8 th Annual J.P. Morgan Homebuilding & Building Products Conference May 19, 2015

Transcription

1 8 th Annual J.P. Morgan Homebuilding & Building Products Conference May 19, 2015

2 Forward-Looking Statements This presentation may include forward-looking statements as defined by the Private Securities Litigation Reform Act of 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 regulation 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. 2

3 D.R. Horton, Inc. Traded on NYSE as DHI #1 builder for 13 consecutive years 1 $9.3 billion in annual revenues 2 32,504 in annual homes closed 2 $10.7 billion of total assets 3 $5.4 billion of stockholders equity 3 1 By closings volume for calendar years 2002 to Twelve months ended March 31, As of March 31,

4 Geographic Diversification HB Revenue (TTM Ended 3/31/15) West 25% East 13% Midwest 6% 79 Markets 27 States Southwest 3% South Central 25% Inventory (as of 3/31/15) West 28% Southeast 28% East 11% Midwest 6% Region East States Covered Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia Midwest Colorado, Illinois, Indiana, Minnesota Southeast Alabama, Florida, Georgia, Mississippi, Tennessee Southwest 4% Southeast 26% South Central 25% South Central Southwest West Louisiana, Oklahoma, Texas Arizona, New Mexico California, Hawaii, Nevada, Oregon, Utah, Washington 4

5 Broad Range of Product Offerings Homes for entry-level, move-up and luxury buyers $151k to $200k Under $150k $500k+ $400k to $500k $300k to $400k $500k+ 53% of closings < $250,000 in Q2 FY15, down from 56% in Q2 FY14 Revenues from homes > $500,000 were 15% $200k to $250k $250k to $300k of home sales revenues in Q2 FY15 flat with Q2 FY14 5

6 Competitive Advantage Average employee tenure: Region Presidents over 20 years Division Presidents 15 years City Managers over 10 years 6

7 D.R. Horton The Heart of our Business 79 markets and 27 states In the second quarter, accounted for: 79% of homes sold 85% of homes closed 87% of home sales revenue Q2 Average Closing Price: $289,000 Reported metrics for D.R. Horton include our Breland Homes and Crown Communities operations 7

8 Emerald Homes Higher-end move-up and luxury buyer Introduced in markets and 16 states In the second quarter, accounted for: 3% of homes sold 2% of homes closed 5% of home sales revenue Q2 Average Closing Price: $561,000 Higher margin, slower absorption 8

9 Express Homes Targeted at the true entry-level buyer $151k to $200k Introduced in Spring markets and 13 states In the second quarter, accounted for: 18% of homes sold 13% of homes closed 8% of home sales revenue Q2 Average Closing Price: $179,000 Higher absorption, lower margin Reported metrics for Express include our Regent Homes operations 9

10 Operational Focus Current land ownership level is sufficient to support double-digit revenue growth 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 Consistently optimize balance of sales absorptions and gross margins to maximize returns in each community Manage land and home inventory levels efficiently Improve cash flow generation 10

11 Targeted Market Consolidations Completed four acquisitions since fiscal 2012 Company Date Acquired $151k to Market(s) $200k Amount Paid Breland Homes Aug-12 Huntsville, Mobile and Baldwin Co., AL & MS gulf coast $105.9 million Regent Homes Oct-13 Charlotte, Greensboro & Winston-Salem, North Carolina $34.5 million Crown Communities May-14 Georgia, South Carolina & eastern Alabama $209.6 million Pacific Ridge Homes Apr-15 Seattle, Washington $72 million 11

12 Q2 FY 2015 Highlights The value of net homes sold, homes closed and homes in backlog increased by 33%, 38% and 27%, respectively 11,135 net homes sold and 8,243 homes closed 12,177 homes in backlog at 3/31/15 Consolidated pre-tax income increased 14% to $230.1 million Consolidated pre-tax income margin was 9.6% Net income increased 13% to $147.9 million 12

13 Home Sales Gross Margin 25% Homes sales gross margin of around 20% in a stable housing market 20% 21.4% 21.9% 22.3% 22.5% 20.7% 20.5% 19.8% 19.7% 15% 18.8% 20.4% 10% 16.1% 17.7% 5% 0% FY11 FY12 1Q FY13 2Q FY13 3Q FY13 4Q FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Shown as a % of home sales revenues Includes interest amortized to cost of sales 13

14 Homebuilding SG&A Long-term annual SG&A goal = 10% of homebuilding revenues Improved 70 basis points year-over-year in Q2 FY2015 FYTD 3/31 Second Fiscal Quarter 2015 SG&A $ SG&A $ $ % $ % $ % $ % $300 $200 $371.3 $480.4 $150 $100 $187.9 $242.4 $100 $50 $ $0 Q2 FY14 Q2 FY15 Shown as a % of homebuilding revenues $ in millions 14

15 Homebuilding Pre-tax Income Homebuilding pre-tax income margin in Q was 8.9% FYTD 3/31 Second Fiscal Quarter 2015 PTI $ $500 $ % 9.0% PTI $ $210 $ % $300 $200 $100 $373.6 $414.7 $200 $195 $190 $ % $191.7 $208.6 $ $180 Q2 FY14 Q2 FY15 Shown as a % of homebuilding revenues $ in millions 15

16 Balance Sheet 3/31/15 9/30/14 3/31/14 HB cash and cash equivalents $ $ $ Restricted cash Inventories 8, , ,783.6 Deferred income taxes, net Other assets 1, , Total $ 10,713.1 $ 10,202.5 $ 9,372.8 Notes payable - HB $ 3,548.0 $ 3,323.6 $ 3,638.3 Other liabilities 1, , ,384.9 Equity 5, , ,349.6 Total $ 10,713.1 $ 10,202.5 $ 9,372.8 Homebuilding Leverage Gross 39.6% 39.4% 45.5% Net of cash 34.7% 34.5% 38.0% Book Value/Share $14.78 $14.03 $13.37 $ in millions 16

17 Homes in Inventory Growing housing inventory to meet increasing sales pace 22,000 20,000 18,000 16,000 17,000 17,600 20,600 21,300 14,000 13,000 12,000 10,000 10,500 8,000 6,000 4,000 2, /30/11 9/30/12 9/30/13 3/31/14 9/30/14 3/31/15 Models Sold Specs 17

18 Robust Lot Position 200, ,000 64,000 of our total lots are finished at 3/31/15 180, , , , , , ,700 54,300 46,900 58,900 55, , ,700 58, ,000 26,900 80,000 60, , , , ,700 40,000 85,800 94,600 20, /30/11 9/30/12 9/30/13 3/31/14 9/30/14 3/31/15 Optioned Owned 18

19 FY 2015 Expectations* Fiscal Year: Closings between 35,500 and 37,500 and consolidated revenues between $9.8 billion and $10.5 billion Home sales gross margin of 19.5% to 20.0% with potential quarterly fluctuations outside of this range Homebuilding SG&A expense of 9.9% to 10.2% of homebuilding revenues for full year Financial Services operating margin of 30% to 33% 2015 income tax rate between 35% and 36% Diluted share count of approximately 370 million shares Third Quarter: Backlog conversion rate of 78% to 80% Home sales gross margin in the range of 19.5% to 20.0% Homebuilding SG&A expense in the range of 9.9% to 10.2% of homebuilding revenues *Based on the relatively stable market conditions noted on the Company s conference call on 4/22/15. 19