D.r. Horton, Inc. · NYSE:DHI
D.r. Horton — Q1 FY2018 Earnings Presentation
30 slides from D.r. Horton's earnings presentation, January 2018
Slide 1: Investor Presentation Q1 FY 2018
Investor Presentation Q1 FY 2018 1
Slide 2: D.R. Horton, Inc.
D.R. HORTON, INC. 2 By closings volume for calendar years 2002 to 2017
Slide 3: Forward-Looking Statements
F O R W A R D - L O O K I N G S TAT E M E N T S This presentation may include “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 outc
Slide 4: D.R. Horton, Inc. traded on NYSE as DHI
D.R. HORTON, INC. TRADED ON NYSE AS DHI 47,135 $14.5 billion Annual homes closed Annual consolidated revenues $13.0 billion $1.7 billion Total assets Annual pre‐tax income $20.98 $7.9 billion Book value per common share Stockholders’ equity 4 As of or for the twelve‐month period ended December 31, 2
Slide 5: Broad National Footprint: 26 States
B R OA D N AT I O N A L F O O T P R I N T 7 9 M A R K E T S | 2 6 S TAT E S 5
Slide 6: Broad National Footprint: Markets by Region
B R OA D N AT I O N A L F O O T P R I N T 7 9 M A R K E T S | 2 6 S TAT E S HB Revenue Inventory 5% 5% 6% 6% 26% 12% 30% 12% 24% 26% 24% 24% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Delaware, Maryland, Colorado Alabama, Florida, Louisiana Arizona California, Hawaii, New Jersey, North Illi
Slide 7: Diverse Product Offerings and Price Points
DIVERSE PRODUCT OFFERINGS AND PRICE POINTS Homes for entry‐level, move‐up, active adult and luxury buyers 7% 20% $0 $500k 26% $200k $300k 27% $250k 20% 7 Represents homes closed for the twelve months ended 12/31/17
Slide 8: Family of Brands
FA M I LY O F B R A N D S FIRST TIME / MOVE UP ENTRY LEVEL LUXURY ACTIVE ADULT 79 markets | 26 states 58 markets | 21 states 39 markets | 16 states 22 markets | 12 states ASP $318k ASP $233k ASP $610k ASP $262k 3% 2% 3% 2% 6% 1% 37% Homes Homes 29% Home Sales 36% Sold Closed Revenue 59% 64% 58% 8 Ba
Slide 9: Management Tenure and Experience
MANAGEMENT TENURE AND EXPERIENCE Executive team and Division presidents City managers region presidents over 13 years over 10 years approx. 25 years Average employee tenure 9
Slide 10: Market Share Dominance
MARKET SHARE DOMINANCE D.R. Horton Share and Rankings in Largest U.S. Housing Markets Top 5 Markets Top 50 Markets 18% 50 16% 14% 40 40 12% 36 30 10% 28 8% 20 6% 4% 10 13 2% 0% 0 DFW Houston Atlanta Phoenix Austin #1 Top 5 Top 10 Operate In DHI market share Market share of highest ranking competitor
Slide 11: Operational Focus
O P E R AT I O N A L F O C U S • Maximize returns by managing inventory levels and balancing sales pace and pricing in each community • Generate consistent positive annual cash flow from operations • Maintain inventories of land, lots and homes that support double‐digit annual growth in both revenue
Slide 12: Emphasis on Return on Inventory (ROI)
EMPHASIS ON RETURN ON INVENTORY (ROI) Steady improvement in Homebuilding ROI 20% 16.6% 17.0% 15% 15.9% 15.4% 12.8% 10% 11.1% 5% 0% FY 2014 FY 2015 FY 2016 TTM 12/31/16 FY 2017 TTM 12/31/17 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inve
Slide 13: Balanced Approach
BALANCED APPROACH Expect to generate positive cash flow from operations for the fourth consecutive year while growing revenues and replenishing land investments Consolidated Revenues Land Investment $15.5 – $16.3 $16 $5 ~$4.0 $14.1 $4 $12 $12.2 $10.8 $3 $3.5 $8 $2.7 $2 $2.2 $4 $1 $0 $0 FY 2015 FY 20
Slide 14: FY Capital and Cash Flow Priorities
F Y 2 0 1 8 C A P I TA L A N D C A S H F L O W P R I O R I T I E S • Balanced, disciplined, flexible and opportunistic • Invest in homebuilding opportunities, including acquisitions, to generate acceptable returns and consolidate market share • Acquired 75% of Forestar for $558 million in October 20
Slide 15: Homebuilding SG&A
HOMEBUILDING SG&A Expect SG&A as a percentage of homebuilding revenues to improve approximately 20 basis points in FY 2018 to around 8.7% HB Rev $ SG&A % $16.0 11.0% 10.0% $12.0 $13.7 $11.9 9.0% $8.0 $10.6 8.0% $7.9 $4.0 7.0% $0.0 6.0% 2014 2015 2016 2017 HB Rev $ SGA % $ in billions 15 Shown as a %
Slide 16: Forestar Acquisition
F O R E S TA R A C Q U I S I T I O N • On October 5, 2017, D.R. Horton (“DHI”) completed the acquisition of 75% of the outstanding shares of Forestar (“FOR”) for $558 million in cash • FOR is and will continue to be a publicly‐traded residential land development company, with operations currently in
Slide 17: Forestar Timeline
F O R E S TA R T I M E L I N E FOR evaluating 22 primarily DHI‐sourced Expect FOR to invest $400 Expect FOR to access the projects (closed on 6 as of million in land acquisition and public markets for additional 12/31/17) ‐ representing development in fiscal 2018 growth capital in fiscal 2019 11,000
Slide 18: FY Expectations
F Y 2 0 1 8 E X P E C TAT I O N S * Fiscal Year: • Consolidated pre‐tax profit margin of 11.8% to 12.0% • Consolidated revenues between $15.5 billion and $16.3 billion • Homes closed between 50,500 homes and 52,500 homes • Home sales gross margin in the range of 20% to 21%, with potential quarterly
Slide 19: Three Year Outlook
THREE YEAR OUTLOOK* FY 18 – FY 20: • Increase consolidated revenues and pre‐tax profits at a double‐digit annual pace • Improve return on inventory • Increase optioned lots to 60% of total homebuilding land and lot position by 2020 • Cash flow from operations growing to over $1.25 billion annually i
Slide 20: First Quarter Data
FIRST QUARTER DATA DRHORTON 20 A nericas Builder
Slide 21: Q1 FY 2018 Highlights
Q1 FY 2018 HIGHLIGHTS • Consolidated pre‐tax income increased 23% to $391.2 million • Consolidated pre‐tax income margin improved 70 basis points to 11.7% • The value of net homes sold, homes closed and homes in backlog increased by 17%, 14% and 11%, respectively • 10,753 net homes sold and 10,788 h
Slide 22: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 16%, 15% and 9%, respectively, in Q1 of FY 2018 compared to Q1 of FY 2017 # of Homes 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 1Q FY 2016 1Q FY 2017 1Q FY 2018 22
Slide 23: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED FISCAL YEAR ENDED 12/31/2017 12/31/2016 9/30/2017 9/30/2016 Homes closed 10,788 9,404 45,751 40,309 Homebuilding Revenues: Home sales $ 3,184.5 $ 2,797.7 $ 13,653.2 $ 11,783.1 Land/lot sales and other 36.4 28.4 88.3 78.7 3,220.9 2,826.1 13,741.5 11,861.8 Gr
Slide 24: Home Sales Gross Margin
HOME SALES GROSS MARGIN Home sales gross margin of around 20% 21% 20.2% 20.3% 20.8% 19.8% 19.8% 19.8% 19.8% 18% 15% 12% 9% 6% 3% 0% FY15 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Shown as a % of home sales revenues 24 Includes interest amortized to cost of sales
Slide 25: Homebuilding SG&A
HOMEBUILDING SG&A First quarter SG&A as a percentage of homebuilding revenues of 9.5% Fiscal Year 2017 First Fiscal Quarter 2018 HB Rev $ SG&A % HB Rev $ SG&A % $14,000 12% $14,000 12% $12,000 $12,000 $10,000 11% $10,000 11% $8,000 $8,000 10% 10% $6,000 9.3% $6,000 8.9% $4,000 9% $4,000 9% $2,000 $2
Slide 26: Consolidated Pre-Tax Income
C O N S O L I DAT E D P R E - TA X I N C O M E Consolidated pre‐tax profit margin improved 70 basis points to 11.7% in Q1 FY 2018 Fiscal Year 2017 First Fiscal Quarter 2018 PTI $ PTI $ $1,800 $1,800 11.4% $1,600 $1,600 $1,400 11.1% $1,602.1 $1,400 $1,200 $1,353.5 $1,200 $1,000 $1,000 $800 $800 $600
Slide 27: Balance Sheet
BALANCE SHEET 12/31/2017 9/30/2017 12/31/2016 Homebuilding Cash and cash equivalents $ 566.3 $ 982.3 $ 1,124.3 Inventories: Construction in progress and finished homes 4,907.8 4,606.0 4,285.4 Land inventories 4,767.9 4,631.1 4,457.0 9,675.7 9,237.1 8,742.4 Other assets 829.6 793.1 678.8 Deferred inc
Slide 28: Homes in Inventory
HOMES IN INVENTORY Homes in inventory increased 13% from a year ago to support expected growth in homes closed 30,000 27,800 26,200 25,000 24,500 23,100 20,600 19,800 20,000 15,000 10,000 5,000 0 9/30/14 9/30/15 9/30/16 12/31/16 9/30/17 12/31/17 Models Sold Specs 28
Slide 29: Homebuilding Land and Lot Position
HOMEBUILDING LAND AND LOT POSITION Optioned lot position increased 42% from a year ago 300,000 259,400 249,000 250,000 204,500 212,600 200,000 183,500 124,000 133,500* 173,900 91,600 94,300 150,000 58,900 55,500 100,000 124,600 118,400 112,900 118,300 125,000 125,900 50,000 0 9/30/14 9/30/15 9/30/16
Slide 30: Homebuilding Public Debt Maturities by Year
H O M E BU I L D I N G P U B L I C D E B T M AT U R I T I E S B Y Y E A R $800 $700 $700 $600 5.750% $500 $500 $500 $400 $400 $350 $300 $200 $100 3.750% 4.000% 2.550% 4.375% 4.750% $0 FY 19 FY 20 FY 21 FY 22 FY 23 $ in millions 30