Taylor Morrison(TMHC) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section details the company's financial performance and position through consolidated statements and explanatory notes ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (%) | | :----------------------------- | :----------------------------- | :------------------------------- | :--------- | | Cash and cash equivalents | $130,174 | $487,151 | (73.3%) | | Total cash | $134,264 | $487,166 | (72.4%) | | Total real estate inventory | $6,505,862 | $6,234,084 | 4.4% | | Total assets | $9,450,644 | $9,297,131 | 1.6% | | Total liabilities | $3,392,782 | $3,418,951 | (0.8%) | | Total stockholders' equity | $6,057,862 | $5,878,180 | 3.1% | Condensed Consolidated Statements of Operations This section outlines the company's financial performance over periods, including revenue, expenses, and net income Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenue | $2,030,070 | $1,991,053 | 2.0% | $3,926,089 | $3,690,805 | 6.4% | | Gross margin | $467,488 | $472,288 | (1.0%) | $930,762 | $889,133 | 4.7% | | Income before income taxes | $263,263 | $267,217 | (1.5%) | $541,832 | $516,097 | 5.0% | | Net income | $193,577 | $199,460 | (3.0%) | $407,043 | $389,730 | 4.4% | | Basic EPS | $1.94 | $1.89 | 2.6% | $4.05 | $3.68 | 10.1% | | Diluted EPS | $1.92 | $1.86 | 3.2% | $3.99 | $3.61 | 10.5% | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity, reflecting net income, stock repurchases, and compensation - Net income contributed $193.6 million (Q2 2025) and $407.0 million (YTD Q2 2025) to stockholders' equity[17][21] - Repurchase of common stock resulted in a reduction of $101.0 million (Q2 2025) and $237.1 million (YTD Q2 2025) in stockholders' equity[17][21] - Stock compensation expense added $8.0 million (Q2 2025) and $15.8 million (YTD Q2 2025) to additional paid-in capital[17][21] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | | Net cash used in operating activities | $(48,726) | $(364,059) | 86.6% | | Net cash used in investing activities | $(56,118) | $(57,308) | 2.1% | | Net cash used in financing activities | $(248,058) | $(136,959) | (81.1%) | | Net Decrease in Cash and Cash Equivalents and Restricted Cash | $(352,902) | $(558,326) | 36.8% | | Cash, Cash Equivalents, and Restricted Cash — End of period | $134,264 | $248,773 | (46.0%) | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. BUSINESS Taylor Morrison Home Corporation operates a residential homebuilding and land development business across 12 states, offering diverse home types under various brands. It also includes "Build-to-Rent" (Yardly) and multi-use property development (Urban Form), alongside financial services (mortgage, title, insurance) organized into East, Central, West, and Financial Services segments - The company operates a residential homebuilding business and is a land developer in 12 states, offering single and multi-family homes for entry-level, move-up, and resort-lifestyle buyers[28] - Key brands include Taylor Morrison, Darling Homes Collection by Taylor Morrison, Esplanade, Yardly (Build-to-Rent), and Urban Form (multi-use properties)[28] - Financial services are provided through wholly owned subsidiaries: Taylor Morrison Home Funding (mortgage), Inspired Title & Escrow Services (title), and Taylor Morrison Insurance Services (homeowner's insurance)[28] - The business is organized into four reportable segments: East, Central, West (homebuilding), and Financial Services[28] Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies, including the basis of financial statement presentation, use of estimates, and specific methodologies for real estate inventory valuation (cost, capitalization of interest, impairment assessment), revenue recognition across home/land closings, amenity, and financial services, and the impact of recently issued accounting pronouncements - Unaudited Condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and instructions to Form 10-Q[29] - Real estate inventory is stated at cost, including raw land, land under development, homes under construction, completed homes, and model homes, with capitalized interest, real estate taxes, and development costs[31] - Inventory impairment charges of $6.8 million (Q2 2025) and $21.6 million (YTD Q2 2025) were recorded due to declining sales prices in certain communities[36] - Revenue from home and land closings is recognized when ownership risks and rewards are transferred, typically at the close of escrow, net of discounts and incentives[49] - ASU 2023-09 (Income Tax Disclosures) is effective for the annual period ending December 31, 2025, and ASU 2024-03 (Income Statement Expenses) is effective for the annual period ending December 31, 2027; neither is expected to have a material impact on consolidated financial statements[50][51] Note 3. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per common share, showing the numerator (net income) and denominator (weighted average shares) components, and identifies anti-dilutive instruments excluded from the diluted EPS calculation Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (in thousands) | $193,577 | $199,460 | $407,043 | $389,730 | | Weighted average shares – basic (in thousands) | 99,537 | 105,500 | 100,387 | 105,979 | | Weighted average shares – diluted (in thousands) | 100,923 | 107,249 | 102,015 | 107,961 | | Basic EPS | $1.94 | $1.89 | $4.05 | $3.68 | | Diluted EPS | $1.92 | $1.86 | $3.99 | $3.61 | - Excluded 384,039 anti-dilutive stock options and unvested RSUs for the three months ended June 30, 2025, and 163,674 shares from ASR programs for the same period[52][53] Note 4. REAL ESTATE INVENTORY The company's real estate inventory primarily consists of developed and under-development land, along with operating communities. It also details the composition of owned and controlled lots, highlighting a slight decrease in total owned lots and an increase in controlled lots year-over-year Real Estate Inventory (in thousands) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Real estate developed and under development | $4,554,827 | $4,455,623 | | Real estate held for development or held for sale | $21,365 | $26,301 | | Operating communities | $1,675,826 | $1,524,352 | | Capitalized interest | $159,649 | $156,613 | | Consolidated real estate not owned | $94,195 | $71,195 | | Total real estate inventory | $6,505,862 | $6,234,084 | Lot and Home Inventory | Lot Type | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | | Owned lots | 34,157 | 36,718 | (7.0%) | | Controlled lots | 50,894 | 49,435 | 2.9% | | Total owned and controlled lots | 85,051 | 86,153 | (1.3%) | | Homes in inventory | 8,192 | 7,698 | 6.4% | Note 5. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES The company holds investments in unconsolidated entities, primarily joint ventures, which reported a decrease in net income for both the three and six months ended June 30, 2025, compared to the prior year. Consolidated joint ventures also saw a slight decrease in total assets Net Income of Unconsolidated Entities (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net income of unconsolidated entities | $2,312 | $6,671 | (65.3%) | | TMHC's share in net income of unconsolidated entities | $326 | $2,628 | (87.6%) | Net Income of Unconsolidated Entities (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :-------------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Net income of unconsolidated entities | $7,538 | $13,796 | (45.4%) | | TMHC's share in net income of unconsolidated entities | $2,301 | $5,379 | (57.2%) | - Assets of consolidated joint ventures totaled $98.1 million as of June 30, 2025, a slight decrease from $98.6 million as of December 31, 2024[60] Note 6. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities decreased overall, primarily due to a significant reduction in compensation and employee benefits. Self-insurance and warranty reserves, however, increased, driven by additions and changes in estimates for pre-existing reserves, including a specific charge for warranty claims in the East region Accrued Expenses and Other Liabilities (in thousands) | Category (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | | Total accrued expenses and other liabilities | $597,373 | $632,250 | (5.5%) | | Compensation and employee benefits | $81,829 | $174,509 | (53.1%) | | Self-insurance and warranty reserves | $237,655 | $214,105 | 11.0% | - Changes in estimates to pre-existing reserves included a $20.4 million charge for warranty claims specific to the East region for the three months ended June 30, 2025, and $22.1 million for the six months ended June 30, 2025[62] Note 7. DEBT The company's total debt slightly decreased, with senior notes remaining stable and loans payable decreasing. The $1 Billion Revolving Credit Facility had no outstanding borrowings, maintaining significant availability. Mortgage warehouse facilities borrowings also saw a slight decrease Debt (in thousands) | Debt Type (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | | Senior notes, net | $1,471,333 | $1,470,454 | 0.1% | | Loans payable and other borrowings | $456,725 | $475,569 | (3.9%) | | Revolving credit facility borrowings | $0 | $0 | 0.0% | | Mortgage warehouse facilities borrowings | $171,319 | $174,460 | (1.8%) | | Total debt | $2,099,377 | $2,120,483 | (1.0%) | - The $1 Billion Revolving Credit Facility had no outstanding borrowings as of June 30, 2025, with $952.0 million of availability[66][67] - Mortgage warehouse facilities borrowings were collateralized by $220.2 million of mortgage loans held for sale as of June 30, 2025[69] Note 8. FAIR VALUE DISCLOSURES The company's financial instruments are measured using a fair value hierarchy, with most debt instruments and mortgage-related assets/liabilities classified as Level 2 or 3. There were no significant changes or transfers between fair value hierarchy levels. Nonrecurring fair value measurements for inventories increased - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[72][73] Fair Value Measurements (in thousands) | Instrument (in thousands) | Level | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--------------------------------- | :---- | :----------------------- | :--------------------------- | | Mortgage loans held for sale | 2 | $220,210 | $207,936 | | IRLCs | 3 | $(4,388) | $(5,917) | | MBSs | 2 | $(6,696) | $4,174 | | Mortgage warehouse facilities borrowings | 2 | $171,319 | $174,460 | | Loans payable and other borrowings | 2 | $456,725 | $475,569 | | 5.875% Senior Notes due 2027 | 2 | $507,820 | $501,770 | | 6.625% Senior Notes due 2027 | 2 | $26,789 | $26,804 | | 5.75% Senior Notes due 2028 | 2 | $456,084 | $446,679 | | 5.125% Senior Notes due 2030 | 2 | $497,460 | $478,455 | - Fair value of inventories on a nonrecurring basis increased from $10.6 million as of December 31, 2024, to $31.6 million as of June 30, 2025, classified as Level 3[75] Note 9. INCOME TAXES The effective tax rate for Q2 2025 and YTD Q2 2025 increased slightly compared to the prior year, primarily due to state income taxes, non-deductible executive compensation, and a decrease in homebuilding activity-related credits. The recently enacted OBBB Act is not expected to materially impact financial statements Effective Tax Rate | Period | Effective Tax Rate 2025 | Effective Tax Rate 2024 | Change (pp) | | :-------------------- | :---------------------- | :---------------------- | :---------- | | Three Months Ended June 30 | 25.6% | 25.2% | +0.4 | | Six Months Ended June 30 | 24.4% | 24.2% | +0.2 | - The effective tax rate for Q2 2025 differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, and excess tax benefits from share-based compensation[76] - The One Big Beautiful Bill Act (OBBB), enacted subsequent to June 30, 2025, is not expected to have a material impact on the company's financial statements[77][78] Note 10. STOCKHOLDERS' EQUITY The company's Board of Directors authorized a renewal of the stock repurchase program for up to $1.0 billion through December 31, 2026, with $675.0 million remaining capacity. Significant share repurchases, including through ASR agreements, were executed during the period - The Board of Directors authorized a renewal of the stock repurchase program for up to $1.0 billion through December 31, 2026[80] - As of June 30, 2025, approximately $675.0 million of available capacity remained under the repurchase program[82] Share Repurchases | Period | Shares Repurchased | Amount Repurchased (in thousands) | | :-------------------------- | :----------------- | :-------------------------------- | | Three Months Ended June 30, 2025 | 1,729,436 | $100,000 | | Three Months Ended June 30, 2024 | 1,703,803 | $104,745 | | Six Months Ended June 30, 2025 | 3,973,431 | $235,093 | | Six Months Ended June 30, 2024 | 3,195,288 | $196,394 | Note 11. STOCK BASED COMPENSATION The company's equity award plan had 4.4 million shares available for future grants. Stock-based compensation expense increased for both the three and six months ended June 30, 2025, primarily driven by restricted stock units - As of June 30, 2025, 4,368,625 shares of Common Stock were available for future grants under the 2013 Omnibus Equity Award Plan[83] Stock Compensation Expense (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | | Restricted stock units expense | $6,761 | $4,671 | 44.7% | | Stock options expense | $1,254 | $1,401 | (10.5%) | | Total stock compensation expense | $8,015 | $6,072 | 32.0% | Stock Compensation Expense (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :-------------------------- | :----------------------------- | :----------------------------- | :----------- | | Restricted stock units expense | $13,474 | $9,444 | 42.7% | | Stock options expense | $2,327 | $2,111 | 10.2% | | Total stock compensation expense | $15,801 | $11,555 | 36.7% | Note 12. OPERATING AND REPORTING SEGMENTS The company operates through three homebuilding segments (East, Central, West) and a Financial Services segment, with Build-to-Rent and Urban Form activities included in Corporate and Unallocated. Segment performance is assessed by gross margin and income before income taxes, with varying revenue and gross margin trends across regions for the current periods - The company's reporting segments are East, Central, West (homebuilding), and Financial Services. Build-to-Rent and Urban Form operations are included in the Corporate and Unallocated segment[87][89] Segment Total Revenue (in thousands) | Segment (in thousands) | Q2 2025 Total Revenue | Q2 2024 Total Revenue | Change (%) | | :--------------------- | :-------------------- | :-------------------- | :----------- | | East | $700,597 | $694,630 | 0.9% | | Central | $482,207 | $493,406 | (2.3%) | | West | $789,552 | $749,076 | 5.4% | | Financial Services | $52,929 | $48,916 | 8.2% | | Corporate and Unallocated | $4,785 | $5,025 | (4.8%) | | Total | $2,030,070 | $1,991,053 | 2.0% | Segment Total Gross Margin (in thousands) | Segment (in thousands) | Q2 2025 Total Gross Margin | Q2 2024 Total Gross Margin | Change (%) | | :--------------------- | :------------------------- | :------------------------- | :----------- | | East | $153,548 | $178,152 | (13.8%) | | Central | $105,931 | $122,628 | (13.6%) | | West | $179,371 | $149,334 | 20.1% | | Financial Services | $27,053 | $20,810 | 29.9% | | Corporate and Unallocated | $1,585 | $1,364 | 16.2% | | Total | $467,488 | $472,288 | (1.0%) | Segment Income Before Income Taxes (in thousands) | Segment (in thousands) | Q2 2025 Income Before Income Taxes | Q2 2024 Income Before Income Taxes | Change (%) | | :--------------------- | :--------------------------------- | :--------------------------------- | :----------- | | East | $90,869 | $124,530 | (27.0%) | | Central | $61,356 | $79,774 | (23.1%) | | West | $118,365 | $98,237 | 20.5% | | Financial Services | $31,400 | $24,415 | 28.6% | | Corporate and Unallocated | $(38,727) | $(59,739) | 35.2% | | Total | $263,263 | $267,217 | (1.5%) | Note 13. COMMITMENTS AND CONTINGENCIES The company has significant commitments including $1.5 billion in letters of credit and surety bonds and $2.1 billion in land purchase option contracts and land banking agreements. Legal proceedings, including the Solivita and Bellalago class action lawsuits, continue to be monitored, with accruals made for estimated liabilities, though ultimate outcomes remain uncertain - Outstanding letters of credit and surety bonds totaled $1.5 billion as of June 30, 2025, up from $1.4 billion as of December 31, 2024[95] - The aggregate purchase price for land under option contracts and land banking agreements was $2.1 billion at June 30, 2025, compared to $1.9 billion at December 31, 2024[96] - Legal accruals were $52.3 million as of June 30, 2025, up from $49.1 million as of December 31, 2024[98] - The company paid $64.7 million in Q4 2023 related to the Solivita litigation and has accrued for estimated legal fees and costs of $22.5 million, $0.6 million, and $0.6 million respectively, for which an appeal has been filed[99] - Lease obligations were $74.4 million as of June 30, 2025, down from $79.0 million as of December 31, 2024[103] Note 14. MORTGAGE HEDGING ACTIVITIES The company uses derivative instruments like IRLCs and MBSs for interest rate risk management, which are recognized at fair value. Total derivative instrument assets/(liabilities) shifted from a net liability to a larger net liability, and commitments to originate loans increased Derivative Instrument Fair Value (in thousands) | Derivative Instrument (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--------------------------------- | :----------------------- | :--------------------------- | | IRLCs | $(4,388) | $(5,917) | | MBSs | $(6,696) | $4,174 | | Total | $(11,084) | $(1,743) | - Total commitments to originate loans approximated $327.7 million as of June 30, 2025, an increase from $246.1 million as of December 31, 2024[104] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a comprehensive analysis of the company's financial condition and results of operations, including a business overview, factors affecting comparability, detailed performance highlights, and a discussion of liquidity, capital resources, and market risks Business Overview Taylor Morrison Home Corporation is a residential homebuilder and land developer operating across 12 states, offering diverse housing products under multiple brands, including "Build-to-Rent" and multi-use properties. It also provides financial services through its mortgage, title, and insurance subsidiaries, organized into East, Central, West, and Financial Services segments - The company's principal business is residential homebuilding and the development of lifestyle communities across 12 states[111] - Operations include various homebuilding brands (Taylor Morrison, Darling Homes, Esplanade), a Build-to-Rent business (Yardly), and multi-use properties (Urban Form)[111] - Financial services are provided through Taylor Morrison Home Funding (mortgage), Inspired Title & Escrow Services (title), and Taylor Morrison Insurance Services (homeowner's insurance)[111] - The business is organized into four reportable segments: East, Central, West, and Financial Services, employing approximately 3,000 full-time equivalent persons[111] Factors Affecting Comparability of Results The company's financial results for the current periods were impacted by significant inventory impairment charges in the West and East segments and an incremental warranty charge in the East region for a specific repair issue, which were not present in the prior year - Recognized $6.8 million in inventory impairment charges for Q2 2025 and $21.6 million for YTD Q2 2025, primarily in the West and East segments, due to declining sales prices[112] - Incurred an incremental $6.9 million warranty charge for Q2 2025 and $7.7 million for YTD Q2 2025 for a specific repair issue in the East region, which was not present in the prior year[113] Second Quarter 2025 Highlights In Q2 2025, Taylor Morrison achieved a 2% increase in home closings revenue and a 4% increase in closings, despite a 2% decrease in average home price. The company improved SG&A leverage, but net sales orders declined by 12%, and the monthly absorption pace slowed. The company maintained a strong land position with 85,051 owned and controlled lots and repurchased $100 million in common shares, ending the quarter with $1.1 billion in liquidity - Home closings revenue increased by 2% to $2.0 billion, with 3,340 closings (up 4%) at an average price of $589,000 (down 2%)[116] - Achieved 90 basis points of SG&A expense leverage, reducing it to 9.3% of home closings revenue[116] - Net sales orders decreased by 12% to 2,733, with the monthly absorption pace slowing from 3.0 to 2.6 per community[116] - Maintained 85,051 homebuilding lots owned and controlled, with 60% controlled off-balance sheet (up from 57% a year ago)[116] - Repurchased 1.7 million common shares for $100 million, contributing to total liquidity of $1.1 billion[116] Results of Operations For the three months ended June 30, 2025, total revenue increased by 2.0% to $2.03 billion, while net income decreased by 3.0% to $193.6 million. Diluted EPS, however, increased by 3.2% to $1.92. For the six months ended June 30, 2025, total revenue grew by 6.4% to $3.93 billion, and net income increased by 4.4% to $407.0 million, with diluted EPS rising by 10.5% to $3.99 Results of Operations (in thousands, except percentages) | Metric (in thousands, except percentages) | Q2 2025 | Q2 2024 | Change (QoQ) | YTD Q2 2025 | YTD Q2 2024 | Change (YoY) | | :------------------------------------------ | :-------- | :-------- | :----------- | :---------- | :---------- | :----------- | | Total revenue | $2,030,070 | $1,991,053 | 2.0% | $3,926,089 | $3,690,805 | 6.4% | | Gross margin | $467,488 | $472,288 | (1.0%) | $930,762 | $889,133 | 4.7% | | Income before income taxes | $263,263 | $267,217 | (1.5%) | $541,832 | $516,097 | 5.0% | | Net income | $193,577 | $199,460 | (3.0%) | $407,043 | $389,730 | 4.4% | | Diluted EPS | $1.92 | $1.86 | 3.2% | $3.99 | $3.61 | 10.5% | | Home closings gross margin % | 22.3% | 23.8% | (1.5 pp) | 23.1% | 23.9% | (0.8 pp) | | SG&A as % of home closings revenue | 9.3% | 10.2% | (0.9 pp) | 9.4% | 10.3% | (0.9 pp) | Non-GAAP Measures The company provides several non-GAAP financial measures, including adjusted net income, adjusted EPS, adjusted income before income taxes, adjusted home closings gross margin, EBITDA, Adjusted EBITDA, and net homebuilding debt to capitalization ratio, to offer a clearer view of operational performance by excluding non-recurring or non-operating items. These metrics are used by management for evaluation and compensation and are considered useful for investors to benchmark performance - Adjusted net income for Q2 2025 was $203.7 million, and adjusted diluted EPS was $2.02, reflecting adjustments for real estate impairment and warranty charges[128] - Adjusted home closings gross margin for Q2 2025 was 23.0%, compared to the GAAP gross margin of 22.3%[132] - Adjusted EBITDA for Q2 2025 was $326.4 million, with an Adjusted EBITDA as a percentage of total revenue of 16.1%[135] - The net homebuilding debt to capitalization ratio was 22.9% as of June 30, 2025[137] Three and six months ended June 30, 2025 compared to three and six months ended June 30, 2024 This section provides a detailed comparison of the company's operational and financial performance for the three and six months ended June 30, 2025, against the same periods in the prior year, covering key metrics such as sales orders, closings, margins, and expenses across its segments Ending Active Selling Communities This section reports the number of active selling communities by segment and explains changes in community count Ending Active Selling Communities | Segment | June 30, 2025 | June 30, 2024 | Change (%) | | :-------- | :------------ | :------------ | :--------- | | East | 135 | 122 | 10.7% | | Central | 95 | 106 | (10.4%) | | West | 115 | 119 | (3.4%) | | Total | 345 | 347 | (0.6%) | - The East segment's increase was due to multiple community openings, including master planned communities, while West and Central regions experienced close-outs[139] Net Sales Orders This section details the volume and value of new home sales orders, including average selling prices and factors influencing changes Net Sales Orders | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Net Sales Orders | 2,733 | 3,111 | (12.2%) | | Sales Value (in thousands) | $1,543,238 | $1,869,807 | (17.5%) | | Average Selling Price (in thousands) | $565 | $601 | (6.0%) | - The decrease in net sales orders was primarily due to community close-outs in the Central region, increased cancellations in the West region, and high mortgage interest rates[141] - Incentives, discounts, and changes in net sales orders mix contributed to the decrease in average selling price[141] Sales Order Cancellations This section presents the cancellation rates for sales orders across segments and discusses contributing market factors Sales Order Cancellation Rate | Segment | Q2 2025 Cancellation Rate | Q2 2024 Cancellation Rate | Change (pp) | | :-------- | :------------------------ | :------------------------ | :---------- | | East | 14.3% | 9.5% | +4.8 | | Central | 11.8% | 9.1% | +2.7 | | West | 17.2% | 9.5% | +7.7 | | Total Company | 14.6% | 9.4% | +5.2 | - The higher cancellation rate was driven by general market conditions, including homeowners' ability to sell their current homes, and reduced required customer deposits[143] Sold Homes in Backlog This section provides the number and value of homes under contract but not yet closed, along with average selling prices Sold Homes in Backlog | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :--------------------------------- | :------------ | :------------ | :--------- | | Sold Homes in Backlog | 4,461 | 6,256 | (28.7%) | | Sales Value (in thousands) | $2,938,512 | $4,197,819 | (30.0%) | | Average Selling Price (in thousands) | $659 | $671 | (1.8%) | - The decrease in backlog units was primarily due to fewer net sales orders and improved construction cycle times leading to more quick-move-in homes closing[144] Home Closings Revenue This section details the revenue generated from home closings, including the number of homes closed and average selling prices Home Closings Revenue | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | | Homes Closed | 3,340 | 3,200 | 4.4% | | Home Closings Revenue, Net (in thousands) | $1,966,100 | $1,920,127 | 2.4% | | Average Selling Price (in thousands) | $589 | $600 | (1.8%) | - Increases in homes closed and revenue were due to improved cycle times, higher quick-move-in home sales, and new master plan communities in the East region[146] - The decrease in average selling price was influenced by incentives, discounts, and net sales orders mix[146] Segment Home Closings Gross Margins This section analyzes the gross margins from home closings across different operating segments and factors affecting them Home Closings Gross Margins | Metric | Q2 2025 | Q2 2024 | Change (pp) | | :--------------------------------- | :------ | :------ | :---------- | | Consolidated Home closings gross margin % | 22.3% | 23.8% | (1.5) | | Consolidated Adjusted home closings gross margin % | 23.0% | 23.9% | (0.9) | - West region's gross margin increased due to product mix, higher lot premiums, and lower home discounts, while East and Central regions saw decreases due to lower lot premium/option revenues and increased finance incentives[149] - Inventory impairment charges in East ($3.8 million) and West ($3.0 million) and a warranty charge in East ($6.9 million) negatively impacted gross margins for Q2 2025[147][149] Financial Services This section reports the financial performance of the company's mortgage, title, and insurance subsidiaries, including revenue and originations Financial Services Performance | Metric (in thousands) | Q2 2025 | Q2 2024 | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | | Total financial services revenue | $52,929 | $48,916 | 8.2% | | Financial services income before income taxes | $31,082 | $23,811 | 30.5% | | Total originations (Principal) | $1,023,172 | $1,007,753 | 1.5% | | Average FICO score | 751 | 751 | 0.0% | - Revenue increases were driven by higher revenue from loan sales, increased title production, and a rise in loan originations[151] Sales, Commissions and Other Marketing Costs This section analyzes the company's sales, commissions, and marketing expenses as a percentage of home closings revenue Sales, Commissions and Other Marketing Costs as % of Home Closings Revenue, Net | Period | As % of Home Closings Revenue, Net 2025 | As % of Home Closings Revenue, Net 2024 | Change (pp) | | :-------------------------- | :-------------------------------------- | :-------------------------------------- | :---------- | | Three Months Ended June 30 | 5.9% | 5.9% | 0.0 | | Six Months Ended June 30 | 5.9% | 6.1% | (0.2) | - The consistent/decreasing percentage was primarily driven by an increase in home closings revenue and leverage in controllable sales and marketing costs[152] General and Administrative Expenses This section details the company's general and administrative expenses, including their percentage of home closings revenue General and Administrative Expenses as % of Home Closings Revenue, Net | Period | As % of Home Closings Revenue, Net 2025 | As % of Home Closings Revenue, Net 2024 | Change (pp) | | :-------------------------- | :-------------------------------------- | :-------------------------------------- | :---------- | | Three Months Ended June 30 | 3.4% | 4.3% | (0.9) | | Six Months Ended June 30 | 3.5% | 4.2% | (0.7) | - Decreases were primarily due to a reduction in variable payroll-related expenses and an increase in home closings revenue[153] Net Income from Unconsolidated Entities This section reports the company's share of net income or loss from its investments in unconsolidated joint ventures Net Income from Unconsolidated Entities (in thousands) | Period (in thousands) | 2025 | 2024 | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Three Months Ended June 30 | $(326) | $2,628 | (112.4%) | | Six Months Ended June 30 | $(2,301) | $5,379 | (142.8%) | - The decrease was primarily due to losses from build-to-rent operations in their lease ramp-up phase and a joint venture with construction defect losses, partially offset by increased income from financial services joint ventures[154] Interest Expense, Net This section details the company's net interest expense, including capitalized interest and interest income Interest Expense, Net (in thousands) | Period (in thousands) | 2025 | 2024 | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Three Months Ended June 30 | $13,819 | $4,087 | 238.1% | | Six Months Ended June 30 | $22,318 | $4,044 | 452.4% | - The increase was primarily due to higher non-capitalizable interest expense related to land banking arrangements and a decrease in interest income earned on outstanding cash balances[155] Income Tax Provision This section outlines the company's income tax expense and effective tax rates for the reported periods Effective Tax Rate | Period | Effective Tax Rate 2025 | Effective Tax Rate 2024 | Change (pp) | | :-------------------- | :---------------------- | :---------------------- | :---------- | | Three Months Ended June 30 | 25.6% | 25.2% | +0.4 | | Six Months Ended June 30 | 24.4% | 24.2% | +0.2 | - The higher effective tax rate for Q2 2025 was primarily due to a decrease in credits related to homebuilding activities[157] Net Income This section summarizes the company's net income and diluted earnings per share, highlighting key drivers of change - Net income for Q2 2025 decreased to $193.6 million from $199.5 million in Q2 2024, primarily due to lower home closings gross margin and increased interest expense, net[158] - Diluted earnings per share for Q2 2025 increased to $1.92 from $1.86 in Q2 2024, primarily attributable to lower diluted weighted average shares of common stock resulting from stock repurchases[158][159] Liquidity and Capital Resources The company maintains strong liquidity through cash from operations, its $1 Billion Revolving Credit Facility, senior notes, and mortgage warehouse facilities. While cash used in operating activities decreased significantly, cash used in financing activities increased due to higher stock repurchases. The company believes it has adequate capital for the next twelve months and beyond, with potential access to capital markets for long-term needs Liquidity This section describes the company's available cash, credit facilities, and overall financial flexibility to meet its obligations - The company finances operations through cash flows, a $1 Billion Revolving Credit Facility, senior notes, mortgage warehouse facilities, project-level real estate financing, and surety bonds/letters of credit[161][167] Total Liquidity (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (%) | | :--------------------------------- | :------------ | :---------------- | :--------- | | Total cash, excluding restricted cash | $130,174 | $487,151 | (73.3%) | | Revolving Credit Facility availability | $951,983 | $947,086 | 0.5% | | Total liquidity | $1,082,157 | $1,434,237 | (24.6%) | - The company believes it has adequate capital resources and access to external financing for the next twelve months and beyond[162] Cash Flow Activities This section analyzes the company's cash flows from operating, investing, and financing activities over the reporting period - Net cash used in operating activities decreased significantly to $48.7 million for the six months ended June 30, 2025, from $364.1 million in the prior year, primarily due to decreased spend on real estate inventory and land deposits[163] - Net cash used in investing activities remained stable at $56.1 million for the six months ended June 30, 2025[164] - Net cash used in financing activities increased to $248.1 million for the six months ended June 30, 2025, from $137.0 million in the prior year, primarily due to increased common stock repurchases and decreased net borrowings on mortgage warehouse facilities[165] Debt Instruments This section provides an overview of the company's debt structure, including senior notes and revolving credit facilities - Detailed information regarding debt instruments, including senior notes and the $1 Billion Revolving Credit Facility, can be found in Note 7 to the unaudited Condensed consolidated financial statements[168] Off-Balance Sheet Arrangements as of June 30, 2025 This section details the company's commitments and obligations not fully reflected on its balance sheet - The company participates in strategic land development and homebuilding joint ventures with third parties[169] - The aggregate purchase price for land under land option contracts and land banking agreements was $2.1 billion at June 30, 2025, up from $1.9 billion at December 31, 2024[171] Seasonality This section discusses the seasonal nature of the company's business and its impact on quarterly financial results - The business is seasonal, with more homes under construction, closings, revenue, and operating income typically occurring in the third and fourth quarters[172] - Quarterly results can fluctuate due to factors such as timing of new projects, sales and closings, market conditions, construction timetables, regulatory approvals, and weather[172][176] Inflation This section addresses the potential impact of inflation on the company's costs, pricing, and overall financial performance - High inflation can adversely affect the company through increased costs for land, financing, labor, and construction materials, as well as higher mortgage interest rates impacting affordability[174] - The company attempts to pass cost increases to buyers through higher sales prices, but this may be challenging in soft housing market conditions[174] Critical Accounting Policies and Estimates There have been no significant changes to the company's critical accounting policies and estimates during the six months ended June 30, 2025, compared to those disclosed in its Annual Report - No significant changes to critical accounting policies and estimates during the six months ended June 30, 2025, compared to those disclosed in the Annual Report[177] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to interest rate risk, with approximately 92% of its debt at fixed rates and 8% at variable rates. Changes in variable rates, particularly those tied to SOFR for mortgage warehouse facilities, could impact earnings and cash flows. A 1% increase in variable rates would increase annual interest incurred by approximately $1.7 million Interest Rate Risk This section assesses the company's exposure to fluctuations in interest rates and their potential effect on financial results - As of June 30, 2025, approximately 92% of the company's debt was fixed rate and 8% was variable rate[179] - Changes in variable interest rates, particularly those based on SOFR for mortgage warehouse facilities and the $1 Billion Revolving Credit Facility, may affect future earnings and cash flows[179][180] - A 1% increase in interest rates would increase the interest incurred by approximately $1.7 million per year, based on variable rate debt outstanding at June 30, 2025[183] Debt Maturity and Interest Rate Profile (in millions) | Debt Type (in millions) | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | Fair Value | Weighted Average Interest Rate | | :---------------------- | :--- | :--- | :--- | :--- | :--- | :--------- | :---- | :--------- | :----------------------------- | | Fixed Rate Debt | $117.4 | $191.0 | $592.6 | $476.8 | $25.3 | $530.7 | $1,933.8 | $1,944.9 | 4.9% | | Variable Rate Debt | $171.3 | $0 | $0 | $0 | $0 | $0 | $171.3 | $171.3 | 5.9% | ITEM 4. CONTROLS AND PROCEDURES The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the quarter Disclosure Controls and Procedures This section confirms the effectiveness of the company's controls for financial reporting and disclosure - The company's disclosure controls and procedures were evaluated and concluded to be effective as of June 30, 2025[185] Changes in Internal Control Over Financial Reporting This section reports on any material changes to the company's internal control over financial reporting - There has been no change in internal control over financial reporting during the quarter ended June 30, 2025, that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[186] PART II — OTHER INFORMATION This section includes additional disclosures not covered in the financial statements, such as legal matters and risk factors ITEM 1. LEGAL PROCEEDINGS This section refers to Note 13 for detailed information on the company's legal proceedings and commitments and contingencies - Information regarding legal proceedings is incorporated by reference from Note 13 - Commitments and Contingencies in the unaudited Condensed consolidated financial statements[188] 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 Part I, Item 1A of the company's Annual Report[189] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company's Board authorized a $1 billion stock repurchase program through December 31, 2026, with $675.0 million remaining capacity as of June 30, 2025. During Q2 2025, the company repurchased 1.7 million shares for approximately $100 million, including through accelerated share repurchase (ASR) agreements - The Board of Directors authorized a renewal of the stock repurchase program for up to $1 billion of common stock through December 31, 2026[191] - As of June 30, 2025, approximately $675.0 million of available capacity remained under the repurchase program[191] Common Stock Repurchases | Period | Total number of shares purchased | Average price paid per share | | :------------------------ | :----------------------------- | :--------------------------- | | April 1 to April 30, 2025 | 173,293 | $60.15 | | May 1 to May 31, 2025 | 1,296,731 | $57.87 | | June 1 to June 30, 2025 | 259,412 | $57.68 | | Total (Q2 2025) | 1,729,436 | $57.82 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[194] ITEM 4. MINE SAFETY DISCLOSURES The company reported no mine safety disclosures - No mine safety disclosures were reported[195] ITEM 5. OTHER INFORMATION During the three months ended June 30, 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - None of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[196] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, By-laws, certifications under Sarbanes-Oxley Act, and Inline XBRL documents - Exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated By-laws, Section 302 and 906 certifications, and Inline XBRL documents[198] SIGNATURES The report is duly signed on behalf of Taylor Morrison Home Corporation by its Chairman of the Board and Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer - The report is signed by Sheryl D. Palmer (Chairman of the Board and Chief Executive Officer), Curt VanHyfte (Executive Vice President and Chief Financial Officer), and Joseph Terracciano (Chief Accounting Officer)[202]