Tri Pointe Homes, Inc.

Greetings and welcome to TriPoint's fourth quarter 2023 earnings conference call. At this time, all participants are in 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 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 fourth quarter of 2023. 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.

Thank you, David, and good morning to everyone on today's call. During the call, we will review operating results for the fourth quarter and the full year, provide a market update, and discuss key operating objectives. In addition, we will provide our first quarter and full year outlook for 2024. 2023 proved to be another strong year for TriPoint Homes, capped off by a successful fourth quarter. We reached or exceeded the high end of all of our key operating metrics for the quarter, closing out the year with strong momentum. During the quarter, we delivered 1,813 homes at an average sales price of $685,000, leading to home sales revenue of $1.2 billion and diluted earnings per share of $1.36. Our gross margin for the quarter was 22.9%. and our SG&A expense as a percentage of home building revenue was 9.3%. We also repurchased approximately 1.8 million shares of our common stock during the fourth quarter at an average price of $27.23 for an aggregate dollar amount of $50 million. Despite the macro headwinds of inflation and volatile interest rate swings, 2023 was a strong year for our company. positioning us for further success in 2024. For the full year of 2023, we delivered 5,274 homes. An average sales price of $693,000, leading to home sales revenue of $3.7 billion. Our home building gross margin was 22.3%, and diluted earnings per share was $3.45. We ended the year with a book value per share of $31.52, a 12% year-over-year increase. Fueled by a 40% rise in net new home orders in 2023, we increased our opening backlog units by 58% heading into 2024. In the fourth quarter of 2023, there was a significant shift in mortgage interest rates, initially peaking at cycle highs in October, rates subsequently declined as market sentiment shifted. As rates began descending in November, home buying activity increased, with December ultimately exhibiting the strongest orders of the quarter. That end-of-year momentum has been sustained through January and into February, and we would characterize the overall demand environment as strong, demonstrated by our January absorption rate of 3.5. In addition, we opened 70 communities in 2023, ending the year with 155 active selling communities, representing a 14% increase compared to the prior year. We anticipate that our higher community count, coupled with the ongoing strong demand, will help us achieve our projected 17% year-over-year increase in deliveries in 2024. Glenn will provide more color in our guidance during his remarks. We remain encouraged about the fundamentals of our business, including household formations, strong demand from millennials and Gen Z buyers, a more normalized supply chain, and shorter cycle times. While each of these factors contributes to the long-term health of our industry, we're particularly optimistic about the ongoing favorable supply and demand dynamics that structurally support new home demand. In addition, the resale market remains locked in as many existing homeowners are holding mortgages far lower than current market rates. These dynamics should continue to support the homebuilding industry with new home market share of total home sales at historical highs. The strength of our balance sheet continues to be a priority. We ended 2023 with $1.6 billion in liquidity and a net debt to net capital ratio of 14.6%. We generated 195 million of cash flow from operations during 2023 and remain committed to producing positive cash flow in the future as we balance our growth initiatives while reducing debt and remaining active in our share repurchase program. With 869 million of cash on hand at year end, we currently plan to pay off the $450 million of senior notes that are due in June. By deleveraging, we expect to save $26 million annually in interest costs and reduce our debt-to-capital ratio by approximately 30%. In December, we announced that our board of directors approved a new $250 million share repurchase authorization, demonstrating our commitment to returning excess capital to shareholders. For the full year of 2023, we repurchased 6.3 million shares at an average price of $27.68, representing a total spend of $174 million. Share repurchases have been a key component of our capital plan over the past several years. Slide 19 of our slide deck highlights the impact of our share repurchase program since its inception. From the end of 2015, we have reduced shares outstanding by 41% and grown our book value per share by 200%. That equates to a 15% compounded annual growth rate in our book value per share. Our goal is to continue to increase book value per share by 10% to 15% annually through a combination of share repurchases and consistently generating strong earnings. As a growth-oriented company, we are focused on growing scale in our existing markets and targeting new markets through organic startups or M&A. In our existing markets, our West region is close to targeted scale and is generating strong margins and cash flow. Over the past few years, we have been investing heavily in our Central and East regions to grow community account, and we are seeing the benefit from that investment. Over the next two years, we expect delivery volumes in Texas to grow over 60% compared to 2023. In the Carolinas, we anticipate delivery volume growth of over 30% in that same period. Not only will this provide for strong top line growth, but increased profitability as our Texas and Carolina divisions are currently producing home building gross margins at or above the company average. For new market expansions, we recently announced our organic entry into Utah, and we are already seeing positive momentum on the land front. We anticipate first deliveries from Utah starting in 2025. We are also actively looking for growth in the southeast by expanding our footprint into the Coastal Carolinas and Florida markets. Another initiative that will be accretive to our long-term growth goals is with our mortgage company, TriPoint Connect. Effective February 1st, 2024, TriPoint Connect became a wholly owned subsidiary of TriPoint Homes as we exercised the right to purchase the minority stake in our joint venture with Loan Depot. This alignment of mortgage operations with our core home building business offers more flexibility in terms of the customer experience, and competitive pricing and will provide increased earnings from our financial services business. TriPoint Connect is an integral part of our business with strong customer satisfaction and mortgage capture rate. We continue to see strength and quality in our home buyers and backlog financing with TriPoint Connect. With an average annual household income of $198,000, an average FICO score of 753, 80% loan-to-value, and a 40% debt-to-income ratio. In summary, the prevailing positive macroeconomic conditions and strong housing fundamentals make us optimistic for 2024 and beyond. Given this environment, TriPoint is in excellent position to expand our scale in each of our markets, particularly considering our well-positioned land holdings and our experienced team members. We are actively taking the necessary steps to capitalize on numerous growth opportunities that exist in the market today and are committed to deploying our capital into accretive long-term growth initiatives. With that, I'll turn the call over to Glenn. Glenn?