Releases

Taylor Morrison Reports Second Quarter Closings of 2,594, an increase of 30% over the prior year quarter, and Diluted Earnings per Share of $0.76

SCOTTSDALE, Ariz., July 31, 2019 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC) today reported second quarter total revenue of $1.3 billion and GAAP home closings gross margin, inclusive of capitalized interest, of 18.0 percent, leading to diluted earnings per share of $0.76.

Taylor Morrison (PRNewsFoto/Taylor Morrison) (PRNewsfoto/Taylor Morrison)

Second Quarter 2019 Highlights:

  • Net sales orders were 2,810, a 20% increase over the prior year quarter
  • Home closings were 2,594, a 30% increase over the prior year quarter
  • Total revenue was $1.3 billion, a 29% increase over the prior year quarter
  • GAAP home closings gross margin was 18.0%, which was flat to compared to the prior year quarter
  • SG&A as a percent of home closings revenue was 10.1%, compared to 10.5% during the prior year quarter
  • Net income was $82 million, up 38% over the prior year quarter, with diluted earnings per share of $0.76

"We continued the momentum experienced at the end of the first quarter, which led us to exceeding expectations in our key operating metrics for the second quarter," said Sheryl Palmer, Chairman and CEO of Taylor Morrison.

Today the Company is also announcing its entry into the single-family build-to-rent community space through a partnership with Christopher Todd Communities.  "With more than 16 million single-family rental homes in the U.S. today and only five percent of that share represented by new home production, it signals an early and exciting time for this new growing segment," shared Palmer.  "We believe this strategic partnership with Christopher Todd Communities and their established platform is in clear alignment with our focus to address affordability in our markets and serve more customers who desire the product and lifestyle of a single-family community while balancing finances, flexibility and maintenance-free living.  This relationship advances our demand-side diversification while leveraging what we do every day in our core business—acquiring and developing land and quality production.  What's more, this strategy will allow us to further increase the velocity of community deliveries and we expect to enhance our time and cost-efficient production process with proven and standardized specifications and a concentrated production line building process creating a rapid land-to-lease-up pipeline."

For the second quarter, net sales orders were 2,810.  Average community count was 357, which resulted in an average monthly sales pace per community of 2.6 for the quarter.  The Company ended the quarter with 5,051 units in backlog, a year-over-year increase of 7 percent, with a sales value of approximately $2.5 billion.

"Closings totaled 2,594 for the quarter, representing a 30 percent increase over the same period last year," added Palmer.  "The inventory sales environment was particularly strong during the quarter, driving our closings results above the high end of our guidance for the period.  Even with the increased inventory sales in the quarter we achieved lower incentive levels than the prior year quarter, which led to a GAAP home closings gross margin of 18 percent."

"We believe our success and strong results that we've seen so far this year are largely due to the hard work that the entire team has put into the integration of AV Homes following the acquisition," said Palmer.  "I'm proud to share that the heavy lifting required for the integration is complete and we are now operating as one company.  This has been achieved sooner than anticipated and with the integration work and negotiations complete, we are pleased to be able to take our total synergy estimate up to $50 million on an annualized basis."

"SG&A as a percentage of homebuilding revenue came in at 10.1 percent, which represented 40 basis points of leverage when compared to second quarter 2018, and the addition of AV Homes is providing further top-line leverage," said Dave Cone, Executive Vice President and Chief Financial Officer.  "Given our success in holding gross margins flat to last year and the SG&A leverage we gained, EBT margin came in at 8.7 percent for the quarter.  This represents about 60 basis points of improvement when compared to Q2 2018.  This was despite about $4 million of AV transaction expenses and debt extinguishment charges hitting during the quarter."

Homebuilding inventories were $4.1 billion at the end of the quarter, including 6,523 homes in inventory, compared to 5,599 homes in inventory at the end of the prior year quarter.  Homes in inventory at the end of the quarter consisted of 3,834 sold units, 495 model homes and 2,194 inventory units, of which 440 were finished.

The Company finished the quarter with $197 million in cash and a net homebuilding debt to capitalization ratio of 43.0%.  As of June 30, 2019, Taylor Morrison owned or controlled approximately 54,000 lots, representing 5.3 years of supply based on a trailing twelve months of closings including a full year of AV, and the Company is focused on securing land for 2021 and beyond.

Share repurchase activity during second quarter 2019 included 3.8 million shares acquired for about $76 million, or an average repurchase price of $19.92.  This activity exhausted the outstanding $100 million authorization and no additional authorization is currently in place.  Since the acquisition of AV Homes, the Company has acquired 16.9 million shares for $296 million, or an average price of $17.51.  This is nearly double the amount of shares that were issued for the transaction and below the price of the shares issued to complete the deal.

The Company has also recently completed two senior notes offerings.  In early June, the Company completed a $500 million offering with an interest rate of 5.875%.  These proceeds, along with cash on hand, were used to redeem the $550 million of 2021 senior notes that were previously outstanding.  In mid-July, the Company offered $450 million of notes with a 5.75% interest rate.  These proceeds will be used to redeem the $400 million of 2022 senior notes outstanding.  These transactions ensure that all senior debt outstanding for the Company now have an interest rate below 6.0% and they push the nearest senior note maturity out to 2023.

Quarterly Financial Comparison







($ thousands)









Q2 2019


Q2 2018


Q2 2019 vs. Q2 2018

Total Revenue


$1,265,426


$980,828



29.0%

Home Closings Revenue


$1,232,261


$956,565



28.8%

Home Closings Gross Margin


$222,192


$172,044



29.1%



18.0

%


18.0

%


Flat

SG&A


$124,817


$100,065



24.7%

% of Home Closings Revenue


10.1

%


10.5

%


40 bps leverage

Third Quarter and Full Year 2019 Business Outlook

Third Quarter 2019:

  • Average active community count is expected to be between 345 and 355
  • Home closings are expected to be between 2,200 and 2,400
  • GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-to-high 17 percent range
  • Effective tax rate is expected to be about 25.5 percent
  • Diluted share count is expected to be about 107 million

Full Year 2019:

  • Average active community count is expected to be between 350 and 360
  • Monthly absorption pace is expected to be consistent with 2018 performance
  • Home closings are expected to be between 9,600 and 10,100
  • GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the high 17 percent range
  • SG&A as a percentage of home closings revenue is expected to be in the low 10 percent range
  • Income from unconsolidated joint ventures is expected to be about $8 million
  • Land and development spend is expected to be approximately $1.2 billion
  • Effective tax rate is expected to be about 25 percent
  • Diluted share count is expected to be about 108 million

Earnings Webcast

A public webcast to discuss the second quarter 2019 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1 (855) 470-8731 and the passcode is 7316268. More information can be found on the Company's investor relations website at investors.taylormorrison.com. A webcast replay will also be available on the site later today and will be available for one year from the date of the original earnings call.

About Taylor Morrison

Taylor Morrison Home Corporation (NYSE: TMHC) is a leading national homebuilder and developer that has been recognized as the 2016, 2017, 2018 and 2019 America's Most Trusted® Home Builder by Lifestory Research. Based in Scottsdale, Arizona we operate under two well-established brands, Taylor Morrison and Darling Homes. We serve a wide array of consumer groups from coast to coast, including first-time, move-up, luxury, and 55 plus buyers. In Texas, Darling Homes builds communities with a focus on individuality and custom detail while delivering on the Taylor Morrison standard of excellence.

For more information about Taylor Morrison and Darling Homes please visit www.taylormorrison.com or www.darlinghomes.com.

Forward-Looking Statements

This earnings summary includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "may," "can," "could," "might," "will" and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: changes in general and local economic conditions (including as a result of recent extreme weather conditions); slowdowns or severe downturns in the housing market; homebuyers' ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; competition in our industry; any increase in unemployment or underemployment; inflation or deflation; the seasonality of our business; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; higher cancellation rates; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; availability of land and lots at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our mortgage operations and title services business; the loss of any of our important commercial relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; material losses in excess of insurance limits; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to our debt and the agreements governing such debt; our ability to access the capital markets; the inherent uncertainty associated with financial or other projections; and risks related to the integration of Taylor Morrison and AV Homes and the ability to recognize the anticipated benefits from the combination of Taylor Morrison and AV Homes. In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law.

CONTACT: Investor Relations
Taylor Morrison Home Corporation
(480) 734-2060
investor@taylormorrison.com

 

Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)




Three Months Ended
June 30,


Six Months Ended

June 30,




2019


2018


2019


2018


Home closings revenue, net


$

1,232,261



$

956,565



$

2,132,142



$

1,689,524



Land closings revenue


5,858



7,997



9,971



13,165



Financial services revenue


22,819



16,266



38,863



30,472



Amenity and other revenue


4,488





9,542





Total revenues


1,265,426



980,828



2,190,518



1,733,161



Cost of home closings


1,010,069



784,521



1,745,866



1,379,427



Cost of land closings


3,792



6,444



6,484



10,725



Financial services expenses


13,045



11,152



23,766



21,196



Amenity and other expense


4,746





8,588





Total cost of revenues


1,031,652



802,117



1,784,704



1,411,348



Gross margin


233,774



178,711



405,814



321,813



Sales, commissions and other marketing costs


82,615



64,604



150,044



118,302



General and administrative expenses


42,202



35,461



78,656



68,778



Equity in income of unconsolidated entities


(3,561)



(4,017)



(5,880)



(7,263)



Interest income, net


(958)



(276)



(1,291)



(619)



Other (income)/expense, net


(489)



3,654



(1,881)



4,092



Transaction expenses


1,750





5,879





Loss on Extinguishment of Debt


2,196





2,196





Income before income taxes


110,019



79,285



178,091



138,523



Income tax provision


28,131



19,993



44,922



31,699



Net income before allocation to non-controlling interests


81,888



59,292



133,169



106,824



Net income attributable to non-controlling interests - joint ventures


(37)



(140)



(187)



(269)



Net income before non-controlling interests


81,851



59,152



132,982



106,555



Net income attributable to non-controlling interests




(474)





(3,133)



Net income available to Taylor Morrison Home Corporation


$

81,851



$

58,678



$

132,982



$

103,422



Earnings per common share










Basic


$

0.77



$

0.53



$

1.23



$

0.94



Diluted


$

0.76



$

0.52



$

1.21



$

0.93



Weighted average number of shares of common stock:










Basic


106,238



111,347



108,363



110,508



Diluted


107,232



113,482



109,479



115,400



 

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)




June 30,

2019


December 31,
2018






Assets





Cash and cash equivalents


$

196,529



$

329,645


Restricted cash


1,698



2,214


Total cash, cash equivalents, and restricted cash


198,227



331,859


Owned inventory


4,073,123



3,965,306


Real estate not owned


30,464



15,259


       Total real estate inventory


4,103,587



3,980,565


Land deposits


54,214



57,929


Mortgage loans held for sale


124,805



181,897


Derivative assets


3,055



1,838


Operating lease right of use assets


33,399




Prepaid expenses and other assets, net


79,794



98,225


Other receivables, net


68,500



86,587


Investments in unconsolidated entities


129,518



140,541


Deferred tax assets, net


145,076



145,076


Property and equipment, net


84,630



86,736


Intangible assets, net


851



1,072


Goodwill


152,116



152,116


Total assets


$

5,177,772



$

5,264,441


Liabilities





Accounts payable


$

162,055



$

151,586


Accrued expenses and other liabilities


242,712



266,686


Operating lease liabilities


36,590




Income taxes payable


1,272




Customer deposits


172,951



165,432


Estimated development liability


36,883



37,147


Senior notes, net


1,599,239



1,653,746


Loans payable and other borrowings


212,897



225,497


Revolving credit facility borrowings


200,000



200,000


Mortgage warehouse borrowings


79,458



130,353


Liabilities attributable to real estate not owned


30,464



15,259


Total liabilities


$

2,774,521



$

2,845,706


Stockholders' Equity





Total stockholders' equity


2,403,251



2,418,735


Total liabilities and stockholders' equity


$

5,177,772



$

5,264,441


 

Homes Closed and Home Closings Revenue, Net






Six Months Ended June 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


2,034



1,575



29.1

%


$

824,313



$

640,787



28.6

%


$

405



$

407



(0.5)

%

Central


1,291



1,051



22.8



614,457



507,701



21.0



476



483



(1.4)


West


1,207



913



32.2



693,372



541,036



28.2



574



593



(3.2)


Total


4,532



3,539



28.1

%


$

2,132,142



$

1,689,524



26.2

%


$

470



$

477



(1.5)

%






Three Months Ended June 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


1,180



875



34.9

%


$

476,144



$

356,351



33.6

%


$

404



$

407



(0.7)

%

Central


746



617



20.9



361,893



294,236



23.0



485



477



1.7


West


668



500



33.6



394,224



305,978



28.8



590



612



(3.6)


Total


2,594



1,992



30.2

%


$

1,232,261



$

956,565



28.8

%


$

475



$

480



(1.0)

%



Net Sales Orders:





Three Months Ended June 30,



Net Sales Orders


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


1,315



894



47.1

%


$

533,931



$

390,007



36.9

%


$

406



$

436



(6.9)

%

Central


820



832



(1.4)



398,770



393,236



1.4



486



473



2.7


West


675



616



9.6



360,295



396,123



(9.0)



534



643



(17.0)


Total


2,810



2,342



20.0

%


$

1,292,996



$

1,179,366



9.6

%


$

460



$

504



(8.7)

%






Six Months Ended June 30,



Net Sales Orders


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


2,450



1,894



29.4

%


$

1,006,267



$

806,809



24.7

%


$

411



$

426



(3.5)

%

Central


1,621



1,587



2.1



769,092



766,742



0.3



474



483



(1.9)


West


1,354



1,304



3.8



730,179



822,759



(11.3)



539



631



(14.6)


Total


5,425



4,785



13.4

%


$

2,505,538



$

2,396,310



4.6

%


$

462



$

501



(7.8)

%



Sales Order Backlog:





As of June 30,



Sold Homes in Backlog


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


2,054



1,832



12.1

%


$

906,518



$

825,231



9.9

%


$

441



$

450



(2.0)

%

Central


1,750



1,587



10.3



886,430



778,782



13.8



507



491



3.3


West


1,247



1,323



(5.7)



660,017



820,175



(19.5)



529



620



(14.7)


Total


5,051



4,742



6.5

%


$

2,452,965



$

2,424,188



1.2

%


$

486



$

511



(4.9)

%




Average Active Selling Communities:




Three Months Ended

June 30,


Six Months Ended

June 30,



2019


2018


Change


2019


2018


Change

East


161



121



33.1

%


167



123



35.8

%

Central


137



124



10.5



140



119



17.6


West


59



52



13.5



59



50



18.0


Total


357



297



20.2

%


366



292



25.3

%


Reconciliation of Non-GAAP Financial Measures
The following tables set forth reconciliations of: (i) adjusted income before income taxes and the related margin, (ii) EBITDA and adjusted EBITDA to net income before allocation to non-controlling interests, and (iii) net homebuilding debt to total capitalization ratio.

Adjusted income before income taxes is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of significant and unusual transactions, which in the quarter were transaction expenses related to our acquisition of AV Homes, and loss on extinguishment of debt.  Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income to exclude interest amortized to cost of sales and interest income, net, income taxes, depreciation and amortization, non-cash compensation expense and loss on extinguishment of debt, if any.  Net homebuilding debt to capitalization is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance costs and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders' equity).

Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation.  We also use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry.  In the future, we may include additional adjustments in the above described non-GAAP financial measures to the extent we deem them appropriate and useful to management and investors.

We believe that adjusted income before income taxes and related margin, as well as EBITDA and adjusted EBITDA, are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metric assists both investors and management in analyzing and benchmarking the performance and value of our business.  Adjusted EBITDA also provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or unusual items.  Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason.

These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.

Adjusted Income Before Income Taxes Margin




Three Months Ended June 30,

(Dollars in thousands)


2019


2018

Income before income taxes


$

110,019


$

79,285

Transaction expenses


1,750


Loss on extinguishment of debt


$

2,196


$

Adjusted income before income taxes


$

113,965


$

79,285






Total revenues


$

1,265,426


$

980,828






Income before income taxes margin (EBT Margin)


8.7%


8.1%

Adjusted income before income taxes margin


9.0%


8.1%

 

Adjusted EBITDA Reconciliation




Three Months Ended June 30,

(Dollars in thousands)


2019


2018

Net income before allocation to non-controlling interests


$

81,888


$

59,292

Interest income, net


(958)


(276)

Amortization of capitalized interest


24,076


19,770

Income tax provision


28,131


19,993

Depreciation and amortization


531


993

EBITDA


$

133,668


$

99,772

Non-cash compensation expense


3,826


2,747

Adjusted EBITDA


$

137,494


$

102,519

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

(Dollars in thousands)

As of
June 30, 2019

Total debt

$

2,091,594

Less unamortized debt issuance premium, net

(761)

Less mortgage warehouse borrowings

79,458

Total homebuilding debt

$

2,012,897

Less cash and cash equivalents

196,529

Net homebuilding debt

$

1,816,368

Total equity

2,403,251

Total capitalization

$

4,219,619



Net homebuilding debt to capitalization ratio


43.0%

 

SOURCE Taylor Morrison