Tri Pointe Homes(TPH) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Tri Pointe Homes, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, equity, and cash flows, reflecting key financial performance and position Consolidated Balance Sheets | Balance Sheet Item | June 30, 2023 (Thousands USD) | December 31, 2022 (Thousands USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $981,567 | $889,664 | | Real estate inventories | $3,193,328 | $3,173,849 | | Total assets | $4,780,559 | $4,719,940 | | Liabilities & Equity | | | | Total liabilities | $1,883,739 | $1,883,409 | | Total stockholders' equity | $2,896,111 | $2,832,389 | | Total liabilities and equity | $4,780,559 | $4,719,940 | - Total assets increased slightly to $4.78 billion from $4.72 billion at year-end 2022, primarily driven by an increase in cash and cash equivalents[13] Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2023 (Thousands USD, except EPS) | Three Months Ended June 30, 2022 (Thousands USD, except EPS) | Six Months Ended June 30, 2023 (Thousands USD, except EPS) | Six Months Ended June 30, 2022 (Thousands USD, except EPS) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $826,959 | $1,005,461 | $1,597,744 | $1,732,953 | | Net income available to common stockholders | $60,724 | $136,383 | $135,466 | $223,861 | | Diluted EPS | $0.60 | $1.33 | $1.34 | $2.12 | - For the three months ended June 30, 2023, total revenues decreased by 17.8% YoY, and net income available to common stockholders decreased by 55.5% YoY[15] Consolidated Statements of Equity - Total stockholders' equity increased from $2.83 billion at the end of 2022 to $2.90 billion as of June 30, 2023. The increase was driven by net income of $135.5 million, partially offset by share repurchases totaling $70.5 million for the six-month period[18] Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2023 (Thousands USD) | Six Months Ended June 30, 2022 (Thousands USD) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $197,734 | $(167,831) | | Net cash used in investing activities | $(20,788) | $(43,942) | | Net cash used in financing activities | $(85,043) | $(199,631) | | Net increase (decrease) in cash | $91,903 | $(411,404) | - The company generated positive cash flow from operations of $197.7 million in the first six months of 2023, a significant improvement from a cash use of $167.8 million in the same period of 2022, primarily due to a smaller increase in real estate inventories[22] Notes to Consolidated Financial Statements - The company operates in two principal businesses: homebuilding and financial services. The homebuilding business is segmented into West, Central, and East regions[39][40] - For the three and six months ended June 30, 2023, the company recorded a real estate inventory impairment charge of $11.5 million related to one active community in the West Segment[50] - As of June 30, 2023, the company had total outstanding senior notes of $1.1 billion and loans payable of $287.4 million. The company was in compliance with all financial covenants[71][76][83] - Under the 2022 Long-Term Incentive Plan, total stock-based compensation expense was $4.2 million for Q2 2023 and $8.0 million for the first six months of 2023[102][106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the improved housing market in Q2 2023, noting increased new home orders despite revenue declines, and highlights the company's strong liquidity and low debt-to-capital ratio Overview and Outlook - The housing market's positive trajectory continued through Q2 2023, supported by a scarcity of resale home supply, which has helped restore pricing power to the business[134] - Q2 2023 highlights include 1,912 net new home orders, an 18% YoY increase in ending community count to 145, and diluted EPS of $0.60[135] - The company ended the quarter with a strong financial position, including total liquidity of $1.7 billion and a record-low debt-to-capital ratio of 32.3%[135] Results of Operations - Three Months Ended June 30, 2023 vs 2022 | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Net New Home Orders | 1,912 | 1,356 | 41% | | Average Selling Communities | 140.3 | 121.8 | 15% | | Monthly Absorption Rate | 4.5 | 3.7 | 22% | | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Backlog Units | 2,765 | 3,826 | (28)% | | Backlog Dollar Value (Billions USD) | $1.9 | $3.0 | (36)% | | Home Sales Revenue (Millions USD) | $819.1 | $1,004.6 | (18)% | | New Homes Delivered | 1,173 | 1,485 | (21)% | - Homebuilding gross margin percentage decreased to 20.4% from 27.2% in the prior-year period, primarily due to increased use of incentives and an $11.5 million impairment charge[149] - SG&A expense as a percentage of home sales revenue increased to 11.9% from 9.5%, driven by higher broker commissions, increased marketing, and lower leverage on fixed costs due to reduced revenue[151] Results of Operations - Six Months Ended June 30, 2023 vs 2022 | Metric | H1 2023 | H1 2022 | % Change | | :--- | :--- | :--- | :--- | | Net New Home Orders | 3,531 | 3,252 | 9% | | Average Selling Communities | 138.4 | 116.7 | 19% | | Monthly Absorption Rate | 4.3 | 4.6 | (7)% | | Metric | H1 2023 | H1 2022 | % Change | | :--- | :--- | :--- | :--- | | Home Sales Revenue (Billions USD) | $1.6 | $1.7 | (8)% | | New Homes Delivered | 2,238 | 2,584 | (13)% | | Homebuilding Gross Margin % | 21.9% | 27.0% | -5.1 p.p. | - SG&A as a percentage of home sales revenue increased to 11.7% from 10.2% in the prior-year period, mainly due to higher broker commissions and marketing expenses[166] Lots Owned or Controlled and Liquidity | Lots | June 30, 2023 | June 30, 2022 | % Change | | :--- | :--- | :--- | :--- | | Lots Owned | 18,378 | 21,579 | (15)% | | Lots Controlled | 14,456 | 17,503 | (17)% | | Total Lots Owned or Controlled | 32,834 | 39,082 | (16)% | - As of June 30, 2023, the company had total liquidity of $1.7 billion, consisting of $981.6 million in cash and $695.0 million available under its credit facility[174] | Leverage Ratio | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Ratio of debt-to-capital | 32.3% | 32.7% | | Ratio of net debt-to-net capital | 12.1% | 14.7% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from interest rate fluctuations on debt, with no derivative financial instruments used for trading or speculative purposes - The company is exposed to market risks from fluctuations in interest rates on its outstanding debt[203] - No derivative financial instruments were utilized during the six months ended June 30, 2023, and the company does not hold derivatives for trading or speculative purposes[203] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[204] - There were no changes during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[205] Part II. OTHER INFORMATION Item 1. Legal Proceedings The company faces routine legal proceedings but recorded no legal reserves as of June 30, 2023, as no probable and estimable losses were identified - The company is subject to legal claims and proceedings in the normal course of business but had zero legal reserves as of June 30, 2023, and December 31, 2022[89][206] 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 company's Annual Report on Form 10-K for the year ended December 31, 2022[207] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its 2023 share repurchase program, repurchasing 1.14 million shares for $32.3 million in Q2 2023 and 2.71 million shares for $69.9 million in H1 2023 - On February 15, 2023, the board approved a share repurchase program authorizing up to $250 million through December 31, 2023[208] | Period | Total Shares Purchased | Average Price Paid | Total Cost (Millions USD) | | :--- | :--- | :--- | :--- | | Q2 2023 | 1,137,478 | $28.43 | $32.3 | | H1 2023 | 2,712,053 | - | $69.9 | - As of June 30, 2023, approximately $180.1 million remained available for repurchase under the program[209] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2023 - No director or officer subject to Section 16 of the Exchange Act adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[210] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO/CFO certifications - The report includes standard corporate governance documents and required CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[211]