TPH - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to TRI Pointe Group's First Quarter 2019 Earnings Conference Call. At this time all participants are in a listen mode. A 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 turn the conference over to your host, Mr. of IR. President Vice Martin, Finance and Chris Thank you.

may begin. You

Chris Martin

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

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

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

Doug Bauer

picked market trends joining first Chris, the resilience Pointe and Overall, in TRI housing strategy. great today quarter pace activity quarter current February, the our community first on improved for as level quarter, Group's depressed X.X company for we the X.X results to you good order morning call in an on homes long-term last March. demand Thanks, the go of the January, progressed, discuss XXXX, and per and X.X up the us demonstrated the as recorded everyone as year. of quarter fourth our Order over as market from in in update

and conditions to previously came weather in despite short of premium option rates lot of expenses guidance our our order comparable of favorable in to economic lifestyle quarter. in result, mortgage gross in operations an and a similar internal in improvement our of quarter, most Our part our the January, in sequential stated large X.X quarter X a came our in produced also projections, largely thanks trends the and $X.X of during gain across during markets, abandonments. as ahead million X.X ahead related brands, due saw came We California Deliveries March. to the X.X for February, adverse a some experiencing Homebuilding backdrop. of with lower expectations, margins in orders

several have part lowering the our directives, marketing and our sales and is last we've to of in X,XXX to initiatives We including the XX% due expect in and deliveries. full-year progresses increasing call, delivery guidance guidance significantly continued have discussed the for our with we X,XXX margin improve The our to progress asset on our at gross margin as confidence gross margins XX% achieving unchanged year costs to made year efficiency. we our and left in

success indirect and to from Or marketing quarter, very lead focusing concessions costs negotiating competitive floor a planted vendors the and and up plans. margin expectations procurement environment. from of heads our sales seeds our a steps exceed These operational and in of by our excellent and some an sales implementing new conversion. department XX-point value meet, have number teams the lower intently existing teams stepped our overhead did strategies and Our price while in plan, to job the reducing engineering the on in of challenge cases,

entry move-up affordable at four of homes challenged back with absorption excellence, entry help continues be Our land move-up to quarter at move-up a projects to month. pace XXXX The on pace Diego, month. also points, their a nicely these at benefit have were acquisition per in per as on experienced time Bay will we to demand community continues always level four Ranch terms absorbing continues San Pointe successful rework Inland but the international introduced and segment programs X.X and efforts are homes The that bounced order market. new currently three several Group, with should our of all higher and in our TRI in Area ways more million community quarter. $X projects been on returns County Empire Skyline for the at in Orange at November, strong be The At a in in affordable with land In programs warmed strong in have deals time striving beyond. Last of teams price of be an above future per projects. per the that operational us focusing Los points up buyers level absorption Angeles. homes and These initiatives first spotty during community to California pace we first success. evidenced during attain driver we price less per goal. month our our delivering monthly the

competitive believe and communities pace highly our the operating all absorption results differentiator was design the industry. per as new brand We that experience that generally in at which during month. these serves price combined X.X our teams to strong opened the XX our commitment by reflect quarter, Our execution premium segments, provide in a innovation

within in of XX% is contribute help the of California long-term operations these of markets, our and grow markets, development our our steadily year-over-year of new our expansion to into goal Another company continued an avenues a growth active the markets, made dynamic Each to of existing recent through and assets. end have growth an combination give Dallas, progress look market. on update to newer growing housing integrating you acquisition some significant community in forward we to presence our this we increase quarter. of in count our in our To

our anticipate of like Skyline in communities California opening our in that Clarita, fit assets of a Affordability the Greenfield of out Our and our In long-term half FHA this process Altis progressing the is our opening Carolinas first June year. in out housing expansion rolling focus communities the new into Beaumont, in nicely, we feature first communities is loan Sacramento, are XXXX. with of Santa we new several both many that in limits. within programs of coming which first

These long location, segments. Our long-term of of and go than of strength optimistic am I the advantage our the much across our was affordable the price our changing all beginning housing ability distinct to margin. the market, conditions, in near-term us consumer, initiatives California the to develop will continuing a and resiliency of affordability Thanks geographic and more the product to points assets diversifying footprint, while way trajectory give a the to design market national about and adapt at I year. economy

sheet, Group, ever the for to it thanks the team. With proven balance will confident Mike I as long-term now turn numbers. to importantly, Pointe More of focus, TRI am over detail in on outlook strong our strategic leadership and that, as more I

Mike Grubbs

and from first posted earlier. on sales was Home operational my slide our to be at sales some some everyone of Thanks, first of of for and call. Chris I'm results that I'll going with and remarks referring to of million slide on welcome an $XXX,XXX. delivered, Doug. outlook Good provides XXX then the our highlight the information At update quarter today's earnings deck and highlights XXXX. certain our metrics finish from price on revenue our the the for homes website deck average and second an our to quarter. X $XXX morning, call full-year Slide key financial and mentioned financial times, expectations quarter,

sales Our for of and selling ended quarter, income. homebuilding increase the for home breakeven in in net were was other expense million percentage basis. new year-over-year percentage margin $X a average gross and was communities $XX,XXX Recorded of Net quarter roughly XX% a down a at income orders revenue XX.X%, SG&A XX% reporting home on the as XX.X%. on

but the first absorption rate posting per absorption increased community. net were rate the down in Our for compared overall absorption we our March call, month quarter X.X per rate We monthly on quarter ahead of the was an X homes X.X orders homes quarter, discussed which encouraged to with per each and during our X.X that last our projected of community month was of XXXX.

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

strong we've So see X with and demand weeks -- of far total continued of through a first the XXX April, orders. to

the active in and during X communities; Washington, X we selling in in X in X opened Arizona, X As Texas. communities first in XX for Maryland our quarter, California, new

quarter, count We also community up closed the selling in XX% an of ending XXX, resulting active XXXX. in XX communities first

of is value at for with the in slide communities first ended X. dollar X,XXX Our $X.X selling active quarter We homes $XXX,XXX by the at a an the of sales backlog price quarter average end billion. shown of on state total

XX% to homes, quarter, which the quarter delivering XX% compared we converted year. XXX of our same quarter the first fourth last During ending a backlog was decrease

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

in quarter period margin Doug our last our the gross homebuilding the XX.X% a percentage earlier, first have compared XX.X% been would compared abandonment Our XX.X% for of same homebuilding gross year. the to mentioned of for guidance XX%. quarter margin to With was approximately charges lot

for there California revenues homebuilding percentage of we To quarter of assets. margins to specifically revert March and backlog. stronger be anticipate units in long-term as our much XX% the more approximately half gross we deliver X,XXX a the as year and in forward, XXXX, from more color, put a of second the to our XX, California, our margin are higher then Moving back

this same overhead homebuilding for operating decrease compared we Through resulting year-over-year over SG&A SG&A Austin the a and future to Worth gross our of increase result period higher lower XX%. in and Sacramento, Based reiterate our of gross on We guidance of XX.X% efforts margin XX% of components in leverage percentage expense largely XX.X% our revenue the due revenue quarter home fixed market. expansion first was as on Carolinas, a sales Dallas-Fort XXXX. trend XX%. into to the the expected and sales costs, The from SG&A, the a full-year the percentage margins, to our as of home margin have strength was of homebuilding

to X.X-year related warehouses, quarter At recorded I mentioned reflected or in we quarterly XX,XXX related breakdown March we of last tax we which XX-Q, of of a amended approximately based deliveries agreement, to other approximately lots, the with income on the a sharing earlier, which will WRECO of represents week. owned our be a supply, liability XX was filed March lots matters million on months reducing with As controlled owned XX. transaction. certain $X detailed Form during this in quarter-end, which The resolving as our report associated our

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

the to Turning sheet. balance

our loan, you revolving mature regarding which credit the adding XXXX. $XXX a term our million facility, month, both existing March and new $XXX earlier of unsecured million this in may extending X-K read of filing of have maturity Some from

with on or to year. facility. senior will the had which satisfy notes, senior will $XXX notes of estate of be inventory. currently the in in credit loan balance hand mature the proceeds billion revolving cash million outstanding quarter-end, this we draw portion The off real from of our June a approximately on $X.X paid At We term

of we resulting on program, term available shares our revolving credit respect senior cash we ratio million with facility million focused billion, million purchase not liquidity, did notes, We hand I outstanding the debt-to-net which and our net stock $XXX of $XXX to towards unsecured of XX.X% ended debt-to-capital facility. and total of any With $X.X was the our consisting cash of during and our quarter as of the maturity quarter, repurchase capital Our debt just XX.X%. loan flows mentioned. in under $XXX a of

summarize our the for second and XXXX. I'd like to full-year quarter Now outlook

active Company expects XXXX. resulting quarter and June new XX a out closed the XXX XX second XXXX, as communities, to of communities, The communities open in selling XX,

percentage Company will anticipates of $XXX,XXX. Company quarter, expense delivering gross for to The as in percentage an the addition, be as its expects home the of XX% X,XXX of the of be price its to XX.X%. in a XX% In XX, sales March average to approximately revenue sales XXXX, second homebuilding backlog of margin XX.X% its at and SG&A homes XX% range

in XX% the Lastly, expects be will effective range of Company tax the rate to XX%.

Company the an reiterates between $XXX,XXX. X,XXX guidance average to full-year of price the X,XXX sales previous delivering and homes For to its $XXX,XXX at

in Company full-year homebuilding XX%. And of the margin sales revenue Company XX% effective to XX% to SG&A of expense will percentage XX%. of gross in finally, the addition, expects a to we expect be the and range of range the home tax range full be rate its year to XX% for to the XX% In the be expects in for then percentage the full year as

over some Now, I'd to remarks. turn the Doug back for closing like to call

Doug Bauer

the we direction combination inflation supply, job seen is industry, creation, constraints. up activity the and of an demand backdrop regulatory company April. as head of growth, trends accelerating provides Mike. nicely good selling into progressed, feel wage season. as by muted picked steady going the Thanks, industry, quarter Order summary, buffeted In into and the our for ideal and good as we've labor about the half it homebuilding our spring second The of in we very

We and market new over business, can into sheet size pursue significant focused combination our facet a every next continue achieving believe through business value all decade and adhering the cash of expansion shareholders. our maintaining markets, principles, on strategic long-term in these to while of initiatives operations, that for positive existing strong by gains creating our our balance the our within to a excellence operational and We flow. generating of we double share

home Finally, year, obstacles would continue There these concludes our overcome our industry happy thank appreciative change be this to team your passion buyers their continues now questions. you I'm prepared take to that day. were your obstacles quarter. facing remarks, lives and energy new every like but we to the I of all members our our for the headed all several and of of very And that as efforts with efforts. to you. into Thank we'll

Operator

with from instructions] East comes [Operator question Wells Our Please Fargo. question. with your Stephen first proceed

Paul Przybylski

on Stephen. Thanks. Paul is Actually Przybylski this for

the you well? could monthly incentives if of the us and quarter wondering was and California I as First, overall on progression for say, in give for some color Company the then

Doug Bauer

months. X.X the in for Hi, it's Doug. running as our Overall, as It's Paul. backlog, X.X far around to first three

very So very consistent.

Paul Przybylski

us then your the there a California -- any project? Company some average type And magnitude is you order rank give Okay. of can or long-term for versus [indiscernible] assets by

Mike Grubbs

doing that Yes, project, Paul. been we haven't by

an As somewhere talked basis were assets. well getting we back margins the the California mean, for I instance, of the XX% of and are we long-term our XX%, just those mentioned, about average, XX%. north some outside of for

is think we long-term we deliver about So, this overall the XX% year assets. what California will on

Paul Przybylski

sounds on retraded deals what it like? can Okay. guess, you land of Great. [indiscernible] I color on, color bit you then a And dollar give some us little amounts

Doug Bauer

lot the in was Northwest. primary the abandonment That's Yes. up charge and a

As lot last price year. erosion Seattle you had of a suffered know,

a our was was of our of the in So took that the group took. some result -- deals land at all that and action we escrow look

Operator

Our Associates. next is Ratner & Zelman question Alan with from

Alan Ratner

So about sound think and few others the than today certainly Doug, you optimistic heard well. months more that as we've ago, market from a I

particular snap-back geographies business business? you price that your are in when not across Just it widespread any have noticed and parts there of curious, is trend, point pretty it, the you any a have or stronger your participated in footprint, across is look or that

Doug Bauer

the There say lifestyle time the brands. way I'd characterize know fourth will Area plus in buyer houses but a down to first move-up still it's back million quarter, mentioned [death] that overall County, it's you is earnings time Tom though a we It's of the overblown Orange greatly I six really premium market crime. think come is our still say no it's because sell up. as the in move-up from I continue with still. second the challenge. -- it's the I I the Bay call, $X

again. markets, As million. the very focus a $X.X far priced it's some innovation want there, product, our for on add I'm San teams color? are the the as and to those homes the operating $X has and Tom, a down execution back strong of some Diego on other of million Phoenix. But come and bullish design you very testament

Tom Mitchell

Basically, core off. we're we're seeing Alan, Bay QX Northern as an about better California Certainly, affordable impact doubt. XX% year, Doug the has has of been acceleration, more it it's but accelerated sluggish, off a into but as from from it's more prior segments still we seeing without get out Area, said,

Alan Ratner

Okay.

Doug Bauer

absorption, other really one good or Dallas Austin slide Alan, the a quarter-over-quarter. absorption comment the good through good Brexit, actually plugging Trendmakers the a new improvement can is and We're had along quarter in in Houston there seeing first keeps you deck division On quarter. see our two.

is Texas overall, doing So fine.

Mike Grubbs

And data. Alan, adult to more was more absorption you give active some luxury some level absorbed at move-up X.X, quarter, color. was entry this was the is X.X, and Mike. to I'll the for On give the our just X.X we rates, you X.X, the

Alan Ratner

Mike. helpful That's on And the changes that I have well, a be you but... have do but after, year-over-year second helpful, question, if as those, would maybe

Mike Grubbs

I...

Alan Ratner

Okay.

to want go on just that? quickly You

Mike Grubbs

It the X.X and move-up, active in X.X entry, yes. luxury, first was X.X adult Sure, X.X quarter. on

Alan Ratner

the Doug, doing M&A. done you're you then, guys number organically, And of of markets, in entering or through you've process some have entered are new some a

a other organic? as be which and you're M&A there smoother any preference X some been can as going of the bumps expected, the through kind as along curious, you provide there is going in than commentary road, process, between which there's might forward, far going ones of kind Just retrospective that is over and ones

Doug Bauer

some transaction, in result. the an you you there, and do Whenever M&A organic get bone exactly find closet can want. always gives period M&A here you what immediate you the you more

we over our I our going is mean we about next billion really is we're to at the that $X it -- portion not of a look obviously over Dunhill. doubling plan So over little pursue as to out continue talked big roughly Southeast the you When size, made acquisition in area that plan both. this there Texas game -- at the a decade I growth country. of a over revenue we're getting. for comes

Northwest, in you As we the we $XXX X years, our that's forecast we billion. it million another out area, that's from that want Then $X.X pursue that million, the over $XXX and to existing next XX the some to at areas look another out plan there operations. balance as comes

competitive we've entry brand a it's competition, there lifestyle pivoting our lot luxury less people. got all they're and Everybody as into let the super level is we'll Company business, that mean I level So for of relatively like being entry and adult, position folks in but fine. level entry to runway the just do opportunistic going is the less plan both speaking. premium and and there's a we is the move-up, active

Tom Mitchell

are a those have June opening launch markets the we after project in just really teams. new we're it's Doug to his it's in teams Sacramento. first I'll feel about couple positive more Austin that. remarks now in the about good and relative we've then and our and add place But gaining momentum we're that there existing as Tom. excited right like our in got operations, Alan, We're there. we expect feels our then future that results And said

too, about pretty this we're optimistic So

Operator

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

Stephen Kim

that the you couple covered expecting -- accounting, to quarter in if I call that exactly on remind whether us can was the in what what and Had of I you've just purchase the guess, items XQ? apologize late. that housekeeping already. jumped for begin. I you're a

Mike Grubbs

purchase the by XXX quarter. No, that's The basis about affected points Dallas the fine. accounting even for margins

Stephen Kim

The Right. margins points. or is basis Dallas that XXX

it was for What overall? whole company Okay. the

Mike Grubbs

roughly points basis XX -- It's XX basis points XX basis consolidated. to overall

Stephen Kim

Got it.

anything is beyond? quarter there the And second in Okay. or expected

Mike Grubbs

dollar basis. amount, same Probably about same the

Stephen Kim

pretty Will or half? the much XQ expect eventually you back dissipate by that [indiscernible] what Okay. for do

Mike Grubbs

by gone yes. much Pretty XQ,

Stephen Kim

-- in Great. the margin Okay. April -- in you've in in your that your taken there's right? additional assume no impairment I thus that number, far impairment And guide, then XQ

Mike Grubbs

not. there's No,

Stephen Kim

Yes. Figured.

And in -- the Okay, about great. margins, you've commentary -- then about which that. the the been snap-up the talking

with to your consistent, half margin I XQ We but expecting that's going how weren't so to you has be from margin ago? expecting comments back abrupt. things talk is your saw XQ And of months if the And can guidance year, guess, the be weren't what anything, snap-back in that projected to the if we provided you -- as quite about changed I'm or low. are consistent trajectory X so wondering you the today,

Mike Grubbs

about going range. it's the very it. things saw with quarters to Yes, first we talked end first We couple we flat the around and of at how talked -- quarter that consistent relatively how margins thought we XX% of our be about were in

in So we the to of is delivering revenues amount really the start fourth and snap-back that third the California related from quarter.

If that you remember, many last fourth third the year California quarter, and weak. units didn't we and sell was in relatively

relatively And so, California and many hence, delivering was units we're we're not that weak. --

And much so, that from in we're many this of couple we're that not quarters the hence, California year. -- delivering first revenue --

I think highest our California XQ, $XX margins our alone, in that's down million where was are. from revenue

gave markets in incentives down some So additional other as margins of in well that's the what's XQ. as dragging that the the we

Stephen Kim

OK. Yes.

your of understand make you half more Now XXXX. half margins were XXXX? areas that's these of half expect say And of that it in versus months of closings helpful a geographically in to of the Or as that not case the -- expansions little over in generally things it's some maybe similar relative carry bit in the I on conceptually would on XXXX XXXX? you the be be bringing be first to going front would the would XXXX of or for the your more guidance new it back just into But the XXXX, that is it, how makeup consistent makeup XXXX, XXXX would to what on deliveries the half to it outlook. similar of of then giving to the of than know fair last you're very back the to few

Mike Grubbs

a overall No, XX% year, good is full margin. and a I margins But at little we're bit the delivering we think rest California our we're consistent as first mean, be that for And at assuming our pretty more to have the I our more of the reason next year rate because other merchant sell that a seeing, pace the currently in margins 'XX equivalent the that we bring year. markets spike buying half the the is continues of run moving I that's that for to to forward think markets. will many of units to on builder the not we're just California where XX% 'XX

Stephen Kim

for then And Right, it. got last one me.

terms the Sacramento. mentioned, you expansion, mentioned In Austin you and of

be expand anything the at going You Charlotte you been think to will more be working a -- when Southeast Carolina there. on know I would and that to Raleigh orders; Carolinas. in or I from into didn't beyond was mention hear Gray intention two two, you the least to focused are grow meaningful is initiative those you about the to -- contributor didn't still metros? as the and be business you that to your it base I has broader curious A,

Doug Bauer

the half the communities the order Stephen, meaningful Carolinas, in we'll when M&A. the in organic, and go open first mentioned, I more call as mean As mentioned got first previous lead XXXX -- you -- in I time more really show it previous will call, delivery you've lot you our and I late something bottom-line of question support a earnings 'XX versus start 'XX. and

to continue We at M&A. look

Southeast and our as together As put billion a I map look mentioned previously, of expansion. our $X the we plan as we at

Southeast. billion $X is there the revenue in Now of plus

we and So expand continue just definitely will to in Charlotte the not Southeast, yes, in Raleigh.

Operator

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

Jay McCanless

Hey.

be first XX% guys need backlog? we that the there are there you one had, the was comfortable issues any about? with to the that the How about backlog. So Are gross margin, talked you contingency worried I the

Mike Grubbs

of as some buyers but backlog year. have the we I to do we Well, I in we -- strength the of sell right the of and mean, this mean, close have coming the deliveries thousand -- of more backlog, contingent probably percentages I as now. California strength because units mean, are the a couple we

XX%, assume overall is to going now of would I but to the right that is margin that full So margin start that's the dropping. our Hence California. time backlog driven over backlog year strength by is why XX%

XX% odd probably the in units some California think our I in of are backlog. now right

Tom Mitchell

so on is of this good backlog XX-point contingency on sales really half and contingencies basis. good honed about in our about backlog and in feel really and and that done we Overall, Tom. shape is contingency being close, job We've great a as we've are are of about we're managing those of those half a we and XX% to and on talked is them about initiative one are have those weekly Jay, about of those management, contingency our there. marketing our management focused honed sell to we really

Jay McCanless

this earlier. think and had, I I answered question you second The may have

they are bringing then also apology seeing So them competitors? what running incentives, time you and incentives it, to to [indiscernible]? year, up they this last Are are your now are your from ramping where do those versus down but their

Mike Grubbs

our had give you at X.X% in in you were history, our X.X% to and for -- the Well, -- incentives the and compare I'll we quarter, Jay, on Last fourth in X.X% incentives. the Tom we XQ, for competitors, were fourth but was it when or year deliveries can quarter. the deliveries then maybe Doug jump so

up from the units So, end and a sell within for inventory the XXX reason basis it to, of close lot quarter, able The of that jumped points. our primarily is were we standing year.

incentives in were incentives but on get system X.X% I missed backlog, they and around the we we sit little So and already, bit think fourth mentioned our to Doug quarter through that margin. today hence came those a higher where Backlog, why with probably it's moved X.X%.

So pretty we're that anywhere the X% XX% markets XX% range on from consistent, depending to in. those or but to

Tom Mitchell

seeing are in say markets, though, Jay, relative that sequentially would general In required improvements to most buyers. motivate I we of to incentives our

Jay McCanless

-- sorry, And then Doug.

Doug Bauer

very mentioned out sorry. I consumer. business Jay, mean, a earlier, as with I there it's still the Yes, competitive

we're and -- of other Phoenix, markets direction. much So -- seeing we're more, we're It's and a ground. power the in the heading more in little but but lot markets, we're like losing pricing so San competitive right a with Diego the not not consumer it's

Jay McCanless

the absorption And might could been last thing again type those have then buyer test. give for [indiscernible] this on Mike, you year? by

Mike Grubbs

was X.X was X.X adult. But then just X.X. luxury It's part that entry, QX, X% year, for of business, year it's move-up, luxury remember X.X our active X.X an move-up in like it last for Yes. to active was hasn't a level X.X, -- this for And was much adult X.X, growing was of X% -- entry for delivery, been so XQ and X.X adult it but our and impact. active of was

Doug Bauer

There's XXXX. of quarter first got to examples in the

Operator

question Our Dahl Mike Capital from next with Markets. RBC is

Mike Dahl

months I shaken the both some last around your at in wanted I it some to some back the Alan the circle like industry M&A. Steve seems from six and of question assets or has of for guess, competitors. over a so to earlier movement just And least

M&A narrowed or how you near-term can of whether give has kind on months spread past So the you as kind just here viewing opportunities today, the of and us sit insight bid-ask your you X over so? are

Doug Bauer

really the local best small, and builders premium six strong a a focus small Well, have and I become on we our a very attractive how presence. always mean in regional lot and of with for candidate we've big brands of the

I know generally a but see right we're very to in activity bit you would continue in ask opportunity we disciplined, M&A staying to would found think the like on sized grow where So they we market, small but are Dallas. the medium finding capital markets. is the and builders of are be, that the little I the say regional their generally want in short speaking, north to buyer the

is look the assets talent. to organic attractive, And #X to understand too, accretive are Greenfield up Pointe we say at that we with the would after priority at we so joining long time, becomes look real We estate continue the like then easy deals -- talent right do and to a will the the selling very term TRI or can same I if themselves be find company are the and that. at want in but disciplined. M&A very expansion

Mike Dahl

just there bit been around that improvement. numbers Okay, that's a tone helpful. the second Clearly monthly order nice cadence. question the suggest and has My of your

were first to coin in worse month so it look but that I too April's kind And would to the of standpoint. or of like March a seeing from of April, be trends rest nitpicky, on whether at it's flip a kind the as you better seems look par if not year-on-year running out the the X with than like weeks,

Easter seeing So kind the or the think that seasonal of improvement is a more that something maybe off do you are this impact you of reflection at or point level else?

Doug Bauer

-- to We in an weekend have extra March. get impacting definitely the It's we also really Easter want technical.

Mike Grubbs

realize lot Most within actually had a weekends on rewrite not on weekends you people don't We that orders of March, weekdays. really five inferred.

we of close how that's drop an for [Indiscernible] indicator weeks, anything think currently at We'll I massive see we're April,. perspective. don't absorption sit off out, from or but So a a huge running hereX what

Doug Bauer

other, sales is, speaking, on rest chop the to you've game, the call, our season. are management reducing the rest in earnings wood on [Indiscernible] optimistic as mean on in certain this focus of I the there's cost markets as A costs of say that call, some generally of steady. focusing your a get quite the and looking we're, We're I We intently the so for to mentioned I got mentioned But and we in marketing. to earnings would areas. lot year. reduction the and forward be versus

Operator

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

Soham Bhonsle

for morning. Soham Jack on This this actually is

pace, being on I sales you So quarter -- guess target last continuing think the year. talked as X.X about I your the just for

So given just the outperformance wanted to the see optimistic more that's expectation? still today the in Are year? if you

Doug Bauer

say that Well, I forward think not probably we'd pull much really no, expecting right orders we're X.X we're higher than some now. to -- that much

of I those to previous of you for per the talked so so. XXX orders projection quarter we high year, probably number. That was XXX had When was three I again, X.X to have think we the our looked at and been got for and that's think five that. the And we in helpful, XXX think what and about orders weekend I we really we was in quarter. XXX the we're running weekends, that we close March, fortunately, number had that comp delivered a bar happy

feel I today still we think -- we that pretty productive number. with

Soham Bhonsle

differentiation OK. drive see I our Tom, do also the particularly as seen strategy being as the your across press but being checks, points. price product and in And then aggressive one incentives important absorptions. we've larger what decline the guess We release your of to peers marketing rates talked you on through just about in is sales

expect how compete guess, guess, having to the So the I they you turn door? buyers incentives, buyers I Are somewhat when it through order in those retain today to difficult the with brand? value away to being is trained walk to of

Tom Mitchell

competitive challenging. it As and Doug out certainly definitely market said, there is a it's

of and do our think with needs are. finding engaging advisors I great job and one customers our a sales their each specific every what out

each packaging We to those are every buyers' and we're need. offering to tailor individual incentives and

So it's saying, rate. one and go we the in pretty turning want being sales are demonstrated each and but as brand, stress buy we're lifestyle you our to successful if think them incentive, product. design we an away premium our And not every that innovation that have of by we and our I elsewhere, do

Doug Bauer

is, We by plans and Does certain competitors Vegas. around for all And be very an differentiating brand Yes, buyers the in with good ability to in consumer surveys to I we yes, and and actually of And differentiation attracted were has premium some impact that areas these sell Las a that will pay have Las it. you of incentives have ourselves that our with floor done in in would there will recently our do of to type we do homes. of we lifestyle but a incentive, they add innovation go big point, do the actual that they of then need but what aggressive job no We to to incentive, Cliff very, a get mean differentiation. his will on that providing data market more mean, support to up Vegas, every that. I and designs, team your quarter reviews. little run

still differentiate Montrias ourselves push we'll So feel we divisions. our through our design as again, innovation, all hear, we'll with but it, we

Tom Mitchell

it. Got

-- if just I could sneak Another one in, Mike.

it costs. net For I'm and add in but you then the headcount quarter, a additional SG&A, it should reductions like, which Dunhill correct wrong, if sounds be sounds you some benefit, start-up had in that this me

SG&A So more over dollars think of be deleveraging percentage basis? flat should year to a despite on the we something year

Mike Grubbs

Yes, it's relatively flat.

-- I million quarter G&A our to a $XX runs think we roughly. around $XX million

Operator

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

Carl Reichardt

we XX-year question presence morning. about out, of I one to the double versus that wanted When the decent ask a already how talk you you, Company, is of Thanks. sketch we that the size the new within Good markets? expand into to picture penetration to big to increasing Doug. kind have markets much trying plan just of if sized

Doug Bauer

million to $XXX About $XXX million.

to over of of picture five billion the Just a $X say XX growth you're next roughly painting years.

math, million markets. X.X, a As it $XXX I Southeast, do $XXX had in the in $X the it's down, the I balance billion We in million about about if the million $XXX Texas, Northwest. of the broke it's in

we've the picked. of roadmap that kind that's So -- we've

Mike Grubbs

a But season markets. those we lot plan of to

Doug Bauer

already we've exactly. Yes, --

he's I $XXX part asking, that's of million. that's think what that

Carl Reichardt

you What or down come strong? ability course of kind question the Yes, if two the off that you And the seeing four say segment product is. guys you And then just one geographies incentives you the over quarter your and been either breakout has those that enough at a were little subsets, geography one incentives would look or were incentives to on subsets offering. drag most what the stronger? of to picture

Doug Bauer

cost just pricing in for rest would by It's are first Diego rest that's would about the net I be X% the pricing -- and about market and it's Carl. the down flat. the Seattle, positive three say Norcal, markets net I quarter of that power pricing would Inland Phoenix. some San X% that the Vegas, say months net which Yes, The power offset Empire, improvement is improvements.

we So it's incentives X.X. said at as -- to and running our X.X earlier, backlog

grind. activity Empire, Cedar activity a very our we that in a going still as rest communities. it's new through end open no Phoenix, XX in strong in there be we seeing Inland as in we're -- go to new out we're There the is up We but encouraged community the in the by no way had models the year, So is of of here the up Seattle, Landing.

seeing the puts are market So takes. you across and

just now. classic it's So housing market a right

Carl Reichardt

Doug? picked rates Would up conversion quarter, you the say during traffic

Doug Bauer

Traffic conversion rate.

Carl Reichardt

Yes.

Chris Martin

Yes.

Carl Reichardt

[indiscernible]? So percentage turning traffic you're of

Doug Bauer

yes. Yes,

Operator

comes with question Bank. next Sood Deutsche Our from Nishu

Nishu Sood

So in there. pretty -- obviously pace order the a the the improvement March, improvement in strong

the mentioned issue. weekend You

March. Were well? have rates a patterns So any might incentive price particularly the the obviously the kind a or affected gives to Just of benefit that that boost. demand went price incentive bit might trends down trying and Obviously adjustment of of as timing adjustments, generally. quarter, and have understand of the thinking, boosted there March which of

Doug Bauer

all. at not No,

Nishu Sood

Got got it, it.

folks kind and buyer market Okay. product, trend the pretty you regions did different in California, in the And the you California lot notable not general know type, or if just Was might of -- been California quarter operation improvement a earlier, where not? a California color so, segment sites specifically, California. so specifically talked about. specific -- if it's move-up different of less a there and through product submarkets? is more mentioned you of were notable the impacted, it more have have than And and or -- have since notable, there's focus, folks California that of diverse been lot How the

Doug Bauer

Orange we're market County -- softer, been better gotten Orange the down go you go or San mean it's houses script, down that's of mentioned million, as year. LA, buyer when the million County a to a that are I there. but very profile has million $X.X sequentially I Diego pretty $X international as selling all $X San every IE, Well, month. over to good Empire, out and call in challenging Diego, you to strong, from all as I The sequential continues Bay a improvement mentioned I earnings be the in end had Inland to what the Area

we luxury price paint a can't say, in very a have well. profile you San brush buyer are buyer point here buyer, doing the and very I the year Asian Chinese diverse California and left. and with has So mean just that Diego homes the

Nishu Sood

the end And since improvement notable lower point regions the then, price so take in the it do that from point-wise of was higher the than type in product I was price more year type. product price point that, or

Mike Grubbs

X.X backlog X.X. seen our was average in it opening the see Doug order our talked actually think the about market. mean quarter. points continues our cadence San broad-base to you guys. a Diego we've think the backlog I is as of seen across I We've Diego, well absorption. X.X. San but to picked price late. sequentially January than Inland I and March price Nishu, has throughout in really up up, sell of obviously No, those sales good very comments, the most to pretty from are markets And lower

Operator

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

Scott Schrier

If more understanding lot through question. the also and absorption it's weekends, follow-up quick pickup First, from the really -- than what sequential on that know January a said trends there's it's some not in March I know California I weather, maybe you terms of look had that I is, the And overall really five there. quarter. earlier that anything the 'XX. in 'XX in bad 'XX, an we saw

pickup So any quarter? went kind in also absorption played as I'm weather the wondering meaningful in through the you role of if

Tom Mitchell

a is but say deal. Traffic the of not weather-driven quarter. a Yes. throughout that played we're Scott, could Tom. would chalking California remained to sequentially, have weather it the of I up this big part constant fairly some improvement

we've said, conversion. generation great lead lead job Doug As and a on done

condition. much place too due emphasis wouldn't I the improving weather pickup on to So

Scott Schrier

comment growth? year, can count Got back in community the about how you're maybe of the you on thinking half And it. also

Mike Grubbs

in Yes. XX XX this We've we'll new quarter. guiding do Overall, second the opened what we you about quarter and we first new communities to did, the already, saw year. in XX communities we're

Scott Schrier

Okay.

California or versus comments thinking allocation, about value and book you're how whether them? cash of like longer-dated you're from any assets Lastly flow land some what it's other on you the capital operating holding developing leverage could give accretion items sales terms from on in thinking and

Mike Grubbs

the have positive this our don't focus. have about we'll to we year. think That's We've about and cash highlighted flow that sales. any be million intention any fact Yes, by $XXX talked we land

that million the bonds place a that's are why cash with want to we we drop that pay in On our balance and $XXX paydowns, continue. June, the in due we in term we or operating of So the put have of revolver. loan debt will the

So our that for maturity. focus right now is debt June paydown

Operator

with proceed Alex comes from question B. question. Please your Rygiel next Our Riley. with

Alex Rygiel

Thank you.

First are question, are as And of any and the the return? XX it April, March relates those months coming in their walked have February, that away into to similarities you ago? in marketplace buyers seeing buyers back any are that may

Doug Bauer

a for third because convert in last Not fourth sales conditions of degree, to able that seen were into the huge market but have we to quarter not those year. contingent returning market and the back their some buyers coming

has So have rates that and to buying with spurred renewed in been have the relative people we activity. some decline there successful interest been in that reengaging buyer

Alex Rygiel

we How about unsold it? In at XXX completed, should you Are the homes is of from XXX year-end. pleased with think this? down

Mike Grubbs

I unsold had about are under think that unsold units construction XQ, XQ you Yes, with that we're and under sorry. construction X,XXX actually we completed. construction to sitting X,XXX look when compared here were the numbers at and And under now completed,

standing XXX that well. is a difference. number of like completed that units. number reduced period about we've the lot units a during Obviously think said, sold I And were we've made some and why the a we progress, XX-unit only during closed as period. So That's of by we more lot the units over

Operator

question Our Research. Please with Lacayo proceed G is from with next Alvaro question. your

Alvaro Lacayo

Good morning.

Just SG&A. a on question

may quantify If inflated those the to you factors? that dollars due those expansion as understanding deal can dollars costs the of well an spent have market how on to as get you SG&A been

Doug Bauer

total. you expanding that $XX expanding mean, that I this $XX expanding when add think I all Dallas, on call it market Carolinas. probably Sacramento, to the million we in Austin, incremental Well, said year G&A last million is the across includes the

Alvaro Lacayo

then but And Got it. I might have -- it, missed

Doug Bauer

revenue. In

Alvaro Lacayo

look like if the it for was spend, what not, any On might course. year and quarter? for of on that you land provided what color Right, have the

Mike Grubbs

number have release, a the $XXX year, this don't to I $XXX hand be billion. off the we but billion. have ended did I million think, for pretty guided maybe with to spend consistent a the in We last quarter up number billion $X.X Last so $XXX year. We $X should million, we'll it about -- million, $X to about year right

Operator

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

Alex Barron

guys. Hi, Yes.

direction. I comments builders guess, So about I your level. other entry And in that are moving heard the

I just it? opportunity good just that, in the take level. see like your not that's of or you wanted to be, about your a entry as Are don't So on kind place agreement much hear general thoughts you to are what or

Doug Bauer

or I is generate and by premium about mean, our XX%, XX% brand entry-level; Pointe of XX% the proposition. XX% from adult. our deliveries orders TRI Well is first-time so driven and move-up; second luxury We time balance active

balanced We growth. portfolio, continue to for best approach the a believe opportunity that balanced is a

So a from entirely is differentiate at life-changing facets look it's it our land, for ourselves for pivoting homebuyers. business. is to we to in And we business of a that's have business, helps ourselves going and all families our really I a housing and attract our at our competitors strategy into we it's as continuing some. clearly a continue mean, be not shelter -- culture strategy look for it's company entry level the differentiating and

Alex Barrón

Okay.

rolling example, expect said? should community So the or to out, next two, as season we you a forward to we what mix the just look year is similar for

Doug Bauer

Yes. Yes.

Okay. Go ahead. Thanks everybody.

Operator

this of call Bauer gentlemen, to question-and-answer the turn for end Ladies time, the okay. closing It's reached I'd Doug like session. we the and to And at back comments.

Doug Bauer

about thank good our Well, It in very Have reporting market much. you to July. great a is weekend. where a and was And thanks results going to we the quarter look forward talk everybody.

Operator

This concludes conference. today's

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

Tri Pointe Homes (TPH) 27 Apr 192019 Q1 Earnings call transcript