Taylor Morrison Home (NYSE: TMHC) reported Q2 EPS of $0.80, $0.28 better than the analyst estimate of $0.52. Revenue for the quarter came in at $1.53 billion versus the consensus estimate of $1.56 billion.

Second Quarter 2020 Highlights:

• Net sales orders were 3,453, approximately a 23 percent increase over the prior year quarter
• Average monthly sales pace per community was 2.8, tying the highest level for the second quarter in years
• Home closings were 3,212, approximately a 24 percent increase over the prior year quarter
• Total revenue was $1.53 billion, more than a 20 percent increase compared to the prior year quarter
• SG&A as a percentage of home closings revenue was 9.9 percent, down 20 basis points from the prior year quarter

"I'm happy to share that the trends we reported a couple of weeks ago in connection with our recent bond offering have continued through July," said Sheryl Palmer, Taylor Morrison chairman and CEO. "With two days left in the month we're on track to deliver year-over-year growth in net sales of approximately 80 percent and a projected average monthly sales pace per community of nearly 4, about 60 percent growth year-over-year."

The company finished the quarter with 3,453 net sales, representing year-over-year growth of approximately 23 percent, which was driven by May and June's impressive year-over-year growth of nearly 17 percent and 94 percent, respectively. The overall strength in sales drove a quarterly average monthly sales pace per community of 2.8, which ties the highest level for a second quarter in years for the company. June was the standout month in the quarter with a sales pace of 4.3, which was the highest pace in the company's history. "Pace is a critical metric providing an apples-to-apples lens for sales activity levels and it's important to note the strong performance in this data point was driven by both the Taylor Morrison and William Lyon legacy businesses," said Palmer.

"I continue to be encouraged by another significant driver of our strong sales performance and that's our unmatched focus on the virtual experience with new innovative tools and digital capabilities," added Palmer. "This forward-thinking strategy allowed us to move quickly when rapid change was required, as our website offers more than just a digital retail experience, serving as a true extension of our sales teams."

Today, most of the Company's buyers begin their buying experience virtually. "We believe more than half of our buyers take a hybrid approach where they complete nearly the entire buying process virtually but will visit us in-person to complete their purchase agreement or to do their final walk through. And the true 'cherry on top' is our complete end-to-end virtual buyer, who never steps foot in a sales center and completes 100 percent of the sales process virtually. For the second quarter we averaged 2.4, 100 percent virtual sales per day," said Palmer.

As a result of feedback from our customers, effective August 1st all Taylor Morrison homes sold for new construction will include a number of "Taylor Morrison Live Well" product enhancements. These products will be standard features in every home including an upgraded air filtration system, a new whole house water filtration system and a microbicidal interior paint with a chemical free formula which absorbs bacteria and prevents mold—all contributing to cleaner indoor air quality. "With our customers spending much of their time at home these days, we want to positively contribute to their quality of life by providing standard features that will help keep them healthy," said Palmer. Taylor Morrison will also be introducing a suite of additional health and wellness features that can be added as an option during the design center process.

"Earlier this month, the Company completed a bond offering as a part of our previously stated desire to refinance the debt assumed in the William Lyon Homes acquisition," said Dave Cone, Executive Vice President and Chief Financial Officer. "During this offering we raised $500 million in 10-year bonds at 5.125 percent, which was used to partially refinance the acquired 2023 and 2025 bonds. In addition, we used about $125 million of our cash on-hand to pay off a portion of the same sets of notes while also covering the standard fees and call premiums associated with the refinance. In total, this effort will save the company about $10 million in annualized interest while also furthering our focus on de-levering over time."

The company was able to incorporate a significant pay down piece to this refinancing project because of its strong liquidity position. At the end of the second quarter, and before the debt refinancing, the company had over $900 million in total available liquidity. About $675 million of that was cash on-hand with the remaining difference comprised of capacity on our $800 million corporate revolver. "We did have $485 million in borrowings on the revolver at quarter end, but similar to the end of the first quarter, much of that has been held in cash on our balance sheet as we've taken a cautious approach to preserve liquidity during these uncertain times," said Cone. "We anticipate paying off some or all of the revolver balance by year-end, subject to other considerations around balance sheet management as previously discussed. Our net debt to capital ratio at the end of the second quarter was 46 percent, and we expect it to be in the low to mid 40 percent range at year-end. Our leverage continues to track well ahead of where we expected to be at this point in 2020 and we now believe we will reduce our leverage to the low 40 percent range by the end of 2021, as compared to our previous expectation of mid 40 percent."

"We had about $51 million in transaction expenses and other items, including purchase price accounting of $32.1 million, that impacted our results for the second quarter," said Cone. "When controlling for these, our adjusted net income for the quarter was approximately $104 million demonstrating the strength of our core operations." GAAP net income was about $66 million.

For earnings history and earnings-related data on Taylor Morrison Home (TMHC) click here.