Q3 2019 Earnings Call
Good morning, and welcome to Taylor Morrisons third quarter 2019 earnings Conference call. Currently all participants are in listen only mode. Later, we will conduct a question answer session and instructions. Okay, then well be given at that time as a reminder, this conference calls be recorded.
I'd now like to introduce Mr., Jason Lenderman, Vice President Investor Relations and Treasury.
Thank you and welcome everyone to Taylor Morrisons third quarter 2019 earnings Conference call with me today are Sheryl Palmer, Chairman and Chief Executive Officer, and David Cohen, Executive Vice President and Chief Financial Officer.
Sure, we'll begin the call with an overview of our business performance and our strategic priorities, Dave will take you through financial review of our results along with our guidance then Sheryl will conclude with the outlook for the business after which we'll be happy to take your questions.
Before I turn the call over to Sheryl, Let me remind you that today's call, including the question and answer session includes forward looking statements that are subject to the safe Harbor statement for forward looking information that you will find that today's news release.
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 Securities and Exchange Commission and we do not undertake any obligation to update our forward looking statements.
Now, let me turn the call over to Sheryl Palmer.
Thank you Jason and good morning, everyone. We appreciate you joining us today as we share our results for the third quarter at 29 team. It was another successful quarter for Taylor Morrison as we met or exceeded our guidance in each of our key metric.
We finished the quarter with 2540 net orders, representing a substantial 39% increase compared to the same quarter last year.
In mid September we released our July or August sales sharing or Europe , or your order growth, 30% or the first human took a corridor nicely illustrating the buildup. That's true that we saw as the quarter progress with September up more than 60% year over year.
This growth in sales was driven by strength across all regions as well as all price point.
All three of our regions had sales orders or at least 20% led by the east which was up nearly 64%.
Average community count in the third quarter was 346, leading to a sales pace of 2.4 for the quarter.
This compares twin sales pace of 2.2 in Q3 of 2018 and keeps us on track to achieve an annual sales pace inline or slightly better year over year.
How do we talked about last quarter, our outperformance on sales. This year has impacted our community count as we're selling out of communities faster than we anticipated and do expect that could continue into the fourth quarter.
We delivered 2296 closings, which is 9% higher than our results last year and in line with our guidance for the quarter.
This growth was consistent across geography is with all three regions up year over year.
I believe this was a particularly good result, despite being impacted by Florida hurricane activity and the torrential rains in Houston, resulting in a loss of five or six business days Cushing approximately 50 to 75 closings into the fourth quarter.
Our normal seven day quality inspection requirements and our protocol not closing homes that are 100% complete and this weather activity or activity occurring so close to the end of the corridor. We chose to push these closings to ensure a positive customer experience.
Home closing gross margin inclusive of capitalized interest, but that's strong 18.5%.
E B T margin was 8.2% for the quarter, even with the inclusion of 3.6 million in debt extinguishment charges.
Dave will shortly provide additional detail in our Q3 financials, but we're very pleased with the results that we've achieved during the quarter.
Just passing the one year anniversary of the eight homes acquisition, it's clear that the increased scale. We gained through this deal is having a material impact on our result.
Sales paces are up margins continue to outperform expectations and we expect nice leverage on our overhead in the coming quarters as a result stuff the transaction.
All in all we're delighted with the new Avi team members the assets acquired and the tremendous timing of good deal positioning us to capitalize on a strong real estate market.
How do we discussed last quarter. Our team has built a nice institutional muscle, but all of our M&A activity ultimately integrating them in a way that maximizes value creation and efficiencies.
We've had a nice first three quarters of the year and we believe the market is set up for a strong Q4 and beyond.
There's not a lot of talk about the benefit of interest rate, which is definitely true, but there's also more to within that.
Outside of some geo political noise consumers really have a lot to be confident about.
Incomes are rising the stock market is performing well unemployment is still near all time lows and equity in owned homes continues to increase resulting in improved traffic and our sales offices with willing and able new and return buyers.
We've also continued to make progress on our build tourette implementation, which will modestly show up in our financials late this year as we progress with the previously mentioned initial acquisition and development work.
Consistent with prior messaging this will not exceed 25 million for 2019 and 2020, we will begin vertical construction for the first two projects with heavy lease up through our license partner Christopher talk communities as we head into 2021.
Each project will run nearly parallel timelines and will include approximately 150 units within gated and amenitized communities containing social programming and technology equipped single family rental homes with backyard.
A key differentiator for our business.
We recently hired a precedent of our built around business. He will oversee our rollout plan on an execution as we further define our capital allocation strategy for our multi market expansion plan consumer segmentation and asset divestiture strategy.
We continue to be very excited about the potential for this business given that it's a whole we aligned with our core expertise of developing community and building homes, yeah enables us to capture a completely differentiated mass population of renters.
Many of which are choosing to rent versus buying.
This excitement has been echoed our announcement last quarter by many of our operators trade partners key investors banking relationships and even other market participants that understand that this is a growing asset class that overtime will likely carry a growing share of the rental market.
Now I'll turn the call over to Dave for the financial review.
Thanks, Sheryl and Hello, everyone.
The third quarter net income was 67 million earnings per share was 63 cents.
Excluding the loss on extinguishment of debt EPS was 65 cents as adjusted.
Total revenues were just over 1.1 billion for the quarter, including homebuilding revenues of just under 1.1 billion.
Total revenue was up about 7% from the same quarter last year.
Got home closings gross margin acoustical capitalized interest.
Back from purchase accounting and the mix it apart from maybe closings was 18.5%.
This rate exceeded our third quarter guidance as we benefited from the efficiencies of scale that Cheryl mentioned.
Our margin rate also benefited from some trucks that we took during the quarter related to vendor rebates and profit participation arrangements.
In total these two items positively impacted margin by just over $5 million.
Moving to financial services, we generated approximately 23 million in revenue for the quarter and more than 10 million in gross profit.
Our mortgage capture rate for the quarter came in at 77% compared to 71% in the same quarter last year.
We've been successful and getting the legacy operations up to speed on the financial services side, which not only benefits the companys financial performance, but also provides greater visibility into our buyer pipeline.
As many as a percentage at home closings revenue came in at 11.1%.
This rate was impacted by the de leverage from the push closings due to weather and timing of certain items.
We continue to maintain our annual SGN a guidance in the low 10% range of homebuilding revenue.
We also had a 3.6 million dollar charge for a loss on extinguishment of debt related to our refinancing transaction completed in July .
Cheryl mentioned, our EBITA margin for the quarter was 8.2% on reported basis, but 8.5%, excluding the debt extinguishment charge.
Our effective tax rate for the quarter was 25.9%.
As a reminder, this rate is higher than the same quarter last year. As Q3 2018 included several favorable strategic tax initiatives.
For the quarter, we spent about 315 million a land purchases and development had ended the quarter, we had approximately 54000 lots owned or controlled.
The percentage of watts own was about 80% with the remainder under control.
On average our land bank had approximately 5.4 years of supply at quarter end based on a trailing 12 month of closings, including a full year impact of Avi.
From a land pipeline perspective, we were almost exclusively focused on securing land for 2021 and beyond.
Got it ended the quarter, we had 5295 units and our backlog with a sales value of approximately 2.5 billion.
Compared to the same time last year. This represents an increase of 90% units and an increase of 8% in sales value.
We also had 2049 total specs at quarter end, which included 385 finished specs or about 1.1 per community.
You might recall that we had almost 1.7 finished specs per community at the end up 20 team.
So the teams have done a nice job selling and closing inventory units as this year has progressed.
We talked about how that benefited us in Q2 and that continued this quarter as well.
We expect to build up our spec count again through the fourth quarter as we position ourselves for another successful spring selling season in 2020.
From a liquidity perspective, we ended the quarter with approximately 740 million in total available liquidity.
122 million about liquidity was cash on hand, and the rest was from our 600 million dollar corporate revolver, excluding normal course letters of credit that had been issued against it.
End of the quarter, we had no drawn balance on the revolver and our net debt to capital ratio was 42.7% in.
In addition, we have repaid or 200 million 364, Dave revolver subsequent to quarter end, which was inline with our 2019 financing plan.
I'll wrap up by sharing our guidance for the full year based on the success that we've seen in the first three quarters of the year, we're excited to refine and favorably adjust some of our estimates.
We are tightening the range, you're bringing up the midpoint of our closings and now anticipate closings to be between 9000 810000.
Our average community count will be about 345.
Our 2019 absorption pace is now expected to be between 2.3 to 2.4 compared to 2.3 last year.
We are increasing our GAAP home closings gross margin estimate inclusive of capitalized interest and purchase accounting to the low 18% range.
As I mentioned SGN as a percentage of homebuilding revenue is expected to be in the low 10% range.
JV income is expected to be about 9 million.
We anticipate an effective tax rate of about 25%.
Land and development spend is expected to be approximately 1.2 billion for the year, which includes 25 million for build the rent development activity related to the initial projects that were working on during Q4.
Diluted share count for the year is expected to be around 108 million.
I'll now turn the call back over to Cheryl.
Thank you Dave.
Before we moved acuity I'd like to take a moment to share a couple of market highlight some recent consumer segment findings and an update on our new website and brand messaging.
Oh that most all markets have felt good Phoenix continues to lead the pack in a meaningful way.
Our consistent performance and growth has been a key part of our success in Q3 closings were up in the market more than 30% for the fourth consecutive quarter and sales were up more than 20% for the fifth consecutive quarter.
The market actually led the company in a number of categories for the quarter, including sales pace closings and margin rate.
Hello pays for the entire company was that more than 9% in the quarter and there were a number of markets that contributed to that often Sacramento Orlando southwest, Florida, and Atlanta, all had year over year sales pace increases in the double digits.
Over the last few quarters, we have discussed the moderation in pricing challenges we've seen in Dallas.
The team there has done a nice job and repositioning some of the legacy AB product that needed to be addressed and generally the market feels like it slowly getting better.
As we've seen over the years market throughout the country will naturally go through some ebbs and flows and Dallas certainly would have fallen into that category.
Markets like Phoenix, Houston, and Austin have also seen that over recent years with each of them recovering nicely.
If I were to pick a market that appears to be feeling a better a bit of pressure at the moment it would be the bay.
As everyone is aware the market there has experience.
Extremely strong run over the last few years and we've started to see it bed softness over the last few months.
Underlying fundamentals do remain strong in the market, though so similar to other markets mention we anticipate the bay to regain to trend in due time.
We've talked a lot in the past about the market research, we do and how that informs our understanding of key demographics and our various buyer groups.
Millennials are a key buyer group that we spent a lot of time on recently and I believe there continues to be some confusion in the media about the important role they play in the marketplace.
Five years ago, they represented roughly 20% of our buyers and today almost one out of every three buyers is a millennial.
This demographic is really best understated by dividing them into two groups, rather than oversimplifying, where they might be from a life events perspective.
We approached millennials over 30 years, as one group and those younger than 30 as another.
Today, the average age if a millennial looking to buy is 32 were 33 years old and that buying decision is usually triggered by a key life events, such as meritor children, which is trending later in life for this generation than those before it.
I'm often surprised by the notion out in the marketplace. The millennials aren't buying as we're just not saying that in fact, 75% of our older Millennials are actually binder second home and even for those millennials that we see under the age of 30, 45% of them are buying their second house.
We believe them most millennials will ultimately want to own a home and have a lifestyle similar to what they grew up again, and we're well positioned to take advantage of that.
We continue to believe that our barbell approach with the baby Boomers and our 55 class lifestyle communities, representing one end and the millennials on the other our key consumer groups that we'll continue to drive the growth for Taylor Morrison and the industry.
Lastly, I'm excited to share that earlier. This month, we took our marketing initiatives to new Heights, I unveiling, our new Taylor Morrison website, and a fresh approach to our brand messaging.
Our hope with both is to generate even greater name recognition in our market and to create a seamless experience for our customers starting their new home search online.
We known that now more than ever before consumers are shopping online homes included and our new site was designed to make shopping for new home construction easier.
In addition to its fleet can modern design. The new site include forward thinking features like enhance treaty floor plan toward interactive community site maps, showing real time lot availability and floor plan optionality for each slot, allowing customers to do more research before visiting our communities.
The New Taylor Morrison website went live earlier this month and while it is still very early days, we're already seeing a significant increase in overall traffic and engagement session times are at more than 25% month over month, and we've seen at 33% increase in lead and call conversions across all divisions for users coming from third party advertiser.
We've also seen increased call information request an appointment in most all of our market.
Feedback from our early testing shows that consumers are enjoying the site as well.
They can search for new homes, Moody's and have shared that the new design anesthetics create a warm and welcoming environment.
To further solidify Taylor Morrison in the digital age soon we'll be unveiling a new Amazon Alexa scale with a simple Alaska electric in search for nearby Taylor Morrison communities and driving directions to person on mobile devices and scheduled community tours.
Now, let's just briefly turn to our new brand positioning, which I believe is just a fresh approach to our marketing communication.
Consumers realize the power of their dollar and want to invested in brands that stand for something more than what they sell many believe brands purpose can be the single most compelling reason for people to buy into a brand choosing it over its competition.
Taylor Morrison strategic brand purpose is all about showing our belief in the power of progression.
We know people move to a new home when they're facing transition ahead, whether it's expanding households for marriage or a new baby relocating for a job or looking ahead to retirement.
Her all changes that signify a step forward and through our new brand positioning we will show our belief and the power progress and support our customers on their cost of change.
The launch of our new messaging is rooted in emotional storytelling through video and will allow customers to emotionally connect with Taylor Morrison.
With all of that said I'd be remiss, if I didn't invite you to watch our new brand films and experienced the new Taylor Morrison web site for yourself by visiting Taylor Morrison Dot com.
I'd like to end our call today like I always do by providing an enormous and heartfelt. Thank you to the entire Taylor Morrison team for their efforts day in day out to deliver quality homes for our homeowners and help us achieve our strong performance.
Deeply believe our results are a testament to the passion and dedication of our team members.
Across the country, but that I'd like to open the call to question operator, please provide our participants with instructions.
As a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press the pound key.
Standby well, we compile the culinary roster.
And our first question is from Alan Ratner from Zelman and Associates. Your line is now open.
Hey, guys good morning nice quarter.
Thank you Harold.
Good morning.
My first question I'm, just hoping you can maybe give us a little bit of a peek into the at the mindset at the consumer today and the buyer.
Obviously benefiting a ton from low rates this year, but I feel like they're still this kind of a mindset or belief out there that it's still a little bit of tenuous buyer today and that if rates were to start to creep higher that you could see a pretty dramatic falloff in demand and obviously, that's tough to really forecasts.
But maybe you can kind of just tell us a little bit what you're seeing both from an affordability as well as a copy that standpoint, maybe in the markets, where you're raising prices. Today are you seeing any impact to demand are you seeing any pullback in the in order growth or do you feel like they're still room to run and that's the consumer confidence has rebounded to a point that even if.
Rates were to creep a bit higher that that the market could still remain on solid footing.
Okay packed a lot in their Alan but let me give it might have a shot you know I would tell you that we are seeing general strength across all consumers all price point I think the consumers feeling pretty good and like I said in my prepared remarks, I think they have a lot to feel good about so if I look at the normal indicators and I look at our.
Foot traffic coming in the doors.
Were up year over year on a community basis, if I look at web traffic and engagement on the website I would share. The very same thing now some of that's going to be the rollout of our new website as I talked about but honestly that just happened in the last three weeks, so I've seen that pattern through there.
Weve increased prices and about 40% of our communities this year, albeit.
Slightly more modest increases, but I think that's healthy.
The.
The narrative on the sales floor with our sales associates is actually very strong some markets you're going to see that manifesting itself through offers but most its you know it's just engagement and how quick can I find my lot and what are you going to release, the new phase of lots.
So I don't think the buyers in a very tenuous state now having said all of that I would share two things. One is if we continue to look and test are our backlog. We are staying the same condition that I have spoke about for.
At least eight to 10 corridors and that our buyers can afford somewhere between three and 600 basis points of higher interest rate or a larger house, having said that I think we learned a lot in the fourth quarter and even though our buyers could still a for three or 400 500 more basis points.
They were paralyzed there was an emotional reaction, but I don't think it was 100% the interest rate I think it was the speed in wish that interest rate moved in the prior three months and it at long with that and all the other noise that was happening from a macro standpoint, it had an impact as I look forward I mean, we'll see what.
The fed does today, but if the economists are accurate you know, we're expecting likely another increase today and probably some posture I'm seasonally decrease today. Thank you Dave I'm. Another decrease today and probably some posturing to lets wait and see and probably just kind of holding steady.
Ted between now and the election, and I think you're gonna have rates float somewhere in the high threes to the low fours for the foreseeable future. So I think that all bodes well.
I really appreciate that very comprehensive answer so thank you Charles.
[laughter] so.
Question I guess just in this is maybe just a little bit more confirming some of the guidance, but also just get your thoughts on community count in general So Dave Yeah, I think for to to get to the full year 345 average I mean, you're running close to 360 through the first three quarters. It would seem to imply fourth quarter drops off quite meaningfully maybe down to 300.
It's which I.
I guess I'm curious how how much of that is timing I mean, how quickly do you think that can that can rebound back to levels. You were at when you first close the deal and I guess more broadly I mean, how important is community count for you guys to post gross I mean <unk>. When you look at your portfolio today, even if community count doesn't rebound doctor.
As levels are you still confident that you can at least kind of maintain market level growth next year.
Yes, Alan I'll start maybe with the mechanics of it further fourth quarter, our community count is probably going to be on the low three thirtys.
And that'll get us to our annual guidance.
And it really it's about timing of when communities are rolling off in coming on in it.
And it given quarter and obviously the strength of our order success.
Maybe just a little bit into.
Next year, I think where you're going to see is.
A slow ramp in the first half of 2020 and that that ramp will accelerate back towards the second half of the year, but your questions. A good one around the importance of community count I mean for us it's going to be both obviously, we want to drive community count growth.
As you can see in over the last several years, we're very focused on on that level the growth, but it's also the efficiency and each one of our community so driving the absorptions up.
You know for US I think that some of the great strength and where we're going to.
You know drive the leverage that we want in the business as well.
Got it very helpful. Maybe I was little confused on the community count because I'm, just if I plugging a 330 in the fourth quarter I get closer 350 for the full year, but maybe I'm looking at it a bit differently than you guys are but any case good luck and thanks for answering my questions.
Thanks, Alan have a good one.
Thank you Sir our next question is from Jack Micenko from ISI G. Your line is now fan.
Hey, Good morning, guys is actually so I'm on for Jack This morning.
So cheryl.
Morning.
So surely you talked a little bit about the scale benefits that you guys are realizing today, but could you maybe just spend some time just talking through some of the specifics is that more on the labor front is that materials or are you getting better land terms now that you just bigger.
And then what could that mean sort of for gross margins going forward.
Yeah, all of the above very good question, but you see it you know certainly from the external standpoint, it what it does to the only on market I think where weve excelled in the path as we've always felt like weve through good and bad times, we've retained our relationships and land markets and so getting that first look and quality of select.
Action is significant this certainly helps when you look at the production side I think we're seeing it there and so many places we're seeing it in our local purchasing power, we're seeing it in our ability to partner with our trades and give them visibility of the schedules for months to calm and allows them to bring the crews on site and keep them there.
When I look at the net regional and national purchasing power. The teams have done a tremendous job, which is why we're able to take up some of our synergies in the last quarter call and then you see it on the internal SGN Hs gives you greater efficiency, because so much of that fixed cost benefits from.
Those added units in every community. So we will continue to focus on scale in every market certainly the JV transaction made a huge mark on the organization.
Great.
And then Dave just on gross margin the true up this quarter. It looks like it's about 40 basis points on the margin you know or do you think you guys are through that now with the negotiations or is there anymore. It to be had there.
No we're through it.
I think you know ex that the 40 basis points, that's kind of where we were running from a margin perspective for most of the year and we're taking that into consideration will be somewhere similar in Q4.
Got it thank you.
Thank you.
Next question comes from Michael Rehaut from JP Morgan Your line is now open.
Thanks, Good morning, everyone.
So.
Just wanted to.
You know circle back on an earlier question around community Count I appreciate Dave the you know the thoughts around four to you that was helpful. It as if I heard you all right as well you're talking about.
Growing from that low Thirtys base I'm, a little bit in the first half of the year and then maybe a a little bit more of a pick up in the second half.
And so in that type of backdrop.
Should we.
You know how should we be thinking about overall growth for the I mean, obviously, it's a little premature for a 2020 guidance, but just directionally would be helpful. It would seem like you know barring any major shifts in sales pace.
Order growth might be down.
Double digits in the first half of the year and then depending on community count in the back half.
Second half might be a different story is that the right way to think about it.
Just from a modeling perspective.
Yes, I mean, some of this Michael is gonna be obviously timing of when they come on but I would expect overall for our growth to be probably in line with.
Industry expectations, which are probably kind of mid single digits.
From an order growth perspective, you know I think we have to look at the compare in the first quarter what will be 2020 over.
The 2019 as you remember we got off to a slower start the industry did in the first quarter spring selling season started a little bit later, so I think we'll need to take that into into consideration, but all that said I mean, we're focused on growing orders.
Year over year end 2020, it is a little early for us to give guidance. We're in that process right now, but we'll come out with more details on out in the fourth quarter call and I agree with what you said, David and it really be a strong combination of community count growth and pace improvement as we've seen all the way through this year I think what gives us a lot of exciting.
It is when we look at some of that communities that are under development today and what we expect you know to how we expect them to perform early in the year when they open and I think it gives us great confidence on our pace is looking for it a lot of them are going to be both in that entry first time buyer.
Segment as well as the 55 plus fire, so tried and our sweet spot.
Okay.
I appreciate that I guess also.
I was hoping to delve in a little bit to the very strong September that you had.
Obviously, you know builder stopped reporting monthly orders.
Long time ago for good reason, but I was at the same point I was curious if you were any specific drivers perhaps community count opening perspective.
Or certain markets that that really a push that September to be strong relative to the first two months of the year and if you're thinking about it if you're seeing that type of.
Stronger sales pace continue into the fourth quarter.
Yeah, you know Michael we're quite excited about the consistent sales pace that we saw July through September I mean, the orders were pretty consistent as we made it through the quarter, which normally you begin to see then drop off and even more excited and what we're seeing in the first 20 whats today the 30.
Enter the first 29 days out of October we're right on track with where we were in September somewhere around that to four pace, which is about 50% higher than our pace for the whole fourth quarter last year I don't think it's one thing I think it's the quality of that community.
These I think it on the marketing message to new energy around our website I think the sales teams are doing a really nice job. We have good inventory on the ground as Dave talked about in his prepared remarks, so and the consumers feeling good. So I don't think it's just one.
Silver bullet and I'd add one more than just the integration of the legacy JV communities. Those are all fully integrated up and running their plan, we're maximizing those as well.
That's great and one last one if I could sneak in a Dave did I hear your right that you're expecting a gross margin ex the true up benefit.
The fourth quarter similar to the third quarter in other words like a low 18% 18, one ish something like that.
That's right yellow 18.
Okay perfect. Thank you.
Thank you. Our next question is from Carl Reichardt from B T. G. Your line is now open.
Good morning, everyone.
Just.
Hi.
Couple of a little ones just one could you Dave talk just about what the certain items were in the yesterday and then can you also just chat a little bit about California, and the power outages and obviously, you've got a lot in San Jose, which wasn't really impacted but some others. Just what can we expect in terms of delays and pedestal installations or sales traffic.
Yes about that living through it myself.
Sure, Yes, all start with the asked you in a girl. So on one side of it is timing related the closings as you recall, we kind of pulled some closings forward in Q2, just with the strong spec sale environment and then we did shift some out from Q3 to Q4, just the some of the whether that Sheryl match.
And.
And then from more of the expense standpoint, there's there's there's a couple of things in there.
Probably the biggest ones were the accelerated model amortization.
That is tied directly to our order strength. So we're selling through the communities faster, which is increasing the amortization because we're closing out the community. So instead of taken one quarter's worth the amortization, we could be taking two to three quarters worth because we're selling it out faster than we anticipated and then there's just some other general timing.
Things some of it was also for US some of the web site work.
That we did so some of that gets capitalized, but some of that gets expensed as well.
But we do feel like it is timing that's why we're holding our annual guidance to the low 10%.
We're still seen for the year that increased scale from Avi that's going to help us.
Drive the leverage and ultimately the strength of deliveries that are for the fourth quarter will drive the amount of leverage that we see.
On the in the California fires.
I don't think we know yet to be completely honest I mean, my first concern as our team members and the barrel safe.
And we have a great kind of crisis management to keep in touch with everyone. So once we understand how long these are with us.
I think we can assume it's going to impact. If this is like any of the other so we've seen in the past we can't assume it's going to have some impact on the trade. It's kind of definitely have the greatest impact on the utility companies.
But I can't can articulate that yet we have to get to the other side of it you know very similar to what we saw.
I'm not very similar little different than what we saw in Texas. This year, where we lost about five days. Thank goodness. The storm never really materialize. The way we had thought not in Texas really ran on that was this range really more in Florida, but you still have to go through all the motions and those motions cost.
A few days I'm, hoping we don't have any sites and dangerous I don't see any massive changes. So if we have any impacts will be timing.
But it's just a little too early to now.
Alright, Thanks, I hope everything's, Okay with your property Carlin found our footwear fine property wise or just <unk> Power's [laughter] theres been an issue for a lot of folks out here I know that let me have a lot of team members that have already been displaced and have no power and some that have actually.
Been evacuated, but I just I don't know how long it goes on yet fair enough. Thank you and then just one big picture question for you Sheryl So as you look at.
Lets call. It your pre tax margin EBITDA margin and where you'd like it to go long term as you think about balancing price and pace really strong pieces.
Margins are not quite where some in the rest of the industry are what does this sort of the long term strategy, let's say to get your your your pre tax up to see maybe a double digit is that something that's sort of in your sites and how will you get there if it is.
Of course it it so our expectations that he kind of look at this business over time, Carl you know quite well that we should expect to see something in well over 10% until all the steps that we've been taking for the last few years in growing the business. These are long term strategy to put the business in the right place. So.
It's not one specific strategy. It really is directed through the scale across the entire business and in each of our market to gain the efficiencies, but I can talk you know there's going to be a lot of.
There's going to be a lot of tactics that will deploy to get there and that's everything from the way, we buy our land to our pricing strategy to really kind of pivoting toward pace certainly the innovation in the way we're looking at building sciences and some of the long term opportunities there we're already starting to see try.
Mendis innovation on the mortgage side. Each of these is going to have a role to driving our pre tax to that 10 plus percent.
Great. Thanks, Cheryl Thanks, David.
Thank you.
Thank you. Our next question is from Paul Przybylski from Wells Fargo. Your line is now fan.
Thank you.
Good quarter.
First off I was wondering if you could give us some color on no active adult demand in how you see that consumer shaping up you know what their upcoming selling season given the.
Economic and political backdrop.
Yeah, I would tell you that that's the kind of shoulder season than that were just stepping into gives me confidence.
When I look at Florida, which where we really see that the largest piece of our active adult business today.
It they're doing well.
It's also it's interesting when you kind of dissect the numbers its Florida is a place where I would say the larger builders look for the greatest volumes.
And so we tend to see in the early fall going into the kind of year and closing depending what your year end is we tend to see the most aggressive incentive in Florida that I really do anywhere else.
But it took place where we really do drive volume.
And so far the the consumers you know like that feels pretty good across all segments, including active adult as far as the political backdrop.
And I think back to the last.
Campaign year.
John I can't imagine this one.
Plays out any differently as far as you know just the media noise I think at some level it becomes white noise for the consumer.
I don't know that it can get any.
Can be much worse that has for three years ago.
So I think as long as the consumers feeling good about their own personal situation their ability to sell their house I expect to have a nice shoulder and certainly leading into a strong spring selling I'm specifically to the company. We have some important new openings early next year in southwest, Florida that I think are going to only eight the overall.
Impact to the spring selling.
And I was recently in Orlando and it seemed to me like some of your Avi communities were making a concerted effort to introduce some new product and drive down the selling price and move to a package type design program is that you're going to be a nationwide strategy.
And what impact do you expect that to have on maybe some volumes and your margin even for that.
Yeah, I think you have to we look at this consumer segment by consumers. So we absolutely have been national kind of approach to it but it's not a universal it's not one size fits all how are we at the more affordable segment. We absolutely are looking at more packages when I look at what's happened in Orlando.
Between the Avi the repositioning of the product the simplification.
Our paces are up you know well over 50% there and so it I think it really plays into it were quite delighted with where that Orlando business is going and it's a really nice combination of the entry level, primarily the Avi business at the active adult entry level complemented with <unk>.
Of that more traditional active adult.
So.
It's a little bit of everything I'm like I said, probably a third of that business I really think are trying to simplify the we're also seeing those efforts across the business, but I think it's really important now we understand the consumer in each submarket and not go with a one size fits all I think that's for folks get in trouble.
Okay. Appreciate it thank you very much.
Thank you.
Thank you. Our next question is from Jay Mccanless from Wedbush. Your line is now fan.
Good morning.
Sure.
Communities.
This is how does that.
Legacy Taylor Morrison versus.
Yeah.
You know Jay we don't look at it that way because they're all Taylor Morrison communities today, what we do look at as kind of new opening communities close out communities to see where we're seeing quarter over quarter year over year like house by house price increases.
And I would tell you it's across the board we're seeing it in all consumer sets, which would imply that you know a good percentage of the JV communities would also being some is seeing some of those increases.
And I think as I might have already said earlier I didn't I apologize.
You know the increases are a little bit more modest, but I think that's actually pretty healthy.
But as I look down literally every product every home in our portfolio year over year, it's really across the board I'm seeing it in first time communities first time buyer communities I'm seeing and in 50, plus I'm actually seeing it in some of our luxury communities as well.
If there is a place I'm, probably not seeing pricing power. It's in the Closeouts, we've been trying to move through those and we're definitely seeing it and new communities, where we have a very strategic kind of ramp up of pricing. So to me. That's good news, it's not we're not seeing strength in one consumer group, but really across the portfolio.
Question.
In the prepared comments.
<unk>.
You talked about $25 million.
Just some expense.
<unk>.
Project.
That's part of our Ellen de spend Jay So of the 1.2 billion that we forecasted were just letting you know that 25 million or that is being directed to build the rent.
So you just be land and development spend like we would in any other community and won't be till sometime.
Second quarter, let's call. It next year that you'll begin to see some of the vertical construction. So like Dave said, it's really Ellen de and then you'll start to see ASCO vertical next year, and then be introducing new you know new markets as well next year.
Sounds great. Thanks for taking my question.
Thank you.
Thank you at this time I'm showing no further questions I want to turn the call back over to Sheryl for closing remarks.
Thank you all for joining us today to share our Q3 results I appreciate everyone's time and look forward to speaking to you next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.