TPH - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to the TRI Pointe Group Third Quarter 2018 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. It is now my pleasure to introduce your host, Chris Martin, Vice President of Investor Relations. you. Thank

begin. may You

Chris Martin

including welcome Relations the Pointe results Company of on these third and Presentations under call. are site tab, for earnings at Earlier quarter available results, detailing Documents today, released Company’s XXXX. slide to morning, deck Group’s the Investor TRI the conference the a Web Good its financial www.tripointegroup.com.

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

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

Doug Bauer

generated income of third today's us and $XXX net Wholesale $XX million, Pointe increased expanded in share. XX.X%. to delivered again $X.XX per community gross good We was delivered with to in paces experienced quarter Thanks, was in sales order results below the in and we joining which Chris everyone we third exceptionally But or to pace the 'XX. points quarter, strong margins call. on diluted strong of and of basis on TRI homes XXXX healthy par revenue morning a year-over-year posting once Group the XX% million per the XXX X.X quarter, XXXX. activity the order

demand. the is XXXX has consumer industry in As demand the into our we of years. look for borrowing to at of the this believe in we normal this the all a up consumer offerings dynamic product on household overall a fundamentals costs been to we has should market growing to our of as October, do adults, with continue process industry, last and economy, strong the to to in growth pent softening trends motivation and consumer, order Even a response be us, job we respect along consistent ahead for or demand are years to a and and a and third has demand long believe confidence, continue significant thanks altered to higher our the for behalf young which buyer from clear, see quarter tremendous run. housing that the markets that our sharpen are Company healthy home opportunity feel though to ensure seeing appreciation our our experienced focus To over sales that profile. outlook we With come. of industry few We we are market, formations on reaction we the strong the slowed and with price monitoring not our lead closely point

homes existing build and new level, of number constraint. locations remains the which finished market core availability on front, remains the in at and we in low the supply slots the On

suggest that this continue industry TRI market for adult lifestyle brand unique design be us these home experiencing and to segments premium factors move-up, all luxury and temporary. in All of lifestyle the meets entry has level, innovation from grow our the is needs of will offering new backdrop, that would our will the to our focus Pointe and segments. current buyer consumer. the differentiates Against competition steady We grown to continued on believe and today's slowdown the the active and product approach product expansion,

acquisition locations. our land We continue buyers, to focus market develop affordable solutions maintaining core all while for our on home new

Angeles, solid Our markets operations the housing for in need again to quarter its San and market. Empire the as Southern homes in Diego affordable in making Inland the which particular lots own This state the be homes critical bodes to continues future. Los the California, California, in for and as our new once of segment third us well XX,XXX undersupplied country, Company most over to target product posted in we results affordable allows the for one

to the to to TRI and and such Southeast like Pointe adjustments, operations existing to for we’re our North Series leader market Texas. for be teams desirable of focusing Diego. make often for planning under we Skyline prove California great have Carolina Clarita future advantage our and very grow our the Island's Raleigh and in Belmont. are into announce best the in in Santa in by experiencing on is smart on openings building class proven with both activity, strategies to a excited adult and capitalized led diversity time M&A This made XX a in in the home TRI will and industry disciplined And the progress a significant to our expansion build TRI assets what master our the and Greenfield Pacific is the time as Gray community plant in proven end, Outside capital maximize strong of of companies Homes of term seeds companies California, allows efficient We of office through grand It Shell, To growth. San are our management Pointe long moves Branch team the ours a markets take opportunities will Charlotte years that plan that grow that of expansion Company new development village share. the to in entry market excited over manner. to of new and implement the prudent turbulence in today with strategy about the highly experience. active organic brand. can This well Pointe be long-term

over and Division XXX loss, over excited will or These progress is share in We’re controls bites our open color now in our strategic that to owns establish Pointe half build. on minted also the newly first of first will community Group next markets decade and to XXXX. that, its TRI are here’s and a the leading as some small With growth of further U.S. Sacramento the seeds which making the brief the homebuilder plan in we

California experienced have Company expanded in of our expectations result. operations mentioned, base great Empire Inland while price a solid in order market prices the as activity softness example quarter. appreciation, quarter community had I has a nicely above of sales line gross a California, order our X.X a As Seattle Southern margins monthly a and that significant with the is and with Northern in Order the margins California per experienced our was and average. homes average also and

some we However, to quarter, of a pricing have last we reached that threshold the in near adjustments shift motivation. end buyer made an we experienced significant Anticipating stimulate may affordability to demand. have the

homes community, enjoyed As the Southwest, monthly from on order a the a which quarter. the for Vegas, quarter Las was both market and conditions. second higher three result, stable our base sequential was Phoenix basis for In

new to half improvement the gross XXXX, much including communities especially from At the same quarter opening compared Avance downtown about minutes healthy located Phoenix, continue of we see margin during the first We community XX our the Phoenix. excited prior of anticipated year. are to in seven

significant gained firm year repositioning was remained affordable Colorado and points in a see and of we in In in operations in he has Austin, orders, better This result product at while above traction have both Houston with continue deliveries ago. to we trends more a margins implemented a demand the pricing growth markets. Texas, quarter. Our price really

we near-term, our grow in to Over look strong business see as to economic we continue Texas the affordable housing. and fundamentals

open for of stable Finally, in We excited that new optimistic half six our the given market region, remains communities its market, the steady us. we'll nature a second Mid-Atlantic of the remain are under-supplied the about and the about and XXXX. fundamentals

go Now, to over to I'd Mike more on into turn like who numbers. it the will detail

Mike Grubbs

our of $XXX with homes Good of call morning. Page the third on everyone for like results quarter quarter revenue as on X highlighted was also Doug. an And welcome sales sales I today's deck. the slide Overall, call. X,XXX marked $XXX,XXX. average would to on financial strong was Thanks Home at million delivered price earnings

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

home on communities. a decrease in selling net quarter, For basis average were year-over-year orders the new down on X% XX% a

below the for third which X.X, was absorption overall last pace. Our was quarter rate year's

third XXXX However, in comparable rate XXXX. as Doug quarter mentioned, the absorption to was experienced and we

closed in in the communities, our XX one we four XXX. As California, during selling Colorado. Nevada, in in of We for and opened selling active XX communities Texas an community resulting one new in quarter, in communities, overall six one Washington, count

quarter of development regarding X. at out selling state the end long assets. active by the build California shown update and A term Our the our is communities quick of accelerated Slide on

XX% home period and same consistent these new the year-to-date, our During were quarter assets, year. the with from of net last orders

will our should fourth new backlog at Skyline, as master homebuilding margins four gross term from will half quarter, our unit the second billion. of opening ended average. the decreased assets compared five our X,XXX communities sales San in assets active long in third unit of start community communities delivered increased Pacific Ranch average our the year. in located at margins The with Altis, which the of X% at We Highlands which dollar in and XX backlog, the to homes value last Company We new California well see long was to deliveries Belmont, in our XXXX, adult quarter decrease in openings above California same Clarita community new those Diego. X,XXX XX we and four our price X% communities Santa X% $X.X projects term the that come expect to year-over-year XXX to quarter the of benefit $XXX,XXX our total with plan backlog from During

came ending compared to from increase California, XX% third X% California from quarter was quarter of our XX% term we year. deliveries During an of backlog, assets. the XX% the second quarter, delivering long Approximately including quarter converted for homes, same our which our X,XXX the last

average revenue price in delivered the sales This from XX% and same was up million, last home up the XX% $XXX Our year. homes for year quarter quarter sales up of resulted X% $XXX,XXX, from last quarter. last from

an compared to homebuilding points quarter Our percentage of the the year. same gross third basis was increase margin for last XXX XX.X%, period

percentage brands Our the increased gross of in our during homebuilding one margin quarter.

the third costs. basis SG&A higher XX of to impact percentage expense sales the selling was of for a For revenue and as the home period ASC-XXX primarily due XX.X% increase points in quarter, to XXXX, compared same an of XX.X%,

quarter. third rate quarter, to the XX.X%. than energy of stated the The benefit our rate lower was previously taken due guidance, the credits largely effective during During tax our was

quarter XX% expect the tax be of in We fourth the XX%. for a rate to to range

development. California. in end, XX% lots beyond. the delivery third owned our approximately which which midpoint in XX,XXX acquisitions on land owned controlled of Year-to-date, for deliver land the total guidance, $XXX invested X.X. or communities, quarter of land we of and years in to is acquisition homes invested focus lots, $XXX million XXXX of Based $XXX target we million development. land the approximately The will quarter, in number in or of aggregate acquisitions At our land of is strategy in During XXXX million and and we have land controlled are

which assets California detailed breakdown The turning long-dated quarterly in our our of this investing California. communities accelerating will owned we in faster on reflected our XX-Q, outside markets lots week. our filed focus be and to Form continue of We report in on

slide summary addition, in or Page is on the there owned In a XX lots state by controlled deck. of

in revolving and the billion XX.X% estate net Turning $XXX repurchase debt of quarter to credit our of capital we of the our facility. debt of balance hand $X.X our the with inventories; net of million million XX.X%; liquidity, under total resulting ended of approximately With $X.X $XXX had quarter unsecured to we was stock on available $XX to cash end, consisting program. million at respect of billion, outstanding to and real sheet; debt capital ratio

a XX million. stock for million During we little aggregate amount common dollar our of $XXX quarter, a repurchased shares the under of total

As had of $XXX remaining the approximately end of million the stock our on repurchase million quarter, $XX authorization. we

like to The communities XXX XX year. summarize of out XXXX full new resulting our I’d selling to quarter as outlook for open and XXXX. XX, Now, XX, close active Company the communities December and fourth in expects

During Company the delivering of XX% in sales of the anticipates quarter, approximately XX% X,XXX September an price to XX. as units at fourth backlog of $XXX,XXX. XXXX the average

fourth in quarter, Company The to an X,XXX in XX.X%. full Company of to its anticipates and X,XXX range expects average XX.X% XX% to the the range gross between be year, of the full the $XXX,XXX. homes deliver to of year the price to and at XX% margins homebuilding the be For for sales

our range of expense remarks. a in full XX.X. some to to XX.X of ratio we over the resulting call quarter to closing of sales expense Finally, SG&A X.X% now back revenue, the to expect like be for turn year Doug to X.X% home fourth ratio in SG&A I’d

Doug Bauer

that prudent, with enhance I’m presence other doing existing fashion. industry. we arise our in in and our of strategic adjustment arise as made moves opportunities they opportunistic and the will of well establish be some quarter markets and so to new to take already And markets. positioned in Group ourselves very pleased is evaluating our in disciplined Mike. Pointe a advantage this that period TRI Thanks opportunities performance this We during believe

optimistic excited ahead prospects spring Many for we some I’m Pointe that online remain currently the Group. softness the new future opened about are of about of experiencing recently our While season. demand, I communities are in our TRI coming well, are communities selling of the and performing

through own targeting control currently and all are buying essentially we or lots expected close mentioned, XXXX. for Mike we for opportunities homes beyond. the XXXX As land Meaning to

execute the positive cash the and allows next years, structure note, position In the several achieve solid land deliver we continue a providing necessary strategies pricing marketing will meantime, us strong capital and profile year to out making our goals. to demand operate meet to to Our the tool order to a flow our our when to liquidity. the and close for adjustments of maintain on and pace customers

coupled challenging strong compete Group and industry know our differentiation environment. veterans balance success. TRI positioning, demand how sheet, term Company's is leadership of Our comprised excellent who market product to well long effectively makes in experience, This with Pointe positioned for

all competitive to appreciative your operations. be coming no concludes core And we'll profits members homebuilding of TRI am to to I'd of small all Finally, in our year market have your team their happy Lost poised of fact take throughout continued of success. our that in all highest Group like efforts. history, noise to trajectory the prepared our current from Pointe remarks. fit contributions the Company's and this is This is I our That in questions. housing thank our in the now, is our for the industry

Operator

you. question-and-answer question have to interest ask of Thank a time, session. rejoin queue you and may and welcome any now follow limit that we questions up, be you conducting In the to yourself one please the Instructions]. [Operator one for additional you We'll

Alan comes your line of and Please question from Associates. proceed first question. with Our Ratner with the Zelman

Alan Ratner

into expansion the the on congrats and question the taking for Thanks Carolinas.

can similar Seattle, the So which bit I at you a there absorption terms a orders guess you more adjustments what price hoping elasticity I quite same made not impact can. are markets where adjustments the And seems us increase. Doug, sequentially. you -- you that where was words positive demand? see other adjust, color the least you little give other you didn't mentioned quantify if to did any In you new had of exactly in the to need maybe in on maybe really did

incentives. Just trying feel the elastic to a get discounts is or to today how for consumer

Doug Bauer

speaking to specific, is the really It project Seattle.

walking rose of we million projects over it's area. that’s the well, we a $X and the of they’re I King One really was got opened selling projects peak are season. track digits just this showed sales the you’re and that orders not that that were from reflect and I very of have was a as prices mean taking particular XXXX as we we selling new it the some other through probably and project selling to And adjustment. to the to high to back was one Whereas, to normal the point homebuilding pricing like demand. anywhere in at homes. my I very price point. actually our County It's grinding is Once adjusted actually we the found there, make out XX%, Seattle, not as back, and mid-single out had in mean, momentum. the we is across the universe people we business think stimulate I the sales. it's incentives

Alan Ratner

And guess just adjustment. on those you a reluctance hear lot big of have make and cuts, really but one spike one cancellation. of specific backlog just is that’s in a making mean, thing backlog and don’t the know that protecting And types builders it’s community, because I point, I sure to a we the from

So are other back, a particular some situation; you I you at pulled B, when the Northern thought for pace in or example, had success is guess, you sales you doing in California, did in you. think as where your that A, avoid becoming of I Thank that? there and perhaps look markets more this how already the there, aggressive has

Tom Mitchell

that really a example opening. that new community Seattle to relative It’s was note to in important specific

we really when make could that of throughout came and but And our make we it that of all Most lack implemented move areas so demand with operations some focused. other happen. financing we make of projects we events promotional out and our success more that recognized good have are providers a to some shift immediately didn't incentives really backlog locking financing and that more we have to stimulated particular, incentive we've had in your type demand. seem In activities, relative that

Alan Ratner

one, steam for And really one last end quarter place in if here. in something the third squeeze incentives quarter? just of in of Or come the Is timing wraps into of October? have just I the gained could these that it this of under terms when was most towards the

Tom Mitchell

to demand. third began the was and No, in to be it stimulate that I’d say increase it needed we evident later that quarter

Doug Bauer

the as for through a company. changes we’ve a are good have add market up. again, just rates a a on they’re moving gone gone interest at several but pace, it. point along and incentives up And can’t -- on And before paint our years. to brush market Many of been these Pricing you have not

So company, But and X.X%. to X.X% as everybody comes went got look it when sales a be to a incentive it company sales has our from to marketing. went XX bps down delivery you as actually per at when

So going grind management continue we’re been doing experienced brands. are at sales years. most to in. not all this trying market am XXXX? our to we’ve sugarcoat to I one I going it. But We’ve got you the forward the that’s mean, out to Yes. in have of for XX teams

the the homes year blocking into hitting very next and and to building their to it’s selling And year, and so the it’s and fundamentals forward -- excited they're motivated tackling going in with them. just about end of results back

Operator

you. Thank

Please with comes question. proceed from question next Evercore with your line of Kim the ISI. Our Stephen

Stephen Kim

to follow-up on a little wanted bit the incentives. I

many deal. mean, I feel they Every business. always the that many, a pointed to normal, out of over customer like think like operating the I you this mentioned Doug you is in get just that years as

of are incentives. And In to versus put you there’s that where a general, normal where range incentives we a today. degree, would of so range

Doug Bauer

for what’s as Houston. adjustment on in XX I’ve we I pick housing never I’ve cycle Well, doing normal? typically, been through on pick years, that’s in mentioned, Stephen. and been Texas, But this an just just the any normal,

are is I area and years meet X% oil an to average, would as to different. But several range. a As to broad all cycles manage typically, X%, from have say individually say, crisis went Each that project for X% its speaking, X% through goals. to incentives you the pace let's roughly range

really it’s on So, hard paint to it. a brush

Mike Grubbs

quarter. so that. would, that delivered first house. go the some Mike, is to we give in different would roughly up, houses incentives as you in $XX,XXX But this we a and Stephen, markets. Clearly, to on the average X.X%, was color the expect What third speaking, I we it’s second number quarter, deliver just that’s different and

Tom Mitchell

again, and it's incentivize demand, we’ve range normal we jump from consumer experiencing. to been it’s But very within the When typical. to softening we have a in need what well

Stephen Kim

up to see largely bumping or by little lengths embrace little If size do that. whether price to price reasons degree have And to a or you about do ability broader environment; standardized I’m reduction greater a your that their that degree competitors hitting the in through the gone product. it, for past; will different virtue the maybe In quicker, we’ve the which many standardize could I that incentives, has to other be to to see mix. the obviously, building a in because great their time, against the points, of pull even levers degree bit stuff as you the the the to of talk you you’re not that is actual really of that you limiting seen spec whether ASP generally, where is than to not, ASP? things guessing, one of a market when in this a product the market you you first and it in lot your markets all, operate was words, curious

Doug Bauer

customer our is seller. differentiator focused the in us. ourselves. active process, this that innovation to level our differentiate with buying adult, price a the Obviously, experience differentiator but there’s also the and for luxury up but options design, to huge the our and definitely entry universe really for frankly builders only some to offering point their strong of -- and Not from on really the land of I larger And huge mean, trades a have standardization gone move more and with us a at is that’s buyers

mentioned diversified, to going that, before, a we’re in core to And term. I focus affordability we'll is on our as approach being relative steady So, continue well stick market in the that that point, design But it's products you're is. means price Orange that at smaller Austin, going to right Phoenix, we’re that DC. and whether are footage to in build attached County, to square

Stephen Kim

would are to And the more to to from start see actually generally, in margins, figure X% think I'm of we part. guys you selling package in you in builders that be it obviously, X% on I’m XQ? get or me a pricing, lot. more be to of then is side. bit come lumber the that. range. next shouldn't or What likely lag price, I reasonable benefit And time have range up last one for a back, year, is a to probably little regarding a Lumber two Different give XQ and would back between trying showing that, to guys that it might you see when guessing later out they just

there? revisit percent me attach Can when If there second necessarily me, a out should tell I not margin the products, lower is, implication we we in just pack lumber of say you that hear one you question. told is you attach have we products the your be thinking it when recently. does were homes? What any that, margin price lumber was you And the think could selling general. us remind That a for

Tom Mitchell

because Relative that I'll definitely and lower a try broader interested first, going to lot of a hit Stephen, is to reason take have ASP of product, that's we're The of segment and affordable more provides it markets Tom. in the opportunity some attach relate attach our of a in a does margin. not product a on market. it to is to this it. the all lower

product push the it margins detach to that well. And our there. we're reason that's as So, equal behind has our finding

beginning it's in expect has lately. expect automatically quarter cost we a the that big impact that the some the don't margins, have I'd benefit it year. think significant to going in to side, a the because But fighting do of On see to bottom first right. benefit We and huge I increase to to you're cost not late to of be caution you Lumber to been are next forward. going still line, tariffs. our windfall a us

Stephen Kim

Just do, factoring any incentives am to referring to combined right? to picture, the in I any… would that specifically So borrowing have are cost clear, you you're not

Tom Mitchell

Correct….

Stephen Kim

Okay, got it.

Just make sure… to want

Tom Mitchell

of power lack well. as to pricing impact the going Correct, an is have that on

Operator

Thank you.

comes with Our line Please with the Stephen proceed Securities. next East of question question. from your Wells Fargo

Stephen East

as anything I And a in if little look out just hesitate you the sticker shock really the you a the you bit at anything are seeing out more that of the here true all to versus more short you to through, there you do the strategy do you it's spring into could to some business? significantly. purchase? 'XX, that think really else affordability expand absorptions incentives. in your it that will? know pulled significant a and we it. combat the How actual primarily into do down when you on run, walk differently Can pretty you the heard talk Doug, work buyers that? to are? happening then other needs California, consumer and degree. at consumer what selling just international a and looking change had what's were look you think it But attached. than market, about mean, drivers much I little season it I is How And sit time bit the is might mentioned of the much we Is

Tom Mitchell

operations. a They're has is an year. to reduced the of now. time. prevalent happening our half a had They’re But this a year of first way ago part market. lack not are and big put had the impact. they out completely you a the strong natural when is again, appropriate it. the an seeing combine what's of Certainly, international buyer of less we're at significantly what do reaction shock And we California sticker to rates such believe I from

Doug Bauer

on at San obviously we’re not blessed advantage, say Where importantly the affordable Diego. Stephen, is you mean, have controlling in as solid. in to going lower build it’s sheet affordable is housing a have magically most rates. we’re we change X.X, ’XX later I product prices advantage. that that design can a forward. balance alternative. process. risen few in basis I product, not California communities pretty And we’ve look that. the lot to by interest into us own rest had years that that to Yes, constraint. happen but due offices is land land really adult, with first PHR in I’d far lots first in They other house that’s XX,XXX significant we the a California. But we over first it gives mean, a the into going provide forward active XXXX, Skyline, Those strong and all a quarter, last going up, But timing mean, When going still And going Southern quarter, as -- you’re quarter. California going these product I very be we us in far of to part the move programs is sales whether into pace -- several a huge it's the going going

Tom Mitchell

and adult -- product. availability product in to our add just to it. point And all dash well more related our we've entry-level product XXXX. up, came degradation price absorbed luxury going everyone from in in segment. talking so XXX% knows margin that got of primarily why just active down. but markets really move market our better to is that’s of We absorb product Tom in our that Just entry-level our a back our in of that to about that, absorption We’ve

Stephen East

then versus people the of rate seeing then when understand up. the the qualify is in at what you that And look cold was I your you type to there? versus if you inability how can wondering delta jumped produced third margin to much of are will. getting What gross quarter. feet, you backlog, And

Doug Bauer

the there I'd convert the our Stephen, rates, of some say timely a is inability really in can the On to for buyers contingent of manner. significant the sale their home factor most

end year wanting end goal to and plan. closer and getting we’re that obviously, make So year to

that I well. that retail there cleaning as market has We’re been inventory But and think has increase up. slowed an in

So, forward, we manage a contingent our part how going of buyer. big is to going be that success,

Tom Mitchell

sell our margin and but assumed still actually have our of we additional to units range to provide Stephen, little fourth bit. come a for quarter some we backlog and the the margin, we in with incentive outside going that just just Yes, that is

Operator

Thank you.

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

Jack Micenko

of inventory you’re going targeting happened First, and the lines. several XXXX. on level product quarters X, hear whether the X.X along take last in some view some the a XXXX, X.X it’s question. your changed X, maybe what’s high something the time, about those Thinking right of years to changing I number is

Doug Bauer

heavily interesting that is plus the X.X that mean it’s a own. because we lots number, I So, skewed XX,XXX California by

really Jack, you to area. to it got So, down, break each individual

that two assets, And really they’re California some to if And actually very in the three speaking, of range. dated party divisions year our two around take to long one are generally under-supplied level. the you out

manage to So, that we’ll continue level.

to I to that’s So have that in that XX. we down brand by we really you got math it and Slide -- the And a obviously it by -- need deck but down the break you breaks do slide you division really for by dissect company. don’t X.X

Mike Grubbs

have of fundamentally, inventory not recent the But be forward. carrying our what is to feel the changed right shift costs and we level

Jack Micenko

more beginning to then that versus side? back would I back come the be, we that And more then the the maybe impression was that there on G&A XXX. you give-up so hitting dollar G&A guess an can of something G&A in numbers and the the specifically was half? the was half. on can it year in Mike, event Is margin I what a have amount what we maybe around figure give out us XXX is And on

Mike Grubbs

Yes. mean of continuing impact do communities. at we I the XXX, we so as open impact new the look

XX we’re to community coming highly upfront. and XXX so from XX a where I those mentioned, specifically, coming XX that’s more points the are amenitized Ranch, are California those -- we’re assets. of related communities And that from of Pacific are basis you year-over-year lot this five dollars and higher the put long-term Highlands models out, the And quarter, primarily as California in

is the have it. Overall, math at year-to-date, what look do reconciliation. to big pretty impact. XXX I in difference. it’s We think it, a like that’s And the XX-Q when basis numbers you if see would that without XX points about So the look you ASP want

Doug Bauer

point And for over. add And shape XXXX. question. great through We're went one deliveries Jack, your I wanted land that on in the earnings to this XXXX out we in pointed call we for script

allow protect increase generating appropriate going long-term. capital have to cash do to over is the to to us what on to value positive shareholder be levers is flow focus and the Our

to -- excellent years, our the very couple sheet forward next to so and speak been this very So party and we’re confident position in shape. in is in for we’re our before, we’ve going balance

Operator

you. Thank

comes line question question. Bank. of Our your Please Deutsche Nishu proceed with from with Sood next the

Nishu Sood

third First it question on expected. quarter, the than for ASP in the stronger came

stronger than think indicated. I you've

Or there to understand in some the effect that that point terms just of reflecting that. price pricing this stronger driver want is Just early environment of drove Is the deliveries? higher year? or mix that still

Tom Mitchell

bit an bit on of well. It’s a And continue The impact a could as It’s did both. mix to little well. margins of backlog it our little both some see as have grow you issue.

Nishu Sood

ones now. you you're the California they And as -- assets long-term the mentioned opening

the carry margins. gross As they of that average half deliver 'XX in than communities higher those second Company

matter pricing that gross So, what's I offset how close is that obviously, there does effect? then, out? And against to -- is just to want here. pressures So understand compared margins new those do likely communities' of

much half of carry second the So get to margin lift that other that as we through just want are to to that's of going on. way going gross to factors 'XX. How understand relative

Tom Mitchell

yet. see the lower in on I year half higher you But and 'XX giving because the ASPs. And expected the term We excess year, typically higher in generate the mentioned California at from well these newer of historically assets Company average. for in should overall communities. think, we're of they're the really not of margins guidance of half long then first our the margins probably coming margins back the deliveries

that long that of So will volume the also XX positive gross from year, now, period, greater of assets, currently our percentage be to the impact of think clearly has and long -- But coming they're this what shared have than was on about pressure close impact I margins. good that term some a a so open on assets that it communities of some they out. California term Right the a the margins. from it is this think going waiting communities would have XX I overall pretty during we

Nishu Sood

maybe that term delivering against great well on you'll your weighting positive margins. a -- conversations, long -- but opening more But lower necessarily term assets about from for So understood overall even will PHR. previous than you're point assets, us it then ones the California in That obviously really have what of obviously be closing. points for as as the they some as high long price margins don't like have I high not price what

that So a well? countervailing is effect as

Tom Mitchell

little not the I Company mean, margins average. the below assets bit, of long A too California many term have

have excess average. the of in of most think Company will the margins I ones we're opening u that

Nishu Sood

you… thank it, Got

Doug Bauer

at a communities market. is will in be we to lot of will relative active PHR our in mean, PHR. point And coming the This offerings, time. best of to Nishu, of far then, that by it highest we And number have any the I have product village

optimistic about really those offerings. new we're So,

Operator

you. Thank

of Our your RBC the Mike next question comes from with Capital Markets. Dahl question. with line Please proceed

Mike Dahl

discussion adjustments with and just at looking to to term in just adjusting what the at the XX around comment on the long those? us comments the XX price assets around you've average it's off strategies follow front term of end product is in I And up then also looked community to or on the know the question openings then and the up that the specifically earlier you communities, wanted new opening assets? relating whether I first hand. I in remind to Could the don't pricing. any the on just recall from made point long queues related to communities

Tom Mitchell

the million is introduction starting dichotomy Beaumont with new in mid between with Those PHR got and product project and out at offerings the active our offerings vary upper then really all you've our XXX. price end into $X being so our point by adult over real a

we’re big pretty band changed a haven’t very optimistic then there’s we And relative to So but really offering there. overall, the strategies. again,

of we’re really We our sure new at to pricing is offerings. all critical which But off different are gain wanting we product implementing to opening a any projects, momentum get new at that coming aren’t with to attractive these market to to start. make strategies good the

Doug Bauer

the call does LA noted affordable earnings add for planning Skyline, that range I more I to And forward the in a opening will some that price to here hikes November that’s we’re product buyer. in in County stages been a Mike. that, the time. in

planning forward forward XX that. Empire excited very San opening. to have, six some we’re the gone long to prior on and So about was That the both that’s look for other in to Inland we last look that Then all months Diego. term assets the and the you you of

kinds Meadowood. down of the done and you to Beaumont planning and All to price in more in have We have all price to plan come queue, building those Otay many very years of points. asset and distinct We’ve to ability get affordable with advantage are for constraint door further supply our market. designing next we that’s affordable a that product projects the point the for where at a Banning

So, markets we huge those years. next definitely have the there for several a advantage going into

Tom Mitchell

one our sales add, year-to-date so California of Mike, getting term year, far was assets the thing more are perspective. XXX,XXX. just average The long in to that deliveries some Last price XXX,XXX.

move little weighs going expect is that would that bit I as PHR. by into a So we grow number forward to

Mike Dahl

demand strong and you strategy September the product is against, September for really of you year, relates comments having when then are and it’s the obviously so last a last and response how comping question just just not But of flat, a the is I just absorption the on terms understanding lot had pretty the two the few you years; intended overall rates; of in the end incentive your the color at yet. us give month the the October of weeks you ‘XX you little around trending? different. look October up Could over a thinking to matter, first that both had think quarter some you years, going were on October were towards If to incentives My about picking effect. that about then second

can directional October would commentary any you us give on Just be great?

Doug Bauer

only I Yes, those adjusting still pricing on has increased rates is the that and higher into gone say with it’s interest With the say, the would seasonal. it would I that's mean rates going -- to consumer not years, grind. I a for

grind. mean, to a You into out to scratch takers obviously seasonal fight there. it’s earn have I no and you’re that have a everything going there’s for heading But order now. and right you we’re period that more

and force earn sales forward. going going money, to their all are the teams our So

Operator

you. Thank

with question. question next Please line from proceed comes the of BTIG. Carl Reichardt Our with your

Carl Reichardt

M&A Doug, looking in to. Texas you I you referred mentioned at think the deals and Southeast,

the change year earlier the markets? that but business in to this nine be of private were was about over you trends coming talked become those talking in private not attractive. six to deals Has pricing in You the change last you months more as might changed to that interested the much perspective

Doug Bauer

In in select a slow adjustment we're realization that say market that I period. cases, would there’s yes,

U.S. going crawling because know, at you’re We’ve of strong on, and big walk, the going companies I active very everybody, you as balance I take I XX, year we were economy, XX before this TRI going with map believe, like a mentioned disciplined. as got mentioned adjustments looking, or And again, past company, huge walk So, advantage when we’re don’t area can because run I a Southeast. say over make But the you it, for adjustment. the stayed definitely a of And is -- as in we're housing. and Texas I'd over definitely there’s has we’ve we’ve would in I been sheets very look But And us. you growth forward. before strong to Pointe say know. some affordable not the

at We’re very and our Gray excited time on-board price brand there about affordable building bringing Shell more point. spending

So, in definitely small private. the armor some of some the cracks for

Carl Reichardt

get as some specifically Visa effectively about issue to comment seeing customer. And an tech international may investors/speculators or for in understand. trying who this are Steve's you're go a in just Washington offshore something the back to Is connected quarters this then California to weakness I’m reason from like buyers clarification that that? HXB be or to homes, want is I question say to buyer, what or to

Tom Mitchell

is Tom. of Carl, the We offices seen any really this or heard Visa. sales HXB haven’t implications our in

it’s So, buyer really in. it’s seen It’s former not international as And reduction that. described. more investor oriented of an that you the we’ve that a

Operator

Thank you.

Please FBR. the Our comes Riley Alex Rygiel with from proceed of line with next question your B. question.

Alex Rygiel

You summarize and help provided a that again new in the Could regards to of the Company you us discuss bit XXXX. some for great in guidance of communities for opening with it total a to us cadence number little and quantify model?

Tom Mitchell

Are referring you Alex? to question. bit your little on fourth quarter, cut a out You

Alex Rygiel

cadence�� XXXX and to referring am the I

Tom Mitchell

count guidance really community yet We growth. given any on on XXXX haven’t

counts quarter be anything So, provided growth. but we just XXXX We X% to expect community our to fourth count going X% community what provided that relatively is yet. I were would haven’t

Alex Rygiel

of then talk of And about incentives options it land changed relates those increasing? premiums. and how you light as the have Can some to in

Tom Mitchell

to that I compares X.X% mean, same the and sales for percentage quarter, our overall XXXX options for as current the a quarter. in we're XX.X% price of

Alex Rygiel

you. Thank

Doug Bauer

enhances experience as to can that business and their and consumer. something a capitalize a see differentiate and our personalization and the our really for that customization hoping That's highly And profitable we’re strategy on that we satisfaction. ourselves customer through component of

forward. we that, So, intentional have going focus on do

Operator

Thank you.

Wedbush. proceed next with with the Jay of Please McCanless Our question. comes your from line question

Jay McCanless

compared The month-to-date for first to October What that and the does had. how question last year? I are orders

Tom Mitchell

just tracking about at October currently orders are for as Doug mentioned, Well, X.X.

Jay McCanless

compared that year? how And last does to

Tom Mitchell

I higher year X.XX. XXXX the last think was opening at new slide would of you X.XX, deck, to been in look communities are going our as XX much November. have be XX

in back a should November. So, see we pretty good bounce

Jay McCanless

face it another about we And gross expansion cadence as what that type of because a and that impact about the be expect talk on the at the don't margin margin, right might second need? the thinking gross question drag like just should value of into Can I Carolinas. seems you had, time we

Tom Mitchell

the years. over no gross five I march margin. drag it's next slow So is a to mean, there on two

organic team you've up mean a that got I minimal. you And into in and with you're and it's overhead building really surely starting a So, start costs pipeline.

Jay McCanless

And COGS SG&A more incentives. question doing of then of about in on line? up the on last like you affect don't What would pay that And to sounds had It so, the is brokers if to are is going show to them? I line. which outside terms the having most

Tom Mitchell

that area expect broker see outside sales in could But have an environment cost. again, is some to constant. more increased a Our you remained where challenging

Operator

you. Thank

Gabelli from Please comes Company. Lacayo with Alvaro Our of question. proceed next the question line and your with

Alvaro Lacayo

then about the about the incentives what in wanted that things to closely And identifying are looking that the Can might a and question how around you And Just sequential of what when maybe absorption how thresholds? are terms it different of there, pricing? go little or going to other you back potentially just them. to comments the of mean improvement. the are you and terms elements? you maybe at made apply adjustments a there to Is talk Southern forward in thresholds us drive California, to bit talk price in just identify threshold pricing you're those you Seattle

Doug Bauer

successful with sale we the bought. we meeting about with case-by-case, pace focused homes, I it's strategies and marketing game downs the game we’ve great forward with that success commitments and mean with here project-by-project dials throughout marketing some incentives. a buy I we’ve the analysis. financial been particular, include plan We play strategies, and In play pace. which And and we're marketing a of Seattle, to had sales very it's our plans. in incentives on mean, can other all

all So those to with you a play get pace. to levers

Tom Mitchell

targeting say a be four And three pace. months. we’re In typically, that up to might some I’d Alvaro, we instances, month

absorption in we’re are paces. pricing real looking going maintain implement analyzing and our time, those to we’re paces to So what actively strategies

Alvaro Lacayo

is look I there because footprint states about about footprint back an the just situation? on of in perspective, not? more the been look widespread, as I on stretched it’s wanted geographic And back if of affordability, pace the seeing rising a mean And you by selling fact then what rates has on segment, rates -- segment versus average pace improvement and just at if overall order expectation you think think rise, more And a at also where momentum, just are to that your you you in guys of the by to price order will taxes. probably had the from or continue and

Doug Bauer

when the by varies the look pace at Well, throughout I geography. absorption you mean, it country,

along the at higher a Northern a really targeting had a which month operation, to Seattle. and definitely again, price pace. of consumer is You have many good X.X, has appreciation a other we're that three adjusted And slower around our about to other always motivation submarkets month. But of California, the continued w target than Texas in move

the play target So with I and mean dials get our to forward. to ‘XX that’s continue going into going pace that we'll

Operator

Thank you.

with proceed Our from your comes question Citi. Scott next of question. the Please line Schrier with

Scott Schrier

market I of that those I lot as a recently of outside from make that saw some demand of has been orders Trendmaker. respect maybe Are in the areas. little both And more want Can little know of bit incentives. up to looks move bit products Texas, Are a a away -- to talk in seeing in on you where your of follow-up seeing? just to in there about Texas pricing just of those I give a into you're what comments have like power? you lot still a some Is talk downtown the incentives? Briglin interesting, you’d you’re to pace. general, strides around about you in some seeing with Houston? market continuing absorption very you

Doug Bauer

Houston. about talked you So

been, price category. ASP, foot lot you'll sizes into that next more XX of over One strategies XX average, to to points, diversify our the on our has see in focusing Scott, down on couple some years. And come affordable

more bps for move about a in that Houston -- that’s competitive ‘XX in place product, that and to Houston very bps. at that’s in X% X.X% X sure. still up down market Our incentives seeing XX you’re actually But to from range the ‘XX came

Tom Mitchell

comp I the year expectations. mean last hit improvement just If -- is tougher looking really year-over-year, absorption the and difficult Houston. comp our a you’re it’s our the hurricanes pretty with in at market I just mean, really

it’s So in blowing it Houston. like of -- absorptions we’re not out

Scott Schrier

some acquisition cycle those and then finding finding a at you some of macro about fundamentals And lots, right prepared difficulties long you I areas, just on comments perspective. know on your look a from now land deals core your about finish the in talking you’re it more are When as or environment a How land becoming difficult to Carolina North think the Are do up seeing there? underwrite to just deals? you’re there? segway is able to ramping land think you And difficult you flip your you numbers? of that

Doug Bauer

in going getting just we’re the Carolina market. So

So, we standards strategy I’d our challenging disciplined market the tell and meet and for the and land in remain very more to you company underwriting the actually conditions land acquisition shareholders. for acquisition teams, because changing gets our returns in

And sellers' through for So, the in whether around to the six mean, business Phoenix, used Carolinas, underwrite legging to disciplined, it’s adjustments a it land got XX to so on deals. adjustments the where is business. the months the in hoop the takes and in you disciplined land that’s disciplined how experience are Texas, very continue there strong And you on that of going adjustment. and the years, that has having that phrase throughout to be been management it’s success. I new hanging be we'll number this nation. going teams pretty I have always typically

Operator

you. Thank

line question Housing Alex with your from Research Please final Barron proceed Center. with comes the question. Our of

Alex Barron

if better better guys I would for words, anything? was broker wondering closing found the other one off have this you incentive that if What’s downs, commissions is buy than or been costs? working In or in raise another of be rate working type any to guys, environment. you this

Doug Bauer

in financing the commitments offering has markets. strong a our many repurchase by been those for Whether incentive. of rate a of type forward it's Definitely, it’s programs financing driver or down and us

Alex Barron

expect we far activity, a software more you going to environment. buyback as thing that you guess, then of should And look and Or forward? forward I one-time share as the something this, that Is as was think?

Tom Mitchell

have spent $XXX $XXX million we I there million that. we and about authorization Well, of mean, out

down I the as going to well our continue gross think our returning between pay balance potentially debt. we’re of capital shareholders, capital use and capital as to

So, from we’ll that be opportunistic perspective.

Operator

you. Thank

the have session. end We Mr. Bauer call any over question-and-answer the like back closing of for I to reached turn our remarks. would to

Doug Bauer

after to look to New everyone thanks the you and I talking season great Well, for pre-holiday everybody we us wish to joining today’s on a And forward call. Year. wish, want

much. So, thank you very

Operator

today’s This teleconference. concludes Thank you.

this You may lines disconnect at time. your

Tri Pointe Homes (TPH) 24 Oct 182018 Q3 Earnings call transcript