Taylor Morrison Home Corporation Q2 FY2025 earnings call

• Sales and Market Conditions: Spring selling season was muted with softer sales trends, monthly net absorption pace 2.6 per community. Competitive pressures and cancellations increased. Bias towards price and margin given attractive land positions and customers.
• Programs and Incentives: Introduced a 3.75% conventional 7-year adjustable rate mortgage. Customer satisfaction scores increased. Mortgage programs personalized to assist customers.
• Land and Development: Own/control 85,051 homebuilding lots (6.4 years supply). Invested $612 million in land, 43% for lot development. Entitlements a key development challenge, tariffs had no material impact on horizontal costs.
• Yardly Business: Expect to exit up to 4 communities this year, with a flexible finance facility with Kennedy Lewis to enhance cash generation and optionality.

Taylor Morrison delivered 3,340 homes with $2 billion of home closings revenue, an adjusted home closings gross margin of 23%, and 90 basis points of SG&A expense leverage. By consumer group, Q2 orders were 33% entry-level, 50% move-up, and 17% resort lifestyle. The Esplanade segment, accounting for ~10% of total, had net sales orders down 8% vs 12% total, and a home closings gross margin in the high 20% range. Financial services revenue was $53 million with a gross margin of 51.1%, up from $49 million and 42.5% year-over-year.

• Full Year: Expect to deliver 13,000-13,500 homes, with Q3 expected 3,200-3,300 homes. Avg closing price for full year expected $595,000-$600,000.
• Gross Margin: Q3 home closings gross margin expected ~22%, full year adjusted home closings gross margin ~23%, GAAP ~22.5%.
• Share Repurchases: 2025 target at least $350 million in share repurchases.

• Market Volatility: Consumer sentiment affected by overall environment, interest rates, impacting sales.
• Cancellations: Increase in cancellations, though still below industry average.
• Land Market: Softness in land market, requiring reevaluation of deals and underwriting.

Q: Matthew Bouley asked about the spec mix jump and future expectations.

A: Curt VanHyfte and Sheryl Palmer responded that spec mix is due to inventory and consumer preference, expecting higher spec concentration in near term but aiming for balanced mix long term.

Q: Michael Rehaut inquired about the Kennedy Lewis facility.

A: Erik Heuser explained the facility serves both existing and new assets, provides support through vertical construction, and enhances optionality to optimize asset value.

Q: Trevor Allinson asked about pace and price in soft demand.

A: Sheryl Denise Palmer said pace depends on community and asset, with some assets being patient and others responsive to market.

Q: Mike Dahl asked about July pace and price.

A: Sheryl Denise Palmer noted early August start of normal seasonality, with some communities showing pickup in activity.

Q: Alan Ratner asked about cancellations and 2026 guidance.

A: Sheryl Denise Palmer said cancellations had multiple reasons, and 2026 growth depends on market conditions and responsible replacement of specs.

Q: Rafe Jadrosich asked about margins and incentives by segments.

A: Curt VanHyfte and Sheryl Denise Palmer said incentives are more expensive for finished inventory, tailored to consumer groups.

Q: Ken Zener asked about spec definition and Florida buyers.

A: Curt VanHyfte and Erik Heuser explained spec percentage and Florida buyers come from various regions, seasonal.

Q: Jay McCanless asked about regional performance and SALT cap.

A: Sheryl Denise Palmer discussed regional market performances and SALT cap's potential benefit to confidence.