D.R. Horton, Inc.

Good morning and welcome to the second quarter 2025 earnings conference call for Dior Horton, America's builder. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for Dior Horton.

Thank you, Paul, and good morning. Welcome to our call to discuss our financial results for the second quarter of fiscal 2025. 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 D.R. Horton on the date of this conference call, and D.R. 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 Deer Horton's annual report on Form 10-K and its 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.deerhorton.com, and we plan to file our 10-Q next week. 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 am 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. For the second quarter, the D.R. Horton team delivered solid results. highlighted by earnings of $2.58 per diluted share. Our consolidated pre-tax income was $1.1 billion on $7.7 billion of revenues, with a pre-tax profit margin of 13.8%. We remain focused on improving capital efficiency to generate substantial operating cash flow and deliver compelling returns to our shareholders. Our home building pre-tax return on inventory for the 12 months ended March 31st was 24.3%, return on equity was 17.4%, and return on assets was 12.2%. Although home builders are generally thought of as being capital-intensive businesses, our return on assets ranks in the top 15% of all S&P 500 companies for the past three, five, and 10-year periods. demonstrating that our disciplined, returns-focused operating model produces sustainable results. Over the past 12 months, we have returned all of the cash we generated to shareholders through repurchases and dividends. This year's spring selling season started slower than expected, as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence. In the second quarter, our net sales orders and homebuilding revenues decreased 15%. Our tenured operators are responding appropriately to market conditions by carefully balancing pace versus price to maximize returns, resulting in a home sales gross margin of 21.8%. Where necessary, we have increased sales incentives to drive traffic and incremental sales. Our weekly sales in March and to date in April have outpaced our February rate. Additionally, our cancellation rate remains at the low end of our historical range, indicating that buyers in today's market are able to qualify financially and are committed to their home purchase, despite the volatility and elevated uncertainty of the current economic environment. We expect our incentive levels to remain elevated and increase further, the extent to which will depend on market conditions and changes in mortgage interest rates. With 58% of our second quarter closings also sold in the same quarter, our sales, incentive levels, and gross margin are generally representative of current market conditions. We will continue to adjust our product offerings, sales incentives, and number of homes in inventory based on the level of demand for new homes in each of our local markets. We are well positioned, offering our customers an attractive value proposition with quality homes at affordable price points.