D.R. Horton, Inc.

Good morning, and welcome to the fourth quarter 2024 earnings conference call for D.R. Horton, America's builder, the largest builder in the United States. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you wish to enter the Q&A queue, please press star 1 on your phone at any time. I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.

Thank you, Tom, and good morning. Welcome to our call to discuss our fourth quarter and fiscal 2024 financial results. Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to DR Horton on the date of this conference call, and DR Horton does not undertake any obligation to publicly update or revise any forward-looking statements. Additional information about factors that could lead to material changes in performance is contained in DR Horton's annual report on Form 10-K and our most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. This morning's earnings release can be found on our website at investor.drhorton.com and we plan to file our 10-K in about three weeks. After this call, we will post updated investor and supplementary data presentations to our investor relations site on the presentation section under news and events for your reference. Now, I will turn the call over to Paul Romanowski, our president and CEO.

Thank you, Jessica, and good morning. I'm pleased to also be joined on this call by Mike Murray, our executive vice president and chief operating officer, and Bill Wheat, our executive vice president and chief financial officer. The D.R. Horton team produced solid results to finish the year, highlighted by consolidated pre-tax income of $1.7 billion on revenues of $10 billion, with a pre-tax profit margin of 17.1%. Earnings per diluted share for the fourth quarter were $3.92. For the year, earnings per diluted share increased 4% to $14.34, and our consolidated pre-tax income was $6.3 billion on revenues of $36.8 billion, with a pre-tax profit margin of 17.1%. Our home building pre-tax return on inventory for the year was 27.8%. Return on equity was 19.9%, and return on assets was 13.9%. Our return on assets ranks in the top 25% of all S&P 500 companies for the past three, five, and 10-year periods. Our consolidated cash flow from operations for 2024 was $2.2 billion, and we returned all of the cash we generated this year to shareholders through repurchases and dividends. Our fiscal 2024 share distributions increased by approximately $700 million, or 44% from the prior year. Over the past five years, we have generated $9 billion of cash flow from operations. and we have reduced our outstanding share count by 12%. For the quarter, despite continued affordability challenges and competitive market conditions, our net sales orders increased slightly from the prior year. Our sales pace was in line with normal seasonality from the third to fourth quarter, but below our expectations. While mortgage rates have decreased from their highs earlier this year, many potential home buyers expect rates to be lower in 2025. We believe that the volatility of rates combined with general uncertainty during the election season is causing some buyers to stay on the sidelines in the near term. To help spur demand and address affordability, we are continuing to use incentives such as mortgage rate buy downs and we have continued to start and sell more of our smaller floor plans. With 46% of fourth quarter closings also sold in the same quarter, Our sales, incentive levels, and gross margin are generally representative of current market conditions. We typically experience seasonally slower demand during the fall, and our tenured local operators seek to find the right balance of sales pace, pricing, and incentives in each community that will best position our returns and inventory levels before we enter the spring. For the full year of fiscal 2025, our home building volume and profit margins will largely be dependent on the strength of the upcoming spring selling season. Overall, the demographics supporting housing demand are favorable, and we continue to see a generally limited supply of both new and existing homes at affordable price points, in addition to a limited supply of finished lots available for new home construction. With our focus on affordable product offerings, 37,400 homes in inventory, continued improvement in our construction cycle times, and adequate finished lots available in our pipeline, we are well positioned for fiscal 2025. We remain focused on enhancing the capital efficiency of all of our operations to produce consistent, sustainable returns and cash flows so that we can return more capital to shareholders through both share repurchases and dividends.