Exhibit 99.1
News Release
| CONTACT: Investor Relations | ||||
| Taylor Morrison Home Corporation | ||||
| (480) 734-2060 | ||||
| investor@taylormorrison.com |
Taylor Morrison Reports Third Quarter 2020 Results, Including 53% Year-Over-Year Growth in Net Sales Pace per Community
SCOTTSDALE, Ariz., Oct. 28, 2020 — Taylor Morrison Home Corporation (NYSE: TMHC), the nation’s fifth largest homebuilder, today announced financial results for the third quarter ended Sept. 30, 2020. The Company reported net income of $115 million, or $0.87 per diluted share, up 38 percent year over year. Excluding transaction-related expenses and refinancing charges, adjusted net income was $133 million, or $1.01 per diluted share, up 53 percent year over year.
The Company’s third quarter included the following results, as compared to the prior-year period:
| • | Monthly absorptions increased 53 percent to 3.8 net sales per community, the highest level in our public company history. |
| • | Total revenue increased 54 percent to $1.70 billion. |
| • | GAAP home closings gross margin equaled 17.2 percent. |
| • | Adjusted home closings gross margin, exclusive of purchase accounting impacts, equaled 17.8 percent. |
| • | SG&A as a percentage of home closings revenue declined 210 basis points to 9.0 percent. |
“I am pleased with how our team has navigated the unprecedented environment, allowing us to deliver our stronger-than-expected third quarter performance, including more than 70 percent growth in our net income,” said Sheryl Palmer, Taylor Morrison Chairman and CEO. “Following the third quarter strength, our monthly sales pace per community in October has accelerated from September and is on track to increase more than 50 percent year over year as demand has been remarkably resilient across our markets and price points.”
“With a number of tailwinds driving today’s robust housing market that we expect will persist for the foreseeable future, we are well suited to meet the demand after years of strategic transformation that has provided us with enhanced operating efficiencies and greater depth in each of our markets and consumer segments. With our integration of William Lyon Homes on track to be mostly complete by year end, our top priority entering 2021 is demonstrating the benefits of our expanded scale through improved financial performance as a fully-aligned organization.”
“During the quarter, the Company made further progress in deleveraging our balance sheet by paying off some of the debt assumed in the William Lyon Homes acquisition and a portion of our corporate revolver,” said Dave Cone, Executive Vice President and Chief Financial Officer. “Given the faster-than-anticipated deleveraging achieved thus far, we now expect to reduce our net debt-to-capital ratio to the high-30 percent range by the end of 2021. With nearly $1 billion in available liquidity, we are in a strong position to reinvest in the business and opportunistically manage our balance sheet to drive improved returns.”
Business Highlights (All comparisons are of the current quarter to the prior-year period, unless indicated.)
Homebuilding
| • | Net sales orders increased 74 percent to 4,425, driven in part by the benefit from our acquisition of William Lyon Homes in February as well as a continuation of strong demand trends. |
| • | Monthly absorptions increased 53 percent to 3.8 net sales per community, the highest level in our public company history. |
| • | Average community count increased approximately 14 percent to 393, although this was down four percent from 411 in the second quarter of 2020 due to accelerated close-outs of existing communities from strong sales activity. |
| • | Home closings revenue increased 53 percent to $1.64 billion, driven by 51 percent growth in closings and a one percent increase in average sales price to approximately $473,000. Closings volume exceeded our prior guidance due to increased inventory home sales. |
| • | Home closings gross margin was 17.2 percent, which exceeded the guidance range provided last quarter. Excluding purchase accounting, adjusted gross margin was 17.8 percent. |
| • | SG&A as a percentage of home closings revenue was 9.0 percent, representing 210 basis points of leverage over the prior year given increased scale, cost control measures and strong market conditions. |
| • | The Company had 7,761 units in backlog, up 47 percent, with a sales value of $3.8 billion, up 48 percent. |
Land Portfolio
| • | The Company invested more than $370 million in land and development during the quarter. |
| • | Total homebuilding lot supply equaled approximately 68,200, representing 4.8 years of supply based on trailing twelve-month closings on a pro-forma basis giving effect to the acquisition of William Lyon Homes. Owned lots equaled 3.4 years of supply. |
Financial Services
| • | The financial services’ capture rate increased to 83 percent from 81 percent in the second quarter of 2020 and 77 percent in the third quarter of 2019, reaching the highest level since 2015. |
Balance Sheet
| • | At quarter end, total available liquidity equaled approximately $991 million, including $548 million of unrestricted cash and $443 million of undrawn capacity on the Company’s $800 million corporate revolver. |
| • | The Company refinanced a portion of its 2023 and 2025 senior notes in July and repaid the remaining balance of those same notes in September for a total reduction of $285 million paid with cash on hand and repaid $200 million of its revolver, of which it expects to pay down all or substantially all of the outstanding balance by year end. |
| • | The net debt-to-capitalization ratio declined to 41.6 percent from 46.0 percent at the end of the second quarter. |
| • | Since its acquisition of William Lyon Homes in February, the Company has paid down a total of $497 million of net debt, representing an approximate 17 percent decrease. |
Business Outlook
Fourth Quarter 2020
| • | Average active community count is expected to be approximately 375 to 380 |
| • | Home closings are expected to be about 3,050 |
| • | GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be approximately 18 percent |
| • | Effective tax rate is expected to be approximately 23.0 percent |
| • | Diluted share count is expected to be approximately 131 million |
Full Year 2020
| • | Average active community count is expected to be approximately 385 to 390 |
| • | Home closings are expected to be approximately 12,500 |
| • | GAAP home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid-16 percent range |
| • | SG&A as a percentage of home closings revenue is expected to be in the high-nine percent range |
| • | Effective tax rate is expected to be approximately 24.5 percent |
| • | Diluted share count is expected to be approximately 129 million |
| • | Land and development spend is expected to be approximately $1.4 billion to $1.5 billion |
Quarterly Financial Comparison
| (Dollars in thousands) | ||||||||||||||||||||
| Q3 2020 | Q3 2019 | Q3 2020 vs. Q3 2019 | ||||||||||||||||||
| Total Revenue |
$1,699,434 | $1,105,105 | 53.8% | |||||||||||||||||
| Home Closings Revenue |
$1,640,584 | $1,073,110 | 52.9% | |||||||||||||||||
| Home Closings Gross Margin |
$282,388 | $199,008 | 41.9% | |||||||||||||||||
| 17.2% | 18.5% | 130 bps decrease | ||||||||||||||||||
| Adjusted Home Closings Gross Margin |
$291,301 | $199,008 | 46.4% | |||||||||||||||||
| 17.8% | 18.5% | 70 bps decrease | ||||||||||||||||||
| SG&A |
$147,167 | $119,099 | 23.6% | |||||||||||||||||
| % of Home Closings Revenue |
9.0% | 11.1% | 210 bps leverage | |||||||||||||||||
Earnings Webcast
A public webcast to discuss the third quarter 2020 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1 (855) 470-8731 and the passcode is 3476262. More information can be found on the Company’s investor relations website at investors.taylormorrison.com. A webcast replay will also be available on the site later today and will be available for one year from the date of the original earnings call.
About Taylor Morrison
Taylor Morrison Home Corporation (NYSE: TMHC) is a leading national homebuilder and developer that has been recognized as the 2016-2020 America’s Most Trusted® Home Builder by Lifestory Research. Based in Scottsdale, Arizona we operate under three well-established brands, Taylor Morrison, Darling Homes and William Lyon Signature. We serve a wide array of consumer groups from coast to coast, including first-time, move-up, luxury, and active adult buyers. In Texas, Darling Homes builds communities with a focus on individuality and custom detail while delivering on the Taylor Morrison standard of excellence. We also have an exclusive partnership with Christopher Todd Communities, a growing Phoenix-based developer of innovative, luxury rental communities to operate a “Build-to-Rent” homebuilding business.
For more information about Taylor Morrison, Darling Homes and William Lyon Signature, please visit www.taylormorrison.com or www.darlinghomes.com.
Forward-Looking Statements
This earnings summary includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related to expected financial, operating and performance results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.
Such risks, uncertainties and other factors include, among other things: the scale and scope of the recent COVID-19 (coronavirus) outbreak and resulting pandemic; changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; competition in our industry; any increase in unemployment or underemployment; inflation or deflation; the seasonality of our business; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; availability of land and lots at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our financial services and title services business; the loss of any of our important commercial lender relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to our substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; risks related to the integration of William Lyon Homes; the ability to recognize the anticipated benefits from the combination of Taylor Morrison and William Lyon Homes; and our ability to effectively manage our expanded operations.
In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our quarterly report on Form 10-Q filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law.
Taylor Morrison Home Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Home closings revenue, net |
$ | 1,640,584 | $ | 1,073,110 | $ | 4,376,218 | $ | 3,205,252 | ||||||||
| Land closings revenue |
6,756 | 4,420 | 40,241 | 14,391 | ||||||||||||
| Financial services revenue |
47,451 | 23,254 | 115,787 | 62,117 | ||||||||||||
| Amenity and other revenue |
4,643 | 4,321 | 39,572 | 13,863 | ||||||||||||
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| Total revenues |
1,699,434 | 1,105,105 | 4,571,818 | 3,295,623 | ||||||||||||
| Cost of home closings |
1,358,196 | 874,102 | 3,672,923 | 2,619,968 | ||||||||||||
| Cost of land closings |
5,217 | 2,934 | 42,636 | 9,418 | ||||||||||||
| Financial services expenses |
22,207 | 12,829 | 65,650 | 36,595 | ||||||||||||
| Amenity and other expense |
4,125 | 4,166 | 38,986 | 12,754 | ||||||||||||
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| Total cost of revenues |
1,389,745 | 894,031 | 3,820,195 | 2,678,735 | ||||||||||||
| Gross margin |
309,689 | 211,074 | 751,623 | 616,888 | ||||||||||||
| Sales, commissions and other marketing costs |
102,015 | 76,765 | 282,380 | 226,809 | ||||||||||||
| General and administrative expenses |
45,152 | 42,334 | 146,790 | 120,990 | ||||||||||||
| Equity in income of unconsolidated entities |
(2,957 | ) | (2,103 | ) | (8,878 | ) | (7,983 | ) | ||||||||
| Interest income, net |
(347 | ) | (959 | ) | (1,244 | ) | (2,250 | ) | ||||||||
| Other expense/(income), net |
1,830 | 389 | 7,424 | (1,492 | ) | |||||||||||
| Transaction expenses |
4,791 | 617 | 109,877 | 6,496 | ||||||||||||
| Loss on extinguishment of debt, net |
10,247 | 3,610 | 10,247 | 5,806 | ||||||||||||
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| Income before income taxes |
148,958 | 90,421 | 205,027 | 268,512 | ||||||||||||
| Income tax provision |
33,759 | 23,385 | 52,162 | 68,307 | ||||||||||||
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| Net income before allocation to non-controlling interests |
115,199 | 67,036 | 152,865 | 200,205 | ||||||||||||
| Net income attributable to non-controlling interests - joint ventures |
(422 | ) | (24 | ) | (3,845 | ) | (211 | ) | ||||||||
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| Net income available to Taylor Morrison Home Corporation |
$ | 114,777 | $ | 67,012 | $ | 149,020 | $ | 199,994 | ||||||||
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| Earnings per common share |
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| Basic |
$ | 0.88 | $ | 0.64 | $ | 1.17 | $ | 1.86 | ||||||||
| Diluted |
$ | 0.87 | $ | 0.63 | $ | 1.16 | $ | 1.84 | ||||||||
| Weighted average number of shares of common stock: |
||||||||||||||||
| Basic |
129,775 | 105,472 | 127,113 | 107,389 | ||||||||||||
| Diluted |
131,433 | 106,852 | 128,081 | 108,599 | ||||||||||||
Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)
| September 30, 2020 |
December 31, 2019 |
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| Assets |
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| Cash and cash equivalents |
$ | 547,916 | $ | 326,437 | ||||
| Restricted cash |
1,144 | 2,135 | ||||||
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| Total cash, cash equivalents, and restricted cash |
549,060 | 328,572 | ||||||
| Owned inventory |
5,300,106 | 3,967,359 | ||||||
| Consolidated real estate not owned |
122,776 | 19,185 | ||||||
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| Total real estate inventory |
5,422,882 | 3,986,544 | ||||||
| Land deposits |
138,160 | 39,810 | ||||||
| Mortgage loans held for sale |
172,501 | 190,880 | ||||||
| Derivative assets |
6,800 | 2,099 | ||||||
| Lease right of use assets |
71,319 | 36,663 | ||||||
| Prepaid expenses and other assets, net |
223,891 | 85,515 | ||||||
| Other receivables, net |
90,722 | 70,447 | ||||||
| Investments in unconsolidated entities |
125,132 | 128,759 | ||||||
| Deferred tax assets, net |
273,983 | 140,466 | ||||||
| Property and equipment, net |
95,546 | 85,866 | ||||||
| Intangible assets, net |
950 | 637 | ||||||
| Goodwill |
663,502 | 149,428 | ||||||
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| Total assets |
$ | 7,834,448 | $ | 5,245,686 | ||||
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| Liabilities |
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| Accounts payable |
$ | 188,470 | $ | 164,580 | ||||
| Accrued expenses and other liabilities |
398,489 | 325,368 | ||||||
| Lease liabilities |
80,270 | 42,317 | ||||||
| Income taxes payable |
30,497 | 3,719 | ||||||
| Customer deposits |
256,295 | 167,328 | ||||||
| Estimated development liability |
35,444 | 36,705 | ||||||
| Senior notes, net |
2,452,526 | 1,635,008 | ||||||
| Loans payable and other borrowings |
332,953 | 182,531 | ||||||
| Revolving credit facility borrowings |
285,000 | — | ||||||
| Mortgage warehouse borrowings |
109,593 | 123,233 | ||||||
| Liabilities attributable to consolidated real estate not owned |
122,776 | 19,185 | ||||||
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| Total liabilities |
$ | 4,292,313 | $ | 2,699,974 | ||||
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| Stockholders’ Equity |
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| Total stockholders’ equity |
3,542,135 | 2,545,712 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 7,834,448 | $ | 5,245,686 | ||||
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Homes Closed and Home Closings Revenue, Net:
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
| East |
1,216 | 1,029 | 18.2% | $ | 499,212 | $ | 434,446 | 14.9% | $ | 411 | $ | 422 | (2.6)% | |||||||||||||||||||||||
| Central |
913 | 653 | 39.8 | 423,642 | 309,954 | 36.7 | 464 | 475 | (2.3) | |||||||||||||||||||||||||||
| West |
1,340 | 614 | 118.2 | 717,730 | 328,710 | 118.3 | 536 | 535 | 0.2 | |||||||||||||||||||||||||||
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| Total |
3,469 | 2,296 | 51.1% | $ | 1,640,584 | $ | 1,073,110 | 52.9% | $ | 473 | $ | 467 | 1.3% | |||||||||||||||||||||||
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| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| Homes Closed | Home Closings Revenue, Net | Average Selling Price | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
| East |
3,298 | 3,063 | 7.7% | $ | 1,362,082 | $ | 1,258,758 | 8.2% | $ | 413 | $ | 411 | 0.5% | |||||||||||||||||||||||
| Central |
2,791 | 1,944 | 43.6 | 1,270,215 | 924,411 | 37.4 | 455 | 476 | (4.4) | |||||||||||||||||||||||||||
| West |
3,353 | 1,821 | 84.1 | 1,743,921 | 1,022,083 | 70.6 | 520 | 561 | (7.3) | |||||||||||||||||||||||||||
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| Total |
9,442 | 6,828 | 38.3% | $ | 4,376,218 | $ | 3,205,252 | 36.5% | $ | 463 | $ | 469 | (1.3)% | |||||||||||||||||||||||
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Net Sales Orders:
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| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| Net Sales Orders | Sales Value | Average Selling Price | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
| East |
1,548 | 1,161 | 33.3% | $ | 682,744 | $ | 463,201 | 47.4% | $ | 441 | $ | 399 | 10.5% | |||||||||||||||||||||||
| Central |
1,133 | 759 | 49.3 | 537,265 | 360,413 | 49.1 | 474 | 475 | (0.2) | |||||||||||||||||||||||||||
| West |
1,744 | 620 | 181.3 | 946,439 | 331,133 | 185.8 | 543 | 534 | 1.7 | |||||||||||||||||||||||||||
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| Total |
4,425 | 2,540 | 74.2% | $ | 2,166,448 | $ | 1,154,747 | 87.6% | $ | 490 | $ | 455 | 7.7% | |||||||||||||||||||||||
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| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| Net Sales Orders | Sales Value | Average Selling Price | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
| East |
4,085 | 3,611 | 13.1% | $ | 1,728,989 | $ | 1,469,468 | 17.7% | $ | 423 | $ | 407 | 3.9% | |||||||||||||||||||||||
| Central |
3,042 | 2,380 | 27.8 | 1,398,896 | 1,129,506 | 23.9 | 460 | 475 | (3.2) | |||||||||||||||||||||||||||
| West |
4,217 | 1,974 | 113.6 | 2,221,838 | 1,061,312 | 109.3 | 527 | 538 | (2.0) | |||||||||||||||||||||||||||
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| Total |
11,344 | 7,965 | 42.4% | $ | 5,349,723 | $ | 3,660,286 | 46.2% | $ | 472 | $ | 460 | 2.6% | |||||||||||||||||||||||
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Sales Order Backlog:
| As of September 30, | ||||||||||||||||||||||||||||||||||||
| Sold Homes in Backlog | Sales Value | Average Selling Price | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||
| East |
2,603 | 2,186 | 19.1% | $ | 1,158,391 | $ | 935,273 | 23.9% | $ | 445 | $ | 428 | 4.0% | |||||||||||||||||||||||
| Central |
2,331 | 1,856 | 25.6 | 1,119,626 | 936,889 | 19.5 | 480 | 505 | (5.0) | |||||||||||||||||||||||||||
| West |
2,827 | 1,253 | 125.6 | 1,474,011 | 662,440 | 122.5 | 521 | 529 | (1.5) | |||||||||||||||||||||||||||
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| Total |
7,761 | 5,295 | 46.6% | $ | 3,752,028 | $ | 2,534,602 | 48.0% | $ | 483 | $ | 479 | 0.8% | |||||||||||||||||||||||
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Average Active Selling Communities:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| East |
145 | 153 | (5.2)% | 146 | 162 | (9.9)% | ||||||||||||||||||
| Central |
122 | 135 | (9.6) | 130 | 138 | (5.8) | ||||||||||||||||||
| West |
126 | 58 | 117.2 | 116 | 59 | 96.6 | ||||||||||||||||||
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| Total |
393 | 346 | 13.6% | 392 | 359 | 9.2% | ||||||||||||||||||
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Reconciliation of Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this press release relating to: (i) adjusted income before income taxes, (ii) EBITDA and adjusted EBITDA, (iii) adjusted net income and adjusted earnings per share, (iv) net homebuilding debt to capitalization ratio, (v) adjusted home closings gross margin, and (vi) adjusted income before income taxes margin.
Adjusted income before income taxes is a non-GAAP financial measure that reflects our income before income taxes excluding the impact of purchase accounting adjustments related to the acquisition of William Lyon Homes (“WLH”), transaction expenses and loss on extinguishment of debt, as applicable. 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 income/(expense), net, amortization of capitalized interest, income taxes, depreciation and amortization (EBITDA), non-cash compensation expense, if any, purchase accounting adjustments relating to the acquisition of WLH, transaction expenses and loss on extinguishment of debt, as applicable. Adjusted net income and adjusted earnings per share are non-GAAP financial measures that reflect the net income available to the Company excluding the impact of purchase accounting adjustments relating to the acquisition of WLH, transaction expenses, loss on extinguishment of debt and the tax impact due to such adjustments. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, less unamortized debt issuance costs/premiums and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity). 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 purchase accounting adjustments relating to the acquisition of WLH.
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. A reconciliation of our forward-looking net homebuilding debt to capitalization ratio to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. 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 income before income taxes and related margin, adjusted net income and adjusted earnings per share, 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.
Adjusted Net Income and Adjusted Earnings Per Share
| Three Months Ended September 30, |
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| (Dollars in thousands, except per share data) | 2020 | 2019 | ||||||
| Net income available to TMHC |
$ | 114,777 | $ | 67,012 | ||||
| William Lyon Homes related purchase accounting adjustments |
8,913 | — | ||||||
| Transaction expenses |
4,791 | 617 | ||||||
| Loss on extinguishment of debt, net |
10,247 | 3,610 | ||||||
| Tax impact due to Purchase accounting adjustments, Transaction expenses and Loss on extinguishment of debt |
(5,810) | (1,095) | ||||||
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| Adjusted net income |
$ | 132,918 | $ | 70,144 | ||||
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| Basic weighted average shares |
129,775 | 105,472 | ||||||
| Adjusted earnings per common share - Basic |
$ | 1.02 | $ | 0.67 | ||||
| Diluted weighted average shares |
131,433 | 106,852 | ||||||
| Adjusted earnings per common share - Diluted |
$ | 1.01 | $ | 0.66 | ||||
Adjusted Income Before Income Taxes and Related Margin
| Three Months Ended September 30, |
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| (Dollars in thousands) | 2020 | 2019 | ||||||
| Income before income taxes |
$ | 148,958 | $ | 90,421 | ||||
| William Lyon Homes related purchase accounting adjustments |
8,913 | — | ||||||
| Transaction expenses |
4,791 | 617 | ||||||
| Loss on extinguishment of debt, net |
10,247 | 3,610 | ||||||
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| Adjusted income before income taxes |
$ | 172,909 | $ | 94,648 | ||||
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| Total revenues |
$ | 1,699,434 | $ | 1,105,105 | ||||
| Income before income taxes margin |
8.8% | 8.2% | ||||||
| Adjusted income before income taxes margin |
10.2% | 8.6% | ||||||
Adjusted Home Closings Gross Margin
| Three Months Ended September 30, | ||||||||
| (Dollars in thousands) | 2020 | 2019 | ||||||
| Home closings revenue |
$ | 1,640,584 | $ | 1,073,110 | ||||
| Cost of home closings |
1,358,196 | 874,102 | ||||||
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| Home closings gross margin |
$ | 282,388 | $ | 199,008 | ||||
| William Lyon Homes homebuilding related purchase accounting adjustments |
8,913 | — | ||||||
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| Adjusted home closings gross margin |
$ | 291,301 | $ | 199,008 | ||||
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| Home closings gross margin as a percentage of home closings revenue |
17.2% | 18.5% | ||||||
| Adjusted home closings gross margin as a percentage of home closings revenue |
17.8% | 18.5% | ||||||
EBITDA and Adjusted EBITDA Reconciliation
| Three Months Ended September 30, | ||||||||
| (Dollars in thousands) | 2020 | 2019 | ||||||
| Net income before allocation to non-controlling interests |
$ | 115,199 | $ | 67,036 | ||||
| Interest income, net |
(347) | (959) | ||||||
| Amortization of capitalized interest |
34,321 | 22,144 | ||||||
| Income tax provision |
33,759 | 23,385 | ||||||
| Depreciation and amortization |
1,714 | 1,262 | ||||||
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| EBITDA |
$ | 184,646 | $ | 112,868 | ||||
| Non-cash compensation expense |
5,272 | 3,693 | ||||||
| William Lyon Homes related purchase accounting adjustments |
8,913 | — | ||||||
| Transaction expenses |
4,791 | 617 | ||||||
| Loss on extinguishment of debt, net |
10,247 | 3,610 | ||||||
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| Adjusted EBITDA |
$ | 213,869 | $ | 120,788 | ||||
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| Total revenues |
$ | 1,699,434 | $ | 1,105,105 | ||||
| EBITDA as a percentage of total revenues |
10.9% | 10.2% | ||||||
| Adjusted EBITDA as a percentage of total revenues |
12.6% | 10.9% | ||||||
Net Homebuilding Debt to Capitalization Ratio Reconciliation
| (Dollars in thousands) | As of September 30, 2020 |
As of June 30, 2020 |
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| Total debt |
$ | 3,180,072 | $ | 3,769,740 | ||||||
| Less unamortized debt issuance premiums, net |
2,526 | 23,832 | ||||||||
| Less mortgage warehouse borrowings |
109,593 | 149,784 | ||||||||
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| Total homebuilding debt |
$ | 3,067,953 | $ | 3,596,124 | ||||||
| Less cash and cash equivalents |
547,916 | 674,685 | ||||||||
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| Net homebuilding debt |
$ | 2,520,037 | $ | 2,921,439 | ||||||
| Total equity |
3,542,135 | 3,424,740 | ||||||||
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| Total capitalization |
$ | 6,062,172 | $ | 6,346,179 | ||||||
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| Net homebuilding debt to capitalization ratio |
41.6% | 46.0% | ||||||||