TPH TRI Pointe Homes Inc

-Reports Net Income Available to Common Stockholders of $34.8 Million, or $0.22 per Diluted Share--Home Sales Revenue of $578.7 Million for the Quarter--Homebuilding Gross Margin of 20.1% for the Quarter-

TRI Pointe Group, Inc. (the "Company") (NYSE: TPH) today announced results for the third quarter ended September 30, 2016.

Results and Operational Data for Third Quarter 2016 and Comparisons to Third Quarter 2015

• Net income available to common stockholders was $34.8 million, or $0.22 per diluted share, compared to $50.2 million, or $0.31 per diluted share
• New home orders of 932 compared to 996, a decrease of 6%
• Active selling communities averaged 119.0 compared to 120.8, a decrease of 1%
  • New home orders per average selling community were 7.8 orders (2.6 monthly) compared to 8.2 orders (2.7 monthly)
  • Cancellation rate of 17% compared to 16%, an increase of 100 basis points
• Backlog units at quarter end of 1,711 homes compared to 1,856, a decrease of 8%
  • Dollar value of backlog at quarter end of $950.2 million compared to $1.110 billion, a decrease of 14%
  • Average sales price in backlog at quarter end of $555,000 compared to $598,000, a decrease of 7%
• Home sales revenue of $578.7 million compared to $642.4 million, a decrease of 10%
  • New home deliveries of 1,019 homes compared to 1,138 homes, a decrease of 10%
  • Average sales price of homes delivered of $568,000 compared to $564,000, an increase of 1%
• Homebuilding gross margin percentage of 20.1% compared to 21.0%, a decrease of 90 basis points
  • Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 22.7%*
• SG&A expense as a percentage of homes sales revenue of 10.9% compared to 8.8%, an increase of 210 basis points
• Ratios of debt-to-capital and net debt-to-capital of 43.7% and 41.3%*, respectively, as of September 30, 2016
• Repurchased 852,500 shares of common stock at an average price of $12.22 for an aggregate dollar amount of $10.4 million in the three months ended September 30, 2016
• Ended third quarter of 2016 with cash of $128.7 million and $420.7 million of availability under the Company's unsecured revolving credit facility

* See "Reconciliation of Non-GAAP Financial Measures"

“We are pleased with the progress we made this quarter,” said TRI Pointe Group Chief Executive Officer Doug Bauer. “TRI Pointe delivered on its stated guidance for our ending community count, deliveries, home sales revenue and homebuilding gross margin percentage. While the absorption pace in the quarter was slightly lower than it was last year, I am encouraged by the 26% year-over-year increase in new home orders we experienced in the month of September. We expect to continue this momentum into the fourth quarter due to the success of our new community openings.”

Third Quarter 2016 Operating Results

Net income available to common stockholders was $34.8 million, or $0.22 per diluted share in the third quarter of 2016, compared to net income available to common stockholders of $50.2 million, or $0.31 per diluted share for the third quarter of 2015. The decrease in net income available to common stockholders was primarily driven by an $18.5 million decrease in homebuilding gross margin due to a 90 basis point decrease in homebuilding gross margin percentage and lower home sales revenue, which resulted from a 10% decrease in new home deliveries.

Home sales revenue decreased $63.7 million, or 10%, to $578.7 million for the third quarter of 2016, as compared to $642.4 million for the third quarter of 2015. The decrease was primarily attributable to a 10% decrease in new home deliveries to 1,019, offset by an increase in average selling price of homes delivered to $568,000 compared to $564,000 in the third quarter of 2015. The decrease in deliveries was primarily related to the timing of deliveries for the year, as we delivered a large number of our backlog units in the second quarter of 2016, which resulted in a lower number of backlog units going into the quarter compared to the prior year period. For the nine months ended September 30, 2016, deliveries were up 7% compared to the same period in the prior year.

New home orders decreased 6% to 932 homes for the third quarter of 2016, as compared to 996 homes for the same period in 2015, which was up 24% from 803 orders for the same period in 2014. Average selling communities was 119.0 for the third quarter of 2016 compared to 120.8 for the third quarter of 2015. The Company’s overall absorption rate per average selling community for the third quarter of 2016 was 7.8 orders (2.6 monthly) compared to 8.2 orders (2.7 monthly) during the third quarter of 2015.

The Company ended the quarter with 1,711 homes in backlog, representing approximately $950.2 million. The average sales price of homes in backlog as of September 30, 2016 decreased $43,000, or 7%, to $555,000 compared to $598,000 at September 30, 2015.

Homebuilding gross margin percentage for the third quarter of 2016 decreased to 20.1% compared to 21.0% for the third quarter of 2015. Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 22.7%* for the third quarter of 2016 compared to 23.1%* for the third quarter of 2015. The decrease in homebuilding gross margin percentage was largely due to the mix of homes delivered, with 50 less homes delivered from California which have gross margins above the Company average.

Selling, general and administrative ("SG&A") expense for the third quarter of 2016 increased to 10.9% of home sales revenue as compared to 8.8% for the third quarter of 2015 due to decreased leverage as a result of the 10% decrease in home sales revenue.

“Overall, we continue to see encouraging trends in all of our markets,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell. “Due to lower new home orders for the quarter, full year deliveries will likely be on the lower end of our previously stated range of 4,200 to 4,400 homes. That said, we expect to end the year with 125 active selling communities compared to 104 at the end of the prior year. We think this community count growth and the progress we have made in accelerating the development of our longer dated assets in California will enable us to continue to create shareholder value through our homebuilding operations and reach our goal of delivering 5,100 to 5,400 homes in 2018.”

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the fourth quarter of 2016, the Company expects to open nine new communities, and close out of seven, resulting in 125 active selling communities as of December 31, 2016. In addition, the Company anticipates delivering approximately 85% of its 1,711 units in backlog as of September 30, 2016. The Company anticipates its homebuilding gross margin percentage to be approximately 20% for the fourth quarter, resulting in a full year homebuilding gross margin percentage in a range of 20.5% to 21.5%. Finally, the Company expects its SG&A expense ratio to be approximately 9% for the fourth quarter, resulting in a full year SG&A expense ratio in a range of 10.5% to 10.7%.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Thursday, October 27, 2016. The call will be hosted by Doug Bauer, Chief Executive Officer; Tom Mitchell, President and Chief Operating Officer; and Mike Grubbs, Chief Financial Officer.

Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software. The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the TRI Pointe Group Third Quarter 2016 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start. The replay of the call will be available for two weeks following the call. To access the replay, the domestic dial-in number is 1-844-512-2921, the international dial-in number is 1-412-317-6671, and the reference code is #13646378. An archive of the webcast will be available on the Company’s website for a limited time.

About TRI Pointe Group, Inc.

Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE: TPH) is one of the top ten largest public homebuilders by equity market capitalization in the United States. The company designs, constructs and sells premium single-family homes through its portfolio of six quality brands across eight states, including Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia. Additional information is available at www.TRIPointeGroup.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, financial condition, prospects, and capital spending. Our forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “goal,” “expect,” “intend,” “project,” “potential,” “plan,” “predict,” “will,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the continuing drought in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental regulations; legal proceedings and disputes; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our customers’ confidential information or other forms of cyber-attack; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group or its affiliates; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

         

KEY OPERATIONS AND FINANCIAL DATA

(dollars in thousands)

(unaudited)

  Three Months Ended September 30, Nine Months Ended September 30, 2016     2015     Change 2016     2015     Change Operating Data: Home sales revenue $ 578,653 $ 642,352 $ (63,699 ) $ 1,558,633 $ 1,443,855 $ 114,778 Homebuilding gross margin $ 116,330 $ 134,809 $ (18,479 ) $ 339,073 $ 294,664 $ 44,409 Homebuilding gross margin % 20.1 % 21.0 % (0.9 )% 21.8 % 20.4 % 1.4 % Adjusted homebuilding gross margin %* 22.7 % 23.1 % (0.4 )% 24.0 % 22.4 % 1.6 % Land and lot sales revenue $ 2,535 $ 4,876 $ (2,341 ) $ 70,204 $ 74,366 $ (4,162 ) Land and lot gross margin $ 801 $ 1,425 $ (624 ) $ 53,231 $ 57,042 $ (3,811 ) Land and lot gross margin % 31.6 % 29.2 % 2.4 % 75.8 % 76.7 % (0.9 )% SG&A expense $ 63,002 $ 56,774 $ 6,228 $ 180,436 $ 162,108 $ 18,328

SG&A expense as a % of home sales revenue

10.9 % 8.8 % 2.1 % 11.6 % 11.2 % 0.4 %

Net income available to common stockholders

$ 34,834 $ 50,162 $ (15,328 ) $ 137,310 $ 120,389 $ 16,921 Adjusted EBITDA* $ 74,215 $ 99,135 $ (24,920 ) $ 262,945 $ 233,079 $ 29,866 Interest incurred $ 18,601 $ 15,454 $ 3,147 $ 50,030 $ 45,779 $ 4,251 Interest in cost of home sales $ 14,385 $ 13,189 $ 1,196 $ 34,653 $ 27,540 $ 7,113   Other Data: Net new home orders 932 996 (64 ) 3,339 3,428 (89 ) New homes delivered 1,019 1,138 (119 ) 2,784 2,604 180 Average selling price of homes delivered $ 568 $ 564 $ 4 $ 560 $ 554 $ 6 Average selling communities 119.0 120.8 (1.8 ) 117.0 117.4 (0.4 ) Selling communities at end of period 123 118 5 N/A N/A N/A Cancellation rate 17 % 16 % 1 % 14 % 14 % 0 % Backlog (estimated dollar value) $ 950,171 $ 1,109,867 $ (159,696 ) Backlog (homes) 1,711 1,856 (145 ) Average selling price in backlog $ 555 $ 598 $ (43 )   September 30, December 31, 2016 2015 Change Balance Sheet Data: Cash and cash equivalents $ 128,715 $ 214,485 $ (85,770 ) Real estate inventories $ 2,969,148 $ 2,519,273 $ 449,875 Lots owned or controlled 29,713 27,602 2,111 Homes under construction (1) 1,973 1,531 442 Homes completed, unsold 291 351 (60 ) Debt $ 1,384,482 $ 1,170,505 $ 213,977 Stockholders' equity $ 1,785,460 $ 1,664,683 $ 120,777 Book capitalization $ 3,169,942 $ 2,835,188 $ 334,754 Ratio of debt-to-capital 43.7 % 41.3 % 2.4 % Ratio of net debt-to-capital* 41.3 % 36.5 % 4.8 %   (1)     Homes under construction included 52 and 69 models at September 30, 2016 and December 31, 2015, respectively. * See “Reconciliation of Non-GAAP Financial Measures”                            

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

  September 30, December 31, 2016 2015 Assets (unaudited) Cash and cash equivalents $ 128,715 $ 214,485 Receivables 35,321 43,710 Real estate inventories 2,969,148 2,519,273 Investments in unconsolidated entities 17,205 18,999 Goodwill and other intangible assets, net 161,629 162,029 Deferred tax assets, net 111,887 130,657 Other assets 65,998   48,918 Total assets $ 3,489,903   $ 3,138,071   Liabilities Accounts payable $ 77,667 $ 64,840 Accrued expenses and other liabilities 219,396 216,263 Unsecured revolving credit facility 200,000 299,392 Seller financed loans 17,758 2,434 Senior notes 1,166,724   868,679 Total liabilities 1,681,545   1,451,608   Commitments and contingencies   Equity Stockholders' Equity:

Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively

— —

Common stock, $0.01 par value, 500,000,000 shares authorized; 160,064,678 and 161,813,750 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively

1,601 1,618 Additional paid-in capital 894,681 911,197 Retained earnings 889,178   751,868 Total stockholders' equity 1,785,460 1,664,683 Noncontrolling interests 22,898   21,780 Total equity 1,808,358   1,686,463 Total liabilities and equity $ 3,489,903   $ 3,138,071                

CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

2016       2015 2016       2015 Homebuilding: Home sales revenue $ 578,653 $ 642,352 $ 1,558,633 $ 1,443,855 Land and lot sales revenue 2,535 4,876 70,204 74,366 Other operations revenue 606   613   1,790   2,213   Total revenues 581,794 647,841 1,630,627 1,520,434 Cost of home sales 462,323 507,543 1,219,560 1,149,191 Cost of land and lot sales 1,734 3,451 16,973 17,324 Other operations expense 575 570 1,724 1,704 Sales and marketing 31,852 30,038 90,621 78,958 General and administrative 31,150 26,736 89,815 83,150 Restructuring charges 128   2,010   478   2,730   Homebuilding income from operations 54,032 77,493 211,456 187,377 Equity in (loss) income of unconsolidated entities (20 ) (150 ) 181 (82 ) Other income, net 21   47   287   272   Homebuilding income before income taxes 54,033   77,390   211,924   187,567   Financial Services: Revenues 235 300 762 482 Expenses 72 47 183 131 Equity in income (loss) of unconsolidated entities 1,247   147   3,246   (2 ) Financial services income before income taxes 1,410   400   3,825   349   Income before income taxes 55,443 77,790 215,749 187,916 Provision for income taxes (20,298 ) (28,021 ) (77,701 ) (66,088 ) Net income 35,145 49,769 138,048 121,828 Net (income) loss attributable to noncontrolling interests (311 ) 393   (738 ) (1,439 ) Net income available to common stockholders $ 34,834   $ 50,162   $ 137,310   $ 120,389   Earnings per share Basic $ 0.22 $ 0.31 $ 0.85 $ 0.74 Diluted $ 0.22 $ 0.31 $ 0.85 $ 0.74 Weighted average shares outstanding Basic 160,614,055 161,772,893 161,456,520 161,651,177 Diluted 161,267,509 162,366,744 161,916,352 162,299,282              

MARKET DATA BY REPORTING SEGMENT & STATE

(dollars in thousands)

(unaudited)

  Three Months Ended September 30, Nine Months Ended September 30, 2016     2015 2016     2015 New

Homes

Delivered

    Average

Sales

Price

New

Homes

Delivered

    Average

Sales

Price

New

Homes

Delivered

    Average

Sales

Price

New

Homes

Delivered

    Average

Sales

Price

New Homes Delivered: Maracay Homes 165 $ 412 131 $ 386 400 $ 403 307 $ 380 Pardee Homes 302 623 314 543 828 587 724 506 Quadrant Homes 90 531 117 406 287 515 297 426 Trendmaker Homes 121 516 163 495 335 506 394 512 TRI Pointe Homes 260 645 298 752 678 667 611 756 Winchester Homes 81   550   115   599   256   554   271   631 Total 1,019   $ 568   1,138   $ 564   2,784   $ 560   2,604   $ 554     Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 New

Homes

Delivered

Average

Sales

Price

New

Homes

Delivered

Average

Sales

Price

New

Homes

Delivered

Average

Sales

Price

New

Homes

Delivered

Average

Sales

Price

New Homes Delivered: California 412 $ 716 462 $ 720 1,093 $ 707 969 $ 700 Colorado 30 526 51 512 118 505 128 488 Maryland 55 510 58 483 169 504 120 528 Virginia 26 634 57 716 87 650 151 714 Arizona 165 412 131 386 400 403 307 380 Nevada 120 377 99 361 295 360 238 368 Texas 121 516 163 495 335 506 394 512 Washington 90   531   117   406   287   515   297   426 Total 1,019   $ 568   1,138   $ 564   2,784   $ 560   2,604   $ 554              

MARKET DATA BY REPORTING SEGMENT & STATE, continued

(unaudited)

  Three Months Ended September 30, Nine Months Ended September 30, 2016     2015 2016     2015

Net NewHomeOrders

   

AverageSellingCommunities

Net NewHomeOrders

   

AverageSellingCommunities

Net New

Home

Orders

   

Average

Selling

Communities

Net New

Home

Orders

    Average

Selling

Communities

Net New Home Orders: Maracay Homes 134 17.8 150 17.2 526 18.1 495 17.3 Pardee Homes 283 22.5 291 25.0 936 22.8 954 22.8 Quadrant Homes 49 7.3 87 11.8 274 8.5 353 10.8 Trendmaker Homes 130 29.0 125 25.0 385 26.8 381 26.0 TRI Pointe Homes 239 28.7 234 28.3 883 27.3 935 27.0 Winchester Homes 97   13.7   109   13.5   335   13.5   310   13.5 Total 932   119.0   996   120.8   3,339   117.0   3,428   117.4     Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015

Net NewHome

Orders

AverageSellingCommunities

Net NewHomeOrders

AverageSellingCommunities

Net NewHomeOrders

AverageSellingCommunities

Net NewHomeOrders

AverageSellingCommunities

Net New Home Orders: California 380 35.0 392 35.5 1,333 34.3 1,421 33.2 Colorado 31 5.0 34 6.0 107 4.8 168 6.4 Maryland 72 7.2 71 6.0 214 6.7 165 5.8 Virginia 25 6.5 38 7.5 121 6.8 145 7.7 Arizona 134 17.8 150 17.2 526 18.1 495 17.3 Nevada 111 11.2 99 11.8 379 11.0 300 10.2 Texas 130 29.0 125 25.0 385 26.8 381 26.0 Washington 49   7.3   87   11.8   274   8.5   353   10.8 Total 932   119.0   996   120.8   3,339   117.0   3,428   117.4              

MARKET DATA BY REPORTING SEGMENT & STATE, continued

(dollars in thousands)

(unaudited)

  As of September 30, 2016 As of September 30, 2015 BacklogUnits    

BacklogDollarValue

   

AverageSalesPrice

BacklogUnits    

BacklogDollarValue

   

AverageSalesPrice

Backlog: Maracay Homes 329 $ 144,127 $ 438 293 $ 118,164 $ 403 Pardee Homes 382 182,263 477 448 296,477 662 Quadrant Homes 130 83,467 642 169 79,955 473 Trendmaker Homes 186 98,874 532 205 108,250 528 TRI Pointe Homes 495 319,823 646 567 388,336 685 Winchester Homes 189   121,617   643   174   118,685   682 Total 1,711   $ 950,171   $ 555   1,856   $ 1,109,867   $ 598     As of September 30, 2016 As of September 30, 2015 BacklogUnits

BacklogDollarValue

AverageSalesPrice

BacklogUnits

BacklogDollarValue

AverageSalesPrice

Backlog: California 641 $ 387,125 $ 604 770 $ 577,053 $ 749 Colorado 73 42,809 586 124 62,445 504 Maryland 122 75,444 618 98 59,200 604 Virginia 67 46,172 689 76 59,485 783 Arizona 329 144,127 438 293 118,164 403 Nevada 163 72,153 443 121 45,315 375 Texas 186 98,874 532 205 108,250 528 Washington 130   83,467   642   169   79,955   473 Total 1,711   $ 950,171   $ 555   1,856   $ 1,109,867   $ 598                              

MARKET DATA BY REPORTING SEGMENT & STATE, continued

(unaudited)

  September 30, December 31, 2016 2015 Lots Owned or Controlled: Maracay Homes 2,258 1,811 Pardee Homes 16,987 16,679 Quadrant Homes 1,895 1,274 Trendmaker Homes 2,130 1,858 TRI Pointe Homes 3,960 3,628 Winchester Homes 2,483   2,352 Total 29,713   27,602     September 30, December 31, 2016 2015 Lots Owned or Controlled: California 17,452 17,527 Colorado 1,159 876 Maryland 1,875 1,716 Virginia 608 636 Arizona 2,258 1,811 Nevada 2,336 1,904 Texas 2,130 1,858 Washington 1,895   1,274 Total 29,713   27,602     September 30, December 31, 2016 2015 Lots by Ownership Type: Lots owned 25,228 24,733 Lots controlled (1) 4,485   2,869 Total 29,713   27,602   (1)     As of September 30, 2016 and December 31, 2015, lots controlled included lots that were under land option contracts or purchase contracts.    

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(unaudited)

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

      Three Months Ended September 30, 2016       %       2015       % (dollars in thousands) Home sales revenue $ 578,653 100.0 % $ 642,352 100.0 % Cost of home sales 462,323   79.9 % 507,543   79.0 % Homebuilding gross margin 116,330 20.1 % 134,809 21.0 % Add: interest in cost of home sales 14,385 2.5 % 13,189 2.1 % Add: impairments and lot option abandonments 389   0.1 % 366   0.1 % Adjusted homebuilding gross margin $ 131,104   22.7 % $ 148,364   23.1 % Homebuilding gross margin percentage 20.1 % 21.0 % Adjusted homebuilding gross margin percentage 22.7 % 23.1 %     Nine Months Ended September 30, 2016 % 2015 % (dollars in thousands) Home sales revenue $ 1,558,633 100.0 % $ 1,443,855 100.0 % Cost of home sales 1,219,560   78.2 % 1,149,191   79.6 % Homebuilding gross margin 339,073 21.8 % 294,664 20.4 % Add: interest in cost of home sales 34,653 2.2 % 27,540 1.9 % Add: impairments and lot option abandonments 678   0.0 % 1,593   0.1 % Adjusted homebuilding gross margin $ 374,404   24.0 % $ 323,797   22.4 % Homebuilding gross margin percentage 21.8 % 20.4 % Adjusted homebuilding gross margin percentage 24.0 % 22.4 %    

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-capital. We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

              September 30, 2016           December 31, 2015 Unsecured revolving credit facility $ 200,000 $ 299,392 Seller financed loans 17,758 2,434 Senior notes 1,166,724   868,679   Total debt 1,384,482   1,170,505   Stockholders’ equity 1,785,460   1,664,683   Total capital $ 3,169,942   $ 2,835,188   Ratio of debt-to-capital(1) 43.7 % 41.3 %   Total debt $ 1,384,482 $ 1,170,505 Less: Cash and cash equivalents (128,715 ) (214,485 ) Net debt 1,255,767 956,020 Stockholders’ equity 1,785,460   1,664,683   Total capital $ 3,041,227   $ 2,620,703   Ratio of net debt-to-capital(2) 41.3 % 36.5 %   (1)     The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity. (2) The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity.    

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)(unaudited)

The following table calculates the non-GAAP measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP. EBITDA means net income before (a) interest expense, (b) income taxes, (c) depreciation and amortization, (d) expensing of previously capitalized interest included in costs of home sales and (e) amortization of stock-based compensation. Adjusted EBITDA means EBITDA before (f) impairment and lot option abandonments and (g) restructuring charges. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

      Three Months Ended September 30,       Nine Months Ended September 30, 2016       2015 2016       2015 (in thousands) Net income available to common stockholders $ 34,834 $ 50,162 $ 137,310 $ 120,389 Interest expense: Interest incurred 18,601 15,454 50,030 45,779 Interest capitalized (18,601 ) (15,454 ) (50,030 ) (45,779 ) Amortization of interest in cost of sales 14,415 13,339 34,808 28,019 Provision for income taxes 20,298 28,021 77,701 66,088 Depreciation and amortization 866 2,244 2,322 5,414 Amortization of stock-based compensation 3,285   2,994   9,648   8,536   EBITDA 73,698 96,760 261,789 228,446 Impairments and lot abandonments 389 365 678 1,903 Restructuring charges 128   2,010   478   2,730   Adjusted EBITDA $ 74,215   $ 99,135   $ 262,945   $ 233,079    

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Investor Relations Contact:Chris Martin, TRI Pointe GroupDrew Mackintosh, Mackintosh Investor RelationsInvestorRelations@TRIPointeGroup.com949-478-8696orMedia Contact:Carol Ruizcruiz@newgroundco.com310-437-0045