D.r. Horton, Inc. · NYSE:DHI
D.r. Horton — Q3 FY2017 Earnings Presentation
28 slides from D.r. Horton's earnings presentation, July 2017
Slide 1: Q3 FY 2017
Q3 FY 2017
Slide 2: D.R. Horton logo
D-RHORTON #= oy op mic “) Q ®
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 • Annual revenues of $13.7 billion2 • 44,833 in annual homes closed2 • Annual pre‐tax income of $1.5 billion2 • Total assets of $12.0 billion3 • Shareholders’ equity of $7.4 billion3 • Book value per common share of $19.87
Slide 5: Broad National Footprint
Broad National Footprint East HB Revenue1 12% West 79 Markets | 26 States 23% Midwest 6% Southwest 4% South Central 25% Southeast 30% East Inventory2 12% Midwest 5% West Region States 28% East Delaware, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia Midwest Colorado, Il
Slide 6: Diverse Product Offerings
Diverse Product Offerings Homes for entry‐level, move‐up, active adult and luxury buyers 7% $500k+ 22% < $200k 26% $300k to $500k $200k to $250k to $250k $300k 25% 20% Represents homes closed for the trailing twelve months ended 6/30/17 Q3 2017 6
Slide 7: Family of Brands
Family of Brands • The heart of our business • Introduced in 2014, targeted at the true entry‐level buyer • Offered across all 79 markets and 26 states we operate in • Currently in 56 markets and 19 states • 63% of homes closed and 67% of home sales • 33% of homes closed and 25% of home revenue sale
Slide 8: 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 Q3 2017 8
Slide 9: Market Share Dominance
Market Share Dominance D.R. Horton Share & Rankings in Largest U.S. Housing Markets Top 5 Markets Top 50 Markets Market Share # of Markets 18% 50 16% 45 #1 #1 14% #1 40 35 40 12% 36 30 10% #1 25 28 8% #2 20 #1 #2 6% #2 #4 15 4% #2 10 13 2% 5 0% 0 DFW Houston Atlanta Phoenix Austin #1 Top 5 Top 10 Op
Slide 10: Operational Focus
Operational Focus • Maximize returns by managing inventory levels efficiently and consistently balancing sales pace and pricing in each community • Generate consistent positive annual cash flow from operations • Maintain a land and lot portfolio sufficient to support double‐digit annual growth in bo
Slide 11: Emphasis on Return on Inventory (ROI)
Emphasis on Return on Inventory (ROI) 20.0% Steady improvement in Homebuilding ROI 15.0% 16.3% 15.4% 10.0% 14.3% 12.8% 11.1% 5.0% 0.0% FY 2014 FY 2015 TTM 6/30/16 FY 2016 TTM 6/30/17 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average inventory. Average inve
Slide 12: Balanced Approach
Balanced Approach Expect to generate positive cash flow from operations of at least $300 million for the third consecutive year while growing revenues and investing in land $16 $6 $13.9‐$14.1 $14 $5 $12.2 $12 $10.8 $4 $10 $3.6 ‐ $3.8 $8 $3 $2.7 $6 $2.2 $2 $4 $1 $2 $0 $0 FY 2015 FY 2016 FY 2017e FY 2
Slide 13: Capital & Cash Flow Priorities
Capital & Cash Flow Priorities • Flexible, opportunistic and disciplined • Invest in homebuilding business opportunities, including acquisitions, to generate acceptable returns and consolidate market share • Acquisition of 75% of outstanding shares of Forestar for $560 million • Pay off debt at matu
Slide 14: Forestar Acquisition
Forestar Acquisition • On June 29, 2017, D.R. Horton (“DHI”) entered into a definitive merger agreement to acquire 75% of the outstanding shares of Forestar (“FOR”), a publicly‐traded residential real estate company, for $17.75 per share in cash, or approximately $560 million • The strategic relatio
Slide 15: Q4 FY17 & FY18 Expectations
Q4 FY17 & FY18 Expectations* Q4 Fiscal 2017: • Backlog conversion rate in the range of 88% to 90% • Home sales gross margin around 20% • Homebuilding SG&A expense in the range of 8.3% to 8.4% of homebuilding revenues • Financial Services operating margin in the range of 32% to 34% • Income tax rate
Slide 16: Third Quarter Data
D-R-HORTON’ == JS nerica’s 4 Third Quarter Data Q3 2017 16
Slide 17: Q3 FY 2017 Highlights
Q3 FY 2017 Highlights • Consolidated pre‐tax income increased 17% to $444.5 million • Consolidated pre‐tax income margin improved 10 basis points to 11.8% • Net income increased 16% to $289.0 million or $0.76/share • The value of net homes sold and homes closed increased by 13% and 17%, respectively
Slide 18: Sales, Closings & Backlog – Q3 FY 2017
Sales, Closings & Backlog – Q3 FY 2017 Net Sales Orders, Homes Closed and Homes in Backlog increased 11%, 16% and 3%, respectively, in Q3 of FY 2017 compared to Q3 of FY 2016 # of Homes 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 3Q FY15 3Q FY16 3Q FY17 Q3 2017 18
Slide 19: Income Statement
Income Statement Year 3 Months Ended 9 Months Ended Ended 6/30/2017 6/30/2016 6/30/2017 6/30/2016 9/30/2016 Homes closed 12,497 10,739 32,586 28,062 40,309 Revenues: Home sales $ 3,662.3 $ 3,118.7 $ 9,618.1 $ 8,145.6 $ 11,783.1 Land/lot sales and other 22.2 30.1 56.9 65.2 78.7 3,684.5 3,148.8 9,675.
Slide 20: Home Sales Gross Margin
Home Sales Gross Margin Home sales gross margin of around 20% 20% 19.8% 19.9% 19.9% 20.3% 20.5% 19.8% 19.8% 19.8% 15% 10% 5% 0% FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Shown as a % of home sales revenues Includes interest amortized to cost of sales Q3 2017 20
Slide 21: Homebuilding SG&A
Homebuilding SG&A SG&A as a percentage of homebuilding revenues for the nine months ended 6/30/17 improved 50 basis points to 9.0% Fiscal YTD 6/30 Third Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $12,000 12.0% $12,000 12.0% $10,000 $10,000 11.0% 11.0% $8,000 $8,000 $6,000 10.0% $6,000 10.0% 9.5%
Slide 22: Consolidated Pre-tax Income
Consolidated Pre‐tax Income Consolidated pre‐tax profit margin for the nine months ended 6/30/17 improved 30 basis points to 11.2% Fiscal YTD 6/30 Third Fiscal Quarter PTI $ PTI $ $1,400 $1,400 $1,200 11.2% $1,200 $1,000 10.9% $1,116.5 $1,000 $800 $920.4 $800 $600 $600 11.8% $400 $400 11.7% $444.5 $
Slide 23: Balance Sheet
Balance Sheet 6/30/17 9/30/16 6/30/16 Cash and cash equivalents ‐ homebuilding $ 460.8 $ 1,271.8 $ 857.9 Restricted cash 10.9 9.5 11.8 Inventories 9,554.0 8,340.9 8,504.2 Deferred income taxes, net 383.7 476.3 505.1 Other assets 1,567.7 1,460.4 1,454.2 Total assets $ 11,977.1 $ 11,558.9 $ 11,333.2 N
Slide 24: Homes in Inventory
Homes in Inventory Homes in inventory increased 9% from a year ago # of Homes 30,000 27,600 25,300 25,000 23,100 20,600 19,800 20,000 15,000 10,000 5,000 0 9/30/14 9/30/15 6/30/16 9/30/16 6/30/17 Models Sold Specs Q3 2017 24
Slide 25: Land and Lot Position
Land and Lot Position Increased option lot position 41% YOY to achieve initial goal # of Lots of 50% owned, 50% optioned land and lot pipeline 275,000 252,100 250,000 225,000 202,000 204,500 200,000 183,500 126,600 175,000 173,900 89,900 91,600 150,000 58,900 55,500 125,000 100,000 75,000 125,500 12
Slide 26: Inactive Land Held for Development
Inactive Land Held for Development “Mothballed” lot count down 42% from a year ago $350 $332.8 16000 14000 $300 14,000 Balance Lots Held 12000 $250 10000 $202.3 $200 8000 11,100 $155.5 $150 $137.8 9,100 6000 7,300 $107.7 $100 5,300 4000 $50 2000 $0 0 9/30/14 9/30/15 6/30/16 9/30/16 6/30/17 $ in mill
Slide 27: Public Debt Maturities by Year
Public Debt Maturities by Year $800 $700 $700 $600 $500 $500 5.750% $500 $400 $400 $350 $300 $200 $100 3.625% 3.750% 4.000% 4.375% 4.750% $0 FY 18 FY 19 FY 20 FY 22 FY 23 $ in millions Q3 2017 27
Slide 28: Additional Information
Additional Information • In connection with the proposed transaction with Forestar, it is expected that Forestar will file a registration statement on Form S‐4 with the SEC that will include a proxy statement/prospectus to be distributed to Forestar stockholders. SECURITY HOLDERS ARE ADVISED TO READ