D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q2 2017 Earnings Presentation
27 slides from D.R. Horton's earnings presentation, 2017
Slide 1: Q2 FY 2017
D-RHORTON | J nericas Buiter |
Slide 2: D-RHORTON #=
D-RHORTON #= ro 69 oe
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 $13.1 billion2 • 43,075 in annual homes closed2 • Annual pre‐tax income of $1.5 billion2 • Total assets of $11.9 billion3 • Shareholders’ equity of $7.2 billion3 • Book value per common share of $19.23
Slide 5: Broad National Footprint
Broad National Footprint East HB Revenue1 12% West 78 Markets | 26 States 24% Midwest 5% Southwest 4% South Central 25% Southeast 30% East Inventory2 12% Midwest 5% West Region States 27% 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+ 24% < $200k 26% $300k to $500k $200k to $250k to $250k $300k 24% 19% Represents homes closed for the trailing twelve months ended 3/31/17 Q2 FY 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 78 markets and 26 states we operate in • Currently in 55 markets and 18 states • 67% of homes closed and 70% of home sales • 29% of homes closed and 22% 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 Q2 FY 2017 8
Slide 9: 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 Q2 FY 2017 9
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 b
Slide 11: Emphasis on Return on Inventory (ROI)
Emphasis on Return on Inventory (ROI) 20.0% Steady improvement in Homebuilding ROI 15.0% 16.0% 15.4% 10.0% 13.8% 12.8% 11.1% 5.0% 0.0% FY 2014 FY 2015 TTM 3/31/16 FY 2016 TTM 3/31/17 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 to $500 million for a third consecutive year while growing revenues and investing in land $16 $6 $14 $13.6‐$14.0 $5 $12.2 $12 $10.8 $4 $10 >$3.0 $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 where opportunities to generate acceptable returns exist • Business acquisitions to further consolidate market share • Pay off debt at maturity • Plan to repay $350 million of senior notes due
Slide 14: Homebuilding SG&A
Homebuilding SG&A Expect SG&A as a percentage of homebuilding revenues to improve 20 to 50 basis points in FY 2017 to a range of 8.8% to 9.1% Homes Closed SG&A % 50,000 11.0% 44,500 – 46,000 40,309 10.5% 40,000 36,648 10.0% 30,000 28,670 9.5% 20,000 9.0% 10,000 8.5% 0 8.0% 2014 2015 2016 2017e Homes
Slide 15: FY 2017 Expectations
FY 2017 Expectations* Fiscal Year: • Consolidated pre‐tax profit margin of 11.2% to 11.5% • Consolidated revenues between $13.6 billion and $14.0 billion • Homes closed between 44,500 homes and 46,000 homes • Home sales gross margin around 20%, with potential quarterly fluctuations from 19% to 21% •
Slide 16: Second Quarter Data
Second Quarter Data Q2 FY 2017 16
Slide 17: Q2 FY 2017 Highlights
Q2 FY 2017 Highlights • Consolidated pre‐tax income increased 18% to $353.9 million • Consolidated pre‐tax income margin of 10.9% • Net income increased 17% to $229.2 million or $0.60/share • Homebuilding SG&A expense improved 20 basis points to 9.3% • The value of net homes sold, homes closed and h
Slide 18: Sales, Closings & Backlog – Q2 FY 2017
Sales, Closings & Backlog – Q2 FY 2017 Net Sales Orders, Homes Closed and Homes in Backlog increased 14%, 15% and 7%, respectively, in Q2 of FY 2017 compared to Q2 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 2Q FY15 2Q FY16 2Q FY17 Q2 FY 2017 18
Slide 19: Income Statement
Income Statement Year 3 Months Ended 6 Months Ended Ended 3/31/2017 3/31/2016 3/31/2017 3/31/2016 9/30/2016 Homes closed 10,685 9,262 20,089 17,323 40,309 Revenues: Home sales $ 3,158.1 $ 2,686.0 $ 5,955.8 $ 5,026.9 $ 11,783.1 Land/lot sales and other 6.3 15.0 34.7 35.2 78.7 3,164.4 2,701.0 5,990.5
Slide 20: 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% 19.8% 19.8% 16% 20.8% 14% 12% 10% 8% 6% 4% 2% 0% FY13 FY14 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Shown as a % of home sales revenues Includes interest amortized to cost of sal
Slide 21: Homebuilding SG&A
Homebuilding SG&A SG&A as a percentage of homebuilding revenues for the six months ended 3/31/17 improved 50 basis points to 9.4% Fiscal YTD 3/31 Second 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 9.9% 9.4% $6,000 10.0% $6,000
Slide 22: Consolidated Pre-tax Income
Consolidated Pre‐tax Income Consolidated pre‐tax profit margin for the six months ended 3/31/17 improved 40 basis points to 10.9% Fiscal YTD 3/31 Second Fiscal Quarter PTI $ PTI $ $1,400 $1,400 $1,200 $1,200 $1,000 $1,000 $800 $800 10.9% $600 10.5% $600 $672.1 $400 $541.8 $400 10.9% 10.9% $200 $200
Slide 23: Balance Sheet
Balance Sheet 3/31/17 9/30/16 3/31/16 Cash and cash equivalents ‐ HB $ 947.9 $ 1,271.8 $ 1,191.3 Restricted cash 11.1 9.5 11.4 Inventories 9,038.1 8,340.9 8,216.6 Deferred income taxes, net 451.6 476.3 526.6 Other assets 1,472.4 1,460.4 1,354.3 Total assets $ 11,921.1 $ 11,558.9 $ 11,300.2 Notes pay
Slide 24: Homes in Inventory
Homes in Inventory Homes in inventory increased 10% from a year ago # of Homes 30,000 27,100 25,000 24,600 23,100 20,600 19,800 20,000 15,000 10,000 5,000 0 9/30/14 9/30/15 3/31/16 9/30/16 3/31/17 Models Sold Specs Q2 FY 2017 24
Slide 25: Land and Lot Position
Land and Lot Position 52% owned / 48% optioned at 3/31/17 # of Lots Optioned lot position increased 42% from a year ago 250,000 227,300 225,000 204,500 200,000 183,500 188,500 173,900 175,000 91,600 108,800 58,900 76,600 150,000 55,500 125,000 100,000 75,000 124,600 118,500 118,400 111,900 112,900 5
Slide 26: Inactive Land Held for Development
Inactive Land Held for Development “Mothballed” lot count down 49% from a year ago $350 $332.8 16000 14000 $300 14,000 Balance Lots Held 12000 $250 10000 $202.3 $194.3 $200 8000 11,100 $150 $137.8 10,100 $128.4 6000 7,300 $100 5,200 4000 $50 2000 $0 0 9/30/14 9/30/15 3/31/16 9/30/16 3/31/17 $ in mil
Slide 27: 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 *Plan to repay $350 million of senior notes due in May 2017 with existin