Q2 F 2 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 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. Q2 FY2015 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 2014 2 Twelve months ended March 31, 2015 3 As of March 31, 2015 Q2 FY2015 4
Geographic Diversification 79 Markets | 27 States HB Revenue (TTM Ended 3/31/15) East 13% West Midwest 25% 6% Southwest 3% South Central 25% Southeast 28% East Inventory 11% (as of 3/31/15) Region States Covered Midwest West 6% 28% 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 26% Q2 FY2015 5
Broad Range of Product Offerings Homes for entry-level, move-up and luxury buyers Under $500k+ $150k $400k to $500k $151k to $300k to $200k $400k $250k to $300k $200k to $250k 53% of closings < $250,000 in Q2 FY15, down from 56% in Q2 FY14 Revenues from homes > $500,000 were 15% of home sales revenues in Q2 FY15 flat with Q2 FY14 Q2 FY2015 6
Competitive Advantage Average employee tenure: Region Presidents – over 20 years Division Presidents – 15 years City Managers – over 10 years 10 Q2 FY2015 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 Q2 FY2015 8
Emerald Homes Higher-end move-up and luxury buyer Introduced in 2013 41 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 Q2 FY2015 9
Express Homes Targeted at the true entry-level buyer Introduced in Spring 2014 44 markets and 13 states $151k to $200k 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 Q2 FY2015 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 Q2 FY2015 11
Targeted Market Consolidations Completed four acquisitions since fiscal 2012 $151k Company Date Acquired Market(s) Amount Paid to $200k 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 Q2 FY2015 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 Q2 FY2015 13
Sales, Closings & Backlog – Q2 FY15 Net Sales Orders, Homes Closed and Homes in Backlog increased 30%, 33% and 21%, respectively, in Q2 of FY15 compared to Q2 of FY14 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Sales Closings Backlog 2Q FY13 2Q FY14 2Q FY15 Q2 FY2015 14
Income Statement 6 Months Ended Fiscal Year Ended 3/31/2015 3/31/2014 9/30/2014 9/30/2013 Homes closed 16,216 12,382 28,670 24,155 Revenues: Home sales $ 4,559.4 $ 3,310.8 $ 7,804.7 $ 6,024.8 Land/lot sales & other 32.1 21.5 53.8 61.1 4,591.5 3,332.3 7,858.5 6,085.9 Gross Profit: Home sales 899.5 741.3 1,665.6 1,253.3 Land/lot sales & other 4.1 4.6 9.5 10.2 Inventory & land option charges (18.6) (7.1) (85.2) (31.1) 885.0 738.8 1,589.9 1,232.4 SG&A 480.4 371.3 834.2 649.9 Interest and other (income) (10.1) (6.1) (13.1) (9.8) Homebuilding pre-tax income 414.7 373.6 768.8 592.3 Financial Services pre-tax income 36.1 18.0 45.4 65.5 Pre-tax income 450.8 391.6 814.2 657.8 Income tax expense 160.4 137.5 280.7 195.1 Net income $ 290.4 $ 254.1 $ 533.5 $ 462.7 $ in millions Q2 FY2015 15
Home Sales Gross Margin Homes sales gross margin of around 20% in a stable housing market 25% 20% 21.4% 21.9% 22.3% 22.5% 20.7% 20.5% 19.8% 19.7% 20.4% 15% 18.8% 10% 17.7% 16.1% 5% 0% FY11 FY12 1Q 2Q 3Q 4Q Q1 Q2 Q3 Q4 Q1 Q2 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 Shown as a % of home sales revenues Includes interest amortized to cost of sales Q2 FY2015 16
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 $ $500 10.5% $250 10.4% $400 $200 11.1% 11.1% $300 $150 $480.4 $242.4 $200 $100 $187.9 $371.3 $100 $50 $0 $0 Q2 FY14 Q2 FY15 2014 2015 Shown as a % of homebuilding revenues $ in millions Q2 FY2015 17
Homebuilding Pre-tax Income Homebuilding pre-tax income margin in Q2 2015 was 8.9% FYTD 3/31 Second Fiscal Quarter 2015 PTI $ PTI $ $500 $500 9.0% $400 $400 11.2% $300 $300 8.9% 11.3% $414.7 $200 $200 $373.6 $208.6 $191.7 $100 $100 $0 $0 Q2 FY14 Q2 FY15 2014 2015 Shown as a % of homebuilding revenues $ in millions Q2 FY2015 18
Balance Sheet 3/31/15 9/30/14 3/31/14 HB cash and cash equivalents $ 665.8 $ 632.5 $ 972.8 Restricted cash 10.4 10.0 79.8 Inventories 8,136.9 7,700.5 6,783.6 Deferred income taxes, net 547.7 565.0 569.8 Other assets 1,352.3 1,294.5 966.8 Total $ 10,713.1 $ 10,202.5 $ 9,372.8 Notes payable - HB $ 3,548.0 $ 3,323.6 $ 3,638.3 Other liabilities 1,744.1 1,759.2 1,384.9 Equity 5,421.0 5,119.7 4,349.6 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 Q2 FY2015 19
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