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Taylor Morrison Reports Third Quarter Sales Orders of 2,540, an increase of 39% over the prior year quarter, and GAAP Home Closings Gross Margin of 18.5%

October 30, 2019
Taylor Morrison (PRNewsFoto/Taylor Morrison) (PRNewsfoto/Taylor Morrison)
Taylor Morrison (PRNewsFoto/Taylor Morrison) (PRNewsfoto/Taylor Morrison)

SCOTTSDALE, Ariz., Oct. 30, 2019 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC) today reported third quarter total revenue of $1.1 billion and GAAP home closings gross margin of 18.5 percent, leading to diluted earnings per share of $0.63. Adjusted earnings per share was $0.65 when the reported $3.6 million loss on extinguishment of debt is excluded.

Third Quarter 2019 Highlights:

“The third quarter was another successful one for Taylor Morrison as we met or exceeded our quarterly guidance on each of our key metrics,” said Sheryl Palmer, Chairman and CEO of Taylor Morrison. “Although declining interest rates have been a benefit for our buyers, we believe there’s a lot more beyond that giving consumers confidence, including rising incomes, strong stock markets, near record unemployment levels and improving equity in owned homes.”

“We finished the quarter with 2,540 net sales orders, representing a substantial 39 percent increase compared to the same quarter last year,” said Palmer. “In mid-September we released our July and August sales sharing our year-over-year order growth of 30 percent for the first two months of the quarter, nicely illustrating the buildup of strength that we saw as the quarter progressed with September up more than 60 percent year-over-year. This growth in sales was driven by strength across all regions, as well as price points. All three of our regions had sales orders up at least 20 percent, led by the East which was up nearly 64 percent.”

Average community count was 346, which resulted in an average monthly sales pace per community of 2.4 for the quarter. This compared to a sales pace of 2.2 in the third quarter of 2018. The Company ended the quarter with 5,295 units in backlog, a year-over-year increase of 19 percent, with a sales value of approximately $2.5 billion.

“We delivered 2,296 closings, which is 9 percent higher than our results for the prior year quarter and in-line with guidance for the quarter,” added Palmer. “This was a strong result despite being impacted by the Florida hurricane activity and the torrential rains in Houston resulting in a loss of five or six business days, which pushed approximately 50 to 75 closings into the fourth quarter.”

“Having just passed the one-year anniversary of the AV Homes acquisition, it’s clear that the increased scale we gained through the deal is having a material impact on our results,” said Palmer. “Sales paces are up, margins continue to outperform expectations and we expect leverage on our overhead in the coming quarters as a result of the transaction. All in all, we are delighted with the new AV team members, assets acquired and the positive timing of the deal, which we believe positions us to capitalize on a strong real estate market.”

“GAAP home closings gross margin, inclusive of capitalized interest, the impact from purchase accounting and the mix impact from AV-related closings, was 18.5 percent. This rate exceeded our third quarter guidance as we were able to benefit from the efficiencies of scale,” said Dave Cone, Executive Vice President and Chief Financial Officer. “Our margin rate did benefit from some true-ups that we took during the quarter related to vendor rebates and profit participation arrangements. In total, these two items impacted margin by just over $5 million.”

“SG&A as a percentage of home closings revenue came in at 11.1 percent for the quarter. This rate was impacted by the deleverage from pushed closings due to weather and timing of certain items,” added Cone. “We continue to maintain our annual SG&A guidance in the low 10 percent range of homebuilding revenue.”

Homebuilding inventories were $4.3 billion at the end of the quarter, including 6,709 homes in inventory, compared to 5,478 homes in inventory at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 4,198 sold units, 462 model homes and 2,049 inventory units, of which 385 were finished.

The Company finished the quarter with $224 million in total cash and a net homebuilding debt to capitalization ratio of 42.7 percent. As of September 30, 2019, Taylor Morrison owned or controlled approximately 54,000 lots, representing 5.4 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.








Quarterly Financial Comparison







($ thousands)









Q3 2019


Q3 2018


Q3 2019 vs. Q3 2018

Total Revenue


$1,105,105


$1,036,379


6.6

%

Home Closings Revenue


$1,073,110


$1,014,168


5.8

%

Home Closings Gross Margin


$199,008


$191,218


4.1

%


18.5

%


18.9

%


40 bps decrease

SG&A

% of Home Closings Revenue


$119,099


$100,520


18.5

%


11.1

%


9.9

%


120 bps increase

Full Year 2019 Business Outlook

Full Year 2019:

Earnings Webcast

A public webcast to discuss the third 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 8770336. 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
September 30,


Nine Months Ended
September 30,



2019


2018


2019


2018

Home closings revenue, net


$

1,073,110



$

1,014,168



$

3,205,252



$

2,703,692


Land closings revenue


4,420



5,170



14,391



18,335


Financial services revenue


23,254



17,041



62,117



47,513


Amenity and other revenue


4,321





13,863




Total revenues


1,105,105



1,036,379



3,295,623



2,769,540


Cost of home closings


874,102



822,950



2,619,968



2,202,377


Cost of land closings


2,934



3,979



9,418



14,704


Financial services expenses


12,829



10,451



36,595



31,647


Amenity and other expense


4,166





12,754




Total cost of revenues


894,031



837,380



2,678,735



2,248,728


Gross margin


211,074



198,999



616,888



520,812


Sales, commissions and other marketing costs


76,765



67,504



226,809



185,806


General and administrative expenses


42,334



33,016



120,990



101,795


Equity in income of unconsolidated entities


(2,103)



(2,514)



(7,983)



(9,777)


Interest income, net


(959)



(670)



(2,250)



(1,289)


Other expense/(income), net


389



798



(1,492)



4,889


Transaction expenses


617





6,496




Loss on extinguishment of debt


3,610





5,806




Income before income taxes


90,421



100,865



268,512



239,388


Income tax provision


23,385



6,424



68,307



38,123


Net income before allocation to non-controlling interests


67,036



94,441



200,205



201,265


Net income attributable to non-controlling interests - joint ventures


(24)



(159)



(211)



(428)


Net income before non-controlling interests


67,012



94,282



199,994



200,837


Net income attributable to non-controlling interests




(714)





(4,391)


Net income available to Taylor Morrison Home Corporation


$

67,012



$

93,568



$

199,994



$

196,446


Earnings per common share









Basic


$

0.64



$

0.84



$

1.86



$

1.75


Diluted


$

0.63



$

0.83



$

1.84



$

1.73


Weighted average number of shares of common stock:









Basic


105,472



111,396



107,389



112,449


Diluted


106,852



113,440



108,599



116,378


Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)




September 30,
2019


December 31,
2018






Assets





Cash and cash equivalents


$

222,049



$

329,645


Restricted cash


1,747



2,214


Total cash, cash equivalents, and restricted cash


223,796



331,859


Owned inventory


4,229,971



3,965,306


Real estate not owned


23,703



15,259


Total real estate inventory


4,253,674



3,980,565


Land deposits


41,790



57,929


Mortgage loans held for sale


108,550



181,897


Derivative assets


2,903



1,838


Operating lease right of use assets


37,751




Prepaid expenses and other assets, net


85,725



98,225


Other receivables, net


80,886



86,587


Investments in unconsolidated entities


128,363



140,541


Deferred tax assets, net


142,597



145,076


Property and equipment, net


83,654



86,736


Intangible assets, net


743



1,072


Goodwill


149,428



152,116


Total assets


$

5,339,860



$

5,264,441


Liabilities





Accounts payable


$

189,556



$

151,586


Accrued expenses and other liabilities


252,687



266,686


Operating lease liabilities


43,171




Income taxes payable


7,598




Customer deposits


184,975



165,432


Estimated development liability


36,762



37,147


Senior notes, net


1,634,176



1,653,746


Loans payable and other borrowings


225,203



225,497


Revolving credit facility borrowings


200,000



200,000


Mortgage warehouse borrowings


56,051



130,353


Liabilities attributable to real estate not owned


23,703



15,259


Total liabilities


$

2,853,882



$

2,845,706


Stockholders' Equity





Total stockholders' equity


2,485,978



2,418,735


Total liabilities and stockholders' equity


$

5,339,860



$

5,264,441


Homes Closed and Home Closings Revenue, Net:




Three Months Ended September 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


1,029



953



8.0

%


$

434,446



$

392,767



10.6

%


$

422



$

412



2.4

%

Central


653



594



9.9



309,954



272,980



13.5



475



460



3.3


West


614



568



8.1



328,710



348,421



(5.7)



535



613



(12.7)


Total


2,296



2,115



8.6

%


$

1,073,110



$

1,014,168



5.8

%


$

467



$

480



(2.7)

%






Nine Months Ended September 30,



Homes Closed


Home Closings Revenue, Net


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


3,063



2,528



21.2

%


$

1,258,758



$

1,033,553



21.8

%


$

411



$

409



0.5

%

Central


1,944



1,645



18.2



924,411



780,682



18.4



476



475



0.2


West


1,821



1,481



23.0



1,022,083



889,457



14.9



561



601



(6.7)


Total


6,828



5,654



20.8

%


$

3,205,252



$

2,703,692



18.6

%


$

469



$

478



(1.9)

%


Net Sales Orders:




Three Months Ended September 30,



Net Sales Orders


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


1,161



710



63.5

%


$

463,201



$

289,200



60.2

%


$

399



$

407



(2.0)

%

Central


759



617



23.0



360,413



298,111



20.9



475



483



(1.7)


West


620



495



25.3



331,133



306,004



8.2



534



618



(13.6)


Total


2,540



1,822



39.4

%


$

1,154,747



$

893,315



29.3

%


$

455



$

490



(7.1)

%






Nine Months Ended September 30,



Net Sales Orders


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


3,611



2,604



38.7

%


$

1,469,468



$

1,096,008



34.1

%


$

407



$

421



(3.3)

%

Central


2,380



2,204



8.0



1,129,506



1,064,852



6.1



475



483



(1.7)


West


1,974



1,799



9.7



1,061,312



1,128,763



(6.0)



538



627



(14.2)


Total


7,965



6,607



20.6

%


$

3,660,286



$

3,289,623



11.3

%


$

460



$

498



(7.6)

%


Sales Order Backlog:




As of September 30,



Sold Homes in Backlog


Sales Value


Average Selling Price

(Dollars in thousands)


2019


2018


Change


2019


2018


Change


2019


2018


Change

East


2,186



1,589



37.6

%


$

935,273



$

754,666



23.9

%


$

428



$

475



(9.9)

%

Central


1,856



1,610



15.3



936,889



814,173



15.1



505



506



(0.2)


West


1,253



1,250



0.2



662,440



771,135



(14.1)



529



617



(14.3)


Total


5,295



4,449



19.0

%


$

2,534,602



$

2,339,974



8.3

%


$

479



$

526



(8.9)

%

Average Active Selling Communities:




Three Months Ended
September 30,


Nine Months Ended
September 30,



2019


2018


Change


2019


2018


Change

East


153



109



40.4

%


162



119



36.1

%

Central


135



118



14.4



138



119



16.0


West


58



48



20.8



59



50



18.0


Total


346



275



25.8

%


359



288



24.7

%

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, (iii) adjusted net income and adjusted earnings per share and (iv) 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 third quarter of 2019 was a loss on extinguishment of debt. 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 amortized to cost of sales and interest income, net, income taxes, depreciation and amortization (EBITDA), and non-cash compensation expense, if any (Adjusted EBITDA). Adjusted net income and adjusted earnings per share are non-GAAP financial measures that reflect the net income available to the Company excluding the impact of significant and unusual transactions, which in the third quarter of 2019 was a loss on extinguishment of debt, and transaction and corporate reorganization expenses and the tax impact due to such items and one-time tax reductions, which for the third quarter of 2018 included an acceleration of tax deductions following an inventory analysis, a favorable conclusion of a state tax audit centered on NOL’s and benefit due to a repatriation of foreign earnings and utilization of foreign tax credits. 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, adjusted net income and adjusted earnings per share, 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 and Related Margin




Three Months Ended September 30,

(Dollars in thousands)


2019


2018

Income before income taxes


$

90,421



$

100,865


Loss on extinguishment of debt


$

3,610



$


Adjusted income before income taxes


$

94,031



$

100,865







Total revenues


$

1,105,105



$

1,036,379







Income before income taxes margin


8.2

%


9.7

%

Adjusted income before income taxes margin


8.5

%


9.7

%







EBITDA and Adjusted EBITDA Reconciliation




Three Months Ended September 30,

(Dollars in thousands)


2019


2018

Net income before allocation to non-controlling interests


$

67,036



$

94,441


Interest income, net


(959)



(670)


Amortization of capitalized interest


22,144



21,345


Income tax provision


23,385



6,424


Depreciation and amortization


1,262



985


EBITDA


$

112,868



$

122,525


Non-cash compensation expense


3,693



3,591


Adjusted EBITDA


$

116,561



$

126,116


Net Homebuilding Debt to Capitalization Ratio Reconciliation


(Dollars in thousands)

As of
September 30, 2019

Total debt

$

2,115,431


Less unamortized debt issuance costs

(15,823)


Less mortgage warehouse borrowings

56,051


Total homebuilding debt

$

2,075,203


Less cash and cash equivalents

222,049


Net homebuilding debt

$

1,853,154


Total equity

2,485,978


Total capitalization

$

4,339,132




Net homebuilding debt to capitalization ratio

42.7

%

Adjusted Net Income and Earnings Per Share Reconciliation




Three Months Ended
September 30,

(Dollars in thousands, except per share data)


2019


2018

Net income available to TMHC – basic


$

67,012



$

93,568


Net income attributable to non-controlling interest


$



$

714


Loss fully attributable to public holding company


$



$

100


Net income – diluted


$

67,012



$

94,382







Income before income taxes


$

90,421



$

100,865


Loss on extinguishment of debt


$

3,610



$


Adjusted income before income taxes


$

94,031



$

100,865







Income tax provision


$

23,385



$

6,424


Adjustments to income tax provision





Loss on extinguishment of debt


$

934



$


Acceleration of tax deductions related to inventory


$



$

8,075


Settlement of state tax audit


$



$

7,875


Utilization of foreign tax credits related to repatriation of foreign earnings


$



$

3,220


Adjusted income tax provision


$

24,319



$

25,594







Adjusted net income from continuing operations - basic


$

69,712



$

75,271


Net income from continuing operations attributable to non-controlling interest


$



$

714


Loss fully attributable to public holding company


$



$

100


Adjusted net income from continuing operations - diluted


$

69,712



$

76,085







Weighted average number of shares of common stock:





Basic


105,472



111,396


Diluted


106,852



113,440







Earnings per common share — basic:


$

0.64



$

0.84


Adjusted earnings per common share — basic:


$

0.66



$

0.68


Earnings per common share — diluted:


$

0.63



$

0.83


Adjusted earnings per common share — diluted:


$

0.65



$

0.67















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SOURCE Taylor Morrison