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

Q3 F 3 FY2015 2015

Forward-Looking Statements 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: 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 3

D.R. Horton, Inc.  Traded on NYSE as DHI  #1 builder for 13 consecutive years 1  $10.1 billion in annual revenues 2  34,684 in annual homes closed 2  $10.9 billion of total assets 3  $5.6 billion of stockholders’ equity 3 1 By closings volume for calendar years 2002 to 2014 2 Twelve months ended June 30, 2015 3 As of June 30, 2015 Q3 FY2015 4

Geographic Diversification 79 Markets | 27 States HB Revenue (TTM Ended 6/30/15) East 13% West Midwest 25% 6% Southwest 3% South Central 26% Southeast 27% East Inventory 11% (as of 6/30/15) Region States Covered Midwest West 6% 29% 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 4% Southwest Arizona, New Mexico South Central West California, Hawaii, Nevada, Oregon, Utah, Washington 25% Southeast 25% Q3 FY2015 5

Broad Range of Product Offerings Homes for entry-level, move-up and luxury buyers Under $500k+ $150k $400k to $500k $151k to $200k $300k to $400k $200k to $250k to $250k $300k 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 Q3 FY2015 6

Competitive Advantage Average employee tenure:  Region Presidents – over 20 years  Division Presidents – 15 years  City Managers – over 10 years 10 Q3 FY2015 7

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 Q3 FY2015 8

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 Q3 FY2015 9

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 Q3 FY2015 10

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 operational 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 Q3 FY2015 11

Targeted Market Consolidations Completed four acquisitions since fiscal 2012 $151k to $200k Q3 FY2015 12

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 Q3 FY2015 13

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 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 3Q FY13 3Q FY14 3Q FY15 Q3 FY2015 14

Income Statement 9 Months Ended Fiscal Year Ended 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 Q3 FY2015 15

Home Sales Gross Margin Homes sales gross margin of around 20% in a stable housing market 25% 20% 22.5% 22.3% 21.9% 20.7% 21.4% 20.5% 19.8% 19.9% 19.7% 20.4% 15% 18.8% 10% 17.7% 5% 0% FY12 1Q 2Q 3Q 4Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 FY15 Shown as a % of home sales revenues Includes interest amortized to cost of sales Q3 FY2015 16

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 SG&A $ SG&A $ $800 9.9% $800 10.9% $600 $600 $738.2 $400 $400 9.0% 10.6% $593.2 $200 $200 $257.8 $221.9 $0 $0 Q3 FY14 Q3 FY15 2014 2015 Shown as a % of homebuilding revenues $ in millions Q3 FY2015 17

Homebuilding Pre-tax Income Homebuilding pre-tax income margin in Q3 2015 was 10.5% FYTD 6/30 Third Fiscal Quarter 2015 PTI $ PTI $ $800 $800 9.6% $600 $600 9.8% $400 10.5% $400 $716.8 7.5% $532.2 $302.1 $200 $200 $158.6 $0 $0 Q3 FY14 Q3 FY15 2014 2015 Shown as a % of homebuilding revenues $ in millions Q3 FY2015 18

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 Q3 FY2015 19