Investor Presentation 1 Q2 FY 2018
D . R . H O R T O N , I N C . 2 By closings volume for calendar years 2002 to 2017
F O R W A R D - L O O K I N G S T A T E M E N T S 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
T R A D E D O N N Y S E A S D H I D . R . H O R T O N , I N C . 48,731 $15.1 billion $1.8 billion Annual homes closed Annual consolidated revenues Annual pre‐tax income $630.3 million $8.2 billion $21.72 Cash flow from operations* Stockholders’ equity Book value per common share As of or for the twelve‐month period ended March 31, 2018 4 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
7 9 M A R K E T S | 2 6 S TAT E S B R O A D N A T I O N A L F O O T P R I N T 5
7 9 M A R K E T S | 2 6 S TAT E S B R O A D N A T I O N A L F O O T P R I N T HB Revenue Inventory 5% 5% 6% 6% 27% 29% 12% 12% 25% 25% 24% 24% EAST MIDWEST SOUTHEAST SOUTH CENTRAL SOUTHWEST WEST Louisiana Arizona Delaware, Maryland, Colorado Alabama, Florida, California, Hawaii, New Jersey, North and Illinois Georgia, Mississippi, Oklahoma New Mexico Nevada, Oregon, Utah, Minnesota Tennessee Texas South Carolina, Washington Pennsylvania, Virginia 6 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
D I V E R S E P R O D U C T O F F E R I N G S A N D P R I C E P O I N T S Homes for entry‐level, move‐up, active adult and luxury buyers 7% 18% $0 $500k 27% $200k $300k 28% $250k 20% 7 Represents homes closed for the twelve months ended 3/31/18
F A M I L Y O F B R A N D S ENTRY LEVEL FIRST TIME / MOVE UP LUXURY ACTIVE ADULT 36 markets | 16 states 25 markets | 14 states 79 markets | 26 states 60 markets | 21 states ASP $578k ASP $271k ASP $323k ASP $241k 3% 2% 2% 3% 2% 6% 36% Homes Home Sales Homes 30% 38% Closed Revenue Sold 57% 62% 59% 8 Based on Q2 FY 2018 results
M A N A G E M E N T T E N U R E A N D E X P E R I E N C E Executive team and region presidents 25 years Division presidents 14 years City managers over 10 years 9 Average employee tenure
M A R K E T S H A R E D O M I N A N C E D.R. Horton Share and Rankings in Largest U.S. Housing Markets Top 5 Markets Top 50 Markets 18% 50 16% 40 14% 40 12% 36 30 10% 28 8% 20 6% 4% 10 13 2% 0% 0 DFW Houston Atlanta Phoenix Austin #1 Top 5 Top 10 Operate In DHI market share Market share of highest ranking competitor 10 10 Source: Builder magazine ‐ 2017 Local Leaders issue, rankings based on homes closed in calendar 2016
O P E R A T I O N A L F O C U S • 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 11
E M P H A S I S O N R E T U R N O N I N V E N T O R Y ( R O I ) Steady improvement in Homebuilding ROI 20% 17.6% 16.6% 15% 16.0% 15.4% 12.8% 10% 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 12 12 ROI calculation is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.
B A L A N C E D A P P R O A C H 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 $15.9 – $16.3 $16 $5 ~$4.0 $14.1 $4 $12 $12.2 $3.5 $10.8 $3 $8 $2.7 $2 $2.2 $4 $1 $0 $0 FY 2015 FY 2016 FY 2017 FY 2018e FY 2015 FY 2016 FY 2017 FY 2018e 13 13 $ in billions Expect to generate positive cash flow from operations for the fourth consecutive year excluding Forestar
F Y 2 0 1 8 C A P I T A L A N D C A S H F L O W P R I O R I T I E S • 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 14
C O N S O L I D A T E D P R E - T A X P R O F I T M A R G I N Expect consolidated pre‐tax profit margin to improve 70 Consol. Rev $ PTI % to 90 basis points in FY 2018 $18.0 13.0% 12.1% ‐ 12.3% $16.0 12.0% 11.4% 11.1% $15.9 – $16.3 $14.0 11.0% 10.4% $12.0 $14.1 10.0% $10.0 $12.2 $10.8 $8.0 9.0% $6.0 8.0% $4.0 7.0% $2.0 $0.0 6.0% FY 2015 FY 2016 FY 2017 FY 2018e Consol. Rev $ PTI % $ in billions 15 15 Consolidated pre‐tax profit margin shown as a % of consolidated revenues
F O R E S T A R G R O U P ( “ F O R ” ) • 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% 16 16 *Expectations are for Forestar’s standalone operations
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