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Fun Facts

7

Years America’s Most Trusted® Builder (2016-2022)

334

average active selling communities

19

markets across 11 states

13,699

homes delivered in 2021

~3,000

full time team members

$7.5B

revenue in 2021

Oct 26, 2022
Taylor Morrison Reports Third Quarter 2022 Results, Including Record Earnings per Diluted Share of $2.72

SCOTTSDALE, Ariz., Oct. 26, 2022 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC), a leading national land developer and homebuilder, announced results for the third quarter ended September 30, 2022. Reported net income of $310 million, or $2.72 per diluted share, was up 84 percent and 103 percent, respectively, from the third quarter of 2021.

Third quarter highlights included the following, as compared to the prior-year quarter:

  • Home closings revenue increased 12 percent to $2.0 billion.
  • Home closings gross margin improved 630 basis points to 27.5 percent.
  • SG&A as a percentage of home closings revenue improved 210 basis points to 7.4 percent.
  • Homebuilding lot supply increased three percent to approximately 80,000 owned and controlled homesites.
  • Controlled lots as a percentage of total lot supply increased approximately 600 basis points to 42 percent.
  • Repurchased 4.2 million shares outstanding for $105 million.
  • Return on equity improved 1,300 basis points to 25.8 percent.

"Our team once again generated record quarterly profitability metrics, including new highs for home closings gross margin, earnings per share and return on equity, despite the continued affordability and supply chain challenges facing our industry and the significant impact from Hurricane Ian on our Florida and Carolinas markets. While these headwinds, particularly the production-related delays from the storm, impacted our volume of home closings and sales, we still generated a record home closings gross margin of 27.5% and an all-time low SG&A ratio of 7.4%. These results drove a 103 percent increase in our earnings per diluted share and a doubling of our return on equity to 26 percent," said Sheryl Palmer, Taylor Morrison Chairman and CEO. 

"The significant improvement in our earnings reflect the enhanced profitability and overall business effectiveness that we have achieved through our focus on operational excellence, scale synergies and disciplined land investment. These internal initiatives and our successful M&A integrations have positioned our company to be resilient as we navigate the current economic uncertainty and recalibration of housing market conditions to the sharply higher interest rate environment."

Recognizing changing consumer demands, Palmer also shared that the Company recently unveiled an enhanced end-to-end digital reservation system for to-be-built homes, an evolution of the technology that was first introduced in March 2021. The first-to-market technology gives Taylor Morrison home shoppers the ability to build a new home entirely online—and see it come to life through an interactive visualizer—by selecting their floor plan, lot, the home's exterior design, structural options, interior finishes, and then reserve the configuration online with a small deposit, all with the transparency of pricing along the way. In the third quarter, total spec and to-be-built online reservations had a conversion rate of approximately 40 percent, accounting for 13 percent of company sales.

"As the market evolves, we will continue to prioritize the health of our balance sheet and position ourselves to be opportunistic by balancing pace and price, managing inventory levels and preserving our capital. Our homebuilding and mortgage teams are focused on working closely with our customers to provide compelling incentives to address each buyers' unique circumstances, as well as adjusting pricing as needed on an asset-by-asset basis, appreciating each community's inventory, duration, competitive dynamics and targeted consumer group. While we remain positive on the long-term opportunity for housing, we expect the market to remain highly sensitive to interest rates and are therefore emphasizing a disciplined and prudent approach across our business," continued Palmer.  

Lou Steffens, Executive Vice President and Chief Financial Officer, said "our capital position is strong with approximately $1.4 billion of liquidity, and we are focused on further strengthening our balance sheet and driving strong cash flow generation. Accordingly, we increased our total revolving credit facility capacity to $1.1 billion and are taking steps to reduce gross debt outstanding through the early redemption of $350 million of senior notes on October 31st."

"We also significantly slowed our investment in new land acquisitions and moderated our starts pace. At the same time, given the compelling opportunity we continue to see in our equity, we continued to invest in share repurchases, which totaled $105 million during the quarter. Based on our healthy cashflow outlook, we remain on track to reduce our net debt-to-capitalization ratio to the mid-20 percent range by year end. However, due to the significant level of uncertainty in the current housing market, ongoing material and labor supply issues as well as the added complexity and production delays stemming from Hurricane Ian, we are not providing fourth quarter operational guidance," said Steffens.

Business Highlights (All comparisons are of the current quarter to the prior-year quarter, unless indicated.)

Homebuilding

  • Home closings revenue increased 12 percent to $2.0 billion, driven by a 22 percent increase in average closing price to $650,000, which more than offset an eight percent decline in home closings to 3,050.
  • Home closings gross margin improved 630 basis points to 27.5 percent, a Company high. The improvement was driven by robust pricing power, improved operating efficiencies and acquisition synergies.
  • SG&A as a percentage of home closings revenue declined 210 basis points to 7.4 percent, an all-time low, driven by revenue growth, cost discipline and sales efficiencies.
  • Net sales orders of 2,069 were down 39 percent due primarily to a decline in the monthly absorption pace to 2.1 net sales orders per community as sharply higher mortgage interest rates and economic uncertainty have dampened homebuyer confidence. The preparation and recovery surrounding Hurricane Ian also impacted sales activity.
  • Cancellations increased to 4.3% of beginning backlog from 3.3% in the prior quarter and 2.4% a year ago, although this remains below the long-term average of 7.1% since 2014. As a percentage of gross orders, cancellations increased to 15.6% from 10.8% in the prior quarter and 6.7% a year ago.
  • Average net sales order price decreased three percent to $619,000, driven primarily by a mix impact from a decline in the penetration of resort lifestyle transactions compared to a year ago as well as pricing adjustments to reflect the softer demand environment.
  • Ending backlog was 7,941 sold homes, down 23 percent, with a sales value of $5.4 billion, down 12 percent.

Land Portfolio

  • Investment in homebuilding land acquisition and development totaled $377 million, down 21 percent from $478 million a year ago. Development-related spend accounted for 73 percent of the total versus 32 percent a year ago as the Company has significantly reduced spend for new lots and is working to monetize its well-vintaged land portfolio.
  • Homebuilding lot supply was approximately 80,000 owned and controlled homesites, up three percent.
  • Controlled homebuilding lots as a percentage of total lot supply was 42 percent, up from 36 percent.
  • Based on trailing twelve-month home closings, total homebuilding lots represented 3.5 years of owned supply and 6.1 years of total supply.

Financial Services

  • The mortgage capture rate equaled 68 percent.
  • Borrowers had an average credit score of 752 and debt-to-income ratio of 39 percent.

Balance Sheet

  • At quarter end, total available liquidity was approximately $1.4 billion, including $329 million of unrestricted cash and $1.1 billion of capacity on the Company's revolving credit facilities, which were undrawn outside of normal letters of credit.
  • Net homebuilding debt-to-capital equaled 34.0 percent, down from 41.1 percent a year ago.
  • The Company repurchased 4.2 million of its outstanding shares, or approximately four percent of prior diluted shares outstanding, for $105 million at an average share price of $24.92. At quarter end, the Company had $320 million remaining on its $500 million share repurchase authorization.

Business Outlook

Full Year 2022

  • Effective tax rate is now expected to be approximately 24.5 percent
  • Diluted share count is now expected to be approximately 116 million
  • Homebuilding land and development spend is now expected to be approximately $1.8 billion

Quarterly Financial Comparison








($ in thousands)


Q3 2022


Q3 2021


Q3 2022 vs. Q3 2021

Total Revenue


$2,034,644


$1,858,751


9.5 %

Home Closings Revenue


$1,983,775


$1,772,495


11.9 %

Home Closings Gross Margin


$545,611


$375,176


45.4 %


27.5 %


21.2 %


630 bps increase

SG&A

% of Home Closings Revenue


$147,049


$167,610


(12.3) %


7.4 %


9.5 %


210 bps leverage

Earnings Conference Call Webcast

A public webcast to discuss the Company's third quarter 2022 earnings will be held later today at 8:30 a.m. EST. A live audio webcast of the conference call will be available on Taylor Morrison's website at investors.taylormorrison.com under the Events & Presentations tab. For call participants, the dial-in number is (844) 200-6205 and conference ID is 205344. The call will be recorded and available for replay on the Company's website later today and will be available for one year from the date of the original earnings call.

About Taylor Morrison

Headquartered in Scottsdale, Arizona, Taylor Morrison is one of the nation's leading homebuilders and developers. We serve a wide array of consumers from coast to coast, including first-time, move-up, luxury and resort lifestyle homebuyers under our family of brands—including Taylor Morrison, Esplanade and Darling Homes Collection by Taylor Morrison. From 2016-2022, Taylor Morrison has been recognized as America's Most Trusted® Builder by Lifestory Research. Our strong commitment to sustainability, our communities, and our team is highlighted in our latest Environmental, Social, and Governance (ESG) Report on our website.

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 ""anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "may," "will," "can," "could," "might," "should" and similar expressions identify forward-looking statements, including statements related to expected financial, operating and performance 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: inflation or deflation; changes in general and local economic 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; the scale and scope of the ongoing COVID-19 pandemic; the seasonality of our business; the physical impacts of climate change and the increased focus by third-parties on sustainability issues; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; 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 financial services and title services business; the loss of any of our important commercial lender 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; 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 substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; and our ability to effectively manage our expanded operations.

In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our subsequent quarterly reports 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.

 

Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)








Three Months Ended
September 30,


Nine Months Ended

September 30,



2022


2021


2022


2021

Home closings revenue, net


$ 1,983,775


$ 1,772,495


$ 5,511,204


$   4,780,304

Land closings revenue


14,225


42,228


66,651


79,174

Financial services revenue


27,749


38,046


98,419


119,503

Amenity and other revenue


8,895


5,982


56,517


16,862

Total revenue


2,034,644


1,858,751


5,732,791


4,995,843

Cost of home closings


1,438,164


1,397,319


4,084,748


3,838,602

Cost of land closings


11,571


36,439


50,139


68,604

Financial services expenses


20,395


26,202


66,092


76,136

Amenity and other expense


6,574


6,341


39,264


16,907

Total cost of revenue


1,476,704


1,466,301


4,240,243


4,000,249

Gross margin


557,940


392,450


1,492,548


995,594

Sales, commissions and other marketing costs


94,692


97,185


279,950


280,697

General and administrative expenses


52,357


70,425


189,905


201,975

Net loss/(income) from unconsolidated entities


1,180


(1,482)


2,986


(9,269)

Interest expense, net


4,382


710


13,823


594

Other expense/(income), net


5,751


47


(4,720)


1,067

Gain on extinguishment of debt, net


(71)



(13,542)


Income before income taxes


399,649


225,565


1,024,146


520,530

Income tax provision


90,418


53,098


243,300


120,865

Net income before allocation to non-controlling interests


309,231


172,467


780,846


399,665

Net loss/(income) attributable to non-controlling interests - joint
ventures


548


(4,333)


(3,377)


(9,363)

Net income available to Taylor Morrison Home Corporation


$    309,779


$     168,134


$     777,469


$       390,302

Earnings per common share









Basic


$          2.75


$           1.35


$           6.63


$             3.07

Diluted


$          2.72


$           1.34


$           6.56


$             3.02

Weighted average number of shares of common stock:









Basic


112,701


124,378


117,242


127,217

Diluted


113,780


125,770


118,438


129,043

 

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands, unaudited)








September 30,
2022


December 31,
2021

Assets





Cash and cash equivalents


$            329,244


$             832,821

Restricted cash


578


3,519

Total cash, cash equivalents, and restricted cash


329,822


836,340

Owned inventory


5,904,344


5,444,207

Consolidated real estate not owned


54,733


55,314

Total real estate inventory


5,959,077


5,499,521

Land deposits


290,340


229,535

Mortgage loans held for sale


161,264


467,534

Derivative assets


23,832


2,110

Lease right of use assets


82,226


85,863

Prepaid expenses and other assets, net


188,671


314,986

Other receivables, net


214,282


150,864

Investments in unconsolidated entities


306,081


171,406

Deferred tax assets, net


151,240


151,240

Property and equipment, net


223,594


155,181

Goodwill


663,197


663,197

Total assets


$         8,593,626


$         8,727,777

Liabilities





Accounts payable


$            264,190


$             253,348

Accrued expenses and other liabilities


456,632


525,209

Lease liabilities


91,554


96,172

Income taxes payable


27,757


Customer deposits


527,412


485,705

Estimated development liabilities


37,958


38,923

Senior notes, net


2,173,798


2,452,322

Loans payable and other borrowings


409,791


404,386

Revolving credit facility borrowings



31,529

Mortgage warehouse borrowings


146,335


413,887

Liabilities attributable to consolidated real estate not owned


54,733


55,314

Total liabilities


$         4,190,160


$         4,756,795

Stockholders' Equity





Total stockholders' equity


4,403,466


3,970,982

Total liabilities and stockholders' equity


$         8,593,626


$         8,727,777

 

Homes Closed and Home Closings Revenue, Net:






Three Months Ended September 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

($ in thousands)


2022


2021


Change


2022


2021


Change


2022


2021


Change

East


1,118


1,167


(4.2) %


$        638,270


$        554,995


15.0 %


$       571


$      476


20.0 %

Central


835


764


9.3


522,247


398,762


31.0


625


522


19.7

West


1,097


1,396


(21.4)


823,258


818,738


0.6


750


586


28.0

Total


3,050


3,327


(8.3) %


$     1,983,775


$     1,772,495


11.9 %


$       650


$      533


22.0 %

 



Nine Months Ended September 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

($ in thousands)


2022


2021


Change


2022


2021


Change


2022


2021


Change

East


3,152


3,464


(9.0) %


$     1,757,444


$     1,564,206


12.4 %


$    558


$  452


23.5 %

Central


2,277


2,246


1.4


1,347,828


1,101,681


22.3


592


491


20.6

West


3,421


3,706


(7.7)


2,405,932


2,114,417


13.8


703


571


23.1

Total


8,850


9,416


(6.0) %


$     5,511,204


$     4,780,304


15.3 %


$    623


$  508


22.6 %

 

Net Sales Orders:






Three Months Ended September 30,



Net Sales Orders


Sales Value


Average Selling Price

($ in thousands)


2022


2021


Change


2022


2021


Change


2022


2021


Change

East


1,041


1,279


(18.6) %


$   640,093


$   742,449


(13.8) %


$          615


$          580


6.0 %

Central


450


921


(51.1)


267,681


577,477


(53.6)


595


627


(5.1)

West


578


1,172


(50.7)


372,223


840,963


(55.7)


644


718


(10.3)

Total


2,069


3,372


(38.6) %


$  1,279,997


$ 2,160,889


(40.8) %


$          619


$          641


(3.4) %

 



Nine Months Ended September 30,



Net Sales Orders


Sales Value


Average Selling Price

($ in thousands)


2022


2021


Change


2022


2021


Change


2022


2021


Change

East


3,189


4,358


(26.8) %


$  1,976,798


$ 2,334,431


(15.3) %


$          620


$          536


15.7 %

Central


1,979


2,843


(30.4)


1,294,106


1,661,934


(22.1)


654


585


11.8

West


2,509


4,085


(38.6)


1,878,886


2,680,460


(29.9)


749


656


14.2

Total


7,677


11,286


(32.0) %


$  5,149,790


$ 6,676,825


(22.9) %


$          671


$          592


13.3 %

 

Sales Order Backlog:






As of September 30,



Sold Homes in Backlog


Sales Value


Average Selling Price

($ in thousands)


2022


2021


Change


2022


2021


Change


2022


2021


Change

East


3,256


3,729


(12.7) %


$ 2,121,673


$ 2,090,661


1.5 %


$        652


$        561


16.2 %

Central


2,489


2,995


(16.9)


1,694,111


1,760,401


(3.8)


681


588


15.8

West


2,196


3,549


(38.1)


1,579,937


2,272,904


(30.5)


719


640


12.3

Total


7,941


10,273


(22.7) %


$ 5,395,721


$ 6,123,966


(11.9) %


$        679


$        596


13.9 %

 

Ending Active Selling Communities:








As of





September 30, 2022


June 30, 2022


Change

East


118


117


0.9 %

Central


105


104


1.0

West


103


102


1.0

Total


326


323


0.9 %

Reconciliation of Non-GAAP Financial Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we have provided information in this press release relating to: (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) EBITDA and adjusted EBITDA and (iv) net homebuilding debt to capitalization ratio.

Adjusted net income, adjusted earnings per common share and adjusted income before income taxes and related margin are non-GAAP financial measures that reflect the net income/(loss) available to the Company excluding the impact of gains on land transfers and extinguishment of debt, net, and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, gains on land transfers and extinguishment of debt, net. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less 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 net income, adjusted earnings per common share, 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 metrics assist 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 Net Income and Adjusted Earnings Per Common Share






Three Months Ended
September 30,

($ in thousands, except per share data)


2022


2021

Net income available to TMHC


$         309,779


$          168,134

Gain on land transfers


(808)


Gain on extinguishment of debt, net


(71)


Tax impact due to above non-GAAP reconciling items


205


Adjusted net income


$         309,105


$          168,134






Basic weighted average number of shares


112,701


124,378

Adjusted earnings per common share - Basic


$               2.74


$                1.35






Diluted weighted average number of shares


113,780


125,770

Adjusted earnings per common share - Diluted


$               2.72


$                1.34

 






Adjusted Income Before Income Taxes and Related Margin






Three Months Ended

September 30,

($ in thousands)


2022


2021

Income before income taxes


$         399,649


$         225,565

Gain on land transfers


(808)


Gain on extinguishment of debt, net


(71)


Adjusted income before income taxes


$         398,770


$         225,565






Total revenue


$      2,034,644


$      1,858,751






Income before income taxes margin


19.6 %


12.1 %

Adjusted income before income taxes margin


19.6 %


12.1 %






 

EBITDA and Adjusted EBITDA Reconciliation






Three Months Ended September 30,

($ in thousands)


2022


2021

Net income before allocation to non-controlling interests


$             309,231


$                 172,467

Interest expense, net


4,382


710

Amortization of capitalized interest


33,774


37,951

Income tax provision


90,418


53,098

Depreciation and amortization


1,484


2,164

EBITDA


$             439,289


$                 266,390

Non-cash compensation expense


5,333


4,793

Gain on land transfers


(808)


Gain on extinguishment of debt, net


(71)


Adjusted EBITDA


$             443,743


$                 271,183






Total revenue


$          2,034,644


$              1,858,751

Net income before allocation to non-controlling interests as a percentage of total revenue


15.2 %


9.3 %

EBITDA as a percentage of total revenue


21.6 %


14.3 %

Adjusted EBITDA as a percentage of total revenue


21.8 %


14.6 %

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation


($ in thousands)

As of

September 30, 2022


As of

June 30, 2022


As of

September 30, 2021

Total debt

$                 2,729,924


$              2,950,744


$              3,221,569

Plus: unamortized debt issuance cost/(premium), net

11,242


11,891


(2,333)

Less: mortgage warehouse borrowings

(146,335)


(179,555)


(235,685)

Total homebuilding debt

$                 2,594,831


$              2,783,080


$              2,983,551

Less: cash and cash equivalents

(329,244)


(378,340)


(373,407)

Net homebuilding debt

$                 2,265,587


$              2,404,740


$              2,610,144

Total equity

4,403,466


4,193,895


3,745,896

Total capitalization

$                 6,669,053


$              6,598,635


$              6,356,040







Net homebuilding debt to capitalization ratio

34.0 %


36.4 %


41.1 %

 

CONTACT:
Mackenzie Aron, VP Investor Relations
(480) 734-2060
[email protected]

SOURCE Taylor Morrison

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