Taylor Morrison(US:TMHC)2022-04-27 19:18Financial Data and Key Metrics Changes - The company reported first-quarter earnings of $1.44 per diluted share, a 92% increase year-over-year, driven by strong revenue growth and improved gross margins [29] - Home closings gross margin improved by 450 basis points year-over-year to 23.1%, with expectations to reach at least 24.5% for the full year, up over 400 basis points from 2021 [33][8] - SG&A as a percentage of home closings revenue decreased by 120 basis points year-over-year to 9.6%, with expectations to improve to the mid- to high 8% range in 2022 [34] Business Line Data and Key Metrics Changes - The company delivered 2,768 homes in the first quarter, with a 23% increase in average closing price to $594,000, generating home closings revenue of $1.6 billion [29] - The backlog consists of 9,400 sold homes, with strong embedded equity and a cancellation rate of approximately 6%, among all-time lows [12][8] - The company expects to deliver between 14,000 to 15,000 homes in 2022, including 3,000 to 3,200 homes in the second quarter [32] Market Data and Key Metrics Changes - The average net sales order price increased by 24% year-over-year, reflecting strong demand across markets [9] - The company ended the quarter with a monthly absorption pace of 3.1 net sales orders per community, with strong demand exceeding this level [10] - The average credit score of borrowers in the backlog is at an all-time high of 752, with average down payments of 24% higher than a year ago [12] Company Strategy and Development Direction - The company is focused on operational priorities to leverage market scale, prime land positions, and consumer-centric products, aiming for long-term structural improvements [7] - A disciplined investment strategy is in place, with a robust land pipeline of approximately 77,000 owned and controlled homebuilding lots, representing 5.6 years of total supply [22] - The company is increasing its share of land spend on development, with over 50% of first-quarter land investment dedicated to land development [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook despite rising interest rates and geopolitical issues, focusing on delivering a record year of financial performance [8] - The company is closely monitoring the impact of rising mortgage rates on consumer behavior, particularly among entry-level buyers [11] - Management highlighted the strength of their buyers and the quality of their land positions, indicating resilience in demand [12] Other Important Information - The company published its fourth annual environmental, social, and governance report, emphasizing sustainable business practices and community contributions [39][40] - The company has introduced a new extended rate loss program to help maintain strong mortgage capture rates amid rising interest rates [16] Q&A Session Summary Question: Performance of different buyer segments - Management noted robust demand across all consumer segments, with no significant differences observed in April compared to the first quarter [47] Question: Sales restrictions and home release timing - Management indicated that sales restrictions are still in place, but they expect to have a more open environment by the latter part of the quarter [49] Question: Impact of rising rates on land acquisition strategy - Management confirmed that the overall mix of the business remains intentional, with no significant changes in land acquisition strategy due to rising rates [62] Question: Land market conditions - Management stated that there has not been meaningful capitulation in the land market yet, with a typical 9-month lag expected before any significant changes occur [78] Question: Supply chain and SKU rationalization - Management confirmed that SKU rationalization has been beneficial, leading to improved gross margins while maintaining customer customization options [82]