Q4 2024 Tri Pointe Homes Inc Earnings Call
and the American Heart Association. For more information, visit www.fema.gov or call 1-800-424-8333. For more information, visit www.fema.gov or call 1-800-424-8333.
Speaker Change: Ladies and gentlemen, good morning and welcome to the TriPoint Homes 4th 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Except as required by law, the company undertakes no duty to update these forelooking 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 NSSEC filings.
Speaker Change: 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.
Doug Bauer: 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.
Doug Bauer: In the fourth quarter, we delivered 1,748 new homes, generating $1.2 billion in home sales revenue.
Doug Bauer: Our home building gross margin improved 40 basis points year-over-year to 23.3%.
Doug Bauer: SG&A as a percentage of home sales revenue was 10.3%, contributing to a pre-tax margin of 14%.
Doug Bauer: has generated $129 million of net income, or $1.37 per diluted share during the quarter.
Doug Bauer: These strong fourth quarter results contribute to an outstanding 2024 for TriPoint.
Doug Bauer: We delivered a record-high 6,460 new homes. Our full-year home building gross margin was 23.3%.
Doug Bauer: The net income was $458 million, or $4.83 per diluted share, representing a 40% increase year over year.
Doug Bauer: We also achieved record operating cash flows, redeemed 450 million of senior notes, and finished the year with the strongest balance sheet and liquidity in our history.
Doug Bauer: We continue 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 an 11% increase in the Carolinas.
Doug Bauer: We expect to continue that momentum with our new startup divisions in Salt Lake City, Orlando, and the Coastal Carolinas.
Doug Bauer: For 2024, we achieved a return on average equity of 14.5%, a 270 basis point improvement over the previous year.
Doug Bauer: Through these strong results and our disciplined capital allocation, including the repurchase of 4 million in shares outstanding by our repurchase program, we increased year-over-year book value per share by 14.5 percent.
We remain committed to our shared repurchases for 2025.
Doug Bauer: In December, we announced a new $250 million share repurchase authorization.
Doug Bauer: And in the first six weeks of 2025, we have already repurchased approximately 691,000 shares for a total spend of $25 million.
Doug Bauer: Since the program's inception in 2016, we have reduced shares outstanding by 43 percent.
a key driver of our book value per share growth.
Doug Bauer: Coming off a record year of operating cash flow and all-time high liquidity, we're well positioned to continue this strategy, leveraging market opportunities to create shareholder value.
Now, turning to current market dynamics.
Doug Bauer: We experienced softer seasonal sales trends in the third and fourth quarter, leading to a lower backlog for the company to start 2025.
Doug Bauer: Elevated mortgage rates, sticky inflation, the uncertainty around the election, and slowing job growth caused some consumers to stay on the sidelines.
Doug Bauer: 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.
Doug Bauer: As we plan for 2025, there are additional political uncertainties that could cause consumer hesitancy and operating headwinds.
Doug Bauer: 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.
Doug Bauer: So far in 2025, we have seen a pickup in demand from the fourth quarter, but we also see an incentive trending lower as order of momentum increases.
Doug Bauer: 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.
Doug Bauer: 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.
Doug Bauer: We remain confident in our ability to navigate short-term demand fluctuations.
Doug Bauer: 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 watts.
which is a 14% increase compared to the previous year.
Doug Bauer: 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.
Doug Bauer: 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.
Doug Bauer: 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.
Doug Bauer: 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.
Doug Bauer: Our customers in backlog with TriPoint Connect have an average FICO scores of 753, debt to income ratio of 41%, an average household income of $220,000.
Doug Bauer: 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.
Doug Bauer: In 2025, we will continue to invest in our three new organic expansion markets, Salt Lake City, Orlando, and Coastal Carolinas.
Doug Bauer: In Salt Lake, we currently own or control over 1,000 lots.
Doug Bauer: 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.
Doug Bauer: 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.
Doug Bauer: We expect first communities and deliveries coming out of Orlando in 2026.
Doug Bauer: Meanwhile, our Coastal Carolina Division is ramping up operations and remains on track for deliveries beginning in 2026.
Doug Bauer: Each of these markets remains highly attractive for our premium lifestyle brand, and we are leveraging expertise from our established divisions to ensure success.
Doug Bauer: 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.
Doug Bauer: 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 home buyers in 2024, referred to TriPoint Homes by a friend or family member.
Doug Bauer: Furthermore, we are one of the top two homebuilders in the 2024 America's Most Trusted Homebuilders Study.
Doug Bauer: As the industry evolves with advances 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.
Doug Bauer: We believe our industry is well positioned, supported by the solid fundamentals of the housing market, including persistent undersupply and favorable demographics.
Doug Bauer: By prioritizing the customer, we will continue driving profitable growth and maximizing long-term value for our shareholders.
Glenn Keeler: With that, I will now turn the call over to Glenn. Glenn?
Glenn Keeler: Thanks Doug and good morning. I'd like to highlight some of our results for the fourth quarter and then finish my remarks with our expectations and outlook for the first quarter and full year for 2025.
Glenn Keeler: The fourth quarter produced strong financial results for the company. We delivered 1,748 homes, which was near the high end of our guidance. Home sales revenue was $1.2 billion for the quarter, with an average sales price of $699,000.
Glenn Keeler: Gross margins were 23.3% for the quarter, right at the midpoint of our guidance, while SG&A expense as a percentage of home sales revenue was better than our guide at 10.3%. Finally, diluted EPS for the quarter was $1.37.
Glenn Keeler: Net new home orders in the fourth quarter were 940 with an absorption pace of 2.1 homes per community per month. Our cancellation rate on gross orders during the fourth quarter was 14%.
Glenn Keeler: As Doug mentioned, we have seen some pickup in demand so far in 2025. Absorption pace for the month of January was 2.5, and so far for the first few weeks of February, absorption pace has increased to 2.8. Average incentives on orders in 2025 have decreased to 6%.
Glenn Keeler: During the fourth quarter, we invested $172 million in land and land development. We ended the year with over 36,000 total lots, 54% of which are controlled via option. We under control all of the land needed to meet our community account and delivery goals for 2025, 2026, and the majority of 2027.
Glenn Keeler: We end in 2024 with 145 active selling communities. For 2025, we expect to open approximately 65 communities and end with 150 to 160 active communities.
Glenn Keeler: Based on our strong law position, we expect meaningful community count growth over the next several years as we grow our community count in our growth and startup markets of Utah, Texas, the Carolinas, and Florida.
Thank you.
Glenn Keeler: Looking at the balance sheet and capital spend, we ended the quarter with approximately $1.7 billion of liquidity, consisting of $970 million of cash, $694 million available under our unsecured revolving credit facility.
Glenn Keeler: Our home-building debt-to-capital ratio was 21.6%, and our home-building net-debt-to-net-capital ratio was negative 1.6% to end the quarter, both all-time low ratios for TriPoint.
Glenn Keeler: During the fourth quarter, we repurchased 1.2 million shares for an aggregate dollar spend of $50 million. For the full year, we lowered our outstanding share count by 3.2 percent, repurchasing a total of 4 million shares for a total spend of $147 million.
Glenn Keeler: For 2025, we are targeting spending $50 million a quarter on share repurchases, with the ability to be opportunistic up to our $250 million annual authorization as we balance our capital needs with market opportunities.
Glenn Keeler: For the first quarter, we anticipate delivering between 900 and 1100 homes at an average sales price of between $685,000 and $695,000.
Glenn Keeler: We expect home building gross margin percentage to be in the range of 22% to 23% and anticipate our SG&A expense ratio to be in the range of 15% to 16%.
Glenn Keeler: Lastly, we estimate our effective tax rate for the first quarter to be approximately 26 percent.
Glenn Keeler: For the full year, we anticipate delivering between 5,500 homes to 6,100 homes with an average sales price between $660,000 and $670,000.
Glenn Keeler: The projected volume of deliveries takes into consideration the lower backlog we started the year with and the strategy to balance price with pace with a focus on margin.
Glenn Keeler: Based on the current level of incentives and our mix of lot costs for new communities in 2025, we expect our full year home building gross margin to be in the range of 20.5% to 22%.
Glenn Keeler: Finally, we anticipate our SG&A expense ratio to be in the range of 11% to 12%, and we estimate our effective tax rate for the full year to be approximately 26%.
Doug Bauer: With that, I will now turn the call back over to Doug for some closing remarks.
Doug Bauer: Thanks, Glenn. As we wrap up, I want to take a moment to express my gratitude to the exceptional team at TriPoint who are pivotal to ongoing success.
Doug Bauer: Their hard work, talent, and dedication to our core values and mission fuel the numerous recognitions that TriPoint has recently enjoyed, including being named as the 2024 Developer of the Year.
Doug Bauer: Our view of the future for the new home market is very positive.
Doug Bauer: We continue to see strong demand from the Millennial and Gen Z cohort, a significantly undersupplied market.
Doug Bauer: with a persistent shortage of housing and less competition from the resale market due to the lingering locked-in effect.
Doug Bauer: As a result, we remain confident in the long-term outlook for our industry, and at TriPoint is strongly positioned for ongoing future growth and success.
Doug Bauer: We have a clear vision, the right strategy, and a strong team to capitalize on the opportunities we see in the market.
With that, I'll open the call for questions. Operator?
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue.
Doug Bauer: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Doug Bauer: Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: The first question comes from the line of Stephen Kim from Evercore ISI. Please go ahead.
Stephen Kim: Thanks very much guys appreciate all the the color as usual and good job in the quarter Wanted to ask you about your guidance And in particular you gave some encouraging commentary about you know the pickup in demand over the last few weeks several weeks
Stephen Kim: And yet, the lower end of your gross margin guidance range of 20.5%, I was wondering if you could talk about what sort of things are embedded in that that would cause you to hit that number. Are there mix effects, for example, that we should be thinking of?
Stephen Kim: What kind of trajectory and incentives does that envision? Obviously, I know you always embed a pretty considerable amount of conservatism in your numbers, but it would be helpful, I think, for us to understand what's in that. What would lead to a 20.5% gross margin?
Stephen Kim: and then continuing along that, if I take the high end of your SG&A guide, that would imply an operating margin of about 8.5%.
Stephen Kim: And I'm curious if you could just sort of comment about how you feel about that as sort of, is that representative of what you would expect you could sustain over the longer term?
Hey Stephen, it's Glenn. Good question.
Stephen Kim: and if to get to that higher end of the range of the market it would have to be market improvement from there and lower incentives really to drive that.
Speaker Change: On the SG&A side, I would say eight and a half is low long term, right? As we grow our startup divisions and get more scale on larger revenue and top line growth, I would see that that operating margin be, you know, better than the eight and a half percent long term.
Speaker Change: are all the answers to these questions. There's more to the answer to this question, so please let us know what you think in the comments section. This is the most popular answer for KEVIN at Atlanta. They the best way to stretch out slip stories for atlanta rhyme.com. Thanks a lot, Kevin and greetings to Greg for bringing up the atlanta-ric Ahh program. Again, welcome to atlanta-rhyme-com.
Speaker Change: But really the savings the last couple of years have been on the S side of things. So if we end up having a better quarter from, you know, better code broke or better sales and advertising savings that's how we have beaten that number in the first quarters in the past.
Speaker Change: But the reason obviously the number is elevated in the first quarter is just due to the lower revenue we were projecting in the first quarter.
Speaker Change: Yep, got it. Okay, great. Appreciate that, guys. Thanks very much.
Thank you.
Speaker Change: Thank you. The next question comes from the line of Paul Schabelsky from Wolf Research. Please go ahead.
Paul Schabelsky: Good morning. I noticed your quarter ASP was up about 3% sequentially and 5% in the east.
Speaker Change: Is that really due to mix or do you have any component of pricing power and you know along those lines I also know that the builders typically try to pass along you know cost increases
Speaker Change: What ability do you think in the current market environment do you have to pass along any potential tariffs?
Yeah, all this
Speaker Change: I think as you look at tariffs going into this year, they...
Speaker Change: really affect the bottom back third of the year, so there's a lot of unknown. As far as pricing power, I think it can range in different sub markets from either, broadly speaking, 1 to 5%.
Speaker Change: And to answer the first part of your question Paul, that ASP change was just mixed as in the fourth quarter that you saw.
Paul Schabelsky: Okay, and I know it's pretty early in this process, but has DOJ had any negative impacts on...
on your Mid-Atlantic business over the past several weeks.
Paul Schabelsky: Similarly, did you see any kind of fall-off in demand in California, as I know you don't build in the Pacific Palisades, but given the wildfires kind of brought the insurance controversy back to the forefront, did that have any kind of negative impacts on you?
Paul Schabelsky: As far as the East Coast, no. Actually, DC Metro is one of our stronger markets, so none of the doge effects have been felt. As far as the insurance,
Yeah, there are some insurance
Paul Schabelsky: issues most notably out in the Inland Empire at the entry level.
Paul Schabelsky: But we're working through that with our TriPoint Assurance and having solutions for the consumers. In some cases, we're utilizing some incentives to help, especially with the entry-level homebuyer. That's where it's most affected as far as the insurance side.
Okay, all right. I appreciate it. Thank you
Thanks, Paul.
Speaker Change: Thank you. The next question comes from the line of Mike Dahl from RBC Capital Markets. Please go ahead.
Mike Dahl: Morning, thanks for taking my questions. I guess just to circle back on the pace comments, I'm actually, it's not clear that
Mike Dahl: But you articulated is that encouraging in terms of January and February if I look back historically at your tip goal
Mike Dahl: either sequential increase or absolute level of pace. So if I think about kind of 2.5 in January, 2.8 in February last year, you did a 3.9 a month.
Mike Dahl: in 1Q of 24 and I think usually March is only up modestly versus Feb. That kind of implies down 25 to 30 percent year-on-year.
Speaker Change: I know different market dynamics, different mix, but can you just talk about that a little bit more and if that's really the ballpark that you're kind of thinking about and how that plays through the balance of the year when you're speaking about this balanced approach to pace and price?
Yeah, Mike, good question. That's Glenn.
Speaker Change: You know, our comments were relative to Q4, and so we have seen, you know, a little bit of improvement, like we said, in January, which was 2.5, February, so far, 2.8, and that's coming off of a Q4, we're already around 2.1, but you're right, year-over-year is a tough comp. Last year was unseasonably strong this time of year, and so we are down year-over-year, and that's partly reflected in the delivery guidance for the full year, assuming, you know, this kind of...
Mark it!
and I...
Mike Dahl: Mike, add some color to the consumer. Obviously, year over year.
Mike Dahl: absorption paces will be down when you compare it to 24. It's interesting to note that the consumer
Speaker Change: and the consumer mindset. If you look at mortgage rates today and where they were a year ago, they're basically the same, plus or minus a tenth of a point here or there. And so what this business is really all about is, and I've coined this phrase before,
Speaker Change: And, you know, the great thing about being a home builder like TriPoint and many of our peers is we have the levers to pull.
to be able to make
That decision and payment were affordable.
Speaker Change: But it has definitely changed the psychology of the homebuyer. A year ago, there was all this anticipation of rates going down.
Discount rates went down, mortgage rates go up.
So it's really, it's really confused.
Speaker Change: the homebuyers, now they're getting a little bit of the uncertainty with the current administration.
My personal opinion is that this is a short-term
Speaker Change: demand issues, short-term kind of news headline, long-term not only is the company but also the the economy and the industry going to be well positioned for growth. So I'm very bullish going forward.
Speaker Change: This year we're making a conscious effort and we're planning our absorption about three per month. So that's right in line with your thought processes as you look at 25 going forward.
Speaker Change: Okay yeah thanks for that Tom and and Doug because my follow-up was going to be back on that you know the decision or kind of targeting so so is that kind of
Speaker Change: you look at the market and you're saying if I if I've got six percent incentives today that's about the pace
Speaker Change: That I can run and for your business and your land position You think the trade-off is too great in terms of what you'd have to give up on incentive or or margin To push the pace back towards how you typically run it
Yes, exactly, and you really look at the macro.
Our number one competitor has always been the resale market.
Speaker Change: and yes, there's some sub-markets that have a little bit more supply, but nationally, our major competitor is not turning about a million to a million and a half homes.
If you look at the laws of supply and demand...
Speaker Change: There's not there's not enough supply in the resale market to make it Dan
Speaker Change: But it's nothing to be worried about. So our focus is just the way you talked about it. 6%-ish would be the right incentives. Focus a little bit more on margin over pace.
Speaker Change: Still got to sell homes, still got to generate gas flow, but the incremental effect of doubling down or increasing your incentives is not worth it in the final analysis in our mind.
I appreciate that. Thank you.
Yeah.
Speaker Change: Thank you. The next question comes from the line of Ken Zena from Seaport Research. Please go ahead.
Good morning, everybody.
again.
Speaker Change: I know you made gross margin comments for the high-low range in 1Q. Can you kind of talk about what's leading to the progression?
you know, to 20.5 to 22 for the full year.
Speaker Change: It's not really regional mix, Ken, because across the regions the margins are pretty similar. It's really about new communities coming on throughout the year at a higher lot cost, and closing out of some high margin communities in the first quarter. So that's why you see a little bit of a difference in that higher first quarter margin versus the rest of the year. We're opening 65 new communities this year.
Speaker Change: And we started the year at 145 communities, and we gave you the range of 150 to 160 to end. So that means we're turning over about half the communities as well. And that just—that mix is kind of what is leading to that progression of margin throughout the year.
Speaker Change: I appreciate it and then if the communities are newer realizing you're doing quite a bit of your land development
Speaker Change: How should the interest expense kind of be looking like? What would you say that number is going to be as we kind of get exit this year?
Speaker Change: Our interest expense will definitely be lower, you know, this year than it was last year. Part of that is paying off the 450 million of senior notes last year and then just having a higher inventory base to kind of amortize that expense over. So you will see our interest trend down.
Thank you.
Thank you.
Speaker Change: The next question comes from the line of Karl Reichardt from BTIG. Please go ahead.
Speaker Change: Thanks, everyone. You mentioned that revenue in 24, 500 million or so was design studio, so I think it's about 11% or so of revenue. So as you're thinking about margin focus for 25 and maybe beyond that,
Speaker Change: A, are you expecting that number to grow faster than overall sales?
Speaker Change: B, what kind of margin are you earning on that $500 million of incremental? And does that also mean that you'll move more to bill to order and away from spec as you look at expanding the community count? Maybe that's also true of the price points in 25 and beyond.
Speaker Change: Hey Carl, it's Tom. Good questions all the way around, and as you know, we really try to differentiate ourselves with our build-to-order business and design studio business.
Speaker Change: Even on SPACs, we've maximized our opportunities through the design studio.
Speaker Change: I would say that our growth relative to that is really dependent on just basically volume growth and revenue growth within our home building operations. So I would expect to target a very similar revenue kind of number as we achieved this year.
Speaker Change: As you look on it relative to gross margins, you know, the business is highly profitable and our gross margin target is that 40% for our design studio business and we are achieving that now.
Speaker Change: and then as you look to... what was the last part of your question?
Speaker Change: I was just wondering if that if you if you'll switch your mix I mean knowing that you'll do some spec up till drywall and allow people to customize but will your mix of true build to order versus True spec past the ability in which it can it can add options if that will change in 25 It kind of looks like it's it may
Speaker Change: Yeah, marginally it will change a little bit, you know, historically the last couple years we've been running probably a 65-35 mix and as we go forward you'll probably see it shift down slightly closer towards 50-50.
Speaker Change: Great. Thank you, Tom. And then just, I guess, for Glenn, on the land side, if I've got it right, about 20,000 lots option, and I think 6,000 or so of those are in JVs.
Speaker Change: So of the 14,000 left, Glenn, what percentage of those are you doing?
Speaker Change: or self-developed farmer options where you'll put up very little up front and then...
Speaker Change: have those on balance sheet to self-develop. And do you think the pricing of land bank capital is likely to change meaningfully over the course of the next year or so?
Speaker Change: Good question. I would say of that option number probably about 75% is land-banked and the rest are more like you said options with individual sellers.
Speaker Change: And then some of them are just, well, I should take that back, probably more like 50%, because some of those are options with true, like...
Speaker Change: where we have the deposit of that but we haven't taken down the land yet.
Speaker Change: As far as pricing, I think there will be some downward, in a positive way, you know, pressure on pricing. There's a lot of capital out there, there's a lot of people interested in land banking, and it's creating good competition for the market.
Thanks Glenn, appreciate it guys.
Speaker Change: Hey, thanks for taking my question. So the first one I had, it looks like...
Speaker Change: Completed specs are more than double where they were this time last year. I guess, is that part of what's driving this pretty steep decline in gross margin through the year? Getting through those homes? And also, could you talk about what the spread is between your gross margins versus spec at this point?
Speaker Change: Hey Jay, good question. They are up compared to last year but from a historical perspective it's it's kind of right in line with where we normally have been. If you look at kind of
Speaker Change: Pre-pandemic, when things changed quite a bit, we were 3 to 4 per community on a completed basis, and right now I think we're at 3.1 on a completed basis.
Speaker Change: So that is not out of the normal for us, and that's not what's driving, you know, the margin compared to 1Q guidance for the full year guidance. That was, again, more mix of new communities with a different lot basis than the ones we're closing out. So it's really just mix driving that.
Speaker Change: And Jay, relative to the question about the spread from 2B builds to stack, historically that's been about 2%, but obviously with more completed right now and the higher interest rate environment, that's a little bit higher, I'd say closer to about 4%.
Speaker Change: and that is incorporated in the numbers that we presented. So you're right on in that assumption.
Speaker Change: Thanks, Tom. And then in terms of your customer mix, where do you think you are with first-time buyers now versus maybe this time last year?
Speaker Change: Jay, this is Linda. That's a really interesting question. We are seeing less first-time buyers in our backlog and that is certainly a result of, you know, seeing more opportunity in first and second move-up in particular and also the aging of Millennials as Doug talked about in the script.
Oklahoma DNR
Speaker Change: And then I guess the last question I had, I think on the third quarter call you guys had talked about 170 to 180 communities by fiscal 26. Is that still viable or where are you thinking that goes now?
Speaker Change: Yeah, it's still in that range, Jay. It'll just depend on the market and how we close communities and timing of opening communities, but it's in that zip code.
Okay, great. Thanks for taking my questions.
Thank you. The next question comes from
Speaker Change: Hi, thanks for taking my questions. Linda, click one on the price point information you just addressed. So it sounds like the move up price point and demand from those buyers is stronger than at the entry level. Is that right?
Speaker Change: Premium entry level, 39% first move up, 14% second move up, and then 6% in luxury, 1% in active adult.
Speaker Change: So that had shifted over time at one time with lower interest rates, our premium entry level segment was closer to 50%.
Speaker Change: Yeah, and just as far as demand goes, absorption pace, historically, entry level is a little bit higher than move-up, but it's about consistent with move-up right now, which is, I think, part of your question is expected considering higher rates and where our mix is.
Speaker Change: Okay, that's really helpful. Thank you. My second question is something we get from clients a lot is the impact from ICE raids or deportation. Have you seen any impact from either the supply side of the equation or the demand side of the business?
Speaker Change: Hi Jesse, it's Doug. No, no impacts at all and typically our trades have
Doug Bauer: maintain the necessary requirements as far as making sure that they're legal citizens. But our trades have
Doug Bauer: employees and teammates that have been with them for quite a while so I would we're not expecting any labor issues
Doug Bauer: this year, to be honest with you. I mean, the tariffs are going to have some impact, but it's still too early to tell exactly where that's going to land out.
That's what I thought. Thanks so much.
Yeah.
Speaker Change: Thank you. As there are no further questions, I now hand the conference over to Doug Bauer for his closing comments.
Doug Bauer: Well thank you everybody for joining us on today's call. We look forward to chatting with all of you in April. Have a great week. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, the conference of TriPoint Homes has now concluded. Thank you for your participation. You may now disconnect your lines. Goodbye.