Management Discussion
Management Discussion
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, 2024 (the "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. 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 our homebuilding segment under the Taylor Morrison and Esplanade brand names. 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 subsidiaries, including mortgage services through TMHF, title and escrow services through Inspired Title, and homeowner's insurance policies through TMIS. Our business is organized into multiple homebuilding operating components, and a financial services component, all of which are organized 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, Pacific Northwest, Phoenix, Sacramento, and Southern California
Financial ServicesTaylor Morrison Home Funding, Inspired Title, and Taylor Morrison Insurance Services
As of September 30, 2025, 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.
Factors Affecting Comparability of Results
For the three and nine months ended September 30, 2025, we recognized $7.2 million and $28.8 million in inventory impairment charges, respectively. For the nine months ended September 30, 2024, we recognized $2.3 million in inventory impairment charges and there were no inventory impairment charges recognized for the three months ended September 30, 2024. Inventory impairment charges are recorded to Cost of home closings on the unaudited Condensed consolidated statements of operations.
For the nine months ended September 30, 2024, we recorded $6.8 million of fair value adjustments for land held for sale in our West reporting segment. We recorded no such adjustments for the three months ended September 30, 2024 or for the three and nine months ended September 30, 2025, respectively. Fair value adjustments for land held for sale are recorded to Cost of home closings on the unaudited Condensed consolidated statements of operations.
Third Quarter 2025 Highlights:
•Home closings revenue of $2.0 billion
◦3,324 closings at an average sales price of $602,000
•Home closings gross margin of 22.1% and adjusted home closings gross margin of 22.4%
•80 basis points of SG&A expense leverage to 9.0% of home closings revenue
•Net sales orders of 2,468
◦Monthly absorption pace of 2.4 per community
◦Ending active selling communities of 349
•84,564 homebuilding lots owned and controlled
◦60% controlled off balance sheet
•Total homebuilding land spend of $533 million, of which 50% was development related
•Repurchased 1.3 million common shares for $75 million
•Total liquidity of $1.3 billion
TAYLOR MORRISON HOME CORPORATION 10-Q
24
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 EndedSeptember 30,Nine Months EndedSeptember 30,
(Dollars in thousands)2025202420252024
Statements of Operations Data:
Home closings revenue, net$2,000,909 $2,029,134 $5,797,077 $5,585,516
Land closings revenue5,733 27,820 10,415 48,279
Financial services revenue, net55,918 49,654 160,040 145,529
Amenity and other revenue33,191 14,234 54,308 32,323
Total revenue2,095,751 2,120,842 6,021,840 5,811,647
Cost of home closings1,558,237 1,525,825 4,476,497 4,231,740
Cost of land closings2,154 27,010 5,850 50,915
Financial services expenses26,570 27,304 80,767 80,553
Amenity and other expenses32,169 9,634 51,343 28,237
Total cost of revenue1,619,130 1,589,773 4,614,457 4,391,445
Gross margin476,621 531,069 1,407,383 1,420,202
Sales, commissions and other marketing costs115,426 117,714 340,891 334,270
General and administrative expenses65,275 81,627 199,478 231,970
Net income from unconsolidated entities(1,253)(707)(3,554)(6,086)
Interest expense, net12,774 3,379 35,092 7,423
Other expense/(income), net12,004 (3,635)21,249 3,837
Income before income taxes272,395 332,691 814,227 848,788
Income tax provision67,944 81,219 200,060 206,241
Net income before allocation to non-controlling interests204,451 251,472 614,167 642,547
Net income attributable to non-controlling interests(3,010)(346)(5,683)(1,691)
Net income$201,441 $251,126 $608,484 $640,856
Home closings gross margin22.1%24.8%22.8%24.2%
Sales, commissions and other marketing costs as a percentage of home closings revenue, net5.8%5.8%5.9%6.0%
General and administrative expenses as a percentage of home closings revenue, net3.2%4.0%3.4%4.2%
TAYLOR MORRISON HOME CORPORATION 10-Q
25
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 have provided information in this quarterly report 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 the net income/(loss) available to the Company excluding, to the extent applicable in a given period, the impact of real estate and inventory impairment charges, impairment of investments in unconsolidated entities, pre-acquisition abandonment charges, certain warranty charges, gains/losses 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 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 tax provision, depreciation and amortization to calculate EBITDA. Adjusted EBITDA further excludes non-cash compensation expense, if any, real estate and inventory impairment charges, impairment of investments in unconsolidated entities, pre-acquisition abandonment charges, certain warranty charges, gains/losses 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.
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 facilities 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).
Adjusted home closings gross margin is a non-GAAP financial measure based on GAAP home closings gross margin (which is inclusive of capitalized interest), excluding inventory impairment charges and certain warranty charges.
Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our segments, and to set targets for performance-based compensation. We also use the net homebuilding debt to capitalization ratio as an indicator of overall financial 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 net homebuilding debt to capitalization ratio 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 adjusted net income, adjusted earnings per common share, adjusted income before income taxes and related margin, adjusted home closings gross margin, EBITDA, Adjusted EBITDA, and net homebuilding debt to capitalization ratio to the comparable GAAP measures follows. For purposes of our presentation of our non-GAAP financial measures for the three-months ended September 30, 2024, such measures have been recast to include certain adjustments being presented in the three months ended September 30, 2025 that were previously deemed immaterial in the prior period.
TAYLOR MORRISON HOME CORPORATION 10-Q
26
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 September 30,
(Dollars in thousands, except per share data)20252024
Net income $201,441 $251,126
Inventory impairment charges7,189 -
Pre-acquisition abandonment charges6,651 1,851
Warranty adjustments(1,273)3,064
Tax impact of non-GAAP reconciling items(3,135)(1,200)
Adjusted net income$210,873 $254,841
Basic weighted average number of shares98,439 104,132
Adjusted earnings per common share - Basic$2.14 $2.45
Diluted weighted average number of shares100,048 106,089
Adjusted earnings per common share - Diluted$2.11 $2.40
Adjusted Income Before Income Taxes and Related Margin
Three Months Ended September 30,
(Dollars in thousands)20252024
Income before income taxes$272,395 $332,691
Inventory impairment charges7,189 -
Pre-acquisition abandonment charges6,651 1,851
Warranty adjustments
(1,273)3,064
Adjusted income before income taxes$284,962 $337,606
Total revenue$2,095,751 $2,120,842
Income before income taxes margin13.0%15.7%
Adjusted income before income taxes margin13.6%15.9%
Adjusted Home Closings Gross Margin
Three Months Ended September 30,
(Dollars in thousands)20252024
Home closings revenue, net$2,000,909 $2,029,134
Cost of home closings1,558,237 1,525,825
Home closings gross margin$442,672 $503,309
Inventory impairment charges7,189 -
Warranty adjustments
(1,273)3,064
Adjusted home closings gross margin$448,588 $506,373
Home closings gross margin as a percentage of home closings revenue22.1%24.8%
Adjusted home closings gross margin as a percentage of home closings revenue22.4%25.0%
TAYLOR MORRISON HOME CORPORATION 10-Q
27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EBITDA and Adjusted EBITDA Reconciliation
Three Months Ended September 30,
(Dollars in thousands)20252024
Net income before allocation to non-controlling interests$204,451 $251,472
Interest expense, net12,774 3,379
Amortization of capitalized interest27,125 30,064
Income tax provision67,944 81,219
Depreciation and amortization1,750 2,668
EBITDA$314,044 $368,802
Non-cash compensation expense6,536 5,461
Inventory impairment charges
7,189 -
Pre-acquisition abandonment charges
6,651 1,851
Warranty adjustments
(1,273)3,064
Adjusted EBITDA$333,147 $379,178
Total revenue$2,095,751 $2,120,842
Net income before allocation to non-controlling interests as a percentage of total revenue9.8%11.9%
EBITDA as a percentage of total revenue15.0%17.4%
Adjusted EBITDA as a percentage of total revenue15.9%17.9%
Net Homebuilding Debt to Capitalization Ratio Reconciliation
(Dollars in thousands)As of September 30, 2025As of June 30, 2025As of September 30, 2024
Total debt$2,190,761 $2,099,377 $2,143,223
Plus: unamortized debt issuance cost, net5,298 5,737 7,056
Less: mortgage warehouse facilities borrowings(150,176)(171,319)(233,331)
Total homebuilding debt$2,045,883 $1,933,795 $1,916,948
Total stockholders' equity
6,197,515 6,057,862 5,723,462
Total capitalization$8,243,398 $7,991,657 $7,640,410
Total homebuilding debt to capitalization ratio24.8%24.2%25.1%
Total homebuilding debt2,045,883 1,933,795 1,916,948
Less: cash and cash equivalents(370,591)(130,174)(256,447)
Net homebuilding debt$1,675,292 $1,803,621 $1,660,501
Total stockholders' equity
$6,197,515 $6,057,862 $5,723,462
Total capitalization$7,872,807 $7,861,483 $7,383,963
Net homebuilding debt to capitalization ratio21.3%22.9%22.5%
TAYLOR MORRISON HOME CORPORATION 10-Q
28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three and nine months ended September 30, 2025 compared to three and nine months ended September 30, 2024
Ending Active Selling Communities
As of September 30,
Change
20252024
East137 120 14.2%
Central95 106 (10.4%)
West117 114 2.6%
Total349 340 2.6%
The total ending active selling communities increased by nine at September 30, 2025 compared to September 30, 2024. The East segment had multiple community openings, including master planned communities which resulted in an increase in outlets that was offset by the Central region which closed-out several higher paced communities in certain markets.
Net Sales Orders
Three Months Ended September 30,
Net Sales Orders (1)
Sales Value (1)
Average Selling Price
(Dollars in thousands)20252024Change 20252024Change 20252024Change
East1,0241,140(10.2%)$526,527 $610,892 (13.8%)$514 $536 (4.1%)
Central602747(19.4%)292,376 398,587 (26.6%)486 534 (9.0%)
West842943(10.7%)581,058 651,841 (10.9%)690 691 (0.1%)
Total2,4682,830(12.8%)$1,399,961 $1,661,320 (15.7%)$567 $587 (3.4%)
Nine Months Ended September 30,
Net Sales Orders (1)
Sales Value (1)
Average Selling Price
(Dollars in thousands)20252024Change 20252024Change 20252024Change
East3,5623,595(0.9%)$1,836,083 $2,004,598 (8.4%)$515 $558 (7.7%)
Central2,2002,466(10.8%)1,097,411 1,362,042 (19.4%)499 552 (9.6%)
West2,8133,566(21.1%)2,008,999 2,404,249 (16.4%)714 674 5.9%
Total8,5759,627(10.9%)$4,942,493 $5,770,889 (14.4%)$576 $599 (3.8%)
(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 decreased 12.8% and 10.9% for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. The decreases in the Central region were primarily due to community close-outs and the decreases in the West and East regions were primarily due to declining sales pace and demand and an increase in cancellations. We continue to offer our buyers various incentives, discounts, and financing programs to drive sales, however we believe economic conditions such as elevated mortgage interest rates contributed to delays in buyers' decisions to purchase a home. The decrease in the average selling price for the three and nine months ended September 30, 2025 compared to the same periods in the prior year was primarily driven by incentives and discounts as well as net sales orders mix.
TAYLOR MORRISON HOME CORPORATION 10-Q
29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales Order Cancellations
Cancellation Rate(1)
Three Months EndedSeptember 30,Nine Months EndedSeptember 30,
2025202420252024
East14.9%8.4%13.0%8.0%
Central15.4%9.3%11.9%9.0%
West16.0%10.4%15.2%8.8%
Total Company15.4%9.3%13.5%8.6%
(1) Cancellation rate represents the number of canceled sales orders divided by gross sales orders.
The total company cancellation rate increased for the three and nine months ended September 30, 2025, compared to the same periods in the prior year. We believe the higher cancellation rate for the three and nine months ended September 30, 2025 was driven by market conditions, including the inability of homeowners to sell their current home prior to closing on a new home. In addition, we have reduced required customer deposits as means of stimulating new sales orders which can further contribute to higher cancellation rates.
As of September 30,
Sold Homes in Backlog (1)
Sales ValueAverage Selling Price
(Dollars in thousands)20252024Change 20252024Change 20252024Change
East1,5032,176(30.9%)$965,710 $1,493,828 (35.4%)$643 $687 (6.4%)
Central7411,238(40.1%)423,806 758,008 (44.1%)572 612 (6.5%)
West1,3612,278(40.3%)948,048 1,578,168 (39.9%)697 693 0.6%
Total3,6055,692(36.7%)$2,337,564 $3,830,004 (39.0%)$648 $673 (3.7%)
(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 decreased by 36.7% and 39.0% at September 30, 2025 compared to September 30, 2024, respectively. The decrease in units is primarily due to fewer net sales orders in the current period compared to the same period in the prior year, as well as improved construction cycle times and more quick-move-in homes which sold and closed during the nine months ended September 30, 2025 compared to the same period in the prior year. Incentives and discounts as well as net sales orders mix led to the total company decrease in the average selling price.
TAYLOR MORRISON HOME CORPORATION 10-Q
30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Home Closings Revenue
Three Months Ended September 30,
Homes ClosedHome Closings Revenue, NetAverage Selling Price
(Dollars in thousands)20252024Change 20252024Change 20252024Change
East1,3611,3203.1%$740,346 $758,179 (2.4%)$544 $574 (5.2%)
Central749932(19.6%)382,899 515,643 (25.7%)511 553 (7.6%)
West1,2141,1426.3%877,664 755,312 16.2%723 661 9.4%
Total3,3243,394(2.1%)$2,000,909 $2,029,134 (1.4%)$602 $598 0.7%
Nine Months Ended September 30,
Homes ClosedHome Closings Revenue, NetAverage Selling Price
(Dollars in thousands)20252024Change 20252024Change 20252024Change
East3,796 3,490 8.8%$2,061,257 $1,991,038 3.5%$543 $570 (4.7%)
Central2,557 2,628 (2.7%)1,342,179 1,468,197 (8.6%)525 559 (6.1%)
West3,359 3,207 4.7%2,393,641 2,126,281 12.6%713 663 7.5%
Total9,7129,3254.2%$5,797,077 $5,585,516 3.8%$597 $599 (0.3%)
The number of homes closed decreased by 2.1% for the three months ended September 30, 2025. The decrease was primarily due to the Central region, which had a decrease in the number of active selling communities and an increase in cancellations for the three months ended September 30, 2025 compared to the same period in the prior year. The number of homes closed increased by 4.2% for the nine months ended September 30, 2025, compared to the same period in the prior year. The increase was primarily due to improved production cycle times and more quick move-ins being sold and closed in the same period in the East and West regions. Average selling price remained relatively consistent for the three and nine months ended September 30, 2025 compared to the same periods in the prior year.
Amenity and Other Revenue
Three Months Ended September 30,
(Dollars in thousands)20252024Change
East$5,065 $8,629 $(3,564)
Central- - -
West633 281 352
Corporate27,493 5,324 22,169
Total$33,191 $14,234 $18,957
Nine Months Ended September 30,
(Dollars in thousands)20252024Change
East$16,561 $16,853 $(292)
Central- - -
West1,418 959 459
Corporate36,329 14,511 21,818
Total$54,308 $32,323 $21,985
Several of our communities operate amenities such as golf courses, club houses, and fitness centers. We provide club members access to the amenity facilities and other services in exchange for club dues and fees. Our Corporate region also includes the activity relating to our Build-To-Rent and Urban Form operations. The increase in Amenity and other revenue in Corporate for the three and nine months ended September 30, 2025 was due to the sale of an asset relating to our Urban Form operations which generated $22.8 million of revenue.
TAYLOR MORRISON HOME CORPORATION 10-Q
31
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Segment Home Closings Gross Margins
Three Months Ended September 30,
East Central West Consolidated
(Dollars in thousands)20252024202520242025202420252024
Home closings revenue, net$740,346 $758,179 $382,899 $515,643 $877,664 $755,312 $2,000,909 $2,029,134
Cost of home closings573,641 551,542 300,499 388,565 684,097 585,718 1,558,237 1,525,825
Home closings gross margin$166,705 $206,637 $82,400 $127,078 $193,567 $169,594 $442,672 $503,309
Inventory impairment charges
7,189 - - - - - 7,189 -
Warranty adjustments
(1,273)3,064 - - (1,273)3,064
Adjusted home closings gross margin$172,621 $209,701 $82,400 $127,078 $193,567 $169,594 $448,588 $506,373
Home closings gross margin %22.5%27.3%21.5%24.6%22.1%22.5%22.1%24.8%
Adjusted home closings gross margin %23.3%27.7%21.5%24.6%22.1%22.5%22.4%25.0%
Nine Months Ended September 30,
East Central West Consolidated
(Dollars in thousands)20252024202520242025202420252024
Home closings revenue, net$2,061,257 $1,991,038 $1,342,179 $1,468,197 $2,393,641 $2,126,281 $5,797,077 $5,585,516
Cost of home closings1,588,326 1,458,270 1,038,225 1,096,603 1,849,946 1,676,867 4,476,497 4,231,740
Home closings gross margin$472,931 $532,768 $303,954 $371,594 $543,695 $449,414 $1,320,580 $1,353,776
Inventory impairment charges
25,851 2,325 - - 2,970 - 28,821 2,325
Warranty adjustments
6,389 3,064 - - - - 6,389 3,064
Adjusted home closings gross margin$505,171 $538,157 $303,954 $371,594 $546,665 $449,414 $1,355,790 $1,359,165
Home closings gross margin %22.9%26.8%22.6%25.3%22.7%21.1%22.8%24.2%
Adjusted home closings gross margin %24.5%27.0%22.6%25.3%22.8%21.1%23.4%24.3%
Consolidated home closings gross margin decreased to 22.1% from 24.8% for the three months ended September 30, 2025, compared to the same period in the prior year and to 22.8% from 24.2% for the nine months ended September 30, 2025, compared to the same period in the prior year. The decrease in the West region for the three months ended September 30, 2025 was primarily due to decreases in lot premiums, option revenues and related margins compared to the same period in the prior year. The increase in the West region for the nine months ended September 30, 2025 was primarily due to closing product mix as well as decreases in home discounts and incentives on a per unit basis compared to the same period in the prior year, partially offset by inventory impairment charges. The decrease in the East region was due to decreases in lot premium, option revenues and related margins. The decrease in the Central region was due to additional discounts and an increase in financing incentives. In addition, for the three and nine months ended September 30, 2025, the East region was negatively impacted by inventory impairment charges across certain communities as a result of recent pricing decreases and increases in incentives. The East was also impacted by a warranty charge related to a specific repair issue in the three and nine months ended September 30, 2025.
TAYLOR MORRISON HOME CORPORATION 10-Q
32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 EndedSeptember 30,Nine Months EndedSeptember 30,
(Dollars in thousands)20252024Change 20252024Change
Mortgage services revenue$42,881 $38,284 12.0%$124,637 $113,423 9.9%
Title services and other revenue13,037 11,370 14.7%35,403 32,106 10.3%
Total financial services revenue55,918 49,654 12.6%160,040 145,529 10.0%
Financial services net income from unconsolidated entities2,740 1,337 104.9%9,865 7,236 36.3%
Total revenue58,658 50,991 15.0%169,905 152,765 11.2%
Financial services expenses26,570 27,304 (2.7%)80,767 80,553 0.3%
Financial services income before income taxes$32,088 $23,687 35.5%$89,138 $72,212 23.4%
Total originations:
Number of Loans2,237 2,312 (3.2%)6,600 6,418 2.8%
Principal$1,038,399 $1,074,620 (3.4%)$3,053,871 $2,958,946 3.2%
Three Months EndedSeptember 30,Nine Months EndedSeptember 30,
2025202420252024
Supplemental data:
Average FICO score750754751752
Funded origination breakdown:
Government (FHA,VA,USDA)24.9%20.4%24.6 %21.8%
Other agency70.6%75.8%71.9 %75.1%
Total agency95.5%96.2%96.5%96.9%
Non-agency4.5%3.8%3.5 %3.1%
Total funded originations100.0%100.0%100.0%100.0%
Total financial services revenue increased by 12.6% to $55.9 million and by 10.0% to $160.0 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in the prior year. These increases were a result of increased revenue earned on the sale of loans, increased title production, and to a lesser extent, an increase in loan originations for the nine months ended September 30, 2025.
Sales, Commissions and Other Marketing Costs
Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, remained consistent at 5.8% for the three months ended September 30, 2025 compared to the same period in the prior year and decreased to 5.9% from 6.0% for the nine months ended September 30, 2025 compared to the same period in the prior year. The relatively consistent results are primarily driven by leverage in controllable sales and marketing costs.
General and Administrative Expenses
General and administrative expenses as a percentage of home closings revenue, net, decreased to 3.2% from 4.0% and to 3.4% from 4.2% for the three and nine months ended September 30, 2025, respectively, compared to the same periods in the prior year. The decreases were primarily due to a decrease in variable compensation-related expenses.
Net Income from Unconsolidated Entities
Net income from unconsolidated entities was $1.3 million and $3.6 million for the three and nine months ended September 30, 2025, respectively, and $0.7 million and $6.1 million for the three and nine months ended September 30, 2024, respectively. Net income from unconsolidated entities includes income from our joint ventures related to our financial services segment which is partially offset for the three and nine months ended September 30, 2025 by losses experienced by our joint venture relating to our Build-to-Rent operations which has projects that have been placed into service, thus incurring depreciation, while still in the lease ramp-up phase.
TAYLOR MORRISON HOME CORPORATION 10-Q
33
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest Expense, Net
Interest expense, net was $12.8 million and $35.1 million for the three and nine months ended September 30, 2025, respectively, and $3.4 million and $7.4 million for the three and nine months ended September 30, 2024, respectively. The increase in interest expense, net, was primarily due an increase in the amount of non-capitalizable interest expense relating to land banking arrangements as well as a decrease in interest income earned on our outstanding cash balances.
Other Expense/(Income), Net
Other expense, net was $12.0 million and $21.2 million for the three and nine months ended September 30, 2025, respectively, which reflects an increase in self-insurance reserves and write-offs of pre-acquisition costs for projects we are no longer pursuing. Other income, net was $3.6 million for the three months ended September 30, 2024 and other expense, net was $3.8 million for the nine months ended September 30, 2024. The other income, net was primarily related to the reduction in estimates for our estimated development liabilities. The other expense, net was primarily related to legal costs.
Income Tax Provision
The effective tax rate for the three and nine months ended September 30, 2025 was 24.9% and 24.6%, respectively, compared to 24.4% and 24.3% for the same periods in 2024. Our income tax rate for the third quarter of 2025 was higher than the same period last year primarily due to a decrease in credits related to homebuilding activities.
For the three months ended September 30, 2025, 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 excess tax benefits from share-based compensation.
Net Income
Net income and diluted earnings per share for the three months ended September 30, 2025 were $201.4 million and $2.01, respectively. Net income and diluted earnings per share for the three months ended September 30, 2024 were $251.1 million and $2.37, respectively. The decreases in net income and diluted earnings per share from the prior year were primarily attributable to a decrease in home closings gross margin and an increase in interest expense, net.
TAYLOR MORRISON HOME CORPORATION 10-Q
34
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 $1 Billion Revolving Credit Facility;
•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 homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our unaudited Condensed consolidated statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.
The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):
As of
(Dollars in thousands)September 30, 2025December 31, 2024
Total cash, excluding restricted cash$370,591 $487,151
$1 Billion Revolving Credit Facility availability
1,000,000 1,000,000
Letters of credit outstanding(45,196)(52,914)
Revolving Credit Facility availability954,804 947,086
Total liquidity$1,325,395 $1,434,237
We believe we have adequate capital resources from cash generated from operations and sufficient access to external financing sources from borrowings under our $1 Billion Revolving Credit Facility 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 funds, 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 equity through open market purchases, privately negotiated transactions or otherwise. Purchases or retirements of debt and/or purchases of equity, 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 provided by operating activities was $170.9 million for the nine months ended September 30, 2025, compared to net cash used in operating activities of $228.2 million for the nine months ended September 30, 2024. The change in cash provided by operating activities is primarily due to a decrease in spend on real estate inventory and land deposits offset by a decrease in accounts payable, accrued expenses and other liabilities.
Investing Cash Flow Activities
Net cash used in investing activities was $83.9 million for the nine months ended September 30, 2025, compared to $82.3 million for the nine months ended September 30, 2024. The modest increase in cash used in investing activities was due to an increase in purchases of property and equipment, partially offset by an increase in distributions of capital from unconsolidated entities and a decrease in investments of capital into unconsolidated entities for newly formed joint ventures.
Financing Cash Flow Activities
Net cash used in financing activities was $203.3 million for the nine months ended September 30, 2025, compared to $239.3 million for the nine months ended September 30, 2024. The decrease in cash used in financing activities was primarily due to an increase in loans payable and other borrowings offset by an increase in the repurchase of common stock, and an increase in net repayments on our mortgage warehouse facilities.
TAYLOR MORRISON HOME CORPORATION 10-Q
35
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Debt Instruments
For information regarding our debt instruments, including the terms governing our senior notes and our $1 Billion Revolving Credit Facility, see Note 7 - Debt in the Notes to the unaudited Condensed consolidated financial statements included in this quarterly report.
Off-Balance Sheet Arrangements as of September 30, 2025
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 or strategic partners have allowed us to combine our homebuilding expertise with access to our partners' capital.
For the nine months ended September 30, 2025 and 2024, total cash investments of capital into unconsolidated joint ventures were $73.4 million and $74.6 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 ongoing 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 $3.0 billion and $1.9 billion at September 30, 2025 and December 31, 2024, respectively.
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 revenue 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, but are not limited to:
•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 condition of the real estate market and general economic conditions in the areas in which we operate;
•mix of homes closed;
•construction timetables;
•the timing of receipt of regulatory approvals for development and construction;
•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.
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.
TAYLOR MORRISON HOME CORPORATION 10-Q
36
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2025 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