0001628280-26-026535
SEC filingTMHC's Q1 2026 revenue fell 27% YoY to $1.39B, net income dropped 54% to $98.6M, driven by lower closings and margin compression.
In Q1 2026, Taylor Morrison experienced a significant decline in financial performance compared to the prior year. Total revenue decreased 26.8% to $1.39 billion, driven primarily by a 28.3% drop in home closings revenue to $1.31 billion. Home closings fell 25.6% to 2,268 units, and the average selling price declined 3.7% to $578,000. The drop in closings reflected lower opening backlog from 2025 and a strategic shift toward more to-be-built homes, which reduced quick move-in inventory. Home closings gross margin contracted 400 basis points to 20.0%, as discounts and incentives rose 330 bps and the mix shifted to lower-margin quick move-in and multi-family homes. Inventory impairment charges of $8.2 million (primarily in East and West) further pressured margins. Net income fell 53.8% to $98.6 million, and diluted EPS dropped from $2.07 to $1.01. The SG&A ratio increased to 11.4% of home closings revenue as fixed costs deleveraged on lower volume. Interest expense rose to $11.2 million due to expanded land banking arrangements, and the effective tax rate was 23.2%.
All homebuilding segments reported lower revenues and margins. East segment revenue declined 25.0% to $469 million, with home closings gross margin falling from 24.3% to 22.0%, including a $0.8 million impairment. Central segment saw the steepest drop, with revenue down 43.2% to $271 million and margin falling from 24.3% to 20.0%, driven by a higher proportion of spec homes and lower ASP ($486,000, down 10.2%). West segment revenue decreased 21.4% to $571 million, with margin down 520 bps to 18.3%, including $7.4 million in impairments. West's resort lifestyle segment showed relative resilience with flat ASP and increased net sales orders. Financial Services revenue edged down 3.8% to $49 million, but pre-tax income rose 13.2% to $29.4 million as lower expenses and higher gains on loan sales offset a 28.7% drop in loan origination volume (1,513 loans vs. 2,121).
Management highlighted macroeconomic headwinds—tariffs, elevated mortgage rates, inflation, and geopolitical tensions (e.g., war with Iran)—as factors weighing on buyer sentiment, particularly for entry-level and move-up buyers. Net sales orders fell 13.6% to 2,914, though the cancellation rate improved to 10.0% from 11.0%, aided by higher deposits and targeted incentives. Backlog of 3,465 homes was down 31.6% year-over-year but increased 23% sequentially from year-end 2025, suggesting a potential trough. The company continued investing in land, with $503 million in land and development spend during the quarter. No explicit quantitative guidance was provided, but the strategic emphasis on to-be-built homes and incentives to drive orders indicates a cautious near-term outlook. The robust liquidity position ($1.6 billion) and ongoing share repurchases underscore management's confidence in long-term fundamentals despite near-term cyclical pressure.
As of March 31, 2026, the company held $652.9 million in cash and equivalents plus $0.5 million restricted cash, down from $851.2 million at year-end 2025. Total assets stood at $9.77 billion against stockholders’ equity of $6.25 billion. Total debt (carrying value) was $2.34 billion, composed of $1.46 billion in senior notes, $787.1 million in loans payable and other borrowings, and $90.9 million in mortgage warehouse facility borrowings. The revolving credit facility had no drawn balance and $905.2 million of availability (after $94.8 million in letters of credit). Inventory (owned and consolidated not owned) totaled $6.24 billion, up slightly from $6.14 billion at year-end. Goodwill remained unchanged at $663.2 million.
Total purchase price under land option contracts and land banking agreements was $3.4 billion as of March 31, 2026. The company also had $1.5 billion in outstanding letters of credit and surety bonds. Lease liabilities were $72.8 million. The company’s exposure under land banking arrangements (homebuilding) was $245.5 million; for Build-to-Rent land banking, exposure was $53.5 million. Legal accruals were $43.4 million, including a $22.6 million settlement agreement related to the Solivita litigation.
During the three months ended March 31, 2026, the company repurchased 2,457,073 shares of common stock for $149.6 million (including excise tax). On February 11, 2026, the Board authorized a new $1.0 billion stock repurchase program valid through December 31, 2027, leaving $862.6 million remaining at quarter end. No dividends were declared. Capital expenditures for property and equipment were $10.0 million. Debt repayments totaled $9.6 million; no new debt was issued. The company also invested $6.5 million in unconsolidated entities and received $8.8 million in distributions of capital.
Segment disclosures in Note 12 showed East segment revenue of $489.5 million (down 22.5% YoY) and operating income of $50.4 million; Central revenue of $271.3 million (down 43.6%) and operating income of $15.6 million; West revenue of $572.1 million (down 21.4%) and operating income of $47.6 million; Financial Services revenue of $49.3 million (down 3.8%) and operating income of $29.7 million; Corporate & Unallocated revenue of $5.0 million with an operating loss of $12.6 million. Home closings gross margins were $103.1M (East), $54.1M (Central), and $104.5M (West). Total company home closings gross margin was $261.7 million.
Operating cash flow (CFO) of -$10.4M in Q1 2026 contrasts sharply with net income of $100.4M, indicating significant working capital outflows. The primary driver was a $127.3M increase in real estate inventory and land deposits, reflecting land acquisition and development spending. This was partially offset by a $29.5M increase in customer deposits and a $40.1M decrease in accounts payable and accrued liabilities. The prior-year quarter had a $64.8M income tax payable benefit, which reversed in the current period.
Capital expenditures (capex) of $10.0M were modest relative to net income but increased year-over-year. Free cash flow (not explicitly stated) was deeply negative after capex. Share repurchases of $149.6M far exceeded CFO, funded by cash on hand and net financing outflows. The company also made net investments in unconsolidated entities and fixed-maturity securities, further consuming cash.
Overall, cash flow quality is weak due to heavy inventory investment and aggressive share buybacks, resulting in a $197.8M decline in cash and restricted cash.