I N V E S T O R P R E S E N T A T I O N
Q 1 2 0 2 0
2
F O R W A R D - L O O K I N G S T A T 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 outcomes will not be materially different. Factors that may cause the actual results to be materially different from the future results expressed by the forward‐looking statements include, but are not limited to: the cyclical nature of the homebuilding and lot development industries and changes in economic, real estate and other conditions; constriction of the credit and public capital markets, which could limit our ability to access capital and increase our costs of capital; reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates; the risks associated with our land and lot inventory; our ability to effect our growth strategies, acquisitions or investments successfully; the impact of an inflationary, deflationary or higher interest rate environment; home warranty and construction defect claims; the effects of health and safety incidents; the effects of negative publicity; supply shortages and other risks of acquiring land, building materials and skilled labor; reductions in the availability of performance bonds; increases in the costs of owning a home; the effects of governmental regulations and environmental matters on our homebuilding and land development operations; the effects of governmental regulations on our financial services operations; our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations; competitive conditions within the homebuilding and financial services industries; the effects of the loss of key personnel; and information technology failures and data security breaches. Additional information about issues that could lead to material changes in performance is contained in D.R. Horton's annual report on Form 10‐K, which is filed with the Securities and Exchange Commission.
3
D . R . H O R T O N , I N C . | T R A D E D O N N Y S E A S D H I |
58,434 | $18.1 billion | $2.3 billion |
Annual homes closed | Annual consolidated revenues | Annual pre‐tax income |
18.7% & 18.2% | $10.2 billion | $27.92 |
ROI (HB) & ROE, respectively* | Stockholders' equity | Book value per common share |
As of or for the twelve-month period ended December 31, 2019
*See slides 12 and 13 for definition of ROI [Return on Inventory (Homebuilding)] and ROE (Return on Equity)
4
G E O G R A P H I C D I V E R S I F I C A T I O N | 9 0 M A R K E T S | 2 9 S T A T E S |
EAST | MIDWEST |
Delaware, Maryland, | |
New Jersey, North | Colorado, Illinois, |
and South Carolina, | Indiana, Iowa, |
Pennsylvania, | Minnesota, Ohio |
Virginia | |
SOUTH CENTRAL | SOUTHEAST |
Louisiana | Alabama, Florida, |
Oklahoma | Georgia, Mississippi, |
Texas | Tennessee |
SOUTHWEST | WEST |
California, Hawaii, | |
Arizona | |
Nevada, Oregon, | |
New Mexico | |
Utah, Washington | |
Inventory
Homebuilding
Revenue
9% 6%
27%
12%
21% 25%
7% 5%
13%29%
21%
25%
As of or for the twelve-month period ended December 31, 2019
Savannah, Georgia is included in the East Region; Atlanta and Augusta, Georgia are included in the Southeast
5
D I V E R S E P R O D U C T O F F E R I N G S A N D P R I C E P O I N T S
Homes for entry-level,move-up, active adult and luxury buyers
67% of homes closed <$300k
$0 - $200k $200k - $250k $250k - $300k $300k - $500k >$500k
9% | 33% | 25% | 28% | 5% |
Represents homes closed & price points for the twelve months ended 12/31/19
6
F A M I L Y O F B R A N D S
Homes | Homes | Home | Average | # of | # of |
Sold | Closed | Sales | Selling | Markets | States |
Revenue | Price | ||||
61% | 61% | 64% | $316k | 90 | 29 |
34% | 34% | 28% $245k | 58 | 19 |
3% | 3% | 3% $285k 27 | 13 |
2% | 2% | 5% $593k 26 | 14 |
As of or for the twelve months ended December 31, 2019
7
M A N A G E M E N T T E N U R E A N D E X P E R I E N C E
Executive Team &
Region Presidents
25 years
Division Presidents
~15 years
City Managers
>10 years
Average employee tenure
8
D H I G R O W T H , C O N S O L I D A T I O N A N D M A R K E T S H A R E
Total New U.S. Single-Family Houses Sold ('000s) | |
1,400 | DHI Homes Closed as a Percentage of U.S. Single-Family New Home Sales |
1,200 | |
1,000 | |
800 | |
600 | |
400 | |
200 | |
0 |
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Company filings, Census
Note: Periods represent full calendar year
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
9
M A R K E T S H A R E D O M I N A N C E
D.R. Horton Share and Rankings in Largest U.S. Housing Markets
Top 5 Markets | Top 50 Markets |
18%
16%
14%
12%
10%
8%
6%
4%
2%
50
40 | 43 |
38
3031
20
10 13
0% | 0 | |||||||||
DFW | Houston | Atlanta Phoenix Austin | #1 | Top 5 | Top 10 | Operate In | ||||
DHI Market Share | Next Ranking Competitor Market Share | |||||||||
Source: Builder magazine ‐ 2019 Local Leaders issue, rankings based on homes closed in calendar 2018 and proforma for D.R. Horton's acquisition of Westport Homes, a top 5 builder in Indianapolis, IN and Columbus, OH, which closed in November 2018
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H O M E B U I L D I N G O P E R A T I O N A L F O C U S
- 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 expectations for each community:
- Minimum 20% annual pre tax return on inventory (ROI)
- Initial cash investment returned within 24 months or less
- Increase lots controlled by expanding relationships with developers
- Continue to grow Forestar's lot manufacturing platform
- Control SG&A while ensuring infrastructure supports targeted growth
11
E M P H A S I S O N R E T U R N O N I N V E N T O R Y ( R O I )
Homebuilding ROI expected to remain strong in the 18% to 20% range
20%
20.2%
19.3%18.1%18.7%
15% 16.6%
10%
5%
0%
FY 2017 | FY 2018 | TTM 12/31/18 | FY 2019 | TTM 12/31/19 |
Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inventory. Average homebuilding inventory in the ROI calculation is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.
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R E T U R N O N E Q U I T Y ( R O E )
ROE 20%
ROE has improved to the high-teens while leverage has decreased
HB leverage
40%
17.6% | 18.2% | 18.2% |
17.2% | ||
15% | 30% | |
14.4% | ||
10% | 20% |
5% | 10% |
0% | 0% | |||||
FY 2017 | FY 2018 | TTM 12/31/18 | FY 2019 | TTM 12/31/19 |
ROE Leverage
ROE is calculated as net income divided by average stockholders' equity. Average stockholders' equity in the ROE calculation is the sum of ending stockholders' equity balances for the trailing five quarters divided by five.
Leverage is calculated as homebuilding notes payable divided by stockholders' equity plus homebuilding notes payable.
13
B O O K V A L U E P E R S H A R E
Consistent annual double-digit percentage growth in book value per share
$25.00
$27.20$27.92
$23.88$24.45
$20.00 $20.66
$15.00
$10.00
$5.00
$0.00
9/30/2017 | 9/30/2018 | 12/31/2018 | 9/30/2019 | 12/31/2019 |
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C A P I T A 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; focused on enhancing long-term value
- Invest in homebuilding business, including acquisitions
- Invest in DHI Communities, our multi-family rental company
- Maintain conservative homebuilding leverage
- $500 million senior note maturity in Q2 FY 2020
- Consistent dividends to shareholders
- Increased cash dividend per share by 17% in Q1 FY 2020
- Approximately $250 million annually
- Repurchases of common stock to reduce outstanding shares
- Repurchased 3.0 million shares during Q1 2020 for $163.1 million
- $732.6 million remaining share repurchase authorization with no expiration date
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C A S H F L O W A T W O R K
Utilization of $4 billion of cash generated by homebuilding operations
1,800
1,600 | $1,438 |
5 Year Cumulative Capital
1,400
1,200
1,000
$1,002
Cash Flow from | $4.0B |
Homebuilding Operations | |
Acquisitions | $1.0B |
800$581
$600 | $304 | |
600 | ||
400
200
0
FY 2015 | FY 2016 | FY 2017 | FY 2018 | FY 2019 |
Acquisitions Debt Paydown Dividends Share Repurchases HB Cash Flow from Ops
Homebuilding Senior | $1.4B |
Notes Paydown | |
Shareholder Return | $1.4B |
through Dividends and | |
Share Repurchases |
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F O R E S T A R ( " F O R " )
- FOR, a majority-owned subsidiary of DHI, is a publicly traded residential lot manufacturer, with operations in 51 markets and 20 states as of December 31, 2019
- Advancing DHI's strategy of increasing land and lots controlled through purchase contracts
- FOR has begun raising capital to fund long-term growth
- In fiscal 2019, FOR issued $350 million of senior unsecured notes and $100.7 million of common stock
- FOR expects to opportunistically raise additional growth capital in the public debt and equity markets
- DHI's long-term goal is to deconsolidate FOR from DHI's financial statements
- DHI's ownership of FOR is 65% as of 12/31/19 compared to 75% one year ago
- Delivered 2,422 lots and generated $247.2M of revenue in Q1 2020
- Annual lot delivery and revenue expectations*
- Fiscal 2020: 10,000 lot deliveries and $800M to $850M of revenue
- Fiscal 2021: 12,000 lot deliveries and $900M to $1B of revenue
*Expectations are for Forestar's standalone operations
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F Y 2 0 2 0 E X P E C T A T I O N S *
- Q2 FY 2020
- Consolidated revenues in a range of $4.25 billion to $4.4 billion
- Homes closed in a range between 13,800 homes and 14,300 homes
- Home sales gross margin of approximately 21%
- Homebuilding SG&A of approximately 9% of homebuilding revenues
- Income tax rate between 23% and 24%
- FY 2020
- Consolidated revenues in a range of $18.5 billion to $19.1 billion
- Homes closed in a range between 60,000 homes and 61,500 homes
- Income tax rate between 23% and 24% for second, third and fourth fiscal quarters
- Outstanding share count at end of fiscal 2020 down 2% from end of fiscal 2019
- Generate homebuilding cash flow from operations in excess of $1 billion
*Based on current market conditions as noted on the Company's Q1 FY20 conference call on 1/27/20
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F I R S T Q U A R T E R D A T A
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Q 1 F Y 2 0 2 0 H I G H L I G H T S
- Net income per diluted share increased 53% to $1.16
- Net income attributable to D.R. Horton increased 50% to $431.3 million
- Consolidated revenues increased 14% to $4.0 billion
- Consolidated pre-tax income increased 39% to $523.3 million
- Consolidated pre-tax profit margin improved 230 basis points to 13.0%
- Net homes sold and homes closed increased by 19% and 13%, respectively
- 13,126 net homes sold and 12,959 homes closed
- Repurchased 3.0 million shares of common stock for $163.1 million
Comparisons to prior year quarter
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S A L E S A N D C L O S I N G S
Net Sales Orders and Homes Closed increased 19% and 13%,
respectively, in Q1 FY 2020 compared to Q1 FY 2019
# of Homes
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0
Sales | Closings | |||
1Q FY 2018 | 1Q FY 2019 | 1Q FY 2020 | ||
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I N C O M E S T A T E M E N T
3 MONTHS ENDED | FISCAL YEAR ENDED | ||||||||||
12/31/2019 | 12/31/2018 | 9/30/2019 | 9/30/2018 | ||||||||
Homes closed | 12,959 | 11,500 | 56,975 | 51,857 | |||||||
Homebuilding | |||||||||||
Revenues: | |||||||||||
Home sales | $ | 3,863.3 | $ | 3,410.6 | $ | 16,925.0 | $ | 15,502.0 | |||
Land/lot sales | 19.7 | 6.7 | 91.9 | 121.8 | |||||||
3,883.0 | 3,417.3 | 17,016.9 | 15,623.8 | ||||||||
Gross profit: | |||||||||||
Home sales | 811.7 | 681.4 | 3,417.9 | 3,306.5 | |||||||
Land/lot sales and other | 6.4 | 1.6 | 16.8 | 22.7 | |||||||
Inventory and land option charges | (3.5) | (8.0) | (53.2) | (48.8) | |||||||
814.6 | 675.0 | 3,381.5 | 3,280.4 | ||||||||
SG&A | 358.4 | 324.7 | 1,482.3 | 1,346.2 | |||||||
Interest and other (income) | (5.4) | (4.0) | (11.5) | (23.0) | |||||||
Homebuilding pre-tax income | 461.6 | 354.3 | 1,910.7 | 1,957.2 | |||||||
Financial services, Forestar and other pre-tax income | 61.7 | 21.4 | 214.6 | 102.8 | |||||||
Pre-tax income | 523.3 | 375.7 | 2,125.3 | 2,060.0 | |||||||
Income tax expense | 90.8 | 89.0 | 506.7 | 597.7 | |||||||
Net income | 432.5 | 286.7 | 1,618.6 | 1,462.3 | |||||||
Net income (loss) attributable to noncontrolling interests | 1.2 | (0.5) | 0.1 | 2.0 | |||||||
Net income attributable to D.R. Horton, Inc. | $ | 431.3 | $ | 287.2 | $ | 1,618.5 | $ | 1,460.3 | |||
Net income per diluted share | $ | 1.16 | $ | 0.76 | $ | 4.29 | $ | 3.81 |
$ in millions except per share data
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H O M E S A L E S G R O S S M A R G I N
22% | ||||||||
20% | 20.0% | 21.3% | 20.0% | 20.3% | 21.0% | 20.2% | 21.0% | |
18% | 19.3% | |||||||
16% | ||||||||
14% | ||||||||
12% | ||||||||
10% | ||||||||
8% | ||||||||
6% | ||||||||
4% | ||||||||
2% | ||||||||
0% | ||||||||
FY 2017 | FY 2018 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | FY 2019 | 1Q20 | |
Shown as a % of the Company's homebuilding segment's home sales revenues Includes interest amortized to cost of sales
Refer to slide 4 of the Company's Q1 FY20 Supplementary Data presentation for detailed components of home sales gross margin
23
H O M E B U I L D I N G S G & A
SG&A as a percentage of homebuilding revenues improved 30 basis points to 9.2% in Q1 FY 2020
Fiscal Year | |
HB Rev $ | SG&A % |
$18,000 | 12% |
$16,000 |
HB Rev $ $14,000 $12,000
First Fiscal Quarter
SG&A % 12%
$14,000 | 11% | ||
$12,000 | 10% | ||
$10,000 | |||
$8,000 | 9% | ||
$6,000 | |||
8.7% | |||
$4,000 | 8.6% | ||
8% | |||
$2,000 | |||
$0 | 7% | ||
$10,000 $8,000 $6,000 $4,000 $2,000
$0
9.5% 9.2%
11%
10%
9%
8%
7%
2018 | 2019 |
HB Rev $ | SG&A % |
$ in millions
Shown as a % of homebuilding revenues
Q1 FY19 | Q1 FY20 |
HB Rev $ | SG&A % |
24
C O N S O L I D A T E D P R E - T A X I N C O M E
Consolidated pre-tax profit margin improved 230 basis points to 13.0% in Q1 FY 2020
Fiscal Year | First Fiscal Quarter |
PTI $ $2,250 $2,000 $1,750 $1,500 $1,250 $1,000
$750 $500 $250 $0
12.8%12.1%
$2,060.0 $2,125.3
20182019
PTI $ $1,600
$1,400 $1,200 $1,000 $800 $600 $400 $200 $0
13.0%
10.7%
$523.3
$375.7
Q1 FY19 | Q1 FY20 |
$ in millions
Shown as a % of consolidated revenues
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B A L A N C E S H E E T
Homebuilding | 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||||
Cash and cash equivalents | $ | 1,159.5 | $ | 1,051.0 | $ | 546.2 | |||||
Construction in progress and finished homes | 5,603.3 | 5,249.0 | 5,840.4 | ||||||||
Land inventories | 5,282.3 | 5,036.6 | 5,057.8 | ||||||||
10,885.6 | 10,285.6 | 10,898.2 | |||||||||
Other assets | 1,291.5 | 1,232.9 | 1,066.7 | ||||||||
Deferred income taxes, net | 154.1 | 163.1 | 181.4 | ||||||||
Financial services, Forestar and other assets | 2,832.2 | 2,874.0 | 1,843.3 | ||||||||
Total assets | $ | 16,322.9 | $ | 15,606.6 | $ | 14,535.8 | |||||
Homebuilding | |||||||||||
Notes payable | $ | 2,470.0 | $ | 2,047.6 | $ | 2,748.7 | |||||
Other liabilities | 1,865.3 | 1,751.1 | 1,791.2 | ||||||||
Financial services, Forestar and other liabilities | 1,484.7 | 1,512.8 | 697.7 | ||||||||
Stockholders' equity | 10,227.4 | 10,020.9 | 9,124.7 | ||||||||
Noncontrolling interests | 275.5 | 274.2 | 173.5 | ||||||||
Total equity | 10,502.9 | 10,295.1 | 9,298.2 | ||||||||
Total liabilities and equity | $ | 16,322.9 | $ | 15,606.6 | $ | 14,535.8 | |||||
Debt to total capital - consolidated | 27.0% | 25.3% | 26.8% | ||||||||
Debt to total capital - homebuilding | 19.5% | 17.0% | 23.2% | ||||||||
Common shares outstanding | 366.27 | 368.43 | 373.24 | ||||||||
Book value per common share | $ | 27.92 | $ | 27.20 | $ | 24.45 |
$ in millions except per share metrics
Homebuilding cash and cash equivalents presented above includes $6.6 million, $8.0 million, and $8.7 million of restricted cash for the periods ended 12/31/19, 9/30/19 and 12/31/18, respectively.
26
H O M E S I N I N V E N T O R Y
Well-positioned to achieve FY 2020 closings guidance
35,000
31,800 | ||
30,000 | 30,200 | |
27,900 | 27,700 | |
25,000 | 24,600 | |
20,000
15,000
10,000
5,000
0
9/30/17 | 9/30/18 | 12/31/18 | 9/30/19 | 12/31/19 | ||||
Sold | Specs | |||||||
Homes in inventory excluding model homes
27
H O M E B U I L D I N G L A N D A N D L O T P O S I T I O N
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Controlled lot position increased 8% from a year ago
39% owned / 61% controlled at 12/31/19
309,400307,300319,000
288,500
249,000
164,200* | 180,900* | 185,900* | 195,600* |
124,000
125,000 | 124,300 | 128,500 | 121,400 | 123,400 |
9/30/17 | 9/30/18 | 12/31/18 | 9/30/19 | 12/31/19 |
Owned | Controlled |
*Includes lots owned or controlled by FOR that DHI has under contract or the right of first offer to purchase of 25,600, 23,400, 18,800 and 13,600 at 12/31/19, 9/30/19, 12/31/18 and 9/30/18, respectively
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H O M E B U I L D I N G P U B L I C D E B T M A T U R I T I E S B Y Y E A R
$800
$700 | $700 | |||||
$600 | ||||||
$500* | 5.750% | $500 | ||||
$500 | ||||||
$400 | $400 | |||||
$350 | ||||||
$300 | ||||||
$200 | 4.375% | 4.750% | ||||
4.000% | 2.550% | 2.500% | ||||
$100 | ||||||
$0 | ||||||
FY 20 | FY 21 | FY 22 | FY 23 | FY 24 | FY 25 | |
$ in millions
*plan to repay at maturity utilizing cash on hand and revolving credit facility as necessary
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D.R. Horton Inc. published this content on 27 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2020 14:54:07 UTC