Taylor Morrison Home (TMHC) Q1 2025 Earnings Call April 23, 2025 08:30 AM ET Company Participants Mackenzie Aron - VP, IRSheryl Palmer - Chairman & CEOErik Heuser - Chief Corporate Operations OfficerCurt VanHyfte - Executive VP & CFOMichael Rehaut - Executive DirectorAlan Ratner - Managing DirectorMike Dahl - Managing Director - Equity ResearchCarl Reichardt - Managing Director - Equity ResearchJay McCanless - SVP - Equity ResearchBuck Horne - Managing Director - Equity ResearchAlex Barron - President & Fou ...

Financial Data and Key Metrics Changes - In Q1, the company delivered over 6,500 homes, achieving gross margins of 27.5%, with net income of $523 million, translating to $2.57 per share, down from $663 million or $3.10 per share in Q1 2024 [10][36][37] - The trailing 12-month return on equity was reported at 25.4% [10] - Home sale revenues totaled $3.7 billion, a decrease of 2% from $3.8 billion in the previous year [24] Business Line Data and Key Metrics Changes - Net new orders totaled 7,765 homes, a decrease of 7% year-over-year, with a 10% decrease in net new orders per store [21] - The average spend on options and lot premiums per home increased to $110,000 in Q1, up from $102,000 and $107,000 in the first and fourth quarters of the previous year [13] - The cancellation rate increased slightly to 11% compared to 10% in the prior year [21] Market Data and Key Metrics Changes - The company noted that 20% of its divisions were able to increase prices due to a drop in the 30-year mortgage rate below 7% [13] - The financial strength of move-up and active adult home buyers led to 60% of the portfolio being aligned to serve these key buyer groups [14] Company Strategy and Development Direction - The company aims to balance price and pace to drive high returns, prioritizing price over volume in the current environment [29][45] - The land investment for 2025 is expected to be approximately $5 billion, reflecting a more prudent approach in the current market [39][46] - The company plans to deliver between 29,000 and 30,000 homes for the full year, slightly below prior guidance of 31,000 [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand dynamics within the housing industry, despite current macroeconomic uncertainties [48] - The company is prepared to adjust land spending in response to changes in buyer demand, while maintaining a strong financial position [40][42] - Management acknowledged the volatility in consumer demand due to economic concerns but remains optimistic about future sales [17][90] Other Important Information - The company reported a gross margin of 27.5% in Q1, flat sequentially but down from the previous year [32] - SG&A expenses for Q1 were $393 million, or 10.5% of home sale revenues, compared to $358 million, or 9.4% of home sale revenues in the prior year [33] Q&A Session Summary Question: Second half margin expectations and tariff impact - Management confirmed that the incentive load for orders in Q1 was consistent with the 8% realized in deliveries, and the tariff impact is estimated at 1% of average sales price, approximately $5,000 [56][57] Question: Share repurchases - The company repurchased $300 million in shares during the quarter and has $1.9 billion remaining under its share repurchase authorization [60][61] Question: Cash flow guidance - The cash flow guide of $1.4 billion assumes homes needed to meet the delivery target, with adjustments made for land spend [64][66] Question: Market conditions and demand - Management acknowledged persistent demand but noted that exceeding this demand could require significant price reductions [73][76] Question: Tariff impact and guidance changes - The tariff impact is expected primarily in the fourth quarter, with specific categories identified, and the guidance reflects adjustments based on current market conditions [108][109] Question: Land spend and growth intentions - The reduction in land spend to $5 billion signals a prudent approach, with no impact on long-term growth plans [112][116]

Core Viewpoint - The new "Residential Project Standards" issued by the Ministry of Housing and Urban-Rural Development aims to ensure safety, comfort, sustainability, and intelligence in residential construction, effective from May 1 this year [1][2]. Summary by Sections Basic Requirements - The new standards emphasize safety, durability, human-centered design, health, and comfort, as well as green and low-carbon principles [2]. - Residential projects must adhere to barrier-free design principles and meet various performance requirements such as ventilation, lighting, sound insulation, waterproofing, moisture-proofing, thermal insulation, and heat preservation [2]. Building Space - New residential buildings must have a minimum floor height of 3 meters, with living spaces like bedrooms and living rooms having a net height of at least 2.6 meters, and kitchens and bathrooms at least 2.2 meters [2]. - Minimum usable areas are specified: bedrooms must be at least 5 square meters, combined living and bedroom spaces at least 9 square meters, and the short side width of bedrooms must not be less than 1.80 meters [2]. Public Space - For residential buildings with four or more floors, each unit must have at least one elevator; for buildings with twelve or more floors, at least two elevators are required [2]. - The standards also mandate that public mobile communication signals must cover public spaces and elevator cabins [2]. Indoor Environment - The new standards enhance sound insulation performance between units and set noise limits for structural noise and drainage noise in living areas [3]. Performance Requirements - Basic performance requirements for residential buildings include winter insulation, summer heat insulation, and ventilation [4]. - The new standards are considered mandatory engineering construction regulations aimed at ensuring basic housing conditions and living environments for residents [4]. Comparison with Previous Standards - Compared to the 2005 and 2011 standards, the new regulations take a more holistic approach to residential projects, focusing on increasing floor heights, controlling density, refining elderly-friendly requirements, strengthening noise restrictions, and improving thermal environment standards [4].

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Group 1 - The core viewpoint emphasizes the government's commitment to building and promoting "good houses" that meet the high-quality living needs of the public, focusing on safety, comfort, sustainability, and intelligence [1][2] Group 2 - The first focus area is establishing standards, including the development of a "good house" construction guide and revising residential project specifications, with a specific requirement for residential ceiling heights to be no less than 3 meters [1] - The second focus area is enhancing technology by promoting practical new technologies, materials, processes, and products to address common issues such as poor sound insulation, leakage, cracking, and odor, while also advancing smart home solutions [1] - The third focus area involves driving projects that encourage cities and enterprises to construct "good houses" and actively promote this initiative [2]