Tri Pointe Homes, Inc.

Hello, and welcome to the TriPoint Homes third quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to David Lee, General Counsel. Please go ahead.

Good morning, and welcome to TriPoint Homes earnings conference call. Earlier this morning, the company released its financial results for the third quarter of 2021. Documents detailing these results, including a slide deck, are available at www.tripointhomes.com through the investors link and under the events and presentations tab. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating performance, are forward-looking statements that involve risks and uncertainties. Discussion of risks and uncertainties and other factors that could cause actual results to differ materially are detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through TriPoint's website and in its SEC filings. Hosting the call today are Doug Bauer, the company's chief executive officer, Glenn Keeler, the company's chief financial officer, Tom Mitchell, the company's chief operating officer and president, and Linda Mamet, the company's chief marketing officer. With that, I will now turn the call over to Doug.

Well, thanks, David, and good morning to everyone joining us on the call today. TriPoint Homes delivered another quarter of excellent operating results in the third quarter of 2021. generating net income of $133 million or earnings of $1.17 per share. New home deliveries of 1,632 represent a 25% increase compared to the prior year and exceeded our stated guidance for the quarter as our teams did an outstanding job dealing with the labor and supply chain issues that continue to challenge our industry. Our focus on returns was evident in our third quarter performance. with a return on average tangible equity hitting 20.8% on a trailing 12-month basis, representing 650 basis point improvement over the same period last year. Margin expansion has been a key component to our success in driving better returns this year, and we made even more progress on that front in the third quarter, with gross margins hitting 26.3%, a record for our company. Another factor that continues to improve our returns has been our shift to a more asset light land strategy, using option agreements and land banking arrangements to control lots. At the end of the third quarter, the percentage of lots controlled but not owned stood at 42% of our total lot count, compared to 37% at the end of the third quarter of 2020. Programmatic share repurchases continue to be an area of focus, and we repurchased an additional $65 million of stock in the third quarter and have surpassed $850 million of share repurchases dating back to 2015. We have executed this without sacrificing home building revenue growth, which has increased it at a compounded annual growth rate of 9% over the same period. As a result of this revenue growth, coupled with margin expansion, and a significant reduction in shares outstanding, our book value per share has also grown by a compounded annual growth rate of 13% since 2015. Concurrently, we have reduced our current net debt to net capital ratio to 24.3% and continue to accelerate our inventory terms. We are extremely pleased with the way these initiatives have led to tangible improvements to our return profile and believe they will continue to benefit our shareholders. New home demand in the third quarter was healthy across all our markets and product segments, with our monthly sales pace averaging 4.1 homes per community per month for the quarter. We continue to see favorable new home environment in our markets with low levels of home inventory, low interest rates, and a heightened interest in single-family home ownership brought about by the pandemic. In addition, millennials are the most active home buyers, and we expect this to continue over the next several years. Millennials currently represent 54% of our backlog with our affiliated mortgage company, TriPoint Connect. That, coupled with current demand for entry-level and first move-up homes in locations that are close to job centers and transportation, gives TriPoint a significant advantage across our markets. We believe this favorable demand dynamic will be in place for the foreseeable future, providing an excellent operating environment for our company and our industry. Complicating this positive fundamental outlook for home building, however, are the ongoing supply chain challenges that continue to slow the pace of our operations. While the rate of this slowdown varies by market, we are experiencing supply chain issues across our home building footprint, and expect these issues to persist into 2022. Fortunately we have successfully navigated this difficult operating environment thanks in part to our focus on being the best of big and small as a home builder. By that I mean we strive to take advantage of our size and scale to procure the inputs we need from our national suppliers while staying nimble enough to work with our local suppliers and contractors to get our backlog closed in a timely manner. As a result of these efforts, we have not changed our full year delivery guidance and still expect to deliver 6,000 to 6,300 homes for the year. Looking forward, we are extremely pleased with our new community pipeline. We plan to open 110 new communities over the next five quarters and end 2022 with between 150 and 160 active selling communities. Beyond that, we have an additional 80 new communities planned to open in 2023, which we estimate will grow any community count in 2023 to between 170 and 180 communities. Based on the cadence of community openings and assuming a continued strong market, we expect year-over-year order growth to occur starting in Q2 of next year. With strong operational momentum and excellent balance sheet, and a sizable backlog, TriPoint is in a great position to finish out 2021 on a high note and carry that momentum into 2022. With that, I'd like to turn it over to Glenn, who will provide more details about our results for this quarter and give some guidance for the rest of this year and 2022. Glenn?