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Employees say:"The company's strong commitment to building not just homes, but thriving communities, is unique. There's a deep sense of purpose in knowing that our work has a lasting impact on families and neighborhoods. The culture here supports innovation, collaboration, and continuous learning, especially in cross-functional roles like mine, where land development, HOA management, and resident experience intersect. Leaders truly empower employees to lead with integrity and heart, which makes it both fulfilling and inspiring to be part of the team."

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F500-2021-452-Taylor Morrison Home

Taylor Morrison builds mid-to-upscale, first-time, and mid-market homes in 10 U.S. states. It makes its Fortune 500 debut this year.

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Founded in 1936, Taylor Morrison Home Corporation is a land developer and homebuilder that designs, builds, and sells single-family and multifamily detached and attached homes. It also develops various types of planned communities. Under the Urban Form brand name, it develops and constructs multiuse properties that include commercial space, as well as multifamily properties. Under the Yardly brand, it operates a build-to-rent homebuilding business. Other brands it holds include Darling Homes Collection by Taylor Morrison and Esplanade.

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Taylor Morrison Home (TMHC): Company Profile, Stock Price, News, Rankings

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Taylor Morrison Home

taylor morrison home

Ladies and gentlemen, the Q1 twenty twenty five Taylor Morrison Home Corp. Earnings Webcast will begin shortly with your host, Mackenzie Aron. We appreciate your patience as we prepare your session today. During the call, we encourage participants to rate any questions they may have. Good morning, and welcome to Taylor Morrison's First Quarter twenty twenty five Earnings Conference Call.

Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session. Any instructions will be given at that time. As a reminder, this call is being recorded. I'd now like to introduce Mackenzie Aron, Vice President of Investor Relations.

Thank you, and good morning, everyone. We appreciate you joining us today. Before we begin, let me remind you that this call, including the question and answer session, will include forward looking statements. These statements are subject to the Safe Harbor statement for forward looking information that you can review in our earnings release on the Investor Relations portion of our website at hannonmorrisone.com. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, those factors identified in the release and in our filings with the SEC, and we do not undertake any obligation to update our forward looking statements. In addition, we will refer to certain non GAAP financial measures on the call, which are reconciled to GAAP figures in the release. Now I will turn the call over to our Chairman and Chief Executive Officer, Cheryl Palmer.

Thank you, Mackenzie, and good morning, everyone. Joining me is Kirk Van Hefty, our chief financial officer and Eric Huser, our chief corporate operations officer. To begin, I would like to recognize our team's exceptional performance during the first three months of the year. Among the highlights, we delivered 3,048 homes at an average price of 600,000, producing 1,800,000,000.0 at home closings revenue, up 12% year over year, with an adjusted home closings gross margin of 24.8%, up 80 basis points year over year. Combined with 70 basis points of SG and A leverage, our adjusted earnings per diluted share increased 2516% to approximately $58.

Once again, each of our operational metrics met or exceeded our prior guidance. These strong top and bottom line results reflect the benefits of our diversified consumer and product strategy, especially in volatile market environment. This diversification is a valuable differentiator that we believe contributes to volume and margin resiliency. From a sales perspective, the slow start in January gave way to stabilization in February and modest growth in March, following the historic pattern, albeit with slightly less velocity than we would have otherwise anticipated during the early spring selling season. In total, our monthly absorption pace increased to 3.3 per community from 2.6 in the fourth quarter, but was down from the near record of 3.7 we achieved a year ago.

As I noted on our last earnings call, we experienced exceptional sales trends in the first quarter of twenty twenty four driven by a decline in interest rates that helped unleash the demand. Alternatively, this first quarter, interest rates moved higher alongside macroeconomic and political uncertainty related to tariffs and immigration. More recently, the significant volatility in the stock market and additional policy related changes have impacted buyer's sense of urgency, causing some shoppers to move to the sidelines as we have seen before during periods of uncertainty. Despite these headwinds, it's worth highlighting that our first quarter's pace was still solidly ahead of our pre COVID historic average of 2.6 from 2013 to 2019, reflecting our strategic shift into higher pacing, larger community that is helping support our long term ROE target. It's also worth highlighting that our sales success was in part due to strong year over year improvement in conversion of online home reservation, another driver of improved efficiency.

Now appreciating the macro backdrop, our first quarter performance highlights several key drivers of our success that I believe are unique to Erin Morrison. First, even in the face of rising incentives across our industry, our diversified portfolio is relatively insulated to broader net pricing pressure due to the strength of our fire and appeal of our quality locations in desirable communities and product offerings. By Consumer Group, our first quarter orders consisted of 32% entry level, 47% move up, and 21% resort lifestyle. On a year over year basis, our resort lifestyle segment was the only to post growth with a 3% increase in net orders aided by strength in Florida, while our move up sales were down just 2% and entry level sales declined steeply down 21%. Secondly, our emphasis on personalized finance incentives, including proprietary forward commitment structures, allows us to be tactical in our use of such tools to help our consumers with their home purchase.

42% of our first quarter closings used a forward commitment, just over half of which were first time home buyers. By using these and other incentive programs effectively, incentives on new orders increased only 20 basis points sequentially during the quarter. As we have discussed in detail, we believe our diverse consumer segmentation is critically important given varying demand sensitivity and financial profiles among different buyer groups that contribute to healthier, more resilient growth opportunities and pricing over time. To that point, we have been closely monitoring our proprietary shopper survey data for any insights into the consumer mindset of late. This information is always an important input into our marketing and incentive offers as we look to best address consumer needs.

Unsurprisingly, home prices and interest rates have been the most common theme cited by shoppers in their home buying decision. However, parsing the data by generations reveals important differences. These responses are more common for Gen z and millennial consumers than for Gen x and boomers who are instead more focused on finding their next home, floor plan, and community location as well as selling their existing home. Interestingly, across all age groups, uncertainty around tariffs was cited equally, but not as a significant factor. This data gives us confidence that demand, particularly in our second move up and resort lifestyle, will likely recover quickly as consumers regain greater clarity on the macro outlook.

And lastly, because of the expertise of our local teams, we are nimble in balancing case and price at the community level as we make daily operating decisions designed to reach our targeted returns. Given our diversification and emphasis on core locations, there is not a singular approach to our pay versus price strategy, but rather an ongoing community specific process that considers each asset's unique competitive dynamics, sales momentum, and other market influences. We believe that this community by community approach is even more critical in the current environment because we are seeing significant urgency in the performance of core versus noncore locations. As Eric will elaborate, total inventory of both existing and new homes has risen sharply across the country with the vast majority of this located in noncore submarket. It is in these markets which primarily serve entry level consumers with spec offerings where discounting and incentives are the greatest.

Alternatively, prime poor communities, particularly with two people products, are generally faring better with manageable incentives and solid pricing. With this in mind, it's worth highlighting that 58% of our first quarter closings were spec homes, including a record 27% that were sold and closed each quarter, well ahead of the 21 to 24% share in the prior February. While our teams have been effective in selling and closing spec homes, finished inventory at quarter end was elevated compared to our targeted levels at 2.4 homes per community following the slower start to the spring. In response, we moderated our first quarter starts pace by 6% year over year and will remain highly selective in new starts moving forward. Additionally, we will look to move through finished specs for the remainder of the selling season to return to more normalized inventory levels resulting in a higher anticipated spend penetration in the second quarter.

As a result, we expect incentives to rise more meaningfully in the second quarter. Given the lower margin and price associated with specs as compared to two deal homes, we expect moderation in our home closings gross margin to around 23% and in our average closing price to around $585,000 in the second quarter with approximately 3,200 deliveries. For the remainder of the year, we are assuming expenses remain at current elevated levels, although market conditions are highly fluid and dependent on mortgage rates and consumer confidence. As a result, we now expect to deliver between 13,000 to 13,500 homes this year at a home closing gross margin around 23%. Alongside this revised volume forecast, we have reduced our expected land investment this year to approximately $2,400,000,000 from 2,600,000,000.0 previously and are ensuring that new land underwriting decisions are sensitized to a wide range of pricing and pay scenarios.

At the same time, we now expect to repurchase approximately $350,000,000 of our shares outstanding this year, the high end of our prior target. While the current environment has made it challenging to provide near term guidance with strong conviction, we remain confident in our long term trajectory on our path to 20,000 closings by 2028. The path will not be a straight line as we navigate the market with twenty twenty five now expected to represent the speed on our path there. However, we believe our disciplined underwriting and attractive product position is strongly supported by business capable of generating low to mid 20% from closing gross margin and high teen returns on equity over time. Looking further out, we continue to believe the market overall remains undersupply and demographic supportive of the strong need for new construction.

As you heard at our Investor Day in March, we have transformed and solidified Taylor Morrison's operational capabilities through strategic rationalization and optimization of our products, community footprint, and customer segmentation. By leveraging digital sales tool and personalized finance incentives, we are driving efficiencies throughout our business from lead generation, sales conversion, and revenue opportunity. Backed by our industry leading innovation and customer experience, we are confident that we are well positioned for outsized growth in the years ahead. In aspiring to reach 20,000 closings, we will prioritize bottom line earnings and returns for our shareholders while always maintaining the health of our balance sheet. We are not interested in growth for growth's sake.

As our strategy has proven over the last decade plus, we seek to maximize long term return potential by thoughtfully balancing both pace and price through a uniquely diversified portfolio that is well positioned to withstand housing cyclicality. With that, let me now turn the call to Eric.

Thanks, Cheryl, and good morning. Beginning with our land portfolio, our owned and controlled lot inventory was 86,266 home building lots at quarter end. Based on trailing twelve month closings, this represented six point five years of supply, of which only two point seven years was owned. Of these total lots, 59% were controlled via options and off balance sheet structures, up from 53% a year ago to a new company high as we continue making progress towards our goal of controlling at least 65% of lots. The importance of being able to self develop our communities in capital efficient ways cannot be understated, and our recent survey has suggested that over 80% of our shoppers value the community and amenity options at least as much as the actual home, reinforcing our strength as a community developer.

As Cheryl noted, we now expect our homebuilding land investment this year to be around $2,400,000,000 down from our prior expectation of approximately $2,600,000,000 driven by prudence along with the reduction in anticipated full year closings. Of course, our ultimate cash investment will be dependent on market opportunities as we maintain our disciplined underwriting guardrails. As a reminder, all previously approved transactions as well as future phases of development are re reviewed by our investment committee for final alignment or any necessary adjustments before closing. From a community count perspective, we forecast an ending outlet count of around three forty five in the second quarter and at least 355 by the end of the year. As we have discussed previously, our average underwritten outlet size and sales pace expectations have evolved over time.

In recent years, both metrics have increased, allowing us to efficiently expand our business on a smaller community count, all in SQL. As I have shared in recent quarters, we are carefully tracking rising inventory of both resale and new home supply, which has been more pronounced in Florida and Texas. We continue to find that the majority of the supply would not be considered directly competitive to our new home communities. For example, specific to new home inventory in Texas, we have found that the submarkets in which we operate have an average month of supply that is 19% below that of our other submarkets within the respective MSA, again highlighting the benefits for our core focus. To reinforce that our emphasis on quality locations resonates with our consumers, we recently surveyed our shoppers whether they considered their Taylor Morrison community of interest core, which the overwhelming majority of respondents affirmed.

Somewhat related, over half of the shoppers also confirmed that they were aware of the home insurance benefits associated with new construction, including superior availability and cost implications. Taken together, both of these factors helped partially insulate us from some of the headwinds currently facing our industry. We will continue to leverage our internal muscle of being able to decipher market data and to deeply engage with our shoppers and buyers in understanding their concerns, needs and wants as the cycle evolves. With that, I will turn the call to Curt.

Thanks, Eric, and good morning, everyone. For the first quarter, reported net income was $213,000,000 or $2.07 per diluted share. After excluding an impairment charge, our adjusted net income was $225,000,000 or $2.18 per diluted share. This was up 25% from adjusted earnings per share of $1.75 in the first quarter of twenty twenty four, driven by higher revenue due to increased closing volume, a higher adjusted home closings gross margin, healthy SG and A leverage and a lower diluted share count. Our closings volume increased 12% year over year to 3,048 homes.

The average closing price of these deliveries was roughly flat from a year ago at $600,000 This produced home closings revenue of $1,800,000,000 up 12%. From a production standpoint, we reduced our start pace by 6% to 3.3 per community from 3.5 a year ago, equating to total starts of 3,382 in the first quarter. This moderation is consistent with our strategy of aligning new starts with sales and carefully managing our inventory to achieve targeted levels. At quarter end, we had 8,032 homes under production, of which 3,482 were specs, including eight forty finished homes or 2.4 per community. During the quarter, our cycle times continued to improve and were down approximately twenty five days from the first quarter of twenty twenty four and more than one hundred and twenty days since the peak we experienced in the first quarter of twenty twenty three.

The ongoing improvement in cycle times allows us to start and close a higher number of homes during the year, improving our ability to flex our growth potential as market conditions evolve. As Cheryl noted, we now expect to deliver between 13,000 to 13,500 homes this year, down from our prior guidance of 13,500 to 14,000 homes. This includes approximately 3,200 homes in the second quarter. Given a higher anticipated spec penetration in the coming months as we sell through finished inventory, we expect the average closing price to moderate sequentially to approximately $585,000 in the second quarter. However, for the full year, we continue to anticipate the average closing price to be in the range of $590,000 to $600,000 Our home closings gross margin was 24% on a reported basis and 24.8% adjusted for a $15,000,000 impairment charge.

This compared to an adjusted home closings gross margin of 24.9% in the prior quarter and 24% a year ago. As we look into the second quarter, we anticipate our home closings gross margin to moderate to approximately 23%. This is reflective of a higher mix of spec homes, which generate lower margins than to be built homes in part due to higher competitive pressures. We're also expecting incentives to trend higher as they did throughout the first quarter as market dynamics evolve. Recognizing there are more uncertainties than is typical as we look out to the remainder of the year, we currently expect our home closings gross margin to be around 23% this year, the low end of our prior guidance range.

This assumes land cost inflation of approximately 7%, low single digit stick and brick cost inflation and a continuation of challenged market conditions. Taking a step back, we are pleased that this year's home closings gross margin outlook remains within our long term target of the low to mid-twenty percent range despite the significant macro headwinds and competitive pressures at play. We continue to believe that our diversified consumer segmentation and mix of spec in to be built homes enhances our long term margin resiliency. Now to sales. We generated 3,374 net orders, which was down 8% from last year's exceptionally strong first quarter.

Our monthly absorption pace was 3.3 per community, down from 3.7 a year ago, while our ending outlet count was up 4% to three forty four communities. Cancellations equaled 11% of gross orders. This was consistent with long term norms as we continue to benefit from our diligent prequalification requirements and average backlog customer deposits of approximately $48,000 per home. SG and A as a percentage of home closings revenue was 9.7%, down 70 basis points from a year ago. For the year, we continue to expect our SG and A ratio to improve to the mid 9% range from 9.9% in 2024.

Financial services revenue was $51,000,000 with a gross margin of 44.7% as compared to $47,000,000 and 46.5% in the first quarter of twenty twenty four. Our financial services team maintained a strong capture rate of 89%, up from 87% a year ago. During the quarter, buyers financed by Taylor Morrison Home Funding had an average credit score of 751, down payment of 22 and household income of $187,000 Turning now to our balance sheet. We ended the quarter with liquidity of approximately $1,300,000,000 This included $378,000,000 of unrestricted cash and $934,000,000 of available capacity on a revolving credit facility, which was undrawn outside normal course letters of credit. Our net homebuilding debt to capitalization ratio was within targeted ranges at 20.5% at quarter end and our next senior note maturity is not until 2027.

During the quarter, we repurchased 2,200,000.0 shares of our common stock outstanding for $135,000,000 At quarter end, our remaining repurchase authorization was $775,000,000 Having repurchased a total of approximately $1,900,000,000 of our shares outstanding since 2015, we expect to continue utilizing our healthy cash generation to repurchase our shares with programmatic and opportunistic strategies. For 2025, we are now targeting total share repurchases to be around the high end of our prior guide range at approximately $350,000,000 Inclusive of this target, we now expect our diluted shares outstanding to average approximately $101,000,000 for the full year, including 102,000,000 in the second quarter. Now I will turn the call back over to Cheryl.

Thank you, Kurt. As we look ahead, there are more macro related uncertainties facing the business, and I can recall at almost any point in my career outside of the early days of the COVID pandemic. Consumer confidence is the most critical factor on monitoring as it will be key in determining how sales and pricing hold up for the remainder of the spring selling season. I expect we will continue to see many home shoppers taking a wait and see approach to their purchasing decisions until there is greater clarity on the economic outlook. Thankfully, I also believe with confidence that Taylor Morrison has never been in a stronger place organizationally and financially to weather any potential market volatility.

We have a strong balance sheet with well over a billion dollars in liquidity, a flexible operating model that is able to quickly flex and pivot given our expertise in both spec and to be built production, and a stronger than average customer base that is well positioned to move forward with their home buying plan as they regain confidence. As always, I want to end by thanking our team members across the country, especially in this unique market environment. You distinguish yourselves with your tenacity, dedication, and service to our homebuyers. Thank you for all you do. Now let's open the call to your questions.

Operator, please provide our participants with instructions.

Thank you very much. We'd now like to open the lines for Q Our first question comes from Paul Przybylski from Wolfe Research. Paul, your line is now open.

Thank you. Good morning, everyone. I guess to start off, Cheryl, can you walk us across the various Texas and Florida markets and provide any color on any positive or negative demand changes you've seen over the past three to four months?

Of course. How are doing, Paul? Thanks for the question.

Absolutely. When I think about Florida, and I'm sure we'll spend some time, and I'll probably ask Eric to chime in on the resell market because I think we have some good data. But as you saw, our sales were up year over year in Florida. It was actually one of our strongest year over year beats. I would tell you Orlando continues to be a strong first time market, first time buyer market for us.

We had very good year over year growth despite the market headwinds. It is one of our lowest ASPs in the company. We had some good community openings. I think sales were up. Community count were was up.

Closings were a bit flat. But that was probably at the cost of a little bit of margin given the first time penetration. When I look across the rest of the state, Nabels also had some strong community count growth and good sales growth. One of the strong continues to be one of the strongest margins in the company along with Sarasota. I would tell you the Esplanade brand, as we talked about in the last quarter call, we had a lot of new openings that are coming to market with our resort lifestyle.

We have a lot of new amenities opening, and we saw good traffic with that consumer. Having said that, certainly not at the highs that we would have historically expected. If I were to move to Texas, let me start with Austin. You know, despite the market turbulence we've seen there, probably now, Paul, for, you know, going on two years, I think the team did a tremendous job, you know, really found some traction. Our TAM rate was down year over year, which I consider to be a really good signal of how the market is responding.

We closed out of some, I would say, tough competitive community that you're in. Our discounts were generally flat there. There's this market mystique around Austin, so I have high confidence that the market is coming back, and we're starting to see some some good traction. Dallas holding on to high margin. It's really a whole new business.

It's almost hard to compare Dallas to the prior years. We have outsized growth there this year and in the coming years with really that business doubling in size. Excited given the size and strength of the Dallas market to see us really show up there in a new differentiated way. And then I'd wrap up Texas with Houston. You know, another great story.

We've talked a lot about the repositioning of that market to self develop ASP down. So as a new consumer set, I mean, almost a hundred thousand dollars, pace is up, but discounts down. So all in all, holding their own. But, Eric, maybe some resell color would will be helpful.

Yeah. Sure. And hi, Paul. Yeah. Just to round out a couple those thoughts, you know, as we've shared over time, as we think about positioning relative to resale, we've kinda done that study to really understand diving into Florida and Texas specifically in terms of, you know, how many homes would be truly competitive in the consumer's eyes.

And that's been floating kind of 17% to 20%, which we find attractive and competitive. Relative to Texas, as I shared in the prepared comments, the core locations of our portfolio is really helping us out as we think about being having lower exposure to inventory levels on a new home level. And then maybe bouncing back to Florida briefly, I would just say just taking a look at the recent updates of March resale inventory, the months of supply have gone down from January, February to March. So that's encouraging. We're continuing to watch it.

But the average months of supply for our markets in Florida has a five handle on it. So that is still okay. It's elevated in the most recent quarters, and so we'll continue to watch it.

Okay. Next question. Any thoughts on M and A in the current environment? What are you seeing with regard to deal flow? And we've all seen what's happened to the public builder valuations.

Are you seeing the the private builders and and what they're asking, you know, becoming more rational? And and as a follow on, just how is the Indianapolis integration coming along?

Yeah. Good couple questions there, Paul. You know, on the m and a front, interestingly enough, I would say the amount of packages have probably picked up. And it it makes sense if you think about just some of the market challenges. I think you're seeing some smaller private.

I think it's about time. You know, are we seeing kind of some rational differences between the bid ask? I think getting better, probably not exactly where it needs to be. So we'll continue to look at packages. And, you know, as we've always said, we have a very high bar on expectations.

But, yeah, I think it's been interesting to see some of the package activity pick

Yeah. I think that valuation wise, maybe expectations calibrated to kind of fourth quarter of last year, but maybe not necessarily completely recalibrated.

Not quite there yet. I think those are gonna be deal by deal kind of negotiations to see if any of those start to make sense, but we'll see. As far as Indy, integration's done for the most part. I think we're still you know, from a system standpoint, there's probably just some of the last plans that are making its way to the system. Honestly, really excited about what we're seeing there.

I think I know I don't I know that we had our best sales quarter in the first quarter. I'd say that was, you know, well in line with our expectations. And as we've talked about before, Paul, you know, we're really looking forward to growing that business in more core markets. ASPs under 400,000 this year. It's just a really important new position for the company.

Thank you very much. Our next question comes from Michael Rehaut of JPMorgan. Michael, your line is now open.

Thanks. Good morning, everyone. Thanks for taking my question. First, I'd love to get, if possible, a little bit of better sense of cadence of order trends through the first quarter and April specifically in terms of sales pace? And also to the extent that there has been some volatility obviously in the marketplace, what your approach has been to incentives and discounts and perhaps how those have trended as well throughout the first four months of the year?

Yeah. Hey there, Michael. You know, as far as sales cadence, I'll be honest. A little surprised how consistent the first quarter was. We saw a 10% increase in February over January.

We saw in March another 13% over February. I think in the last call, we articulated that we came out the gates in January a little slower. When I look at that compared to last year, which was a stellar first quarter for us, you know, last year, February was down and March was flat. So all in all, I'm very, very pleased with the first quarter sales results. As far as what we look like in April, we expected April to probably be the sales peak month of the year.

Obviously, we're not done yet. I'm not sure that will be the case. You know, it's it's actually day by day, week by week. I I look at the April results, Mike, and, you know, we definitely saw the impact of the Liberation Day announcement. And the first week, that could, I think you know, I think that had put some folks on the sidelines.

We've seen pickup each week since then. Too early to say how we'll finish the month. I'm thinking it's probably closer to first quarter averages. But right now, like you said, we're looking We're looking at incentives.

We're looking at our offering, not on a weekly or monthly, but probably on a daily basis because the consumers are responding to daily news with everything that's going on in the macro marketplace.

Okay. No. No. No. Appreciate that, Sheryl.

I I guess the second question just kind of focusing a little bit on the back half of the year. I guess the guidance points to roughly a, 22.5% gross margin. And I think prior comments you pointed to a few different drivers of that land inflation, maybe a little bit of construction cost inflation, maybe a little bit higher incentives, if I heard that right. I was wondering if you kind of coming off of 3Q I'm sorry, 2Q gross margin guidance of 23% even, I would assume it's a little bit of each. I was wondering if there was also any estimated impact from tariffs as far as you can early as far as you can tell or estimate so far?

And what are kind of the bigger if you have the kind of rank order the drivers of back half guidance versus 2Q, what might those be?

Mike, thanks for the question. There's a lot there. So let me just kind of start, I think. Yes, from a margin guide for the rest of the year, in our prepared comments, we talked a lot about higher spec penetration to a certain extent in some of the quarters, especially as we're looking at Q2. We also have, as we've stated even back in the prior call from Q1, we've got lot cost inflation over the course of the year that we're dealing with as well.

So when we look at kind of the rest of the year, I think a lot of our quarters are going to be hovering around that 23% level, given the course based on the fact of how many to be built we can still sell and close for the year, whether it's late Q3 or even throughout Q4, and then the mix of specs as it balances against that. So again, we're going to hover around that 23% probably for the rest of the year. As for tariffs, lots of discussion, a lot of noise in the media relative to it. And as we're kind of looking at that and its impact on the year, we've kind of, again, guided to some low single digit house cost inflation for the year. And so we're starting to see some increases mainly from kind of the metals and aluminum tariff and the 10% kind of blanket tariff.

But for the most part, it's all impacting today kind of the metal side or the aluminum side, which is HVAC, which is firebox fireplace boxes, post tension cable, so along the lines, a lot of the metals that are in our products. So we we are seeing that. But, again, that will not come through until q four because there are recent kind of increases that'll that'll be going into some of our upcoming starts.

And well covered in our and our earlier again,

the guide that we have out there from a low single digits perspective. The lumber kind of tariff noise, that's on pause. If that comes to fruition, we see that mainly as a 2026 kind of event for us as we kinda look beyond.

And we say that about balance of the tariffs too. Right, Kurt? I mean, we're not prepared to articulate what kind of impact we might see in '26. Mike, It's good news that '25, to Kurt's point, is gonna be relatively modest. Until we see how these negotiations with different parts of the world really go, I think it's a little early.

So we can talk about that hopefully next quarter. And then the only other comment I would throw on on top of Kurt's comments on the margin profile, like I said, interest rates really are the name of the game on what what is impacting our incentive line. We see a direct correlation as incentive as rates go up, it costs us a little bit more for those commitments. If rates moderate, you know, we'll see if we end up with a cut or two, and that has a direct impact on the cost of, once again, these forward commitments if rates go down.

Great. No. Thanks for all the detail. Appreciate it.

Thank you very much. Our next question comes from Alan Ratner of Zelman and Associates. Alan, your line is now open.

Guys. Good morning. Thanks for all the details so and nice job in a tough market environment. Good morning, Cheryl. First question on the pricing environment.

I know your guide assumes a tick up in incentives just to clear through some of that spec inventory. I'm just curious if you think the elasticity is still as high today as it was a year or two ago in terms of are the incremental incentives having the same impact on pulling buyers off the fence? Or are there certain situations where maybe base price adjustments are more in the cards in order to get that buyer to the finish line?

Yeah. It's a really interesting question, Alan. I think it's almost hard to answer that on a broad base. I would tell you in certain communities, I'm talking to our sales team now that we get get prepared for this call on our cash calls. We hear a little bit of that.

I would tell you there's certain communities where the consumer doesn't believe they're gonna hold the mortgage for long or it's about price. We have wonderful tools, as you know, in our toolbox. We recognize the impact on the monthly mortgage payment by using finance incentives. So, generally, we will always lean in there. Our TMHF team is tremendous about really personalizing to the individual customer's needs.

I would tell you the price, you know, adjustment would be the very last thing we would look at. In some communities, we've seen flex dollars where folks can be a little bit more discerning on what's important to them to work, but I would tell you priority one would be using mortgage incentives. When I think about overall price elasticity, once again, very dependent on customer. Obviously, with our move up, our active adult that as Eric mentioned in the prepared remarks, the impact of community Is it I think it was in your prepared remarks.

Okay. Was this important as the home itself? And so then we do have some levers to pull with the the value of that home site. We actually even had one or two communities across the portfolio in the quarter where we saw, you know, a little bidding action on the home site. So once again, I'd be it'd be really dangerous to make broad comments across the portfolio because of the diversity we see in our customer set.

Makes sense. No. I I appreciate that, and and thank you for for the thoughts there. Second question, you know, on the land spend guidance reduction and just kind of thinking through the 20,000 closings target by 28,000. How should we think about the multiyear impact of spending less on land this year?

Did that kind of push the envelope on 26 land spend in order to achieve that? Are you assuming, you know, maybe some loosening in the land market either in terms of pricing or just, you know, kind of more ability to to option or bank land, the better terms that will get you to the 20 k? Because I imagine it's not a zero sum game. If you're spending less on land or tying up less land, that probably does have some type of impact on the multiyear growth trajectory.

Alan. It's Eric. Hi. How are doing? So I I would start with we're we're well subscribed.

Right? So as you think about 2026, less than a 2% pull in the business plan in terms of the land we need. And if you go out to '27, it's above 12%. So those are very normal numbers. If we're sitting here next year and kind of really slowed at this time, then then it's a it's a pretty relevant topic.

But certainly not concerned today, as we said, that six and a half years of supply and and still finding ways to elevate that percent control. Those tools are available. So I would say when you think about the access to to financing tools as well as kind of balancing a little bit of the patience I just mentioned with some opportunism, What's really interesting, as you think about the deals that have come through our investment committee to date this year, 66% of the lots have come through with takedown or option structures, and 27% have been finished. And those are not normal numbers for us, to be honest with you. I think the percent takedowns have really gravitated in prior years more around 25%, and the percent of finished lots available for us is more like 15%.

So we are finding some I wouldn't say them truly distressed deals, but there's ways to negotiate deals that have beneficial structures to us as we think about feeding the out here. So we're kind of balancing that patience and opportunity.

Thank you very much. Our next question comes from Matthew Bouley of Barclays. Matthew, your line is now open.

Good morning. You have Elizabeth Lange on for Matt today. Thank you for taking the questions. I wanted to or kind of continue that conversation around land. Would you offer any thoughts on, like, what you're actually seeing in the market today in terms of, you know, deals that you're looking at right now?

You know, are you seeing changes for what developers are offering given the uncertainty? Or is it kind of you're not seeing too many changes at the time?

I would suggest what we've seen to date is the opportunity to negotiate terms, more favorable terms, that really allow us all to kind of look at what's transacting today in the market and what we project over the coming months. And so like I said, not an extreme level of distress, but a little bit lower demand or froth in the market, which is just enabling the ability to negotiate terms and make sure that we're insulating ourselves against anything that we don't foresee in the coming months. So really, terms would be the short term answer.

Touching on gross margins, I know that you kind of mentioned that you're expecting to kind of sit around 23% through the second half. Would you mind talking a little bit about what you're expecting from your spec to be built mix? Are you kind of expecting the spec to kind

more in 2Q and then taper off? Or any color you can offer around that would be helpful.

Yeah. Hello, Elizabeth. Yeah. I think we had said that, I think, in q one, our spec closings were roughly 58%. And I think we also alluded to that our spec penetration would be higher in q two as well.

So we're seeing just with our spec inventory that we have available and some of the, you know, the pressures from a competitive perspective out there, the need to lean in a little bit on some some of the specs that we have out there. And so we the the penetration for q two will continue to be probably in that upper fifties, kind of 60% kind of range as we sit here today.

Taylor Morrison Home (TMHC) Q1 2025 Earnings Call Transcript

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