TriPointe Group (NYSE:TPH) on Wednesday reported net income of $73.9 million, or $0.46 per diluted share in the second quarter of 2016 ended June 30, compared with $54.9 million, or $0.34 per diluted share for the second quarter of 2015. Analysts were expecting a profit of $0.28 per share.
The company said the gain was primarily driven by an increase of $38.7 million in home building gross margin due to higher home-sales revenue resulting from a 25% increase in new home deliveries and a 230 basis point improvement in home building gross margin percentage, offset by an increase in selling, general and administrative expenses and the provision for income taxes.
Home sales revenue increased $129.7 million, or 30%, to $556.9 million for the quarter, compared to $427.2 million for the same period in 2015. The increase was primarily attributable to a 25% increase in new home deliveries to 994.
New home orders increased 2% to 1,258 homes for the second quarter of 2016, up marginally from 1,238 homes for the same period in 2015, which was up 62 % from 763 orders for the same period in 2014. Average active selling communities was 119.5 for each three month period ended June 30, 2016 and 2015. The company’s overall quarterly absorption rate per average selling community for the quarter was 10.5 orders (3.5 monthly) compared to 10.4 orders (3.5 monthly) during the same period in 2015.
The company ended the quarter with 1,798 homes in backlog, representing approximately $1.0 billion in future home sales revenue. The average sales price of homes in backlog as of June 30, 2016 decreased $30,000, or 5%, to $571,000 compared to $601,000 at June 30, 2015.
Home building gross margin percentage for the second quarter of 2016 increased to 22.3% compared to 20.0% for the same period in 2015. Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted home building gross margin percentage was 24.4% for the second quarter of 2016 versus 22.0% for the same period in 2015.
Land and lot sales revenue of $67.3 million for the second quarter of 2016, as compared to $67.5 million for the same period in 2015. Land and lot sales gross margin percentage for the second quarter of 2016 decreased to 78.5% compared to 82.9% for the same period in 2015.
During the quarter, the Pardee Homes unit sold two parcels, totaling 102 home building lots, located in the Pacific Highlands Ranch community in San Diego, California. Pardee Homes received $61.6 million in cash proceeds from the sale. During the quarter ended June 30, 2015, Pardee Homes reporting segment sold a commercial site in the Pacific Highlands Ranch community for $53.0 million in cash proceeds. Both transactions involving the Pacific Highlands Ranch community included significant gross margins due to the low land basis of the community which was acquired in 1981.
Selling, general and administrative expense for the second quarter of 2016 improved to 11.3% of home sales revenue as compared to 12.6% for the same period in 2015 due to greater leverage as a result of the 30% increase in home sales revenue.
“During the second quarter of 2016 we again proved our ability to sell homes with high average selling prices at an elevated pace and strong margins,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell. “Our results this quarter are a testament to our customer driven culture as well as to the quality of our land holdings. We are in a great position to build on the successes from this quarter as we continue to execute on our strategic vision, open new communities and find ways to continue to monetize our sizeable California land position, which we feel holds significant value.”