D.R. Horton, Inc. · NYSE:DHI
D.R. Horton — Q4 FY2018 Earnings Presentation
33 slides from D.R. Horton's earnings presentation, November 2018
Slide 1: Investor Presentation Q4 FY 2018
Investor Presentation 1 | 1 Q4 FY 2018
Slide 2: #1 by closings volume for fiscal years 2002 to 2018
#1 by closings volume for fiscal years 2002 to 2018 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 51,857 $16.1 billion $2.1 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income 20.2% $9.0 billion $23.88 Homebuilding return on inventory* Stockholders’ equity Book value per common share As of or for the fiscal year ended September
Slide 5: FY 2018 Highlights
FY 2018 HIGHLIGHTS • Net income attributable to D.R. Horton increased 41% to $1.5 billion, $3.81 per diluted share • Consolidated pre‐tax income increased 29% to $2.1 billion • Consolidated pre‐tax profit margin improved 140 basis points to 12.8% • 52,740 net homes sold and 51,857 homes closed – bot
Slide 6: Geographic Diversification
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 1 M A R K E T S | 2 7 S TAT E S HB Revenue Inventory 5% 5% 6% 6% 29% 28% 12% 12% 24% 24% 24% 25% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Delaware, Maryland, Colorado Alabama, Florida, Louisiana Arizona California, Hawaii, New Jersey, Nor
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 67% of homes closed <$300k 6% 15% $0 $500k 27% $200k $300k 31% $250k 21% Represents homes closed for the fiscal year ended 9/30/18 7
Slide 8: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 13%, 13% and 8%, respectively, in FY 2018 compared to FY 2017 # of Homes 60,000 50,000 40,000 30,000 20,000 10,000 0 Sales Closings Backlog FY 2016 FY 2017 FY 2018 8
Slide 9: Family of Brands
FA M I LY O F B R A N D S FIRST TIME / MOVE UP ENTRY LEVEL LUXURY ACTIVE ADULT 81 markets | 27 states 61 markets | 21 states 34 markets | 14 states 29 markets | 16 states ASP $317k ASP $245k ASP $609k ASP $275k 3% 3% 3% 3% 6% 3% 37% Homes Homes Home Sales 37% Closed 30% Revenue Sold 57% 61% 57% Base
Slide 10: Management Tenure and Experience
MANAGEMENT TENURE AND EXPERIENCE Executive team and Division presidents City managers region presidents 14 years over 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% 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 12: 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 • Generate strong profits and cash flow from operations • Maintain sufficient inventories of land, lots and homes to support annual growth in both revenues and
Slide 13: Emphasis on Return on Inventory (ROI)
EMPHASIS ON RETURN ON INVENTORY (ROI) Achieved >20% Homebuilding ROI in FY 2018 20% 20.2% 15% 16.6% 15.4% 12.8% 10% 5% 0% FY 2015 FY 2016 FY 2017 FY 2018 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inventory. Average homebuilding invento
Slide 14: Balanced Approach
BALANCED APPROACH FY 2018 was fourth consecutive year of positive operating cash flows during a period when annual revenues doubled Consolidated Revenues Land Investment ‐ Homebuilding $20 $5 $4 $15 $16.1 $3.8 $14.1 $3.5 $3 $12.2 $10 $10.8 $2.7 $2 $2.3 $2.2 $8.0 $5 $1 $0 $0 FY 2014 FY 2015 FY 2016 F
Slide 15: 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 • Invest in homebuilding opportunities, including acquisitions, to increase returns and market share • Expect $400 million to $600 million of homebuilding acquisitions in FY 2019 • Reduce homeb
Slide 16: Return on Equity (ROE)
RETURN ON EQUITY (ROE) ROE Steady improvement in ROE while reducing homebuilding leverage HB leverage 20% 40% 17.6% 15% 30% 14.4% 13.7% 14.1% 10% 20% 5% 10% 0% 0% FY 2015 FY 2016 FY 2017 FY 2018 ROE Leverage ROE is calculated as net income divided by average shareholders’ equity. Average shareholder
Slide 17: Book Value per Share
B O O K VA LU E P E R S H A R E Consistent double‐digit percentage growth in book value per share $25.00 $23.88 $20.00 $20.66 $18.21 $15.00 $15.99 $10.00 $5.00 $0.00 FY 2015 FY 2016 FY 2017 FY 2018 17
Slide 18: 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 Consolidated pre‐tax profit margin improved 140 basis points Rev $ in FY18 compared to FY17 PTI % $20 14% 12.8% 11.4% 12% 11.1% 10.4% $15 $16.1 10% $14.1 $12.2 8% $10 $10.8 6% 4% $5 2% $1.4 $1.6 $2.1 $1.1 $0 0% FY 2015 FY 2016 FY 2017 FY 201
Slide 19: 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 residential lot development company, with operations in 24 markets and 14 states as of September 30, 2018 • The strategic relationship between DHI and FOR will significantly grow FO
Slide 20: 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 owns and controls 20,100 lots as of 9/30/18, with 13,600 under contract with or subject to right Expect FOR to access the capital markets of first offer to DHI in FY19 for long‐term growth capital Sept. 30, 2019 Sept. 30, 2020 Oct. 5, 2017 Sept. 30, 201
Slide 21: Company Outlook
C O M PA N Y O U T L O O K * • Sales prices for new and existing homes have increased across most markets over the past several years, which coupled with rising interest rates has impacted affordability and resulted in some moderation of demand for homes, particularly at higher price points • Contin
Slide 22: FY Expectations
F Y 2 0 1 9 E X P E C TAT I O N S * • Full year fiscal 2019 results will be significantly impacted by the spring selling season • Due to uncertainty based on recent market conditions, the Company is only providing first quarter guidance for revenues, homes closed and pre‐tax profit margin • The Comp
Slide 23: Fourth Quarter Data
FOURTH QUARTER DATA DRHORION 23 America’s Builder
Slide 24: Q4 FY 2018 Highlights
Q4 FY 2018 HIGHLIGHTS • Net income attributable to D.R. Horton increased 49% to $466.1 million or $1.22 per diluted share • Consolidated pre‐tax income increased 25% to $607.7 million • Consolidated pre‐tax profit margin improved 180 basis points to 13.5% • Net homes sold, homes closed and homes in
Slide 25: Sales, Closings and Backlog
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 11%, 11% and 8%, respectively, in Q4 FY 2018 compared to Q4 FY 2017 # of Homes 15,000 12,500 10,000 7,500 5,000 2,500 0 Sales Closings Backlog 4Q FY 2016 4Q FY 2017 4Q FY 2018 25
Slide 26: Income Statement
I N C O M E S TAT E M E N T 3 MONTHS ENDED FISCAL YEAR ENDED 9/30/2018 9/30/2017 9/30/2018 9/30/2017 Homes closed 14,674 13,165 51,857 45,751 Homebuilding Revenues: Home sales $ 4,379.9 $ 4,035.1 $ 15,502.0 $ 13,653.2 Land/lot sales 12.7 31.4 121.8 88.3 4,392.6 4,066.5 15,623.8 13,741.5 Gross profit
Slide 27: Home Sales Gross Margin
HOME SALES GROSS MARGIN In a healthy market, home sales gross margin improved 130 basis points in FY18 compared to FY17 22% 20% 21.3% 19.8% 20.2% 20.0% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY 2015 FY 2016 FY 2017 FY 2018 Shown as a % of the Company’s homebuilding segment’s home sales revenues Includes
Slide 28: Homebuilding SG&A
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues improved 30 basis points to 8.6% in FY 2018 HB Rev $ SG&A % $16,000 12% $14,000 11% $12,000 $10,000 10% 9.5% $8,000 9.3% 8.9% 9% $6,000 8.6% $4,000 8% $2,000 $0 7% FY 2015 FY 2016 FY 2017 FY 2018 $ in millions HB Rev $ SG&A % 28 Shown a
Slide 29: 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 180 basis points to 13.5% in Q4 FY 2018 Fiscal Year Fourth Fiscal Quarter PTI $ PTI $ $2,200 12.8% $2,200 $2,000 $2,000 $1,800 11.4% $2,060.0 $1,800 $1,600 $1,600 $1,400 $1,602.1 $1,400 $1,200 $1,200 $1,000 $1
Slide 30: Balance Sheet
BALANCE SHEET 9/30/2018 9/30/2017 Homebuilding Cash and cash equivalents $ 1,120.4 $ 982.3 Inventories: Construction in progress and finished homes 5,084.4 4,606.0 Land inventories 4,790.7 4,631.1 9,875.1 9,237.1 Other assets 960.8 793.1 Deferred income taxes, net 176.5 365.0 Financial services, For
Slide 31: Homes in Inventory
HOMES IN INVENTORY Homes in inventory increased from a year ago to support expected growth in homes closed 29,700 30,000 26,200 25,000 23,100 19,800 20,000 15,000 10,000 5,000 0 9/30/15 9/30/16 9/30/17 9/30/18 Models Sold Specs 31
Slide 32: Homebuilding Land and Lot Position
HOMEBUILDING LAND AND LOT POSITION Optioned lot position increased 32% from a year ago 43% owned / 57% optioned at 9/30/18 350,000 300,000 288,500 249,000 250,000 204,500 200,000 164,200* 173,900 124,000 91,600 150,000 55,500 100,000 118,400 112,900 125,000 124,300 50,000 0 9/30/15 9/30/16 9/30/17 9
Slide 33: 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 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 33 *Expect to repay from cash flow at maturity in March 2019