TPH - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Tri Pointe Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Lee, General Counsel at Tri Pointe. Please proceed.

David Lee

Good morning, and welcome to Tri Pointe Homes Earnings Conference Call. company XXXX. financial the second for morning, of quarter this released results its the Earlier detailing results, and documents www.tripointehomes.com, and These these tab. through available deck, Presentations the at are Investors link under Events including the a slide

involve to and could Before required cause uncertainties certain everyone are no and forward-looking and operating the forward-looking that which not these differ performance, statements would statements company's including other that call, that risks statements. historical this are remind facts, the risks on company concerning update I The results of materially actual factors detailed SEC call discussion to are begins, filings. by undertakes and like the uncertainties. in to Except made future duty as statements financial law,

Executive Officer; on filings. financial Operating Officer; company's Pointe's Chief Chief today With company's to of the Mamet, the call to be the Additionally, measures most turn Tom Linda SEC that, comparable over Tri and Glenn are [indiscernible]. accessed Bauer, through Officer; the company's Chief discussed its reconciliations Hosting call Doug. will in non-GAAP President measures can and now the GAAP Mitchell, Doug call Keeler, the I website and Financial the

Douglas Bauer

morning everyone call. you, David, Thank and good to on today's

we progress some of on call, results for initiatives. market the discuss the the the will During operating a our share and second quarter, update provide growth

outlook and year quarter In third for addition, we provide will full XXXX. our

as to markets. the the our quarter, on efficiencies growth focus organic within existing extremely and Tri We're new results we lay X were which building pleased with continue by driven for outstanding markets second foundation in Pointe's scale in our

This from cycle in revenue community was resulting homes count improved fueled of a year. times. $XXX,XXX, X,XXX and increase $X.X a compared XX% strong by previous to home sales increased market price billion, delivered deliveries, at average increase XX% in We growth sales the of an resulting conditions,

to points quarters, past revenue points quarter. us basis by increase for ratio year, This XXX pricing our has the expanded to XX% percentage the prior XX.X% the the revenue compared basis by Higher we help driven was base moderate Our several as XXX enabled by in which incentives. provided over gross the XX margin leverage which as basis of power home experienced and to pricing to to improved generate homebuilding quarter. sales improvement operating SG&A, XX.X% operating margin, point for a a have

increase of combination cost execution strong a or revenue, XXX% of the prior to year. $X.XX disciplined and management compared operational per earnings led strong to share The diluted

orders new levels Our continued with X,XXX net averaged per X% for mortgage per reflecting community rates demand rate the quarter quarter. X.X orders a despite that month, were during the absorption monthly of healthy

X.X% down from in with strong Incentives which on first quarter demand strength X.X%, core Tri indicating buyer were orders was is slightly the that the the Connect. company, with locations Pointe our of coupled a financing mortgage profile our quarter, in in market

XX% Connect Our generational score and XX% and homebuyers ratio millennials and $XXX,XXX loan-to-value XX% First-time backlog. an an debt-to-income are XX%, FICO in perspective, Tri of are X% Gen XXX gross a of with from of of Pointe Z. ratio our backlog buyers And income average household have of average are

with in XX%. rate quarter capture remained at second Our Tri strong Pointe Connect the

to remains by rates both dynamics overall volume enjoying sales total our demand influence and support nearly new new construction to effect elevated, home markets. remaining and for The historical XX% share conditions existing across continues below lock-in compared X%. elevated Rates pricing bolster as sales the norms. The and These of most of mortgage mortgage holders homebuilders selling garnered of homes

rates objectives. in Historically, overall meet pace have to June and a sales continue far July. and months, lower close to balancing we summer drew we into as take shape our the so absorption and price seen on seasonal normal We to have demand will trends focus experienced

see We X%. to traffic orders have July as been rates mortgage pleased and throughout that have dipped below improved

demand of company. half of we have the the lower been strong business. rates, be the Long and positive with the back in possibility Considering and elevated for industry rates would a optimistic very consumer our trends the how a maintain for term, year our outlook

a future millennials increasing The resale new ongoing in demand success market, for for factors persistent the supply land Gen These resources, with for constraints to need availability growth Z, we continue housing labor market. in sustained limited as in position face of the the company address inventory. the favorably new create and for housing strong from foundation and new coupled our homes

notes, During repurchase program. staying repaid sheet while was still in eliminating senior payments. active positive our to and cash, million community $XXX $XX demonstrating This flow ability we to balance quarter, interest delever annual the in using generate of grow accomplished our share million business the cash to count existing our in second investing

debt improved homebuilding while strong ratio Our XX.X% to liquidity billion. to $X.X of capital maintaining

our the Speaking for shares X total over of quarter share a just spend program, repurchased million of during we repurchase $XX million.

share our XX share the count outstanding X% by months, over bringing since to beginning the XXXX. reduction past of reduced have the XX% total We

growth strong per and same the have Through value compounded we profitability, reduction over book achieved share XX% this in in annually period. shares a

and call, diversifying strategic new ongoing earnings X committed As Orlando. of growing growth in in we and share and Utah, us to while company prior our our scale for expansion markets the markets, our we Carolinas on existing Coastal positioning discussed further are

first deliveries Utah, we progress are towards In with XXXX. goal our pleased our meeting in of

in which city including premium in desirable detached projects townhomes. a opportunities Central for market identifying premium highly innings Lake, first land Coastal our the and will product. Orlando but attracting have under It's our talent core still both homes early and are Salt Holladay offer our of community control, and teams in Carolinas the We markets,

and geographic are diversification for growth and further new will divisions We enthusiastic these to that contribute our they about company. confident significantly

the fourth Homes state the while have currently always in to business as deliveries, benefits We that measured and our growing XXXX. our seen market core of in builder land we in With largest Tri revenue of focusing on and customer points by strong to Pointe produce price diversify started California locations. said, California continue base the And in outside we profits.

MSAs less our XX% division from than of total the expected previously the [indiscernible] non-California to into XXXX, by Currently, demonstrating our successful of Revenue other is represented XX% California approximately business country. outside company generated grow revenue. to expansion top across revenue of

for half new industry's markets. of underlying pursue homes fundamentals and demand. driving housing on Pointe existing second Tri conclusion, Homes we our to in undersupply both robust is The remain a and persistent continue strengths very In capitalize a poised as and beyond, with positive XXXX of opportunities

industry on XX% generating focus our returns, outlook, returns, our driving remain XX% strategic annually combined our committed to strong incremental a fuels per with shareholders. shareholder and of Our strong optimism. while value goal by increasing for to book We profitability, growth share value

With that, turn the I call will over Glenn? Glenn. to

Glenn Keeler

I'd some Doug, full like second remarks to the for finish highlight Thanks, for our quarter XXXX. and and the my year then morning. results and third with and of outlook expectations quarter good for our

homes homeowners second remained per demand absorption quarter of X,XXX an X.X Doug the in at As community new net mentioned, per month. pace strong with

for outsized absorption with were above continue moderate Central to the the California, Results [indiscernible] an Washington show overall report X.X. pace absorption region and the Nevada some Arizona, quarter. all with For color demand X of markets, in on paces

while rates our quarter Demand an division entry-level for Colorado new Texas, homes, increase strong and due has in In communities. showed market. show higher resale Houston continued premium activity a our DFW and to and buyer the Austin to well-located remained supply move-up both challenging softening in of in some and

In Share company absorption a rates Raleigh types above the range with average. [indiscernible] the to product produce continue across East, markets attractive points our price strong of

D.C. from lack demand benefit supply metro with over quarter. market an for our Finally, pace and continues of high X the absorption to

remained quarter with cancellation the $X Our we in billion X,XXX revenues. X%, future and ended approximately rate quarter low representing at the backlog, homes of during

the Turning was communities, XXX communities. over with opened active ending increase the X% XX prior communities XX, and to closed in quarter year. selling We which a new

community growth. and our pipeline approximately We about the land lots. ended We are total with quarter future excited XX,XXX count

are to this with controlled owned We of goal our and controlled our increasing lots XX-XX approaching a short-term quarter XX%. lot ratio

spend. Looking quarter liquidity, the unsecured and billion revolving facility. credit million and capital of consisting balance under We at of of cash with ended approximately $X.X $XXX sheet $XXX our the million available

Our the debt-to-capital during basis paying to XXX after decreased quarter. notes sequentially ratio off points XX.X% of senior $XXX million

to homebuilding Our the net net ratio debt quarter. was capital to XX.X% end

strong XXXX, puts and which another do a to in capital to stock us our repurchase not program. business invest We use share position through our in support our maturity the debt until have

million $XXX aggregate total During quarter, available shares of authorization. we $XX current million, a million our a second us X little leaving with the over dollar spend under repurchased for

investing during We quarter, in in $XXX approximately the million land continue and the land to land active be development. market second

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

third between between the anticipate at quarter, sales and and For X,XXX we price homes $XXX,XXX homes average X,XXX an delivering $XXX,XXX.

of of homebuilding to be and expect we ratio We to be range SG&A margin XX% in the range our to expense the gross XX.X%, anticipate XX.X%. percentage XX% in to

to our to estimate deliveries Based raising an be our our we third of half X,XXX year the heading on into we effective guidance rate of XX.X%. to updated strong Lastly, XXXX, back of for approximately the homes. full quarter tax are backlog range X,XXX

to $XXX,XXX. sales average increasing price to also $XXX,XXX an updated are We of expected range our

our range ratio our expect the expense gross to range and homebuilding XX% SG&A of be anticipate full in in margin of to XX.X% year XX.X%, be We XX%. to we to the

for the Lastly, effective we to XX.X%. tax our be approximately estimate rate year

over closing turn will back the With to that, some now I Doug call for remarks.

Douglas Bauer

an closing, we years work again entire as great the our my of the In as we particularly excellence of proud to Pointe are celebrate relentless sincere values dedication I of Their in pursuit certification of. success. want are Their commitment our Tri Glenn. we founding Homes. to work once to our are earn place since to the express and honor XXXX, XX Thanks, reason mission foundation and the gratitude to team a

confident and future industry the landscape. broader I in company's remain our

strategy on a team We to ahead. and have clear place capitalize right opportunities a the vision, robust the in

inevitable we arise, improvement While stronger we every emerge unwavering challenges continuous the commitment our ensures navigate that to year.

With open that, call for Operator? Thank now you. I'll the questions.

Operator

first ISI. Our Kim Stephen comes with from Evercore question Instructions] [Operator

Stephen Kim

little good specifically. the incentives wondering quarter. I you a if this on could Congratulations about was talk bit numbers

us, how with hadn't spoke time I of they're indicated the quarter you Curious as and kind you'd trending been they've trending think how through they April. risen late last now. really of

you talk also pace. absorption if about could And your

about generally see how you think typically could the forth. about talked so a for as see that absorption -- typically little you there's And the Do there and -- fall. kind bit think you of rates year? like normal talk maybe your you a pattern some you summer a as Do into I you a what sense you us reacceleration? months to seasonality seasonal how what slows us give about in the through get

Douglas Bauer

our Yes, typically doing? see Stephen, you conditions we As quarter, How bit We tad this first had quarter. much Doug. choppiness. a reported is market And the very we're say planned. incentives for below I'd acting we some like the are are

have is And X thing your years. then every national happens which the X you to the planning add election, into that

So that our playbook. we add into

as So rates that pulled in the go as up. be sometimes that too. will if picking and tick will Obviously, into months the it anticipated, require through fall, summer more help, to starts levers down September you

just as is actually planned. working everything So we

Stephen Kim

holdings, we And look a in think I was when but lots, in specifically seems maybe the I'm little I at of think, specs. It if up. your land area encouraging. could you bit talk is not down, mistaken, inventory, your your landholdings owned like about if That's

turn, kind if in how Curious backlog activity your we're given Just sort much of sort What's what your semi-permanent spec issues that. leaning has you there it into I'm spec of driving a maybe that of right, of implies mix talk the, of that seeing -- your about change, of if geographic increased. that could are is, of activity? Is in view, sort terms kind there?

Glenn Keeler

changed That's this our question. It's we've wouldn't same. spec roughly Glenn. I the strategy Stephen, quarter. good say a it's

homes for start somewhere It's spec consistent XX% between the are spec about the think same. And couple on and strategy spec, of our orders starts of of on pretty to has up last our XX% quarter. this been over us our XX% years. that's were I been

the right? I just year, deliveries, deliver is bit are the back what little ready homes of inventory the seeing in getting in build year-end an more think a of underway. for and always homes those it's started We you're and half

Stephen Kim

price pretty Got issues nicely. you. ASP or factors Any I other trending up geographic noticed Because there has or been point maybe your mix?

Glenn Keeler

nothing there. But point mix. just really That's has. out It to

on done community-by-community other. is basis. or any a all way think sticks out think And geography I this I the don't one

going it's according of, like kind said, Doug to plan. think all I

Operator

Mike next Dahl RBC comes with Capital. The question from

Michael Dahl

Steve's I that with to the hand, around slowing. one you're your comments Just there's, questions saying July. stick June, on kind guess on seeing of seasonal you're

On your help square traffic improved orders the you that you're few that just I Can saying weeks the your you know rates typically see tick [indiscernible] and tick as other, down to last down. may versus up? relative that for seasonality? it seasonality, how normal message is intent better tracking XQ July XQ. be your But than normal you characterize? would to Or just your

Douglas Bauer

Mike, seasonality. normal it's Doug. it's No,

[indiscernible] pattern out So said, year, And different plan, this I of we and than as a weeks I X I've can't either. you seasonal seen don't previously. X or QX see the like look into weeks the make quarter you of pattern, anything

Zs. very strong between the Gen So where there's and we demand we're very millennials and today, stand bullish

But sure election lot of month, familiar with months. summer I are it's summer And the creates and honest creates, an it a be during additional national the then as normal with you I'm you. to almost mentioned, also

everything just plan it across people forward. in goal going levers our few And very again, takes we So a line. the to get And normal. business more

Thomas Mitchell

is Tom. Mike, this

July. to to of rate comments buyer reflective positivity and Just environment. improvements declining into regarding traffic a more around in the that, to say on relative the that's quality add I'd

some is short-term in what normal overall, see do as experiencing. seasonality we Doug so that. we're And But fluctuation said,

Michael Dahl

right. Okay. All

Sorry, some predict, paste growth Second over near community [indiscernible] trajectory where updated But term, less question in remind SKUs position that's it in for that next or I takes on -- more success terms the to opening around Can tough and on you're half? you regional you're now? Obviously, been there's is I openings. then if couple just how your count years. nice update your mean and of the your about always just out close community back us in the missed but just thinking remarks, the count. for basis, put us having your the

Glenn Keeler

-- Yes. one. is Mike, this that have Glenn. take all that opened. I'll the our everything for planned openings is count, year Community we

in originally comes this we've originally, more than absorption had out think So thought year flat that when a communities few were to we it's we And just paces certain going some ending of guided be strong we community closed with thought, just year-over-year to it markets. we I roughly count.

a that. might we I be from think little bit down

I think to somewhere be XXX the in XXX in communities now range year. end from the to we'll

out But all again, openings. that has a some nothing faster. to do with communities bit That's just kind of closing little

count be community and like growth into the year next so And as year said, will well. next into year. after there you count the community And [indiscernible] some

Michael Dahl

'XX? what make closeouts, can Given for that faster base level and there ending think you about [indiscernible] is and 'XX lower comment you setting around any just

Glenn Keeler

to and We count, we're had going said think last in where about community this end growth going that I we're compared count quarter still see 'XX, roughly that to we feel good XX% community to ending year.

pipeline it's still when to -- comes said, to hard there. It's community the yes, close predict it's like so just you out. And it is

driving that's that's of all year. the that end the So towards

Operator

comes Associates. The question & with Alan next from Ratner Zelman

Alan Ratner

love could notable First if drill among more your a of of did the in, seeing price today? given just question, shifts points of elasticity see more in you and buyers and in any move you're little I'd quarter? especially where terms interested Any first-time bit I segments the rates, across what sit consumer. volatility during kind within you guess up in I'm your things maybe

Glenn Keeler

quarter, consistent and was up at you at entry between and good pretty Not active instance, It's fairly let's a for much look absorption pace mix. -- adult. the difference it move for there. When

maybe you those level, consistent consistent. look When a incentive more across pretty of entry-level so as was entry regions. fairly think again, some it they're entry Because margins, out at see require I level so you level it and is our And of premium the there. builders as doesn't

So it there. pretty out even felt

Linda Mamet

[indiscernible] us Alan. slight. but segment to move-up. move-up for it's that, higher and level very entry was add between typically, slightly premium order fairly I mean, quarter, just this And I'll The for mix even

Alan Ratner

debt for this guess, on more is Second probably question, Glenn I the pay-down.

about Just in But annually, against builders about how margin? expense. million about the interest think given correctly. guess go burden P&L there the we kind easier? the And it differently of you're maybe through to down doing I aggressively reduction your straight a I'm Or land capitalization a facilitates gross but should curious to for maybe in $XX it's probably you if math drop sense one-for-one on I now that margin, won't the as a know that of lower growth and immediately It's interest the filter thinking the compete think that doesn't able GAAP about bit that interest. of expect forward, to -- even you to have maybe being not more do a be

Glenn Keeler

about Yes, is a to annually I are Alan, million, margin, be right, And we see land will until think take you're lot also impact $XX And utilizing slight banks It you there margin. to $XX X.X good that question. million grow maybe percentage. it to impact years savings. although controlled our positive will

cost And hits as margins so well. that

for with it's allows don't delever gives at. opportunity we're us know and -- that's be if and on the leverage where sheet I it But to land. opportunistic our to margin. our I us balance to the mean pay it

process, we I have and that. good stick a we underwriting to think really

So that think I into don't really it. factors

Operator

the with Carl from BTIG. Reichardt comes question next The

Carl Reichardt

wondered pricing, particular the aggressive rest business? in more year-on-year. the specific terms metros. And what, Just within the softness then the XX% region incentive the are if absorptions could thinking that on I'm in [indiscernible] if you just Central XX%, of down, just And given you're I about color, talk of metal California wondering to strengths region, more kind through relative a of strategy

Thomas Mitchell

good is This by the there. Empire. encouraged Carl, throughout Southern Inland markets we has all very been noted strong, But activity be California, continue Tom. questions. by our specifically, to On California

the can You see volume that having of there. we're activity

continues little Area And balancing the go we've got in I'd in Sacramento our to order have softer in Bay and tools on changes we than had market, making say, continue and price continue the pace a our focus we right is typical, first The well. we'll to Sacramento anticipated. to see as toolbox and QX pace. sure

Douglas Bauer

Carl, this Doug. is

markets to has look market very peaked resale On their having that the softer in been definitely more Central the when has X definitely Austin. the Colorado is levers Houston is at issues. The and Austin we've you region, probably up still at area. strong. pull Dallas

So it's early strong actually part get of back and very coming as July. into we June the

would be me, primary So Colorado. the Austin would would I levers assessment. you That my my focus ask think to we markets be on pull that with if X right and

Carl Reichardt

at addressed some And back versus Glenn, some in Okay. so new that given 'XX roughly be growth year? it, issue meaningful your of markets to kind community expect Carolinas, the as cetera. look you Is et you mix shift price point, coming, do in the or the just got we in anticipation, year's mix move-up there'll to entry-level -- on then count. Or look that similar, in of next terms of a any Glenn, some next regions

that next in pricing just I'm year. thinking about terms So for of

Glenn Keeler

significantly, Carl. Not question. good Yes,

not like good I East, Dallas is and big, more places going be a in meaningful a community as mix pipeline think and it's will Central mix Raleigh, you Houston and but see a to the there Charlotte and in shift. slightly count the

Operator

Wedbush question comes McCanless next Jay with The from Securities.

James McCanless

Doug. your markets? threat Austin the Colorado? just that I for that those guess, move-up inventory first harmful more stay to your communities to new, in more comment is inventory entry-level of or The in and on existing a communities one, or a and Is And minute, wanted

Douglas Bauer

the market. The inventory really in on is Austin resale

can pull it's the up. peaked definitely You up data,

the So doing market. our typically core builders a in focus have still competitor home well. of that -- is In we're very core we now new locations. and the And Most inventory. us to less new home locations, builders on

and locked the look at little in. a example, inventory jn market actually new inventory levels you bit see is for higher still the very home resale very, you'll DFW, If

X So it's analysis tale there. of different kind a of

James McCanless

were quarter during together about X.X. you're finished type we when so So first works July? X.X, Could the call, us and things happened an far the these on all And April talked numbers really of at quarter the but at guys through what you walk seeing what slowed last absorption when quarter you maybe you down? in in

Glenn Keeler

pretty talked Yes, Jay, we X.X X.X. April, both fairly was April question. that at May were and good consistent the second throughout quarter. close And it so actually then to about. X.X, June was that

right tick is in we May And kind nice you think a pace. a going normal little then range, business But feels of to into little a to like you of It's pace. when X.X like absorption. normal good up bit absorption we it is we X little seasonal patterns. when us, our to said, on somewhere I said. for is rates kind saw saw now, plan say a in impact still X July But early and and that

James McCanless

Glenn, me, communities hold to price? tell also guys you able Could were right. the during you quarter take what percentage either All or of

Glenn Keeler

over XX% in Yes. of a lowering roughly through a communities able a to or So our combination was slightly XX% [indiscernible] price pricing, said. little over communities. of raise increases either base have were we of It little

Operator

Barron from Alex Housing with comes question next The Research Center.

Alex Barrón

more of deliveries Yes, year. this I was lines wondering the the along I pattern, guess, of the just

quarter, think guys your guidance. above were This I you

up sequentially guess And Next the I down. then implies fourth quarter, guidance in quarter. back full

what's from kind which pattern wondering timing is of historical? that driving just way, been So was of the the or unusual delivery I somewhat

Glenn Keeler

Alex, question. the deliveries to Good highest see in quarter. Glenn. fourth It's it's our normal

think don't out of So the I norm. that's

We I those came and successful quarter third selling just little dip the spec within good of homes pipeline, the seeing think we what kind closing into really a with and had. first the you're were quarter and quarter second is quarters. a in we

then of fourth then higher into so normal that quarter. backlog, I led so kind the -- you'll second filling the see pipeline what quarter. and up the and you're think deliveries outperformance that's And and to And back in then the

Alex Barrón

I know it. did in number? give you missed it. of terms And Got I that if starts, don't

Thomas Mitchell

on didn't But quarter, pace. almost around X,XXX No, which was we that starts Alex. number, right our XX% about we're right of those... give And for the

Alex Barrón

Sorry?

Thomas Mitchell

And of those starts. were specs those about XX% for

Operator

with have McCanless a Securities. follow-up Wedbush We from Jay

James McCanless

to the could guide XQ and lot to that talk cost for want year, as what next did for in for of give contemplated how with the insight would year be full lot ask, you you that cost I you you color put thinking quarter about margin you're about And gross out type guide? any could us the inflation appreciated. inflation going into

Glenn Keeler

the -- factored it's they guidance. Yes. actually think going up, are into don't costs up. next costs mean, contributing but our year, into factor. have going Obviously, go huge always gone lots And I are lot think we a I

think talked XX% anywhere last about call from costs. in X% I lot we're that to we seeing

obviously, haven't year. mix we that guidance given that So new there's always has But for community next impact. some

Douglas Bauer

actually, our known. for control Jay, of would 'XX majority for are year our own all forecast 'XX. the I -- And costs this for and Yes. is mean, log and add. next We Doug. a deliveries so I delivery

So cost variable pretty not is stuff the like variable lot well direct cost will It's The indirect plan. that. in known. business our a revenues, costs, be

for So is today beyond. at a 'XX, really looking really 'XX late but land we're variable and that

Operator

Mr. call turn over questions back I at further closing would to this no are to for the comments. There like Bauer time.

Douglas Bauer

and hope enjoy I summer Well, for look next today's months. you call. thanks, all joining We your Thank chatting forward you. on everybody, with quarter, us to you

Operator

teleconference. today's This concludes

your and lines You have a time. Thank great at for day. participation, you your this may disconnect

Tri Pointe Homes (TPH) 25 Jul 242024 Q2 Earnings call transcript