TPH

Key Points

• In the third quarter, exceeded delivery guidance with 1,217 homes closed, $817 million in home sales revenue, adjusted gross margin 21.6%, and adjusted net income $62 million.
• Spent $51 million repurchasing 1.5 million shares year-to-date, with total spend $226 million on 7 million shares, reducing share count by 7% year-to-date and 47% since 2016.
• Increased term loan by $200 million with optionality to extend maturity to 2029, ending the quarter with $1.6 billion in total liquidity.
• Market conditions soft, but underlying demand for homeownership among needs-based buyers exists; new market expansions in Utah, Florida, and Coastal Carolinas underway, expecting growth from 2027 onward.
• Expect to end 2025 with ~155 communities and grow community count by 10%-15% by end of 2026, driven by Central and East regions.

Fourth Quarter

• Expect to deliver between 1,200 and 1,400 homes with average sales price between $690,000 and $700,000.
• Anticipate homebuilding gross margin percentage in range of 19.5% to 20.5%.
• SG&A expense ratio expected to be in range of 10.5% to 11.5% and effective tax rate ~27%.

Full Year 2025

• Expect deliveries between 4,800 and 5,000 homes with average sales price ~$680,000.
• Full year homebuilding gross margin anticipated to be ~21.8% (excluding inventory-related charges).
• SG&A expense ratio anticipated to be ~12.5% and effective tax rate ~27%.

In the third quarter, Tri Pointe Homes closed 1,217 homes with an average sales price of $672,000, generating $817 million in home sales revenue. The adjusted homebuilding gross margin was 21.6%, and adjusted net income was $62 million or $0.71 per diluted share. The product segment targeted to premium move-up buyers demonstrated resilience. Revenue contribution from the premium move-up buyer segment was significant, supported by strong customer characteristics like average household income of $220,000, FICO score of 752, etc.

Risks

• Soft market conditions throughout the third quarter, with muted home buyer interest due to slow job growth and broader economic uncertainty.
• Uncertainty in consumer confidence which could impact homeownership demand.

Q: Could you provide some color on the monthly cadence of your orders and incentives through the quarter?

A: The monthly cadence was pretty consistent through the quarter. Absorption was roughly the same each month, with September being a little bit better than August. Incentives were also consistent throughout the quarter, with incentive on deliveries being 8.2% for the quarter.

Q: If I could just follow up on Paul's question here on the incentives, you said 8.2%, I think, of revenues or home sales. Were -- how much of those were financial incentives, if you sort of include closing costs and rate buydowns for purchase commitments and that sort of thing?

A: It was 8.2% of revenue in the quarter and about 1/3 of those were financing related, including closing costs.

Q: Can you just update us on your spec position and strategy and how you're thinking about spec just in terms of the contribution to the business?

A: We did reduce our total spec inventory by 17% quarter-over-quarter. Both under construction and completed homes are included in the total spec inventory reduction. We're focused on getting our business back to a more balanced approach of spec to be build, with 4Q starts more comparable with Q3 as we move through inventory while focusing on community count growth.