Tri Pointe (TPH) Q3 2025 Earnings Call Transcript

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Date

Thursday, Oct. 23, 2025, at 10 a.m. ET

Call participants

• Chief Executive Officer — Doug Bauer
• Chief Financial Officer — Glenn Keeler
• Chief Marketing Officer — Linda Mamet
• Chief Operating Officer — Tom Mitchell

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Takeaways

• Home Closings -- 1,217 homes delivered at an average sales price of $672,000, resulting in $817 million in home sales revenue.
• Adjusted Homebuilding Gross Margin -- 21.6% after excluding $8 million in inventory-related charges.
• SG&A Expenses -- 12.9% of home sales revenue, at the lower end of guidance due to cost savings and higher deliveries.
• Share Repurchase Activity -- $51 million spent to repurchase 1.5 million shares, totaling $226 million and 7 million shares year to date, with a 7% reduction in share count year to date, and a 47% reduction in share count since program inception in 2016.
• Liquidity and Capitalization -- $1.6 billion in total liquidity, composed of $792 million in cash, and $791 million available under the revolving credit facility; debt-to-capital ratio of 25.1%, and net debt-to-net-capital ratio of 8.7%.
• Term Loan Update -- Increase of $200 million, bringing total outstanding to $450 million with the option to extend maturity to 2029.
• Net New Orders and Absorption Pace -- 995 net new orders with a company-wide absorption pace of 2.2 homes per community per month; West region absorption pace was 2.3, Central region averaged 1.8 absorption pace, and East region absorption pace was 2.8 homes per community per month.
• Spec Inventory Reduction -- 17% quarter-over-quarter decline in total spec inventory, including both homes under construction and completed homes.
• Incentives on Deliveries -- 8.2% of revenue, with about one-third being financing-related, and under 1% relating to forward purchase commitments.
• Land Position -- Over 32,000 total lots owned or controlled, with 51% controlled via option agreements.
• Community Expansion -- Opened first two communities in Utah; plan to end 2025 with approximately 155 communities, and target 10%-15% growth in ending community count by end of 2026, primarily in central and east regions.
• Customer Profile -- Buyers financing through Tri Pointe Connect have an average household income of $220,000, FICO score of 752, 78% loan-to-value ratio, consistent with recent quarters, and 41% average debt-to-income (as reported for home buyers financing through Tri Pointe Connect, consistent with recent quarters).
• Q4 Outlook -- Expected deliveries of 1,200-1,400 homes for Q4 2025, average sales price of $690,000-$700,000 for Q4 2025, homebuilding gross margin of 19.5%-20.5% for Q4 2025, SG&A expense ratio of 10.5%-11.5% for Q4 2025, and effective tax rate of about 27%.
• Full-year 2025 outlook -- Projected deliveries of 4,800-5,000 homes at an average sales price of approximately $680,000 for the full year 2025, full-year gross margin of about 21.8% (excluding inventory charges) for 2025, SG&A expense ratio of 12.5% for full year 2025, and tax rate of about 27% for the full year.

Summary

Tri Pointe Homes (NYSE:TPH) surpassed delivery guidance. Management emphasized ongoing community count expansion, with a strategic focus on scaling in central and eastern markets while leveraging a large, option-controlled lot inventory. The company expects continued financial discipline, a balanced approach to inventory, and the maintenance of a premium move-up buyer profile to support order growth as market conditions evolve.

• Glenn Keeler said, "Incentives on deliveries were 8.2% for the quarter," specifying that "about a third of those were financing related, including closing costs."
• Tom Mitchell noted, "our starts for the quarter were about 577, and that's down significantly from where we were in Q1 and Q2," reflecting a deliberate shift to normalize spec inventory and starts volume in line with demand trends.
• Doug Bauer stated, "We expect to end 2025 with approximately 155 communities, and we anticipate growing our ending community count by 10%-15% by the end of 2026."
• Linda Mamet said, "we reduced our total spec inventory by 17% quarter over quarter."
• Management confirmed the backlog remains resilient, with buyer financials holding at elevated levels, and stable credit profiles.

Industry glossary

• Spec inventory: Homes built by the company without corresponding buyer contracts, held for immediate sale to meet demand or manage absorption pace.
• Absorption pace: The average number of homes sold per community per month, serving as a key metric for sales velocity and inventory management.
• Option agreements (lots controlled via option): Land parcels the company has secured the rights to purchase for future development without immediately owning, providing capital flexibility and risk control.
• Forward purchase commitments: Agreements to lock in future mortgage rates for buyers, typically used as a selling incentive or for marketing purposes.

Full Conference Call Transcript

Doug Bauer: Good morning and thank you for joining us today as we review Tri Pointe Homes' results for the third quarter of 2025. I want to begin by recognizing our entire Tri Pointe Homes team. Their dedication and focus allowed us to deliver strong results in a period that continues to present challenges to the housing industry. In the third quarter, we exceeded the high end of our delivery guidance, closing 1,217 homes at an average sales price of $672,000, generating $817 million in home sales revenue. Our adjusted homebuilding gross margin, excluding $8 million of inventory-related charges, was 21.6%, while adjusted net income was $62 million or $0.71 per diluted share. We remain focused on creating long-term shareholder value.

During the quarter, we spent $51 million repurchasing 1.5 million shares, bringing our year-to-date total spend to $226 million, representing a total of 7 million shares. This activity has reduced our share count by 7% year to date and by 47% since we initiated the program in 2016, underscoring our disciplined approach to enhancing shareholder returns. Additionally, we also strengthened our liquidity by increasing our term loan by $200 million, with optionality to extend the maturity into 2029. We believe this incremental leverage is prudent, supporting capital efficiency, funding for our community count growth, and continued flexibility to return capital to our shareholders.

We ended the quarter with $1.6 billion in total liquidity, including $792 million in cash, and a debt-to-capital ratio of 25.1%, and a net debt-to-net-capital ratio of 8.7%. Market conditions remained soft throughout the third quarter. Homebuyer interest remained somewhat muted, with lower confidence driven by slow job growth and broader economic uncertainty. However, we continue to see underlying demand for home ownership among needs-based buyers. We anticipate that home shoppers are preparing to re-engage when conditions stabilize, leading to more normalized absorptions. Our management team has successfully navigated multiple housing cycles, and we remain focused on near-term execution while staying aligned with our long-term growth strategy.

In the short term, we are prioritizing inventory management, disciplined cost control, and the sale of move-in-ready homes while steadily increasing the mix of to-be-built homes over time. For long-term success, we continue to invest in both our core and expansion markets, with a goal of scaling our operations, consistently growing community count, and increasing book value per share to drive sustained shareholder returns. We are encouraged by the progress of our new market expansions in Utah, Florida, and Coastal Carolinas. Development activity is well underway, and strong local leadership teams are in place. While initial contributions will be modest, we expect these divisions to generate meaningful growth beginning in 2027 and beyond as they gain scale.

During the quarter, we are pleased to open our first two communities in Utah, a key milestone for that region. A cornerstone of our strategy is to invest in well-located, core land positions close to employment centers, high-performing schools, and key amenities. We currently own or control over 32,000 lots, positioning us well for community count growth in the years ahead. We expect to end 2025 with approximately 155 communities, and we anticipate growing our ending community count by 10 to 15% by the end of 2026. The majority of this growth will be driven by expansion in our central and east regions.

This disciplined growth strategy enhances our operating scale, increases geographic diversification, and positions Tri Pointe Homes for sustainable, profitable growth as demand improves and our expansion divisions mature. At Tri Pointe Homes, our product is primarily targeted to premium, move-up buyers with financial strength, seeking better locations, larger homes, curated finishes, and elevated lifestyles. This segment has demonstrated resilience even amid shifting market conditions, supported by strong income profiles, sound credit, and larger down payments, and our backlog reflects this strength. Home buyers financing through Tri Pointe Connect, our affiliated mortgage company, have an average household income of $220,000, FICO score of 752, 78% loan-to-value ratio, and an average debt-to-income level of 41%, consistent with recent quarters.

These strong characteristics have reinforced the financial stability and quality of our customer base and the durability of our future deliveries. As consumer confidence improves, we expect pent-up demand to grow the pool of move-up buyers attracted to our premium communities and design-driven offerings that align with their lifestyle aspirations. Our premium brand, community locations, and innovative product design continue to differentiate Tri Pointe Homes in the marketplace. We have the financial strength and operational discipline to invest through the cycle while returning capital to shareholders. Together, these strengths, along with an experienced management team, position Tri Pointe Homes to drive long-term performance and value creation.

With that, I'll turn the call over to Glenn to provide additional detail on our financial results. Glenn?

Glenn Keeler: Thanks, Doug, and good morning. I'd like to highlight key results for the third quarter and then finish my remarks with our expectations and outlook for the fourth quarter and full year. The third quarter produced strong financial results for the company. We delivered 1,217 homes, exceeding the high end of our guidance. Home sales revenue was $817 million for the quarter, with an average sales price of $672,000. Gross margin, adjusted to exclude an $8 million impairment charge, was 21.6% for the quarter.

SG&A expenses, as a percentage of home sales revenue, was 12.9%, which was at the lower end of our guidance, benefiting from savings in G&A and better top-line revenue leverage as a result of exceeding our delivery guidance. Finally, net income for the year was $62 million or $0.71 per diluted share, also adjusted for the same inventory-related charge. Net new home orders in the third quarter were 995, with an absorption pace of 2.2 homes per community per month. Regionally, our absorption pace in the West was 2.3, with the Southern California markets outperforming and the Bay Area experiencing softer market conditions.

The Central region averaged 1.8 absorption pace for the quarter, with increased supply of both new and resale homes in Austin, Dallas, and Denver impacted pace during the quarter, while Houston continued to outperform in the region. In the East, absorption pace was 2.8, led by strong results in our DC Metro and Raleigh divisions, while Charlotte was consistent with the company average. We invested approximately $260 million in land and land development during the quarter and ended with over 32,000 total lots, 51% of which are controlled via option. Looking at the balance sheet, we ended the quarter with $1.6 billion in liquidity, consisting of $792 million of cash and $791 million available under our unsecured revolving credit facility.

As of the end of the quarter, our homebuilding debt-to-capital ratio was 25.1%, and our homebuilding net debt-to-net-capital ratio was 8.7%. As Doug mentioned, we increased our term loan by $200 million to a total outstanding amount of $450 million and added extension rights that, if exercised, could extend the due date to 2029. The term loan is an effective source of additional liquidity to help fuel our future community count growth and other capital needs. Now I'd like to summarize our outlook for the fourth quarter and full year of 2025. For the fourth quarter, we expect to deliver between 1,200 and 1,400 homes at an average sales price of between $690,000 and $700,000.

We anticipate homebuilding gross margin percentage to be in the range of 19.5% to 20.5%. We expect our SG&A expense ratio to be in the range of 10.5% to 11.5%, and we estimate our effective tax rate for the fourth quarter to be approximately 27%. For the full year, we expect to deliver between 4,800 and 5,000 homes with an average sales price of approximately $680,000. We anticipate our full-year homebuilding gross margin to be approximately 21.8%, which excludes the inventory-related charges recorded year to date. Finally, we anticipate our SG&A expense ratio to be approximately 12.5%, and we estimate our effective tax rate for the full year to be approximately 27%.

With that, I will now turn the call back over to Doug for closing remarks.

Doug Bauer: Thanks, Glenn. In closing, I want to thank our team members, customers, trade partners, and shareholders for their ongoing trust and support. We're proud to have been recognized once again as one of Fortune 100 Best Companies to Work For in 2025, a reflection of the culture and values that drive our performance. While the near-term environment remains uncertain, our long-term outlook is very positive, and we are confident that our strategy, our people, and our financial and operating discipline position Tri Pointe Homes to deliver sustainable growth and long-term shareholder value. With that, I'll turn the call over to the operator for any questions. Thank you.

Operator: We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. In the interest of time, we ask that participants limit themselves to one question and one follow-up. One moment, please, while we poll for questions. Thank you. Our first question is from Paul Przybylski with Wolfe Research.

Paul Przybylski: Thank you. Good morning. I guess, first off, could you provide some color on the monthly cadence of your orders and incentives through the quarter?

Glenn Keeler: Sure, Paul. Hey, this is Glenn. The monthly cadence was pretty consistent, actually, through the quarter. If you look at absorption, it was roughly the same each month, with September being a little bit better than August. Incentives were also consistent throughout the quarter. Incentives on deliveries were 8.2% for the quarter.

Paul Przybylski: Okay. Thank you very much. I guess you know your absorptions are getting down close to the two level. Is there a, you know, an absolute floor that you want to maintain on your sales pace, i.e., increase incentives to keep a level?

Doug Bauer: Hey, Paul. It's Doug. It's a good question. The industry's kind of working through a big, it's like trudging through mud right now. Somewhere between two and two and a half is kind of where everybody seems to be landing. If you're looking at, we're really looking at very strong community count growth in 2026. As we look forward to that, and even under similar market conditions, we've got some pretty, pretty nice growth in orders going forward.

Paul Przybylski: Thank you. Appreciate it.

Doug Bauer: Thanks, Paul.

Operator: Our next question is from Stephen Kim with Evercore ISI.

Stephen Kim: Hey, thanks, guys. I appreciate the color so far. If I could just follow up on Paul's question here on the incentives, you said 8.2% of revenues or home sales. How much of those were financial incentives if you sort of include closing costs and, you know, rate buydowns for purchase commitments and that sort of thing?

Glenn Keeler: Hey, Stephen. It's Glenn. You're correct. It was 8.2% of revenue in the quarter, and about a third of those were financing related, including closing costs.

Stephen Kim: Okay. What do you, how about forward purchase commitments specifically? Do you use them very much?

Linda Mamet: Stephen, this is Linda. Yes, we do. We primarily use forward commitments for advertising purposes, and they do have good value in driving additional interest in traffic. Ultimately, as Glenn said, most of our customers really don't need to have a significantly lower interest rate to qualify for the home, so they prefer to use more of their incentive dollars in design studio personalization.

Stephen Kim: Yeah. If you think of the third, let's say the 35% or whatever that are financial incentives, how much of that third would you say is forward purchase commitments?

Linda Mamet: Oh, it's very small, under 1%.

Stephen Kim: Yeah, very small number. Okay. Awesome. Yeah, that's great. Your average order ASP, not your closings ASP, but your order ASP has come down to, you know, call it, what is it, $654,000, I think, this quarter. Last quarter was like about $665,000. Is it reasonable to think that eventually your closings ASP is going to be at roughly that kind of level, you know, $650,000, $660,000?

Glenn Keeler: It is, Stephen. I mean, it's the mix within the quarter does play a part. When you look at, you know, our growth next year of a lot of Central and East regions, those do carry a little bit lower of an ASP versus the West. It's really just mix for us more than anything else.

Stephen Kim: Gotcha. Appreciate the color, guys. Thanks.

Operator: Our next question is from Jay McCanless with Wedbush Securities.

Jay McCanless: Hey, thanks for taking my questions. First one, the SG&A guide for the fourth quarter, it looks like you guys are getting much better leverage than what the top line would suggest. Are there some one-times in there? Can you talk about how you're able to potentially get this very good SG&A to sales number?

Glenn Keeler: No real specific one-times there, Jay. It is just a little bit more, you know, more revenue in the quarter with a higher delivery number, and that's what's really driving it.

Jay McCanless: Okay. That was actually going to be my next question. The gross margin guide is better than we were expecting. Is there some mix in there, more move-up? Anything you can give us on that?

Glenn Keeler: A little bit of mix. I think some of the divisions that continue to outperform are, you know, strong margin divisions, like when you look at like a Houston, Inland Empire in Southern California, you know, things like that have driven the mix of margin, you know, to our benefit. That plays a little part into it, Jay.

Jay McCanless: Okay. One more if I could, just kind of thinking about the newer markets y'all have discussed and just wondering what y'all think ASP might look like this next year, just given some of the smaller median price markets that you're going to be expanding into.

Glenn Keeler: We'll give that guidance next time, Jay, as we kind of roll up the plan and see what that looks like. I don't think you're going to be too different than where we're at this year. No, we're not getting significant contributions out of our new expansion divisions yet next year. It should have a minimal impact.

Jay McCanless: Okay. Great. Appreciate it.

Glenn Keeler: Thanks.

Operator: Our next question is from Alan Ratner with Zelman & Associates.

Alan Ratner: Hey, guys. Good morning. Thanks for all the details so far. Can you just update us on your spec position and strategy and how you're thinking about spec just in terms of the contribution to the business? I guess just thinking forward to 2026, you're going to enter the year with a backlog that's down quite a bit. You know, are you going to lean heavily on spec next year to kind of bridge that gap, or is that kind of a TBD based on what happens in the spring?

Doug Bauer: It's Doug, Alan. We've got about three-quarters of our orders running as specs as we go into the end of the year. All the builders have a little bit more inventory than what they anticipated. We'll burn through that inventory going into the first quarter of next year and then get to a more balanced approach. Demand is very inelastic, and we're going to continue to focus on price over pace as we go into the new year. We're just assuming similar market conditions. What we're really focused on is that strong community count growth. Even in similar market conditions, as I mentioned earlier, we'll have really good order growth going into 2026 and then 2027.

We're really looking to the future while we've been dealing with some of the challenges the market has posed to the entire industry. That's kind of how we're looking at our approach.

Linda Mamet: To add to that, Alan, we did reduce our total spec inventory by 17% quarter over quarter.

Alan Ratner: Got it. Linda, is that total specs under construction or completed homes specifically?

Linda Mamet: Both together, 17%.

Alan Ratner: Got it. The total number. Perfect. Doug, you mentioned community count growth next year several times. I'm just curious, when you think about the pricing strategy there, obviously, you guys have been very steadfast in your approach. When you open up communities, how do you think about pricing on those? Is the intention to kind of maybe come out of the gate with more attractive pricing and build up a backlog as you and then raise prices through the lifecycle of the project, or are you kind of maintaining a similar strategy to your active communities?

Like you have an idea of what the value is, and you're going to come to market with that price, and you know whatever the absorption is, that's what it's going to be for the time being.

Doug Bauer: Yeah. No, Tri Pointe, you know, as you know, Alan, is more of a premium brand proposition. You know, we look at our value proposition as it enters the market. Sure, you love to start with some momentum, but there's not any sort of material pricing thought process there because we're building, you know, along Main and Main, great locations, close to employment, and great amenities. The value proposition is what we're looking at. Frankly, as you said, I'm really, my lens is to the future. We've been dealing with choppy marketing conditions in my mind for about 18 months.

If it's more of the same next year, so be it, but we're going to have a strong community count, and we'll price the product appropriately to the marketplace to have the right value proposition that we propose.

Alan Ratner: Understood. Appreciate it. Thanks a lot.

Operator: Our next question is from Michael Dahl with RBC Capital Markets.

Chris Hahn: Hi. This is Chris Hahn from Mike. Can you just talk through your initial thoughts around the administration's affordable housing push? What conversations have you had to date, and how are you thinking about the opportunities and risks to your operating and capital allocation strategy?

Doug Bauer: Yeah. No, obviously, several builders have already made comments on that, and we're kind of the tail wagging the dog here, so to speak. We share the administration's goal of providing more housing in the U.S. As Julie noted, the industry has been underbuilt and been doing this for 35 years. It kind of started after the great financial crisis. That makes me very old. We welcome working with the relevant stakeholders at the federal, state, and local levels. It's a very complicated, interrelated discussion. Most of it happens at the local and state level, but we look forward to working with the administration wherever Tri Pointe Homes can help.

We will build, we've got 32,000 lots that we own and control. We're opening a very strong community count growth of up to 15% next year. We'll be doing our share of bringing in more communities that will be attainable for our buyer profile.

Chris Hahn: Makes sense. Yeah, the community count growth is definitely encouraging. Just shifting to the fourth-quarter gross margin guide, could you help bracket some of the big moving pieces or the moving pieces around the sequential step down in gross margin? How much of that is incremental incentives, mix, stick and brick? Just help frame that for us. Thank you.

Glenn Keeler: Yeah. This is Glenn. Good question. It's not really sticks and bricks or anything like that. I think it's a little bit of a mix, but also just, you know, we've increased incentives as we've gotten through the year. We have, you know, spec homes to sell and close within the quarter, and those generally carry a little bit higher of an incentive. All that kind of goes into that margin guide.

Chris Hahn: Got it. I appreciate the color. Thanks.

Operator: Our next question is from Kenneth Zener with Seaport Research Partners.

Kenneth Zener: Good morning, everybody.

Doug Bauer: Morning.

Kenneth Zener: I am hoping you can walk us through kind of the logic, not giving guidance or anything, but just kind of understand the cadence. Looking at starts and orders, it looks like you guys did about 500 starts this quarter in the third quarter versus orders that were higher than that. As we exit the year, how are you thinking about starts versus orders? Your inventory is down, units are down about 30% year over year. I'm just trying to understand, since you're talking about opening communities. Doug, I think you just said upwards of 15%, or is that what you had said as well, community count growth next year?

Doug Bauer: We indicated that community count growth will be 10% to 15%.

Kenneth Zener: I'm just trying to see how we actually get these, right, the units in the ground, which could portend future closings. That's why I'm focusing on the starts versus the order and how you're thinking about that. Thank you.

Tom Mitchell: Yeah, Ken. This is Tom. It's a great place to focus on, as we've been focused on it as well. As Doug mentioned earlier in the Q&A, we're focused on getting our business back to a more balanced approach of spec to-be-built. You're right on with our starts for Q3 was about 577, and that's down significantly from where we were in Q1 and Q2. Again, it's relative to that balanced approach. I think you'll see Q4 starts more comparable with what Q3 was just because of the amount of in-process, under-construction homes that we have available. That's our number one goal, to move through that inventory.

After that, we'll move to a more normalized strategy, which takes into account absorption on a community-by-community basis.

Kenneth Zener: Appreciate it, Tom. I just, what I heard you say, four-Q starts is going to be similar to three-Q. Is that right? I mean, that means you're ending inventory. I'm just trying to imagine the growth you're having community count with the actual contraction in your, you know, inventory units. I guess I'm trying to think if there's some greater inflection that I don't understand.

Tom Mitchell: No, I don't think you're missing anything there. I mean, as you look at it on a community-by-community basis, obviously, when we're moving into new communities, we're making the necessary starts relative to our anticipated demand. Right. Where we have existing communities, obviously, we have excess inventory that we're going to be working through before we move to a more normalized, balanced start strategy.

Kenneth Zener: Great. Appreciate it. On the community count growth, is most of that G&A, the fixed G&A, already kind of loaded in there? Is there any big lift we should expect there? Thank you.

Glenn Keeler: Not too much of a lift on the G&A side. Maybe some incremental, that's more field and sales that will be needed to open those communities, but yeah.

Kenneth Zener: Thank you, guys. Bye-bye.

Operator: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Doug Bauer for closing remarks.

Doug Bauer: Thank you, everybody, for joining us today. We're looking forward to sharing our growth plan and strategy for 2026 and beyond with you at our next quarter's call. As we go into 2026, we're very excited and bullish about the future for housing. Thank you and talk to you next quarter.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this point.

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