• Revenue: Nearly $2.2 billion from home closings.
• Adjusted Home Closings Gross Margin: 24.9%.
• Adjusted Earnings Per Diluted Share: Increased nearly 30% year-over-year.
• Book Value Per Share: Increased 14% year-over-year to $56.
• Net Orders: Increased 11% year-over-year.
• Absorption Pace: 2.6 per community, up from 2.4 a year ago.
• Net Income: $242 million or $2.30 per diluted share.
• Adjusted Net Income: $278 million or $2.64 per diluted share.
• Closings Volume: Increased 12% year-over-year to 3,571 homes.
• Average Closing Price: $608,000.
• SG&A Ratio: 9.4% of home closings revenue.
• Financial Services Revenue: $54 million with a gross margin of 48%.
• Liquidity: Approximately $1.4 billion, including $487 million of unrestricted cash.
• Net Homebuilding Debt to Capitalization Ratio: 20% at year-end.
• Share Repurchases: 1.4 million shares for $90 million in the quarter, with a full-year target of $300 million to $350 million.

• Warning! GuruFocus has detected 2 Warning Signs with PYPD.

Release Date: February 12, 2025

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 strong financial results in Q4 2024, with nearly $2.2 billion in revenue and an adjusted home closings gross margin of 24.9%.
• The company achieved a 30% year-over-year growth in adjusted earnings per diluted share and a 14% increase in book value per share.
• Net orders increased by 11% year-over-year, with an absorption pace of 2.6 per community, indicating healthy demand trends.
• TMHC's strategic focus on quality locations and diversified consumer segments has helped maintain stable margins despite market volatility.
• The company has effectively managed its land portfolio, with 57% of lots controlled via options and off-balance sheet structures, enhancing returns on invested capital.

Negative Points

• Interest rates have increased sharply, posing challenges to affordability, particularly for entry-level buyers.
• The company anticipates a step-up in land cost inflation to approximately 7% in 2025, which could pressure margins.
• There is a projected moderation in gross margins over the course of 2025 due to increased incentives and land cost inflation.
• The resort lifestyle segment saw a 9% decline in orders, partly due to hurricane impacts in Florida and timing of community openings.
• Rising inventory levels in certain markets, such as Florida, could pose competitive pressures, although TMHC's strategic positioning mitigates some of this risk.

Q & A Highlights

Q: Could you talk about how you're thinking about the cadence for gross margins this year with higher incentives and your Q1 gross margin guide in the high 23% range? A: Curt Vanhyfte, CFO: For the first quarter, we're guiding to the high 23% range. We expect margins to moderate over the course of the year due to a step-up in rates and lot cost inflation. The exit rate from Q4 is similar to what we expect, given rates are generally in the same place.

Q: What are you assuming around material costs with the potential impact of tariffs? A: Curt Vanhyfte, CFO: The cost environment was stable until recent tariff discussions. If tariffs on steel are implemented, the impact would be minimal, around $1,200 per lot, affecting us in the back half of the year. Other tariffs could impact costs by $4,000 to $5,000 per house, likely affecting the fourth quarter. These are manageable within our guidance.

Q: Can you provide insight into your pricing strategy, given the market's increase in incentives? A: Sheryl Palmer, CEO: In Q4, we saw pricing power in about 50% of our communities. We implemented a national price increase in January. While January started slow, we've seen a pickup since mid-January. Pricing opportunities are community-specific, and we expect a small increase in incentives compared to Q4.

Q: How are you approaching SG&A guidance, given the expectation for volume growth and a competitive backdrop? A: Sheryl Palmer, CEO: We're seeing a reduction in broker commissions, with a 10% year-over-year decrease in Q4. Curt Vanhyfte, CFO: With increased closings and revenue growth, we're achieving SG&A leverage. Our teams focus on running an efficient business, contributing to this leverage.

Q: What is driving your strong performance in the central region, particularly in Texas? A: Sheryl Palmer, CEO: Performance is generally strong across the board. Austin saw a 20% sales increase and 30% absorption increase. Houston and Dallas also showed significant growth. Erik Heuser, COO: Our strategic submarket positioning results in lower resale home supply in our operating areas, aiding performance.

Q: Can you elaborate on the use of incentives and rate buydowns within your portfolio? A: Sheryl Palmer, CEO: Incentives are primarily used in first-time buyer communities due to affordability challenges. Our personalized approach helps manage costs. Erik Heuser, COO: Land supply and competition are highest in first-time buyer markets, creating pressure. Our diverse portfolio helps mitigate this.

Q: Have you seen any changes in the land market, such as willingness to renegotiate option contracts? A: Erik Heuser, COO: Demand for land decreased slightly in Q3 and Q4, providing more flexibility in deal structures. We're focusing on efficient deal structures to increase our controlled lot percentage and enhance returns.

Q: How are you managing land banking costs, and what is the trade-off between gross margin impact and return on equity? A: Erik Heuser, COO: Land banking demand is strong, and costs have decreased. Our last facility had a 197 basis point gross margin impact for a 750 basis point return impact, a 3.8x trade-off. We use various tools to manage exposure and increase control.

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