing pricing, incentives, and inventory levels based on local market conditions.

The rental segment demonstrated resilience, with revenues of $224.1 million for the three months ended March 31, 2023, a slight increase from the prior year. However, rental pre-tax income decreased significantly to $34.6 million from $102.5 million year-over-year, impacted by a decrease in multi-family rental revenue. The company continues to invest heavily in this segment, with rental property inventory growing to $3.3 billion.