TRI Pointe Group, Inc. Reports 2019 Third Quarter Results
-New Home Orders up 25% Year-Over-Year--Homebuilding Gross Margin Percentage Increased 130 Basis Points to 22.6%--Diluted Earnings Per Share of $0.44-
IRVINE, Calif., Oct. 31, 2019 (GLOBE NEWSWIRE) -- TRI Pointe Group, Inc. (the “Company”) (NYSE: TPH) today announced results for the third quarter ended September 30, 2019.
“I am extremely pleased with our performance in the third quarter of 2019 as we exceeded our stated guidance for every key metric in the quarter,” said TRI Pointe Group Chief Executive Officer Doug Bauer. “We continue to see healthy demand trends across our product portfolio, as evidenced by our 25% increase in orders as compared to the third quarter of 2018. In addition, homebuilding gross margin improved 130 basis points year-over-year to 22.6%.”
Mr. Bauer continued, “Our operations in California continue to perform extremely well for us, thanks to our sizable market presence, our differentiated product focus and our emphasis on value for each market segment, with orders in California increasing 26% year-over-year.”
Mr. Bauer concluded, “We’ve made great strides in our efforts to further diversify our Company from both a geographic and product standpoint, and we expect to see the benefit of these efforts for years to come. In the meantime, we are staying balanced in our approach to the business by maintaining a healthy balance sheet while continuing to grow our operations. Given the success we achieved in the first three quarters of the year and our sizable unit backlog at the end of the period, we are in a great position to deliver on the full year guidance we issued at the beginning of 2019.”
Results and Operational Data for Third Quarter 2019 and Comparisons to Third Quarter 2018
- Net income was $62.9 million, or $0.44 per diluted share, compared to $64.0 million, or $0.43 per diluted share
- Home sales revenue of $746.3 million compared to $771.8 million, a decrease of 3%
- New home deliveries of 1,187 homes compared to 1,205 homes, a decrease of 1%
- Average sales price of homes delivered of $629,000 compared to $640,000, a decrease of 2%
- Homebuilding gross margin percentage of 22.6% compared to 21.3%, an increase of 130 basis points
- Excluding interest and impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 25.3%*
- SG&A expense as a percentage of homes sales revenue of 11.6% compared to 10.7%, an increase of 90 basis points
- Net new home orders of 1,291 compared to 1,035, an increase of 25%
- Active selling communities averaged 147.5 compared to 127.3, an increase of 16%
- New home orders per average selling community were 8.8 orders (2.9 monthly) compared to 8.1 orders (2.7 monthly)
- Cancellation rate of 17% compared to 19%
- Backlog units at quarter end of 2,312 homes compared to 2,101, an increase of 10%
- Dollar value of backlog at quarter end of $1.5 billion compared to $1.4 billion, an increase of 4%
- Average sales price of homes in backlog at quarter end of $645,000 compared to $681,000, a decrease of 5%
- Ratios of debt-to-capital and net debt-to-net capital of 40.4% and 38.2%*, respectively, as of September 30, 2019
- Repurchased 3,035,420 shares of common stock at a weighted average price per share of $13.75 for an aggregate dollar amount of $41.7 million in the three months ended September 30, 2019
- Ended the third quarter of 2019 with total liquidity of $548.9 million, including cash and cash equivalents of $130.3 million and $418.6 million of availability under the Company’s unsecured revolving credit facility
* See “Reconciliation of Non-GAAP Financial Measures”
Third Quarter 2019 Operating Results
Net income was $62.9 million, or $0.44 per diluted share, for the third quarter of 2019, compared to net income of $64.0 million, or $0.43 per diluted share, for the third quarter of 2018.
Home sales revenue decreased $25.5 million, or 3%, to $746.3 million for the third quarter of 2019, as compared to $771.8 million for the third quarter of 2018. The decrease was attributable to a 2% decrease in average sales price of homes delivered to $629,000, compared to $640,000 in the third quarter of 2018, and a 1% decrease in new home deliveries to 1,187, compared to 1,205 in the third quarter of 2018.
Homebuilding gross margin percentage for the third quarter of 2019 increased to 22.6%, compared to 21.3% for the third quarter of 2018. The increase in homebuilding gross margin was due to a greater mix of deliveries from certain long-dated California communities, which produce gross margins above the Company average. Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 25.3%* for the third quarter of 2019, compared to 24.0%* for the third quarter of 2018.
Sales and marketing and general and administrative (“SG&A”) expense for the third quarter of 2019 increased to 11.6% of home sales revenue as compared to 10.7% for the third quarter of 2018, primarily the result of lower operating leverage on the fixed components of SG&A as a result of the 3% decrease in home sales revenue and higher overhead costs as a result of our expansion efforts into the Charlotte, Raleigh, Sacramento and Dallas–Fort Worth markets.
New home orders increased 25% to 1,291 homes for the third quarter of 2019, as compared to 1,035 homes for the same period in 2018. Average selling communities increased 16% to 147.5 for the third quarter of 2019 compared to 127.3 for the third quarter of 2018. The Company’s overall absorption rate per average selling community increased 8% for the third quarter of 2019 to 8.8 orders (2.9 monthly) compared to 8.1 orders (2.7 monthly) during the third quarter of 2018.
The Company ended the quarter with 2,312 homes in backlog, representing approximately $1.5 billion. The average sales price of homes in backlog as of September 30, 2019 decreased $36,000, or 5%, to $645,000, compared to $681,000 as of September 30, 2018.
“At TRI Pointe Group, we pride ourselves on being at the forefront of homebuilding design and innovation, but we also recognize the importance of providing value for the consumer,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell. “That is why we’ve made a concerted effort to bring our average selling prices down in several of our markets through higher density projects and smaller floor plans. These projects have all the hallmarks of a typical TRI Pointe community, but at a more affordable price point. We believe the combination of product differentiation and value has been a big factor in our success this year and it will continue to be so in the future.”
* See “Reconciliation of Non-GAAP Financial Measures”
Outlook
For the fourth quarter of 2019, the Company anticipates delivering 73% to 77% of its 2,312 homes in backlog as of September 30, 2019, resulting in full year deliveries between 4,800 and 4,900 homes. The Company expects its average sales price to be $620,000 for both the fourth quarter and full year 2019. The Company expects its homebuilding gross margin percentage to be in a range of 20.5% to 21.5% for the fourth quarter, resulting in a full year homebuilding gross margin percentage to be in the range of 19% to 20%. The Company anticipates its SG&A expense as a percentage of homes sales revenue will be in a range of 9.2% to 9.6% for the fourth quarter, resulting in a full year SG&A expense as a percentage of homes sales revenue in a range of 11% to 12%. Lastly, the Company expects its effective tax rate for both the fourth quarter and the full year to be in the range of 25% to 26%.
Earnings Conference Call
The Company will host a conference call via live webcast for investors and other interested parties beginning at 12:00 p.m. Eastern Time on Thursday, October 31, 2019. The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer, and Mike Grubbs, Chief Financial Officer.
Interested parties can listen to the call live and view the related presentation slides on the internet through the Investors section of the Company’s website at www.TRIPointeGroup.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 by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the TRI Pointe Group Third Quarter 2019 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start. The replay of the call will be available for two weeks following the call. To access the replay, the domestic dial-in number is 1-844-512-2921, the international dial-in number is 1-412-317-6671, and the reference code is #13695062. An archive of the webcast will be available on the Company’s website for a limited time.
About TRI Pointe Group®
Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE: TPH) is a family of premium regional homebuilders that designs, builds, and sells homes in major U.S. markets. As one of the top 10 largest public homebuilding companies based on revenue in the United States, TRI Pointe Group combines the resources, operational sophistication, and leadership of a national organization with the regional insights, community ties, and agility of local homebuilders. The TRI Pointe Group family includes Maracay® in Arizona, Pardee Homes® in California and Nevada, Quadrant Homes® in Washington, Trendmaker® Homes in Texas, TRI Pointe Homes® in California, Colorado, North Carolina and South Carolina, and Winchester® Homes* in Maryland and Virginia. TRI Pointe Group was recognized in Fortune magazine’s 2017 100 Fastest-Growing Companies list, named 2015 Builder of the Year by Builder magazine, and 2014 Developer of the Year by Builder and Developer magazine. The company was also named one of the Best Places to Work in Orange County by the Orange County Business Journal in 2016, 2017, 2018 and 2019. For more information, please visit www.TRIPointeGroup.com.
*Winchester is a registered trademark and is used with permission.
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 effect 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; levels of competition; the successful execution of our internal performance plans, including any restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the re-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; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental 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 customers’ 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:
Chris Martin, TRI Pointe GroupDrew Mackintosh, Mackintosh Investor Relations[email protected], 949-478-8696
Media Contact:Carol Ruiz, [email protected], 310-437-0045
KEY OPERATIONS AND FINANCIAL DATA(dollars in thousands)(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||||
| Operating Data: | |||||||||||||||||||||||
| Home sales revenue | $ | 746,269 | $ | 771,768 | $ | (25,499 | ) | $ | 1,931,110 | $ | 2,123,135 | $ | (192,025 | ) | |||||||||
| Homebuilding gross margin | $ | 168,642 | $ | 164,715 | $ | 3,927 | $ | 357,263 | $ | 461,484 | $ | (104,221 | ) | ||||||||||
| Homebuilding gross margin % | 22.6 | % | 21.3 | % | 1.3 | % | 18.5 | % | 21.7 | % | (3.2 | )% | |||||||||||
| Adjusted homebuilding gross margin %* | 25.3 | % | 24.0 | % | 1.3 | % | 21.5 | % | 24.3 | % | (2.8 | )% | |||||||||||
| SG&A expense | $ | 86,585 | $ | 82,963 | $ | 3,622 | $ | 248,090 | $ | 240,287 | $ | 7,803 | |||||||||||
| SG&A expense as a % of home sales revenue | 11.6 | % | 10.7 | % | 0.9 | % | 12.8 | % | 11.3 | % | 1.5 | % | |||||||||||
| Net income | $ | 62,861 | $ | 63,969 | $ | (1,108 | ) | $ | 89,194 | $ | 170,529 | $ | (81,335 | ) | |||||||||
| Adjusted EBITDA* | $ | 115,605 | $ | 115,333 | $ | 272 | $ | 207,371 | $ | 312,221 | $ | (104,850 | ) | ||||||||||
| Interest incurred | $ | 22,405 | $ | 23,942 | $ | (1,537 | ) | $ | 67,740 | $ | 67,089 | $ | 651 | ||||||||||
| Interest in cost of home sales | $ | 19,240 | $ | 20,128 | $ | (888 | ) | $ | 51,502 | $ | 53,926 | $ | (2,424 | ) | |||||||||
| Other Data: | |||||||||||||||||||||||
| Net new home orders | 1,291 | 1,035 | 256 | 4,103 | 3,874 | 229 | |||||||||||||||||
| New homes delivered | 1,187 | 1,205 | (18 | ) | 3,126 | 3,344 | (218 | ) | |||||||||||||||
| Average sales price of homes delivered | $ | 629 | $ | 640 | $ | (11 | ) | $ | 618 | $ | 635 | $ | (17 | ) | |||||||||
| Cancellation rate | 17 | % | 19 | % | (2 | )% | 16 | % | 16 | % | 0 | % | |||||||||||
| Average selling communities | 147.5 | 127.3 | 20.2 | 147.3 | 129.0 | 18.3 | |||||||||||||||||
| Selling communities at end of period | 150 | 125 | 25 | ||||||||||||||||||||
| Backlog (estimated dollar value) | $ | 1,491,452 | $ | 1,431,225 | $ | 60,227 | |||||||||||||||||
| Backlog (homes) | 2,312 | 2,101 | 211 | ||||||||||||||||||||
| Average sales price in backlog | $ | 645 | $ | 681 | $ | (36 | ) | ||||||||||||||||
| September 30, | December 31, | ||||||||||||||||||||||
| 2019 | 2018 | Change | |||||||||||||||||||||
| Balance Sheet Data: | (unaudited) | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 130,262 | $ | 277,696 | $ | (147,434 | ) | ||||||||||||||||
| Real estate inventories | $ | 3,345,390 | $ | 3,216,059 | $ | 129,331 | |||||||||||||||||
| Lots owned or controlled | 28,756 | 27,740 | 1,016 | ||||||||||||||||||||
| Homes under construction (1) | 2,802 | 2,166 | 636 | ||||||||||||||||||||
| Homes completed, unsold | 295 | 417 | (122 | ) | |||||||||||||||||||
| Debt | $ | 1,433,058 | $ | 1,410,804 | $ | 22,254 | |||||||||||||||||
| Stockholders’ equity | $ | 2,111,685 | $ | 2,056,924 | $ | 54,761 | |||||||||||||||||
| Book capitalization | $ | 3,544,743 | $ | 3,467,728 | $ | 77,015 | |||||||||||||||||
| Ratio of debt-to-capital | 40.4 | % | 40.7 | % | (0.3 | )% | |||||||||||||||||
| Ratio of net debt-to-net capital* | 38.2 | % | 35.5 | % | 2.7 | % | |||||||||||||||||
__________(1) Homes under construction included 67 and 40 models at September 30, 2019 and December 31, 2018, respectively.* See “Reconciliation of Non-GAAP Financial Measures”
CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share amounts)
| September 30, | December 31, | ||||||
| 2019 | 2018 | ||||||
| Assets | (unaudited) | ||||||
| Cash and cash equivalents | $ | 130,262 | $ | 277,696 | |||
| Receivables | 70,507 | 51,592 | |||||
| Real estate inventories | 3,345,390 | 3,216,059 | |||||
| Investments in unconsolidated entities | 4,207 | 5,410 | |||||
| Goodwill and other intangible assets, net | 160,026 | 160,427 | |||||
| Deferred tax assets, net | 57,275 | 67,768 | |||||
| Other assets | 173,804 | 105,251 | |||||
| Total assets | $ | 3,941,471 | $ | 3,884,203 | |||
| Liabilities | |||||||
| Accounts payable | $ | 81,279 | $ | 81,313 | |||
| Accrued expenses and other liabilities | 315,436 | 335,149 | |||||
| Loans payable | 400,000 | — | |||||
| Senior notes | 1,033,058 | 1,410,804 | |||||
| Total liabilities | 1,829,773 | 1,827,266 | |||||
| Commitments and contingencies | |||||||
| Equity | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively | — | — | |||||
| Common stock, $0.01 par value, 500,000,000 shares authorized; 139,237,697 and 141,661,713 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 1,392 | 1,417 | |||||
| Additional paid-in capital | 624,312 | 658,720 | |||||
| Retained earnings | 1,485,981 | 1,396,787 | |||||
| Total stockholders’ equity | 2,111,685 | 2,056,924 | |||||
| Noncontrolling interests | 13 | 13 | |||||
| Total equity | 2,111,698 | 2,056,937 | |||||
| Total liabilities and equity | $ | 3,941,471 | $ | 3,884,203 | |||
CONSOLIDATED STATEMENT OF OPERATIONS(in thousands, except share and per share amounts)(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Homebuilding: | |||||||||||||||
| Home sales revenue | $ | 746,269 | $ | 771,768 | $ | 1,931,110 | $ | 2,123,135 | |||||||
| Land and lot sales revenue | 607 | 2,225 | 6,819 | 3,966 | |||||||||||
| Other operations revenue | 618 | 598 | 1,853 | 1,795 | |||||||||||
| Total revenues | 747,494 | 774,591 | 1,939,782 | 2,128,896 | |||||||||||
| Cost of home sales | 577,627 | 607,053 | 1,573,847 | 1,661,651 | |||||||||||
| Cost of land and lot sales | 495 | 2,234 | 7,552 | 4,163 | |||||||||||
| Other operations expense | 609 | 590 | 1,826 | 1,781 | |||||||||||
| Sales and marketing | 47,834 | 44,854 | 133,888 | 128,881 | |||||||||||
| General and administrative | 38,751 | 38,109 | 114,202 | 111,406 | |||||||||||
| Homebuilding income from operations | 82,178 | 81,751 | 108,467 | 221,014 | |||||||||||
| Equity in income (loss) of unconsolidated entities | 18 | 15 | (33 | ) | (384 | ) | |||||||||
| Other income (expense), net | 325 | (477 | ) | 6,719 | (379 | ) | |||||||||
| Homebuilding income before income taxes | 82,521 | 81,289 | 115,153 | 220,251 | |||||||||||
| Financial Services: | |||||||||||||||
| Revenues | 901 | 480 | 1,959 | 1,154 | |||||||||||
| Expenses | 817 | 125 | 1,765 | 391 | |||||||||||
| Equity in income of unconsolidated entities | 2,114 | 1,986 | 4,861 | 4,972 | |||||||||||
| Financial services income before income taxes | 2,198 | 2,341 | 5,055 | 5,735 | |||||||||||
| Income before income taxes | 84,719 | 83,630 | 120,208 | 225,986 | |||||||||||
| Provision for income taxes | (21,858 | ) | (19,661 | ) | (31,014 | ) | (55,457 | ) | |||||||
| Net income | $ | 62,861 | $ | 63,969 | $ | 89,194 | $ | 170,529 | |||||||
| Earnings per share | |||||||||||||||
| Basic | $ | 0.45 | $ | 0.43 | $ | 0.63 | $ | 1.13 | |||||||
| Diluted | $ | 0.44 | $ | 0.43 | $ | 0.63 | $ | 1.13 | |||||||
| Weighted average shares outstanding | |||||||||||||||
| Basic | 141,088,381 | 147,725,074 | 141,729,759 | 150,377,472 | |||||||||||
| Diluted | 141,533,546 | 148,318,032 | 142,128,786 | 151,482,456 | |||||||||||
MARKET DATA BY REPORTING SEGMENT & STATE(dollars in thousands)(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
| NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | ||||||||||||||||||||
| New Homes Delivered: | |||||||||||||||||||||||||||
| Maracay | 138 | $ | 513 | 137 | $ | 487 | 318 | $ | 522 | 383 | $ | 476 | |||||||||||||||
| Pardee Homes | 461 | 698 | 354 | 634 | 1,028 | 634 | 1,005 | 645 | |||||||||||||||||||
| Quadrant Homes | 56 | 880 | 73 | 898 | 167 | 976 | 241 | 795 | |||||||||||||||||||
| Trendmaker Homes | 224 | 459 | 150 | 516 | 628 | 462 | 389 | 501 | |||||||||||||||||||
| TRI Pointe Homes | 226 | 685 | 367 | 721 | 749 | 693 | 983 | 723 | |||||||||||||||||||
| Winchester Homes | 82 | 569 | 124 | 590 | 236 | 599 | 343 | 571 | |||||||||||||||||||
| Total | 1,187 | $ | 629 | 1,205 | $ | 640 | 3,126 | $ | 618 | 3,344 | $ | 635 | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
| NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | NewHomesDelivered | AverageSalesPrice | ||||||||||||||||||||
| New Homes Delivered: | |||||||||||||||||||||||||||
| California | 494 | $ | 758 | 513 | $ | 718 | 1,230 | $ | 705 | 1,429 | $ | 733 | |||||||||||||||
| Colorado | 62 | 576 | 63 | 598 | 215 | 564 | 182 | 594 | |||||||||||||||||||
| Maryland | 66 | 467 | 87 | 533 | 172 | 493 | 253 | 539 | |||||||||||||||||||
| Virginia | 16 | 992 | 37 | 724 | 64 | 885 | 90 | 661 | |||||||||||||||||||
| Arizona | 138 | 513 | 137 | 487 | 318 | 522 | 383 | 476 | |||||||||||||||||||
| Nevada | 131 | 509 | 145 | 571 | 332 | 551 | 377 | 538 | |||||||||||||||||||
| Texas | 224 | 459 | 150 | 516 | 628 | 462 | 389 | 501 | |||||||||||||||||||
| Washington | 56 | 880 | 73 | 898 | 167 | 976 | 241 | 795 | |||||||||||||||||||
| Total | 1,187 | $ | 629 | 1,205 | $ | 640 | 3,126 | $ | 618 | 3,344 | $ | 635 | |||||||||||||||
MARKET DATA BY REPORTING SEGMENT & STATE, continued(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
| Net New Home Orders | Average Selling Communities | Net New Home Orders | Average Selling Communities | Net NewHomeOrders | AverageSellingCommunities | Net NewHomeOrders | AverageSellingCommunities | ||||||||||||||||
| Net New Home Orders: | |||||||||||||||||||||||
| Maracay | 157 | 15.5 | 97 | 11.0 | 571 | 14.0 | 382 | 12.6 | |||||||||||||||
| Pardee Homes | 424 | 43.0 | 357 | 36.8 | 1,379 | 43.9 | 1,294 | 34.3 | |||||||||||||||
| Quadrant Homes | 68 | 6.8 | 64 | 7.0 | 210 | 6.9 | 226 | 6.8 | |||||||||||||||
| Trendmaker Homes | 192 | 37.0 | 139 | 27.5 | 682 | 38.1 | 455 | 28.7 | |||||||||||||||
| TRI Pointe Homes | 293 | 29.7 | 266 | 30.3 | 882 | 29.7 | 1,133 | 32.5 | |||||||||||||||
| Winchester Homes | 157 | 15.5 | 112 | 14.7 | 379 | 14.7 | 384 | 14.1 | |||||||||||||||
| Total | 1,291 | 147.5 | 1,035 | 127.3 | 4,103 | 147.3 | 3,874 | 129.0 | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
| Net New Home Orders | Average Selling Communities | Net New Home Orders | Average Selling Communities | Net New Home Orders | Average Selling Communities | Net New Home Orders | Average Selling Communities | ||||||||||||||||
| Net New Home Orders: | |||||||||||||||||||||||
| California | 526 | 53.0 | 416 | 45.3 | 1,659 | 53.8 | 1,651 | 45.0 | |||||||||||||||
| Colorado | 50 | 6.0 | 72 | 6.8 | 187 | 6.4 | 251 | 6.9 | |||||||||||||||
| Maryland | 87 | 10.8 | 69 | 9.0 | 255 | 10.2 | 254 | 9.2 | |||||||||||||||
| Virginia | 70 | 4.7 | 43 | 5.7 | 124 | 4.5 | 130 | 4.9 | |||||||||||||||
| Arizona | 157 | 15.5 | 97 | 11.0 | 571 | 14.0 | 382 | 12.6 | |||||||||||||||
| Nevada | 141 | 13.7 | 135 | 15.0 | 415 | 13.4 | 525 | 14.9 | |||||||||||||||
| Texas | 192 | 37.0 | 139 | 27.5 | 682 | 38.1 | 455 | 28.7 | |||||||||||||||
| Washington | 68 | 6.8 | 64 | 7.0 | 210 | 6.9 | 226 | 6.8 | |||||||||||||||
| Total | 1,291 | 147.5 | 1,035 | 127.3 | 4,103 | 147.3 | 3,874 | 129.0 | |||||||||||||||
MARKET DATA BY REPORTING SEGMENT & STATE, continued(dollars in thousands)(unaudited)
| As of September 30, 2019 | As of September 30, 2018 | ||||||||||||||||||||
| Backlog Units | Backlog Dollar Value | Average Sales Price | Backlog Units | Backlog Dollar Value | Average Sales Price | ||||||||||||||||
| Backlog: | |||||||||||||||||||||
| Maracay | 404 | $ | 218,424 | $ | 541 | 216 | $ | 122,617 | $ | 568 | |||||||||||
| Pardee Homes | 753 | 542,370 | 720 | 698 | 451,398 | 647 | |||||||||||||||
| Quadrant Homes | 89 | 77,426 | 870 | 129 | 127,136 | 986 | |||||||||||||||
| Trendmaker Homes | 367 | 184,563 | 503 | 239 | 143,000 | 598 | |||||||||||||||
| TRI Pointe Homes | 451 | 306,337 | 679 | 627 | 460,700 | 735 | |||||||||||||||
| Winchester Homes | 248 | 162,332 | 655 | 192 | 126,374 | 658 | |||||||||||||||
| Total | 2,312 | $ | 1,491,452 | $ | 645 | 2,101 | $ | 1,431,225 | $ | 681 | |||||||||||
| As of September 30, 2019 | As of September 30, 2018 | ||||||||||||||||||||
| Backlog Units | Backlog Dollar Value | Average Sales Price | Backlog Units | Backlog Dollar Value | Average Sales Price | ||||||||||||||||
| Backlog: | |||||||||||||||||||||
| California | 885 | $ | 669,724 | $ | 757 | 888 | $ | 654,929 | $ | 738 | |||||||||||
| Colorado | 116 | 65,469 | 564 | 169 | 92,037 | 545 | |||||||||||||||
| Maryland | 144 | 75,251 | 523 | 114 | 64,672 | 567 | |||||||||||||||
| Virginia | 104 | 87,081 | 837 | 78 | 61,701 | 791 | |||||||||||||||
| Arizona | 404 | 218,424 | 541 | 216 | 122,617 | 568 | |||||||||||||||
| Nevada | 203 | 113,514 | 559 | 268 | 165,133 | 616 | |||||||||||||||
| Texas | 367 | 184,563 | 503 | 239 | 143,000 | 598 | |||||||||||||||
| Washington | 89 | 77,426 | 870 | 129 | 127,136 | 986 | |||||||||||||||
| Total | 2,312 | $ | 1,491,452 | $ | 645 | 2,101 | $ | 1,431,225 | $ | 681 | |||||||||||
MARKET DATA BY REPORTING SEGMENT & STATE, continued(unaudited)
| September 30, | December 31, | ||
| 2019 | 2018 | ||
| Lots Owned or Controlled(1): | |||
| Maracay | 3,490 | 3,308 | |
| Pardee Homes | 13,927 | 14,376 | |
| Quadrant Homes | 1,427 | 1,744 | |
| Trendmaker Homes | 3,143 | 2,492 | |
| TRI Pointe Homes | 5,189 | 4,095 | |
| Winchester Homes | 1,580 | 1,725 | |
| Total | 28,756 | 27,740 | |
| September 30, | December 31, | ||
| 2019 | 2018 | ||
| Lots Owned or Controlled(1): | |||
| California | 14,908 | 15,218 | |
| Colorado | 1,096 | 866 | |
| Maryland | 1,062 | 1,142 | |
| Virginia | 518 | 583 | |
| Arizona | 3,490 | 3,308 | |
| Nevada | 2,453 | 2,387 | |
| North Carolina | 659 | — | |
| Texas | 3,143 | 2,492 | |
| Washington | 1,427 | 1,744 | |
| Total | 28,756 | 27,740 | |
| September 30, | December 31, | ||
| 2019 | 2018 | ||
| Lots by Ownership Type: | |||
| Lots owned | 23,028 | 23,057 | |
| Lots controlled(1) | 5,728 | 4,683 | |
| Total | 28,756 | 27,740 | |
__________(1) As of September 30, 2019 and December 31, 2018, lots controlled included lots that were under land option contracts or purchase contracts.
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 tables reconcile 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 September 30, | |||||||||||||
| 2019 | % | 2018 | % | ||||||||||
| (dollars in thousands) | |||||||||||||
| Home sales revenue | $ | 746,269 | 100.0 | % | $ | 771,768 | 100.0 | % | |||||
| Cost of home sales | 577,627 | 77.4 | % | 607,053 | 78.7 | % | |||||||
| Homebuilding gross margin | 168,642 | 22.6 | % | 164,715 | 21.3 | % | |||||||
| Add: interest in cost of home sales | 19,240 | 2.6 | % | 20,128 | 2.6 | % | |||||||
| Add: impairments and lot option abandonments | 1,029 | 0.1 | % | 568 | 0.1 | % | |||||||
| Adjusted homebuilding gross margin | $ | 188,911 | 25.3 | % | $ | 185,411 | 24.0 | % | |||||
| Homebuilding gross margin percentage | 22.6 | % | 21.3 | % | |||||||||
| Adjusted homebuilding gross margin percentage | 25.3 | % | 24.0 | % | |||||||||
| Nine Months Ended September 30, | |||||||||||||
| 2019 | % | 2018 | % | ||||||||||
| Home sales revenue | $ | 1,931,110 | 100.0 | % | $ | 2,123,135 | 100.0 | % | |||||
| Cost of home sales | 1,573,847 | 81.5 | % | 1,661,651 | 78.3 | % | |||||||
| Homebuilding gross margin | 357,263 | 18.5 | % | 461,484 | 21.7 | % | |||||||
| Add: interest in cost of home sales | 51,502 | 2.7 | % | 53,926 | 2.5 | % | |||||||
| Add: impairments and lot option abandonments | 6,519 | 0.3 | % | 1,425 | 0.1 | % | |||||||
| Adjusted homebuilding gross margin(1) | $ | 415,284 | 21.5 | % | $ | 516,835 | 24.3 | % | |||||
| Homebuilding gross margin percentage | 18.5 | % | 21.7 | % | |||||||||
| Adjusted homebuilding gross margin percentage(1) | 21.5 | % | 24.3 | % | |||||||||
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.
| September 30, 2019 | December 31, 2018 | ||||||
| Loans payable | $ | 400,000 | $ | — | |||
| Senior notes | 1,033,058 | 1,410,804 | |||||
| Total debt | 1,433,058 | 1,410,804 | |||||
| Stockholders’ equity | 2,111,685 | 2,056,924 | |||||
| Total capital | $ | 3,544,743 | $ | 3,467,728 | |||
| Ratio of debt-to-capital(1) | 40.4 | % | 40.7 | % | |||
| Total debt | $ | 1,433,058 | $ | 1,410,804 | |||
| Less: Cash and cash equivalents | (130,262 | ) | (277,696 | ) | |||
| Net debt | 1,302,796 | 1,133,108 | |||||
| Stockholders’ equity | 2,111,685 | 2,056,924 | |||||
| Net capital | $ | 3,414,481 | $ | 3,190,032 | |||
| Ratio of net debt-to-net capital(2) | 38.2 | % | 35.5 | % | |||
__________(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.
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 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 September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| (in thousands) | |||||||||||||||
| Net income | $ | 62,861 | $ | 63,969 | $ | 89,194 | $ | 170,529 | |||||||
| Interest expense: | |||||||||||||||
| Interest incurred | 22,405 | 23,942 | 67,740 | 67,089 | |||||||||||
| Interest capitalized | (22,405 | ) | (23,942 | ) | (67,740 | ) | (67,089 | ) | |||||||
| Amortization of interest in cost of sales | 19,234 | 20,293 | 51,674 | 54,199 | |||||||||||
| Provision for income taxes | 21,858 | 19,661 | 31,014 | 55,457 | |||||||||||
| Depreciation and amortization | 6,795 | 7,002 | 18,356 | 19,581 | |||||||||||
| EBITDA | 110,748 | 110,925 | 190,238 | 299,766 | |||||||||||
| Amortization of stock-based compensation | 3,828 | 3,765 | 10,614 | 10,955 | |||||||||||
| Impairments and lot option abandonments | 1,029 | 643 | 6,519 | 1,500 | |||||||||||
| Adjusted EBITDA | $ | 115,605 | $ | 115,333 | $ | 207,371 | $ | 312,221 | |||||||
