D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q4 2019 Earnings Presentation
30 slides from D.R. Horton's earnings presentation, November 2019
Slide 1: Investor Presentation Q4 2019
I N V E S T O R P R E S E N T A T I O N Q4 2019
Slide 2: America's #1 Homebuilder Since 2002
AMERICA’S #1 HOMEBUILDER SINCE 2002 ORTON | 0.8. norton. express - EMERALD - FREEDOM
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 key figures, fiscal year 2019
D.R. HORTON, INC. TRADED ON NYSE AS DHI 56,975 $17.6 billion $2.1 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income 18.1% & 17.2% $10.0 billion $27.20 ROI (HB) & ROE, respectively* Stockholders’ equity Book value per common share As of or for the fiscal year ended Septem
Slide 5: FY 2019 Highlights
FY 2019 HIGHLIGHTS • Net income per diluted share increased 13% to $4.29 • Net income attributable to D.R. Horton increased 11% to $1.6 billion • Consolidated pre tax income increased 3% to $2.1 billion, with a pre-tax profit margin of 12.1% • 56,565 net homes sold and 56,975 homes closed – an incre
Slide 6: Geographic Diversification
GEOGRAPHIC DIVERSIFICATION 90 MARKETS | 29 STATES 6% 8% 28% EAST 13% Delaware, Maryland, MIDWEST Inventory New Jersey, North Colorado, Illinois, and South Carolina, Indiana, Iowa, 20% 25% Pennsylvania, Minnesota, Ohio Virginia SOUTH CENTRAL SOUTHEAST Louisiana Alabama, Florida, Oklahoma Georgia, Mis
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 68% of homes closed <$300k $0 - $200k $200k - $250k $250k - $300k $300k - $500k >$500k 10% 34% 24% 27% 5% Represents homes closed & price points for the fiscal year ended 9/30/19 7
Slide 8: Sales and Closings
SALES AND CLOSINGS Net Sales Orders and Homes Closed increased 7% and 10%, # of Homes respectively, in FY 2019 compared to FY 2018 60,000 50,000 40,000 30,000 20,000 10,000 0 Sales Closings FY 2017 FY 2018 FY 2019 8
Slide 9: Family of Brands
FAMILY OF BRANDS Homes Homes Home Average # of # of Sold Closed Sales Selling Markets States Revenue Price 60% 60% 63% $315k 90 29 34% 35% 29% $243k 59 19 3% 3% 3% $283k 27 13 3% 2% 5% $611k 26 14 As of or for the fiscal year ended September 30, 2019 9
Slide 10: 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 10
Slide 11: 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 12: Homebuilding Operational Focus
HOMEBUILDING OPERATIONAL FOCUS • 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 plans • Underwriting expe
Slide 13: 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% 18.1% 15% 16.6% 15.4% 10% 5% 0% FY 2016 FY 2017 FY 2018 FY 2019 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inventory. Ave
Slide 14: Return on Equity (ROE)
RETURN ON EQUITY (ROE) ROE ROE has improved to over 17% while leverage has decreased HB leverage 20% 40% 17.6% 17.2% 15% 30% 14.1% 14.4% 10% 20% 5% 10% 0% 0% FY 2016 FY 2017 FY 2018 FY 2019 ROE Leverage ROE is calculated as net income divided by average stockholders’ equity. Average stockholders’ eq
Slide 15: Book Value Per Share
BOOK VALUE PER SHARE Consistent annual double-digit percentage growth in book value per share $27.20 $25.00 $23.88 $20.00 $20.66 $18.21 $15.00 $10.00 $5.00 $0.00 FY 2016 FY 2017 FY 2018 FY 2019 15
Slide 16: Capital and Cash Flow Priorities
CAPITAL AND CASH FLOW PRIORITIES • Balanced, disciplined, flexible and opportunistic; focused on enhancing long-term value • Invest in homebuilding business, including acquisitions, to increase returns and market share • Invest in DHI Communities, our multi-family rental company • Maintain conservat
Slide 17: Cash Flow at Work
CASH FLOW AT WORK Utilization of $4 billion of cash generated by homebuilding operations 1,800 1,600 $1,438 5 Year Cumulative Capital 1,400 Cash Flow from $4.0B Homebuilding Operations 1,200 $1,002 1,000 Acquisitions $1.0B 800 $581 $600 Homebuilding Senior $1.4B 600 $304 Notes Paydown 400 Shareholde
Slide 18: Forestar ("FOR")
FORESTAR (“FOR”) • FOR, a majority-owned subsidiary of DHI, is a publicly traded residential lot manufacturer, with operations in 51 markets and 20 states as of September 30, 2019 • Advancing DHI’s strategy of increasing land and lots controlled through purchase contracts to enhance efficiency and r
Slide 19: FY 2020 Expectations
FY 2020 EXPECTATIONS* • Q1 FY 2020 • Consolidated revenues in a range of $3.7 billion to $3.8 billion • Homes closed in a range between 12,100 homes and 12,400 homes • Home sales gross margin of approximately 21% • Homebuilding SG&A around 9.5% of homebuilding revenues • FY 2020 • Consolidated reven
Slide 20: Fourth Quarter Data
FOURTH QUARTER DATA D.R. HORTON - EXPRESS - EMERALD - FREEDOM
Slide 21: Q4 FY 2019 Highlights
Q4 FY 2019 HIGHLIGHTS • Net income per diluted share increased 11% to $1.35 • Net income attributable to D.R. Horton increased 8% to $505.3 million • Consolidated revenues increased 12% to $5.0 billion • Consolidated pre-tax income increased 9% to $660.1 million • Consolidated pre-tax profit margin
Slide 22: Sales and Closings
SALES AND CLOSINGS Net Sales Orders and Homes Closed increased 14% and 9%, respectively, in Q4 FY 2019 compared to Q4 FY 2018 # of Homes 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0 Sales Closings 4Q FY 2017 4Q FY 2018 4Q FY 2019 22
Slide 23: Income Statement
INCOME STATEMENT 3 MONTHS ENDED FISCAL YEAR ENDED 9/30/2019 9/30/2018 9/30/2019 9/30/2018 Homes closed 16,024 14,674 56,975 51,857 Homebuilding Revenues: Home sales $ 4,799.2 $ 4,379.9 $ 16,925.0 $ 15,502.0 Land/lot sales 42.8 12.7 91.9 121.8 4,842.0 4,392.6 17,016.9 15,623.8 Gross profit: Home sale
Slide 24: Home Sales Gross Margin
HOME SALES GROSS MARGIN 22% 20% 21.3% 21.0% 20.2% 20.0% 20.0% 20.3% 20.2% 18% 19.3% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY 2016 FY 2017 FY 2018 1Q19 2Q19 3Q19 4Q19 FY 2019 Shown as a % of the Company’s homebuilding segment’s home sales revenues Includes interest amortized to cost of sales Refer to slide
Slide 25: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues of 8.5% in Q4 FY 2019 Fiscal Year Fourth Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $18,000 12% $14,000 12% $16,000 $12,000 $14,000 11% 11% $10,000 $12,000 10% $8,000 10% $10,000 $8,000 $6,000 9% 9% $6,000 8.7% $4,000 $4,000 8.6% 8%
Slide 26: Consolidated Pre-Tax Income
CONSOLIDATED PRE-TAX INCOME Consolidated pre-tax profit margin of 13.1% in Q4 FY 2019 Fiscal Year Fourth Fiscal Quarter PTI $ PTI $ $2,250 12.8% 12.1% $1,600 $2,000 $1,400 $1,750 $2,060.0 $2,125.3 $1,200 $1,500 $1,000 $1,250 $800 13.1% $1,000 13.5% $600 $750 $660.1 $607.7 $500 $400 $250 $200 $0 $0 2
Slide 27: Balance Sheet
BALANCE SHEET 9/30/2019 9/30/2018 Homebuilding Cash and cash equivalents $ 1,051.0 $ 1,120.4 Construction in progress and finished homes 5,249.0 5,084.4 Land inventories 5,036.6 4,790.7 10,285.6 9,875.1 Other assets 1,232.9 960.8 Deferred income taxes, net 163.1 194.0 Financial services, Forestar an
Slide 28: Homes in Inventory
HOMES IN INVENTORY Expect to increase inventory turnover to achieve FY 2020 closings guidance 35,000 30,000 27,900 27,700 25,000 24,600 21,500 20,000 15,000 10,000 5,000 0 9/30/16 9/30/17 9/30/18 9/30/19 Sold Specs Homes in inventory excluding model homes 28
Slide 29: Homebuilding Land and Lot Position
HOMEBUILDING LAND AND LOT POSITION Controlled lot position increased 13% from a year ago 40% owned / 60% controlled at 9/30/19 350,000 307,300 300,000 288,500 249,000 250,000 204,500 185,900* 164,200* 200,000 124,000 91,600 150,000 100,000 112,900 125,000 124,300 121,400 50,000 0 9/30/16 9/30/17 9/3
Slide 30: Homebuilding Public Debt Maturities by Year
HOMEBUILDING PUBLIC DEBT MATURITIES BY YEAR $800 $700 $700 $600 $500 5.750% $500 $500 $400 $400 $350 $300 $200 4.000% 2.550% 4.375% 4.750% 2.500% $100 $0 FY 20 FY 21 FY 22 FY 23 FY24 FY25 $ in millions As of November 12, 2019 30