J.P. Morgan 10 th Annual Homebuilding and Building Products Conference May 18, 2017

Transcription

1 J.P. Morgan 10 th Annual Homebuilding and Building Products Conference May 18, 2017

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: 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; 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; our ability to effect our growth strategies, acquisitions or investments successfully; 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. J.P. Morgan I May

3 D.R. Horton, Inc. Traded on NYSE as DHI #1 builder for 15 years in a row 1 Annual revenues of $13.1 billion 2 43,075 in annual homes closed 2 Annual pre tax income of $1.5 billion 2 Total assets of $11.9 billion 3 Shareholders equity of $7.2 billion 3 Book value per common share of $ By closings volume for calendar years 2002 to Twelve months ended March 31, As of March 31, 2017 J.P. Morgan I May

4 Broad National Footprint HB Revenue 1 East 12% West 24% Midwest 5% 78 Markets 26 States Southwest 4% Southeast 30% South Central 25% Inventory 2 West 27% Southwest 5% Southeast 26% 1 Twelve months ended March 31, As of March 31, 2017 East 12% Midwest 5% South Central 25% J.P. Morgan I May Region East Midwest Southeast South Central Southwest West States Delaware, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Virginia Colorado, Illinois, Minnesota Alabama, Florida, Georgia, Mississippi, Tennessee Louisiana, Oklahoma, Texas Arizona, New Mexico California, Hawaii, Nevada, Oregon, Utah, Washington

5 Diverse Product Offerings Homes for entry level, move up, active adult and luxury buyers 7% $500k+ 24% < $200k $300k to $500k 26% $200k to $250k $250k to $300k 24% 19% Represents homes closed for the trailing twelve months ended 3/31/17 J.P. Morgan I May

6 Family of Brands The heart of our business Offered across all 78 markets and 26 states we operate in 67% of homes closed and 70% of home sales revenue Average selling price of $311,000 Introduced in 2014, targeted at the true entrylevel buyer Currently in 55 markets and 18 states 29% of homes closed and 22% of home sales revenue Average selling price of $220,000 Introduced in 2013, focused on the higher end move up and luxury buyer Currently in 43 markets and 18 states 4% of homes closed and 8% of home sales revenue Average selling price of $617,000 Introduced in July 2016 as carefree affordable living for active adults Currently in 10 markets and 8 states Low maintenance lifestyle Expect to have available in approximately 1/3 of our 78 markets by the end of the year Based on Q2 FY 2017 results J.P. Morgan I May

7 Management Tenure & Experience Average employee tenure: Executive Team and Region Presidents over 20 years Division Presidents and City Managers over 13 years J.P. Morgan I May

8 D.R. Horton Market Share Rankings # Markets Top 50 U.S. Housing Markets #1 Top 5 Top 10 Operations In Source: Builder magazine 2016 Local Leaders issue Market share rankings based on homes closed in respective years J.P. Morgan I May

9 Operational Focus Maximize returns by managing inventory levels efficiently and consistently balancing sales pace and pricing in each community Generate consistent positive annual cash flow from operations Maintain a land and lot portfolio sufficient to support double digit annual growth in both revenues and profits Underwriting criteria for land and lot purchases and operational expectations for each community across all brands: Minimum 20% annual net return on inventory investment (ROI) Initial cash investment returned within 24 months or less Control SG&A costs while ensuring our infrastructure supports growth J.P. Morgan I May

10 Emphasis on Return on Inventory (ROI) 20.0% Steady improvement in Homebuilding ROI 15.0% 16.0% 15.4% 10.0% 12.8% 13.8% 5.0% 11.1% 0.0% FY 2014 FY 2015 TTM 3/31/16 FY 2016 TTM 3/31/17 Homebuilding ROI is calculated as homebuilding pre tax income for the year divided by average inventory. Average inventory in the ROI calculation is the sum of ending inventory balances for the trailing five quarters divided by five. J.P. Morgan I May

11 Balanced Approach Expect to generate positive cash flow from operations of at least $300 to $500 million for a third consecutive year while growing revenues and investing in land $16 $6 $14 $12 $10 $10.8 $12.2 $13.6 $14.0 $5 $4 >$3.0 $8 $3 $2.7 $6 $2 $2.2 $4 $2 $1 $0 $ in billions $0 FY 2015 FY 2016 FY 2017e FY 2015 FY 2016 FY 2017e Consolidated Revenues Land Investment J.P. Morgan I May

12 Capital & Cash Flow Priorities Flexible, opportunistic and disciplined Invest in homebuilding business where opportunities to generate acceptable returns exist, including acquisitions to further consolidate market share Pay off debt at maturity Repaid $350 million of senior notes at maturity in May 2017 with existing cash Consistent dividends to shareholders Expect annual cash dividends of approximately $150 million at current rate Share repurchases to partially offset dilution Repurchased 1.85 million shares quarter to date (as of 5/16/17) for a total of $60.6 million J.P. Morgan I May

13 Homes in Inventory # of Homes 30,000 25,000 20,000 20,600 Homes in inventory increased 10% from a year ago 24,600 23,100 19,800 27,100 15,000 10,000 5, /30/14 9/30/15 3/31/16 9/30/16 3/31/17 Models Sold Specs J.P. Morgan I May

14 Land and Lot Position # of Lots 52% owned / 48% optioned at 3/31/17 Optioned lot position increased 42% from a year ago 250, , , , , ,500 58, ,900 55, ,500 76, ,500 91, , , , ,000 75,000 50,000 25, , , , , , /30/14 9/30/15 3/31/16 9/30/16 3/31/17 Optioned Owned J.P. Morgan I May

15 FY 2017 Expectations* Consolidated pre tax profit margin of 11.2% to 11.5% Consolidated revenues between $13.6 billion and $14.0 billion Homes closed between 44,500 homes and 46,000 homes Home sales gross margin around 20%, with potential quarterly fluctuations from 19% to 21% Homebuilding SG&A expense of 8.8% to 9.1% of homebuilding revenues Financial Services operating margin of approximately 35% Income tax rate of approximately 35.5% Diluted share count of approximately 380 million shares Cash flow from operations in the range of $300 to $500 million *Based on housing market conditions as noted on the Company s conference call on 4/20/17 J.P. Morgan I May