Taylor Morrison Home Corporation

Good morning and welcome to Taylor Morrison's fourth quarter 2025 earnings webcast. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aaron, Vice President of Investor Relations. Please go ahead.

Thank you and good morning. 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 where applicable. 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 Heuser, our Chief Corporate Operations Officer. I am pleased to share the results of our fourth quarter performance and look forward to sharing an update on our strategic priorities for 2026. Our fourth quarter results met or exceeded our expectations across nearly all key operational metrics, despite challenging market conditions. These results concluded a solid year of performance in 2025, during which we delivered nearly 13,000 homes at an adjusted home closings gross margin of 23% and generated 40 basis points of SG&A expense leverage on essentially flat home closings revenue. Coupled with $381 million of share repurchases, these results drove a 13% return on equity and 14% growth in our book value per share. With the majority of homebuilders having already reported year-end results, it's clear that Taylor Morrison's 2025 performance stands apart. Among our peers, we delivered one of the highest home closings gross margin in the industry. We're the only to achieve year-over-year SG&A leverage and modestly increased our closings volume while the industry was generally flat to down, which together drove more resilient bottom line earnings and returns. In a year characterized by softer consumer confidence and heightened pricing competition and inventory levels, we believe that these results reflect the effectiveness of our diversified operating model and broad consumer reach across our national footprint of well-located communities. Given the market's persistent affordability constraints, which are felt most heavily among first-time home buyers, Our portfolio's unique concentration on move-up and resort lifestyle customers has helped us to navigate the market's headwinds. We pride ourselves on developing thoughtfully designed communities, often with amenities, in prime locations and offering a balanced mix of spec and to-be-built home offerings that meet the needs and aspirations of our customers. I believe this is perhaps Taylor Morrison's greatest competitive advantage, the desire to deeply understand our consumers, respond to their feedback, and deliver a home buying experience that is second to none. It is this unrelenting focus on our customers that has recently earned us the reputation as America's most trusted builder for the 11th consecutive year and to Fortune's most admired companies list. I believe these strengths Our diversification, attractive product offerings, and consumer-centric philosophy will be even more critical to our success as we move forward. While there are reasons for optimism, industry-wide inventory levels remain elevated and consumers remain highly attuned to competitive dynamics in the marketplace and are closely weighing incentives, pricing, and spec offerings in their purchase decisions. And while affordability has improved over the last year alongside lower interest rates, wage growth, and price discovery, I believe consumer confidence in the broader economic and political outlook will be critical for further demand recovery. That said, I'm cautiously encouraged by the sales success we achieved in the fourth quarter of 2025 and by the early momentum thus far in 2026. Our fourth quarter monthly absorptions outperformed typical seasonal patterns as our pace held steady from the third quarter, defying the average mid-single-digit sequential decline we have historically experienced. This is notable considering that we carefully managed pace and price, community by community, and in some cases chose to be more patient as peers pushed through inventory into year end and held incentives on new orders stable sequentially. This momentum continued into January, even with the winter storm disruptions, and early signs are positive as the spring selling season generally kicks off in full force this week. The fourth quarter strength was driven primarily by our premier Esplanade resort lifestyle communities, which experienced 7% year-over-year net order growth. This was followed by a low single digit decline in move up sales while non Esplanade resort lifestyle and entry level orders were down in the mid to high single digits. On a mixed basis, our orders by buyer groups stayed relatively consistent quarter over quarter at 31% entry level, 49% move up and 20% resort lifestyle. From a market perspective, sales were strongest in our east and west areas, with most of our Florida markets, California, and Phoenix increasing year over year, while our central region was slower due to softness across Texas, particularly in Austin. As we look ahead, I expect 2026 to be another solid year for our organization, albeit one focused on setting the stage for a reacceleration of growth in 2027 and beyond. I'd like to walk through the moving pieces that are influencing our outlook for this year, while Kurt will provide the specifics of our guidance in just a moment. Given slower sales of to-be-built homes in 2025, we entered this year with a lower than normal backlog of just over 2,800 homes. As a result, this year's home closing deliveries and margins will be more dependent on sales during the spring selling season than is typical for our business. Positively, we expect to accelerate the number of new community openings in 2026 from 2025 with well over 100 new outlets planned, including over 20 new Esplanade outlets, which are already supported by deep interest lists. The majority of these outlets will open for sales in the first half of the year and begin contributing closings in the second half and into 2027. In addition, the improvement in construction cycle times over the last two years has greatly enhanced our production flexibility with homes now able to start well into the third quarter and still close by year end in many of our markets. Based on targeted consumer groups in the move up and resort lifestyle segment where personalization is valued We expect new community openings to help shift our sales mix back to a more balanced mix of spec and to-be-built orders. We are already seeing signs of this shift back to more historic preferences with to-be-built sales in January gaining 700 basis points of share versus the fourth quarter when we sold a record number of intra-quarter spec closings. Given the meaningfully higher average gross margin on to-be-built homes, we believe this mix shift will be an important driver of our long-term margin potential. However, in the near term, while we have reduced our spec home inventory by 24% since the second quarter of 2025, we still ended the year with nearly 3,000 unsold homes, including just over 1,200 finished homes. We are focused on continuing to responsibly sell through this inventory while being highly selective in putting new specs into production. This inventory management is expected to temporarily impact our gross margins in the first half of the year. Looking further out, we continue to target outsized growth over the next many years, including a continued aspiration to reach 20,000 closings but we will not do so simply for growth sake. Our capital allocation and strategic priorities are firmly rooted in generating attractive returns on our invested capital throughout housing cycles. With competitive pricing pressures unlikely to meaningfully abate in the foreseeable future and housing fundamentals continuing to evolve, we are taking proactive steps to ensure our portfolio remains well positioned to perform regardless of the market backdrop. For one, we are limiting incremental land investment in non-core sub-markets that primarily cater to the most price-sensitive buyers. While these locations make up only a small portion of our overall portfolio, greater pricing pressure and a reliance on spec inventory in these areas has compressed margin opportunities versus comparable core markets. Over time, this shift will allow us to concentrate our efforts on serving more discerning entry-level demand where our offerings are more strategically aligned. As Eric will discuss, we believe we are best able to meet the need for affordable single-family housing through our differentiated built-to-rent platform, Yardley, with a model that is both financially sustainable and supported by compelling demand tailwinds. We also expect to reinforce our focus on the first and second move-up segments, which have long represented the core of our company's expertise and customer base. These buyers value the choice, community development, and prime locations that distinguish our offerings and often invest in lot and option selections that help sustain above average margin and returns. In 2025, These combined lot and option premiums represented nearly 19% of our base price. In addition, demographics in the move-up segment are highly supportive of future growth with outsized net population gains projected among 40 to 55-year-olds over the next decade behind only those age 70 plus. At the other end of the consumer spectrum, we will also continue to invest in the differentiated strength of our resort lifestyle brand, Esplanade. Unlike traditional active adult offerings, Esplanade communities deliver a lifestyle first experience complete with luxury amenities and concierge level services that extends well beyond the home itself. This unique value proposition drives superior home prices and gross margins that consistently exceed the balance of our business. With a strong pipeline of Esplanade communities coming soon and opportunities for brand expansion in many of our markets, we expect this segment's contribution to our bottom line to grow meaningfully in the years ahead. And finally, we are doubling down on innovation across the organization. From the sales floor to purchasing, land due diligence, financial services, and back office functions, We have made significant strides in deploying our proprietary digital sales tools to reduce friction during the customer journey and AI-enabled processes to enhance efficiency and manage costs. For example, we have developed a proprietary AI-powered platform that today houses digital tools and AI agents spanning purchasing, sales, customer service, financial services, and employee resources. On the sales floor, our customer 360 agent gives field leaders a comprehensive, real-time view of our customer's journey from contract through warranty. In purchasing, AI-powered tools allow our teams to analyze purchase orders and query procurement data using natural language while also enabling our purchasing standardization initiatives. We will continue to scale these technologies to better serve our customers, streamline our operations, and strengthen our competitive position. With that, let me now turn the call over to Eric.