• Home Sales Revenue: $1.2 billion in the fourth quarter of 2024.
• Homebuilding Gross Margin: Improved by 40 basis points year over year to 23.3% in Q4 2024.
• SG&A as a Percentage of Home Sales Revenue: 10.3% in Q4 2024.
• Pretax Margin: 14% in Q4 2024.
• Net Income: $129 million or $1.37 per diluted share in Q4 2024.
• Full-Year Net Income: $458 million or $4.83 per diluted share, a 40% increase year over year.
• Operating Cash Flows: Record high in 2024.
• Senior Notes Redemption: $450 million redeemed in 2024.
• Return on Average Equity: 14.5% for 2024, a 270-basis point improvement over the previous year.
• Book Value Per Share Growth: Increased by 14.5% year over year.
• Share Repurchase: 4 million shares repurchased in 2024; new $250 million authorization announced in December 2024.
• Liquidity: Approximately $1.7 billion at the end of Q4 2024.
• Homebuilding Debt-to-Capital Ratio: 21.6% at the end of Q4 2024.
• Homebuilding Net Debt to Net Capital Ratio: Negative 1.6% at the end of Q4 2024.
• Active Selling Communities: 145 at the end of 2024; expected to end 2025 with 150 to 160.
• Lots Owned or Controlled: Over 36,000, a 14% increase compared to the previous year.

• Warning! GuruFocus has detected 4 Warning Signs with MED.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tri Pointe Homes Inc (NYSE:TPH) delivered a strong fourth quarter with 1,748 new homes and $1.2 billion in home sales revenue.
• The company achieved a record high of 6,460 new homes delivered in 2024, with a 40% year-over-year increase in net income.
• Tri Pointe Homes Inc (NYSE:TPH) has made significant geographic diversification gains, particularly in Texas and the Carolinas.
• The company has a strong balance sheet with $1.7 billion in liquidity and a negative 1.6% homebuilding net debt to net capital ratio.
• Tri Pointe Homes Inc (NYSE:TPH) has a robust land position, owning or controlling over 36,000 lots, a 14% increase from the previous year.

Negative Points

• The company experienced softer seasonal sales trends in the third and fourth quarters, leading to a lower backlog for 2025.
• Elevated mortgage rates and economic uncertainties have caused some consumers to stay on the sidelines.
• Incentives increased to 7% in the fourth quarter to move completed inventory, indicating pressure on pricing.
• The company anticipates a lower homebuilding gross margin for 2025, ranging from 20.5% to 22%, compared to 23.3% in 2024.
• Tri Pointe Homes Inc (NYSE:TPH) faces potential political uncertainties and operating headwinds that could impact consumer confidence and demand.

Q & A Highlights

Q: Can you elaborate on the factors that could lead to the lower end of your gross margin guidance of 20.5%? A: Glenn Keeler, CFO, explained that the lower end of the gross margin guidance would imply continued elevated incentives similar to those seen in the first quarter. To achieve the higher end of the range, market improvement and lower incentives would be necessary. He also noted that the operating margin of 8.5% is considered low for the long term, as they expect better margins with growth and scale.

Q: What is driving the sequential increase in average sales price (ASP) and do you have pricing power in the current market? A: Douglas Bauer, CEO, stated that the ASP increase was due to mix changes in the fourth quarter. Regarding pricing power, it varies by submarket, ranging from 1% to 5%. He also mentioned that tariffs could affect the latter part of the year, but there is uncertainty around this.

Q: How do you view the current absorption pace compared to last year, and what is your strategy for balancing price and pace? A: Glenn Keeler, CFO, noted that while there has been some improvement in absorption pace from Q4, year-over-year comparisons are tough due to last year's strong performance. Douglas Bauer, CEO, added that the consumer mindset has shifted due to stable mortgage rates and political uncertainties, but he remains bullish on long-term growth. Tom Mitchell, President and COO, mentioned that they are planning for a slightly lower absorption pace this year to focus on enhancing margins.

Q: Can you discuss the impact of completed specs on your gross margin and the spread between to-be-built and spec homes? A: Glenn Keeler, CFO, explained that the number of completed specs is in line with historical norms and not driving the margin decline. The margin difference is due to new communities with different lot costs. Tom Mitchell, President and COO, added that the spread between to-be-built and spec homes has increased to about 4% due to the current interest rate environment.

Q: What is the current mix of first-time buyers in your customer base, and how has it changed? A: Linda Mamet, EVP and CMO, noted a decrease in first-time buyers in their backlog, with more opportunities in the first and second move-up segments. This shift is attributed to the aging millennial demographic and current market conditions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.