TMHC - Earnings call transcript Q2 2021 | Taylor Morrison Home Corporation

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Operator

Good morning, and welcome to Taylor Morrison's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations. Please go ahead.

Mackenzie Aron

Thank you, and good morning. by Cone, Chairman Chief Executive today Officer; Chief Financial joined Dave and Vice am Sheryl and Palmer, Executive Officer. I President and strategic questions. share provide while we financial will will an to of which performance Sheryl take happy your overview results, after Dave highlights the and will be of our our priorities, which information are the safe release, harbor [Operator Instructions] question-and-answer available the today's to including is will session includes in for Investor subject of forward-looking that the Today's call, forward-looking you find statements www.taylormorrison.com. Relations that website our on statement earnings portion at These uncertainties results expectations actual statements to are from projections. and subject risks that could our materially differ and cause to are undertake These update the filings those limited statements. with to, in any our and forward-looking in risks but factors do we obligation our and SEC, uncertainties to not not the include, identified release and

to refer are release. financial will reconciled we GAAP on which figures to addition, certain in the the call, non-GAAP In measures

to let Sheryl. Now call me turn the over

Sheryl Palmer

good our appreciate start today's Thank each overview doing will I Mackenzie, I you second well. of with you discussing everyone. long-term strategic a potential hope time improvement spend and today, quarter and of then driving view earnings well on into market. results in our as as some call sustainable brief sincerely XXXX you, focus us are joining our our morning, We the and on

at average in price sales an homes, of a X,XXX billion. delivered closings home our increase we revenue XX% driving quarter, year-over-year the to During $XXX,XXX, $X.X

full committed quarter some prior year our to weather supply in and our our of of homes. While by closed XX,XXX a remain chain we few closings were guidance second delayed slightly XX,XXX of markets, interruptions to

year-over-year prior our and demand with June. XX.X%, setting XXX year-over-year the power to May, across guidance strong stage a market This further per From favorable, expansion growth the pace quarters adult absorption our some responding margin national lifestyle the the markets X.X basis our to sales by gross for April experienced in XX% perspective, normalization of sales notably who buyers year-over-year improved outperformance in brand, in active and drove increase exceeding reengaged in closing's in led of net to Each pricing home well improvement groups community. and remained and particularly market recent premier Our ahead. the paces our Esplanade. are monthly points consumer our among in

least And that option to leveraging lastly, competitive maximize supply to land change homes. In operational gross that homebuilder enhancing cost year. next Homes second while improve further also starts production metrics our beginning This as our structure our sales anticipation have of release established pleased and focus cost new with to we portfolio limited operations, following increased in intentionally of any acquisition XX we I'm tight navigate XX% X.X to and land gains original notable which William efficiency of strategic recently our of in and of capital timeline per last our includes sold arrangements completed the risk later acquiring in the This elongating quarters These closings meaningful and years, pillar and we drive build margin on proven further we the the expanding playbook, our is our reduce as margin efficiency position side the With our year By product our XX% tools. to full performance the of excellence on until construction returns by supply cadence and by towards we To the capital financing latter land and necessary and generating of experience. in long-term one full successfully strategic progress gaining of our increase our our playbook. However, XXX%, monthly record continue underperforming focusing to our taking new customer our the the land ahead traction our returns after we opportunity. are is the now effectively within financial for constrained their for seven left leading all past with backlog are months. of three on we market our streamlining and half quarter. the during financing of of the without remainder through ahead. and way have of vehicles strength improvement finalized operating acquisitions portfolio These in consolidated a over and the spec enable these applying us committed housing delayed consistent are driving companies point, for leverage position working the in will team strategic further capable pillars, our proactively the Lyon releases scale, the at challenges efforts through availability, gaining construction community attractive XX,XXX ground us labor in stay record of and advantage a target, our will we make long-term the homes our shareholders. gross the cycle This material to accelerated six intentionally pace year. year, starts operational year-over-year, track significant paved and cycle sequentially to times and record we our governors

excess gross of this basis we in in our William in markets meaningfully Lyon home is benefits a This is a we to XXXX XX% in ROEs This returns in company our Combined represent to synergies stock shares enhancements in year, significant business, by the XX-month of generate a million at we and in drive to and improvement have when and of of year value. outstanding after XXXX, past, cash XX long-term view, simplification effect. margin by an attractive be operational and more year. next now expect to effectively which, closing, those our an multiple XX% equity mark since in positive our our account impacted acquisitions margin in with we driven with can we months transformed backlog continue it our million note, expected in high our seen by continue XXXX operational progress gross over both starts composition the a Accordingly, of quickly returns. $XXX have to began our our that Because on pulled cycle level XXXX, expected over teens Homes as is sold than appropriately warrants ROE does would buy points last strength to which back early current company to margins each home followed average from highs. our earnings closings have and optimizing capital On new focus and a and of of critical improved and scale to than and doubled We to To initiatives efforts. in year. a through benefits in and ability this momentum improvement before our improvements range returns. have year from late margin times and that to X.X believe gross markets give XXX takes the expansion magnitude basis the opportunistically on acquisition in also stronger and as mark integration this share shareholders XX% similar of valuation, XX% approximately acquisition XXX high during X% the than return new more expect points take full since return we recognized not approximately strategic further the of for further that quarter our approach the we would the improving improvement financial results. and to by share to sheet similar and the our the homes shared of our to overall deal's deliver on AV combined our the utilize sizable looking repurchase acquisition of sense flows, our and to achieved As the XX% our the generate you confidence closings to balance in have range this we expect enhance compete notable XXXX buybacks based improvement and

efficiency floor renewed like acquisitions to spend support that the some I'd time propelled that double top core a to on operational five Now end, to excellence, portfolio of further from down offerings these large to goals, cost a opportunity trade enhancements by production-oriented and cycle plans our underway over year, within multiple are have our discussing combined outlook. years focused we our into focus business. appeal. the rationalization By construction portfolio construction for streamline faster on and engineering opportunities. most and partner option brings leader and residential recently business value product XX times and To lower can that pursue schedules. profitable improved we our to After homebuilder capture last optimize the closely accelerate our consumer building us our and experience senior SKUs, our efficient this To and our simplifying hired identifying streamlining benefits national fully especially enhance design working newer plan that and entire across scalable operational of markets a home product and teams drive we of the engineering cost,

our is team our working costs. supply-constrained to our maximize operators push partners solutions rationalization our and and today's also and continue and in purchasing closely to on to improving evaluating find secure addition, with supporting In our buying They availability product our SKU purchasing supply power reduce processes ahead construction contracts, material market.

standardized product goal as by them value the the all to and implementing of many completed rollout rates, Canvas take the features template our well using also known homes interior highest These model we forward. During Canvas our for achieved customers curated and a compelling spec design as margins and easier a packages designers are homes our to offer availability divisions as pallets our experience. with design all our as going of of quarter,

visibility, pilot time homes week anticipated these closings results market. to in markets addition, and today's indicate even lines. increase supply our In non-Canvas margin reduce a home time packages cycle Early compared two construction more unique improve chain expected than gross advantage

year-over-year homes XX% on also in favorable becoming the approach price notable homes which to-be-built tools design in than the benefits, premiums, maximize especially strategic our groups. our by to and package conditions, drove options releases our our that and have today's This partly business. processes communities, premiums. strong many scale way harnessing Amid backlog. the function just more a selectively we first and consumer doubled favorable lifestyle market norm our price, pace a away average strategy significant $XXX,XXX. we are our for we limited is increase leveraging sold our our are portion growth order XX-plus lot model time our shift the by envision emphasis these growth driven create base all is our more predictable This including sales competitive this strategic first raised higher and option was efficient, in sales, also nearly profitable To move-up pricing from top line as in one employed sales evidenced a to traditional buyers within Given in of on evolution and have lot which we our 'XX of that balance center bidding to design a mix

of in are thoughtful protect processes have months. the including continue sustainable cognizant of to each neighborhood's value return to coming and we been see maintain across this markets, of and mind, the we using to prices in inflation our forward, the on price expect strategies cycle. pace affordability higher while we strategic life buyer market levels selling and in by Looking our impact point dynamics, pricing to of pricing sentiment price more communities the opportunity long-term our and affordability to tailored our With

of rates the for rate our a healthy. one higher spread and you me and monitor scores actual monitoring have maximum also remain heard Taylor consumers' the points FHA equal. year-over-year is financial basis withstand else the they or spread XXX with basis pricing before, As all our basis could buyers to interest on points at Home funding interest ratios being finance in which Average affordability buyers for qualified Morrison our Other by way between was we sequentially XXX by debt-to-income stable share and very and This buyer metrics roughly stable ability have were approximately rate we healthy levels borrowers. credit for sequential at buyers. LTV, for conventional gauge also

attention sequentially the increased spend backlog. the further buyers are based needs, their For And in bigger such have expect we the affordability on confidence. trends sold of while financial our as of for impact pricing has In Florida, more demand other poised which choosing to favorable of second opportunities. lifestyle sign support in buyers and another the out-of-state year square lastly, quarter meet footage homes buy of and example, and demographic destinations Austin words, and to continue been our back much is homes increase employment the markets to to their long and to local on that health Southwest in half healthy given been attractive and to migration strong and

In Northeast these in Florida. from above markets, showing in in have of recent seen pre-COVID and any our of buyers reversing. acceleration in California back these market shoppers well consumers of Nevada as further levels we is fact, months, signs out-of-state and Southeast share share the and In the not and Texas buyers the out-of-state as or

Now his the Dave review. let call me over financial to turn for

Dave Cone

Thanks, everyone. Sheryl, morning, and good

to Before quarter's spend on IPO, lasting want been this so at members, which diving career a our back least acquisitions, Taylor family included partners, exit I'm our to and homebuilder moment and Canadian with upcoming develop not a and X step philanthropic financial of my and the time recent the my into I announcement team my nearly of address interests. fortunate our Morrison, about performance, colleagues the relationships After have position the been decade a from to industry to retirement. the take has more, much at which operations, has to friendships professional more investors. in with I

second company for half I to ensuring of process seek results financial and transition am chapter. year, working confident striving next our its the to second strong search people committed The deliver is closely will none, While as are my we we culture in we strongest I then, the seamless greatly underway into success, to candidate will to I and Sheryl positioned miss future and help believe the well Taylor at head I leaving toward. have I with the which here be Morrison, well lead be a I'm successor. Until as the teams the the will been will which company

million of on of generated to the turn a and let the details to income per impacts of me or share. XX% Now up quarter of Lyon $X.XX We the net Homes in of GAAP was period. diluted second this our Compared an the XX% $XXX basis prior quarter our adjusted XXXX, results. William excluding acquisition second on basis after year

For our absorption totaled flat X,XXX increased orders was XX% to which year-over-year, sales per year-over-year X.X community. roughly quarter, sales monthly net orders pace while the net

$X.X value quarter Sheryl up spec billion, limiting a built in As homes, maximize we backlog. our managed by the cycle described, margin of and year-over-year. our of At representing activity record opportunity sales XX,XXX construction release homes backlog the end, was to later this through XX%

of was backlog quality. all-time that company consumer rate an strength and cancellation reflects the low our X.X%, Our

was community consistent average guidance. our XXX Our of prior with count

this metric for is XXX be approximately XXX as the ahead, in quarter well to to the year. Looking expected third as full now

development anticipate As of out openings and we in to community higher time a the pipeline further, by new look on XXXX, high based ending followed XXXX in growth sharp our in double-digit our community XXX inflection count range we lines.

expect are highest this Sarasota we In year. Naples, are XXX open These margin gains Phoenix, portfolio continue and consumer communities and across by addition, contributors. in led among nearly to communities to our our new groups which spread new Austin,

second quarter. Turning delivered X,XXX to the We homes. closings in

pace close remain with in midpoint. coordination partners we an year, quarter. increase trade construction our suppliers, homes the X,XXX homes XX,XXX year-over-year to acceleration to between and to in community X,XXX and X.X teams homes per the includes our XX% strong delivering XX,XXX our purchasing and and guidance This starts committed third the With closed at this

XX% in This our year-over-year improve quarter momentum, closings XX.X%, this gross margin prior anticipate to in Our to home basis home points XXX our the margin third closings exceeding Building low range initiatives. on XX% about which prior range guidance. improved and to we operational the and gross our year to positive of the quarter. high is ahead expectation faster-than-anticipated to the drive low fourth traction to strong due of our gross the XX% range, XX% trends pricing XX% margin would in full our

discussed, XXXX acquisitions. and margin Sheryl anticipated As in from basis XX%. we points our to further XXXX, drive to our This XXX least approximately expect gains points from margin would approximately benefits represent improvement basis of at recent XXXX XXX due to gross of

closings of Our home SG&A percentage as revenue was a XX.X%.

the expect cost increase SG&A our by year, full anticipated our overhead to decline and the range, to to in scale. continue enhanced our the total synergies For revenue driven from mid-X% leverage from we

to land year. in We Turning second development expect approximately and our $XXX quarter the investment and acquisition this $X in be land continue million approximately now land to portfolio. for billion invested total our to

Our vehicles we acquire financing land vehicles in are underwriting described other are cycle. auctions to process from tools profitable an disciplined over new before in risk-adjusted to see up financing approving seller our new to short-dated that accretive year. for today sophistication next finalized land with growth ventures, XX,XXX quarter, were such more land asset-light net owned to overall and our parcels. to benefit share acquisitions strategies include sequential for land returns programmatic financing largely supply in XX% well our another XXXX, These near Equipped where opportunities even controlled full XX% X,XXX These the we our and the of represented we in to Approximately the expect supply, total beyond. these our X to that we existing of land a with holdings owned. at and offer layer years on portfolio which financing. attractive remains a land Because of approximately quarter to housing was years achieve total the basis venture of increase expected ventures, subscribed deliveries the term, are land second XX% new drive are earlier. land lots banking and arrangements, of our least land In home second recently we XXXX via of lots project of long-dated sites. Sheryl joint as controlled and added controlled impact X.X This of lots a

will We new optimal where land with provides and cost operating work our identify lead teams opportunities local execution financing closely the to of these such capital. vehicles of risk-adjusted the

to our the with now and Turning liquidity, available total normal billion including $XXX of of million letters capacity undrawn unrestricted outside balance which We million $X.X revolving of the quarter of sheet. on our $XXX ended facility, is cash credit. credit course $XXX of million

quarter X equaled X.X quarter. first our at This community per nearly community, which spec of total approximately construction. homes up were inventory the Additionally, homes of end the at was from per end, under all

and intend mix we portfolio balance our market of homes both diverse local forward, strategies as conditions price Going on and to communities. depending of our we point of deploy the spec to-be-built

XX.X% net based our equaled generation. Our on ratio cash debt-to-capital outlook for strong flow

We net range XX% expect continue by further in our by reach ratio low to year-end, deleveraging XXXX. followed to the debt-to-capital

an quarter, Directors repurchase increase Lastly, our to announced, million Board the as of our in in XXXX. authorized $XXX end authorization share the previously through second of

of million quarter in expect to shares of current nearly end, at attractive well valuation. deleverage and share of profitable further XXXX. are brought quarter, we our million a and to remaining stock average approximately given continue authorization share At cash repurchases During $XXX to cumulative million With since million or had shareholders opportunistic XXXX repurchase growth, repurchases. excess flow in our $XXX to spent on to outstanding return our the outlook to $XXX strong XX% capital be our our price the business sheet excess via $XXX our positioned continue balance for invest operating we annually, compelling an

back the turn over Sheryl. to I'll Now call

Sheryl Palmer

significant in will by continue I to saying up advantages realize an expect XXXX our wrap journey financial a we the Thank operational that of point to important growth. inflection you, to Dave. and multiyear mark

I'm As achieving second ahead operational on half to of priorities I year, a energized closings and strong focus by year buyers. our the team's record of to look our delivering the our home

set for summarize sales significant months, is margin of by outlook, to quarters managing drive and XX% to cash range balance gross while our all into and margins closings on in controlling disciplined is expected XXXX. realize in a financial further pivot levels. home results, focus these the teens XXXX, our improvement record gross costs stock's expected returns and percent to This production X stage high in Our high our expect meaningful approximately multiple strong We in the our drive with the firmly equity our next current from coming ramping expansion highlighted XXXX. on discounted strong in in followed in a in the home expectation for we XX% accretion XXXX, deleveraging sheet over closings by performance our new results paces expect flow. to To our to

of operational focus have through we sustainable our of strong maximizing cost our strategies as realization selling As execute profitability the a improvement multiple acquisitions our and successfully we plan. and is from business this on synergies management function strategic described,

our We and years. long-running meet believe our evolving the supply lifestyle serving to through limited between growing formations to well buyers demand this portfolio, positioned coming in consumers household addition breadth consumer luxury housing first-time market a of is the and is needs. size new company-specific by In construction supported the opportunity, and mismatch

members want to our achieve partners trade allow and to customers and for us our and commitment unique to thank conditions. effort I and is thankful team I their that today's our goals, It am their will during for their serving all collaboration market endlessly dedication. Lastly, organization

questions. your instructions. please for call the provide our open with Operator, participants to like I'd Now

Operator

Carl first with from BTIG. [Operator comes Our question Reichardt Instructions]

Carl Reichardt

now, guidance your next of next your would into your flow XX% margin gross guide backlog X,XXX, -- the for X,XXX like is So backlog year, year. units Obviously, right

today what of you to selling stores going on So be as as this can embedded flat terms margin price that's Are of costs open your of are similar -- is kind Or in trend? to growth communities your year average next we guide? I year, going basically price XX%? get there can an understand be, prices assumption to next assuming are land you are saying that what in

Sheryl Palmer

as would forward next market that as as But price. our no see we'll in And over the tell some guide. things remarks. X, assumed It's still of I would will months. absolutely look you'll of talked guidance. movement X months, function really we there's be But probably some opportunity prepared there aggressively that price all last think the I few forward not you've no would continue determine prices to seen Carl, expect in at No, levels. the more The I our modest to assumed the to about appreciation pockets you, that a appreciation in move see we

Dave Cone

Carl, embedded because at that That's be cost We're If things a -- down, could said, it's we're price and helps. today. our same from there's perspective that cost of perspective. equal now right up, a looking helps. on the now. right from it's what's everything cost in And being if price what kind Obviously, backlog movement seeing

Carl Reichardt

raised the average Central $XXX,XXX, this some I'm region towards the in degree. order of on that? adult you of a you which that also orders active expand less product was price then excess the a average near is order And there fell mentioned that mix shift Could think, Sheryl, price. also quarter, because sort contributor, was to which assuming for on I

just a on detail little maybe So more that.

Sheryl Palmer

of bit a it's both. think I

adult, volume. when have the we've obviously, you you order with at shift, central strength our XX-plus some lifestyle But our You seen. mix look that buyer, and the active see do

like you If the mix think the look sales in something quarter, at were the XX%. I

we basis higher is lot a So generally, this what up buyer with Carl. few hundred premiums. would be points, that And see

seen think look are in I historically. what communities, their -- premiums as options within we we've prepared in or backlog average. next their remarks, And would the year the year, what the that out company I our lifestyle Xx in my I Xx premiums what see lot are mentioned this are generally Xx

an seeing have all creation. we're adult working and seen acceptance Esplanades great really value team The We operating hold, with the markets. President, of active we've really taking that's our that in is Barron's

So as grow continues a to excited portfolio. portion as about this it set of and our consumer

Operator

comes Bouley next Our question Matthew with Barclays. from

Ashley Kim

Kim first the is on on for next year. question just This Matt for today. gross is My XX% margin Ashley guide

tailwind? on that lumber specifically, lumber leverage Just be is would lower Or embedding a flat?

Dave Cone

last Repeat the part.

Sheryl Palmer

lumber. the embedding isn't It

Dave Cone

no. No,

Sheryl Palmer

not. really It's

Some moderation.

Dave Cone

call now, that market in still flowing above in, we it's have XX% today. it, the where are Right costs trading

I think we're to to QX, in down see peak we're will hopefully in going but lumber It that XXXX, yet. come embedding QX. not there start

Sheryl Palmer

see to quarter the certainly where be kind What backlog, opportunity of that we goes that is of what not visibility beyond we're it's in first we're the the trying seen, do we've and that. and peak but Actually, prices we're really point, to next Dave's expecting year. XXX% lean give early where those showing go the cost to in our certainly through

Dave Cone

we we But feel it at point. more despite got X call bit we'll movements. that to QX a firm can get that months some you've to to, Obviously, see can little market something it, information call is -- you the we and give deliver XX% more up,

Ashley Kim

on whole comment just you that's you're can pace is, what a read on that giving given restriction then picture? fire not demand, obviously, sales seeing in And else telling the the

Sheryl Palmer

Ashley, I a question. missed we read part of the Can what? on give

Ashley Kim

telling Just buyer that given you're pace, isn't whole restriction the the in picture? demand, in seeing sales just what

Sheryl Palmer

Yes, absolutely.

somewhat call very of brush a and in managing Ashley, today, year actually would standards. the to a our in the we're single difficult any frenzied XX% our by momentum. strong across sales market U.S. still XX% to is I But Demand very paint with programs tremendous very healthy historical early communities. probably is it

tell plan we by is marketplace. of in geographies consumer seasonality. everyone tremendous you the summer you despite the we've with as But have groups the certainly, entered fatigued number in the But to say appreciation. You of the seen strategy we're momentum. for and as the a very is little we've travel that lotteries I somewhat it's need levels absorbing [Habos], consumer at of consumer see groups see continue community. caged up to generally pace would summer wouldn't into all and We seen that in dynamics a Demand price some than felt market, obviously look community is I July, forward, what the saw would given quarter months. bit that our We've sales and stronger typical. strong been after has looking the up. seeing we

say I a but consumer, a people, able XX experience. to place you people, -- trades healthier demand. company, XX a sustainable deliver to for the for might you still would environment might lottery, for our customer more have and not might on might be tremendous You as not you good the describe a have certainly have today

Operator

Our comes Research. Truman from Patterson next Wolfe with question

Paul Przybylski

was improvement, is Canvas. William This is you maybe your is actually how shifting margin break and much coming pricing wondering, dynamics much from Przybylski. slice i.e., from Lyon that coming from construction the Paul coming efficient further current is I out a can much bit then and processes, how gross the little synergies? more or on How

Dave Cone

margin the So talking are or guidance? the about quarter you

Paul Przybylski

if you both, could. Actually

Dave Cone

to take But then of hold of maybe guidance was our around emphasis on standard costs -- some which that engineering, at actions That's kind majority to is we That close structure were true impacting more bit simplification, the coming the I'd plus SKUs. looking QX, we year the little to that more big a we'll reduce at that's inflection reduce openings, though, because around homes. time, vast William which taken say also about little various our Lyon cycle that the initially. to the And William from expanding And plans. synergies synergies for us especially new to taking that Lyon mix is value also offering package. some going in helps of really our in obviously, home's were see homes really during on take while deliver Lyon allowed us prepared truly they're thought the set hold, highest QX, weighted sell buying for remarks. a remarks the we've than up And synergies expanding aesthetics, quarter. mentioned and to in component then more was that we're the Paul. design really to in rationalization markets be without the and starting going that, that the spec that as a to we cost puts for floor-plan definitely where then just plan focused William And power of our our concentrated to so our talked of I QX there narrowing pricing of were of the bit high-profit the that more the a that improved floor faster it's point power in community margins. just prepared seeing That on being we able of and able more

start So But when that QX. into that's for seeing definitely, well us full benefit XXXX. up we setting we get

Sheryl Palmer

We've days. margin country, -- In Canvas, pilot look in are these we without backlog deal we Paul, as tremendous said And expect year. in be pickup maybe add your numbers pressure obvious, the to came would just the as But remarks. year it. with Paul. just as trajectory forward. you're I that, a on the saw the peak in And and a that part our markets we is what the point, of we're seeing, And in at into the of early of lumber backlog. to took early like out look contributor Dave. prepared early that when we rolled unfortunately, is our we seeing To great we more we across a overstating

to spec look being price as well our movement deal great we forward. of that the from the some So newest confidence also as lap a sales. That into inventory move gives us able of and as

Dave Cone

we equal. being when And see XXXX you margin accretion dollars. XXXX, end into then All expect around than said, think next beyond there, a in Sheryl little that that that that lot of we're with will as but place of XXXX bit we're on couple it earlier the carry more normally will growth in the leaning want And I we and well to things out further inflection things at impact get the actually for the kind too now year, much community bodes count of And that gross to putting would. don't a we XXXX.

Sheryl Palmer

'XX In 'XX. really and Good strong point.

Paul Przybylski

that? cutting builders impact Are of doing Are could are you timing And the of? if you actually think up little the cutting external ticked we and lot lines, a What guess second along the that? broker quarter. commissions. strong external a of those would there, of demand internal commissions? bit your the sales or with question, so, I And the SG&A what magnitude driver we in out was know be

Dave Cone

in the of this We'll sequentially leaned heavily we From probably bit little tag Lyon a were I we an down year, a on mean, little remember up year-over-year. QX specs. bit. pretty last SG&A, one William team

to So of through. at our little it but more we argue I on were we be closings When the at would the look this bit meet end closings, I guidance able QX, pushed lower range. a

were in would little have there middle, I if bit obviously So we helped. a more the think that

mid full still back come that. lot of just a that to in around timing guidance, it So if year off go haven't is range. our We're of X% Paul, you we

So it timing. really is just

You're going and closings leverage, given stronger through. overall just the QX, obviously, of level in to see some QX coming

Sheryl Palmer

year strong pick on base And actual paying some on we to in the the backlog. piece. across just from have It's U.S. the adjustments again, Once markets a everything then we I'll gone very fee into a program made commissions up, adjusted the we've Paul, came the national with to of on Dave, broker the price.

seen early You've of that traction year. actually that done very was this because all hit little

impacted have so spec percentage of a closings. And it only small would really our

we've a those me, and our are to system. closings broker we And The start virtual, participation so honorable that a lower as virtually other -- got virtual and they hundreds participation, that Paul, fee through excuse completely look come generally of environment you've completely are lower closings to. a would that carry the lower thing mention, get had forward to be deserves an

Dave Cone

the relative of top line, selling expenses. we to really then seeing line. the is leverage the And the are timing which on G&A and And It's impacting that deleverage.

Operator

McCanless Our with Wedbush. next question comes from Jay

Jay McCanless

be on price to just So that deal and the is lots assuming William Morrison correctly, clear, benefit expected from acquired the going more coming were guide, Lyon cost to in legacy less, hearing Taylor land If probably fiscal the the I'm I'm 'XX be it's land? you side. that's

Dave Cone

this You're the is talking about the No, actions... margin guidance?

Jay McCanless

for Yes, 'XX.

Dave Cone

of on we're even expensive operational designed our enhance enhancements. side, is a and be But to our size all them of all going driver. little probably varies sharpening get but things just That's as kind bulk year. cost I much that price, that more bit every help of This the the to just the more it land component overall based through costs action mix, that to the so the taking on but being I went scale. either reflective it, All is of mean, the on things gets they're equal,

that typically a you're and So on -- hopefully year, with price off typical you're better efficiency. setting

Sheryl Palmer

there's or but And a if pickup savings, you driver. the same, think residual, existing. moved the with that be about would would the residual modest been have some as prices obviously, modest I Dave pickup concur I completely the I actually that on up generally in won't But say --

Jay McCanless

Christopher question any second your The had, I single-family to-rent update efforts? Todd and on just

Sheryl Palmer

now, Todd new in development a of has and are have well. VTR advanced in markets to the of is Absolutely. projects operations to strategies, It there's slightly markets, land two recruiting of Arizona. year-end. in a outside under and the start and little is SFR planning melting stages, been been multiple be and somewhat already actually Each most our place. with announced as Jay, we'll very both design at pot Phoenix of but Christopher the to by traction expected our Jay, leases model Florida right from interesting, construction process is in different we're leader market seven Houston we've expanding Phoenix

at the that owned the more LOI active to a XX excited these accepted be certainly we will XX we're Recognizing bit and our by to pretty deals they have about of in for land. time the little some X from markets now, some entitle least deals at use. end complex approximately are Right So year. stage operations through take

see assets, late won't begin until on year. next an to sell likely really impact the You financials we

even the optimize as So we'll much I be be think anything. would best guidance, more as see way with -- the it'll there'll the you'll we optimize, we so think 'XX And price. explore -- 'XX, I modest. rental income think you. about don't In move to get specific Dave, don't

Dave Cone

be our amenity and to revenue other going minimal. will go it said, line, that's And in as Sheryl

the becomes You next this meaningful. notice years, won't much as of it couple But impact really of an year. through move more we

Sheryl Palmer

this Jay, next start Yes, see I year, the you'll to pre-leasing then and be year. actually you'll think really income

Operator

from Alex B. comes Riley. Our question with next Rygiel

Alex Rygiel

one up on And business invested that follow of as going that last to annual that how question have capital to much we builds-to-rent. you to How Quick relates on think basis into forward? date? should there sort it allocation business an about capital into

Dave Cone

it, of done financing help is around probably million, Yes. perspective, to The from gross number. Alex, a number, that of call some which $XXX just XX% return we've that

with that, will a land cash year. forward, we're it or hundred still, million, built And budgets. million but flow of $XXX our in more be off development even few that's going each Going and operating overall to throw

Sheryl Palmer

these be project of projects financed. each will again, individually once And

Dave Cone

Yes.

Alex Rygiel

on incredibly on level this? of visibility Clearly, closings. you your confidence for are guidance And there the then discuss coming your risks to strong and your Can that suggests guidance, where for that? an are and there back fourth And quarter opportunities where sort

Dave Cone

and we're half. day help deliver it's fourth You get the and many the quarter. We We're and is obstacles fourth deliveries. a to X,XXX around guidance, our with big early opportunities daily we're cycle every know But what's construction team, on closing. in what the And X,XXX to for between they in ahead. teams It's it, second construction here the know our discussing still our of quarter ahead. cycle implied the working

though, priority, be to Our going delivering a complete always is home.

shortages haven't Some that heard are is that of biggest think anything material I already there. new you out don't the it's challenges, around the really and

that yet of double and the there. it Some seen points shortages. to trusses couple the to times another lead only name day now. just right end work day right things out come challenge. a to for be biggest We've pain But almost more, of and of it's to see challenge. the up wake Other the continues windows. next up us things, But roof around are bricks, reality We every the now by a kind day, knock

to we've end to year. and push those, to of of the far, going continue overcome to so And been many able the we're

Sheryl Palmer

thing you well the houses deliver year. years, actually would we only the August The look I'd to is, past in into start probably add if at

the But have are ground. on, in constraints everything We supply real. the Dave's spot

are managing day. every teams them Our

quarter. sit COVID big fourth we with some timing -- But So plan have very from to dropping would to issues. there. get there's We a variant this create not we we we more today, impact as here Hopefully, crews what need worsen. know no if conditions today, because that

Dave Cone

would. as materials ordering a than where typically also some lot materials we're we And well. stockpiling sooner it we're And makes sense

Sheryl Palmer

it'll Yes, be for record a company. quarter the

Operator

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

Alan Ratner

new tell to pull steady impressive the I'd of back if little guessing is drill in you've rate really that or of uptick of sustainable. run those run the per getting that's us community like starts about per on is to would current to love been kind you've over curious in success that not I'm rate has per limitations and conditions starting your in So of rethink in some market of of starts I'm of that starts, in past. almost per something the the talked a the strength you place in vast kind given are in a sales community X community sales necessarily terms starts, And kind growth the to month. or on But bit caused quarter target putting you majority on kind in you communities?

Dave Cone

maybe in starts, hit side. I'll jump the sales Yes. on will Sheryl the

we Alan, order starts So the with to pace. align our continue

bit backlog we Not that large significant had and a we had challenges probably had and last started. year to mention, a in QX. were they from we get weather starts, QX to Our inflated,

strong saw of most and QX with that the little a was pace catch-up, that we of So bit QX. a coupled

into a of would are especially this there about I what As to Sheryl high probably per to And the start starts normalize us took in now. per ground us, cadence that's X.X community. just for that starts supply the us to should This X it's pace right community. out get everything chain is somewhere us for the given mentioned, that quarter argue for big range deliver challenges year. healthier for a the probably help

Sheryl Palmer

on was just we're So of as try it a I pace, high slowing wouldn't to lot to Dave's unique read market that We're going levels. sustainable take Xs. to it, a QX down. the on a normal which, Alan, to probably get point, different

would As far expect to deploy traditional more different as some the I strategies back forward, by we'll sales front will community, looking Alan. continue communities to releases. go

continue still will be managed. Some to

lot communities still customer the inventory to ahead specs existing folks releasing are important held really backlog holding not of a said get keep glut being the have that, to. until than further you A that other of longer back any market sort -- builders some Having there's mentioned others in wanting they start. of we're and We into of construction in potentially at We conditions have the understand the today. to get that's cycle. any and of strategy

certainly plays that into it. So

the managing. So there's good. be things teams momentum the and strength But quite a the to are continues number of

Alan Ratner

can now. right that's bit your a Taylor little where maybe was clarity And $XXX,XXX above on of here. hoping by you kind little price know impacted Second order quarter. know maybe price a in you the of we price mix mentioned, it's question, almost provide But around think was moving been point delivery bit I this I I going, just tough, but is should about that your

price growth So you your price where price see one community where next appreciation over coming count do as kind pike, and the that and of look year, you one year of see, -- average half some normalizes do assuming through the anticipate? the you going as you at

Sheryl Palmer

it instinct coming I over is, communities see As just year back in next think price to see I settle 'XX, new you're communities as look that we going are certainly the bit of the mix at My a mentioned, online. up XXXX. the given you'll

been a the times peak, of I premiums, mentioned, lot provides 'XX seeing I we're any I lot a that we've in you the to to -- I place been, on Alan. movement of environment want because we've that versus price the where So think see we've what all base think premiums buyers steered really probably to any couple backwards price. base think, don't competitive all of

of of some deal appreciation, feeding what a you certainly selling great that's in the saw So the in QX. price price

out, that it we're in that taking would levels earlier we not the pricing expect level in the it taking year. at We're price again, that communities. overall took some As I just -- once

Dave Cone

rate, mix. mean ASP On our of from not largely I lot an it's order overall a perspective,

a get we of factor I as you little into might see well. more think mix a play bit XXXX,

Sheryl Palmer

that going into price. I'm think does thing play to mention Alan, one other I

center. we As behavior backlog, up. square we still look our look are going and consumers' more at at footages the design They're spending in the today,

it's important more and house we to that qualify says premiums. affordable just lot not site meets a on continue buying lot about consumer. on actually into home that They're When look what's them. little at we're inventory to I try reducing which their bigger serve to think a a square that their So to needs, bit our a putting spec we're footage to ability market,

kind bit. why of you'll get back see a price, that's I settle blurring in our of I it overall So and think mix you'll this think

Operator

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

Unidentified Analyst

kind to for half we at we saw absorptions to month X- of outlook X.X selling down return When normal see X-month Clearly, actually year. XQ. is back more per This the your of for Mike. the the [Cloud] to from back step Chris want on a I can go level? pace sizable back to just

into think mean, structural Or you going quarter? July, So improvement selling seeing is to on do in see you this a pace? do in next what I you're of based continue more your

Sheryl Palmer

at -- July let with consistent be I X. to term. realistic don't to back When is done if the we'll we low think but think of look not we becomes historical think our mid-Xs at the me I mid-Xs, paces yet, the But that I in do go more long that to low I X there. -- will July certainly, If I look expect July, relatively month look at start QX. to more something

the see managed think paces that get there. you'll I kind mostly but talking some seasonality in think because about, of of we're half, you'll I back normalization, the So also in

Dave Cone

with And if -- and at an it then you year up. it of pandemic the what look where XXXX, bit slow, picked was anomaly a

to company more different remember more Coast aspects well, XXXX, have some back pace. and higher higher typically as with we're which affordable, compare have also West especially you a the you a acquisitions, paces, to If geared

I just there seeing the you're So business. think structural also shift the of

Unidentified Analyst

something breadth in you your the I at out that And hedging there was of or of the follow-up, for instead mean, of Is seeing placing if guys the for their whether gave wondering XX you're multiple that all bids are at seeing all and kind dynamic bids odds across system the buyers Is a communities. of prior. or lottery that contemplating hearing outlook? in XX of I kind there. of my you there you seeing have of example demand be tracking if overestimation in any way current example, out a could

Sheryl Palmer

participating place actually amount in quarter, decent first managing a secure being fear But we're strong of frenzied standards. to consumer been XX% to XX% normalized the programs early customers. the today's I has I experience in in mentioned, lotteries. for in would difficult There's sales by able into in would in I a our think a -- much have you, I As the community and we better saw, a quarter is any very quite second I our multiple year, tell provide better -- It's been the moving environment. we're to that They it the from about the and the of home. for actually say, pace demand

going. better There the of pace construction to provide amount are feed So units. we're mean I to like like where the that as think tremendous this because to what experience is match a so our demand continues cycle country. we a we I undersupplied business still can consumer. is is of fact managing the I our I millions a

we've think runway got ahead. I some So

Operator

question comes from Deepa Fargo. with next Raghavan Wells Our

Deepa Raghavan

say question traffic lack demand would maybe early slower, is there have Would the now et for is that and got Sheryl, strong not in buyer as the whatever Or houses, been still this and it's availability some of versus fatigue. say cetera. in not on that demand the you necessarily impacts that of a I'm you to gated year? There's reason asked. marginal that affordable tag as going demand

the So think how cetera, bids, how in would backdrop of we you the then still about get, but this strong. number et is you do -- slowdown that pretty

more a it or is demand is like something So versus happening? there dynamic more traffic

Sheryl Palmer

holding very think ourselves that's I As do just understand And have said, know We remains think we're we is strong. Deepa, the I community I against. consider sustainable it if frenzied per environment, not environment. to actually up Traffic we up. a what

I over XX%. around year think year somewhere

really Our are our conversion look at rates I strong. When web up. are all indicators for our divisions, traffic

me are tremendously, Our when communities all which ago. now And a our considering are up up. open that is they web weren't year surprises web and traffic conversions really

things have you we all So I think talked about. the

I think you fatigue. bit do have of a little

bit a little I have do you think seasonality. of

right people weeks have X at we back, And -- then see pull so they're it. where we back

able credit is XX%, The put affordability, to more incomes is down strength it, modestly at just buyer's and this about up. and When are been we've over think sequential is higher you or ratios actually if a a up better, I try I $XXX,XXX just using have their because house buyer today our a the look overall that's ago, that a it's year strong is their to Deepa, strong generic in are profile numbers seen payment So good way normalization. posted, take that's buyers. think their the I

the monthly is overall price expense So relatively movement. so unchanged, their absorb to able they're

we look at to even the these they're money and when houses, what has income, putting bigger would use it. them today's income spread increases. And really a backlog, buyer are year had they fact, household then a I buying between total ago. I more income And they said, qualify into absorbing the from as qualifying that be greater In their our

different. is buyer the think The FHA good buyer I slightly shape. So be might in pretty

than lift XXX same of ratios room. ago are The they basis year haven't tighter, We the with place income. little seen a a still points they were but in in a might be better

But caution month-to-month So I movement think think obviously, I thing think of kind to would because going peak market. demand from last I not using have point see year's strong, a I and And very quarter-to-quarter. one to to paces. we us high you're

I that to a we'll think I think normal, we our as X.X%. seen, last about that's has try our company the June I year, ever was qualify think, ourselves. disappoint If peak

Deepa Raghavan

margin. on gross is follow-up My

gross raised pricing current guide You benefits XX.X%, play that -- just the the XX% raise into et action cetera. actually this already more the raise year, on Or stronger et margins XXXX the actions that is cetera? end, cost much of towards Does incorporate XXXX? that from upper some

Dave Cone

more of Deepa, a we than that the enhancements it's in QX little making, there. bit I thought. innings early it's would yes, in as we're it's on and I describe faster, little Relative as bit and the side coming to it's both. through a mean, kind cost in meaningful QX. it coming our expectations,

prices a playing factor, cost is it. the which to news ahead that's is great have But of So favorable of also also the thing. pricing very staying a been date,

Deepa Raghavan

the But the what or next year, is you rate you're of of giving all cost run that of is for that run would rate full say your XX% that that? actions all

Dave Cone

like Well, at finishing a color months we next in you synergies more the up. from the kind up. we'll will But this We'll benefit said, basis, there's six out, on sometime But of we're able firm of QX. time, give we I be us But rate that an things QX also hold enhancements really to over said, XXXX. we be we're around some as to Deepa, I taking year. more like will think firm run couple give that 'XX going additional that make in that annualized in quarters

Sheryl Palmer

noise, typically that But after this always not the pivot price, pretty have based or appreciation months we a of true at stake point give time And the forward acquisition an X believe we provided ground on of because it's to guidance. years. with a now for would type this integration real But we the But Deepa, business. said without nearly that stock a believe trajectory and quarter that longer onetime costs period, misunderstanding early. of there's better just haven't an we've approaching But that it pandemic acquisition. just time in everything. it's really in XX we're how the probably the put distorted is feels little we're we visibility. leaning the give everyone I

in So coming continue as we update. get the quarters, to greater visibility we'll

Operator

comes Our next Janney. Tyler with question Batory from

Tyler Batory

for Just me. one question multipart

were interested land XXXX. really in beyond? land what little their perhaps There to are also, step underwriting In the different your things? into using the And really a in the Are are longer now comfortable metrics, towards of XXXX profiles how land hurdles the more up there of financing the price up position. than substantial number generally mean ramp you're seeing a some right in are a you I are you business are on of the Would new expect or next trying that terms to year and in you terms builders market their broadly vehicles. bit spending that the others ramp looking before? on are then are land And of what position. return where with side then you

Dave Cone

So financing, on the to land relative Tyler. up I'll question hurdle pick your

incorporate of we're a a more around place. that the we're return. offset that obviously, a We But sensitivities about the minute. to same ASPs drag lot is hurdles us in are better enhance been various little understand those thus is No, overall to today a talk going it's way. Sure, enhancing than themselves, trade-off the little have That's Obviously, different, help actually with pricing return we'll But costs underwriting that. company. enhancements gross that we've the overall the the our talking unique a of all So here a for there. return are are what lot changed? We There land operational putting different. they're get the comes to demand. a The of project, bit feel to still in vehicles margin bit a deal. financing designed good in drag a the

is lots years. and our the balance next enhance increase lighten option really this the really to over many a way So returns sheet,

Sheryl Palmer

competitive So in mentioned. we've land One place, the are vehicle kind able as before. that seen anything as there's like will banking and rates two vehicles, we've put we of been ever to as act a honestly,

and one other by a be kind a that underwritten like parties. more of It our individually both be is Each for JV, will larger will The deal acts assets. venture. of

something this tool first the allow we'll importantly available XX kind and mitigating on will additional when growth vehicles capitalize capital will cycle. us, I It closing. the expect don't $XXX $XXX been makes -- putting of think in between for So opportunities at for us, risk million be consider while rate of sense. In monthly spend. and point actually we've these of place, first be in days get L&D us the put to this a we a to million waiting but allocation that run will it to to

of what Dave's to trajectory return the delighted, this business. kind will point, on of the do we're So long-term

market, retain As to cost I far are I they maybe I closed competition think in seeing that really We're adding and with both getting as of some higher kind cadence underwriting today, terms. hedging would things any and price not you The time continue sensitivities diligence, tell movement it's going as quickly you maybe to we cost things due our land are earlier housing retain I that proper would approval the on expectation pricing pace. have recall. tell that to fierce the without closing seeing very in standards. entitlement. out on -- and our about but in regimens, appreciation the and need we're as seeing there the I'm sellers are

good the but very putting actually deals tight. So the always some on it's teams And it's tight, are books.

pipeline So in it's some today, quality. when the I business, of actually across look high at the the stuff

Operator

question Research. with Barrón from comes next Housing Alex Our

Alex Barrón

quarter have guys it amount quarter? measured if last think buyers. curious was this you the last discussed versus of you quarter, I out-of-state I what increased was

Sheryl Palmer

you in and surge we're of amount really that with comments, the tremendous offline detail Arizona, a -- get out-of-state pretty both meaningful. But And have can of business, to specifics. seeing Florida we've really happy business seen might we have trajectory strong I'm seen schedule. with buyers real shoppers of buyers you have said tremendous Texas, of I get that to Colorado, we kind in in in the -- we've a if I actually both to the and prepared Nevada. in we Alex, grab when strong our traction. back surge to I a We of California Carolinas then our see northeast because continued as my into is maybe I mean on and even have

Alex Barrón

do what a this is, feel about or point, curious built? homes or of the was at side greater you shortage things material concern I is thing other to the The get labor

Dave Cone

you one other. can't without Yes, have the

Sheryl Palmer

depends That market. on the

Dave Cone

on the Yes. are Alex. market. I It the on construction way, It depends depends say they where would cycle. in it this

accustomed the as more I shortage think an to dealing industry. we're with labor

that's do That's a think level don't I they but for been that the go deal still hand-in-hand. of it's change and typically something somewhat shortage, with, us. material we new

Sheryl Palmer

I'd almost materials market, shortage. being you if to I you'd brought the say more the like Alex, industry of the it we a to that were labor probably that's don't this, supply meet needed know Dave, have agree. had across If

Dave Cone

Yes, true.

Sheryl Palmer

just with demand issue logistics, able got some the the of of because Because we not this they're shortfalls. you've meet to trade-by-trade, And commodities.

ports with drivers. You've containers to creating that from of the the got points, a that's pain some issue logistics, tremendous everything trucking and at are and

So there's with and keep what they're it, labor the the difficult to is up lot of a side making are of things trying very material that getting.

Operator

further no any Please questions. proceed are There with closing remarks.

Sheryl Palmer

and to to call much day, great look joining very Have forward today. next a quarter. us you for you for Thank talking our QX

Operator

conference. conclude does This the

may Everyone, now day. disconnect. have great You a

Taylor Morrison Home (TMHC) 31 Jul 212021 Q2 Earnings call transcript