31 slides from D.r. Horton's earnings presentation, November 2016
Slide 1: Q4 FY 2016
D-R-HORTON Junericas Buttder FY 2016
Slide 2: D-RHORTON ’ &
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Slide 3: Forward-Looking Statements
Forward‐Looking Statements 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 outcomes will not be mate
Slide 4: D.R. Horton, Inc.
D.R. Horton, Inc. • Traded on NYSE as DHI • #1 builder for 15 years in a row1 • Revenues of $12.2 billion • Closed 40,309 homes • Pre‐tax income of $1.4 billion • Total assets of $11.6 billion • Shareholders’ equity of $6.8 billion • Book value per share of $18.21 As of or for the fiscal year ended
Slide 5: Geographic Diversification
Geographic Diversification East HB Revenue1 12% West 78 Markets | 26 States 25% Midwest 6% Southwest 3% South Central 25% Southeast 29% East Inventory2 11% Midwest 5% West Region States 28% East Delaware, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia Midwest Colorado,
Slide 6: Broad Range of Product Offerings
Broad Range of Product Offerings Homes for entry‐level, move‐up, active adult and luxury buyers 7% $500k+ 26% < $200k 25% $300k to $500k $200k to $250k to $250k $300k 24% 18% Represents homes closed in fiscal 2016 Q4 2016 6
Slide 7: Substantial Growth in New Brands
Substantial Growth in New Brands New Brand Growth ‐ TTM Overall Brand Mix – Q4 # of Homes 14,000 4% 12,000 1,593 10,000 29% 8,000 6,000 1,059 67% 10,461 4,000 5,648 2,000 0 TTM 9/30/15 TTM 9/30/16 Represents homes closed Q4 2016 7
Slide 8: Newest Brand – Freedom Homes
Newest Brand – Freedom Homes 8 MARKETS 7 STATES Targeted at the active adult buyer • Introduced in July 2016 • Carefree affordable living for active adults • Low‐maintenance lifestyle • Age‐restricted and age‐targeted communities • Currently available in 8 markets • Expect to have available in appro
Slide 9: Management Tenure & Experience
Management Tenure & Experience Average employee tenure: • Executive Team and Region Presidents – over 20 years • Division Presidents and City Managers – over 13 years Q4 2016 9
Slide 10: D.R. Horton Market Share Rankings
D.R. Horton Market Share Rankings Top 50 U.S. Housing Markets # Markets 50 45 40 41 35 35 36 30 30 29 25 20 23 15 10 13 5 7 0 #1 Top 5 Top 10 Operations In 2009 2015 Source: Builder magazine ‐ 2016 Local Leaders issue Market share rankings based on homes closed in respective years Q4 2016 10
Slide 11: FY 2016 Highlights
FY 2016 Highlights • Consolidated pre‐tax income increased 20% to $1.4 billion • Consolidated pre‐tax profit margin improved 70 basis points to 11.1% • Net income increased 18% to $886.3 million • The value of net homes sold, homes closed and homes in backlog increased by 12%, 13% and 9%, respective
Slide 12: Sales, Closings & Backlog – FY 2016
Sales, Closings & Backlog – FY 2016 Net Sales Orders, Homes Closed and Homes in Backlog increased 9%, 10% and 8%, respectively, in FY 2016 compared to FY 2015 # of Homes 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Sales Closings Backlog FY14 FY15 FY16 Q4 2016 12
Slide 13: Operational Focus
Operational Focus • Current land ownership level is sufficient to support double‐digit annual growth in both revenues and profits • Consistently optimize balance of sales absorptions and gross margins to maximize returns in each community • Manage land and home inventory levels efficiently to genera
Slide 14: Emphasis on Return on Inventory (ROI)
Emphasis on Return on Inventory (ROI) 20.0% Steady improvement in Homebuilding ROI 15.0% 10.0% 15.4% 11.1% 12.8% 5.0% 0.0% FY 2014 FY 2015 FY 2016 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average inventory. Average inventory in the ROI calculation is the
Slide 15: Cash Flow from Operations
Cash Flow from Operations Generating positive cash flow from operations while growing Homes Closed $800 50,000 45,000 40,000 $600 35,000 30,000 $500.0 $400 25,000 $700.4 $618.0 20,000 15,000 $200 $300.0 10,000 5,000 $0 0 FY 2015 FY 2016 FY 2017e Cash Flow from Operations Homes Closed $ in millions Q
Slide 16: Cash Flow Priorities
Cash Flow Priorities • Be opportunistic, while remaining disciplined • Invest in homebuilding business where opportunities to generate acceptable returns exist • Business acquisitions to further consolidate market share • Pay off debt at maturity • Paid $543 million of senior notes at maturity durin
Slide 17: Wilson Parker Acquisition
Wilson Parker Acquisition • Acquired the homebuilding operations of Wilson Parker Homes (WPH) in September 2016 for $91.9 million in cash ($82.2 million paid in FY16) • WPH operates in Atlanta and Augusta, GA; Raleigh, NC; Columbia, SC and Phoenix, AZ • Assets included approximately 490 lots, 380 ho
Slide 18: FY 2017 Expectations
FY 2017 Expectations* Fiscal Year: • Consolidated pre‐tax profit margin of 11.2% to 11.5% • Consolidated revenues between $13.4 billion and $13.8 billion • Homes closed between 43,500 homes and 45,500 homes • Home sales gross margin around 20%, with potential quarterly fluctuations from 19% to 21% •
Slide 19: Fourth Quarter Data
Fourth Quarter Data Q4 2016 19
Slide 20: Q4 FY 2016 Highlights
Q4 FY 2016 Highlights • Consolidated pre‐tax income increased 28% to $433.0 million • Consolidated pre‐tax income margin improved 90 basis points to 11.6% • Net income increased 19% to $283.6 million • The value of net homes sold, homes closed and homes in backlog increased by 7%, 19% and 9%, respec
Slide 21: Family of Brands
Family of Brands • The heart of our business • Introduced in 2014, targeted at the true entry‐level buyer • Offered across all 78 markets and 26 states we operate in • Currently in 53 markets and 17 states • 67% of homes closed and 70% of home sales • 29% of homes closed and 20% of home revenue sale
Slide 22: Sales, Closings & Backlog – Q4 FY 2016
Sales, Closings & Backlog – Q4 FY 2016 Net Sales Orders, Homes Closed and Homes in Backlog increased 3%, 16% and 8%, respectively, in Q4 of FY 2016 compared to Q4 of FY 2015 # of Homes 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 4Q FY14 4Q FY15 4Q FY16 Q4 2016 22
Slide 23: Income Statement
Income Statement 3 Months Ended Fiscal Year Ended 9/30/2016 9/30/2015 9/30/2016 9/30/2015 Homes closed 12,247 10,576 40,309 36,648 Revenues: Home sales $ 3,637.5 $ 3,052.1 $ 11,783.1 $ 10,469.4 Land/lot sales and other 13.5 39.0 78.7 89.6 3,651.0 3,091.1 11,861.8 10,559.0 Gross profit: Home sales 74
Slide 24: Home Sales Gross Margin
Home Sales Gross Margin Home sales gross margin of around 20% 22% 20% 18% 21.3% 19.8% 19.9% 19.9% 20.3% 20.5% 16% 20.8% 14% 12% 10% 8% 6% 4% 2% 0% FY13 FY14 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Shown as a % of home sales revenues Includes interest amortized to cost of sales Q4 2016 24
Slide 25: Homebuilding SG&A
Homebuilding SG&A SG&A as a percentage of homebuilding revenues improved 20 basis points in FY 2016 Fiscal Year Fourth Fiscal Quarter SG&A $ SG&A $ $1,200 $1,200 9.3% $1,000 9.5% $1,000 $800 $800 $600 $1,100.3 $600 $1,003.0 $400 $400 8.8% 8.8% $200 $200 $272.8 $321.9 $0 $0 2015 2016 Q4 FY15 Q4 FY16
Slide 26: Consolidated Pre-tax Income
Consolidated Pre‐tax Income Consolidated pre‐tax profit margin improved 70 basis points to 11.1% and 90 basis points to 11.6% in FY 2016 and Q4 FY 2016, respectively Fiscal Year Fourth Fiscal Quarter PTI $ PTI $ $1,400 11.1% $1,400 $1,200 10.4% $1,200 $1,000 $1,000 $800 $800 $1,353.5 $600 $1,123.4 $
Slide 27: Balance Sheet
Balance Sheet 9/30/16 9/30/15 Cash and cash equivalents ‐ HB $ 1,271.8 $ 1,354.8 Restricted cash 9.5 9.7 Inventories 8,340.9 7,807.0 Deferred income taxes, net 476.3 558.1 Other assets 1,460.4 1,421.4 Total assets $ 11,558.9 $ 11,151.0 Notes payable ‐ HB $ 2,798.3 $ 3,333.6 Other liabilities 1,967.6
Slide 28: Homes in Inventory
Homes in Inventory Positioned to start FY 2017 off strong # of Homes 30,000 25,300 25,000 24,600 23,100 21,500 20,600 19,800 20,000 17,000 15,000 10,000 5,000 0 9/30/13 9/30/14 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 Models Sold Specs Q4 2016 28
Slide 29: Land and Lot Position
Land and Lot Position Supports annual double‐digit growth in both revenues and pre‐tax profits # of Lots 225,000 202,000 204,500 200,000 183,500 188,500 180,900 177,700 173,900 175,000 150,000 54,300 58,900 55,500 61,100 76,600 89,900 91,600 125,000 100,000 75,000 126,600 124,600 118,400 116,600 111
Slide 30: Inactive Land Held for Development
Inactive Land Held for Development “Mothballed” lot count down 48% from 9/30/14 $500 25000 $450.2 $450 $400 21,700 Balance 20000 Lots Held $350 $332.8 $300 15000 $250 14,000 $202.3 $200 10000 $155.5 $150 11,100 $137.8 9,100 $100 7,300 5000 $50 $0 0 9/30/13 9/30/14 9/30/15 6/30/16 9/30/16 $ in millio
Slide 31: Public Debt Maturities by Year
Public Debt Maturities by Year $350 million in maturities in FY 2017 $800 $700 $700 $600 $500 $500 $500 5.750% $400 $400 $350 $350 $300 $200 $100 4.750% 3.625% 3.750% 4.000% 4.375% 4.750% $0 FY 17 FY 18 FY 19 FY 20 FY 22 FY 23 $ in millions Q4 2016 31