Taylor Morrison(US:TMHC)2024-04-30 10:32Q1 2024 Earnings Overview Taylor Morrison's Q1 2024 performance was strong, with net income and diluted EPS stable, exceeding sales expectations and maintaining good gross margins, leading to an upward revision of full-year guidance Executive Summary Taylor Morrison delivered a strong Q1 2024, with net income and diluted EPS consistent year-over-year, exceeding sales activity expectations and achieving good gross margins, leading to an upward revision of full-year guidance and highlighting diversified consumer and geographic strategies as foundational for sustained growth and profitability Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :------------------- | :--------------- | :--------------- | :----- | | Net Income ($ Million) | $190 | $191 | -0.5% | | Diluted EPS ($) | $1.75 | $1.74 | +0.6% | | Home Closings | 2,731 | - | - | | Home Closings Gross Margin (%) | 24.0% | - | - | | Book Value Per Share Growth ($) | $50 | - | 14% | | Net Sales Orders Growth (%) | 29% | - | - | | Monthly Sales Pace Per Community | 3.7 | 2.9 | +27.6% | - The company raised its full-year guidance, expecting approximately 12,500 home deliveries, with a home closings gross margin between 23.5% and 24.0%, and an average closing price between $600,000 and $610,0005 - A diversified consumer mix, from entry-level to resort lifestyle buyers, and geographic footprint underpin the company's strong performance, maximized by optimizing construction efficiency and gross margin opportunities5 Key Business Highlights This quarter, the company excelled in homebuilding, land portfolio, financial services, and balance sheet, achieving significant growth in home closings revenue and net sales orders, maintaining stable gross margins, and successfully enhancing liquidity and optimizing debt structure Homebuilding Operations Homebuilding operations saw growth in revenue and deliveries, a significant increase in net sales orders, and a notable decrease in cancellation rates in Q1, indicating improved market demand and enhanced operational efficiency Homebuilding Operations Key Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----------------------- | :--------------- | :--------------- | :------- | | Home Closings Revenue ($ Billion) | $1.6 | $1.6 | +2% | | Home Closings | 2,731 | - | +8% | | Average Closing Price ($) | $599,000 | - | -6% | | Home Closings Gross Margin (%) | 24.0% | 23.9% | +10 bps | | Net Sales Orders | 3,686 | - | +29% | | Monthly Sales Pace Per Community | 3.7 | 2.9 | +28% | | Number of Communities | 331 | - | +2% | | SG&A as % of Home Closings Revenue | 10.4% | 9.9% | +50 bps | | Cancellation Rate (%) | 7.0% | 14.0% | -7.0 pp | | Homes in Backlog | 6,244 | - | - | | Backlog Sales Value ($ Billion) | $4.2 | - | - | Land Portfolio The company increased land acquisition and development expenditures while maintaining an ample land supply, with controlled lots remaining stable, ensuring future homebuilding needs for several years Land Portfolio Key Metrics | Metric | Q1 2024 | Q1 2023 | YoY Change | | :------------------- | :--------------- | :--------------- | :------- | | Land Acquisition & Development Spend ($ Million) | $588 | $321 | +83% | | Development-Related Spend (%) | 38% | 68% | -30 pp | | Total Owned & Controlled Lots | 74,182 | 72,362 (End of 2023) | +2.5% | | Controlled Lots (%) | 53% | 53% (End of 2023) | 0 pp | | Total Supply (Years) | 6.5 | - | - | | Owned Land Supply (Years) | 3.1 | - | - | Financial Services Financial services saw an improved mortgage capture rate and strong borrower credit profiles, demonstrating the company's effectiveness in supporting homebuyers' financing needs Financial Services Key Metrics | Metric | Q1 2024 | Q1 2023 | YoY Change | | :------------------- | :--------------- | :--------------- | :------- | | Mortgage Capture Rate (%) | 87% | 82% | +5 pp | | Average Borrower FICO Score | 751 | - | - | | Average Borrower DTI Ratio (%) | 40% | - | - | Balance Sheet & Liquidity The company maintained strong liquidity, achieved a credit rating upgrade, successfully reduced its total homebuilding debt to capitalization ratio, and actively repurchased shares, enhancing shareholder value Balance Sheet & Liquidity Key Metrics | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----------------------- | :--------------- | :--------------- | :------- | | Total Liquidity ($ Billion) | $1.6 | - | - | | Unrestricted Cash ($ Million) | $554 | - | - | | Moody's Credit Rating | BA1 (Stable) | BA2 | Upgrade | | Total Homebuilding Debt to Capitalization Ratio (%) | 26.1% | 30.9% | -4.8 pp | | Net Homebuilding Debt to Capitalization Ratio (%) | 20.1% | 21.0% | -0.9 pp | | Share Repurchases (Million Shares) | 1.5 | - | - | | Share Repurchase Amount ($ Million) | $92 | - | - | | Remaining Share Repurchase Authorization ($ Million) | $403 | - | - | Strategic Initiatives Taylor Morrison expanded its geographic footprint by entering the Indianapolis market, acquiring approximately 1,500 lots to capitalize on local growth and affordability Indianapolis Market Expansion Taylor Morrison entered the growing Indianapolis market by acquiring approximately 1,500 lots after Q1, further diversifying its geographic footprint and leveraging the area's job growth and affordability advantages - The company acquired approximately 1,500 lots in Indianapolis, with nearly 55% controlled through options, and the transaction was funded with cash on hand10 - This expansion further diversifies Taylor Morrison's geographic footprint, entering a healthy market supported by above-average job growth and affordability10 Business Outlook Taylor Morrison provides guidance for Q2 and full-year 2024, projecting stable home deliveries, average closing prices, and gross margins, alongside planned share repurchases Second Quarter 2024 Guidance The company anticipates approximately 3,000 home deliveries in Q2 2024, maintaining healthy average closing prices and gross margins, and a stable number of communities Second Quarter 2024 Performance Guidance | Metric | Expected Value | | :------------------- | :------- | | Home Closings | Approx. 3,000 | | Average Closing Price | Approx. $605,000 | | Home Closings Gross Margin | At least 23.5% | | Ending Active Selling Communities | 330 to 340 | | Effective Tax Rate | Approx. 25% | | Diluted Share Count (Million Shares) | Approx. 108 | Full Year 2024 Guidance The company raised its full-year 2024 guidance, expecting increased home deliveries and average closing prices, stable gross margins, and plans for approximately $300 million in share repurchases Full Year 2024 Performance Guidance | Metric | Expected Value | | :----------------------- | :------- | | Home Closings | Approx. 12,500 | | Average Closing Price | $600,000 to $610,000 | | Home Closings Gross Margin | 23.5% to 24.0% | | Ending Active Selling Communities | 330 to 340 | | SG&A as % of Home Closings Revenue | High 9% range | | Effective Tax Rate | Approx. 25% | | Diluted Share Count (Million Shares) | Approx. 108 | | Land & Development Spend ($ Billion) | $2.3 to $2.5 | | Share Repurchases ($ Million) | Approx. $300 | Corporate Information This section provides details on Taylor Morrison's Q1 earnings conference call and an overview of the company's profile as a leading national homebuilder Earnings Conference Call The company will host a public webcast on April 30, 2024, at 8:30 AM ET to discuss its Q1 earnings, with investors able to participate via the company website or conference call - The earnings conference call will be held on April 30, 2024, at 8:30 AM ET, accessible via the investor relations section of Taylor Morrison's website15 - The dial-in number for the conference call is (833) 470-1428, with conference ID 54430715 About Taylor Morrison Taylor Morrison, headquartered in Scottsdale, Arizona, is a leading national homebuilder and developer serving a broad consumer base, consistently recognized as 'America's Most Trusted Home Builder' for multiple years - Taylor Morrison is headquartered in Scottsdale, Arizona, and is one of the leading homebuilders and developers in the United States16 - The company serves first-time, move-up, and resort lifestyle homebuyers and renters, with brands including Taylor Morrison, Esplanade, Darling Homes Collection by Taylor Morrison, and Yardly16 - From 2016 to 2024, Taylor Morrison has been recognized as 'America's Most Trusted Home Builder' by Lifestory Research16 Legal Disclosures This section outlines the nature of forward-looking statements within the report, emphasizing inherent risks and uncertainties that may cause actual results to differ materially from expectations Forward-Looking Statements This earnings summary contains forward-looking statements subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from expectations, with no obligation to update them unless required by applicable law - Forward-looking statements involve predictions, estimates, or expectations about future events, which may differ materially from actual results due to various risks and uncertainties such as inflation, changes in economic conditions, rising interest rates, labor shortages, and increased competition1718 - The company undertakes no obligation to update any forward-looking statements unless required by applicable law19 Financial Statements & Supplementary Data This section presents Taylor Morrison's consolidated statements of operations, condensed consolidated balance sheets, and detailed regional operational metrics for Q1 2024 Consolidated Statements of Operations In Q1 2024, the company achieved growth in total revenue and gross profit, with net income remaining largely consistent year-over-year and diluted earnings per share slightly increasing Consolidated Statements of Operations (Q1 2024 vs Q1 2023) | (Thousands of Dollars) | March 31, 2024 | March 31, 2023 | | :--------------------------- | :------------- | :------------- | | Home Closings Revenue, Net | $1,636,255 | $1,612,595 | | Land Closings Revenue | 7,225 | 4,520 | | Financial Services Revenue | 46,959 | 35,149 | | Other Revenue | 9,313 | 9,593 | | Total Revenue | 1,699,752 | 1,661,857 | | Cost of Home Closings | 1,243,209 | 1,227,513 | | Cost of Land Closings | 5,202 | 4,345 | | Financial Services Expenses | 25,143 | 22,148 | | Other Expenses | 9,353 | 8,285 | | Total Cost of Revenue | 1,282,907 | 1,262,291 | | Gross Profit | 416,845 | 399,566 | | Selling, Commission & Other Marketing Expenses | 102,600 | 92,760 | | General & Administrative Expenses | 67,564 | 66,261 | | Net Income | $190,270 | $191,051 | | Diluted EPS ($) | $1.75 | $1.74 | Condensed Consolidated Balance Sheets As of March 31, 2024, the company's total assets and total stockholders' equity increased, while cash and cash equivalents decreased, alongside an increase in real estate inventory and liabilities Condensed Consolidated Balance Sheets (March 31, 2024 vs December 31, 2023) | (Thousands of Dollars) | March 31, 2024 | December 31, 2023 | | :----------------------- | :------------- | :------------- | | Assets | | | | Cash & Cash Equivalents | $554,287 | $798,568 | | Total Real Estate Inventory | 5,985,353 | 5,545,446 | | Investments in Unconsolidated Entities | 369,982 | 346,192 | | Total Assets | $8,910,343 | $8,672,087 | | Liabilities | | | | Accounts Payable | $276,093 | $263,481 | | Customer Deposits | 357,657 | 326,087 | | Senior Notes, Net | 1,469,135 | 1,468,695 | | Loans & Other Borrowings | 441,190 | 394,943 | | Total Liabilities | $3,484,175 | $3,339,801 | | Stockholders' Equity | 5,426,168 | 5,332,286 | | Total Liabilities & Stockholders' Equity | $8,910,343 | $8,672,087 | Regional Operational Metrics The company's regional operational data reveals strong performance in home closings and net sales orders in the West, while the East and Central regions experienced varying market dynamics Homes Closed and Home Closings Revenue, Net by Region The Western region showed significant growth in home closings and revenue, while the Eastern region experienced a decline, and the Central region saw increased deliveries but a decreased average selling price Homes Closed and Home Closings Revenue, Net (by Region, Q1 2024 vs Q1 2023) | Region | 2024 Closings | 2023 Closings | Closings Change | 2024 Revenue ($ Thousand) | 2023 Revenue ($ Thousand) | Revenue Change | 2024 Avg. Price ($ Thousand) | 2023 Avg. Price ($ Thousand) | Avg. Price Change | | :--- | :----------- | :----------- | :--------- | :------------------- | :------------------- | :------- | :----------------------- | :----------------------- | :----------- | | East | 933 | 1,004 | (7.1)% | $541,730 | $601,611 | (10.0)% | $581 | $599 | (3.0%) | | Central | 832 | 731 | 13.8% | 472,032 | 463,394 | 1.9% | 567 | 634 | (10.6)% | | West | 966 | 806 | 19.9% | 622,493 | 547,590 | 13.7% | 644 | 679 | (5.2%) | | Total | 2,731 | 2,541 | 7.5% | $1,636,255 | $1,612,595 | 1.5% | $599 | $635 | (5.7%) | Net Sales Orders by Region Net sales orders grew across all regions, with the Central and Western regions showing the largest increases, indicating robust market demand Net Sales Orders (by Region, Q1 2024 vs Q1 2023) | Region | 2024 Orders | 2023 Orders | Orders Change | 2024 Sales Value ($ Thousand) | 2023 Sales Value ($ Thousand) | Sales Value Change | 2024 Avg. Price ($ Thousand) | 2023 Avg. Price ($ Thousand) | Avg. Price Change | | :--- | :----------- | :----------- | :--------- | :----------------------- | :----------------------- | :----------- | :----------------------- | :----------------------- | :----------- | | East | 1,295 | 1,079 | 20.0% | $776,861 | $644,519 | 20.5% | $600 | $597 | 0.5% | | Central | 904 | 674 | 34.1% | 478,419 | 384,830 | 24.3% | 529 | 571 | (7.4%) | | West | 1,487 | 1,101 | 35.1% | 984,483 | 756,344 | 30.2% | 662 | 687 | (3.6%) | | Total | 3,686 | 2,854 | 29.2% | $2,239,763 | $1,785,693 | 25.4% | $608 | $626 | (2.9%) | Sales Order Backlog by Region As of the end of Q1, the company's total sales order backlog remained consistent year-over-year, though the Western region saw significant growth in backlog, while the Eastern and Central regions experienced declines Sales Order Backlog (by Region, Q1 2024 vs Q1 2023) | Region | 2024 Backlog Homes | 2023 Backlog Homes | Backlog Homes Change | 2024 Sales Value ($ Thousand) | 2023 Sales Value ($ Thousand) | Sales Value Change | 2024 Avg. Price ($ Thousand) | 2023 Avg. Price ($ Thousand) | Avg. Price Change | | :--- | :--------------- | :--------------- | :------------- | :----------------------- | :----------------------- | :----------- | :----------------------- | :----------------------- | :----------- | | East | 2,433 | 2,658 | (8.5)% | $1,715,398 | $1,775,970 | (3.4)% | $705 | $668 | 5.5% | | Central | 1,371 | 1,660 | (17.4)% | 870,550 | 1,132,928 | (23.2)% | 635 | 682 | (6.9)% | | West | 2,440 | 1,949 | 25.2% | 1,662,190 | 1,328,187 | 25.1% | 681 | 681 | — % | | Total | 6,244 | 6,267 | (0.4)% | $4,248,138 | $4,237,085 | 0.3% | $680 | $676 | 0.6% | Ending Active Selling Communities by Region As of March 31, 2024, the company's total number of active selling communities slightly increased, with growth in the Eastern and Western regions and a slight decrease in the Central region Ending Active Selling Communities (by Region, March 31, 2024 vs March 31, 2023) | Region | March 31, 2024 | March 31, 2023 | Change | | :--- | :------------- | :------------- | :--- | | East | 113 | 106 | 6.6% | | Central | 93 | 98 | (5.1)% | | West | 125 | 120 | 4.2% | | Total | 331 | 324 | 2.2% | Non-GAAP Financial Measures Reconciliation This section provides reconciliations for non-GAAP financial measures, including adjusted net income, EBITDA, and debt to capitalization ratios, to offer a comprehensive view of the company's performance and leverage Introduction to Non-GAAP Measures The company provides non-GAAP financial measures such as adjusted net income, adjusted pre-tax income, adjusted home closings gross margin, EBITDA, adjusted EBITDA, and net homebuilding debt to capitalization ratio to supplement GAAP results, aiding investors in evaluating performance and leverage - Non-GAAP financial measures include adjusted net income, adjusted pre-tax income, adjusted home closings gross margin, EBITDA and adjusted EBITDA, and net homebuilding debt to capitalization ratio28 - Management uses these non-GAAP metrics to assess overall and regional performance and set performance-based compensation targets, while the net homebuilding debt to total capitalization ratio serves as a measure of overall leverage and for comparison with industry peers32 - These metrics are not separately presented as there were no adjustments in the current period that would cause adjusted net income, adjusted pre-tax income, or adjusted home closings gross margin to differ materially from comparable GAAP measures35 EBITDA and Adjusted EBITDA Reconciliation The company provides a reconciliation of EBITDA and Adjusted EBITDA, showing a slight decrease in these non-GAAP metrics in Q1 2024 compared to the prior year, yet maintaining a high percentage of total revenue EBITDA and Adjusted EBITDA Reconciliation (Q1 2024 vs Q1 2023) | (Thousands of Dollars) | March 31, 2024 | March 31, 2023 | | :----------------------------------- | :------------- | :------------- | | Net Income Attributable to Noncontrolling Interests | $191,161 | $191,228 | | Interest Income, Net | (43) | (1,111) | | Amortization of Capitalized Interest | 23,625 | 27,649 | | Income Tax Expense | 57,719 | 57,191 | | Depreciation & Amortization | 3,138 | 1,790 | | EBITDA | $275,600 | $276,747 | | Non-Cash Compensation Expense | 5,483 | 7,533 | | Adjusted EBITDA | $281,083 | $284,280 | | Adjusted EBITDA as % of Total Revenue | 16.5% | 17.1% | Debt to Capitalization Ratios Reconciliation The company provides a reconciliation of debt to capitalization ratios, indicating a decrease in both total homebuilding debt to capitalization and net homebuilding debt to capitalization ratios as of March 31, 2024, compared to the prior year, reflecting improved leverage Debt to Capitalization Ratios Reconciliation (March 31, 2024 vs December 31, 2023 vs March 31, 2023) | (Thousands of Dollars) | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------- | :------------- | :------------- | :------------- | | Total Debt | $2,093,499 | $2,017,102 | $2,301,878 | | Total Homebuilding Debt | $1,918,260 | $1,872,013 | $2,165,737 | | Total Stockholders' Equity | 5,426,168 | 5,332,286 | 4,846,546 | | Total Capitalization | $7,344,428 | $7,204,299 | $7,012,283 | | Homebuilding Debt to Capitalization Ratio (%) | 26.1% | 26.0% | 30.9% | | Net Homebuilding Debt | $1,363,973 | $1,073,445 | $1,288,020 | | Total Capitalization | $6,790,141 | $6,405,731 | $6,134,566 | | Net Homebuilding Debt to Capitalization Ratio (%) | 20.1% | 16.8% | 21.0% |