TRI Pointe Group, Inc., Irvine (NYSE:TPH) today announced results for the fourth quarter ended December 31, 2017 and full year 2017.
Results and Operational Data for Fourth Quarter 2017 and Comparisons to Fourth Quarter 2016
- Net income available to common stockholders was $74.0 million, or $0.49 per diluted share, compared to $57.9 million, or $0.36 per diluted share. In the fourth quarter 2017, the company recorded a $22.0 million tax charge related to the re-measurement of the company’s net deferred tax assets as a result of the recently enacted Tax Cuts and Jobs Act, as well as a pretax charge of $13.2 million related to the impairment of an investment in an unconsolidated entity. Excluding these items, adjusted net income available to common stockholders was $107.4 million, or $0.70 per diluted share.* No similar adjustments existed in the fourth quarter of 2016.
- New home orders of 1,063 compared to 909, an increase of 17%
- Active selling communities averaged 127.5 compared to 122.8, an increase of 4%
- New home orders per average selling community increased by 13% to 8.3 orders (2.8 monthly) compared to 7.4 orders (2.5 monthly)
- Cancellation rate of 17% compared to 20%, a decrease of 300 basis points
- Backlog units at quarter end of 1,571 homes compared to 1,193, an increase of 32%
- Dollar value of backlog at quarter end of $1.0 billion compared to $661.1 million, an increase of 56%
- Average sales price in backlog at quarter end of $657,000 compared to $554,000, an increase of 19%
- Home sales revenue of $1.1 billion compared to $770.7 million, an increase of 46%
- New home deliveries of 1,757 homes compared to 1,427 homes, an increase of 23%
- Average sales price of homes delivered of $639,000 compared to $540,000, an increase of 18%
- Home building gross margin percentage of 21.7% compared to 20.0%, an increase of 170 basis points
- Excluding interest, impairments and lot option abandonments, adjusted home building gross margin percentage was 24.2%*
- SG&A expense as a percentage of homes sales revenue of 7.2% compared to 9.2%, a decrease of 200 basis points
- Ratios of debt-to-capital and net debt-to-net capital of 43.3% and 38.1%*, respectively, as of December 31, 2017
- Ended fourth quarter of 2017 with total liquidity of 875.2 million, including cash of $282.9 million and $592.3 million of availability under the company’s unsecured revolving credit facility
Results and Operational Data for Full Year 2017 and Comparisons to Full Year 2016
- Net income available to common stockholders was $187.2 million, or $1.21 per diluted share, compared to $195.2 million, or $1.21 per diluted share. Adjusted net income available to common stockholders was $220.6 million, or $1.42 per diluted share, after excluding the $22.0 million tax charge related to the re-measurement of the Company’s net deferred tax assets and the $13.2 million pretax charge related to the impairment of an investment in an unconsolidated entity.* No similar adjustments existed in 2016.
- New home orders of 5,075 compared to 4,248, an increase of 19%
- Active selling communities averaged 127.5 compared to 118.3, an increase of 8%
- New home orders per average selling community increased by 11% to 39.8 orders (3.3 monthly) compared to 35.9 orders (3.0 monthly)
- Cancellation rate of 15% in both full year periods
- Home sales revenue of $2.7 billion compared to $2.3 billion, an increase of 17%
- New home deliveries of 4,697 homes compared to 4,211 homes, an increase of 12%
- Average sales price of homes delivered of $582,000 compared to $553,000, an increase of 5%
- Home building gross margin percentage of 20.5% compared to 21.2%, a decrease of 70 basis points
- Excluding interest, impairments and lot option abandonments, adjusted home building gross margin percentage was 22.9%*
- SG&A expense as a percentage of homes sales revenue of 10.1% compared to 10.8%, a decrease of 70 basis points
- Repurchased 8,994,705 shares of common stock at an average price of $12.48 for an aggregate dollar amount of $112.2 million in the full year ended December 31, 2017
“We ended 2017 on a very strong note,” said TRI Pointe Group CEO Doug Bauer. “Fourth quarter home sales revenue grew 46% year-over-year, thanks to a 23% increase in new home deliveries and an 18% rise in average selling price. We also posted solid year-over-year operating margin expansion, as both home building gross margins and SG&A as a percentage of revenue improved during the quarter, culminating in an 81% increase in pretax income. New home orders during the quarter also surpassed last year’s comparable quarter total, as our average sales pace per community was a healthy 2.8 homes per community per month compared to 2.5 in the same period last year.”
“For the full year 2017, we posted double digit gains in new home orders of 19%, home sales revenue of 17% and pretax income of 13%, and we ended the year with a backlog dollar value 56% higher than the prior year,” said Mr. Bauer. These results are a testament to the ongoing strength of our homebuilding markets, the quality of our land positions and the value created by our unique operating strategy.”
Home sales revenue increased $352.1 million, or 46%, to $1.1 billion for the fourth quarter of 2017, as compared to $770.7 million for the fourth quarter of 2016. The increase was primarily attributable to a 23% increase in new home deliveries to 1,757, and an 18% increase in average selling price of homes delivered to $639,000compared to $540,000 in the fourth quarter of 2016.
New home orders increased 17% to 1,063 homes for the fourth quarter of 2017, as compared to 909 homes for the same period in 2016. Average selling communities was 127.5 for the fourth quarter of 2017 compared to 122.8 for the fourth quarter of 2016. New home orders per average selling community for the fourth quarter of 2017 was 8.3 orders (2.8 monthly) compared to 7.4 orders (2.5 monthly) during the fourth quarter of 2016.
The company ended the quarter with 1,571 homes in backlog, representing approximately $1.0 billion. The average selling price of homes in backlog as of December 31, 2017 increased $103,000, or 19%, to $657,000 compared to $554,000 at December 31, 2016.
Home building gross margin percentage for the fourth quarter of 2017 increased to 21.7% compared to 20.0% for the fourth quarter of 2016. Excluding interest, impairments and lot option abandonments in cost of home sales, adjusted home building gross margin percentage was 24.2% for the fourth quarter of 2017 compared to 22.2% for the fourth quarter of 2016.* The increase in home building gross margin percentage was largely due to the mix of homes delivered during the quarter, with 225 more homes delivered from our California assets, which have gross margins above the Company average.
Selling, general and administrative (“SG&A”) expense for the fourth quarter of 2017 decreased to 7.2% of home sales revenue as compared to 9.2% for the fourth quarter of 2016 due to increased leverage as a result of the 46% increase in home sales revenue.
“We continue to be at the forefront of home building innovation, both in terms of community planning and new home design,” said TRI Pointe Group COO Tom Mitchell. “We strive to create a unique home buying experience for our customers, one that takes into account the distinct aesthetic of our local markets and the lifestyle wants and needs of each buyer segment. We believe that this emphasis on design and innovation played a key role in our strong financial performance in 2017. We are in the process of rolling out several communities with new home concepts that we expect will appeal to two of the largest home buying segments – Active Adults and Millennials – and we are excited about their prospects.”
Outlook
For the full year 2018, the company said it expects to grow average selling communities by 5% compared to 2017 and deliver between 5,100 and 5,400 homes at an average sales price of approximately $610,000. The Company expects its home building gross margin percentage for the full year 2018 to be in the range of 20.5% to 21.5% and expects its SG&A expense as a percentage of home sales revenue to be in the range of 9.9% to 10.3%. Finally, the Company expects its effective tax rate to be in the range of 25% to 26%.
For the first quarter of 2018, the company expects to open 8 new communities and close out of 11 communities, resulting in 127 active selling communities as of March 31, 2018. In addition, the company anticipates delivering approximately 55% of its 1,571 homes in backlog as of December 31, 2017 at an average sales price of $630,000 to $640,000. The company anticipates its home building gross margin percentage to be in a range of 21.5% to 22.5% for the first quarter of 2018. Finally, the Company expects its SG&A expense as a percentage of home sales revenue to be in the range of 13.0% to 13.5% for the first quarter of 2018.
