TRI Pointe Group Inc TPH

Fourth Quarter Highlights

-Diluted Earnings Per Share of $0.92-
-Homebuilding Gross Margin Percentage of 23.2%-
-Net New Home Orders up 14% Year-Over-Year-
-Backlog Dollar Value of $1.9 Billion, up 69% Year-Over-Year-

INCLINE VILLAGE, Nev., Feb. 18, 2021 (GLOBE NEWSWIRE) -- Tri Pointe Homes, Inc. (the “Company”) (NYSE: TPH) today announced results for the fourth quarter ended December 31, 2020 and full year 2020.

“Tri Pointe Homes finished the year on a strong note in the fourth quarter of 2020, highlighted by year-over-year order growth of 14% on a 38% improvement in order pace, homebuilding gross margin expansion of 130 basis points to 23.2% and a unit backlog increase of 69% as compared to last year,” said Tri Pointe Homes Chief Executive Officer Doug Bauer. “These results are reflective of a housing market that continues to exhibit strong momentum and our operational focus that seeks to capitalize on these trends.”

Mr. Bauer continued, “Tri Pointe enters 2021 on a solid foundation, with $1.2 billion in total liquidity, $621 million in cash, a debt-to-capital ratio of 37.6% and a net-debt-to-net capital ratio of 24.4%*. We believe this financial strength puts us in an excellent position to continue expanding our operations with an eye towards generating strong stockholder returns. Our main focus remains on this as we move forward and anticipate continued headway in 2021.”

Mr. Bauer concluded, “Given the current market dynamics, it is clear that there is a critical long-term need for additional housing supply in this country. Existing home inventory remains at historically low levels while demand is being driven by, among other things, powerful demographic forces and changes to how we live as a result of the COVID-19 pandemic. We believe these positive tailwinds will remain in place for the foreseeable future, providing our industry and our company with a very bright outlook.”

Results and Operational Data for Fourth Quarter 2020 and Comparisons to Fourth Quarter 2019

• Net income was $115.1 million, or $0.92 per diluted share, compared to $118.0 million, or $0.85 per diluted share
• Home sales revenue for the quarter was $1.0 billion, a decrease of 8%
  
  °  New home deliveries of 1,633 homes compared to 1,795 homes, a decrease of 9%
  
  °  Average sales price of homes delivered of $640,000 compared to $634,000, an increase of 1%

• Homebuilding gross margin percentage was 23.2% compared to 21.9%, an increase of 130 basis points
  
  °  Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 26.3%*
• Selling, general and administrative (“SG&A”) expense as a percentage of homes sales revenue of 9.9% compared to 9.2%, an increase of 70 basis points
• Net new home orders of 1,409 compared to 1,235, an increase of 14%
• Active selling communities averaged 117.5 compared to 142.8, a decrease of 18%
  
  °  Net new home orders per average selling community increased by 38% to 12.0 orders (4.0 monthly) compared to 8.6 orders (2.9 monthly)
  
  °  Cancellation rate of 10% compared to 14%
• Backlog units at quarter end of 2,964 homes compared to 1,752, an increase of 69%
  
  °  Dollar value of backlog at quarter end of $1.9 billion compared to $1.1 billion, an increase of 69%
  
  °  Average sales price in backlog at quarter end remained flat at $647,000 compared to $648,000
• Ratios of debt-to-capital and net debt-to-net capital of 37.6% and 24.4%*, respectively, as of December 31, 2020
• Repurchased 4,962,823 shares of common stock at an average price of $17.53 for an aggregate dollar amount of $87.0 million in the three months ended December 31, 2020
• Ended fourth quarter of 2020 with total liquidity of $1.2 billion, including cash of $621.3 million and $535.9 million of availability under the Company’s unsecured revolving credit facility
  
  *  See “Reconciliation of Non-GAAP Financial Measures”

Results and Operational Data for Full Year 2020 and Comparisons to Full Year 2019

• Net income available to was $282.2 million, or $2.17 per diluted share, compared to $207.2 million, or $1.47 per diluted share
• Home sales revenue of $3.2 billion compared to $3.1 billion, an increase of 5%
  
  °  New home deliveries of 5,123 homes compared to 4,921 homes, an increase of 4%
  
  °  Average sales price of homes delivered of $631,000 compared to $624,000, an increase of 1%
• Homebuilding gross margin percentage of 22.0% compared to 19.8%, an increase of 220 basis points
  
  °  Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 25.0%*
• SG&A expense as a percentage of homes sales revenue of 10.8% compared to 11.5%, a decrease of 70 basis points
• Net new home orders of 6,335 compared to 5,338, an increase of 19%
• Active selling communities averaged 133.2 compared to 145.7, a decrease of 9%
  
  °  Net new home orders per average selling community increased by 29% to 47.6 orders (4.0 monthly) compared to 36.6 orders (3.1 monthly)
  
  °  Cancellation rate of 13% compared to 15%, a decrease of 200 basis points
• Repurchased 15,163,477 shares of common stock at an average price of $16.53 for an aggregate dollar amount of $250.7 million in the full year ended December 31, 2020
  
  *  See “Reconciliation of Non-GAAP Financial Measures”

“2020 was a challenging year and I would like to thank the Tri Pointe Homes team for their commitment, tenacity, and ingenuity in making this a record year for our company,” said Tri Pointe Homes President and Chief Operating Officer Tom Mitchell. “Our success was driven by a combination of positive industry factors, well-located communities and innovative new home designs. The accelerated demand allowed us to increase prices at a majority of our communities and stay ahead of the cost pressures we are experiencing as an industry. I am very excited about the successful implementation of our one unified brand – Tri Pointe Homes. With an increased emphasis on affordability and the growth of our early-stage divisions I am very optimistic that 2021 will be another strong year for our company.”

Outlook

There remains uncertainty regarding COVID-19 and future developments, including the duration and severity of the outbreak, as well as the related short-term and long-term impacts on the economy. The following outlook is based on the Company’s backlog as of December 31, 2020, current market dynamics and management’s estimates. Actual results could differ due to, among other things, the effects of the COVID-19 pandemic.

For the first quarter of 2021, the Company anticipates delivering between 1,100 and 1,200 homes at an average sales price between $625,000 and $635,000. The Company expects its homebuilding gross margin percentage to be in the range of 21.5% to 22.5% for the first quarter of 2021 and anticipates its SG&A expense as a percentage of home sales revenue will be in the range of 12.0% to 12.5%. Lastly, the Company expects its effective tax rate for the first quarter of 2021 to be approximately 25%.

For the full year, the Company expects to open approximately 70 new communities and end the year with between 125 and 135 active selling communities. In addition, the Company anticipates delivering between 5,700 and 6,000 homes at an average sales price between $600,000 and $610,000. The Company expects homebuilding gross margin percentage to be in the range of 21.0% to 22.0% for the full year and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 10.0% to 10.5%. Finally, the Company expects its effective tax rate for the full year to be approximately 25%.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 7:00 a.m. Pacific Time (10:00 a.m. Eastern Time) on Thursday, February 18, 2021.  The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer and Glenn Keeler, Chief Financial Officer.

Interested parties can listen to the call live and view the related presentation slides on the internet through the Events & Presentations heading in the Investors section of the Company’s website at TriPointeHomes.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software. The call can also be accessed toll free at (877) 407-3982, or (201) 493-6780 for international participants. Participants should ask for the Tri Pointe Homes Fourth Quarter 2020 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start of the call. A replay of the call will be available for two weeks following the call toll free at (844) 512-2921, or (412) 317-6671 for international participants, using the reference number 13714650. An archive of the webcast will also be available on the Company’s website for a limited time.

About Tri Pointe Homes, Inc.

One of the largest homebuilders in the U.S., Tri Pointe Homes® (NYSE: TPH) is a publicly traded company and a recognized leader in customer experience, innovative design, and environmentally responsible business practices. The company builds premium homes and communities in 10 states, with deep ties to the communities it serves—some for as long as a century. Tri Pointe Homes combines the financial resources, technology platforms and proven leadership of a national organization with the regional insights, longstanding community connections and agility of empowered local teams. Tri Pointe has won multiple Builder of the Year awards, most recently in 2019, and made Fortune magazine’s 2017 100 Fastest-Growing Companies list. The company was also named one of the Best Places to Work by the Orange County Business Journal for four consecutive years. For more information, please visit TriPointeHomes.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include, but are not limited to, statements regarding our strategy, projections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, including our estimates for growth, financial condition, sales prices, prospects, and capital spending. Forward-looking statements that are included in this press release are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effects of the ongoing COVID-19 pandemic, which are highly uncertain and subject to rapid change, cannot be predicted and will depend upon future developments, including the emergence and spread of new strains or variants of COVID-19, the severity and the duration of the outbreak, the duration of existing and future social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability and acceptance of effective vaccines, adequate testing and treatments and the prevalence of widespread immunity to COVID-19; the impacts on our supply chain, the health of our employees, service providers and trade partners, and the reactions of U.S. and global markets and their effects on consumer confidence and spending; the effects of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such parcels; access to adequate capital on acceptable terms; geographic concentration of our operations, particularly within California; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; raw material and labor prices and availability; oil and other energy prices; the effects of U.S. trade policies, including the imposition of tariffs and duties on homebuilding products and retaliatory measures taken by other countries; the effects of weather, including the re-occurrence of drought conditions in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters; the risk of loss from acts of war, terrorism, civil unrest or outbreaks of contagious diseases, such as COVID-19; transportation costs; federal and state tax policies; the effects of land use, environment and other governmental laws and regulations; legal proceedings or disputes and the adequacy of reserves; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our homebuyers’ confidential information or other forms of cyber-attack; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)

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⁽¹⁾  Homes under construction included 86 and 78 models at December 31, 2020 and December 31, 2019, respectively.
*    See “Reconciliation of Non-GAAP Financial Measures”

CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)

MARKET DATA BY REPORTING SEGMENT & STATE
(dollars in thousands)
(unaudited)

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(dollars in thousands)
(unaudited)

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)

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⁽¹⁾  As of December 31, 2020 and December 31, 2019, lots controlled included lots that were under land option contracts or purchase contracts.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP financial measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage and non-cash impairments and lot option abandonments have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who may adjust gross margins in a similar fashion.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-net capital. We believe that the ratio of net debt-to-net capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

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⁽¹⁾  The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.
⁽²⁾  The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table calculates the non-GAAP financial measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP. EBITDA means net income before (a) interest expense, (b) expensing of previously capitalized interest included in costs of home sales, (c) income taxes and (d) depreciation and amortization. Adjusted EBITDA means EBITDA before (e) amortization of stock-based compensation, (f) real estate inventory impairments and lot option abandonments, (g) early loan termination costs and (h) restructuring charges. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table contains information about our operating results reflecting certain adjustments to income before income taxes, provision for income taxes, net income, net income available to common stockholders and earnings per share (diluted). We believe reflecting these adjustments is useful to investors in understanding our recurring operations by eliminating the varying effects of certain non-routine events, and may be helpful in comparing the Company to other homebuilders to the extent they provide similar information.

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(1)   Includes (i) a $10.2 million charge for the year ended December 31, 2020 related to the early extinguishment of a portion of our 4.875% Senior Notes due 2021, which is included in other income (expense), net on our consolidated statements of operations, and (ii) $58,000 and $5.7 million charges for the three months and full year ended December 31, 2020, respectively, related to restructuring charges stemming from a workforce reduction plan.
(2)   Includes a tax adjustment to reflect the higher pretax earnings associated with the aforementioned adjustments.