Tri Pointe Homes(US:TPH)2023-04-27 20:19PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Tri Pointe Homes' unaudited consolidated financial statements for Q1 2023, covering Balance Sheets, Operations, Equity, and Cash Flows Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $966,298 | $889,664 | | Real estate inventories | $3,142,412 | $3,173,849 | | Total assets | $4,739,240 | $4,719,940 | | Liabilities & Equity | | | | Senior notes, net | $1,091,509 | $1,090,624 | | Total liabilities | $1,872,755 | $1,883,409 | | Total equity | $2,866,485 | $2,836,531 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Total revenues | $770,785 | $727,492 | | Homebuilding income from operations | $92,331 | $115,016 | | Net income available to common stockholders | $74,742 | $87,478 | | Diluted Earnings Per Share (EPS) | $0.73 | $0.81 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $135,639 | $(116,114) | | Net cash used in investing activities | $(9,452) | $(19,688) | | Net cash used in financing activities | $(49,553) | $(133,023) | | Net increase (decrease) in cash | $76,634 | $(268,825) | Notes to Consolidated Financial Statements These notes detail accounting policies and financial statement breakdowns, covering segment information, real estate inventories, debt, and stock-based compensation Segment Revenues and Income Before Taxes (in thousands) | Segment | Revenues (Q1 2023) | Income Before Taxes (Q1 2023) | Revenues (Q1 2022) | Income Before Taxes (Q1 2022) | | :--- | :--- | :--- | :--- | :--- | | West | $480,941 | $72,911 | $530,496 | $100,557 | | Central | $166,140 | $13,939 | $137,097 | $12,951 | | East | $123,704 | $13,312 | $59,899 | $1,726 | | Total Homebuilding | $770,785 | $100,162 | $727,492 | $115,234 | | Financial Services | $8,876 | $3,045 | $8,752 | $3,490 | Real Estate Inventories (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Homes completed or under construction | $1,191,754 | $1,293,681 | | Land under development | $1,335,789 | $1,279,394 | | Land purchase and land option deposits | $215,628 | $228,892 | | Total real estate inventories | $3,142,412 | $3,173,849 | Outstanding Debt Summary (in thousands) | Debt Instrument | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Senior Notes, net | $1,091,509 | $1,090,624 | | 5.875% Senior Notes due 2024 | $450,000 | $450,000 | | 5.250% Senior Notes due 2027 | $300,000 | $300,000 | | 5.700% Senior Notes due 2028 | $350,000 | $350,000 | | Loans Payable | $287,427 | $287,427 | | Term loan facility | $250,000 | $250,000 | | Seller financed loans | $37,427 | $37,427 | - As of March 31, 2023, the company had interests in land and lot option agreements with a remaining purchase price of $1.23 billion, secured by $215.6 million in deposits61 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, highlighting improved housing market conditions, key operational metrics, and the company's capital resources and liquidity - The housing market showed signs of improvement in Q1 2023, with modestly decreased mortgage rates positively impacting sales pace, though management expects demand to remain potentially volatile due to macroeconomic factors125 - Q1 2023 highlights include 1,619 net new home orders, a 23.5% homebuilding gross margin, and diluted EPS of $0.73126 - The company ended the quarter with total liquidity of $1.7 billion, including $966.3 million in cash and $691.4 million available under its credit facility, with the debt-to-capital ratio at an all-time low of 32.5%126151 Results of Operations Q1 2023 results show a 15% decrease in net new home orders, a 6% increase in home sales revenue, and a decline in homebuilding gross margin to 23.5% Net New Home Orders by Segment (Q1 2023 vs Q1 2022) | Segment | Net New Home Orders 2023 | Net New Home Orders 2022 | % Change | | :--- | :--- | :--- | :--- | | West | 954 | 1,109 | (14)% | | Central | 355 | 546 | (35)% | | East | 310 | 241 | 29% | | Total | 1,619 | 1,896 | (15)% | - Backlog dollar value decreased 49% to $1.5 billion as of March 31, 2023, from $2.9 billion a year prior, driven by a 49% decrease in backlog units134 New Homes Delivered and Revenue by Segment (Q1 2023) | Segment | New Homes Delivered | Home Sales Revenue (in thousands) | Average Sales Price (in thousands) | | :--- | :--- | :--- | :--- | | West | 590 | $478,733 | $811 | | Central | 254 | $165,968 | $653 | | East | 221 | $123,704 | $560 | | Total | 1,065 | $768,405 | $722 | - Homebuilding gross margin percentage decreased to 23.5% in Q1 2023 from 26.8% in Q1 2022, largely due to higher incentives, with adjusted homebuilding gross margin at 26.2%, down from 29.3%139141 Liquidity and Capital Resources As of March 31, 2023, the company maintained strong liquidity of $1.7 billion, improved leverage ratios, and repurchased $37.6 million in common stock - Total liquidity was $1.7 billion as of March 31, 2023, including $966.3 million in cash and cash equivalents151 Leverage Ratios | Ratio | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Ratio of debt-to-capital | 32.5% | 32.7% | | Ratio of net debt-to-net capital (Non-GAAP) | 12.6% | 14.7% | - On February 15, 2023, the board approved a new share repurchase program authorizing up to $250 million, with the company repurchasing 1,574,575 shares for $37.6 million in Q1 2023163 - Net cash provided by operating activities was $135.6 million for Q1 2023, a significant improvement from the $116.1 million used in Q1 2022, primarily due to a $265.2 million decrease in cash used for real estate inventory purchases167 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate fluctuations on outstanding debt, with no use of derivative financial instruments - The primary market risk exposure is related to interest rate fluctuations on outstanding debt180 - The company did not utilize any derivative financial instruments during the three months ended March 31, 2023, and does not hold derivatives for trading or speculative purposes180 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - Based on an evaluation by management, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023181 - No changes occurred during the first quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting182 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings in the normal course of business, with zero legal reserves recorded as of March 31, 2023 - Information regarding legal proceedings is incorporated by reference from Note 13 of the financial statements183 - The company had zero legal reserves as of March 31, 2023, and December 31, 202284 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2022 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022184 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The board authorized a new $250 million share repurchase program on February 15, 2023, with $37.6 million in repurchases completed in Q1 2023 - A new share repurchase program was approved on February 15, 2023, authorizing up to $250 million in repurchases185 Share Repurchases for the Three Months Ended March 31, 2023 | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2023 | — | $— | $250,000,000 | | Feb 1 - Feb 28, 2023 | — | $— | $250,000,000 | | Mar 1 - Mar 31, 2023 | 1,574,575 | $23.87 | $212,420,984 | | Total | 1,574,575 | $23.87 | | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including governance documents, compensatory plans, and CEO/CFO certifications - The report includes exhibits such as CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various corporate agreements187