TMHC - Earnings call transcript Q4 2019 | Taylor Morrison Home Corporation

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Operator

Good morning and welcome to Taylor Morrison's Fourth 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 would 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 fourth 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 materially the and subject the news expectations that uncertainties that will includes turn to subject differ the are cause over statements our statements results today's in risks I you Harbor release. information projections. let that call These and to forward-looking from today's are actual statement me find for Safe Sheryl, session Before that to remind could you to

include not uncertainties to our our Securities but filings forward-looking Exchange the not we those factors limited and obligation identified and in with risks These and and Commission in undertake to any the do release are statements. update

me turn Sheryl Palmer. over let the Now to call

Sheryl Palmer

you, Jason, Thank and good morning everyone.

transformational Lyon results We today Homes. a we the and for XXXX for year-end acquisition ahead as appreciate of look on us what we our our William joining be year you share soon company to will as close

decade reflect into back like on the Before meant to last too I take to I'd Morrison. details, Taylor to step get what many a

eight Canadian acquired with private we completed X,XXX TPG Oaktree. In operations Homes. and equity by public activity more we Stock In Darling company XXXX, our our totaled our continued history. XXXX, Homes. in largest markets. our acquisition we Texas, U.S. became through year, XXXX, New York XXXX In IPO with we Orleans with in acquisition Exchange first sales JEH deepen firms and homebuilder We a early in and orders to presence sold plans the across XXXX, In two a were of that

Southeast Private yet. And successfully operational fifth closed investment acquisition our Homes. XXXX, XXXX with company a This in make we public dedication Partners in and January focus we exited us to year in our in in and then furthered expansion the decade first on and our acquired XXXX same Atlanta. Equity our Homes their Acadia on AV of excellence the We company when position of our intentional to smart deal put biggest our growth year

I representing us XX,XXX and growth XXXX. We period. Passing it ended Morrison the XX% significant XX rate markets milestone XX,XXX U.S., big a forward to annual for throughout the year Taylor over with a take that an across is orders XX-year sales homes positions leap compounded believe in

low, balance about to confident. remain optimistic landscape be extremely to strong continues and XX-year reasons many ever. personal at remain are our new as today stronger sheets in markets a favor consumers income the to continues pick-up, Economic indicators kick-off than have growth are to Unemployment We're and the a consumer decade. in place

our sales integration was planning our performance time. and We occurring announcement strongest company history. QX off we company that acquisition in came Homes this where in offices, manifesting during Lyon This see the just our sales activity William in amidst

at period X.X to and the compared for the XX% last quarter were XX% up was over year-over-year. year pace orders Sales same

selling season for typical as the see we the comp holiday obviously high includes QX. spring first tied that was the normally also falls seasonality year, Keep fully given It's actually versus QX in which pace prior-year that QX that the squarely the month AV notable isn't that in period. during mark especially our mind usual our in the strong QX

The count expectations our XXX. average XXXX at led on X.X sales of pace an community to ending above success for year the for a

sales XX% of has X.X Our into in success consumer a and a growth to continued pace over sales at for sales January. XXXX geographies segments leading across all

we're In see positive to more paid-off which in saw strong Pacific January business has the of Lyon the period. paces that in in William over and pleased a them as in fact, a sales increase the XX% than market Northwest. well, a prior-year resurgence includes William Lyon for movement activity

company. didn't expand would the were entry to the work integrated versus we fully of we with into which in some the impact to we quickly, AV level assets, investment With the rather AV benefits strong of remiss as via our where thesis paces did progressed. be this team the do following Homes Immediately in reposition acquired and as us acquisition, sales The our to having initial have standalone acknowledge presence strong momentum, the was business if allowing XXXX. we a to year reap

segment surprise move-up success that the highest consumer up all at were the fourth segments. consumer important move-up in quarter But and It all entry we that second across level learn orders the strong for was to had during probably Entry sales anyone the note quarter. was least it's won't level. XX% sales pace to first

experience Lyon early behind with that five play seen we well the during William anticipate With prior in to planning we and us, AV integration tremendously our already have our acquisitions organizational work. the with integration pay-off out ahead work now collective the

follow combined company. completing our closing forward prepared so know, week. as and this and we're XX those moving filings on respective transaction to we're Thursday, and final sets of shareholders that now officially one merger-related approved the before the deal announcements Both you steps of the January close And

us of conviction a day, addition merits even of of have deal. With Lyon exposure, three Lyon William of allows a Taylor team. and increase this existing each it level and that us, add markets, been entry boxes Morrison our to the The into scale about list, the top number of talented that compliment of our markets passing gain the entry culture we watch the have in stronger number at with an William values for checked our strategic to

for also which our we were morning's a the this of expectations. with results business, of provided flash release, line in Lyon part earnings William As

planning integration announcement upon ensure to hit began The ground following to process able running closing. we're the the immediately

transaction, place an As the AV Office Integration Lou we've we or entire Management Steffens, was the President during M&A, formed our in of discussed, IMO integration. by AV and that remained led throughout

representation AV acquired during A key process the we more from the lesson needed company. substantive we that was learned

throughout added lead that William team means members Lyon's leaders is actually base both that lead, part that from IMO So transaction, this in their business. to transferred, and as from all of order knowledge within senior of ensure to a Taylor communicated Morrison we've IMO the entire to William an are IMO the today, member consists Steffens, leadership This process. IMO the and from companies Lou Lyon our key three properly

our December, an Chief we and announced Additionally, evolution differently, would must To a transformational this, Operations as new our use continued and Corporate acquisition. Ahrens, the upon we In Officer, Heuser, it by effective this and growth, differently. corporate our Dar acquisition with of operate we structure. organizational knew close of require our as think Officer, resources led differently, Field regional Operations Chief next support structure our Erik

growing corporate into help the it into we given two company's functions, support from greater the rationalize the team scale distinct the the regional us way field of these splitting operations and provide added groups, William will By and our Lyon. areas line sight

structure regions William Morrison Taylor will Lyon. from five by regional and led move to Presidents Our three Area be and from both

from similar members. strategy to talent Throughout Taylor very we which William acquisition, both the AV team what of pursued this interviews a hundreds process, and employed during Morrison Lyon we included

One talented necessary individuals as allowed finding talent in part that of to the combined identify in industry this the top will challenges move toughest demanding, us of larger this but company. process is forward

join be the this During of identified also announced Lead that November, closing. second Lyon's the we of now the members are we will board William share Taylor Independent acquisition William us Lyon; our H. board board. When to also share Hunt, Lyon's the early two perspective we were the current Board that And Bill will join closing. would we Morrison time, Director Gary pleased delighted joining upon to in H. Chairman that

will with and impressive To I'm strategy, out diverse to the real sure our experience estate, his table. help in Bill that everyone's already what our bring well. bring politics, members as we're board the Gary about background excited round and familiar board consulting, will to

approach to In or to new our on ambitious addition achieve thereafter. set structure, day we by goals soon the one organizational

markets our ensuring being the the same them of in or as possible. space as together quickly overlapping office teams One in

members and Lyon market. office been Morrison Taylor all ready team will get are of in the live decisions that most space all some close, day to relevant and while for be have upon achieve branding able Plans go shortly the of William used thereafter. won't there going that information of all place be Fortunately, each the in forward is to website with community made will

the believe key fast these we allow steps for moving that and integration from process possible as to a is us and to We immediately. as successful them to us begin

we organizational each of in is of and time every appropriate combined the is the close in the go-forward that company have asset positioning our new important required of evaluation Ensuring at the important. structure equally But markets.

taken have based This to accounting accretive Using company use will on of we're on of number and ensure returns. adjustments the Lyon up quarter market. repositioning transaction. Chicago the well, small within purchase generating some our completed related the the write-down sale the post-close the a the impacted during the based the impairments communities best financials as we business the likely those this also across required required assets assets to goal although that Similar that the will our of be Taylor during We've require areas Our show of quarter some Morrison assets price in investing William is complete of process. will all additional cash acquisition. that criteria, are to of fourth on in

deliberate organizational we It's efforts structure and an through and extremely thoughtful to have assure best portfolio that and the business each outline combined in of we've been strong these able place.

to nearly we're even results testament Overall, on increased strong a and deliver point delivered ability the set and for organization an it We a back quarter which future. Turning to were our business active a year an last the near steps exclamation we closings great was of most very even and for XXXX. up than in for its put to guidance. high-end recently strong higher taking results, year us. XXXX, when was the XX% And our X,XXX stronger imperative it's to extremely it

Dave that, With the the financial call over detailed turn for to I'll review.

Dave Cone

everyone. Sheryl, Thanks, and hello

$X.XX. and million diluted per $XXX income For earnings $XXX adjusted On adjusted was share a was GAAP $X.XX. share was earnings and million per net XXXX diluted basis, net was income

$X.X billion. just than year revenues Total more the the from were were XX% revenues revenues for prior-year. up Homebuilding billion including $X.X homebuilding almost of over

transaction confident the in there $XX future. debt expenses taxes million that that and Sheryl for refinancing the unusual certain of all in metrics. the our the write-offs almost impairments, behind The up William during were for reserve to strengthens the warranty the this $X included As our and for of earnings almost business earlier million exit, year. transactions the both mentioned, extinguishment a sheet related loss the sets an the million impact central almost us, for increase for $X items With to this million we're in our related $XX key issue $XX quarter impacted before our of region, to related AV Chicago to and Lyon, balance impacted to due to how remediating related on million many

margin For $XX margin year impacted the that was XX.X% unusual was year, XX%. million in home the when metric. the gross for for closings GAAP closings charges gross adjusted the home adjusted

actually Moving million strength to $XX the year in approximately generated profit company financial the in services, achieved during history gross highest We we the unit and during experienced in per fourth quarter. and revenue our $XX for profit. million approximately year continued

year capture XX% mortgage rate the XX% to at Our compared for company came XXXX. during

year the As at notable operations that actually financial increased to in capture quarter XX%. XXXX, it the services throughout was see AV our integrated our business ending every into QX we throughout rate

business with expand into that and transaction will complementary financial benefit Sheryl and east team financial and from embedded teams of based organizational mentioned evaluated well. we as to structure to center go-forward is market. organization Coast that will the Florida, builder headed services focused The be reach an in this combined services within Phoenix in now a on we fulfillment our applies each field which the smaller West the

the the serve customers across will This allow a to zones. team seamless provide better all our time country across experience and

XX.X%. was revenue adjusted of as unusual a was On XX.X%. of SG&A impact home for closings percentage the reported a items it basis,

was but as basis. Adjusted EBT X.X% margin on an X.X% reported

effective tax tax tax by year was approved the energy The rate XX.X%. recently was rate Our benefited for positively effective credits.

end average, we purchases On quarter, we spent XX% of The the we're year, supply controlled. for on owned under of was XX,XXX securing the almost development. billion owned for our control. XXXX almost land at percentage combined bank on perspective, land in approximately the For and quarter-end approximately new the years From land of At XX-months and and with had of remainder a X.X trailing pipeline a $X.X focused lots beyond had land closings. the lots exclusively company. based

of $X.X represents of X% At in units we an of quarter, end the value. last of units a value in Compared our year, X,XXX increase XX% the sales increase with and this approximately had backlog sales an billion. to

quarter-end about finished specs actually that per per community. XXX ending the which is our down flat finished also at included from X.X almost it's specs X,XXX We XXXX we X.X community This end at of QX from or total backs and had had the balance.

increase, spec expect position a When finished averages in us their we of plan as to down population we working Lyon, back spec high it that operate for the our closer many historical positions this year helping is a our on model. spring season solely add we strong selling recognize time. you year. but do The with But we inventory to population William turn that over entered

the allocation. it the debt completed were the invest we lead core results to back look for to bridge the $XX.X helped capital authorization, which of year. the Homes, for we when deal I complete the exhausted year, paid-off loan of after saw took to record our our AV we due, to came share in in which repurchase As continue We total our million million as AV million comes up and repurchased $XXX I'm integration shares we to on business proud work $XXX able this we acquisition

we From cash was million liquidity the revolver corporate million perspective, liquidity that on and a approximately hand was $XXX our million with available $XXX total liquidity, year rest from ended in the $XXX quarter, on been letters was the At and that end excluding against of the it. we normal of debt balance capital no revolver ratio XX.X%. course credit our issued the had to have net of drawn

have net capital had of as the debt the combined pro mid-XX% a in On XX/XX, company basis forma would to a ratio range.

the the date, beyond year could As as range progresses we this increase. XX% cash looked as as and the reach acquisition high needs close seasonal

focuses As we level. mentioned, continuing this be next when the we leverage reduce announced the deal, one year to of through our we'll and

We have worked will million for company. be of the skills to revolver our of of $XXX the size upsize the close increased transaction. This combined and the as also account to corporate to current effective

on the William with The have of metrics. XXXX and financial year shift and will integration exciting through significant Lyon, a impact closing which operating our

provide combined in annual business during the acquisition to April. position first be will call November a William year, on late in guidance quarter in As our we mentioned Lyon we of in last announcement the

me QX for by on a For Morrison our guidance up now, wrap sharing basis. Taylor standalone let

forward. The XXXX difficult end first out count community by sooner community XXX. openings It's pull community January sales the count remember and having more weighted new back QX communities success in is important be to be between and short-term we overall closing are of have on than our it's several normalize expected, For impact for our to a or community the that quarter, to half while may anticipate XXX year. and as the openings should strong

XX.X%. inclusive SG&A and a gross as quarter the be expected be home effective X,XXX revenue to percentage in homebuilding rate to mid margin the expected to GAAP range. X,XXX. interest expected is XX%. to be about capitalized is XX% of planned about of is closings are for Closings between tax The be

Our first operations. by the and include which closing of a of Lyon, quarter metrics portion be March's will February William will of all impacted

over the to now turn I'll back Thanks and call Sheryl.

Sheryl Palmer

you, Thank Dave.

officially Q&A, development Before the move progress update the our our on purchase quick strategy build-to-rent closed first on and new to continued quarter. provide during to business site We Phoenix of I'd a we in fourth the unit like and the our for a of Phoenix are start which excited on have is our month far. closing pipeline that's second big We and project on project, thus anticipate started attacking been the this work built to effort. milestone this initial

to We're to excited well of fits also build-to-rent our thrilled Phoenix, the markets on and to outside Orlando. We investment need as and each in opportunity. believe are the Dallas, markets these announce the that strategy expanded local Charlotte, we've three teams thesis product are capitalize demand apparent our for additional and of

expansion continue have report We and much the year more throughout expect our to we'll additional markets as XXXX into to progresses.

our work build-to-rent construction year properties and identified initial by growing as within with vertical As for pipeline projects. build-to-rent the year-end with market is we've expectation to as this additional land discussed, well control the continue our development some continued

We leasing impact later will divest late any initial XXXX. financial in we look expected from as build-for-rent activities year material our with and/or this to the projects projects XXXX start

like also to and this the enhance morning. of Morrison highlights a announcements recent which emphasize we've what share moment makes that financial already unique, to I'd discussed a all operational of take couple Taylor

of forefront to can do should at It's and thing to us trust home experience right each Morrison Most of and make With and trust inspires customers a we an for means Taylor put be. very great customers Life unprecedented do. we Story as in America's an determined homebuilder and our recently, Research motivates row. always our every everything as the day trusted the named place fifth-year in responsibility. nature that we incredible most magical what by and The it of to were are continue us building amount at great comes

to hard and even is trust harder earn know, all to keep. we As

the proud to discretionary effort in the that of the put the of team honor. to this that been we've longevity especially I'm achieve able ensure has So and repeat

more mentality the is XX the customer of on couldn't we're homebuilder XXXX. much and delighted for places our the top a Taylor work Glassdoor the Glassdoor recognizes we've best Also share feedback only number America on for been to our of of that garnered direct honored Employees This the list. Morrison anonymous to companies I out does work the as again employee. time best input based to first with that be award Choice result Award an a second focuses was the places on ranked recognizing XXX homebuyers. I customers internal believe it that that as the our in

mid-XXXX, the through across we the levels of short customer Business to In partnership and train, hosting Ritz engaging well in find, with sets industry, a customers, to person enhancing through commitment experience, at organization team organization retain mission These focused with only but members our practices, in began the Carlton our our leaders large. and to minutes a culture, for all I building teams on timely apart, inspire huddles the on two-way service best as us communication employees, who focusing as through together huddles come discuss daily whole the our XX News. reinforce all passion homeowners, not authenticity, vehicles. and customer America our as their relevant believe corporate

and transparency women's our as committed a of Thirdly, in I recent quickly would Bloomberg's equality. Gender to Equality repeat to distinguishes advancing Index. reporting, member companies list This like gender recognition highlight

hire never best the philosophy for been has rather to person to Our each meeting but tied job. always recruitment quotas,

everyone, but today and of female see industry or XX% benefit only Morrison home we our regardless can the exceptional can enjoys of and almost and directors talent gender organically a race Taylor the not board today Taylor thought an as current diversity for proud from Our that where acknowledges leadership to that enjoy of greater at grew well, male workforce, split. themselves of our makeup recognition This I'm Morrison.

executives rankings company based on about for and being And We social on this we second best we are deeply. World's the quality, not special reputation. survey all honor there's industry innovation, Admired proud fortunate very Fortune and care consecutive year. of and areas the in management, of responsibility, We've something The leaders feedback analysts the be but last product awards, based to but our Magazine's scored recognized that in provide Companies least, to responses areas many that by also I'm who about industry. Most other for been from added list people very performance recipient were

another XXXX outside was proving within history one. be more year company's to hard true. acquisition-related that organization occurring it's there's amazing things the would pivotal of to already activity. But a say and an the yet is the To XXXX understatement in imagine It's be

last it be tomorrow. announced would Friday, we of Just the Index joining XXX was Midcap that S&P as

chatbot week add smarter who continue like also transformational day. XXX and to being Olivia journey, that will our business booked and successful teams on more seek every ways of alone conversions Our conducting interactions, X,XXX recently new our generated than with to things her launched first appointments

Taylor Morrison process. mortgage the through journey transformation, Home at application Funding has digital also and mortgage made significant bots progress streamlining the

actually During homes we record the as Most days. nine as importantly, experience the originate each time, turn busy as and an at we're in process, providing our TMHF expedite to customers. elevated holiday for quick season, able was close

are These teams meaningful continue Morrison Taylor take customer that improve to experience. but our that steps the small

and our strong in call integration while Taylor William is always Morrison out and an our team. end of today to ensure do to heartfelt enormous I by providing deliver a you after so diligently inspiring. day will efforts smooth working thank closing day results I to like Their Lyon

the like Operator, instructions. open to participants to call I'd With our provide questions. please that, with

Operator

Thank you. [Operator Instructions].

Alan comes question from Associates. first & Zelman Our Ratner with

open. line Your is

Alan Ratner

morning. Hey close than very quarter on exciting. earlier and expected deal, the guys, of good Congrats the the

Sheryl Palmer

Thanks, Alan. Good morning.

Alan Ratner

Good morning.

a on, expand first you've we how into And sounds bit as taken here. sub-XX% lot should about looking targeted of past, business, think I step backwards a the about in regions a know here of SG&A. been where deep the like of guess question, at a and So the you've obviously, of five integration organization kind going little a this year but kind a was look to you've thinking I the obviously still the structure? go-forward goal Will giving should impact margins, new targeting type with this thinking guess to restructurings? broadly be but returns, understanding near-term you are it's kind it not about any current there And of metrics that about think I just be would where do posts the just of Are share kind organizational from annual business guidance, well level? in more whether be at directionally how absorptions, terms want we at any the and the of go-forward the just you helpful? decision you least of

Dave Cone

Sure, I'll with start well, guess I Alan SG&A.

not We're Lyon to on to will correct. going but have we The we call. we'll to into better vision that that in leverage the And driving bit You're integration. will from insight need SG&A. scale our little take when obviously of a on changing QX through work time; get our long-term increase the that's that just William help leverage

to But you grow legacy little invest going feel Lyon tell to to be a slightly business; bit We're look and basis, to a expect out the in BTR we like are structure leverage I drive going our as on those even we we're come place, we to continuing able going have before forward. do acquisition. later. in William to with leveraging we would longer-term, revenues be flat

other and I that on you hit on then think hit margins. And maybe a ones absorptions couple you on,

on maybe we side, the a up basis. start So, I'll to on be relative would looking to anticipate at XXXX, legacy XXXX absorption

is be business, pace demand governor there'll But necessarily in a higher a because pace strong. availability, little business. -- is it with anything not lot the on around bit demand maybe a William more think Lyon of I if

was to that. going So part And pace firmly enhance strategy of believe we our there forward. still

integration demand. with margins. we on color and maybe again a this is on upside potential hit to just the noise think purchase obviously margins be again But from the synergies scale I'd the have a strong drive the bit anticipate from the see little Lyon on of the little we accretive We'll accounting. legacy maybe side, forward strategy we just to And around we margin going where getting of benefits then lastly, would William have through AV

Alan Ratner

guess strong that's very I just really like some to quarter, numbers I peers this it's a Awesome, your that sounds growth, great well. up start are obviously appreciate think impressive very order I and David, you helpful. putting off as secondly, January

little perhaps on kind what aggressive a pricing You is of flip side there more the on becoming bit the you touched maybe point, the but governor front count doing on a at are outlook with bit the it margin this of and price lot increases to of given year out in it lot maybe the that an translate What communities are the power now? become coming becomes fact like goes might does that counts as faster, labor on. right seems pricing issue, tighter closing terms

Sheryl Palmer

good Alan. Yes, question,

amongst each I a we're you see, even expense quite communities, focused power in of can on think as the segments. driving the community little pricing do all bit pace at of count. I think still there's

demand, specifically level get think seeing across at buyer. more entry the we're impact look also economics in certainly the that of sector the it. level, that But little and the of at I to that the sensitive ahead simple entry ourselves there's of just you don't sensitivity and we're disciplined If people

as look at given and market, kind match paces we as the labor prices mentioned, pace important that most what's construction managing to you really we think of I capacity. is

plan continue [ph] we And And price so maintain it's cadence in really our production them accordingly. but don't position. concern a difficult put to to a the

Operator

Thank you.

with Micenko SIG. Jack from comes question next Our

Your open. line is

Jack Micenko

good Hi, morning.

production to prior relative in occurs. Sheryl, do think How the maybe just past context normal pretty that you how the low-XXs leverage repurchase question about talked talked the to following into we about been you the guys years, some of the you are of share cadence about temporarily. that that buybacks leverage, it taking closed? First level in have we But XX up deals; maybe around about moving active closing. thinking And you've up the deals

Dave Cone

Jack, I'll take one. that

as share XXXX of purchased we've part repurchases stock. our in $XXX almost you of we QX million Since strategy. As like know, overall

forward. For now, The combined we go flows to authorization. share we'll close is new sufficient seek likely going business before need to expected and out we generate wait a repurchase until the transaction cash

say the possibly potentially But might towards bit transaction we're are, I'd through some and interest a refine have given getting paying of also the a more Lyon some at bias of even rates of William we little the looking that where debt, current that down. debt

we're So take to to a going capital continue balanced approach to allocation.

we back it which checking at something talk in Lyon, like and obviously that's are free going it's a us and function really going M&A case advantage, we opportunities, interest opportunistic. they're share might looking And William rates be about this heard take around leverage be to box that reinvesting where the to to our very at feel want You've we're now looking then flow. will right into business, and with cash repurchase, debt we favorable before

Jack Micenko

All XXXX, that's helpful. Lyon's deal. oriented since first guess number time you. William were Thank a of got or acquisitions really And the XXXX the so. been And have or you've those I XXXX right, or as five then is

another level footprint, forward? you've this competitor combine quarter, where compete I very very build-to-order, going you've going got -- company Now down, Morrison doing that a include some all the stripped you've got to from small what's where level As at Taylor branding entry mean, in perspective? entry the brand got the Taylor everything you that is

Sheryl Palmer

a stab take I think one. at I'll that

quality first critical we we've this time first But -- we key by-market the market- focus everyone's playing And product; little think in talked that we some the right, before, affordable it's do at organization. a that maybe right, that choice the simple a has penetration serve right and because house, levels, markets. folks, time bit right attach do this a home very I really And you're at place price. product, the about differently do sort it's right for being simplified in through look consumer the consumer. absolutely little buyer think the we consumer those I of the for fact really been very in first-timer

a And Along choice. the that the continuum and coined them time first-timer serve professional do customizing bit give money with do specifications more more what time we their a and we bit they really first little consumer, liking. we've spend though, to little also the buyer,

affordable very a across talk that that right So I breath truly move-up. edge when pretty first-timer, first would to of something broad time it's be we our portfolio, on about the the think

to Lyon more more points. I William say position I level our six definitely that a piece around simplified entry spec businesses, as product. are penetration the much greater overall Dave a a we we'll would five will somewhere the move that where of And larger be really of have or think probably with going would penetration, have percentage discussed, up affordable,

Operator

Thank you.

comes next with Our Michael question from JPMorgan. Rehaut

Your line open. is

Michael Rehaut

earlier everyone. morning deal getting expected. congrats good than done a And the Thanks, little on

Sheryl Palmer

Thank you, Michael.

Michael Rehaut

you've and I working going of obviously the on I hoping biggest. several Sheryl, forward a from I what you and the comments few company the will First question little was to deal upon deal part your combined over close? do of you've lot had from the or know, was a get deals, maybe Lyon William that the be the done standpoint additional perspective to years. past expect

out You've the also other industry. of had deals couple a in

that as well as gone well. not haven't Some more were have gone or criticizes

acquisition industry, the the William this mindful of are two right Calatlantic, and you path you're different the of the takeover and views year done had a feel investors over some different Lennar's two? the perhaps deals you’ve the that you in at or bit Calatlantic Specifically, the But Lyon on, put was of of bit successful. which a what on things others next three I can look as or that that that particularly more think impact

Sheryl Palmer

easy, that's Yes, and easy really complicated answer for us. a topic

price right piece the go most the has underwrite to or go As you most the very don't the you actually underwrite the is you through staff due work. right diligence, cultures, all the properly through and successful don't the integrate people, making transaction thing if you you of have people you because Michael, assets, But day, process, important acquisition. any to the have of you don't the have obviously little you difficult have the the end to at sure chance a

having people, even and best it mindset to by their though go And role through Taylor would the their there's the that's and enhance we're talking acquiring business, better wonderful ours, the think history, processes, bringing not time team tell what's actually put to Morrison, it. we're about is and open that. this, their we to have apart, every ours I field. And rip my not so you And one in But which we spent a a some I than depth seeing within methodology. organization prepared I've in going in but very this comments to

that getting and people, mind So in an we through go-forward the becomes team a a field. "we" go said, diligent with and have very we understand making sure the it's really, best sure And we every very the the the that single we start role process I open for have interviewing of and about organization then quickly, that best strategy. to making as

Dave Cone

bumps bumps. necessary upfront, a but cost from on And they're say, during pays lot -- as little know, know Sheryl's that you double have are difficult go accordingly bit the bit the where team have And times as for members a best integration. just that do sure, little Integration you they're there's of supported back I the also financially this, on done through end around those resources dividends is which, it that for this plans tremendous, down to a our at for that the even standpoint things and an process, morale you will to of and plan dedicating to a

Sheryl Palmer

And is I've got the through and process. more entire it's last communication Michael, one key, key thing,

to I daily muscle in going keeping of in tell the multiple So the kind prepared to huddle entire on basis The would be quick, and everything the quick critical not we've week. for team people. around if because arms about about we've both one. been of this we It's to getting them. you, send been transactions to developed, know I'll a talking of daily that since will be the really it a our last the We isn't the that announcement. have and we for putting five on members spoke organization organizations memos day front is success trigger

November I'm IMO end March. able the to confidence of this As going happen till think ready didn't of is get week. and for my to what the But us kind great of because really been we they've this news. team do to said was we in call, the thinking very that's quickly,

Michael Rehaut

year That's execute appreciate great. those luck I best as you of plans. obviously this And that.

Sheryl Palmer

Thank you.

Michael Rehaut

obviously question guess to I of back five from over back to you been I there's will think or secondly, margin, despite lot organization, lower And building the there's But forward, four investments. valuation you're flattish range roughly of X.X to X.X. earlier has going on drive to let's this when critical. want at to years, in kind multiple, a I understanding trying the say, investment around systems a different it. I last year operating think SG&A XX% involved XX.X% in revenues circle better secondly, look you the, there's that, And be since out functional SG&A returns going better if think that XXXX, and been I the look the

there? and number get you you bit. being Sheryl, over So think the flat three a think Dave, do that you over do that mean talked what little about years, maybe real terms the and would in basis down look to should you next number I of what But to as how be opportunity or because where two levers on legacy at the that about is a time be

Dave Cone

at by going start think Michael, rate. first I by our Sure, to SG&A

you at acquisitions argue if through our actually have we I different mean, look peer competitive. purchasing cycle. function have against And made their made or we've investments. I investments several it construction [indiscernible] group, would think we right, around it's done, very I in you're the

mentioned, And, at muscle do creating to to be of as that allow us part successful acquisitions that was Sheryl and integration. to

the where going we're And it So those where very are proud foundation forward. for we're that today of. actually lays things and we're

year. change going little because, of couple is least vote position to us at in a not is belt, we right for to we go our said, having Lyon, game to decided going to and was as for returns all us have as the out months But you Lyon a SG&A the get on forward We're we margins, move I'll want establish in the with William it leveraging short-term going the look bit. we through this rates be accretive SG&A, transformational. based get William But to now forward. guidance cash; we long-term integration. under to This process a our generating of for tell additional enhancing once strategically

in out to we're very But our competitive think sector, when going and take of conditions. we be the well-positioned, other advantage to we're going market we continue end, come be to

Sheryl Palmer

investment end the stuff the have good the we BTR we lot actually Dave, so when out a and just there. and side, revenue from point, And streams I of when think earlier come the to your other not of integration

Operator

you. Thank

Our Mike Dahl with comes next from question Capital Markets. RBC

is Your open. line

Mike Dahl

to the wanted back absorption come I Hi, to question.

the at at for that Morrison translating public in that kind you month like Alan over you per three the release, around sales January earlier. like north of talked But any it think even a the number about I quarter. three least, as press look a numbers, of asked a produced more that's it or actually in XQ -- month, seems pace hasn't on so sales company X.X those to Taylor for

the pace a and manage of William coming you're pullback that just that structurally basis seeing there guess the impact evidence the on So ask to follow-up is the from there rates price, versus to something the go-forward way or notwithstanding to mix pull-forward is Lyon, looking with that? and that wanted respect any that I legacy on in just like I about different alongside secondly, anything this a kind but you're business is

Sheryl Palmer

certainly more over the decision price, that us and I and a pace that of have Michael. advantages quarters you very that for wanted to market-by-market. I see the and talking to long of we've anything structural a don't it's community-by-community of bias think a to started moderating, bias we've on couple about But that saw acceleration. price the probably you a though pace at margin for Like corporate have we strong all, gives is day, think at even time said, I benefits been the a end that

don't think in strong I this is there ourselves a pulling you say pull-forward. a are ask three rates last every we us field, and Is pull-forward, about years out time that activity forward. think two, pace there's if the we the some

we In even think given a more even more. I even around pullback this saw rates could or fact, that concerns are rates virus, the I morning likely see little the drop

don't So I think so.

storm market-by-market. is the and I things, perfect think that good of feeling. consumer I and markets tight, some mean energy you the the the that a we're around the excitement is what Inventory is go tight almost way in all across seeing creating if on inventory is it's way

Dave Cone

And phasing that, look as And acquired business. through when in throw talked a higher had the were when also them, AV about I Sheryl get they we at integration. you we to really as quarter in I efficiency completed that seeing out well. you're business that integration our of we last and now, expected our through numbers is think coming what call, that the we

Sheryl Palmer

with comments, to And up see strength so and we're XX% that in prepared also that first groups across we see consumer delighted our all and we're see to second entry level. tremendous. the But excited that year-over-year, to it’s time buyer said move-up as

Michael Dahl

there. rebound the move-up entry into extending see and to great it's yes, level it, Got beyond

noise purchase around that those hold to mentioned. Dave going way the give any you numbers accounting that accounting but purchase anything are accounting just and on next you to size some understand should you that us models even impacts can think about up, talk margins as question look off there? your we up, you're specifically but flat impact, can margins still to just basis, about until providing inclusive Second purchase And forma think you margins gross margins a when and specific of build-out quarter we year-on-year up to on those and pro guidance legacy

Dave Cone

through margin seen touch legacy demand accretive a year-over-year is on on like of speak synergies be side and would more the benefits obviously said bit the our I strong from to little But from a to Yes, the we've factor. I'll that yes, the expect a I accounting. then AV; I'll a purchase basis, bit playing legacy

see And half costs now; William us have I will purchase you perspective, impact right; normalized. right price Lyon margins input have the you're a out. we're we transaction the don't at core overall our will seeing integration But allocates looking process. assets to the a that of for been that there's dive cost around on have tell is a this into that begin we first accounting. the so. And somewhat and From this know, that focus us backlog We're gives as the do strong how this of for lot fair we'll know some deeper But confidence transaction. value an a at stage But purchase year. we

position now. point. we’re share in speculation right this So kind not that a to It'd be a pure at of

did we little thing have would But one we one-time book. you bit transaction a have is for around work We're I QX AV to maybe this the we'll full-year. way transaction one-time but call But do. with quarter, next through and leave as it around more doing book. roughly And it QX you will we our take for guide us in all the

Operator

Thank you.

with comes from Wells Patterson Our next question Fargo. Truman

Your line open. is

Truman Patterson

everyone. Hi, morning, good

the year increasing to wanted margin. been a just on past and market messy over purchase little accounting; gross with incentives. there First deceleration It's the was touch

your difficult today? what kind synergies walk P&L see margin AV you synergies from gross through have the actually have of of Can kind it's possibly flown that us just through acquisition. So flown you to quantify guys have what seen through or been

Dave Cone

two-thirds there, call XX in it a fully $XX about through. bit our ended the December, through that of synergy goes months XX quarter to maybe overall it to ultimately as about that we're million, about margin. the you talked But Yes, for it We bet. us months little of ultimately that, up go transaction number through end at at XX last move we takes

in like we'll as rate to started time. play improvement come the What XXXX. going right, it's it got forward. last typically we And margin better was rate cost, efficiency But here than of we we started saw year then some quarter wane, and as So at the for seeing kind of out benefit transactions. with example, as the did, you're point that. purchase accounting next run had that hit mean, into move we benefits And the AV annualized on I more that probably said margin lower we're still take noisy rate accounting a into impacts they of the the that so to does purchase see I we underlying more of

Truman Patterson

Okay.

kind Thank community a on And count. you. Okay. of multi-part then question

of You as kind difficult, community of company have leads openings first what through cadence count sometimes to growth rate M&A about bit integration, then, do keep acquisition, actually suffers. in I to from maybe more guided Will And XX% the year-over-year, managers even the maybe what should growth thought all suggest the little it's and combined generally it and of positive the on we by year, regarding how count think the industry that inflect safeguards community Lyon would will a rate AV a end pro slower become quarter you year? down about than a that if the of the of XX% to focus kind gapping out? guess all forma William

Dave Cone

Again basis, call year. of Well, let's QX to slightly XXXX. start a flat with to relative to for probably community I on us this legacy count would up be expect it

was So our XXX. average around community count

year. out first on of the prepared we'll coming in But be quarter, the quarter, remarks, we'll about flatten online kind more bit flat weighted. again communities to of a but half second see to talked the we the late by As little slightly see dip that we a up second end have of

Sheryl Palmer

the I you're being in lots digested first slower kind pull organization. Only you is at William announced; And to as think the was was start quarter look these into think Lyon's all to When thing sales it of deal do. if I'd there's Truman right. it together, was work add I the of a that you when trend

year what very coming Really they've seen organization. looks and the into Pacific and January top that earlier, and understand the for delighted, the the And the it across sales certainly a saw on to as seen we've January where paces pace on as board I in said it amongst the Northwest in them. were future pickup went They people began like. with good

to side that on work that. integrate teams are on together already will not be starting it able our many I the community really So blips to opening and think be too our to intent because these see

Operator

And Jay Thank McCanless question our Wedbush. comes next you. from with

Your line open. is

Jay McCanless

morning. good Hey,

basis? about company So the pro Sheryl, Where I those move-up? you entry adult guys forma are think How believe question transaction. look buckets percentage going maybe first after a do the versus the to active versus your on level

Sheryl Palmer

of third, is entry about, in and the really So the and a first into kind specific the moving of that market of move-up net maybe the of bit makeup right. active Jay level, plus talked the third, is third is we’ve where normally that's business middle of kind show they a first the third, portfolio. that and a And time total kind up of to little communities, buyer that adult XX third, that third a not but

and see at level the expectation I that the of to and points as lots you'll look second see go-forward see you're percentage buyer the if lot, that first going organizations, buyer luxury move-up business move-up few I a probably blended time you're at entry the going look I business percentage My And first move-up move-up points. of slightly to few the two think a kind probably that buyer first reduced.

Jay McCanless

operating a deal? Then after closed in there our assume next to the to three count business had be great. fast that for Morrison question of That's the amount meaningful it should we going the you on same the change just closing? community immediate Or if community as model, to thinking week we be took there are and William for roughly quarters? is forward a combined to forward the an to I Taylor to model, second be that thinking council blended businesses today, after impact the of our about have about going Is the then terms guys Lyon communities for we're going two

Sheryl Palmer

the seeing both portfolio. move that the we think early Dave drove only into they're long-term make same moving some the seeing concur sense Dave very are communities. And in the as the given that closeouts closeouts, in We're I'd bias have Generally, a than might be might little thing. positions that don't I guidance seeing, earlier And with a both And done, that's the Yes, that few we're strategy the if the businesses -- some say there that correct little we feedback a work is we've work just analyze shared, a and might shows we think you I success -- think we I the different probably strategy. up lighter portfolio, on anticipated. is that the sales seeing quickly.

Operator

our question Thank Carl you. next BTIG. Reichardt And comes with from

Your line is open.

Carl Reichardt

got Good post-close think as of deals? to ask just of you way you is all. my the you look have Sheryl, you'll is it sits ask stable guess your relatively way guess footprint I you footprint I to crude doing scale Truman other share, to have one, the morning it it scale in want is where be, want you kind at and and depth to your a is, I Thanks. it market be now. are where nice it, if done your that one.

Sheryl Palmer

So about I think can't today busy. even down large transaction. crude and and We're very another like We're I is your approach. head here That sit good.

were to for we we'd before integrated little ready same for we to I this, think we would to us a make anything busy sure while we're see had just like you'll consider different. and was make the ever have AV appropriately here, going do

doubling and to I'm I When say with there, Las sub-scale I I the delighted, look and size, done look at it's California at well dynamics Pacific as Austin market footprint. as at Denver added of what's of look transaction the I happened the and the very what I our being markets the one this Vegas. would that look at the at at markets strategic Northwest benefits

that in we're feel thinking place. now don't at in think big never on I deals any now we not But We very quite like So could to we're what, holds. comment think I right the a And see good be about months emanates months, very XX I place. all. XX, good like portfolio. from a really XX honest, I'm I

Operator

comes FBR. next with B. And Riley you. Thank question our Rygiel Alex from

Your open. line is

Alex Rygiel

in to us regional the the a you feeling as of you Could run you, you're through order of Lyon's William January quickly in could on relates sort Thank questions. and else bit of quick well two what of little update sales the give as sort activity seeing a pace month update on tranches? it

Sheryl Palmer

Yes, be to. happy I'd

So the we've far as January, strong. like that said, sales that think William their was preliminary I seen Lyon, as I numbers quite from in

I think they had a to something pace of close X.X.

So that's that's -- tremendous.

saw I pickup. business week slightly the of their expectations. think ahead it think they I each was And

the I at and four that about good. I of weeks, weeks pace the XX has said, last last excited So compared the their as look eight, been when to activity

the I board. around world for, a would feeling tell yes, the are you quick I nice If things across do generally

to above felt of do some some trade as seems pricing and with and budget Having seen pace then XXXX some saw in January and impact their considerably months, in Bay. activity resistance, three with a interestingly XXXX, pricing last half months, tour, and quick dropped sales year. through about I start last maybe pretty enough, tough that, some January their like XX and like that I'd some good of has the seen back of communities. They before back the said buyers inventory a probably create, more those move sales the let's the of even QX the saw it sub-markets. signing, slightly pickup and power feels Chinese we we resurgence traffic of a in an with little maybe think seeing we've in little we've I maybe deal it seeing back it bit over some the sense talk markets say the makes that challenge, the

is business our the couple California, than of and the last repositioned of down As ASP State years the over through more of year-over-year. I rest XX% the SoCal move

change so the started come through and quite footing. through is And dramatically favorable predictable last that they've going business the add on gate that to movement very with at strong William I year very like Lyon. look discounts the then how out of year it each And the and and quarter reduced they're when the year January in feels obviously of

a Sacramento, good in seen in lot come stronger competitive entries quarters company, there's the lot seen mean, we've the sales into in really last steady been as and the I that of a you decade. entries market new it's three new have just go, we've really But of Sac. in

feels are other assets. we year, lot press, national Jobs a the run Dallas the probably through greatest last do to was of had just time. I I would the challenges in think the some most are to seen more it consistent we've than place of But AV there some work inventories actually the a that good, tightening up. last too repositioning much noise hard. year, you tell inventory of market over lot pricing can That's

really think I a team's nice done the job there.

And on ability seeing I with pace opportunity sure in get Houston round year-over-year the the get and I probably Lyon Austin, business. ground sales making Houston pace is of start-up just results the Austin and of I'm per capacity. double growth William out don't keep of Texas, great strong. really size community. ahead production that we cap the excited add business business see to our lots to and challenge our there's think If

shift probably that Carolina notable are in slightly begin months markets But we've specifically great see seen Carolinas activity, trend the that improve, to AV say the we to we're Raleigh most kind think in do and over is down the the repositioning is I'd of I where Charlotte see lot fruits from to probably starting we of work. family team's a had of the last seen multifamily. as a we've few hard the single well from year-over-year. to

What's growth whole. as year-over-year the active each out Taylor both year-over-year and didn't market Morrison markets quarter-over-quarter Florida, in adult having a tremendous as We a in call the specifically of and left? positions this our for being function sets and a the out up like growth Esplanade other was really consumer year. closed positions opening communities, that in us lot large a and new of early

XXXX number Once AV business that with hard. production finished I strong, in business. affected look And forma acquisition, been of but along they've Phoenix that the and scale really than handled revenue. benefits with the William can charge we availability. And Lyon up just And think lot a cadence it affected worth about only do the that I one do. really the -- market I basis, be to business dramatically can change for they're sales if and to in January. humming a what production a more pro And on noting have we in continues the masterfully. strong, all both Phoenix what think is and would by It's XX% probably machine really Atlanta the that Denver going reaping by Phoenix is at again, plan in is will

big So a for Phoenix. really move

Operator

Bouley next question our comes Barclays. Matthew And from with

is line open. Your

Matthew Bouley

on I me to color else demand But of I return for perspective? around kind are pricing tightening, again, to inventories and wanted when Good of guess market pricing the pricing perspective seen power we've I bring is it could your if you. already have to incentives hear being take Obviously, here. of some market. in great the markets around or power favorable, side what the you mean, morning. it. your sort pricing guess fitting the resale strong, into ask a give Thank from of that's would I rates power sort back Thanks just piece it Sheryl, maybe left fickle. still would to be

Sheryl Palmer

Well have we the bet. You do in think market. pricing power I

what shut think builders to we this responsibly is don't sure make act I seeing off. you're the that

So measured at that -- is taking see I'm want more look approach. long where be that And long there's much you a if you careful of fan opportunities replacement out some a know when a opportunity. shelf a you really have community, you're really you not you communities as to closing life,

pricing have power. say, we wouldn't I don't So

have In seeing markets. pricing in fact, it power do all think I we're and we

a we're a it little think shot; don't our ski and responsible is over we probably more X,XXX seeing difference being a the get sure that out make of to tips. I instead bit bit little carefully more metering

Matthew Bouley

yet appreciate guidance the I it's of whether the I you. Thank deal Okay, guys been material Appreciate closure side, of Lyon, or about full to still on just updates to with head around land start But on you're the just sort synergy that. synergies then guess the have just sourcing thinking the that? on how come. you ahead of And secondly, able side understood. get kind is a any

Dave Cone

Yes, deal. in announced same Matthew, maybe the when spot we're we the

$XX So take come divisional local, are that. identifying and through from consolidation national of what we're expecting to right overheads offices. months XX% going to the work We're regional, and XX work rate us run our corporate synergies to XX a now Again, on to would million. Probably be continuing through target of probably synergies. of around

to to starting deliver we think say we're have hope quarter and each an as to trending. back but early process, would more, work we I where with $XX we'll that in with million. do come We this it's update something synergies again, are

Operator

that's time turn for back Sheryl I'd we the and all questions today. you the remarks. Thank to for any call like closing to have

Sheryl Palmer

talk Thank importantly you much. more I great as and the very the a Have QX appreciate us ahead. everyone about we day. today exciting joining results year

Operator

and call. you conference Ladies for participating. today's Thank concludes gentlemen, this

a disconnect. have day. Everyone You may great now

Taylor Morrison Home (TMHC) 5 Feb 202019 Q4 Earnings call transcript