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TM

Taylor Morrison Home Corp (TMHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a clean top-line/EBITDA beat, with revenue $2.03B (+2% YoY) and EBITDA $304.8M versus S&P Global consensus revenue ~$1.93B and EBITDA ~$280M; diluted EPS of $1.92 was a slight miss versus ~$1.94 as higher spec mix and incentives compressed margin . Estimates noted with asterisk are from S&P Global.*
  • Mix pivot toward spec homes (71% of sales; 65% of closings) supported volume but pressured gross margin (home closings GM 22.3%; adjusted 23.0%); management guides Q3 and likely Q4 GM to ~22% before FY adjusted ~23% .
  • FY25 guidance largely maintained (13,000–13,500 closings; adjusted HC GM ~23%); notable adjustments: GAAP HC GM ~22.5% (now explicit), ACPU raised to $595–$600k, ending communities trimmed to ~350, buybacks lifted to at least $350M .
  • Strategic optionality increased via a $3B Yardly build‑to‑rent financing facility with Kennedy Lewis, enhancing cash generation, balance sheet relief, and disposition flexibility over time -.
  • Near‑term stock narrative catalyst: revenue/EBITDA beat vs EPS miss; sequential margin step‑down and elevated spec penetration into 2H vs stronger capital returns and BTR optionality could drive divergent reactions .

What Went Well and What Went Wrong

What Went Well

  • Revenue, EBITDA, and SG&A leverage: Total revenue grew 2% YoY to $2.03B, adjusted EBITDA margin held >16%, and SG&A fell 90 bps to 9.3% of home closings revenue .
  • Pricing discipline and customer‑specific incentives sustained margins above peers: “Our overall bias between pace and price leans more heavily towards price, and ultimately margin and returns… The success of this approach is evident in our home closings gross margin.” — Sheryl Palmer .
  • Strategic financing for Yardly: $3B facility with Kennedy Lewis broadens funding of land/development/vertical BTR costs, providing “balance sheet relief and greater optionality” on asset exits -.

What Went Wrong

  • Orders and absorption softness: Net sales orders declined 12% YoY to 2,733; monthly absorption moderated to 2.6 vs 3.0; cancellations rose to 14.6% of gross orders (vs 9.4%) amid competitive incentives and macro confidence headwinds .
  • Mix pressure on margins: Spec sales climbed to 71% (sales) and 65% (closings), compressing ASP and driving sequential GM moderation; Q3 GM guided to ~22% with Q4 likely similar given continued spec penetration and stable incentive assumptions .
  • Community count trimmed: FY25 ending community count now ~350 vs prior at least 355, tempering the near‑term growth trajectory as management prioritizes returns/capital efficiency .

Financial Results

Core P&L vs prior year and prior quarter, with estimates

MetricQ2 2024Q1 2025Q2 2025Q2 2025 vs Est.
Total Revenue ($B)$1.991 $1.896 $2.030 $1.929* → Beat by ~$0.10B
Diluted EPS ($)$1.86 $2.07 $1.92 $1.94* → Miss by ~$0.02
Adjusted Diluted EPS ($)$1.97 $2.18 $2.02 N/A
Home Closings GM %23.8% 24.0% 22.3% N/A
Adjusted HC GM %23.9% 24.8% 23.0% N/A
SG&A % of HC Rev10.2% 9.7% 9.3% N/A
EBITDA ($M)——$304.8 $280.0* → Beat by ~$24.8M

Notes: Asterisked estimates are from S&P Global. Values retrieved from S&P Global.

Segment breakdown – home closings (Q2)

SegmentHomes Closed Q2’24Homes Closed Q2’25Rev Q2’24 ($M)Rev Q2’25 ($M)ASP Q2’24 ($k)ASP Q2’25 ($k)
East1,237 1,325 $691.1 $695.2 559 525
Central864 925 $480.5 $481.8 556 521
West1,099 1,090 $748.5 $789.1 681 724
Total3,200 3,340 $1,920.1 $1,966.1 600 589

KPIs and balance sheet

KPIQ2 2024Q1 2025Q2 2025
Net Sales Orders (units)3,111 3,374 2,733
Monthly Absorption (per community)3.0 3.3 2.6
Cancellation Rate (% of gross)9.4% 11.0% 14.6%
Backlog (units/$B)6,256 / $4.20 5,068 / $3.36 4,461 / $2.94
Active Selling Communities (period-end)347 344 345
Spec Mix (sales/closings)~59% sales; — closings 58% closings 71% sales; 65% closings
Mortgage Capture89% 89% 87%
Liquidity—~$1.3B ~$1.1B
Net HB Debt/Capital22.8% /20.5% 22.9%

Guidance Changes

MetricPeriodPrevious Guidance (Q1’25 8-K, Apr 23)Current Guidance (Q2’25 8-K, Jul 23)Change
Home Closings (units)FY 202513,000–13,500 13,000–13,500 Maintained
Average Closing PriceFY 2025$590k–$600k $595k–$600k Slightly raised midpoint
GAAP HC Gross MarginFY 2025~23% (unspecified GAAP/Adj) ~22.5% (incl. impairment/warranty) Clarified/lower GAAP
Adjusted HC Gross MarginFY 2025—~23% (excl. 1H charges; assumes no more) New explicit adjusted target
Ending Active CommunitiesFY 2025At least 355 ~350 Lowered
SG&A % of HC RevenueFY 2025Mid‑9% Mid‑9% Maintained
Effective Tax RateFY 202524.5%–25.0% 24.5%–25.0% Maintained
Diluted Share CountFY 2025~101M ~101M Maintained
Land Inv. (Acq/Dev)FY 2025~$2.4B ~$2.4B Maintained
Share RepurchasesFY 2025~ $350M ≥ $350M Raised floor
Home ClosingsQ3 2025—3,200–3,300 New
Avg Closing PriceQ3 2025—~ $600k New
GAAP HC Gross MarginQ3 2025—~22% New
Ending CommunitiesQ3 2025—340–345 New
Effective Tax RateQ3 2025—~25% New
Diluted SharesQ3 2025—~100M New

Earnings Call Themes & Trends

TopicQ4 2024 (Q‑2)Q1 2025 (Q‑1)Q2 2025 (Current)Trend
Pace vs PriceStable margins; ROE ~16%; disciplined growth -Guided ~23% HC GM for FY; emphasized diversified pricing strategy -Bias toward price over pace; margin resilience but sequential moderation More defensive on pace; protect margins
Spec vs TBB mixSpecs supportive of volume [implied]Specs 58% of closings Spec sales 71%; closings 65%; intra‑qtr sold/closed 28% Higher spec penetration near term
Incentives & RatesHealthy margins despite incentives Adjusted GM 24.8%; incentives tailored Stable incentive assumptions; 3.75% 7/1 ARM promo; incentives heavier on finished specs - Incentives elevated; targeted
Supply chain & costsOperating efficiencies Ongoing cost management Cycle times improving; access to trades easing; development cost inflation moderating Modest cost relief
Regional TrendsBroad growth; strong East/West -Resort lifestyle strength in FL; entry-level softer East outperforming; FL mixed (Orlando strong, Tampa soft); Bay Area stable; SoCal intentionally smaller -Mixed; FL/TX resilient pockets
Macro/Regulatory—Cautious spring start Consumers financially sound but macro drives sentiment; SALT cap changes could help confidence -Sentiment‑driven demand
Capital Returns$348M buybacks in 2024 $135M in Q1; plan ~$350M FY -$100M in Q2; ≥$350M FY; $2B since 2015 Elevated, supportive
BTR/Yardly——New $3B facility for Yardly; optionality and balance sheet relief over time -Expanded optionality

Management Commentary

  • “Our overall bias between pace and price leans more heavily towards price, and ultimately margin and returns… The success of this approach is evident in our home closings gross margin.” — Sheryl Palmer (CEO) .
  • “Adjusted home closings gross margin… was 23%, in line with our prior guidance… we expect Q3 home closings gross margin to be approximately 22%… We expect our full year adjusted home closings gross margin to be approximately 23%.” — Curt VanHyfte (CFO) .
  • “Spec sales increased… to a new high of 71%… With specs carrying gross margins below that of to-be-built homes, we expect this temporary mix shift will impact… margin in the third and fourth quarter.” — Sheryl Palmer .
  • “We have executed a flexible finance facility… covering total project costs of $3 billion… to enhance cash generation, balance sheet relief, and greater optionality” (Yardly BTR) — Erik Heuser (CCOO) and press release .
  • “Our one‑of‑a‑kind digital sales environment… continues to gain traction and support our healthy SG&A structure.” — Sheryl Palmer .

Q&A Highlights

  • Spec mix and margin cadence: Higher spec penetration to persist near term; Q3 GM guided ~22% and Q4 likely similar depending on rates/incentives; FY adjusted ~23% intact .
  • Yardly $3B facility mechanics: Functions akin to land bank; serves existing and new assets; provides timing flexibility to optimize exit value; some existing assets may move, impact ramps over coming quarters -.
  • Pace vs price thresholds: Will flex by submarket; patient on irreplaceable core assets; long‑term paces in low 3s; Q2 pace impacted by specific Esplanade timing issues .
  • Cost backdrop: Acquisition terms softening modestly; development inflation trending to low single digits; improved access to trades .
  • Demand/ASP color: Order ASP down from mix/geography/specs; Indianapolis ramping with lower price points; resort lifestyle resilient with strong option/lot premiums (~$270k combined) .
  • Cancellations: Up to 14.6% driven by home‑to‑sell, relocations, and competitive incentives; deposits generally retained unless contingencies apply (with re‑apply option within 12 months) -.

Estimates Context

Metric (Q2 2025)Consensus*ActualDelta
Revenue ($B)1.9292.030 +0.101
Diluted EPS ($)1.941.92 −0.02
EBITDA ($M)279.96304.8 +24.8

Notes: Asterisked estimates are from S&P Global. Values retrieved from S&P Global.

Implication: Street likely raises revenue/EBITDA for FY while trimming near‑term margin cadence and EPS given sustained spec mix and stable incentive assumptions .

Key Takeaways for Investors

  • Quality beat on revenue/EBITDA with a modest EPS miss; the mix‑driven GM step‑down should keep near‑term EPS contained despite volume resilience .
  • Management is prioritizing margin/returns over pace; spec penetration remains elevated through year‑end, keeping Q3/Q4 GM near ~22% before normalizing longer‑term .
  • FY guide intact on units and adjusted margin; community count trimmed and GAAP HC GM clarified at ~22.5% reflects prudent stance amid competition and incentives .
  • $3B Yardly financing adds capital‑light growth and exit optionality; watch for asset transfers and cash flow benefits to build over coming quarters -.
  • Orders softness and higher cancellations point to macro sentiment vs borrower health; tailored financing (e.g., 3.75% 7/1 ARM) remains an effective lever .
  • Regional mix is a swing factor: East/Orlando strong; Tampa soft; Bay Area stable; SoCal intentionally smaller — monitor new Esplanade openings (e.g., Summerlin) for mix/margin support -.
  • Capital returns are a support: ≥$350M buybacks targeted in FY25; diluted shares ~101M FY/100M in Q3 — accretive to EPS and ROE .

Appendix: Additional Data Points

  • Q2 2025 Total Revenue composition: Home closings $1.966B; Financial services $52.9M; Amenity/other $10.6M; Land closings $0.4M .
  • Balance sheet at 6/30/25: Cash $130M; Total assets $9.45B; Equity $6.06B; Net HB debt/cap 22.9% .
  • Land activity: Q2 land spend $612M (43% development); 85,051 lots owned/controlled; 60% optioned/off‑balance‑sheet; ~6.4 years supply (2.6 owned) .

Estimates in the report marked with an asterisk are Values retrieved from S&P Global.