I N V E S T O R P R E S E N T A T I O N I N V E S T O R P - - PowerPoint PPT Presentation

Q 3 2 0 2 0

I N V E S T O R P R E S E N T A T I O N

I N V E S T O R P R E S E N T A T I O N

Q 3 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 effects of public health issues such as a major epidemic or pandemic, including the impact of C-19 on the economy and our businesses; 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, lot development 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 reports on Form 10-Q, all of which are or will be filed with the Securities and Exchange Commission.

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C O V I D - 1 9 ( “ C - 1 9 ” )

• During the latter part of March 2020, the impacts of the C-19 pandemic and the related widespread reductions in economic activity across the U.S.

began to negatively affect the Company’s business; however, residential construction and financial services are designated as essential businesses as part of critical infrastructure in almost all municipalities across the U.S. where the Company operates, and D.R. Horton implemented operational protocols to comply with social distancing and other health and safety standards

• During April 2020 when restrictive stay-at-home orders were in place for many markets, the Company experienced increases in sales cancellations and

decreases in sales orders, and net sales orders for April were 1% lower than the same month in the prior year; however, as economic activity began to resume and restrictive orders began to be lifted, the Company’s weekly sales pace during May and June increased significantly and cancellation rates returned to normal levels

• In both May and June, the Company’s net sales orders increased by more than 50% compared to the prior year periods; however, even with the

resurgence of demand in May and June, the Company remains cautious as to the impact C-19 may have on its operations and on the overall economy in the future as there is significant uncertainty regarding the extent to which and how long C-19 and its related effects will impact the U.S. economy and level of employment, capital markets, secondary mortgage markets, consumer confidence, demand for the Company’s homes and availability of mortgage loans to homebuyers.

• The extent to which this impacts the Company’s operational and financial performance will depend on future developments, including the duration and

spread of C-19 and the impact on D.R. Horton’s customers, trade partners and employees, all of which are highly uncertain and cannot be predicted.

• The Company believes its strong balance sheet and liquidity position provides it with the flexibility to operate effectively through these changing

economic conditions, and the Company plans to continue to generate strong cash flows from its homebuilding operations and manage its land acquisition and development investments, product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on its inventory investments in each of its communities based on local housing market conditions

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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

$18.9 billion

Consolidated revenues

$11.0 billion

Stockholders’ equity

$2.6 billion

Consolidated pre-tax income

$30.38

Book value per common share

21.6% & 19.9%

ROI (HB) & ROE, respectively*

18.4%

Homebuilding leverage*

As of or for the twelve-month period ended June 30, 2020 *See slides 15 and 16 for definitions of ROI [Return on Inventory (Homebuilding)], ROE (Return on Equity) and homebuilding leverage

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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

2011 Closings: 17,176

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

61,164 Homes Closed during TTM ended 6/30/2020

2019 Closings: 58,434 1992 Closings: 1,231 2006 Closings: 53,410

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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

11 36 40 44 10 20 30 40 50 #1 Top 5 Top 10 Operate In

Top 50 Markets

Source: Builder magazine ‐ 2020 Local Leaders issue, rankings based on homes closed in calendar 2019

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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 ~27 years Division Presidents ~15 years City Managers >10 years

Average employee tenure

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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
• Strong balance sheet, ample liquidity and low leverage provide significant financial

flexibility to effectively operate through changing economic conditions

• Invest in homebuilding business
• Invest in DHI Communities, our multi-family rental company
• Maintain conservative homebuilding leverage
• In early May, issued $500 million of 2.6% senior notes due 2025
• $400 million of senior note maturities in next twelve months
• Dividends to shareholders
• Repurchases of common stock
• Plan to cautiously manage level of share repurchases in the near-term to maintain

financial flexibility until there is better visibility to future market conditions and the company’s expected operating results

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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, while maintaining affordability for homebuyers

• 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
• Expanding relationships with land developers to increase lots controlled
• Continue to grow Forestar’s lot manufacturing platform
• Control SG&A while ensuring infrastructure supports the business

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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

8 8 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 June 30, 2020 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

30% 25% 20% 13% 7% 5% 26% 27% 20% 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 6/30/20

Homes for entry-level, move-up, active adult and luxury buyers 66% of homes closed <$300k

$0 - $200k $200k - $250k $250k - $300k $300k - $500k >$500k

7% 32% 27% 29% 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 June 30, 2020

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

63% 62% 65% $315k 88 29 32% 33% 28% $251k 60 19 3% 3% 3% $290k 28 14 2% 2% 4% $551k 24 13

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F O R E S T A R ( “ F O R ” )

• FOR is a publicly traded residential lot manufacturer with operations in 51 markets and 22 states
• Supporting DHI’s strategy of increasing land and lots controlled through purchase contracts
• Delivered 6,396 lots and generated $584.3 million of revenue FYTD
• FOR has raised capital to fund its growth
• In fiscal 2019, issued $350 million of senior unsecured notes due 2024 and $100.7 million of common stock
• In February 2020, issued $300 million of senior unsecured notes due 2028
• FOR expects to opportunistically raise additional growth capital in the public debt and equity markets
• Liquidity of $704 million: $356 million of unrestricted cash and $348 million available capacity on revolving

credit facility

• Net debt to capitalization of 25.2%; next senior note maturity in fiscal 2024
• DHI’s long-term goal is to deconsolidate FOR from DHI’s financial statements
• DHI’s ownership of FOR is 65% as compared to 75% one year ago

As of 6/30/2020 unless otherwise noted

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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 target of >20%

16.6% 20.2% 18.1% 18.1% 21.6% 0% 5% 10% 15% 20%

FY 2017 FY 2018 TTM 6/30/19 FY 2019 TTM 6/30/20

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 (HB) notes payable divided by stockholders’ equity plus homebuilding notes payable.

14.4% 17.6% 17.3% 17.2% 19.9%

0% 10% 20% 30% 40% 0% 5% 10% 15% 20% FY 2017 FY 2018 TTM 6/30/19 FY 2019 TTM 6/30/20

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 $26.08 $27.20 $30.38

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 9/30/2017 9/30/2018 6/30/2019 9/30/2019 6/30/2020

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

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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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• In April 2020, due to the uncertainty in the U.S. economy and the Company’s business operations

resulting from C-19, the Company withdrew its previously issued guidance for fiscal 2020

• Based on today’s market conditions, the Company is now providing its expectations for Q4

FY 2020:

• Consolidated revenues in a range of $5.5 billion to $5.8 billion
• Homes closed between 18,000 homes and 19,000 homes
• Homes sales gross margin similar to Q3 FY 2020 in the mid-21% range
• Homebuilding SG&A of 8.0% to 8.2% of homebuilding revenues
• Financial services pre-tax profit margin of approximately 40%
• Income tax rate of approximately 23%
• The Company expects to provide annual guidance for fiscal 2021 when it has sufficient visibility

into market conditions E X P E C T A T I O N S *

*Based on current market conditions as noted on the Company’s Q3 FY20 conference call on 7/28/20

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T H I R D Q U A R T E R D A T A

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Q 3 F Y 2 0 2 0 H I G H L I G H T S

• Net income per diluted share increased 37% to $1.72
• Net income attributable to D.R. Horton increased 33% to $630.7 million
• Consolidated revenues increased 10% to $5.4 billion
• Consolidated pre-tax income increased 25% to $782.4 million
• Consolidated pre-tax profit margin improved 170 basis points to 14.5%
• Net homes sold and homes closed increased by 38% and 10%, respectively
• 21,519 net homes sold and 17,642 homes closed

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 38% and 10%, respectively, in Q3 FY 2020 compared to Q3 FY 2019

2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000 Sales Closings

3Q FY18 3Q FY19 3Q FY20 # 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

YEAR ENDED 6/30/2020 6/30/2019 6/30/2020 6/30/2019 9/30/2019 Homes closed 17,642 15,971 45,140 40,951 56,975 Homebuilding Revenues: Home sales $ 5,207.6 $ 4,734.6 $ 13,434.2 $ 12,125.8 $ 16,925.0 Land/lot sales 14.5 27.5 49.7 49.2 91.9 5,222.1 4,762.1 13,483.9 12,175.0 17,016.9 Gross profit: Home sales 1,125.3 961.6 2,865.0 2,409.3 3,417.9 Land/lot sales and other 4.3 4.3 14.8 11.6 16.8 Inventory and land option charges (4.9) (19.2) (17.3) (41.0) (53.2) 1,124.7 946.7 2,862.5 2,379.9 3,381.5 SG&A 415.1 387.4 1,135.3 1,071.4 1,482.3 Interest and other (income) (0.2) (2.5) (9.7) (8.1) (11.5) Homebuilding pre-tax income 709.8 561.8 1,736.9 1,316.6 1,910.7 Financial services, Forestar and other pre-tax income 72.6 64.9 190.0 148.6 214.6 Pre-tax income 782.4 626.7 1,926.9 1,465.2 2,125.3 Income tax expense 149.5 153.1 377.6 350.5 506.7 Net income 632.9 473.6 1,549.3 1,114.7 1,618.6 Net income (loss) attributable to noncontrolling interests 2.2 (1.2) 4.6 1.5 0.1 Net income attributable to D.R. Horton, Inc. $ 630.7 $ 474.8 $ 1,544.7 $ 1,113.2 $ 1,618.5 Net income per diluted share $ 1.72 $ 1.26 $ 4.17 $ 2.94 $ 4.29 3 MONTHS ENDED 9 MONTHS 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% 21.3% 21.6%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% FY 2017 FY 2018 1Q19 2Q19 3Q19 4Q19 FY 2019 1Q20 2Q20 3Q20

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 Q3 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 40 basis points to 8.4% for fiscal YTD 2020

Fiscal YTD 6/30 Third Fiscal Quarter

8.8% 8.4%

7% 8% 9% 10% 11% 12% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2019 2020 HB Rev $ SG&A %

8.1% 7.9%

7% 8% 9% 10% 11% 12% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Q3 FY19 Q3 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

$1,465.2 $1,926.9 $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 2019 2020 11.7% 13.9%

Fiscal YTD 6/30 Third Fiscal Quarter Consolidated pre-tax profit margin improved 220 basis points to 13.9% for fiscal YTD 2020

$626.7 $782.4 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q3 FY19 Q3 FY20 12.8% 14.5% 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 $9.0 million, $8.0 million, and $9.8 million of restricted cash for the periods ended 6/30/20, 9/30/19, and 6/30/19 respectively.

6/30/2020 9/30/2019 6/30/2019 Homebuilding $ 1,905.8 $ 1,051.0 $ 587.7 Construction in progress and finished homes 5,886.0 5,249.0 5,723.5 Land inventories 5,030.8 5,036.6 4,954.9 10,916.8 10,285.6 10,678.4 Other assets 1,359.0 1,232.9 1,192.7 Deferred income taxes, net 158.6 163.1 173.9 Financial services, Forestar and other assets 3,633.7 2,874.0 2,591.3 Total assets $ 17,973.9 $ 15,606.6 $ 15,224.0 Homebuilding Notes payable $ 2,490.3 $ 2,047.6 $ 2,191.3 Other liabilities 2,143.8 1,751.1 1,796.4 Financial services, Forestar and other liabilities 2,012.7 1,512.8 1,421.6 Stockholders’ equity 11,048.0 10,020.9 9,642.4 Noncontrolling interests 279.1 274.2 172.3 Total equity 11,327.1 10,295.1 9,814.7 Total liabilities and equity $ 17,973.9 $ 15,606.6 $ 15,224.0 Debt to total capital – consolidated 28.0% 25.3% 26.4% Debt to total capital – homebuilding 18.4% 17.0% 18.5% Common shares outstanding 363.63 368.43 369.75 Book value per common share $ 30.38 $ 27.20 $ 26.08 Cash and cash equivalents

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24,600 27,900 29,200 27,700 32,800

5,000 10,000 15,000 20,000 25,000 30,000 35,000 9/30/17 9/30/18 6/30/19 9/30/19 6/30/20

Sold Specs

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

Well-positioned to respond to increased new home demand

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

125,000 124,300 118,500 121,400 115,200 124,000 164,200* 184,500* 185,900* 220,300* 249,000 288,500 303,000 307,300 335,500 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 9/30/17 9/30/18 6/30/19 9/30/19 6/30/20

Owned Controlled

Controlled lot position increased 19% from a year ago 34% owned / 66% controlled at 6/30/20

*Includes lots owned or controlled by FOR that DHI has under contract or the right of first offer to purchase of 29,600, 23,400, 24,100 and 13,600 at 6/30/20, 9/30/19, 6/30/19 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 21 FY 22 FY 23 FY 24 FY 25 FY 26

4.750%

$350

4.375% 5.750%

$700

$ in millions

$400

2.550%

$500

2.600%

$400 million of senior note maturities in next 12 months

2.500%

$500