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 - - PowerPoint PPT Presentation

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

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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

• utcomes 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

• ur 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 and subsequent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.

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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

Annual homes closed

18.7% & 18.2%

ROI (HB) & ROE, respectively*

$18.1 billion

Annual consolidated revenues

$10.2 billion

Stockholders’ equity

$2.3 billion

Annual pre‐tax income

$27.92

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)

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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

Homebuilding Revenue Inventory

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 Region

EAST

Delaware, Maryland, New Jersey, North and South Carolina, Pennsylvania, Virginia

MIDWEST

Colorado, Illinois, Indiana, Iowa, Minnesota, Ohio

SOUTHEAST

Alabama, Florida, Georgia, Mississippi, Tennessee

SOUTH CENTRAL

Louisiana Oklahoma Texas

SOUTHWEST

Arizona New Mexico

WEST

California, Hawaii, Nevada, Oregon, Utah, Washington

29% 25% 21% 13% 7% 5% 27% 25% 21% 12% 9% 6%

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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

Represents homes closed & price points for the twelve months ended 12/31/19

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%

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F A M I L Y O F B R A N D S

As of or for the twelve months ended December 31, 2019

Homes Sold Homes Closed Home Sales Revenue Average Selling Price # of Markets # of States

61% 61% 64% $316k 90 29 34% 34% 28% $245k 58 19 3% 3% 3% $285k 27 13 2% 2% 5% $593k 26 14

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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

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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

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 200 400 600 800 1,000 1,200 1,400

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 2019

Total New U.S. Single-Family Houses Sold ('000s) DHI Homes Closed as a Percentage of U.S. Single-Family New Home Sales

Source: Company filings, Census Note: Periods represent full calendar year

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M A R K E T S H A R E D O M I N A N C E

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

DFW Houston Atlanta Phoenix Austin

DHI Market Share Next Ranking Competitor Market Share

D.R. Horton Share and Rankings in Largest U.S. Housing Markets Top 5 Markets

13 31 38 43 10 20 30 40 50 #1 Top 5 Top 10 Operate In

Top 50 Markets

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

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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

16.6% 20.2% 19.3% 18.1% 18.7% 0% 5% 10% 15% 20%

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 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.

14.4% 17.6% 18.2% 17.2% 18.2%

0% 10% 20% 30% 40% 0% 5% 10% 15% 20% FY 2017 FY 2018 TTM 12/31/18 FY 2019 TTM 12/31/19

ROE Leverage

ROE has improved to the high-teens while leverage has decreased

ROE HB leverage

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B O O K V A L U E P E R S H A R E

$20.66 $23.88 $24.45 $27.20 $27.92

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 9/30/2017 9/30/2018 12/31/2018 9/30/2019 12/31/2019

Consistent annual double-digit percentage growth in book value per share

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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

$600 $581 $304 $1,002 $1,438

200 400 600 800 1,000 1,200 1,400 1,600 1,800 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Acquisitions Debt Paydown Dividends Share Repurchases HB Cash Flow from Ops

5 Year Cumulative Capital

Cash Flow from Homebuilding Operations

$4.0B

Acquisitions

$1.0B

Homebuilding Senior Notes Paydown

$1.4B

Shareholder Return through Dividends and Share Repurchases

$1.4B

Utilization of $4 billion of cash generated by homebuilding operations

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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

2,500 5,000 7,500 10,000 12,500 15,000 17,500 Sales Closings

1Q FY 2018 1Q FY 2019 1Q FY 2020 # of Homes

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I N C O M E S T A T E M E N T

$ in millions except per share data

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 3 MONTHS ENDED FISCAL YEAR ENDED

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H O M E S A L E S G R O S S M A R G I N

20.0% 21.3% 20.0% 19.3% 20.3% 21.0% 20.2% 21.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 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

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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 First Fiscal Quarter

8.6% 8.7%

7% 8% 9% 10% 11% 12% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 2018 2019 HB Rev $ SG&A %

9.5% 9.2%

7% 8% 9% 10% 11% 12% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Q1 FY19 Q1 FY20 HB Rev $ SG&A % HB Rev $ SG&A % HB Rev $ SG&A %

$ in millions Shown as a % of homebuilding revenues

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C O N S O L I D A T E D P R E - T A X I N C O M E

$2,060.0 $2,125.3 $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 2018 2019 12.8% 12.1%

Fiscal Year First Fiscal Quarter Consolidated pre-tax profit margin improved 230 basis points to 13.0% in Q1 FY 2020

$375.7 $523.3 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q1 FY19 Q1 FY20 10.7% 13.0% PTI $ PTI $

$ in millions Shown as a % of consolidated revenues

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B A L A N C E S H E E T

$ 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.

12/31/2019 9/30/2019 12/31/2018 Homebuilding $ 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 Cash and cash equivalents

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24,600 27,900 31,800 27,700 30,200

5,000 10,000 15,000 20,000 25,000 30,000 35,000 9/30/17 9/30/18 12/31/18 9/30/19 12/31/19

Sold Specs

H O M E S I N I N V E N T O R Y

Well-positioned to achieve FY 2020 closings guidance

Homes in inventory excluding model homes

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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

125,000 124,300 128,500 121,400 123,400 124,000 164,200* 180,900* 185,900* 195,600* 249,000 288,500 309,400 307,300 319,000 50,000 100,000 150,000 200,000 250,000 300,000 350,000 9/30/17 9/30/18 12/31/18 9/30/19 12/31/19

Owned Controlled

Controlled lot position increased 8% from a year ago 39% owned / 61% controlled at 12/31/19

*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 $0 $100 $200 $300 $400 $500 $600 $700 $800 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25

4.750%

$350 $500*

4.000% 4.375% 5.750%

$700

$ in millions *plan to repay at maturity utilizing cash on hand and revolving credit facility as necessary

$400

2.550%

$500

2.500%