Taylor Morrison Home Corp Q4 FY2024 earnings call

• Sheryl Palmer highlighted strong fourth quarter results with 3,571 homes delivered, $2.2 billion revenue, and adjusted earnings per diluted share up nearly 30% year-over-year.
• Sales performance: fourth quarter net orders increased 11% year-over-year, absorption pace 2.6 per community.
• Consumer segments: entry-level, move-up, and resort lifestyle with different performance trends.
• Marketing: involvement in ABC's Extreme Makeover: Home Edition boosted web traffic. Online home reservations had 53% conversion to sale and reduced real estate agent participation.
• Land portfolio: owned and controlled lot inventory 86,153 at quarter-end, $590 million invested in land acquisition and development during the quarter, projecting $2.6 billion investment in 2025.
• Financial performance: reported net income $242 million or $2.30 per diluted share, adjusted net income $278 million or $2.64 per diluted share, up 29% year-over-year.

In the fourth quarter, Taylor Morrison delivered 3,571 homes at an average price of $608,000, generating nearly $2.2 billion of revenue. The adjusted home closings gross margin was 24.9%. By consumer group, fourth quarter orders consisted of 32% entry-level, 48% move-up, and 20% resort lifestyle. Year-over-year, move-up segment orders grew 27%, entry-level was up 5%, and resort lifestyle declined 9% due to factors like hurricane impact in Florida and community open/close timings.

• 2025 guidance: expects 13,500 to 14,000 home closings, gross margin between 23% to 24%, SG&A ratio in mid 9% range.
• Land investment: projecting $2.6 billion total homebuilding land investment in 2025 with similar split between acquisition and development.
• Share repurchases: targeting total share repurchases in the range of $300 million to $350 million for 2025.

• Interest rate fluctuations: impact on affordability and incentive costs.
• Supply chain and tariffs: potential cost pressure from tariffs, especially on steel and other materials.
• Market competition: resale home supply increase in most markets, affecting pricing in some areas.
• Hurricane impact: affected resort lifestyle segment in Florida.
• Regulatory changes: impact on real estate agent participation and pricing transparency.

Q: Good morning. You have Elizabeth Langan for Matt this morning. I just wanted to start off on gross margins. I know that you noted that incentives are moving higher. Could you talk a little bit about how you're thinking about the cadence for gross margins this year with the higher incentives and with your 1Q gross margin guide in the high 23% range?

A: Yeah. Elizabeth, this is Curt. I'll take that one. So again, for the first quarter, we're guiding to the high 23% range. And as I think you can tell by our full year margin guide for the year, we're assuming moderating our margins over the course of the year as we take into account the step up in rates and the fact that we have lot cost inflation that we're going to be taking on over the course of the year. So that's kind of, I guess, the general idea is that -- I guess in summary is that the margin will moderate over the course of the year.

Q: Good morning, everyone. Thanks for taking my questions. First, I'd love to get a sense for the pricing backdrop. You mentioned that you had only modest incentive -- increase in incentives in the fourth quarter and you're actually looking for a price increase, if I've heard you right, in January. So, which is a little counter to, I think, the rest of the group. So, I'd love to get a better sense of, number one, your pricing strategy in general, how you are approaching the market, given that perhaps the rest of the market is seeing perhaps a sharper increase in incentives.

A: Yeah. Fair questions, Michael. Thanks for them. Let me start with kind of the fourth quarter. We saw kind of pricing power in just about 50% of our communities. So, we felt really good about the sales performance in the fourth quarter, even as you mentioned, a very difficult selling environment. Looking month-to-month over the quarter, performance felt like it was kind of more in line with historical patterns, albeit with maybe a few more little obstacles. But honestly, if anything, I was a little surprised how consistent each month was within the quarter, seeing a very, very small spread between the months. As we moved into '25, the price increase that you spoke of, we actually did do a national price increase. I think it was on the 2nd of January. The January started off pretty slow, I'll be honest. Very pleased with the pickup we've seen since mid-January and further pickup into February. Having said that, as I mentioned in my prepared remarks, we had a very robust Q1 last year. So, we're up against a very difficult comp. I'm not sure if we'll catch it, but I'm very optimistic about the traffic we're seeing. As you would expect, Mike, the pricing opportunities is very much a community-by-community decision. We even had one or two communities in the fourth quarter and maybe in January that we actually had a hobo. And so, when you're looking at these distinct locations with our move-up and active adults on unique lots, we actually do have pricing power. As I mentioned to Elizabeth, when I think about what came through the P&L in the fourth quarter, I would expect a small tick up in incentives. When I look at what we were actually offering on the sales floor, I think where we ended Q4 is generally what our expectations are for 2025. So yes, our guide does contemplate the environment we're in today. If we see something meaningfully different and rates go up significantly from where we are today, I'm not sure we'll have that captured. But generally, we feel we're in a pretty good place when we look, as Curt mentioned, the combination of our to-be-built and the higher margin opportunity they have as well as what's required in our first-timers. And maybe I'll wrap that up, Mike, with just one more comment. And that's just the strength of our buyer groups. When we look at the move-up in the resort lifestyle, we just don't see the same need on the incentive side on rates because they're taking smaller loans. And obviously within our resort lifestyle, we're still seeing a great deal of cash.