D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q4 FY2017 Earnings Presentation
33 slides from D.R. Horton's earnings presentation, 2017
Slide 1: Investor Presentation Q4 FY 2017
Investor Presentation | Q4 FY 2017 1
Slide 2: D.R. Horton, Inc.
D.R. HORTON, INC. 2 By closings volume for fiscal years 2002 to 2017
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 traded on NYSE as DHI
D.R. HORTON, INC. TRADED ON NYSE AS DHI 45,751 $14.1 billion Annual homes closed Consolidated revenues $12.2 billion $1.6 billion Total assets Annual pre‐tax income $20.66 $7.7 billion Book value per common share Shareholders’ equity 4 As of or for the fiscal year ended September 30, 2017
Slide 5: Broad National Footprint
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% 4% 5% 6% 12% 30% 27% 12% 24% 26% 24% 25% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Delaware, Maryland, Colorado Alabama, Florida, Louisiana Arizona California, Hawaii, New Jersey, North Illi
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% 21% $0 $500k 26% $200k $300k 26% $250k 20% 7 Represents homes closed for the fiscal year ended 9/30/17
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 58 markets | 21 states 40 markets | 17 states 21 markets | 12 states ASP $327k ASP $232k ASP $636k ASP $265k 4% 1% 4% 1% 8% 1% 37% Homes 34% Homes 26% Home Sales Sold Closed Revenue 61% 65% 58% 8 Ba
Slide 9: Management Tenure and Experience
MANAGEMENT TENURE AND EXPERIENCE Executive team and Division presidents City managers region presidents over 13 years over 10 years approx. 25 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 40 12% 36 30 10% 28 8% 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: FY 2017 Highlights
FY 2017 HIGHLIGHTS • Consolidated pre‐tax income increased 18% to $1.6 billion • Net income increased 17% to $1.0 billion or $2.74 per share • Consolidated pre‐tax profit margin improved 30 basis points to 11.4% • The value of net homes sold and homes closed both increased by 16% • 46,605 net homes
Slide 12: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders and Homes Closed increased 14% and Homes in Backlog increased 7% in FY 2017 compared to FY 2016 # of Homes 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Sales Closings Backlog FY 2015 FY 2016 FY 2017 12
Slide 13: 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 14: Emphasis on Return on Inventory (ROI)
EMPHASIS ON RETURN ON INVENTORY (ROI) Steady improvement in Homebuilding ROI 20% 15% 16.6% 15.4% 12.8% 10% 11.1% 5% 0% FY 2014 FY 2015 FY 2016 FY 2017 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average inventory. Average 14 inventory in the ROI calculation
Slide 15: Return on Equity (ROE)
RETURN ON EQUITY (ROE) Steady improvement in ROE while reducing leverage ROE Leverage 20% 40% 15% 30% 14.1% 14.4% 13.7% 10% 11.8% 20% 5% 10% 0% 0% FY 2014 FY 2015 FY 2016 FY 2017 ROE Leverage ROE is calculated as net income divided by average shareholders’ equity. Average shareholders’ equity in the
Slide 16: 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 $15.5 – $16.3 $16 $5 >$4.0 $14.1 $4 $12 $12.2 $10.8 $3 $3.5 $8 $2.7 $2 $2.2 $4 $1 $0 $0 FY 2015 FY 20
Slide 17: 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 • Disciplined, flexible and opportunistic • Invest in homebuilding opportunities, including acquisitions, to generate acceptable returns and consolidate market share • Acquired 75% of Forestar for approximately $560 million in Octobe
Slide 18: Forestar Acquisition
F O R E S TA R A C Q U I S I T I O N • On October 5, 2017, D.R. Horton (“DHI”) completed the acquisition of 75% of the outstanding shares of Forestar (“FOR”) for approximately $560 million in cash • FOR is and will continue to be a publicly‐traded residential real estate company, with operations cur
Slide 19: Forestar Timeline
F O R E S TA R T I M E L I N E FOR evaluating 15 DHI sourced projects Expect FOR to commit at least $400 million June 29, 2017 (closed on 2) ‐ representing 8,000 lots with of capital primarily to DHI sourced projects DHI and FOR a total peak inventory investment of $200m during 2018 announce merger
Slide 20: 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 approximately 11.5% to 11.7% • Consolidated revenues between $15.5 billion and $16.3 billion • Homes closed between 50,500 homes and 52,500 homes • Home sales gross margin around 20%, with potential quarterly fl
Slide 21: 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 land and lot position by 2020 • Cash flow from operations growing to over $1 billion annually in 2020 • Maintai
Slide 22: Fourth Quarter Data
FOURTH QUARTER DATA DRHORTON 22 A nericas Builder
Slide 23: Q4 FY 2017 Highlights
Q4 FY 2017 HIGHLIGHTS • Consolidated pre‐tax income increased 12% to $485.6 million • Net income increased 10% to $313.2 million or $0.82 per share • The value of net homes sold and homes closed increased by 19% and 11%, respectively • 10,333 net homes sold and 13,165 homes closed • 12,329 homes in
Slide 24: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 18%, 7% and 7%, respectively, in Q4 of FY 2017 compared to Q4 of FY 2016 # of Homes 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 4Q FY 2015 4Q FY 2016 4Q FY 2017 24
Slide 25: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED FISCAL YEAR ENDED 9/30/2017 9/30/2016 9/30/2017 9/30/2016 Homes closed 13,165 12,247 45,751 40,309 Revenues: Home sales $ 4,035.1 $ 3,637.5 $ 13,653.2 $ 11,783.1 Land/lot sales and other 31.4 13.5 88.3 78.7 4,066.5 3,651.0 13,741.5 11,861.8 Gross profit Hom
Slide 26: Home Sales Gross Margin
HOME SALES GROSS MARGIN Home sales gross margin of around 20% 21% 19.8% 20.2% 19.8% 19.8% 19.8% 20.3% 20.0% 18% 15% 12% 9% 6% 3% 0% FY15 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Shown as a % of home sales revenues 26 Includes interest amortized to cost of sales
Slide 27: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues improved 40 basis points to 8.9% in FY 2017 Fiscal Year Fourth Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $14,000 12% $14,000 12% $12,000 $12,000 $10,000 11% $10,000 11% $8,000 $8,000 10% 10% $6,000 9.3% 8.9% $6,000 $4,000 9% $4,000
Slide 28: 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 30 basis points to 11.4% in FY 2017 Fiscal Year Fourth Fiscal Quarter PTI $ PTI $ $1,800 $1,800 11.4% $1,600 $1,600 $1,400 11.1% $1,602.1 $1,400 $1,200 $1,353.5 $1,200 $1,000 $1,000 $800 $800 $600 $600 11.7% 1
Slide 29: Balance Sheet
BALANCE SHEET 9/30/2017 9/30/2016 Cash and cash equivalents ‐ homebuilding $ 973.0 $ 1,271.8 Restricted cash 9.3 9.5 Inventories: Construction in progress and finished homes 4,606.0 4,034.7 Land inventories 4,631.1 4,306.2 9,237.1 8,340.9 Deferred income taxes, net 365.0 476.3 Other assets 1,600.2 1
Slide 30: Homes in Inventory
HOMES IN INVENTORY Homes in inventory increased 13% from a year ago to support expected growth in homes closed 30,000 27,100 27,600 26,200 25,000 24,500 23,100 20,600 20,000 19,800 15,000 10,000 5,000 0 9/30/14 9/30/15 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Models Sold Specs 30
Slide 31: Land and Lot Position
LAND AND LOT POSITION Achieved initial goal of 50% owned, 50% optioned land and lot pipeline in FY 17 300,000 252,100 249,000 250,000 227,300 212,600 204,500 200,000 183,500 173,900 126,600 124,000 108,800 91,600 94,300 150,000 58,900 55,500 100,000 124,600 118,400 112,900 118,300 118,500 125,500 12
Slide 32: Inactive Land Held for Development
INACTIVE LAND HELD FOR DEVELOPMENT “Mothballed” lot count down 34% from a year ago $350 $332.8 16000 14000 $300 Balance 14,000 Lots Held 12000 $250 $202.3 10000 $200 11,100 8000 $150 $137.8 6000 $107.7 $101.0 7,300 $100 5,300 4000 4,800 $50 2000 $0 0 9/30/14 9/30/15 9/30/16 6/30/17 9/30/17 32
Slide 33: Public Debt Maturities by Year
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** $400 $350 $300 $200 $100 3.625% 3.750% 4.000% 2.550% 4.375% 4.750% $0 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 $ in millions *These notes will be redeemed on 12/29/17 (as announced on 11/29/17) 33 **