Taylor Morrison(TMHC) - 2024 Q3 - Quarterly Report

Part I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Taylor Morrison Home Corporation, including balance sheets, statements of operations, equity, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $9.30 billion as of September 30, 2024, from $8.67 billion at year-end 2023, primarily driven by a significant rise in real estate inventory from $5.55 billion to $6.44 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total cash | $257,293 | $807,099 | | Total real estate inventory | $6,440,525 | $5,545,446 | | Total assets | $9,300,436 | $8,672,087 | | Liabilities & Equity | | | | Senior notes, net | $1,470,014 | $1,468,695 | | Total liabilities | $3,576,974 | $3,339,801 | | Total stockholders' equity | $5,723,462 | $5,332,286 | Condensed Consolidated Statements of Operations For the nine months ended September 30, 2024, total revenue increased to $5.81 billion from $5.40 billion year-over-year, driving net income up to $640.9 million from $596.3 million Key Performance Indicators (in thousands, except per share amounts) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Total revenue | $5,811,647 | $5,397,966 | $1,675,545 | | Gross margin | $1,420,202 | $1,290,969 | $391,718 | | Net income | $640,856 | $596,344 | $170,691 | | Diluted EPS | $5.97 | $5.40 | $1.54 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity grew from $5.33 billion at the end of 2023 to $5.72 billion by September 30, 2024 - For the nine months ended September 30, 2024, the company repurchased 4,238,767 shares of common stock for $260.4 million[10] - Net income of $642.5 million was the primary driver of the increase in stockholders' equity during the first nine months of 2024[10] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, the company experienced a net cash outflow from operating activities of $228.2 million, a significant shift from the $550.6 million net cash inflow in the same period of 2023 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | $(228,170) | $550,561 | | Net cash used in investing activities | $(82,318) | $(94,104) | | Net cash used in financing activities | $(239,318) | $(568,516) | | Net Decrease in Cash | $(549,806) | $(112,059) | Notes to the Unaudited Condensed Consolidated Financial Statements This section details the company's accounting policies and financial data, covering business operations, inventory, debt, segment performance, and legal contingencies - The company operates residential homebuilding and land development businesses across 12 states, organized into East, Central, West, and Financial Services segments[14] - Real estate inventory is stated at cost, and the company reviews it for impairment on a community-level basis each reporting period. For the nine months ended September 30, 2024, the company recorded a $2.3 million inventory impairment[17][19] - The company utilizes land banking arrangements to acquire land in staged takedowns, limiting risk. As of September 30, 2024, it had the right to purchase 5,822 lots for an aggregate price of $968.4 million under these arrangements[21][22] - The company is involved in legal proceedings, notably the Solivita and Bellalago litigations in Florida concerning amenity fees. An accrual for estimated liability has been recorded for these matters[84][86][87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, highlighting strong performance, increased earnings, and strategic capital management Third Quarter 2024 Highlights and Business Overview The company's residential homebuilding business achieved significant Q3 2024 growth, marked by increased EPS, sales orders, and improved gross margins - Diluted EPS increased 54% to $2.37[97] - Net sales orders increased 9% to 2,830[97] - Home closings gross margin improved to 24.8% from 23.1% a year ago[97] - The company controlled a record 58% of its 83,579 homebuilding lots off-balance sheet[97] - Share repurchases totaled $61 million during the quarter[97] Results of Operations Analysis Operational performance for Q3 and nine months ended September 30, 2024, showed strong growth in home closings, net sales orders, and expanded gross margins Key Operational Metrics (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales Orders | 2,830 | 2,592 | 9.2% | | Homes Closed | 3,394 | 2,639 | 28.6% | | Home Closings Revenue (in thousands) | $2,029,134 | $1,611,883 | 25.9% | | Average Selling Price (Closings) | $598,000 | $611,000 | (2.1)% | | Cancellation Rate | 9.3% | 11.4% | -210 bps | - Consolidated home closings gross margin increased by 170 basis points to 24.8% for Q3 2024, driven by improved product mix and lower incentives in the West region[122] - Financial Services revenue increased 24.0% in Q3 2024 due to a 33% increase in mortgage originations and higher gains on sale of loans[123][124] Non-GAAP Measures The company utilizes non-GAAP measures like adjusted gross margin and debt-to-capitalization ratio to assess financial performance and leverage Adjusted Home Closings Gross Margin Reconciliation (Q3) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Home closings gross margin | $503,309 | $372,884 | | Inventory impairment charges | — | $11,791 | | Adjusted home closings gross margin | $503,309 | $384,675 | | Adjusted home closings gross margin % | 24.8% | 23.9% | Net Homebuilding Debt to Capitalization Ratio | (in thousands) | Sep 30, 2024 | | :--- | :--- | | Net homebuilding debt | $1,660,501 | | Total stockholders' equity | $5,723,462 | | Total capitalization | $7,383,963 | | Net homebuilding debt to capitalization ratio | 22.5% | Liquidity and Capital Resources The company maintains liquidity through cash, credit facilities, and senior notes, with total liquidity at $1.2 billion as of September 30, 2024 Total Liquidity (in thousands) | Component | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total cash, excluding restricted cash | $256,447 | $798,568 | | Revolving Credit Facilities availability | $945,778 | $1,038,819 | | Total liquidity | $1,202,225 | $1,837,387 | - Net cash used in operating activities was $228.2 million for the nine months ended Sep 30, 2024, a shift from $550.6 million provided in the prior-year period, mainly due to higher spending on real estate inventory[133] - Net cash used in financing activities decreased to $239.3 million from $568.5 million year-over-year, as the prior year included a $350 million repayment of senior notes[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk with most debt at fixed rates, while variable rate debt is tied to SOFR, impacting interest expense - As of September 30, 2024, approximately 89% of the company's debt was fixed-rate and 11% was variable-rate[145] - A hypothetical 1% increase in interest rates on the outstanding variable rate debt balance as of September 30, 2024, would increase annual interest expense by approximately $2.3 million[148] - The company had no outstanding borrowings under its $1 Billion Revolving Credit Facility as of September 30, 2024[145] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024 - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2024[149] - No changes occurred in internal control over financial reporting during the quarter ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls[150] Part II - OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings, including ongoing litigations concerning amenity fees, are detailed in Note 13 to the financial statements - The company's legal proceedings are discussed in Note 13 of the financial statements, which is incorporated by reference[150] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors set forth in the Company's Annual Report have occurred[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its stock repurchase program in Q3 2024 and renewed and increased its authorization to $1 billion through December 31, 2026 - On October 23, 2024, the Board of Directors authorized a renewal of the stock repurchase program, permitting the repurchase of up to $1 billion of Common Stock through December 31, 2026[151] Share Repurchases in Q3 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 374,231 | $55.57 | | August 2024 | — | — | | September 2024 | 669,248 | $67.94 | | Total | 1,043,479 | $63.50 | - As of September 30, 2024, approximately $236.8 million remained available for repurchase under the then-existing program[151] Item 5. Other Information During the third quarter of 2024, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q3 2024[155] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL data files - Filed exhibits include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[157]