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Q1 FY2015

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  • Q1 FY2015

  • Q1 FY2015

    Forward-Looking StatementsThis presentation may include “forward-looking statements” as defined by the Private Securities Litigation Reform Actof 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is noassurance that actual outcomes will not be materially different. Factors that may cause the actual results to bematerially 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 thehomebuilding 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 mortgagefinancing and the liquidity provided by government-sponsored enterprises, the effects of government programs, adecrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates; the risksassociated with our land and lot inventory; home warranty and construction defect claims; supply shortages and otherrisks 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 ofgovernmental regulation on our financial services operations; our substantial debt and our ability to comply withrelated debt covenants, restrictions and limitations; competitive conditions within the homebuilding and financialservices industries; our ability to effect our growth strategies or acquisitions successfully; our ability to realize the fullamount of our deferred income tax assets; the effects of the loss of key personnel; the effects of negative publicity; andinformation technology failures and data security breaches. Additional information about issues that could lead tomaterial changes in performance is contained in D.R. Horton’s annual report on Form 10-K and our most recentquarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.

    3

  • Q1 FY2015

    D.R. Horton, Inc.

    Traded on NYSE as DHI

    #1 builder for 13 consecutive years1

    $8.7 billion in annual revenues2

    30,455 in annual homes closed2

    $10.3 billion of total assets3

    $5.3 billion of stockholders’ equity3

    1 Based on public builders reported closings as of January 26, 20152 Twelve months ended December 31, 20143 As of December 31, 2014

    4

  • Q1 FY2015

    Geographic Diversification

    79 Markets | 27 States

    Region States Covered

    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 Arizona, New Mexico

    West California, Hawaii, Nevada, Oregon, Utah, Washington

    South Central

    25%

    Southwest3%

    West25%

    HB Revenue(TTM Ended 12/31/14)

    Midwest7%

    South Central

    24%Southeast26%

    Inventory (as of 12/31/14)

    East13%

    Midwest6%

    Southeast28%

    West28%

    Southwest4%

    East11%

    5

  • Q1 FY2015

    Broad Range of Product Offerings

    Homes for entry-level, move-up and luxury buyers

    53% of closings < $250,000 in Q1 FY15, down from 58% in Q1 FY14

    Revenues from homes > $500,000 increased to 17% of home sales revenues in Q1 FY15 compared to 14% in Q1 FY14

    Under $150k

    $200k to $250k

    $250k to $300k

    $300k to $400k

    $400k to $500k

    $500k+

    $151k to $200k

    6

  • Q1 FY2015

    D.R. Horton

    The Heart of our Business

    79 markets and 27 states

    In the first quarter, accounted for:

    84% of homes sold

    87% of homes closed

    88% of home sales revenue

    Q1 Average Closing Price: $283,000

    Reported metrics for D.R. Horton include our Breland Homes and Crown Communities operations

    7

  • Q1 FY2015

    Emerald Homes

    Higher-end move-up and luxury buyer

    Introduced in 2013

    35 markets and 15 states

    In the first quarter, accounted for:

    3% of homes sold

    3% of homes closed

    6% of home sales revenue

    Q1 Average Closing Price: $660,000

    Higher margin, slower absorption

    8

  • Q1 FY2015

    Express Homes

    Targeted at the true entry-level buyer

    $151k to $200k

    Introduced in Spring 2014

    38 markets and 11 states

    In the first quarter, accounted for:

    13% of homes sold

    10% of homes closed

    6% of home sales revenue

    Q1 Average Closing Price: $169,000

    Higher absorption, lower margin

    Reported metrics for Express include our Regent Homes operations

    9

  • Q1 FY2015

    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

    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

  • Q1 FY2015

    Q1 FY 2015 Highlights

    The value of net homes sold, homes closed and homes in backlog increased by 40%, 37% and 29%, respectively

    7,370 net homes sold and 7,973 homes closed 9,285 homes in backlog at 12/31/14 Consolidated pre-tax income increased 16% to $220.7

    million Consolidated pre-tax income margin was 9.6% Net income increased 16% to $142.5 million

    11

  • Q1 FY2015

    Sales, Closings & Backlog – Q1 FY15

    Net Sales Orders, Homes Closed and Homes in Backlog increased 35%, 29% and 21%, respectively, in Q1 of FY15 compared to Q1 of FY14

    01,0002,0003,0004,0005,0006,0007,0008,0009,000

    10,000

    Sales Closings Backlog

    1Q FY13 1Q FY14 1Q FY15

    12

  • Q1 FY2015

    Income Statement

    12/31/2014 12/31/2013 9/30/2014 9/30/2013

    Homes closed 7,973 6,188 28,670 24,155

    Revenues:Home sales 2,240.7$ 1,630.8$ 7,804.7$ 6,024.8$ Land/lot sales & other 12.3 4.8 53.8 61.1

    2,253.0 1,635.6 7,858.5 6,085.9 Gross Profit:

    Home sales 442.6 364.1 1,665.6 1,253.3 Land/lot sales & other 2.0 0.5 9.5 10.2 Inventory & land option charges (6.0) (2.6) (85.2) (31.1)

    438.6 362.0 1,589.9 1,232.4 SG&A 238.0 183.4 834.2 649.9 Interest and other (income) (5.5) (3.3) (13.1) (9.8) Homebuilding pre-tax income 206.1 181.9 768.8 592.3 Financial Services pre-tax income 14.6 7.8 45.4 65.5 Pre-tax income 220.7 189.7 814.2 657.8 Income tax expense 78.2 66.5 280.7 195.1 Net income 142.5$ 123.2$ 533.5$ 462.7$

    $ in millions

    3 Months Ended Fiscal Year Ended

    13

  • Q1 FY2015

    Home Sales Gross Margin

    Shown as a % of home sales revenuesIncludes interest amortized to cost of sales

    0%

    5%

    10%

    15%

    20%

    25%

    FY11 FY12 1QFY13

    2QFY13

    3QFY13

    4QFY13

    Q1FY14

    Q2FY14

    Q3FY14

    Q4FY14

    Q1FY15

    16.1%17.7%

    18.8%

    20.4%

    21.4% 21.9% 22.3% 22.5% 20.7% 20.5% 19.8%

    Homes sales gross margin of around 20% in a stable housing market

    14

  • Q1 FY2015

    Homebuilding SG&A

    Long-term annual SG&A goal = 10% of homebuilding revenuesImproved 60 basis points year-over-year in Q1 FY2015

    Fiscal Year 2014 First Fiscal Quarter 2015

    $0

    $200

    $400

    $600

    $800

    $1,000

    2013 2014

    $649.9$834.2

    10.7%

    10.6%

    $0

    $50

    $100

    $150

    $200

    $250

    Q1 FY14 Q1 FY15

    $183.4

    $238.0

    10.6%

    SG&A $ SG&A $

    11.2%

    Shown as a % of homebuilding revenues$ in millions

    15

  • Q1 FY2015

    Homebuilding Pre-tax Income

    Homebuilding pre-tax income margin in Q1 2015 was 9.1%

    Fiscal Year 2014 First Fiscal Quarter 2015

    $0

    $200

    $400

    $600

    $800

    2013 2014

    $592.3$768.8

    9.7%

    9.8%

    PTI $

    $160

    $170

    $180

    $190

    $200

    $210

    Q1 FY14 Q1 FY15

    $181.9

    $206.111.1%

    9.1%

    PTI $

    Shown as a % of homebuilding revenues$ in millions

    16

  • Q1 FY2015

    Balance Sheet

    12/31/14 9/30/14 12/31/13

    HB cash and cash equivalents 517.7$ 632.5$ 801.1$ Restricted cash 9.6 10.0 81.1 Inventories 7,989.3 7,700.5 6,496.1 Deferred income taxes, net 552.7 565.0 578.5 Other assets 1,269.4 1,294.5 970.4 Total 10,338.7$ 10,202.5$ 8,927.2$

    Notes payable - HB 3,403.1$ 3,323.6$ 3,276.1$ Other liabilities 1,671.8 1,759.2 1,451.2 Equity 5,263.8 5,119.7 4,199.9 Total 10,338.7$ 10,202.5$ 8,927.2$

    Homebuilding LeverageGross 39.3% 39.4% 43.8%Net of cash 35.4% 34.5% 37.1%

    Book Value/Share $14.40 $14.03 $12.97

    $ in millions

    17

  • Q1 FY2015

    Homes in Inventory

    Growing housing inventory to meet increasing sales pace

    0

    2,000

    4,000

    6,000

    8,000

    10,000

    12,000

    14,000

    16,000

    18,000

    20,000

    22,000

    9/30/11 9/30/12 9/30/13 12/31/13 9/30/14 12/31/14

    Models Sold Specs

    10,500

    13,000

    17,000 16,800

    20,600 21,300

    18

  • Q1 FY2015

    Robust Lot Position

    71,000 of our total lots are finished at 12/31/14

    85,800 94,600

    126,600 125,800 124,600 124,500

    26,900

    58,100

    54,300 49,000 58,900 60,200

    0

    20,000

    40,000

    60,000

    80,000

    100,000

    120,000

    140,000

    160,000

    180,000

    200,000

    9/30/11 9/30/12 9/30/13 12/31/13 9/30/14 12/31/14

    Optioned Owned

    112,700

    152,700

    180,900174,800

    183,500 184,700

    19

  • Q1 FY2015

    Inactive Land Held for Development

    “Mothballed” lot count down 36% from 9/30/13

    $699.2

    $628.3

    $450.2

    $332.8$304.3

    43,100

    39,400

    21,700

    14,000 13,900

    0

    5000

    10000

    15000

    20000

    25000

    30000

    35000

    40000

    45000

    50000

    $0

    $100

    $200

    $300

    $400

    $500

    $600

    $700

    $800

    9/30/11 9/30/12 9/30/13 9/30/14 12/31/14Balance Lots Held

    Land held for development is shown as separate line item on face of balance sheet$ in millions

    20

  • Q1 FY2015

    Public Debt Maturities by Year

    Pro-forma balance of public notes o/s of $3.3b (for Feb issuance of $500m 4.0% notes due 2020 and payment of $158m notes at maturity).$ in millions

    $0

    $100

    $200

    $300

    $400

    $500

    $600

    $700

    $800

    FY 16 FY 17 FY 18 FY 19 FY 20 FY 22 FY 23

    4.750%

    $350

    $500

    $400$350

    $543$500

    $350$400

    5.625%

    6.500%

    4.750% 3.625% 3.750% 4.375%

    $700

    5.750%

    As of February 17, 2015

    4.000%

    21

  • Q1 FY2015

    FY 2015 Expectations*Fiscal Year:

    Closings between 34,500 and 37,500 and consolidated revenues between $9.5 billion and $10.5 billion

    Home sales gross margin of 19.5% to 20.5% with potential quarterly fluctuations outside of this range

    Homebuilding SG&A expense of 10.0% to 10.3% of homebuilding revenues for full year

    Financial Services operating margin of 25% to 30% 2015 income tax rate between 35% and 36% Diluted share count of approximately 370 million shares

    Second Quarter: Backlog conversion rate of between 81% and 85% Home sales gross margin in the range of 19.5% to 20.0% Homebuilding SG&A expense in the range of 10.6% to 10.8% of homebuilding

    revenues

    *Based on the relatively stable market conditions noted on the Company’s conference call on 1/26/15.

    22

    Slide Number 1Slide Number 2Forward-Looking StatementsD.R. Horton, Inc.Geographic DiversificationBroad Range of Product OfferingsD.R. HortonEmerald HomesExpress HomesOperational FocusQ1 FY 2015 HighlightsSales, Closings & Backlog – Q1 FY15Income StatementHome Sales Gross MarginHomebuilding SG&AHomebuilding Pre-tax IncomeBalance SheetHomes in InventoryRobust Lot PositionInactive Land Held for DevelopmentPublic Debt Maturities by YearFY 2015 Expectations*