Taylor Morrison Home Corporation (NYSE: TMHC) today reported second quarter net income of $46 million and earnings per share of $0.37, beating estimates by three cents a share.
Revenue was up 21.9% to $854.3 million from the comparable quarter last year as home closings jumped to 1,816 this quarter from 1,480 in last year's quarter. Community counts was up 29% to 315. Net sales orders increased 8% from the prior year quarter to 2,025. Backlog of homes under contract at the end of the quarter was 3,642 units, with a sales value of $1.8 billion.
"We stand firm in our belief that the home building industry is in the midst of a sustained and measured recovery, and that the sector – and more notably Taylor Morrison – is well positioned for continued growth and efficiency through the ongoing maturation of the cycle," said Sheryl Palmer, President and CEO.
Home building gross margin, including capitalized interest, was 18.1% compared to 18.9% in the second quarter of last year. Although the rate was slightly better than we expected, the year-over-year decline was driven by mix and higher land residuals, partially offset by lower capitalized interest, which declined to 2.7% of home closings revenue from 3.0%. Construction costs were neutral to the overall margin rate.
Mortgage operations contributed gross profit of $5.3 million on revenue of $13.5 million. GAAP net income from continuing operations grew 138% from the same quarter last year to $45 million. When adjusted for a $33 million loss on extinguishment of debt in the second quarter of 2015, net income grew 14% for the second quarter of 2016.
SG&A as a percentage of home building revenue was 11% for the quarter. "We've experienced a significant transformation and tremendous growth, both organically and through expansion into new markets, over the last 12 months," stated Ms. Palmer. "As we absorb this growth, we have made some necessary investments to prepare the company for the future. Core to all of this is people, processes and tools. We believe this will position us for the long-term, enabling us to drive consistent further growth at attractive profitability levels."
The company ended the quarter with $132 million in cash. Net home building debt to capitalization ratio was 42.4%, which the company said represents the expected peak level for the year.
Home building inventories were $3.2 billion at the end of the quarter with 4,607 homes in inventory, compared to 4,206 homes at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 2,810 sold units, 457 model homes and 1,340 inventory units, of which 283 were finished. The company continues to maintain four to five inventory units per community at various stages of construction. In an effort to increase the efficiency of the balance sheet, the Company has targeted finished inventory at about 1.0 per community, down from the historical average of 1.0 to 1.5 per community. At the end of the quarter, finished inventory units were 0.9 per community compared to 1.2 per community in the same quarter last year. The company owned or controlled approximately 43,000 lots at June 30, 2016.