Taylor Morrison(US:TMHC)2023-02-15 17:48Financial Data and Key Metrics Changes - In Q4 2022, the company delivered over 12,600 homes with a record adjusted home closings gross margin of 25.5%, up more than 500 basis points year-over-year, and an all-time low SG&A ratio of 8.2% [4][5] - Net income increased nearly 60% on a 10% increase in total revenue, with earnings of $2.51 per diluted share, or $2.93 after adjustments [5][22] - The company reduced net home building leverage to 24% from 34% at the end of 2021, and book value per share increased 33% to over $42 [5][31] Business Line Data and Key Metrics Changes - The company reported that 64% of Q4 gross sales orders were for spec homes, up from 47% a year ago, indicating a shift in consumer preference [12] - Average closing price for homes delivered in Q4 was $626,000, generating home closings revenue of $2.4 billion [23] - The average cycle times for home deliveries extended several days due to supply chain challenges, particularly in Florida and the Southeast [23] Market Data and Key Metrics Changes - The company noted a positive momentum in sales activity and shopper sentiment since mid-January, with gross sales orders improving to a normalized pace of approximately three per month [8] - The cancellation rate trended into the mid-teens, with net sales pace at 2.5 compared to 1.9 in Q4 [8][9] - The average deposit from customers in backlog was nearly $70,000 per home, with a capture rate of 78% for buyers financed by Taylor Morrison Home Funding [9] Company Strategy and Development Direction - The company emphasized a balanced and diverse portfolio, serving various consumer segments including entry-level, move-up, and resort lifestyle [6] - Strategic pricing adjustments were made to drive sales and protect backlog value, with a focus on mortgage incentives and selective base price adjustments [7][10] - The company is pursuing cost rationalization opportunities and has moderated starts volume to align with sales activity [11][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that housing market conditions remain below peak levels, but expressed confidence in the enduring demand for home ownership [10] - The company expects to deliver between 2,300 to 2,400 homes in Q1 and between 10,000 to 11,000 homes for the full year [25] - Management highlighted the importance of operational flexibility and innovation in sales programs to navigate the current market [14] Other Important Information - The company was named America’s Most Trusted Homebuilder for the eighth consecutive year and recognized for gender equality in the workplace [33] - The launch of a new build-to-rent brand, Yardly, was announced, focusing on cottage-style homes in branded communities [20] Q&A Session Summary Question: Clarification on normalized net order absorption pace and land spend - Management confirmed that the normalized net order absorption pace was about 2.5 per month and discussed the impact of reduced land spend on future community openings [35][36] Question: Future margin performance relative to peers - Management indicated that while there are challenges, they expect strong margins due to a solid backlog and operational enhancements [40][42] Question: Changes in product mix for 2023 - Management does not anticipate significant changes in the mix between entry-level, move-up, and resort lifestyle products [45] Question: Trends in average selling prices (ASPs) - Management clarified that gross order ASPs were over $600,000, with some adjustments affecting the reported figures [56] Question: Insights on luxury and active adult buyers - Management noted strong engagement from luxury buyers and improvements in active adult segments, particularly in markets like Florida [58][60] Question: Inventory impairment charges and future expectations - Management stated that the impairment charges were expected and attributed to a specific non-core community, with no systemic issues anticipated [67][68] Question: Future incentives and pricing adjustments - Management confirmed a reduction in incentives and a selective approach to base price adjustments, focusing on finance incentives [51][70]