D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q2 FY2018 Earnings Presentation
30 slides from D.R. Horton's earnings presentation, April 2018
Slide 1: Investor Presentation Q2 FY 2018
Investor Presentation 1 Q2 FY 2018
Slide 2: D.R. Horton, Inc.
D.R. HORTON, INC. By closings volume for calendar years 2002 to 2017 2
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 48,731 $15.1 billion $1.8 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income $630.3 million $8.2 billion $21.72 Cash flow from operations* Stockholders’ equity Book value per common share As of or for the twelve‐month period ended M
Slide 5: Broad National Footprint Markets | 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 | 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 HB Revenue Inventory 5% 6% 5% 6% 29% 27% 12% 12% 25% 25% 24% 24% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Delaware, Maryland, Colorado Alabama, Florida, Louisiana Arizona California, Hawaii, New Jersey, North and
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% 18% $0 $500k 27% $200k $300k 28% $250k 20% Represents homes closed for the twelve months ended 3/31/18 7
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 60 markets | 21 states 36 markets | 16 states 25 markets | 14 states ASP $323k ASP $241k ASP $578k ASP $271k 3% 2% 3% 2% 6% 2% 36% Homes Home Sales Homes 30% 38% Sold Closed Revenue 57% 62% 59% Base
Slide 9: Management Tenure and Experience
MANAGEMENT TENURE AND EXPERIENCE Executive team and region presidents 25 years Division presidents 14 years City managers over 10 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 12% 40 30 36 10% 8% 28 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% 17.6% 15% 16.6% 16.0% 15.4% 12.8% 10% 5% 0% FY 2015 FY 2016 TTM 3/31/17 FY 2017 TTM 3/31/18 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inventory. Average h
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 ‐ Homebuilding $15.9 – $16.3 $16 $5 ~$4.0 $14.1 $4 $12 $12.2 $10.8 $3.5 $3 $8 $2.7 $2 $2.2 $4 $1 $0 $
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: Consolidated Pre-Tax Profit Margin
C O N S O L I DAT E D P R E - TA X P R O F I T M A R G I N Expect consolidated pre‐tax profit margin to improve 70 Consol. Rev $ PTI % to 90 basis points in FY 2018 $18.0 13.0% 12.1% ‐ 12.3% $16.0 12.0% 11.4% $14.0 11.1% $15.9 – $16.3 11.0% $12.0 10.4% $14.1 $10.0 10.0% $12.2 $8.0 $10.8 9.0% $6.0 8.
Slide 16: Forestar Group ("FOR")
F O R E S TA R G R O U P ( “ F O R ” ) • FOR, a majority‐owned subsidiary of DHI (as of 10/5/17), is a publicly‐traded land development company, with operations in 18 markets and 10 states • The strategic relationship between DHI and FOR will significantly grow FOR into a large, national residential
Slide 17: Forestar Growth Timeline
F O R E S TA R G R O W T H T I M E L I N E FOR evaluating 38 primarily Expect FOR to invest $400M in DHI‐sourced projects (closed Expect FOR to access the public land acquisition and development on 20 as of 3/31/18) markets for additional growth and have a bank credit facility in representing 15,000
Slide 18: FY 2018 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 12.1% to 12.3% • Consolidated revenues between $15.9 billion and $16.3 billion • Homes closed between 51,500 homes and 52,500 homes • Home sales gross margin in the range of 20.5% to 21.0%, with potential quarte
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: Second Quarter Data
SECOND QUARTER DATA DRHORTON 20 Aunericas Buitder
Slide 21: Q2 FY 2018 Highlights
Q2 FY 2018 HIGHLIGHTS • Net income attributable to D.R. Horton increased 53% to $351.0 million or $0.91 per diluted share • Consolidated pre‐tax income increased 26% to $444.8 million • Consolidated pre‐tax profit margin improved 80 basis points to 11.7% • Net homes sold, homes closed and homes in b
Slide 22: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 13%, 15% and 8%, respectively, in Q2 FY 2018 compared to Q2 FY 2017 # of Homes 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 2Q FY 2016 2Q FY 2017 2Q FY 2018 22
Slide 23: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED 6 MONTHS ENDED YEAR ENDED 3/31/2018 3/31/2017 3/31/2018 3/31/2017 9/30/2017 Homes closed 12,281 10,685 23,069 20,089 45,751 Homebuilding Revenues: Home sales $ 3,672.1 $ 3,158.1 $ 6,856.6 $ 5,955.8 $ 13,653.2 Land/lot sales and other 13.6 6.3 50.0 34.7 88.3
Slide 24: Home Sales Gross Margin
HOME SALES GROSS MARGIN Home sales gross margin of around 20% 22% 20% 20.8% 20.8% 19.8% 20.2% 19.8% 19.8% 19.8% 20.3% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY15 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Shown as a % of the Company’s homebuilding segment’s home sales revenues Includes interes
Slide 25: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues improved 50 basis points to 8.8% in Q2 FY 2018 Fiscal YTD 3/31 Second Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $14,000 12% $14,000 12% $12,000 $12,000 11% 11% $10,000 $10,000 $8,000 $8,000 10% 10% $6,000 $6,000 $4,000 9.4% $4,000
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 80 basis points to 11.7% in Q2 FY 2018 Fiscal YTD 3/31 Second Fiscal Quarter PTI $ PTI $ $1,800 $1,800 $1,600 $1,600 $1,400 $1,400 $1,200 $1,200 $1,000 11.7% $1,000 $800 10.9% $800 $836.1 $600 $672.1 $600 11.7
Slide 27: Balance Sheet
BALANCE SHEET 3/31/2018 9/30/2017 3/31/2017 Homebuilding Cash and cash equivalents $ 538.3 $ 982.3 $ 959.0 Inventories: Construction in progress and finished homes 5,119.6 4,606.0 4,642.6 Land inventories 4,720.0 4,631.1 4,395.5 9,839.6 9,237.1 9,038.1 Other assets 828.4 793.1 711.0 Deferred income
Slide 28: Homes in Inventory
HOMES IN INVENTORY Homes in inventory increased from a year ago to support expected growth in homes closed 29,400 30,000 27,100 26,200 25,000 23,100 19,800 20,000 15,000 10,000 5,000 0 9/30/15 9/30/16 3/31/17 9/30/17 3/31/18 Models Sold Specs 28
Slide 29: Homebuilding Land and Lot Position
HOMEBUILDING LAND AND LOT POSITION Optioned lot position increased 23% from a year ago 48% owned / 52% optioned at 3/31/18 300,000 249,000 257,700 250,000 227,300 204,500 200,000 173,900 124,000 133,500* 108,800 91,600 150,000 55,500 100,000 118,400 112,900 118,500 125,000 124,200 50,000 0 9/30/15 9
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