D.R. Horton, Inc.

Good morning and welcome to the third quarter 2025 earnings conference call for D.R. Horton, America's Builder. We'll open the floor for your questions and comments after the presentation. I'll now like to turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.

Thank you, Matthew, and good morning. Welcome to our call to discuss our financial results for the third 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.O. 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.O. Horton on the date of this conference call, and D.O. 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 D.L. 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.dlhorton.com, and we plan to file our 10-Q later this week. After this call, we will post updated investor and supplementary data presentations to our investor relations sites on the presentation section under News and Events through 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 DR Horton team exceeded our expectations and delivered solid results for the third quarter. highlighted by earnings of $3.36 per diluted share. Our consolidated pre-tax income was $1.4 billion on $9.2 billion of revenues, with a pre-tax profit margin of 14.7%. Our net sales orders in the third quarter were flat with the prior year quarter and increased 3% sequentially. Our tenured operators continue to respond to market conditions with discipline. balancing pace versus price to maximize returns in each of our communities, achieving 23,160 homes closed this quarter with a home sales gross margin of 21.8%, both of which were above our guidance range. We remain focused on maximizing capital efficiency to generate substantial operating cash flows and deliver compelling returns to our shareholders. Over the past 12 months, we have generated $2.9 billion of cash from operations, and we have returned $4.6 billion to shareholders through repurchases and dividends. For the trailing 12 months ended June 30th, our home building pre-tax return on inventory was 22.1%, while our consolidated returns on equity and assets were 16.1% and 11.1%. Our return on assets ranks in the top 15% of all S&P 500 companies for the past 3, 5, and 10-year periods, demonstrating that our disciplined, returns-focused operating model produces sustainable results and positions us well for continued value creation. New home demand continues to be impacted by ongoing affordability constraints and cautious consumer sentiment. Where necessary, we have increased incentives to drive traffic and incremental sales. 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 uncertainty of the current economic environment. We expect our sales incentives to remain elevated and increase further during the fourth quarter. the extent to which will depend on the strength of demand, changes in mortgage interest rates, and other market conditions. With 54% of our third 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 tailor our product offerings, utilize sales incentives, and adjust the number of homes and inventory based on demand in each of our markets. We are well positioned, offering our customers an attractive value proposition with quality homes at affordable price points, and we have a positive outlook for the housing market over the medium to long term.