TRI Pointe Group, Inc., Irvine (NYSE:TPH) early Thursday reported net income of $26.3 million, or $0.18 per diluted share, for the second quarter ended June 30, 2019. The gain compared to $63.7 million, or $0.42 per diluted share, in the prior-year quarter. Analysts were expecting a gain of $0.15 per share.

Home sales revenue decreased $76.7 million, or 10%, to $692.1 million for the second quarter of 2019, as compared to $768.8 million for the second quarter of 2018. The decrease was primarily attributable to a 7% decrease in new home deliveries to 1,125, compared to 1,215 in the second quarter of 2018, and a 3% decrease in the average sales price of homes delivered to $615,000, compared to $633,000 in the second quarter of 2018.
Home building gross margin percentage for the second quarter of 2019 decreased to 17.0%, compared to 21.4% for the second quarter of 2018. The decrease in home building gross margin was due to a lower mix of deliveries from certain long-dated California communities, which produce gross margins above the company average, as well as the impact of increased incentives in the second half of 2018 on inventory homes that delivered in the first half of 2019. Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted home building gross margin percentage was 19.6%* for the second quarter of 2019, compared to 24.0%* for the second quarter of 2018.
Sales and marketing and general and administrative expense for the second quarter of 2019 increased to 12.1% of home sales revenue as compared to 10.7% for the second quarter of 2018, primarily the result of lower operating leverage on the fixed components of SG&A as a result of the 10% decrease in home sales revenue and higher overhead costs as a result of our expansion efforts into the Charlotte, Raleigh, Sacramento and Dallas–Fort Worth markets.
New home orders increased 11% to 1,491 homes for the second quarter of 2019, as compared to 1,343 homes for the same period in 2018. Average selling communities increased 12% to 146.0 for the second quarter of 2019 compared to 130.8 for the second quarter of 2018. The Company’s overall absorption rate per average selling community remained flat for the second quarter of 2019 at 10.2 orders (3.4 monthly) compared to 10.3 orders (3.4 monthly) during the second quarter of 2018.
The company ended the quarter with 2,208 homes in backlog, representing approximately $1.4 billion. The average sales price of homes in backlog as of June 30, 2019 decreased $16,000, or 2%, to $652,000, compared to $668,000 as of June 30, 2018.
For the third quarter of 2019, the company said it expects to open 14 new communities and close out of 12 communities, which would result in 148 active selling communities as of September 30, 2019. In addition, the company anticipates delivering 45% to 50% of its 2,208 homes in backlog as of June 30, 2019 at an average sales price of $620,000. The company expects its home building gross margin percentage to be in a range of 21.0% to 22.0% for the third quarter and anticipates its SG&A expense as a percentage of homes sales revenue will be in a range of 12.0% to 12.5%. Lastly, the company expects its effective tax rate to be in the range of 25% to 26%.
TRI Pointe Group Chief Executive Officer Doug Bauer stated, “Our team members did an excellent job executing this quarter, as we met or exceeded our stated guidance for deliveries and margins for the quarter and grew our average community count by 12% year-over-year. Our orders for the quarter were up 11% year-over-year with a strong sales pace of 3.4 homes per community per month. While the recent decline in interest rates likely aided our sales efforts, we believe the quality of our home offerings and our execution of our 12 point sales and marketing program provided the tools for success during the quarter.”
Bauer continued, “We continue to focus on growing our operations through the build-out of our long-term California assets and the expansion of our presence in a number of markets around the country. We believe the investments we are making today will result in a more diverse and profitable business in the coming years.”

