Tri Pointe Homes, Inc. Reports 2021 Fourth Quarter and Full Year Results and Announces $250 Million Increase to Its Stock Repurchase Program

February 17, 2022

Fourth Quarter Highlights

-Diluted Earnings Per Share of $1.33, Up 45% Year-Over-Year-
-Pre-tax Margin of 16.2%-
-Backlog Dollar Value of $2.2 Billion, up 17% Year-Over-Year-
-Return on Average Equity of 20.3%*-

INCLINE VILLAGE, Nev., Feb. 17, 2022 (GLOBE NEWSWIRE) -- Tri Pointe Homes, Inc. (the “Company”) (NYSE: TPH) today announced results for the fourth quarter ended December 31, 2021 and full year 2021. The Company also announced that its Board of Directors has authorized the repurchase of up to an additional $250 million of common stock under its existing stock repurchase program (“Repurchase Program”), increasing the aggregate authorization under the Repurchase Program from $500 million to $750 million.

“Tri Pointe Homes had a record-breaking 2021 in terms of profitability and a company-best return on average equity of 20.3%,” said Doug Bauer, Chief Executive Officer of Tri Pointe Homes. “We ended the year on a high note, generating fourth quarter earnings of $1.33 per diluted share, a 45% year-over-year improvement. We also met or exceeded our previously stated guidance for key operational metrics for the quarter due in large part to the excellent job that our team members’ did navigating the supply chain challenges that persist in our industry.”

“The factors that contributed to our fourth quarter success continue to provide momentum, including demand for new homes that has outstripped supply across our markets. We continue to see motivated buyers across our geographic footprint, driven in part by strong demographics and an overall change in attitude towards home ownership brought on by the pandemic, both of which we believe are long-term shifts. We believe that these persisting trends, combined with the limited supply of existing home inventory available for sale, make for a promising outlook for our industry.”

Bauer concluded, “Tri Pointe Homes is poised to build on the record-breaking success we experienced in 2021. We had 50% more lots under control at the end of 2021 than we did in the prior-year, which should provide us with a strong runway for future growth. In addition, our strong balance sheet and sizable backlog give us a favorable market position going forward, making me extremely optimistic about the future of Tri Pointe Homes.”

Results and Operational Data for Fourth Quarter 2021 and Comparisons to Fourth Quarter 2020

  • Net income was $147.4 million, or $1.33 per diluted share, compared to $115.1 million, or $0.92 per diluted share
  • Home sales revenue for the quarter was $1.2 billion, an increase of 15%
    • New home deliveries of 1,885 homes compared to 1,633 homes, an increase of 15%
    • Average sales price of homes delivered of $637,000 compared to $640,000
  • Homebuilding gross margin percentage of 24.4% compared to 23.2%, an increase of 120 basis points, which includes $20.1 million of impairments and lot option abandonments
    • Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 28.1%**
  • Selling, general and administrative (“SG&A”) expense as a percentage of homes sales revenue of 8.5% compared to 9.9%, a decrease of 140 basis points
  • Net new home orders of 1,424 compared to 1,409, an increase of 1%
  • Active selling communities averaged 110.5 compared to 117.5, a decrease of 6%
    • Net new home orders per average selling community increased by 1% to 12.9 orders (4.3 monthly) compared to 12.0 orders (4.0 monthly)
    • Cancellation rate of 9% compared to 10%
  • Backlog units at quarter end of 3,158 homes compared to 2,964, an increase of 7%
    • Dollar value of backlog at quarter end of $2.2 billion compared to $1.9 billion, an increase of 17%
    • Average sales price in backlog at quarter end of $710,000 compared to $647,000, an increase of 10%
  • Ratios of debt-to-capital and net debt-to-net capital of 35.3% and 21.1%**, respectively, as of December 31, 2021
  • Repurchased 2,762,900 shares of common stock at an average price of $22.64 for an aggregate dollar amount of $62.6 million in the three months ended December 31, 2021
  • Ended fourth quarter of 2021 with total liquidity of $1.3 billion, including cash of $681.5 million and $601.1 million of availability under the Company’s unsecured revolving credit facility

    * Return on average equity is calculated as net income for the trailing twelve months divided by average stockholders’ equity for the trailing five quarters
    ** See “Reconciliation of Non-GAAP Financial Measures”

Results and Operational Data for Full Year 2021 and Comparisons to Full Year 2020

  • Net income was $469.3 million, or $4.12 per diluted share, compared to $282.2 million, or $2.17 per diluted share
  • Home sales revenue of $4.0 billion compared to $3.2 billion, an increase of 22%
    • New home deliveries of 6,188 homes compared to 5,123 homes, an increase of 21%
    • Average sales price of homes delivered of $639,000 compared to $631,000, an increase of 1%
  • Homebuilding gross margin percentage of 24.9% compared to 22.0%, an increase of 290 basis points, which includes $20.8 million of impairments and lot option abandonments
    • Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 27.9%**
  • SG&A expense as a percentage of homes sales revenue of 9.6% compared to 10.8%, a decrease of 120 basis points
  • Net new home orders of 6,382 compared to 6,335, an increase of 1%
  • Active selling communities averaged 111.8 compared to 133.2, a decrease of 16%
    • Net new home orders per average selling community increased by 20% to 57.1 orders (4.8 monthly) compared to 47.6 orders (4.0 monthly)
    • Cancellation rate of 8% compared to 13%,
  • Repurchased 13,063,465 shares of common stock at an average price of $21.13 for an aggregate dollar amount of $276.0 million in the full year ended December 31, 2021

    ** See “Reconciliation of Non-GAAP Financial Measures”

“Our sales pace for the fourth quarter came in at 4.3 homes per community per month, which is well above seasonal norms for that time of year,” said Tri Pointe Homes President and Chief Operating Officer Tom Mitchell. “Demand was consistent company-wide, as each of our regions registered a sales pace above 3.9. We believe this is a testament to the innovative design and broad-based appeal of our homes as well as our strong market positioning. Last year’s successful one-brand initiative simplified our marketing processes across our divisions, while amplifying our unified brand across the country. We feel these factors have positioned Tri Pointe for continuing success into 2022 and beyond.”

Outlook

For the first quarter of 2022, the Company anticipates delivering between 900 and 1,100 homes at an average sales price between $650,000 and $660,000. The Company expects its homebuilding gross margin percentage to be in the range of 25.0% to 26.0% for the first quarter of 2022 and anticipates its SG&A expense as a percentage of home sales revenue will be in the range of 13.0% to 13.5%. Lastly, the Company expects its effective tax rate for the first quarter of 2022 to be in the range of 25.0% to 26.0%.

For the full year, the Company expects to open between 90 and 100 new communities and end the year with between 150 and 160 active selling communities. In addition, the Company anticipates delivering between 6,500 and 6,800 homes at an average sales price between $660,000 and $670,000. The Company expects homebuilding gross margin percentage to be in the range of 25.0% to 26.0% for the full year and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 9.7% to 10.2%. Finally, the Company expects its effective tax rate for the full year to be in the range of 25.0% to 26.0%.

Stock Repurchase Program

On February 16, 2022, the Company’s Board of Directors approved the repurchase of up to an additional $250 million of Company common stock pursuant to its Repurchase Program. As of February 16, 2022, the Company had purchased an aggregate of 18,278,907 shares of common stock for approximately $387.6 million pursuant to the Repurchase Program. Under the Repurchase Program as amended, the Company may repurchase shares of its outstanding common stock with an aggregate value of up to $750 million through December 31, 2022. Purchases of common stock pursuant to the Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The Company is not obligated under the Repurchase Program to repurchase any specific number or amount of shares of common stock, and it may modify, suspend or discontinue the program at any time. Company management will determine the timing and amount of repurchase in its discretion based on a variety of factors, such as the market price of the Company’s common stock, corporate requirements, general market economic conditions and legal requirements.

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 17, 2022. 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 www.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 2021 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 13726044. 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, Inc.® (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. Named one of the Best Places to Work by the Orange County Business Journal for four consecutive years, Tri Pointe Homes also became a Great Place to Work-Certified™ company in 2021. 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; the prices and availability of supply chain inputs, including raw materials and labor; 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 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: Media Contact:
   
Drew Mackintosh, Mackintosh Investor Relations Carol Ruiz, cruiz@newgroundco.com 310-437-0045
InvestorRelations@TriPointeHomes.com 949-478-8696  
   

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

  Three Months Ended December 31,   Year Ended December 31,
    2021       2020     Change   % Change     2021       2020     Change   % Change
Operating Data:                              
Home sales revenue $ 1,200,222     $ 1,045,020     $ 155,202     15 %   $ 3,955,154     $ 3,232,836     $ 722,318     22 %
Homebuilding gross margin $ 292,580     $ 242,002     $ 50,578     21 %   $ 982,917     $ 712,046     $ 270,871     38 %
Homebuilding gross margin %   24.4 %     23.2 %     1.2 %         24.9 %     22.0 %     2.9 %    
Adjusted homebuilding gross margin %*   28.1 %     26.3 %     1.8 %         27.9 %     25.0 %     2.9 %    
SG&A expense $ 102,451     $ 103,155     $ (704 )   (1 )%   $ 379,377     $ 349,414     $ 29,963     9 %
SG&A expense as a % of home sales revenue   8.5 %     9.9 %     (1.4 )%         9.6 %     10.8 %     (1.2 )%    
Net income $ 147,440     $ 115,114     $ 32,326     28 %   $ 469,267     $ 282,207     $ 187,060     66 %
Adjusted EBITDA* $ 257,365     $ 203,396     $ 53,969     27 %   $ 801,310     $ 532,915     $ 268,395     50 %
Interest incurred $ 24,766     $ 20,450     $ 4,316     21 %   $ 92,783     $ 83,120     $ 9,663     12 %
Interest in cost of home sales $ 23,991     $ 31,013     $ (7,022 )   (23 )%   $ 101,176     $ 93,131     $ 8,045     9 %
                               
Other Data:                              
Net new home orders   1,424       1,409       15     1 %     6,382       6,335       47     1 %
New homes delivered   1,885       1,633       252     15 %     6,188       5,123       1,065     21 %
Average selling price of homes delivered $ 637     $ 640     $ (3 )   0 %   $ 639     $ 631     $ 8     1 %
Cancellation rate   9 %     10 %     (1 )%         8 %     13 %     (5 )%    
Average selling communities   110.5       117.5       (7.0 )   (6 )%     111.8       133.2       (21.4 )   (16 )%
Selling communities at end of period   112       112       0     0 %                
Backlog (estimated dollar value) $ 2,242,159     $ 1,916,664     $ 325,495     17 %                
Backlog (homes)   3,158       2,964       194     7 %                
Average selling price in backlog $ 710     $ 647     $ 63     10 %                
                               
  December 31,
2021
  December 31,
2020
  Change                    
Balance Sheet Data:                              
Cash and cash equivalents $ 681,528     $ 621,295     $ 60,233                      
Real estate inventories $ 3,054,743     $ 2,910,142     $ 144,601                      
Lots owned or controlled   41,675       35,641       6,034                      
Homes under construction (1)   3,632       3,044       588                      
Homes completed, unsold   27       68       (41 )                    
Total debt, net $ 1,337,723     $ 1,343,001     $ (5,278 )                    
Stockholders' equity $ 2,447,621     $ 2,232,537     $ 215,084                      
Book capitalization $ 3,785,344     $ 3,575,538     $ 209,806                      
Ratio of debt-to-capital   35.3 %     37.6 %     (2.3 )%                    
Ratio of net debt-to-net-capital*   21.1 %     24.4 %     (3.3 )%                    

_____________________________________
(1) Homes under construction included 85 and 86 models at December 31, 2021 and December 31, 2020, respectively.
* See “Reconciliation of Non-GAAP Financial Measures”


CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

    December 31,
2021
  December 31,
2020
Assets   (unaudited)    
Cash and cash equivalents   $ 681,528     $ 621,295  
Receivables     116,996       63,551  
Real estate inventories     3,054,743       2,910,142  
Investments in unconsolidated entities     118,095       75,056  
Goodwill and other intangible assets, net     156,603       158,529  
Deferred tax assets, net     57,096       47,525  
Other assets     151,162       145,882  
Total assets   $ 4,336,223     $ 4,021,980  
         
Liabilities        
Accounts payable   $ 84,854     $ 79,690  
Accrued expenses and other liabilities     466,013       366,740  
Loans payable     250,504       258,979  
Senior notes     1,087,219       1,084,022  
Total liabilities     1,888,590       1,789,431  
         
Commitments and contingencies        
         
Equity        
Stockholders' Equity:        
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively            
Common stock, $0.01 par value, 500,000,000 shares authorized; 109,644,474 and 121,882,778 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively     1,096       1,219  
Additional paid-in capital     91,077       345,137  
Retained earnings     2,355,448       1,886,181  
Total stockholders' equity     2,447,621       2,232,537  
Noncontrolling interests     12       12  
Total equity     2,447,633       2,232,549  
Total liabilities and equity   $ 4,336,223     $ 4,021,980  


CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except share and per share amounts)
(unaudited)

  Three Months Ended
December 31,
  Year Ended
December 31,
    2021       2020       2021       2020  
Homebuilding:              
Home sales revenue $ 1,200,222     $ 1,045,020     $ 3,955,154     $ 3,232,836  
Land and lot sales revenue   5,496       12,470       13,016       15,932  
Other operations revenue   650       642       2,619       2,542  
Total revenues   1,206,368       1,058,132       3,970,789       3,251,310  
Cost of home sales   907,642       803,018       2,972,237       2,520,790  
Cost of land and lot sales   5,667       2,653       11,585       6,443  
Other operations expense   439       624       2,550       2,496  
Sales and marketing   48,390       50,565       179,214       183,110  
General and administrative   54,061       52,590       200,163       166,304  
Restructuring charges         58             5,661  
Homebuilding income from operations   190,169       148,624       605,040       366,506  
Equity in (loss) income of unconsolidated entities   (24 )     95       (96 )     162  
Other income (expense), net   97       97       525       (8,978 )
Homebuilding income before income taxes   190,242       148,816       605,469       357,690  
Financial Services:              
Revenues   3,644       2,695       11,446       9,137  
Expenses   1,782       1,417       6,292       5,115  
Equity in income of unconsolidated entities   4,453       3,904       15,039       11,665  
Financial services income before income taxes   6,315       5,182       20,193       15,687  
Income before income taxes   196,557       153,998       625,662       373,377  
Provision for income taxes   (49,117 )     (38,884 )     (156,395 )     (91,170 )
Net income $ 147,440     $ 115,114     $ 469,267     $ 282,207  
Earnings per share              
Basic $ 1.34     $ 0.93     $ 4.16     $ 2.18  
Diluted $ 1.33     $ 0.92     $ 4.12     $ 2.17  
Weighted average shares outstanding              
Basic   109,911,768       123,944,552       112,836,051       129,368,964  
Diluted   111,126,846       124,815,177       113,809,292       129,951,161  


MARKET DATA BY REPORTING SEGMENT & STATE

(dollars in thousands)
(unaudited)

  Three Months Ended December 31,   Year Ended December 31,
  2021   2020   2021   2020
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
Arizona 218   $ 703   189   $ 601   788   $ 677   664   $ 553
California 745     639   700     687   2,608     664   2,010     721
Nevada 146     718   204     602   527     637   525     561
Washington 73     989   116     973   296     986   286     928
West total 1,182     682   1,209     687   4,219     686   3,485     682
Colorado 77     650   53     597   231     606   219     594
Texas 360     509   212     441   1,081     491   910     459
Central total 437     534   265     472   1,312     512   1,129     485
Maryland 120     543   108     523   323     554   336     553
North Carolina 32     462   7     363   85     419   7     363
South Carolina 18     370   5     325   29     357   5     325
Virginia 96     768   39     747   220     751   161     739
East total 266     603   159     565   657     594   509     607
Total 1,885   $ 637   1,633   $ 640   6,188   $ 639   5,123   $ 631
                               
  Three Months Ended December 31,   Year Ended December 31,
  2021   2020   2021   2020
  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
Arizona 153     11.7   167     15.8   829     13.8   813     16.9
California 521     40.0   559     40.0   2,386     39.2   2,716     48.5
Nevada 149     10.0   111     13.7   717     10.9   524     14.8
Washington 57     5.8   27     5.5   286     5.7   336     7.5
West total 880     67.5   864     75.0   4,218     69.6   4,389     87.7
Colorado 71     7.8   64     4.8   289     6.2   245     4.3
Texas 274     21.7   306     26.0   1,219     22.3   1,063     29.0
Central total 345     29.5   370     30.8   1,508     28.5   1,308     33.3
Maryland 56     4.3   86     6.5   205     5.1   420     8.2
North Carolina 78     3.7   19     0.7   169     2.2   19     0.2
South Carolina 13.0     1.0   2     1.0   51.0     1.3   8     0.3
Virginia 52     4.5   68     3.5   231     5.1   191     3.5
East total 199     13.5   175     11.7   656     13.7   638     12.2
Total 1,424     110.5   1,409     117.5   6,382     111.8   6,335     133.2


MARKET DATA BY REPORTING SEGMENT & STATE, continued

(dollars in thousands)
(unaudited)

    As of December 31, 2021   As of December 31, 2020
    Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
Arizona   520   $ 401,257   $ 772   479   $ 324,410   $ 677
California   1,036     774,901     748   1,258     855,261     680
Nevada   326     237,712     729   136     95,963     706
Washington   129     133,317     1,033   139     139,435     1,003
West total   2,011     1,547,187     769   2,012     1,415,069     703
Colorado   184     134,831     733   126     71,940     571
Texas   636     337,232     530   498     232,323     467
Central total   820     472,063     576   624     304,263     488
Maryland   83     59,528     717   201     113,828     566
North Carolina   96     45,380     473   12     4,274     356
South Carolina   25     9,825     393   3     840     280
Virginia   123     108,176     879   112     78,390     700
East total   327     222,909     682   328     197,332     602
Total   3,158   $ 2,242,159   $ 710   2,964   $ 1,916,664   $ 647
                         
    December 31,
2021
  December 31,
2020
               
Lots Owned or Controlled:                        
Arizona   4,607     4,128                
California   15,091     15,040                
Nevada   2,161     2,639                
Washington   1,010     964                
West total   22,869     22,771                
Colorado   1,683     1,080                
Texas   12,297     6,985                
Central total   13,980     8,065                
Maryland   573     892                
North Carolina   3,044     2,808                
South Carolina   414     106                
Virginia   795     999                
East total   4,826     4,805                
Total   41,675     35,641                
                         
    December 31,
2021
  December 31,
2020
               
Lots by Ownership Type:                        
Lots owned   22,136     22,620                
Lots controlled (1)   19,539     13,021                
Total   41,675     35,641                

_____________________________________
(1) As of December 31, 2021 and 2020, lots controlled included lots that were under land option contracts or purchase contracts. As of December 31, 2021 and 2020, lots controlled for Central include 2,950 and 2,083 lots, respectively, and lots controlled for East include 179 lots, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.

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, as applicable, have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who may adjust gross margins in a similar fashion.

    Three Months Ended December 31,
      2021     %     2020     %
    (dollars in thousands)
Home sales revenue   $ 1,200,222     100.0 %   $ 1,045,020     100.0 %
Cost of home sales     907,642     75.6 %     803,018     76.8 %
Homebuilding gross margin     292,580     24.4 %     242,002     23.2 %
Add:  interest in cost of home sales     23,991     2.0 %     31,013     3.0 %
Add:  impairments and lot option abandonments     20,125     1.7 %     1,960     0.2 %
Adjusted homebuilding gross margin(1)   $ 336,696     28.1 %   $ 274,975     26.4 %
Homebuilding gross margin percentage     24.4 %         23.2 %    
Adjusted homebuilding gross margin percentage(1)     28.1 %         26.3 %    


    Year Ended December 31,
      2021     %     2020     %
    (dollars in thousands)
Home sales revenue   $ 3,955,154     100.0 %   $ 3,232,836     100.0 %
Cost of home sales     2,972,237     75.1 %     2,520,790     78.0 %
Homebuilding gross margin     982,917     24.9 %     712,046     22.0 %
Add:  interest in cost of home sales     101,176     2.6 %     93,131     2.9 %
Add:  impairments and lot option abandonments     20,838     0.5 %     4,004     0.1 %
Adjusted homebuilding gross margin(1)   $ 1,104,931     27.9 %   $ 809,181     25.0 %
Homebuilding gross margin percentage     24.9 %         22.0 %    
Adjusted homebuilding gross margin percentage(1)     27.9 %         25.0 %    


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.

    December 31, 2021   December 31, 2020
Loans payable   $ 250,504     $ 258,979  
Senior notes     1,087,219       1,084,022  
Total debt     1,337,723       1,343,001  
Stockholders’ equity     2,447,621       2,232,537  
Total capital   $ 3,785,344     $ 3,575,538  
Ratio of debt-to-capital(1)     35.3 %     37.6 %
         
Total debt   $ 1,337,723     $ 1,343,001  
Less: Cash and cash equivalents     (681,528 )     (621,295 )
Net debt     656,195       721,706  
Stockholders’ equity     2,447,621       2,232,537  
Net capital   $ 3,103,816     $ 2,954,243  
Ratio of net debt-to-net capital(2)     21.1 %     24.4 %

_____________________________________
(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.

    Three Months Ended
December 31,
  Year Ended
December 31,
      2021       2020       2021       2020  
    (in thousands)
Net income available to common stockholders   $ 147,440     $ 115,114     $ 469,267     $ 282,207  
Interest expense:                
Interest incurred     24,766       20,450       92,783       83,120  
Interest capitalized     (24,766 )     (20,450 )     (92,783 )     (83,120 )
Amortization of interest in cost of sales     23,991       31,082       101,448       93,248  
Provision for income taxes     49,117       38,884       156,395       91,170  
Depreciation and amortization     8,323       10,301       32,421       29,497  
EBITDA     228,871       195,381       759,531       496,122  
Amortization of stock-based compensation     8,369       5,997       20,941       16,885  
Real estate inventory impairments and lot option abandonments     20,125       1,960       20,838       4,004  
Early loan termination costs                       10,243  
Restructuring charges           58             5,661  
Adjusted EBITDA   $ 257,365     $ 203,396     $ 801,310     $ 532,915  

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Source: Tri Pointe Homes, Inc.
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