D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q3 2018 Earnings Presentation
30 slides from D.R. Horton's earnings presentation, July 2018
Slide 1: Investor Presentation Q3 FY 2018
Investor Presentation 1 Q3 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 50,348 $15.7 billion $1.9 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income 19.1% $8.6 billion $22.80 Homebuilding return on inventory* Stockholders’ equity Book value per common share As of or for the twelve‐month period ended Jun
Slide 5: Broad National Footprint | 26 States
B R OA D N AT I O N A L F O O T P R I N T 8 0 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 8 0 M A R K E T S | 2 6 S TAT E S HB Revenue Inventory 5% 5% 5% 6% 29% 27% 12% 13% 25% 24% 24% 25% 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% 16% $0 $500k 27% $200k $300k 30% $250k 20% Represents homes closed for the twelve months ended 6/30/18 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 80 markets | 26 states 60 markets | 21 states 34 markets | 14 states 27 markets | 15 states ASP $322k ASP $243k ASP $629k ASP $263k 3% 3% 3% 2% 7% 2% 37% Homes Homes Home Sales 37% 29% Sold Closed Revenue 58% 62% 57% 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 41 12% 30 32 10% 27 8% 20 6% 4% 10 14 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 11: Homebuilding Operational Focus
H O M E BU 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 • Generate consistent positive annual cash flow from operations • Maintain inventories of land, lots and homes that support double‐digit annual growth in both re
Slide 12: Emphasis on Return on Inventory (ROI)
EMPHASIS ON RETURN ON INVENTORY (ROI) Steady improvement in Homebuilding ROI 20% 19.1% 15% 16.3% 16.6% 15.4% 12.8% 10% 5% 0% FY 2015 FY 2016 TTM 6/30/17 FY 2017 TTM 6/30/18 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 $18 $5 $16.1 – $16.3 ~$4.0 $4 $14.1 $12 $3.5 $12.2 $3 $10.8 $2.7 $2 $2.2 $6 $1 $0 $0 F
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 increase returns and consolidate market share • Acquired 75% of Forestar for $558 million in October 2017 • Reduce
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 Rev $ PTI % 130 to 150 basis points in FY 2018 $18 15% 12.7% ‐ 12.9% $16 11.1% 11.4% $14 $16.1 – $16.3 10.4% $12 10% $14.1 $10 $12.2 $8 $10.8 $6 5% $4 $2 $0 0% FY 2015 FY 2016 FY 2017 FY 2
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 20 markets and 11 states as of June 30, 2018 • The strategic relationship between DHI and FOR will significantly grow FOR into a large,
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 Expect FOR to invest $400M in land acquisition and development and have a bank credit facility in place in FY18 Expect FOR to access the public FOR owns and controls 19,100 lots as of 6/30/18, with 11,100 markets for additional growth under contract with or
Slide 18: FY18 & FY19 Expectations
F Y 1 8 & F Y 1 9 E X P E C TAT I O N S * Q4 Fiscal 2018 • Backlog conversion rate in the range of 90% to 93% • Home sales gross margin consistent with the third quarter of fiscal 2018 • Homebuilding SG&A expense around 8% • Income tax rate of approximately 26% Fiscal 2018 • Consolidated revenues of
Slide 19: FY19 & FY20 Outlook
FY19 & FY20 OUTLOOK* • Increase consolidated revenues and pre‐tax profits at a double‐digit annual pace • Maintain homebuilding pre‐tax return on inventory around 20% • Increase optioned lots to 60% of total homebuilding land and lot position • Increase cash flow from operations excluding Forestar t
Slide 20: Third Quarter Data
THIRD QUARTER DATA DRHORTON 20 Aunericas Buitder
Slide 21: Q3 FY 2018 Highlights
Q3 FY 2018 HIGHLIGHTS • Net income attributable to D.R. Horton increased 57% to $453.8 million or $1.18 per diluted share • Consolidated pre‐tax income increased 39% to $616.2 million • Consolidated pre‐tax profit margin improved 210 basis points to 13.9% • Net homes sold, homes closed and homes in
Slide 22: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 12%, 13% and 9%, respectively, in Q3 FY 2018 compared to Q3 FY 2017 # of Homes 15,000 12,500 10,000 7,500 5,000 2,500 0 Sales Closings Backlog 3Q FY 2016 3Q FY 2017 3Q FY 2018 22
Slide 23: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED 9 MONTHS ENDED YEAR ENDED 6/30/2018 6/30/2017 6/30/2018 6/30/2017 9/30/2017 Homes closed 14,114 12,497 37,183 32,586 45,751 Homebuilding Revenues: Home sales $ 4,265.5 $ 3,662.3 $ 11,122.1 $ 9,618.1 $ 13,653.2 Land/lot sales and other 59.1 22.2 109.2 56.9 8
Slide 24: Home Sales Gross Margin
HOME SALES GROSS MARGIN In a healthy market, home sales gross margin improved 210 basis points from the prior year quarter 22% 21.9% 20% 20.8% 19.8% 20.2% 19.8% 20.0% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY15 FY16 Q3 FY17 FY17 Q2 FY18 Q3 FY18 Shown as a % of the Company’s homebuilding segment’s home s
Slide 25: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues improved 30 basis points to 8.1% in Q3 FY 2018 Fiscal YTD 6/30 Third 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 10% $8,000 10% $6,000 9% $6,000 9% $4,000 9.0% $4
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 210 basis points to 13.9% in Q3 FY 2018 Fiscal YTD 6/30 Third Fiscal Quarter PTI $ PTI $ $1,800 $1,800 $1,600 12.6% $1,600 $1,400 $1,400 $1,452.3 $1,200 11.2% $1,200 $1,000 $1,116.5 $1,000 $800 $800 13.9% $600
Slide 27: Balance Sheet
BALANCE SHEET 6/30/2018 9/30/2017 6/30/2017 Homebuilding Cash and cash equivalents $ 759.2 $ 982.3 $ 471.7 Inventories: Construction in progress and finished homes 5,194.8 4,606.0 4,905.6 Land inventories 4,715.5 4,631.1 4,648.4 9,910.3 9,237.1 9,554.0 Other assets 879.7 793.1 729.9 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 29,800 30,000 27,600 26,200 25,000 23,100 19,800 20,000 15,000 10,000 5,000 0 9/30/15 9/30/16 6/30/17 9/30/17 6/30/18 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 44% owned / 56% optioned at 6/30/18 300,000 277,700 252,100 249,000 250,000 204,500 200,000 155,500 * 173,900 126,600 124,000 91,600 150,000 55,500 100,000 118,400 112,900 125,500 125,000 122,200 50,000 0 9/30/15
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