UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________________________________________

FORM 10-Q

_____________________________________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-35796

_____________________________________________________________________________________________

Tri Pointe Homes, Inc.

(Exact Name of Registrant as Specified in Its Charter)

_____________________________________________________________________________________________


Delaware						61-1763235
(State or other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

_____________________________________________________________________________________________

940 Southwood Blvd, Suite 200

Incline Village, Nevada 89451

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (775) 413-1030

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

____________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

TPH

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~101,638,020~~100,098,269 shares of the registrant's common stock were issued and outstanding as of ~~July 15, 2022.~~April 14, 2023.

EXPLANATORY NOTE

As used in this quarterly report on Form 10-Q, references to “Tri Pointe”, “the Company”, “we”, “us”, or “our” (including in the consolidated financial statements and related notes thereto in this annual report on Form 10-Q) refer to Tri Pointe Homes, Inc., a Delaware corporation, and its consolidated subsidiaries.

TRI POINTE HOMES, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

~~June 30, 2022~~March 31, 2023


		Page Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of ~~June 30~~March 31, 2023 ~~, 2022~~ (unaudited) and December 31, ~~2021~~202 2	3

	Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30~~March 31 , ~~2022~~202 3 and ~~2021~~202 2 (unaudited)	4

	Consolidated Statements of Equity for the Three ~~and Six~~Months Ended J ~~une 30~~March 31 , ~~2022~~202 3 and ~~2021~~202 2 (unaudited)	5

	Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30~~March 31 , ~~2022~~202 3 and ~~2021~~202 2 (unaudited)	6

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3735

Item 4.	Controls and Procedures	3735

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	3837

Item 1A.	Risk Factors	3837

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3837

Item 6.	Exhibits	3938

SIGNATURES		4039

- 2 -

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRI POINTE HOMES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	270,124	$	681,528	Cash and cash equivalents	$	966,298	$	889,664
Receivables	Receivables	145,430		116,996		Receivables	141,076		169,449
Real estate inventories	Real estate inventories	3,490,321		3,054,743		Real estate inventories	3,142,412		3,173,849
Investments in unconsolidated entities	Investments in unconsolidated entities	131,399		118,095		Investments in unconsolidated entities	134,071		129,837
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	156,603		156,603		Goodwill and other intangible assets, net	156,603		156,603
Deferred tax assets, net	Deferred tax assets, net	57,095		57,096		Deferred tax assets, net	34,851		34,851
Other assets	Other assets	163,686		151,162		Other assets	163,929		165,687
Total assets	Total assets	$	4,414,658	$	4,336,223	Total assets	$	4,739,240	$	4,719,940
Liabilities	Liabilities					Liabilities
Accounts payable	Accounts payable	$	112,942	$	84,854	Accounts payable	$	57,544	$	62,324
Accrued expenses and other liabilities	Accrued expenses and other liabilities	474,202		466,013		Accrued expenses and other liabilities	436,275		443,034
Loans payable	Loans payable	250,000		250,504		Loans payable	287,427		287,427
Senior notes, net	Senior notes, net	1,088,895		1,087,219		Senior notes, net	1,091,509		1,090,624
Total liabilities	Total liabilities	1,926,039		1,888,590		Total liabilities	1,872,755		1,883,409

Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)

Equity	Equity					Equity
Stockholders’ equity:	Stockholders’ 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
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as March 31, 2023 and December 31, 2022, respectively						Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as March 31, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.01 par value, 500,000,000 shares authorized; 100,172,227 and 101,017,708 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value, 500,000,000 shares authorized; 100,172,227 and 101,017,708 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	1,002		1,010
Additional paid-in capital	Additional paid-in capital	—		91,077		Additional paid-in capital	—		3,685
Retained earnings	Retained earnings	2,486,547		2,355,448		Retained earnings	2,862,621		2,827,694
Total stockholders’ equity	Total stockholders’ equity	2,487,566		2,447,621		Total stockholders’ equity	2,863,623		2,832,389
Noncontrolling interests	Noncontrolling interests	1,053		12		Noncontrolling interests	2,862		4,142
Total equity	Total equity	2,488,619		2,447,633		Total equity	2,866,485		2,836,531
Total liabilities and equity	Total liabilities and equity	$	4,414,658	$	4,336,223	Total liabilities and equity	$	4,739,240	$	4,719,940

See accompanying condensed notes to the unaudited consolidated financial statements.

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TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Homebuilding:	Homebuilding:									Homebuilding:
Home sales revenue	Home sales revenue	$	1,004,644	$	1,009,307	$	1,729,895	$	1,725,982	Home sales revenue	$	768,405	$	725,251
Land and lot sales revenue	Land and lot sales revenue	114		5,416		1,711		6,939		Land and lot sales revenue	1,706		1,597
Other operations revenue	Other operations revenue	703		660		1,347		1,323		Other operations revenue	674		644
Total revenues	Total revenues	1,005,461		1,015,383		1,732,953		1,734,244		Total revenues	770,785		727,492
Cost of home sales	Cost of home sales	731,352		761,215		1,262,012		1,306,571		Cost of home sales	588,118		530,660
Cost of land and lot sales	Cost of land and lot sales	344		4,874		819		5,027		Cost of land and lot sales	1,443		475
Other operations expense	Other operations expense	704		686		1,350		1,310		Other operations expense	665		646
Sales and marketing	Sales and marketing	38,523		45,489		70,762		85,949		Sales and marketing	41,862		32,239
General and administrative	General and administrative	56,829		51,263		105,285		92,612		General and administrative	46,366		48,456

Homebuilding income from operations	Homebuilding income from operations	177,709		151,856		292,725		242,775		Homebuilding income from operations	92,331		115,016
Equity in income (loss) of unconsolidated entities	Equity in income (loss) of unconsolidated entities	143		(16)		88		(29)		Equity in income (loss) of unconsolidated entities	227		(55)
Other income, net	Other income, net	116		149		389		257		Other income, net	7,604		273
Homebuilding income before income taxes	Homebuilding income before income taxes	177,968		151,989		293,202		243,003		Homebuilding income before income taxes	100,162		115,234
Financial Services:	Financial Services:									Financial Services:
Revenues	Revenues	12,228		2,681		20,980		4,786		Revenues	8,876		8,752
Expenses	Expenses	6,322		1,485		11,630		2,892		Expenses	5,831		5,308
Equity in income of unconsolidated entities	Equity in income of unconsolidated entities	—		3,949		46		6,640		Equity in income of unconsolidated entities	—		46
Financial services income before income taxes	Financial services income before income taxes	5,906		5,145		9,396		8,534		Financial services income before income taxes	3,045		3,490
Income before income taxes	Income before income taxes	183,874		157,134		302,598		251,537		Income before income taxes	103,207		118,724
Provision for income taxes	Provision for income taxes	(45,936)		(39,265)		(76,161)		(62,866)		Provision for income taxes	(27,350)		(30,225)
Net income	Net income	137,938		117,869		226,437		188,671		Net income	75,857		88,499
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(1,555)		—		(2,576)		—		Net income attributable to noncontrolling interests	(1,115)		(1,021)
Net income available to common stockholders	Net income available to common stockholders	$	136,383	$	117,869	$	223,861	$	188,671	Net income available to common stockholders	$	74,742	$	87,478
Earnings per share	Earnings per share									Earnings per share
Basic	Basic	$	1.33	$	1.01	$	2.14	$	1.60	Basic	$	0.74	$	0.82
Diluted	Diluted	$	1.33	$	1.00	$	2.12	$	1.59	Diluted	$	0.73	$	0.81
Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	102,164,377		116,824,108		104,731,388		118,082,691		Basic	101,019,253		107,326,911
Diluted	Diluted	102,787,919		117,770,084		105,478,446		118,921,340		Diluted	101,706,438		108,197,485

See accompanying condensed notes to the unaudited consolidated financial statements.

- 4 -

TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(in thousands, except share amounts)


		Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity			Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at March 31, 2022		104,980,860	$	1,050	$	—	$	2,407,184	$	2,408,234	$	896	$	2,409,130
Balance at December 31, 2022															Balance at December 31, 2022	101,017,708	$	1,010	$	3,685	$	2,827,694	$	2,832,389	$	4,142	$	2,836,531
Net income	Net income		—		—		136,383		136,383		1,555		137,938		Net income		—		—		74,742		74,742		1,115		75,857
Shares issued under share-based awards	Shares issued under share-based awards	32,367	1		—		—		1		—		1		Shares issued under share-based awards	729,094	7		225		—		232		—		232
Minimum tax withholding paid on behalf of employees for restricted stock units		—	—		(16)		—		(16)		—		(16)
Tax withholding paid on behalf of employees for share-based awards															Tax withholding paid on behalf of employees for share-based awards	—	—		(9,780)		—		(9,780)		—		(9,780)
Stock-based compensation expense	Stock-based compensation expense	—	—		5,751		—		5,751		—		5,751		Stock-based compensation expense	—	—		3,861		—		3,861		—		3,861
Share repurchases	Share repurchases	(3,152,234)	(32)		(62,755)		—		(62,787)		—		(62,787)		Share repurchases	(1,574,575)	(15)		(37,806)		—		(37,821)		—		(37,821)
Distributions to noncontrolling interests, net	Distributions to noncontrolling interests, net	—	—		—		—		—		(1,398)		(1,398)		Distributions to noncontrolling interests, net	—	—		—		—		—		(2,395)		(2,395)

Reclass the negative APIC to retained earnings	Reclass the negative APIC to retained earnings	—	—		57,020		(57,020)		—		—		—		Reclass the negative APIC to retained earnings	—	—		39,815		(39,815)		—		—		—
Balance at June 30, 2022		101,860,993	$	1,019	$	—	$	2,486,547	$	2,487,566	$	1,053	$	2,488,619
Balance at March 31, 2023															Balance at March 31, 2023	100,172,227	$	1,002	$	—	$	2,862,621	$	2,863,623	$	2,862	$	2,866,485

		Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity			Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021	Balance at December 31, 2021	109,644,474	$	1,096	$	91,077	$	2,355,448	$	2,447,621	$	12	$	2,447,633	Balance at December 31, 2021	109,644,474	$	1,096	$	91,077	$	2,355,448	$	2,447,621	$	12	$	2,447,633
Net income	Net income	—	—		—		223,861		223,861		2,576		226,437		Net income	—	—		—		87,478		87,478		1,021		88,499
Shares issued under share-based awards	Shares issued under share-based awards	663,989	7		23		—		30		—		30		Shares issued under share-based awards	631,622	6		23		—		29		—		29
Minimum tax withholding paid on behalf of employees for restricted stock units		—	—		(9,092)		—		(9,092)		—		(9,092)
Stock-based compensation expense		—	—		11,023		—		11,023		—		11,023
Share repurchases		(8,447,470)	(84)		(185,793)		—		(185,877)		—		(185,877)
Distributions to noncontrolling interests, net		—	—		—		—		—		(1,780)		(1,780)
Net effect of consolidations of VIE's		—	—		—		—		—		245		245
Reclass the negative APIC to retained earnings		—	—		92,762		(92,762)		—		—		—
Balance at June 30, 2022		101,860,993	$	1,019	$	—	$	2,486,547	$	2,487,566	$	1,053	$	2,488,619

		Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at March 31, 2021		118,824,242	$	1,188	$	281,591	$	1,956,983	$	2,239,762	$	12	$	2,239,774
Net income		—	—		—		117,869		117,869		—		117,869
Shares issued under share-based awards		53,640	1		17		—		18		—		18
Minimum tax withholding paid on behalf of employees for restricted stock units		—	—		(14)		—		(14)		—		(14)
Tax withholding paid on behalf of employees for share-based awards															Tax withholding paid on behalf of employees for share-based awards	—	—		(9,076)		—		(9,076)		—		(9,076)
Stock-based compensation expense	Stock-based compensation expense	—	—		4,506		—		4,506		—		4,506		Stock-based compensation expense	—	—		5,272		—		5,272		—		5,272
Share repurchases	Share repurchases	(3,666,676)	(39)		(82,812)		—		(82,851)		—		(82,851)		Share repurchases	(5,295,236)	(52)		(123,038)		—		(123,090)		—		(123,090)

Balance at June 30, 2021		115,211,206	$	1,150	$	203,288	$	2,074,852	$	2,279,290	$	12	$	2,279,302
Balance at March 31, 2022															Balance at March 31, 2022	104,980,860	$	1,050	$	—	$	2,407,184	$	2,408,234	$	1,033	$	2,409,267

		Number of Shares of Common Stock (Note 1)	Common Stock		Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2020		121,882,778	$	1,219	$	345,137	$	1,886,181	$	2,232,537	$	12	$	2,232,549

Net income		—	—		—		188,671		188,671		—		188,671
Shares issued under share-based awards		654,665	6		2,828		—		2,834		—		2,834
Minimum tax withholding paid on behalf of employees for restricted stock units		—	—		(4,636)		—		(4,636)		—		(4,636)
Stock-based compensation expense			—		8,162				8,162				8,162
Share repurchases		(7,326,237)	(75)		(148,203)		—		(148,278)		—		(148,278)

Balance at June 30, 2021		115,211,206	$	1,150	$	203,288	$	2,074,852	$	2,279,290	$	12	$	2,279,302

See accompanying condensed notes to the unaudited consolidated financial statements.

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TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	226,437	$	188,671	Net income	$	75,857	$	88,499
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	12,026		16,120		Depreciation and amortization	7,054		5,285
Equity in income of unconsolidated entities, net		(134)		(6,610)
Deferred income taxes, net		1		3,136
Equity in (income) loss of unconsolidated entities, net						Equity in (income) loss of unconsolidated entities, net	(227)		9

Amortization of stock-based compensation	Amortization of stock-based compensation	11,023		8,162		Amortization of stock-based compensation	3,861		5,272
Charges for impairments and lot option abandonments	Charges for impairments and lot option abandonments	1,897		445		Charges for impairments and lot option abandonments	717		766
Returns on investments in unconsolidated entities, net	Returns on investments in unconsolidated entities, net	2,253		7,135		Returns on investments in unconsolidated entities, net	—		2,253
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Real estate inventories	Real estate inventories	(435,219)		(173,740)		Real estate inventories	31,965		(233,238)
Receivables	Receivables	(28,434)		(27,797)		Receivables	28,373		247
Other assets	Other assets	687		(7,996)		Other assets	(429)		(1,622)
Accounts payable	Accounts payable	28,088		61,453		Accounts payable	(4,780)		(8,839)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	13,544		28,325		Accrued expenses and other liabilities	(6,752)		25,254

Net cash (used in) provided by operating activities		(167,831)		97,304
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	135,639		(116,114)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(28,620)		(8,946)		Purchases of property and equipment	(6,501)		(12,547)

(Investments in) distributions from unconsolidated entities, net		(15,322)		480
Net investments in unconsolidated entities						Net investments in unconsolidated entities	(2,951)		(7,141)

Net cash used in investing activities	Net cash used in investing activities	(43,942)		(8,466)		Net cash used in investing activities	(9,452)		(19,688)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings from debt		25,000		—

Repayment of debt	Repayment of debt	(25,504)		—		Repayment of debt	—		(504)
Debt issuance costs		(2,408)		(3,570)

Distributions to noncontrolling interests	Distributions to noncontrolling interests	(1,780)		—		Distributions to noncontrolling interests	(2,395)		(382)
Proceeds from issuance of common stock under share-based awards	Proceeds from issuance of common stock under share-based awards	30		2,834		Proceeds from issuance of common stock under share-based awards	232		29
Minimum tax withholding paid on behalf of employees for share-based awards		(9,092)		(4,636)
Tax withholding paid on behalf of employees for share-based awards						Tax withholding paid on behalf of employees for share-based awards	(9,780)		(9,076)
Share repurchases	Share repurchases	(185,877)		(148,278)		Share repurchases	(37,610)		(123,090)
Net cash used in financing activities	Net cash used in financing activities	(199,631)		(153,650)		Net cash used in financing activities	(49,553)		(133,023)
Net decrease in cash and cash equivalents		(411,404)		(64,812)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	76,634		(268,825)
Cash and cash equivalents–beginning of period	Cash and cash equivalents–beginning of period	681,528		621,295		Cash and cash equivalents–beginning of period	889,664		681,528
Cash and cash equivalents–end of period	Cash and cash equivalents–end of period	$	270,124	$	556,483	Cash and cash equivalents–end of period	966,298		412,703

See accompanying condensed notes to the unaudited consolidated financial statements.

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TRI POINTE HOMES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization

Tri Pointe is engaged in the design, construction and sale of innovative single-family attached and detached homes across 10ten states, including Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, and the District of Columbia.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In the opinion of management, all adjustments consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The results for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2022~~2023 due to seasonal variations and other factors.

The consolidated financial statements include the accounts of Tri Pointe Homes and its wholly owned subsidiaries, as well as other entities in which Tri Pointe Homes has a controlling interest and variable interest entities (“VIEs”) in which Tri Pointe Homes is the primary beneficiary. The noncontrolling interests as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 represent the outside owners’ interests in the Company’s consolidated entities. All significant intercompany accounts have been eliminated upon consolidation.

Unless the context otherwise requires, the terms “Tri Pointe”, “the Company”, “we”, “us”, and “our” used herein refer to Tri Pointe Homes, Inc., a Delaware corporation, and its consolidated subsidiaries.

Use of Estimates

The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from our estimates.

Cash and Cash Equivalents and Concentration of Credit Risk

We define cash and cash equivalents as cash on hand, demand deposits with financial institutions, and short-term liquid investments with a maturity date of less than three months from the date of acquisition, including U.S. Treasury bills and government money-mark funds with maturities of 90 days or less when purchased. The Company’s cash balances exceed federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, we apply the following steps to determine the timing and amount of revenue to recognize: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

Home sales revenue

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We generate the majority of our total revenues from home sales, which consists of our core business operation of building and delivering completed homes to homebuyers. Home sales revenue and related profit is generally recognized when title to and possession of the home are transferred to the homebuyer at the home closing date. Our performance obligation to deliver the agreed-upon home is generally satisfied in less than one year from the original contract date. Included in home sales revenue are forfeited deposits, which occur when homebuyers cancel home purchase contracts that include a nonrefundable deposit. Both revenue from forfeited deposits and deferred revenue resulting from uncompleted performance obligations existing at the time we deliver new homes to our homebuyers are immaterial.

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Land and lot sales revenue

Historically, we have generated land and lot sales revenue from a small number of transactions, although in some periods we have realized a significant amount of revenue and gross margin. We do not expect our future land and lot sales revenue to be material, but we still consider these sales to be an ordinary part of our business, thus meeting the definition of contracts with customers. Similar to our home sales, revenue from land and lot sales is typically fully recognized when the land and lot sales transactions are consummated, at which time no further performance obligations are left to be satisfied. Some of our historical land and lot sales have included future profit participation rights. We will recognize future land and lot sales revenue in the periods in which all closing conditions are met, subject to the constraint on variable consideration related to profit participation rights, if such rights exist in the sales contract.

Other operations revenue

The majority of our homebuilding other operations revenue relates to a ground lease included in our West segment. We are responsible for making lease payments to the landowner, and we collect sublease payments from the ~~buyers~~owners of the buildings. This ground lease is accounted for in accordance with ~~ASC~~Accounting Standards Topic 842 (“ASC 842”), Leases. We do not recognize a material profit on this ground lease.

Financial services revenues

Tri Pointe Solutions is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.

Mortgage financing operations

Tri Pointe Connect was formed as a joint venture with an established mortgage lender. The joint venture acts as a preferred mortgage loan broker to our homebuyers in all of the markets in which we operate, generating income from fees paid by third party lenders for the successful funding and closing of loans for homebuyers that originate through Tri Pointe Connect. ~~From inception and through~~Due to our ability to direct the ~~fiscal year ended December 31, 2021, Tri Pointe Connect was accounted for under~~activities of the ~~equity method of accounting where we recorded a percentage of income earned by Tri Pointe Connect based on our ownership percentage in this~~ joint ~~venture. Under~~venture that most significantly affect the equity method of accounting, Tri Pointe Connect activity appeared as equity in income of unconsolidated entities under the Financial Services section of our consolidated statements of operations. Beginning in the fiscal year ending December 31, 2022,entity’s economic performance, Tri Pointe Connect is fully consolidated under the Financial Services section of our consolidated statements of operations, with the noncontrolling interest recorded on the consolidated statements of operations as net income attributable to noncontrolling interests.

Title and escrow services operations

Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and Colorado and both title examinations and escrow services for our homebuyers in Arizona, the District of Columbia, Maryland, Nevada, Texas, Washington and Virginia. Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company. Revenue from our title and escrow services operations is fully recognized at the time of the consummation of the home sales transaction, at which time no further performance obligations are left to be satisfied. Tri Pointe Assurance revenue is included in the Financial Services section of our consolidated statements of operations.

Property and casualty insurance agency operations

Tri Pointe Advantage is a wholly owned subsidiary of Tri Pointe and provides property and casualty insurance agency services that help facilitate the closing process in all of the markets in which we operate. The total consideration for these services, including renewal options, is estimated upon the issuance of the initial insurance policy, subject to constraint. Tri Pointe Advantage revenue is included in the Financial Services section of our consolidated statements of operations.

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Recently Issued Accounting Standards Not Yet Adopted

No recent accounting pronouncements or changes in accounting pronouncements have been issued or adopted since those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 that are of material significance, or have potential material significance, to the Company.

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2. Segment Information

We ~~operate 2~~operate two principal businesses: homebuilding and financial se~~rvices.~~services.

Effective January 15, 2021, we consolidated our 6 regional homebuilding brands into 1 unified name, Tri Pointe Homes, under which we continue to acquire and develop land and construct and sell single-family detached and attached homes. In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments within our homebuilding business, we have considered similar economic and other characteristics, including product types, average ~~selling~~sales prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply. Based upon these factors and in consideration of the geographical layout of our homebuilding markets, we have identified 3three homebuilding reporting segments and, as ~~a result of~~ such, ~~change, beginning in the quarter ended March 31, 2021,~~ our homebuilding segments are reported under the following hierarchy:

West region: Arizona, California, Nevada and Washington

Central region: Colorado and Texas

East region: District of Columbia, Maryland, North Carolina, South Carolina and Virginia

Our Tri Pointe Solutions financial services operation is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, our Tri Pointe Assurance title and escrow services operations, and our Tri Pointe Advantage property and casualty insurance agency operations. For further details, see Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies.

Corporate is a non-operating segment that develops and implements company-wide strategic initiatives and provides support to our homebuilding reporting segments by centralizing certain administrative functions, such as marketing, legal, accounting, treasury, insurance, internal audit, ~~and~~ risk management, information technology and human resources, to benefit from economies of scale. Our Corporate non-operating segment also includes general and administrative expenses related to operating our corporate headquarters. All of the expenses incurred by Corporate are allocated to each of the homebuilding reporting segments based on their respective percentage of revenues.

The reportable segments follow the same accounting policies used for our consolidated financial statements, as described in Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

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Total revenues and income before income taxes for each of our reportable segments were as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Revenues	Revenues									Revenues
West	West	$	670,692	$	784,952	$	1,201,188	$	1,324,998	West	$	480,941	$	530,496
Central	Central	214,402		149,620		351,499		270,738		Central	166,140		137,097
East	East	120,367		80,811		180,266		138,508		East	123,704		59,899
Total homebuilding revenues	Total homebuilding revenues	1,005,461		1,015,383		1,732,953		1,734,244		Total homebuilding revenues	770,785		727,492
Financial services	Financial services	12,228		2,681		20,980		4,786		Financial services	8,876		8,752
Total	Total	$	1,017,689	$	1,018,064	$	1,753,933	$	1,739,030	Total	$	779,661	$	736,244

Income before taxes
Income before income taxes										Income before income taxes
West	West	$	129,604	$	130,254	$	230,161	$	209,831	West	$	72,911	$	100,557
Central	Central	33,896		15,853		46,847		25,550		Central	13,939		12,951
East	East	14,468		5,882		16,194		7,622		East	13,312		1,726
Total homebuilding income before income taxes	Total homebuilding income before income taxes	177,968		151,989		293,202		243,003		Total homebuilding income before income taxes	100,162		115,234
Financial services	Financial services	5,906		5,145		9,396		8,534		Financial services	3,045		3,490
Total	Total	$	183,874	$	157,134	$	302,598	$	251,537	Total	$	103,207	$	118,724

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Total real estate inventories and total assets for each of our reportable segments, as of the date indicated, were as follows (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Real estate inventories	Real estate inventories					Real estate inventories
West	West	$	2,487,811	$	2,242,314	West	$	2,254,286	$	2,258,606
Central	Central	651,267		543,097		Central	594,189		598,700
East	East	351,243		269,332		East	293,937		316,543
Total	Total	$	3,490,321	$	3,054,743	Total	$	3,142,412	$	3,173,849

Total assets(1)	Total assets(1)					Total assets(1)
West	West	$	2,776,540	$	2,505,237	West	$	2,549,111	$	2,552,121
Central	Central	795,357		674,862		Central	756,928		761,082
East	East	404,431		328,014		East	355,119		376,129
Corporate	Corporate	394,710		781,265		Corporate	1,036,791		978,748
Total homebuilding assets	Total homebuilding assets	4,371,038		4,289,378		Total homebuilding assets	4,697,949		4,668,080
Financial services	Financial services	43,620		46,845		Financial services	41,291		51,860
Total	Total	$	4,414,658	$	4,336,223	Total	$	4,739,240	$	4,719,940

__________

(1) Total assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 includes $139.3 million of goodwill, with $125.4 million included in the West segment, $8.3 million included in the Central segment and $5.6 million included in the East segment. Total Corporate assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 includes our Tri Pointe Homes trade name. For further details on goodwill and our intangible assets, see Note 8, Goodwill and Other Intangible Assets.

3. Earnings Per Share

The following table sets forth the components used in the computation of basic and diluted earnings per share (in thousands, except share and per share amounts):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator:
Net income available to common stockholders $ 136,383 $ 117,869 $ 223,861 $ 188,671
Denominator:
Basic weighted-average shares outstanding 102,164,377 116,824,108 104,731,388 118,082,691
Effect of dilutive shares:
Stock options and unvested restricted stock units 623,542 945,976 747,058 838,649
Diluted weighted-average shares outstanding 102,787,919 117,770,084 105,478,446 118,921,340
Earnings per share
Basic $ 1.33 $ 1.01 $ 2.14 $ 1.60
Diluted $ 1.33 $ 1.00 $ 2.12 $ 1.59
Antidilutive stock options and unvested restricted stock units not included in diluted earnings per share 1,489,263 1,805,413 1,778,492 2,101,688

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	Three Months Ended March 31,
	2023		2022
Numerator:
Net income available to common stockholders	$	74,742	$	87,478
Denominator:
Basic weighted-average shares outstanding	101,019,253		107,326,911
Effect of dilutive shares:
Stock options and unvested restricted stock units	687,185		870,574
Diluted weighted-average shares outstanding	101,706,438		108,197,485
Earnings per share
Basic	$	0.74	$	0.82
Diluted	$	0.73	$	0.81
Antidilutive stock options and unvested restricted stock units not included in diluted earnings per share	2,671,754		2,405,692

4. Receivables

Receivables consisted of the following (in thousands):

June 30, 2022 December 31, 2021
Escrow proceeds and other accounts receivable, net $ 82,239 $ 53,096
Warranty insurance receivable (Note 13) 63,191 63,900
Total receivables $ 145,430 $ 116,996

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	March 31, 2023		December 31, 2022
Escrow proceeds and other accounts receivable, net	$	84,709	$	113,082
Warranty insurance receivable (Note 13)	56,367		56,367
Total receivables	$	141,076	$	169,449

Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables based on an expected credit loss approach. Receivables were net of allowances for doubtful accounts of $472,000 as of both ~~June 30, 2022 a~~March 31, 2023 and nd December 31, ~~2021.~~2022.

5. Real Estate Inventories

Real estate inventories consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Real estate inventories owned:	Real estate inventories owned:					Real estate inventories owned:
Homes completed or under construction	Homes completed or under construction	$	1,827,603	$	1,222,468	Homes completed or under construction	$	1,191,754	$	1,293,681
Land under development	Land under development	1,024,754		1,187,485		Land under development	1,335,789		1,279,394
Land held for future development	Land held for future development	139,956		200,362		Land held for future development	158,908		140,725
Model homes	Model homes	239,984		202,693		Model homes	240,333		231,157
Total real estate inventories owned	Total real estate inventories owned	3,232,297		2,813,008		Total real estate inventories owned	2,926,784		2,944,957
Real estate inventories not owned:	Real estate inventories not owned:					Real estate inventories not owned:
Land purchase and land option deposits	Land purchase and land option deposits	258,024		241,735		Land purchase and land option deposits	215,628		228,892

Total real estate inventories not owned	Total real estate inventories not owned	258,024		241,735		Total real estate inventories not owned	215,628		228,892
Total real estate inventories	Total real estate inventories	$	3,490,321	$	3,054,743	Total real estate inventories	$	3,142,412	$	3,173,849

Homes completed or under construction is comprised of costs associated with homes in various stages of construction and includes direct construction and related land acquisition and land development costs. Land under development primarily consists of land acquisition and land development costs, which include ~~capitalized~~capitalized interest and real estate taxes, associated with land undergoing im~~provement~~improvement activity. Land held for future development principally reflects land acquisition and land development costs related to land where development activity has not yet begun or has been suspended, but is expected to occur in the future. The ~~decrease~~increase in land held for future development as of ~~June 30, 2022~~March 31, 2023 compared to December 31, ~~2021~~2022 is attributable to ~~a project~~two projects located ~~in San Jose, California~~ in our West reporting segment that ~~was~~were transferred tofrom land under development.

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Real estate inventories not owned represents deposits related to land purchase and land and lot option ~~agreements, as well as consolidated inventory held by variable interest entities.~~agreements. For further details, see Note 7, Variable Interest Entities.

Interest incurred, capitalized and expensed were as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Interest incurred	Interest incurred	$	28,789	$	22,558	$	57,342	$	43,737	Interest incurred	$	37,479	$	28,553
Interest capitalized	Interest capitalized	(28,789)		(22,558)		(57,342)		(43,737)		Interest capitalized	(37,479)		(28,553)
Interest expensed	Interest expensed	$	—	$	—	$	—	$	—	Interest expensed	$	—	$	—
Capitalized interest in beginning inventory	Capitalized interest in beginning inventory	$	185,051	$	182,729	$	173,563	$	182,228	Capitalized interest in beginning inventory	$	191,411	$	173,563
Interest capitalized as a cost of inventory	Interest capitalized as a cost of inventory	28,789		22,558		57,342		43,737		Interest capitalized as a cost of inventory	37,479		28,553
Interest previously capitalized as a cost of inventory, included in cost of sales	Interest previously capitalized as a cost of inventory, included in cost of sales	(24,963)		(31,124)		(42,028)		(51,802)		Interest previously capitalized as a cost of inventory, included in cost of sales	(20,251)		(17,065)
Capitalized interest in ending inventory	Capitalized interest in ending inventory	$	188,877	$	174,163	$	188,877	$	174,163	Capitalized interest in ending inventory	$	208,639	$	185,051

Interest is capitalized to real estate inventory during development and other qualifying activities. During all periods presented, we capitalized all interest incurred to real estate inventory in accordance with ASC Topic 835, Interest, as our qualified assets exceeded our debt. Interest that is capitalized to real estate inventory is included in cost of home sales or cost of land and lot sales as related units or lots are delivered. Interest that is expensed as incurred is included in other (expense) income, net.

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Real Estate Inventory Impairments and Land Option Abandonments

Real estate inventory impairments and land and lot option abandonments and pre-acquisition charges consisted of the following (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Real estate inventory impairments	Real estate inventory impairments	$	—	$	—	$	—	$	—	Real estate inventory impairments	$	—	$	—
Land and lot option abandonments and pre-acquisition charges	Land and lot option abandonments and pre-acquisition charges	1,131		232		1,897		445		Land and lot option abandonments and pre-acquisition charges	717		766
Total	Total	$	1,131	$	232	$	1,897	$	445	Total	$	717	$	766

Impairments of real estate inventory, if any, relate primarily to projects or communities that include homes completed or under construction. Within a project or community, there may be individual homes or parcels of land that are currently held for sale. Impairment charges recognized as a result of adjusting individual held-for-sale assets within a community to estimated fair value less cost to sell are also included in the total impairment charges.

In addition to owning land and residential lots, we also have option agreements to purchase land and lots at a future date. We have option deposits and capitalized pre-acquisition costs associated with the optioned land and lots. When the economics of a project no longer support acquisition of the land or lots under option, we may elect not to move forward with the acquisition. Option deposits and capitalized pre-acquisition costs associated with the assets under option may be forfeited at that time.

Real estate inventory impairments and land option abandonments are recorded in cost of home sales and cost of land and lot sales on the consolidated statements of operations.

6. Investments in Unconsolidated Entities

As of ~~June 30, 2022,~~March 31, 2023, we held equity investments in 12twelve active homebuilding partnerships or limited liability companies. Our participation in these entities may be as a developer, a builder, or an investment partner. Our ownership percentage varies from 7% to 50%, depending on the investment, with no controlling interest held in any of these investments. During the first quarter of 2022, a reconsideration event under ASC 810 occurred for our Tri Pointe Connect joint venture, which required us to reassess whether the joint venture is a variable interest entity (“VIE”) and, if so, whether the Company is the primary beneficiary. This mortgage financing joint venture was accounted for as an equity-method investment as of December 31, 2021. Based on the reassessment performed during the first quarter of 2022, this joint venture was deemed to be a VIE and the Company was identified as the primary beneficiary of the VIE. For further details, see Note 7, ~~Variable Interest Entities~~.

~~Unconsolidated Financial Information~~

Aggregated assets, liabilities and operating results of the entities we account for as equity-method investments are provided below. Because our ownership interest in these entities varies, a direct relationship does not exist between the information presented below and the amounts that are reflected on our consolidated balance sheets as ~~our investments in unconsolidated entities or on our consolidated statements of operations as equity in income of unconsolidated entities.~~follows (in thousands):

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~~Assets and liabilities of unconsolidated entities (in thousands):~~


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Cash	Cash	$	40,023	$	35,966	Cash	$	22,575	$	34,556
Receivables	Receivables	11,658		8,359		Receivables	36,298		30,893
Real estate inventories	Real estate inventories	442,847		359,324		Real estate inventories	451,417		458,121
Other assets	Other assets	4,057		534		Other assets	11,237		7,751
Total assets	Total assets	$	498,585	$	404,183	Total assets	$	521,527	$	531,321
Liabilities and equity	Liabilities and equity					Liabilities and equity
Accounts payable and other liabilities	Accounts payable and other liabilities	$	128,851	$	73,675	Accounts payable and other liabilities	$	145,388	$	149,172
Company’s equity	Company’s equity	131,399		118,095		Company’s equity	134,071		129,837
Outside interests’ equity	Outside interests’ equity	238,335		212,413		Outside interests’ equity	242,068		252,312
Total liabilities and equity	Total liabilities and equity	$	498,585	$	404,183	Total liabilities and equity	$	521,527	$	531,321

Results of operations from unconsolidated entities (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net sales	Net sales	$	17,399	$	12,588	$	22,722	$	20,397	Net sales	$	22,138	$	5,323
Other operating expense	Other operating expense	(17,335)		(6,973)		(22,779)		(10,821)		Other operating expense	(21,653)		(5,444)
Other loss, net	Other loss, net	94		(4)		94		(4)		Other loss, net	(3)		—
Net income		$	158	$	5,611	$	37	$	9,572
Company’s equity in income of unconsolidated entities		$	143	$	3,933	$	134	$	6,611
Net income (loss)										Net income (loss)	$	482	$	(121)
Company’s equity in income (loss) of unconsolidated entities										Company’s equity in income (loss) of unconsolidated entities	$	227	$	(9)

7. Variable Interest Entities

Land and Lot Option Agreements

In the ordinary course of business, we enter into land and lot option agreements in order to procure land and residential lots for future development and the construction of homes. The use of such land and lot option agreements generally allows us to reduce the risks associated with direct land ownership and development, and reduces our capital and financial commitments. Pursuant to these land and lot option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. These deposits are recorded as land purchase and land option deposits under real estate inventories not owned on the accompanying consolidated balance sheets.

We analyze each of our land and lot option agreements and other similar contracts under the provisions of Accounting Standards Topic 810 (“ASC ~~810,~~810”), Consolidation to determine whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are determined to be the primary beneficiary of the VIE, we will consolidate the VIE in our financial statements and reflect its assets as real estate inventory not owned included in our real estate inventories, its liabilities as debt (nonrecourse) held by VIEs in accrued expenses and other liabilities and the net equity of the VIE owners as noncontrolling interests on our consolidated balance sheets. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE.

Creditors of the entities with which we have land and lot option agreements have no recourse against us. The maximum exposure to loss under our land and lot option agreements is generally limited to non-refundable option deposits and any capitalized pre-acquisition costs. In some cases, we have also contracted to complete development work at a fixed cost on behalf of the landowner and budget shortfalls and savings will be borne by us. Additionally, we have entered into land banking arrangements which require us to complete development work even if we terminate the option to procure land or lots.

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The following provides a summary of our interests in land and lot option agreements (in thousands):


		June 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Deposits		Remaining Purchase Price		Consolidated Inventory Held by VIEs		Deposits		Remaining Purchase Price		Consolidated Inventory Held by VIEs			Deposits		Remaining Purchase Price		Consolidated Inventory Held by VIEs		Deposits		Remaining Purchase Price		Consolidated Inventory Held by VIEs

Unconsolidated VIEs	Unconsolidated VIEs	$	236,413	$	1,411,735	N/A		$	211,835	$	1,507,304	N/A		Unconsolidated VIEs	$	200,168	$	1,055,531	N/A		$	207,846	$	1,129,369	N/A
Other land option agreements	Other land option agreements	21,611		275,853		N/A		29,900		319,646		N/A		Other land option agreements	15,460		170,658		N/A		21,046		210,964		N/A
Total	Total	$	258,024	$	1,687,588	$	—	$	241,735	$	1,826,950	$	—	Total	$	215,628	$	1,226,189	$	—	$	228,892	$	1,340,333	$	—

Unconsolidated VIEs represent land option agreements that were not consolidated because we were not the primary beneficiary. Other land option agreements were not with VIEs.

In addition to the deposits presented in the table above, our exposure to loss related to our land and lot option contracts consisted of capitalized pre-acquisition costs of ~~$13.8~~$14.3 million and ~~$17.9~~$13.8 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These pre-acquisition costs are included in real estate inventories as land under development on our consolidated balance sheets.

Tri Pointe Connect Joint Venture

During the first quarter of 2022, a reconsideration event under ASC 810 occurred for our Tri Pointe Connect joint venture that gave us the ability to direct the activities of the joint venture that most significantly affect the entity’s economic performance. Based on our reassessment, we concluded that the mortgage financing joint venture is a VIE and we are the primary beneficiary based on our controlling financial interest. As a result, beginning in January 2022, the joint venture is accounted for as a consolidated VIE. As of January 1, 2022, the accompanying consolidated balance sheets include the assets, liabilities and noncontrolling interests of this VIE. As of ~~June 30, 2022,~~March 31, 2023, the accompanying consolidated balance sheets included the carrying value of the VIE’s assets ~~was $9.5~~of $6.4 million ~~which was primarily included in~~of cash and $5.1 million of other assets, ~~$6.5~~$3.4 million of ~~liabilities was included in~~ accrued expenses and other liabilities, and ~~$1.0~~$2.9 million ~~was included~~ in noncontrolling ~~interests in the accompanying consolidated balance sheets.~~interests.

8. Goodwill and Other Intangible Assets

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, $139.3 million of goodwill is included in goodwill and other intangible assets, net on each of the consolidated balance sheets, which was recorded in connection with our merger with Weyerhaeuser Real Estate Company (“WRECO”) in 2014.

We In addition, as of March 31, 2023 and December 31, 2022, we have 1one intangible asset aswith a carrying amount of ~~June 30, 2022,~~$17.3 million comprised of a Tri Pointe Homes trade name, which has an indefinite useful life and is non-amortizing, resulting from the acquisition of WRECO in ~~2014, which has an indefinite useful life.~~2014.

Goodwill and other intangible assets ~~consisted of the following (in thousands):~~

June 30, 2022 December 31, 2021
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Goodwill $ 139,304 $ — $ 139,304 $ 139,304 $ — $ 139,304
Trade names 27,979 (10,680) 17,299 27,979 (10,680) 17,299
Total $ 167,283 $ (10,680) $ 156,603 $ 167,283 $ (10,680) $ 156,603

~~In October 2020, in conjunction with the announcement of our move to a single brand, Tri Pointe Homes, we modified the useful life of the former Maracay trade name which expired in June 2021. The~~ intangible asset related to the Maracay trade name was fully amortized during 2021. Amortization expense related to this intangible asset was $963,000 and $1.9 million for the three- and six-month periods ended June 30, 2021, respectively. Amortization of this intangible was charged to sales and marketing expense. Our $17.3 million indefinite life intangible asset related to the Tri Pointe Homes trade name is not amortizing. All trade names and goodwill are evaluated for impairment on an annual basis, or more frequently if indicators of impairment exist.

9. Other Assets

~~- 14 -~~

Other assets consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Prepaid expenses	Prepaid expenses	$	12,283	$	11,797	Prepaid expenses	$	17,959	$	20,471
Refundable fees and other deposits	Refundable fees and other deposits	5,584		6,611		Refundable fees and other deposits	7,107		5,226
Development rights, held for future use or sale	Development rights, held for future use or sale	1,192		1,192		Development rights, held for future use or sale	1,192		1,192
Deferred loan costs—loans payable	Deferred loan costs—loans payable	7,238		5,412		Deferred loan costs—loans payable	6,155		6,515
Operating properties and equipment, net	Operating properties and equipment, net	68,083		51,489		Operating properties and equipment, net	66,880		67,430
Lease right-of-use assets	Lease right-of-use assets	68,372		73,727		Lease right-of-use assets	63,700		63,918

Other	Other	934		934		Other	936		935
Total	Total	$	163,686	$	151,162	Total	$	163,929	$	165,687

- 14 -

10. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accrued payroll and related costs	Accrued payroll and related costs	$	38,052	$	59,419	Accrued payroll and related costs	$	22,352	$	60,682
Warranty reserves (Note 13)	Warranty reserves (Note 13)	103,454		103,976		Warranty reserves (Note 13)	101,527		104,375
Estimated cost for completion of real estate inventories	Estimated cost for completion of real estate inventories	125,320		107,702		Estimated cost for completion of real estate inventories	107,792		108,072
Customer deposits	Customer deposits	77,732		55,156		Customer deposits	43,439		42,027
Income tax liability to Weyerhaeuser		199		199

Accrued income taxes payable	Accrued income taxes payable	16,735		34,894		Accrued income taxes payable	44,193		17,280

Accrued interest	Accrued interest	7,689		6,189		Accrued interest	23,972		9,351

Other tax liability	Other tax liability	1,068		3,306		Other tax liability	2,741		4,099
Lease liabilities	Lease liabilities	80,203		77,264		Lease liabilities	77,472		77,728
Other	Other	23,750		17,908		Other	12,787		19,420
Total	Total	$	474,202	$	466,013	Total	$	436,275	$	443,034

11. Senior Notes and Loans Payable

Senior Notes

The Company’s outstanding senior notes (together, the “Senior Notes”) consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
5.875% Senior Notes due June 15, 2024	5.875% Senior Notes due June 15, 2024	$	450,000	$	450,000	5.875% Senior Notes due June 15, 2024	$	450,000	$	450,000
5.250% Senior Notes due June 1, 2027	5.250% Senior Notes due June 1, 2027	300,000		300,000		5.250% Senior Notes due June 1, 2027	300,000		300,000
5.700% Senior Notes due June 15, 2028	5.700% Senior Notes due June 15, 2028	350,000		350,000		5.700% Senior Notes due June 15, 2028	350,000		350,000
Discount and deferred loan costs	Discount and deferred loan costs	(11,105)		(12,781)		Discount and deferred loan costs	(8,491)		(9,376)
Total	Total	$	1,088,895	$	1,087,219	Total	$	1,091,509	$	1,090,624

In June 2020, Tri Pointe issued $350 million aggregate principal amount of 5.700% Senior Notes due 2028 (the “2028 Notes”) at 100.00% of their aggregate principal amount. Net proceeds of this issuance were $345.2 million, after debt issuance costs and discounts. The 2028 Notes mature on June 15, 2028 and interest is paid semiannually in arrears on June 15 and December 15 of each year until maturity.

In June 2017, Tri Pointe issued $300 million aggregate principal amount of 5.250% Senior Notes due 2027 (the “2027 Notes”) at 100.00% of their aggregate principal amount. Net proceeds of this issuance were $296.3 million, after debt issuance costs and discounts. The 2027 Notes mature on June 1, 2027 and interest is paid semiannually in arrears on June 1 and December 1 of each year until maturity.

~~- 15 -~~

Tri Pointe and its wholly owned subsidiary, Tri Pointe Homes Holdings, Inc., are co-issuers of the $450 million aggregate principal amount 5.875% Senior Notes due 2024 (the “2024 Notes”). The 2024 Notes were issued at 98.15% of their aggregate principal ~~amount.~~amount in June of 2014. The net proceeds from the offering of the 2024 Notes was $429.0 million, after debt issuance costs and discounts. The 2024 Notes mature on June 15, 2024, with interest payable semiannually in arrears on June 15 and December 15 of each year until maturity.

As of ~~June 30, 2022,~~March 31, 2023, there were ~~$9.0~~$7.2 million of capitalized debt financing costs, included in senior notes, net on our consolidated balance sheet, related to the Senior Notes that will amortize over the lives of the Senior Notes. Accrued interest related to the Senior Notes was $18.8 million and $3.2 million as of ~~both June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

- 15 -

Loans Payable

The Company’s outstanding loans payable consisted of the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Term loan facility	Term loan facility	$	250,000	$	250,000	Term loan facility	$	250,000	$	250,000
Seller financed loans	Seller financed loans	—		504		Seller financed loans	37,427		37,427
Total	Total	$	250,000	$	250,504	Total	$	287,427	$	287,427

On June 29, 2022, we entered into a Third Modification Agreement (the “Modification”) to our Second Amended and Restated Credit Agreement dated as of March 29, 2019. The Modification, among other things, (i) ~~increases~~increased the maximum amount of the revolving credit facility (the “Revolving Facility”) under the Credit Agreement from $650.0 million to $750.0 million, (ii) ~~increases~~increased the sublimit for issuance of letters of credit under the Revolving Facility from $100 million to $150 million and (iii) ~~extends~~extended the maturity date of both the Revolving Facility and term loan facility (the “Term Facility”) under the Credit Agreement to June 29, 2027. We may increase the Credit Facility to not more than $1.2 billion in the aggregate, at our request, upon satisfaction of specified conditions. We may borrow under the Revolving Facility in the ordinary course of business to repay senior notes and fund our operations, including our land acquisition, land development and homebuilding activities. Borrowings under the Revolving Facility will be governed by, among other things, a borrowing base. Interest rates under the Revolving Facility will be based on the Secured Overnight Financing Rate (“SOFR”), plus a spread ranging from 1.25% to 1.90%, depending on the Company’s leverage ratio. Interest rates under the Term Facility will be based on SOFR, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio.

As of ~~June 30, 2022,~~March 31, 2023, we had no outstanding debt under the Revolving Facility and there was ~~$667.5~~$691.4 million of availability after considering the borrowing base provisions and outstanding letters of credit. As of ~~June 30, 2022,~~March 31, 2023, we had $250 million outstanding debt under the Term Facility with an interest rate of ~~2.16%~~4.55%. As of ~~June 30, 2022,~~March 31, 2023, there were ~~$7.2~~$6.2 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that will amortize over the remaining term of the Credit Facility. Accrued interest, including loan commitment fees, related to the Term Facility was ~~$723,000~~$346,000 and ~~$570,000~~$1.5 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had outstanding letters of credit of ~~$82.5~~$58.6 million and ~~$48.9~~$58.9 million, respectively. These letters of credit were issued to secure various financial obligations. We believe it is not probable that any outstanding letters of credit will be drawn upon.

As of March 31, 2023 and December 31, 2022, we had $37.4 million outstanding related to one seller-financed loan to acquire lots for the construction of homes. Principal on this loan is expected to mature in 2023, provided certain achievements are met. The seller-financed loan accrues interest at an imputed interest rate of 4.50% per annum.

Interest Incurred

During the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company incurred interest of ~~$28.8~~$37.5 million and ~~$22.6~~$28.6 million, respectively, related to all debt during the period. Included in interest incurred are amortization of deferred financing and Senior Note discount costs of $1.2 million and $1.1 million for ~~both~~ the three months ended ~~June 30,~~March 31, 2023 and 2022, and 2021, respectively. During the six months ended June 30, 2022 and 2021, the Company incurred interest of $57.3 million and $43.7 million, respectively, related to all debt during the period and amortization of deferred financing and Senior Note discount costs of $2.3 million and $2.2 million for the six months ended June 30, 2022 and 2021, respectively. Accrued interest related to all outstanding debt at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was ~~$7.7~~$24.0 million and ~~$6.2~~$9.4 million, respectively.

Covenant Requirements

The Senior Notes contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.

~~- 16 -~~

Under the Credit Facility, the Company is required to comply with certain financial covenants, including those relating to consolidated tangible net worth, leverage, liquidity or interest coverage, and a spec unit inventory test. The Credit Facility also requires that at least 95.0% of consolidated tangible net worth must be attributable to the Company and its guarantor subsidiaries, subject to certain grace periods.

The Company was in compliance with all applicable financial covenants as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

- 16 -

12. Fair Value Disclosures

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, defines “fair value” as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

•Level 1—Quoted prices for identical instruments in active markets

•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date

•Level 3—Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date

Fair Value of Financial Instruments

A summary of assets and liabilities at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, related to our financial instruments, measured at fair value on a recurring basis, is set forth below (in thousands):


			June 30, 2022				December 31, 2021						March 31, 2023				December 31, 2022
		Hierarchy	Book Value		Fair Value		Book Value		Fair Value			Hierarchy	Book Value		Fair Value		Book Value		Fair Value
Senior Notes(1)	Senior Notes(1)	Level 2	$	1,097,919	$	1,016,670	$	1,097,428	$	1,199,825	Senior Notes(1)	Level 2	$	1,098,685	$	1,041,250	$	1,098,425	$	1,040,750

Term loan(2)	Term loan(2)	Level 2	$	250,000	$	250,000	$	250,000	$	250,000	Term loan(2)	Level 2	$	250,000	$	250,000	$	250,000	$	250,000
Seller financed loans(3)	Seller financed loans(3)	Level 2	$	—	$	—	$	504	$	504	Seller financed loans(3)	Level 2	$	37,427	$	37,427	$	37,427	$	37,427

__________

(1)The book value of the Senior Notes is net of discounts, excluding deferred loan coc~~sts~~osts of ~~$9.0~~$7.2 million and ~~$10.2~~$7.8 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The estimated fair value of the Senior Notes at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 is based on quoted market prices.

(2)The estimated fair value of the Term Loan Facility as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 approximated book value due to the variable interest rate terms of this loan.

(3)The estimated fair value of our seller financed loan as of December 31, ~~2021~~2022 approximated book value due to the short term nature of these loans.

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the carrying value of cash and cash equivalents and receivables approximated fair value due to their short-term nature.

~~- 17 -~~

Fair Value of Nonfinancial Assets

Nonfinancial assets include items such as real estate inventories and long-lived assets that are measured at fair value on a nonrecurring basis when events and circumstances indicating the carrying value is not recoverable. ~~The following table presents impairment charges and the remaining net fair value for nonfinancial assets that were measured during the periods presented (in thousands):~~

Six Months Ended June 30, 2022 Year Ended December 31, 2021
Hierarchy Impairment
Charge Fair Value
Net of
Impairment Impairment
Charge Fair Value
Net of
Impairment
Real estate inventories(1)
Level 3 $ — $ — $ 19,600 $ 27,300

~~__________~~

~~(1)Fair value of real estate inventories, net of impairment charges represents only those assets whose~~No carrying values were adjusted to fair value infor the ~~respective periods presented,~~three months ended March 31, 2023 or the year ended December 31, 2022.

13. Commitments and Contingencies

Legal Matters

Lawsuits, claims and proceedings have been and may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices, environmental protection and financial services. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations.

We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable. We accrue for these matters based on facts and circumstances specific to each matter and revise these estimates when necessary. In view of the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. Accordingly, it is possible that the ultimate outcome of any matter, if in excess of a related accrual or if no accrual was made, could be material to our financial statements. For matters as to which the Company believes a loss is probable and reasonably estimable, we had zero legal reserves as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

- 17 -

Warranty

Warranty reserves are accrued as home deliveries occur. Our warranty reserves on homes delivered will vary based on product type and geographic area and also depending on state and local laws. The warranty reserve is included in accrued expenses and other liabilities on our consolidated balance sheets and represents expected future costs based on our historical experience over previous years. Estimated warranty costs are charged to cost of home sales in the period in which the related home sales revenue is recognized.

We maintain general liability insurance designed to protect us against a portion of our risk of loss from warranty and construction defect-related claims. We also generally require our subcontractors and design professionals to indemnify us for liabilities arising from their work, subject to various limitations. However, such indemnity is significantly limited with respect to certain subcontractors that are added to our general liability insurance policy.

Our warranty reserve and related estimated insurance recoveries are based on actuarial analysis that uses our historical claim and expense data, as well as industry data to estimate these overall costs and related recoveries. Key assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur over an extended period of time. Our warranty reserve may also include an estimate of future fit and finish warranty claims to the extent not contemplated in the actuarial analysis. These estimates are subject to variability due to the length of time between the delivery of a home to a homebuyer and when a warranty or construction defect claim is made, and the ultimate resolution of such claim; uncertainties regarding such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or interpretations, among other factors. Due to the degree of judgment involved and the potential for variability in these underlying assumptions, our actual future costs could differ from those estimated. There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims or that claims will not arise out

~~- 18 -~~

of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors.

We also record expected recoveries from insurance carriers based on actual insurance claims made and actuarially determined amounts that depend on various factors, including the above-described reserve estimates, our insurance policy coverage limits for the applicable ~~policy~~policy years and historical recovery rates. Because of the inherent uncertainty and variability in these assumptions, our actual in~~surance~~insurance recoveries could differ significantly from amounts currently estimated. Outstanding warranty insurance receivables were ~~$63.2 million and $63.9~~$56.4 million as of ~~June 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, respectively. Warranty insurance receivables are ~~recorded~~recorded in receivables on the ~~accompanying~~accompanying consolidated balance sheets.

Warranty reserve activity consisted of the following (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Warranty reserves, beginning of period	Warranty reserves, beginning of period	$	103,034	$	94,793	$	103,976	$	94,475	Warranty reserves, beginning of period	$	104,375	$	103,976
Warranty reserves accrued	Warranty reserves accrued	6,880		5,779		11,601		12,293		Warranty reserves accrued	5,902		4,721

Warranty expenditures	Warranty expenditures	(6,460)		(7,050)		(12,123)		(13,246)		Warranty expenditures	(8,750)		(5,663)
Warranty reserves, end of period	Warranty reserves, end of period	$	103,454	$	93,522	$	103,454	$	93,522	Warranty reserves, end of period	$	101,527	$	103,034

Performance Bonds

We obtain surety bonds in the normal course of business to ensure completion of certain infrastructure improvements of our projects. The beneficiaries of the bonds are various municipalities. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had outstanding surety bonds totaling ~~$739.2~~$692.0 million and ~~$693.2~~$710.8 million, respectively. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our estimated cost to complete obligations related to these surety bonds was ~~$498.2~~$411.1 million and ~~$497.5~~$443.7 million, respectively.

- 18 -

Lease Obligations

Under ASC 842 we recognize a right-of-use lease asset and a lease liability for contracts deemed to contain a lease at the inception of the contract. Our lease population is fully comprised of operating leases, which are now recorded at the net present value of future lease obligations existing at each balance sheet date. At the inception of a lease, or if a lease is subsequently modified, we determine whether the lease is an operating or financing lease. Key estimates involved with ASC 842 include the discount rate used to measure our future lease obligations and the lease term, where considerations include renewal options and intent to renew. Lease right-of-use assets are included in other assets and lease liabilities are included in accrued expenses and other liabilities on our consolidated balance sheet.

Operating Leases

We lease certain property and equipment under non-cancelable operating leases. Office leases are for terms of up to ten years and generally provide renewal options. In most cases, we expect that, in the normal course of business, leases that expire will be renewed or replaced by other leases. Equipment leases are typically for terms of three to four years.

Ground Leases

In 1987, we obtained 2two 55-year ground leases of commercial property that provided for 3three renewal options of ten years each and 1one 45-year renewal option. We exercised the 3three 10-year extensions on 1one of these ground leases to extend the lease through 2071. The commercial buildings on these properties have been sold and the ground leases have been sublet to the buyers.

For one of these leases, we are responsible for making lease payments to the landowner, and we collect sublease payments from the buyers of the buildings. This ground lease has been subleased through 2041 to the buyers of the commercial buildings. For the second lease, the buyers of the buildings are responsible for making lease payments directly to the landowner, however, we have guaranteed the performance of the buyers/lessees. See below for additional information on leases (dollars in thousands):


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Lease Cost
Operating lease cost (included in SG&A expense)	$	2,845	$	2,499
Ground lease cost (included in other operations expense)	663		635
Sublease income, operating leases	—		—
Sublease income, ground leases (included in other operations revenue)	(673)		(644)
Net lease cost	$	2,835	$	2,490

Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease cash flows (included in operating cash flows)	$	2,429	$	3,381
Ground lease cash flows (included in operating cash flows)	$	663	$	663
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,927	$	83


	March 31, 2023		December 31, 2022
Weighted-average discount rate:
Operating leases	4.7	%	4.7	%
Ground leases	10.2	%	10.2	%
Weighted-average remaining lease term (in years):
Operating leases	6.8		7.0
Ground leases	45.1		45.3

- 19 -

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
Lease Cost
Operating lease cost (included in SG&A expense) $ 2,480 $ 2,443 $ 4,979 $ 4,924
Ground lease cost (included in other operations expense) 702 645 1,346 1,269
Sublease income, operating leases — — — —
Sublease income, ground leases (included in other operations revenue) (692) (655) (1,327) (1,288)
Net lease cost $ 2,490 $ 2,433 $ 4,998 $ 4,905
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease cash flows (included in operating cash flows) $ 2,129 $ 1,838 $ 4,424 $ 4,626
Ground lease cash flows (included in operating cash flows) $ 664 $ 634 $ 1,327 $ 1,269
Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,309 $ — $ 1,392 $ 3,006

June 30, 2022 December 31, 2021
Weighted-average discount rate:
Operating leases 4.7 % 4.6 %
Ground leases 10.2 % 10.2 %
Weighted-average remaining lease term (in years):
Operating leases 7.5 7.1
Ground leases 45.8 46.1

The future minimum lease payments under our operating leases are as follows (in thousands):


		Property, Equipment and Other Leases		Ground Leases (1)			Property, Equipment and Other Leases		Ground Leases (1)
Remaining in 2022		$	3,987	$	1,619
2023		9,030		3,237
Remaining in 2023						Remaining in 2023	$	6,973	$	2,428
2024	2024	8,618		3,237		2024	9,106		3,237
2025	2025	8,150		3,237		2025	8,717		3,237
2026	2026	7,328		3,237		2026	7,633		3,237
2027						2027	6,893		3,237
Thereafter	Thereafter	24,709		81,878		Thereafter	18,092		78,640
Total lease payments	Total lease payments	$	61,822	$	96,445	Total lease payments	$	57,414	$	94,016
Less: Interest	Less: Interest	10,127		67,937		Less: Interest	8,215		65,743
Present value of operating lease liabilities	Present value of operating lease liabilities	$	51,695	$	28,508	Present value of operating lease liabilities	$	49,199	$	28,273

__________

(1) Ground leases are fully subleased through 2041, representing ~~$62.6~~$60.2 million of the ~~$96.4~~$94.0 million future ground lease obligations.

14. Stock-Based Compensation

2022 Long-Term Incentive Plan

On April 20, 2022, our stockholders approved the Tri Pointe Homes, Inc. 2022 Long-Term Incentive Plan (the “2022 Plan”), which had been previously approved by our board of directors. The 2022 Plan ~~replaces~~replaced the Company’s prior stock compensation plan, the TRI Pointe Group, Inc. Amended and Restated 2013 Long-Term Incentive Plan (the “2013 Plan”). The 2022 Plan provides for the grant of equity-based awards, including options to purchase shares of common stock, stock appreciation rights, restricted stock, restricted stock units, bonus stock and performance awards. The 2022 Plan will

~~- 20 -~~

automatically expire on the tenth anniversary of its effective date. Our board of directors may terminate or amend the 2022 Plan at any time, subject to any requirement of stockholder approval required by applicable law, rule or regulation.

The number of shares of our common stock that may be issued under the 2022 Plan is 7,500,000 shares. No new awards have been or will be granted under the 2013 Plan from and after February 23, 2022. Any awards outstanding under the 2013 Plan will remain subject to and be paid under the 2013 Plan, and any shares subject to outstanding awards under the 2013 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2022 Plan.

To the extent that shares of our common stock subject to an outstanding option, stock appreciation right, stock award or performance award granted under the 2022 Plan are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or the settlement of such award in cash, then such shares of our common stock generally will again be available under the 2022 Plan. However, the 2022 Plan prohibits us from re-using shares that are tendered or surrendered to pay the exercise cost or tax obligation for stock options and SARs.

As of ~~June 30, 2022,~~March 31, 2023, there were ~~7,494,910~~6,415,172 shares available for future grant under the 2022 Plan.

The following table presents compensation expense recognized related to all stock-based awards (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Total stock-based compensation $ 5,751 $ 4,506 $ 11,023 $ 8,162


	Three Months Ended March 31,
	2023		2022
Total stock-based compensation	$	3,861	$	5,272

Stock-based compensation is charged to general and administrative expense on the accompanying consolidated statements of operations. As of ~~June 30, 2022,~~March 31, 2023, total unrecognized stock-based compensation expense related to all stock-based awards was ~~$36.7~~$32.4 million and the weighted average term over which the expense was expected to be recognized was ~~2.0~~2.3 years.

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Summary of Stock Option Activity

The following table presents a summary of stock option awards for the ~~six~~three months ended ~~June 30, 2022:~~March 31, 2023:


		Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)			Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2021		284,225	$	15.58	1.6	$	3,430
Options outstanding at December 31, 2022								Options outstanding at December 31, 2022	159,255	$	15.08	0.9	$	565
Granted	Granted	—	—		—	—		Granted	—	—		—	—
Exercised	Exercised	(3,000)	$	9.68	—	—		Exercised	(48,592)	$	14.87	—	—
Forfeited	Forfeited	—	$	—	—	—		Forfeited	—	$	—	—	—
Options outstanding at June 30, 2022		281,225	$	15.65	1.1	$	333
Options exercisable at June 30, 2022		281,225	$	15.65	1.1	$	333
Options outstanding at March 31, 2023								Options outstanding at March 31, 2023	110,663	$	15.17	0.9	$	1,064
Options exercisable at March 31, 2023								Options exercisable at March 31, 2023	110,663	$	15.17	0.9	$	1,064

The intrinsic value of each stock option award outstanding or exercisable is the difference between the fair market value of the Company’s common stock at the end of the period and the exercise price of each stock option award to the extent it is considered “in-the-money”. A stock option award is considered to be “in-the-money” if the fair market value of the Company’s stock is greater than the exercise price of the stock option award. The aggregate intrinsic value of options outstanding and options exercisable represents the value that would have been received by the holders of stock option awards had they exercised their stock option award on the last trading day of the period and sold the underlying shares at the closing price on that day.

Summary of Restricted Stock Unit Activity

The following table presents a summary of RSUs for the ~~six~~three months ended ~~June 30, 2022:~~March 31, 2023:

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		Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value (in thousands)			Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value (in thousands)
Nonvested RSUs at December 31, 2021		3,345,091	$	17.16	$	92,492
Nonvested RSUs at December 31, 2022							Nonvested RSUs at December 31, 2022	3,679,521	$	19.93	$	68,402
Granted	Granted	1,573,753	$	21.53	—		Granted	1,209,608	$	23.21	—
Vested	Vested	(1,066,574)	$	14.58	—		Vested	(1,133,424)	$	19.18	—
Forfeited	Forfeited	(142,510)	$	12.40	—		Forfeited	(126,093)	$	18.24	—
Nonvested RSUs at June 30, 2022		3,709,760	$	19.93	$	62,081
Nonvested RSUs at March 31, 2023							Nonvested RSUs at March 31, 2023	3,629,612	$	21.28	$	77,238

RSUs that vested, as reflected in the table above, during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 include previously granted time-based RSUs. RSUs that were forfeited, as reflected in the table above, during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 include performance-based RSUs and time-based RSUs that were forfeited for no consideration.

On February 22, 2023, the Company granted an aggregate of 505,200 time-based RSUs to certain employees and officers. The RSUs granted vest in equal installments annually on the anniversary of the grant date over a three-year period. The fair value of each RSU granted on February 22, 2023 was measured using a price of $23.21 per share per share, which was the closing stock price on the date of grant. Each award will be expensed on a straight-line basis over the vesting period.

On February 22, 2023, the Company granted an aggregate of 704,408 performance-based RSUs to the Company’s Chief Executive Officer, Chief Operating Officer and President, Chief Financial Officer, General Counsel, Chief Marketing Officer, Chief Human Resources Officer and division presidents. These performance-based RSUs are allocated to two separate performance metrics, as follows: (i) 50% to homebuilding revenue of the applicable Company division, and (ii) 50% to pre-tax earnings of the applicable Company division. The vesting, if at all, of these performance-based RSUs may range from 0% to 100% and will be based on the applicable Company division’s percentage attainment of specified threshold, target and maximum performance goals. The performance period for these performance-based RSUs is January 1, 2023 to December 31, 2025. The fair value of these performance-based RSUs was measured using a price of $23.21, which was the closing stock price on the date of grant. Each award will be expensed over the requisite service period.

On February 22, 2022, the Company granted an aggregate of 629,520 time-based RSUs to certain employees and officers. The RSUs granted vest in equal installments annually on the anniversary of the grant date over a three-year period. The

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fair value of each RSU granted on February 22, 2022 was measured using a price of $21.00 per share per share, which was the closing stock price on the date of grant. Each award will be expensed on a straight-line basis over the vesting period.

On February 22, 2022, the Company granted an aggregate of 668,150 performance-based RSUs to the Company’s Chief Executive Officer, Chief Operating Officer and President, Chief Financial Officer, General Counsel, Chief Marketing Officer and Chief Human Resources Officer. These performance-based RSUs are allocated to two separate performance metrics, as follows: (i) 50% to homebuilding revenue, and (ii) 50% to pre-tax earnings. The vesting, if at all, of these performance-based RSUs may range from 0% to 100% and will be based on the Company’s percentage attainment of specified threshold, target and maximum performance goals. Any award earned based on performance achieved may be increased or decreased by 25% based on the Company’s total stockholder return (“TSR”) relative to its peer-group homebuilders. The performance period for these performance-based RSUs is January 1, 2022 to December 31, 2024. The fair value of these performance-based RSUs was determined to be $22.30 per share based on a Monte Carlo simulation. Each award will be expensed over the requisite service period.

On February 22, 2022, the Company granted an aggregate of 235,078 performance-based RSUs to the Company’s division presidents. These performance-based RSUs are allocated to two separate performance metrics, as follows: (i) 50% to homebuilding revenue of the applicable Company division, and (ii) 50% to pre-tax earnings of the applicable Company division. The vesting, if at all, of these performance-based RSUs may range from 0% to 100% and will be based on the applicable Company division’s percentage attainment of specified threshold, target and maximum performance goals. The performance period for these performance-based RSUs is January 1, 2022 to December 31, 2024. The fair value of these performance-based RSUs was measured using a price of $21.00, which was the closing stock price on the date of grant. Each award will be expensed over the requisite service period.

On April 25, 2022, the Company granted an aggregate of 38,385 time-based RSUs to the non-employee members of its board of directors. The RSUs granted to the non-employee directors vest in their entirety on the day immediately prior to the Company’s 2023 annual meeting of stockholders. The fair value of each RSU granted on April 25, 2022 was measured using a price of $20.19 per share, which was the closing stock price on the date of grant. Each award will be expensed on a straight-line basis over the vesting period.

In June 2022, the Company granted an aggregate of 2,620 time-based RSUs to certain employees. The RSUs granted vest in equal installments annually beginning on anniversary of the grant date over a three-year period. The fair value of the RSUs granted were measured using prices of $21.07 and $17.43 per share, respectively, which were the closing stock prices on the applicable date of each grant. Each award will be expensed on a straight-line basis over the vesting period.

As RSUs vest for employees, a portion of the shares awarded is generally withheld to cover employee tax withholdings. As a result, the number of RSUs vested and the number of shares of Tri Pointe common stock issued will differ.

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15. Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statements and tax bases of assets and liabilities using enacted tax rates for the years in which taxes are expected to be paid or recovered. Each quarter we assess our deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable under ASC 740. We are required to establish a valuation allowance for any portion of the asset we conclude is more likely than not to be unrealizable. Our assessment considers, among other things, the nature, frequency and severity of our current and cumulative losses, forecasts of our future taxable income, the duration of statutory carryforward periods and tax planning alternatives.

We had net deferred tax assets of ~~$57.1~~$34.9 million as of both ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. We had a valuation allowance related to those net deferred tax assets of $3.4 million as of both ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company will continue to evaluate both positive and negative evidence in determining the need for a valuation allowance against its deferred tax assets. Changes in positive and negative evidence, including differences between the Company’s future operating results and the estimates utilized in the determination of the valuation allowance, could result in changes in the Company’s estimate of the valuation allowance against its deferred tax assets. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation allowance against the Company’s deferred tax assets.

Tri Pointe has certain liabilities to Weyerhaeuser Company (“Weyerhaeuser”) related to a tax sharing agreement. As of June 30, 2022 and December 31, 2021, we had an income tax liability to Weyerhaeuser of $199,000. The income tax liability to Weyerhaeuser is recorded in accrued expenses and other liabilities on the accompanying consolidated balance sheets.

Our provision for income taxes totaled ~~$45.9~~$27.4 million and ~~$39.3~~$30.2 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and $76.2 million and $62.9 million for the six months ended June 30, 2022 and 2021,~~ respectively. The Company classifies any interest and penalties related to income taxes assessed by jurisdiction as part of income tax expense. The Company did not have any uncertain tax positions recorded as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company has not been assessed interest or penalties by any major tax jurisdictions related to prior years.

The Company files income tax returns in the U.S., including federal and multiple state and local jurisdictions. We are

currently under examination by California for the 2020 and 2021 tax years. The outcome of this examination is not yet determinable.

16. Related Party Transactions

We had no related party transactions for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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17. Supplemental Disclosure to Consolidated Statements of Cash Flows

The following are supplemental disclosures to the consolidated statements of cash flows (in thousands):


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid (capitalized), net	Interest paid (capitalized), net	$	(3,757)	$	(3,061)	Interest paid (capitalized), net	$	(15,866)	$	(17,869)
Income taxes paid (refunded), net		$	94,321	$	69,308
Income taxes paid, net						Income taxes paid, net	$	329	$	—
Supplemental disclosures of noncash activities:	Supplemental disclosures of noncash activities:					Supplemental disclosures of noncash activities:
Amortization of senior note discount capitalized to real estate inventory	Amortization of senior note discount capitalized to real estate inventory	$	490	$	460	Amortization of senior note discount capitalized to real estate inventory	$	259	$	243
Amortization of deferred loan costs capitalized to real estate inventory	Amortization of deferred loan costs capitalized to real estate inventory	$	1,767	$	1,744	Amortization of deferred loan costs capitalized to real estate inventory	$	986	$	889

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are based on our current intentions, beliefs, expectations and predictions for the future, and you should not place undue reliance on these statements. These statements use forward-looking terminology, are based on various assumptions made by us, and may not be accurate because of risks and uncertainties surrounding the assumptions that are made.

Factors listed in this section—as well as other factors not included—may cause actual results to differ significantly from the forward-looking statements included in this Quarterly Report on Form 10-Q. There is no guarantee that any of the events anticipated by the forward-looking statements in this Quarterly Report on Form 10-Q will occur, or if any of the events occurs, there is no guarantee what effect it will have on our operations, financial condition, or share price.

We undertake no, and hereby disclaim any, obligation to update or revise any forward-looking statements, unless required by law. However, we reserve the right to make such updates or revisions from time to time by press release, periodic report, or other method of public disclosure without the need for specific reference to this Quarterly Report on Form 10-Q. No such update or revision shall be deemed to indicate that other statements not addressed by such update or revision remain correct or create an obligation to provide any other updates or revisions.

Forward-Looking Statements

Forward-looking statements that are included in this Quarterly Report on Form 10-Q are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or other words that convey the uncertainty of future events or outcomes. 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, the outcome of legal proceedings, the anticipated impact of natural disasters or contagious diseases on our operations, operational and financial results, including our estimates for growth, financial condition, sales prices, prospects and capital spending.

Risks, Uncertainties and Assumptions

The major risks and uncertainties—and assumptions that are made—that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

•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 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, ~~inflation,~~ interest rate levels, home affordability, inflation, consumer sentiment, 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;~~operations;

•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, labor and ~~labor;~~home components;

•oil and other energy prices;

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•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;~~parts of the western United States;

•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 public health emergencies, including outbreaks of contagious ~~diseases,~~disease, such as COVID-19;

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•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

•other factors described in “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and in other filings we make with the Securities and Exchange Commission (“SEC”).

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related condensed notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our securities. We urge investors to review and consider carefully the various disclosures made by us in this report and in our other reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and subsequent reports on Form 8-K, which discuss our business in greater detail. The section entitled “Risk Factors” set forth in Item 1A of our Annual Report on Form 10-K, and similar disclosures in our other SEC filings, discuss some of the important risk factors that may affect our business, results of operations and financial condition. Investors should carefully consider those risks, in addition to the information in this report and in our other filings with the SEC, before deciding to invest in, or maintain an investment in, our common stock.

Overview and Outlook

~~During the second quarter~~The housing market began showing signs of ~~2022, the robust~~improvement in January 2023, following a reduction in demand ~~environment within the homebuilding industry that had persisted since~~for new home orders in the second half of ~~2020 began to soften. The substantial inflation pressures that our economy continues to face has resulted in many headwinds, most notably~~2022. Despite instability in the ~~form~~banking sector and treasury markets, mortgage rates decreased modestly during the first quarter of ~~rising interest rates, a softening~~2023 as compared to the fourth quarter of ~~consumer sentiment and early signs of a potential broader~~2022, which positively impacted our sales pace. We continue to focus on key economic ~~slowdown. As~~indicators that could impact the ~~Federal Reserve has prioritized its mandate of price stability, it continues to take actions that are targeted to reduce, and ultimately stabilize, inflation, notwithstanding~~housing industry as the ~~potential recessionary risks posed by such actions.~~

~~Supply chain bottlenecks and production inefficiencies remain widespread in all of our markets. Coupled~~economy contends with the current inflationary ~~environment~~cycle and the ~~strain~~impact of higher ~~costs~~interest rates resulting from the Federal Reserve’s series of aggressive federal funds rate hikes. We remain encouraged by the fundamental backdrop of housing due to, among other things, the lack of available supply, including due to less competition from the resale market, as existing homeowners are less motivated to sell and surrender their historically low interest rates. However, we recognize that ~~has resulted in price instability~~the housing industry continues to navigate many uncertain macroeconomic factors and ~~a swift tightening of monetary policy, the resulting economic risks and uncertainties~~expect demand to remain ~~a focal point of our attention. In addition,~~potentially volatile. As such, we continue to ~~monitor~~focus on maintaining a strong balance sheet and ample liquidity. Further, as homebuyers further acclimate to the ~~potential impacts on~~current higher interest rate environment, we continue to analyze price positioning and product offerings at our ~~business~~communities and look for opportunities to drive cost savings to produce more affordable price points for homebuyers. Notwithstanding these near-term challenges, due to the lack of the ongoing geopolitical risks stemming from the war in Ukraine, as well as the appearance of new variants of COVID-19. In light of the aforementioned headwinds, which have resulted in a slower order pace in most of our markets,available supply and favorable buyer demographics, we ~~believe the homebuilding industry is entering a period of uncertainty and that it may take some time for the market to stabilize. Despite these numerous risks, however, we believe~~remain optimistic about the long-term outlook for ~~our industry remains favorable given the undersupplied nature of our markets and the favorable demographics that support the need for new~~ housing.

Highlights of the quarter include an1,619 net new home orders at a monthly absorption rate of 4.0 orders per average selling community. We opened 18 new communities during the quarter, which helped us achieve a 22% increase in average selling communities compared to the prior-year period. We increased our home sales revenue to $768.4 million, as we delivered 1,065 new homes at an average sales price of $742,000. Our homebuilding gross margin percentage ~~to 27.2%~~for the quarter was 23.5% and ~~a reduction in~~our sales and marketing and general and administrative (“SG&A”) expense as a percentage of home sales revenue ~~to 9.5%~~was 11.5%. These factors ~~along with an average sales price of homes delivered of $677,000, allowed us~~led to ~~achieve~~ net income available to common stockholders of ~~$137.9~~$74.7 million, or diluted earnings per share of ~~$1.33. Our monthly absorption rate for the quarter was 3.7 orders per month and as of June 30, 2022, our backlog dollar value is $3.0 billion, an increase of 18% compared to the prior-year period.~~$0.73. In addition, we ended the ~~first~~ quarter with total liquidity of ~~$937.7 million,~~$1.7 billion, including cash and cash equivalents of ~~$270.1~~$966.3 million and ~~$667.5~~$691.4 million of availability under our Credit Facility. Further, our ratio of debt-to-capital at quarter end was an all-time low of 32.5%.

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Our results for the three months ended June 30, 2022 may not be indicative of trends that will persist, as uncertainty caused by COVID-19, government responses to the pandemic, increasing inflation, the war in Ukraine and supply chain disruptions have impacted, and will continue to impact, our business and operations. See “Cautionary Note Concerning Forward-Looking Statements” above.

Consolidated Financial Data (in ~~thousands,~~thousands, except per share amounts):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Homebuilding:	Homebuilding:									Homebuilding:
Home sales revenue	Home sales revenue	$	1,004,644	$	1,009,307	$	1,729,895	$	1,725,982	Home sales revenue	$	768,405	$	725,251
Land and lot sales revenue	Land and lot sales revenue	114		5,416		1,711		6,939		Land and lot sales revenue	1,706		1,597
Other operations revenue	Other operations revenue	703		660		1,347		1,323		Other operations revenue	674		644
Total revenues	Total revenues	1,005,461		1,015,383		1,732,953		1,734,244		Total revenues	770,785		727,492
Cost of home sales	Cost of home sales	731,352		761,215		1,262,012		1,306,571		Cost of home sales	588,118		530,660
Cost of land and lot sales	Cost of land and lot sales	344		4,874		819		5,027		Cost of land and lot sales	1,443		475
Other operations expense	Other operations expense	704		686		1,350		1,310		Other operations expense	665		646
Sales and marketing	Sales and marketing	38,523		45,489		70,762		85,949		Sales and marketing	41,862		32,239
General and administrative	General and administrative	56,829		51,263		105,285		92,612		General and administrative	46,366		48,456

Homebuilding income from operations	Homebuilding income from operations	177,709		151,856		292,725		242,775		Homebuilding income from operations	92,331		115,016
Equity in income (loss) of unconsolidated entities	Equity in income (loss) of unconsolidated entities	143		(16)		88		(29)		Equity in income (loss) of unconsolidated entities	227		(55)
Other income, net	Other income, net	116		149		389		257		Other income, net	7,604		273
Homebuilding income before income taxes	Homebuilding income before income taxes	177,968		151,989		293,202		243,003		Homebuilding income before income taxes	100,162		115,234
Financial Services:	Financial Services:									Financial Services:
Revenues	Revenues	12,228		2,681		20,980		4,786		Revenues	8,876		8,752
Expenses	Expenses	6,322		1,485		11,630		2,892		Expenses	5,831		5,308
Equity in income of unconsolidated entities	Equity in income of unconsolidated entities	—		3,949		46		6,640		Equity in income of unconsolidated entities	—		46
Financial services income before income taxes	Financial services income before income taxes	5,906		5,145		9,396		8,534		Financial services income before income taxes	3,045		3,490
Income before income taxes	Income before income taxes	183,874		157,134		302,598		251,537		Income before income taxes	103,207		118,724
Provision for income taxes	Provision for income taxes	(45,936)		(39,265)		(76,161)		(62,866)		Provision for income taxes	(27,350)		(30,225)
Net income	Net income	137,938		117,869		226,437		188,671		Net income	75,857		88,499
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(1,555)		—		(2,576)		—		Net income attributable to noncontrolling interests	(1,115)		(1,021)
Net income available to common stockholders	Net income available to common stockholders	$	136,383	$	117,869	$	223,861	$	188,671	Net income available to common stockholders	$	74,742	$	87,478
Earnings per share	Earnings per share									Earnings per share
Basic	Basic	$	1.33	$	1.01	$	2.14	$	1.60	Basic	$	0.74	$	0.82
Diluted	Diluted	$	1.33	$	1.00	$	2.12	$	1.59	Diluted	$	0.73	$	0.81

Three Months Ended ~~June 30, 2022~~March 31, 2023 Compared to Three Months Ended ~~June 30, 2021~~March 31, 2022

Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment


		Three Months Ended June 30, 2022			Three Months Ended June 30, 2021			Percentage Change							Three Months Ended March 31, 2023			Three Months Ended March 31, 2022			Percentage Change
		Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders		Average Selling Communities		Monthly Absorption Rates			Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders		Average Selling Communities		Monthly Absorption Rates
West	West	933	72.5	4.3	1,133	71.7	5.3	(18)	%	1	%	(19)	%	West	954	78.2	4.1	1,109	64.3	5.7	(14)	%	22	%	(29)	%
Central	Central	187	30.0	2.1	336	27.8	4.0	(44)	%	8	%	(48)	%	Central	355	39.8	3.0	546	30.5	6.0	(35)	%	30	%	(50)	%
East	East	236	19.3	4.1	153	15.0	3.4	54	%	29	%	20	%	East	310	18.0	5.7	241	16.7	4.8	29	%	8	%	19	%
Total	Total	1,356	121.8	3.7	1,622	114.5	4.7	(16)	%	6	%	(21)	%	Total	1,619	136.0	4.0	1,896	111.5	5.7	(15)	%	22	%	(30)	%

- 26 -

Net new home orders for the three months ended ~~June 30, 2022~~March 31, 2023 decreased by ~~266,~~277, or ~~16%~~15%, to ~~1,356,~~1,619, compared to ~~1,622~~1,896 during the prior-year period. The decrease in net new home orders was due to a ~~21%~~30% decrease in monthly absorption rates, offset by an 6%22% increase in average selling communities. ~~New home~~Despite the negative year-over-year order comparison, demand ~~slowed throughout~~improved significantly during the quarter ~~due largely~~compared to the ~~steep increase in mortgage interest rates, which negatively impacted~~preceding quarter ended December 31, 2022. While both ~~consumer confidence and affordability. Despite the adverse impact of rising mortgage rates on~~ net new home ~~orders, we believe~~order volume and monthly absorption rates are down compared to the ~~persistently limited supply of new housing, which remains below~~same prior-year period, current-year period absorption levels remained elevated compared to our typical historical first quarter levels prior to the ~~level necessary to serve longer-term demand, will continue to drive some level of demand, though likely below the levels we have experienced over the past two years.~~pandemic.

Our West segment reported ~~an 18%~~a 14% decrease in net new home orders due to a ~~19%~~29% decrease in monthly absorption rates offset by a 1%22% increase in average selling communities. ~~While demand~~The 22% increase in average selling communities was due to growth in a majority of our West ~~segment remained strong during~~markets, with the quarter relative to pre-pandemic levels, the demand realized in the prior-year period was exceptionally strong, likely due in large part to significantly lower mortgage interest rates in the prior-year period. While our quarterly absorption rate in the West was strong, the month-over-month trends demonstrated sequential declines, largely following the lead of adverse inflation data and rising mortgage interest rates.greatest impact coming from Southern California. Our Central segment reported a ~~44%~~35% decrease in net new home orders due to a ~~48%~~50% decrease in monthly absorption rates offset by a 8%30% increase in average selling communities. Monthly absorption rates in our Central segment decreased in both Colorado and Texas, as evidenced by comparable sequential month-over-month declines in monthly absorption rates during the current-year period, likely due to rising inflation and mortgage interest rates during this quarter. The 8%30% increase in average selling communities was due to growth in our Austin, ~~Houston~~Dallas-Fort Worth and ~~Colorado~~Houston markets. Our East segment reported a ~~54%~~29% increase in net new home orders due to a ~~29%~~19% increase in monthly absorption rates, along with an 8% increase in average selling ~~communities and a 20%~~communities. Net new home order growth in our East segment was driven primarily by our Charlotte market, where orders increased to 200 for the current-year period compared to 94 in the prior-year period, an increase ~~in monthly absorption rates.~~of 106 orders, or 113%. Growth in average selling communities in our East segment was due ~~largely~~ to accelerated operations in both Charlotte and Raleigh, where ~~net new home orders and~~ average selling communities for the current-year period increased by ~~130 and 7.8, respectively,~~3.0 in each of these markets compared to the prior-year period.

Backlog Units, Dollar Value and Average Sales Price by Segment (dollars in thousands)


		As of June 30, 2022					As of June 30, 2021					Percentage Change							As of March 31, 2023					As of March 31, 2022					Percentage Change
		Backlog Units	Backlog Dollar Value		Average Sales Price		Backlog Units	Backlog Dollar Value		Average Sales Price		Backlog Units		Backlog Dollar Value		Average Sales Price			Backlog Units	Backlog Dollar Value		Average Sales Price		Backlog Units	Backlog Dollar Value		Average Sales Price		Backlog Units		Backlog Dollar Value		Average Sales Price
West	West	2,396	$	2,055,255	$	858	2,536	$	1,756,858	$	693	(6)	%	17	%	24	%	West	1,200	$	963,560	$	803	2,380	$	1,936,552	$	814	(50)	%	(50)	%	(1)	%
Central	Central	896	587,260		655		948	499,295		527		(5)	%	18	%	24	%	Central	433	271,897		628		1,103	672,420		610		(61)	%	(60)	%	3	%
East	East	534	338,740		634		418	268,289		642		28	%	26	%	(1)	%	East	393	267,925		682		472	320,215		678		(17)	%	(16)	%	1	%
Total	Total	3,826	$	2,981,255	$	779	3,902	$	2,524,442	$	647	(2)	%	18	%	20	%	Total	2,026	$	1,503,382	$	742	3,955	$	2,929,187	$	741	(49)	%	(49)	%	—	%

Backlog units reflect the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a homebuyer but for which we have not yet delivered the home. Homes in backlog are generally delivered within seven to ten months from the time the sales contract is entered into, although we may experience cancellations of sales contracts prior to delivery. Our cancellation rate of homebuyers who contracted to buy a home but cancelled prior to delivery of the home (as a percentage of overall orders) was ~~16%~~10% and 7%8% during the three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. Our cancellation rate for the current-year period increased slightly due largely to the impact of higher and ~~2021, respectively.~~more volatile interest rates during the current-year period compared to the prior-year period during which rates were significantly lower. The dollar value of backlog was ~~$3.0~~$1.5 billion as of ~~June 30, 2022, an increase of $456.8 million, or 18%,~~March 31, 2023 compared to ~~$2.5~~$2.9 billion as of ~~June 30, 2021. This increase~~March 31, 2022. The decrease in dollar value of backlog was due to ~~an increase~~a decrease in ~~the average sales price of~~ backlog units of ~~$132,000,~~1,929, or ~~20%~~49%, to ~~$779,000~~2,026 as of ~~June 30, 2022,~~March 31, 2023, compared to ~~$647,000~~3,955 at June 30, 2021. The increase in the average sales price of backlog units was due primarily to our ability to raise prices over the past several quarters, along with a combination of product mix and the geographic composition of backlog units.March 31, 2022.

Backlog dollar value in our West segment ~~increased 17%~~decreased 50% due to a ~~24%~~50% decrease in backlog units and a 1% decrease in average sales price. The decrease in backlog units is largely due to the slower market conditions experienced in the second half of 2022 which led to a lower backlog balance leading into the current year. Backlog dollar value in our Central segment decreased by 60% due to a 61% decrease in backlog units, offset by a 3% increase in average sales ~~price, offset by a 6% decrease in backlog units. The increase in average sales price is a reflection of the strong pricing power we possessed in 2021 and early 2022.~~price. The decrease in backlog units is due to a decrease in net new home order activity in the current-year period. Our Central segment expanded its backlog dollar value by 18% due to a 24% increase in average sales price, offset by a 5% decrease in backlog units. The increase in average sales price during the current-year period is due primarily to the ~~strong pricing power~~slower demand we experienced ~~in 2021 in our Texas and Colorado markets, a trend which continued through the first quarter of 2022 and has gradually slowed~~ during the second ~~quarter. The decrease in~~half of 2022 which led to lower backlog ~~units is due to the decrease in net new home order activity in~~leading into the current year. Backlog dollar value in our East segment ~~increased~~decreased by ~~26%~~16% due to a ~~28% increase~~17% decrease in backlog units offset by a 1% ~~decrease~~increase in average sales price. The ~~increase~~decrease in backlog units ~~during the current-year period~~ is largely due to ~~our accelerated operations in both Charlotte and Raleigh, where we began selling homes in~~the slower market conditions that persisted through the second half of ~~2020. Backlog units in our Charlotte division increased to 274 units during the current-year period as compared to 31 units during the prior-year period.~~2022.

- 27 -

New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands)


		Three Months Ended June 30, 2022					Three Months Ended June 30, 2021					Percentage Change							Three Months Ended March 31, 2023					Three Months Ended March 31, 2022					Percentage Change
		New Homes Delivered	Home Sales Revenue		Average Sales Price		New Homes Delivered	Home Sales Revenue		Average Sales Price		New Homes Delivered		Home Sales Revenue		Average Sales Price			New Homes Delivered	Home Sales Revenue		Average Sales Price		New Homes Delivered	Home Sales Revenue		Average Sales Price		New Homes Delivered		Home Sales Revenue		Average Sales Price
West	West	917	$	669,875	$	731	1,117	$	778,881	$	697	(18)	%	(14)	%	5	%	West	590	$	478,733	$	811	740	$	528,255	$	714	(20)	%	(9)	%	14	%
Central	Central	394	214,402		544		292	149,620		512		35	%	43	%	6	%	Central	254	165,968		653		263	137,097		521		(3)	%	21	%	25	%
East	East	174	120,367		692		136	80,806		594		28	%	49	%	16	%	East	221	123,704		560		96	59,899		624		130	%	107	%	(10)	%
Total	Total	1,485	$	1,004,644	$	677	1,545	$	1,009,307	$	653	(4)	%	—	%	4	%	Total	1,065	$	768,405	$	722	1,099	$	725,251	$	660	(3)	%	6	%	9	%

Home sales revenue ~~decreased $4.7~~increased $43.2 million to ~~$1.0 billion~~$768.4 million for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the prior-year period. The ~~decrease~~increase was comprised of ~~$39.2~~$65.6 million related to a ~~60-unit decrease in new homes delivered in the three months ended June 30, 2022 compared to the prior-year period, offset by $34.5 million related to a $24,000~~$62,000 increase in average sales price of homes delivered in the three months ended ~~June 30, 2022~~March 31, 2023 compared to the prior-year period, offset by a $22.4 million decrease related to 34 fewer homes delivered during the three months ended March 31, 2023 compared to the prior-year period.

Home sales revenue in our West segment decreased ~~14%~~9% due to an ~~18%~~20% decrease in new homes delivered, offset by a 5%14% increase in average sales price during the current-year period. The decrease in new homes delivered was due a decrease in backlog units to start the current-year period compared to the prior-year period, ~~along with~~partially offset by a ~~decrease~~large increase in backlog conversion rate. The decline in backlog units to start the current-year period was due largely to the impact of higher interest rates in that second half of 2022, which negatively impacted our net new home orders. The improvement we experienced in our backlog conversion rate ~~as labor and~~was due to supply chain ~~constraints continue~~improvements and overall reductions in construction cycle times that had been disrupted due to ~~negatively impact~~ the ~~timing of our new home deliveries.~~pandemic. The increase in average sales ~~prices~~price was due to ~~stronger pricing power reflected~~market and product mix factors as a higher percentage of homes delivered in our ~~backlog entering into the current-year period compared to the prior-year period.~~West segment were from markets and communities with higher average sales prices. Home sales revenue in our Central segment increased ~~43%~~21% due to a ~~35% increase in new homes delivered and a 6%~~25% increase in average sales ~~price. The increase~~price, offset by a 3% decrease in new homes ~~delivered was due to higher backlog units to start the current-year period compared to the prior-year period.~~delivered. The increase in average sales price is a reflection of the strong pricing power ~~we realized~~that existed through the first half of 2022 compared to the pricing levels that fueled deliveries that took place during the first quarter of 2022. The decrease in ~~2021 and early 2022.~~new homes delivered was due a decrease in backlog units to start the current-year period compared to the prior-year period. Similar to our West segment, this impact was offset some by a higher backlog conversion rate in the current-year period. Home sales revenue in our East segment increased by ~~49%~~107% due to a ~~28%~~130% increase in new homes delivered, ~~and~~offset by a ~~16% increase~~10% decrease in average sales price. The increase in new homes delivered was due to a higher backlog ~~units to start~~conversion rate during the current-year period compared to the prior-year period. All of the year-over-year delivery growth came from our newer Charlotte and Raleigh operations, where combined deliveries grew from 28 in the prior-year period to 175 during the current-year period. The ~~increase~~decrease in average sales price was also due to our growth in the ~~strong pricing power we experienced throughout 2021 and early 2022,~~Carolinas, as ~~each of~~housing prices tend to be generally lower in this market compared to our other markets in ~~our~~the East, ~~segment experienced significant growth~~which are located in ~~average sales price compared to~~ the ~~prior-year period.~~Washington D.C. area.

Homebuilding Gross Margins (dollars in thousands)


		Three Months Ended June 30,											Three Months Ended March 31,
		2022			%		2021			%			2023			%		2022			%
Home sales revenue	Home sales revenue	$	1,004,644		100.0	%	$	1,009,307		100.0	%	Home sales revenue	$	768,405		100.0	%	$	725,251		100.0	%
Cost of home sales	Cost of home sales	731,352			72.8	%	761,215			75.4	%	Cost of home sales	588,118			76.5	%	530,660			73.2	%
Homebuilding gross margin	Homebuilding gross margin	273,292			27.2	%	248,092			24.6	%	Homebuilding gross margin	180,287			23.5	%	194,591			26.8	%
Add: interest in cost of home sales	Add: interest in cost of home sales	24,963			2.5	%	30,851			3.1	%	Add: interest in cost of home sales	20,226			2.6	%	17,065			2.4	%
Add: impairments and lot option abandonments	Add: impairments and lot option abandonments	972			0.1	%	232			0.0	%	Add: impairments and lot option abandonments	717			0.1	%	489��			0.1	%
Adjusted homebuilding gross margin(1)	Adjusted homebuilding gross margin(1)	$	299,227		29.8	%	$	279,175		27.7	%	Adjusted homebuilding gross margin(1)	$	201,230		26.2	%	$	212,145		29.3	%
Homebuilding gross margin percentage	Homebuilding gross margin percentage	27.2		%			24.6		%			Homebuilding gross margin percentage	23.5		%			26.8		%
Adjusted homebuilding gross margin percentage(1)	Adjusted homebuilding gross margin percentage(1)	29.8		%			27.7		%			Adjusted homebuilding gross margin percentage(1)	26.2		%			29.3		%

__________

(1)Non-GAAP financial measure (as discussed below).

- 28 -

Our homebuilding gross margin percentage ~~increased~~decreased to ~~27.2%~~23.5% for the three months ended ~~June 30, 2022 as~~March 31, 2023 compared to ~~24.6%~~26.8% for the prior-year period. The ~~increase~~decrease in gross margin percentage was due largely to higher incentives utilized in the first quarter of 2023 compared to the prior-year period. Market conditions during the first quarter of 2022 were generally much stronger as higher interest rates had not yet impacted pricing or market sentiment. As our homes are generally delivered within seven to ten months from the time we enter into a ~~combination~~sales contract, in the current environment—in which we are facing extended construction cycles compared to historical norms—the demand slowdown we experienced during the second half of ~~product mix and~~2022 has put some downward pressure on current-year gross margins, as a ~~strong demand environment that allowed us to reduce~~higher percentage of homes delivered have been impacted by higher incentives ~~and raise prices in all of our markets.~~and/or price decreases. Excluding interest, impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was ~~29.8%~~26.2% for the three months ended ~~June 30, 2022,~~March 31, 2023 compared to ~~27.7% for the prior-year period.~~

~~- 28 -~~

should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the most directly comparable GAAP measure.

~~Sales and Marketing, General and Administrative Expense (dollars in thousands)~~

Three Months Ended June 30, As a Percentage of
Home Sales Revenue
2022 2021 2022 2021
Sales and marketing $ 38,523 $ 45,489 3.8 % 4.5 %
General and administrative (G&A) 56,829 51,263 5.7 % 5.1 %
Total sales and marketing and G&A $ 95,352 $ 96,752 9.5 % 9.6 %

Total SG&A expense as a percentage of home sales revenue decreased to 9.5% for the three months ended June 30, 2022, compared to 9.6% in the prior-year period. Total SG&A expense decreased $1.4 million to $95.4 million for the three months ended June 30, 2022 from $96.8 million in the prior-year period.

Sales and marketing expense as a percentage of home sales revenue decreased to 3.8% for the three months ended June 30, 2022, compared to 4.5% for the prior-year period. The decrease was due primarily to lower broker commissions and advertising expense.

General and administrative (“G&A”) expense as a percentage of home sales revenue increased to 5.7% of home sales revenue for the three months ended June 30, 2022 compared to 5.1% for the prior-year period. G&A expense increased to $56.8 million for the three months ended June 30, 2022 compared to $51.3 million for the prior-year period, largely due to higher employee costs as we continued to grow our headcount.

~~Interest~~

Interest, which we incurred principally to finance land acquisitions, land development and home construction, totaled $28.8 million and $22.6 million for the three months ended June 30, 2022 and 2021, respectively. All interest incurred in both periods was capitalized.

~~Income Tax~~

For the three months ended June 30, 2022, we recorded a tax provision of $45.9 million based on an effective tax rate of 25.0%. For the three months ended June 30, 2021, we recorded a tax provision of $39.3 million based on an effective tax rate of 25.0%. The increase in provision for income taxes is due to a $26.7 million increase in income before income taxes to $183.9 million for the three months ended June 30, 2022, compared to $157.1 million for the prior-year period.

~~Financial Services Segment~~

Income before income taxes from our financial services operations increased to $5.9 million for the three months ended June 30, 2022 compared to $5.1 million for the prior-year period. This increase is due to higher volumes from both our title and escrow service operations and our property and casualty insurance operations. Additionally, during the current fiscal year, we consolidated our mortgage financing operations, which was previously accounted for as an unconsolidated joint venture. The new accounting treatment of our mortgage financing operations has resulted in net income attributable to noncontrolling interests, which is presented on our consolidated statements of operations.

~~- 29 -~~

~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

~~Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment~~

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Percentage Change
Net New
Home
Orders Average
Selling
Communities Monthly
Absorption
Rates Net New
Home
Orders Average
Selling
Communities Monthly
Absorption
Rates Net New
Home
Orders Average
Selling
Communities Monthly
Absorption
Rates
West 2,042 68.7 5.0 2,410 70.9 5.7 (15) % (3) % (12) %
Central 733 30.1 4.1 870 28.3 5.1 (16) % 6 % (20) %
East 477 17.9 4.4 329 14.2 3.9 45 % 26 % 13 %
Total 3,252 116.7 4.6 3,609 113.4 5.3 (10) % 3 % (13) %

Net new home orders for the six months ended June 30, 2022 decreased by 357, or 10%, to 3,252, compared to 3,609 during the prior-year period. The decrease in net new home orders was due to a 13% decrease in monthly absorption rates offset by a 3% increase in average selling communities. New home order demand slowed during the second half of the six months ended June 30, 2022 due largely to the steep increase in mortgage interest rates, which negatively impacted both consumer confidence and affordability. Despite the adverse impact of rising mortgage rates on net new home orders, we believe the persistently limited supply of new housing, which remains below the level necessary to serve longer-term demand, will continue to drive some level of demand, though likely below the levels we have experienced over the past two years.

Our West segment reported a 15% decrease in net new home orders due to a 12% decrease in monthly absorption rates and a 3% decrease in average selling communities. While demand in our West segment remained strong during the majority of the current-year period, ~~the impact of sharply rising interest rates slowed the trajectory of monthly absorption rates throughout the second quarter~~. The decrease in average selling communities in the current-year period is largely due to the robust demand experienced throughout 2021 and through the first quarter of 2022, which has resulted in a decline in community count. Our monthly absorption rate of 5.0 in our West segment represents a sales pace above historical trends, however we expect this rate to decline under the current market conditions, in which affordability has become of increasing concern. Our Central segment reported a 16% decrease in net new home orders due to a 20% decrease in monthly absorption rates, offset by a 6% increase in average selling communities. Monthly absorption rates in our Central segment remained strong in both Colorado and Texas during the first quarter, however experienced a significant slowdown during the second quarter as mortgage interest rates increased. Our East segment reported a 45% increase in net new home orders due to a 26% increase in average selling communities and a 13% increase in monthly absorption rates. Growth in average selling communities in our East segment was due largely to accelerated operations in Charlotte, where average selling communities for the current-year period increased by 5.3 compared to the prior-year period. The increase in monthly absorption rates in the East segment was also due to strong performance in Charlotte, where our monthly absorption rate increased to 6.1 for the current-year period compared to 3.5 in the prior-year period.

~~New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands)~~

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Percentage Change
New
Homes
Delivered Home
Sales
Revenue Average
Sales
Price New
Homes
Delivered Home
Sales
Revenue Average
Sales
Price New
Homes
Delivered Home
Sales
Revenue Average
Sales
Price
West 1,657 $ 1,198,130 $ 723 1,886 $ 1,316,769 $ 698 (12) % (9) % 4 %
Central 657 351,499 535 546 270,738 496 20 % 30 % 8 %
East 270 180,266 668 239 138,475 579 13 % 30 % 15 %
Total 2,584 $ 1,729,895 $ 669 2,671 $ 1,725,982 $ 646 (3) % — % 4 %

Home sales revenue increased $3.9 million to $1.7 billion for the six months ended June 30, 2022 compared to the prior-year period. The increase was comprised of $60.1 million related to an increase in average sales price of homes delivered in the six months ended June 30, 2022 compared to the prior-year period, offset by $56.2 million related to a decrease of 87 new homes delivered in the six months ended June 30, 2022 compared to the prior-year period.

~~- 30 -~~

Home sales revenue in our West segment decreased 9% due to a 12% decrease in new homes delivered, offset by a 4% increase in average sales price during the current-year period. The decrease in new homes delivered was due a decrease in backlog conversion rate, as labor and supply chain constraints continue to negatively impact the timing of our new home deliveries. The increase in average sales prices was due to stronger pricing power reflected in our backlog entering into the current-year period compared to the prior-year period. Home sales revenue in our Central segment increased 30% due to a 20% increase in new homes delivered in addition to an 8% increase in average sales price. The increase in new homes delivered was due to higher backlog units to start the current-year period compared to the prior-year period, in addition to a higher backlog conversion rate. The increase in average sales price is a reflection of the strong pricing power we realized in 2021. Home sales revenue in our East segment increased by 30% due to a 15% increase in average sales price in addition to a 13% increase in new homes delivered. The increase in average sales price was due to the strong pricing power we experienced throughout 2021, as each of our markets in our East segment experienced significant growth in average sales price compared to the prior-year period. The increase in new homes delivered was due primarily to activity in our Charlotte market, in which new homes delivered for the current-year period increased by 65 units compared to the prior-year period.

~~Homebuilding Gross Margins (dollars in thousands)~~

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(1) $ 511,372 29.6 % $ 471,385 27.3 %
Homebuilding gross margin percentage 27.0 % 24.3 %
Adjusted homebuilding gross margin percentage(1) 29.6 % 27.3 %

~~__________~~

~~(1)Non-GAAP financial measure (as discussed below).~~

Our homebuilding gross margin percentage increased to 27.0% for the six months ended June 30, 2022 as compared to 24.3% for the prior-year period. The increase in gross margin percentage was due to a combination of product mix and a strong demand environment that has allowed us to reduce incentives and raise prices in all of our markets. Excluding interest, impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 29.6% for the six months ended June 30, 2022, compared to 27.3%29.3% for the prior-year period.

Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. Because adjusted homebuilding gross margin is not calculated in accordance with GAAP, it 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. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the most directly comparable GAAP measure.

Sales and Marketing, General and Administrative Expense (dollars in thousands)


		Six Months Ended June 30,				As a Percentage of Home Sales Revenue					Three Months Ended March 31,				As a Percentage of Home Sales Revenue
		2022		2021		2022		2021			2023		2022		2023		2022
Sales and marketing	Sales and marketing	$	70,762	$	85,949	4.1	%	5.0	%	Sales and marketing	$	41,862	$	32,239	5.4	%	4.4	%
General and administrative (G&A)	General and administrative (G&A)	105,285		92,612		6.1	%	5.4	%	General and administrative (G&A)	46,366		48,456		6.0	%	6.7	%
Total sales and marketing and G&A	Total sales and marketing and G&A	$	176,047	$	178,561	10.2	%	10.3	%	Total sales and marketing and G&A	$	88,228	$	80,695	11.5	%	11.1	%

Total SG&A expense as a percentage of home sales revenue ~~decreased~~increased to ~~10.2%~~11.5% for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~10.3%~~11.1% in the prior-year period. Total SG&A expense ~~decreased $2.5~~increased $7.5 million to ~~$176.0~~$88.2 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 from ~~$178.6~~$80.7 million in the prior-year period.

~~- 31 -~~

Sales and marketing expense as a percentage of home sales revenue ~~decreased~~increased to ~~4.1%~~5.4% for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~5.0%~~4.4% for the prior-year period. The ~~decrease~~increase was due primarily to ~~lower~~higher broker commissions along with increased marketing and advertising ~~expense.~~expenses, all of which are a response to year-over-year decline in market conditions.

General and administrative (“G&A”) expense as a percentage of home sales revenue ~~increased~~decreased to ~~6.1%~~6.0% of home sales revenue for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to ~~5.4%~~6.7% for the prior-year period. G&A expense ~~increased~~decreased to ~~$105.3~~$46.4 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to ~~$92.6~~$48.5 million for the prior-year period, largely due to ~~higher employee costs as we continued to grow our headcount.~~lower headcount and a reduction in professional services.

Interest

Interest, which we incurred principally to finance land acquisitions, land development and home construction, totaled ~~$57.3~~$37.5 million and ~~$43.7~~$28.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. All interest incurred in both periods was capitalized.

Other Income, Net

Other income, net for the three months ended March 31, 2023 and 2022 was income of $7.6 million and $273,000, respectively. The increase was primarily due to higher interest income stemming from the higher interest rates realized on our existing cash balances.

- 29 -

Income Tax

For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we recorded a tax provision of ~~$76.2~~$27.4 million based on an effective tax rate of ~~25.2%~~26.5%. For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we recorded a tax provision of ~~$62.9~~$30.2 million based on an effective tax rate of ~~25.0%~~25.5%. The ~~increase~~decrease in provision for income taxes is due to a ~~$51.1~~$15.5 million ~~increase~~decrease in income before income taxes to ~~$302.6~~$103.2 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$251.5~~$118.7 million for the prior-year period.

Financial Services Segment

Income before income taxes from our financial services operations ~~increased~~decreased to ~~$9.4~~$3.0 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to ~~$8.5~~$3.5 million for the prior-year period. ~~This increase is due to higher volumes from both our title and escrow service operations and our property and casualty insurance operations. Additionally, during~~Beginning in the ~~current~~ fiscal year weended December 31, 2022, Tri Pointe Connect was fully consolidated under the Financial Services section of our ~~mortgage financing~~consolidated statements of operations, ~~which was previously accounted for~~with the noncontrolling interest recorded on the consolidated statements of operations as ~~an unconsolidated joint venture. This new accounting treatment has resulted in~~ net income attributable to noncontrolling ~~interests from our mortgage financing operations, which is presented below net income on our consolidated statements of operations.~~interests.

Lots Owned or Controlled by Segment

Lots owned or controlled include our share of lots controlled by our unconsolidated land development joint ventures. Investments in joint ventures are described in Note 6, Investments in Unconsolidated Entities, of the notes to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. The table below summarizes our lots owned or controlled by segment as of the dates presented:


		June 30,		Increase (Decrease)				March 31,		Increase (Decrease)
		2022	2021	Amount	%			2023	2022	Amount	%
Lots Owned	Lots Owned						Lots Owned
West	West	14,485	16,065	(1,580)	(10)	%	West	12,131	14,967	(2,836)	(19)	%
Central	Central	5,413	5,065	348	7	%	Central	4,824	5,641	(817)	(14)	%
East	East	1,681	1,576	105	7	%	East	1,304	1,709	(405)	(24)	%
Total	Total	21,579	22,706	(1,127)	(5)	%	Total	18,259	22,317	(4,058)	(18)	%
Lots Controlled(1)	Lots Controlled(1)						Lots Controlled(1)
West	West	5,626	5,673	(47)	(1)	%	West	4,036	6,902	(2,866)	(42)	%
Central	Central	7,953	5,341	2,612	49	%	Central	6,432	7,947	(1,515)	(19)	%
East	East	3,924	3,392	532	16	%	East	3,328	4,662	(1,334)	(29)	%
Total	Total	17,503	14,406	3,097	21	%	Total	13,796	19,511	(5,715)	(29)	%
Total Lots Owned or Controlled(1)	Total Lots Owned or Controlled(1)	39,082	37,112	1,970	5	%	Total Lots Owned or Controlled(1)	32,055	41,828	(9,773)	(23)	%

__________

(1)As of ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ lots controlled represented lots that were under land or lot option contracts or purchase contracts. As of ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ lots controlled for Central include ~~3,447~~3,210 and ~~2,114~~3,317 lots, respectively, and East include ~~157~~124 and ~~184~~174 lots, respectively, which represent our expected share of lots owned by our unconsolidated land development joint ventures.

~~- 32 -~~

Liquidity and Capital Resources

Overview

Our principal uses of capital for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 were operating expenses, land purchases, land development, home construction and repurchases of our common stock. We used funds generated by our operations to meet our short-term working capital requirements. We monitor financing requirements to evaluate potential financing sources, including bank credit facilities and note offerings. We also continue to monitor the credit markets as we remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and keep us poised for growth. As of ~~June 30, 2022,~~March 31, 2023, we had total liquidity of ~~$937.7 million,~~$1.7 billion, including cash and cash equivalents of ~~$270.1~~$966.3 million and ~~$667.5~~$691.4 million of availability under our Credit Facility, as described below, after considering the borrowing base provisions and outstanding letters of credit.

Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the availability of particular assets, and our Company as a whole, to generate cash flow to cover the expected debt service.

- 30 -

Senior Notes

Our outstanding senior notes (the “Senior Notes”) contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions. As of ~~June 30, 2022,~~March 31, 2023, we were in compliance with the covenants required by our Senior Notes.

Loans Payable

On June 29, 2022, we entered into a Third Modification Agreement (the “Modification”) to our Second Amended and Restated Credit Agreement dated as of March 29, 2019. The Modification, among other things, (i) increases the maximum amount of the revolving credit facility (the “Revolving Facility”) under the Credit Agreement from $650.0 million to $750.0 million, (ii) increases the sublimit for issuance of letters of credit under the Revolving Facility from $100 million to $150 million and (iii) extends the maturity date of both the Revolving Facility and term loan facility (the “Term Facility”) under the Credit Agreement to June 29, 2027. We may borrow under the Revolving Facility in the ordinary course of business to repay senior notes and fund our operations, including our land acquisition, land development and homebuilding activities. Borrowings under the Revolving Facility will be governed by, among other things, a borrowing base. Interest rates under the Revolving Facility will be based on the Secured Overnight Financing Rate (“SOFR”), plus a spread ranging from 1.25% to 1.90%, depending on the Company’s leverage ratio. Interest rates under the Term Facility will be based on SOFR, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio.

As of ~~June 30, 2022,~~March 31, 2023, we had no outstanding debt under the Revolving Facility and there w~~as $667.5~~was $691.4 million of availability after considering the borrowing base provisions and outstanding letters of credit. As of ~~June 30, 2022,~~March 31, 2023, we had $250 million of outstanding debt under the Term Facility with an interest rate of ~~2.16%~~4.55%. As of ~~June 30, 2022,~~March 31, 2023, there were ~~$7.2~~$6.2 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that

~~- 33 -~~

will amortize over the remaining term of the Credit Facility. Accrued interest, including loan commitment fees, related to the Term Facility was ~~$723,000~~$346,000 and ~~$570,000~~$1.5 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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Under the Credit Facility, we are required to comply with certain ~~financial~~financial covenants, including, but not limited to, those set forth in the table below (dollars in thousands):

Actual at
June 30,

Covenant
Requirement at
June 30,

Actual at
March 31,

Covenant
Requirement at
March 31,

Financial Covenants

2022

Financial Covenants

2023

Consolidated Tangible Net Worth

2,323,886

1,648,191

Consolidated Tangible Net Worth

2,699,326

1,861,662

(Not less than $1.58 billion plus 50% of net income and

50% of the net proceeds from equity offerings after

March 31, 2022)

(Not less than $1.58 billion plus 50% of net income and

50% of the net proceeds from equity offerings after

March 31, 2022)

(Not less than $1.58 billion plus 50% of net income and

50% of the net proceeds from equity offerings after

March 31, 2022)

Leverage Test

32.0

≤60%

Leverage Test

13.6

≤60%

(Not to exceed 60%)

Interest Coverage Test

7.9

≥1.5

Interest Coverage Test

6.9

≥1.5

(Not less than 1.5:1.0)

In addition, the Credit Facility limits the aggregate number of single family dwellings (where construction has commenced) owned by the Company or any guarantor that are not presold or model units to no more than the greater of (i) 50% of the number of housing unit closings (as defined) during the preceding 12 months; or (ii) 100% of the number of housing unit closings during the preceding 6 months. However, a failure to comply with this “Spec Unit Inventory Test” will not be an event of default or default, but will be excluded from the borrowing base as of the last day of the quarter in which the non-compliance occurs. The Credit Facility further requires that at least 95.0% of consolidated tangible net worth must be attributable to the Company and its guarantor subsidiaries, subject to certain grace periods.

As of ~~June 30, 2022,~~March 31, 2023, we were in compliance with all of these financial covenants.

Stock Repurchase Program

On ~~November 11, 2020, we announced the approval~~February 15, 2023, our board of ~~our new~~directors approved a share repurchase program (the “2023 Repurchase ~~Program~~Program”), authorizing the repurchase of shares of common stock with an aggregate value of up to $250 million ~~of common stock~~ through December 31, 2021. On July 21, 2021, our board of directors authorized the repurchase of up to an additional $250 million of common stock and extended the term of the Repurchase Program through December 31, 2022, increasing the aggregate value of shares of common stock authorized to be repurchased under the Repurchase Program from $250 million to $500 million. On February 16, 2022, our board of directors authorized the repurchase of up to an additional $250 million2023. Purchases of common stock pursuant to the Repurchase Program, increasing the aggregate value of shares of common stock authorized to be repurchased under the Repurchase Program from $500 million to $750 million. Purchases of common stock pursuant to the2023 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We are not obligated under the 2023 Repurchase Program to repurchase any specific number or amount of shares of common stock, and we may modify, suspend or discontinue the program at any time. Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions, legal requirements and ~~legal requirements.~~applicable tax effects. During the three months ended ~~June 30, 2022,~~March 31, 2023, we repurchased and retired an aggregate of ~~3,152,234~~1,574,575 shares of our common stock under the Repurchase Program for ~~$62.8 million. For the six months ended June 30, 2022, we repurchased and retired an aggregate of 8,447,470 shares of our common stock under the Repurchase Program for a total of $185.9~~$37.6 million.

Leverage Ratios

We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. The ratio of debt-to-capital and the ratio of net debt-to-net capital are calculated as follows (dollars in thousands):

- 3432 -


		June 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
Loans Payable	Loans Payable	$	250,000		$	250,504		Loans Payable	$	287,427		$	287,427
Senior Notes	Senior Notes	1,088,895			1,087,219			Senior Notes	1,091,509			1,090,624
Total debt	Total debt	1,338,895			1,337,723			Total debt	1,378,936			1,378,051
Stockholders’ equity	Stockholders’ equity	2,487,566			2,447,621			Stockholders’ equity	2,863,623			2,832,389
Total capital	Total capital	$	3,826,461		$	3,785,344		Total capital	$	4,242,559		$	4,210,440
Ratio of debt-to-capital(1)	Ratio of debt-to-capital(1)	35.0		%	35.3		%	Ratio of debt-to-capital(1)	32.5		%	32.7		%

Total debt	Total debt	$	1,338,895		$	1,337,723		Total debt	$	1,378,936		$	1,378,051
Less: Cash and cash equivalents	Less: Cash and cash equivalents	(270,124)			(681,528)			Less: Cash and cash equivalents	(966,298)			(889,664)
Net debt	Net debt	1,068,771			656,195			Net debt	412,638			488,387
Stockholders’ equity	Stockholders’ equity	2,487,566			2,447,621			Stockholders’ equity	2,863,623			2,832,389
Net capital	Net capital	$	3,556,337		$	3,103,816		Net capital	$	3,276,261		$	3,320,776
Ratio of net debt-to-net capital(2)	Ratio of net debt-to-net capital(2)	30.1		%	21.1		%	Ratio of net debt-to-net capital(2)	12.6		%	14.7		%

__________

(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 a non-GAAP financial measure and 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 most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-net capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital. Because the ratio of net debt-to-net capital is not calculated in accordance with GAAP, it 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.

Cash Flows—~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 Compared to ~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022

For the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 as compared to the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

•Net cash ~~used~~provided by (used in) in operating activities increased by ~~$265.1~~$251.8 million to net cash ~~used~~provided of ~~$167.8~~$135.6 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to net cash ~~provided~~used by operating activities of ~~$97.3~~$116.1 million for the prior-year period. The change was comprised primarily of ~~offsetting activity, including (i) an increase~~a decrease in cash used for real estate inventory purchases of ~~$261.5~~$265.2 million, offset by ~~(ii) an increase in net income to $226.4 million for the six months ended June 30, 2022 compared to $188.7 million in the prior-year period, and (iii)~~a mix of other offsetting changes in net income, other assets, receivables, accounts payable, accrued expenses and other liabilities, deferred income taxes and returns on investments in unconsolidated entities.

•Net cash used in investing activities was ~~$43.9~~$9.5 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~net cash provided by investing activities of $8.5~~$19.7 million for the prior-year period. The ~~change~~decrease in net cash used in investing activities was due to ~~the net change~~a reduction in cash ~~flows~~used related to both investments in unconsolidated entities ~~along with an increase in~~and purchases of property and equipment.

•Net cash used in financing activities was ~~$199.6~~$49.6 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to net cash used in financing activities of ~~$153.7~~$133.0 million for the prior-year period. Net cash used in financing activities in the current-year period was primarily comprised of ~~$185.9~~$37.6 million of cash used for share repurchases.

Off-Balance Sheet Arrangements and Contractual Obligations

In the ordinary course of business, we enter into purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and land banking arrangements as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. These option contracts and land banking arrangements generally require a non-refundable deposit for the right to acquire land and lots over a specified period of time at pre-determined prices. We generally have the right, at our discretion, to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash

~~- 35 -~~

deposit with no further financial responsibility to the land seller. In some cases, however, we may be contractually obligated to complete development work even if we terminate the option to procure land or lots. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$258.0~~ $215.6

- 33 -

million of cash deposits, the majority of which are non-refundable, pertaining to land and lot option contracts and purchase contracts with an aggregate remaining purchase price of ~~$1.7~~$1.2 billion (net of deposits). See Note 7, Variable Interest Entities, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Our utilization of land and lot option contracts and land banking arrangements is dependent on, among other things, the availability of land sellers or land banking firms willing to enter into such arrangements, the availability of capital to finance the development of optioned land and lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

As of ~~June 30, 2022,~~March 31, 2023, we held equity investments in twelve active homebuilding partnerships or limited liability companies. Our participation in these entities may be as a developer, a builder, or an investment partner. See Note 6, Investments in Unconsolidated Entities, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Supplemental Guarantor Financial Information

2027 Notes and 2028 Notes

On June 5, 2017, Tri Pointe issued the 2027 Notes and on June 10, 2020, Tri P~~ointe~~Pointe issued the 2028 Notes. All of Tri Pointe’s 100% owned subsidiaries that are guarantors (each a “Guarantor” and, collectively, the “Guarantors”) of the Credit Facility, including Tri Pointe Homes Holdings, are party to supplemental indentures pursuant to which they jointly and severally guarantee Tri Pointe’s obligations with respect to these Notes. Each Guarantor of the 2027 Notes and the 2028 Notes is 100% owned by Tri Pointe, and all guarantees are full and unconditional, subject to customary exceptions pursuant to the indentures governing the 2027 Notes and the 2028 Notes, as described in the following paragraph. All of our non-Guarantor subsidiaries have nominal assets and operations and are considered minor, as defined in Rule 3-10(h) of Regulation S-X. In addition, Tri Pointe has no independent assets or operations, as defined in Rule 3-10(h) of Regulation S-X. There are no significant restrictions upon the ability of Tri Pointe or any Guarantor to obtain funds from any of their respective wholly owned subsidiaries by dividend or loan. None of the assets of our subsidiaries represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X.

A Guarantor of the 2027 Notes and the 2028 Notes shall be released from all of its obligations under its guarantee if (i) all of the assets of the Guarantor have been sold; (ii) all of the equity interests of the Guarantor held by Tri Pointe or a subsidiary thereof have been sold; (iii) the Guarantor merges with and into Tri Pointe or another Guarantor, with Tri Pointe or such other Guarantor surviving the merger; (iv) the Guarantor is designated “unrestricted” for covenant purposes; (v) the Guarantor ceases to guarantee any indebtedness of Tri Pointe or any other Guarantor which gave rise to such Guarantor guaranteeing the 2027 Notes or the 2028 Notes; (vi) Tri Pointe exercises its legal defeasance or covenant defeasance options; or (vii) all obligations under the applicable supplemental indenture are discharged.

2024 Notes

Tri Pointe and Tri Pointe Homes Holdings are co-issuers of the 2024 Notes. All of the Guarantors (other than Tri Pointe Homes Holdings) have entered into supplemental indentures pursuant to which they jointly and severally guarantee the obligations of Tri Pointe and Tri Pointe Homes Holdings with respect to the 2024 Notes. Each Guarantor of the 2024 Notes is 100% owned by Tri Pointe and Tri Pointe Homes Holdings, and all guarantees are full and unconditional, subject to customary exceptions pursuant to the indentures governing the 2024 Notes, as described below.

A Guarantor of the 2024 Notes shall be released from all of its obligations under its guarantee if (i) all of the assets of the Guarantor have been sold; (ii) all of the equity interests of the Guarantor held by Tri Pointe or a subsidiary thereof have been sold; (iii) the Guarantor merges with and into Tri Pointe or another Guarantor, with Tri Pointe or such other Guarantor surviving the merger; (iv) the Guarantor is ~~designated~~designated “unrestricted” for covenant purposes; (v) the Guarantor ceases to guarantee any indebtedness of Tri Pointe or any other Guarantor which gave rise to such Guarantor guaranteeing the 2024 Notes; (vi) Tri Pointe exercises its legal defeasance or covenant defeasance options; or (vii) all obligations under the applicable indenture are discharged.

Tri Pointe’s non-Guarantor subsidiaries are considered minor, as defined in Rule 3-10(h) of Regulation S-X, therefore the consolidated financial statements represent the full issuer and guarantor subsidiary results.

- 3634 -

Inflation

~~In 2021, the inflation rate~~Inflation in the ~~U.S. increased significantly, and the inflation rate~~United States remained elevated during the three months ended ~~June 30,~~March 31, 2023, despite notable improvement from the prior-year peak levels. In 2022, ~~was~~inflation materially exceeded a target range generally deemed appropriate in the ~~highest in four decades.~~United States, and despite the improvements achieved since the Federal Reserve began increasing its benchmark rate, current levels remain elevated above the acceptable target. Our operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher and more volatile mortgage rates, which can significantly affect the affordability of mortgage financing to ~~homebuyers.~~homebuyers, as well as the confidence of our consumer base. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we are often unable to offset cost increases with higher selling prices.

Seasonality

We have experienced seasonal variations in our quarterly operating results and capital requirements. We typically take orders for more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry (including developments and volatility resulting from ~~COVID-19 and~~ the war in Ukraine). In addition to the overall volume of orders and deliveries, our operating results in a given quarter are significantly affected by the number and characteristics of our active selling communities; timing of new community openings; the timing of land and lot sales; and the mix of product types, geographic locations and average ~~selling~~sales prices of the homes delivered during the quarter. Therefore, our operating results in any given quarter will fluctuate compared to prior periods based on these factors.

Critical Accounting Estimates

The preparation of our consolidated financial statements requires the use of judgment in the application of accounting policies and estimates of uncertain matters. There have been no significant changes to our critical accounting policies and estimates during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Recently Issued Accounting Standards

See Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks related to fluctuations in interest rates on our outstanding debt. We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. We did not enter into during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, and currently do not hold, derivatives for trading or speculative purposes.

Item 4. Controls and Procedures

We have established disclosure controls and procedures to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and accumulated and communicated to management, including the Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”), as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of senior management, including our Principal Executive Officer and Principal Financial Officer, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2022.~~March 31, 2023.

- 35 -

Our management, including our Principal Executive Officer and Principal Financial Officer, has evaluated our internal control over financial reporting to determine whether any change occurred during the three months ended ~~June 30, 2022~~March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the three months ended ~~June 30, 2022.~~March 31, 2023.

- 3736 -

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required with respect to this item can be found under Note 13, Commitments and Contingencies—Legal Matters, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and is incorporated by reference into this Item 1.

Item 1A. Risk Factors

There have been no material changes to the risk factors in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. If any of the risks discussed in our Annual Report on Form 10-K occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the trading price of our common stock could decline significantly and you could lose all or a part of your investment. Some statements in this Quarterly Report on Form 10-Q constitute forward-looking statements. Please refer to Part I, Item 2 of this Quarterly Report on Form 10-Q entitled “Cautionary Note Concerning Forward-Looking Statements.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On ~~November 11, 2020, we announced~~February 15, 2023, our board of directors approved the ~~approval of our new~~2023 Repurchase Program, authorizing the repurchase of shares of common stock with an aggregate value of up to $250 million ~~of common stock~~ through December 31, 2021. On July 21, 2021, our board of directors authorized the repurchase of up to an additional $250 million of common stock and extended the term of the Repurchase Program through December 31, 2022, increasing the aggregate value of shares of common stock authorized to be repurchased under the Repurchase Program from $250 million to $500 million. On February 16, 2022, our board of directors authorized the repurchase of up to an additional $250 million2023. Purchases of common stock pursuant to the Repurchase Program, increasing the aggregate value of shares of common stock authorized to be repurchased under the Repurchase Program from $500 million to $750 million. Purchases of common stock pursuant to the2023 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We are not obligated under the 2023 Repurchase Program to repurchase any specific number or amount of shares of common stock, and we may modify, suspend or discontinue the program at any time. Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions, legal requirements and ~~legal requirements.~~applicable tax effects. During the three months ended ~~June 30, 2022,~~March 31, 2023, we repurchased and retired an aggregate of ~~3,152,234~~1,574,575 shares of our common stock under the Repurchase Program for ~~$62.8 million. For the six months ended June 30, 2022, we repurchased and retired an aggregate of 8,447,470 shares of our common stock under the Repurchase Program for a total of $185.9~~$37.6 million.

During the three months ended ~~June 30, 2022,~~March 31, 2023, we repurchased and retired the following shares pursuant to our repurchase programs:

Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program
April 1, 2022 to April 30, 2022 3,152,234 $ 19.92 3,152,234 $ 239,052,207
May 1, 2022 to May 31, 2022 — $ — — $ 239,052,207
June 1, 2022 to June 30, 2022 — $ — — $ 239,052,207
Total 3,152,234 $ 19.92 3,152,234


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced program	Approximate dollar value of shares that may yet be purchased under the program
January 1, 2023 to January 31, 2023	—	$	—	—	$	250,000,000
February 1, 2023 to February 28, 2023	—	$	—	—	$	250,000,000
March 1, 2023 to March 31, 2023	1,574,575	$	23.87	1,574,575	$	212,420,984
Total	1,574,575	$	23.87	1,574,575

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Item 6. Exhibits


Exhibit Number						Exhibit Description

3.1						Amended and Restated Certificate of Incorporation of Tri Pointe Homes, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (filed July 7, 2015))

3.2						Certificate of Amendment to Amended and Restated Certificate of Incorporation of Tri Pointe Homes, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K (filed January 21, 2021))

3.3						Amended and Restated Bylaws of Tri Pointe Homes, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (filed October 27, 2016))

10.1†						Form of Performance-Based Restricted Stock Unit Award Agreement (Pre-Tax Earnings) (Executive Form)

10.2†						Form of Performance-Based Restricted Stock Unit Award Agreement (Revenue) (Executive Form)

10.3†						Form of Performance-Based Cash Award Agreement

~~10.4†~~22.1						~~Form of Performance-Based Restricted Stock Unit Award Agreement (Pre-Tax Earnings) (Company/Division President Form)~~

~~10.5†~~						~~Form of Performance-Based Restricted Stock Unit Award Agreement (Revenue) (Company/Division President Form)~~

~~10.6†~~						~~Form of Time-Vested Restricted Stock Unit Award Agreement (Executive Form)~~

~~10.7†~~						~~Form of Time-Vested Restricted Stock Unit Award Agreement~~

~~10.8†~~						~~Form of Non-Employee Director Restricted Stock Unit Award Agreement~~

~~10.9~~						~~Third Modification Agreement, dated as of June 29, 2022, among Tri Pointe Homes, Inc., U.S. Bank National Association, and the lenders party thereto~~ ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (filed~~ ~~June 30, 2022))~~

~~22.1~~						List of guarantor subsidiaries of Tri Pointe Homes, Inc. (incorporated by reference to Exhibit 22.1 to the Company’s Annual Report on Form 10-K (filed February ~~18, 2022)~~21, 2023))

31.1						Chief Executive Officer Section 302 Certification of the Sarbanes-Oxley Act of 2002

31.2						Chief Financial Officer Section 302 Certification of the Sarbanes-Oxley Act of 2002

32.1						Chief Executive Officer Section 906 Certification of the Sarbanes-Oxley Act of 2002

32.2						Chief Financial Officer Section 906 Certification of the Sarbanes-Oxley Act of 2002

101						The following materials from Tri Pointe Homes, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2022,~~March 31, 2023, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Cash Flows, and (iv) Condensed Notes to Consolidated Financial Statement.

104						Cover page from Tri Pointe Homes, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2022,~~March 31, 2023, formatted in Inline XBRL (and contained in Exhibit 101).

†						Management Contract or Compensatory Plan or Arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Tri Pointe Homes, Inc.

Date: ~~July 21, 2022~~April 27, 2023	By:	/s/ Douglas F. Bauer
		Douglas F. Bauer
		Chief Executive Officer
		(Principal Executive Officer)
Date: ~~July 21, 2022~~April 27, 2023	By:	/s/ Glenn J. Keeler
		Glenn J. Keeler
		Chief Financial Officer
		(Principal Financial Officer)

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	June 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Goodwill	$	139,304	$	—	$	139,304	$	139,304	$	—	$	139,304
Trade names	27,979		(10,680)		17,299		27,979		(10,680)		17,299
Total	$	167,283	$	(10,680)	$	156,603	$	167,283	$	(10,680)	$	156,603


		Six Months Ended June 30, 2022				Year Ended December 31, 2021
	Hierarchy	Impairment Charge		Fair Value Net of Impairment		Impairment Charge		Fair Value Net of Impairment
Real estate inventories(1)	Level 3	$	—	$	—	$	19,600	$	27,300


	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021			Percentage Change
	Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders	Average Selling Communities	Monthly Absorption Rates	Net New Home Orders		Average Selling Communities		Monthly Absorption Rates
West	2,042	68.7	5.0	2,410	70.9	5.7	(15)	%	(3)	%	(12)	%
Central	733	30.1	4.1	870	28.3	5.1	(16)	%	6	%	(20)	%
East	477	17.9	4.4	329	14.2	3.9	45	%	26	%	13	%
Total	3,252	116.7	4.6	3,609	113.4	5.3	(10)	%	3	%	(13)	%