Tri Pointe Homes, Inc.

Good morning and welcome to the TriPoint Homes fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please signal the operator by pressing star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Lee, General Counsel of TriPoint Homes. Please go ahead.

Good morning and welcome to TriPoint Homes earnings conference call. Earlier this morning, the company released its financial results for the fourth quarter of 2024. Documents detailing these results, including a slide deck, are available at www.tripointhomes.com through the investors link and under the events and presentations tabs. 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 for 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 President and Chief Operating Officer, and Linda Mamet, the company's Executive Vice President and Chief Marketing Officer. With that, I will now turn the call over to Doug.

Good morning, everyone, and thank you for joining us today. I am very pleased to report that TriPoint delivered a strong fourth quarter, capping off an exceptional year for our company. In the fourth quarter, we delivered 1,748 new homes, generating $1.2 billion in home sales revenue. Our home building gross margin improved 40 basis points year over year to 23.3%. SG&A as a percentage of home sales revenue was 10.3%, contributing to a pre-tax margin of 14%. This generated $129 million of net income, or $1.37 per diluted share during the quarter. These strong fourth quarter results contributed to an outstanding 2024 for TriPoint. We delivered a record high 6,460 new homes. Our full year home building gross margin was 23.3%. The net income was $458 million, or $4.83 per diluted share, representing a 40% increase year over year. We also achieved record operating cash flows, regained $450 million of senior notes, and finished the year with the strongest balance sheet in liquidity in our history. We continued down our path of geographic diversification in our growth markets, with significant gains in Texas, where we achieved a 60% increase in deliveries in 2024, while accomplishing a 11% increase in the Carolinas. We expect to continue that momentum with our new startup divisions in Salt Lake City, Orlando, and the Coastal Carolinas. For 2024, we achieved a return on average equity of 14.5%, a 270 basis point improvement over the previous year. Through these strong results and our disciplined capital allocation, including the repurchase of 4 million and shares outstanding by our repurchase program, we increased year-over-year book value per share by 14.5%. We remain committed to our share repurchases for 2025. In December, we announced a new $250 million share repurchase authorization. And in the first six weeks of 2025, we have already repurchased approximately 691,000 shares for a total spend of $25 million. Since the program's inception in 2016, we have reduced shares outstanding by 43%, a key driver of our book value per share growth. Coming off a record year of operating cash flow and all-time high liquidity, we are well-positioned to continue this strategy. leveraging market opportunities to create shareholder value. Now, turning to current market dynamics, we experienced softer seasonal sales trends in the third and fourth quarter, leading to a lower backlog for the company to start 2025. Elevated mortgage rates, sticky inflation, the uncertainty around the election, and slowing job growth caused some consumers to stay on the sideline. While we did increase incentives to move completed inventory in the second half of 2024, we took a measured approach and didn't chase the market. As we plan for 2025, there are additional political uncertainties that could cause consumer hesitancy and operating headwinds. Despite these macro headwinds, our communities are well located in core markets, and as a result, our strategy is to appropriately balance price and pace to enhance margin in the current market environment. So far in 2025, we have seen a pickup in demand from the fourth quarter, and we also see an incentives trending lower as order of momentum increases. On the macro level, strong demographics, particularly the growing millennial and Gen Z buyer cohorts, and a persistent supply shortage continue to support long-term demand. The resilience of home prices through this softer demand environment further reinforces the strengths of the market's fundamentals. Housing has been undersupplied since the global financial crisis, and we believe there are continuing growth opportunities, especially for public home builders who are well-positioned to tackle higher interest rates through buy-downs and other flexible financing options. We remain confident in our ability to navigate short-term demand fluctuations while staying well-positioned to capitalize on the long-term growth opportunities within our markets. TriPoint is poised for growth over the next several years. We currently own or control over 36,000 lots, which is a 14% increase compared to the previous year. Our ability to self-develop communities which represents approximately 70% of our business, creates values that should lead to strong margin and earnings from these communities. As a company, we continue to invest in our core market strategy, focusing on A locations that are close to employment, good schools, and lifestyle amenities. Our core land holdings, along with our differentiated premium brand and customer-focused strategy, allows us to attract a well-qualified and resilient buyer profile who aspires to our product, reinforcing our long-term value proposition. The maturing millennial generation, ranging in age from 29 to 44 years old, now represents 64% of our backlog financing with our mortgage company, TriPoint Connect. Our customers and backlog with TriPoint Connect have an average FICO scores of 753, debt-to-income ratio of 41%, and average household income of $220,000. Last year, customers spent nearly a half a billion dollars at our design studios, which shows our consumers' desire for personalization and represents a strong profit center for our company. In 2025, we will continue to invest in our three new organic expansion markets, Salt Lake City, Orlando, and Coastal Carolinas. In Salt Lake, we currently own or control over 1,000 lots. We have broken ground on our first project and plan to open two new communities in 2025, with first deliveries expected in the back half of this year. In Orlando, we continue to build the team and make meaningful progress on the land front, ending the year with 252 lots owned or controlled, with additional land negotiations well underway. We expect first communities and deliveries coming out of Orlando in 2026. Meanwhile, our Coastal Carolina division is ramping up operations and remains on track for deliveries beginning in 2026. Each of these markets remains highly attractive for our premium lifestyle brand, and we are leveraging expertise from our established divisions to ensure success. As I conclude, I want to reaffirm that at the core of our success is our unwavering focus on creating exceptional living experiences through high quality, innovative, and desirable homes and communities. Customer satisfaction is not just a priority. It is the foundation of everything we do, as evidenced by our high referral rate with 26% of our homebuyers in 2024 referred to TriPoint Homes by a friend or family member. Furthermore, we are one of the top two homebuilders in the 2024 America's Most Trusted Homebuilders Study. As the industry evolves with advancements in technology, including AI, and a more dynamic digital home shopping experience, we remain committed to meeting the changing needs of our customers and delivering products and experiences that exceed their expectations. We believe our industry is well positioned, supported by the solid fundamentals of the housing market, including persistent under supply and favorable demographics. By prioritizing the customer, We will continue driving profitable growth and maximizing long-term value for our shareholders. With that, I will now turn the call over to Glenn. Glenn?