0001562476-25-000007
SEC filingRevenue grew 2% YoY to $2.03B, but net income fell 3% due to lower home closings gross margin and higher interest expense.
For the three months ended June 30, 2025, total revenue increased 2.0% to $2.03 billion from $1.99 billion in the prior-year period, driven primarily by a 2.4% rise in home closings revenue to $1.97 billion. Home closings grew 4.4% to 3,340 units, but the average selling price declined 1.8% to $589,000 due to increased incentives and a shift in sales mix. Consolidated home closings gross margin contracted 150 basis points to 22.3% from 23.8%, reflecting $6.8 million in inventory impairment charges and a $6.9 million warranty charge related to a specific repair issue in the East region. Excluding these items, adjusted home closings gross margin was 23.0%, down 90 bps from 23.9%.
Net income decreased 3.0% to $193.6 million ($1.92 per diluted share) from $199.5 million ($1.86 per diluted share) in the prior year. The decline was primarily attributable to lower home closings gross margin and a $9.7 million increase in net interest expense, partially offset by a $16.1 million reduction in general and administrative expenses. Diluted earnings per share increased due to a lower share count from stock repurchases.
Segment performance varied significantly. The East region reported home closings revenue of $695.2 million, essentially flat YoY, but its home closings gross margin plunged to 22.2% from 26.0%, weighed down by inventory impairments and the warranty charge. The Central region saw home closings revenue of $481.8 million, up 0.3%, but gross margin fell to 21.9% from 25.3% due to lower lot premiums and higher finance incentives. In contrast, the West region posted a 5.4% increase in home closings revenue to $789.1 million, and its gross margin improved to 22.7% from 20.8%, benefiting from favorable product mix and reduced discounts.
The Financial Services segment was a bright spot, with total revenue up 8.2% to $52.9 million and income before taxes surging 30.5% to $31.1 million, driven by higher mortgage and title revenue. Loan originations increased 1.4% to 2,242 loans, with an average FICO score of 751.
Net sales orders declined 12.2% to 2,733, with the cancellation rate rising to 14.6% from 9.4% YoY, reflecting higher mortgage rates and reduced customer deposits. Backlog units fell 28.7% to 4,461, and backlog sales value dropped 30.0% to $2.94 billion.
The MD&A did not provide explicit forward guidance. Management noted that the business is seasonal, with a higher portion of home closings expected in the third and fourth quarters. Key strategic priorities include managing through elevated mortgage rates, offering incentives to drive sales, and maintaining liquidity. The company repurchased 1.7 million common shares for $100 million during the quarter and had total liquidity of $1.1 billion as of June 30, 2025. Management believes it has adequate capital resources from operations and its $1 billion revolving credit facility to fund operations for the next twelve months.
As of June 30, 2025, Taylor Morrison held $134.3 million in cash and restricted cash against total debt of $2,099.4 million, resulting in net debt of $1,965.1 million. Stockholders' equity stood at $6,057.9 million, giving a debt-to-equity ratio of 0.35x. Real estate inventory was $6,505.9 million, including $159.6 million in capitalized interest. Customer deposits (a proxy for deferred revenue) totaled $211.5 million, down from $239.2 million at year-end, reflecting lower order backlog.
The company had $2.1 billion in aggregate purchase commitments for land acquisition through option contracts and land banking arrangements as of June 30, 2025 (up from $1.9 billion at December 31, 2024). These commitments are secured by non-refundable deposits totaling $214.0 million. Additionally, outstanding letters of credit and surety bonds amounted to $1.5 billion, though management does not expect material draws. Legal accruals were $52.3 million, primarily related to the Solivita and Bellalago litigation.
Taylor Morrison repurchased $235.1 million of common stock during the first half of 2025 (3.97 million shares), leaving $675 million of authorization remaining under the $1.0 billion program authorized in October 2024. No dividends were declared. Net debt decreased by $21.1 million, driven by repayments on loans payable and mortgage warehouse facilities. Capital expenditures totaled $16.2 million (0.41% of revenue), mainly for property and equipment including Build-to-Rent assets.
The company reports four segments: East, Central, West, and Financial Services. For Q2 2025, total revenue was $2,030.1 million. West was the largest segment ($789.6M revenue, $118.4M operating income, 15.0% margin), followed by East ($700.6M, $90.9M, 13.0%), Central ($482.2M, $61.4M, 12.7%), and Financial Services ($52.9M, $31.4M, 59.3%). Corporate and Unallocated (Build-to-Rent and Urban Form) reported an operating loss of $38.7M. YoY revenue growth was strongest in West (+5.4%) and Financial Services (+8.2%), while Central declined 2.3%. Home closings gross margin was 22.4% for the quarter, with East at 22.2%, Central 21.9%, West 22.7%.
Net cash used in operating activities improved significantly to $(48.7) million for the six months ended June 30, 2025, compared to $(364.1) million in the prior year period. This improvement was driven by a substantial reduction in cash used for real estate inventory and land deposits ($(323.1) million vs. $(688.4) million), partially offset by a decrease in accounts payable and accrued liabilities. Net income before allocation to non-controlling interests was $409.7 million, indicating that the operating cash flow deficit was primarily due to working capital investment in land and inventory, a common pattern in homebuilding.
Capital expenditures (capex) were $(16.2) million, relatively stable year-over-year. Free cash flow (not explicitly stated) would be negative given the operating cash flow deficit and capex. The company returned significant capital to shareholders via share repurchases of $(235.1) million, funded largely by financing activities including net borrowings on mortgage warehouse facilities. No dividends were paid.
Anomalies include a $21.6 million inventory impairment charge in 2025 (vs. $2.3 million in 2024) and a $6.8 million land held for sale write-down in 2024. Income taxes paid were $(156.7) million, up from $(125.8) million. The company also had a net decrease in cash and restricted cash of $(352.9) million, ending the period with $134.3 million.