10-QPeriod: Q3 FY2020

HORTON D R INC /DE/ Quarterly Report for Q3 Ended Jun 30, 2020

Filed July 30, 2020For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported strong financial performance for the nine months ended June 30, 2020, with consolidated revenues increasing 11% year-over-year to $13.9 billion. Net income attributable to D.R. Horton, Inc. saw a significant jump of 39% to $1.5 billion, with diluted earnings per share rising to $4.17. The company's homebuilding segment demonstrated robust growth, driven by a 10% increase in homes closed and a 38% rise in net sales orders for the third quarter, indicating strong demand despite the ongoing economic uncertainties related to the COVID-19 pandemic. The company's financial services segment also experienced revenue growth of 19%. The company maintained a strong balance sheet and liquidity position, with $2.4 billion in cash and cash equivalents at the end of the period. DHI's strategy to focus on increasing the portion of its land and finished lot pipeline controlled through purchase contracts, leveraging its relationship with Forestar, has proven effective. Despite the challenges posed by the pandemic, DHI's operational resilience, including its designation as an essential business in most operating areas, allowed it to navigate disruptions and capitalize on resurgent demand in May and June.

Financial Highlights

38 data points
Beta

Revenue

$5.39B

24.2% Gross Margin

Net Income

$632.90M

11.7% Net Margin

EPS (Diluted)

$1.72

Total Assets

$17.97B

Cash & Equivalents

$2.37B

Free Cash Flow

$964.80M

Financial Statements
Beta
Revenue$5.39B
Cost of Revenue$4.08B
Gross Profit$1.31B
SG&A Expenses$527.50M
Net Income$632.90M
EPS (Basic)$1.73
EPS (Diluted)$1.72
Shares Outstanding (Basic)363.80M
Shares Outstanding (Diluted)367.70M

Key Highlights

  • 1Consolidated revenues increased 11% to $13.9 billion for the nine months ended June 30, 2020.
  • 2Net income attributable to D.R. Horton, Inc. rose 39% to $1.5 billion, with diluted EPS of $4.17.
  • 3Homebuilding revenues increased 10% to $5.2 billion in the third quarter, driven by a 10% increase in homes closed.
  • 4Net sales orders for homebuilding increased significantly by 38% in the third quarter, reflecting strong consumer demand.
  • 5The financial services segment saw revenues increase by 19% for the nine months ended June 30, 2020.
  • 6The company ended the period with a strong cash position of $2.4 billion.
  • 7Home sales gross margin improved to 21.6% in the third quarter, up from 20.3% in the prior year.

Frequently Asked Questions

While the COVID-19 pandemic caused initial disruptions in late March and April 2020, leading to increased cancellations and decreased sales orders, D.R. Horton's business, largely considered essential, continued operations. Demand rebounded strongly in May and June, with net sales orders increasing over 50% year-over-year in those months, driven by lower interest rates and limited housing supply. The company maintained operational protocols to comply with health and safety standards and believes its strong balance sheet and liquidity provide flexibility to navigate ongoing uncertainties.

D.R. Horton is focused on increasing the portion of its land and finished lot pipeline controlled through purchase contracts. This strategy is enhanced by its relationship with Forestar, its majority-owned lot development company. As of June 30, 2020, lots controlled under purchase contracts represented 66% of the total lots owned and controlled, up from 60% at September 30, 2019. This approach aims to optimize returns and cash flows while managing capital investment.

The financial services segment, primarily DHI Mortgage and its subsidiary title companies, experienced a 19% increase in revenues to $364.0 million for the nine months ended June 30, 2020. Financial services pre-tax income rose to $124.0 million from $105.6 million in the prior year period. The segment saw a higher percentage of D.R. Horton's home closings financed by DHI Mortgage (68% vs. 56% in the prior year), partly due to programs offering below-market interest rates and increased efficiencies.

The company faces several risks, including the ongoing impact of the COVID-19 pandemic on the economy, consumer confidence, and the housing market. Other risks include the cyclical nature of the homebuilding industry, potential disruptions in credit and public capital markets, availability of mortgage financing, risks associated with inventory management, the ability to execute growth strategies, interest rate fluctuations, warranty and construction defect claims, and supply chain disruptions for land, materials, and labor.