Taylor Morrison Home Corp Q3 FY2024 earnings call

Market Update

• Diversified consumer and geographic strategy benefited from third quarter results despite market challenges like interest rate volatility, economic uncertainty, and hurricane-related disruptions.

Land Portfolio

• Owned and controlled lot inventory was 83,579 homebuilding lots at quarter-end, representing 6.6 years of supply (2.7 years owned). 58% of lots controlled via off-balance sheet structures. Secured $1 billion land banking facility with Kennedy Lewis for land acquisition and development.

Financials

• Third quarter net income was $251 million or $2.37 per diluted share, up 54% year-over-year. Closings volume increased 29% year-over-year to 3,394 homes. SG&A as a percentage of home closings revenue was 9.8%, down from 10.4% a year ago. Financial Services revenue was $50 million with a gross margin of 45%, up from $40 million and 42.2% a year ago.

Online Tools

• Record highs in online reservations during the third quarter with a conversion rate of 58% and 17% contribution to sales. Realtor participation on online tools reservations continued to trend downward but improved year-over-year.

In the third quarter, Taylor Morrison delivered 3,394 homes at an average price of $598,000, generating over $2 billion in revenue with a home closings gross margin of 24.8%. By consumer group, third quarter orders consisted of 33% entry level, 43% move-up, and 24% resort lifestyle. Year-over-year, orders were strongest in the resort lifestyle segment with 20% growth, move-up sales increased 8%, and entry level was up 4%. Resort lifestyle communities had an outsized contribution to revenue and margin.

2024 Outlook

• Full year 2024 expected closings of 12,725 homes, with a gross margin of around 24.3%.

2025 Outlook

• Confident in strong performance in 2025 supported by capital-efficient growth. Board authorized an increase in share repurchase authorization up to $1 billion effective through December 31, 2026.

• Hurricane-related disruptions impacted land under development, particularly in Florida, Carolinas, and Georgia. - Heightened risk of shrinking homeowners insurance availability in coastal markets, though insurance via Taylor Morrison Insurance Services has not been an obstacle for buyers thus far.

Q: Good morning, everyone. First, I’d love to dive into the comments you’ve made so far around competition and incentives...

A: Okay, Mike, I think you threw about a half dozen questions in there, but I’m going to – maybe the best way to go about it is – and I appreciate the question. I really do, is maybe to take a little spin – maybe I’ll start kind of macro and then take a little spin around the country for you...

Q: Thanks. Good morning, everyone. First, I’d love to dive into the comments you’ve made so far around competition and incentives...

A: Hey Mike, it's Erik. Happy to take that. And yes, as I mentioned, we've added the field and Kennedy Lewis is a well-respected and good firm that we feel comfortable with. And I appreciate your framing of the question in that it has been an evolution...

Q: Okay. Okay, great. Thank you for taking my questions. First, just wanted to ask a question about consumer segments moving forward...

A: Which will perform best? I thought you were going to a different place, but will our balance look like. Actually, I have confidence, I think, for different reasons in each of the groups...

Q: Good morning, everyone. Thanks for taking the questions. I wanted to go back to the question around incentives...

A: Well, I appreciate the recognition. I really do, Matt. It’s interesting because obviously, we’ve seen over the last few weeks, we’ve seen a lot of noise around incentives going up...

Q: Good morning. Thanks for taking my questions. Just one clarification on the gross margin this quarter...

A: Carl, it was more geographic mix kind of as to what we said in our prepared comments with that Bay asset. The West overall, based on the assumptions that we had going into kind of the guide closed a few more houses generally speaking, overall, but a lot of that was in the Bay...

Q: Thanks. I appreciate it. I know we're going over time, so I'll try to be brief. But congrats on the great quarter and the circumstances, I wanted to dive in on land spend...

A: Yes. Hey Buck, it's Erik. I will start with kind of the environment. It's competitive out there. I don't know that it's pretty rare for me not to say it's not competitive. Demand typically is higher than supply in the land market...

Q: Good morning, everybody. I appreciate your time. I would like you kind of baseline given the… A: Yes. Hey, Ken. Erik Heuser here. Yes, so as we look at the deals that are coming through the business, about 20% are finished, which I think was one of your first questions. What are we acquiring that might be finished? Land banking, the 20% to 25% that I referenced is really as a percent of the control...

Q: Yes. Thank you, and I wasn't sure if I missed it, but did you guys talk about your build time and whether there was any improvement in the quarter? And how much is it versus last year?

A: Yes, Alex, I can take that one. We did see some sequential improvement quarter-over-quarter. I think we saw roughly about two weeks of improvement quarter-over-quarter. The teams have been working really hard at trying to drive some efficiency in the cycle times. A lot of our markets are already at pre kind of pandemic levels. We have a few outliers that are out there, and I know the teams are working really hard at driving those cycle times down.