8-K
Taylor Morrison Home Corp (TMHC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 27, 2022
Taylor Morrison Home Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-35873 | 83-2026677 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
| 4900 N. Scottsdale Road, Suite 2000 | ||
| --- | ||
| Scottsdale, Arizona 85251 | ||
| (Address of principal executive offices and zip code) |
(480) 840-8100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Name of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, $0.00001 par value | TMHC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On July 27, 2022, Taylor Morrison Home Corporation (the “Company”) issued a press release setting forth its financial results for its second quarter ended June 30, 2022. A copy of the Company’s press release is attached as Exhibit 99.1 to this report. The Company does not intend for this Item 2.02 or Exhibit 99.1 to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities of that section, nor shall they be deemed to be incorporated by reference into filings under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits
| Exhibit<br> No. | Description |
|---|---|
| 99.1 | Press release issued July 27, 2022 by Taylor Morrison Home Corporation and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
2
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Taylor Morrison Home Corporation | |
|---|---|
| By: | /s/ Darrell C. Sherman |
| Name: | Darrell C. Sherman |
| Title: | Executive Vice President, Chief Legal<br> <br>Officer and Secretary |
Date: July 27, 2022
EX-99.1
Exhibit 99.1
CONTACT:
Mackenzie Aron, VP Investor Relations
(480) 734-2060
investor@taylormorrison.com
Taylor Morrison Reports Second Quarter 2022 Results, Including Record Earnings per Diluted Share of $2.45
SCOTTSDALE, Ariz., July 27, 2022—Taylor Morrison Home Corporation (NYSE: TMHC), a leading national land developer and homebuilder, announced results for the second quarter ended June 30, 2022. Reported net income was $291 million, or $2.45 per diluted share, compared to $124 million, or $0.95 per diluted share, in the second quarter of 2021. Excluding gains on an extinguishment of debt and land transfers to unconsolidated joint ventures in the second quarter of 2022, adjusted net income of $271 million and adjusted earnings per diluted share of $2.27 were up 118 percent and 139 percent, respectively, from the second quarter of 2021.
Second quarter highlights included the following, as compared to the prior-year quarter:
| • | Home closings revenue increased 15 percent to $1.9 billion. |
|---|---|
| • | Home closings gross margin improved 750 basis points to 26.6 percent. |
| --- | --- |
| • | SG&A as a percentage of home closings revenue improved 140 basis points to 8.8 percent.<br> |
| --- | --- |
| • | Homebuilding lot supply increased eight percent to approximately 82,000 owned and controlled homesites.<br> |
| --- | --- |
| • | Controlled lots as a percentage of total lot supply increased approximately 600 basis points to 41 percent.<br> |
| --- | --- |
| • | Repurchased 6.8 million shares outstanding for $172 million. |
| --- | --- |
| • | Return on equity improved 1,090 basis points to 23.1 percent. |
| --- | --- |
“We are pleased to share the results of our second quarter, which included new Company highs for home closings gross margin, earnings per diluted share and return on equity. To have achieved these record results despite the unprecedented spike in mortgage interest rates, ongoing supply chain challenges and broader economic uncertainty demonstrates the strength of our scale, team, strategy, land portfolio and well-qualified consumer set. These strengths will continue to serve us well as we adapt to today’s market reality,” said Sheryl Palmer, Taylor Morrison Chairman and CEO.
“Housing market conditions evolved quickly during the second quarter as the impact of higher interest rates collided with home price appreciation, stock market volatility and geopolitical tensions. The rapid deterioration in affordability and consumer confidence cooled homebuying demand as shoppers faced significant uncertainty, related as much to the sheer speed of change as to the shock of higher costs. These headwinds became most pronounced in the latter weeks of the quarter and have continued thus far in July. The impact has been felt across our wide range of price points, geographies and consumer groups, albeit to varying degrees. Our move-up and active lifestyle segments have displayed greater resiliency—from a traffic, sales, pricing and cancellation perspective—compared to our entry-level segment,” said Palmer.
“As the market continues to search for its new equilibrium, our homebuilding and mortgage teams have acted quickly to reestablish sales momentum, maintain the quality of our backlog and manage production and inventory levels. We remain focused on protecting our strong balance sheet and maintaining disciplined guardrails on land investment. With a well-vintaged land pipeline of 82,000 homesites, we are in a favorable position to drive future growth, be patient with investment spend and weather changing market conditions,” continued Palmer.
Lou Steffens, Executive Vice President and Chief Financial Officer, said “following the strong upside to our second quarter home closings gross margin, we are once again raising our full-year outlook and now expect to generate a home closings gross margin between 25 percent and 26 percent in 2022. This margin performance has been driven by our focus on operational effectiveness, acquisition synergies and robust pricing power, which has more than offset cost pressure from rising inflation and supply chain constraints. However, given the elevated level of uncertainty in today’s market and ongoing disruptions and delays in the construction cycle, we now anticipate our full-year home closing volume to be around 13,500 deliveries.”
“Our well-capitalized balance sheet is strong, with over $1 billion of liquidity. During the quarter, we reduced gross debt levels, which improved our long-term risk profile and will enhance future gross margins. At the same time, we accelerated our pace of share repurchases to $172 million, the highest level since 2018. Looking ahead, we continue to expect to drive our return on equity to the mid-to-high 20 percent range this year and remain on track to reduce our net debt-to-capitalization ratio to the mid-20 percent range by year end,” said Steffens.
Business Highlights (All comparisons are of the current quarter to the prior-year quarter, unless indicated.)
Homebuilding
| • | Home closings revenue increased 15 percent to $1.9 billion, driven by a 24 percent increase in<br>average closing price to $621,000, which more than offset a seven percent decline in home closings to 3,032. |
|---|---|
| • | Home closings gross margin improved 750 basis points to 26.6 percent, a Company high. The improvement was<br>driven by robust pricing power, improved operating efficiencies and acquisition synergies. |
| --- | --- |
| • | SG&A as a percentage of home closings revenue declined 140 basis points to 8.8 percent due to top-line<br>growth, cost management and sales efficiencies from virtual sales tools, including lower broker commissions. |
| --- | --- |
| • | Net sales orders of 2,554 were down 25 percent compared to the exceptional strength experienced in the prior<br>year due to a decline in the monthly absorption pace to 2.6 net sales orders per community and lower community count. |
| --- | --- |
| • | The Company’s cancellation rate increased to 10.8% of gross orders from 6.4% in the prior quarter and 5.2% a<br>year ago, although this remains below its historical average. |
| --- | --- |
| • | Average net sales order price increased 17 percent to $699,000, driven by robust pricing power and a<br>favorable mix impact from a greater penetration of move-up transactions versus entry-level sales compared to a year ago. |
| --- | --- |
| • | Ending backlog was 8,922 sold homes, down 13 percent, with a sales value of $6.1 billion, up six<br>percent. |
| --- | --- |
Land Portfolio
| • | Investment in homebuilding land acquisition and development totaled $451 million, of which 52 percent<br>was development-related versus 45 percent a year ago. |
|---|---|
| • | Homebuilding lot supply was approximately 82,000 owned and controlled homesites, up eight percent.<br> |
| --- | --- |
| • | Controlled homebuilding lots as a percentage of total lot supply was 41 percent, up from 35 percent.<br> |
| --- | --- |
| • | Based on trailing twelve-month home closings, total homebuilding lots represented 3.6 years of owned supply and<br>6.1 years of total supply. |
| --- | --- |
Financial Services
| • | The mortgage capture rate equaled 67 percent. |
|---|---|
| • | Borrowers had an average credit score of 755 and<br>debt-to-income ratio of 38 percent. |
| --- | --- |
Balance Sheet
| • | At quarter end, total available liquidity was approximately $1.1 billion, including $378 million of<br>unrestricted cash and $684 million of undrawn capacity on the Company’s corporate revolving credit facilities. |
|---|---|
| • | Net homebuilding debt-to-capital<br>equaled 36.4 percent. |
| --- | --- |
| • | The Company repurchased 6.8 million of its outstanding shares, or 5.5 percent of its prior diluted<br>shares outstanding, for $172 million at an average share price of $25.43. At quarter end, the Company had $425 million remaining on its $500 million share repurchase authorization. |
| --- | --- |
Business Outlook
Third Quarter 2022
| • | Ending active community count is expected to be between 315 to 325 |
|---|---|
| • | Home closings are expected to be between 3,200 and 3,400 |
| --- | --- |
| • | GAAP home closings gross margin is expected to be consistent with the second quarter |
| --- | --- |
| • | Effective tax rate is expected to be approximately 25 percent |
| --- | --- |
| • | Diluted share count is expected to be approximately 115 million |
| --- | --- |
Full Year 2022
| • | Ending active community count is expected to be around 350 |
|---|---|
| • | Home closings are now expected to be around 13,500 |
| --- | --- |
| • | GAAP home closings gross margin is now expected to be between 25 percent and 26 percent<br> |
| --- | --- |
| • | Average sales price is expected to be at least $625,000 |
| --- | --- |
| • | SG&A as a percentage of home closings revenue is expected to be in the mid-to-high eight percent range |
| --- | --- |
| • | Effective tax rate is now expected to be approximately 25 percent |
| --- | --- |
| • | Diluted share count is now expected to be approximately 118 million |
| --- | --- |
| • | Homebuilding land and development spend is now expected to be around $2 billion |
| --- | --- |
Quarterly Financial Comparison
| ($ in thousands) | Q2 2022 | Q2 2021 | Q2 2022 vs. Q2 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Total Revenue | $ | 1,995,023 | $ | 1,719,280 | 16.0 | % | |||
| Home Closings Revenue | $ | 1,883,020 | $ | 1,644,380 | 14.5 | % | |||
| Home Closings Gross Margin | $ | 501,410 | $ | 313,339 | 60.0 | % | |||
| 26.6 | % | 19.1 | % | 750 bps increase | |||||
| SG&A | $ | 165,542 | $ | 167,557 | (1.2 | )% | |||
| % of Home Closings Revenue | 8.8 | % | 10.2 | % | 140 bps leverage |
Earnings Conference Call Webcast
A public webcast to discuss the Company’s second quarter 2022 earnings will be held later today at 8:30 a.m. EST. A live audio webcast of the conference call will be available on Taylor Morrison’s website at investors.taylormorrison.com under the Events & Presentations tab. For call participants, the dial-in number is (844) 200-6205 and conference ID is 073087. The call will be recorded and available for replay on the Company’s website later today and will be available for one year from the date of the original earnings call.
About Taylor Morrison
Headquartered in Scottsdale, Arizona, Taylor Morrison is one of the nation’s leading homebuilders and developers. We serve a wide array of consumers from coast to coast, including first-time, move-up, luxury and 55-plus active lifestyle homebuyers under our family of brands—including Taylor Morrison, Esplanade, Darling Homes Collection by Taylor Morrison and Christopher Todd Communities built by Taylor Morrison. From 2016-2022, Taylor Morrison has been recognized as America’s Most Trusted^®^ Builder by Lifestory Research. Our strong commitment to sustainability, our communities, and our team is highlighted in our latest Environmental, Social, and Governance (ESG) Report on our website.
Forward-Looking Statements
This earnings summary includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words ““anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “will,” “can,” “could,” “might,” “should” and similar expressions identify forward-looking statements, including statements related to expected financial, operating and performance results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: inflation or deflation; changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; competition in our industry; any increase in unemployment or underemployment; the scale and scope of the ongoing COVID-19 pandemic; the seasonality of our business; the physical impacts of climate change and the increased focus by third-parties on sustainability issues; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; availability of land and lots at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our financial services and title services business; the loss of any of our important commercial lender relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to our substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; and our ability to effectively manage our expanded operations.
In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our subsequent quarterly reports filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law.
Taylor Morrison Home Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
| Three Months EndedJune 30, | Six Months Ended<br>June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Home closings revenue, net | $ | 1,883,020 | $ | 1,644,380 | $ | 3,527,429 | $ | 3,007,809 | ||||
| Land closings revenue | 36,816 | 32,057 | 52,426 | 36,946 | ||||||||
| Financial services revenue | 35,471 | 37,392 | 70,670 | 81,457 | ||||||||
| Amenity and other revenue | 39,716 | 5,451 | 47,622 | 10,880 | ||||||||
| Total revenues | 1,995,023 | 1,719,280 | 3,698,147 | 3,137,092 | ||||||||
| Cost of home closings | 1,381,610 | 1,331,041 | 2,646,584 | 2,441,283 | ||||||||
| Cost of land closings | 24,204 | 28,138 | 38,568 | 32,165 | ||||||||
| Financial services expenses | 21,483 | 25,935 | 45,697 | 49,934 | ||||||||
| Amenity and other expense | 26,246 | 5,463 | 32,690 | 10,566 | ||||||||
| Total cost of revenues | 1,453,543 | 1,390,577 | 2,763,539 | 2,533,948 | ||||||||
| Gross margin | 541,480 | 328,703 | 934,608 | 603,144 | ||||||||
| Sales, commissions and other marketing costs | 96,135 | 97,560 | 185,258 | 183,512 | ||||||||
| General and administrative expenses | 69,407 | 69,997 | 137,549 | 131,550 | ||||||||
| Net loss/(income) from unconsolidated entities | 3,637 | (2,126 | ) | 1,806 | (7,787 | ) | ||||||
| Interest expense/(income), net | 5,189 | 3 | 9,441 | (116 | ) | |||||||
| Other (income)/expense, net | (11,014 | ) | 45 | (10,472 | ) | 1,020 | ||||||
| Gain on extinguishment of debt, net | (13,471 | ) | — | (13,471 | ) | — | ||||||
| Income before income taxes | 391,597 | 163,224 | 624,497 | 294,965 | ||||||||
| Income tax provision | 98,443 | 38,469 | 152,882 | 67,767 | ||||||||
| Net income before allocation to non-controlling<br>interests | 293,154 | 124,755 | 471,615 | 227,198 | ||||||||
| Net income attributable to non-controlling<br>interests—joint ventures | (2,167 | ) | (608 | ) | (3,925 | ) | (5,030 | ) | ||||
| Net income available to Taylor Morrison Home Corporation | $ | 290,987 | $ | 124,147 | $ | 467,690 | $ | 222,168 | ||||
| Earnings per common share | ||||||||||||
| Basic | $ | 2.47 | $ | 0.97 | $ | 3.91 | $ | 1.73 | ||||
| Diluted | $ | 2.45 | $ | 0.95 | $ | 3.87 | $ | 1.70 | ||||
| Weighted average number of shares of common stock: | ||||||||||||
| Basic | 117,932 | 128,440 | 119,550 | 128,661 | ||||||||
| Diluted | 118,931 | 130,259 | 120,796 | 130,766 |
Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)
| June 30,<br>2022 | December 31,<br>2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 378,340 | $ | 832,821 |
| Restricted cash | 953 | 3,519 | ||
| Total cash, cash equivalents, and restricted cash | 379,293 | 836,340 | ||
| Owned inventory | 5,975,551 | 5,444,207 | ||
| Consolidated real estate not owned | 70,817 | 55,314 | ||
| Total real estate inventory | 6,046,368 | 5,499,521 | ||
| Land deposits | 278,314 | 229,535 | ||
| Mortgage loans held for sale | 203,238 | 467,534 | ||
| Derivative assets | 4,918 | 2,110 | ||
| Lease right of use assets | 82,876 | 85,863 | ||
| Prepaid expenses and other assets, net | 157,252 | 314,986 | ||
| Other receivables, net | 171,737 | 150,864 | ||
| Investments in unconsolidated entities | 291,560 | 171,406 | ||
| Deferred tax assets, net | 151,240 | 151,240 | ||
| Property and equipment, net | 220,230 | 155,181 | ||
| Goodwill | 663,197 | 663,197 | ||
| Total assets | $ | 8,650,223 | $ | 8,727,777 |
| Liabilities | ||||
| Accounts payable | $ | 291,337 | $ | 253,348 |
| Accrued expenses and other liabilities | 431,478 | 525,209 | ||
| Lease liabilities | 91,872 | 96,172 | ||
| Income taxes payable | 1,855 | — | ||
| Customer deposits | 579,945 | 485,705 | ||
| Estimated development liabilities | 38,280 | 38,923 | ||
| Senior notes, net | 2,173,998 | 2,452,322 | ||
| Loans payable and other borrowings | 447,191 | 404,386 | ||
| Revolving credit facility borrowings | 150,000 | 31,529 | ||
| Mortgage warehouse borrowings | 179,555 | 413,887 | ||
| Liabilities attributable to consolidated real estate not owned | 70,817 | 55,314 | ||
| Total liabilities | $ | 4,456,328 | $ | 4,756,795 |
| Stockholders’ Equity | ||||
| Total stockholders’ equity | 4,193,895 | 3,970,982 | ||
| Total liabilities and stockholders’ equity | $ | 8,650,223 | $ | 8,727,777 |
Homes Closed and Home Closings Revenue, Net:
| Three Months Ended June 30, | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | |||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||
| East | 1,097 | 1,245 | (11.9 | )% | $ | 613,176 | $ | 563,326 | 8.8 | % | $ | 559 | $ | 452 | 23.7 | % | |||||
| Central | 778 | 791 | (1.6 | ) | 457,006 | 382,743 | 19.4 | 587 | 484 | 21.3 | |||||||||||
| West | 1,157 | 1,232 | (6.1 | ) | 812,838 | 698,311 | 16.4 | 703 | 567 | 24.0 | |||||||||||
| Total | 3,032 | 3,268 | (7.2 | )% | $ | 1,883,020 | $ | 1,644,380 | 14.5 | % | $ | 621 | $ | 503 | 23.5 | % | |||||
| Six Months Ended June 30, | |||||||||||||||||||||
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | |||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||
| East | 2,034 | 2,297 | (11.4 | )% | $ | 1,119,172 | $ | 1,009,211 | 10.9 | % | $ | 550 | $ | 439 | 25.3 | % | |||||
| Central | 1,442 | 1,482 | (2.7 | ) | 825,582 | 702,920 | 17.5 | 573 | 474 | 20.9 | |||||||||||
| West | 2,324 | 2,310 | 0.6 | 1,582,675 | 1,295,678 | 22.2 | 681 | 561 | 21.4 | ||||||||||||
| Total | 5,800 | 6,089 | (4.7 | )% | $ | 3,527,429 | $ | 3,007,809 | 17.3 | % | $ | 608 | $ | 494 | 23.1 | % |
Net Sales Orders:
| Three Months Ended June 30, | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net Sales Orders | Sales Value | Average Selling Price | |||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||
| East | 1,121 | 1,302 | (13.9 | )% | $ | 730,495 | $ | 713,398 | 2.4 | % | $ | 652 | $ | 548 | 19.0 | % | |||||
| Central | 642 | 850 | (24.5 | ) | 443,146 | 500,976 | (11.5 | ) | 690 | 589 | 17.1 | ||||||||||
| West | 791 | 1,270 | (37.7 | ) | 610,932 | 828,731 | (26.3 | ) | 772 | 653 | 18.2 | ||||||||||
| Total | 2,554 | 3,422 | (25.4 | )% | $ | 1,784,573 | $ | 2,043,105 | (12.7 | )% | $ | 699 | $ | 597 | 17.1 | % | |||||
| Six Months Ended June 30, | |||||||||||||||||||||
| Net Sales Orders | Sales Value | Average Selling Price | |||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||
| East | 2,148 | 3,079 | (30.2 | )% | $ | 1,336,705 | $ | 1,591,982 | (16.0 | )% | $ | 622 | $ | 517 | 20.3 | % | |||||
| Central | 1,529 | 1,922 | (20.4 | ) | 1,026,426 | 1,084,457 | (5.4 | ) | 671 | 564 | 19.0 | ||||||||||
| West | 1,931 | 2,913 | (33.7 | ) | 1,506,663 | 1,839,497 | (18.1 | ) | 780 | 631 | 23.6 | ||||||||||
| Total | 5,608 | 7,914 | (29.1 | )% | $ | 3,869,794 | $ | 4,515,936 | (14.3 | )% | $ | 690 | $ | 571 | 20.8 | % |
Sales Order Backlog:
| As of June 30, | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sold Homes in Backlog | Sales Value | Average Selling Price | |||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||
| East | 3,333 | 3,617 | (7.9 | )% | $ | 2,119,850 | $ | 1,903,206 | 11.4 | % | $ | 636 | $ | 526 | 20.9 | % | |||||
| Central | 2,874 | 2,838 | 1.3 | 1,948,678 | 1,581,686 | 23.2 | 678 | 557 | 21.7 | ||||||||||||
| West | 2,715 | 3,773 | (28.0 | ) | 2,030,972 | 2,250,680 | (9.8 | ) | 748 | 597 | 25.3 | ||||||||||
| Total | 8,922 | 10,228 | (12.8 | )% | $ | 6,099,500 | $ | 5,735,572 | 6.3 | % | $ | 684 | $ | 561 | 21.9 | % |
Ending Active Selling Communities:
| As of | |||||||
|---|---|---|---|---|---|---|---|
| June 30, 2022 | March 31, 2022 | Change | |||||
| East | 117 | 121 | (3.3 | )% | |||
| Central | 104 | 106 | (1.9 | ) | |||
| West | 102 | 97 | 5.2 | ||||
| Total | **** | 323 | **** | 324 | **** | (0.3 | )% |
Reconciliation of Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this press release relating to: (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) EBITDA and adjusted EBITDA and (iv) net homebuilding debt to capitalization ratio.
Adjusted net income, adjusted earnings per common share and adjusted income before income taxes and related margin are non-GAAP financial measures that reflect the net income/(loss) available to the Company excluding the impact of gains on land transfers and extinguishment of debt, net, and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items. EBITDA and Adjusted EBITDA are non-GAAP financial measures that measure performance by adjusting net income before allocation to non-controlling interests to exclude interest expense/(income), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, gains on land transfers and extinguishment of debt, net. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance premiums, net, and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity).
Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation. We also use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry. In the future, we may include additional adjustments in the above-described non-GAAP financial measures to the extent we deem them appropriate and useful to management and investors.
We believe that adjusted net income, adjusted earnings per common share, adjusted income before income taxes and related margin, as well as EBITDA and adjusted EBITDA, are useful for investors in order to allow them to evaluate our operations without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because such metrics assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA also provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or unusual items. Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason.
These non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.
Adjusted Net Income and Adjusted Earnings Per Share
| Three Months Ended<br>June 30, | |||||
|---|---|---|---|---|---|
| ($ in thousands, except per share data) | 2022 | 2021 | |||
| Net income available to TMHC | $ | 290,987 | $ | 124,147 | |
| Gain on land transfers | (13,700 | ) | — | ||
| Gain on extinguishment of debt, net | (13,471 | ) | — | ||
| Tax impact due to above non-GAAP reconciling<br>items | 6,749 | — | |||
| Adjusted net income | $ | 270,565 | $ | 124,147 | |
| Basic weighted average shares | 117,932 | 128,440 | |||
| Adjusted earnings per common share—Basic | $ | 2.29 | $ | 0.97 | |
| Diluted weighted average shares | 118,931 | 130,259 | |||
| Adjusted earnings per common share—Diluted | $ | 2.27 | $ | 0.95 |
Adjusted Income Before Income Taxes andRelated Margin
| Three Months Ended<br>June 30, | ||||||
|---|---|---|---|---|---|---|
| ($ in thousands) | 2022 | 2021 | ||||
| Income before income taxes | $ | 391,597 | $ | 163,224 | ||
| Gain on land transfers | (13,700 | ) | — | |||
| Gain on extinguishment of debt, net | (13,471 | ) | — | |||
| Adjusted income before income taxes | $ | 364,426 | **** | $ | 163,224 | **** |
| Total revenues | $ | 1,995,023 | $ | 1,719,280 | ||
| Income before income taxes margin | **** | 19.6 | % | **** | 9.5 | % |
| Adjusted income before income taxes margin | **** | 18.3 | % | **** | 9.5 | % |
EBITDA and Adjusted EBITDA Reconciliation
| Three Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| ($ in thousands) | 2022 | 2021 | ||||
| Net income before allocation to non-controllinginterests | $ | 293,154 | **** | $ | 124,755 | **** |
| Interest expense, net | 5,189 | 3 | ||||
| Amortization of capitalized interest | 33,420 | 34,070 | ||||
| Income tax provision | 98,443 | 38,469 | ||||
| Depreciation and amortization | 1,442 | 2,193 | ||||
| EBITDA | $ | 431,648 | **** | $ | 199,490 | **** |
| Non-cash compensation expense | 5,278 | 4,654 | ||||
| Gain on land transfers | (13,700 | ) | — | |||
| Gain on extinguishment of debt, net | (13,471 | ) | — | |||
| Adjusted EBITDA | $ | 409,755 | **** | $ | 204,144 | **** |
| Total revenues | $ | 1,995,023 | **** | $ | 1,719,280 | **** |
| Net income before allocation to non-controllinginterests as a percentage of total revenues | **** | 14.7 | % | **** | 7.3 | % |
| EBITDA as a percentage of total revenues | **** | 21.6 | % | **** | 11.6 | % |
| Adjusted EBITDA as a percentage of total revenues | **** | 20.5 | % | **** | 11.9 | % |
Net Homebuilding Debt to Capitalization Ratio Reconciliation
| ($ in thousands) | As of<br>June 30, 2022 | As of<br>March 31, 2022 | ||||
|---|---|---|---|---|---|---|
| Total debt | $ | 2,950,744 | $ | 3,048,373 | ||
| Less unamortized debt issuance (cost)/premiums, net | (11,891 | ) | 2,311 | |||
| Less mortgage warehouse borrowings | 179,555 | 200,662 | ||||
| Total homebuilding debt | $ | 2,783,080 | **** | $ | 2,845,400 | **** |
| Less cash and cash equivalents | 378,340 | 569,249 | ||||
| Net homebuilding debt | $ | 2,404,740 | **** | $ | 2,276,151 | **** |
| Total equity | 4,193,895 | 4,094,798 | ||||
| Total capitalization | $ | 6,598,635 | **** | $ | 6,370,949 | **** |
| Net homebuilding debt to capitalization ratio | **** | 36.4 | % | **** | 35.7 | % |