Tri Pointe Homes, Inc. Q2 FY2024 earnings call

• Second quarter results: Delivered 1,700 homes, revenue up 38%, gross margin 23.6%, homebuilding operating margin 12.6%, EPS $1.25 (108% increase YOY). - Market update: Strong demand from millennials and Gen Z, lock-in effect from elevated mortgage rates, normal seasonal demand trends. - Growth initiatives: Progress in Utah, and early work in Coastal Carolinas and Orlando; aim to grow community count. - Debt and liquidity: Repaid $450 million of senior notes, reducing annual interest by $26 million; liquidity $1.2 billion; debt-to-capital ratio 22.9%. - Share repurchase: Repurchased over 1 million shares during the quarter, reducing shares outstanding by 5% over 12 months.

In the second quarter, Tri Pointe delivered 1,700 homes with an average sales price of $666,000, resulting in home sales revenue of $1.1 billion, a 38% increase year-over-year. Gross margin expanded by 320 basis points to 23.6%. Homebuilding operating margin was 12.6%, a 420 basis point improvement. Revenue from non-California divisions previously represented less than 50% of total company revenue and is expected to grow to approximately 70% by 2026.

• Third quarter outlook: Anticipates delivering 1,450-1,550 homes, average sales price $685,000-$695,000, gross margin 23%-23.5%, SG&A ratio 11%-11.5%, effective tax rate ~25.5%. - Full year 2024 outlook: Raised deliveries to 6,300-6,500 homes, average sales price $670,000-$680,000, gross margin 23%-23.5%, SG&A ratio 10.5%-11%, effective tax rate ~25.5%.

Q: Could you talk about incentives and absorption pace?

A: Incentives were a tad below first quarter. Absorption has normal seasonal patterns with slower summer months, but expected reacceleration in fall.

Q: Can you update on community count trajectory?

A: Community count ended the year in range 140-150, with openings planned and some communities closing faster.

Q: Any shifts in consumer segments?

A: Mix of entry-level, move-up, and active adult was consistent, with move-up slightly higher this quarter.

Q: Thoughts on lot cost inflation?

A: Lot costs factored into guidance, with 5%-10% increase expected, but lot costs for 2025 are known as most deliveries are owned/controlled.