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TM

Taylor Morrison Home Corp (TMHC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose 11.5% YoY to $1.90B with adjusted diluted EPS of $2.18; both exceeded internal guidance, supported by 80 bps YoY improvement in adjusted home closings gross margin to 24.8% and 70 bps SG&A leverage to 9.7% . Versus S&P Global consensus, TMHC delivered a beat on EPS ($2.18 vs $1.90*) and revenue ($1.90B vs $1.81B*). Values retrieved from S&P Global.
  • Demand moderated: net orders fell 8.5% YoY, absorption dipped to 3.3 from 3.7, and cancellations rose to 11% (from 7%), with strength in resort lifestyle (Florida) offset by weaker entry-level .
  • Guidance trimmed: FY closings now 13,000–13,500 (prior 13,500–14,000), gross margin “around 23%” (prior 23–24%); land spend cut to ~$2.4B (from ~$2.6B) while buybacks raised to ~$350M .
  • Near-term margin pressure expected as spec penetration stays elevated; Q2 guide calls for ~3,200 closings, ~23% gross margin, and ~$585k ASP; management prioritizes price/margin over pace in current competitive spec environment .

What Went Well and What Went Wrong

What Went Well

  • Outperformance vs guidance and YoY: “each of our operational metrics met or exceeded our prior guidance,” with adjusted EPS up 25% YoY and book value per share up 16% to ~$58, driven by diversified product and consumer mix .
  • Cost discipline and mix drove margin resiliency: adjusted home closings gross margin improved to 24.8% (+80 bps YoY); SG&A fell to 9.7% (-70 bps YoY) .
  • Balance sheet and capital returns: liquidity ~$1.3B, net homebuilding debt/cap 20.5%, and $135M of share repurchases (2.2M shares) with $775M authorization remaining at quarter-end .

What Went Wrong

  • Demand and mix: net orders down 8.5% YoY, absorption 3.3 (vs 3.7), cancellations 11% (vs 7%), with a steeper reduction in entry-level sales, pressuring order value and future mix .
  • Elevated spec mix to be cleared: spec closings were ~58% in Q1 and expected higher in Q2, requiring higher incentives and driving Q2 margin guide to ~23% and lower ASP .
  • Guidance reduced amid macro/tariff uncertainty and competitive spec pressure: FY closings and gross margin lowered; management cites difficult near-term conviction while maintaining long-term path to ~20,000 closings by 2028 .

Financial Results

Summary vs prior year and prior quarter

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($USD Billions)$1.70 $2.36 $1.90
Diluted EPS (GAAP)$1.75 $2.30 $2.07
Adjusted Diluted EPS$1.75 $2.64 $2.18
Home Closings Gross Margin % (GAAP)24.0% 24.8% 24.0%
Adjusted Home Closings Gross Margin %24.0% 24.9% 24.8%
SG&A % of Home Closings Revenue10.4% 9.4% 9.7%

Results vs S&P Global consensus (Q1 2025)

MetricConsensus*ActualSurprise
Revenue ($USD Billions)$1.81*$1.90 +$0.09B (≈+5%)*
Primary EPS$1.90*$2.18 +$0.28 (≈+15%)*
EBITDA ($USD Billions)$0.271*$0.299 +$0.028 (≈+10%)*
Values retrieved from S&P Global.

Regional/Segment Breakdown (Homebuilding)

RegionQ1 2024 ClosingsQ1 2025 ClosingsYoYQ1 2024 Revenue ($MM)Q1 2025 Revenue ($MM)YoYASP Q1 2024 ($k)ASP Q1 2025 ($k)YoY
East933 1,110 +19.0% 541.7 625.7 +15.5% 581 564 -2.9%
Central832 883 +6.1% 472.0 477.5 +1.2% 567 541 -4.6%
West966 1,055 +9.2% 622.5 726.9 +16.8% 644 689 +7.0%
Total2,731 3,048 +11.6% 1,636.3 1,830.1 +11.8% 599 600 +0.2%

KPIs and Operating Metrics

KPIQ1 2024Q1 2025Commentary
Net Sales Orders (units)3,686 3,374 -8.5% YoY
Monthly Absorption Pace3.7 3.3 Down YoY; up from 2.6 in Q4
Cancellations (% of gross)7.0% 11.0% Up to historic norms
Backlog (units/$)6,244 / $4.25B 5,068 / $3.36B Lower YoY
Mortgage Capture87% 89% Strong captive funnel
Spec Share of Closingsn/a~58% Record 27% sold-and-closed intra-quarter
Liquidityn/a~$1.3B $934M revolver availability
Net Homebuilding Debt/Cap20.1% (3/31/24) 20.5% (3/31/25) Within target

Guidance Changes

MetricPeriodPrevious Guidance (2/12/25)Current Guidance (4/23/25)Change
Home Closings (units)FY 202513,500–14,000 13,000–13,500 Lowered
Home Closings Gross Margin (GAAP)FY 202523–24% ~23% Lowered
Average Closing PriceFY 2025$590k–$600k $590k–$600k Maintained
Ending Active CommunitiesFY 2025≥355 ≥355 Maintained
SG&A % of Home ClosingsFY 2025Mid-9% Mid-9% Maintained
Effective Tax RateFY 202524.5–25.0% 24.5–25.0% Maintained
Diluted Share CountFY 2025~102M ~101M Lowered
Land InvestmentFY 2025~$2.6B ~$2.4B Lowered
Share RepurchasesFY 2025$300–$350M ~ $350M Raised to high end
Home ClosingsQ2 2025—~3,200 New
ASPQ2 2025—~$585k New
Home Closings Gross Margin (GAAP)Q2 2025—~23% New
Ending CommunitiesQ2 2025—~345 New
Effective Tax RateQ2 2025—~25% New
Diluted SharesQ2 2025—~102M New

Earnings Call Themes & Trends

TopicQ-2 (Q3’24)Q-1 (Q4’24)Current (Q1’25)Trend
Incentives, price vs. pacePersonalized incentives; forward commitments ~1/3 of closings; incentive cost modest; margins steady in mid-24% National price increase in Jan; expecting step-up in incentives in 2025; still prioritizing personalized finance tools Higher spec penetration elevating incentives; Q2 gross margin guided to ~23%; prioritizing price/returns over pace Gradual increase in incentives; margin moderation near-term
Supply chain / cycle timesSequential improvement (~2 weeks) Down ~30 days YoY; normalization supports more to-be-built Down ~25 days YoY; ~8,032 homes in production Improving throughput
Resale competitionOnly ~17% of nearby resales truly competitive; core locations advantaged Analysis reinforced; core submarkets lower months of supply Divergence core vs non-core; core with manageable incentives Manageable; strategy validated
Tariffs / macroMonitoring; storms/insurance manageable via captive Tariff impact manageable; lot cost inflation ~7% in 2025 Metals/HVAC cost pressure H2’25/2026; ‘25 impact modest within guide Risk up, but contained in 2025
NAR/broker & digitalOnline reservations conversion 58%; lower realtor participation Further reduction in co-broke; online momentum; ~10% reduction in broker commissions YoY Improved online reservation conversion aiding sales Mix shift to direct/digital
Land / OBS controlNew $1B land-banking facility; 58% controlled off-BS Continued OBS emphasis; attractive ROE trade-offs 59% controlled off-BS; target ≥65% Increasing asset-light mix
Florida insuranceCaptive insurer, stable availability; not a buyer impediment New construction premiums rising less than resale Shoppers aware of insurance benefits of new construction Still manageable

Management Commentary

  • “These strong top and bottom-line results reflect the benefits of our diversified consumer and product strategy…this diversification is a valuable differentiator that…contributes to greater volume and margin resiliency.” — Sheryl Palmer, CEO .
  • “We now expect to deliver between 13,000 to 13,500 homes this year and a home closings gross margin around 23%.” — Sheryl Palmer, CEO .
  • “Given the higher anticipated spec penetration…we anticipate our home closings gross margin to moderate to approximately 23% [in Q2]…We’re also expecting incentives to trend higher.” — Curt VanHyfte, CFO .
  • “Owned and controlled lot inventory was 86,266…59% controlled via options and off-balance sheet structures, up from 53% a year ago.” — Erik Heuser, COO .

Q&A Highlights

  • Geographic demand: Florida remained a bright spot in resort lifestyle (Naples/Sarasota margins strong), while Texas showed improving traction (Austin/Dallas/Houston repositioned), though West had tougher comps and more rate-sensitive pockets (Denver) .
  • Incentives and elasticity: Mortgage incentives preferred over base price cuts; price cuts are last resort and largely targeted to spec inventory and more competitive fringe submarkets .
  • Tariffs and costs: Metals/aluminum are the primary 2025 impact; broader tariff risks more of a 2026 issue; 2025 house cost inflation assumed low-single-digit within guidance .
  • Orders cadence and cancellations: Q1 saw steady month-over-month improvement; April was “choppier” amid macro headlines but tracking around Q1 averages; cancellations ticked up slightly early in Q2 but within seasonal norms .
  • Capital allocation and land spend: Land spend reduced to ~$2.4B and share repurchases raised to ~$350M; M&A pipeline active but disciplined; Indianapolis integration on track with strong early sales .

Estimates Context

  • Q1 2025 vs S&P Global consensus: Revenue $1.90B vs $1.81B*; Primary EPS $2.18 vs $1.90*; EBITDA $0.299B vs $0.271B*. Beat on all three; magnitude implies positive revisions risk concentrated in near-term gross margin/ASP assumptions. Values retrieved from S&P Global.
  • Implications: Despite a strong beat, management’s lower FY volume/margin guide and Q2 margin step-down signal potential estimate resets lower for FY gross margin and units, offset by higher buybacks and SG&A leverage .

Key Takeaways for Investors

  • Diversification cushion: Mix across entry-level, move-up, and resort lifestyle plus core-location bias is preserving mid-20s adjusted margins even as incentives rise for specs .
  • Near-term margin trough likely Q2: Elevated spec mix and targeted incentives should weigh on gross margins to ~23%; watch spec inventory clearance pace and to-be-built mix recovery into H2 .
  • Demand is slower but stable: Orders/absorption softened YoY amid macro uncertainty, yet remain above pre-COVID norms; April tracking near Q1 averages .
  • Asset-light progress and ROE: OBS-controlled lots at 59% with path to ≥65%—supporting returns amid moderated growth; land spend prudently reduced to ~$2.4B .
  • Capital return intact: FY buybacks lifted to ~$350M, aided by >$1B liquidity and 20.5% net homebuilding debt/cap .
  • Watchlist into Q2: Spec penetration, incentive intensity, metals/HVAC cost pass-through, and regional pricing vs pace (Florida/Texas strength vs West pressure) .
  • Medium-term thesis: Management reiterates path to ~20k closings by 2028 with low-to-mid 20% margins and high-teen ROE targets as macro stabilizes and OBS/scale efficiencies accrue .

[All consensus values marked with an asterisk (*) are retrieved from S&P Global. Document-sourced figures are cited inline.]