Taylor Morrison(US:TMHC)2019-10-30 19:01Financial Data and Key Metrics Changes - For Q3 2019, net income was $67 million, with earnings per share (EPS) at $0.63. Excluding debt extinguishment losses, adjusted EPS was $0.65. Total revenues exceeded $1.1 billion, marking a 7% increase from the same quarter last year [20][21][30] - Home closings gross margin, including capitalized interest, was 18.5%, exceeding guidance due to efficiencies of scale [21][24] - The effective tax rate for the quarter was 25.9%, higher than the previous year due to favorable tax initiatives in Q3 2018 [24] Business Line Data and Key Metrics Changes - The company recorded 2,540 net orders, a 39% increase year-over-year, with September orders up over 60% compared to the previous year [8][11] - Average community count was 346, leading to a sales pace of 2.4, compared to 2.2 in Q3 2018 [9] - Financial services generated approximately $23 million in revenue, with a mortgage capture rate of 77%, up from 71% in the same quarter last year [22] Market Data and Key Metrics Changes - The East region led sales orders with nearly 64% growth, while all three regions experienced at least 20% growth [8] - Phoenix market saw closings up over 30% for the fourth consecutive quarter, with sales up more than 20% for the fifth consecutive quarter [32] - Dallas market showed signs of improvement after a period of pricing challenges, indicating a recovery trend [33] Company Strategy and Development Direction - The company is focused on integrating M&A activities to maximize value creation and efficiencies, particularly following the AV Homes acquisition [13][14] - A build-to-rent strategy is being implemented, with initial investments not exceeding $25 million for 2019, and vertical construction expected to begin in 2020 [16][17] - The company aims to enhance its brand positioning and digital presence, including a new website and marketing initiatives to improve customer engagement [38][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in consumer sentiment, citing rising incomes, a strong stock market, and low unemployment as positive indicators [15] - The company anticipates a strong Q4 and beyond, with expectations for continued order growth and market stability despite potential interest rate increases [14][50] - Management noted that the integration of legacy AV communities has been successful, contributing to overall performance [69] Other Important Information - The company ended the quarter with approximately $740 million in total available liquidity, with a net debt to capital ratio of 42.7% [28][29] - Land and development spending for the year is expected to be around $1.2 billion, including $25 million for build-to-rent activities [32][95] Q&A Session Summary Question: Consumer mindset and demand outlook - Management noted that consumers are feeling confident, with increased foot traffic and web engagement, despite some concerns about potential interest rate increases [50] Question: Community count and growth expectations - Management indicated that community count is expected to be in the low 330s for Q4, with a gradual ramp-up anticipated in 2020 [52][53] Question: Scale benefits and gross margins - Management highlighted benefits from scale in land purchasing and production, contributing to improved gross margins [58] Question: Active adult demand and political backdrop - Management expressed confidence in active adult demand, particularly in Florida, and noted that political noise is becoming less impactful on consumer sentiment [86] Question: Pricing strategies and community performance - Management confirmed that price increases are being seen across all consumer segments, with a focus on strategic pricing in new communities [93]