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Tri Pointe Homes, Inc. Reports 2022 Second Quarter Results

July 21, 2022 6:00 AM

-Diluted Earnings Per Share of $1.33--Homebuilding Gross Margin Percentage of 27.2%--Monthly Absorption Rate of 3.7--Backlog Dollar Value up 18% Year-Over-Year-

INCLINE VILLAGE, Nev., July 21, 2022 (GLOBE NEWSWIRE) -- Tri Pointe Homes, Inc. (the “Company”) (NYSE: TPH) today announced results for the second quarter ended June 30, 2022.

“Tri Pointe Homes delivered another quarter of strong top- and bottom-line results for the second quarter of 2022,” said Doug Bauer, Tri Pointe Homes Chief Executive Officer. “Home sales revenue eclipsed the $1 billion mark for the quarter thanks to our operating teams who once again did an outstanding job managing backlog, overcoming labor and supply chain issues and delivering homes in a timely manner. Home sales gross margin percentage was 27.2% for the quarter, a record for our company, while SG&A as a percentage of home sales revenue was 9.5%. This strong margin performance was the primary driver behind the 33% year-over-year increase in our fully diluted earnings per share to $1.33.”

Mr. Bauer continued, “We generated 1,356 net new home orders during the quarter on a sales pace of 3.7 homes per community per month. While this pace is consistent with our company’s pre-pandemic order performance for a second quarter, we experienced softening in order activity as the quarter progressed, as the combination of higher mortgage interest rates and lower consumer confidence began to impact demand. We believe there will likely be a period of adjustment as buyers adapt to this new reality, however, we believe the favorable fundamentals of demographic trends and undersupply of housing in our markets remain in place and we are confident in the long-term health of our industry.”

Mr. Bauer concluded, “Our balance sheet remained in excellent condition, as we ended the quarter with total liquidity of $938 million, including cash and cash equivalents of $270 million and $668 million available under our unsecured revolving credit facility. The company’s debt-to-capital ratio was 35.0% and our net debt-to-net capital ratio was 30.1%*. We believe this combination of low leverage and ample liquidity will allow us to make smart, rational decisions from a position of financial strength going forward and that Tri Pointe is well prepared for what comes next.”

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

*See “Reconciliation of Non-GAAP Financial Measures”

“Tri Pointe ended the second quarter with a record sold backlog of nearly $3 billion, putting us in an excellent position to continue delivering strong top- and bottom-line results for the remainder of the year,” said Tri Pointe Homes President and Chief Operating Officer Tom Mitchell. “We believe that our approach of acquiring land in prime locations close to employment and transportation centers and other lifestyle amenities that homebuyers value, combined with our innovative, premium homes, gives us a distinct selling advantage in a challenging market. We also have strong leadership teams at both the local and national levels who have successfully navigated prior housing cycles and are skilled at operating through such times. Given these positives, we remain as confident as ever in the long-term outlook for Tri Pointe Homes.”

Outlook

For the third quarter, the Company anticipates delivering between 1,300 and 1,500 homes at an average sales price between $700,000 and $715,000. The Company expects homebuilding gross margin percentage to be in the range of 26.0% to 27.0% for the third 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 third quarter to be in the range of 25.0% to 26.0%.

Due to quickly changing market conditions and significant uncertainty related to the broader economy, the Company is providing guidance for the third quarter and is not providing updated guidance for the full year at this time.

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, July 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 Second 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 13730783. 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 was also named a Great Place to Work-Certified™ company in both 2021 and 2022. 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 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 June 30, Six Months Ended June 30,
2022 2021 Change % Change 2022 2021 Change % Change
Operating Data:(unaudited)
Home sales revenue$1,004,644 $1,009,307 $(4,663) 0% $1,729,895 $1,725,982 $3,913 0%
Homebuilding gross margin$273,292 $248,092 $25,200 10% $467,883 $419,411 $48,472 12%
Homebuilding gross margin % 27.2% 24.6% 2.6% 27.0% 24.3% 2.7%
Adjusted homebuilding gross margin %* 29.8% 27.7% 2.1% 29.6% 27.3% 2.3%
SG&A expense$95,352 $96,752 $(1,400) (1)% $176,047 $178,561 $(2,514) (1)%
SG&A expense as a % of home sales revenue 9.5% 9.6% (0.1)% 10.2% 10.3% (0.1)%
Net income available to common stockholders$136,383 $117,869 $18,514 16% $223,861 $188,671 $35,190 19%
Adjusted EBITDA*$220,905 $201,986 $18,919 9% $366,996 $328,066 $38,930 12%
Interest incurred$28,789 $22,558 $6,231 28% $57,342 $43,737 $13,605 31%
Interest in cost of home sales$24,963 $30,851 $(5,888) (19)% $42,028 $51,529 $(9,501) (18)%
Other Data:
Net new home orders 1,356 1,622 (266) (16)% 3,252 3,609 (357) (10)%
New homes delivered 1,485 1,545 (60) (4)% 2,584 2,671 (87) (3)%
Average sales price of homes delivered$677 $653 $24 4% $669 $646 $23 4%
Cancellation rate 16% 7% 9% 11% 7% 4%
Average selling communities 121.8 114.5 7.3 6% 116.7 113.4 3.3 3%
Selling communities at end of period 123 109 14 13%
Backlog (estimated dollar value)$2,981,255 $2,524,442 $456,813 18%
Backlog (homes) 3,826 3,902 (76) (2)%
Average sales price in backlog$779 $647 $132 20%
June 30, December 31,
2022 2021 Change % Change
Balance Sheet Data:(unaudited)
Cash and cash equivalents$270,124 $681,528 $(411,404) (60)%
Real estate inventories$3,490,321 $3,054,743 $435,578 14%
Lots owned or controlled 39,082 41,675 (2,593) (6)%
Homes under construction (1) 4,707 3,632 1,075 30%
Homes completed, unsold 42 27 15 56%
Debt$1,338,895 $1,337,723 $1,172 0%
Stockholders’ equity$2,487,566 $2,447,621 $39,945 2%
Book capitalization$3,826,461 $3,785,344 $41,117 1%
Ratio of debt-to-capital 35.0% 35.3% (0.3)%
Ratio of net debt-to-net capital* 30.1% 21.1% 9.0%

__________(1) Homes under construction included 88 and 85 models at June 30, 2022 and December 31, 2021, respectively.* See “Reconciliation of Non-GAAP Financial Measures”

CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)

June 30, December 31,
2022 2021
Assets(unaudited)
Cash and cash equivalents$270,124 $681,528
Receivables 145,430 116,996
Real estate inventories 3,490,321 3,054,743
Investments in unconsolidated entities 131,399 118,095
Goodwill and other intangible assets, net 156,603 156,603
Deferred tax assets, net 57,095 57,096
Other assets 163,686 151,162
Total assets$4,414,658 $4,336,223
Liabilities
Accounts payable$112,942 $84,854
Accrued expenses and other liabilities 474,202 466,013
Loans payable 250,000 250,504
Senior notes 1,088,895 1,087,219
Total liabilities 1,926,039 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 June 30, 2022 and December 31, 2021, respectively — —
Common stock, $0.01 par value, 500,000,000 shares authorized; 101,860,993 and 109,644,474 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 1,019 1,096
Additional paid-in capital — 91,077
Retained earnings 2,486,547 2,355,448
Total stockholders’ equity 2,487,566 2,447,621
Noncontrolling interests 1,053 12
Total equity 2,488,619 2,447,633
Total liabilities and equity$4,414,658 $4,336,223

CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Homebuilding:
Home sales revenue$1,004,644 $1,009,307 $1,729,895 $1,725,982
Land and lot sales revenue 114 5,416 1,711 6,939
Other operations revenue 703 660 1,347 1,323
Total revenues 1,005,461 1,015,383 1,732,953 1,734,244
Cost of home sales 731,352 761,215 1,262,012 1,306,571
Cost of land and lot sales 344 4,874 819 5,027
Other operations expense 704 686 1,350 1,310
Sales and marketing 38,523 45,489 70,762 85,949
General and administrative 56,829 51,263 105,285 92,612
Homebuilding income from operations 177,709 151,856 292,725 242,775
Equity in income (loss) of unconsolidated entities 143 (16) 88 (29)
Other income, net 116 149 389 257
Homebuilding income before income taxes 177,968 151,989 293,202 243,003
Financial Services:
Revenues 12,228 2,681 20,980 4,786
Expenses 6,322 1,485 11,630 2,892
Equity in income of unconsolidated entities — 3,949 46 6,640
Financial services income before income taxes 5,906 5,145 9,396 8,534
Income before income taxes 183,874 157,134 302,598 251,537
Provision for income taxes (45,936) (39,265) (76,161) (62,866)
Net income 137,938 117,869 226,437 188,671
Net income attributable to noncontrolling interests (1,555) — (2,576) —
Net income available to common stockholders$136,383 $117,869 $223,861 $188,671
Earnings per share
Basic$1.33 $1.01 $2.14 $1.60
Diluted$1.33 $1.00 $2.12 $1.59
Weighted average shares outstanding
Basic 102,164,377 116,824,108 104,731,388 118,082,691
Diluted 102,787,919 117,770,084 105,478,446 118,921,340

MARKET DATA BY REPORTING SEGMENT & GEOGRAPHY(dollars in thousands) (unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
NewHomesDelivered AverageSalesPrice NewHomesDelivered AverageSalesPrice NewHomesDelivered AverageSalesPrice NewHomesDelivered AverageSalesPrice
Arizona127 $732 223 $652 197 $733 383 $658
California579 698 698 705 1,093 690 1,155 692
Nevada157 724 127 589 241 711 201 602
Washington54 1,092 69 968 126 1,023 147 985
West total917 731 1,117 697 1,657 723 1,886 698
Colorado76 682 59 568 119 662 99 582
Texas318 511 233 498 538 507 447 477
Central total394 544 292 512 657 535 546 496
Carolinas(1)44 462 21 407 72 458 39 381
Washington D.C. Area(2)130 770 115 628 198 744 200 618
East total174 692 136 594 270 668 239 579
Total1,485 $677 1,545 $653 2,584 $669 2,671 $646
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net NewHomeOrders AverageSellingCommunities Net NewHomeOrders AverageSellingCommunities Net NewHomeOrders AverageSellingCommunities Net NewHomeOrders AverageSellingCommunities
Arizona195 14.2 233 15.2 410 13.6 494 15.1
California601 49.2 630 39.0 1,302 44.7 1,320 38.6
Nevada116 7.3 180 11.3 261 8.0 435 11.6
Washington21 1.8 90 6.2 69 2.4 161 5.6
West total933 72.5 1,133 71.7 2,042 68.7 2,410 70.9
Colorado34 8.0 58 5.8 165 8.0 163 5.3
Texas153 22.0 278 22.0 568 22.1 707 23.0
Central total187 30.0 336 27.8 733 30.1 870 28.3
Carolinas(1)170 11.5 40 3.8 296 10.0 88 3.1
Washington D.C. Area(2)66 7.8 113 11.2 181 7.9 241 11.1
East total236 19.3 153 15.0 477 17.9 329 14.2
Total1,356 121.8 1,622 114.5 3,252 116.7 3,609 113.4

(1) Carolinas comprises North Carolina and South Carolina.(2) Washington D.C. Area comprises Maryland, Virginia and the District of Columbia.

MARKET DATA BY REPORTING SEGMENT & GEOGRAPHY, continued(dollars in thousands) (unaudited)

As of June 30, 2022 As of June 30, 2021
BacklogUnits BacklogDollarValue AverageSalesPrice BacklogUnits BacklogDollarValue AverageSalesPrice
Arizona733 $586,871 $801 590 $424,048 $719
California1,245 1,128,517 906 1,423 921,602 648
Nevada346 279,679 808 370 245,895 665
Washington72 60,188 836 153 165,314 1,080
West total2,396 2,055,255 858 2,536 1,756,859 693
Colorado230 178,845 778 190 126,913 668
Texas666 408,415 613 758 372,381 491
Central total896 587,260 655 948 499,294 527
Carolinas(1)345 162,317 470 64 26,171 409
Washington D.C. Area(2)189 176,423 933 354 242,118 684
East total534 338,740 634 418 268,289 642
Total3,826 $2,981,255 $779 3,902 $2,524,442 $647
June 30, December 31,
2022 2021
Lots Owned or Controlled:
Arizona3,522 4,607
California13,588 15,091
Nevada2,064 2,161
Washington937 1,010
West total20,111 22,869
Colorado2,045 1,683
Texas11,321 12,297
Central total13,366 13,980
Carolinas(1)4,075 3,458
Washington D.C. Area(2)1,530 1,368
East total5,605 4,826
Total39,082 41,675
June 30, December 31,
2022 2021
Lots by Ownership Type:
Lots owned21,579 22,136
Lots controlled (3)17,503 19,539
Total39,082 41,675

(1) Carolinas comprises North Carolina and South Carolina.(2) Washington D.C. Area comprises Maryland, Virginia and the District of Columbia.(3) As of June 30, 2022 and December 31, 2021, lots controlled included lots that were under land option contracts or purchase contracts. As of June 30, 2022 and December 31, 2021, lots controlled for Central include 3,447 and 2,950 lots, respectively, and lots controlled for East include 157 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 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 June 30,
2022 % 2021 %
(dollars in thousands)
Home sales revenue$1,004,644 100.0% $1,009,307 100.0%
Cost of home sales 731,352 72.8% 761,215 75.4%
Homebuilding gross margin 273,292 27.2% 248,092 24.6%
Add: interest in cost of home sales 24,963 2.5% 30,851 3.1%
Add: impairments and lot option abandonments 972 0.1% 232 0.0%
Adjusted homebuilding gross margin$299,227 29.8% $279,175 27.7%
Homebuilding gross margin percentage 27.2% 24.6%
Adjusted homebuilding gross margin percentage 29.8% 27.7%

Six Months Ended June 30,
2022 % 2021 %
Home sales revenue$1,729,895 100.0% $1,725,982 100.0%
Cost of home sales 1,262,012 73.0% 1,306,571 75.7%
Homebuilding gross margin 467,883 27.0% 419,411 24.3%
Add: interest in cost of home sales 42,028 2.4% 51,529 3.0%
Add: impairments and lot option abandonments 1,461 0.1% 445 0.0%
Adjusted homebuilding gross margin$511,372 29.6% $471,385 27.3%
Homebuilding gross margin percentage 27.0% 24.3%
Adjusted homebuilding gross margin percentage 29.6% 27.3%

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.

June 30, 2022 December 31, 2021
Loans payable$250,000 $250,504
Senior notes 1,088,895 1,087,219
Total debt 1,338,895 1,337,723
Stockholders’ equity 2,487,566 2,447,621
Total capital$3,826,461 $3,785,344
Ratio of debt-to-capital(1) 35.0% 35.3%
Total debt$1,338,895 $1,337,723
Less: Cash and cash equivalents (270,124) (681,528)
Net debt 1,068,771 656,195
Stockholders’ equity 2,487,566 2,447,621
Net capital$3,556,337 $3,103,816
Ratio of net debt-to-net capital(2) 30.1% 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 available to common stockholders, 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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in thousands)
Net income available to common stockholders$136,383 $117,869 $223,861 $188,671
Interest expense:
Interest incurred 28,789 22,558 57,342 43,737
Interest capitalized (28,789) (22,558) (57,342) (43,737)
Amortization of interest in cost of sales 24,963 31,124 42,028 51,802
Provision for income taxes 45,936 39,265 76,161 62,866
Depreciation and amortization 6,741 8,990 12,026 16,120
EBITDA 214,023 197,248 354,076 319,459
Amortization of stock-based compensation 5,751 4,506 11,023 8,162
Impairments and lot option abandonments 1,131 232 1,897 445
Adjusted EBITDA$220,905 $201,986 $366,996 $328,066

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Source: Tri Pointe Homes, Inc.

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