Investor Presentation Q2 FY 2018 1
D.R. HORTON, INC. By closings volume for calendar years 2002 to 2017 2
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: 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
D.R. HORTON, INC. TRADED ON NYSE AS DHI 48,731 Annual homes closed $15.1 billion Annual consolidated revenues $1.8 billion Annual pre tax income $630.3 million Cash flow from operations* $8.2 billion Stockholders equity $21.72 Book value per common share As of or for the twelve month period ended March 31, 2018 Consolidated cash flow from operations excluding the Forestar, eliminations and other adjustment columns in the segment tables in the Company s Q2 FY 2018 press release 4
BROAD NATIONAL FOOTPRINT 79 MARKETS 26 STATES 5
BROAD NATIONAL FOOTPRINT 79 MARKETS 26 STATES HB Revenue Inventory 12% 5% 5% 29% 12% 6% 6% 27% 25% 24% 25% 24% EAST Delaware, Maryland, New Jersey, North and South Carolina, Pennsylvania, Virginia MIDWEST Colorado Illinois Minnesota SOUTHEAST Alabama, Florida, Georgia, Mississippi, Tennessee SOUTH CENTRAL Louisiana Oklahoma Texas SOUTHWEST Arizona New Mexico WEST California, Hawaii, Nevada, Oregon, Utah, Washington As of or for the twelve month period ended March 31, 2018 Savannah, Georgia is included in the East Region; Atlanta and Augusta, Georgia are included in the Southeast Region 6
DIVERSE PRODUCT OFFERINGS AND PRICE POINTS Homes for entry level, move up, active adult and luxury buyers 27% 7% $500k $0 18% $200k $300k 20% $250k 28% Represents homes closed for the twelve months ended 3/31/18 7
FAMILY OF BRANDS FIRST TIME / MOVE UP ENTRY LEVEL LUXURY ACTIVE ADULT 79 markets 26 states ASP $323k 60 markets 21 states ASP $241k 36 markets 16 states ASP $578k 25 markets 14 states ASP $271k 3% 2% 3% 2% 6% 2% 36% Homes Sold 59% 38% Homes Closed 57% 30% Home Sales Revenue 62% Based on Q2 FY 2018 results 8
MANAGEMENT TENURE AND EXPERIENCE Executive team and region presidents 25 years Division presidents 14 years City managers over 10 years Average employee tenure 9
MARKET SHARE DOMINANCE D.R. Horton Share and Rankings in Largest U.S. Housing Markets Top 5 Markets Top 50 Markets 18% 50 16% 14% 40 12% 10% 30 36 40 8% 6% 20 28 4% 2% 0% DFW Houston Atlanta Phoenix Austin DHI market share Market share of highest ranking competitor 10 0 13 #1 Top 5 Top 10 Operate In Source: Builder magazine 2017 Local Leaders issue, rankings based on homes closed in calendar 2016 10
OPERATIONAL FOCUS 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
EMPHASIS ON RETURN ON INVENTORY (ROI) Steady improvement in Homebuilding ROI 20% 15% 15.4% 16.0% 16.6% 17.6% 10% 12.8% 5% 0% FY 2015 FY 2016 TTM 3/31/17 FY 2017 TTM 3/31/18 Homebuilding ROI is calculated as homebuilding pre tax income for the year divided by average homebuilding inventory. Average homebuilding inventory in the ROI calculation is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five. 12
BALANCED APPROACH Expect to generate positive cash flow from operations for the fourth consecutive year while growing revenues and replenishing land investments Consolidated Revenues Land Investment Homebuilding $16 $15.9 $16.3 $5 $12 $8 $10.8 $12.2 $14.1 $4 $3 $2 $2.2 $2.7 $3.5 ~$4.0 $4 $1 $0 FY 2015 FY 2016 FY 2017 FY 2018e $0 FY 2015 FY 2016 FY 2017 FY 2018e $ in billions Expect to generate positive cash flow from operations for the fourth consecutive year excluding Forestar 13
FY 2018 CAPITAL AND CASH FLOW PRIORITIES 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 1,000,000 shares during the six months ended 3/31/18 for $47.9 million Remaining Board authorization at 3/31/18 of $152.1 million 14
CONSOLIDATED PRE-TAX PROFIT MARGIN Consol. Rev $ $18.0 $16.0 $14.0 $12.0 $10.0 $8.0 10.4% $10.8 Expect consolidated pre tax profit margin to improve 70 to 90 basis points in FY 2018 11.1% $12.2 11.4% $14.1 12.1% 12.3% $15.9 $16.3 PTI % 13.0% 12.0% 11.0% 10.0% 9.0% $6.0 $4.0 8.0% $2.0 7.0% $0.0 FY 2015 FY 2016 FY 2017 FY 2018e Consol. Rev $ PTI % 6.0% $ in billions Consolidated pre tax profit margin shown as a % of consolidated revenues 15
FORESTAR GROUP ( FOR ) FOR, a majority owned subsidiary of DHI (as of 10/5/17), is a publicly traded land development company, with operations in 18 markets and 10 states The strategic relationship between DHI and FOR will significantly grow FOR into a large, national residential land development company, selling lots to DHI and other homebuilders Advances DHI strategy of increasing access to optioned land and lots to enhance efficiency and returns Over the next 3 to 5 years, DHI intends to reduce its ownership position and increase FOR s public float Effective 1/30/18, FOR s fiscal year end aligns with DHI s September 30 fiscal year Annual lot delivery and revenue expectations* Fiscal 2018: 1,200 lot deliveries and $90M of revenue Fiscal 2019: 4,000 lot deliveries and $300M to $350M of revenue Fiscal 2020: 10,000 lot deliveries and $700M to $800M of revenue Over the next three years, expect FOR s stabilized pre tax profit margin to be 10% to 12% Forestar is targeting a net debt to capital ratio of 40% *Forestar standalone 16
FORESTAR GROWTH TIMELINE FOR evaluating 38 primarily DHI sourced projects (closed on 21 as of 3/31/18) representing 15,000 lots Expect FOR to invest $400M in land acquisition and development and have a bank credit facility in place in FY18 Expect FOR to access the public markets for additional growth capital in FY19 Oct. 5, 2017 DHI acquisition date of 75% of o/s shares of FOR Feb. 2018 FOR strategic asset sale July 2018 DHI Q3 earnings release & call Sept. 30, 2018 DHI & FOR fiscal year end Sept. 30, 2019 Sept. 30, 2020 DHI to provide updated FOR guidance Expect FOR to deliver 1,200 lots and generate $90M of revenues in fiscal 2018 DHI does not expect FOR to have a material impact on its fiscal 2018 results Expect FOR to deliver 4,000 lots and generate $300M to $350M of revenues in FY19 Expect FOR to deliver 10,000 lots and generate $700M to $800M of revenues in FY20 Lot counts and dollar amounts are approximate Forestar standalone 17
FY 2018 EXPECTATIONS* Fiscal Year: Consolidated pre tax profit margin of 12.1% to 12.3% Consolidated revenues between $15.9 billion and $16.3 billion Homes closed between 51,500 homes and 52,500 homes Home sales gross margin in the range of 20.5% to 21.0%, with potential quarterly fluctuations that may be outside of this range Homebuilding SG&A expense of around 8.7% of homebuilding revenues Financial Services operating margin of approximately 30% Income tax rate of approximately 25%** Outstanding share count increase of less than 1% Cash flow from operations of at least $800 million (excluding Forestar) Third Quarter: Backlog conversion rate in the range of 87% to 89% Home sales gross margin of 20.5% to 21.0% Homebuilding SG&A expense in the range of 8.2% to 8.3% of homebuilding revenues Income tax rate between 25% and 26% *Based on the Company s results for 1H18 and market conditions as noted on its Q2 FY18 conference call on 4/26/18 and excluding Forestar **Excludes Q1 FY 2018 charge of $108.7 million to reduce net deferred tax assets as a result of the Tax Cuts and Jobs Act 18
THREE YEAR OUTLOOK* FY 18 FY 20: Increase consolidated revenues and pre tax profits at a double digit annual pace Improve return on inventory Increase optioned lots to 60% of total homebuilding land and lot position by 2020 Cash flow from operations growing to over $1.25 billion annually in 2020 Maintain or reduce debt and leverage Increase dividends Repurchase shares to offset dilution with a target to keep our outstanding share count flat by 2020 *Based on market conditions as noted on the Company s conference call on 4/26/18 and excluding Forestar 19
SECOND QUARTER DATA 20
Q2 FY 2018 HIGHLIGHTS Net income attributable to D.R. Horton increased 53% to $351.0 million or $0.91 per diluted share Consolidated pre tax income increased 26% to $444.8 million Consolidated pre tax profit margin improved 80 basis points to 11.7% Net homes sold, homes closed and homes in backlog increased by 13%, 15% and 8%, respectively 15,828 net homes sold and 12,281 homes closed Homes in inventory increased 8% to 29,400 homes Lots owned and controlled up 13% to 257,700; 52% optioned, up from 48% Repurchased 500,000 shares during the quarter for $22.5 million Comparisons to prior year quarter 21
SALES, CLOSINGS AND BACKLOG Net Sales Orders, Homes Closed and Homes in Backlog increased 13%, 15% and 8%, respectively, in Q2 FY 2018 compared to Q2 FY 2017 # of Homes 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 2Q FY 2016 2Q FY 2017 2Q FY 2018 22
INCOME STATEMENT 3 MONTHS ENDED 6 MONTHS ENDED YEAR ENDED 3/31/2018 3/31/2017 3/31/2018 3/31/2017 9/30/2017 Homes closed 12,281 10,685 23,069 20,089 45,751 Homebuilding Revenues: Home sales $ 3,672.1 $ 3,158.1 $ 6,856.6 $ 5,955.8 $ 13,653.2 Land/lot sales and other 13.6 6.3 50.0 34.7 88.3 3,685.7 3,164.4 6,906.6 5,990.5 13,741.5 Gross profit: Home sales 764.6 626.0 1,427.6 1,178.9 2,725.4 Land/lot sales and other 1.6 0.7 6.7 8.3 13.5 Inventory and land option charges (30.1) (12.2) (33.8) (14.5) (40.2) 736.1 614.5 1,400.5 1,172.7 2,698.7 SG&A 322.7 294.5 627.5 562.9 1,220.4 Interest and other (income) (2.6) (2.4) (16.8) (6.5) (11.0) Homebuilding pre tax income 416.0 322.4 789.8 616.3 1,489.3 Financial services, Forestar and other pre tax income 28.8 31.5 46.3 55.8 112.8 Pre tax income 444.8 353.9 836.1 672.1 1,602.1 Income tax expense 94.0 124.7 296.4 236.0 563.7 Net income 350.8 229.2 539.7 436.1 1,038.4 Net loss attributable to noncontrolling interests (0.2) 0.0 (0.6) 0.0 0.0 Net income attributable to D.R. Horton, Inc. $ 351.0 $ 229.2 $ 540.3 $ 436.1 $ 1,038.4 Diluted earnings per share $ 0.91 $ 0.60 $ 1.41 $ 1.15 $ 2.74 $ in millions except per share data 23
HOME SALES GROSS MARGIN Home sales gross margin of around 20% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 19.8% 20.2% 19.8% 19.8% 19.8% 20.3% 20.8% 20.8% FY15 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Shown as a % of the Company s homebuilding segment s home sales revenues Includes interest amortized to cost of sales Refer to slide 3 of the Company s Q2 FY18 Supplementary Data presentation for detailed components of home sales gross margin 24
HOMEBUILDING SG&A SG&A as a percentage of homebuilding revenues improved 50 basis points to 8.8% in Q2 FY 2018 Fiscal YTD 3/31 Second Fiscal Quarter HB Rev $ SG&A % HB Rev $ SG&A % $14,000 12% $14,000 12% $12,000 $12,000 $10,000 11% $10,000 11% $8,000 $6,000 10% $8,000 $6,000 10% $4,000 $2,000 $0 9.4% 9.1% 2017 2018 9% 8% $4,000 $2,000 $0 9.3% Q2 FY17 8.8% Q2 FY18 9% 8% HB Rev $ SG&A % HB Rev $ SG&A % $ in millions Shown as a % of homebuilding revenues 25
CONSOLIDATED PRE-TAX INCOME Consolidated pre tax profit margin improved 80 basis points to 11.7% in Q2 FY 2018 Fiscal YTD 3/31 Second Fiscal Quarter PTI $ PTI $ $1,800 $1,800 $1,600 $1,600 $1,400 $1,400 $1,200 $1,200 $1,000 $800 $600 $400 $200 10.9% $672.1 11.7% $836.1 $1,000 $800 $600 $400 $200 10.9% $353.9 11.7% $444.8 $0 2017 2018 $0 Q2 FY17 Q2 FY18 $ in millions Shown as a % of consolidated revenues 26
BALANCE SHEET 3/31/2018 9/30/2017 3/31/2017 Homebuilding Cash and cash equivalents $ 538.3 $ 982.3 $ 959.0 Inventories: Construction in progress and finished homes 5,119.6 4,606.0 4,642.6 Land inventories 4,720.0 4,631.1 4,395.5 9,839.6 9,237.1 9,038.1 Other assets 828.4 793.1 711.0 Deferred income taxes, net 219.9 365.0 451.6 Financial services, Forestar and other assets 1,791.9 807.1 761.4 Total assets $ 13,218.1 $ 12,184.6 $ 11,921.1 Homebuilding Notes payable $ 2,623.1 $ 2,451.6 $ 2,803.4 Other liabilities 1,536.8 1,508.7 1,428.0 Financial services, Forestar and other liabilities 686.3 476.7 469.6 Stockholders equity 8,198.9 7,747.1 7,219.6 Noncontrolling interests 173.0 0.5 0.5 Total equity 8,371.9 7,747.6 7,220.1 Total liabilities and equity $ 13,218.1 $ 12,184.6 $ 11,921.1 Debt to total capital homebuilding 24.2% 24.0% 28.0% Common shares outstanding 377.41 374.99 374.40 Book value per common share $ 21.72 $ 20.66 $ 19.23 $ in millions except per share metrics Homebuilding cash and cash equivalents presented above includes $9.4 million, $9.3 million and $11.1 million of restricted cash for the periods ended 3/31/18, 9/30/17 and 3/31/17, respectively. 27
HOMES IN INVENTORY Homes in inventory increased 8% from a year ago to support expected growth in homes closed 30,000 25,000 23,100 27,100 26,200 29,400 20,000 19,800 15,000 10,000 5,000 0 9/30/15 9/30/16 3/31/17 9/30/17 3/31/18 Models Sold Specs 28
HOMEBUILDING LAND AND LOT POSITION 300,000 Optioned lot position increased 23% from a year ago 48% owned / 52% optioned at 3/31/18 250,000 227,300 249,000 257,700 200,000 150,000 173,900 55,500 204,500 91,600 108,800 124,000 133,500 * 100,000 50,000 118,400 112,900 118,500 125,000 124,200 0 9/30/15 9/30/16 3/31/17 9/30/17 3/31/18 Optioned Owned *Includes 8,700 lots owned or controlled by FOR that DHI has under contract or the right of first offer or refusal to purchase 29
HOMEBUILDING PUBLIC DEBT MATURITIES BY YEAR $800 $700 $600 $500 $500 $500 $700 5.750% $400 $300 $200 $400 $350 $100 $0 3.750% 4.000% 2.550% 4.375% 4.750% FY 19 FY 20 FY 21 FY 22 FY 23 $ in millions 30