8th Annual J.P. Morgan Homebuilding & Building …investor.drhorton.com/~/media/Files/D/D-R-Horton-IR/reports-and... · 8th Annual J.P. Morgan Homebuilding & Building Products Conference

8th Annual J.P. Morgan Homebuilding & Building Products Conference

May 19, 2015

J.P. Morgan Homebuilding and Building Products Conference

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 actualoutcomes will not be materially different. Factors that may cause the actual results to be materially different from the futureresults expressed by the forward-looking statements include, but are not limited to: potential deterioration in homebuildingindustry 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 increaseour costs of capital; reductions in the availability of mortgage financing and the liquidity provided by government-sponsoredenterprises, the effects of government programs, a decrease in our ability to sell mortgage loans on attractive terms or anincrease in mortgage interest rates; the risks associated with our land and lot inventory; home warranty and construction defectclaims; supply shortages and other risks of acquiring land, building materials and skilled labor; reductions in the availability ofperformance bonds; increases in the costs of owning a home; the impact of an inflationary, deflationary or higher interest rateenvironment; the effects of governmental regulations and environmental matters on our homebuilding operations; the effectsof governmental regulation on our financial services operations; our substantial debt and our ability to comply with related debtcovenants, restrictions and limitations; competitive conditions within the homebuilding and financial services industries; ourability to effect our growth strategies or acquisitions successfully; our ability to realize the full amount of our deferred incometax assets; the effects of the loss of key personnel; the effects of negative publicity; and information technology failures anddata security breaches. Additional information about issues that could lead to material changes in performance is contained inD.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 theSecurities and Exchange Commission.

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D.R. Horton, Inc.

Traded on NYSE as DHI

#1 builder for 13 consecutive years1

$9.3 billion in annual revenues2

32,504 in annual homes closed2

$10.7 billion of total assets3

$5.4 billion of stockholders’ equity3

1 By closings volume for calendar years 2002 to 20142 Twelve months ended March 31, 20153 As of March 31, 2015

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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 3/31/15)

Midwest6%

South Central

25%Southeast26%

Inventory (as of 3/31/15)

East13%

Midwest6%

Southeast28%

West28%

Southwest4%

East11%

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Broad Range of Product Offerings

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

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

Under $150k

$200k to $250k

$250k to $300k

$300k to $400k

$400k to $500k

$500k+

$500k+

$151k to $200k

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Competitive Advantage

Average employee tenure:

Region Presidents – over 20 years

Division Presidents – 15 years

City Managers – over 10 years

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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

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Emerald Homes

Higher-end move-up and luxury buyer

Introduced in 2013



3% of homes sold

2% of homes closed



Higher margin, slower absorption

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Express Homes

Targeted at the true entry-level buyer

$151k to $200k

Introduced in Spring 2014



18% of homes sold

13% of homes closed



Higher absorption, lower margin

Reported metrics for Express include our Regent Homes operations

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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

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Targeted Market Consolidations

Completed four acquisitions since fiscal 2012

$151k to $200kCompany Date Acquired Market(s) Amount Paid

Breland Homes Aug-12 Huntsville, Mobile and Baldwin Co., AL & MS gulf coast $105.9 millionRegent Homes Oct-13 Charlotte, Greensboro & Winston-Salem, North Carolina $34.5 millionCrown Communities May-14 Georgia, South Carolina & eastern Alabama $209.6 millionPacific Ridge Homes Apr-15 Seattle, Washington $72 million

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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

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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

Q2FY15

16.1%17.7%

18.8%

20.4%

21.4% 21.9% 22.3% 22.5% 20.7% 20.5% 19.8% 19.7%

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

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Homebuilding SG&A

Long-term annual SG&A goal = 10% of homebuilding revenuesImproved 70 basis points year-over-year in Q2 FY2015

FYTD 3/31 Second Fiscal Quarter 2015

$0

$100

$200

$300

$400

$500

2014 2015

$371.3

$480.4

11.1%

10.5%

$0

$50

$100

$150

$200

$250

Q2 FY14 Q2 FY15

$187.9

$242.4

10.4%SG&A $ SG&A $

11.1%

Shown as a % of homebuilding revenues$ in millions

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Homebuilding Pre-tax Income

Homebuilding pre-tax income margin in Q2 2015 was 8.9%

FYTD 3/31 Second Fiscal Quarter 2015

$0

$100

$200

$300

$400

$500

2014 2015

$373.6$414.7

11.2%9.0%

PTI $

$180

$185

$190

$195

$200

$205

$210

Q2 FY14 Q2 FY15

$191.7

$208.611.3%

8.9%

PTI $

Shown as a % of homebuilding revenues$ in millions

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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 LeverageGross 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

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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 3/31/14 9/30/14 3/31/15

Models Sold Specs

10,500

13,000

17,000

20,60021,300

17,600

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Robust Lot Position

64,000 of our total lots are finished at 3/31/15

85,800 94,600

126,600 124,700 124,600 121,700

26,900

58,100

54,30046,900

58,900 55,500

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 3/31/14 9/30/14 3/31/15

Optioned Owned

112,700

152,700

180,900 183,500171,600 177,200

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FY 2015 Expectations*Fiscal Year:

Closings between 35,500 and 37,500 and consolidated revenues between $9.8 billion and $10.5 billion

Home sales gross margin of 19.5% to 20.0% with potential quarterly fluctuations outside of this range

Homebuilding SG&A expense of 9.9% to 10.2% of homebuilding revenues for full year

Financial Services operating margin of 30% to 33%

2015 income tax rate between 35% and 36%

Diluted share count of approximately 370 million shares

Third Quarter:

Backlog conversion rate of 78% to 80%

Home sales gross margin in the range of 19.5% to 20.0%

Homebuilding SG&A expense in the range of 9.9% to 10.2% of homebuilding revenues

*Based on the relatively stable market conditions noted on the Company’s conference call on 4/22/15.

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Documents

8th Annual J.P. Morgan Homebuilding & Building …investor.drhorton.com/~/media/Files/D/D-R-Horton-IR/reports-and... · 8th Annual J.P. Morgan Homebuilding & Building Products Conference