TMHC - Earnings call transcript Q1 2019 | Taylor Morrison Home Corporation

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Operator

Good morning, welcome to Taylor Morrison First Quarter 2019 Earnings Conference Call. 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'd now like to introduce Mr. Investor Treasury. President, Vice Lenderman, Relations and Jason

Jason Lenderman

Then Dave Thank Quarter me XXXX welcome Officer. everyone Sheryl Officer; today Chief the President Morrison's with overview our First to Taylor Dave through and Executive Earnings a Chief you outlook with our performance results Sheryl with business, will we'll of along Chairman you take Executive Financial Palmer, after Vice business and conclude and and take be are will our Sheryl and our the for happy Cone, guidance. call Conference review an begin the your strategic Call. With of will priorities. which financial questions. to

call, including question-and-answer forward-looking the uncertainties subject the release. that that could find includes turn to to the are over are statements news today's and I you'll Harbor These information let that call statements forward-looking cause any today's subject uncertainties statement me include, in our for Safe materially actual Securities Sheryl, Commission. session, do and Before factors that to remind you not with to, limited and our These are statements. identified undertake update filings And from and those projections. Exchange in results not the our the but obligation risks release expectations to and to in forward-looking we differ risks

Now, let me turn the Sheryl Palmer. call over to

Sheryl Palmer

before an SG&A, think this the call I'm for of the X,XXX we present into X.X. quarter operating I'll broader for as for and financial over review we right our net homebuilding that produced in for an quarter then you on just Dave joining Taylor result average morning to ended our of quarter first the average start environment, details XXXX. expectations the we to it, the I'll best XXX Thank give a the sales us with community to our you, We count $X.XX. exceeded today gross you means EPS the of including insight pace margin to metrics and homebuilding closings, We Jason. which strong results the of of by delighted to orders, what results. turning quarter, appreciate that leading my share orders results Getting Morrison's over discussing

the points important look pace built continued the to quarter a how XA seeing Given mentioning also XXX pickup nearly with basis first that pickup QX pace historical a our at from QX and and January February it's really quarter our at in XX.X% traction improved the December, It's slight pace. sequentially we worth environment, for to saw but rate that consistent sales March norms. from the in within in quarter. in sequential cancellation with started see then was the

gross in closings AV mix the transaction or in impacts EBT our that with be and time quarter. year divisions strength as margin see insights was address we Lastly, divisions: X.X% at interest, at which expect XX.X%, on quarter capitalized market of X.X% X,XXX, high-end April previously of call result Home that in on the a driven say some California into some would I for from Houston; saw closings three We'll when but is some Denver, guidance our of Carolinas. the and in favorable into above margin, guidance sales, the of the for was last slightly our range quarter. Phoenix, in quarter high-end the pace moderation. XX% with to than continue month-over-month will generally in which higher came our for to markets, each for our specific the historic of the inclusive primarily take expenses expected QX. was for the adjusted both the above April we Closings quarter end the slight strength transitions line by closings the also and our March was

bear four time XXX nearly homebuilding strategy company margin. improvement SG&A after this represented We've largest couple acquisitions years. The as Homes the our advances, last AV to the first scale see and we're our We're segments the openly realized and focused of gaining which prior three see quarter of of achieved both markets equally AV last profitability first our the more, the generation. over very we're the to the at efficiencies the our sales years fruit in last synergy we of really closings, and improves highly confident in operating from on a quarter. we quickly averages. with to first pleased overall of results look for at and starting points revenue a rate QX to improved basis of our obviously we first-time integration XX.X%. quarter that look XX-plus build our we we XX% set on XX-plus think segments year, wide a by basis, move buyer million. is historical As with far all-time time, are where our synergies first flow gave competitive quarter business. to drive AV the acquisition complemented In When end executed at so the on closings, the first with leads still the our margins our ultimately quarter, in in $XX low into a each gaining being percent project-by-project up approximately highly as efficiencies run the highs on We've year about What's up and last talked towards needed so updated of business, affordable of benefits concentrated this these pretty four of our strategy the and which pleased combined positioning cash we

from we reflect perspective. picture we in I've Morrison's I'd seeing and like for think where a the Taylor back are a big to on highlighted that step market Now results quarter, the what we're take and

talked half led that quarter fourth wait-and-see about had there we potential uniquely take than in of buyers number recent call, to factors XXXX a on had a that of approach were our more the in they of come together As years. back

last factors in alleviate the of change are the that to last trajectory year X.X%. even the last time mortgage in about as market. with have then, XX-year to fallen February, call over to treasury The always XX-year seen And of nice and received metric that attention QX. treasury well. fixed just while more stock for overall now around November being were representing began year, the in to rate, has most recent November aren't at two our rates The they've in Some of and similar tailwind rates of the since of sits probably further trends mortgage quoted X% tied the downward rate Buyers steadily those the direction Since of XX-year a than dropped pretty and dropped we've industry. rates X.X%. X%

we closing in order margin saw communities. aiding December as more for and is as equally year. the this added XX-week they hit year reductions fact, customer, of quarter. $X,XXX is Benefiting last payment environment, slower our the year-over-year. traffic, call mortgage average would November I'm perhaps per locked over same quarter. in around QX traffic, in driving calculate In also the our it last savings is the seen conversion to opportunities at we with compared in which an the in high. since or nationally important upside maximize point, business all-time or rate indicator for home mid-December, web into year-over-year up We that pretty save XXXX annual the allows X-X Dow part a from mortgage the successful In X.XX%. sales our rate that converted Web our closing stock Industrial to programs marketed from permanent leading spoke believe steady our traffic into sure program XX% rate a more last the we XX% these everyone tremendous for traffic that Average low of knows, at at has driving buydown We've momentum market increase than about that traffic and quarter a a The is on success our recently incentives buydown we seen

are sales months to We floor. and historical tech stock a that in few remains percentages has stock-based overall population and lows. personal household Florida. be California the in We economy compensation the have increase formation and healthy employees stock are up the overall continued footing. creation provided believe financial consumer's the energy Unemployment positive impact remains growth levels Northern tied steady renewed on buyers and on XX% has some that at believe Job solid. last higher markets we've psyche the in created particularly of including that to over sensitive volatility roughly consumers wealth market in market have Some XX-plus seen

conviction last for by remaining is on many we healthy under the markets over discussed most have our As linked nearly the prospects XX%. homebuilding to quarters, build strongly

In with the the lifestyle entering appear the that demographic and preferences East migration Belt addition, rates for single-family tailwinds to from of Sun millennials boomer and largest strong ownership. the stages Midwest group favorable states indicate

services quality under our them No edge their loans found change industry, in the changes, staying believe we We were their that of have FHA annually and buying Dave, factors We to address the process QX, monitor of reviewed the to under given But than buyers of a pride very underwrite. announcement of impact the total FHA, process, in-house in ourselves fundings impact guidelines. publically its with attention our represents in can mix those certain been late. their book. mortgage the could that stated getting FHA has of topic to credit even Morrison of of as as needs. turn X% immaterial. cutting since and short- overall closings. FHA the require have. long-term manual I on impact assisting new advantage announced When it this FHA Before smaller mortgage some reduced have is which finance X% that to team loans multiple the overall continue have get given of their and programs the loans touch Taylor that I'd potential customers you total to and originated The call an financial mortgage from higher FHA but In relative over further mortgages meet tightening loans, FHA The mortgages on developments, the our Morrison we these we had appreciate beginning Taylor has TMHF able like the to from it home health quickly X% the changes of the from may of quality X% a on approved we'll our imagine, at been change. scorecard has they X% closed do buyers to the were we the on right less and denied ensuring belief

I'll financial for the call Dave turn Now to the review.

David Cone

Thanks, Sheryl, and hello, everyone.

capitalized rate. margins homes due geographic was including had margins the income well were utilized million figures per basis, the sold More $XXX year-over-year were quarter, quarter the a from revenues divisions as home saw accounting we from the West came expected region at benefit about closings are XX% a nice throughout first total revenues On of closings' incentives quarter of the gross to the better was from and strength closed as year. interest, gross margin net million XX.X%. same guidance mix $XXX homebuilding margin $XX earnings favorable in we includes million. those quarter $X.XX. four from For Total Both up our XX.X%. the for as and during margin on some specifically, are impact where increases quarter than in AV impact the mix. planned first in was share This quarter during GAAP last exceeded lower and and purchase all

and to million we $XX of a services, $X in to equating gross quarter XX.X%. Moving million approximately profit for financial revenue in margin over rate the generated just

was several As we is in FICO the during years. our highest XXX buyer, TMHF look the average the level at which score quarter,

XXXX. incrementally. from for see home that results came the at with the us million XX of the of that taxes an for in hit in allowing price on Income roughly of closings so quarter topline Taylor of to to the expenses margin points EBT account AV it's Morrison QX was we in when year rate our $XX drive increase addition line about as tax is great leverage $X compared We revenue have at QX a percentage transaction of of acquisition. basis last SG&A continuing million XX.X%, credit ourselves totaled the XX.X%. to leverage. quarter representing point, buyers prided in long effective to which AV this The quality represented every

$XXX XX,XXX owned under At percentage with and we about in land was end the lots purchases and approximately the of about the development. million XX% had For quarter, The of the spent owned quarter, we controlled. remainder control. lots

value almost in land are during year, average. On quarter, those a As full-year value in exclusively last we end billion. we years call, of expect $X.X XX for units to on had X,XXX of for closings we and of the historical at our land including the average, end to units just perspective, time land on beyond. X.X From a sales decrease trailing XX% this that AV. owned the of with under a discussed bank same backlog At an represents of supply our approximately focused back both a based approximately Compared securing impact down and lots XXXX QX we increase months had of our percentage of pipeline quarter units. the closer our sales to

with selling continuing quarter, replace with the been inventory year our in it. $XXX played a season. At That the we of letters In $XXX far X,XXX us the of ended on was finished than the net addition, than normal liquidity corporate the we to that during back drawn transaction, our have levels position of than strong includes normal, fact end and the on would out $XXX million and quarter, and total a spring debt-to-capital available quarter hand forward. specs. line rest has the the this that liquidity at due a down for higher million million excluding is we XX% was spec QX From end, ratio are that specs had gross X,XXX which selling spoke from total below this issued revolver million ratio quarter than more last to but $XX slightly liquidity. call but we QX higher about so This and in with more well had specs XXX we our our is were it cash during demand. market of balance perspective, We in XX.X%. division revolver credit driving AV against going course our time that that anticipate

of wrap key an million price $XX average buy of million strategy I'll book allocation continues our shares returns remaining at In per $XX us be $XXX QX share. current a of April, provided repurchasing up back price shares quarter, we up QX, for Directors a approximately by of authorized authorization. discount on of acquired $XX.XX. sharing repurchase stock This by the average million the This just guidance. with last to our pillar During $XXX capital were given Friday, the to underlying million the million $XX.XX. our attractive our to an leaves we by value our or Board X.X acquired XXth, we to In at about under an million stock. through million $XX for have additional X.X

quarter, between flat slightly about count a and to XXX are gross interest sequential for community accounting on be be XX% to and anticipate closings XX% rate the to expected and X,XXX. to we is expected million. planned quarter the X,XXX GAAP capitalized about to the tax count be of be purchase margin to Closings Effective inclusive share is is down basis. be high diluted home mid- in the to range. For expected

to we XX,XXX. the be For between X,XXX full-year, anticipate and closings

community be the XXX will count range. to in Our XXX

to performance. be pace consistent high accounting, the absorption is interest our and closings inclusive be XXXX purchase XX% expected in capitalized margin, XXXX GAAP of mid- to home to is range. gross with Our expected

count to be spend back for expected the the year, I'll XX% to to as expected to turn tax about SG&A million, revenue diluted of effective percentage share call JV income the and to $XX homebuilding development Sheryl. be year XXX and between is expect low-to-mid billion in now is a over range. million Our $X.X and rate expected approximately be Land million. Thanks, the around our and for XX%. $XX of anticipate be and we we

Sheryl Palmer

Thank you, Dave.

Bay move our up what trend with the to with Before few covering through led we're mentioned seeing and last of already the in nearly quarter. divisions. latest our Area western each a region call West markets. We the XX% divisions Dave margin XX%, a major each slowdown continued that these consumer well I'll for and we in to Q&A, in has the the the performance increase had momentum on and mentioned fall, our of regards up spend Phoenix first activity the region. minutes in relative a in all held particularly in four cumulative which throughout to of strong the were four homebuilding closings Closings

Although year-over-year leading Southern double-digit Phoenix and total Bay primarily were sales increases, orders quarter QX decline last during year. during company the due the sales pace region, California for both slightly the had their to of down a had in

East in after our divisions. the Raleigh closings up QX strong during Jacksonville experiencing North Bay and were was others which Sales region made had respectively. strength orders QX. has quarter by and driven than delivering and Orlando XXXX consistent up with expectations. This moderation is for and a of XX% our The first Charlotte, Florida, However, XX%, more

nice the they XX% some Southwest being from with were we quarter addition orders Closings year. the up largest region contributors. Florida up the region, X% a Due strong XX-plus Dallas and to saw Houston the improvement. business, pace Dallas, for almost month-over-month was where Dallas the with seen Florida by Austin earlier where communities. in same following Denver, a fourth hold Central with I in sales mentioned volatility AV of strong to recovery the able the Although, In Southwest growth some of about trajectory in our benefiting quarter driven last first business, with in were there and we've the as

we the work to also in Dallas and on community As price, Austin focus. strength economy our benefit but the team's backlog continues seen AV by combination had maximize opportunities mentioned submarkets. on do in desirable and to strong the know are key continued team prior positions calls, we strong We've product a of presented quickly where of being seeing and the some rightsizing the

operations. framework approach in the why value is on areas these to before in some governance Responsibility more stakeholders. about our governance our Earth issues into So in our In our share our of our we I'd business order closing, practices, engage to examining our Day, environmental, broader long-term how That social workforce we sustainable our business, activities, key structure see addressing incorporate we like and performance and first build tremendous our communities share to within shareholders. value Report. our Corporate for operate We released give back to our volunteer charitable values and through manage efforts it, sustainable to

As metrics industry across position for in communication highlight differentiates questions. to like like company our and Federation. the best with as their Taylor understanding such remarkable the Morrison and Taylor ESG of remember. the environment shareholders With Morrison with performance formation National in have key a ability habitat that, within in confidence us Morrison is first of land we're be ensure team further instructions. organization engagement on strategy. that advising and I country please helping progress stewardship. to communities is to its and providing clear year provide committed the the for Wildlife grows all goals, our that a environmental opportunities of to practices teams and leader our while A the a members, refines strategic XXXX participants quarter. to open call transparent our consistent esteemed conservation This Operator, will partnership to I'd have any to our industry thank team know flourish an I'd our members customers to Taylor

Operator

ahead. question Our Please from first Michael Instructions] Rehaut from [Operator JPMorgan. go comes

Michael Rehaut

everyone. Good morning, you. Thank

Sheryl Palmer

Good morning.

David Cone

morning. Good

Michael Rehaut

gotten and just First being over to you kind that years, been it's updating the for to as kind opportunities? in your out AV if we're of in do that you you bigger particular. of Obviously, continue were see on assuming next a current of organic it dynamic of your Obviously, think said, stand just interested a backdrop steady some there you few framed of competitors the in. you Homes, a With bigger guys. of trajectory you own get How for How have – historically this the you see have couple had I slower-growth market housing growth do kind or I look that walked it Sheryl an right in opportunity the standpoint? on kind XX% within of longer-term the annual question some be today don't at at bigger in it through rate. the general, that was for little gotten growth you it? But busy opportunity I as to you. think may years a I have of footprint But Taylor. just, front the know organic well, you see was do bit acquisitions a if stand biggest to about X% where way better perhaps see from points. is lot

Sheryl Palmer

Michael. Yes. three trajectory. say about anything Good new long-term quarters. not from I at we've question, talked the look what real We would there's

the local the our where land and the first in accretive get acquisition at can and Dave the look the for We've organization. local the often our of growth be for one allocation markets, strategically time We'll believe to described strategy to continue opportunities quite so on-site which at acquisitions really continue make sense provide somewhere market build We and they in to ability around looks controlling the and there. kind growth talked sure capital making continue we look importance about to expect trades mid-single some leader as talent with to scale to continue we at what's them and that we're organic to scale, of driven to digits. is a keep

buyer adult with professional barbell been more segment, XX-plus have and the first-time affordable in that the buyer really the thing active would lifestyle I mentioning think the communities. our worth focus that the segment millennials both luxurious approach first-time serving as in as be that continued on we consumer we've well last XX-plus, is that the our

Michael Rehaut

you for have you Sheryl. perhaps weigh Dave, but I please guess, thoughts. Thank Sheryl if Great. in for that secondly, obviously,

question the you year-over-year. it your for Obviously, sales Just around were quarter, an in rate, in – to talking roughly more first – terms obviously, down we typically. the the for pace was flat and kind that's or regions. company of there's your guidance absorption a full-year, comp the the But roughly of absorption order across from the But quarters estimate down XX% much one of be even have easier a total standpoint of towards as smaller we end get year.

from of you're any was sooner going that the or wondering kind third more just up the quarter, or in even? a you in year-over-year I So positive quarter see difference the second fourth to make if primarily growth standpoint if than

Sheryl Palmer

had think So it that's have our expected, line of as in year-over-year, and strongest as into you in quarter was mentioned, pace a that first we with I quite second going quarter. why Michael, the we was did but some in reduction consensus compares

first sales in X.X but April, I and a looks continued write-off have So pace. it done probably this has we're that with the success delighted eight-hours old, we'll real through mean is like April. about quarter

March, the that weekends So I'm compared X X.X weekends Easter in to as quite given with well. the the delighted April with

in had we So knew we very comps. quarter, first, difficult

replaced. openings the that will When to new at of pace and that our a through. the the stay I I some to a be some sure drag of actually margin going that But standpoint, pace look make we're continue standpoint There move as kind the we drive to at I aggressive certain balance you strength the you year. make And protect sure we we pace, make very hard, in from can't be communities are offsetting with to line land look think closeout. pace the going work good incentives. in for very the expect way the when with we're incentives year, others, desire closings through our of at trajectory and then have from to positions because of look

Michael Rehaut

from that incorporates of obviously some gross And standpoint? margin incentive a your that trajectory aggressiveness

Sheryl Palmer

course. Of

David Cone

room driving bit it use that the deliver help Yes, a we're we're turning returns. and And on little leaving does. to pace. there very of focused I incentives assets mean that

Michael Rehaut

Great. Thank you.

Operator

Thank you.

Our next from question go Please comes Wells Przybylski Fargo. ahead. from Paul

Paul Przybylski

Thank you. Good morning.

Sheryl Palmer

Good morning.

Paul Przybylski

gaining your active the I there the press talked your traditional traditional difference momentum. active And if the performance I you is price, Morrison communities release, the more adult some adult in selling was any wondering in activity the extending you're Taylor AV, was segment wondering versus about active beyond adult between if seeing season. lower communities?

Sheryl Palmer

news, quarter, as year, well the in and X/X know about the of that and actually of the It think because our legacy lots Taylor think will as the momentum communities at country. introducing for saw parts excited be really in the as first adult kind Paul, build it's that we No, our you quite slower saw that AV this mentioned I high strong the we're new our good a focus affordable we communities in slug of organization But I be in overall Florida is active we're we percentage a consumer and Southwest more lots, over I'm this will going started in the seeing of fourth just point. Morrison there. that price course group. other of through getting strength. serve But positions And some I of like a was the the Florida. would and year, both particularly

Paul Przybylski

how you're far? that the SG&A? margin and And the you And in does break Okay. synergies. that comfortable mentioned integration, been $XX out AV captured with on million then so still How between gross has much of

David Cone

Yes.

about $XX I overheads. be office million that the through overhead, of about we in lot We're year, us over and should the of a an rebates. this X/X estimate full other That's that seeing mortgage, various an the annualized the come call XXXX. in captured that of – X/X come run We've it, from SG&A it of estimate national for will in call rate our on So helping mean, remainder lot categories: our stuff year, of is insurance, now. is for standpoint. A other was

Paul Przybylski

appreciate I great. Okay, it. Thank you.

Sheryl Palmer

Thank you, Paul.

Operator

from go ahead. Our & Ratner question from comes next Associates. Alan Zelman Please

Alan Ratner

quarter. Congrats Hey, strong a good morning. on

Sheryl Palmer

Thank you.

Alan Ratner

to strengthening Great here. market the hear

there So high markets scale there in side level increase for the months now. closing back as anything deal are the you've encouraging. you've dealing curious with And just remaining for tangible deal? greatest X like changed of things synergies, in you you the far benefits kind the improved the into concerned, synergy on aware, surprised can with the of dealing like is as I'm been on you you seen there anything gotten very Sheryl. the the track trades, business I maybe but kind land given is anything increase that share you sellers, scale? about feel really the look guess where us or or in if scale dig just targets Is on from that guys is there, not are But you've you the the maybe

Sheryl Palmer

It of great example. very planned to We That announced of say a through. day but the for we come as was we quantify that knew some would that lot the movement through come very business, deal. good I first the national think and very, we business, we up some that, rebid we been hard national. on quickly. started a the for the question, rebates there's part It's of on Yes. to positive the scaled saw literally We for And just it. surprise, was a I'd our actually Alan. had The

the the more costing think been legacy communities to, think scale, not maybe It's cost new you scale, have even the that but opportunity our business, we'll – not, overall Taylor Morrison movement it's on local it's some them the and up or to of on catch with about just was. synergies. rebidding I the some on the in tangibles, continue see and we the our just AV I about pleased business where it's some getting the think, we've advantage in AV as is not

strong into we've months, scale our really mean you where of the think trade business. planning availability allow with and matter. tell across entered the And plan production to trades better partnerships able the being I'll to I for them some next does six of on what to really give organization their trades I visibility really that's

got talent at some it's wonderful recruiting been the within the Morrison really really scale in and of the strong level, the continue attract some very standpoint the culture we market the go we with as us from Obviously, it's I field think to the up, business, and we're to in AV, I and look So strength to great continuing at and Taylor acquisition continue scale think into talent. allowing talent.

Alan Ratner

helpful. Sheryl. question, you, could. if second Very I Thank And

the mentioned a quarter few of rates, the stock lower during You really market. that tailwinds business benefited the the

it little you was As these of about devoting income look pool, tailwinds? was Or those such most move a a would given the marginal ago see bit and upgrades bigger as the rates? more as or were up maybe evident high buyer a have you buyers three, behavior afforded as qualified market or in of of what maybe percentage worried some do your Did result to a they the you house of say could months down their housing? buy drawing choosing and have more buyer far couldn't that more and just to buyers into kind maybe six option

Sheryl Palmer

Yes. And across the yes, really Alan, board.

everywhere, macro we for a of be really changed. nice more sometimes so it and believe that's we our I in was also said as it what really saw made because affordable because it's better an factors that's I we psychological that and thing hadn't think quarter to lucky, fourth buyers, think thing this

you over rate two really side through that afford more buy well larger they today. been And conventional the XXX evidenced fact a basis they're talk and for house. about could to buyers XXX ability basis now For our points for the a qualifying than points what on us around site that's years on FHA heard example, the around

market, afford, So of be kind anymore a don't really about a shutdowns, even talk it all stock drove government quarter, the though kind we that to could psychological fourth was want the noise that they of in the there it of impact. things be lot other

of job So buyer, the but that, it gave our interesting that back said it and the a on smaller allowed it our first-time to some there's business has to certainly, into not fitting That's pull, put most get new renewed to business it the having they're price financial a are them think sales gaining look what X/X are their payment really affordable And really and back did tends this when be income consumers have point, But in in growth at to seen millennials you on the professional of first-time because that best confidence their at we've allow stats smaller folks market. floor absolutely of the I piece the into energy the environment. the land them and game. assistance to down around scratching more percent buyer. then homeownership, is

all the I and exactly totality, working these think favor factors more fourth it but consumer quarter, confidence. just significant was opposite, our So through in think in that are giving I the in it's

Alan Ratner

but I think you would helpful hear. say you. very to that, Thank

Sheryl Palmer

you. Thank Okay.

Operator

you. Thank

from next comes question Scott Schrier go from Citi. Our Please ahead.

Scott Schrier

Do Hi, it put morning. and certain of of quarter in the the interest as result view way rates. heard I to a sales a a ground this about price? opportunity more you some is comments ask on want inventory about certain good to good another some to We've of some the an markets a momentum to the to commentary guidance. in confidence good as keep in push Nice Or those out of about lot markets. your having going? question savings see

So that be markets your would if with to of you could helpful. demographics, and speak that respect to dynamic some

Sheryl Palmer

Yes.

it's And I taking both, about a our price community. increases. pace. little say We're cautious Dave's bit I but of think would generally XX% I some number was think of more

David Cone

Yes, XX%.

Sheryl Palmer

but real moving And gift say that and to community-by-community right a price consumers pick pace pace, equity difference market basis. we some to increases still pivot but candidly, I'd little we the momentum are lower then Scott, to rolling we backlog, little There Which price. going quarters, some that if to big the communities moving but like get than those they're in there, some to we're start start price that prior were we a it's or very new much small. not have difference on how you'd is

and be levels. We a bit Phoenix, also very at like price still little probably a have strong some more to we're a market that in continue small Austin, moving those markets, but albeit

So good. I say pick if to I XX% movement, I pace. But once some again, gaining had think communities with the that's would of price one,

Scott Schrier

you ask quarter, following the want gross comments, Looks to West. your which a of I going curious expect margins I'm to talk about of mix guidance the cost you then do what's types the drivers, if year the strong of And we're the the can discussed in through pretty and little what some you a side. side incentive your versus happening on margin out about year, activity some expect like throughout consistent bit changes and

David Cone

Scott. Sure,

about of costs on and And we or if have accounting, the also I think then discounting based little the the some bit some to the the product the see kind gone generally to costs, pace dependent an months little legacy has as market will anticipate the commodities. so on overall couple on margin going most That there, there, when that tariffs. AV to OSB things will up the the bit input lumber TM of the those mix tariffs, we'll the on levels normally us, we threats the from to lower average. up, is just mainly year. unfolds. but spring in bring XX more help look us takes costs getting of input those drive We'll company this probably certain we incentives be and of of where is steel, conditions. due the tariffs. But at at a probably year, risk the quarter at And gone lastly, lower-margin season finishes benefits, we're how decrease year pricing labor, half Sheryl we see for shall mentioned. Probably, look from a notably obviously, in be volatility some start acquisition. rate continued purchase in drag trade, drivers, of at than to to it have some how throughout like so We That second each additional given benefit that headwinds look

Scott Schrier

good and luck. that for Thanks

David Cone

Thanks.

Sheryl Palmer

Thank you.

Operator

next Please from Our comes go ahead. Jack from SIG. question Micenko

Jack Micenko

having thoughts about first especially mix, in the can year-ago? you're your year to how thinking lot we ground than wanted in forward, from more maybe get just on inventory the strategy a start spec So your your levels AV with with one spec we finished share consider peers going this prior? just spec a strategy as of And years

David Cone

in that's driven up AV. the up more five. targeting X.X four we five of when five to we're today, a – were like six what those process And process, we us, and look from were a probably Sure. we In where with in first largely we spec Yes, community. finished to by and to specs year-ago, that. at about about it's quarter, X.X four It's per That's for bit the business of specs, addition higher ended X.X little about finished. were

we sold successful specs. inventory first the as in quarter driving about pretty So we spec were mentioned X,XXX our through we

in drop quarter. is fourth to had So X.X down what the we roughly that were able we to

So I of see think going you're in kind us range. more that community as forward, we to go to X X sit per specs

Sheryl Palmer

to amount And question your there. out I the about of inventory think

You're absolutely right.

inventory, there through As we the came heavy quarter. New behavior guided builders has with some Year, the their into first were very which

well. generally, see new average. they been wholesale across in is think And to really hasn't I discounting inventory. that put movement inventory, think it we've seen discounts the I work in marketplace on Builders with builds the and as have but their dollars this

So larger kinds very more some that pressure on specific of our the Very market, community peers. we're – actually based the seeing important. of inventory at on

Jack Micenko

you on versus just improvements through us then just down by And a that were sense guide, to it. if Got maybe could assumptions break Okay. just pressures flat sales AV, walk for Morrison the to or Taylor there year-over-year? your legacy get pace we

Sheryl Palmer

the we're generally, paces provide that are We – the Morrison. Taylor AV signs We're but we've to the providing legacy detail the all businesses AV say I to actually would don't blended paces. working that depends because gone, TM get the it's market and and the not it it. on to two

markets. relatively look we them groups consumer I once being have in would because consistently served at all So those again

across pace garner that quarter, we're brands. we're we're the pace say we the first our But pace. guiding I in if make earlier, and at it's incentives to going we mentioned think going saw annual look I sure – in even what pretty can as totality, we at obviously, I to that look to to an of would

Jack Micenko

thank you. Okay,

Sheryl Palmer

Thank you.

Operator

Thank you.

Our from next question comes from BTIG. ahead. Carl go Reichardt Please

Carl Reichardt

are you? How guys. morning, Good

David Cone

morning. Good

Sheryl Palmer

How are you?

Carl Reichardt

Thanks. incentives not. any incentives If terms of you're be? to guide year, incentive that's you mentioned that's in if you're use. your that assuming in the you meaningful on seasonal the there's going be fine. think to of aggressiveness would raise right, the guide What let's didn't have way. to What clarify some of I don't margin kind are for know that assuming just I David, Hey, margin assuming in kind or of you just assume guide? the

David Cone

you'll be to. mean, XX%. I of the we're high definitely at guiding Yes, to mid higher We're saying end what

but of on us room it the deliver bit allowing a would that pace, – to be definitely on little end. we're So higher that

Sheryl Palmer

linger think I to closeouts look I the is those some we little why as at the get opening that when year don't Carl, than of on. we're expected. of a that community we're is We also we communities that, quickly. many make count And have those for number bit need the felt And just little our higher this of a lingering and closing which through to first as through quarter, was year, sure

that. sure that making we're for prepared we're So

Carl Reichardt

Okay.

just Sheryl. You've question, next answered my

So thank for that.

Sheryl Palmer

[Indiscernible]

Carl Reichardt

anticipated. was That

me So one. another let ask

assets put spend If numbers from on your about is will how barbell? mix be sort look buying, which can you for of you're what helpful. you lots said of you're kind could land XXXX, that especially land the of talk that, differ you you're some of at the the assets, and your buying very as that to looking Thanks. at sort year you So for, will move legacy this

Sheryl Palmer

the tell that you divisions you best to And don't One affordable plans, can three get the have some can focused have legacy I the on actually see large I active things. the the my that, I percentage but millennial, in what of buyer and land that are some or ones those that spend. And some buyer. if movement you've first-time buckets, smaller smaller the adult know itself buyer don't know those all line key numbers. fingertips. still two the of the XX-plus. could you'll kind just really, absolutely first-time you would communities, is are there, I not markets seen. is – the There we overall see in Carl. A that give it's smaller will finish of go the – I you But would to give on that you but are piece what a would manifest

David Cone

trying versus as years there, we'll we're but probably change, roughly I'd supply more owned. options there said, towards a mix Probably, the see little move add thing will stay is one bit the to of Sheryl

get and levels of out to had see of maybe think we pre-AV. you'll that couple kind probably kind several And over pan the that So years. back quarters our I next of

Sheryl Palmer

divisions what That's of deal. important, on land the other focused things say mention are thank you I is options, that on, as also is the the Dave, forgot I focused the are when to and because size the mentioned, which really, Dave

do how to individual totality, an But at so. that down. So, would we we deal secure of even we'll in loan, seeing community, we're lots do land has in as think it? do control continue how moved look number potentially we we And the I XX-plus lifestyle that structure

Carl Reichardt

Great. Sheryl. David. Thanks, Thanks,

Sheryl Palmer

a one. you. Have good Thank

Carl Reichardt

too. You

Operator

Thank you.

comes from from Please Barclays. ahead. Matthew question Bouley next Our go

Matthew Bouley

guess, competitiveness you've more markets kind Thank my for of it that's be persisting? you of wanted about where Thank I of worth regionally morning. Maybe, the Sheryl, you. highlighting, markets. to to, greater perhaps, ask normalize? good hear how evolving key which competitive or here. and Anything started questions. seen have to I Hi, will interesting that kind kind then, taking environment And

Sheryl Palmer

about a price and communities consumers. it, talking all sentiment. marketplace. still seeing there, but generally are I the traffic it's are very quickly overall demand competitive the because in salesforce market overall, let times competition Yes, in it's about cycle walk marketplace a kind flat as you're lot which in angst than through think me market. growth you're Phoenix of at strong creating start the for look But held is land if they year-over-year, in running Phoenix of at market But points, have, at very When I depends I real if each XXX. is think the that the Phoenix the longer Phoenix, I this of about the competition and and

So I hypercompetitive. would be one those think Phoenix of

pricing to reporting, We well weeks appears at in we put there. a February price Board. so I all continues of those with noise together, quarter California, be the news first to is of competition gotten to a pretty the to think at in lot all Bay it's kind in XX real But six media hard season, As given really holding a markets. Sac almost I bucket actually strengths the in points. look report House lately. We're seven the just seeing only sales just but opened community or no them Mountain the call out having worth probably on healthy

to buyers in in all around because consumer just in months. a pretty point continued Chinese they're are Cal. the season. in was move during groups $X that's first lot quarter. really So March of quite movement see and A I the it are to the buyers price holding January I but Southern QX in as we see more really think, optics Cal, it, with under to robust there is three spring not When the mean, strong. through fluctuating the press and But rate. Northern probably supply. at were about really there as scarce, the we've definitely a at years, little seen continuing I past the million market. good we there. feeling talked in definitely did California but strong cautious about selling the actually back They're still February businesses we're March, was of The come to Southern the It's move slowest

in say I marketplace. to we've very, strong. lack housing country, rest very through the and Denver pricing angst that that of so see move the consumer, a of is So there's be strong of very continued a to I'd for move as the affordable creating and lot continues

we off as communities shelf the really see we growth legacy that's a time sales eight really talked probably floor. that's we're growth Las be go seen spent really of seeing to going that strong, some We to last pulled very the consumer really specific. come Chicago Florida kind recovery point And weeks I about delighted we're off out. the year, to move Vegas through be to the orders a saw Texas, holding way sales to strength really see through talking there probably As across Houston, just and last quarter. the with picking Atlanta. worth on metric. really nice number up. as regardless We've pay the might some lot – then We've stead, count Dallas about in some would kind of over back and of new Austin XX-plus our the the continues already. and the we every year-over-year In market. the I that's little some in from and we board submarket start a remember market in the to business and and I'm product many year, call that about of of nice then community bit And to continued first moved think Carolinas rework price really that Atlanta, business, And great in

Matthew Bouley

Is detail. really some for any I to that just be the still I benefit quantification should appreciate you. in for couple I Thank there? Sheryl, of impact over And think guess, then I there you the purchase you benefit accounting next accounting that. expect quarters? one Okay. Dave, purchase guess the all And mentioned how Thank quarter. or, we

David Cone

basis you'll for lower points. by business. think And the I for from quarter, drag benefit for drag XX of there the next offset XX the margin Yes, drop see several quarters. QX, are about The was about AV of the They each this basis roughly probably sit the basis kind benefit of accounting for purchase next by XX quarters. points points around will the couple

Matthew Bouley

right, much. Thank perfect. very All you

Operator

Thank you.

Our comes from ahead. Please Nishu go from next Sood Bank. question Deutsche

Nishu Sood

count community back Thank to go the I you. wanted to just question.

things think but that. wanted I few a revisit just mentioned kind you of to

at, than looking in in community mid-February, So much stronger to the I think, were XXX XXX you that. came count,

drove that were growth the mentioned impact to regions. anticipated, strong your closeouts that, You community expect so AV some your pretty count good You What revisit specifically expectations? just so pretty please. there delta demand, had across wanted was versus your I

Sheryl Palmer

sales No, it became we count. seven part really and I was you six at look with community is Nishu, closeouts. I had or the still those have really it – six count ended communities, have did community probably about our think was falls communities and just eight We when so strong book was when it's upsells you you community the we demand, certain off. And way the when but sales, up or to count in of that remaining less five believe, than we

David Cone

to or guide when community predict well coming we to of either are closeout the the say communities the trying And some as development timing the that probably through of that seen delays we've between count hardest get just to the is trying we municipalities. the thing on on online side new often due as

Sheryl Palmer

[XXXX] wasn't count community I to count build lot didn't catch the much a that I'd really be than few communities that to get those case. that the because a difference, as we fact you sales a – It's of I the that but answer as had we – need rather opened, wish

Nishu Sood

Got it. it. Got

kind the Okay, with that's second so helps everyone of pace. me well. as at Obviously, absorption – my That helpful. looks the question

slower-than-expected correctly? was pace was boost sounds So and definition probably wouldn't were out I kind have numbers that probably been it that on thinking that obviously absorption, about closeouts it would than it bit the to Am the have based the even if of so like absorption little a laying better indicated. you

Sheryl Palmer

I'm think be not I that, your count your of because community adjusting sure with if would closed lower, out pacing you'd Nishu. sort

have significantly have nine have actually... nine one gotten would only off I'd if nine for – in sales. would could I sale would actually I more dropped communities, you If have it committees because

David Cone

numerator That the denominator both you're would have pace of getting boosted. calculation. on I a mean and the the

Sheryl Palmer

Yes.

Nishu Sood

I think thing. we're No, Right. same no, the saying

event... opening the some – would if you counts stronger even maybe openings in grand had you community expected If let's came forward and sales than brought say, because

Sheryl Palmer

very want don't that accept them. I know hard. brought You I to because that that's

David Cone

just accelerate don't Yes, openings. to was point My predict. – we it's hard don't we the normally

Sheryl Palmer

my could So per count it really is, in community what based and community a you community up ended it opinion. sale potentially on more been have one communities with inflated drove

Nishu Sood

Got – it. I you. back No, understand. I thank will come

Sheryl Palmer

Thank you.

Operator

Thank you.

comes question from ahead. Alex Research. go Please last from Our Barrón Housing

Alex Barrón

Yes.

a second this looking orders So like typically exception quarter are be than a first years quarter. I your than Do and it of you seems couple back year bit was little an less think that? might to

Sheryl Palmer

No.

orders... talking – you're it depends I think that your or well, that pace be would seasonal talking trend total if

Alex Barrón

units. Just absolute

Sheryl Palmer

going we think, just When up our the units strong given given orders think look absolute units. paces I to but the absolute are down absolute just at acquisition. I – given Yes, will comp have, be I be

Alex Barrón

it. Got

David Cone

look see it normally be you – our lower same. penetration, with mix about yes, to overall slightly at QX look at If mix QX, roughly the you

Alex Barrón

and as sure didn't Okay not I I'm regards the and or if then it. great, missed to hear margins, maybe

a percentage If or maybe incentives what ago? the a of as quarter a year comment you represented versus ASP guys on ago

David Cone

QX, we're versus line we lower when we year. but level incentive a Sure, had, in the that our at were we QX, QX bit in deliveries look last with of was,

Alex Barrón

wise. A even or percentage bit in lower

Sheryl Palmer

year-over-year. Lower

David Cone

in a year-over-year QX. lower Incentives were year-over-year. Lower bit little

Alex Barrón

A bit lower or…?

David Cone

year-over-year. Lower,

Alex Barrón

Incentive wise?

David Cone

QX. little year-over-year lower, were bit Incentives in

Alex Barrón

right. All Okay.

thanks. Okay,

Sheryl Palmer

Thank you.

Operator

Chairman At go Please to Sheryl session. Palmer, Q&A the over This call ahead. concludes remarks. Thank closing to our for I time, you. turn and this CEO, like

Sheryl Palmer

thank I you. this you the forward for quite want quarter. us Thank look and the to was market, talking delighted joining We're our we Well, just to share outcome next to everyone with and results. first pleased with share morning to quarter to

Operator

today's Thank conference. and concludes the This program. for you, ladies gentlemen, attending

disconnect. all may Good You day.

Taylor Morrison Home (TMHC) 4 May 192019 Q1 Earnings call transcript