D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q3 2019 Earnings Presentation
29 slides from D.R. Horton's earnings presentation, 2019
Slide 1: Investor Presentation Q3 2019
I N V E S T O R P R E S E N T A T I O N Q3 2019
Slide 2: #1 by volume for calendar years 2002 to 2018
#1 by volume for calendar years 2002 to 2018
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 55,625 $17.1 billion $2.1 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income 18.1% $9.6 billion $26.08 Homebuilding return on inventory* Stockholders’ equity Book value per common share As of or for the twelve‐month period ended Ju
Slide 5: Geographic Diversification: 29 States
G E O G R A P H I C D I V E R S I F I C AT I O N 8 7 M A R K E T S | 2 9 S TAT E S HB Revenue Inventory 5% 6% 6% 8% 29% 26% 13% 12% 22% 22% 26% 25% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Delaware, Maryland, Colorado, Illinois, Alabama, Florida, Louisiana Arizona California, Hawaii, New
Slide 6: Diverse Product Offerings and Price Points
DIVERSE PRODUCT OFFERINGS AND PRICE POINTS Homes for entry‐level, move‐up, active adult and luxury buyers 68% of homes closed <$300k 6% 11% $0 $500k 26% $200k 34% $300k $250k 23% Represents homes closed for the twelve months ended 6/30/19 6
Slide 7: Family of Brands
FA M I LY O F B R A N D S FIRST TIME / MOVE UP ENTRY LEVEL LUXURY ACTIVE ADULT 87 markets | 29 states 60 markets | 20 states 29 markets | 14 states 30 markets | 15 states ASP $314k ASP $242k ASP $596k ASP $281k 2% 3% 3% 2% 5% 2% 34% Homes 34% Homes 28% Home Sales Sold Closed Revenue 61% 65% 61% Base
Slide 8: Management Tenure and Experience
MANAGEMENT TENURE AND EXPERIENCE Executive Team & Division Presidents City Managers Region Presidents ~15 years >10 years 25 years Average employee tenure 8
Slide 9: 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% 40 43 14% 38 12% 30 10% 31 8% 20 6% 4% 10 13 2% 0% 0 DFW Houston Atlanta Phoenix Austin #1 Top 5 Top 10 Operate In DHI Market Share Next Ranking Competitor Market Share Sourc
Slide 10: Homebuilding Operational Focus
H O M E B U I L D I N G O P E R AT I O N A L F O C U S • Maximize returns by managing inventories, sales pace and pricing in each community • Consolidate market share while generating strong profits and operating cash flow • Maintain sufficient inventories of land, lots and homes to support growth p
Slide 11: Emphasis on Return on Inventory (ROI)
EMPHASIS ON RETURN ON INVENTORY (ROI) Homebuilding ROI expected to remain strong in the 18% to 20% range 20% 20.2% 19.1% 18.1% 15% 16.6% 15.4% 10% 5% 0% FY 2016 FY 2017 TTM 6/30/18 FY 2018 TTM 6/30/19 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homeb
Slide 12: Return on Equity (ROE)
RETURN ON EQUITY (ROE) ROE has improved annually while leverage decreased ROE HB leverage 20% 40% 17.6% 17.3% 15% 16.4% 30% 14.4% 14.1% 10% 20% 5% 10% 0% 0% FY 2016 FY 2017 TTM 6/30/18 FY 2018 TTM 6/30/19 ROE Leverage ROE is calculated as net income divided by average shareholders’ equity. Average s
Slide 13: Book Value per Share
B O O K VA LU E P E R S H A R E Consistent annual double‐digit percentage growth in book value per share $25.00 $26.08 $23.88 $22.80 $20.00 $20.66 $18.21 $15.00 $10.00 $5.00 $0.00 9/30/2016 9/30/2017 6/30/2018 9/30/2018 6/30/2019 13
Slide 14: Capital and Cash Flow Priorities
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 • Focused on enhancing long‐term value of DHI • Invest in homebuilding opportunities, including acquisitions, to increase returns and market share • Reduce homebuilding leverage • Consistent di
Slide 15: Forestar (FOR)
F O R E S TA R ( “ F O R ” ) • FOR, a majority‐owned subsidiary of DHI, is a publicly traded residential lot development company, with operations in 50 markets and 20 states as of June 30, 2019 • The strategic relationship between DHI and FOR will grow FOR into a large, national residential lot deve
Slide 16: Forestar Timeline
F O R E S TA R T I M E L I N E Own and control 37,400 lots at Expect to invest Expect to own a 3 to 4‐year 6/30/19, with 24,100 under > $900M in land supply of land and lots at contract with or subject to acquisition and scale right of first offer to DHI development in FY19 DHI acquisition date Obta
Slide 17: Company Outlook
C O M PA N Y O U T L O O K * • Affordability concerns caused some moderation of demand for homes in late fiscal 2018 and early fiscal 2019, and in response, we increased sales incentives to improve sales pace • During the quarter, interest rates on mortgage loans decreased, and we reduced the level
Slide 18: FY 2019 & FY 2020 Expectations
F Y 2 0 1 9 & F Y 2 0 E X P E C TAT I O N S * • Q4 FY 2019 • Consolidated revenues between $4.75 billion and $4.9 billion • Homes closed in the range of 15,700 homes to 16,000 homes • Home sales gross margin in the range of 20.4% to 20.7% • Homebuilding SG&A percentage of 8.1% to 8.3% • Financial se
Slide 19: Third Quarter Data
THIRD QUARTER DATA DRHORTON i9 America's Buitder
Slide 20: Q3 FY 2019 Highlights
Q3 FY 2019 HIGHLIGHTS • Net income per diluted share increased 7% to $1.26 • Net income attributable to D.R. Horton increased 5% to $474.8 million • Consolidated revenues increased 11% to $4.9 billion • Consolidated pre‐tax income increased to $626.7 million • Consolidated pre‐tax profit margin of 1
Slide 21: Sales and Closings
SALES AND CLOSINGS Net Sales Orders and Homes Closed increased 6% and 13%, respectively, in Q3 FY 2019 compared to Q3 FY 2018 # of Homes 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0 Sales Closings 3Q FY 2017 3Q FY 2018 3Q FY 2019 21
Slide 22: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED 9 MONTHS ENDED YEAR ENDED 6/30/2019 6/30/2018 6/30/2019 6/30/2018 9/30/2018 Homes closed 15,971 14,114 40,951 37,183 51,857 Homebuilding Revenues: Home sales $ 4,734.6 $ 4,265.5 $ 12,125.8 $ 11,122.1 $ 15,502.0 Land/lot sales 27.5 59.1 49.2 109.2 121.8 4,76
Slide 23: Home Sales Gross Margin
HOME SALES GROSS MARGIN 22% 20% 21.3% 20.2% 20.0% 20.0% 20.3% 18% 19.3% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY 2016 FY 2017 FY 2018 Q1 FY19 Q2 FY19 Q3 FY19 Shown as a % of the Company’s homebuilding segment’s home sales revenues Includes interest amortized to cost of sales 23 Refer to slide 3 of the Comp
Slide 24: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues of 8.1% in Q3 FY 2019 Fiscal YTD 6/30 Third Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $16,000 12% $14,000 12% $14,000 $12,000 11% 11% $12,000 $10,000 $10,000 10% 10% $8,000 $8,000 9% $6,000 9% $6,000 8.7% 8.8% $4,000 $4,000 8% 8% $
Slide 25: 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 of 12.8% in Q3 FY 2019 Fiscal YTD 6/30 Third Fiscal Quarter PTI $ PTI $ $1,600 12.6% 11.7% $1,600 $1,400 $1,400 $1,452.3 $1,465.2 $1,200 $1,200 $1,000 $1,000 $800 $800 13.9% 12.8% $600 $600 $616.2 $626.7 $400 $400 $200
Slide 26: Balance Sheet
BALANCE SHEET 6/30/2019 9/30/2018 6/30/2018 Homebuilding Cash and cash equivalents $ 587.7 $ 1,120.4 $ 759.2 Inventories: Construction in progress and finished homes 5,723.5 5,084.4 5,194.8 Land inventories 4,954.9 4,790.7 4,715.5 10,678.4 9,875.1 9,910.3 Other assets 1,192.7 960.8 879.7 Deferred in
Slide 27: Homes in Inventory
HOMES IN INVENTORY Well‐positioned to achieve fiscal 2019 closings guidance 35,000 30,000 29,200 28,100 27,900 25,000 24,600 21,500 20,000 15,000 10,000 5,000 0 9/30/16 9/30/17 6/30/18 9/30/18 6/30/19 Sold Specs Homes in inventory excluding model homes 27
Slide 28: Homebuilding Land and Lot Position
HOMEBUILDING LAND AND LOT POSITION Controlled lot position increased 19% from a year ago 39% owned / 61% controlled at 6/30/19 350,000 303,000 300,000 288,500 277,700 249,000 250,000 204,500 164,200* 184,500* 200,000 155,500* 124,000 91,600 150,000 100,000 112,900 125,000 122,200 124,300 118,500 50,
Slide 29: Homebuilding Public Debt Maturities by Year
H O M E B U 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 $500 5.750% $500 $400 $400 $350 $300 $200 $100 4.000% 2.550% 2.550% 4.375% 4.750% $0 FY 20 FY 21 FY 22 FY 23 $ in millions 29