Taylor Morrison(TMHC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, reported net income was $174 million or $1.76 per diluted share, while adjusted net income was $188 million or $1.91 per diluted share, reflecting a solid performance despite market challenges [25][26] - For the full year 2025, reported net income was $783 million or $7.77 per diluted share, with adjusted net income at $830 million or $8.24 per diluted share, indicating strong overall financial health [25][26] - The company achieved a return on equity of 13% and a 14% growth in book value per share [5] Business Line Data and Key Metrics Changes - The company delivered nearly 13,000 homes in 2025 with an adjusted home closings gross margin of 23% [5] - In Q4 2025, net orders totaled 2,499 homes, down 5% year-over-year, driven by a moderation in monthly absorption pace [25][26] - The average price of homes delivered in Q4 was $596,000, generating approximately $2 billion in home closings revenue [26] Market Data and Key Metrics Changes - Sales were strongest in the east and west areas, particularly in Florida, California, and Phoenix, while the central region, especially Texas, showed slower performance [10] - The company experienced a 7% year-over-year net order growth in its Esplanade resort lifestyle communities, contrasting with declines in other segments [10] Company Strategy and Development Direction - The company plans to accelerate new community openings in 2026, with over 100 new outlets planned, including more than 20 new Esplanade outlets [12] - The focus will shift towards serving more discerning entry-level demand and enhancing the build-to-rent platform, Yardly, to meet affordable housing needs [15][22] - The company aims to concentrate efforts on core markets and limit investments in non-core submarkets to optimize capital efficiency [14][20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about sales momentum in early 2026, despite ongoing market challenges such as elevated inventory levels and consumer confidence issues [8][9] - The company anticipates that the spring selling season will be critical for home closing deliveries and margins, with expectations for gradual margin improvement throughout the year [30][31] Other Important Information - The company repurchased 1.2 million shares for $71 million in Q4 2025, totaling 6.5 million shares for approximately $381 million for the full year [33] - The board approved an increase in the share repurchase authorization to $1 billion, reflecting a commitment to return excess capital to shareholders [33] Q&A Session Summary Question: Long-term view on business mix and geographies - Management expects a slight decrease in entry-level buyer mix, focusing on core markets like Florida and Texas while pulling back from California due to underwriting constraints [40][42] Question: Spec versus to-be-built mix - The intention is to gradually shift back towards a more balanced mix, with a target of 50/50 over time, though achieving this in 2026 may be challenging [43][46] Question: Absorption rates in new communities - New communities are performing well, with strong interest and sales activity, indicating positive momentum as the spring selling season approaches [64] Question: Construction cost outlook - While construction costs are expected to remain stable, there are concerns about potential increases in lumber prices and other materials [56] Question: Incentives and gross margin guidance - Incentives were relatively flat from Q4 to Q1, with expectations for gross margins to improve as the mix shifts towards to-be-built homes [78][80]