Taylor Morrison Home Corporation

good morning and welcome to taylor morrison's fourth quarter 2024 earnings conference call currently all participants are on listen only mode later we will conduct question answer session and the instructions will be given at that time as a reminder this conference call is being recorded and i'd like to introduce your host mackenzie aaron vice president of investor relations 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 today is Kurt Van Hefte, our Chief Financial Officer, and Eric Huser, our Chief Corporate Operations Officer. I will share 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 detail our financial performance and initial guidance for 2025. I am proud to share the strong results of our fourth quarter, which I believe once again distinguished our team's execution and the merits of our diversified consumer and geographic strategy. Among the highlights, we delivered 3,571 homes at an average price of $608,000, producing nearly $2.2 billion of revenue with an adjusted home closings gross margin of 24.9%. Each of our operational metrics met or exceeded our prior guidance. Combined with cost leverage, improved financial services income and a favorable tax rate, this generated nearly 30% year-over-year growth in our adjusted earnings per diluted share and a 14% year-over-year increase in our book value per share to $56. From a sales perspective, as I shared on our last earnings call in October, we were seeing healthy demand trends in line with seasonal patterns. While interest rates increased sharply through the quarter, activity held up with impressive consistency through year end. As a result, our fourth quarter net orders increased 11% year over year with an absorption pace of 2.6 per community up from 2.4 a year ago. This brought our annualized absorption pace to three for the year within our targeted range. I am pleased that this sales success was achieved with only a modest increase in incentives needed to address the impact of higher interest rates. This contributed to our better than expected fourth quarter adjusted gross margin, which was stable sequentially and up year over year, in contrast to significant compression seen across our industry. As I have highlighted on recent calls, our margins have remained in a tight range over the last two years, despite the volatile rate environment. I attribute our positive results to the quality locations of our communities, which are concentrated in attractive core submarkets with minimal exposure to further out tertiary locations. As Eric will discuss, tertiary markets are facing the most pricing pressure from rising inventory, as well as greater sensitivity to affordability constraints among first-time buyers attracted to such markets. Alternatively, our prime location strategy continues to benefit from attractive underlying fundamentals by serving well-qualified homebuyers in our entry-level, move-up, and resort lifestyle segments. Across our portfolio, we further diversify by offering both to-be-built and spec homes aimed at meeting the needs and preferences of our customers. In addition to aiding our sales opportunities, this balanced mix further insulates our margins from broader market pressures as to-be-built homes generate superior gross margins. As we have discussed in the past, A high percentage of our resort lifestyle buyers prefer to select their own home site, floor plan, and elevation and generally spend three times more in lot and option premiums as compared to each of our other consumer groups. They also require less incentives than entry-level heavy spec homes. This makes our fourth quarter margin performance all the more notable when considering that 54% of the quarter's closings came from specs, including 21% that were sold and closed during the quarter, a higher than normal contribution that helped drive the upside to our closing volume. As we look ahead, we expect this balanced approach and longstanding emphasis on quality locations to serve us well as we balance pace and price in each community to maximize our returns. With the spring selling season officially kicking off this week following Sunday's Super Bowl, early indicators are encouraging. Appreciating that we have a difficult year-over-year comparison this quarter given the exceptionally strong sales recorded in the first quarter of 2024, we are pleased to see pre-qualifications growing by week and web traffic to taylormorrison.com almost up 40% from a year ago. This strong lift in website visitors is a direct correlation to our involvement in ABC's reboot of Extreme Makeover Home Edition, where we serve as the season's official home builder, providing beautiful, functional homes to deserving families. In the fourth quarter and continuing into 2025, we're seeing healthy momentum in online home reservations with a 53% conversion to sale and a declining rate of participation with real estate agents. Most notably, among customers using our online scheduling tool, we saw a sharp decline in the share of sales with a real estate agent to 67% last quarter from 80% a year ago. This shift is likely due to a number of factors, including the recent NAR rulings, the pricing transparency delivered by our digital experience, and our longstanding reputation as America's most trusted home builder 10 years running. Alongside the year's early momentum, we are strategically managing our pricing and incentives including the rollout of a national base price increase in early January. As needed, we continue to prioritize customizable finance incentives to address each customer's unique circumstances. By working closely with our customers to personalize the most effective use of sales tools, we better manage our overall incentive cost while improving our customers' purchasing power. This customer by customer strategy has allowed us to maintain a relatively low utilization of mortgage forward commitments tied to below market interest rates, with just 38% of our fourth quarter closings using these most costly incentive structures. Similar to the last many quarters, about half of the customers using these forward commitments are first time homebuyers. By consumer group, our fourth quarter orders consisted of 32% entry level, 48% move up, and 20% resort lifestyle. On a year-over-year basis, orders were strongest in our move up segment with 27% growth, while our entry level sales were up 5% and resort lifestyle declined 9%, in part due to the hurricane impact in Florida, where this segment is heaviest, as well as the timing of opening and closeouts of Esplanade communities at year end. In addition, Florida has been faced with some of the highest levels of rising inventory, but as Eric will elaborate on, we have found that most of this supply is not competitive to our communities, and we are encouraged that Florida has started to show some positive signs year to date. Overall, I would characterize buyer demand across all of our buyer profiles as healthy, albeit with varying needs of assistance to overcome affordability challenges with the most pressure at the entry level. Recognizing that there are more unknowns this year than typical given the new administration, we continue to be grounded in a positive view on the need for new construction that meets the needs and budgets of our targeted consumer groups. While interest rates are unlikely to provide near term relief to affordability constraints, we believe our suite of incentive tools and broad product offerings are appropriately aligned to achieve our targeted sales goals. We will meet the market as needed as we look to maintain an annualized sales pace in the low three range, while also generating healthy gross margins in the low to mid 20% range. As Kurt will discuss in greater detail, our initial guidance for the year calls for 13,500 to 14,000 home closings at a gross margin between 23 to 24% and an SG&A ratio in the mid 9% range. Let me just end by saying that as an organization with significant tenure across our leadership and operating teams, we are well accustomed to facing uncertainty and market disruptions head on. Our teams are nimble and have the flexibility to adjust our starts, product offerings, and pricing structures as needed to minimize risk and maximize long-term profitability. Beyond the near-term potential headwinds, we remain confident in our outlook and look forward to providing more insights into our strengthened organizational capabilities at our upcoming Investor Day. We hope all of you will join us on March 6th at 12 p.m. Eastern time for the webcast presentations, which will highlight our multi-year growth trajectory and the many ways in which we have set up Taylor Morrison to succeed regardless of the market backdrop. For those of you able to attend in person, we look forward to seeing you soon. With that, let me now turn the call over to Eric.