PR Newswire | Oct 28, 2020 06:55AM EDT

Year-Over-Year Growth in Net Sales Pace per Community

10/28 05:55 CDT

Taylor Morrison Reports Third Quarter 2020 Results, Including 53% Year-Over-Year Growth in Net Sales Pace per Community SCOTTSDALE, Ariz., Oct. 28, 2020

SCOTTSDALE, Ariz., Oct. 28, 2020 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC), the nation's fifth largest homebuilder, today announced financial results for the third quarter ended Sept. 30, 2020. The Company reported net income of $115 million, or $0.87 per diluted share, up 38 percent year over year. Excluding transaction-related expenses and refinancing charges, adjusted net income was $133 million, or $1.01 per diluted share, up 53 percent year over year.

The Company's third quarter included the following results, as compared to the prior-year period:

* Monthly absorptions increased 53 percent to 3.8 net sales per community, the highest level in our public company history. * Total revenue increased 54 percent to $1.70 billion. * GAAP home closings gross margin equaled 17.2 percent. * Adjusted home closings gross margin, exclusive of purchase accounting impacts, equaled 17.8 percent. * SG&A as a percentage of home closings revenue declined 210 basis points to 9.0 percent.

"I am pleased with how our team has navigated the unprecedented environment, allowing us to deliver our stronger-than-expected third quarter performance, including more than 70 percent growth in our net income," said Sheryl Palmer, Taylor Morrison Chairman and CEO. "Following the third quarter strength, our monthly sales pace per community in October has accelerated from September and is on track to increase more than 50 percent year over year as demand has been remarkably resilient across our markets and price points."

"With a number of tailwinds driving today's robust housing market that we expect will persist for the foreseeable future, we are well suited to meet the demand after years of strategic transformation that has provided us with enhanced operating efficiencies and greater depth in each of our markets and consumer segments. With our integration of William Lyon Homes on track to be mostly complete by year end, our top priority entering 2021 is demonstrating the benefits of our expanded scale through improved financial performance as a fully-aligned organization."

"During the quarter, the Company made further progress in deleveraging our balance sheet by paying off some of the debt assumed in the William Lyon Homes acquisition and a portion of our corporate revolver," said Dave Cone, Executive Vice President and Chief Financial Officer. "Given the faster-than-anticipated deleveraging achieved thus far, we now expect to reduce our net debt-to-capital ratio to the high-30 percent range by the end of 2021. With nearly $1 billion in available liquidity, we are in a strong position to reinvest in the business and opportunistically manage our balance sheet to drive improved returns."

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

Homebuilding

* Net sales orders increased 74 percent to 4,425, driven in part by the benefit from our acquisition of William Lyon Homes in February as well as a continuation of strong demand trends. * Monthly absorptions increased 53 percent to 3.8 net sales per community, the highest level in our public company history. * Average community count increased approximately 14 percent to 393, although this was down four percent from 411 in the second quarter of 2020 due to accelerated close-outs of existing communities from strong sales activity. * Home closings revenue increased 53 percent to $1.64 billion, driven by 51 percent growth in closings and a one percent increase in average sales price to approximately $473,000. Closings volume exceeded our prior guidance due to increased inventory home sales. * Home closings gross margin was 17.2 percent, which exceeded the guidance range provided last quarter. Excluding purchase accounting, adjusted gross margin was 17.8 percent. * SG&A as a percentage of home closings revenue was 9.0 percent, representing 210 basis points of leverage over the prior year given increased scale, cost control measures and strong market conditions. * The Company had 7,761 units in backlog, up 47 percent, with a sales value of $3.8 billion, up 48 percent.

Land Portfolio

* The Company invested more than $370 million in land and development during the quarter. * Total homebuilding lot supply equaled approximately 68,200, representing 4.8 years of supply based on trailing twelve-month closings on a pro-forma basis giving effect to the acquisition of William Lyon Homes. Owned lots equaled 3.4 years of supply.

Financial Services

* The financial services' capture rate increased to 83 percent from 81 percent in the second quarter of 2020 and 77 percent in the third quarter of 2019, reaching the highest level since 2015.

Balance Sheet

* At quarter end, total available liquidity equaled approximately $991 million, including $548 million of unrestricted cash and $443 million of undrawn capacity on the Company's $800 million corporate revolver. * The Company refinanced a portion of its 2023 and 2025 senior notes in July and repaid the remaining balance of those same notes in September for a total reduction of $285 million paid with cash on hand and repaid $200 million of its revolver, of which it expects to pay down all or substantially all of the outstanding balance by year end. * The net debt-to-capitalization ratio declined to 41.6 percent from 46.0 percent at the end of the second quarter. * Since its acquisition of William Lyon Homes in February, the Company has paid down a total of $497 million of net debt, representing an approximate 17 percent decrease.

Business Outlook

Fourth Quarter 2020

* Average active community count is expected to be approximately 375 to 380 * Home closings are expected to be about 3,050 * GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be approximately 18 percent * Effective tax rate is expected to be approximately 23.0 percent * Diluted share count is expected to be approximately 131 million

Full Year 2020

* Average active community count is expected to be approximately 385 to 390 * Home closings are expected to be approximately 12,500 * GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-16 percent range * SG&A as a percentage of home closings revenue is expected to be in the high-nine percent range * Effective tax rate is expected to be approximately 24.5 percent * Diluted share count is expected to be approximately 129 million * Land and development spend is expected to be approximately $1.4 billion to $1.5 billion

Quarterly Financial Comparison



(Dollars in thousands) Q3 2020 Q3 2019 Q3 2020 vs. Q3 2019

Total Revenue $1,699,434 $1,105,105 53.8%

Home Closings Revenue $1,640,584 $1,073,110 52.9%

$282,388 $199,008 41.9% Home Closings Gross Margin 17.2% 18.5% 130 bps decrease

Adjusted Home Closings Gross $291,301 $199,008 46.4% Margin 17.8% 18.5% 70 bps decrease

SG&A $147,167 $119,099 23.6% % of Home Closings Revenue 9.0% 11.1% 210 bps leverage



Earnings Webcast

A public webcast to discuss the third quarter 2020 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 3476262. 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 2016-2020 America's Most Trusted(r) Home Builder by Lifestory Research. Based in Scottsdale, Arizona, we operate under three well-established brands, Taylor Morrison, Darling Homes and William Lyon Signature. We serve a wide array of consumer groups from coast to coast, including first-time, move-up, luxury, and active adult buyers. In Texas, Darling Homes builds communities with a focus on individuality and custom detail while delivering on the Taylor Morrison standard of excellence. We also have an exclusive partnership with Christopher Todd Communities, a growing Phoenix-based developer of innovative, luxury rental communities to operate a "Build-to-Rent" homebuilding business.

For more information about Taylor Morrison, Darling Homes and William Lyon Signature, 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 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: the scale and scope of the recent COVID-19 (coronavirus) outbreak and resulting pandemic; 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; inflation or deflation; the seasonality of our business; 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; risks related to the integration of William Lyon Homes; the ability to recognize the anticipated benefits from the combination of Taylor Morrison and William Lyon Homes; 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 quarterly report on Form 10-Q 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 Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Home closings $1,640,584$1,073,110$4,376,218$3,205,252revenue, net

Land closings revenue6,756 4,420 40,241 14,391

Financial services 47,451 23,254 115,787 62,117 revenue

Amenity and other 4,643 4,321 39,572 13,863 revenue

Total revenues 1,699,434 1,105,105 4,571,818 3,295,623

Cost of home closings1,358,196 874,102 3,672,923 2,619,968

Cost of land closings5,217 2,934 42,636 9,418

Financial services 22,207 12,829 65,650 36,595 expenses

Amenity and other 4,125 4,166 38,986 12,754 expense

Total cost of 1,389,745 894,031 3,820,195 2,678,735 revenues

Gross margin 309,689 211,074 751,623 616,888

Sales, commissions and other marketing 102,015 76,765 282,380 226,809 costs

General and administrative 45,152 42,334 146,790 120,990 expenses

Equity in income of unconsolidated (2,957) (2,103) (8,878) (7,983) entities

Interest income, net (347) (959) (1,244) (2,250)

Other expense/ 1,830 389 7,424 (1,492) (income), net

Transaction expenses 4,791 617 109,877 6,496

Loss on extinguishment of 10,247 3,610 10,247 5,806 debt, net

Income before income 148,958 90,421 205,027 268,512 taxes

Income tax provision 33,759 23,385 52,162 68,307

Net income before allocation to 115,199 67,036 152,865 200,205 non-controlling interests

Net income attributable to non-controlling (422) (24) (3,845) (211) interests - joint ventures

Net income available to Taylor Morrison $114,777 $67,012 $149,020 $199,994 Home Corporation

Earnings per common share

Basic $0.88 $0.64 $1.17 $1.86

Diluted $0.87 $0.63 $1.16 $1.84

Weighted average number of shares of common stock:

Basic 129,775 105,472 127,113 107,389

Diluted 131,433 106,852 128,081 108,599

Taylor Morrison Home Corporation Condensed Consolidated Balance Sheets (In thousands)

September December 31, 30, 2019 2020



Assets

Cash and cash equivalents $547,916 $326,437

Restricted cash 1,144 2,135

Total cash, cash equivalents, and restricted cash549,060 328,572

Owned inventory 5,300,106 3,967,359

Consolidated real estate not owned 122,776 19,185

Total real estate inventory 5,422,882 3,986,544

Land deposits 138,160 39,810

Mortgage loans held for sale 172,501 190,880

Derivative assets 6,800 2,099

Lease right of use assets 71,319 36,663

Prepaid expenses and other assets, net 223,891 85,515

Other receivables, net 90,722 70,447

Investments in unconsolidated entities 125,132 128,759

Deferred tax assets, net 273,983 140,466

Property and equipment, net 95,546 85,866

Intangible assets, net 950 637

Goodwill 663,502 149,428

Total assets $7,834,448$5,245,686

Liabilities

Accounts payable $188,470 $164,580

Accrued expenses and other liabilities 398,489 325,368

Lease liabilities 80,270 42,317

Income taxes payable 30,497 3,719

Customer deposits 256,295 167,328

Estimated development liability 35,444 36,705

Senior notes, net 2,452,526 1,635,008

Loans payable and other borrowings 332,953 182,531

Revolving credit facility borrowings 285,000 -

Mortgage warehouse borrowings 109,593 123,233

Liabilities attributable to consolidated real 122,776 19,185 estate not owned

Total liabilities $4,292,313$2,699,974

Stockholders' Equity

Total stockholders' equity 3,542,135 2,545,712

Total liabilities and stockholders' equity $7,834,448$5,245,686

Homes Closed and Home Closings Revenue, Net:

Three Months Ended September 30,

Homes Closed Home Closings Revenue, Net Average Selling Price

(Dollars in 2020 2019 Change 2020 2019 Change 2020 2019 Changethousands)

East 1,2161,02918.2% $499,212 $434,446 14.9% $411$422(2.6)%

Central 913 653 39.8 423,642 309,954 36.7 464 475 (2.3)

West 1,340614 118.2 717,730 328,710 118.3 536 535 0.2

Total 3,4692,29651.1% $1,640,584$1,073,11052.9% $473$4671.3%

Nine Months Ended September 30,

Homes Closed Home Closings Revenue, Net Average Selling Price

(Dollars in 2020 2019 Change 2020 2019 Change 2020 2019 Changethousands)

East 3,2983,0637.7% $1,362,082$1,258,7588.2% $413$4110.5%

Central 2,7911,94443.6 1,270,215 924,411 37.4 455 476 (4.4)

West 3,3531,82184.1 1,743,921 1,022,083 70.6 520 561 (7.3)

Total 9,4426,82838.3% $4,376,218$3,205,25236.5% $463$469(1.3)%

Net Sales Orders:

Three Months Ended September 30,

Net Sales Orders Sales Value Average Selling Price

(Dollars 2019 in 2020 2019 Change 2020 2019 Change 2020 thousands) Change

$ East 1,548 1,161 33.3% $ 682,744 $ 463,201 47.4% $441399 10.5%

475 Central 1,133 759 49.3 537,265 360,413 49.1 474 (0.2)

534 West 1,744 620 181.3 946,439 331,133 185.8 543 1.7

$ Total 4,425 2,540 74.2% $ 2,166,448 $ 1,154,747 87.6% $490455 7.7%



Nine Months Ended September 30,

Net Sales Orders Sales Value Average Selling Price

(Dollars in 2020 2019 Change 2020 2019 Change 2020 2019 Change thousands)

East 4,085 3,61113.1% $1,728,989$1,469,46817.7% $423$4073.9%

Central 3,042 2,38027.8 1,398,896 1,129,506 23.9 460 475 (3.2)

West 4,217 1,974113.6 2,221,838 1,061,312 109.3 527 538 (2.0)

Total 11,344 7,96542.4% $5,349,723$3,660,28646.2% $472$4602.6%



Sales Order Backlog:

As of September 30,

Sold Homes in BacklogSales Value Average Selling Price

(Dollars in 2020 2019 Change 2020 2019 Change 2020 2019 Change thousands)

East 2,6032,18619.1% $1,158,391$935,273 23.9% $445$4284.0%

Central 2,3311,85625.6 1,119,626 936,889 19.5 480 505 (5.0)

West 2,8271,253125.6 1,474,011 662,440 122.5 521 529 (1.5)

Total 7,7615,29546.6% $3,752,028$2,534,60248.0% $483$4790.8%

Average Active Selling Communities:

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 Change 2020 2019 Change

East 145 153 (5.2)% 146 162 (9.9)%

Central 122 135 (9.6) 130 138 (5.8)

West 126 58 117.2 116 59 96.6

Total 393 346 13.6% 392 359 9.2%

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 income before income taxes, (ii) EBITDA and adjusted EBITDA, (iii) adjusted net income and adjusted earnings per share, (iv) net homebuilding debt to capitalization ratio, (v) adjusted home closings gross margin, and (vi) adjusted income before income taxes margin.

Adjusted income before income taxes is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of purchase accounting adjustments related to the acquisition of William Lyon Homes ("WLH"), transaction expenses and loss on extinguishment of debt, as applicable. 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 income/(expense), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, purchase accounting adjustments relating to the acquisition of WLH, transaction expenses and loss on extinguishment of debt, as applicable. 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 purchase accounting adjustments relating to the acquisition of WLH, transaction expenses, loss on extinguishment of debt and the tax impact due to such adjustments. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance costs/premiums 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). Adjusted home closings gross margin is a non-GAAP financial measure based on GAAP home closings gross margin (which is inclusive of capitalized interest), excluding purchase accounting adjustments relating to the acquisition of WLH.

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. A reconciliation of our forward-looking net homebuilding debt to capitalization ratio to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. 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 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. We believe that adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance.

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 Share

Three Months Ended September 30,

(Dollars in thousands, except per share data) 2020 2019

Net income available to TMHC $114,777 $67,012

William Lyon Homes related purchase accounting 8,913 - adjustments

Transaction expenses 4,791 617

Loss on extinguishment of debt, net 10,247 3,610

Tax impact due to Transaction expenses and Loss on (5,810) (1,095) extinguishment of debt

Adjusted net income $132,918 $70,144



Basic weighted average shares 129,775 105,472

Adjusted earnings per common share - Basic $1.02 $0.67





Diluted weighted average shares 131,433 106,852

Adjusted earnings per common share - Diluted $1.01 $0.66





Adjusted Income Before Income Taxes and Related Margin

Three Months Ended September 30,

(Dollars in thousands) 2020 2019

Income before income taxes $148,958 $90,421

William Lyon Homes related purchase accounting 8,913 - adjustments

Transaction expenses 4,791 617

Loss on extinguishment of debt, net 10,247 3,610

Adjusted income before income taxes $172,909 $94,648



Total revenues $1,699,434 $1,105,105



Income before income taxes margin 8.8% 8.2%

Adjusted income before income taxes margin 10.2% 8.6%







Adjusted Home Closings Gross Margin



Three Months Ended September 30,

(Dollars in thousands) 2020 2019

Home closings revenue $1,640,584$1,073,110

Cost of home closings 1,358,196 874,102

Home closings gross margin $282,388 $199,008

William Lyon Homes homebuilding related purchase 8,913 - accounting adjustments

Adjusted home closings gross margin $291,301 $199,008

Home closings gross margin as a percentage of 17.2% 18.5% home closings revenue

Adjusted home closings gross margin as a 17.8% 18.5% percentage of home closings revenue





EBITDA and Adjusted EBITDA Reconciliation

Three Months Ended September 30,

(Dollars in thousands) 2020 2019

Net income before allocation to non-controlling$115,199 $67,036 interests

Interest income, net (347) (959)

Amortization of capitalized interest 34,321 22,144

Income tax provision 33,759 23,385

Depreciation and amortization 1,714 1,262

EBITDA $184,646 $112,868

Non-cash compensation expense 5,272 3,693

William Lyon Homes related purchase accounting 8,913 - adjustments

Transaction expenses 4,791 617

Loss on extinguishment of debt, net 10,247 3,610

Adjusted EBITDA $213,869 $120,788



Total revenues $1,699,434 $1,105,105

EBITDA as a percentage of total revenues 10.9% 10.2%

Adjusted EBITDA as a percentage of total 12.6% 10.9% revenues





Net Homebuilding Debt to Capitalization Ratio Reconciliation

As of As of (Dollars in thousands) September 30,June 30, 2020 2020

Total debt $3,180,072 $3,769,740

Less unamortized debt issuance premiums, net 2,526 23,832

Less mortgage warehouse borrowings 109,593 149,784

Total homebuilding debt $3,067,953 $3,596,124

Less cash and cash equivalents 547,916 674,685

Net homebuilding debt $2,520,037 $2,921,439

Total equity 3,542,135 3,424,740

Total capitalization $6,062,172 $6,346,179



Net homebuilding debt to capitalization ratio41.6% 46.0%

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

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