Q3 F 3 FY2015 2015 Forward-Looking Statements This presentation - - PowerPoint PPT Presentation

Q3 F 3 FY2015 2015

Q3 FY2015

Forward-Looking Statements

3

This presentation may include “forward-looking statements” as defined by the Private Securities Litigation Reform Act

• f 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: potential deterioration in homebuilding industry conditions or general economic conditions; 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 and the liquidity provided by government-sponsored enterprises, the effects of government 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; home warranty and construction defect claims; 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 impact of an inflationary, deflationary or higher interest rate environment; the effects of governmental regulations and environmental matters on our homebuilding operations; the effects of governmental regulations on our financial services operations; our substantial debt and our ability to comply with related debt covenants, restrictions and limitations; competitive conditions within the homebuilding and financial services industries; our ability to effect our growth strategies or acquisitions successfully; our ability to realize the full amount of our deferred income tax assets; the effects of the loss of key personnel; the effects of negative publicity; 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.

Q3 FY2015

D.R. Horton, Inc.

 Traded on NYSE as DHI  #1 builder for 13 consecutive years1  $10.1 billion in annual revenues2  34,684 in annual homes closed2  $10.9 billion of total assets3  $5.6 billion of stockholders’ equity3

1 By closings volume for calendar years 2002 to 2014 2 Twelve months ended June 30, 2015 3 As of June 30, 2015

4

Q3 FY2015

Geographic Diversification

79 Markets | 27 States

Region States Covered East Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia Midwest Colorado, Illinois, Indiana, Minnesota Southeast Alabama, Florida, Georgia, Mississippi, Tennessee South Central Louisiana, Oklahoma, Texas Southwest Arizona, New Mexico West California, Hawaii, Nevada, Oregon, Utah, Washington

South Central 26% Southwest 3% West 25%

HB Revenue

(TTM Ended 6/30/15)

Midwest 6% South Central 25% Southeast 25%

Inventory

(as of 6/30/15)

East 13% Midwest 6% Southeast 27% West 29% Southwest 4% East 11%

5

Q3 FY2015

Broad Range of Product Offerings

Homes for entry-level, move-up and luxury buyers

49% of closings < $250,000 in Q3 FY15, down from 57% in Q3 FY14 Revenues from homes > $500,000 were 16% of home sales revenues in Q3 FY15 and 15% in Q3 FY14

Under $150k $200k to $250k $250k to $300k $300k to $400k $400k to $500k $500k+ $151k to $200k 6

Q3 FY2015

10

Average employee tenure:  Region Presidents – over 20 years  Division Presidents – 15 years  City Managers – over 10 years

Competitive Advantage

7

Q3 FY2015

D.R. Horton

The Heart of our Business

 79 markets and 27 states  In the third quarter, accounted for:  77% of homes sold  81% of homes closed  84% of home sales revenue  Q3 Average Closing Price: $300,000

Reported metrics for D.R. Horton include our Crown Communities and Pacific Ridge Homes operations 8

Q3 FY2015

Emerald Homes

Higher-end move-up and luxury buyer

 Introduced in 2013  46 markets and 18 states  In the third quarter, accounted for:  4% of homes sold  3% of homes closed  6% of home sales revenue  Q3 Average Closing Price: $524,000  Higher margin, slower absorption

9

Q3 FY2015

Express Homes

Targeted at the true entry-level buyer

 Introduced in Spring 2014  44 markets and 14 states  In the third quarter, accounted for:  19% of homes sold  16% of homes closed  10% of home sales revenue  Q3 Average Closing Price: $188,000  Higher absorption, lower margin

Reported metrics for Express include our Regent Homes operations 10

Q3 FY2015

Operational Focus

 Consistent positive cash flow from operations  Current land ownership level is sufficient to support double-digit revenue and profit growth  Consistently optimize balance of sales absorptions and gross margins to maximize returns in each community  Manage land and home inventory levels efficiently  Underwriting criteria for land and lot purchases and

• perational expectations for each community:

 Minimum 20% annual net return on inventory investment (ROI) for all three brands

 Net ROI% = Pre-tax Income divided by Average Inventory

 Initial cash investment returned within 24 months

11

Q3 FY2015

Targeted Market Consolidations

12

Completed four acquisitions since fiscal 2012

$151k to $200k

Q3 FY2015

Q3 FY 2015 Highlights

 The value of net homes sold, homes closed and homes in backlog increased by 25%, 37% and 15%, respectively  10,398 net homes sold and 9,856 homes closed  12,761 homes in backlog at 6/30/15  Consolidated pre-tax income increased 94% to $333.8 million  Consolidated pre-tax income margin improved 330 basis points to 11.3%  Net income increased 96% to $221.4 million  Positive cash flow from operations of $357.4 million for 3 months ended June and $188.6 million for 9 months ended June

13

Q3 FY2015

Sales, Closings & Backlog – Q3 FY15

Net Sales Orders, Homes Closed and Homes in Backlog increased 22%, 28% and 12%, respectively, in Q3 of FY15 compared to Q3 of FY14 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Sales Closings Backlog 3Q FY13 3Q FY14 3Q FY15

14

Q3 FY2015

Income Statement

6/30/2015 6/30/2014 9/30/2014 9/30/2013 Homes closed 26,072 20,058 28,670 24,155 Revenues: Home sales 7,417.4 $ 5,401.1 $ 7,804.7 $ 6,024.8 $ Land/lot sales & other 50.6 34.0 53.8 61.1 7,468.0 5,435.1 7,858.5 6,085.9 Gross Profit: Home sales 1,468.6 1,173.6 1,665.6 1,253.3 Land/lot sales & other 6.5 6.5 9.5 10.2 Inventory & land option charges (34.0) (63.9) (85.2) (31.1) 1,441.1 1,116.2 1,589.9 1,232.4 SG&A 738.2 593.2 834.2 649.9 Interest and other (income) (13.9) (9.2) (13.1) (9.8) Homebuilding pre-tax income 716.8 532.2 768.8 592.3 Financial Services pre-tax income 67.8 31.2 45.4 65.5 Pre-tax income 784.6 563.4 814.2 657.8 Income tax expense 272.8 196.1 280.7 195.1 Net income 511.8 $ 367.3 $ 533.5 $ 462.7 $ $ in millions 9 Months Ended Fiscal Year Ended

15

Q3 FY2015

Home Sales Gross Margin

Shown as a % of home sales revenues Includes interest amortized to cost of sales

0% 5% 10% 15% 20% 25%

FY12 1Q FY13 2Q FY13 3Q FY13 4Q FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15

17.7% 18.8% 20.4% 21.4% 21.9% 22.3% 22.5% 20.7% 20.5% 19.8% 19.7% 19.9% 16

Homes sales gross margin of around 20% in a stable housing market

Q3 FY2015

Homebuilding SG&A

Long-term annual SG&A goal = 10% of homebuilding revenues Improved 160 basis points year-over-year in Q3 FY2015

FYTD 6/30 Third Fiscal Quarter 2015

$0 $200 $400 $600 $800 2014 2015 $593.2 $738.2 10.9% 9.9% $0 $200 $400 $600 $800 Q3 FY14 Q3 FY15 $221.9 $257.8 9.0% SG&A $ SG&A $ 10.6%

Shown as a % of homebuilding revenues $ in millions 17

Q3 FY2015

Homebuilding Pre-tax Income

Homebuilding pre-tax income margin in Q3 2015 was 10.5%

FYTD 6/30 Third Fiscal Quarter 2015

$0 $200 $400 $600 $800 2014 2015 $532.2 $716.8 9.8% 9.6% PTI $ $0 $200 $400 $600 $800 Q3 FY14 Q3 FY15 $158.6 $302.1 7.5% 10.5% PTI $

Shown as a % of homebuilding revenues $ in millions 18

Q3 FY2015

Balance Sheet

6/30/15 9/30/14 6/30/14 HB cash and cash equivalents 766.7 $ 632.5 $ 580.8 $ Restricted cash 11.7 10.0 20.1 Inventories 8,111.2 7,700.5 7,375.6 Deferred income taxes, net 544.3 565.0 582.6 Other assets 1,429.6 1,294.5 1,157.5 Total 10,863.5 $ 10,202.5 $ 9,716.6 $ Notes payable - HB 3,373.1 $ 3,323.6 $ 3,142.4 $ Other liabilities 1,859.4 1,759.2 1,604.3 Equity 5,631.0 5,119.7 4,969.9 Total 10,863.5 $ 10,202.5 $ 9,716.6 $ Homebuilding Leverage Gross 37.5% 39.4% 38.7% Net of cash 31.6% 34.5% 34.0% Book Value/Share $15.35 $14.03 $13.63

$ in millions

19

Q3 FY2015

Homes in Inventory

Growing housing inventory to meet increasing sales pace

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 9/30/11 9/30/12 9/30/13 6/30/14 9/30/14 6/30/15

Models Sold Specs

10,500 13,000 17,000 20,600 21,200 20,500

20

Q3 FY2015

Robust Lot Position

65,000 of our total lots are finished at 6/30/15

85,800 94,600 126,600 124,900 124,600 120,100 26,900 58,100 54,300 53,600 58,900 53,500 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 9/30/11 9/30/12 9/30/13 6/30/14 9/30/14 6/30/15

Optioned Owned

112,700 152,700 180,900 183,500 178,500 173,600

21

Q3 FY2015

Inactive Land Held for Development

“Mothballed” lot count down 41% from 9/30/13

$699.2 $628.3 $450.2 $332.8 $235.4 43,100 39,400 21,700 14,000 12,800 $0 $250 $500 $750 9/30/11 9/30/12 9/30/13 9/30/14 6/30/15

Carrying Value Lots Held

Land held for development is shown as separate line item on face of balance sheet $ in millions 22

Q3 FY2015

Public Debt Maturities by Year

Balance of public notes outstanding at 6/30/15 of $3.3 billion $ in millions

$0 $100 $200 $300 $400 $500 $600 $700 $800 FY 16 FY 17 FY 18 FY 19 FY 20 FY 22 FY 23 4.750% $350 $500 $543 $500 $350 $400 5.625% 6.500% 4.750% 3.625% 3.750% 4.375% $700 5.750%

23

4.000%

Q3 FY2015

Q4 FY 2015:  Backlog conversion rate in the range of 81 – 84%  Home sales gross margin consistent with first three quarters of the year (high 19’s to 20%)  Homebuilding SG&A expense in the range of 8.7% to 8.9% of homebuilding revenues  Financial Services operating margin between 35% and 40%  Income tax rate between 35% and 36%  Diluted share count of approximately 371 million shares Fiscal Year 2016:  Consolidated revenue growth of 10% to 15%  Consolidated pre-tax margin in the range of 10.5% to 11.0%  Positive cash flow from operations in the range of $300 million to $500 million - expect to use primarily toward debt maturities  Income tax rate between 35% and 36%  Diluted share count increase of approximately 1% from fiscal 2015

Future Expectations*

24

*based on current housing market conditions as noted on the Company’s conference call on July 28, 2015