Taylor Morrison(US:TMHC)2020-08-01 22:41Financial Data and Key Metrics Changes - The company reported net income of $104 million and diluted earnings per share of $0.80 when adjusted for acquisition-related expenses, while GAAP net income was $66 million with diluted earnings per share of $0.50 [44] - Total revenues for the quarter were $1.53 billion, with homebuilding revenues exceeding $1.47 billion, marking a 20% increase from the prior year [45] - The net debt to capital ratio at the end of the second quarter was 46%, with expectations to reduce it to the low to mid-40% range by year-end [43] Business Line Data and Key Metrics Changes - The company achieved 3,453 net sales in the quarter, representing a 23% year-over-year growth, with a significant rebound in sales from April's low point [11] - Closings for the quarter totaled 3,212, an increase of 24% compared to the same quarter last year [16] - Financial services generated approximately $40 million in revenue, with a mortgage capture rate of 81%, up from 72% in the same quarter of 2019 [49] Market Data and Key Metrics Changes - The company noted strong sales growth in states with higher COVID-19 infection rates, such as Arizona, Texas, and Florida, indicating robust consumer demand despite the pandemic [59] - The active adult group showed slower recovery, with sales slightly better than flat year-over-year, while in-state sales in Florida increased by over 50% [14][59] Company Strategy and Development Direction - The company plans to introduce the "Live Well" product enhancements in all new construction starts, focusing on health and wellness features [22] - A strong emphasis on virtual sales experiences and digital capabilities has been established, with significant engagement in self-service features and online home reservations [26][30] - The company aims to continue enhancing its cash position and managing debt effectively, with a recent refinancing effort expected to save about $10 million in annualized interest [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current interest rate environment, which is seen as a strong driver for home sales [18] - The company anticipates that the trend of moving from urban to suburban areas will continue, driven by consumer preferences for more space [19][33] - Management remains cautious about potential disruptions from COVID-19 but is encouraged by the resilience shown in sales and operations [10][32] Other Important Information - The company has approximately 67,000 homebuilding lots owned and controlled, with an average land bank supply of about 4.9 years [53] - The company expects to spend approximately $1.4 billion to $1.5 billion on land and development for the year [57] Q&A Session Summary Question: Clarification on guidance regarding margins - Management indicated that the purchase accounting impact for Q3 is likely around 100 basis points, with expectations for Q4 around 50 basis points [67] Question: Thoughts on geographic and consumer mix post-acquisition - Management expressed satisfaction with the current geographic footprint and consumer mix, noting a strong bias towards entry-level buyers [69][70] Question: Balance sheet and debt repayment strategy - Management clarified that the remaining balance on the 2023 and 2025 bonds is about $185 million, and the recent refinancing will save approximately $10 million in interest [74] Question: Impact of virtual sales on SG&A - Management acknowledged the significant advancements in virtual sales and its potential long-term impact on SG&A, including reduced advertising costs [76][80] Question: Orders breakdown between to-be-built and spec homes - Management reported that orders were close to half for to-be-built homes, with delivery timelines varying based on municipality regulations [103] Question: Trends in active adult buyer segments - Management noted a recovery in the more affordable active adult segment, which took longer to re-engage compared to luxury buyers [109]