Tri Pointe Homes, Inc.

TriPoint Homes first quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Lee, Investor Relations for TriPoint Homes. Thank you. You may begin.

Good morning and welcome to TriPoint Homes earnings conference call. Earlier this morning, the company released its financial results for the first quarter of 2022. 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. The 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.

Good morning, and thank you for joining us today as we go over our results for the first quarter of 2022 and provide some thoughts on the balance of the year. TriPoint Homes delivered another excellent quarter of profitability, generating earnings of 81 cents per diluted share in the first quarter of 2022. compared to 59 cents in the prior year period. We once again came in at the high end or above our stated guidance for key operational metrics, including new home deliveries of 1,099, average selling price of 660,000, and home building gross margin of 26.8%. Because of strong demand throughout the quarter, we continued to sell homes at an elevated pace of 5.7 homes per community per month. This sales success resulted in a first quarter ending company record backlog, both in terms of units with 3,955 homes in backlog and dollar value of 2.9 billion, which places us in an excellent position to deliver on our guidance for the full year. We were also successful in meeting our projected new community openings. For the quarter, we opened 22 new communities with excellent initial sales results. Because of demand and our differentiated product offering, we continue to realize accelerated sales with virtual openings. We are still on pace to open 90 to 100 new communities for the year, which will contribute significantly to delivery growth in the coming years. We are extremely pleased with our results this quarter and are encouraged by our team's ability to work through the supply chain issues that persist in our industry. Demand continued to remain robust in all of our markets in the first quarter, even as mortgage rates have moved materially higher. The homebuyers in our backlog are well-qualified and are pre-qualified through our mortgage affiliate prior to purchasing a home. They have an average debt-to-income ratio of 39%, and an average FICO score of 749, an average loan-to-value of 82%, and average annual household income of $189,000. The majority of our homebuyers are millennials, and this cohort continues to be a strong source of demand for the industry, driven by needs-based, life-changing events such as marriage, a growing family, or a job relocation. This sizable population of buyers is in the prime homebuying phase of their lives, And the home building industry stands to benefit from their participation in the markets for years to come. Demand is also being fueled by what we believe will be the long-lasting transformation of home buyer preferences and needs brought about by the pandemic. Whether it's born out of a desire for more living space, the ability to work from home, or a need to feel more in control of one's living conditions, the pandemic has created a heightened desire for home ownership in our country. Another positive dynamic for the industry is the ongoing and severe lack of existing home supply in our markets. This lack of resale competition has caused an increasing number of buyers to consider purchasing a new home. According to the most recent figures from the National Association of Realtors, as of the end of March, the inventory of unsold existing homes stood at 950,000 units. which is equivalent to two months of supply at the current monthly sales base and well below historical norms. Inventory levels for new homes also remain constrained by the ongoing supply chain issues that have limited the number of homes that can be brought to the market and kept pricing firm while maintaining a sense of urgency for each new home site release. We believe that this supply demand imbalance for both new and existing homes will persist for some time. providing the new home industry with a healthy fundamental backdrop for the foreseeable future. Given this outlook, TriPoint Homes remains focused on consistent operational and financial performance by executing on the five strategic initiatives we have emphasized for the several quarters now. These include the continued monetization of our long-dated California assets, the growth and build-out of our early-stage markets, a disciplined approach to land acquisition, further improvements to our cost structure across our home building platform, and a consistent share repurchase program. With respect to our long-dated California assets, these communities continue to generate positive cash flow and outsized profits for our company due to their favorable land basis, desirable locations, innovative new home designs, and attractive pricing. In terms of our early stage markets of Austin, Dallas, Sacramento, and the Carolinas, we made further progress towards greater scale and operational efficiency, opening nine new communities in the first quarter. These divisions are now making valuable contributions to the bottom line and generating healthy margins. We continue to be disciplined but active in the land market. TriPoint grew its total lock count by 14% on a year-over-year basis in the first quarter, With the bulk of that increase coming by option agreements and land banking arrangements. Lots controlled as a percentage of our total was 47% at the end of the quarter compared to 38% at the end of the first quarter of 2021. Additionally, we have been expanding our geographic diversity and as a result of that strategy, deliveries from our non-California divisions are expected to increase to approximately 70% of the company's overall deliveries by 2024 versus 58% in 2021. TriPoint continues to look for ways to utilize technology to drive efficiencies across our home building platform. We have made significant investments in virtual sales tools and expanded our online marketing efforts, which we believe have resulted in long-lasting structural changes to the way we do business. With that, we continue to see efficiencies related to our marketing and advertising spending and reductions in both the outside broker attachment rate as well as broker cost per delivery. The final piece of our returns-focused strategy has been to allocate a significant portion of our cash flow to share repurchases. In the first quarter, we repurchased 5.3 million shares for a total of $123 million. With our undervalued stock price and the positive fundamental outlook we see for our industry in the long term, we feel this is an excellent use of our capital that further enhances shareholder returns. As of March 31, 2022, we had $302 million remaining on our outstanding share repurchase authorization. Currently, we are in a difficult geopolitical and inflationary environment in the U.S., The Federal Reserve has made it their top priority to tame this inflation with higher interest rates and a reduction of their balance sheet. As a result, we have seen mortgage rates increase over 200 basis points, and with higher interest rates, the consumer loses purchasing power. While this creates a changed environment, we have been there before. Our company is led by seasoned executives who know how to successfully operate during these periods. We acknowledge that higher financing costs will be a headwind for our industry. However, we are encouraged that the U.S. economy remains strong and wages continue to rise, leading us to believe that the demand drivers we see in our industry and our markets can continue to propel the housing market forward and present a much more positive fundamental outlook than our current equity valuation would suggest. In summary, TriPoint Homes delivered excellent results in the first quarter of 2022, thanks to a combination of strong execution, careful planning, and a continuation of our returns-focused strategy. While investors remain focused on mortgage rates, we remain centered on doing what is best for the long-term interests of our company and our shareholders and believe we have the right strategy and leadership teams in place to be successful. With that, I'd like to turn the call over to Glenn, who will provide more detail about our results and give an update on our forward-looking guidance. Glenn?