Taylor Morrison(US:TMHC)2025-07-23 13:32Financial Data and Key Metrics Changes - The company reported net income of $194 million or $1.92 per diluted share, up from $1.86 a year ago [22] - Adjusted net income was $204 million or $2.20 per diluted share, up from $1.97 a year ago [22] - Home closings revenue increased 2% to approximately $2 billion, with an average closing price of $589,000, slightly ahead of prior guidance [22][24] - The adjusted home closings gross margin was 23%, in line with prior guidance, while the home closings gross margin was 22.3% [25][24] Business Line Data and Key Metrics Changes - The company delivered 3,340 homes, with 65% of closings coming from spec homes, up from 58% in the prior quarter [22][24] - The share of spec sales increased to a new high of 71%, including 50% in the Esplanade segment [12] - The second quarter orders consisted of 33% entry-level, 50% move-up, and 17% resort lifestyle homes [12] Market Data and Key Metrics Changes - The overall cancellation rate was 14.6% of gross orders, up from 9.4% a year ago, reflecting changes in consumer confidence [26] - The average credit score for buyers using Taylor Morrison home funding was 751, with a down payment of 22% and household income of $188,000 [29] - The company controlled 85,051 homebuilding lots, representing 6.4 years of supply [16] Company Strategy and Development Direction - The company emphasizes a balanced portfolio of to-be-built and spec homes, primarily in attractive core submarkets [11] - The strategy includes prioritizing capital efficiency and returns over volume in a competitive marketplace [14] - The company plans to continue expanding its Esplanade brand, which has shown resilience in sales [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the sales environment has been softer than normal due to various economic factors, but they expect a more patient growth trajectory [7][14] - The company believes that the need for affordable new construction remains intact across its markets [14] - Management expressed confidence in their ability to generate mid to high teen returns on equity throughout the cycle [15] Other Important Information - The company has invested approximately $612 million in homebuilding land during the quarter, with a total anticipated investment of around $2.4 billion for the year [17] - The company ended the quarter with liquidity of approximately $1.1 billion, including $130 million of unrestricted cash [29] - The company repurchased 1.7 million shares for $100 million during the quarter, with a remaining repurchase authorization of $675 million [30] Q&A Session Summary Question: Spec mix in the quarter - Management indicated that the increase in spec sales was driven by consumer preferences for inventory homes due to the current incentive environment [34][38] Question: Gross margin expectations - Management expects Q3 gross margin to be around 22%, with Q4 expected to be approximately 22% as well [44][45] Question: $3 billion facility with Kennedy Lewis - The facility is intended to provide balance sheet relief and greater optionality for asset disposition, with both current and prospective assets being considered [50][54] Question: Growth expectations for 2026 - Management has not provided specific guidance for 2026 but expects growth in the coming years, contingent on market conditions [60][62] Question: Cancellation rates - Management noted that cancellations were primarily due to buyers unable to sell their existing homes, but overall rates remain below industry averages [96][98]