Taylor Morrison Home Corporation (NYSE: TMHC) on Wednesday reported net income of $51 million, or diluted earnings per share of $0.46, for its first quarter ended March 31. The gain compares to a net of $0.41 per share in the comparable quarter last year. Wall Street was looking for a gain of $0.34.
Among the highlights:
- Net sales orders were 2,615, a 7% increase over the prior year quarter
- Home closings were 1,938, a 25% increase over the prior year quarter
- Total revenue was $925 million, a 23% increase over the prior year quarter
- GAAP home closings gross margin was 18.2%
- SG&A as a percent of home closings revenue was 11.5%, compared to 11.9% during Q1 2018
For the first quarter, net sales orders were 2,615, with an average community count of 372. The company ended the quarter with 4,835 units in backlog, a year-over-year increase of 10%, with a sales value of almost $2.4 billion.
SG&A as a percentage of home building revenue came in at 11.5%, up 40 basis points compared to first quarter 2018.
Home building inventories were $4.1 billion at the end of the quarter, including 6,153 homes in inventory, compared to 5,053 homes in inventory at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 3,544 sold units, 492 model homes and 2,117 inventory units, of which 561 were finished.
The company finished the quarter with $172 million in cash and a net home building debt to capitalization ratio of 44.3%. As of March 31, 2019, Taylor Morrison owned or controlled approximately 55,000 lots, representing 5.4 years of supply based on a trailing twelve months of closings.
Share repurchase activity during first quarter 2019 included 4.3 million shares acquired for about $77 million, or an average repurchase price of $17.93. Second quarter repurchases through April 26 amounted to 1.4 million shares for just under $27 million, or an average repurchase price of $18.63. As of that date, TMHC had approximately $49 million remaining on the current $100 million share repurchase authorization.
"We have been focused on smart growth for some time now as shown by our four acquisitions in the past four years, allowing us to gain scale in a meaningful way," said Sheryl Palmer, chairman and CEO of Taylor Morrison. "As a result of the teams' hard work, we set all-time first quarter highs for the company in both sales and closings."
"We believe the home building market remains strong given a solid, growing economy, 30-year mortgage rates near four percent, stock market indexes near all-time highs and under-built markets with historically low inventory levels," said Palmer. "We continue to see strength in many segments of our markets including our 55-plus communities, which saw nice sales momentum during the quarter."
"The addition of AV Homes is allowing us to drive top-line leverage," said Dave Cone, EVP and CFO. "Our earnings before income taxes as a percent of total revenue was 7.4%, or 7.8% when adjusted for AV transaction expenses during the quarter."
For the second quarter and full year 2019, the company's guidance included:
- Average active community count is expected to be flat to slightly down sequentially
- Home closings are expected to be between 2,225 and 2,425
- GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-to-high 17 percent range
- Effective tax rate is expected to be about 25 percent
- Diluted share count is expected to be about 108 million
Full Year 2019:
- Average active community count is expected to be between 365 and 375
- Monthly absorption pace is expected to be consistent with 2018 performance
- Home closings are expected to be between 9,500 and 10,000
- GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-to-high 17 percent range
- SG&A as a percentage of home closings revenue is expected to be in the low-to-mid 10 percent range
- Income from unconsolidated joint ventures is expected to be between $11 million to $13 million
- Land and development spend is expected to be approximately $1.2 billion
- Effective tax rate is expected to be about 25 percent
- Diluted share count is expected to be about 108 million
