TPH - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the TRI Pointe Group Fourth Quarter and Full Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to of conference Finance like Martin, to now President Vice and would turn over the Chris I Investor Relations. you. Thank

begin. may You

Chris Martin

at Good Relations detailing released Presentations on TRI Earlier to full under year www.tripointegroup.com. the morning the earnings XX, and web including and call. XXXX. the a December conference deck Documents fourth Pointe quarter available today, results, financial company's tab its Group's company site are ending Investor results these for the welcome slide

described begins, call, call to including everyone cause those other to and the not such the Form involve and like Before I the that on and actual factors, that forward-looking remind with Except operating made important from no in results statements made financial facts, risks are call. statements filings required Form recent materially of course Report company's that update of would to risks that in operating uncertainties. most duty made during and including undertakes course statements the historical forward-looking the differ discussion could law, are quarterly by report in its performance, statements as and future uncertainties certain this its Annual SEC, detailed which the statements concerning of are company XX-Q. forward-looking this these in are the XX-K on A

call today Mitchell, With to financial these the filings Chief accessed Executive web Doug. with measures Chief Pointe's Officer financial to accordance the the through in call Financial will the is Officer; non-GAAP over of non-GAAP President. will Bauer, Doug SEC. most Chief Additionally, measures and its TRI Grubbs, Tom Reconciliations comparable this be site the the company's I on be prepared turn and Officer; call. the company's discussed Operating can now and GAAP in that, Mike with measures conference Hosting company's the

Doug Bauer

today's insight set provide good where headed. quarter Tri call. unique us morning with business year also reviewing and our to Throughout I will where everyone full Chris, by opportunities in year, some our fourth into joining Group a and is start Pointe the and challenges. of XXXX presented and you, and it stands Thank results, XXXX

positive weather Group study improving build. in life that we included confidence the domestic affected and Texas, benefitted Pointe areas. the cost front, of which the On in related Tri material a both in and increased [ph] consumer the fundamentals scarcity California events housing labor increases from and economy, impacted strong trade and markets in deeply Challenges

year As the was XXXX, home its and Tri evidenced our and growth in arose. it included new of Group XX% order Highlights net year-over-year effective for growth XXXX by full of when home results, to revenue of Pointe able most solutions make XX%. found adversity sales opportunities to out

also reduced in basis SG&A XX as points percentage to our lowest sales a by the company's We history. expense revenue our of XX.X%, home

was a XX% we backlog end of value from the approximately which XXXX. the increase with year billion, $X of Additionally, ended of an dollar

and and that strategy. we differentiated drives by create and that Tri innovator believe Tri and an Group this is be Group design, years, these continue execute Pointe in coming on proud industry for are shareholders. successes Pointe capitalize operating to the value accomplishments fundamentals, and and we industry build of XXXX unique to different our favorable, believe can We in us customer a on mindset as our

location. in this community that average and communities has and of put order why planning experience, We wants, that each industry stage customer to to in opposite to unique experience, rates emphasis on emphasis we is many driving will and prices thoughtful also cater home home home taken our lifestyles. unique Pointe for a average. behind been sales their customers home believe approach. a has ways the is the Group the feel needs buying new Tri generate commoditize that While an are and look including for life around homes and factor, buying That that excess buyers peer understand, buying, for their ability Pointe Group center the publicly We our that homebuilder Tri group traded unique. looking

millennial baby that and New home distinctly boomers. community nest or to features than different often amenities empty to appeal young appeal [indiscernible] family,

different that distinct the are communities buying each and our We preferences the constantly so trends. of consumer reflect studying patterns homebuyer these of segment,

next attainable, feature in and in has the the markets. smart quo spend for oriented in our new their a our suites our resulted research technology, which which We innovative, from of connected responsive where baby of concepts be cutting challenge continue our millennial performance number homes, oriented Concept, in value how of in status lives. of of markets our home to and Evidence the will Life consumer fourth believe homebuilding, a lock-off Our each driver seen truly creation could redefines to boomers chapter be our innovative these that XXX home quarter. concepts, success big our edge

in XX% year-over-year. new produced orders operations home California, once up Our again great with results,

particularly in We in product and profit limits. rates Area. and buyers more company strong in strong, Absorption of Empire, portfolio also and oriented core also were best homes affordable our be California offerings, Bay San broadened value to margins the response FHA loan have been Inland for our Diego more has have tremendous, advantage margin. absorption in Northern include Demand to the taken home continue where the profit resulting rates in

Sacramento with to repositioning to quarter XXX% bottom startup market example grew growth. were California and coupled Seattle brand market improvements is is of Quadrant Homes poised design, healthy line. in deliveries, continue planning we market profit fundamentals, pre-tax markets, for can and will the excess and of the strong thoughtful and has margins believe innovative fourth local lead benefitted from land We of the years Quadrant up Homes few for a to invest we all the back, constrained our Division, which the income in in embarked in year-over-year. orders fundamentals, the perfect how significant including

Austin, margin to order are in and optimistic this Southwest quarter. perform strong points. communities and points very basis establishing the our has strengthening it also XXXX, as well new Thanks especially prospect quarter. In compared head The over the of to economy. vibrant entry to activity detail all phase continue the new as deliveries product devastation for our resilience, and Vegas, share shown XXXX. is operations Our both Trendmaker With has performance affordable to introduce to increase Colorado better excess Vegas of our more following to demand Fourth market acquisitions, this and more last market, Las Homes orders Winchester Homes. margins seeing In in new this made the the market quarter gross opportunity Las our we market are we to and the located, improving difficult with we Mid-Atlantic, Arizona of Mike, see up spring. solid and new the optimistic margins homebuilding expanded behind at produce Arizona real the the level. XXX our In great XX% year-over-year, we new on of continued at in during of quarter. improved price adjustments XX% presence us, improvement, were fourth and improve, the conditions. in Colorado Texas. fourth in year's quarter about that, in city, quality Fourth gross Houston and and I'd in turn a were experience to we should growth we we continue and we were to land Hurricane like the about Harvey, leadership year-over-year for up see into in our place of home this as a growing

Mike Grubbs

first conclusion slide earlier. and results fourth California to financial a Good term our Doug. call. year Slide significant site on of and XXXX, progress XXXX. fourth on of referring and will our Overall that long and strong meaningful to full assets. with from then XXXX, some December X including finish Chris mentioned am results, outlook web going the to operating marked times, provides quarter remarks was information the full our revenue for some the sales with call I of billion slide of Thanks key and X,XXX At our and quarter quarter my everyone and Home $XXX,XXX. year posted $X.X and metrics quarter. I today's deck, fourth earnings our morning, the highlight delivered, XX, for the deck from certain to at financial homes ending financial our welcome operating sales on price be highlights expectations average an

$X.XX or was and diluted homebuilding $XX of gross our the income home came at million in margin expense, was quarter percentage SG&A percentage share. a as revenue, XX.X%, Our Net X.X%. sales for per

of related of net deferred assets, $XX which into Job Tax Our million law company's the was a a quarter. Act fourth tax remeasurement quarter fourth income charge, result Cut signed the the net and the included during tax to as

charge we recorded the pre-tax investment addition, a of of unconsolidated an $XX.X entity. to and impairment million, In an related

our revenue adjusted share. delivered, highlights call full financial sales Slide sales the operating at Home was income or diluted Excluding earnings X from and homes of year. average price these net per the charges, $XXX,XXX. X,XXX billion million $XXX.X was on $X.X of slide $X.XX provides an deck

$XXX.X was a margin XX.X%. $X.XX or million and year sales was per income share. home as at gross expense, percentage homebuilding for percentage XX.X%, Our SG&A in the revenue came Net diluted our of

$XXX.X quarter, or charge home average Excluding quarter per net increase $X.XX a diluted and fourth same XXXX. the share. the net a on in compared of impairment XXXX X% I to XX% We our mentioned, adjusted for increase communities income the new in million tax orders selling posting previously was ended

increase full new on year, XXXX. communities home the increase XX% selling in orders net we average a an posted to in compared X% For

year, term a percentage which moving become of of to deliveries continued and forward. development orders larger our we the the we long the California and buildout expect our During assets,

our term California long full for new quarter, up term in from XX% were fourth net in home orders the of During And long California year. last XX% from net these quarter of new up the assets, were assets, XX% orders same our XXXX. the year, from home from XX% these

which As four California quarter, active our of count in the quarter, orders. We new Washington. Arizona, ending active opened each Of for opened resulting with XX XX which the and California, assets Maryland, selling closed we Texas of long December nine our communities during term nine and XX XX fourth one from long California in during great to Nevada, in our in the communities, out in XXX, assets. selling Diego, Community term San from success were Western at communities an communities, in community California the new are

on the at of is by active shown end year Our communities the selling X. state slide

home orders, up new fourth community year As mentioned, the the prior period. quarter, XX% count than a previously was increase average net for reported I we in X%

overall period. the per X.X fourth quarter, rate X.X compared increased for previous the to month absorption year Our XX% homes community in per to

For full orders company-wide rate three was community X.X per the per year, month, XXXX. absorption up in the from

the You monthly slide historical XX. see of can orders cadence on

in a backlog $X we the same in compared of Through to fourth increased XX% we dollar was the demand. last quarter up strong $XXX,XXX over and orders our increased this quarter XX% backlog with which and XXXX, The new We backlog, build year. year-over-year weeks six the the year-over-year. As our average continue roll to to total home homes ended net to see XX% price billion. forward increase were of year, XX% first X,XXX value

up backlog, of the up quarter XX% compared for delivering and home of XX% average completed year, year. XX% we the third quarter from same year. $X.X our same with quarter, in XX% ending quarter X,XXX sales The fourth homes, X% last quarter. billion, the in last the fourth a increase homes same resulted up which revenue This quarter last from price of quarter last sales $XXX,XXX, delivered the to was During

year. to Our homebuilding was quarter same guidance basis and the last was an for percentage points our XX.X%, end fourth on quarter margin the increase which compared range higher of XXX the gross of

SG&A compared a in XXX from For expense, of as largely SG&A revenue XXXX, percent X.X%. XX% XXX point sales improvement to was This the was point our to period and of same basis in fourth as third X.X% home due result was percentage increase sales revenue. a Year-over-year improvement increased for the quarter. the basis a home leverage, a quarter, in improvement

$XXX in During and million development. the invested million quarter, $XXX we land land fourth in acquisition

we state currently $XXX own deck. is filed XXXX For page primarily slide million years markets. of invested approximately the all are XXXX on s turning by or and breakdown deliveries, our will planned full XX% goal which XX-K we deliver in over lots on to as we on of Form our our XXXX of year, XX% in summary focus is or XXXX. land The owned in lots, assets, California total deliveries term quarter homes end, our controlled the lots duration land needed acquisition lots XXXX. California. be investing plan of our and aggregate of or deliveries in by for in in and in At beyond, our on of an long X.X. land to detailed XX,XXX there located the a planned today, in focus to our of years, our strategy land our in communities acquisition in number land or of controlled XX% meet of addition, continued our all the control Annual the accelerating deliveries five continuing to in shorten target of A pipeline It over to will of which the of which XX Based land we development. of faster XXXX reflected controlled Report owned communities in owned and later and owned

balance $X.X approximately end, Turning of real billion had at we sheet, estate inventory. to the year

resulting during that not We to of with consisting on debt net repurchase of in fourth of of and any Our under net did quarter. XX.X%. shares of $XXX million ended $XXX quarter revolving total to stock outstanding $XXX available the With facility. credit our million billion, capital million debt unsecured was the of $X.X ratio liquidity, of purchase debt-to-capital ratio we cash and hand program, respect our XX.X%,

total of approximately $XXX dollar average year, For repurchased company a the aggregate a price the million. at shares, full X million $XX.XX, amount weighted of for

the have now, and stock And $XXX authorization will a year XXXX. recently XXXX. We expire summarize our quarter to replaced for and repurchase like our in previous first full March million program, I'd with outlook

sales the of a approximately be the selling be by to The of XXXX, communities and X.X% expense average year XX%. to of SG&A price gross year and For at company be XX.X% XX.X% effective in The percentage revenue. to anticipates on homebuilding XX.X% average full grow X,XXX between the of in range to tax XXXX, it's an deliver range and to from we home basis margin X% XX% anticipates in rate to homes, expect X,XXX sales $XXX,XXX. full year-over-year will of range it's company the

as company to expects and eight out For March close in communities XX, open XXX the the first resulting quarter, new XX, of active selling XXXX. communities

approximately for in to percentage revenue. the anticipates of XX.X% the XXX. XX% in just XX.X% we to quarter, average home an a wanted XXXX, make price sales SG&A the before expense adoption margin delivering addition, at sales SG&A accounting I $XXX,XXX standard range end back in homebuilding to range units new The In of of over But of it's about our the of increasing through gross and the to to at our backlog the company $XXX,XXX. to the guidance. to range in year, turn first anticipate be primarily X,XXX in be XX.X% of I revenue It's ASC the call XX% Doug, the of comment

will a rent forward on that XXXX, which at but our into just now to be on the used differences, of statement, selling when other marketing and to it's geography although look running the the office timing the Moving upgrades the be the mainly these through income life sales life some And costs certain the model to the of of used cost of, will be you a and because impact of over income amortized opening the capitalized at through projects expensed the net costs, project. it's of net of project really be to margins, statement, change project, geography the expense.

So Doug back percentage over the it's With XX call I'd points SG&A turn moving to closing our by XX basis impacting like remarks. now to some forward. to that, for about

Doug Bauer

Real in we the through At removed were Mar, XXXX. which established Day Mike. X,XXX delivering a future, a Well, an of the approach each thanks we and to our in of a the continue eye the this in XXX homes. potential markets, we communities with grow in time, to of our with backlog hosted the it. in forward. business from start homebuilding bottom X,XXX and in in is view little we Del that on respective we over transformative we Weyerhaeuser favorable evolving which closing homebuilding goal growth Each inherent the the Investor brands and forward our a towards incremental brands of mindset, selling and XXXX, a potential. objective. industry, over homes forward the transaction, that their California, Consistent contributions and to year year homes a to Back understanding Estate great Fast industry, to actively to are and make constantly and to with With an of sell going we with must our in today, room to We achieve knew believe has homebuilding X,XXX evolve position deliver top line thinking to Company. this deliver

was level, Our to XXXX results that in this a trend high and continue I confident we XXXX. in at we continue will execute am evidence,

balance Beyond sheet to acquisition XXXX, expect and expand activity. management, while operations our continue to measured through and we cash our growth, responsible disciplined continuing flow

there. where We and want get want have we a how to of vision clear be, we to

to up it's that vision. to Now execute us, on

the success. all who Pointe Tri team Group members, a thank such to year want I Finally, made this

we will your you. vision Thank the prepared reality, our I all be concludes work. of hard happy appreciative company's and turn who your ones questions. take and You to am are remarks, into our That

Operator

[Operator Instructions].

your and proceed from Alan is Zelman with with Associates. Please question. question first Our Ratner

Alan Ratner

a and year. great good and guy, congrats Hey on quarter, good morning

Doug Bauer

Thanks Alan.

Alan Ratner

a it there and XXXX, the as of that, you you into goes half deceleration on at strong obviously I open to now There XXXX guidance growth back for out you had is multiyear of there sitting year, strengthened, are position. a some So you is market in looked in that skepticism But especially, guys the communities have a backlog today lot your certainly seems expecting rates skittishness that XXXX, obviously obviously and some at ability I in and time, your at where guidance here several cost I'd some is are volume goes years, know your that the and into you the kind imply has for it there. know, same If a rising and on out thinking the kind very obviously, especially hit markets. a about that there say, of time, back there or the maybe plan from saw and the communities. to of side, was right are that that we regarding the guys now unchanged which of I to great impact in closing the the is demand, is higher might remained

give So just little more could deceleration. are that, orders more up implies January a very bit was I it than your color, a solid, you up bit so was hoping some but year-to-date, XX%

in view around more demand demand? Thank general, where are regarding are right through homebuyer plan just is, now, of what moving more the get you on business you. they us, give a the deceleration rates, context your any of So how And seeing to affordability some can you much expecting can a about are that color a saying walk patterns, just that? the to you kind versus just here bit you is function of us outlook, what little that

Doug Bauer

about Well XX That's XX this or Doug. is questions. think Alan, I

growth pleased go. of as -- don't it there people XX%. community to am is see sales decelerating, compared to obviously very the actually quite in from XXXX about closings, So are actually earnings overall, We ready XXXX those listen, look are lot regarding at unit the very all revenue delivery, backlog, timing going our and and differences into have those excited backlogs, in I with I a set, growth Obviously, pleased XXXX. to and XXXX, you between but double when fashion, digit we openings and

because as As demand, the far increase. into off the to as couch the strong first our we we rates teams, going to the Anecdotally, are sales will out, the to of talk to perception see and we pointed hop get some as people that definitely continue sales demand. weeks continue office,

entry move to buyer between interest balance of profile changes entry about level, the buyer. Our is less XX% immune compared the level rate is in XX% luxury. to our balance the up, and activity is

a So really and of cycles of little in bit some decline, and now, supply you right look rate you surge, now, XXXX have are feel see that historically, XXXX, pinch see we the a year nice we go you the demand growth then in previous tend little I see potential. interest back very this increase and seen, into an housing a but to and characteristics the with don't as that the about volume, right you then back and to industry and I excited

We got new Tom, to the of lot on that? communities coming of a half second questions you year. add lot to from in a do It's of Alan. anything the want have

Tom Mitchell

the strong to all that price and side. continue I in season. on are seeing and demand spring really what selling through we all going board, has are Alan, echo demand markets reiterated segments, the Doug it's the Really, consumer would the across optimistic from

Alan Ratner

Thanks it. guys. lot. for right All questions. Great. Thanks Appreciate those a answering all

Doug Bauer

Thanks.

Operator

Evercore Our is proceed Please ISI. with question. from question with Kim your Stephen next

Christopher Shook

it? faster good is This at and Hi, accelerate actually you any Obviously, is than plans much initially your are Investor that count anticipated guidance. anticipated is other My it's just growth to are responsible this, for closings, there first for Day, community than Chris XXXX question and than there Steve. what materializing anything your morning. lower on about

Mike Grubbs

pace that Mike. driven is count beyond we back achieved been be year, XXXX our which Investor Yeah, that and not last from have our think is going second close-outs. increased absorption by started directly Day, all mean, to I quarter planning, the we faster daylighting the this it's what is I when had we community after the saw

are we large that over year to amount saw year, communities we XX as have that are in because of as pace seen. XXXX, and to -- fairly see year, we we but We still this going the this that XXXX going So year in well, well this closing open accelerated see are that or last well. a we

Christopher Shook

those Okay. And then seeing sort what with impact the Are your so margins ASP Inland producing activity in of products. and is Inland communities? and those the of [indiscernible] in entry -- similar sort communities, to are opening in heighted you in obviously assuming from coastal are you full guidance moving more higher have California margin there Empire on Sacramento, obviously up or growth any those level affordability year

Mike Grubbs

I long Inland Empire, Inland California not to Empire our average, same in as California end just because your our But in those our margins Weyerhaeuser. from margins term think. question, of have that. in the deliver I with excess continued do mentioned of they from Well land so there of excess the basis you company has margins high that deliver assets, the understand out we products, the transaction generate will

Christopher Shook

thank much. All very right. Well you

Operator

Dahl question. your Our is next with proceed Barclays. Please from with question Mike

Mike Dahl

for taking questions. Thanks Hi. my

XXXX have on the year by we providing the follow-up Thanks a communities. about a out think in long through currently remarks should details represents; some communities the Just end, how California opening it, term there it be we as we on openings long for comment term get to what about of but should assets. we on I expect should end nice the of point some at where long represent? the your got What year you at assets term the think mix

Mike Grubbs

Mike. Hey Mike, it's

term about are year, the long I assets. units think roughly we this X,XXX delivering from California

the number percentage you as count, but -- number, that community the with of some well the probably the I be year will long based was look slightly of assets, basis. term on -- it end the end community XXX as of a mentioned roughly when California up midpoint at it's was XXXX And guidance, XX%. So at and

Mike Dahl

Got it.

Okay. recognition about then, SG&A, should that far going change as SG&A what life, you in now goes, stepped how the those like beyond of And to this expenses year on first means have sounds thinking a back so steadier just that apply be community as up accounting it the state you some we changes? for kind early

Mike Grubbs

I here we think had pretty But XX XX originally be determined points think about soon. that to will anticipated. over what basis roughly I that

the into that going range XX.X. be seeing are in X.X is and call to midpoint X.X, this let's we midpoint, year, So to roughly anticipated the the we so X.X, now

you'd about think I a moving forward. difference point is XX what see

effectively, communities, we right, up in down get we that going impact the to of Now just open we margin to as are SG&A. because our costs are moving from margin

offset get not one, in year in bump in should but year maybe So to two, corresponding margin you gross that. the

Mike Dahl

margin as standpoint, be should than as I if what get margin is thought? So from better the what I previously this actually operating life there margins, shouldn't at the life end have community we and even are but of so of of you of front result having the the you end in affected, step -- community looking communities, guess, would am getting an kind a we the is, later as loaded profile change, up think it of kind sounds margins, as of -- towards like

Mike Grubbs

That's correct.

Mike Dahl

Got it. Thanks guys.

Operator

Our next Fargo. question with is Please Stephen your question. from East with proceed Wells

Stephen East

you with remarks. on said, will a Doug, there. congratulations what start quarter your Guys, closing with maybe nice I

XXXX XXXX as toward like maybe that all beyond different about XXXX, we what You bit what's that in have what's today? vision driving your a move vision -- into than a are you and you and little maybe looks talk could on vision going

Doug Bauer

good Yeah, question. that's a

and years, next southeast, northwest decade, inquisitive, the in at this next very like primarily Dallas. our to five But this top business maintain ambitious it the over goals, We sheet, the balance and to actually inside frankly, we see going we are and call bottom continue some We and be growth. line but to vision our those over are to we'd look measured double. XX our

proud when it to digit for can that, of going doing am earnings hit over I also balance well are mentioned a you take to mindset been you we see having a double sheet of have to to revenue sure very a advantage you are road, to XXXX, and you in look growth, bump business, you in to maintain the this a But for years that. make have going at As to that, so XXXX continue XX hopefully deliveries, strong earlier, and I liquidity you hit opportunity. always want hiccup,

to So to over as disciplined five vision we continue will that at we XX next very the be years. look

Stephen East

your All some then, a how much I assume or one, of right, product great. talk couple could significant here, geography? orders, is you guess, saw Thank you all you. of that I different I about is price appreciate of geography lot either on running real you that. And increases. mix, hard? of hard, just those And a is actually what on up versus Pointe, running appreciation? what's it then and maybe seeing XX%, price Tri the that how and process, orders thought that community HPA much are if versus in it growth was questions those

Doug Bauer

Stephen? revenue are absolute dollars, in growth, talking far As growth, as you pricing

Stephen East

the the significantly. orders. you sorry, ASP, I pretty Yeah, order am up jumped

And you wanting orders, Pointe either know, just versus your Just then of price geographic were product that? understand and XX%, real that seeing what Tri up or much appreciation so understand are about you how out units trying there? to is mix, to on

Doug Bauer

Got you.

Mike Grubbs

even up all more absorption Tri We really board even Pointe Stephen, Colorado, it's quarter. good about our saw Pointe. across in in in fourth the Tri increased in was of specifically, the we brands, absorptions Community saw count Mike. XX%

communities average XX% XX -- were absorptions on So up an and

Stephen East

it. Got

Tom Mitchell

And Stephen, this is Tom.

that us opened entry expected we shifting to affordable price lot new much we of we We level absorption. at several growth, as point, more As that to, guided our outsized communities into were have that enabled mix more order a product.

Stephen East

you. Got

Okay.

trying though, geographically a two year-over-year ASP orders, the processes? So to in just up your so those lot went thought reconcile

Mike Grubbs

It's look in markets, mean, it's see when primarily lot ASPs. appreciation mix, you I at by driven but primarily we price do of mix. a our

Stephen East

a Thanks Okay. lot.

Operator

with is question your proceed next question. Please from Micenko Our SIG. Jack with

Soham Bhonsle

for question Soham guys, gross on Hey this on good first this Jack morning was is margin. My morning.

but assets, not think really entirely end; be long push the margin what your the quarter for California? outlook drives us margin you there those may year, the deliveries with So seems as with backlog deliveries for about we to has like the conversion. gross that high in been mix give and the That's first guidance, quarter could XX% California of dated just because the first or out it some low the

a get look what to this sense trying of year? could like California just So

Mike Grubbs

Typically, longer dated look California, the converting the ASPs, California, and that XX% some is sitting number overall and let me around more produce and some is XX%. high precise Typically of give backlog once and A quickly I not homes, have a longer I California of as math. it's assets at why maybe do call, that. the lot our Yeah the maybe there will that those is year. are follow-up larger you backlog, around last we of of just so ASP as the they did that's so to and taking product it's deliveries,

Soham Bhonsle

land any is guess, development last about target I ROE you capital becoming is quarter then formal guys this looking you there balance off and for update the And going and talked on forward, Okay. year? there that are any Doug, so sheet, more efficient

Doug Bauer

mid-teens, a number continue opportunity our the land delivering improving into will we that ROE and of to an to interact with bankers, term as objective. long We and look on to as focus our continue at

those term go look pursue continue we to to at So a will activities, continue But mitigating doing land to flow we be efforts of grow, want acquisition look that management, that, our at we to and will forward. cash as has mindful we risk to as so continue long effect. we

Mike Grubbs

the And about back you of of if this about range. the the Soham, count It's -- midpoint XX% to are year, California it's XX% overall Mike. deliveries

Soham Bhonsle

the then could some Is nature the just quarter? ongoing? in onetime that And charge in or color on we Okay. get

Mike Grubbs

onetime unconsolidated, of which term term a impact that's joint [indiscernible] has is charge plan, it entitlement. [indiscernible] California long our just on really doesn't long the that's impact our since a No, at it and venture Doesn't been XXXX, assets all. any books

Soham Bhonsle

Thank great. Okay, you.

Operator

Sood Bank. Our your question. Deutsche next proceed question is with from Please with Nishu

Nishu Sood

you. Thank

order as problem the well about done percentage conversion. closings, think good I past, which so as the in out to you a obviously rate discussion take six Mike, job longer on. quarters, backlog that of have the had resulting five deliver of on higher that, good up of surge from pretty you laying a have California the or that following Just

version terms through look assets? are given you been conversion, with your at -- has you have these of XXXX. we backlog but is kind quarters the backlog kind find of if that the we the have doing slowdown term longer of slowing gone -- kind portfolio, you At So it that stage what been, of do has here, backdrop normal in worsening, of a of for given the us as along what rate

Mike Grubbs

backlog rate, mean, [ph] I and our speck backlogs our why seen starts Well I'd that's versus -- success absorption more starts. up production think say I are have the of you is dirt

little a the our speck of starts markets. from in away bit moved have We some of

just are taking a And those, on those naturally with sale. going higher longer absorption to were. to say aren't higher rates little at as it's the bit out XXXX we get probably available cadence what to by our XXXX, probably maybe produce because we I'd rate, our So deliveries, back the then level

Nishu Sood

some imply to don't but backlog everyone that models does numbers, back? ratio that folks compute I bounce kind So your you And conversion run way. know, obviously it of

So imply stabilize that does of in kind bounce back of a somewhat XXXX? or that we

Mike Grubbs

more a No it's I of stabilization. think

Nishu Sood

wanted as absorption your also And have where and stayed state most, course anti-housing to -- reform, seem about it. local of obviously in would overall terrific, ask Got -- environment have the they demand reform and the it. growth, but one Tax we the to numbers. impact add to have tax Got would folks is about to seen been that of tax property reform California. is the concerned seem

early way longer what it's too effects the say term even will to Now be.

influence terms doing what or work ready what to thoughts might of might putting your kind understand, wanted that other have in of So have, that folks buyer what might been effect any if of have at you pool, what looking of how bring, are anything? there, for being on out sort it you you product sort

Mike Grubbs

buyer Act more I has larger you as luxury, a discretionary Obviously, range, you down Reform luxury up the the actually, down person if $X actually California, it should payment. Tax puts income, in at look are Well say helps in homebuyers. million and -- many meets frankly that move plus you our of

office purchase up. their -- are it, a level actually based decisions property based rest and this for are mix on family the look and healthy -- the we research continue into a of life to portfolio, on So a for at good of done have tax, we the changing sales sales move entry or coming event. But

up is XX% in XX%. level up mix low entry Our move is range, the going

along So parts level we that. up is to Price entry which in move that dominate, program our state, are really we the means then obviously, you amount our look a of will that continue with at more going Empire, the in is of and there [indiscernible] point on coastal $XXX,XXX Empire the build Inland average Group. now California, Inland to market loan

we by So act. income reform actually more disposable really are a are this deduction. not affected having Frankly people higher those tax with standard

we So year. into get good activity, part we as the pretty see order continue of to the first

Tom Mitchell

area I'd add excited Tom. One we to offerings. product more are age really that, getting about adult one our thing of Nishu, is into year, active this targeted is this that

as are to our that additive really forward see and we to looking mix being that. So

talking it's buyers. with far, all about something so -- we have the team our sales And

too line, it We positive tell. have But and we it's than so will not as impact seen tax business the But you act to think negative. usual. reform far, as from any bottom early negative more be said, maybe

Nishu Sood

for your Thanks thoughts. Okay.

Doug Bauer

Nishu. Thanks

Operator

with Our proceed WedBush next question. with Securities. Please McCanless is question from your Jay

Jay McCanless

morning Good guys.

question So price about and talk on has rising what a kind you your have can communities some you been guys follow-up two part that I the I to of it, of and the raised everyone percentage costs through question discussing? this prices of got to have, one, first a pricing. input Number is then quarter, ability

Doug Bauer

six all first cost we them, cases battling of our X% Generally gradually and increasing we markets a we are and labor years, communities Jay, increase offsetting weeks of increases throughout pricing kind are speaking, and most year. in are. in The the in and our we around pricing are material forecasting this

year, X%, net the But you market. costs, which are on look generally when they a was from about X%, X% X.X%. X%, X% high to you of in last low range a average So as is if to pack, of at material labor stronger

offsetting you So battling price constantly between those increases the with cost increases. are

Jay McCanless

then a some also is that's of to planning made of of in to or Tri the my you acquisition are That's make one assets. different Okay. some markets? Inland of Pointe What phase, What builder outlook? then close good your competitor's the hear. to [indiscernible] the follow-up acquisition, your And to acquisition there, your or expand question, an and help seeing the acquisition backyard your potentially could out move or in Texas is next Empire what's

Doug Bauer

little ambitious we mentioned the ago, I five Group, and as of bit next goal next Pointe mean, look Well at Stephen Jay; income. years, we the to revenues a an our to I Tri decade, in doubling have as got XX --

be market come are we that that through of the as, very brands, with But and we in. the going areas well as we in areas are in, the have, growth will disciplined. be organic we not are some inquisitive measured So growth market going some of six we about our that's to many of to

the in seen that at activity when of Sometimes look place, have maybe there. acquisition it's you out second better to some be you

WRECO very blessed have strong a We Inland the to presence very land are Empire transaction. the in through

much have So that dominate advantage cost we and market a bases. huge our land pretty on

Jay McCanless

Okay.

Thank great. Sounds you.

Operator

Our Research. Mark from Buckingham question with proceed is with next question. Weintraub your Please

Mark Weintraub

you. Thank

I basis margin? on so, XX if and it clarifying, capitalized I being was would correctly, there that's -- that I the basis if then year And you well, seeing what's showing understood correctly run as just year. saying understood reductions type lag, the the so understand the in previously, start on? that this way points, the to in to XX expensed next now First are increase then XX XX Is being right offsetting are the increase are we not in through would SG&A, the up that that so is gross one to where, but a understand gross we but effectively going points the seeing year, that margin, SG&A,

Mike Grubbs

is there But a stage, an upgraded project, we when dollars, no to model the the at are of project, individual spending net when change fairly Yeah up life early at model. you the look you have Mark, opening typically margin. complex, and

are to the seeing of two three that moving going year in of SG&A corresponding year get forward. are but margin you then that You the hit impact benefit one, in and

the day, end there impacts, at in so new some XXXX, that net, XX corresponding and that so the But to upfront it's to move year, are marketing, the no and sales well. are of down there the taking going as effect. we the XXXX. do line, associated adjustment those costs immediate there be deliveries as over with are this below communities well having we is to is an costs So no will hit opening as we

Mark Weintraub

change. capture guidance just So margin accounting effectively, and SG&A XX -- by since up you went with what your XX this effectively, gross constant, had it been, to

So really a ASPs impact are you fundamental from than higher had for only the what looking that, previously, been was you standpoint.

higher a to expecting costs, back that to are of is so actually in I just been mix touch just And -- is few months what come shift had the that? expecting to you And/or from wanted a because you it ago?

Mike Grubbs

We range again, the range is of Mike. a tight SG&A, a our revenue that -- very tight percentage this very home XXXX. on there we as had out end a had we put sales mean, I of Yeah. at

of point range had tight X.X, a a very margin. range on a X.X margins, was range our broad XXX we that in our So to but basis

is on still whatever range saying that get had that, in so margin, within going -- we point XXX year, we from in what SG&A our are to XXXX. XX it's we we that margin. is not expect there did to think basis impact XX our And a basis point our this we might within benefit But be

didn't margin change why our So we that's range.

Mark Weintraub

have, significantly you any, update, sales? on if I land scaling get believe And just just sales quickly, to you this really the year, land program back Okay. then, what an expectations wanted

Mike Grubbs

anticipate over asked glad sales you California of next assets. question. that in We do moving forward am significant I years not any our the land any few

Mark Weintraub

you. Thank Okay.

Operator

with Randow Our Citigroup. question. with is Will your from question Please proceed next

Will Randow

Hey good morning congratulations the guys progress. on and

Doug Bauer

Will. Thanks

Will Randow

just on guess, follow-up inflation. I cost to

was about you matches can fourth on hit to, ways, assumed, have relative but there call inflation power that or have in it? you increases? exceeds know And this pricing matches incremental then historically, few you You XXXX, different spread? the in quarter, real it, for what assuming talk price cost you are it, a as margin Meaning, you experienced

Doug Bauer

Will, is Doug. this

For you the on get to year, and will back actual quarter. the to have I

X.X% Our revenue increases; labor all about company, the generally X%, and markets. material cost offset average by were across and increases, almost in our

market tough same to teams experience, continuing lots that. with very operating strong are do roughly there, very into going out XXXX. We the need It's forecast of it's and we to that a something have you have to those

Will Randow

conversion, to cash there obviously a Got you perspective? step or next locked given then, up could that cash conversion land flow through through the three free modeling you that continue have of and years, kind your XXXX, over is on flow development expecting from to you Are it. And talk free your of us most up grading ratio related costs.

Doug Bauer

Well, flow cash this positive we million $XXX about were year.

have been daylighting that -- We

Mike Grubbs

year. Last

Doug Bauer

moving we Last than from been and thought, year we the asset money head, our land year We term say last for flow forward since and land year that we be time, flow, long development able was ought anticipated. those long cash in and would had less XXXX positive forward. expectations. that moving cash year to we I the still last to have a sorry. generate in $XXX did my positive it This million talking have XXXX, of we about is spend acquisition,

million Our and we $XXX for spent million $XXX about $X.X below original just range the year. was to billion,

is that into cash to positive But maintain XXXX. flow to going to expectation development roll is some of forward. try land So just our moving

Will Randow

Thanks again. guys congrats and

Operator

[Operator Instructions].

is question Center. with Barron Alex proceed question. next from your Housing Please Research with Our

Alex Barron

Houston is is there job performance the division, you you the Austin, you ask Thank guys. difference and of so versus your how in far? any kind help Austin on could division of comment can I understand to us if or guys doing wanted great -- significant Texas

Doug Bauer

generous for been definitely, you mean, your I about execution business and years. a won't your as costs entry your in do as be what, when XX, Yeah. startup, operation XX has

that of are and we us, So advantage community. that's market and that behind to take poised

on focused has Austin continue years. in in increase will bit to would market year, you than team did Austin last But definitely margin startup lags couple will the it over and -- more year. see last the little will lags the Our Houston. entry this in Austin and a But definitely just focus a capacity, expect I of Houston enjoy Houston,

Alex Barron

terms in -- there and quarters, versus Usually, what pretty than wanted [indiscernible] on the in two any lower to drove noticeable questions; orders also increase fact, quarter? the difference rest a coastal given, but was, weeks I performance been California. is it had And quarter this well the of sneak the you it. Southern Colorado, in one California? strong rate few Colorado Has the in Got fourth of ask, last

Tom Mitchell

products really and quarter is able the Alex, were On comparatively the to what XXXX. mentioned, get absorption, some of as marketplace finally to this affordable Hey of more led Tom. we fourth performing Colorado, I in to the outsized fourth those the in quarter, that's

traffic change forward, are side, the couple that. going the last weeks, a in we about of demand feel We really have much over California absorption. we level seen not absorption mix excited to dramatic And and of we quite any levels, better So on really drive as have and consistent well. higher a

Alex Barron

so much. you Thank Okay.

Operator

Bauer the to question-and-answer closing back reached call and of turn our Doug for over have remarks. we would gentlemen, the I Ladies end to like session.

Doug Bauer

chatting with Well day. look much. call. very quarter you you all have thank Thank of us hope a you We to you forward everyone and joining great today's next for to

Operator

today's This Thank conference. concludes you.

disconnect thank participation. for lines may your you at your and You this time

Tri Pointe Homes (TPH) 20 Feb 182017 Q4 Earnings call transcript