Taylor Morrison Home Corporation

Good morning and welcome to the Taylor Morris third quarter 2024 earnings conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will be given at the time. As a reminder, this conference call is being recorded. I would now like to introduce to you Mackenzie Aaron, Vice President of Investor Relations. Mackenzie.

Thank you and good morning, everyone. We appreciate you joining us today. Before we begin, let me remind you that this call, including the question and answer session, will include forward-looking statements. These statements are subject to the safe harbor statement for forward-looking information that you can review in our earnings release on the investor relations portion of our website at taylormorrison.com. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to those factors identified in the release and in our filings with the SEC, and we do not undertake any obligation to update our forward-looking statements. In addition, we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in the release. Now, I will turn the call over to our Chairman and Chief Executive Officer, Cheryl Palmer.

Thank you, Mackenzie, and good morning, everyone. Joining me is Kurt Van Hefty, our Chief Financial Officer, and Eric Huser, our Chief Corporate Operations Officer. As always, I will focus my remarks on an update on the market and our strategic priorities, while Eric will discuss our land portfolio and thoughts on the resale market, and Kurt will provide our detailed financials and guidance. I am proud to share the outstanding results of our third quarter, which clearly demonstrates the benefits of our diversified consumer and geographic strategy, as well as our team's execution amid continued interest rate volatility, economic uncertainty, and hurricane-related disruptions. To begin, in the third quarter, we delivered 3,394 homes at an average price of $598,000 Eugenia Larmore, Producing over 2 billion of revenue with a home closings gross margin of 24.8%. Eugenia Larmore, Coupled with strong SG&A leverage and improved financial services income, this generated over 50% year over year growth in our earnings per diluted share to $2.37 and a 15% year over year increase in our book value per share to approximately $54. Once again, both our closings volume and gross margin exceeded our guidance, which I am particularly proud of considering there were two hurricanes during the quarter, including Hurricane Helene during the critical final two weeks. Thankfully, our communities withstood the storms, winds, and rains well with minimal damage reported. However, consistent with our robust safety protocols, we shut sales offices and construction sites three days in advance of the storms and then required several days for cleanup and recovery, resulting in nearly two weeks worth of disruption. Most notably, the excess water has the greatest impact on land under development. With Florida, the Carolinas, and Georgia representing a combined 35% of our total communities, these storms impacted a sizable portion of our portfolio. As a result, I believe our better than expected third quarter closings and gross margins are all the more impressive, particularly given our resort lifestyle community's outsized contribution to revenue and margin. While there will be some temporary timing delays due to the storms, I believe the most lasting impact will be related to the heightened risk of shrinking availability of homeowners insurance, specifically in coastal markets. Fortunately for our customers, we are able to offer well-priced coverage via our wholly owned subsidiary, Taylor Morrison Insurance Services, which as of the third quarter had a 59% capture rate. Because of the strong construction quality of our newly built homes compared to older existing homes and careful site selection, generally away from coastlines, the average premium of our insurance policies is typically lower than the market and has increased to a lesser degree. While we are closely watching the evolving market dynamics, we do not expect a meaningful change in insurance availability and are pleased that insurance has generally not been an obstacle for our buyers. Turning now to the quarter, home buyer demand was generally solid in most markets, led by the east and central regions, while the west coast was more mixed As I shared on our second quarter call, we had begun to see traffic recover in June and July, which translated into improving order volume throughout the third quarter, with activity ending on a high note in September. In total, our net orders increased 9% year over year during the quarter, driven by a monthly absorption pace of 2.8 per community. While still early in October, demand has generally been healthy and consistent with seasonal trends, even with the impact of yet another hurricane in Florida. By consumer group, our third quarter orders consisted of 33% entry level, 43% move up, and 24% resort lifestyle. On a year over year basis, orders were strongest in our resort lifestyle segment with 20% growth, even as this Florida heavy business bore the brunt of hurricane related disruptions. Meanwhile, our move up sales increased 8% while the entry level was more modestly at 4%. Since the Federal Reserve announced its long-awaited rate reduction in September, mortgage rates have been somewhat range-bound in the mid-6% range as the market largely anticipated the move. On the sales floor, we continue to lean primarily on customizable finance incentives in lieu of base price adjustments to address each consumer's unique circumstances as needed. This approach allows us to better maintain our community's home prices and protect our gross margins, all while improving our customers purchasing power. Importantly, our use of relatively costly mortgage forward commitments to secure below market interest rates has remained at just around a third of our third quarter closings, half of which are for first time buyers. Many of our buyers instead prefer to allocate their incentive dollars towards closing costs or temporary buy downs. This is one reason why our consumer diversification supports our strong gross margins. In addition, our margins reflect the sizable lot and option premium revenue we earn primarily on 2B built homes. On a per home basis, this combined revenue averaged $101,000 in the third quarter or 17% of our average closing price. This contributes to several hundred basis points spread between our to-be-built and spec home margins, again reinforcing the benefits of our diversified approach. In the third quarter, to-be-built homes accounted for 40% of our sales, down from 45% a year ago. In addition to the margin benefit, we have found that by offering both to-be-built and spec homes we are better able to compete for sales against builders with more limited options. Our online tools have been a great option for home shoppers looking to take more control of the buying process. Following the National Association of Realtors' new rules governing the way realtors get paid and by whom, we are seeing more customers opt for self-service within our online home reservation system. In fact, the third quarter brought record highs for the year in online reservation with a conversion rate of 58% and a 17% contribution to sales. Realtor participation on our online tools reservations continues to trend downward with meaningful improvement year over year. Taking a step back, we continue to believe that the housing market remains severely undersupplied with a multi-million unit deficit due to years of under-building relative to household formation. While the existing home market has started to loosen, with resale listings gravitating back towards historic norms, especially in Florida and Texas, we believe our communities and product have not been meaningfully impacted given a substantial portion of the listings are not truly competitive, as Eric will discuss in just a moment. Alison Tucher, At Taylor Morrison, regardless of the ever shifting macro backdrop, we believe that our ability to drive outside growth and attractive returns. Alison Tucher, has been permanently strengthened since expanding our company scale and refining our operational capabilities over the last many years. Alison Tucher, This is reflected in the long term targets that we introduced earlier this year, each of which are meaning police more strong than our historic norms. These targets include a 10% annual home closings growth, an annualized low three absorption pace, low to mid 20% home closings growth margins, and mid to high teen return on equity. This year, with just two months to go, we expect to meet or exceed each of these metrics with double digit closings growth to approximately 12,725 homes, at a gross margin of around 24.3% as 2024 has shaped up to be another milestone year for our company. As we head into 2025, we are confident that our longstanding emphasis on capital efficient growth will yield another year of strong performance supported by strong tailwinds driving the need for new construction and our favorable positioning as a diversified home builder. With that, let me now turn the call over to Aaron.