Taylor Morrison Home Corporation Q1 FY2025 earnings call

• Strong first quarter performance: Delivered 3,048 homes with $1.8 billion in closings revenue, up 12% y/y; adjusted earnings per diluted share increased 25%.
• Sales trends: Slow start in January, stabilization in February, modest growth in March; monthly absorption rate was 3.3 per community, down from prior year but ahead of pre-COVID historic average.
• Diversified portfolio: Relatively insulated from net pricing pressure due to strong buyer appeal and quality locations; resort lifestyle segment grew 3% in net orders, move up down 2%, entry level down 21%.
• Personalized finance incentives: 42% of first quarter closings used a forward commitment, with over half being first-time homebuyers; incentives on new orders increased only 20 basis points sequentially.
• Inventory and starts: Finished inventory at quarter end was elevated; moderated first quarter starts pace by 6% y/y and will be selective in new starts moving forward.
• Land portfolio: Owned and controlled lot inventory was 86,266 homebuilding lots at quarter end, representing 6.5 years of supply.
• Financial services: Financial services revenue was $51 million with a gross margin of 44.7%, and a strong capture rate of 89%.

For the first quarter, Taylor Morrison delivered 3,048 homes with an average price of $600,000, generating $1.8 billion of home closings revenue, which was up 12% year-over-year. The adjusted home closings gross margin was 24.8%, an 80 basis point increase year-over-year. By consumer group, first quarter orders consisted of 32% entry level, 47% move up, and 21% resort lifestyle. The resort lifestyle segment saw a 3% increase in net orders, move up sales were down 2%, and entry level sales declined 21% year-over-year.

• Expect to deliver between 13,000 to 13,500 homes in 2025 with a home closing gross margin around 23%.
• Reduced expected land investment for 2025 to approximately $2.4 billion from $2.6 billion previously.
• Target total share repurchases for 2025 to be around the high end of the prior guide range at approximately $350 million.

• Macro uncertainties: Impact of interest rate fluctuations, macroeconomic and political uncertainty related to tariffs and immigration, affecting buyer urgency.
• Inventory issues: Elevated finished inventory in non-core submarkets with greater discounting and incentives needed.
• Tariffs: Potential impact on construction costs, with some metals and aluminum tariffs already affecting the business.
• Student loan resumption: Potential pressure on entry level consumers, though no significant issues seen to date.

Q: Paul Przybylski from Wolfe Research asked about Texas and Florida market demand changes.

A: Sheryl Palmer discussed Florida markets like Orlando, Naples, and resort lifestyle growth, while in Texas, Austin, Dallas, and Houston had varying trends; Erik Heuser added on resell inventory in Florida.

Q: Paul Przybylski asked about M&A in the current environment.

A: Sheryl Palmer said M&A package activity picked up but bid-ask still not fully rational; Erik Heuser commented on valuation expectations.

Q: Michael Rehaut of JPMorgan asked about sales cadence and gross margin guidance.

A: Sheryl Palmer discussed sales cadence trends; Curt VanHyfte talked about gross margin drivers including spec penetration, land inflation, and tariffs.

Q: Alan Ratner of Zelman & Associates asked about pricing environment elasticity.

A: Sheryl Palmer said elasticity varies by community and customer, with preference for mortgage incentives over price adjustments.

Q: Alan Ratner asked about land spend guidance reduction and 20,000 closings target.

A: Erik Heuser said land supply is well subscribed and they're balancing patience and opportunism in land deals.

Q: Elizabeth Langan of Barclays asked about current land deals and spec-to-to-be-built mix.

A: Erik Heuser talked about negotiating favorable land terms; Curt VanHyfte discussed spec penetration in Q2.

Q: Mike Dahl of RBC asked about gross margin cadence and April sales.

A: Curt VanHyfte discussed margin changes due to spec penetration; Sheryl Palmer said April sales were choppy but close to Q1 averages.

Q: Carl Reichardt of BTIG asked about buyer concerns for those lacking urgency.

A: Sheryl Palmer said concerns include affordability, inflation, recession fears, etc., across demographics.

Q: Carl Reichardt asked about West market trends.

A: Sheryl Palmer discussed West market trends including Denver, Portland, California, etc., and their rate sensitivity.

Q: Jay McCanless of Wedbush asked about cancellations.

A: Sheryl Palmer said cancellations were favorable with slight tick up but leveling out.

Q: Buck Horne of Raymond James asked about immigration enforcement and student loan impacts.

A: Sheryl Palmer said no direct community impact from immigration; discussed student loan impacts on entry level consumers.

Q: Ken Zener of Seaport Research Partners asked about year-end units in production.

A: Curt VanHyfte said units in production would moderate further based on cycle time reductions.

Q: Alex Barron of Housing Research Center asked about price cuts and Esplanade communities.

A: Sheryl Palmer discussed price cut philosophy favoring mortgage incentives over price cuts on to-be-built; Erik Heuser talked about Esplanade community outlook with new openings and growth pipeline.