雅虎香港財經 Tri Pointe Homes, Inc. (NYSE:TPH) Q1 2024 Earnings Call Transcript
Tri Pointe Homes, Inc. (NYSE:TPH) Q1 2024 Earnings Call Transcript April 25, 2024
Tri Pointe Homes, Inc. beats earnings expectations. Reported EPS is $1.03, expectations were $0.76. Tri Pointe Homes, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Tri Pointe’s First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I would now turn the call over to your host, David Lee, General Counsel. Thank you. You may begin.
David Lee: Good morning, and welcome to Tri Pointe Homes’ earnings conference call. Earlier this morning, the company released its financial results for the first quarter of 2024. Documents detailing these results, including a slide deck are available at www. tripointehomes.com, through the Investors link and under the Events and Presentations tab. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating performance, are forward-looking statements that involve risks and uncertainties. The discussion of risks and uncertainties and other factors that could cause actual results to differ materially are detailed in the company’s SEC filings.
Except as required by law, the company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Tri Pointe’s website and in its SEC filings. Hosting the call today are Doug Bauer, the company’s Chief Executive Officer; Glenn Keeler, the company’s Chief Financial Officer; Tom Mitchell, the company’s President and Chief Operating Officer; and Linda Mamet, the company’s Executive Vice President and Chief Marketing Officer. With that, I will now turn the call over to Doug.
Doug Bauer: Thank you, David, and good morning to everyone on today’s call. During the call, we’ll review operating results for the first quarter, discuss some of our growth initiatives, and provide a market update. In addition, we will provide second quarter and full year outlook for 2024. We’re pleased to report that Tri Pointe Homes had an outstanding first quarter that met or exceeded the high-end of our guidance across all key operating metrics. We delivered 1,393 homes at an average sales price of $659,000, resulting in home sales revenue of $918 million, a 20% increase compared to the previous year. Home sales gross margins were 23% for the quarter, which was at the high end of our guidance range resulting from lower incentives.
Our increased delivery volume allowed us to benefit from improved operating leverage, resulting a decrease in SG&A has a percentage of home sales revenue to 11.1%, a 40 basis point improvement compared to the prior year. In addition, our strategic shift towards a higher percentage of spec starts to meet the prevailing supply demand gap in the housing market has enabled us to address consumer needs and further increased deliveries. This, along with our ongoing success with reducing cycle times to pre-pandemic levels, creates an efficient engine to generate profits. These outstanding results led to net income of $99 million and diluted earnings per share of $1.03, marking a 41% improvement over the prior year. Relative to demand, market conditions remain favorable for new homebuilders.
Today’s environment is fueled by a strong economy, low unemployment, and an ongoing shortage of housing supply. Tri Pointe Homes’ results reflect our focus on core market locations and innovative product that appeal to well-qualified customers. During the quarter, we recorded 1,814 net new orders, which was an improvement of 12% compared to the prior year. Our absorption pace remained healthy throughout the quarter, averaging 3.9 homes per community per month. With our strong demand, we focused on finding a balance between pace and price to maximize our profitability. During the first quarter, we were able to raise net pricing in most of our communities with incentives on orders improving to 3.8%, compared to 4.8% sequentially from the fourth quarter.
With a substantial backlog of 2,741 homes and a spring selling season that continues to reflect strong demand. We are raising our full year guidance for deliveries, ASP, and gross margin percentage. Glenn will give further details on our guidance in a moment. We generated a $145 million of positive cash flow from operations and ended the quarter with $944 million of cash on hand. We have $450 million of senior notes that are maturing in the second quarter, and we plan to pay these notes off in full. This will decrease our annual interest carry by $26 million and reduce our debt-to-capital ratio to the low 20% level. Our strong balance sheet and liquidity, along with our ability to generate positive cash flow from operations, enables us to grow our business, while also returning capital to our stock repurchase program.
During the quarter, we repurchased approximately 1.4 million shares of our common stock at an average price of $34.66 for an aggregate dollar amount of $50 million. We remain committed to our share repurchase program as a key component of our capital allocation strategy, as we continue to drive down our shares outstanding and drive up our earnings and book value per share. The cumulative benefit of share repurchases continues to show on our results. Since the end of 2016, the first year in which we began repurchasing shares, we have increased our book value per share by 279% or 15% compounded annually. During this same period, our shares outstanding have been reduced by 40%. In addition to strong operating results to kick off 2024, we have also executed on key growth initiatives that we discussed on our fourth quarter earnings call.
During the first quarter, our mortgage company, Tri Pointe Connect, became wholly-owned by Tri Pointe Homes, following the acquisition of the minority stake from loanDepot. This integration allows for an enhanced customer experience and pricing flexibility, while increasing earnings from financial services. Our capture rate with Tri Pointe Connect in the first quarter remains strong at 86%. Our buyers and backlog financing with Tri Pointe Connect demonstrate financial strength with an average FICO score of 753, debt-to-income ratio of 41%, loan-to-value ratio of 80% and an average gross household income of $195,000. Another exciting development for our business is the expansion of the Tri Pointe brand into new markets. Late last year we announced our entry into the greater Salt Lake City market, and earlier this month we announced the opening of the Coastal Carolinas and Orlando Divisions.
We are thrilled to expand into these Southeastern markets, leveraging the strong foundation and successes we have established in both Charlotte and Raleigh. The Southeast has emerged as an economic engine with South Carolina and Florida being the two fastest-growing states in the nation in 2023, growing their populations by 1.7 and 1.6%, respectively. Both markets boast diverse economies that fuel jobs and drive housing demand. We feel these markets provide an excellent opportunity for our brand that caters to the need for premium entry level and move up housing in both markets. We anticipate first deliveries in both the Coastal Carolinas and Orlando Divisions in 2026. Looking beyond our first quarter results, order activity in April has remained strong, despite recent increases in mortgage rates.
We continue to see the shortage of resale supply as a key factor in the ongoing strength of the new housing market, driving high-quality traffic to our communities. In the current housing cycle, new homebuilders are continuing to capture share of the total home sales at a historic percentage. Despite near-term inflation-driven rate increases, we remain encouraged about the long-term fundamentals of our business, which are supported by a solid economic environment and ongoing household formations, particularly among the millennials and Gen Z buyers who continue to act as a demand catalyst. To wrap up, the outlook for Tri Pointe is very positive for 2024 and beyond, as we leverage our strengths to seize opportunities in both existing and new markets.
We are also very optimistic about the outlook for our industry as the undersupply of housing continues to fuel demand. As the supply demand gap continues to diverge with no end in sight, we believe our unwavering dedication to long-term growth, coupled with prudent financial management, positions us well for continued success as we create and deliver value for our shareholders and customers alike. With that, I will now turn the call over to Glenn. Glenn?
Glenn Keeler: Thanks, Doug, and good morning. I’m going to highlight some of our results for the first quarter, and then finish my remarks with our expectations and outlook for the second quarter and full year for 2024. As Doug mentioned, demand remains strong in the first quarter with net new home orders at 12% year-over-year at an absorption pace of 3.9 homes per community per month. Our cancellation rate remained low at only 7%, and we ended the quarter with 2,741 homes in backlog, which was a 35% increase year-over-year. Despite the recent increase in rates, the current demand environment continues to feel positive and our April absorption pace has remained consistent with the first quarter. With the strong demand experienced in the quarter, we were able to realize some pricing power by increasing base home pricing and reducing incentives.
Overall, we were able to increase net pricing in approximately 80% of our communities for an average amount of 2.5%. Incentives on orders for the first quarter were 3.8%, which was within the range of our historical company average of 3% to 4%. The use of incentives for some type of financing or rate buy-down continues to be a popular consumer choice. With that said, we have started to see the level of rate buy-downs and frequency of long-term rate locks decline as homebuyers are acclimatized to a higher rate environment. During the communities, we opened 20 new communities in the quarter and closed 19, ending with 156 active selling communities, which was a 15% increase over the prior year. Consistent with our previous guidance, we plan to open approximately 65 new communities for the full year and expect to close a similar number.
With our strong land pipeline, we anticipate growing our 2025 ending community count by approximately 10%. We ended the quarter with approximately 34,000 total lots, 46% of which were controlled. Our population of controlled lots increased 19% sequentially from last quarter, and we are well on our way to achieving our stated goal of increasing our controlled lot percentage to 50%. Looking at the balance sheet and capital spend, we ended the quarter with approximately $1.6 billion of liquidity consisting of $944 million of cash, and $703 million available under our unsecured revolving credit facility. Our debt-to-capital ratio was 31.2%, and our net debt-to-net capital ratio was 12.6%. As Doug mentioned, we plan to use the cash on hand to payoff of $450 million of senior notes that are due in the second quarter.
We did not have another debt maturity until 2027, which puts us in a strong position to use our capital to invest in our business and continue to be active in our share repurchase program. During the first quarter, we repurchased 1.4 million shares for a total aggregate dollar spend of $50 million, leaving us with $200 million available under our current authorization. For the first quarter, we invested approximately $238 million in land and land development. To support our gross targets, we expect to spend approximately $1.2 billion to $1.5 billion annually on land and land development. Now, I’d like to summarize our outlook for the second quarter and full year for 2024. For the second quarter, we anticipate delivering between 1,500 and 1,600 homes at an average sales price between $670,000 and $680,000.
We expect homebuilding gross margin percentage to be in the range of 22.5% to 23.5% and anticipate our SG&A expense ratio to be in the range of 11% to 11.5%. Lastly, we estimate our effective tax rate for the second quarter to be approximately 26%. For the full year, we anticipate delivering between 6,200 and 6,400 homes at an average sales price between $660,000 and $670,000. We expect homebuilding gross margin percentage to be in the range of 22.5% to 23.5%, and anticipate our SG&A expense ratio to be in the range of 10.5% to 11%. Lastly, we estimate our effective tax rate for the year to be approximately 26%. With that, I will now turn the call back over to Doug for some closing remarks.
Doug Bauer: Thanks, Glenn. In closing, I want to express my deepest gratitude to the entire Tri Pointe team. Their dedication, innovation, and hard work are truly the driving force behind our success. As a premium lifestyle brand, our ability to consistently innovate and differentiate ourselves rests on the shoulders of this extraordinary team. Looking ahead, we have confidence in the future of the housing industry and Tri Pointe’s growth. Our commitment to discipline execution underscores our pursuit of market share expansion within our existing divisions and strategic growth in our three new markets. We’re energized to continue delivering value to our shareholders and customers alike. Thank you for your time today, and let’s proceed to a Q&A session. Operator?
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