Investor Presentation Q1 FY 2018 1
D . R . H O R T O N , I N C . 2 By closings volume for calendar years 2002 to 2017
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 industry and changes in economic, real estate and other conditions; constriction of the credit 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; home warranty and construction defect claims; the effects of a health and safety incident; the effects of negative publicity; supply shortages and other risks of acquiring land, building materials and skilled labor; the impact of an inflationary, deflationary or higher interest rate environment; 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 operations; the effects of governmental regulations on our financial services operations; our significant debt and our ability to 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 our most recent quarterly report on Form 10‐Q, both of which are filed with the Securities and Exchange Commission. 3
T R A D E D O N N Y S E A S D H I D . R . H O R T O N , I N C . 47,135 $14.5 billion Annual homes closed Annual consolidated revenues $13.0 billion $1.7 billion Total assets Annual pre‐tax income $20.98 $7.9 billion Book value per common share Stockholders’ equity 4 As of or for the twelve‐month period ended December 31, 2017
B R O A D N A T 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
B R O A D N A T 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% 5% 6% 6% 26% 30% 12% 12% 24% 26% 24% 24% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST California, Hawaii, Delaware, Maryland, Colorado Alabama, Florida, Louisiana Arizona New Jersey, North Illinois Georgia, Mississippi, Oklahoma New Mexico Nevada, Oregon, Utah, Washington and South Carolina, Minnesota Tennessee Texas Pennsylvania, Virginia 6 As of or for the twelve‐month period ended December 31, 2017 Savannah, Georgia is included in the East Region; Atlanta and Augusta, Georgia are included in the Southeast Region
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 7% 20% $0 $500k 26% $200k $300k 27% $250k 20% 7 Represents homes closed for the twelve months ended 12/31/17
F A M I L Y O F B R A N D S FIRST TIME / MOVE UP ENTRY LEVEL LUXURY ACTIVE ADULT 39 markets | 16 states 22 markets | 12 states 58 markets | 21 states 79 markets | 26 states ASP $262k ASP $233k ASP $610k ASP $318k 1% 3% 2% 3% 2% 6% 29% 37% Home Sales Homes Homes 36% Revenue Sold Closed 59% 64% 58% 8 Based on Q1 FY 2018 results
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 and Division presidents City managers region presidents over 13 years over 10 years approx. 25 years 9 Average employee tenure
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% 50 16% 40 14% 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 10 Source: Builder magazine ‐ 2017 Local Leaders issue, rankings based on homes closed in calendar 2016
O P E R A T 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 revenues and profits • Underwriting expectations for each community: • Minimum 20% annual pre‐tax return on inventory (ROI) • Initial cash investment returned within 24 months or less • Increase optioned land and lots by expanding relationships with land developers • Grow Forestar’s land development platform • Control SG&A while ensuring infrastructure supports 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 ) Steady improvement in Homebuilding ROI 20% 17.0% 16.6% 15% 15.9% 15.4% 12.8% 10% 11.1% 5% 0% FY 2014 FY 2015 FY 2016 TTM 12/31/16 FY 2017 TTM 12/31/17 Homebuilding ROI is calculated as homebuilding pre‐tax income for the year divided by average homebuilding inventory. 12 Average homebuilding inventory in the ROI calculation is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.
B A L A N C E D A P P R O A C H 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 $3.5 $10.8 $3 $8 $2.7 $2 $2.2 $4 $1 $0 $0 FY 2015 FY 2016 FY 2017 FY 2018e FY 2015 FY 2016 FY 2017 FY 2018e 13 $ in billions Expect to generate positive cash flow from operations for the fourth consecutive year excluding Forestar
F Y 2 0 1 8 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 • Invest in homebuilding opportunities, including acquisitions, to generate acceptable returns and consolidate market share • Acquired 75% of Forestar for $558 million in October 2017 • Reduce or maintain debt levels and leverage • Refinanced $400 million of senior notes in Q1 FY 2018 • Consistent dividends to shareholders • Increased quarterly dividend by 25% in Q1 FY 2018 • Approximately $190 million annually • Share repurchases to partially offset dilution • Repurchased 500,000 shares during Q1 FY 2018 for $25.4 million • Remaining Board authorization of $174.6 million 14
H O M E B U I L D I N G S G & A Expect SG&A as a percentage of homebuilding revenues to improve approximately 20 basis points in FY 2018 to around 8.7% HB Rev $ SG&A % $16.0 11.0% 10.0% $12.0 $13.7 9.0% $11.9 $10.6 $8.0 8.0% $7.9 $4.0 7.0% $0.0 6.0% 2014 2015 2016 2017 HB Rev $ SGA % $ in billions 15 Shown as a % of homebuilding revenues
F O R E S T A 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 $558 million in cash • FOR is and will continue to be a publicly‐traded residential land development company, with operations currently in 16 markets and 11 states • The strategic relationship will significantly grow FOR into a large, national residential land development company, selling lots to D.R. Horton and other homebuilders • Advances DHI’s strategy of increasing its access to optioned land and lots to enhance operational efficiency and returns • FOR is led by new Executive Chairman Don Tomnitz, DHI’s CEO for over 15 years, and is supported by an experienced management team and board of directors • Over the longer term, DHI intends to gradually reduce its ownership position and increase the public float of FOR stock • Effective 1/30/18, FOR’s fiscal year will end on 9/30, which aligns with DHI’s fiscal year • Expect FOR’s annual deliveries to grow to approximately 10,000 lots by fiscal 2020 16
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