TRI Pointe Group, Inc. Reports 2020 Third Quarter Results

October 22, 2020

-Net New Home Orders up 50% Year-Over-Year-
-Backlog Dollar Value up 39% Year-Over-Year-
-Homebuilding Gross Margin Percentage of 22.1%-
-Diluted Earnings Per Share of $0.61-

IRVINE, Calif., Oct. 22, 2020 (GLOBE NEWSWIRE) -- TRI Pointe Group, Inc. (the “Company”) (NYSE:TPH) today announced results for the third quarter ended September 30, 2020.

“TRI Pointe Group delivered another quarter of outstanding results in the third quarter of 2020, generating year-over-year net order growth of 50% and net income of $78.7 million, or earnings per share of $0.61,” said TRI Pointe Group Chief Executive Officer Doug Bauer. “Our homebuilding operations continue to benefit from extremely strong housing fundamentals, marked by low interest rates, scarcity of new and existing home inventory and highly motivated buyers. We believe these positive drivers will remain in place for the foreseeable future and will serve as tailwinds for our company as we grow our presence across the country.”

Mr. Bauer continued, “The robust demand we experienced in the quarter resulted in pricing power at our communities and allowed us to stay ahead of input cost inflation. As a result, home sales gross margin for the quarter came in at 22.1%, which was higher than we had forecast. The strong closing volumes also led to better operating leverage in the quarter, as evidenced by our SG&A ratio improving by 180 basis points year-over-year. We will continue to balance our growth objectives against our efforts to improve profitability in each of our markets.”

Mr. Bauer concluded, “Equally important are our ongoing efforts to improve returns. We remain focused on ways in which we can be more efficient with our capital and believe we can improve our return profile over time through a combination of better operating leverage, quicker inventory turns and additional share repurchases. We believe these initiatives will drive returns higher and create more value for our shareholders over time.”

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

  • Net income was $78.7 million, or $0.61 per diluted share, compared to $62.9 million, or $0.44 per diluted share. In the third quarter of 2020, the Company recorded costs related to the early extinguishment and refinancing of the remaining portion of its Senior Notes due 2021 in connection with the issuance of its Senior Notes due 2028 during the second quarter. The current quarter charge incurred was $3.4 million and is included in other (expense) income, net on the Company's consolidated statements of operations. In addition, the Company incurred $54,000 of additional restructuring charges related to a workforce reduction plan that was implemented in the second quarter of 2020. Excluding these items, adjusted net income was $81.3 million, or $0.63 per diluted share, for the third quarter of 2020.* 

  • Home sales revenue of $826.0 million compared to $746.3 million, an increase of 11%

    • New home deliveries of 1,303 homes compared to 1,187 homes, an increase of 10%

    • Average sales price of homes delivered of $634,000 compared to $629,000, an increase of 1%

  • Homebuilding gross margin percentage of 22.1% compared to 22.6%, a decrease of 50 basis points

    • Excluding interest and impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 25.0%*

  • SG&A expense as a percentage of homes sales revenue of 9.8% compared to 11.6%, a decrease of 180 basis points

  • Net new home orders of 1,933 compared to 1,291, an increase of 50%

  • Active selling communities averaged 134.0 compared to 147.5, a decrease of 9%

    • Net new home orders per average selling community were 14.4 orders (4.8 monthly) compared to 8.8 orders (2.9 monthly)

    • Cancellation rate of 9% compared to 17%

  • Backlog units at quarter end of 3,188 homes compared to 2,312, an increase of 38%

    • Dollar value of backlog at quarter end of $2.1 billion compared to $1.5 billion, an increase of 39%

    • Average sales price of homes in backlog at quarter end of $648,000 compared to $645,000, an increase of 1%

  • Ratios of debt-to-capital and net debt-to-net capital of 37.8% and 27.6%*, respectively, as of September 30, 2020

  • Repurchased 3,662,738 shares of common stock at a weighted average price per share of $16.94 for an aggregate dollar amount of $62.1 million in the three months ended September 30, 2020

  • Ended the third quarter of 2020 with total liquidity of $1.0 billion, including cash and cash equivalents of $493.6 million and $533.2 million of availability under the Company’s unsecured revolving credit facility

*      See “Reconciliation of Non-GAAP Financial Measures”

“In keeping with our focus on operational efficiency, we have made the strategic decision to consolidate our homebuilding brands into one unified name – TRI Pointe Homes,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell. “This change will allow us to concentrate our sales and marketing efforts around one brand instead of six, while also creating a stronger national awareness for our company.  Our operational mantra of leveraging the best of big and small, with local expertise and relationships powered by large scale financial resources and technology platforms, will continue to define who we are as a company as we look to the future.”

Outlook

For the fourth quarter of 2020, the Company anticipates delivering between 1,400 and 1,500 homes at an average sales price between $625,000 and $635,000.  The Company expects its homebuilding gross margin percentage will be in the range of 20.5% to 21.5% for the fourth quarter of 2020 and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 9.8% to 10.3% during such period. Lastly, the Company expects its effective tax rate for the fourth quarter of 2020 will be in the range of 25.0% to 25.5%.

For the full year, the Company anticipates delivering between 4,900 and 5,000 homes at an average sales price between $625,000 and $630,000. In addition, the Company expects homebuilding gross margin percentage will be in the range of 21.0% to 21.5% for the full year and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 10.8% to 11.2%. Finally, the Company expects its effective tax rate for the full year will be in the range of 24.0% to 24.5%.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Thursday, October 22, 2020.  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 slides on the Internet under the Events & Presentations heading in the Investors section of the Company’s website at presentation slides on the internet through the Investors section of the Company’s website at www.TRIPointeGroup.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 Group Second 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 13711225. An archive of the webcast will also be available on the Company’s website for a limited time.

About TRI Pointe Group®

Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE: TPH) is a family of premium, regional homebuilders that designs, builds, and sells homes in major U.S. markets. As one of the top 10 largest public homebuilding companies based on revenue in the United States, TRI Pointe Group combines the resources, operational sophistication, and leadership of a national organization with the regional insights, community ties, and agility of local homebuilders. The TRI Pointe Group family includes Maracay® in Arizona, Pardee Homes® in California and Nevada, Quadrant Homes® in Washington, Trendmaker® Homes in Texas, TRI Pointe Homes® in California, Colorado and the Carolinas, and Winchester® Homes* in Maryland and Virginia. TRI Pointe Group was named 2019 Builder of the Year by Builder and Developer magazine, recognized in Fortune magazine’s 2017 100 Fastest-Growing Companies list, and garnered the 2015 Builder of the Year Award by Builder magazine. The company was also named one of the Best Places to Work in Orange County by the Orange County Business Journal in 2016, 2017, 2018 and 2019. For more information, please visit www.TriPointeGroup.com.

*Winchester is a registered trademark and is used with permission.

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 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 efficacy of a vaccine, 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.  

Investor Relations Contact:

Drew Mackintosh, Mackintosh Investor Relations
InvestorRelations@TRIPointeGroup.com, 949-478-8696

Media Contact:

Carol Ruiz, cruiz@newgroundco.com, 310-437-0045  



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

  Three Months Ended September 30,
  Nine Months Ended September 30,
  2020   2019   Change   % Change   2020   2019   Change   % Change
       
Operating Data: (unaudited)  
Home sales revenue $ 826,036     $ 746,269     $ 79,767     11 %   $ 2,187,816     $ 1,931,110     $ 256,706     13 %
Homebuilding gross margin $ 182,580     $ 168,642     $ 13,938     8 %   $ 470,044     $ 357,263     $ 112,781     32 %
Homebuilding gross margin % 22.1 %   22.6 %   (0.5 )%         21.5 %   18.5 %   3.0 %      
Adjusted homebuilding gross margin %* 25.0 %   25.3 %   (0.3 )%         24.4 %   21.5 %   2.9 %      
SG&A expense $ 81,037     $ 86,585     $ (5,548 )   (6 )%   $ 246,259     $ 248,090     $ (1,831 )   (1 )%
SG&A expense as a % of home sales
   revenue
9.8 %   11.6 %   (1.8 )%         11.3 %   12.8 %   (1.5 )%      
Net income $ 78,682     $ 62,861     $ 15,821     25 %   $ 167,093     $ 89,194     $ 77,899     87 %
Adjusted net income* $ 81,309     $ 62,861     $ 18,448     29 %   $ 179,168     $ 89,194     $ 89,974     101 %
Adjusted EBITDA* $ 140,792     $ 115,605     $ 25,187     22 %   $ 329,519     $ 207,371     $ 122,148     59 %
Interest incurred $ 20,063     $ 22,405     $ (2,342 )   (10 )%   $ 62,670     $ 67,740     $ (5,070 )   (7 )%
Interest in cost of home sales $ 23,495     $ 19,240     $ 4,255     22 %   $ 62,118     $ 51,502     $ 10,616     21 %
                                               
Other Data:                                              
Net new home orders 1,933     1,291     642     50 %   4,926     4,103     823     20 %
New homes delivered 1,303     1,187     116     10 %   3,490     3,126     364     12 %
Average sales price of homes delivered $ 634     $ 629     $ 5     1 %   $ 627     $ 618     $ 9     1 %
Cancellation rate 9 %   17 %   (8 )%         14 %   16 %   (2 )%      
Average selling communities 134.0     147.5     (13.5 )   (9 )%   138.8     147.3     (8.5 )   (6 )%
Selling communities at end of period 126     150     (24 )   (16 )%                        
Backlog (estimated dollar value) $ 2,067,366     $ 1,491,452     $ 575,914     39 %                        
Backlog (homes) 3,188     2,312     876     38 %                        
Average sales price in backlog $ 648     $ 645     $ 3     0 %                        
                                   
  September 30,   December 31,                            
  2020   2019   Change   % Change                  
Balance Sheet Data: (unaudited)                                
Cash and cash equivalents $ 493,585     $ 329,011     $ 164,574     50 %                  
Real estate inventories $ 2,989,377     $ 3,065,436     $ (76,059 )   (2 )%                  
Lots owned or controlled   31,860       30,029       1,831     6 %                  
Homes under construction (1)   2,777       2,269       508     22 %                  
Homes completed, unsold   109       343     (234 )   (68 )%                  
Debt $ 1,333,254     $ 1,283,985     $ 49,269     4 %                  
Stockholders’ equity $ 2,198,088     $ 2,186,530     $ 11,558     0.5 %                  
Book capitalization $ 3,531,342     $ 3,470,515     $ 60,827     2 %                  
Ratio of debt-to-capital 37.8 %   37.0 %   0.8 %                        
Ratio of net debt-to-net capital* 27.6 %   30.4 %   (2.8 )%                        

__________
(1)   Homes under construction included 73 and 78 models at September 30, 2020 and December 31, 2019, respectively.
*     See “Reconciliation of Non-GAAP Financial Measures”



CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

  September 30,   December 31,
  2020   2019
Assets (unaudited)    
Cash and cash equivalents $ 493,585     $ 329,011  
Receivables 73,419     69,276  
Real estate inventories 2,989,377     3,065,436  
Investments in unconsolidated entities 36,880     11,745  
Goodwill and other intangible assets, net 159,492     159,893  
Deferred tax assets, net 30,752     49,904  
Other assets 174,060     173,425  
Total assets $ 3,957,565     $ 3,858,690  
       
Liabilities      
Accounts payable $ 94,064     $ 66,120  
Accrued expenses and other liabilities 332,147     322,043  
Loans payable 250,000     250,000  
Senior notes 1,083,254     1,033,985  
Total liabilities 1,759,465     1,672,148  
       
Commitments and contingencies      
       
Equity      
Stockholders’ equity:      
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively      
Common stock, $0.01 par value, 500,000,000 shares authorized; 126,825,194 and 136,149,633 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 1,268     1,361  
Additional paid-in capital 425,753     581,195  
Retained earnings 1,771,067     1,603,974  
Total stockholders’ equity 2,198,088     2,186,530  
Noncontrolling interests 12     12  
    Total equity 2,198,100     2,186,542  
Total liabilities and equity $ 3,957,565     $ 3,858,690  




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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
Homebuilding:              
Home sales revenue $ 826,036       $ 746,269       $ 2,187,816       $ 1,931,110    
Land and lot sales revenue 3,242       607       3,462       6,819    
Other operations revenue 634       618       1,900       1,853    
Total revenues 829,912       747,494       2,193,178       1,939,782    
Cost of home sales 643,456       577,627       1,717,772       1,573,847    
Cost of land and lot sales 3,214       495       3,790       7,552    
Other operations expense 624       609       1,872       1,826    
Sales and marketing 44,714       47,834       132,545       133,888    
General and administrative 36,323       38,751       113,714       114,202    
Restructuring charges 54             5,603          
Homebuilding income from operations 101,527       82,178       217,882       108,467    
Equity in loss of unconsolidated entities 106       18       67       (33 )  
Other (expense) income, net (3,120 )     325       (9,075 )     6,719    
Homebuilding income before income taxes 98,513       82,521       208,874       115,153    
Financial Services:              
Revenues 2,552       901       6,442       1,959    
Expenses 1,334       817       3,698       1,765    
Equity in income of unconsolidated entities 3,273       2,114       7,761       4,861    
Financial services income before income taxes 4,491       2,198       10,505       5,055    
Income before income taxes 103,004       84,719       219,379       120,208    
Provision for income taxes (24,322 )     (21,858 )     (52,286 )     (31,014 )  
Net income $ 78,682       $ 62,861       $ 167,093       $ 89,194    
Earnings per share              
Basic $ 0.61       $ 0.45       $ 1.27       $ 0.63    
Diluted $ 0.61       $ 0.44       $ 1.27       $ 0.63    
Weighted average shares outstanding              
Basic 128,941,901       141,088,381       131,190,301       141,729,759    
Diluted 129,515,114       141,533,546       131,672,652       142,128,786    




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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
Reporting Segment:                              
Maracay 170     $ 559     138     $ 513     475     $ 534     318     $ 522  
Pardee Homes 368     680     461     698     987     680     1,028     634  
Quadrant Homes 78     927     56     880     170     897     167     976  
Trendmaker Homes 235     454     224     459     698     464     628     462  
TRI Pointe Homes 292     694     226     685     810     701     749     693  
Winchester Homes 160     619     82     569     350     626     236     599  
Total 1,303     $ 634     1,187     $ 629     3,490     $ 627     3,126     $ 618  
                               
                               
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
State:                              
Arizona 170     $ 559     138     $ 513     475     $ 534     318     $ 522  
California 481     726     494     758     1,310     740     1,230     705  
Colorado 47     625     62     576     166     593     215     564  
Maryland 98     578     66     467     228     567     172     493  
Nevada 132     563     131     509     321     534     332     551  
Texas 235     454     224     459     698     628     628     462  
Virginia 62     684     16     992     122     736     64     885  
Washington 78     927     56     880     170     167     167     976  
Total 1,303     $ 634     1,187     $ 629     3,490     $ 627     3,126     $ 618  


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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
Reporting Segment:                              
Maracay 244     18.7     157     15.5     646     17.4     571     14.0  
Pardee Homes 696     40.0     424     43.0     1,594     41.5     1,379     43.9  
Quadrant Homes 78     8.5     68     6.8     309     8.2     210     6.9  
Trendmaker Homes 318     30.5     192     37.0     757     30.3     682     38.1  
TRI Pointe Homes 422     25.3     293     29.7     1,163     29.2     882     29.7  
Winchester Homes 175     11.0     157     15.5     457     12.2     379     14.7  
Total 1,933     134.0     1,291     147.5     4,926     138.8     4,103     147.3  
                               
                               
  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
State:                              
Arizona 244     18.7     157     15.5     646     17.4     571     14.0  
California 895     45.2     526     53.0     2,157     51.1     1,659     53.8  
Colorado 72     4.3     50     6.0     181     4.2     187     6.4  
Maryland 131     8.0     87     10.8     334     8.8     255     10.2  
Nevada 145     15.5     141     13.7     413     15.3     415     13.4  
South Carolina 6     0.3             6     0.1          
Texas 318     30.5     192     37.0     757     30.3     682     38.1  
Virginia 44     3.0     70     4.7     123     3.4     124     4.5  
Washington 78     8.5     68     6.8     309     8.2     210     6.9  
Total 1,933     134.0     1,291     147.5     4,926     138.8     4,103     147.3  


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

  As of September 30, 2020   As of September 30, 2019
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
Reporting Segment:                      
Maracay 501     $ 317,887     $ 635     404     $ 218,424     $ 541  
Pardee Homes 1,067     696,520     653     753     542,370     720  
Quadrant Homes 228     222,394     975     89     77,426     870  
Trendmaker Homes 404     184,507     457     367     184,563     503  
TRI Pointe Homes 682     461,574     677     451     306,337     679  
Winchester Homes 306     184,484     603     248     162,332     655  
Total 3,188     $ 2,067,366     $ 648     2,312     $ 1,491,452     $ 645  
                       
                       
  As of September 30, 2020   As of September 30, 2019
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
State:                      
Arizona 501     $ 317,887     $ 635     404     $ 218,424     $ 541  
California 1,399     941,768     673     885     669,724     757  
Colorado 115     65,576     570     116     65,469     564  
Maryland 223     122,133     548     144     75,251     523  
Nevada 229     148,899     650     203     113,514     559  
South Carolina 6     1,851     309              
Texas 404     184,507     457     367     184,563     503  
Virginia 83     62,351     751     104     87,081     837  
Washington 228     222,394     975     89     77,426     870  
Total 3,188     $ 2,067,366     $ 648     2,312     $ 1,491,452     $ 645  


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

  September 30,   December 31,
  2020   2019
Lots Owned or Controlled(1):      
Maracay 3,817     3,730  
Pardee Homes 13,706     13,267  
Quadrant Homes 932     1,103  
Trendmaker Homes 4,445     4,034  
TRI Pointe Homes 7,300     6,170  
Winchester Homes 1,660     1,725  
Total 31,860     30,029  
       
       
  September 30,   December 31,
  2020   2019
Lots Owned or Controlled(1):      
Arizona 3,817     3,730  
California 14,544     14,677  
Colorado 1,198     1,033  
Maryland 1,000     1,140  
Nevada 2,445     2,026  
North Carolina 2,708     1,590  
South Carolina 111     111  
Texas 4,445     4,034  
Virginia 660     585  
Washington 932     1,103  
Total 31,860     30,029  
       
       
  September 30,   December 31,
  2020   2019
Lots by Ownership Type:      
Lots owned 22,197     22,845  
Lots controlled(1) 9,663     7,184  
Total 31,860     30,029  

__________
(1)   As of September 30, 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 measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

  Three Months Ended September 30,
  2020   %   2019   %
   
  (dollars in thousands)
Home sales revenue $ 826,036     100.0 %   $ 746,269     100.0 %
Cost of home sales 643,456     77.9 %   577,627     77.4 %
Homebuilding gross margin 182,580     22.1 %   168,642     22.6 %
Add:  interest in cost of home sales 23,495     2.8 %   19,240     2.6 %
Add:  impairments and lot option abandonments 315     0.0 %   1,029     0.1 %
Adjusted homebuilding gross margin $ 206,390     25.0 %   $ 188,911     25.3 %
Homebuilding gross margin percentage 22.1 %       22.6 %    
Adjusted homebuilding gross margin percentage 25.0 %       25.3 %    


  Nine Months Ended September 30,
  2020   %   2019   %
Home sales revenue $ 2,187,816     100.0 %   $ 1,931,110     100.0 %
Cost of home sales 1,717,772     78.5 %   1,573,847     81.5 %
Homebuilding gross margin 470,044     21.5 %   357,263     18.5 %
Add:  interest in cost of home sales 62,118     2.8 %   51,502     2.7 %
Add:  impairments and lot option abandonments 2,044     0.1 %   6,519     0.3 %
Adjusted homebuilding gross margin(1) $ 534,206     24.4 %   $ 415,284     21.5 %
Homebuilding gross margin percentage 21.5 %       18.5 %    
Adjusted homebuilding gross margin percentage(1) 24.4 %       21.5 %    


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.

  September 30, 2020   December 31, 2019
Loans payable $ 250,000       $ 250,000    
Senior notes 1,083,254       1,033,985    
Total debt 1,333,254       1,283,985    
Stockholders’ equity 2,198,088       2,186,530    
Total capital $ 3,531,342       $ 3,470,515    
Ratio of debt-to-capital(1) 37.8   %   37.0   %
       
Total debt $ 1,333,254       $ 1,283,985    
Less: Cash and cash equivalents (493,585 )     (329,011 )  
Net debt 839,669       954,974    
Stockholders’ equity 2,198,088       2,186,530    
Net capital $ 3,037,757       $ 3,141,504    
Ratio of net debt-to-net capital(2) 27.6   %   30.4   %

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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
  (in thousands)
Net income $ 78,682       $ 62,861       $ 167,093       $ 89,194    
Interest expense:              
Interest incurred 20,063       22,405       62,670       67,740    
Interest capitalized (20,063 )     (22,405 )     (62,670 )     (67,740 )  
Amortization of interest in cost of sales 23,538       19,234       62,166       51,674    
Provision for income taxes 24,322       21,858       52,286       31,014    
Depreciation and amortization 7,020       6,795       19,196       18,356    
EBITDA 133,562       110,748       300,741       190,238    
Amortization of stock-based compensation 3,477       3,828       10,888       10,614    
Impairments and lot option abandonments 315       1,029       2,044       6,519    
Early loan termination costs 3,384             10,243          
Restructuring charges 54             5,603          
Adjusted EBITDA $ 140,792       $ 115,605       $ 329,519       $ 207,371    


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.

  Three Months Ended September 30, 2020   Nine Months Ended September 30, 2020
  As Reported   Adjustments   Adjusted   As Reported   Adjustments   Adjusted
  (in thousands, except per share amounts)
Income before income taxes $ 103,004       $ 3,438     (1 ) $ 106,442       $ 219,379       $ 15,846     (1 ) $ 235,225    
Provision for income taxes (24,322 )     (811 )   (2 ) (25,133 )     (52,286 )     (3,771 )   (2 ) (56,057 )  
Net income $ 78,682       $ 2,627       $ 81,309       $ 167,093       $ 12,075       $ 179,168    
Earnings per share                      
Diluted $ 0.61           $ 0.63       $ 1.27           $ 1.36    
Weighted average shares outstanding                      
Diluted 129,515           129,515       131,673           131,673    
                       
Effective tax rate 23.6   %       23.6   %   23.8   %       23.8   %

_________
(1)   Includes (i) a $3.4 million and $10.2 million charge for the three and nine months ended September 30, 2020, respectively, related to the early extinguishment of a portion of our Senior Notes due 2021, which is included in other (expense) income, net on our consolidated statements of operations, and (ii) a $56,000 and $5.6 million charge for the three and nine months ended September 30, 2020, 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.


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Source: TRI Pointe Group Inc.

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INCLINE VILLAGE, NV: 940 Southwood Blvd, Suite 200, Incline Village, NV 89451 | 775-413-1030

IRVINE, CA: 19540 Jamboree Road, Suite 300, Irvine, CA 92612 | 949-438-1400

info@TriPointeHomes.com

BUILDER OF THE YEAR – 2019 AND 2015.