10-QPeriod: Q3 FY2018

HORTON D R INC /DE/ Quarterly Report for Q3 Ended Jun 30, 2018

Filed July 27, 2018For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported strong financial results for the nine months ended June 30, 2018, demonstrating significant growth in its core homebuilding operations. Revenues increased by 16% year-over-year, driven by a 14% rise in homes closed and a 14% increase in net sales orders. This top-line growth translated into a substantial improvement in profitability, with net income attributable to D.R. Horton increasing by 37% to $1.0 billion. The company's strategic acquisition of Forestar Group Inc. in October 2017 appears to be integrating well, enhancing land and lot access. DHI also maintained a healthy balance sheet with a strong liquidity position and controlled debt levels, indicating a solid financial foundation amidst a recovering housing market. Key to the improved performance was a notable increase in the home sales gross margin, rising by 140 basis points to 21.2% for the nine-month period. This margin expansion, combined with disciplined control over selling, general, and administrative (SG&A) expenses, led to a significant improvement in pre-tax income as a percentage of revenues. The company's broad geographic diversification and varied product offerings, particularly in the affordable entry-level segment, continue to resonate with consumers, supporting robust demand across most of its markets. DHI's financial services segment also performed steadily, contributing to overall financial strength.

Financial Highlights

38 data points
Beta

Revenue

$4.44B

23.4% Gross Margin

Net Income

$453.70M

10.2% Net Margin

EPS (Diluted)

$1.18

Total Assets

$13.59B

Cash & Equivalents

$1.18B

Free Cash Flow

$390.80M

Financial Statements
Beta
Revenue$4.44B
Cost of Revenue$3.40B
Gross Profit$1.04B
SG&A Expenses$434.90M
Interest Expense$0
Net Income$453.70M
EPS (Basic)$1.20
EPS (Diluted)$1.18
Shares Outstanding (Basic)377.40M
Shares Outstanding (Diluted)383.40M

Key Highlights

  • 1Homebuilding revenues surged by 16% to $11.2 billion for the nine months ended June 30, 2018, compared to the prior year.
  • 2Net income attributable to D.R. Horton increased by 37% to $1.0 billion for the nine months ended June 30, 2018.
  • 3Home sales gross margin improved by 140 basis points to 21.2% for the nine-month period, reflecting effective cost management and pricing.
  • 4The company's acquisition of Forestar Group Inc. is supporting its strategy of increasing access to optioned land and lot positions.
  • 5Diluted earnings per share grew to $2.59 for the nine-month period, up from $1.92 in the prior year.
  • 6Net cash provided by operating activities was $306.5 million for the nine months ended June 30, 2018, a significant improvement from a cash usage of $185.7 million in the prior year period.
  • 7Homebuilding debt to total capital remained well-controlled at 22.2% as of June 30, 2018.

Frequently Asked Questions

D.R. Horton experienced significant growth, with homebuilding revenues increasing by 16% to $11.2 billion and net income attributable to the company rising by 37% to $1.0 billion for the nine months ended June 30, 2018. This was driven by a 14% increase in homes closed and a 14% rise in net sales orders, alongside an improvement in home sales gross margin.

The acquisition of Forestar Group Inc. in October 2017 appears to be a strategic success, enhancing D.R. Horton's access to optioned land and lot positions, which is key to its strategy for operational efficiency and improved returns. Forestar contributed $77.0 million in revenues and $19.1 million in pre-tax income (from the acquisition date) during the nine-month period, with a significant portion of its lots under contract or subject to a right of first offer with D.R. Horton.

D.R. Horton maintains a strong focus on capital resources and liquidity. As of June 30, 2018, the company's homebuilding debt to total capital ratio was a healthy 22.2%, well below its target of 35%. The company has a substantial revolving credit facility and sufficient cash on hand, indicating a strong liquidity position to fund operations and growth initiatives.

The outlook appears positive, supported by strong demand for new homes, particularly in the affordable entry-level segment, and limited new home supply across most of its markets. The company's broad geographic footprint and diverse product offerings position it well to capitalize on market conditions. However, the company acknowledges that future performance is dependent on continued economic improvement, stable mortgage interest rates, and manageable construction costs.