Q3 2025 TRI Pointe Group Inc Earnings Call

Speaker #3: Greetings and welcome to the Tripoint Homes . Third quarter 2025 Earnings Conference Call . At this time , all participants are in a listen only mode .

Operator: Greetings and welcome to the Tri Pointe Homes Third Quarter 2025 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, 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, General Counsel at Tri Pointe Homes. You may proceed.

Speaker #3: A question and answer session will follow the formal presentation . If anyone should require operator assistance , please press Star Zero on your telephone keypad .

Speaker #3: As a reminder, this conference is being recorded. It is now my pleasure to introduce David Lee, General Counsel at Tri Pointe Homes, Inc.

Speaker #3: You may proceed .

Speaker #4: Good morning and welcome to Tri Pointe Homes, Inc. earnings conference call . Earlier this morning , the company released its financial results for the third quarter of 2020 .

David Lee: Good morning and welcome to Tri Pointe Homes' Earnings Conference Call. Earlier this morning, the company released its financial results for the third quarter of 2025. Documents detailing these results, including a slide deck, are available at www.tripointehomes.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.

Speaker #4: Five . Documents detailing these results , including a slide deck , are available at WW Tri Pointe Homes, Inc. through the investors link and under the events and Presentations tab .

Speaker #4: 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 #4: 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 #4: 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 the most comparable GAAP measures can be accessed through Tripoints website and in its SEC filings .

David Lee: Additionally, reconciliations of non-GAAP financial measures discussed on this call, the most comparable GAAP measures, can be accessed through Tri Pointe Homes' 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.

Speaker #4: 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 .

Speaker #4: And Linda may , the company's executive vice president and chief marketing officer . With that , I will now turn the call over to Doug .

Speaker #4: Good morning .

Speaker #5: And thank you for joining us today . As we review Tripoints . Results for the third quarter of 2025 . I want to begin by recognizing our entire Tripoint team .

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.

Speaker #5: Their dedication and focus allowed us to deliver strong results and appeared that continues to present challenges to the housing industry . In the third quarter , we exceeded the high end of our delivery guidance , closing 1217 homes , an average sales price of $672,000 , generating $817 million in home sales revenue .

Speaker #5: Our adjusted home 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 .

Speaker #5: 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 .

Speaker #5: 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 .

Doug Bauer: 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.

Speaker #5: Additionally , we also strengthened our liquidity by increasing our term loan by $200 million . With optionality to extend the maturity into 2029 .

Speaker #5: 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 .

Speaker #5: 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% .

Speaker #5: Market conditions remained soft throughout the third quarter . Home buyer interest remained somewhat muted , with lower confidence driven by slow job growth and broader economic uncertainty .

Speaker #5: However , we continue to see underlying demand . Home ownership among needs based buyers . We anticipate that home shoppers are preparing to reengage when conditions stabilize , leading to to more normalized absorptions .

Doug Bauer: 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.

Speaker #5: 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.

Speaker #5: 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 .

Speaker #5: For long term success , we continue to invest in both our core and expansion markets with goal of scaling our operations , consistently growing community count , and increasing book value per share to drive sustained shareholder returns .

Speaker #5: 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 .

Speaker #5: While initial contributions will be modest , we expect these divisions to generate meaningful growth beginning in 2027 and beyond . As they gain scale .

Doug Bauer: 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 region and East region.

Speaker #5: 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 .

Speaker #5: We currently own or control over 32,000 lots , position 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 .

Speaker #5: The majority of this growth will be driven by by expansion in our central and east regions . This disciplined growth strategy enhances our operating scale , increases geographic diversification , and positions tripoint for sustainable , profitable growth .

Doug Bauer: 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.

Speaker #5: As demand improves and our expansion divisions mature . At tripoint , our product is primarily targeted to premium move up buyers with financial strength , seeking better locations , larger homes , curated finishes and elevated lifestyles .

Speaker #5: 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 .

Speaker #5: Home buyers financing through Tripoint Connect , our affiliated mortgage company , have average household income of $220,000 , Fico score of 752 , 78% .

Speaker #5: Loan to value ratio and average debt to income level of 41% . Consistent with recent quarters , these strong characteristics and reinforce 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 .

Doug Bauer: 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 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 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?

Speaker #5: Our premium brand community locations and innovative product design continue to differentiate tripoint in the marketplace . We have the financial strength and operational discipline to invest through the cycle while returning capital to shareholders .

Speaker #5: Together , these strengths , along with an experienced management team , positions tripoint 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 .

Speaker #5: Glenn .

Speaker #6: 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.

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.

Speaker #6: The third quarter produced strong financial results for the company . We delivered 1217 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 .

Speaker #6: Gross margin . Adjusted to exclude an $8 million impairment charge was 21.6% for the quarter , and expenses as a percentage of home sales revenue was 12.9% , which was at the lower end of our guidance .

Speaker #6: 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 .

Speaker #6: 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 .

Glenn Keeler: Signed 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 impacting 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.

Speaker #6: Regionally , our absorption pace in the west was 2.3 , with the Southern California markets outperforming and the Bay area experiencing softer market conditions .

Speaker #6: The central region averaged a 1.8 absorption pace for the quarter, with increased supply of both new and resale homes in Austin, Dallas, Denver, and Denver impacting pace during the quarter, while Houston continued to outperform in the region.

Speaker #6: 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 .

Speaker #6: We invested approximately 260 million land and land development during the quarter , and ended with over 32,000 total lots , 51% of which are controlled via option .

Speaker #6: 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 .

Glenn Keeler: 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.

Speaker #6: As of the end of the quarter , our homebuilding debt to capital ratio was 25.1% and our home building net debt to net capital ratio was 8.7% .

Speaker #6: 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 .

Speaker #6: 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 .

Speaker #6: For the fourth quarter , we expect to deliver between 1214 hundred 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% .

Glenn Keeler: 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.

Speaker #6: We expect our 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% .

Speaker #6: For the full year , we expect deliveries between 4800 and 5000 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 .

Speaker #6: Finally, we anticipate our expense ratio to be approximately 12.5%, and we estimate our effective tax rate for the full year to be approximately 27%.

Speaker #6: With that, I will now turn the call back over to Doug for closing remarks.

Speaker #5: Thanks , Glenn . In closing , I want to thank our team members , customers , trade partners and shareholders for their ongoing trust and support .

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.

Speaker #5: 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 .

Speaker #5: 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, Inc. to deliver sustainable growth and long term shareholder value .

Speaker #5: With that, I'll turn the call over to the operator for any questions. Thank you.

Speaker #3: We'll now be conducting a question and answer session . If you'd like to ask a question , please press star One on your telephone keypad .

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 pull for questions. Thank you. Our first question is from Paul Prizbilski with Wolfe Research.

Speaker #3: A confirmation tone will indicate your line is in the question queue . You may press star two to remove yourself from the queue .

Speaker #3: 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 the participants to limit themselves to one question and one follow-up.

Speaker #3: One moment please . While we pull for questions . Thank you . Our first question is from Paul Prybylski with Wolfe Research .

Speaker #7: 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 ?

[Analyst 1]: Thank you. Good morning. First off, could you provide some color on the monthly cadence of your orders and incentives through the quarter?

Speaker #6: Sure . Paul . Hey , this is Glenn . The monthly cadence was 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 than August .

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.

Speaker #6: And then on incentives . Incentives were also consistent throughout the quarter . Incentives on deliveries were 8.2% for the quarter .

Speaker #7: Okay . Thank you very much . And then I guess , you know , you're Absorptions are getting down close to the two level .

[Analyst 1]: 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?

Speaker #7: Is there a , you know , an absolute floor that you want to maintain on your sales pace , i.e. increase incentives to , to keep a level ?

Speaker #5: Hey Paul , it's Doug . You know , it's a good question . I mean , the industry's kind of working through a big it's like trudging through mud right now .

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.

Speaker #5: And so , you know , somewhere between 2 and 2 and a half is kind of where , you know , everybody seems to be landing and , you know , if you're looking at we're really looking at very strong community count growth in 26 .

Speaker #5: So as we look forward to that , and even under similar market conditions . We've got some pretty , pretty nice growth in orders going forward .

Speaker #7: Okay . Thank you . Appreciate it .

[Analyst 1]: Thank you. Appreciate it.

Speaker #5: Thanks , Paul .

Doug Bauer: Thanks, Paul.

Speaker #3: Our next question is from Stephen Kim with Evercore ISI .

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

Speaker #8: 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% .

[Analyst 2]: 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 financing-related incentives if you sort of include closing costs and rate buydowns for purchase commitments and that sort of thing?

Speaker #8: I think of of a revenues or home sales were how much of those were financial incentives . If you sort of include closing costs and , you know , rate by downs , forward purchase commitments and that sort of thing .

Speaker #6: 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 including closing costs .

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.

Speaker #8: Okay . And what how about forward purchase commitments specifically ? Do you use them very much ?

[Analyst 2]: Okay. What do you, how about forward purchase commitments specifically? Do you use them very much?

Speaker #4: Stephen .

Speaker #9: This is Linda . Yes , we do . We primarily use forward commitments for advertising purposes . And they do have good value in driving additional interest and traffic .

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 and 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.

Speaker #9: But ultimately is Glenn said , most of our customers really don't need to have a significantly lower interest rate to qualify for the home .

Speaker #9: So, they prefer to use more of their incentive dollars and design studio personalization.

Speaker #8: Yeah . So like if you think of the third , let's say the 35% or whatever that are financial incentives , you know , how much of that third would you say is forward purchase commitments ?

[Analyst 2]: If you think of the third, let's say the 35% or whatever that are financing-related incentives, how much of that third would you say is forward purchase commitments?

Speaker #9: Oh , it's very small under 1% .

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

Speaker #6: Yeah , very small number .

Glenn Keeler: Yeah, very small number.

Speaker #8: Okay . Awesome . Yeah , that's that's great . And then your average order ASP not your not your closings ASP . But your order ASP .

[Analyst 2]: Okay. That's great. Your average order ASP, not your closings ASP, but your order ASP, has come down to, call it, what is it, $654,000, I think, this quarter. Last quarter was about $665,000. Is it reasonable to think that eventually your closings ASP is going to be at roughly that kind of level, $650,000, $660,000?

Speaker #8: You know , has come down to you know , call it what is it . 654 I think this quarter last quarter it was like about 665 .

Speaker #8: So is it reasonable to think that , you know , eventually you're closings ? ASP is going to be at roughly that kind of level , you know , six 5660 .

Speaker #8: .

Speaker #6: Yeah , it is Stephen . I mean , it's they're mixed within the quarter . Does play a part . But when you look at , you know , our growth next year is a lot of central and east regions .

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 in 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.

Speaker #6: And those do carry a little bit lower of an ASP versus the West . And so just it's really just mix for us more than anything else .

Speaker #8: Gotcha. Okay. Well, I appreciate the color, guys. Thanks.

[Analyst 2]: Gotcha. Appreciate the color, guys. Thanks.

Speaker #3: Our next question is from Jay McCandless with Wedbush Securities.

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

Speaker #10: Hey , thanks for taking my questions . First one , the guide for for the fourth quarter . It looks like you guys are getting much better leverage than than what ?

[Analyst 3]: 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?

Speaker #10: Than what the top line would suggest . Are there some one times in there ? Can you talk about how you're able to to potentially get this very good start sales number ?

Speaker #6: No real specific one time there . Jay . It's it is just a little bit more you know , more revenue in the quarter with a higher delivery number .

Glenn Keeler: No. We're all 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.

Speaker #6: And that's what's really driving it .

Speaker #10: Okay. And then, kind of, that was actually going to be my next question. The gross margin guide is better than we were expecting.

[Analyst 3]: 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?

Speaker #10: Is there some mix in there . More move up . Anything you can give us on that . ?

Speaker #6: A little bit of mix . I think some of the divisions that continue to outperform our strong margin divisions , like when you look at like a Houston , Inland Empire and Southern California , you know , things like 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 to our benefit. That plays a little part into it, Jay.

Speaker #6: Have have driven the mix of margin , you know , to our benefit . So that that plays a little part into it .

Speaker #6: Jay . .

Speaker #10: Okay . And then one more , if I could just kind of thinking about the newer markets , you all discussed and just wondering what you all think ASP might look like this next year .

[Analyst 3]: Okay. One more, if I could, just kind of thinking about the newer markets you all have discussed and just wondering what you 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.

Speaker #10: Just given some of the smaller median price markets that you're going to be expanding into.

Speaker #6: We'll give that guidance next time , Jay , as we kind of roll up the plan and see what that looks like . But I don't think you're going to be too different than where we're at this year .

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.

Speaker #5: No , we're not getting significant contributions out of our new expansion divisions yet . Next year . So it should have a minimal impact .

[Analyst 3]: No, we're not getting significant contributions out of our new expansion divisions yet next year, so it should have a minimal impact. Okay. Great. Appreciate it.

Speaker #10: Okay, great. Appreciate it.

Speaker #6: Thanks .

Glenn Keeler: Thanks.

Speaker #3: Our next question is from Alan Ratner with Zelman and Associates.

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

Speaker #11: Hey , guys . Good morning . Thanks for all the detail so far . Can you just update us on your your spec position and strategy and how you're thinking about spec just in terms of the contribution to the business ?

[Analyst 2]: 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?

Speaker #11: And I guess just thinking forward to 26 , you're going to enter the year with a backlog that's down quite a bit . So 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 ?

Speaker #5: It's it's Alan , you know , we've got a about three quarters of our orders are running as specs as we go into the , into the end of the year , you know , all the builders have a little bit more inventory than .

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 or so 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 a 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.

Speaker #5: Than what they anticipated . So we'll we'll burn through that inventory going into the first quarter or so of next year and then get to a more balanced approach .

Speaker #5: Again, demand is very inelastic, and we're going to continue to focus on price over pace as we go into the new year.

Speaker #5: We're just assuming similar market conditions . What we're really focused on is that strong community count growth , even as similar market conditions .

Speaker #5: As I mentioned earlier , will have a really good order growth going into 26 . And and then 27 . So we're really looking to the future while we've been dealing with some of the obviously the challenges the market has has posed to the entire industry .

Speaker #5: So that's kind of how we're looking at our approach . .

Doug Bauer: That's kind of how we're looking at our approach.

Speaker #9: And just to add to that, Ellen, we did reduce our total spec inventory by 17% quarter over quarter.

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

Speaker #11: Got it. Linda, is that total specs under construction or completed? Homes specifically.

[Analyst 2]: Got it. Linda, is that total specs under construction or completed homes specifically?

Speaker #9: Both together 17 .

Linda Mamet: Both together, 17%.

Speaker #11: Got it . So 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 .

[Analyst 2]: Got it. That's 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 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 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 whatever the absorption is, that's what it's going to be for the time being.

Speaker #11: 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 life cycle of the project ?

Speaker #11: 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 the absorption is , that's what it's going to be for the time being .

Speaker #5: Yeah . No tripoint , you know , as you know , Alan is more of a premium brand proposition . So , you know , we look at our value proposition as it as it enters the market .

Doug Bauer: Yeah. No, Tri Pointe Homes, 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.

Speaker #5: Sure . You love to start with some momentum , but there's not a any sort of material pricing thought process there because we're we're building , you know , along main and main , great locations close to employment and great amenities .

Speaker #5: So the value proposition is what we're looking at . And frankly , as you said , I'm really my lens is to the future .

Speaker #5: We've been dealing with choppy market conditions in my mind for about 18 months. So, if it's more of the same next year, so be it.

Speaker #5: 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 .

Speaker #11: Understood. Appreciate it. Thanks a lot.

[Analyst 2]: Understood. Appreciate it. Thanks a lot.

Speaker #3: Our next question is from Mike Dahl with RBC Capital Markets .

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

Speaker #12: I think for 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 ?

[Analyst 3]: Hi. This is Chris Allen 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?

Speaker #5: Yeah , obviously , several builders have already made comments on that , and we're kind of a tail wagging the dog here , so to speak .

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 Doug Bauer noted, I mean, the industry has been underbuilt and been doing this for 35 years. It kind of started after the great financial crisis, so it 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, I mean, 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.

Speaker #5: But we share the administration's goal of providing more housing in the US . As duly noted . I mean , the industry has been underbuilt in been doing this for 35 years .

Speaker #5: It kind of started after the great financial crisis . So it makes me very old . But we welcome working with the relevant stakeholders at the federal , state and local levels .

Speaker #5: 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 tripoint can help .

Speaker #5: We will build. I mean, we've got 32,000 lots that we own and control. We're opening with very strong community count growth of up to 15% next year.

Speaker #5: So we'll be doing our share of bringing in more communities that will be attainable for our buyer profile .

Doug Bauer: We'll be doing our share of bringing in more communities that will be attainable for our buyer profile.

Speaker #12: Makes sense . Yeah . And the community council definitely encouraging . It . Just shifting to the for Q gross margin guide , could you just help bracket some of the big moving pieces or the moving pieces around the sequential step down and gross margin ?

[Analyst 3]: Makes sense. Yeah, the community count was definitely encouraging. Just shifting to the Q4 gross margin guide, could you help bracket some of the big moving pieces or the moving 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.

Speaker #12: How much of that is is incremental incentives mix , stick and brick ? Just help help frame that for us . Thank you .

Speaker #6: Yeah , this is Glenn . Good question . And not really sticking bricks or anything like that . I think it's a little bit of mix .

Glenn Keeler: Yeah. This is Glenn. Good question. It's not really stick and bricks or anything like that. I think it's a little bit of 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.

Speaker #6: 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 .

Speaker #6: And those generally carry a little bit higher of an incentive . So all that kind of goes into that margin guide .

Speaker #12: Got it . I appreciate color . Thanks .

[Analyst 3]: Got it. I appreciate the color. Thanks.

Speaker #3: Our next question is from Ken Zener with Seaport Research Partners .

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

Speaker #13: Good morning everybody .

Doug Bauer: Good morning, everybody.

Speaker #5: Morning .

Glenn Keeler: Morning.

Speaker #13: I am hoping you can walk us through kind of the logic—not giving guidance or anything, but just kind of understanding the cadence.

Doug Bauer: 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, and Doug, I think you just said upwards of 15%, or is that what you had said as well, community growth next year?

Speaker #13: So 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 .

Speaker #13: So as we exit the year , how are you thinking about . Starts versus orders . Because your inventory is down . Units are down about 30% year over year .

Speaker #13: So I'm just trying to understand , since you're talking about opening communities , and I think you just said upwards of 15% , or is that what you had said as well ?

Speaker #13: Community growth next .

Speaker #5: Year . potentially indicated that community count growth will be 10 to 15% .

Glenn Keeler: Yeah.

Doug Bauer: Potentially.

Glenn Keeler: We indicated that community count growth will be 10% to 15%.

Speaker #13: So I'm just trying to see how we actually get these right . The units from the ground , which could portend future closings .

Doug Bauer: 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. 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.

Speaker #13: So that's why I'm focusing on the starts versus the order and how you're thinking about that . Thank you .

Speaker #5: Yeah , Ken . This is Tom . It's a it's a great place to focus on as we've been focused on it as well .

Speaker #5: As Doug mentioned earlier in the Q&A , you know , we're focused on getting our business back to a more balanced approach of spec to to be built .

Speaker #5: And 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 .

Speaker #5: But 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 Inprocess under construction .

Speaker #5: Homes that we have available . And that's our number one goal to move through that inventory . And then after that , we'll move to a more normalized strategy , which takes into account absorption on a community by community basis .

Doug Bauer: After that, we'll move to a more normalized strategy, which takes into account absorption on a community-by-community basis. Appreciate it, Tom. I guess what I heard you say, Q4 starts is going to be similar to Q3. Is that right? That means you're ending inventory. I'm just trying to imagine the growth you're having in community count with the actual contraction in your inventory units. I guess I'm trying to think if there's some greater inflection that I don't understand. No, I don't think you're missing anything there. 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. Great. Appreciate it.

Speaker #13: Appreciate it . Tom . I just what I heard you say for queue starts is going to be similar to three . Queue .

Speaker #13: 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 .

Speaker #13: I guess I'm trying to that think if there's some greater inflection that I don't understand .

Speaker #5: No , I don't 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 .

Speaker #5: But where we have 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 balance start strategy .

Speaker #13: Appreciate it . And then on the community count growth , is most of that G&A , the fixed G&A already kind of loaded in there , or is there any big lift we should expect there ?

Doug Bauer: 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.

Speaker #13: Thank you .

Speaker #6: Not not not too much of a lift on the north side . You may see some incremental that's more field and sales that will be needed to open those communities .

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.

Speaker #6: But .

Speaker #5: Yeah .

Speaker #13: Thank you guys . Bye bye .

Doug Bauer: Thank you, guys. Bye-bye.

Speaker #3: 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.

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.

Speaker #5: Well, 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.

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.

Speaker #5: And as we go into 2026 , we're very excited and bullish about the future for housing . So thank you and talk to you next quarter .

Speaker #3: Thank you . This concludes today's conference . You may disconnect your lines at this time .

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

Linda Mamet: Goodbye.