• Revenue: Over $2 billion from home closings.
• Home Closings: 3,394 homes delivered.
• Average Closing Price: $598,000 per home.
• Gross Margin: 24.8% for home closings.
• Earnings Per Diluted Share: $2.37, a 50% year-over-year increase.
• Net Income: $251 million, up 54% from the previous year.
• Book Value Per Share: Approximately $54, a 15% year-over-year increase.
• Net Orders: Increased 9% year-over-year.
• SG&A as a Percentage of Revenue: 9.8%, down from 10.4% a year ago.
• Financial Services Revenue: $50 million with a gross margin of 45%.
• Liquidity: Approximately $1.2 billion, including $256 million in cash.
• Net Homebuilding Debt to Capitalization Ratio: 22.5%.
• Share Repurchases: 1 million shares for $61 million in the quarter.
• Land Inventory: 83,579 lots, representing 6.6 years of supply.
• Community Count: 340 outlets, a 5% increase year-over-year.

• Warning! GuruFocus has detected 6 Warning Signs with ASX:IKE.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Taylor Morrison Home Corp (NYSE:TMHC) delivered 3,394 homes at an average price of $598,000, generating over $2 billion in revenue with a gross margin of 24.8%.
• The company achieved over 50% year-over-year growth in earnings per diluted share to $2.37 and a 15% increase in book value per share to approximately $54.
• Net orders increased 9% year-over-year, driven by a monthly absorption pace of 2.8 per community.
• Taylor Morrison Home Corp (NYSE:TMHC) maintained a strong financial position with a net homebuilding debt to capitalization ratio of 22.5% and liquidity of approximately $1.2 billion.
• The company has a diversified consumer and geographic strategy, which has helped maintain strong gross margins despite interest rate volatility.

Negative Points

• Hurricane-related disruptions caused nearly two weeks of operational delays, impacting a sizable portion of the portfolio in Florida, the Carolinas, and Georgia.
• The availability of homeowners insurance in coastal markets is shrinking, posing a potential risk to future sales.
• The West Coast market showed mixed results, with some areas experiencing increased competition and inventory challenges.
• Inventory turnover has decreased slightly, with inventory dollars up almost 20% year-over-year, indicating potential inefficiencies.
• The company faces ongoing challenges with affordability issues for first-time buyers, exacerbated by high interest rates and general inflation.

Q & A Highlights

Q: Can you explain how Taylor Morrison's incentive levels have trended, particularly in Florida and Texas, given the competitive environment? A: Sheryl Palmer, CEO, noted that despite increased competition, particularly in Texas, Taylor Morrison's incentive levels have remained stable or even declined slightly. The company focuses on a personalized approach to finance incentives, which helps maintain home prices and protect margins. Florida markets like Orlando and Tampa have shown strong sales and margins, while Texas markets like Austin and Dallas have experienced significant growth and repositioning efforts.

Q: How is Taylor Morrison progressing with its lot optioning strategy, and what impact does this have on margins and returns? A: Erik Heuser, Chief Corporate Operations Officer, explained that Taylor Morrison has increased its controlled lot percentage to 58% and aims for 60-65%. The cost of land banking is slightly higher due to interest rates, with a margin impact of under 2% but a significant return benefit. Currently, 20% of controlled lots are through land banking, which may increase slightly.

Q: Which consumer segment does Taylor Morrison expect to perform best given the current market conditions? A: Sheryl Palmer, CEO, expressed confidence in all consumer segments. First-time buyers are expected to benefit as rates moderate, move-up buyers will gain from improved market conditions, and active adults are driven by lifestyle choices. The company values its diversified portfolio and expects balanced performance across segments.

Q: How does Taylor Morrison view its current inventory levels, especially in light of interest rate volatility? A: Curt Vanhyfte, CFO, stated that the company is comfortable with its current inventory levels, which are around 1.8 completed specs per community. This level supports the business's trajectory and the entry-level consumer segment, which remains a significant part of their business.

Q: What is Taylor Morrison's outlook on incentives and pricing resiliency compared to industry trends? A: Sheryl Palmer, CEO, highlighted that Taylor Morrison's incentives in the quarter were the lowest in two years, reflecting the company's ability to personalize buyer needs and maintain strong margins. While acknowledging affordability challenges, the company expects its incentive strategy to remain less volatile than industry trends.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.