PR Newswire | Jul 29, 2021 06:01AM EDT

Year-Over-Year Growth to 3.4 Net Sales Orders per Community

07/29 05:00 CDT

Taylor Morrison Reports Second Quarter 2021 Results, Including 23 Percent Year-Over-Year Growth to 3.4 Net Sales Orders per Community SCOTTSDALE, Ariz., July 29, 2021

SCOTTSDALE, Ariz., July 29, 2021 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC), the nation's fifth largest homebuilder, announced results for the second quarter ended June 30, 2021. Reported net income of $124 million, or $0.95 per diluted share, compared to $65 million, or $0.50 per diluted share, in the second quarter of 2020.

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

* Monthly absorptions increased 23 percent to 3.4 net sales orders per community. * Home closings gross margin increased 370 basis points to 19.1 percent. * Backlog increased 50 percent to 10,228 sold homes with a sales value of $5.7 billion, up 78 percent. * Homebuilding lot supply increased 13 percent to approximately 76,000 total lots owned and controlled. * Controlled lots as a percentage of total supply increased approximately 700 basis points to 35 percent.

"Our team delivered strong second quarter results and made further progress in achieving our strategic priorities as we continue to capture the synergies of our recent acquisitions and optimize our operations by fully leveraging the benefits of our national and local scale," said Sheryl Palmer, Taylor Morrison Chairman and CEO.

"During the quarter, we strategically managed our sales activity by delaying the release of lots to maximize our margin opportunity and accelerated our monthly production pace by over 140 percent to a record 4.8 starts per community as we build through our backlog of over 10,200 sold homes, positioning us for strong home closings and gross margin expansion in the second half of the year. This disciplined approach gives us confidence to raise our 2021 home closings gross margin guidance to the high-19 to 20 percent range and reaffirm our closings expectation of 14,500 to 15,000 deliveries despite the well-known supply side challenges facing our industry."

"This strength is expected to continue in 2022 with an anticipated home closings gross margin of approximately 22 percent based on the composition of our sold homes in backlog and confidence in the achieved operational enhancements and synergies of our combined business. These enhancements include leveraging our buying power, pursuing cost rationalization and value engineering, expanding our new standardized design packages and streamlining our floorplan and option offerings to fully capture the benefits of scalable, production-oriented homebuilding, especially within our newer markets."

"Coupled with our focus on capital efficiency, we now expect to generate returns on equity in the high-teens percent range this year and over 20 percent in 2022 as we have quickly and meaningfully pulled through the benefits of our acquisitions and strategic initiatives that have transformed our ability to compete effectively and generate long-term value," said Palmer.

"We also recently finalized new land financing vehicles that will enable us to cost-effectively increase our optioned land position to at least 40 percent within the next 18 months. These vehicles supplement our existing asset-light land strategies to improve the capital efficiency of our land portfolio, reduce long-term risk and enhance expected returns over the course of a housing cycle."

"By managing our balance sheet and driving improved cash flow generation, we remain on track to drive our net debt-to-capital ratio to the low-30 percent range by year-end followed by a further reduction in 2022," said Dave Cone, Executive Vice President and Chief Financial Officer. "In addition to investing in our core business for future growth, we spent $107 million to repurchase 3.8 million shares outstanding during the quarter and expect to continue to return excess capital to shareholders as a key element of our balanced capital allocation framework."

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

Homebuilding

* Net sales orders were roughly flat at 3,422 homes but increased 31% in value to $2.0 billion, driven by a 32% increase in average sales price to $597,000. The Company strategically limited sales releases to align with production capacity and to maximize its margin opportunity by delaying the release of spec homes while managing the length of its record backlog of sold homes. * Monthly absorptions increased 23 percent to 3.4 net sales orders per community, the highest second quarter level in the Company's history. * Average community count was 332, consistent with prior guidance. * Home closings revenue increased 12 percent to $1.6 billion, driven by a 10 percent increase in average sales price to approximately $503,000 and a modest increase in closings to 3,268 due to temporary supply chain interruptions and weather delays in some markets. * Home closings gross margin increased 370 basis points to 19.1 percent, driven by strong pricing power, operational enhancements and the burn-off of transaction-related impacts in the prior-year period. This was ahead of prior guidance due to favorable pricing trends. * SG&A as a percentage of home closings revenue was 10.2 percent, down 60 basis points sequentially. * Backlog at quarter end was 10,228 sold homes, up 50 percent, with a sales value of $5.7 billion, up 78 percent.

Land Portfolio

* The Company invested $451 million in land acquisition and development. * Total homebuilding lot supply equaled approximately 76,000, up 13 percent. * Controlled lots as a percentage of total supply was 35 percent, up from 28 percent in the prior-year quarter. * Based on trailing twelve-month home closings, the lot position represented 3.9 years of owned supply and 6.0 years of total supply.

Financial Services

* Mortgage capture rate increased to 84 percent from 81 percent in the prior-year quarter.

Balance Sheet

* At quarter end, total available liquidity equaled approximately $1.1 billion, including $366 million of unrestricted cash and $755 million of undrawn capacity on the Company's $800 million corporate revolver. * Net homebuilding debt-to-capital equaled 40.5 percent. The Company continues to anticipate its net debt-to-capital ratio to decline to the low-30 percent range by the end of 2021 followed by further deleveraging in 2022. * During the second quarter, the Company repurchased 3.8 million of its outstanding shares for $107 million, bringing the year-to-date total to approximately $145 million and 5.3 million outstanding shares. At quarter end, the Company had approximately $192 million remaining on its share repurchase authorization.

Business Outlook

Third Quarter 2021

* Average active community count is expected to be approximately 330 to 335 * Home closings are expected to be between 3,300 to 3,500 * GAAP home closings gross margin is expected to be about 20 percent * Effective tax rate is expected to be approximately 23.5 percent * Diluted share count is expected to be approximately 128 million

Full Year 2021

* Average active community count is now expected to be approximately 330 to 335 * Home closings are expected to be between 14,500 to 15,000 * GAAP home closings gross margin is now expected to be in the high-19 to 20 percent range * SG&A as a percentage of home closings revenue is expected to be in the mid-9 percent range * Effective tax rate is expected to be approximately 23.0 percent * Diluted share count is expected to be approximately 129 million * Land and development spend is expected to be approximately $2.0 billion

Quarterly Financial Comparison

($ in thousands) Q2 2021 Q2 2020 Q2 2021 vs. Q2 2020

Total Revenue $1,719,280 $1,526,685 12.6%

Home Closings Revenue $1,644,380 $1,470,994 11.8%

Home Closings Gross Margin $313,339 $226,770 38.2%

19.1% 15.4% 370 bps increase

Adjusted Home Closings Gross Margin $313,339 $258,908 21.0%

19.1% 17.6% 150 bps increase

SG&A $167,557 $145,151 15.4%

% of Home Closings Revenue 10.2% 9.9% 30 bps deleverage

Earnings Webcast

A public webcast to discuss the second quarter 2021 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 6955009. 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

Headquartered in Scottsdale, Arizona, Taylor Morrison is the nation's fifth largest homebuilder and developer. We serve a wide array of consumers from coast to coast, including first-time, move-up, luxury and 50-plus active lifestyle homebuyers under our family of brands-including Taylor Morrison, Esplanade, Darling Homes and Christopher Todd Communities built by Taylor Morrison. Our Financial Services segment provides mortgage financing, title services and homeowners' insurance. From 2016-2021, Taylor Morrison has been recognized as America's Most Trusted(r) Builder by Lifestory Research. Our strong commitment to sustainability, our communities and our team is highlighted in our latest annual Environmental, Social and Governance (ESG) Report.

For more information about Taylor Morrison, please visit www.taylormorrison.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 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; 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 Six Months Ended June 30, June 30,

2021 2020 2021 2020

Home closings $1,644,380$1,470,994$3,007,809$2,735,634revenue, net

Land closings revenue32,057 10,546 36,946 33,485

Financial services 37,392 40,297 81,457 68,336 revenue

Amenity and other 5,451 4,848 10,880 34,929 revenue

Total revenues 1,719,280 1,526,685 3,137,092 2,872,384

Cost of home closings1,331,041 1,244,224 2,441,283 2,314,727

Cost of land closings28,138 10,287 32,165 37,419

Financial services 25,935 22,796 49,934 43,443 expenses

Amenity and other 5,463 5,200 10,566 34,861 expense

Total cost of 1,390,577 1,282,507 2,533,948 2,430,450 revenues

Gross margin 328,703 244,178 603,144 441,934

Sales, commissions and other marketing 97,560 94,038 183,512 180,365 costs

General and administrative 69,997 51,112 131,550 101,638 expenses

Equity in income of unconsolidated (2,126) (3,495) (7,787) (5,921) entities

Interest expense/ 3 (337) (116) (897) (income), net

Other expense/ 45 (696) 1,020 5,595 (income), net

Transaction expenses - 18,712 - 105,086

Income before income 163,224 84,844 294,965 56,068 taxes

Income tax provision 38,469 17,622 67,767 18,403

Net income before allocation to 124,755 67,222 227,198 37,665 non-controlling interests

Net income attributable to non-controlling (608) (1,548) (5,030) (3,423) interests - joint ventures

Net income available to Taylor Morrison $124,147 $65,674 $222,168 $34,242 Home Corporation

Earnings per common share

Basic $0.97 $0.51 $1.73 $0.27

Diluted $0.95 $0.50 $1.70 $0.27

Weighted average number of shares of common stock:

Basic 128,440 129,629 128,661 125,768

Diluted 130,259 130,364 130,766 126,726

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)



June 30, December 31, 2020 2021



Assets

Cash and cash equivalents $366,267 $532,843

Restricted cash 1,854 1,266

Total cash, cash equivalents, and restricted cash368,121 534,109

Owned inventory 5,692,753 5,209,653

Consolidated real estate not owned 63,717 122,773

Total real estate inventory 5,756,470 5,332,426

Land deposits 126,015 125,625

Mortgage loans held for sale 277,017 201,177

Derivative assets 3,687 5,294

Lease right of use assets 68,490 73,222

Prepaid expenses and other assets, net 278,806 242,744

Other receivables, net 100,969 96,241

Investments in unconsolidated entities 130,044 127,955

Deferred tax assets, net 238,078 238,078

Property and equipment, net 127,869 97,927

Goodwill 663,197 663,197

Total assets $8,138,763$7,737,995

Liabilities

Accounts payable $269,924 $215,047

Accrued expenses and other liabilities 435,466 430,067

Lease liabilities 78,814 83,240

Income taxes payable 18,677 12,841

Customer deposits 481,312 311,257

Estimated development liability 39,356 40,625

Senior notes, net 2,452,344 2,452,365

Loans payable and other borrowings 415,074 348,741

Revolving credit facility borrowings - -

Mortgage warehouse borrowings 215,230 127,289

Liabilities attributable to consolidated real 63,717 122,773 estate not owned

Total liabilities $4,469,914$4,144,245

Stockholders' Equity

Total stockholders' equity 3,668,849 3,593,750

Total liabilities and stockholders' equity $8,138,763$7,737,995

Homes Closed and Home Closings Revenue, Net:



Three Months Ended June 30,

Homes Closed Home Closings Revenue, Net Average Selling Price

($ in 2021 2020 Change 2021 2020 Change 2021 2020 Changethousands)

East 1,2451,09713.5 %$563,326 $467,154 20.6 %$452$4266.1 %

Central 791 1,059(25.3) 382,743 473,549 (19.2) 484 447 8.3

West 1,2321,05616.7 698,311 530,291 31.7 567 502 12.9

Total 3,2683,2121.7 %$1,644,380$1,470,99411.8 %$503$4589.8 %

Six Months Ended June 30,

Homes Closed Home Closings Revenue, Net Average Selling Price

($ in 2021 2020 Change 2021 2020 Change 2021 2020 Changethousands)

East 2,2972,08210.3 %$1,009,211$862,870 17.0 %$439$4146.0 %

Central 1,4821,878(21.1) 702,920 846,573 (17.0) 474 451 5.1

West 2,3102,01314.8 1,295,678 1,026,191 26.3 561 510 10.0

Total 6,0895,9731.9 %$3,007,809$2,735,6349.9 %$494$4587.9 %

Net Sales Orders:



Three Months Ended June 30,

Net Sales Orders Sales Value Average Selling Price

($ in 2021 2020 Change 2021 2020 Change2021 2020 Changethousands)

East 1,3021,17610.7 %$713,398 $484,701 47.2%$548$41233.0%

Central 850 1,003 (15.3) 500,976 437,568 14.5 589 436 35.1

West 1,270 1,274 (0.3) 828,731 643,156 28.9 653 505 29.3

Total 3,4223,453(0.9) %$2,043,105$1,565,42530.5%$597$45331.8%



Six Months Ended June 30,

Net Sales Orders Sales Value Average Selling Price

($ in 2021 2020 Change2021 2020 Change2021 2020 Changethousands)

East 3,0792,53721.4%$1,591,982$1,046,24552.2%$517$41225.5%

Central 1,9221,9090.7 1,084,457 861,631 25.9 564 451 25.1

West 2,9132,47317.8 1,839,497 1,275,399 44.2 631 516 22.3

Total 7,9146,91914.4%$4,515,936$3,183,27541.9%$571$46024.1%

Sales Order Backlog:



As of June 30,

Sold Homes in Backlog Sales Value Average Selling Price

($ in 2021 2020 Change2021 2020 Change2021 2020 Changethousands)

East 3,617 2,27159.3%$1,903,206$974,860 95.2%$526$42922.6%

Central 2,838 2,11134.4 1,581,686 1,006,002 57.2 557 477 16.8

West 3,773 2,42355.7 2,250,680 1,245,301 80.7 597 514 16.1

Total 10,2286,80550.3%$5,735,572$3,226,16377.8%$561$47418.4%

Average Active Selling Communities:



Three Months Ended Six Months Ended June 30, June 30,

20212020Change 20212020Change

East 126153(17.6)%127148(14.2)%

Central101132(23.5) 102133(23.3)

West 105126(16.7) 106112(5.4)

Total 332411(19.2)%335393(14.8)%

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

Adjusted income before income taxes (and related margin) 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") and transaction expenses. 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, purchase accounting adjustments relating to the acquisition of WLH and transaction expenses. 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 and financial services operating loss relating to the acquisition of WLH, transaction expenses and the tax impact due to such items. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance premiums, net, 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 June 30,

($ in thousands, except per share data) 2021 2020

Net income available to TMHC $124,147$65,674

William Lyon Homes related purchase accounting - 32,138 adjustments

Transaction expenses - 18,712

Tax impact due to above non-GAAP reconciling items - (12,709)

Adjusted net income $124,147$103,815



Basic weighted average shares 128,440 129,629

Adjusted earnings per common share - Basic $0.97 $0.80





Diluted weighted average shares 130,259 130,364

Adjusted earnings per common share - Diluted $0.95 $0.80

Adjusted Income Before Income Taxes and Related Margin

Three Months Ended June 30,

($ in thousands) 2021 2020

Income before income taxes $163,224 $84,844

William Lyon Homes related purchase accounting - 32,138 adjustments

Transaction expenses - 18,712

Adjusted income before income taxes $163,224 $135,694



Total revenues $1,719,280 $1,526,685



Income before income taxes margin 9.5% 5.6%

Adjusted income before income taxes margin 9.5% 8.9%

Adjusted Home Closings Gross Margin

Three Months Ended

June 30,

($ in thousands) 2021 2020

Home closings revenue $ 1,644,380 $ 1,470,994

Cost of home closings $ 1,331,041 $ 1,244,224

Home closings gross margin $ 313,339 $ 226,770

William Lyon Homes homebuilding related purchase - 32,138accounting adjustments

Adjusted home closings gross margin $ 313,339 $ 258,908

Home closings gross margin as a percentage of 19.1 % 15.4 %home closings revenue

Adjusted home closings gross margin as a 19.1 % 17.6 %percentage of home closings revenue

EBITDA and Adjusted EBITDA Reconciliation



Three Months Ended June 30,

($ in thousands) 2021 2020

Net income before allocation to non-controlling $124,755 $67,222 interests

Interest expense/(income), net 3 (337)

Amortization of capitalized interest 34,070 28,667

Income tax provision 38,469 17,622

Depreciation and amortization 2,193 1,467

EBITDA $199,490 $114,641

Non-cash compensation expense 4,654 4,986

William Lyon Homes related purchase accounting - 32,138 adjustments

Transaction expenses - 18,712

Adjusted EBITDA $204,144 $170,477



Total revenues $1,719,280$1,526,685

EBITDA as a percentage of total revenues 11.6% 7.5%

Adjusted EBITDA as a percentage of total revenues 11.9% 11.2%

Net Homebuilding Debt to Capitalization Ratio Reconciliation

As of As of($ in thousands) June 30, 2021 March 31, 2021

Total debt $ 3,082,648 $ 3,025,587

Less unamortized debt issuance premiums, net 2,344 2,354

Less mortgage warehouse borrowings 215,230 180,833

Total homebuilding debt $ 2,865,074 $ 2,842,400

Less cash and cash equivalents 366,267 392,500

Net homebuilding debt $ 2,498,807 $ 2,449,900

Total equity 3,668,849 3,655,564

Total capitalization $ 6,167,656 $ 6,105,464

Net homebuilding debt to capitalization ratio 40.5 % 40.1 %

CONTACT: Investor Relations(480) 734-2060investor@taylormorrison.com

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SOURCE Taylor Morrison