Q4 2025 Taylor Morrison Home Corp Earnings Call

February 11, 2026

Speaker #1: Good morning, and welcome to Taylor Morrison's fourth quarter 2025 Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

Operator: Good morning, and welcome to Taylor Morrison's Q4 2025 Earnings Webcast. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations. Please go ahead.

Speaker #1: As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations.

Speaker #1: As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations. Please go ahead.

Speaker #2: Thank you, and good morning. We appreciate you joining us today. Before we begin, let me remind you that this call, including the question-and-answer session, will include forward-looking statements.

Mackenzie Aron: Thank you, and good morning. We appreciate you joining us today. Before we begin, let me remind you that this call, including the question-and-answer session, will include forward-looking statements. These statements are subject to the safe harbor statement for forward-looking information that you can review in our earnings release on the investor relations portion of our website at taylormorrison.com. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the release and in our filings with the SEC, and we do not undertake any obligation to update our forward-looking statements. In addition, we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in the release where applicable.

Speaker #2: These statements are subject to the Safe Harbor Statement for forward-looking information that you can review in our earnings release, on the Investor Relations portion of our website, at taylormorrison.com.

Speaker #2: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to those factors identified in the release and in our filings with the SEC, and we do not undertake any obligation to update our forward-looking statements.

Speaker #2: In addition, we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in the release, where applicable. Now, I will turn the call over to our Chairman and Chief Executive.

Mackenzie Aron: Now, I will turn the call over to our Chairman and Chief Executive Officer, Sheryl Palmer.

Speaker #2: Officer, Sheryl Palmer. Thank

Speaker #3: you, Mackenzie, and good morning, everyone. Joining me is Kurt VanHyfte, our Chief Financial Officer, and Eric Heuser, our Chief Corporate Operations Officer. I am pleased to share the results of our fourth quarter performance and look forward to sharing an update on our strategic priorities for 2026.

Sheryl Palmer: Thank you, Mackenzie, and good morning, everyone. Joining me is Curt VanHyfte, our Chief Financial Officer, and Erik Heuser, our Chief Corporate Operations Officer. I am pleased to share the results of our Q4 performance and look forward to sharing an update on our strategic priorities for 2026. Our Q4 results met or exceeded our expectations across nearly all key operational metrics, despite challenging market conditions. These results concluded a solid year of performance in 2025, during which we delivered nearly 13,000 homes at an adjusted home closings gross margin of 23%, and generated 40 basis points of SG&A expense leverage on essentially flat home closings revenue. Coupled with $381 million of share repurchases, these results drove a 13% return on equity and 14% growth in our book value per share.

Speaker #3: Our fourth quarter results met or exceeded our expectations across nearly all key operational metrics, despite challenging market conditions. These results concluded a solid year of performance in 2025, during which we delivered nearly 13,000 homes at an adjusted home closings gross margin of 23% and generated 40 basis points of SG&A expense leverage on essentially flat home closings revenue.

Speaker #3: Coupled with $381 million of share repurchases, these results drove a 13% return on equity and 14% growth in our book value per share. With the majority of home builders having already reported year-end results, it's clear that Taylor Morrison’s 2025 performance stands apart.

Sheryl Palmer: With the majority of homebuilders having already reported year-end results, it's clear that Taylor Morrison's 2025 performance stands apart. Among our peers, we delivered one of the highest home closings gross margin in the industry. We're the only to achieve year-over-year SG&A leverage and modestly increased our closings volume while the industry was generally flat to down, which together drove more resilient bottom-line earnings and returns. In a year characterized by softer consumer confidence and heightened pricing competition, and inventory levels, we believe that these results reflect the effectiveness of our diversified operating model and broad consumer reach across our national footprint of well-located communities. Given the market's persistent affordability constraints, which are felt most heavily among first-time homebuyers, our portfolio's unique concentration on move-up and resort lifestyle customers has helped us to navigate the market's headwinds.

Speaker #3: Among our peers, we delivered one of the highest home closings gross margins in the industry, where the only to achieve year-over-year SG&A leverage and modestly increased our closings volume while the industry was generally flat to down, which together drove more resilient bottom-line earnings and returns.

Speaker #3: In a year characterized by softer consumer confidence, heightened pricing competition, and elevated inventory levels, we believe that these results reflect the effectiveness of our diversified operating model and broad consumer reach across our national footprint of well-located communities.

Speaker #3: Given the market's persistent affordability constraints, which are felt most heavily among first-time home buyers, our portfolios' unique concentration on move-up and resort lifestyle customers has helped us to navigate the market's headwinds.

Speaker #3: We pride ourselves on developing thoughtfully designed communities, often with amenities, in prime locations, and offering a balanced mix of spec and to-be-built home offerings that meet the needs and aspirations of our customers.

Sheryl Palmer: We pride ourselves on developing thoughtfully designed communities, often with amenities in prime locations, and offering a balanced mix of spec and to-be-built home offerings that meet the needs and aspirations of our customers. I believe this is perhaps Taylor Morrison's greatest competitive advantage, the desire to deeply understand our consumers, respond to their feedback, and deliver a home buying experience that is second to none. It is this unrelenting focus on our customers that has recently earned us the reputation as America's Most Trusted Builder for the 11th consecutive year, and to Fortune's Most Admired Companies list. I believe these strengths, our diversification, attractive product offerings, and consumer-centric philosophy will be even more critical to our success as we move forward.

Speaker #3: I believe this is perhaps Taylor Morrison's greatest competitive advantage: the desire to deeply understand our consumers, respond to their feedback, and deliver a home-buying experience that is second to none.

Speaker #3: It is this unrelenting focus on our customers that has recently earned us the reputation as America's most trusted builder for the 11th consecutive year, and to Fortune's most admired company's list.

Speaker #3: I believe these strengths—our diversification, attractive product offerings, and consumer-centric philosophy—will be even more critical to our success as we move forward. While there are reasons for optimism, industry-wide inventory levels remain elevated, and consumers remain highly attuned to competitive dynamics in the marketplace and are closely weighing incentives, pricing, and spec offerings in their purchase decisions.

Sheryl Palmer: While there are reasons for optimism, industry-wide inventory levels remain elevated, and consumers remain highly attuned to competitive dynamics in the marketplace and are closely weighing incentives, pricing, and spec offerings in their purchase decisions. While affordability has improved over the last year alongside lower interest rates, wage growth, and price discovery, I believe consumer confidence in the broader economic and political outlook will be critical for further demand recovery. Matt said, "I'm cautiously encouraged by the sales success we achieved in the fourth quarter of 2025, and by the early momentum thus far in 2026." Our fourth quarter monthly absorptions outperformed typical seasonal patterns as our pace held steady from the third quarter, defying the average mid-single-digit sequential decline we have historically experienced.

Speaker #3: And while affordability has improved over the last year alongside lower interest rates, wage growth, and price discovery, I believe consumer confidence in the broader economic and political outlook will be critical for further demand recovery.

Speaker #3: That said, I'm cautiously encouraged by the sales success we achieved in the fourth quarter of 2025 and by the early momentum thus far in 2026.

Speaker #3: Our fourth quarter monthly absorptions outperform typical seasonal patterns, as our pace held steady from the third quarter defying the average mid-single-digit sequential decline, we have historically experienced.

Speaker #3: This is notable considering that we carefully

Sheryl Palmer: This is notable considering that we carefully managed pace and price, community by community, and in some cases, chose to be more patient as peers pushed through inventory into year-end and held incentives on new orders stable sequentially. This momentum continued into January, even with the winter storm disruptions, and early signs are positive as the spring selling season generally kicks off in full force this week. The Q4 strength was driven primarily by our premier Esplanade resort lifestyle communities, which experienced 7% year-over-year net order growth. This was followed by a low single-digit decline in move-up sales, while non-Esplanade resort lifestyle and entry-level orders were down in the mid- to high-single digits. On a mix basis, our orders by buyer group stayed relatively consistent quarter-over-quarter at 31% entry level, 49% move-up, and 20% resort lifestyle.

Speaker #1: pace Managed and price community by community and in some cases chose to be more patient as peers push through inventory into year end and held incentives on new orders , chose to be more patient as push peers through inventory into year end and held incentives on new orders , stable sequentially .

Speaker #1: This momentum continued into January . Even with the winter storm disruptions and early are positive as the spring selling season generally kicks off in full force .

Speaker #1: This week . The fourth quarter strength was driven primarily by our Premier Esplanade Resort lifestyle communities , which experienced 7% year over year .

Sheryl Palmer: From a market perspective, sales were strongest in our east and west areas, with most of our Florida markets, California, and Phoenix increasing year-over-year, while our central region was slower due to softness across Texas, particularly in Austin. As we look ahead, I expect 2026 to be another solid year for our organization, albeit one focused on setting the stage for a re-acceleration of growth in 2027 and beyond. I'd like to walk through the moving pieces that are influencing our outlook for this year, while Curt will provide the specifics of our guidance in just a moment. Given slower sales of to-be-built homes in 2025, we entered this year with a lower than normal backlog of just over 2,800 homes.

Speaker #1: Percent resort lifestyle from a market perspective . Sales were strongest in our East and west areas , with most of our Florida , California markets and Phoenix , increasing year over year .

Speaker #1: While our central region was slower due to softness across Texas , particularly in Austin . As we look ahead , I expect 2026 to be another for our solid year organization , albeit one focused on setting the stage for a re-acceleration of growth in 2027 and beyond .

Speaker #1: I'd like to walk through the moving pieces that are influencing our outlook for this year . While Kurt will provide the specifics of our guidance in just a moment , given slower sales of to built homes in 2025 , we entered this year with a lower than normal backlog of just over 2800 homes .

Sheryl Palmer: As a result, this year's home closing deliveries and margins will be more dependent on sales during the spring selling season than is typical for our business. Positively, we expect to accelerate the number of new community openings in 2026 from 2025, with well over 100 new outlets planned, including over 20 new Esplanade outlets, which are already supported by deep interest lists. The majority of these outlets will open for sales in the first half of the year and begin contributing closings in the second half and into 2027. In addition, the improvement in construction cycle times over the last 2 years has greatly enhanced our production flexibility, with homes now able to start well into Q3 and still close by year-end in many of our markets.

Speaker #1: As a result , this year's home closing deliveries and margins will be more dependent on sales during the spring selling season than is typical for our business .

Speaker #1: Positively , we expect to accelerate the number of new community openings in 2026 with from 2025 , well over 100 new outlets planned , including over 20 new Esplanade outlets , which are already supported by interest lists .

Speaker #1: The majority of these outlets will open for sales in the first half of the year, and begin contributing closings in the second half and into 2027.

Speaker #1: In addition, the improvement in construction cycle times over the last two years has greatly enhanced our production flexibility, with homes now able to start well into the third quarter and still close by year-end in many of our markets.

Sheryl Palmer: Based on targeted consumer groups in the move-up and resort lifestyle segments, where personalization is valued, we expect new community openings to help shift our sales mix back to a more balanced mix of spec and to-be-built orders. We are already seeing signs of this shift back to more historic preferences, with to-be-built sales in January gaining 700 basis points of share versus the fourth quarter, when we sold a record number of intra-quarter spec closings. Given the meaningfully higher average gross margin on to-be-built homes, we believe this mix shift will be an important driver of our long-term margin potential. However, in the near term, while we have reduced our spec home inventory by 24% since the second quarter of 2025, we still ended the year with nearly 3,000 unsold homes, including just over 1,200 finished homes.

Speaker #1: Based on targeted consumer groups and the move up and resort lifestyle segments where personalization is valued , we expect new openings to community help shift our sales back to a more balanced mix of spec , and to be built orders .

Speaker #1: We are already seeing signs of this shift back to more historic preferences with to be built sales in January gaining 700 basis points of versus the share fourth quarter when we sold a record number of intra quarter spec closings .

Speaker #1: Given the meaningfully higher average gross margin on Tubby built homes , we believe this mix shift will be an important driver of our long term margin potential .

Speaker #1: However , in the near term , while we have reduced our spec home inventory by 24% since the second quarter of 2025 , we still ended the year with nearly 3000 unsold homes , including just over 1200 finished homes .

Sheryl Palmer: We are focused on continuing to responsibly sell through this inventory while being highly selective in putting new specs into production. This inventory management is expected to temporarily impact our gross margins in the first half of the year. Looking further out, we continue to target outsized growth over the next many years, including a continued aspiration to reach 20,000 closings, but we will not do so simply for growth's sake. Our capital allocation and strategic priorities are firmly rooted in generating attractive returns on our invested capital throughout housing cycles. With competitive pricing pressures unlikely to meaningfully abate in the foreseeable future and housing fundamentals continuing to evolve, we are taking proactive steps to ensure our portfolio remains well-positioned to perform regardless of the market backdrop. For one, we are limiting incremental land investment in non-core submarkets that primarily cater to the most price-sensitive buyers.

Speaker #1: We are focused on continuing to responsibly sell through this inventory while being highly selective in putting new specs into production . This inventory management is expected to temporarily impact our gross margins in the first half of the year .

Speaker #1: Looking further out , we continue to target outsized growth over the next many years , including a continued aspiration to 20,000 closings . reach But we will not do so simply for growth's sake .

Speaker #1: Our capital allocation and strategic priorities are firmly rooted in generating attractive returns on invested capital throughout housing cycles , with competitive pricing pressures unlikely to meaningfully abate in the foreseeable future , and housing fundamentals continuing to evolve .

Speaker #1: We are taking proactive steps to ensure our portfolio remains well positioned to perform regardless of the market backdrop . For one , we are limiting incremental land investment in non-core submarkets that primarily cater to the most price sensitive buyers .

Sheryl Palmer: While these locations make up only a small portion of our overall portfolio, greater pricing pressure and a reliance on spec inventory in these areas has compressed margin opportunities versus comparable core markets. Over time, this shift will allow us to concentrate our efforts on serving more discerning entry-level demand, where our offerings are more strategically aligned. As Erik will discuss, we believe we are best able to meet the need for affordable single-family housing through our differentiated build-to-rent platform, Yardly, with a model that is both financially sustainable and supported by compelling demand tailwinds. We also expect to reinforce our focus on the first and second move-up segments, which have long represented the core of our company's expertise and customer base.

Speaker #1: While these locations make up only a small portion of our overall portfolio , greater pricing pressure and a reliance on spec inventory in these areas has compressed margin opportunities versus comparable core markets over time , this shift will allow us to concentrate our serving more discerning entry on efforts level demand , where our offerings are more strategically aligned .

Speaker #1: As Eric will discuss , we believe we are best able to meet the need for affordable single family housing through our differentiated build to rent platform .

Speaker #1: Yardley , with a model that is both financially sustainable and supported by compelling demand tailwinds . We also expect to reinforce our focus on the first and second move up segments , which have long represented the core of our company's expertise and customer base .

Sheryl Palmer: These buyers value the choice, community development, and prime locations that distinguish our offerings and often invest in lot and option selections that help sustain above-average margin and returns. In 2025, these combined lot and option premiums represented nearly 19% of our base price. In addition, demographics in the move-up segment are highly supportive of future growth, with outsized net population gains projected among 40- to 55-year-olds over the next decade, behind only those aged 70+. At the other end of the consumer spectrum, we will also continue to invest in the differentiated strength of our resort lifestyle brand, Esplanade. Unlike traditional active adult offerings, Esplanade communities deliver a lifestyle-first experience, complete with luxury amenities and concierge-level services that extend well beyond the home itself. This unique value proposition drives superior home prices and gross margins that consistently exceed the balance of our business.

Speaker #1: These buyers value the choice community development and prime locations that distinguish our offerings , and often invest in Lot and option selections that help sustain above average margin and returns in 2025 .

Speaker #1: These combined lot and option premiums represented nearly 19% of our base price . In addition move , demographics in the up are highly supportive of future growth , with outsized net population gains projected among 40 to 55 year olds over the next decade , behind only those aged 70 plus .

Speaker #1: At the other end of the consumer spectrum, we will also continue to invest in the differentiated strength of our resort lifestyle brand, Esplanade.

Speaker #1: Unlike traditional active adult offerings, communities deliver a lifestyle-first experience, complete with luxury amenities and concierge-level services that extend well beyond the home itself.

Speaker #1: This unique value proposition drives superior home prices and gross margins that consistently exceed the balance of our business . With a strong pipeline of Esplanade communities coming soon and opportunities for brand expansion in many of our markets .

Sheryl Palmer: With a strong pipeline of Esplanade communities coming soon and opportunities for brand expansion in many of our markets, we expect this segment's contribution to our bottom line to grow meaningfully in the years ahead. Finally, we are doubling down on innovation across the organization. From the sales floor to purchasing, land due diligence, financial services, and back-office functions, we have made significant strides in deploying our proprietary digital sales tools to reduce friction during the customer journey and AI-enabled processes to enhance efficiency and manage costs. For example, we have developed a proprietary AI-powered platform that today houses digital tools and AI agents spanning purchasing, sales, customer service, financial services, and employee resources. On the sales floor, our Customer 360 agent gives field leaders a comprehensive, real-time view of our customer's journey from contract through warranty.

Speaker #1: We expect this segment contribution to our bottom line to grow meaningfully in the ahead finally , we . And years doubling down on innovation across the organization from the sales floor to purchasing land , due diligence , financial services and back office functions .

Speaker #1: We have made significant strides in deploying our proprietary digital sales tools to reduce friction during the customer journey and AI-enabled processes to enhance efficiency and manage costs.

Speaker #1: For example , we have developed a proprietary AI powered platform that today houses digital tools and AI spanning agents purchasing , sales , customer service , financial services , and employee resources .

Speaker #1: On the floor, our Customer 360 agent gives field leaders a comprehensive, real-time view of our customers' journey from contract through warranty.

Sheryl Palmer: In purchasing, AI-powered tools allow our teams to analyze purchase orders and query procurement data using natural language, while also enabling our purchasing standardization initiatives. We will continue to scale these technologies to better serve our customers, streamline our operations, and strengthen our competitive position. With that, let me now turn the call over to Erik.

Speaker #1: In purchasing AI powered tools allow our teams to analyze , purchase orders and query procurement data using natural language , while also enabling our purchasing standardization initiatives .

Speaker #1: We will continue to scale these technologies to better serve our customers , streamline our operations and strengthen our competitive position . With that , let me now turn the call over to Eric .

Erik Heuser: Thanks, Sheryl, and good morning, everyone. At year-end, we owned or controlled 78,835 homebuilding lots, of which 54% were controlled off-balance sheet. This compares to 86,153 lots at the end of 2024, of which 57% were controlled. The decline in our controlled ratio, which we expect to be temporary, reflects the impact of normal course takedowns in a few of our larger assets that were being seller-financed, as well as recent walkaways from controlled lot deals as we have reevaluated our pipeline against current market conditions. Over the long term, we continue to target a controlled ratio of at least 65% as we seek to optimize our capital efficiency and manage portfolio risk.

Speaker #2: Sheryl , and good morning , everyone Thanks , . At owned end , we or year controlled 78,835 home building , lots of which 54% were controlled off balance sheet .

Speaker #2: This compares to 86,153 lots at the end of 2024 , of which 57% were controlled . The decline in our controlled ratio , which we expect to be temporary , reflects the impact of normal course take downs and a few of our larger assets that were being seller financed , as well as recent walk aways from controlled lot deals .

Speaker #2: As we have reevaluated our pipeline against current market conditions over the long term , we continue to target a controlled ratio of at least seek to optimize our 65% as we capital efficiency and manage portfolio risk based on trailing 12 month home closings .

Erik Heuser: Based on trailing twelve-month home closings, we owned 2.8 years of lots out of a total of 6.1 years of controlled supply at year-end. This was similar to 2.8 years owned and 6.6 years controlled at the end of 2024. The majority of our lots remain in prime locations within core submarkets, where we see the strongest long-term fundamentals. While we selectively invested in tertiary locations as work from home expanded, we have since shifted that limited portion of investment allocations back to core markets. Notably, 85% of our 2025 investment approvals were deemed to be in core locations based on consumer desirability. Our recent consumer research reinforces this focus. Most of our buyers view their chosen community as core, and they consistently tell us that the overall community design is as or more important than the home itself.

Speaker #2: We owned 2.8 years of lots out of a total of 6.1 years of controlled supply at year end . This was similar to 2.8 years owned and 6.6 years controlled .

Speaker #2: At the end of 2024 , the majority of our lots remain in prime locations within core submarkets , where we see the strongest long term fundamentals .

Speaker #2: While we selectively invested in tertiary locations as work from home expanded , we have since shifted that limited portion of investment allocations back to core markets .

Speaker #2: Notably , 85% of our 2025 investment approvals deemed to be in core locations based on consumer desirability for a recent consumer research reinforces this focus Most of .

Speaker #2: our buyers view their chosen as community core , and they consistently tell us that the overall community design is as or more home important than the itself .

Erik Heuser: Furthermore, 80% of our buyers say that wellness is important to their purchase decision, and even a higher percentage in our Esplanade communities, where hundreds of residents hold wellness club memberships. As a result, we believe our emphasis on prime locations, thoughtful community development, and amenity offerings position us well, particularly as national new home supply remains elevated, especially at the entry level. In 2025, homebuilding land investment was approximately $2.2 billion, down slightly from $2.4 billion in 2024. This was below our prior full-year target of approximately $2.3 billion, reflecting our cautiousness in approving new land deals and additional phases in the current market environment.

Speaker #2: Furthermore , 80% of our buyers say that wellness is important to their purchase decision and even a higher percentage in our Esplanade communities where hundreds of residents hold wellness club memberships .

Speaker #2: As a result , we believe our emphasis on prime locations , thoughtful community development and amenity offerings position us well , particularly as national new home supply remains elevated , especially at the entry level .

Speaker #2: In 2025 . Home building land investment was approximately $2.2 billion , down slightly from $2.4 billion in 2024 . This was below our prior full year target of approximately $2.3 billion , reflecting our cautiousness in approving new land deals and additional phases in the current market environment .

Erik Heuser: With a healthy land pipeline already controlled, we expect to invest around $2 billion in 2026, with a renewed emphasis on opportunities in move-up and resort lifestyle positions, consistent with the strategic priorities discussed by Sheryl. Before wrapping up, I'd like to now spend a moment discussing our build-to-rent business, Yardly. Yardly develops rental communities akin to horizontal apartments that blend a single-family living experience, complete with private backyards and amenities, with the affordability and flexibility of renting. Developed exclusively as rental homes, these communities provide a desirable and affordable solution for consumers looking for an alternative to traditional multifamily rental options. Unlike traditional single-family rentals of scattered home sites, our Yardly communities are zoned and mapped as single tax parcels, and transact like multifamily assets.

Speaker #2: healthy With a land pipeline already controlled , we expect to invest around $2 billion in 2026 with a renewed emphasis on opportunities and move up and resort lifestyle positions consistent with the strategic priorities discussed by Cheryl .

Speaker #2: Before wrapping up , I'd like to now spend a moment discussing our Build to rent business . Yardley . Yardley develops rental communities akin to horizontal apartments that blend a single family living experience , complete with private backyards and amenities .

Speaker #2: With the affordability and flexibility of renting, developed exclusively as rental homes, these communities provide a desirable and affordable solution for consumers looking for an alternative to traditional multifamily rental options.

Speaker #2: Unlike traditional single family rentals with scattered home sites , our Yardley communities are zoned and mapped as single tax parcels and transact like multifamily .

Erik Heuser: As a result, and given what we have come to understand to date, we do not anticipate any impact from the administration's recent executive order aimed at the single-family rental market. In Q4, we sold 1 Yardly community for approximately $55 million. At year-end, we had a total of 46 Yardly projects owned and controlled, representing approximately 10,400 home sites across 9 markets in Arizona, Texas, Florida, and the Carolinas, representing one of the industry's largest build-to-rent pipelines. Approximately 17 of these projects will be in profitable leasing operations this year, 7 of which are expected to reach targeted stabilization levels over the next 12 months. Once stabilized, we evaluate individual or packaged disposition strategies dependent on market dynamics and purchaser and equity sentiment.

Speaker #2: assets As a result , and given what we have come to understand to date , we do not anticipate any impact from the administration's recent executive order aimed at the single family rental market .

Speaker #2: In the fourth quarter , we sold one Yardley community for approximately $55 million at year end . We had a total of 46 Yardley projects owned and controlled , representing approximately 10,400 home sites across nine markets in Arizona , Texas , Florida and the Carolinas .

Speaker #2: Representing one of the industry's largest build to rent pipelines . Approximately . 17 of these projects will be in profitable leasing operations this year .

Speaker #2: Seven of which are expected to reach targeted stabilization levels over the next 12 months . Once stabilized , we evaluate individual or packaged disposition strategies dependent on market dynamics and purchaser and equity sentiment , supported by our $3 billion land bank .

Erik Heuser: Supported by our $3 billion land bank with Kennedy Lewis, we believe that we are well positioned to continue to efficiently and prudently scale this unique rental offering in the years ahead, as less than 10% of Yardly's total units are fully on our balance sheet. Now I will turn the call to Curt.

Speaker #2: With Kennedy Lewis . We believe that we are well positioned to continue to efficiently and prudently scale this unique rental offering in the years ahead , as less than 10% of Yardley's total units are fully on our balance sheet .

Curt VanHyfte: Thanks, Erik, and good morning, everyone. I will review the details of our Q4 and full year 2025 financial performance. For the Q4, reported net income was $174 million, or $1.76 per diluted share, while our adjusted net income was $188 million, or $1.91 per diluted share, after excluding the impact of pre-acquisition abandonment charges and the loss on the extinguishment of debt related primarily to the redemption of our 2027 senior notes. For the full year, reported net income was $783 million, or $7.77 per diluted share, while adjusted net income was $830 million, or $8.24 per diluted share.

Speaker #2: Now I will turn the call to Kurt .

Speaker #3: Thanks, Erik, and good morning, everyone. I will review the details of our fourth quarter and full year 2025 financial performance for the fourth quarter.

Speaker #3: Reported net income was $174 million, or $1.76 per diluted share. While our adjusted net income was $188 million, or $1.91 per diluted share.

Speaker #3: After excluding the impact of Pre-acquisition abandonment charges and the loss on the extinguishment of debt related primarily to the redemption of our 2027 senior Notes .

Speaker #3: For the full year , reported net income was $783 million , or $7.77 per diluted share . While adjusted net income was $830 million , or $8.24 per diluted share .

Curt VanHyfte: In addition to the Q4 adjustments noted previously, full-year earnings were also adjusted for real estate impairments, additional pre-acquisition abandonments, and warranty charges incurred earlier in the year. Now to sales. Net orders in the Q4 totaled 2,499 homes, which was down 5% year-over-year. This decline was driven by moderation in our monthly absorption pace to 2.4 homes per community from 2.6 a year ago, partially offset by a 1% increase in our ending community count to 341 outlets. This was supported in part by improved cancellation trends. As a percentage of gross orders, cancellations were 12.5%, down from 15.4% in the prior quarter and 13.1% a year ago.

Speaker #3: In addition to the fourth quarter adjustments noted previously , full year earnings were also adjusted for real estate impairments . Additional pre-acquisition abandonments , and warranty charges incurred earlier in the year .

Speaker #3: Now to sales net orders in the fourth quarter totaled 2499 homes , which was down 5% year over year . This decline was driven by moderation in our monthly absorption pace to 2.4 homes per community from 2.6 a year ago , partially offset by a 1% increase in our ending community count to 341 outlets .

Speaker #3: This was supported in part by improved cancellation trends as a percentage of gross orders . Cancellations were 12.5% . Down from 15.4% in the prior quarter , and 13.1% a year ago .

Curt VanHyfte: As Sheryl noted, we have well over 100 communities expected to open this year, including over 20 new outlets in Esplanade communities. These openings are expected to drive high single-digit outlet growth to 365 to 370 outlets by year-end. For Q1, we expect to end with around 360 communities. Turning to closings, we delivered 3,285 homes in Q4 at an average price of $596,000, generating home closings revenue of approximately $2 billion. Compared to our guidance, closings volume was at the high end of our expected range, and the average price was slightly ahead of expectations.

Speaker #3: As Cheryl noted , we have well over 100 communities expected to open this year , including over 20 new outlets in Esplanade communities .

Speaker #3: These openings are expected to drive high single digit outlet growth to 365 to 370 outlets by year end . For the first quarter , we expect to end with around 360 communities turning to closings .

Speaker #3: We delivered 3285 homes in the fourth quarter at an average price of $596,000 , generating home closings , revenue of approximately $2 billion compared to our guidance , closings .

Curt VanHyfte: For the full year, we delivered 12,997 homes at an average price of $597,000, producing approximately $7.8 billion of home closings revenue. Cycle time improvements continue to be a major driver of efficiency. During the quarter, we achieved about 1 week of sequential improvement, leaving us more than 5 weeks faster year-over-year and over 9 weeks faster than 2 years ago. These improvements enhance our ability to flex production and manage inventory, allowing us to start homes later for year-end closing dates. In the fourth quarter, we started 2.1 homes per community, equating to 2,136 total starts.

Speaker #3: Volume was at the high end of our expected range , and the average price was slightly ahead of expectations for the full year .

Speaker #3: We delivered 12,997 homes at an average price of $597,000 , producing approximately $7.8 billion of home closings . cycle time improvements continued to be a major driver of efficiency .

Speaker #3: During the quarter, we achieved about one week of sequential improvement, leaving us more than five weeks faster year over year and over nine weeks faster than two years ago.

Speaker #3: These improvements enhance our to ability flex production and manage inventory , allowing us to start homes later for year end closing dates in the fourth quarter .

Speaker #3: We started 2.1 homes per community , equating to 2136 total starts . We ended the quarter with 5682 homes under construction , including 2956 specks , of which 1232 were finished .

Curt VanHyfte: We ended the quarter with 5,682 homes under construction, including 2,956 specs, of which 1,232 were finished. Our total spec count was down 11% sequentially as our teams continued making progress in right sizing our inventory positions by community, with these focused sales efforts expected to continue through the first half of 2026.... Based on our backlog, sales expectations, and cycle times, we currently expect to deliver around 11,000 homes this year, including around 2,200 homes in the first quarter. We expect the average closing price to be approximately $580,000 in the first quarter, and between $580,000 to $590,000 for the full year.

Speaker #3: Our total spec count was down 11% sequentially as our teams continued making progress in rightsizing our positions inventory by community . With these focused sales efforts expected to continue through the first half of 2026 , based on our backlog , sales expectations and cycle times , we currently expect to deliver around 11,000 homes this year , including around 2200 homes in the first quarter .

Speaker #3: We average expect the closing price to be approximately $580,000 in the first quarter , and between 500 and $80,000 to $590,000 for the full year .

Curt VanHyfte: Turning to margins, our home closings gross margin was 21.8%, slightly above our prior guidance of approximately 21.5%. This compares to 22.1% in Q3 2025, and 24.8% in Q4 2024, reflecting higher incentive levels and a greater mix of lower-margin spec home closings. During the quarter, spec homes accounted for 72% of sales and 66% of closings, up from 61% and 54%, respectively, in Q4 2024. For the full year, our home closings gross margin was 22.5% on a reported basis and 23% adjusted for inventory impairments and warranty charges.

Speaker #3: Turning to margins , our home closings , gross margin was 21.8% , slightly above our prior guidance of approximately 21.5% . This compares to 22.1% in the third quarter of 2025 , and 24.8% in the fourth quarter 2020 .

Speaker #3: of For reflecting higher incentive levels and a greater mix of lower margin spec home closings quarter . during the Spec homes accounted for 72% of sales and 66% of closings , up from 61% and 54% , respectively , in the fourth quarter of 2020 .

Speaker #3: For for the full year , closings our home gross margin was 22.5% on a reported basis and 23% adjusted for inventory impairments and warranty charges .

Curt VanHyfte: This compares to a reported margin of 24.4% and an adjusted margin of 24.5% for the full year 2024. In Q1, we expect our home closings gross margin, exclusive of any inventory-related charges, to be approximately 20%, reflecting a higher share of spec homes as we prioritize the sale of existing inventory. Beyond Q1, we expect gross margins to improve gradually throughout the year, driven primarily by an increase in the share of to-be-built home deliveries and a modest reduction in incentives as the year progresses. However, the ultimate level of incentives will be highly dependent on consumer demand during the spring selling season and interest rates. We expect construction costs to be relatively stable, while lot costs are expected to be up in the mid-single-digit range.

Speaker #3: This compares to a reported margin of 24.4% and an adjusted margin of 24.5% for the full year 2020 . For in the first quarter , we expect our home closings , gross margin exclusive of any inventory related to charges be approximately 20% , reflecting a higher share of spec homes .

Speaker #3: As we prioritize the sale of existing inventory beyond the first quarter , we expect gross margins to improve gradually throughout the year . Driven primarily increase in the share be built of to home deliveries and a modest reduction in incentives as the year progresses .

Speaker #3: However , the ultimate level of incentives will be highly dependent on consumer demand during the spring selling season , and interest rates , we expect construction costs to be relatively stable , while costs are expected to be up in the mid single digit range as we gain greater visibility into the spring selling season , we will look to provide greater detail on our full year margin expectations .

Curt VanHyfte: As we gain greater visibility into the spring selling season, we will look to provide greater detail on our full-year margin expectations. We also maintain strong overhead discipline. Our SG&A ratio was 9.9% of home closings revenue in Q4, and 9.5% for the full year, a 40 basis point improvement compared to 2024. This expense leverage was driven primarily by lower payroll-related costs, while ongoing strategic consolidation efforts and efficiencies created by our digital tools further improved our cost management. For 2026, we expect our SG&A ratio to be in the mid-10% range. During the quarter, we incurred net interest expense of approximately $12 million, up from approximately $6 million a year ago, due to an increase in land banking activity.

Speaker #3: We also maintained strong overhead discipline. Our SGA ratio was 9.9% of home closings revenue in the fourth quarter and 9.5% for the full year.

Speaker #3: A 40 basis point improvement compared to 2020 . For this expense , driven leverage was primarily by lower payroll related costs . While ongoing strategic consolidation efforts and efficiencies created by our digital further tools improved our cost management .

Speaker #3: For 2026 , we expect our G&A ratio to be in the mid 10% range during the quarter . We incurred net interest expense of approximately $12 million , up from approximately $6 million a year ago due to an increase in land banking activity in 2026 .

Curt VanHyfte: In 2026, we expect net interest expense to increase modestly year-over-year. Financial services posted another strong quarter, with revenue of approximately $49 million. The team achieved an 88% capture rate, supported by competitive mortgage offerings and strategic alignment with our home building operations. Among buyers using our mortgage company, qualification metrics remained strong in the quarter, with an average credit score of 750, down payment of 21%, and household income above $183,000. In addition to the strong average credit profile, our customers and backlog were secured by average deposits of approximately $44,000 at quarter end. Now on to our balance sheet. We ended the quarter with strong liquidity of approximately $1.8 billion.

Speaker #3: We expect net interest expense to increase modestly year over year . Financial services posted another strong quarter , with revenue of approximately $49 million .

Speaker #3: The team achieved an 88% capture rate , supported by competitive mortgage offerings and strategic alignment with our home building operations among buyers . Using our mortgage company qualification metrics remain strong .

Speaker #3: In the quarter , with an average credit score of 750 , down payment of 21% , and household income above In addition $183,000 .

Speaker #3: to the average credit strong profile , our customers and backlog were secured by average deposits of approximately $44,000 at quarter end . Now on to our balance sheet .

Curt VanHyfte: This included $850 million of unrestricted cash and $928 million of available capacity on our revolving credit facility. At quarter end, our net home building debt to capitalization ratio was 17.8%, down from 20% a year ago. During the quarter, we repurchased 1.2 million shares of our common stock outstanding for $71 million. For the full year, we repurchased a total of 6.5 million shares, representing approximately 6% of our beginning diluted share count for approximately $381 million. As seen in this morning's earnings release, our board of directors approved an increase and extension of our share repurchase authorization to $1 billion. This program expires on December 31, 2027, and replaces our prior authorization.

Speaker #3: We ended the quarter with strong liquidity of approximately $1.8 billion . This included $850 million of unrestricted cash and $928 million of available capacity on our revolving credit facility at quarter end , our net homebuilding debt to capitalization ratio was 17.8% , down from 20% a year ago .

Speaker #3: During the quarter , we repurchased 1.2 million shares of our common stock outstanding for $71 million . For the full year , we repurchased a total of 6.5 million shares , representing approximately 6% of our beginning diluted share count .

Speaker #3: For approximately $381 million . As seen in this morning's earnings release , our board of directors approved an increase and extension of our share repurchase authorization to $1 billion .

Speaker #3: This program expires on December 31st , 2027 , and replaces our prior authorization . We remain committed to disciplined and returns driven capital allocation strategies , including the return of excess capital to our shareholders after investing in profitable growth opportunities and prudently managing our liabilities in 2026 , we expect to repurchase approximately $400 million of our common stock , inclusive of this repurchase target , we expect our diluted shares outstanding to average approximately 95 million in the full year , including approximately 98 million in the first quarter .

Curt VanHyfte: We remain committed to disciplined and returns-driven capital allocation strategies, including the return of excess capital to our shareholders after investing in profitable growth opportunities and prudently managing our liabilities. In 2026, we expect to repurchase approximately $400 million of our common stock. Inclusive of this repurchase target, we expect our diluted shares outstanding to average approximately 95 million in the full year, including approximately 98 million in Q1. Now, I will turn the call back over to Sheryl.

Sheryl Palmer: Thank you, Curt. To wrap up, I'd like to share a few closing thoughts on recent news headlines regarding the administration's focus on addressing the need for greater housing affordability and accessibility. As I shared last quarter, we have been encouraged by constructive dialogue with the administration and progress being made in Congress to advance housing legislation, and are prepared to participate in meaningful policy solutions.... As you heard this morning, our focus on delivering the right product to our customers, whether that be home buyers or renters, is this organization's guiding mission. We believe we have the platform to greatly scale our business as market opportunities present themselves, and we will maintain our long-standing discipline around capital allocation and investment strategies to create long-term value for our customers, communities, and shareholders.

Speaker #3: Now , I will turn the call back over to Cheryl .

Speaker #1: Thank you . Curt , to wrap up , I'd like to share a few closing thoughts on recent news headlines regarding the administration's focus on addressing the need for greater affordability and accessibility .

Speaker #1: As I shared last quarter , we have been encouraged by constructive dialogue with the administration and progress being made in Congress to advance housing legislation and are prepared to participate in meaningful policy solutions .

Speaker #1: As you heard this morning , our focus on delivering the right product to our customers , whether that be buyers or renters , is this organization's guiding mission .

Speaker #1: We believe we have the platform to greatly scale our business as market opportunities present themselves , and we will maintain our long standing discipline around capital allocation and investment strategies to create long term value for our customers , communities , and shareholders .

Sheryl Palmer: Before I close, I want to express my sincere gratitude to our entire team for delivering a strong finish to 2025, and for the effort and dedication I know you will demonstrate as we move through 2026. Together, we will continue to push our company forward and achieve even greater success as we refocus and recommit to all that makes Taylor Morrison so unique. Thank you to everyone who joined us today, and let's now open the call to your questions. Operator, please provide our participants with instructions.

Speaker #1: Before I close , I want to express my sincere gratitude to our entire team for delivering a strong finish to 2025 and for the effort and dedication .

Speaker #1: I know you will demonstrate as we move through 2026 . Together , we will continue to push our company forward and achieve even greater success as we refocus and recommit to all that makes Taylor Morrison Home so unique .

Speaker #1: Thank you to everyone who joined us today , let's now and open the call to your questions . Operator . Please provide our participants with instructions

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Matthew Bouley with Barclays. Your line is open. Please go ahead.

Speaker #4: will now

Speaker #4: begin the . We question and answer session . Please limit yourself to one question and one follow up . If you would like to ask a question , please press star one on your telephone keypad to withdraw your question , press star one again .

Speaker #4: Pick up your handset when asking a question . If you are muted locally , please remember to unmute your device . Please stand by now while we compile the Q&A roster .

Speaker #4: Your first question comes from the line of Matthew Bouley with Your Barclays . line is open . Please go ahead .

Matthew Bouley: Hey, good morning, everyone. Thank you for taking the questions.

Sheryl Palmer: Morning.

Matthew Bouley: Wanted to start around, sort of the long-term view around, the mix of the business, the buyer segments, and geographies. Some interesting commentary there around, you know, where you'll be leaning in and out of, of, land investments in the future, and sort of the favorable demographics for the move-up population going forward. So I guess the question is, number one, where do you see the entry-level mix going, over time? And number two, just kind of you know, anything around the, you know, specific geographies or submarkets, to kind of help us understand, you know, where do you think you have the right scale, where you want to continue to lead into, versus sort of where do you want to de-emphasize? Thank you.

Speaker #5: Total .

Speaker #6: Hey . Good morning everyone . Thank you for taking the questions . I wanted to start around sort of the long term view around the mix of the business .

Speaker #6: The buyer segments and geographies . It's interesting commentary there around , you know , where you'll be leaning in and out of , of land investments in the future .

Speaker #6: And sort of the favorable demographics for the move up population forward . going So I guess the question is , number one , where do you see the entry level mix going over time ?

Speaker #6: And number two , just kind of , you know , anything around the . Specific geographies or submarkets to kind of help us understand , you know , where do you think you have the right scale , where you want to continue to lean into versus sort of where do you want to de-emphasize ?

Sheryl Palmer: Thanks so much, Matt. Appreciate the question. As far as the ultimate mix of entry-level to the business, you know, we've generally been running something like 1/3, 1/3, and 1/3. And I would expect that you'll see the first-time buyer come down a bit. But once again, it's not, it's not necessarily about, you know, departing from the first-time buyer business, it's refocusing the business geographically, where we don't, you know, buy land in what I would call those more fringe or tertiary locations that attract a very different entry-level buyer. And as we see movements in the market, I think we've proven, we've seen over the years, and we thought maybe it could be a little bit different during COVID, that those more tertiary locations might provide, you know, a different experience, coming out of COVID.

Speaker #6: Thank you .

Speaker #1: Thanks so much . I appreciate the question . As far as the ultimate mix of entry level to the business , we've generally been running like a third , something a third and a third , and I would expect that you'll see the first time buyer come down a bit , but once again , it's not it's not necessarily about , you know , departing from the first time buyer business .

Speaker #1: It's refocusing the business geographically where we don't , you know , buy land in what I would call those more fringe or tertiary locations that attract a very different entry level buyer .

Speaker #1: And as we see movements in the market , I think we've been we've proven we've seen over the years and we thought maybe it could be a little bit different during Covid that those more tertiary locations might provide a different experience coming out of Covid .

Sheryl Palmer: But the honest truth is, it's just not the case, that the further out you get, when markets slow down a bit, we see those come to a very different stop. And the level of incentives required to get those first-time buyers into a house, it, it's tough. So it's not necessarily about, once again, leaving... You've heard us over the years, talk about the professional first-time buyer, Matt, where that's generally a dual income. I mean, more than 50% of our business today is millennials, and we're seeing more than half, if I'm not mistaken, Eric, of those millennials already buying their second house. So it's really a subset of the first time.

Speaker #1: But the honest truth is , it's just not the case that the further out you get when markets slow down a bit , we see those come to a very different stop and the level of incentives required to get those first time buyers into a house , it's tough .

Speaker #1: So it's not necessarily about once again leaving . You've heard us over the years talk about the professional first time buyer , Matt , where that's generally a dual income .

Speaker #1: I mean , more than 50% of our business today is millennials . And we're seeing more than half , if I'm not mistaken , Eric , if those millennials already buying their second house .

Sheryl Palmer: As far as geographic penetrations, I think we've talked over the last few quarters that we've pulled back some investment in California a bit, recognizing some of the underwriting constraints that we've seen there. So I think you'll see that, you know, geographic shift mix. But beyond that, I would think you'll continue to see us invest across our markets. When I look at the business, Florida continues to be, you know, we continue to be very bullish on it, and it continues to be the home of our Esplanade brand. So I think you'll see continued penetrations, Florida, Texas, you know, slight difference in California. Phoenix, very steady for us, Colorado. So I don't think you'll see a huge shift in the geography.

Speaker #1: So it's really a subset of the first time as far as geographic penetrations , I think we've talked over the last few quarters that we've pulled back some investment in California a bit , recognizing some of the underwriting constraints that we've seen there .

Speaker #1: So I think you'll see that , you know , geographic shift mix . But beyond that , I would think you'll you'll continue to see us invest across our markets .

Speaker #1: When I look at the business , Florida continues to be , you know , we continue bullish very to be on it . And it continues to be the home of our Esplanade brand .

Speaker #1: So I think you'll see , continued penetrations . Florida , Texas , you know , different slight different in slight difference in California .

Speaker #1: Phoenix very steady for us Colorado . So I don't think you'll see a huge shift in the geography .

Matthew Bouley: Okay. No, that, that's perfect. Thank you for that color, Sheryl. Really detailed. Second one, spec versus to-be-built mix. I think I heard you say 72% spec sales in Q4, and that you've sort of mixed somewhat back towards to-be-builts, year to date, if I heard you correctly. So is the intention to get back to 50/50, and can that happen in 2026? Or sort of what's the timeline and intention around that mix? Thank you.

Speaker #6: Okay . No that's perfect . Thank you for that color . Cheryl . Really detailed second one spec versus to be built mix .

Speaker #6: I think I heard you say 72% spec sales in Q4 . And that you've sort of mixed somewhat back towards to be built year to date .

Speaker #6: If I heard you correctly . So is the intention to get back to 50 over 50 and can that happen in 2026 or sort of what's the timeline and intention around that mix ?

Sheryl Palmer: Yeah. It's a great question. Hard for me to be 100% certain of where that mix lands. What I'm excited about is we are seeing the consumer show up differently, Matt. I mean, last year, it's not like we ever changed our strategy and we wanted to sell less to-be-builts. But what we definitely saw is the consumer, you know, our industry trained them, and the honest truth is that the incentives were stronger with an inventory home, and the closer that home got to completion, the stronger the incentives, and the buyer really began to appreciate the impact of that. What we've seen since the first of the year is they're showing up with more of a desire to buy what they want, where they want it, how they want it.

Speaker #6: Thank you .

Speaker #1: Yeah , it's a great question . Hard for me to be 100% certain . mix lands . What What that I'm excited about is we are seeing the consumer show up differently .

Speaker #1: Matt . I mean , last year , it's not like we ever changed our strategy and we wanted to sell less , to be built .

Speaker #1: But what we definitely saw is the consumer , you know , our industry trained them and the honest truth is that the incentives were stronger with a inventory home .

Speaker #1: And the closer that home got to completion , the stronger the incentives and the the buyer really began to appreciate the impact of that .

Speaker #1: What we've seen since the first of the year is they're showing up with more of a desire to buy what they want , where they want it , how they want it .

Sheryl Palmer: They want to appoint the house in a way. Lot premiums have become quite important again. And so, yeah, we've seen 700 basis points in January over the average of to-be-builts in the Q4. We have seen that continue in February, so I'm very encouraged about that. I'm not sure we were ever 50/50. We were probably 60/40-ish, Curt?

Speaker #1: They want to appoint the house in a way , a lot . Premiums have become quite important again . And so , yeah , we've seen 700 basis points in January over the average of to be built in the fourth quarter .

Speaker #1: We have seen that continue in February . So I'm very encouraged about that . I'm not sure we were ever We were 5050 .

Curt VanHyfte: Yeah.

Sheryl Palmer: And, you know, it's kind of moved on the margin 5 percentage points. 50/50 would be ideal, and maybe over time, Matt, as we continue to evolve the portfolio further away from the more attainable buyer, we might see that. I would be pleased but surprised if we saw a 50/50 mix in 2026. Do you agree?

Speaker #1: probably 6040 ish . Kurt . And you know , it's kind of moved on the margin five percentage points , 5050 would be ideal .

Speaker #1: And maybe over time, Matt, as we continue to evolve the portfolio further away, more from the attainable buyer, we might see that. I would be pleased.

Curt VanHyfte: No, I agree. And I think, Matt, over the course of the year, we're going to work our way through that. That's something that's not going to happen overnight. Just kind of where we've made great progress with our spec inventory. I think as Sheryl-

Speaker #1: But surprised if we saw a 5050 mix in 2026 . Do you agree ?

Speaker #3: No , I agree , and I think the course Matt , over of the year we're going to work our way through that .

Speaker #3: That's something that's not going to happen overnight . Just kind of where we've made great progress with our spec inventory . I think as Cheryl .

Sheryl Palmer: Yeah.

Curt VanHyfte: Yeah, but we still have a little bit higher number of finished inventory than maybe we would like. So we'll continue to work our way through that and balance that with bringing in some of these to-be-built sales, especially on some of the new outlets that we'll be opening over the course of the year.

Speaker #3: Yeah . But we still have a little bit number of higher finished inventory than maybe we would So like . we'll continue to work our way through that .

Speaker #3: And balance that with bringing in some of these to be sales , especially on some of the new that will outlets opening be course of the year .

Sheryl Palmer: New Esplanades, and yep.

Curt VanHyfte: Yeah.

Sheryl Palmer: I hope that helps, Matt.

Operator: Your next question comes from the line of Alan Ratner with Zelman. Your line is open. Please go ahead.

Speaker #1: Yeah hope that , I helps . Matt .

Speaker #4: Your next question comes from the line of Alan Ratner with Zelman . Your line is open . Please go ahead .

Alan Ratner: Hey, guys. Good morning. Thanks-

Sheryl Palmer: Good morning.

Alan Ratner: for all the details so far. I appreciate it.

Sheryl Palmer: Sure.

Alan Ratner: First question, you know, similarly, on the mix of the business, I just want to make sure I'm thinking about kind of Esplanade the right way in terms of... It sounds like, you know, a lot of the community growth, or at least the share of coming from Esplanade, is going to continue to rise. I know you showed that off at your Analyst Day last year. When we look at absorptions, kind of where they were running at in 2025 and where you see that in 2026 and beyond, should we think of any mix shift there, either higher or lower, as more of the business comes from Esplanade? I think generally those are higher absorption communities, but just wanted to confirm that.

Speaker #7: Good Hey , guys . morning . Thanks for all the detail so far . I appreciate it . you First question , know , similarly on the mix of the business , I just want to make sure I'm thinking about kind of esplanade the right way in terms of it sounds like a lot of the community growth , or at least the share of coming from Esplanade , is going to continue to rise .

Speaker #7: I know you showed that off at your Analyst Day last year . When we look at kind of Absorptions where they were running at in 25 and where you see that in 26 and beyond , should we think of any mix shift there either higher or lower , as more of the business comes from Esplanade ?

Sheryl Palmer: I'd say actually, Alan, I think they're actually quite consistent with the rest of the business. You know, we might have a couple positions within... I mean, as you know, we probably have 4 or 5 communities per Esplanade, so we might have some that, you know, run in a low 3, some that run in a high 2. But I think on average, they're pretty consistent. Just for clarity, as we talk about those 20 new outlets, that's probably, you know, 4 or 5 new communities. But I wouldn't see any significant change, and the pace will continue to aspire as we see some market demand to get back to that annualized pace of a low 3.

Speaker #7: I think generally those are higher absorption communities , but I just wanted to confirm

Speaker #7: that .

Speaker #1: say I'd Alan , I think they're , actually , actually quite consistent with the rest of the business . You know , we might have a couple positions within I mean , as you know , we probably have 4 or 5 communities per esplanade .

Speaker #1: So we might have some that , run three , some in a low that run in a high two . But I think on average they're pretty consistent .

Speaker #1: Just for clarity , as we talk about those 20 new outlets , that's probably , you know , 4 or 5 new communities .

Speaker #1: But I went to see any significant change in the pace . We'll continue to aspire as we see some market bend to get back to that annualized pace of the low .

Sheryl Palmer: But as I said in the prepared remarks, it's just not our intention to just throw inventory in the ground and sell at all costs, given, I think, the value creation that we have with our land holdings.

Speaker #1: But as I said in the prepared remarks , it's just not our intention to just throw inventory in the and sell ground at all costs .

Alan Ratner: Makes sense. Second question on the cost side. I know you, mentioned that your outlook is for pretty flattish construction costs this year, and certainly, I think cost has been a nice tailwind in general for builders over the last year or so. You know, we're starting to see lumber prices, tick back up again. There's a little bit of increased chatter about maybe some cost increase announcements around the new year, which I think is fairly normal for this time of the year. But, you know, you have the headlines around ice raids still out there. So I'm just curious, you know, is there any risk to that outlook, based on what you're seeing here the first six weeks or so of the year?

Speaker #1: Given I think the value creation that we have with our landholdings .

Speaker #7: Makes sense . Second question on cost side , I the know you mentioned that your outlook is for pretty flattish construction costs this year , and certainly I think cost has been a nice tailwind in general for builders over the last year or so .

Speaker #7: You know , we're starting to see lumber prices tick back up again . There's a little bit of increased chatter about maybe some cost increase announcements around the new year , which I is think fairly normal for this time of year .

Speaker #7: But you have the headlines around Ice raids still out there . So just curious , you know , is there any risk to that outlook based on what you're seeing here ?

Alan Ratner: You know, generally speaking, where do you see, you know, cost trending beyond?

Speaker #7: The first six weeks or so of the year and , you know , generally speaking , do you see where cost trending beyond .

Curt VanHyfte: Hi, Alan. Great, great question. Just kind of a little backdrop on the cost side. You know, we saw tremendous. You know, teams did a lot of work in 2025 on our house cost initiatives. Very proud of what we were able to accomplish. And to your point, lumber here, more recently, is starting to run up a little bit, but our teams continue to focus on house cost reduction strategies, working with our trade partners, working with our suppliers.

Speaker #7: ?

Speaker #3: Hi , Alan . Great question . Just kind of a little backdrop on the cost side . You know , we saw tremendous , you know , we saw teams did a lot of work in 2025 on our house costs initiatives .

Speaker #3: Very proud of what we were able to accomplish in two year point lumber here . More recently is starting to run up a little bit .

Speaker #3: But our teams continue to focus on house cost reduction strategies , working with our trade partners , working with our suppliers . And so we think we have the ability to , you know , to offset some of those potential headwinds that are out there through just our continued work on optimizing the business , whether it's through our discussion with our trade partners , our suppliers , or just our continued work on optimizing our floor plans , you know , value engineering , our new communities , you know , all those different type of tactical things .

Curt VanHyfte: And so we think we have the ability to hope, you know, to offset some of those potential headwinds that are out there through just our continued work on optimizing the business, whether it's through our discussion with our trade partners, our suppliers, or just our continued work on optimizing our floor plans, you know, value engineering our new communities, you know, all those different type of tactical things. So it's something that we're looking at and watching and something the teams are very focused on.

Speaker #3: So it's something that we're looking at and watching and teams are something the very focused on .

Alan Ratner: Thanks a lot. Appreciate it.

Operator: Your next question comes from the line of Trevor Allinson with Wolfe Research. Your line is open. Please go ahead.

Speaker #7: Thanks a lot . Appreciate it .

Speaker #4: Your next question comes from the line of Trevor Allanson with Wolfe Research . Your line is open . Please go ahead .

Paul Przybylski: Good morning. Actually, you've got Paul Shedlosky on. I apologize if I missed this, but good morning. Could you bridge the sequential gross margin decline for Q1, you know, among the leverage, incentives, land inflation, mix, et cetera? And I think you said the incentive environment was stable in Q4. If that remains the case in Q1, should we expect a gross margin, you know, in Q2 similar to Q1?

Speaker #8: Good morning Ashley , you've got Paul on . I I missed this , good morning . bridge the Could you gross sequential margin decline for one ?

Speaker #8: Q you know , among leverage incentives , land inflation mix , etc. ? And I think you said the incentive environment was stable and four Q if that remains the case in one Q should we expect a gross margin , you know , in Q similar to one Q ?

Curt VanHyfte: Great question, Paul. Yeah, we're not going to probably talk further beyond Q1 today. I think in our prepared comments, we did talk about a gradual increase in margins over the course of the year, just because of the change in mix to a higher concentration of to-be-built homes. And of course, as we work our way through our existing inventory, you know, from Q4 to Q1, sequentially, the margins are down, I think, 100 basis points, and that is in large part from a mix standpoint. We pulled in some higher ASP and higher margin homes in 2024 into Q4. And as a result, now we have a few more of those entry-level, kind of tertiary kind of community closings coming through Q1.

Speaker #3: Great question , Paul . Yeah , not going we're to probably talk further beyond Q1 I think today . in our prepared comments , we did talk about a gradual increase in margins over the course of the year just because of the change in mix to a higher concentration of to be built .

Speaker #3: homes And of course , as we work our way through our existing inventory , you know , from Q4 to Q1 , sequentially , the margins are down .

Speaker #3: I think 180 basis points . And that is in large part from a mix standpoint . A we pulled in some higher ASP and higher margin homes in 25 into Q4 .

Speaker #3: And as a result , now we have a few more of those entry level kind of tertiary kind of community closings coming through Q1 .

Curt VanHyfte: And so as we work our way through that, you know, we'll see our margins, you know, in line with that guide that we put out there. So, and relative to incentives, as Sheryl alluded to in our talking points, they were modestly in line from an order perspective, but they were kind of, at the end of the day, they're remaining elevated, so to speak, from Q4 into Q1, from a closing perspective.

Speaker #3: And so as we work our way through that , you know , we'll we'll see our margins , you know , in line with that guide that we we put out there .

Speaker #3: So and relative to incentives , as Cheryl alluded to talking in our points , they were modestly in line from an order perspective , but they were kind of at the end of the day , they stayed there remaining elevated , so to speak , from Q4 into Q1 , from a closing perspective .

Sheryl Palmer: Maybe, Chris, the only other thing I might add is, obviously, Paul, we're going to take price as the market allows. You know, I was interested that in Q4, we did see base prices increase in more than half of the communities that had been opened the prior year, and more than a quarter of our total communities. So, if the opportunity exists, we're going to continue to take base price increases, reduce incentives, which is where we're getting the confidence to say we expect Q1 to be the low point at the margin.

Speaker #1: , and maybe , Chris , the only other thing I might add is obviously , Paul , we're going to take price as the market allows us .

Speaker #1: You know, I was interested that in the fourth quarter, we did see base prices increase in more than half of the communities that had been open the prior year.

Speaker #1: And more than a quarter of our communities . total so And if the opportunity we're going to exists , continue to take base price increases , reduce incentives , which is where we're getting the confidence to say we expect Q1 to be the low point of the margin .

Paul Przybylski: Okay, thank you. Then, I guess, you know, you talked a lot about, you know, the 100 new community openings this year.

Speaker #8: Okay . Thank you . And then I guess you talked a lot about the 100 new community openings this year . How how have how have Absorptions been performing in your your new communities relative to legacy ?

Sheryl Palmer: Yes.

Paul Przybylski: How have absorptions been performing in your new communities relative to legacy? Are they still, as you know, seeing that historical spread?

Sheryl Palmer: Historical spread. I mean, I'm excited about the new communities we're opening. You know, I can give you a couple examples. I might have mentioned in prior quarters that we were opening a new community in Phoenix. It's over 1,200 lots. I think we have 5 positions. We opened it in Q4, some of it at the end of September, one or two. One position in October. We've got well over 100 units sold in there already, so I would say paces there are really, really strong. One that's been. It's a beautiful master plan called Verden. When I look at some of our Esplanade pre-opening activities and what we call our signature VIP events, I mean, some of these communities have waiting lists or, or interest lists, not waiting, we haven't started sales, interest lists of hundreds to thousands of names.

Speaker #8: they Are still , you know , seeing that historical spread ?

Speaker #1: Historical spread ? I mean , I'm excited about the new communities we're opening and I can give you a couple examples . I might have mentioned in prior quarters that we were opening a new community in Phoenix .

Speaker #1: It's over 1,200 lots. I think we have five positions. We opened it in the fourth, some of it at the end of September.

Speaker #1: 1 or 2 , one position in October . We've got well over 100 units sold in there already , so I would say pace is there really , really strong one that's been it's a beautiful master plan called Verdin .

Speaker #1: look When I at some of our Esplanade pre-opening activities and what we call our signature VIP events , I mean , some of these communities have waiting lists or or interest lists , not waiting .

Sheryl Palmer: So there is this activity that we're seeing. We're also seeing traffic generally has picked up in the first of the year. When I look at web traffic year over year, up in most all of our divisions. So both new and old, I think we are starting to see a little traction and, you know, it's early days. Like I said, generally, we see spring kickoff after Super Bowl, so here we are. So if we can continue that, then I think that gives us some upside to the year.

Speaker #1: We haven't started sales interest list of hundreds to thousands of names . So there is this activity that we're seeing . We're also seeing traffic generally has picked up in the When I look first of the year .

Speaker #1: at web traffic year over year up in most all of our divisions . So both new and old , I think we are starting to see a little traction .

Speaker #1: And early , you know , it's days . Like I said , generally we see spring kick off after Super Bowl . So here we are .

Paul Przybylski: Great. Thank you very much. Good luck.

Speaker #1: So, if we can, then I think that gives us some upside to the year.

Sheryl Palmer: Thank you.

Operator: Your next question comes from the line of Michael Dahl with RBC Capital Markets. Your line is open. Please go ahead.

Speaker #8: Great . Thank you very much . Good luck .

Speaker #1: Thank you .

Speaker #4: Your next question comes from the line of Michael Dahl with RBC Capital Markets. Your line is open. Please go ahead.

Michael Dahl: Hi, thanks for taking my questions. Sheryl, just to pick up on the last comment around kind of the seasonal improvement and similarly your opening comments about the improvement. Obviously, like, it hasn't been a very normal period of time, the past number of months, so can you just help us dial that in a little bit more? Like, obviously, seasonally, you should see traffic pick up, Q4 better than normal seasonal sequential change in orders, but off worse than normal. So what are we actually talking about in terms of quantifying kind of the pace dynamics that you've seen over the past couple of months or January into Feb, more specifically?

Speaker #2: Hi . Thanks for taking my questions , Cheryl , just to pick up on the last comment around kind of the seasonal improvement and similarly similarly , your opening comments about the improvement .

Speaker #2: Obviously , like it hasn't been a very normal period of time . The past number of months . So can you just help us dial that in a little bit more ?

Speaker #2: Like obviously seasonally you should see traffic pick up for Q better than normal seasonal sequential change in orders , but off worse than normal .

Speaker #2: So what are we actually talking about in terms of quantifying the pace dynamics that you've seen over the past couple of months, January into more February?

Sheryl Palmer: Yeah. No, it's a fair question, and, you know, you don't, I don't want to get too over my ski tips, Mike, but what I would tell you is, you know, the improvement we saw through the fourth quarter, December being better than November, that would be something relatively unusual in my tenure. January, better than December. Okay, we should expect that, and the good news is we got it. And like you said, given the volatility that we've seen over the last year, I take each of these as, you know, positive green shoots. I'd say it's a little...

Speaker #2: specifically ?

Speaker #1: Yeah , no , it's a fair question . And , you know , you don't I don't want to get too over my ski tips , Mike , but what I would tell you is , you the improvement we saw fourth quarter , through the December being better than November , that would be something .

Speaker #1: Relatively unusual in my tenure . January better than December . we should Okay , expect that . And the good news is we got it .

Speaker #1: And like you said , given the volatility that we've seen over the last year , I take each of these as positive greenshoots I'd say it's a little and honestly , and I think we said it , our prepared remarks , what made January even more .

Sheryl Palmer: And honestly, and I think we said it in our prepared remarks, what made January even more, I don't want to, probably a better word than sensational, but strong, was the fact that we had a real significant weather event in a, you know, a large part of the country. We were closed in many of our communities for days in Texas and the Southeast, and we still saw a nice January finish, and I give a lot of credit to our virtual tools on the ability to be able to continue to work with these consumers, even when they couldn't come into the sales office. February, we're 10 days in, a little early. I would say, you know, generally similar. You know, I'm not, I, it's hard to make a trend in 10 days.

Speaker #1: I don't want to probably a better word than sensational , but strong was the fact that we had a real significant weather event .

Speaker #1: And , you know , a large part of the country , we we were closed in many of our for days communities in Texas .

Speaker #1: And the Southeast, and we still saw a nice January finish. And I give a lot of credit to our virtual on tools—the ability to be able to continue to work with these consumers even when they couldn't come into the sales office.

Speaker #1: February . We're ten days in a little early . I would say , you know , generally similar , and I'm not . It's hard to make a trend in ten days .

Sheryl Palmer: We've got some communities that are doing really well and ahead of pace and some that aren't quite there yet. We had a strong finish. We've also had weather into early February. So all in all, I'd say generally supportive of kind of normal seasonal trends. To your point, we haven't seen in some time, so it's nice to see that momentum building.

Speaker #1: We've got some communities that are doing really well and ahead of pace and some that aren't quite there yet . We had a strong finish .

Speaker #1: We've also had weather into early February , so all in all , I'd say generally supportive of kind of normal seasonal trends . To your point , we haven't seen in some time .

Michael Dahl: ... Okay, thanks. And maybe just one quick one on that, just to put an even finer point on that. Are we talking absorptions now flat year-over-year, up year-over-year? So down a little year-over-year? So then my second question is really then on the-- I want to make sure I understand the incentive comments, appreciating you're not guiding beyond Q1. When you consider conceptually Q1, potentially the low and incentives improving, are you really just saying incentives should improve as a function of your build to order mix? Or do you also expect, just from a market level, incentives to improve through the year?

Speaker #1: So it's nice to see that momentum building .

Speaker #2: Okay , thanks . And maybe just one just to quick one on that put a in an even finer point that . Are on we talking absorptions now flat year on , year up , year on year .

Speaker #2: Go down a little year . But then my year on second question is really then on the I want to make sure I understand the incentive comments appreciating you're not guiding beyond one Q when you consider conceptually one Q the row and incentives improving , are you really just saying incentives should improve as a function of your build to order mix , or do you also expect just from a market level incentives to improve through the year ?

Sheryl Palmer: Well, obviously, if we get continued traction, and continued pickup in market, like I said, we'll continue to take price when we can, incentives. We've also seen some relief from interest rates. I mean, still somewhat volatile. I think we're probably in the 6.1% range over the last few days. You know, sometime last year, that was closer to mid- to high 6s. So I think you've got a number of things working. And I think, you know, once again, we have the programs, Mike, to help the customer and not spread those incentives like peanut butter. The to-be-built mix will certainly be a piece of it as well, but I wouldn't just point to that. I think there's a number of factors that would help us.

Speaker #1: Well , obviously if we get continued traction and continued pickup in market , like I said , we'll continue to take price reduce incentives .

Speaker #1: We've also seen some relief from interest rates . I mean , still somewhat volatile . I think we're probably in the 6.1 range over the last few days .

Speaker #1: You know , sometime that last year was closer to high mid to sixes . So I think you've got a number of things working .

Speaker #1: And I think , you know , once again we have the programs . Mike , to help the customer and not spread those incentives like peanut butter .

Speaker #1: The TB built mix will certainly be a piece of it as well . But I wouldn't just point to that . I think there's a number of factors that would help .

Sheryl Palmer: Now, having said that, competitive pressure and seeing what others offer is going to continue to also have an impact on the incentives the consumer continues to expect. But all in all, I'm hoping there's some discipline across the market, and we see a pullback in incentives and have the ability to take price. Pace, I don't know that I've seen... I've looked at current year-over-year. I mean, I think, you know, we had a strong first quarter last year, so my instinct is probably a little down year-over-year, Mike, but I need to verify that. But just, you know, going into the Investor Day last year, we had a really nice, strong first quarter.

Speaker #1: us Now , having said that , competitive pressure . And seeing what others offer is going to continue to also have an impact on the incentives the consumer continues to expect .

Speaker #1: But all in all , I'm hoping there's some discipline across the market and we see a pullback in incentives and have the ability to take price pace .

Speaker #1: I don't know that I've seen . I've looked at year over year . I mean , I think , you know , we had a strong first quarter last year .

Speaker #1: So my instinct is probably a little down year over year . Mike . But I need to verify that . just But into the you know , going Investor Day last year , we had a really nice strong first quarter .

Sheryl Palmer: Offsetting that, you're going to see some good community count growth as you saw us going from low 340 to something closer to 360 in Q1.

Speaker #1: But offsetting that , you're going to see some good community count growth . As you saw us going from low . 340 to something to closer 360 in the first quarter .

Michael Dahl: Okay, great. Appreciate it. Thanks, y'all.

Sheryl Palmer: Thank you.

Operator: Your next question comes from the line of Michael Rehaut with JP Morgan. Your line is open. Please go ahead.

Speaker #2: Okay , great . Appreciate it . Thanks , Charles .

Speaker #1: you Thank .

Speaker #4: Your next question comes from the line of Michael Ryholt with J.P. Morgan . Your line is open . Please go ahead .

Michael Rehaut: Thanks. Good morning, everyone. Thanks for taking my questions. First, I just wanted to make sure I heard it correctly, and sorry if this is being a little repetitive, but just wanted to appreciate the trend of incentives that you guys have offered in, you know, from the beginning of the fourth quarter to the end of the fourth quarter. I think you said it was relatively consistent, but I just want to make sure I heard that right. And also, when you think about the first quarter gross margin guidance, how much of that is reflective of just higher incentives flowing through more broadly versus mix and maybe flushing out some of the impact of selling some of the excess spec that you have in inventory?

Speaker #9: You're .

Speaker #10: Thanks . Good morning everyone . Thanks for taking my questions . First , I just wanted to make sure I heard it correctly .

Speaker #10: And sorry if this is being a little repetitive , but just wanted to appreciate the trend of incentives that you guys have offered in .

Speaker #10: You know , from the beginning of the fourth quarter to fourth quarter , the end of the you said it was relatively consistent , but I just sure I want to make heard that right .

Speaker #10: And also , when you think about the first quarter , gross margin guidance , how much of that is reflective of just higher incentives flowing through more broadly versus mix ?

Speaker #10: And maybe flushing out some of the the impact of of selling some of the excess spec that you have in inventory .

Sheryl Palmer: I'll let Curt get into the particulars, but Mike, I really, as Curt said in his prepared remarks, I mean, we have a lot of inventory that we want to, even though we're going to continue to get those to-be builds, it's hopefully a different customer. We need to work through that inventory in Q1, so we are expecting some pressure there. And if you look at just the ASP that we articulated for Q1 and how far, you know, slightly lower than what we saw in Q4, I think it speaks to the mix. And, you know, as we've said, the more affordable positions require greater incentives, so we're anxious to work through those and, then see the to-be build be a healthier piece of the mix.

Speaker #1: I'll get into the particulars , but , Mike , I really , as Kurt said in his prepared remarks , I mean , we have a lot of inventory that we want to even though we're going to continue to get those to be built to hopefully a different customer .

Speaker #1: We need to work through that inventory . In the first quarter . So we are expecting some pressure . There . And if at you look the just ASP that we articulated for the first quarter and how far you know , slightly lower than what we saw in the fourth quarter , I think it speaks to the mix and , you know , as we've said , the more affordable positions greater incentives .

Curt VanHyfte: Yeah, and then Mike, on the incentives, in our prepared comments, you did hear it correctly. They were relatively flat, sequentially from Q3 to Q4. As we kind of... I think we alluded to that last quarter, that we're going to you know, that we would have elevated incentives to move through, based on that spec penetration for Q4 closings as we work through the inventory.

Speaker #1: So we're anxious to work through those, and then see the two people be a healthier piece of the mix.

Speaker #3: Yeah . And then Mike , on the incentives in our prepared comments , you did hear it correctly . They were relatively flat sequentially from Q3 to Q4 , as we kind of I think we alluded to that last quarter that we're going to , you know , that we would have elevated incentives to move through based on that spec penetration for Q4 closings as we work through the inventory .

Michael Rehaut: Okay. I guess that-

Operator: Your next question comes from Rafe Jadrosich with Bank of America. Your line is open, please go ahead.

Speaker #10: . I guess .

Speaker #4: Your next question comes from Ralph Jadresic with Bank of America . line is Your open . go Please ahead .

Rafe Jadrosich: Hi, yeah, good morning. Thanks for taking my questions. Just for following up on the comment on incremental land investment in the non-core submarket, sort of shifting away from that, obviously makes sense given the context of what's going in the market at the entry level today. When you think about, you know, are you finding better land deals at the move-up and resort lifestyle, sort of price points? Is there just less competition in those markets, or are you just more bullish on the long-term fundamentals on move-up resort lifestyle versus entry level? Can you just talk a little bit more about the shift there and why the returns will be higher at move up and then compared to entry level?

Speaker #11: Hi . Good morning . Thanks for taking my questions . Just for following up on the comment on incremental land investment in the Noncore submarket .

Speaker #11: Sort of shifting away from that , obviously , it makes sense given the context of what's going in the market at the entry level today .

Speaker #11: When you think about , are you finding better land deals at the move up and resort lifestyle sort of price points ? Is there just less competition in those markets , or are you just more bullish on the long term fundamentals ?

Speaker #11: On move up or lifestyle versus entry level ? You just talk a little bit more about the shift . There and why the returns will be higher at move up and then compared to entry level .

Erik Heuser: ... Hi, hi, Rafe. Erik. Yeah, good question. It's really kind of a light pivot to where we've come from, right? If we were to look historically, we've really been at that 15% kind of exposure to that tertiary entry level. And, you know, coming out of COVID, as Sheryl suggested, we saw such strong demand there, and really were discerning, you know, how much of that work from home was gonna be kind of sustainable. And so it moved up to 20 to 25%, call it. And so it's really a repivot back to 15%. Direct to your question, I would say yes.

Speaker #12: Hi . Hi , Ralph . Eric . Yeah . Good question . It's really kind of a light pivot to where we've come from .

Speaker #12: If we were right, to look historically, we've really been at that 15% kind of exposure to, to kind of that tertiary entry level.

Speaker #12: And , you know , coming out of Covid , as Cheryl suggested , we saw such strong demand there . And really , we're discerning , you know , how much of that work from home was going to be kind of sustainable .

Speaker #12: And so it moved up 20 to 25% , call to it . And so it's really a repivot back to 15% direct to your question , I would say yes .

Erik Heuser: When you think about the competitive landscape and some of the peer group that's very focused on that entry level, I would suggest that the land market has yielded some opportunity for us, especially as the market has evolved. So I would say yes, it's what we're good at. It's what we've been historically focused on. From an opportunity standpoint, that's where we're seeing some of the opportunity, and I would expect some good performance looking forward.

Speaker #12: When you think about the competitive landscape and some of the peer group , that's very focused on that entry level , I would suggest that the land market has yielded some opportunity for us , especially as the market has evolved .

Speaker #12: So I would say , yes , it's it's it's what we're good at . It's what we've been historically focused on from an opportunity standpoint .

Sheryl Palmer: And the only thing I'd throw on top of that, Rafe, is, you know, when we're talking about the first-time buyer environment today, with every sale, it's really working through with them, can they make this work? When you look at the move-up and the Esplanade buyer, it's really, should I, given just the confidence things we've talked about. They have the capabilities, they have the balance sheet, they just wanna make sure that the time, it makes sense for them, and they have the time, you know, it's the right time to do it. It's a very different formula when you're dealing with this first-time buyer and how many consumers we have to, you know, preapprove to try to get folks that actually can make the final purchase. And we don't see that that is gonna significantly change, in the foreseeable future.

Speaker #12: That's where we're seeing some of the opportunity . And I would expect some good performance . Looking forward . .

Speaker #1: And the only thing I'd throw on top of that , Ralph , is when we're talking about the first time buyer environment today with every sale , it's really working through with them .

Speaker #1: Can they make this work ? When you look at the move up and the Esplanade buyer , it's really should I given just the confidence things we've talked about , they have the capabilities , they have the balance sheet .

Speaker #1: They just want to make sure that the time it makes sense for them and they have the time . It's the right time to do it .

Speaker #1: It's a very different formula when you're dealing with this first time buyer . And how many consumers we have to pre-approve to try to get folks that actually can make the final purchase .

Speaker #1: We don't see that that is going to significantly change in the foreseeable future.

Rafe Jadrosich: Okay, that, that's helpful, and that makes sense. And then just, following up on the land side, mid-single digit lot inflation for 2026. For the land that you're contracting today, what's the inflation that you're seeing? And is there a point here where we'd expect some relief, like, does it roll over in 2027? How do we think about that through the year?

Speaker #11: Okay . helpful . And That's that makes sense . And then just following up on the land side , mid-single digit lot inflation for 26 for land that you're contracting today , what's the inflation that you're seeing .

Speaker #11: And is there a point here where you'd expect some relief, like does it roll over in '27? How do we think about that through the year?

Erik Heuser: Yeah, as far as the land conditions out there, yeah, and as you know, when we expressed in Q4, you know, we really focused on paring to really the core opportunities, the cream of the crop for us, and I think others have done that, too. And so you are seeing kind of a stabilization in the land market that's resulting in something that approximates 0, so kind of low single digits in terms of land appreciation expectations in the market today. So, we are seeing... And as we expressed in Q3, too, we've experienced a lot of success in working with sellers in renegotiating pretty much everything that comes through the investment committee.

Speaker #12: Yeah . As far as the land conditions out there and as you know when we expressed in fourth quarter , you know we really focused on paring to to really the core opportunities , the cream of the crop for us .

Speaker #12: And I think others have done that too . And so you are seeing kind of a stabilization , stabilization in the land market .

Speaker #12: That's resulting in something that approximates zero . So kind of low , low single digits in terms of land appreciation expectations in the market today .

Speaker #12: So we are seeing and as we expressed in third quarter two , we've experienced a lot of success . And working with sellers and renegotiating pretty much everything that comes through the investment committee .

Rafe Jadrosich: Thank you. That's helpful.

Erik Heuser: You're welcome.

Operator: Your next question comes from the line of Kenneth Zenner with Seaport. Your line is open. Please go ahead.

Speaker #11: That's Thank you . helpful .

Speaker #12: welcome You're .

Speaker #4: next Your comes question from the line of Kenneth Zener with seaport . Your line is Please go open . ahead .

Sheryl Palmer: Hi, Ken.

Kenneth Zener: Good morning, everybody.

Erik Heuser: Hi, Ken.

Kenneth Zener: Could you comment on the, I know Central, and you mentioned Austin, but could you talk about, you know, what the dynamics were that saw the order rates for that whole segment come down first? And then second, are you guys gonna try to—it sounds like you're probably gonna run starts in line with orders, or is there gonna be more of a front-end load this year? That's it. Thank you.

Speaker #13: Good morning everybody .

Speaker #5: Thank you .

Speaker #13: Could you comment on—I know Central, and you mentioned Austin—but could you talk about, you know, what the dynamics were that saw the order rates for that whole segment come down, first and then second?

Speaker #13: Are you guys going to try to sounds like you're probably going to run start in line with orders . Or is there going to be more of a front end load this year .

Sheryl Palmer: Yeah, maybe I'll take the first one, and then Kirk can grab the second. You know, when I think about Texas, it has been a little bit more of a mixed bag, Ken. You know, Austin has probably seen the greatest pullback of volume. But honestly, our locations are, I believe, best in market, and so we continue to see a strong margin. So we've been okay holding the line a bit there and not giving away, you know, quality, irreplaceable communities. The good news in Austin is we have seen spec inventory drop in more than half over the last year. Land activity continues to be tough, but the teams are being very diligent in making sure we don't get ahead of ourselves. Houston and Dallas, you know, slowed down year-over-year, but not what we saw in Austin.

Speaker #13: That's it . Thank you .

Speaker #1: Yeah, maybe I'll take the first one, and then Kurt can grab the second. You know, when I think about Texas, it has been a little bit more of a mixed bag.

Speaker #1: Ken . You Austin know has probably seen the greatest pullback of volume , but honestly , our locations are , I believe , best in market .

Speaker #1: And so we continue to see a we've been strong margin . okay holding the bit line a there and not giving away . Quality irreplaceable communities .

Speaker #1: The good news in Austin is we have seen spec inventory drop by more than half over the last year. Land activity continues to be tough, but the teams are being very diligent and making sure we don't get ahead of ourselves.

Sheryl Palmer: We did see paces hold serve in Dallas, and Houston paces are ahead of the company average. So like I said, a little bit of a couple different stories. Similar to Austin, though, margins have held up well in all of Texas. So I think Texas provides the perfect example of the important trade-offs we'll make between price and pace, where we'll take a lower volume to protect the margin. As I look forward, Texas is an important part of the portfolio. I expect the state of Texas to be the highest population growth over the next, you know, three to four years.

Speaker #1: Houston and Dallas, you know, slowed down year over year, but not like what we saw in Austin. We did see paces hold serve in Dallas and Houston.

Speaker #1: Paces are ahead of the company average . So like I said , a little bit of a couple different stories similar to Austin , though , margins have held up well in all of Texas .

Speaker #1: So I think Texas provides the perfect example of the important trade offs we'll make between price and pace , but we'll take a lower volume to protect the margin .

Speaker #1: As I look forward . Texas is an important part of the portfolio . I expect the state of Texas to be highest the population growth over the next 3 to 4 years .

Erik Heuser: And then on the starts front, Ken, the last couple of quarters, we've, I guess, understarted relative to sales as we've kind of worked our way through our inventory. But on a go-forward basis, I envision us being more sticky to the sales standpoint, from a start standpoint, on a go-forward basis. So that's what, kind of we're looking at as we're sitting here today.

Speaker #3: And then on the starts front , Ken , the last couple of quarters , we've I guess under started relative to sales as we've kind of worked our way through our inventory .

Speaker #3: But on a go forward basis , I envision us being more sticky to the sales standpoint from a start standpoint on a go forward basis .

Kenneth Zener: Thank you.

Speaker #3: So that's what kind of we're looking at as we're sitting here today .

Speaker #13: you Thank .

Operator: Your next question comes from the line of Alex Barron with Housing Research Center, LLC. Your line is open. Please go ahead.

Speaker #4: Your next question comes from the line of Alex Barron with Housing Research Center LLC . Your line is open . Please go ahead .

Alex Barron: Yes, thank you. I think you just answered one of my questions. The other one was, I think there was, you know, more price discounting activity from yourselves and other builders in the Q4, but do you feel like that's mainly a 2025 thing, and that the type of incentives that are now in 2026 has gone back to primarily, the, you know, rate buydowns and that type of thing, closing costs?

Speaker #14: Yes . Thank you . I think you just answered one of my questions . The other one was , I think there was , you know , more price discounting activity from yourselves and other builders in the fourth quarter .

Speaker #14: But do you feel like that's mainly a 2025 thing? And that the type of incentives that are now in 2026 has gone back to primarily built, you know, great bargains and that type of thing?

Sheryl Palmer: Yeah, I think that will continue to be part of the mix. Alex, as we've said, we continue to personalize our incentives by consumer. You know, when you're dealing with the resort lifestyle, honestly, for them, it's not as much about mortgage buydowns as it is maybe, you know, credit in the design center as they customize their home. I think the competitive market will help guide us there. But once again, I think we're gonna try to hold the line. Certainly, we have some quality assets, in large master plans, where we're gonna be very careful about the inventory we leak in, to make sure that we can protect the values.

Speaker #14: Closing costs ?

Speaker #1: Yeah , I think that will continue to be part of the mix . Alex , as we've said , we continue to personalize our incentives by consumer .

Speaker #1: You know , when you're dealing with the resort lifestyle , honestly , for them , not as it's much about mortgage buy downs as it is .

Speaker #1: Maybe , you know , credit in the design center as they customize their home . I think the competitive market will help guide us there , but once again , I think we're going to try to hold the line .

Speaker #1: Certainly we have some quality assets in large master plans where we're going to be very careful about the inventory . We leak to in make sure that we can protect the values .

Alex Barron: How are you guys thinking in terms of specs per community or spec starts? You know, I know there's different price points that you guys are working with, but maybe, like, especially at the entry level, how are you guys thinking about what's the ideal number of specs for your strategy?

Speaker #14: How are you guys thinking in terms of specs per community or spec starts ? You know , I know there's different price points that you guys are with , but working maybe like especially at the entry level , how are you guys thinking about what's the ideal number of of specs for your strategy ?

Curt VanHyfte: Yeah, Alex, we have what I would call a spec management kind of program that we kinda follow. It's a subdivision-by-subdivision or community-by-community kind of basis analysis. In entry-level communities or multifamily communities, we'll tend to have maybe a little bit higher spec counts in those communities. And then as we work our way up the consumer segmentation kind of profile to the move-up and resort lifestyles, we'll have less specs that we'll have in the program. But at the end of the day, it all comes down to it's a community-by-community analysis, and what the, you know, what the demand is. And so we're looking at those all on an individual basis.

Speaker #3: Yeah , Alex , we have a what I would call a spec management kind of program that we kind of follow . It's a subdivision by subdivision .

Speaker #3: Or community by community , kind of basis analysis and entry level communities or multifamily communities will tend to have maybe a little bit higher spec counts in those communities .

Speaker #3: And then as we work our way up, the consumer segmentation kind of profile to the move-up and resort lifestyles, we'll have less specs that we'll have in the program.

Speaker #3: But at the end of the day , it all comes down to it's a community by community analysis and what , you know , what the the is demand so we're looking at .

Alex Barron: Got it. Okay. Best of luck, guys. Thank you.

Speaker #3: And those all on an individual basis .

Sheryl Palmer: Thank you.

Operator: There are no further questions at this time. I will now turn the call back to Sheryl Palmer, CEO and Chairman, for closing remarks. Please go ahead.

Speaker #14: Got it. Okay. Best of luck, guys. Thank you.

Speaker #1: Thank you .

Speaker #4: There are no further questions at this time. I will now turn the call back to Sheryl Palmer, CEO and Chairman, for closing remarks.

Sheryl Palmer: Well, thank you very much for joining us today, where we had the opportunity to share our 2025 results, and we look forward to talking to you at the end of Q1. Take care.

Speaker #4: Please go ahead .

Speaker #1: Well , thank you very much for joining us today where we had the opportunity to share our 2025 results . And we look forward to talking to you at the end of the first quarter .

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Speaker #1: Take care .

Q4 2025 Taylor Morrison Home Corp Earnings Call

Request a DemoDemo

TMHC

Taylor Morrison Home

Earnings