10q10k10q10k.net

What changed in Tri Pointe Homes, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Tri Pointe Homes, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+263 added−256 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-22)

Top changes in Tri Pointe Homes, Inc.'s 2024 10-K

263 paragraphs added · 256 removed · 209 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

32 edited+3 added−5 removed111 unchanged
Biggest changeOur board of directors considers a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service.
Biggest changeOur board of directors considers a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. - 10 - We intend to finance future acquisitions and developments with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of common and preferred equity, secured and unsecured corporate-level debt, property-level debt and mortgage financing and other public, private or bank debt.
To recognize and promote outstanding employees, we conduct a comprehensive talent and succession planning review process on an annual basis, focused on identifying and developing top-performing, high-potential and diverse team members for consideration to advance into key positions in the future. This review process is overseen by the compensation committee of our board of directors.
To recognize and promote outstanding employees, we conduct a comprehensive talent and succession planning review process on an annual basis, focused on identifying and developing top-performing, high-potential team members for consideration to advance into key positions in the future. This review process is overseen by the compensation committee of our board of directors.
Further, due to shortages of components, such as electronic chips that are commonly used in appliances and other building materials, as well as lingering supply chain disruptions associated with the COVID-19 pandemic, shipping delays, factory downtime, and other factors, we have experienced and may continue to experience delays in our supply chain.
Further, due to shortages of components, such as electronic chips that are commonly used in appliances and other building materials, as well as some lingering supply chain disruptions associated with the COVID-19 pandemic, shipping delays, factory downtime, and other factors, we have experienced and may continue to experience delays in our supply chain.
We seek to ensure that our compensation, recognition and rewards programs are fair, equitable and competitive, align with key business objectives, motivate and reward great performance and increase team member engagement and retention.
We seek to ensure that our compensation, recognition and rewards programs are fair and competitive, align with key business objectives, motivate and reward great performance and increase team member engagement and retention.
We expect all of our backlog at December 31, 2023 to be converted to deliveries and revenues during 2024, net of cancellations. For information concerning backlog units, the dollar value and average sales price by segment, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this annual report on Form 10-K.
We expect all of our backlog at December 31, 2024 to be converted to deliveries and revenues during 2025, net of cancellations. For information concerning backlog units, the dollar value and average sales price by segment, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this annual report on Form 10-K.
While our homebuyers may obtain financing from any mortgage provider of their choice, Tri Pointe Connect has acted as a preferred mortgage broker to our homebuyers in all of the markets in which we operate, providing mortgage financing options that help facilitate the sale and closing process as well as generating additional fee income for us.
While our homebuyers may obtain financing from any mortgage provider of their choice, Tri Pointe Connect has acted as a preferred mortgage company to our homebuyers in all of the markets in which we operate, providing mortgage financing options that help facilitate the sale and closing process as well as generating additional fee income for us.
Homes in backlog are generally delivered within seven to ten months from the time the sales contract is entered into, although we may experience cancellations of sales contracts prior to delivery. The dollar value of backlog was approximately $1.6 billion and $1.2 billion as of December 31, 2023 and 2022, respectively.
Homes in backlog are generally delivered within seven to ten months from the time the sales contract is entered into, although we may experience cancellations of sales contracts prior to delivery. The dollar value of backlog was approximately $1.2 billion and $1.6 billion as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, we had no outstanding debt related to our unsecured revolving credit facility (the “Revolving Facility”) and $250 million in outstanding debt related to a term loan facility (the “Term Facility” and together with the Revolving Facility, the “Credit Facility”).
As of December 31, 2024, we had no outstanding debt related to our unsecured revolving credit facility (the “Revolving Facility”) and $250 million in outstanding debt related to a term loan facility (the “Term Facility” and together with the Revolving Facility, the “Credit Facility”).
For purposes of this annual report on Form 10-K, the results of our homebuilding operations are organized into the three reportable segments of which our operations consisted during the year ended December 31, 2023: West Region: Arizona, California, Nevada and Washington Central Region: Colorado and Texas East R egion: District of Columbia, Maryland, North Carolina, South Carolina and Virginia Our growth strategy is to capitalize on high demand in selected “core” markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors.
For purposes of this annual report on Form 10-K, the results of our homebuilding operations are organized into the three reportable segments of which our operations consisted during the year ended December 31, 2024: West Region: Arizona, California, Nevada and Washington Central Region: Colorado, Texas and Utah East Region: District of Columbia, Florida, Maryland, North Carolina, South Carolina and Virginia Our growth strategy is to capitalize on high demand in selected “core” markets with favorable population and employment growth as a result of proximity to job centers or primary transportation corridors.
Lots owned or controlled include our share of lots controlled from our unconsolidated land development joint ventures. Investments in joint ventures are describe d in Note 6, Investments in Unconsolidated Entities , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K.
Lots owned or controlled include our share of lots controlled from our unconsolidated land development joint ventures. Investments in joint ventures are described in Note 6, Investments in Unconsolidated Entities , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K.
Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and Colorado and both title examinations and escrow services for our homebuyers in Arizona, Texas, Maryland, Nevada and Virginia. Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company.
Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and both title examinations and escrow services for our homebuyers in Arizona, Colorado, the District of Columbia, Maryland, Nevada, Texas, Washington and Virginia. Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company.
Although cancellations can delay the sale of our homes, they have historically not had a material - 8 - impact on our operating results. The cancellation rate of homebuyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was 10% and 19% for the years ended December 31, 2023 and 2022, respectively.
Although cancellations can delay the sale of our homes, they have historically not had a material - 8 - impact on our operating results. The cancellation rate of homebuyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was 10% for each of the years ended December 31, 2024 and 2023.
The following table presents certain information with respect to our lots owned or controlled as of December 31, 2023.
The following table presents certain information with respect to our lots owned or controlled as of December 31, 2024.
There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates and comparable self-insured - 9 - retentions, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims, that claims will not exceed our insurance coverage limits, or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors or design professionals.
Warranty insurance receivables are recorded in receivables on our consolidated balance sheet. - 9 - There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates and comparable self-insured retentions, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims, that claims will not exceed our insurance coverage limits, or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors or design professionals.
Cancellation rates are subject to a variety of factors beyond our control, such as adverse economic conditions and increases in mortgage interest rates. Our inventory of completed and unsold production homes was 263 and 287 homes as of December 31, 2023 and 2022, respectively.
Cancellation rates are subject to a variety of factors beyond our control, such as adverse economic conditions and increases in mortgage interest rates. Our inventory of completed and unsold production homes was 464 and 263 homes as of December 31, 2024 and 2023, respectively.
Further, we expect that as concerns about climate change and other environmental issues continue to grow, homebuilders will be required to comply with new and increasingly stringent laws and regulations, including the climate-related disclosure rules recently enacted by the State of California and any disclosure requirements ultimately adopted by the Securities and Exchange Commission (“SEC”) and/or other states, which we anticipate will likewise result in additional compliance costs to us.
Further, we expect that as concerns about climate change and other environmental issues continue to grow, homebuilders will be required to comply with new and increasingly stringent laws and regulations, including the climate-related disclosure law enacted by the State of California and any disclosure requirements that may be adopted by the Securities and Exchange Commission (“SEC”) and/or other states, which we anticipate will likewise result in additional compliance costs to us and our suppliers.
Additionally, i n September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah. These markets are generally characterized by high job growth and increasing populations, which typically create strong demand for new housing.
Additionally, i n September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah, followed by our expansion into the Orlando and Coastal Carolinas regions in early 2024. These markets are generally characterized by high job growth and increasing populations, which typically create strong demand for new housing.
As a result, we build across a variety of base sales price points, ranging from approximately $213,000 to $3.3 million, and home sizes, ranging from approximately 1,190 to 5,220 square feet.
As a result, we build across a variety of base sales price points, ranging from approximately $230,000 to $4.3 million, and home sizes, ranging from approximately 1,190 to 5,200 square feet.
As of December 31, 2023, we owned 502 model homes that were either completed or under construction, including seven homes in backlog. We frequently build model homes at our projects and have them professionally decorated to display design features.
As of December 31, 2024, we owned 446 model homes that were either completed or under construction, including 19 homes in backlog. We frequently build model homes at our projects and have them professionally decorated to display design features.
Based upon these factors and in consideration of the geographical layout of our homebuilding markets, we have identified three homebuilding operating and reporting segments: West region: Arizona, California, Nevada and W ashington Central region: Colorado and Texas East region: District of Columbia, Maryland, North Carolina, South Carolina and Virginia In September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah.
Based upon these factors and in consideration of the geographical layout of our homebuilding markets, we have identified three homebuilding operating and reporting segments: West region : Arizona, California, Nevada and Washington Central region : Colorado, Texas and Utah East region : District of Columbia, Florida, Maryland, North Carolina, South Carolina and Virginia In September 2023, we announced our expansion into the greater Salt Lake City region.
However, a rapid increase in the number of homes started, governmental trade and other policies, or other market conditions could cause delays in the delivery of, shortages in, or higher prices for necessary materials, such as concrete or lumber and other forest products.
However, a rapid increase in the number of homes started, governmental trade and other policies, other market conditions, or natural disasters, such as the January 2025 wildfires in Southern California, could cause delays in the delivery of, shortages in, or higher prices for necessary materials, such as concrete or lumber and other forest products.
For the years ended December 31, 2023 and 2022, we delivered 5,274 and 6,063 homes, respectively, and the average sales price of our new homes delivered was approximately $693,000 and $708,000, respectively.
For the years ended December 31, 2024 and 2023, we delivered 6,460 and 5,274 homes, respectively, and the average sales price of our new homes delivered was approximately $679,000 and $693,000, respectively.
In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply.
Segments The Company’s operations are organized in two principal businesses: homebuilding and financial services. In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply.
Notwithstanding our best efforts to protect against incidents, workplace accidents have occurred and may occur in the future. As of December 31, 2023, we had 1,438 employees, 525 of whom were executive, management and administrative personnel, 406 of whom were sales and marketing personnel and 507 of whom were involved in field construction.
Notwithstanding our efforts to protect against incidents, workplace accidents have occurred and may occur in the future. As of December 31, 2024, we had 1,750 employees, 747 of whom were executive, management and administrative personnel, 449 of whom were sales and marketing personnel and 554 of whom were involved in field construction.
Lots Owned or Controlled As of December 31, 2023, we owned or controlled, pursuant to land option contracts or purchase contracts, an aggregate of 31,960 lots, comprised of 59% lots owned and 41% lots controlled. We refer to lots that are under land option contracts as “controlled.” See “Acquisition Process” below.
Lots Owned or Controlled As of December 31, 2024, we owned or controlled, pursuant to land option contracts or purchase contracts, an aggregate of 36,490 lots, comprised of 46% lots owned and 54% lots controlled. We refer to lots that are under land option contracts as “controlled.” See “Acquisition Process” below.
As of December 31, 2023, our operations consisted of 155 active selling communities and 31,960 lots owned or controlled. See “Lots Owned or Controlled” below.
As of December 31, 2024, our operations consisted of 145 active selling communities and 36,490 lots owned or controlled. See “Lots Owned or Controlled” below.
Since then, we have grown from a Southern California fee homebuilder into a regionally-focused national homebuilder engaged in the design, construction and sale of innovative single-family attached and detached homes in 15 markets across ten states and the District of Columbia.
Since then, we have grown from a Southern California fee homebuilder into a regionally-focused national homebuilder engaged in the design, construction and sale of innovative single-family attached and detached homes in 17 markets across twelve states and the District of Columbia. In late 2023, we announced our expansion into the greater Salt Lake City region.
As of December 31, 2023, we had $697.7 million available under the Credit Facility after considering the borrowing base provisions and outstanding letters of credit, as well as $869.0 million in cash and cash equivalents. As of December 31, 2023, we had $1.1 billion of outstanding senior notes.
As of December 31, 2024, we had $694.4 million available under the Credit Facility after considering the borrowing base provisions and outstanding letters of credit, as well as $970.0 million in cash and cash equivalents. As of December 31, 2024, we had $646.5 million of outstanding senior notes.
As of December 31, 2023, we had not yet commenced significant operations in this market. Our financial services operation (Tri Pointe Solutions) is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.
Our financial services operation (Tri Pointe Solutions) is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.
Moreover, we believe that workforce diversity is not limited to these characteristics. In furtherance of our efforts to maintain a healthy workplace culture, we measure employee engagement and satisfaction by conducting team member engagement surveys to ensure that our employees have an opportunity to provide meaningful feedback on their experiences.
In furtherance of our efforts to maintain a healthy workplace culture, we measure - 12 - employee engagement and satisfaction by conducting team member engagement surveys to ensure that our employees have an opportunity to provide meaningful feedback on their experiences. We also regularly assess and track team member retention and engagement to generate actions plans for continued improvement.
We also regularly assess and track team member retention and engagement to generate actions plans for continued improvement. All of our employees must comply with our Code of Business Conduct and Ethics, which requires our employees to conduct business in accordance with all applicable laws and regulations and adhere to the highest standards of business ethics.
All of our employees must comply with our Code of Business Conduct and Ethics, which requires our employees to conduct business in accordance with all applicable laws and regulations and adhere to the highest standards of business ethics.
Lots Owned Lots Controlled (1) Lots Owned or Controlled West 11,172 3,867 15,039 Central 5,967 5,997 11,964 East 1,600 3,357 4,957 Total 18,739 13,221 31,960 ______________________________________________ (1) Lots controlled for Central and East include 3,561 and 71 lots, respectively, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.
Lots Owned Lots Controlled (1) Lots Owned or Controlled West 9,475 4,949 14,424 Central 5,437 9,841 15,278 East 1,697 5,091 6,788 Total 16,609 19,881 36,490 ______________________________________________ (1) Lots controlled for Central and East include 5,816 and 14 lots, respectively, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.
Removed
In September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah. As of December 31, 2023, we had not yet commenced significant operations in this market.
Added
In early 2024, we further expanded into the Orlando and Coastal Carolinas regions. As of December 31, 2024, we had not commenced home sales in any of these new markets.
Removed
Warranty insurance receivables are recorded in receivables on our consolidated balance sheet.
Added
In early 2024, we further expanded into the Orlando and Coastal Carolinas regions. As of December 31, 2024, we had not commenced home sales in any of these new markets.
Removed
We intend to finance future acquisitions and developments with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of common and preferred equity, secured and unsecured corporate-level debt, property-level debt and mortgage financing and other public, private or bank debt.
Added
We believe that a variety of perspectives brings innovative ideas to the table, and we seek to foster an open and inclusive work environment.
Removed
Segments - 10 - The Company’s operations are organized in two principal businesses: homebuilding and financial services.
Removed
We believe that a diverse staff brings diverse ideas to the table, and promote diversity by seeking to foster an open and inclusive work environment. Our commitment to diversity does not constitute a representation that we - 12 - have achieved, or will achieve, a workforce comprised of specific percentages of racial, ethnic, gender, sexual orientation or other characteristics.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+14 added−8 removed259 unchanged
Biggest changeIncurring substantial debt subjects us to many risks that, if realized, would materially and adversely affect our Financial Performance, including the risks that: • it may be more difficult for us to satisfy our obligations with respect to our debt or to our other creditors; • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt, which is likely to result in acceleration of our debt; • our debt may increase our vulnerability to adverse economic and industry conditions, including fluctuations in market interest rates, with no assurance that investment yields will increase with higher financing cost, particularly in the case of debt with a floating interest rate; • our debt may limit our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; • we may be required to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations and capital expenditures, future investment opportunities or other purposes; • in the case of secured indebtedness, we could lose our ownership interests in our land parcels or other assets because defaults thereunder may result in foreclosure actions initiated by lenders; • our debt may limit our ability to buy back our common stock or pay cash dividends; • our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby limiting our ability to compete with companies that are not as highly leveraged; and • the terms of any refinancing may not be as favorable as the terms of the debt being refinanced.
Biggest changeOur board of directors considers a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of such assets and the ability of the particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. - 27 - Incurring substantial debt subjects us to many risks that, if realized, would materially and adversely affect our Financial Performance, including the risks that: • it may be more difficult for us to satisfy our obligations with respect to our debt or to our other creditors; • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt, which is likely to result in acceleration of our debt; • our debt may increase our vulnerability to adverse economic and industry conditions, including fluctuations in market interest rates, with no assurance that investment yields will increase with higher financing cost, particularly in the case of debt with a floating interest rate; • our debt may limit our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; • we may be required to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations and capital expenditures, future investment opportunities or other purposes; • in the case of secured indebtedness, we could lose our ownership interests in our land parcels or other assets because defaults thereunder may result in foreclosure actions initiated by lenders; • our debt may limit our ability to buy back our common stock or pay cash dividends; • our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby limiting our ability to compete with companies that are not as highly leveraged; and • the terms of any refinancing may not be as favorable as the terms of the debt being refinanced.
Our charter and/or bylaws contain anti-takeover provisions that: • authorize our board of directors, without further action by the stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series, and with respect to each series, to fix the number of shares constituting that series and establish the rights and other terms of that series; - 30 - • require that actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors or our chief executive officer (or if there is no chief executive officer, the president); • establish advance notice procedures for stockholders to submit nominations of candidates for election to our board of directors and other proposals to be brought before a stockholders meeting; • provide that our bylaws may be amended by our board of directors without stockholder approval; • allow our directors to establish the size of our board of directors by action of our board, subject to a minimum of three members; • provide that vacancies on our board of directors or newly created directorships resulting from an increase in the number of our directors may be filled only by a majority of directors then in office, even though less than a quorum; • do not give the holders of our common stock cumulative voting rights with respect to the election of directors; and • prohibit us from engaging in certain business combinations with any “interested stockholder” unless specified conditions are satisfied as described below.
Our charter and/or bylaws contain anti-takeover provisions that: • authorize our board of directors, without further action by the stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series, and with respect to each series, to fix the number of shares constituting that series and establish the rights and other terms of that series; • require that actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors or our chief executive officer (or if there is no chief executive officer, the president); • establish advance notice procedures for stockholders to submit nominations of candidates for election to our board of directors and other proposals to be brought before a stockholders meeting; • provide that our bylaws may be amended by our board of directors without stockholder approval; • allow our directors to establish the size of our board of directors by action of our board, subject to a minimum of three members; • provide that vacancies on our board of directors or newly created directorships resulting from an increase in the number of our directors may be filled only by a majority of directors then in office, even though less than a quorum; • do not give the holders of our common stock cumulative voting rights with respect to the election of directors; and • prohibit us from engaging in certain business combinations with any “interested stockholder” unless specified conditions are satisfied as described below.
Our ability to conduct - 25 - our business may be materially and adversely impaired if our or our service providers’ computer resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third-party, natural disaster, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), loss of portable devices, or lost connectivity to our networked resources.
Our ability to conduct our business may be materially and adversely impaired if our or our service providers’ computer resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third-party, natural disaster, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), loss of portable devices, or lost connectivity to our networked resources.
Our current financing arrangements contain, and the financing arrangements we may enter into in the future will likely contain, covenants affecting our ability to, among other things: • incur or guarantee additional indebtedness; • make certain investments; • reduce liquidity below certain levels; • pay dividends or make distributions on our capital stock; • sell assets, including capital stock of restricted subsidiaries; • agree to payment restrictions affecting our restricted subsidiaries; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into transactions with our affiliates; • incur liens; • engage in sale-leaseback transactions; and • designate any of our subsidiaries as unrestricted subsidiaries.
Our current financing arrangements contain, and the financing arrangements we may enter into in the future will likely contain, covenants affecting our ability to, among other things: • incur or guarantee additional indebtedness; • make certain investments; • reduce liquidity below certain levels; • pay dividends or make distributions on our capital stock; • sell assets, including capital stock of restricted subsidiaries; • agree to payment restrictions affecting our restricted subsidiaries; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into transactions with our affiliates; • incur liens; • engage in sale-leaseback transactions; and - 29 - • designate any of our subsidiaries as unrestricted subsidiaries.
Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the market’s perception of our growth potential, including relative to other opportunities; • with respect to acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our corporate credit rating and ratings of our senior notes; • our current debt levels; • our current and expected future earnings; • our cash flow; • pending litigation and claims; and • the market price per share of our common stock.
Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the market’s perception of our growth potential, including relative to other opportunities; - 28 - • with respect to acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our corporate credit rating and ratings of our senior notes; • our current debt levels; • our current and expected future earnings; • our cash flow; • pending litigation and claims; and • the market price per share of our common stock.
For example, due to shortages of components, such as electronic chips that are commonly used in appliances and other building materials, as well as lingering supply chain disruptions associated with the COVID-19 pandemic, shipping delays, factory downtime, and other factors, we have experienced and may continue to experience delays in our supply chain, including the ability to timely obtain the raw materials that we require to build our homes, as well as certain other construction materials.
For example, due to shortages of components, such as electronic chips that are commonly used in appliances and other building materials, as well as some lingering supply chain disruptions associated with the COVID-19 pandemic, shipping delays, factory downtime, and other factors, we have experienced and may continue to experience delays in our supply chain, including the ability to timely obtain the raw materials that we require to build our homes, as well as certain other construction materials.
Furthermore, since WRECO self-insured a significant portion of its general liability exposure relating to its operations outside of California and Nevada prior to the merger, it is likely that most of these claims will not be covered by insurance. There can be no assurance that any current or future developments undertaken by us will be free from defects once completed.
Furthermore, since WRECO self-insured a significant portion of its general liability exposure relating to its operations outside of California and Nevada prior to the merger, it is likely that most of these claims will not be covered by insurance. - 23 - There can be no assurance that any current or future developments undertaken by us will be free from defects once completed.
In addition, project opponents can delay or impede development activities by bringing challenges to the permits and other approvals required for - 21 - projects and operations under environmental laws and regulations. As a result, we cannot assure that our costs, obligations and liabilities relating to environmental matters will not materially and adversely affect our Financial Performance.
In addition, project opponents can delay or impede development activities by bringing challenges to the permits and other approvals required for projects and operations under environmental laws and regulations. As a result, we cannot assure that our costs, obligations and liabilities relating to environmental matters will not materially and adversely affect our Financial Performance.
In addition, we could be required to make significant expenditures related to the settlement of such issues or disputes or to modify our community development plans, which could materially and adversely affect our Financial Performance. - 22 - The homebuilding industry is highly competitive, and if our competitors are more successful or offer better value to potential homebuyers, our business could decline.
In addition, we could be required to make significant expenditures related to the settlement of such issues or disputes or to modify our community development plans, which could materially and adversely affect our Financial Performance. The homebuilding industry is highly competitive, and if our competitors are more successful or offer better value to potential homebuyers, our business could decline.
If Tri Pointe Connect is unable to sell mortgage loans to investors on favorable terms, its ability to originate and sell mortgage loans at competitive prices or at all could be reduced, which would negatively affect our business. In - 28 - addition, Tri Pointe Connect may depend upon one or more warehouse loan facilities to finance our lending activities.
If Tri Pointe Connect is unable to sell mortgage loans to investors on favorable terms, its ability to originate and sell mortgage loans at competitive prices or at all could be reduced, which would negatively affect our business. In addition, Tri Pointe Connect may depend upon one or more warehouse loan facilities to finance our lending activities.
Moreover, such a loss could be negatively perceived in the capital markets, which could, in turn, materially and adversely affect the market price of our common stock. We have not obtained key man life insurance that would provide us with proceeds in the event of death or disability of any of our key personnel.
Moreover, such a loss could be negatively perceived in the capital markets, which could, in turn, materially and adversely affect the market price of our common stock. - 30 - We have not obtained key man life insurance that would provide us with proceeds in the event of death or disability of any of our key personnel.
The release of proprietary, personal or confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators. The outcome of any such proceeding, which could include penalties or fines, could materially and adversely affect our Financial Performance.
Our collection or release of proprietary, personal or confidential information may also lead to litigation or other proceedings against us by affected individuals, business partners and/or regulators. The outcome of any such proceeding, which could include penalties or fines, could materially and adversely affect our Financial Performance.
The timing and quality of our construction activities depend upon the availability, cost and skill of contractors and subcontractors and their employees. The supply of labor in the markets in which we operate could be adversely affected by changes in immigration laws and policies as well as changes in immigration trends.
The timing and quality of our construction activities depend upon the availability, cost and skill of contractors and subcontractors and their employees. The supply of labor in the markets in which we operate could be adversely affected by changes in immigration laws, policies, and enforcement as well as changes in immigration trends.
Because our operations currently are limited to these areas, a prolonged economic downturn in one or more of these areas could have a material adverse effect on our Financial Performance and could have a disproportionately - 24 - greater impact on us than other homebuilders with more diversified operations.
Because our operations currently are limited to these areas, a prolonged economic downturn in one or more of these areas could have a material adverse effect on our Financial Performance and could have a disproportionately greater impact on us than other homebuilders with more diversified operations.
For these - 23 - and other reasons, we establish warranty, claim and litigation reserves that we believe are adequate based on historical experience in the markets in which we operate and judgment of the risks associated with the types of homes, lots and land we sell.
For these and other reasons, we establish warranty, claim and litigation reserves that we believe are adequate based on historical experience in the markets in which we operate and judgment of the risks associated with the types of homes, lots and land we sell.
We may also need to refinance all or a portion of our existing or future indebtedness on or before its maturity, and we cannot make any assurances that we will be able to refinance - 27 - any of our indebtedness on commercially reasonable terms or at all.
We may also need to refinance all or a portion of our existing or future indebtedness on or before its maturity, and we cannot make any assurances that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
Various federal, state and local statutes, ordinances, rules and regulations concerning building, health and safety, environment, land use, zoning, density requirements, labor and wages, sales and similar matters apply to or affect the housing industry.
Various federal, state and local statutes, ordinances, rules and regulations concerning building, health and safety, environment, affordable housing, land use, zoning, density requirements, labor and wages, sales and similar matters apply to or affect the housing industry.
Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither us nor the partner or co-venturer would have full control over the partnership or joint venture.
Such investments may also have the potential risk of impasses on decisions, such - 32 - as a sale, because neither us nor the partner or co-venturer would have full control over the partnership or joint venture.
Efforts that we make to resolve these issues or disputes could be deemed unsatisfactory by the affected homebuyers, and subsequent actions by these homebuyers could materially and adversely affect our sales and reputation.
Efforts that we make to resolve these issues or disputes could be deemed unsatisfactory by the affected homebuyers, and subsequent actions by these homebuyers could - 22 - materially and adversely affect our sales and reputation.
Purchases of common stock pursuant to the 2024 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Exchange Act.
Purchases of common stock pursuant to the 2025 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Exchange Act.
Furthermore, as we continue to grow our - 31 - business, our internal controls will become more complex, and we will require significantly more resources to ensure that our internal controls remain effective.
Furthermore, as we continue to grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure that our internal controls remain effective.
Homebuyers’ ability to obtain financing largely depends on prevailing mortgage loan interest rates, the credit standards that mortgage lenders use and the availability of mortgage loan programs. In January 2024, the U.S. Federal Open Market Committee (“FOMC”) decided to maintain the current target range for federal funds.
Homebuyers’ ability to obtain financing largely depends on prevailing mortgage loan interest rates, the credit standards that mortgage lenders use and the availability of mortgage loan programs. In January 2025, the U.S. Federal Open Market Committee (“FOMC”) decided to maintain the current target range for federal funds.
Repurchases pursuant to the 2024 Repurchase Program or any other stock repurchase program we adopt in the future could affect our stock price and increase its volatility and will reduce the market liquidity for our stock.
Repurchases pursuant to the 2025 Repurchase Program or any other stock repurchase program we adopt in the future could affect our stock price and increase its volatility and will reduce the market liquidity for our stock.
We are not obligated under the 2024 Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and we may modify, suspend or discontinue the 2024 Repurchase Program at any time.
We are not obligated under the 2025 Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and we may modify, suspend or discontinue the 2025 Repurchase Program at any time.
Acts of war, any outbreak or escalation of hostilities or geopolitical conflict (such as the ongoing wars between Russia and Ukraine and Israel and Hamas, respectively), acts of terrorism (including cyber-terrorism), civil unrest or public health emergencies, including outbreaks of contagious diseases, such as COVID-19 or other major epidemics or pandemics, have caused and may in the future cause disruption to the U.S. economy, or the local economies of the markets in which we operate, result in sanctions or export controls that could adversely impact our supply chain, cause shortages of building materials, disrupt utilities, increase costs associated with obtaining building materials, increase the price of gasoline and other fuels, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, affect public health and public perception of health risk, or cause economic changes and/or social instability or distress that we cannot anticipate, all of which could reduce demand for our homes and materially and adversely impact our Financial Performance.
Acts of war, any outbreak or escalation of hostilities or geopolitical conflict (such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, respectively), acts of terrorism (including cyber-terrorism), civil unrest or public health emergencies, including outbreaks of contagious diseases, such as COVID-19 or other major epidemics or pandemics, have caused and may in the future cause disruption to the U.S. economy, or the local economies of the markets in which we operate, result in sanctions or export controls that could adversely impact our supply chain, cause shortages of building materials, disrupt utilities, increase costs associated with obtaining building materials, increase the price of gasoline and other fuels, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, affect public health and public perception of health risk, or cause economic changes and/or social instability or distress that we cannot anticipate, all of which could reduce demand for our homes and materially and adversely impact our Financial Performance. - 25 - We are subject to litigation and claims that could materially and adversely affect us.
During the year ended December 31, 2023, we had active selling communities in the states of Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, as well as the District of Columbia.
During the year ended December 31, 2024, we had active selling communities in the states of Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, as well as the District of - 24 - Columbia.
If economic conditions become more uncertain, mortgage financing becomes less available or more expensive, or current homeowners find it difficult to sell their current homes, more home buyers may cancel their purchase contracts. An increase in the level of home order cancellations could have a material and adverse impact on our Financial Performance.
If economic conditions become more uncertain, mortgage financing becomes less available or more expensive, or current homeowners find it difficult to sell their current homes, more homebuyers ma y cancel their purchase contracts. An increase in the level of home order cancellations could have a material and adverse impact on our Financial Performance.
The housing markets in areas affected by California’s recent wildfires have been adversely affected by difficulties in obtaining homeowners’ insurance and increased insurance costs. There are some risks of loss for which we may be unable to purchase insurance coverage.
The housing markets in areas affected by California’s recent wildfires and in other high risk wildfire areas have been adversely affected by difficulties in obtaining homeowners’ insurance and/or increased insurance costs. There are some risks of loss for which we may be unable to purchase insurance coverage.
The current term of these agreements will expire on March 20, 2024 and automatically renews for additional one-year periods unless either party gives written notice of non-renewal at least 60 days in advance. There is no assurance that these executives will remain employed with us.
The current term of these agreements will expire on August 29, 2027 and automatically renews for additional one-year periods unless either party gives written notice of non-renewal at least 60 days in advance. There is no assurance that these executives will remain employed with us.
In these circumstances, homebuyers may terminate their existing purchase contracts in order to negotiate for a lower price or because they cannot, or will not, complete the purchase. Our cancellation rate was 10% and 19% for the years ended December 31, 2023 and 2022, respectively. Cancellation rates may rise significantly in the future.
In these circumstances, homebuyers may terminate their existing purchase contracts in order to negotiate for a lower price or because they cannot, or will not, complete the purchase. Our cancellation rate was 10% for each of the years ended December 31, 2024 and 2023. Cancellation rates may rise significantly in the future.
Specifically, our charter provides that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the person became an interested stockholder, unless: • prior to the time that person became an interested stockholder, our board of directors approved either the business combination or the transaction which resulted in the person becoming an interested stockholder; • upon consummation of the transaction which resulted in the person becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding certain shares; or • at or subsequent to the time the person became an interested stockholder, the business combination is approved by our board of directors and by the affirmative vote of at least 66 2 / 3 % of the outstanding voting stock which is not owned by the interested stockholder.
Specifically, our charter provides that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the person became an interested stockholder, unless: • prior to the time that person became an interested stockholder, our board of directors approved either the business combination or the transaction which resulted in the person becoming an interested stockholder; • upon consummation of the transaction which resulted in the person becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding certain shares; or • at or subsequent to the time the person became an interested stockholder, the business combination is approved by our board of directors and by the affirmative vote of at least 66 2 / 3 % of the outstanding voting stock which is not owned by the interested stockholder. - 31 - Generally, a business combination includes a merger, consolidation, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder.
For the years ended December 31, 2023, 2022 and 2021, we recorded real estate inventory impairment charges of $11.5 million, zero and $19.6 million, respectively.
For the years ended December 31, 2024, 2023 and 2022, we recorded real estate inventory impairment charges of zero, $11.5 million and zero, respectively.
A substantial portion of our access to capital is through the issuance of senior notes, of which we have $1.1 billion outstanding, net of debt issuance costs, as of December 31, 2023. Among other things, we may rely on proceeds of debt issuances to pay the principal of existing senior notes when they mature.
A substantial portion of our access to capital is through the issuance of senior notes, of which we have $646.5 million outstanding, net of debt issuance costs, as of December 31, 2024. Among other things, we may rely on proceeds of debt issuances to pay the principal of existing senior notes when they mature.
There can be no assurance that any stock repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although stock repurchase programs is intended to enhance long term stockholder value, short-term stock price fluctuations could reduce the effectiveness of these repurchases.
There can be no assurance that any stock repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although stock repurchase programs is intended to enhance long term stockholder value, short-term stock price fluctuations could reduce the effectiveness of these repurchases. Item 1B. Unresolved Staff Comments Not applicable.
On December 19, 2023, our board of directors approved a share repurchase program (the “2024 Repurchase Program”), authorizing the repurchase of shares of common stock with an aggregate value of up to $250 million through December 31, 2024.
On December 18, 2024, our board of directors approved a share repurchase program (the “2025 Repurchase Program”), authorizing the repurchase of shares of common stock with an aggregate value of up to $250 million through December 31, 2025.
Our markets in Colorado have also experienced seasonal wildfires, floods and soil subsidence. In addition, our Washington market has historically experienced significant earthquake, volcanic and seismic activity and our Texas market occasionally experiences extreme weather conditions such as tornadoes, hurricanes and floods.
The risk of future wildfires is expected to continue to increase. Our markets in Colorado have also experienced seasonal wildfires, floods and soil subsidence. In addition, our Washington market has historically experienced significant earthquake, volcanic and seismic activity and our Texas market occasionally experiences extreme weather conditions such as tornadoes, hurricanes and floods.
Further, due to rising inflation rates throughout 2022 and 2023, we have experienced and may continue to experience increases in prevailing costs for skilled contractors and subcontractors.
Further, due to elevated inflation rates from 2022 to 2024, we have experienced and may continue to experience increases in prevailing costs for skilled contractors and subcontractors.
In addition, a California law makes direct contractors liable for wages, fringe or other benefit payments or contributions, and interest owed by a subcontractor that does not make these payments or contributions to its employees.
In addition, a California law makes direct contractors liable for wages, - 19 - fringe or other benefit payments or contributions, and interest owed by a subcontractor that does not make these payments or contributions to its employees. This liability could also extend to penalties and liquidated damages owed by a subcontractor.
In addition, the costs of maintaining adequate protection against such threats to our technology resources, depending on their evolution, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our Financial Performance. Tri Pointe Connect depends materially on vendors that we do not control.
In addition, the costs of maintaining adequate protection against such threats to our technology resources, depending on their evolution, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our Financial Performance.
We may be unable to find and retain suitable contractors and subcontractors at reasonable rates. Substantially all of our construction work is performed by subcontractors with us acting as the general contractor. Accordingly, the timing and quality of our construction depend on the availability, cost and skill of contractors and subcontractors and their employees.
We may be unable to find and retain suitable contractors and subcontractors at reasonable rates. Substantially all of our construction work is performed by subcontractors with us acting as the general contractor.
The residential construction industry experiences serious shortages of skilled labor from time to time. When homebuilding activity declines, skilled tradesmen may choose to leave the real estate industry to take jobs in other industries, - 18 - which would result in shortages in the event that homebuilding activity later increases.
When homebuilding activity declines, skilled tradesmen may choose to leave the real estate industry to take jobs in other industries, which would result in shortages in the event that homebuilding activity later increases.
Our policies, procedures and technical safeguards may be insufficient to prevent or detect timely an attack, assess its impact, or appropriately and timely respond.
However, our cybersecurity program and policies may be insufficient to prevent or detect timely an attack, assess its impact, or appropriately and timely respond.
We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock. - 32 - Future offerings of debt securities, which would rank senior to our common stock in the event of our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.
Future offerings of debt securities, which would rank senior to our common stock in the event of our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.
Any such shortages can be more severe during periods of strong demand for housing or during periods following natural disasters that have a significant impact on existing residential and commercial structures. The cost of raw materials may also be materially and adversely affected during periods of shortages or high inflation.
Any such shortages can be more severe during periods of strong demand for housing or during periods following natural disasters, such as the January 2025 wildfires in Southern California, that have a significant impact on existing residential and commercial structures. The cost of raw materials may also materially increase as a result of higher tariffs, shortages, or high inflation.
There is no assurance that the existence of a stock repurchase program will result in repurchases of our common stock or enhance long term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
Non-U.S. holders should consult their tax advisors concerning the consequences of disposing of shares of our common stock. - 33 - There is no assurance that the existence of a stock repurchase program will result in repurchases of our common stock or enhance long term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
Failure to hedge effectively against interest rate changes may materially and adversely affect our Financial Performance. - 29 - We may obtain one or more forms of interest rate protection—in the form of swap agreements, interest rate cap contracts or similar agreements—to hedge against the possible negative effects of interest rate fluctuations.
We may obtain one or more forms of interest rate protection—in the form of swap agreements, interest rate cap contracts or similar agreements—to hedge against the possible negative effects of interest rate fluctuations.
Increases in tariffs and retaliatory responses may cause increases in the prices of some of the construction materials that we use and may negatively affect the national and local economies. - 26 - The prices that we pay for home construction materials and their availability are affected by changes in United States government trade policies and the responses of other countries to those changes.
The prices that we pay for home construction materials and their availability are affected by changes in United States government trade policies and the responses of other countries to those changes.
Accordingly, there can be no assurance that all control issues or fraud will be detected. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes.
The design of control systems reflects resource constraints and the benefits of controls must be considered in relationship to their costs. Accordingly, there can be no assurance that all control issues or fraud will be detected. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes.
We have substantial operations in Southern and Northern California that have historically experienced significant earthquake activity and seasonal wildfires. The incidence of large wildfires in California has substantially increased in recent years, attributed both to wet and dry period fluctuations and climate change. The risk of future wildfires is expected to increase.
We have substantial operations in Southern and Northern California that have historically experienced significant earthquake activity and seasonal wildfires. The incidence of large wildfires in California, such as the January 2025 wildfires that impacted the Los Angeles metropolitan area, has increased in recent years, attributed to wet and dry period fluctuations, climate change, and governmental policies.
Tri Pointe Connect materially depends upon third-party vendors, including but not limited to consultants, services, platforms, and technologies, that we do not control. In particular, we rely on a third-party vendor to materially assist Tri Pointe Connect with the infrastructure and expertise required to operate a mortgage lending business.
In particular, we rely on a third-party vendor to materially assist Tri Pointe Connect with the infrastructure and expertise required to operate a mortgage lending business.
The occurrence of either or both of these events could materially and adversely affect our Financial Performance.
The occurrence of either or both of these events could materially and adversely affect our Financial Performance. Failure to hedge effectively against interest rate changes may materially and adversely affect our Financial Performance.
Laws and regulations governing the residential mortgage, title insurance, and property and casualty insurance industries could materially and adversely affect our Financial Performance. - 20 - We have established Tri Pointe Solutions, which provides mortgage loans to homebuyers through Tri Pointe Connect, title and escrow services through Tri Pointe Assurance, and property and casualty insurance through Tri Pointe Advantage.
We have established Tri Pointe Solutions, which provides mortgage loans to homebuyers through Tri Pointe Connect, title and escrow services through Tri Pointe Assurance, and property and casualty insurance through Tri Pointe Advantage. The residential mortgage lending, title insurance and property and casualty insurance industries are heavily regulated.
Any of these could result in substantial costs and we could incur judgments or enter into settlements of claims that could have a material adverse effect on our business. Any of these outcomes could materially and adversely affect our Financial Performance. We may be unable to obtain suitable bonding for the development of our housing projects.
In addition, we could be subject to individual or class action litigation alleging violations of these laws and regulations. Any of these could result in substantial costs and we could incur judgments or enter into settlements of claims that could have a material adverse effect on our business. Any of these outcomes could materially and adversely affect our Financial Performance.
Additionally, i n September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah.
Additionally, i n September 2023, we announced our expansion into the greater Salt Lake City region with the launch of a new division in Utah, and in April 2024, we announced further expansion into Orlando, Florida, and the Coastal Carolinas area, which includes parts of Georgia and South Carolina..
Our board of directors will determine our operational policies, investment guidelines and our business and growth strategies. Our board of directors may make changes to, or approve transactions that deviate from, those policies, guidelines and strategies without a vote of, or notice to, our stockholders.
Our board of directors may make changes to, or approve transactions that deviate from, those policies, guidelines and strategies without a vote of, or notice to, our stockholders. This could result in us conducting operational matters, making investments or pursuing different business or growth strategies than those contemplated currently.
In December 2022, however, the California Public Utilities Commission adopted new rules reducing the compensation provided to homeowners for excess power their solar systems send back to the grid.
In December 2022, however, the California Public Utilities Commission adopted new rules reducing the compensation provided to homeowners for excess power their solar systems send back to the grid. In addition, several solar providers have entered bankruptcy or ceased conducting business, resulting in disruptions in the supply and installation of solar panel systems.
We are often required to provide bonds to governmental authorities and others to ensure the completion of our projects. If we are unable to obtain required bonds in the future for our projects, or if we are required to provide credit enhancements with respect to our current or future bonds, our Financial Performance could be materially and adversely affected.
If we are unable to obtain required bonds in the future for our projects, or if we are required to provide credit enhancements with respect to our current or future bonds, our Financial Performance could be materially and adversely affected. We are subject to environmental laws and regulations that may impose significant costs, delays, restrictions or liabilities.
No assurance can be given that our common stock will remain regularly traded on an established securities market in the future. Non-U.S. holders should consult their tax advisors concerning the consequences of disposing of shares of our common stock.
No assurance can be given that our common stock will remain regularly traded on an established securities market in the future.
A material failure to comply with any of these laws or regulations could result in the loss or suspension of required licenses or other approvals, the imposition of monetary penalties, and restitution awards or other relief. In addition, we could be subject to individual or class action litigation alleging violations of these laws and regulations.
Changes to existing laws or regulations or adoption of new laws or regulations could require us to incur significant compliance costs. A material failure to comply with any of these laws or regulations could result in the loss or suspension of required licenses or other approvals, the imposition of monetary penalties, and restitution awards or other relief.
Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to defend ourselves vigorously. However, litigation is inherently uncertain and we cannot be certain of the ultimate outcomes of any claims that may arise.
Lawsuits, claims and proceedings have been, or in the future may be, instituted or asserted against us in the normal course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to defend ourselves vigorously.
As a result, home sales could decline and costs could increase, which could materially and adversely affect our Financial Performance.
As a result, home sales could decline and costs could increase, which could materially and adversely affect our Financial Performance. - 20 - Laws and regulations governing the residential mortgage, title insurance, and property and casualty insurance industries could materially and adversely affect our Financial Performance.
We reserve a percentage of the sales price of each home that we sell to meet our warranty and other legal obligations to our homebuyers. These reserves are established based on market practices, our historical experiences, and our judgment of the qualitative risks associated with the types of homes built.
These reserves are established based on market practices, our historical experiences, and our judgment of the qualitative risks associated with the types of homes built.
These shortages can be more severe during periods of strong demand for housing or during periods following natural disasters that have a significant impact on existing residential and commercial structures. For example, since mid-2020, the labor market has remained constrained, which has led to increases in both the competition for and costs of skilled labor.
These shortages can be more severe during periods of strong demand for housing or during periods following natural disasters that have a significant impact on existing residential and commercial structures, such as the January 2025 wildfires in Southern California.
Sales of substantial amounts of our common stock could cause the market price of our common stock to decrease significantly.
Sales of substantial amounts of our common stock could cause the market price of our common stock to decrease significantly. We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock.
We may be unable to develop our communities successfully or within expected timeframes. Before a community generates any revenue, time and material expenditures are required to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model homes and sales facilities.
Before a community generates any revenue, time and material expenditures are required to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model homes and sales facilities. It can take several years from the time we acquire control of a property to the time we make our first home sale on the site.
This provision could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us. We may change our operational policies, investment guidelines and our business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future.
We may change our operational policies, investment guidelines and our business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future. Our board of directors will determine our operational policies, investment guidelines and our business and growth strategies.
Generally, a business combination includes a merger, consolidation, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock.
Subject to certain exceptions, an interested stockholder is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock. This provision could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.
Delays in the development of communities expose us to the risk of changes in market conditions for homes.
Our costs or the time required to complete development of our communities could increase beyond our estimates after commencing the development process. Delays in the development of communities expose us to the risk of changes in market conditions for homes.
In cases where an endangered or threatened species is involved and related agency rulemaking and litigation are ongoing, the outcome of such rule-making and litigation can be unpredictable and can result in unplanned or unforeseeable restrictions on, or the prohibition of, development and building activity in identified environmentally sensitive areas.
Consequently, there is significant uncertainty in the solar power industry, which could impact the ability of our homeowners to bear the cost of solar panels, including pursuant to a lease agreement, or our ability to timely deliver homes and/or recover any additional construction costs we may incur to comply with applicable law. - 21 - In cases where an endangered or threatened species is involved and related agency rulemaking and litigation are ongoing, the outcome of such rule-making and litigation can be unpredictable and can result in unplanned or unforeseeable restrictions on, or the prohibition of, development and building activity in identified environmentally sensitive areas.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us and the market price of our common stock.
Under any of these circumstances, we may expose ourselves to different and more significant risks in the future, which could have a material adverse effect on our Financial Performance. If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
Despite our quality control efforts, we may discover that our subcontractors were engaging in improper construction practices or installing defective materials in our homes. When we discover these issues, we, generally through our subcontractors, repair the homes in accordance with our new home warranty and as required by law.
We may incur costs, liabilities and reputational damage if our subcontractors engage in improper construction practices or install defective materials. Despite our quality control efforts, we may discover that our subcontractors were engaging in improper construction practices or installing defective materials in our homes.
A system of internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of control systems reflects resource constraints and the benefits of controls must be considered in relationship to their costs.
As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us and the market price of our common stock. A system of internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
California is expected to continue to adopt significant regulations and additional legislation to achieve reductions in greenhouse gas emissions. In addition, federal and state legislation and regulations are being considered that would mandate reporting and/or auditing of greenhouse gas emissions. If adopted, such requirements could impose significant additional compliance costs and/or burdens on us and our suppliers.
California is expected to continue to adopt significant regulations and additional legislation to achieve reductions in greenhouse gas emissions. In 2023, California enacted two new laws requiring certain businesses to disclose their carbon emissions and climate-related financial risks. Other states and the federal government may also mandate reporting and/or auditing of greenhouse gas emissions.
Removed
This liability could also extend to penalties and liquidated damages owed by a subcontractor. - 19 - We may incur costs, liabilities and reputational damage if our subcontractors engage in improper construction practices or install defective materials.
Added
Accordingly, the timing and quality of our construction depend on the availability, cost and skill of contractors and subcontractors and their employees. - 18 - The residential construction industry experiences serious shortages of skilled labor from time to time.
Removed
The residential mortgage lending, title insurance and property and casualty insurance industries are heavily regulated. Changes to existing laws or regulations or adoption of new laws or regulations could require us to incur significant compliance costs.
Added
Since mid-2020, the labor market has remained constrained, which has led to increases in both the competition for and costs of skilled labor.
Removed
We are subject to environmental laws and regulations that may impose significant costs, delays, restrictions or liabilities.
Added
When we discover these issues, we, generally through our subcontractors, repair the homes in accordance with our new home warranty and as required by law. We reserve a percentage of the sales price of each home that we sell to meet our warranty and other legal obligations to our homebuyers.
Removed
In the event that this change, or any similar change in any other jurisdiction in which we operate, impacts the ability of our homeowners to bear the cost of solar panels, including pursuant to a lease agreement, or we are otherwise unable to pass along such costs to homebuyers, we may incur additional construction costs to comply with applicable law.

… 15 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+1 added−1 removed12 unchanged
Biggest changeAdditionally, as part of our risk-based approach to cybersecurity: • our information technology systems and internal controls undergo annual audit; • we conduct annual penetration testing in consultation with a third-party consultant to assess any vulnerabilities in our systems and utilize the results to evaluate and remediate any identified issues; • we perform daily vulnerability scans of all computers within our system; • we use single sign-on and multi-factor authentication; • we conduct diligence on, and seek engagements of, sophisticated, cloud-based third-party service providers for critical functions; • we have implemented a zero-trust security model with group-based access to resources on our network; • we monitor applicable privacy and data protection laws and regulations and implement changes, as necessary, to remain in compliance; • we maintain cyber liability and crime insurance policies; • we maintain immutable backups of the files on our systems to aid in the recovery of our data and for operational continuity, in the event of an incident or incursion; and • our employees participate in mandatory cybersecurity training, including a recurring cyber-phishing awareness campaign designed to assess our employees’ awareness of and responses to phishing requests.
Biggest changeAdditionally, as part of our risk-based approach to cybersecurity: • our information technology systems and internal controls undergo annual audit; • we conduct annual penetration testing in consultation with a third-party consultant to assess any vulnerabilities in our systems and utilize the results to evaluate and remediate any identified issues; • we conduct tabletop exercises in consultation with third-party consultants to enhance our readiness and response strategies in safeguarding against potential threats to our data, information technology systems, and critical business functions; • we perform daily vulnerability scans of all computers within our system; • we use single sign-on and multi-factor authentication; • we conduct diligence on, and seek engagements of, sophisticated, cloud-based third-party service providers for critical functions; • we have implemented a zero-trust security model with group-based access to resources on our network; • we monitor applicable privacy and data protection laws and regulations and implement changes, as necessary, to remain in compliance; • we maintain cyber liability and crime insurance policies; - 34 - • we maintain an alternate recovery site and immutable backups of the files on our systems to aid in the recovery of our data and for operational continuity, in the event of an incident or incursion; and • our employees participate in mandatory cybersecurity training, including a recurring cyber-phishing awareness campaign designed to assess our employees’ awareness of and responses to phishing requests.
Further, we have adopted a Cyber Security Incident Response Plan that applies in the event of a cybersecurity threat or incident (the “IRP”) to provide a standardized framework for responding to security incidents. The IRP sets out a coordinated approach to investigating, containing, documenting, and mitigating incidents.
Further, we have adopted a Cyber Security Incident Response Plan that applies in the event of a cybersecurity threat or incident (the “IRP”) to provide a standardized framework for responding to security incidents. The IRP sets out a coordinated approach to responding to, containing, investigating, documenting, and mitigating incidents.
While we have not experienced any material cybersecurity threats or incidents, there can be no guarantee that we will not be the subject of future successful attacks, threats, or incidents or that we will be successful in mitigating the consequences any such incidents.
While we have not experienced any material cybersecurity incidents, there can be no guarantee that we will not be the subject of future successful attacks, threats, or incidents or that we will be successful in mitigating the consequences of any such incidents.
As part of such reviews, our Board and Audit Committee receive reports and presentations from team members responsible for overseeing our cybersecurity risk management, including our Chief Information Officer (CIO), which address a wide range of topics, including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security considerations arising with respect - 34 - to our peers and third parties.
As part of such reviews, our Board and Audit Committee receive reports and presentations from team members responsible for overseeing our cybersecurity risk management, including our Chief Information Officer (CIO), which address a wide range of topics, including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security considerations arising with respect to our peers and third parties.
Our information technology team regularly discusses the risk management measures implemented by the Company to identify and mitigate data protection and cybersecurity risks.
Our information technology team regularly discusses the risk management measures implemented by us to identify and mitigate data protection and cybersecurity risks. Our CIO joined the Company in 2024 and has extensive cybersecurity knowledge and skills gained from over three decades of experience in technology management, product management, strategic planning, and team leadership.
This team, during our search for a new CIO, continues to implement, monitor, and maintain our cybersecurity program and provides reports on cybersecurity threats to management on an ongoing basis.
She leads the team responsible for implementing, monitoring, and maintaining cybersecurity and data protection practices across our business and reports directly to our Executive Vice President and Chief Marketing Officer. Our CIO and her team continue to implement, monitor, and maintain our cybersecurity program and provides reports on cybersecurity threats to management on an ongoing basis.
Removed
Through December 31, 2023, the date on which our CIO retired, our CIO, who had extensive cybersecurity knowledge and skills gained from over 25 years of experience in the construction industry, including four years as our CIO, led the team responsible for implementing, monitoring, and maintaining cybersecurity and data protection practices across our business and reported directly to our Chief Financial Officer.
Added
A cybersecurity incident could materially and adversely affect our business strategy, results of operations, or financial condition due to a loss, or loss of access to, our funds, reputational damage, a loss of customers and related revenues, and/or the institution of governmental enforcement actions or civil litigation against us.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed3 unchanged
Biggest changeItem 3. Legal Proceedings Lawsuits, claims and proceedings have been and may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants.
Biggest changeItem 3. Legal Proceedings - 35 - Lawsuits, claims and proceedings have been and may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants.
See Note 13, Commitments and Contingencies , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. - 35 - PART II.
See Note 13, Commitments and Contingencies , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. - 36 - PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+0 added−1 removed4 unchanged
Biggest changeDuring the three months ended December 31, 2023, we repurchased the following shares pursuant to our 2023 Repurchase Program: Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (1) October 1, 2023 to October 31, 2023 574,817 $ 26.10 574,817 $ 207,291,224 November 1, 2023 to November 30, 2023 1,250,959 $ 27.74 1,250,959 $ 172,595,700 December 1, 2023 to December 31, 2023 10,401 $ 29.27 10,401 $ 250,000,000 Total 1,836,177 $ 27.23 1,836,177 (1) On December 21, 2023, we announced the completion of our 2023 Repurchase Program and approval of the 2024 Repurchase Program, pursuant to which are are authorized to repurchase shares of common stock with an aggregate value of up to $250 million through December 31, 2024.
Biggest changeDuring the three months ended December 31, 2024, we repurchased the following shares pursuant to our 2024 Repurchase Program: Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (1) October 1, 2024 to October 31, 2024 193,376 $ 40.76 193,376 $ 145,536,898 November 1, 2024 to November 30, 2024 506,569 $ 41.66 506,569 $ 124,435,409 December 1, 2024 to December 31, 2024 502,968 $ 41.79 502,968 $ 250,000,000 Total 1,202,913 $ 41.57 1,202,913 (1) On December 18, 2024, we announced the approval of the 2025 Repurchase Program, pursuant to which are are authorized to repurchase shares of common stock with an aggregate value of up to $250 million through December 31, 2025.
Purchases of common stock pursuant to the 2024 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
Purchases of common stock pursuant to the Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
See Part I, Item 1A, “Risk Factors—Risks Related to Ownership of Our Common Stock—We do not intend to pay dividends on our common stock for the foreseeable future” of this annual report on Form 10-K. - 37 - Item 6. [Reserved] - 38 -
See Part I, Item 1A, “Risk Factors—Risks Related to Ownership of Our Common Stock—We do not intend to pay dividends on our common stock for the foreseeable future” of this annual report on Form 10-K. - 38 - Item 6. [Reserved] - 39 -
Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions, legal requirements and applicable tax effects.
Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of the Company’s common stock, corporate requirements, general market economic conditions, legal requirements, and applicable tax effects.
All shares repurchased in 2023 were under the 2023 Repurchase Program, leaving $250 million of shares remaining to be purchased under the 2024 Repurchase Program as of December 31, 2023.
All shares repurchased in 2024 were under the 2024 Repurchase Program, leaving $250 million of shares remaining to be purchased under the 2025 Repurchase Program as of December 31, 2024.
Issuer Purchases of Equity Securities On December 21, 2023, we announced the approval of the 2024 Repurchase Program, which replaced the stock repurchase program that the Board of Directors authorized in February 2023 (the “2023 Repurchase Program”). The 2024 Repurchase Program authorizes the repurchase of up to $250 million of common stock through December 31, 2024.
Issuer Purchases of Equity Securities On December 18, 2024, we announced the approval of the 2025 Repurchase Program, which replaced the stock repurchase program that the Board of Directors authorized in December 2023 (the “2024 Repurchase Program”). The 2025 Repurchase Program authorizes the repurchase of up to $250 million of common stock through December 31, 2025.
We are not obligated under the 2024 Repurchase Program to repurchase any specific number or amount of shares of common stock, and we may modify, suspend or discontinue the program at any time.
The Company is not obligated under the Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and it may modify, suspend, or discontinue the Repurchase Program at any time.
During the three months ended December 31, 2023, under the 2023 Repurchase Program, we repurchased 1,836,177 shares of common stock at an average price of $27.23 for an aggregate dollar amount of $50.0 million.
During the three months ended December 31, 2024, under the 2024 Repurchase Program, we repurchased 1,202,913 shares of common stock at an average price of $41.57 for an aggregate dollar amount of $50.0 million.
Stockholder Return Performance Graph The following performance graph shows a comparison of the cumulative total returns to stockholders of the Company, as compared with the Standard & Poor’s 500 Composite Stock Index and the Dow Jones U.S.
Stockholder Return Performance Graph The following performance graph shows a comparison of the cumulative total returns to stockholders of the Company, as compared with the Standard & Poor’s 500 Composite Stock Index and the Dow Jones U.S. Home Construction Index. - 37 - The above graph is based upon common stock and index prices calculated as of the dates indicated.
The stock price performance of the Company’s common stock depicted in the graph above represents past performance only and is not necessarily indicative of future performance. As of February 6, 2024, we had 67 holders of record of our common stock.
The Company’s common stock closing price on December 31, 2024 was $36.26 per share. The stock price performance of the Company’s common stock depicted in the graph above represents past performance only and is not necessarily indicative of future performance. As of February 6, 2025, we had 54 holders of record of our common stock.
For the year ended December 31, 2023, under the 2023 Repurchase Program, we repurchased 6,301,275 shares of common stock at an average price of $27.68 for an aggregate dollar amount of $174.4 million.
For the year ended December 31, 2024, under the 2024 Repurchase Program, we repurchased 3,964,537 shares of common stock at an average price of $36.97 for an aggregate dollar amount of $146.6 million.
Removed
Home Construction Index. - 36 - The above graph is based upon common s tock and index prices calculated as of the dates indicated. The Company’s common stock closing price on December 29, 2023 (the last trading day of 2023) was $35.40 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+36 added−32 removed72 unchanged
Biggest changeWe believe our strong balance sheet provides us both flexibility and security as we navigate our business going forward. - 39 - Consolidated Financial Data (in thousands, except share and per share amounts): Year Ended December 31, 2023 2022 2021 Homebuilding: Home sales revenue $ 3,654,035 $ 4,291,563 $ 3,955,154 Land and lot sales revenue 12,197 5,108 13,016 Other operations revenue 2,971 2,695 2,619 Total revenues 3,669,203 4,299,366 3,970,789 Cost of home sales 2,838,513 3,160,581 2,972,237 Cost of land and lot sales 12,083 2,075 11,585 Other operations expense 2,894 2,685 2,550 Sales and marketing 184,388 175,005 179,214 General and administrative 217,994 212,504 200,163 Homebuilding income from operations 413,331 746,516 605,040 Equity in (loss) income of unconsolidated entities (97) 312 (96) Other income, net 39,446 2,307 525 Homebuilding income before income taxes 452,680 749,135 605,469 Financial Services: Revenues 46,001 49,167 11,446 Expenses 31,322 25,136 6,292 Equity in income of unconsolidated entities — 46 15,039 Financial services income before income taxes 14,679 24,077 20,193 Income before income taxes 467,359 773,212 625,662 Provision for income taxes (118,164) (190,803) (156,395) Net income 349,195 582,409 469,267 Net income attributable to noncontrolling interests (5,493) (6,349) — Net income available to common stockholders $ 343,702 $ 576,060 $ 469,267 Earnings per share Basic $ 3.48 $ 5.60 $ 4.16 Diluted $ 3.45 $ 5.54 $ 4.12 Weighted average shares outstanding Basic 98,679,477 102,898,423 112,836,051 Diluted 99,695,662 104,003,652 113,809,292 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment Year Ended December 31, 2023 Year Ended December 31, 2022 Percentage Change Net New Home Orders Average Selling Communities Monthly Absorption Rates Net New Home Orders Average Selling Communities Monthly Absorption Rates Net New Home Orders Average Selling Communities Monthly Absorption Rates West 3,528 77.7 3.8 2,725 73.5 3.1 29 % 6 % 23 % Central 1,707 52.2 2.7 960 32.2 2.5 78 % 62 % 8 % East 887 17.6 4.2 692 19.0 3.0 28 % (7) % 40 % Total 6,122 147.5 3.5 4,377 124.7 2.9 40 % 18 % 21 % - 40 - Net new home orders for the year ended December 31, 2023 increased 40% to 6,122, compared to 4,377 for the prior year.
Biggest changeOur financial strength provides the flexibility and security needed to navigate evolving market conditions while continuing to execute our strategic objectives. - 40 - Consolidated Financial Data (in thousands, except share and per share amounts): Year Ended December 31, 2024 2023 2022 Homebuilding: Home sales revenue $ 4,386,447 $ 3,654,035 $ 4,291,563 Land and lot sales revenue 33,064 12,197 5,108 Other operations revenue 3,162 2,971 2,695 Total revenues 4,422,673 3,669,203 4,299,366 Cost of home sales 3,363,881 2,838,513 3,160,581 Cost of land and lot sales 30,591 12,083 2,075 Other operations expense 3,061 2,894 2,685 Sales and marketing 216,518 184,388 175,005 General and administrative 256,038 217,994 212,504 Homebuilding income from operations 552,584 413,331 746,516 Equity in income (loss) of unconsolidated entities 361 (97) 312 Other income, net 39,640 39,446 2,307 Homebuilding income before income taxes 592,585 452,680 749,135 Financial Services: Revenues 70,197 46,001 49,167 Expenses 45,914 31,322 25,136 Equity in income of unconsolidated entities — — 46 Financial services income before income taxes 24,283 14,679 24,077 Income before income taxes 616,868 467,359 773,212 Provision for income taxes (158,898) (118,164) (190,803) Net income 457,970 349,195 582,409 Net loss (income) attributable to noncontrolling interests 59 (5,493) (6,349) Net income available to common stockholders $ 458,029 $ 343,702 $ 576,060 Earnings per share Basic $ 4.87 $ 3.48 $ 5.60 Diluted $ 4.83 $ 3.45 $ 5.54 Weighted average shares outstanding Basic 93,985,551 98,679,477 102,898,423 Diluted 94,912,589 99,695,662 104,003,652 Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment Year Ended December 31, 2024 Year Ended December 31, 2023 Percentage Change Net New Home Orders Average Selling Communities Monthly Absorption Rates Net New Home Orders Average Selling Communities Monthly Absorption Rates Net New Home Orders Average Selling Communities Monthly Absorption Rates West 3,140 71.6 3.7 3,528 77.7 3.8 (11) % (8) % (3) % Central 1,707 61.6 2.3 1,707 52.2 2.7 — % 18 % (15) % East 810 17.2 3.9 887 17.6 4.2 (9) % (2) % (7) % Total 5,657 150.4 3.1 6,122 147.5 3.5 (8) % 2 % (11) % - 41 - Net new home orders for the year ended December 31, 2024 decreased 8% to 5,657, compared to 6,122 for the prior year.
There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates and comparable self-insured retentions, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims, that claims will not - 52 - exceed our insurance coverage limits, or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors.
There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates and comparable self-insured retentions, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims, that claims will not exceed our insurance coverage limits, or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors.
Purchases of common stock pursuant to the 2024 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
Purchases of common stock pursuant to the Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
We believe this information is meaningful as it isolates the impact that leverage and non-cash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.
We believe this information is meaningful as it isolates the impact that leverage and non-cash charges have on homebuilding gross margin and permits investors to make better - 43 - comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.
We believe the ratio of net debt-to-net cap ital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital.
We believe the ratio of net homebuilding debt-to-net cap ital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital.
Tri Pointe and its 100% owned subsidiary Tri Pointe Homes Holdings, Inc. are co-issuers of the $450.0 million aggregate principal amount of 5.875% Senior Notes due 2024 (the “2024 Notes”). The 2024 Notes were issued at 98.15% of their aggregate principal amount.
Tri Pointe and its 100% owned subsidiary Tri Pointe Homes Holdings, Inc. were co-issuers of the $450.0 million aggregate principal amount of 5.875% Senior Notes due 2024 (the “2024 Notes”). The 2024 Notes were issued at 98.15% of their aggregate principal amount.
Because of the inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from amounts currently estimated. Income Taxes We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”) .
Because of the inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from amounts currently estimated. - 54 - Income Taxes We account for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”) .
Due to this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters of our fiscal year, and the majority of cash receipts from home deliveries occur during the second half of the year.
Due to this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters of our fiscal year, and the majority of cash receipts - 51 - from home deliveries occur during the second half of the year.
See Note 6, Investments in Unconsolidated Entities , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. - 48 - Cont ractual Obligations We have numerous contractual obligations and commitments to pay third parties, impacting our need for short-term and long-term liquidity and capital resources.
See Note 6, Investments in Unconsolidated Entities , of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. - 50 - Cont ractual Obligations We have numerous contractual obligations and commitments to pay third parties, impacting our need for short-term and long-term liquidity and capital resources.
As of December 31, 2023, we were in compliance with the covenants required by our Senior Notes. Loans Payable On December 15, 2023, we entered into a Fourth Modification Agreement (the “Fourth Modification”) to our Second Amended and Restated Credit Agreement dated as of March 29, 2019 (the “Credit Agreement”).
As of December 31, 2024, we were in compliance with the covenants required by our Senior Notes. Loans Payable - 46 - On December 15, 2023, we entered into a Fourth Modification Agreement (the “Fourth Modification”) to our Second Amended and Restated Credit Agreement dated as of March 29, 2019 (the “Credit Agreement”).
These costs related to the Credit Facility will amortize over the remaining term of the Credit Facility and are included in other assets on our consolidated balance sheets. Accrued interest, including loan commitment fees, related to the Credit Facility was $1.6 million and $1.5 million as of December 31, 2023 and 2022, respectively.
These costs related to the Credit Facility will amortize over the remaining term of the Credit Facility and are included in other assets on our consolidated balance sheets. Accrued interest, including loan commitment fees, related to the Credit Facility was $1.5 million and $1.6 million as of December 31, 2024 and 2023, respectively.
Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions, legal requirements and applicable tax effects.
Company management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of the Company’s common stock, corporate requirements, general market economic conditions, legal requirements, and applicable tax effects.
(2) The ratio of net debt-to-net capital is a non-GAAP financial measure and 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 stockholders’ equity. The most directly comparable GAAP financial measure is the ratio of debt-to-capital.
(2) The ratio of net homebuilding debt-to-net capital is a non-GAAP financial measure and is computed as the quotient obtained by dividing net homebuilding debt (which is total homebuilding debt less cash and cash equivalents) by the sum of net homebuilding debt plus stockholders’ equity. The most directly comparable GAAP financial measure is the ratio of homebuilding debt-to-capital.
A Guarantor of the 2027 Notes and the 2028 Notes shall be released from all of its obligations under its guarantee if (i) all of the assets of the Guarantor have been sold; (ii) all of the equity interests of the Guarantor held by Tri Pointe or a subsidiary thereof have been sold; (iii) the Guarantor merges with and into Tri Pointe or another Guarantor, with Tri Pointe or such other Guarantor surviving the merger; (iv) the Guarantor is designated “unrestricted” for covenant purposes; (v) the Guarantor ceases to guarantee any indebtedness of Tri Pointe or any other Guarantor which gave rise to such Guarantor guaranteeing the 2027 Notes or the 2028 Notes; (vi) Tri Pointe exercises its legal defeasance or covenant defeasance options; or (vii) all obligations under the applicable supplemental indenture are discharged. 2024 Notes Tri Pointe and Tri Pointe Homes Holdings are co-issuers of the 2024 Notes.
A Guarantor of the 2027 Notes and the 2028 Notes shall be released from all of its obligations under its guarantee if (i) all of the assets of the Guarantor have been sold; (ii) all of the equity interests of the Guarantor held by Tri Pointe or a subsidiary thereof have been sold; (iii) the Guarantor merges with and into Tri Pointe or another Guarantor, with Tri Pointe or such other Guarantor surviving the merger; (iv) the Guarantor is designated “unrestricted” for covenant purposes; (v) the Guarantor ceases to guarantee any indebtedness of Tri Pointe or any other Guarantor which gave rise to such Guarantor guaranteeing the 2027 Notes or the 2028 Notes; (vi) Tri Pointe exercises its legal defeasance or covenant defeasance options; or (vii) all obligations under the applicable supplemental indenture are discharged.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Discussion and analysis of our 2022 fiscal year and the year-over-year comparison of our 2022 financial performance to our 2021 financial performance may be found in Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023, which is available in the “investors” portion of our internet website at www.tripointehomes.com and the SEC’s website at www.sec.gov .
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Discussion and analysis of our 2023 fiscal year and the year-over-year comparison of our 2023 financial performance to our 2022 financial performance may be found in Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 22, 2024, which is available in the “investors” portion of our internet website at www.tripointehomes.com and the SEC’s website at www.sec.gov .
This omitted information is not incorporated by reference and is not a part of this annual report on Form 10-K. Liquidity and Capital Resources Overview - 44 - Our principal uses of capital for the year ended December 31, 2023 were operating expenses, share repurchases, land purchases, land development and home construction.
This omitted information is not incorporated by reference and is not a part of this annual report on Form 10-K. Liquidity and Capital Resources Overview Our principal uses of capital for the year ended December 31, 2024 were operating expenses, share repurchases, land purchases, land development and home construction.
Our outstanding senior notes (the “Senior Notes”) contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.
Our outstanding Senior Notes contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.
Interest rates under the Term Facility will be based on SOFR, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio. - 45 - We had no outstanding debt under the Revolving Facility as of December 31, 2023 and 2022.
Interest rates under the Term Facility will be based on SOFR, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio. We had no outstanding debt under the Revolving Facility as of December 31, 2024 and 2023.
We used funds generated by our operations to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and keep us poised for growth. As of December 31, 2023, we had $869.0 million of cash and cash equivalents.
We used funds generated by our operations to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and keep us poised for growth. As of December 31, 2024, we had $970.0 million of cash and cash equivalents.
All shares repurchased in 2023 were under the 2023 Repurchase Program, leaving $250 million of shares remaining to be purchased under the 2024 Repurchase Program as of December 31, 2023.
All shares repurchased in 2024 were under the 2024 Repurchase Program, leaving $250 million of shares remaining to be purchased under the 2025 Repurchase Program as of December 31, 2024.
Our cancellation rate of homebuyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was 10% and 19% for the years ended December 31, 2023 and 2022, respectively.
Our cancellation rate of homebuyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was 10% for both the years ended December 31, 2024 and 2023, respectively.
For the years ended December 31, 2023, 2022 and 2021, we recorded real estate inventory impairment charges of $11.5 million, zero and $19.6 million, respectively. Warranty Reserves In the normal course of business, we incur warranty-related costs associated with homes that have been delivered to homebuyers.
For the years ended December 31, 2024, 2023 and 2022, we recorded no real estate inventory impairment charges, $11.5 million and no impairment charges, respectively. Warranty Reserves In the normal course of business, we incur warranty-related costs associated with homes that have been delivered to homebuyers.
All seller-financed loans are to acquire lots for the construction of homes. Principal on these loans are expected to be fully paid by the end of fiscal year 2024, provided certain achievements are met. One of the seller-financed loans, representing $37.4 million of the total balance, accrues interest at an imputed interest rate of rate of 4.50% per annum.
All seller-financed loans are to acquire lots for the construction of homes. Principal on these loans are expected to be fully paid by the end of fiscal year 2025, provided certain achievements are met. One of the seller-financed loans, comprising $20.8 million of the total balance, accrues interest at an imputed interest rate of rate of 4.50% per annum.
Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 25.9% for the year ended December 31, 2023 compared to 29.0% for the prior year. Adjusted homebuilding gross margin is a non-GAAP financial measure.
Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 26.8% for the year ended December 31, 2024 compared to 25.9% for the prior year. Adjusted homebuilding gross margin is a non-GAAP financial measure.
At December 31, 2023 and 2022, we had outstanding letters of credit of $52.3 million and $58.9 million, respectively. These letters of credit were issued to secure various financial obligations. We believe it is not probable that any outstanding letters of credit will be drawn upon.
At December 31, 2024 and 2023, we had outstanding letters of credit of $55.6 million and $52.3 million, respectively. These letters of credit were issued to secure various financial obligations. We believe it is not probable that any outstanding letters of credit will be drawn upon.
As of December 31, 2023, we had $250 million of outstanding debt under the Term Facility with a variable interest rate of 6.5%. As of December 31, 2023 and 2022, there was $5.1 million and $6.5 million, of capitalized debt financing costs.
As of December 31, 2024, we had $250 million of outstanding debt under the Term Facility with a variable interest rate of 5.5%. As of December 31, 2024 and 2023, there was $3.5 million and $5.1 million, respectively, of capitalized debt financing costs.
As of December 31, 2023, we had $175.5 million of non-refundable cash deposits pertaining to land option contracts and purchase contracts with an aggregate remaining purchase price of approximately $1.2 billion (net of deposits).
As of December 31, 2024, we had $241.1 million of non-refundable cash deposits pertaining to land option contracts and purchase contracts with an aggregate remaining purchase price of approximately $2.2 billion (net of deposits).
Covenant Compliance Under the Credit Facility, we are required to comply with certain financial covenants, including, but not limited to, those set forth in the table below (dollars in thousands): Actual at December 31, Covenant Requirement at December 31, Financial Covenants 2023 2023 Consolidated Tangible Net Worth, as defined $ 2,851,601 $ 1,996,143 (Not less than $1.58 billion plus 50% of net income and 50% of the net proceeds from equity offerings after March 31, 2022) Leverage Test 16.5 % ≤60% (Not to exceed 60%) Interest Coverage Test 4.3 ≥1.5 (Not less than 1.5:1.0) In addition, the Credit Facility limits the aggregate number of single-family dwellings (where construction has commenced) that may be owned by the Company or any guarantor that are not presold or model units to no more than the greater of (i) 50% of the number of housing unit closings (as defined) during the preceding 12 months; or (ii) 100% of the number of housing unit closings during the preceding 6 months.
Tri Pointe Connect was in compliance with all covenants and requirements as of December 31, 2024. - 47 - Covenant Compliance Under the Credit Facility, we are required to comply with certain financial covenants, including, but not limited to, those set forth in the table below (dollars in thousands): Actual at December 31, Covenant Requirement at December 31, Financial Covenants 2024 2024 Consolidated Tangible Net Worth, as defined $ 3,175,460 $ 2,225,158 (Not less than $1.58 billion plus 50% of net income and 50% of the net proceeds from equity offerings after March 31, 2022) Leverage Test 0.3 % ≤60% (Not to exceed 60%) Interest Coverage Test 7.2 ≥1.5 (Not less than 1.5:1.0) In addition, the Credit Facility limits the aggregate number of single-family dwellings (where construction has commenced) that may be owned by the Company or any guarantor that are not presold or model units to no more than the greater of (i) 50% of the number of housing unit closings (as defined) during the preceding 12 months; or (ii) 100% of the number of housing unit closings during the preceding 6 months.
As of December 31, 2023 and 2022, lots controlled for Central include 3,561 and 3,325 lots, respectively, and lots controlled for East include 71 and 141 lots, respectively, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.
As of December 31, 2024 and 2023, lots controlled for Central include 5,816 and 3,561 lots, respectively, and lots controlled for East include 14 and 71 lots, respectively, which represent our expected share of lots owned by our investments in unconsolidated land development joint ventures.
For the year ended December 31, 2023, the joint venture acted as a preferred mortgage loan broker to our homebuyers in all of the markets in which we operate, generating income from fees paid by third party lenders for the successful funding and closing of loans for homebuyers that originate through Tri Pointe Connect.
Tri Pointe Connect acted as a preferred mortgage loan broker to our homebuyers in all of the markets in which we operate, generating income from fees paid by third party lenders for the successful funding and closing of loans for homebuyers that originated through Tri Pointe Connect.
If the undiscounted cash flows are more than the asset’s carrying value, no impairment adjustment is required. However, if the undiscounted cash flows are less than the asset’s carrying value, the asset is deemed impaired and is written down to fair value.
However, if the undiscounted cash flows are less than the asset’s carrying value, the asset is deemed impaired and is written down to fair value.
When estimating undiscounted cash flows of a community, we make various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders in other communities, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property.
These impairment evaluations require us to make estimates and assumptions regarding future conditions, including timing and amounts of development costs and sales prices of real estate assets, to determine if expected future undiscounted cash flows will be sufficient to recover the asset’s carrying value. - 53 - When estimating undiscounted cash flows of a community, we make various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders in other communities, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property.
Income Tax For the year ended December 31, 2023, we have recorded a tax provision of $118.2 million based on an effective tax rate of 25.3%. For the year ended December 31, 2022, we recorded a tax provision of $190.8 million based on an effective tax rate of 24.7%.
Income Tax For the year ended December 31, 2024, we have recorded a tax provision of $158.9 million based on an effective tax rate of 25.8%. For the year ended December 31, 2023, we recorded a tax provision of $118.2 million based on an effective tax rate of 25.3% .
Property and casualty insurance agency operations Tri Pointe Advantage is a wholly owned subsidiary of Tri Pointe and provides property and casualty insurance agency services that help facilitate the closing process in all of the markets in which we operate.
Tri Pointe Assurance revenue is included in the Financial Services section of our consolidated statements of operations. Property and casualty insurance agency operations Tri Pointe Advantage is a wholly owned subsidiary of Tri Pointe and provides property and casualty insurance agency services that help facilitate the closing process in all of the markets in which we operate.
This increase was primarily driven by the 15% decrease in home sales revenue resulting in diminished utilization of leverage on the fixed components of our sales and marketing costs. Sales and marketing expense increased to $184.4 million for the year ended December 31, 2023 compared to $175.0 million in the prior year.
This decrease was primarily driven by the 20% increase in home sales revenue resulting in improved utilization of leverage on the fixed components of our sales and marketing costs. Sales and marketing expense increased to $216.5 million for the year ended December 31, 2024 compared to $184.4 million in the prior year.
We are not obligated under the 2024 Repurchase Program to repurchase any specific number or amount of shares of common stock, and we may modify, suspend or discontinue the program at any time.
The Company is not obligated under the Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and it may modify, suspend, or discontinue the Repurchase Program at any time.
As of December 31, 2023, we had $697.7 million of availability under the Credit Facility after considering the borrowing base provisions and outstanding letters of credit. As of December 31, 2023, the Company had $38.3 million outstanding related to two seller-financed loans. As of December 31, 2022 we had $37.4 million outstanding related to one seller-financed loan.
As of December 31, 2024, we had $694.4 million of availability under the Credit Facility after considering the borrowing base provisions and outstanding letters of credit. As of December 31, 2024, the Company had $21.0 million outstanding related to two seller-financed loans. As of December 31, 2023 we had $38.3 million outstanding related to two seller-financed loans.
This decrease was the result of lower utilization of leverage on the fixed components of our general and administrative costs as revenue decreased by 15% during the current year. General and administrative expense increased by $5.5 million to $218.0 million for the year ended December 31, 2023 from $212.5 million for the year ended December 31, 2022.
This decrease was the result of improved utilization of leverage on the fixed components of our general and administrative costs as home sales revenue increased by 20% during the current year. General and administrative expense increased by $38.0 million to $256.0 million for the year ended December 31, 2024 from $218.0 million for the year ended December 31, 2023.
The increase in general and administrative expenses is primarily related to higher employee costs. Total sales and marketing and G&A (“SG&A”) expense increased $14.9 million, or 3.8%, to $402.4 million for the year ended December 31, 2023 from $387.5 million in the prior year.
The increase in general and administrative expenses is primarily related to higher employee costs. Total sales and marketing and G&A (“SG&A”) expense increased $70.2 million, or 17.4%, to $472.6 million for the year ended December 31, 2024 from $402.4 million in the prior year.
Backlog dollar value in our West segment increased 25% compared to the prior year as a result of a 41% increase in backlog units, offset by an 11% decrease in average sales price. The increase in backlog units was due primarily to the increase in new order activity experienced during 2023.
Backlog dollar value in our West segment decreased 29% compared to the prior year as a result of a 31% decrease in backlog units, offset by a 3% increase in average sales price. The decrease in backlog units was due primarily to the decrease in new order activity experienced during 2024, coupled with an increase in deliveries.
Cash Flows—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The comparison of cash flows for the years ended December 31, 2023 and 2022 is as follows: • Net cash provided by operating activities decreased by $249.0 million to $195.3 million in 2023 from cash provided of $444.3 million in 2022.
Cash Flows—Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 - 49 - The comparison of cash flows for the years ended December 31, 2024 and 2023 is as follows: • Net cash provided by operating activities increased by $500.8 million to $696.1 million in 2024 from $195.3 million in 2023.
The change was primarily comprised of (i) a decrease in net income to $349.2 million in 2023 compared to $582.4 million in 2022, and (ii) an increase in cash outflow related to real estate inventories of - 47 - $49.6 million in 2023, offset by (iii) other normal fluctuations, including changes in other assets, accounts payable, accrued expenses and other liabilities and deferred income taxes. • Net cash used in investing activities was $26.4 million in 2023 compared to $58.1 million in 2022.
The change was primarily comprised of (i) an increase in net income to $458.0 million in 2024 compared to $349.2 million in 2023, (ii) an increase in cash related to real estate inventories of $355.4 million in 2024, and (iii) an increase in cash provided by receivables of $168.2 million, offset by (iv) other normal fluctuations, including changes in other assets, accounts payable, accrued expenses and other liabilities and deferred income taxes. • Net cash used in investing activities was $63.5 million in 2024 compared to $26.4 million in 2023.
Backlog dollar value in our East segment increased by 22% due to a 28% increase in backlog units, offset by a 4% decrease in average sales price.
Backlog dollar value in our East segment decreased by 7% due to a 39% decrease in backlog units, offset by a 51% increase in average sales price.
The dollar value of backlog was approximately $1.6 billion as of December 31, 2023, an increase of $447.4 million, or 38%, compared to $1.2 billion as of December 31, 2022.
The dollar value of backlog was approximately $1.2 billion as of December 31, 2024, a decrease of $447.5 million, or 28%, compared to $1.6 billion as of December 31, 2023.
Homebuilding Gross Margins (dollars in thousands) Year Ended December 31, 2023 % 2022 % Home sales revenue $ 3,654,035 100.0 % $ 4,291,563 100.0 % Cost of home sales 2,838,513 77.7 % 3,160,581 73.6 % Homebuilding gross margin 815,522 22.3 % 1,130,982 26.4 % Add: interest in cost of home sales 116,143 3.2 % 106,595 2.5 % Add: impairments and lot option abandonments 14,157 0.4 % 8,747 0.2 % Adjusted homebuilding gross margin (1) $ 945,822 25.9 % $ 1,246,324 29.0 % Homebuilding gross margin percentage 22.3 % 26.4 % Adjusted homebuilding gross margin percentage (1) 25.9 % 29.0 % ______________________________________ (1) Non-GAAP financial measure (as discussed below).
Homebuilding Gross Margins (dollars in thousands) Year Ended December 31, 2024 % 2023 % Home sales revenue $ 4,386,447 100.0 % $ 3,654,035 100.0 % Cost of home sales 3,363,881 76.7 % 2,838,513 77.7 % Homebuilding gross margin 1,022,566 23.3 % 815,522 22.3 % Add: interest in cost of home sales 148,547 3.4 % 116,143 3.2 % Add: impairments and lot option abandonments 4,157 0.1 % 14,157 0.4 % Adjusted homebuilding gross margin (1) $ 1,175,270 26.8 % $ 945,822 25.9 % Homebuilding gross margin percentage 23.3 % 22.3 % Adjusted homebuilding gross margin percentage (1) 26.8 % 25.9 % ______________________________________ (1) Non-GAAP financial measure (as discussed below).
Sales and Marketing, General and Administrative Expense (dollars in thousands) Year Ended December 31, As a Percentage of Home Sales Revenue 2023 2022 2023 2022 Sales and marketing $ 184,388 $ 175,005 5.0 % 4.1 % General and administrative (G&A) 217,994 212,504 6.0 % 5.0 % Total sales and marketing and G&A $ 402,382 $ 387,509 11.0 % 9.0 % Sales and marketing expense as a percentage of home sales revenue increased to 5.0% for the year ended December 31, 2023 from 4.1% for the year ended December 31, 2022.
Sales and Marketing, General and Administrative Expense (dollars in thousands) Year Ended December 31, As a Percentage of Home Sales Revenue 2024 2023 2024 2023 Sales and marketing $ 216,518 $ 184,388 4.9 % 5.0 % General and administrative (G&A) 256,038 217,994 5.8 % 6.0 % Total sales and marketing and G&A $ 472,556 $ 402,382 10.8 % 11.0 % Sales and marketing expense as a percentage of home sales revenue decreased to 4.9% for the year ended December 31, 2024 from 5.0% for the year ended December 31, 2023.
We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements.
These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements.
Beginning in the fiscal year ended December 31, 2022, Tri Pointe Connect is fully consolidated under the Financial Services section of our consolidated statements of operations, with the noncontrolling interest recorded on the consolidated statements of operations as net income attributable to noncontrolling interests.
For the year ended December 31, 2023, Tri Pointe Connect was fully consolidated in accordance with Accounting Standards Topic 810 (“ASC 810”), Consolidation, under the Financial Services section of our consolidated statements of operations, with the noncontrolling interest recorded on the consolidated statements of operations as net income attributable to noncontrolling interests.
Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions. As of December 31, 2023, we held equity investments in thirteen active homebuilding partnerships or limited liability companies. Our participation in these entities may be as a developer, a builder, or an investment partner.
Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions. As of December 31, 2024, we held equity investments in fifteen active homebuilding partnerships or limited liability companies and one financial services limited liability company.
Revenue from our title and escrow services operations is fully recognized at the time of the consummation of the home sales transaction, at which time no further performance obligations are left to be satisfied. Tri Pointe Assurance revenue is included in the Financial Services section of our consolidated statements of operations.
Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company. Revenue from our title and escrow services operations is fully recognized at the time of the consummation of the home sales transaction, at which time no further performance obligations are left to be satisfied.
Related Party Transactions We had no related party transactions for the years ended December 31, 2023 and 2022, res pectively. Recently Issued Accounting Standards See Note 1, Organization and Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. - 53 -
Recently Issued Accounting Standards See Note 1, Organization and Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K. - 55 -
During the three months ended December 31, 2023, under the 2023 Repurchase Program, we repurchased 1,836,177 shares of common stock at an average price of $27.23 for an aggregate dollar amount of $50.0 million.
The 2025 Repurchase Program authorizes the repurchase of up to $250 million of common stock through December 31, 2025. During the three months ended December 31, 2024, under the 2024 Repurchase Program, we repurchased 1,202,913 shares of common stock at an average price of $41.57 for an aggregate dollar amount of $50.0 million.
For the year ended December 31, 2023, under the 2023 Repurchase Program, we repurchased 6,301,275 shares of common stock at an average price of $27.68 for an aggregate dollar amount of $174.4 million.
For the year ended December 31, 2024, under the 2024 Repurchase Program, we repurchased 3,964,537 shares of common stock at an average price of $36.97 for an aggregate dollar amount of $146.6 million.
The net proceeds from the offering of the 2024 Notes was $429.0 million, after debt issuance costs and discounts. The 2024 Notes mature on June 15, 2024, with interest payable semiannually in arrears on June 15 and December 15.
The net proceeds from the offering of the 2024 Notes was $429.0 million, after debt issuance costs and discounts.
Title and escrow services operations Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and Colorado and both title examinations and escrow services for our homebuyers in Arizona, Texas, Maryland, Nevada and Virginia. Tri Pointe Assurance is a wholly owned subsidiary of Tri Pointe and acts as a title agency for First American Title Insurance Company.
Title and escrow services operations Tri Pointe Assurance provides title examinations for our homebuyers in the Carolinas and both title examinations and escrow services for our homebuyers in Arizona, Colorado, the District of Columbia, Maryland, Nevada, Texas, Washington and Virginia.
Total lots owned or controlled as of December 31, 2023 decreased 5% from the prior year, driven by a 12% decrease in lots controlled while lots owned remained flat.
Total lots owned or controlled as of December 31, 2024 increased 14% from the prior year, driven by a 50% increase in lots controlled while lots owned decreased by 11%.
As of December 31, 2023, our cash and cash equivalents balance was $869.0 million. Off-Balance Sheet Arrangements and Contractual Obligations In the ordinary course of business, we enter into land option contracts in order to procure lots for the construction of our homes.
Off-Balance Sheet Arrangements and Contractual Obligations In the ordinary course of business, we enter into land option contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots.
Backlog Units, Backlog Dollar Value and Average Sales Price by Segment (dollars in thousands) As of December 31, 2023 As of December 31, 2022 Percentage Change Backlog Units Backlog Dollar Value Average Sales Price Backlog Units Backlog Dollar Value Average Sales Price Backlog Units Backlog Dollar Value Average Sales Price West 1,178 $ 921,211 $ 782 836 $ 735,952 $ 880 41 % 25 % (11) % Central 754 442,732 587 332 225,989 681 127 % 96 % (14) % East 388 248,171 640 304 202,737 667 28 % 22 % (4) % Total 2,320 $ 1,612,114 $ 695 1,472 $ 1,164,678 $ 791 58 % 38 % (12) % Backlog units reflect the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a homebuyer but for which we have not yet delivered the home.
Backlog Units, Backlog Dollar Value and Average Sales Price by Segment (dollars in thousands) As of December 31, 2024 As of December 31, 2023 Percentage Change Backlog Units Backlog Dollar Value Average Sales Price Backlog Units Backlog Dollar Value Average Sales Price Backlog Units Backlog Dollar Value Average Sales Price West 807 $ 653,064 $ 809 1,178 $ 921,211 $ 782 (31) % (29) % 3 % Central 472 281,377 596 754 442,732 587 (37) % (36) % 2 % East 238 230,161 967 388 248,171 640 (39) % (7) % 51 % Total 1,517 $ 1,164,602 $ 768 2,320 $ 1,612,114 $ 695 (35) % (28) % 11 % Backlog units reflect the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a homebuyer but for which we have not yet delivered the home.
The increase was due largely to an increase in broker commissions. General and administrative expense as a percentage of home sales revenue increased to 6.0% for the year ended December 31, 2023 from 5.0% for the year ended December 31, 2022.
The increase was largely attributable to higher broker and internal commissions, as well as increased advertising expenses aimed at driving traffic and orders in response to more challenging market conditions. General and administrative expense as a percentage of home sales revenue decreased to 5.8% for the year ended December 31, 2024 from 6.0% for the year ended December 31, 2023.
Home sales revenue in our East segment increased by 9% due to a 12% increase in new homes delivered, offset by a 3% decrease in average sales price. The increase in new homes delivered was due to increased activity in our Charlotte and Raleigh markets.
Home sales revenue in our West segment increased 10% due to a 10% increase in new homes delivered offset by a 1% decrease in average sales price.
The ratio of debt-to-capital and the ratio of net debt-to-net capital are calculated as follows (dollars in thousands): December 31, 2023 December 31, 2022 Loans payable $ 288,337 $ 287,427 Senior notes 1,094,249 1,090,624 Total debt 1,382,586 1,378,051 Stockholders’ equity 3,010,958 2,832,389 Total capital $ 4,393,544 $ 4,210,440 Ratio of debt-to-capital (1) 31.5 % 32.7 % Total debt $ 1,382,586 $ 1,378,051 Less: Cash and cash equivalents (868,953) (889,664) Net debt 513,633 488,387 Stockholders’ equity 3,010,958 2,832,389 Net capital $ 3,524,591 $ 3,320,776 Ratio of net debt-to-net capital (2) 14.6 % 14.7 % ______________________________________________ (1) The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt by the sum of total debt plus stockholders’ equity.
The ratio of debt-to-capital and the ratio of net debt-to-net capital are calculated as follows (dollars in thousands): December 31, 2024 December 31, 2023 Loans payable $ 270,970 $ 288,337 Senior notes 646,534 1,094,249 Mortgage repurchase facilities 104,098 — Total debt 1,021,602 1,382,586 Less: mortgage repurchase facilities (104,098) — Total homebuilding debt 917,504 1,382,586 Stockholders’ equity 3,335,710 3,010,958 Total capital $ 4,253,214 $ 4,393,544 Ratio of homebuilding debt-to-capital(1) 21.6 % 31.5 % Total homebuilding debt $ 917,504 $ 1,382,586 Less: Cash and cash equivalents (970,045) (868,953) Net homebuilding debt (52,541) 513,633 Stockholders’ equity 3,335,710 3,010,958 Net capital $ 3,283,169 $ 3,524,591 Ratio of net homebuilding debt-to-net capital(2) (1.6) % 14.6 % ______________________________________________ (1) The ratio of homebuilding debt-to-capital is computed as the quotient obtained by dividing total homebuilding debt by the sum of total homebuilding debt plus stockholders’ equity.
As of December 31, 2023, we were in compliance with all of the above financial covenants. - 46 - Stock Repurchase Program On December 21, 2023, we announced the approval of the 2024 Repurchase Program, which replaced our 2023 Repurchase Program. The 2024 Repurchase Program authorizes the repurchase of up to $250 million of common stock through December 31, 2024.
As of December 31, 2024, we were in compliance with all of the above financial covenants. - 48 - Stock Repurchase Program On December 18, 2024, we announced the approval of the 2025 Repurchase Program, which replaced the stock repurchase program that the Board of Directors authorized in December 2023 (the “2024 Repurchase Program”).
To reduce the potential for such variances, we have procedures that have been applied on a consistent basis, including assessing and revising project budgets on a periodic basis, obtaining commitments from subcontractors and vendors for future costs to be incurred and utilizing the most recent information available to estimate costs. - 51 - If there are indications of impairment, we perform a detailed budget and cash flow review of our real estate assets to determine whether the estimated remaining undiscounted future cash flows of the community are more or less than the asset’s carrying value.
To reduce the potential for such variances, we have procedures that have been applied on a consistent basis, including assessing and revising project budgets on a periodic basis, obtaining commitments from subcontractors and vendors for future costs to be incurred and utilizing the most recent information available to estimate costs.
Other Income, Net Other income, net for the years ended December 31, 2023 and 2022 was income of $39.4 million and $2.3 million, respectively. The current year increase was primarily due to higher interest income stemming from the higher interest rates realized on our existing cash balances.
Other Income, Net Other income, net for the years ended December 31, 2024 and 2023 was income of $39.6 million and $39.4 million, respectively, with both amounts primarily driven by interest income from our existing cash balances.
Backlog dollar value in our Central segment increased 96% compared to the prior year due to a 127% increase in backlog units, offset by a 14% decrease in average sales price. The increase in backlog units was due primarily to the increase in new order activity experienced during 2023.
Backlog dollar value in our Central segment decreased 36% compared to the prior year due to a 37% decrease in backlog units, offset by a 2% increase in average sales price. The decrease in backlog units was due primarily to the slower monthly absorption rate we experienced in 2024, while increasing our new home deliveries by 55%.
Both revenue from forfeited deposits and deferred revenue resulting from uncompleted performance obligations existing at the time we deliver new homes to our homebuyers are immaterial. - 50 - Financial services revenues Tri Pointe Solutions is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.
Financial services revenues Tri Pointe Solutions is a reportable segment and is comprised of our Tri Pointe Connect mortgage financing operations, Tri Pointe Assurance title and escrow services operations, and Tri Pointe Advantage property and casualty insurance agency operations.
This increase was due to an increase in backlog units of 848, or 58%, to 2,320 as of December 31, 2023, compared to 1,472 as of December 31, 2022, offset some by the 12% decrease in average sales price in backlog to $695,000.
This decrease was due to a decrease in backlog units of 803, or 35%, to 1,517 as of December 31, 2024, compared to 2,320 as of December 31, 2023, offset to an extent by the 11% increase in average sales price in backlog to $768,000. Higher mortgage rates, particularly in the second half of 2024, negatively impacted our backlog units.
The decrease in net cash used in investing activities of $31.7 million was due to an $18.2 million decrease in cash used to purchase property and equipment and a $13.5 million decrease in investments in unconsolidated entities. • Net cash used in financing activities increased to $189.6 million in 2023 from $178.0 million in 2022.
The increase in net cash used in investing activities of $37.0 million was due primarily to a $56.2 million increase in investments in unconsolidated entities, offset by a $16.4 million increase in distributions from unconsolidated entities. • Net cash used in financing activities increased to $531.5 million in 2024 from $189.6 million in 2023.
SG&A increased to 11.0% of home sales revenue for the year ended December 31, 2023 from 9.0% for the year ended December 31, 2022. Interest Interest, which was incurred principally to finance land acquisitions, land development and home construction, totaled $147.2 million and $124.5 million for the years ended December 31, 2023 and 2022, respectively.
Interest Interest, which was incurred principally to finance land acquisitions, land development and home construction, totaled $114.9 million and $147.2 million for the years ended December 31, 2024 and 2023, respectively. The decrease in 2024 was primarily driven by a reduced interest burden following the redemption of our 2024 Senior Notes in May 2024.
Tri Pointe’s non-Guarantor subsidiaries are considered minor, as defined in Rule 3-10(h) of Regulation S-X, therefore the consolidated financial statements represent the full issuer and guarantor subsidiary results. - 49 - Inflation The escalating inflation in the U.S. economy that gained traction in 2022 adversely impacted the homebuilding industry, causing increased costs in land, building materials, construction services, warranty repairs, and employee compensation and benefits.
Inflation The escalating inflation in the U.S. economy that gained traction in 2022 adversely impacted the homebuilding industry, causing increased costs in land, building materials, construction services, warranty repairs, and employee compensation and benefits.
The table below summarizes our lots owned or controlled by segment as of the dates presented: Increase December 31, (Decrease) 2023 2022 Amount % Lots Owned West 11,172 12,444 (1,272) (10) % Central 5,967 4,862 1,105 23 % East 1,600 1,456 144 10 % Total 18,739 18,762 (23) — % Lots Controlled (1) West 3,867 4,317 (450) (10) % Central 5,997 7,099 (1,102) (16) % East 3,357 3,616 (259) (7) % Total 13,221 15,032 (1,811) (12) % Total Lots Owned or Controlled (1) 31,960 33,794 (1,834) (5) % ______________________________________________ (1) As of December 31, 2023 and 2022, lots controlled included lots that were under land option contracts or purchase contracts.
The table below summarizes our lots owned or controlled by segment as of the dates presented: Increase December 31, (Decrease) 2024 2023 Amount % Lots Owned West 9,475 11,172 (1,697) (15) % Central 5,437 5,967 (530) (9) % East 1,697 1,600 97 6 % Total 16,609 18,739 (2,130) (11) % Lots Controlled (1) West 4,949 3,867 1,082 28 % Central 9,841 5,997 3,844 64 % East 5,091 3,357 1,734 52 % Total 19,881 13,221 6,660 50 % Total Lots Owned or Controlled (1) 36,490 31,960 4,530 14 % - 45 - ______________________________________________ (1) As of December 31, 2024 and 2023, lots controlled included lots that were under land option contracts or purchase contracts.
The increase in backlog units was largely due to the 28% increase in net new home orders due to the improved market conditions in the current-year period. - 41 - New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands) Year Ended December 31, 2023 Year Ended December 31, 2022 Percentage Change New Homes Delivered Home Sales Revenue Average Sales Price New Homes Delivered Home Sales Revenue Average Sales Price New Homes Delivered Home Sales Revenue Average Sales Price West 3,186 $ 2,408,704 $ 756 3,900 $ 2,978,432 $ 764 (18) % (19) % (1) % Central 1,285 746,752 581 1,448 853,799 590 (11) % (13) % (2) % East 803 498,579 621 715 459,332 642 12 % 9 % (3) % Total 5,274 $ 3,654,035 $ 693 6,063 $ 4,291,563 $ 708 (13) % (15) % (2) % Home sales revenue decreased $637.5 million, or 15%, to $3.7 billion for the year ended December 31, 2023.
The decrease in backlog units was largely due to the 9% decrease in net new home orders, while new homes delivered increased by 20%. - 42 - New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Percentage Change New Homes Delivered Home Sales Revenue Average Sales Price New Homes Delivered Home Sales Revenue Average Sales Price New Homes Delivered Home Sales Revenue Average Sales Price West 3,511 $ 2,641,125 $ 752 3,186 $ 2,408,704 $ 756 10 % 10 % (1) % Central 1,989 1,127,972 567 1,285 746,752 581 55 % 51 % (2) % East 960 617,350 643 803 498,579 621 20 % 24 % 4 % Total 6,460 $ 4,386,447 $ 679 5,274 $ 3,654,035 $ 693 22 % 20 % (2) % Home sales revenue increased $732.4 million, or 20%, to $4.4 billion for the year ended December 31, 2024.
The decrease was comprised of $558.6 million due to a 13% decrease in new homes delivered to 5,274 and $79.1 million due to a 2% decrease in the average sales price of homes delivered to $693,000 for the year ended December 31, 2023.
The increase was comprised of $821.9 million due to a 22% increase in new homes delivered to 6,460, partially offset by a $90.4 million or 2% decrease in the average sales price of new homes delivered, which declined to $679,000 for the year ended December 31, 2024.
Home sales revenue in our West segment decreased 19% due to an 18% decrease in new homes delivered and a 1% decrease in average sales price. The decrease in deliveries was due primarily to a 58% decrease in backlog units to start the current year compared to the prior-year period.
Home sales revenue in our Central segment increased 51% due to a 55% increase in new homes delivered offset by a 2% decrease in average sales price. This growth was supported by a 127% increase in backlog units at the start of the year compared to the prior-year period.
Mortgage financing operations Tri Pointe Connect was formed as a joint venture with an established mortgage lender.
Mortgage financing operations For the year ended December 31, 2023, our Tri Pointe Connect mortgage operations were conducted through a joint venture with an established mortgage lender.
The difference between our effective tax rate for the years ended December 31, 2023 and 2022 and the federal statutory rate was primarily due to state income tax expense, partially offset by federal energy tax credits. - 43 - Financial Services Segment Gross income from our financial services operations decreased to $14.7 million for the year ended December 31, 2023, compared to $24.1 million for the prior-year.
The difference between our effective tax rate for the years ended December 31, 2024 and 2023 and the federal statutory rate was primarily due to state income tax expense, stock-based compensation, federal energy tax credits and non-deductible executive compensation.
Our Central segment opened 34 communities and closed out of 9 communities, leading to an increase of 25 active selling communities as of December 31, 2023 compared to the prior-year period.
Our Central segment reported flat net new home orders due to an 18% increase in average selling communities offset by a 15% decrease in monthly absorption rates. Our Central segment opened 13 communities and closed out of 18 communities during 2024, leading to a decrease of 5 active selling communities as of December 31, 2024 compared to the prior-year period.
Our homebuilding gross margin percentage decreased to 22.3% for the year ended December 31, 2023, as compared to 26.4% for the year ended December 31, 2022.
Our homebuilding gross margin percentage increased to 23.3% for the year ended December 31, 2024, as compared to 22.3% for the year ended December 31, 2023. This increase was driven by a favorable product mix and reduced utilization of incentives in 2024.
Our East segment reported a 28% increase in net new home orders due to a 40% increase in monthly absorption rates, offset by a 7% decrease in average selling communities. Each of our East markets recorded robust increases in monthly absorption rates in 2023, as demand in the East remains strong.
Our East segment reported a 9% decrease in net new home orders due to a 7% decrease in monthly absorption rates and a 2% decrease in average selling communities. Similar to our West segment, the decrease in absorption rates, from 4.2 to 3.9, reflects sustained healthy market demand, despite rising affordability challenges.
The increase in net new home orders was due to a 21% increase in monthly absorption rate and an 18% increase in average selling communities. Contrasting with the greater volatility of 2022, which initially exhibited strength before significantly decelerating due to the rapid increase in mortgage rates, 2023 exhibited less volatility.
The decrease in net new home orders was due to an 11% decrease in monthly absorption rate offset by a 2% increase in average selling communities. While 2023 exhibited less volatility and benefited from resilient demand supported by a decrease in resale competition, 2024 reflected a more nuanced demand environment.

… 70 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed3 unchanged
Biggest changeExpected Maturity Date Estimated December 31, 2024 2025 2026 2027 2028 Thereafter Total Fair Value (dollars in thousands) Liabilities : Variable rate debt $ — $ — $ — $ 250,000 $ — $ — $ 250,000 $ 250,000 Weighted average interest rate — % — % — % 6.5 % — % — % 6.5 % Fixed rate debt $ 488,337 $ — $ — $ 300,000 $ 350,000 $ — $ 1,138,337 $ 1,066,835 Weighted average interest rate 5.9 % — % — % 5.3 % 5.7 % — % 5.6 % Based on the current interest rate management policies we have in place with respect to our outstanding debt, we do not believe that the future market rate risks related to the above securities will have a material adverse impact on our financial position, results of operations or liquidity.
Biggest changeExpected Maturity Date Estimated December 31, 2025 2026 2027 2028 2029 Thereafter Total Fair Value (dollars in thousands) Liabilities : Variable rate debt $ — $ — $ 250,000 $ — $ — $ — $ 250,000 $ 250,000 Weighted average interest rate — % — % 5.5 % — % — % — % 5.5 % Fixed rate debt $ 20,970 $ — $ 300,000 $ 350,000 $ — $ — $ 670,970 $ 663,660 Weighted average interest rate 4.5 % — % 5.3 % 5.7 % — % — % 5.5 % Based on the current interest rate management policies we have in place with respect to our outstanding debt, we do not believe that the future market rate risks related to the above securities will have a material adverse impact on our financial position, results of operations or liquidity.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks related to fluctuations in interest rates on our outstanding debt. We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the year ended December 31, 2023.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks related to fluctuations in interest rates on our outstanding debt. We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the year ended December 31, 2024.
The fair value of our debt, which consists of the Credit Facility, two seller-financed loans and Senior Notes, is based on quoted market prices for the same or similar instruments as of December 31, 2023.
The fair value of our debt, which consists of the Credit Facility, two seller-financed loans and Senior Notes, is based on quoted market prices for the same or similar instruments as of December 31, 2024.

Other TPH 10-K year-over-year comparisons