Taylor Morrison Reports Fourth Quarter and Full Year 2023 Results

SCOTTSDALE, Ariz., Feb. 14, 2024 /PRNewswire/ — Taylor Morrison Home Corporation (NYSE:TMHC), a leading national land developer and homebuilder, announced results for the fourth quarter and year ended December 31, 2023. Reported net income in the fourth quarter was $173 million, or $1.58 per diluted share while adjusted net income was $223 million, or $2.05 per diluted share. For the full year 2023, reported net income was $769 million, or $6.98 per diluted share, while adjusted net income was $830 million, or $7.54 per diluted share.

Fourth quarter 2023 highlights included the following:

Net sales orders increased 30% to 2,361, driven by a monthly absorption pace of 2.4 per community
Home closings revenue of $1.9 billion, driven by 3,190 home closings at an average price of $607,000
Home closings gross margin of 24.1%
72,362 homebuilding lots owned and controlled, representing 6.3 years of total supply, of which 3.0 years was owned

Full year 2023 highlights included the following:

Net sales orders increased 14% to 10,830, driven by a monthly absorption pace of 2.8 per community
Home closings revenue of $7.2 billion, driven by 11,495 home closings at an average price of $623,000
Home closings gross margin of 23.9% and adjusted home closings gross margin of 24.0%
Repurchased 2.8 million common shares for $128 million
Homebuilding debt-to-capitalization of 26.0% on a gross basis and 16.8% net of $799 million of unrestricted cash
Total liquidity of $1.8 billion

“Our team’s strong fourth quarter execution wrapped up another tremendous year for Taylor Morrison. In total, we delivered 11,495 homes to generate $7.2 billion of homebuilding revenue at a healthy adjusted home closings gross margin of 24.0%, driving adjusted earnings of $7.54 per diluted share. Our earnings combined with $889 million of share repurchases over the last four years drove our book value per share to a new high of $49, which was up 15% from a year ago and 53% from two years ago,” said Sheryl Palmer, Taylor Morrison Chairman and CEO.

“While we faced significant headwinds from rising interest rates, economic uncertainty and global unrest, our business displayed the resiliency we have strategically positioned it for following years of intentional growth, transformative M&A integrations, and tireless commitment to streamlining and optimizing our operational abilities. We strongly believe that our diversification across buyer groups ranging from entry-level, move-up and resort lifestyle combined with our emphasis on high-quality community locations are critical differentiators that enhance our bottom-line potential, growth opportunities and risk mitigation throughout housing’s inevitable ebbs and flows as demonstrated with our results through a volatile fourth quarter.”

Palmer continued, “Our top priority as we move ahead is reaccelerating our growth now that we believe that we have firmly established the operational efficiency required for outsized market share gains. In 2024, we expect to deliver at least 12,000 home closings at a home closings gross margin of 23.0% to 23.5%, followed by approximately 10% closings growth in 2025 and thereafter. Our $1.8 billion land investment in 2023 was focused on supporting these growth aspirations, and with one of the strongest balance sheets in our company’s history, we are well positioned to continue investing with an accretive, disciplined approach in 2024 with an initial planned land spend in the range of $2.3 billion to $2.5 billion. In addition to driving growth in the years ahead, we also expect to repurchase approximately $300 million of common stock in 2024, further enhancing our shareholder returns.”

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

Homebuilding

Home closings revenue declined 19% to $1.9 billion, driven by a 16% decrease in home closings to 3,190 and a 3% decrease in average closing price to $607,000.
Home closings gross margin increased 60 basis points year over year to 24.1%. In the fourth quarter of 2022, home closings gross margin included an inventory impairment of $25 million. Excluding this charge, the adjusted home closings gross margin in the fourth quarter of 2022 was 24.5%. There was no similar charge taken in the fourth quarter of 2023.
Net sales orders increased 30% to 2,361, driven by a 29% increase in the monthly absorption pace to 2.4 per community and a 1% increase in ending community count to 327. Average net sales order price increased 9% to $629,000.
SG&A as a percentage of home closings revenue increased 240 basis points to 9.7% from the record low of 7.3% a year ago. The reduced leverage was primarily due to lower home closings revenue, higher performance-based compensation expense and external broker commissions.
Cancellations equaled 11.6% of gross orders, down from 24.4% a year ago. This was consistent with historic norms.
Backlog at quarter end was 5,289 homes with a sales value of $3.6 billion. Backlog customer deposits averaged approximately $62,000, or 9%, per home.

Land Portfolio

Homebuilding land acquisition and development spend totaled $537 million in the fourth quarter, up from $373 million a year ago. Development-related spend accounted for 42% of the fourth quarter total versus 64% a year ago.
To provide greater clarity into our lot position and improve comparability to some of our peers, we adjusted our methodology for calculating owned and controlled lots as of December 31, 2023. Specific to owned lots, we have excluded lots that have begun vertical construction. Those lots are defined separately as homes in inventory. With regard to controlled lots, we have expanded our definition to include those lots under contract with an earnest money deposit that have not yet been formally approved by our investment committee to offer a more complete look at our lot pipeline. All presented periods have been recast under the new methodology.
Homebuilding lot supply was 72,362 owned and controlled homesites, down from 74,787 a year ago and 74,794 lots two years ago.
Controlled homebuilding lots as a share of total lot supply was 53%, up from 51% a year ago and 49% two years ago.
Based on trailing twelve-month home closings, total homebuilding lots represented 6.3 years of total supply, of which 3.0 years was owned. This compared to 5.9 years of total supply and 2.9 years of owned supply at year-end 2022 and 5.5 years of total supply and 2.8 years of owned supply at year-end 2021.

Financial Services

The mortgage capture rate increased to 86%, up from 78% a year ago.
Borrowers had an average credit score of 751 and debt-to-income ratio of 40%.

Balance Sheet

At quarter end, total liquidity was approximately $1.8 billion, including $799 million of unrestricted cash and $1.1 billion of total capacity on the Company’s revolving credit facilities, which were undrawn outside of normal letters of credit.
The gross homebuilding debt-to-capital ratio was 26.0%, down from 32.0% a year ago. Including $799 million of unrestricted cash on hand, the net homebuilding debt-to-capital ratio was 16.8%, down from 24.0% a year ago.
The Company repurchased 2.8 million shares for $128 million in 2023, including approximately 500,000 shares for $24 million in the fourth quarter. At quarter end, the Company had $494 million remaining on its share repurchase authorization.

Business Outlook

First Quarter 2024

Home closings are expected to be approximately 2,700
Average closing price is expected to be around $600,000
Home closings gross margin is expected to be between 23.0% to 23.5%
Ending active community count is expected to be between 320 to 325
Effective tax rate is expected to be approximately 25%
Diluted share count is expected to be approximately 108 million

Full Year 2024

Home closings are expected to be at least 12,000
Average closing price is expected to be around $600,000
Home closings gross margin is expected to be between 23.0% to 23.5%
Ending active community count is expected to be between 320 to 325
SG&A as a percentage of home closings revenue is expected to be in the high-9% range
Effective tax rate is expected to be approximately 25%
Diluted share count is expected to be approximately 109 million
Land and development spend is expected to be between $2.3 billion to $2.5 billion

Quarterly Financial Comparison

Annual Financial Comparison

Earnings Conference Call Webcast

A public webcast to discuss the Company’s earnings will be held later today at 8:30 a.m. ET. A live audio webcast of the conference call will be available on Taylor Morrison’s website at www.taylormorrison.com on the Investor Relations portion of the site under the Events & Presentations tab. For call participants, the dial-in number is (833) 470-1428 and conference ID is 791610. The call will be recorded and available for replay on the Company’s website.

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 and resort lifestyle homebuyers and renters under our family of brands—including Taylor Morrison, Esplanade, Darling Homes Collection by Taylor Morrison and Yardly. From 2016-2024, 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 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 instability in the banking system; risks associated with civil unrest, acts of terrorism, threats to national security, the conflicts in Eastern Europe and the Middle East and other geopolitical events; the scale and scope of current and future public health events, including pandemics and epidemics; any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; 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.  

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