Tri Pointe Homes, Inc. (the “Company”) (NYSE:TPH) today announced results for the first quarter ended March 31, 2022.

“Tri Pointe Homes delivered another quarter of outstanding results in the first quarter of 2022, highlighted by earnings of $0.81 per diluted share,” said Doug Bauer, Chief Executive Officer of Tri Pointe Homes. “We came in at the high end or above our stated guidance for deliveries, average sales price and homebuilding gross margin percentage, once again demonstrating our ability to successfully execute through the operational challenges that persist in our industry. We also increased the dollar value of our backlog by 19% on a year-over-year basis, putting our company in a great position to deliver on our full-year guidance for 2022.”

Mr. Bauer continued, “Tri Pointe remains focused on improving its operational and financial performance by executing on the strategic initiatives we have emphasized for several quarters now. These include the continued monetization of our long-dated California assets, the growth and build-out of our early-stage markets, a disciplined approach to land acquisition, further improvements to our cost structure across our homebuilding platform and a consistent stock repurchase program. We made progress on each of these fronts in the first quarter of 2022 and expect to see the continued benefits of these efforts in the years to come.”

Mr. Bauer concluded, “Tri Pointe remains focused on delivering long-term stockholder value by executing on these major initiatives and by capitalizing on the opportunities that our industry currently presents. We believe we have charted a path for continued success thanks to our strategic focus, our well-capitalized balance sheet and our seasoned management team, and I am excited for what the future holds for our company.”

Results and Operational Data for First Quarter 2022 and Comparisons to First Quarter 2021

  • Net income was $88.5 million, or $0.81 per diluted share, compared to $70.8 million, or $0.59 per diluted share
  • Home sales revenue of $725.3 million compared to $716.7 million, an increase of 1%
    • New home deliveries of 1,099 homes compared to 1,126 homes, a decrease of 2%
    • Average sales price of homes delivered of $660,000 compared to $636,000, an increase of 4%
  • Homebuilding gross margin percentage of 26.8% compared to 23.9%, an increase of 290 basis points
    • Excluding interest and impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 29.3%*
  • SG&A expense as a percentage of homes sales revenue of 11.1% compared to 11.4%, a decrease of 30 basis points
  • Net new home orders of 1,896 compared to 1,987, a decrease of 5%
  • Active selling communities averaged 111.5 compared to 113.3, a decrease of 2%
    • Net new home orders per average selling community were 17.0 orders (5.7 monthly) compared to 17.5 orders (5.8 monthly)
    • Cancellation rate of 8% compared to 6%
  • Backlog units at quarter end of 3,955 homes compared to 3,825, an increase of 3%
    • Dollar value of backlog at quarter end of $2.9 billion compared to $2.5 billion, an increase of 19%
    • Average sales price of homes in backlog at quarter end of $741,000 compared to $641,000, an increase of 16%
  • Ratios of debt-to-capital and net debt-to-net capital of 35.7% and 27.8%*, respectively, as of March 31, 2022
  • Repurchased 5,295,236 shares of common stock at a weighted average price per share of $23.25 for an aggregate dollar amount of $123.1 million in the three months ended March 31, 2022
  • Ended the first quarter of 2022 with total liquidity of $1.0 billion, including cash and cash equivalents of $412.7 million and $568.0 million of availability under the Company’s unsecured revolving credit facility

* See “Reconciliation of Non-GAAP Financial Measures”

“While the housing industry experienced a material rise in mortgage rates during the first quarter of 2022, it did not dampen the demand for our homes as evidenced by our sales pace of 5.7 homes per community per month,” said Tri Pointe Homes President and Chief Operating Officer Tom Mitchell. “We continued to see motivated buyers at our communities, particularly from the Millennial-aged cohort, which represents a significant pool of buyers for our industry. Other demand drivers include the persistent lack of existing home inventory, the ongoing migration to lower cost areas and a heightened desire for home ownership brought about by the pandemic. We believe these positive demand factors will propel the homebuilding industry forward for years to come.”

Outlook

For the second quarter, the Company anticipates delivering between 1,300 and 1,500 homes at an average sales price between $670,000 and $680,000. The Company expects homebuilding gross margin percentage to be in the range of 26.0% to 27.0% for the second quarter and anticipates its SG&A expense as a percentage of home sales revenue will be in the range of 10.0% to 11.0%. Finally, the Company expects its effective tax rate for the second quarter to be in the range of 25.0% to 26.0%.

For the full year, the Company anticipates delivering between 6,500 and 6,800 homes at an average sales price between $680,000 and $690,000. The Company expects homebuilding gross margin percentage to be in the range of 26.0% to 27.0% for the full year and anticipates its SG&A expense as a percentage of home sales revenue will be in the range of 9.7% to 10.2%. Finally, the Company expects its effective tax rate for the full year to be in the range of 25.0% to 26.0%.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Thursday, April 21, 2022. The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer, and Glenn Keeler, Chief Financial Officer. Interested parties can listen to the call live and view the related slides on the Internet under the Events & Presentations heading in the Investors section of the Company’s website at www.TriPointeHomes.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software. The call can also be accessed toll free at (877) 407-3982, or (201) 493-6780 for international participants. Participants should ask for the Tri Pointe Homes First Quarter 2022 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start of the call. A replay of the call will be available for two weeks following the call toll free at (844) 512-2921, or (412) 317-6671 for international participants, using the reference number 13728529. An archive of the webcast will also be available on the Company’s website for a limited time.

About Tri Pointe Homes, Inc.

One of the largest homebuilders in the U.S., Tri Pointe Homes, Inc. (NYSE: TPH) is a publicly traded company and a recognized leader in customer experience, innovative design, and environmentally responsible business practices. The company builds premium homes and communities in 10 states, with deep ties to the communities it serves—some for as long as a century. Tri Pointe Homes combines the financial resources, technology platforms and proven leadership of a national organization with the regional insights, longstanding community connections and agility of empowered local teams. Tri Pointe has won multiple Builder of the Year awards, most recently in 2019, and made Fortune magazine’s 2017 100 Fastest-Growing Companies list. Named one of the Best Places to Work by the Orange County Business Journal for four consecutive years, Tri Pointe Homes also became a Great Place to Work-Certified™ company in 2021. For more information, please visit TriPointeHomes.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include, but are not limited to, statements regarding our strategy, projections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, including our estimates for growth, financial condition, sales prices, prospects, and capital spending. Forward-looking statements that are included in this press release are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effects of the ongoing COVID-19 pandemic, which are highly uncertain and subject to rapid change, cannot be predicted and will depend upon future developments, including the emergence and spread of new strains or variants of COVID-19, the severity and the duration of the outbreak, the duration of existing and future social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability and acceptance of effective vaccines, adequate testing and treatments and the prevalence of widespread immunity to COVID-19; the impacts on our supply chain, the health of our employees, service providers and trade partners, and the reactions of U.S. and global markets and their effects on consumer confidence and spending; the effects of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such parcels; access to adequate capital on acceptable terms; geographic concentration of our operations, particularly within California; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; the prices and availability of supply chain inputs, including raw materials and labor; oil and other energy prices; the effects of U.S. trade policies, including the imposition of tariffs and duties on homebuilding products and retaliatory measures taken by other countries; the effects of weather, including the occurrence of drought conditions in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters; the risk of loss from acts of war, terrorism, civil unrest or outbreaks of contagious diseases, such as COVID-19; transportation costs; federal and state tax policies; the effects of land use, environment and other governmental laws and regulations; legal proceedings or disputes and the adequacy of reserves; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our homebuyers’ confidential information or other forms of cyber-attack; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

Investor Relations Contact:

Drew Mackintosh, Mackintosh Investor RelationsInvestorRelations@TriPointeHomes.com, 949-478-8696

Media Contact:

Carol Ruiz, cruiz@newgroundco.com, 310-437-0045

 
KEY OPERATIONS AND FINANCIAL DATA(dollars in thousands)(unaudited)
 
    Three Months Ended March 31,
      2022       2021     Change   % Change
Operating Data:   (unaudited)
Home sales revenue   $ 725,251     $ 716,675     $ 8,576     1 %
Homebuilding gross margin   $ 194,591     $ 171,319     $ 23,272     14 %
Homebuilding gross margin %     26.8 %     23.9 %     2.9 %    
Adjusted homebuilding gross margin %*     29.3 %     26.8 %     2.5 %    
SG&A expense   $ 80,695     $ 81,809     $ (1,114 )   (1 )%
SG&A expense as a % of home sales revenue     11.1 %     11.4 %     (0.3 )%    
Net income   $ 88,499     $ 70,802     $ 17,697     25 %
Adjusted EBITDA*   $ 146,091     $ 126,080     $ 20,011     16 %
Interest incurred   $ 28,553     $ 21,179     $ 7,374     35 %
Interest in cost of home sales   $ 17,065     $ 20,678     $ (3,613 )   (17 )%
                 
Other Data:                
Net new home orders     1,896       1,987       (91 )   (5 )%
New homes delivered     1,099       1,126       (27 )   (2 )%
Average sales price of homes delivered   $ 660     $ 636     $ 24     4 %
Cancellation rate     8 %     6 %     2 %    
Average selling communities     111.5       113.3       (1.8 )   (2 )%
Selling communities at end of period     116       117       (1 )   (1 )%
Backlog (estimated dollar value)   $ 2,929,187     $ 2,451,805     $ 477,382     19 %
Backlog (homes)     3,955       3,825       130     3 %
Average sales price in backlog   $ 741     $ 641     $ 100     16 %
                 
    March 31,   December 31,        
      2022       2021     Change   % Change
Balance Sheet Data:   (unaudited)            
Cash and cash equivalents   $ 412,703     $ 681,528     $ (268,825 )   (39 )%
Real estate inventories   $ 3,288,347     $ 3,054,743     $ 233,604     8 %
Lots owned or controlled     41,828       41,675       153     0 %
Homes under construction(1)     4,214       3,632       582     16 %
Homes completed, unsold     25       27       (2 )   (7 )%
Debt   $ 1,338,050     $ 1,337,723     $ 327     0 %
Stockholders’ equity   $ 2,408,234     $ 2,447,621     $ (39,387 )   (2 )%
Book capitalization   $ 3,746,284     $ 3,785,344     $ (39,060 )   (1 )%
Ratio of debt-to-capital     35.7 %     35.3 %     0.4 %    
Ratio of net debt-to-net capital*     27.8 %     21.1 %     6.7 %    
 
(1) Homes under construction included 98 and 85 models at March 31, 2022 and December 31, 2021, respectively.* See “Reconciliation of Non-GAAP Financial Measures”

CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share amounts)
 
    March 31,   December 31,
      2022       2021  
Assets   (unaudited)    
Cash and cash equivalents   $ 412,703     $ 681,528  
Receivables     116,749       116,996  
Real estate inventories     3,288,347       3,054,743  
Investments in unconsolidated entities     122,366       118,095  
Goodwill and other intangible assets, net     156,603       156,603  
Deferred tax assets, net     57,096       57,096  
Other assets     160,208       151,162  
Total assets   $ 4,314,072     $ 4,336,223  
         
Liabilities        
Accounts payable   $ 76,015     $ 84,854  
Accrued expenses and other liabilities     490,877       466,013  
Loans payable     250,000       250,504  
Senior notes     1,088,050       1,087,219  
Total liabilities     1,904,942       1,888,590  
         
Commitments and contingencies        
         
Equity        
Stockholders’ equity:        
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively            
Common stock, $0.01 par value, 500,000,000 shares authorized; 104,980,860 and 109,644,474 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively     1,050       1,096  
Additional paid-in capital           91,077  
Retained earnings     2,407,184       2,355,448  
Total stockholders’ equity     2,408,234       2,447,621  
Noncontrolling interests     896       12  
Total equity     2,409,130       2,447,633  
Total liabilities and equity   $ 4,314,072     $ 4,336,223  
CONSOLIDATED STATEMENT OF OPERATIONS(in thousands, except share and per share amounts)(unaudited)
 
    Three Months Ended March 31,
      2022       2021  
Homebuilding:        
Home sales revenue   $ 725,251     $ 716,675  
Land and lot sales revenue     1,597       1,523  
Other operations revenue     644       663  
Total revenues     727,492       718,861  
Cost of home sales     530,660       545,356  
Cost of land and lot sales     475       153  
Other operations expense     646       624  
Sales and marketing     32,239       40,460  
General and administrative     48,456       41,349  
Homebuilding income from operations     115,016       90,919  
Equity in loss of unconsolidated entities     (55 )     (13 )
Other income, net     273       108  
Homebuilding income before income taxes     115,234       91,014  
Financial Services:        
Revenues     8,752       2,105  
Expenses     5,308       1,407  
Equity in income of unconsolidated entities     46       2,691  
Financial services income before income taxes     3,490       3,389  
Income before income taxes     118,724       94,403  
Provision for income taxes     (30,225 )     (23,601 )
Net income     88,499       70,802  
Net income attributable to noncontrolling interests     (1,021 )      
Net income available to common stockholders   $ 87,478     $ 70,802  
Earnings per share        
Basic   $ 0.82     $ 0.59  
Diluted   $ 0.81     $ 0.59  
Weighted average shares outstanding        
Basic     107,326,911       119,355,252  
Diluted     108,197,485       120,086,573  

MARKET DATA BY REPORTING SEGMENT & STATE(dollars in thousands)(unaudited)
 
    Three Months Ended March 31,
    2022   2021
    NewHomesDelivered   AverageSalesPrice   NewHomesDelivered   AverageSalesPrice
Arizona   70     $ 733     160     $ 665  
California   514       680     457       672  
Nevada   84       686     74       626  
Washington   72       972     78       1,001  
West total   740       714     769       699  
Colorado   43       626     40       602  
Texas   220       501     214       453  
Central total   263       521     254       477  
Maryland   29       579     58       546  
North Carolina   18       481     14       368  
South Carolina   10       397     4       290  
Virginia   39       782     27       730  
East total   96       624     103       560  
Total   1,099     $ 660     1,126     $ 636  
                     
    Three Months Ended March 31,
    2022   2021
    Net NewHomeOrders   AverageSellingCommunities   Net NewHomeOrders   AverageSellingCommunities
Arizona   215       13.3     261       15.2  
California   701       39.0     690       38.8  
Nevada   145       9.0     255       12.0  
Washington   48       3.0     71       4.5  
West total   1,109       64.3     1,277       70.5  
Colorado   131       8.0     105       5.0  
Texas   415       22.5     429       24.0  
Central total   546       30.5     534       29.0  
Maryland   52       5.2     63       6.0  
North Carolina   122       8.0     42       1.8  
South Carolina   4       0.5     6       1.0  
Virginia   63       3.0     65       5.0  
East total   241       16.7     176       13.8  
Total   1,896       111.5     1,987       113.3  

MARKET DATA BY REPORTING SEGMENT & STATE, continued(dollars in thousands)(unaudited)
 
    As of March 31, 2022   As of March 31, 2021
    BacklogUnits   BacklogDollarValue   AverageSalesPrice   BacklogUnits   BacklogDollarValue   AverageSalesPrice
Arizona   665     $ 515,500     $ 775     580     $ 394,390     $ 680  
California   1,223       1,016,024       831     1,491       1,004,571       674  
Nevada   387       302,271       781     317       216,693       684  
Washington   105       102,756       979     132       137,379       1,041  
West total   2,380       1,936,551       814     2,520       1,753,033       696  
Colorado   272       198,666       730     191       115,836       606  
Texas   831       473,755       570     713       337,533       473  
Central total   1,103       672,421       610     904       453,369       502  
Maryland   106       85,952       811     206       118,960       577  
North Carolina   201       95,714       476     40       15,770       394  
South Carolina   18       7,255       403     5       1,641       328  
Virginia   147       131,294       893     150       109,032       727  
East total   472       320,215       678     401       245,403       612  
Total   3,955     $ 2,929,187     $ 741     3,825     $ 2,451,805     $ 641  
                             
    March 31,   December 31,                  
    2022     2021                    
Lots Owned or Controlled:                            
Arizona   4,278       4,607                    
California   14,226       15,091                    
Nevada   2,427       2,161                    
Washington   938       1,010                    
West total   21,869       22,869                    
Colorado   2,121       1,683                    
Texas   11,467       12,297                    
Central total   13,588       13,980                    
District of Columbia   105       15                    
Maryland   725       558                    
North Carolina   4,693       3,044                    
South Carolina   18       414                    
Virginia   830       795                    
East total   6,371       4,826                    
Total   41,828       41,675                    
                             
    March 31,     December 31,                  
    2022       2021                    
Lots by Ownership Type:                            
Lots owned   22,317       22,136                    
Lots controlled (1)   19,511       19,539                    
Total   41,828       41,675                    
 
(1) As of March 31, 2022 and December 31, 2021, lots controlled included lots that were under land option contracts or purchase contracts. As of March 31, 2022 and December 31, 2021, lots controlled for Central include 3,317 and 2,950 lots, respectively, and lots controlled for East include 174 and 179 lots, respectively, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following table reconciles homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

    Three Months Ended March 31,
      2022     %     2021     %
    (dollars in thousands)
Home sales revenue   $ 725,251     100.0 %   $ 716,675     100.0 %
Cost of home sales     530,660     73.2 %     545,356     76.1 %
Homebuilding gross margin     194,591     26.8 %     171,319     23.9 %
Add: interest in cost of home sales     17,065     2.4 %     20,678     2.9 %
Add: impairments and lot option abandonments     489     0.1 %     213     0.0 %
Adjusted homebuilding gross margin   $ 212,145     29.3 %   $ 192,210     26.8 %
Homebuilding gross margin percentage     26.8 %         23.9 %    
Adjusted homebuilding gross margin percentage     29.3 %         26.8 %    
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-net capital. We believe that the ratio of net debt-to-net capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

    March 31, 2022   December 31, 2021
Loans payable   $ 250,000     $ 250,504  
Senior notes     1,088,050       1,087,219  
Total debt     1,338,050       1,337,723  
Stockholders’ equity     2,408,234       2,447,621  
Total capital   $ 3,746,284     $ 3,785,344  
Ratio of debt-to-capital(1)     35.7 %     35.3 %
         
Total debt   $ 1,338,050     $ 1,337,723  
Less: Cash and cash equivalents     (412,703 )     (681,528 )
Net debt     925,347       656,195  
Stockholders’ equity     2,408,234       2,447,621  
Net capital   $ 3,333,581     $ 3,103,816  
Ratio of net debt-to-net capital(2)     27.8 %     21.1 %
 
(1) The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt by the sum of total debt plus stockholders’ equity.(2) The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is total debt less cash and cash equivalents) by the sum of net debt plus stockholders’ equity.
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)(unaudited)

The following table calculates the non-GAAP financial measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP. EBITDA means net income available to common stockholders before (a) interest expense, (b) expensing of previously capitalized interest included in costs of home sales, (c) income taxes and (d) depreciation and amortization. Adjusted EBITDA means EBITDA before (e) amortization of stock-based compensation and (f) impairments and lot option abandonments. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

    Three Months Ended March 31,
      2022       2021  
    (in thousands)
Net income available to common stockholders   $ 87,478     $ 70,802  
Interest expense:        
Interest incurred     28,553       21,179  
Interest capitalized     (28,553 )     (21,179 )
Amortization of interest in cost of sales     17,065       20,678  
Provision for income taxes     30,225       23,601  
Depreciation and amortization     5,285       7,130  
EBITDA     140,053       122,211  
Amortization of stock-based compensation     5,272       3,656  
Impairments and lot option abandonments     766       213  
Adjusted EBITDA   $ 146,091     $ 126,080  
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