Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For purposes of this "Management's Discussion and Analysis of Financial Condition and Results of Operations," the terms "the Company," "we," "us," or "our" refer to Taylor Morrison Home Corporation ("TMHC") and its subsidiaries. This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited Condensed consolidated financial statements included elsewhere in this quarterly report.

Forward-Looking Statements

This quarterly report includes certain forward-looking statements within the meaning of the federal securities laws regarding, among other things, our intentions, plans, beliefs, expectations or predictions of future events, which are considered forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business and operations strategy. These statements often include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate," "can," "could," "might," "project" or similar expressions. These statements are based upon assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read this quarterly report, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 ("Annual Report") and in our subsequent filings with the U.S. Securities and Exchange Commission (the "SEC"). Although we believe that these forward-looking statements are based upon reasonable assumptions and currently available information, you should be aware that many factors, including those described under the heading "Risk Factors" in the Annual Report and in our subsequent filings with the SEC, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Our forward-looking statements made herein are made only as of the date of this quarterly report. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by applicable law.

TAYLOR MORRISON HOME CORPORATION 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

Our principal business is residential homebuilding and the development of lifestyle communities with operations across 12 states, including Indiana, our most recent footprint expansion. We provide an assortment of homes across a wide range of price points to appeal to an array of consumer groups. We design, build and sell single and multi-family detached and attached homes in traditionally high growth markets for entry level, move-up, and resort-lifestyle buyers. We operate under various brand names including Taylor Morrison, Darling Homes Collection by Taylor Morrison, and Esplanade. We also have a "Build-to-Rent" homebuilding business which operates under the Yardly brand name. In addition, we develop and construct multi-use properties consisting of commercial space, retail, and multi-family properties under the Urban Form brand name. We also have operations which provide financial services to customers through our wholly owned mortgage subsidiary, TMHF, title services through our wholly owned title services subsidiary, Inspired Title, and homeowner's insurance policies through our wholly owned insurance agency, TMIS. Our business is organized into multiple homebuilding operating components, and a financial services component, all of which are managed as four reportable segments: East, Central, West and Financial Services, as follows:

EastAtlanta, Charlotte, Jacksonville, Naples, Orlando, Raleigh, Sarasota, and Tampa

CentralAustin, Dallas, Denver, Houston, and Indianapolis

WestBay Area, Las Vegas, Phoenix, Portland, Sacramento, Seattle, and Southern California

Financial ServicesTaylor Morrison Home Funding, Inspired Title Services, and Taylor Morrison Insurance Services

As of June 30, 2024, we employed approximately 3,000 full-time equivalent persons. Of these, approximately 2,600 were engaged in corporate and homebuilding operations, and the remaining approximately 400 were engaged in financial services.

Second Quarter 2024 Highlights (all comparisons are of the current quarter to the prior year quarter, unless otherwise indicated):

•Net sales orders increased 3% to 3,111, driven by a monthly absorption pace of 3.0 per community

•Home closings revenue of $1.9 billion, driven by 3,200 home closings at an average price of $600,000

•Home closings gross margin of 23.8% on a reported basis and 23.9% on an adjusted basis

•80,677 homebuilding lots owned and controlled, representing 6.7 years of total supply, of which 2.9 years was owned

•Repurchased 1.7 million common shares for $105 million

•Homebuilding debt to capitalization of 25.4% on a gross basis and 22.8% net of $247 million of unrestricted cash

•Total liquidity of $1.3 billion

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following table sets forth our results of operations for the periods presented:

Three Months EndedJune 30,Six Months EndedJune 30,

(Dollars in thousands)2024202320242023

Statements of Operations Data:

Home closings revenue, net$1,920,127 $1,996,747 $3,556,382 $3,609,342

Land closings revenue13,234 12,628 20,459 17,148

Financial services revenue48,916 41,914 95,875 77,063

Amenity and other revenue8,776 9,275 18,089 18,868

Total revenue1,991,053 2,060,564 3,690,805 3,722,421

Cost of home closings1,462,706 1,514,237 2,705,915 2,741,750

Cost of land closings18,703 12,703 23,905 17,048

Financial services expenses28,106 25,342 53,249 47,490

Amenity and other expenses9,250 8,597 18,603 16,882

Total cost of revenue1,518,765 1,560,879 2,801,672 2,823,170

Gross margin472,288 499,685 889,133 899,251

Sales, commissions and other marketing costs113,956 113,034 216,556 205,794

General and administrative expenses82,779 70,649 150,343 136,910

Net income from unconsolidated entities(2,628)(3,186)(5,379)(5,115)

Interest expense/(income), net4,087 (5,120)4,044 (6,231)

Other expense, net6,877 8,549 7,472 3,715

Income before income taxes267,217 315,759 516,097 564,178

Income tax provision67,303 80,854 125,022 138,045

Net income before allocation to non-controlling interests199,914 234,905 391,075 426,133

Net income attributable to non-controlling interests(454)(303)(1,345)(480)

Net income$199,460 $234,602 $389,730 $425,653

Home closings gross margin23.8 %24.2 %23.9 %24.0 %

Sales, commissions and other marketing costs as a percentage of home closings revenue, net

5.9 %5.7 %6.1 %5.7 %

General and administrative expenses as a percentage of home closings revenue, net

4.3 %3.5 %4.2 %3.8 %

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Non-GAAP Measures

In addition to the results reported in accordance with GAAP, we generally provide our investors with supplemental information relating to: (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) adjusted home closings gross margin; (iv) EBITDA and adjusted EBITDA and (v) 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 net income/(loss), excluding to the extent applicable in a given period, the impact of inventory or land impairment charges, impairment of investment in unconsolidated entities, pre-acquisition abandonment charges, gain/loss on land transfers to joint ventures, extinguishment of debt, net, and legal reserves or settlements the Company deems not to be in the ordinary course of business and in the case of adjusted net income and adjusted earnings per common share, the tax impact due to such items. Adjusted home closings gross margin is a non-GAAP financial measure calculated as GAAP home closings gross margin (which is inclusive of capitalized interest), excluding inventory impairment charges.

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), and non-cash compensation expense, if any, inventory or land impairment charges, impairment of investments in unconsolidated entities, pre-acquisition abandonment charges, gain/loss on land transfers to joint ventures, extinguishment of debt, net, and legal reserves or settlements that the Company deems not to be in the ordinary course of business, in each case, as applicable in a given period.

Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less mortgage warehouse borrowings, net of unrestricted cash and cash equivalents ("net homebuilding debt"), 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 adjusted net income, adjusted earnings per common share and 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. We believe that adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the varying effects of items or transactions we do not believe are characteristic of our ongoing operations or performance.

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.

A reconciliation of (i) adjusted net income and adjusted earnings per common share, (ii) adjusted income before income taxes and related margin, (iii) adjusted home closings gross margin, (iv) EBITDA and adjusted EBITDA, and (v) net homebuilding debt to capitalization ratio to the comparable GAAP measures is presented below.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Adjusted Net Income and Adjusted Earnings Per Common Share

Three Months Ended June 30,

(Dollars in thousands, except per share data)20242023

Net income $199,460 $234,602

Legal reserves or settlements(1)

6,290 -

Inventory impairments(2)

2,325 -

Fair value adjustment for land held for sale(3)

6,782 -

Tax impact due to above non-GAAP reconciling items(3,878)-

Adjusted net income$210,979 $234,602

Basic weighted average number of shares105,500 109,210

Adjusted earnings per common share - Basic$2.00 $2.15

Diluted weighted average number of shares107,249 110,856

Adjusted earnings per common share - Diluted$1.97 $2.12

Adjusted Income Before Income Taxes and Related Margin

Three Months Ended June 30,

(Dollars in thousands)20242023

Income before income taxes$267,217 $315,759

Legal reserves or settlements(1)

6,290 -

Inventory impairments(2)

2,325 -

Fair value adjustment for land held for sale(3)

6,782 -

Adjusted income before income taxes$282,614 $315,759

Total revenue$1,991,053 $2,060,564

Income before income taxes margin13.4 %15.3 %

Adjusted income before income taxes margin14.2 %15.3 %

Adjusted Home Closings Gross Margin

Three Months Ended June 30,

(Dollars in thousands)20242023

Home closings revenue, net$1,920,127 $1,996,747

Cost of home closings1,462,706 1,514,237

Home closings gross margin$457,421 $482,510

Inventory impairments(2)

2,325 -

Adjusted home closings gross margin$459,746 $482,510

Home closings gross margin as a percentage of home closings revenue, net23.8 %24.2 %

Adjusted home closings gross margin as a percentage of home closings revenue, net23.9 %24.2 %

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EBITDA and Adjusted EBITDA Reconciliation

Three Months Ended June 30,

(Dollars in thousands)20242023

Net income before allocation to non-controlling interests$199,914 $234,905

Interest expense/(income), net4,087 (5,120)

Amortization of capitalized interest28,303 37,352

Income tax provision67,303 80,854

Depreciation and amortization3,450 1,540

EBITDA$303,057 $349,531

Non-cash compensation expense6,072 5,271

Legal reserves or settlements(1)

6,290 -

Inventory impairments(2)

2,325 -

Fair value adjustment for land held for sale(3)

6,782 -

Adjusted EBITDA$324,526 $354,802

Total revenue$1,991,053 $2,060,564

Net income before allocation to non-controlling interests as a percentage of total revenue10.0 %11.4 %

EBITDA as a percentage of total revenue15.2 %17.0 %

Adjusted EBITDA as a percentage of total revenue16.3 %17.2 %

(1) Included in Other expense, net on the unaudited Condensed consolidated statements of operations.

(2) Included in Cost of home closings on the unaudited Condensed consolidated statements of operations.

(3) Included in Cost of land closings on the unaudited Condensed consolidated statements of operations.

Net Homebuilding Debt to Capitalization Ratio Reconciliation

As of

(Dollars in thousands)June 30, 2024March 31, 2024June 30, 2023

Total debt$2,150,021 $2,093,499 $2,393,571

Plus: unamortized debt issuance cost, net7,496 7,935 9,613

Less: mortgage warehouse borrowings(276,205)(183,174)(249,898)

Total homebuilding debt$1,881,312 $1,918,260 $2,153,286

Total stockholders' equity

5,526,542 5,426,168 5,095,313

Total capitalization$7,407,854 $7,344,428 $7,248,599

Total homebuilding debt to capitalization ratio25.4 %26.1 %29.7 %

Total homebuilding debt1,881,312 1,918,260 2,153,286

Less: cash and cash equivalents(246,845)(554,287)(1,227,264)

Net homebuilding debt$1,634,467 $1,363,973 $926,022

Total stockholders' equity

$5,526,542 $5,426,168 $5,095,313

Total capitalization$7,161,009 $6,790,141 $6,021,335

Net homebuilding debt to capitalization ratio22.8 %20.1 %15.4 %

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Three and six months ended June 30, 2024 compared to three and six months ended June 30, 2023

Ending Active Selling Communities

As of June 30,Change

20242023

East122 103 18.4 %

Central106 103 2.9 %

West119 121 (1.7 %)

Total347 327 6.1 %

The total ending active selling communities increased by 6.1% at June 30, 2024 when compared to June 30, 2023, primarily driven by our East segment which had multiple master plan community openings. The increase of community openings were partially offset by community close-outs.

Net Sales Orders

Three Months Ended June 30,

Net Sales Orders (1)

Sales Value (1)

Average Selling Price

(Dollars in thousands)20242023Change 20242023Change 20242023Change

East1,1601,04710.8 %$616,846 $582,944 5.8 %$532 $557 (4.5)%

Central8158080.9 %485,036 489,142 (0.8 %)595 605 (1.7)%

West1,1361,168(2.7 %)767,925 782,046 (1.8 %)676 670 0.9 %

Total3,1113,0232.9 %$1,869,807 $1,854,132 0.8 %$601 $613 (2.0 %)

Six Months Ended June 30,

Net Sales Orders (1)

Sales Value (1)

Average Selling Price

(Dollars in thousands)20242023Change 20242023Change 20242023Change

East2,455 2,126 15.5 %$1,393,707 $1,227,463 13.5 %$568 $577 (1.6)%

Central1,719 1,482 16.0 %963,455 873,972 10.2 %560 590 (5.1)%

West2,623 2,269 15.6 %1,752,408 1,538,390 13.9 %668 678 (1.5 %)

Total6,7975,87715.7 %$4,109,570 $3,639,825 12.9 %$605 $619 (2.3 %)

(1) Net sales orders and sales value represent the number and dollar value, respectively, of new sales contracts executed with customers, net of cancellations.

Net sales orders increased 2.9% for the three months ended June 30, 2024, compared to the same period in the prior year, primarily due to our East region as a result of new community openings. The decrease in the West is primarily driven by traditional seasonality with lower sales in the second quarter as well as community close-outs. Net sales orders increased 15.7% for the six months ended June 30, 2024, compared to the same period in the prior year due to strong sales in the first quarter of 2024 as a result of fewer cancellations and improved buyer confidence. Average selling prices decreased for both the three and six months ended June 30, 2024, compared to the same periods in the prior year as a result of a decrease in option and lot premium revenues in certain markets as well as product mix.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Sales Order Cancellations

Cancellation Rate(1)

Three Months EndedJune 30,Six Months EndedJune 30,

2024202320242023

East9.5 %7.3 %7.6 %8.5 %

Central9.1 %15.8 %8.9 %17.1 %

West9.5 %11.3 %8.1 %13.6 %

Total Company9.4 %11.2 %8.1 %12.8 %

(1) Cancellation rate represents the number of canceled sales orders divided by gross sales orders.

The total company cancellation rate decreased for the three and six months ended June 30, 2024, compared to the same periods in the prior year. We believe the decrease in cancellations is due to improved buyer confidence as a result of stabilizing macro economic factors such as mortgage interest rates and inflation.

Sales Order Backlog

As of June 30,

Sold Homes in Backlog (1)

Sales ValueAverage Selling Price

(Dollars in thousands)20242023Change 20242023Change 20242023Change

East2,3562,477(4.9)%$1,641,116 $1,626,635 0.9 %$697 $657 6.1 %

Central1,4231,532(7.1)%875,064 1,009,441 (13.3)%615 659 (6.7)%

West2,4772,15614.9 %1,681,639 1,458,395 15.3 %679 676 0.4 %

Total6,2566,1651.5 %$4,197,819 $4,094,471 2.5 %671 664 1.1 %

(1) Sales order backlog represents homes under contract for which revenue has not yet been recognized at the end of the period (including homes sold but not

yet started). Some of the contracts in our sales order backlog are subject to contingencies including mortgage loan approval and buyers selling their existing

homes, which can result in cancellations.

Total sold homes in backlog and total sales value increased by 1.5% and 2.5% at June 30, 2024 compared to June 30, 2023, respectively. The increase in backlog units in the West is due to an improvement in the cancellation rate coupled with strong sales in the first half of the year in certain master planned communities and other recent community openings. The decrease in backlog units in the Central region is due to the closeout of certain high-selling communities and improved cycle times. The decrease in units in the East is primarily due to the prior year backlog including homes relating to the opportunistic bulk sale transactions to real estate investors.

Home Closings Revenue

Three Months Ended June 30,

Homes ClosedHome Closings Revenue, NetAverage Selling Price

(Dollars in thousands)20242023Change 20242023Change 20242023Change

East1,2371,2280.7 %$691,129 C$732,279 (5.6)%$559 $596 (6.2 %)

Central864936(7.7)%480,522 612,630 (21.6)%556 655 (15.1)%

West1,09996114.4 %748,476 651,838 14.8 %681 678 0.4 %

Total3,2003,1252.4 %$1,920,127 $1,996,747 (3.8)%600 639 (6.1)%

Six Months Ended June 30,

Homes ClosedHome Closings Revenue, NetAverage Selling Price

(Dollars in thousands)20242023Change 20242023Change 20242023Change

East2,170 2,232 (2.8 %)$1,232,859 C$1,333,890 (7.6 %)$568 $598 (5.0 %)

Central1,696 1,667 1.7 %952,554 1,076,025 (11.5 %)562 645 (12.9 %)

West2,065 1,767 16.9 %1,370,969 1,199,427 14.3 %664 679 (2.2)%

Total5,9315,6664.7 %$3,556,382 $3,609,342 (1.5)%600 637 (5.8)%

The number of homes closed increased by 2.4% and 4.7% for the three and six months ended June 30, 2024, compared to the same periods in the prior year, respectively. The increases are primarily driven by the West region as a result of improved build cycle times and several master plan communities that began closing homes during the current year periods. The changes in the East and Central regions are a result of partially offsetting factors relating to the timing of community

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

openings and closings as well as improved build cycle times. In addition, the prior year consisted of closings with longer than usual build cycle times as a result of supply and labor constraints during 2022 which delayed closings until the first half 2023. Average selling price decreased as a result of home closings mix and a decrease in option revenue and lot premium revenue in certain markets for the three and six months ended June 30, 2024, compared to the same periods in the prior year. The increase in units was offset by the decrease in average selling price which resulted in decreased home closings revenue, net for the three and six months ended June 30, 2024, compared to the same periods in the prior year.

Land Closings Revenue

Three Months Ended June 30,

(Dollars in thousands)20242023Change

East$92 $2,051 $(1,959)

Central12,884 10,577 2,307

West258 - 258

Total$13,234 $12,628 $606

Six Months Ended June 30,

(Dollars in thousands)20242023Change

East$859 C$4,954 $(4,095)

Central19,342 12,194 7,148

West258 - 258

Total$20,459 $17,148 $3,311

We generally purchase land and lots with the intent to build and sell homes. However, in some locations where we act as a developer, we occasionally purchase land that includes commercially zoned parcels or areas designated for school or government use, which we typically sell to commercial developers or municipalities, as applicable. We also sell residential lots or land parcels to manage our land and lot supply on larger tracts of land. Land and lot sales occur at various intervals and varying degrees of profitability. Therefore, the revenue and gross margin from land closings will fluctuate from period to period, depending upon market opportunities and our land management strategy. Land closings revenue for the three and six months ended June 30, 2024 was mainly due to lot sales in our Texas markets within the Central region. The prior year included lots sales in certain Florida markets within our East region.

Segment Home Closings Gross Margins

Three Months Ended June 30,

East Central West Consolidated

(Dollars in thousands)20242023202420232024202320242023

Home closings revenue, net$691,129 $732,279 $480,522 $612,630 $748,476 $651,838 $1,920,127 $1,996,747

Cost of home closings511,399 528,792 358,878 452,799 592,429 532,646 1,462,706 1,514,237

Home closings gross margin$179,730 $203,487 $121,644 $159,831 $156,047 $119,192 $457,421 $482,510

Home closings gross margin %26.0 %27.8 %25.3 %26.1 %20.8 %18.3 %23.8 %24.2 %

Six Months Ended June 30,

East Central West Consolidated

(Dollars in thousands)20242023202420232024202320242023

Home closings revenue, net$1,232,859 $1,333,890 $952,554 $1,076,025 $1,370,969 $1,199,427 $3,556,382 $3,609,342

Cost of home closings906,727 965,237 708,038 805,028 1,091,150 971,485 2,705,915 2,741,750

Home closings gross margin$326,132 $368,653 $244,516 $270,997 $279,819 $227,942 $850,467 $867,592

Home closings gross margin %26.5 %27.6 %25.7 %25.2 %20.4 %19.0 %23.9 %24.0 %

Consolidated home closings gross margin decreased 40 basis points to 23.8% from 24.2% for the three months ended June 30, 2024 and 10 basis points for the six months ended June 30, 2024 compared to the same periods in the prior year. The decreases in the East and Central region are primarily a result of closing product mix, a decrease in lot premium and option revenue, as well as an increase in finance incentives at the time of closing. In addition, one community in the East

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

region was impaired which negatively impacted the margin for the current quarter by 30 basis points. The increase in the West region is due to closing product mix and a decrease in incentives and discounts. The changes for the six months ended June 30, 2024 are primarily driven by the same factors, however the Central region experienced higher gross margins in the first quarter of the current year which contributed to the 50 basis point increase for the six months ended June 30, 2024.

Financial Services

The following is a summary for the periods presented of our financial services income before income taxes as well as supplemental data:

Three Months EndedJune 30,Six Months EndedJune 30,

(Dollars in thousands)20242023Change 20242023Change

Mortgage services revenue$37,867 $30,945 22.4 %$75,139 $56,548 32.9 %

Title services and other revenues11,049 10,969 0.7 %20,736 20,515 1.1 %

Total financial services revenue48,916 41,914 16.7 %95,875 77,063 24.4 %

Financial services net income from unconsolidated entities3,001 3,259 (7.9 %)5,898 5,534 6.6 %

Total revenue51,917 45,173 14.9 %101,773 82,597 23.2 %

Financial services expenses28,106 25,342 10.9 %53,249 47,490 12.1 %

Financial services income before income taxes$23,811 $19,831 20.1 %$48,524 $35,107 38.2 %

Total originations:

Number of Loans2,210 2,018 9.5 %4,106 3,549 15.7 %

Principal$1,007,753 $968,590 4.0 %$1,884,325 $1,686,869 11.7 %

Three Months EndedJune 30,Six Months EndedJune 30,

2024202320242023

Supplemental data:

Average FICO score751753751754

Funded origination breakdown:

Government (FHA,VA,USDA)23.4 %20.0 %22.7 %18.0 %

Other agency74.0 %75.0 %74.6 %77.0 %

Total agency97.4 %95.0 %97.3 %95.0 %

Non-agency2.6 %5.0 %2.7 %5.0 %

Total funded originations100.0 %100.0 %100.0 %100.0 %

Total financial services revenue increased by 16.7% and 24.4% for the three and six months ended June 30, 2024 compared to the same periods in the prior year. These increases are a result of increased mortgage originations and the revenue earned on the sale of loans.

Sales, Commissions and Other Marketing Costs

Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, increased to 5.9% from 5.7% and to 6.1% from 5.7% for the three and six months ended June 30, 2024 compared to the same periods in the prior year. The increases are primarily a result of our slight decrease in home closing revenue, net for the three and six months ended June 30, 2024 compared to the same periods in the prior year. We continue to incur external commissions costs and advertising costs in an effort to maintain sales traffic.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General and Administrative Expenses

General and administrative expenses as a percentage of home closings revenue, net, increased to 4.3% from 3.5% and to 4.2% from 3.8% for the three and six months ended June 30, 2024 compared to the same periods in the prior year. The increase was primarily due to an increase in payroll related expenses, along with a slight decrease in home closings revenue.

Net Income from Unconsolidated Entities

Net income from unconsolidated entities was $2.6 million and $5.4 million for the three and six months ended June 30, 2024, respectively, and $3.2 million and $5.1 million for the three and six months ended June 30, 2023, respectively. The changes in net income from unconsolidated entities is primarily a result of income from our joint ventures related to our financial services segment, which for the three months ended June 30, 2024 was 7.9% lower than the comparable 2023 period. For the six months ended June 30, 2024, income from joint ventures related to financial services segment was 6.6% higher due to an increase in originations and an increase in the average revenue earned on the sale of the loans.

Interest Expense/(Income), Net

Interest expense, net was $4.1 million and $4.0 million for the three and six months ended June 30, 2024, respectively, while interest income, net was $5.1 million and $6.2 million for the three and six months ended June 30, 2023, respectively. The increase in interest expense, net was primarily due to a decrease in interest income earned on our outstanding cash balance as well as increase in the amount of non-capitalizable interest expense relating to land banking arrangements.

Other Expense, Net

Other expense, net was $6.9 million and $7.5 million for the three and six months ended June 30, 2024, respectively, and $8.5 million and $3.7 million for the three and six months ended June 30, 2023, respectively. The other expense, net in the current period was primarily related to legal costs. The other expense, net in the prior year period is primarily related to an increase in self-insurance reserves.

Income Tax Provision

The effective tax rate for the three and six months ended June 30, 2024 was 25.2% and 24.2%, respectively, compared to 25.6% and 24.5% for the same periods in 2023. For the three months ended June 30, 2024, the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible executive compensation, and energy credits related to homebuilding activities.

Our income tax rate for the second quarter of 2024 was lower than the same period last year, primarily due to a reduction of income related to non-controlling interest, non-deductible executive compensation, and excess tax benefits from share-based compensation.

Net Income

Net income and diluted earnings per share for the three months ended June 30, 2024 was $199.5 million and $1.86, respectively. Net income and diluted earnings per share for the three months ended June 30, 2023 was $234.6 million and $2.12, respectively. The decreases in net income and diluted earnings per share from the prior year were primarily attributable to lower gross margin, combined with higher general and administrative expenses.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity

We finance our operations through the following:

•Cash generated from operations;

•Borrowings under our Revolving Credit Facilities;

•Our various series of senior notes;

•Mortgage warehouse facilities;

•Project-level real estate financing (including non-recourse loans, land banking, and joint ventures); and

•Performance, payment and completion surety bonds, and letters of credit.

Cash flows for each of our communities depend on the status of the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash expenditures for land acquisitions, on and off-site development, construction of model homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.

Substantially all of our cash currently on deposit with major financial institutions exceeds insured limits. We limit exposure relating to our short-term financial instruments by diversifying these financial instruments among various counterparties, which consist of major financial institutions. Generally, deposits may be redeemed on demand and are maintained with financial institutions with reputable credit.

The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):

As of

(Dollars in thousands)June 30, 2024December 31, 2023

Total cash, excluding restricted cash$246,845 $798,568

$1 Billion Revolving Credit Facility availability(1)

1,000,000 1,000,000

$100 Million Revolving Credit Facility availability100,000 100,000

Letters of credit outstanding(57,042)(61,181)

Revolving Credit Facilities availability1,042,958 1,038,819

Total liquidity$1,289,803 $1,837,387

(1)Subsequent to quarter-end, we borrowed $100 million under our $1 Billion Revolving Credit Facility.

We believe we have adequate capital resources from cash generated from operations and sufficient access to external financing sources under our Revolving Credit Facilities to conduct our operations for the next twelve months. Beyond the next twelve months, our primary demand for funds will be for payments of our long-term debt as it becomes due, land purchases, lot development, home and amenity construction, long-term capital investments, investments in our joint ventures, payments of ongoing operating expenses, and repurchases of our common stock. We believe we will generate sufficient cash from our operations to meet the demands for such payments, however we may also access the capital markets to obtain additional liquidity through debt and equity offerings or refinance debt to secure capital for such long-term demands. As part of our operations, we may also from time to time purchase our outstanding debt or common stock through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt and/or purchases of common stock, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Cash Flow Activities

Operating Cash Flow Activities

Our net cash used in operating activities was $364.1 million for the six months ended June 30, 2024, compared to net cash provided by operating activities of $607.1 million for the six months ended June 30, 2023. The change in cash used in operating activities is primarily due to an increase spend in real estate inventory and land deposits as well as an increase in our mortgage loans held for sale.

Investing Cash Flow Activities

Net cash used in investing activities was $57.3 million for the six months ended June 30, 2024, compared to $44.8 million for the six months ended June 30, 2023. The increase in cash used in investing activities was primarily due to an increase in investments of capital into unconsolidated entities.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financing Cash Flow Activities

Net cash used in financing activities was $137.0 million for the six months ended June 30, 2024, compared to $60.9 million for the six months ended June 30, 2023. The increase in cash used in financing activities was primarily due to higher repurchases of common stock, including our accelerated share repurchase program, during the six months ended June 30, 2024 compared to the same period in the prior year.

Debt Instruments

For information regarding our debt instruments, including the terms governing our senior notes and our Revolving Credit Facilities, see Note 7 - Debt to the unaudited Condensed consolidated financial statements included in this quarterly report.

Off-Balance Sheet Arrangements as of June 30, 2024

Investments in Land Development and Homebuilding Joint Ventures or Unconsolidated Entities

We participate in strategic land development and homebuilding joint ventures with related and unrelated third parties. Our participation with these entities, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on terms that are as favorable. Our partners in these joint ventures historically have been land owners/developers, other homebuilders, and financial or strategic partners. Joint ventures with land owners/developers have given us access to sites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large or expensive land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners' capital.

In certain of our unconsolidated joint ventures, the joint ventures enter into loan agreements, whereby we or one of our subsidiaries will provide the joint venture lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.

For the six months ended June 30, 2024 and 2023, total cash investments of capital into unconsolidated joint ventures were $45.0 million and $24.1 million, respectively.

Land Option Contracts and Land Banking Agreements

We are subject to the usual obligations associated with entering into contracts (including land option contracts and land banking arrangements) for the purchase, development, and sale of real estate in our routine business. We have a number of land purchase option contracts and land banking agreements, generally through cash deposits, for the right to purchase land or lots at a future point in time with predetermined terms. We do not have title to the property and the creditors of the property owner generally have no recourse to the Company. Our obligations with respect to such contracts are generally limited to the forfeiture of the related non-refundable cash deposits and/or letters of credit provided to obtain the options. The aggregate purchase price for land under these contracts was $1.5 billion at June 30, 2024 and December 31, 2023.

Seasonality

Our business is seasonal. We have historically experienced, and in the future expect to continue to experience, variability in our results on a quarterly basis. We generally have more homes under construction, close more homes and have greater revenues and operating income in the third and fourth quarters of the year. Therefore, although new home contracts are obtained throughout the year, a higher portion of our home closings occur during the third and fourth calendar quarters. Our revenue therefore may fluctuate significantly on a quarterly basis, and we must maintain sufficient liquidity to meet short-term operating requirements. Factors expected to contribute to these fluctuations include:

•the timing of the introduction and start of construction of new projects;

•the timing of sales;

•the timing of closings of homes, lots and parcels;

•the timing of receipt of regulatory approvals for development and construction;

•the condition of the real estate market and general economic conditions in the areas in which we operate;

•mix of homes closed;

•construction timetables;

•the cost and availability of materials and labor; and

•weather conditions in the markets in which we build.

As a result of seasonal activity, our quarterly results of operations and financial position are not necessarily representative of the results we expect for the full year.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Inflation

We and the homebuilding industry in general may be adversely affected during periods of high inflation, primarily because of higher land, financing, labor and construction material costs. In addition, higher mortgage interest rates can significantly affect the affordability of mortgage financing to prospective homebuyers. We attempt to pass through to our buyers increases in our costs through increased sales prices. However, during periods of soft housing market conditions, we may not be able to offset our cost increases with higher selling prices.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2024 compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.

TAYLOR MORRISON HOME CORPORATION 10-Q