Taylor Morrison Home Corporation

Ladies and gentlemen, the Taylor Morrison Q2 2025 earnings webcast and conference call will begin shortly with your host Mackenzie Aaron. We appreciate your patience as we prepare your session today. During the call, we encourage participants to raise any questions they may have. You can raise a question by pressing star followed by one on your telephone keypad and to remove the line of questioning will be star followed by two. As a reminder to raise a question, be star followed by one. We will begin shortly. Thank you. Good morning and welcome to Taylor Morrison's second quarter 2025 earnings conference call. Currently all participants are in listen only mode. Later we will conduct question and answer session and instruction will be given at the time. As a reminder, this conference call is being recorded. I'd now like to introduce our host, Mackenzie Aaron. Please go ahead.

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. I am pleased to share our second quarter results, which met or exceeded our guidance on substantially all key metrics, despite the unique environment. We delivered 3,340 homes at an average price of $589,000. This produced $2 billion of home closings revenue with an adjusted home closings gross margin of 23% and 90 basis points of SG&A expense leverage. Our performance reflects our diversified product portfolio that serves a broad and well-qualified consumer set with to-be-built and spec offerings concentrated in core locations. Especially in volatile markets, this balanced strategy is a valuable differentiator that we believe contributes to greater financial resiliency. As I shared on our last call, The start of the spring selling season had been muted as consumers digested stock market volatility, tariff uncertainty, immigration reform, and high interest rates. As the season progressed, sales trends remained softer than normal with some choppiness throughout the quarter. This drove moderation in our monthly net absorption pays to 2.6 per community. Although this was consistent with our historic second quarter average, it was lower than our expectations in normal market conditions due to increased competitive pressures, especially in first and first move-up locations, as well as a pickup in cancellations. In this environment, our overall bias between pace and price leans more heavily towards price and ultimately margin and returns given the value of our attractive land positions, desirable communities, and discerning customers, especially in our amenity-rich move-up and resort lifestyle neighborhoods. We continue to believe that our emphasis on working with each customer hand-in-hand with our Taylor Morrison Home Funding Team to personalize incentives is the most effective way to create value for both our buyers and our company. This process allows us to educate and inform our customers through pre-qualification and tailor programs that provide stability and strengthen their financial goals and needs during home ownership. We pride ourselves that our mortgage programs are aligned to serve the consumers that most need the support. As an example of just one of our programs that has proven successful in driving traffic and assisting a small subset of customers with their financial goals has been a recently introduced 3.75% conventional seven-year adjustable rate mortgage with no discount fees. To put the power of such an offer in perspective, this promotional interest rate would increase our typical customer's purchasing power by about $138,000 on a $500,000 home financed with a 20% down payment as compared to financing and market interest rates. The point being, assuring that we have a wide range of programs and products to meet each customer's needs continues to be key to our success. Affordability continues to be top of mind for our first-time buyers, while quality of community and choice remain critical for our other consumer segments, as Eric will detail in just a moment. We are by no means immune from the headwinds facing our industry. However, we believe our strategy of serving well-qualified homebuyers across the consumer spectrum with a well-balanced portfolio of to-be-built and spec homes, primarily in attractive core submarkets where fundamentals tend to be healthier throughout housing cycles, provides important benefits, including a more stable gross margin profile. In contrast to significant industry gross margin compression, our adjusted home closings gross margin has been relatively range bound between 23% and nearly 25% for the last two and a half years. This is much stronger than our historical average due to the improvement in our scale and operating capabilities. And most importantly, as we look ahead, our gross margin is expected to remain within the bounds of our long-term target in the low to mid 20% range, despite the outsized incentive offers and overall pricing pressure we are competing against, especially on spec sales. The prevalence and depth of these incentives has shifted consumer preferences, even among traditionally to be built customers towards spec homes, as some are willing to trade personalization for the deeper incentives currently available for spec inventory across the industry. As a result, our share of spec sales increased in the second quarter to a new high of 71%, including a higher than typical 50% in our esplanade segment. With specs carrying gross margins below that of to-be-built homes, we expect that this temporary mix shift will impact our home closings gross margin in the third and fourth quarter as our margin is expected to moderate sequentially to approximately 22%. However, for the year, our adjusted home closings gross margin is still expected to be approximately 23%. And longer term, we expect our business to remain more equally balanced between to-be-built and spec home offerings. Maryann Tobin- By consumer group our second quarter orders consisted of 33% entry level 50% move up and 17% resort lifestyle. Maryann Tobin- As a reminder, in the first quarter overall resort lifestyle segment was the only to post year over year net order growth during its peak selling season, while our move up sales were roughly stable and the entry level was down most deeply. In the second quarter, we saw more consistent sales activity across the consumer spectrum with our resort lifestyle and entry-level segments, both down in the high teen range, while our move-up sales were down in the mid single digits, driven by a shared lack of urgency due to less confidence. With our broader resort lifestyle portfolio, our esplanade communities, which account for about 10% of our total, have held up with greater resiliency. as we would expect given its affluent customer base. In the second quarter, Esplanade's net sales orders declined just 8% versus 12% in total for the company, and its home closings gross margin was slightly improved year over year in the high 20% range. This strong margin is driven in part by outsized combined average lot and option premiums of nearly $270,000 three times that of the rest of our business. During the quarter, we broke ground on our newest esplanade in Summerlin outside of Las Vegas, which already has a robust interest list even before we have initiated our first campaign for the community. We remain committed to a robust expansion of this unique brand in the years ahead. Taking a step back from our current sales environment, we believe the need for affordable, desirable new construction remains intact across our markets of operations given the aging of the population, migration patterns, and evolving buyer preferences. We believe that our diverse portfolio is well positioned to serve this need in the years ahead. While the near-term outlook calls for a more patient growth trajectory as we prioritize capital efficiency and returns over volume in today's intensely competitive marketplace, We strongly believe we have the platform and opportunity to jumpstart growth as market dynamics stabilize. In the meantime, with a healthy land pipeline already controlled and healthy balance sheet, we have flexibility to return capital to shareholders on top of the roughly $2 billion we have invested in share repurchases since 2015. As you would expect, our teams are highly focused on controlling costs and working with our trades to further increase production and purchasing efficiencies, which has driven year-over-year improvement in our stick and brick costs. Additionally, our one-of-a-kind digital sales environment is another source of meaningful cost savings that continues to gain traction and support our healthy SG&A structure. Across the business, our operating priorities are grounded in a disciplined model that we expect can generate mid- to high-teen returns on equity throughout the course of a cycle, including this year. With that, let me now turn the call over to Aaron.