Exhibit 99.1
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TRI POINTE GROUP, INC. REPORTS 2020 THIRD QUARTER RESULTS

-Net New Home Orders up 50% Year-Over-Year-
-Backlog Dollar Value up 39% Year-Over-Year-
-Homebuilding Gross Margin Percentage of 22.1%-
-Diluted Earnings Per Share of $0.61-
IRVINE, Calif., October 22, 2020 / TRI Pointe Group, Inc. (the “Company”) (NYSE:TPH) today announced results for the third quarter ended September 30, 2020.
“TRI Pointe Group delivered another quarter of outstanding results in the third quarter of 2020, generating year-over-year net order growth of 50% and net income of $78.7 million, or earnings per share of $0.61,” said TRI Pointe Group Chief Executive Officer Doug Bauer. “Our homebuilding operations continue to benefit from extremely strong housing fundamentals, marked by low interest rates, scarcity of new and existing home inventory and highly motivated buyers. We believe these positive drivers will remain in place for the foreseeable future and will serve as tailwinds for our company as we grow our presence across the country.”
Mr. Bauer continued, “The robust demand we experienced in the quarter resulted in pricing power at our communities and allowed us to stay ahead of input cost inflation. As a result, home sales gross margin for the quarter came in at 22.1%, which was higher than we had forecast. The strong closing volumes also led to better operating leverage in the quarter, as evidenced by our SG&A ratio improving by 180 basis points year-over-year. We will continue to balance our growth objectives against our efforts to improve profitability in each of our markets.”
Mr. Bauer concluded, “Equally important are our ongoing efforts to improve returns. We remain focused on ways in which we can be more efficient with our capital and believe we can improve our return profile over time through a combination of better operating leverage, quicker inventory turns and additional share repurchases. We believe these initiatives will drive returns higher and create more value for our shareholders over time.”
Results and Operational Data for Third Quarter 2020 and Comparisons to Third Quarter 2019
Net income was $78.7 million, or $0.61 per diluted share, compared to $62.9 million, or $0.44 per diluted share. In the third quarter of 2020, the Company recorded costs related to the early extinguishment and refinancing of the remaining portion of its Senior Notes due 2021 in connection with the issuance of its Senior Notes due 2028 during the second quarter. The current quarter charge incurred was $3.4 million and is included in other (expense) income, net on the Company's consolidated statements of operations. In addition, the Company incurred $54,000 of additional restructuring charges related to a workforce reduction plan that was implemented in the second quarter of 2020. Excluding these items, adjusted net income was $81.3 million, or $0.63 per diluted share, for the third quarter of 2020.*
Home sales revenue of $826.0 million compared to $746.3 million, an increase of 11%
New home deliveries of 1,303 homes compared to 1,187 homes, an increase of 10%
Average sales price of homes delivered of $634,000 compared to $629,000, an increase of 1%
Homebuilding gross margin percentage of 22.1% compared to 22.6%, a decrease of 50 basis points
Excluding interest and impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 25.0%*
SG&A expense as a percentage of homes sales revenue of 9.8% compared to 11.6%, a decrease of 180 basis points
Net new home orders of 1,933 compared to 1,291, an increase of 50%
Active selling communities averaged 134.0 compared to 147.5, a decrease of 9%
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Net new home orders per average selling community were 14.4 orders (4.8 monthly) compared to 8.8 orders (2.9 monthly)
Cancellation rate of 9% compared to 17%
Backlog units at quarter end of 3,188 homes compared to 2,312, an increase of 38%
Dollar value of backlog at quarter end of $2.1 billion compared to $1.5 billion, an increase of 39%
Average sales price of homes in backlog at quarter end of $648,000 compared to $645,000, an increase of 1%
Ratios of debt-to-capital and net debt-to-net capital of 37.8% and 27.6%*, respectively, as of September 30, 2020
Repurchased 3,662,738 shares of common stock at a weighted average price per share of $16.94 for an aggregate dollar amount of $62.1 million in the three months ended September 30, 2020
Ended the third quarter of 2020 with total liquidity of $1.0 billion, including cash and cash equivalents of $493.6 million and $533.2 million of availability under the Company’s unsecured revolving credit facility
 
*    See “Reconciliation of Non-GAAP Financial Measures”

“In keeping with our focus on operational efficiency, we have made the strategic decision to consolidate our homebuilding brands into one unified name – TRI Pointe Homes,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell. “This change will allow us to concentrate our sales and marketing efforts around one brand instead of six, while also creating a stronger national awareness for our company. Our operational mantra of leveraging the best of big and small, with local expertise and relationships powered by large scale financial resources and technology platforms, will continue to define who we are as a company as we look to the future.”
Outlook

For the fourth quarter of 2020, the Company anticipates delivering between 1,400 and 1,500 homes at an average sales price between $625,000 and $635,000. The Company expects its homebuilding gross margin percentage will be in the range of 20.5% to 21.5% for the fourth quarter of 2020 and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 9.8% to 10.3% during such period. Lastly, the Company expects its effective tax rate for the fourth quarter of 2020 will be in the range of 25.0% to 25.5%.

For the full year, the Company anticipates delivering between 4,900 and 5,000 homes at an average sales price between $625,000 and $630,000. In addition, the Company expects homebuilding gross margin percentage will be in the range of 21.0% to 21.5% for the full year and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 10.8% to 11.2%. Finally, the Company expects its effective tax rate for the full year will be in the range of 24.0% to 24.5%.
Earnings Conference Call
The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Thursday, October 22, 2020.  The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer, and Glenn Keeler, Chief Financial Officer.
Interested parties can listen to the call live and view the related slides on the Internet under the Events & Presentations heading in the Investors section of the Company’s website at presentation slides on the internet through the Investors section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software. The call can also be accessed toll free at (877) 407-3982, or (201) 493-6780 for international participants. Participants should ask for the TRI Pointe Group Second Quarter 2020 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start of the call. A replay of the call will be available for two weeks following the call toll free at (844) 512-2921, or (412) 317-6671 for international participants, using the reference number 13711225. An archive of the webcast will also be available on the Company’s website for a limited time.
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About TRI Pointe Group®
Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE: TPH) is a family of premium, regional homebuilders that designs, builds, and sells homes in major U.S. markets. As one of the top 10 largest public homebuilding companies based on revenue in the United States, TRI Pointe Group combines the resources, operational sophistication, and leadership of a national organization with the regional insights, community ties, and agility of local homebuilders. The TRI Pointe Group family includes Maracay® in Arizona, Pardee Homes® in California and Nevada, Quadrant Homes® in Washington, Trendmaker® Homes in Texas, TRI Pointe Homes® in California, Colorado and the Carolinas, and Winchester® Homes* in Maryland and Virginia. TRI Pointe Group was named 2019 Builder of the Year by Builder and Developer magazine, recognized in Fortune magazine’s 2017 100 Fastest-Growing Companies list, and garnered the 2015 Builder of the Year Award by Builder magazine. The company was also named one of the Best Places to Work in Orange County by the Orange County Business Journal in 2016, 2017, 2018 and 2019. For more information, please visit www.TriPointeGroup.com.
*Winchester is a registered trademark and is used with permission.
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Forward-Looking Statements
Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include, but are not limited to, statements regarding our strategy, projections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, including our estimates for growth, financial condition, sales prices, prospects, and capital spending. Forward-looking statements that are included in this press release are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effects of the ongoing COVID-19 pandemic, which are highly uncertain and subject to rapid change, cannot be predicted and will depend upon future developments, including the severity and the duration of the outbreak, the duration of existing and future social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability and efficacy of a vaccine, adequate testing and treatments and the prevalence of widespread immunity to COVID-19; the impacts on our supply chain, the health of our employees, service providers and trade partners, and the reactions of U.S. and global markets and their effects on consumer confidence and spending; the effects of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such parcels; access to adequate capital on acceptable terms; geographic concentration of our operations, particularly within California; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; raw material and labor prices and availability; oil and other energy prices; the effects of U.S. trade policies, including the imposition of tariffs and duties on homebuilding products and retaliatory measures taken by other countries; the effects of weather, including the re-occurrence of drought conditions in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters; the risk of loss from acts of war, terrorism, civil unrest or outbreaks of contagious diseases, such as COVID-19; transportation costs; federal and state tax policies; the effects of land use, environment and other governmental laws and regulations; legal proceedings or disputes and the adequacy of reserves; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our homebuyers’ confidential information or other forms of cyber-attack; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.
Investor Relations Contact:
Drew Mackintosh, Mackintosh Investor Relations
InvestorRelations@TRIPointeGroup.com, 949-478-8696
Media Contact:
Carol Ruiz, cruiz@newgroundco.com, 310-437-0045
  

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KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
20202019Change% Change20202019Change% Change
Operating Data:(unaudited)
Home sales revenue$826,036 $746,269 $79,767 11 %$2,187,816 $1,931,110 $256,706 13 %
Homebuilding gross margin$182,580 $168,642 $13,938 %$470,044 $357,263 $112,781 32 %
Homebuilding gross margin %22.1 %22.6 %(0.5)%21.5 %18.5 %3.0 %
Adjusted homebuilding gross margin %*25.0 %25.3 %(0.3)%24.4 %21.5 %2.9 %
SG&A expense$81,037 $86,585 $(5,548)(6)%$246,259 $248,090 $(1,831)(1)%
SG&A expense as a % of home sales
revenue
9.8 %11.6 %(1.8)%11.3 %12.8 %(1.5)%
Net income$78,682 $62,861 $15,821 25 %$167,093 $89,194 $77,899 87 %
Adjusted net income*$81,309 $62,861 $18,448 29 %$179,168 $89,194 $89,974 101 %
Adjusted EBITDA*$140,792 $115,605 $25,187 22 %$329,519 $207,371 $122,148 59 %
Interest incurred$20,063 $22,405 $(2,342)(10)%$62,670 $67,740 $(5,070)(7)%
Interest in cost of home sales$23,495 $19,240 $4,255 22 %$62,118 $51,502 $10,616 21 %
Other Data:
Net new home orders1,933 1,291 642 50 %4,926 4,103 823 20 %
New homes delivered1,303 1,187 116 10 %3,490 3,126 364 12 %
Average sales price of homes delivered$634 $629 $%$627 $618 $%
Cancellation rate%17 %(8)%14 %16 %(2)%
Average selling communities134.0 147.5 (13.5)(9)%138.8 147.3 (8.5)(6)%
Selling communities at end of period126 150 (24)(16)%
Backlog (estimated dollar value)$2,067,366 $1,491,452 $575,914 39 %
Backlog (homes)3,188 2,312 876 38 %
Average sales price in backlog$648 $645 $%
September 30,December 31,
20202019Change% Change
Balance Sheet Data:(unaudited)
Cash and cash equivalents$493,585 $329,011 $164,574 50 %
Real estate inventories$2,989,377 $3,065,436 $(76,059)(2)%
Lots owned or controlled31,860 30,029 1,831 %
Homes under construction (1)
2,777 2,269 508 22 %
Homes completed, unsold109 343 (234)(68)%
Debt$1,333,254 $1,283,985 $49,269 %
Stockholders’ equity$2,198,088 $2,186,530 $11,558 0.5 %
Book capitalization$3,531,342 $3,470,515 $60,827 %
Ratio of debt-to-capital37.8 %37.0 %0.8 %
Ratio of net debt-to-net capital*27.6 %30.4 %(2.8)%
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(1)     Homes under construction included 73 and 78 models at September 30, 2020 and December 31, 2019, respectively.
*    See “Reconciliation of Non-GAAP Financial Measures”
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CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
September 30,December 31,
20202019
Assets(unaudited)
Cash and cash equivalents$493,585 $329,011 
Receivables73,419 69,276 
Real estate inventories2,989,377 3,065,436 
Investments in unconsolidated entities36,880 11,745 
Goodwill and other intangible assets, net159,492 159,893 
Deferred tax assets, net30,752 49,904 
Other assets174,060 173,425 
Total assets$3,957,565 $3,858,690 
Liabilities
Accounts payable$94,064 $66,120 
Accrued expenses and other liabilities332,147 322,043 
Loans payable250,000 250,000 
Senior notes1,083,254 1,033,985 
Total liabilities1,759,465 1,672,148 
Commitments and contingencies
Equity
Stockholdersequity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively— — 
Common stock, $0.01 par value, 500,000,000 shares authorized; 126,825,194 and 136,149,633 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively1,268 1,361 
Additional paid-in capital425,753 581,195 
Retained earnings1,771,067 1,603,974 
Total stockholders equity
2,198,088 2,186,530 
Noncontrolling interests12 12 
Total equity2,198,100 2,186,542 
Total liabilities and equity$3,957,565 $3,858,690 


 
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CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Homebuilding:  
Home sales revenue$826,036 $746,269 $2,187,816 $1,931,110 
Land and lot sales revenue3,242 607 3,462 6,819 
Other operations revenue634 618 1,900 1,853 
Total revenues829,912 747,494 2,193,178 1,939,782 
Cost of home sales643,456 577,627 1,717,772 1,573,847 
Cost of land and lot sales3,214 495 3,790 7,552 
Other operations expense624 609 1,872 1,826 
Sales and marketing44,714 47,834 132,545 133,888 
General and administrative36,323 38,751 113,714 114,202 
Restructuring charges54 — 5,603 — 
Homebuilding income from operations101,527 82,178 217,882 108,467 
Equity in loss of unconsolidated entities106 18 67 (33)
Other (expense) income, net(3,120)325 (9,075)6,719 
Homebuilding income before income taxes98,513 82,521 208,874 115,153 
Financial Services:
Revenues2,552 901 6,442 1,959 
Expenses1,334 817 3,698 1,765 
Equity in income of unconsolidated entities3,273 2,114 7,761 4,861 
Financial services income before income taxes4,491 2,198 10,505 5,055 
Income before income taxes103,004 84,719 219,379 120,208 
Provision for income taxes(24,322)(21,858)(52,286)(31,014)
Net income$78,682 $62,861 $167,093 $89,194 
Earnings per share  
Basic$0.61 $0.45 $1.27 $0.63 
Diluted$0.61 $0.44 $1.27 $0.63 
Weighted average shares outstanding 
Basic128,941,901 141,088,381 131,190,301 141,729,759 
Diluted129,515,114 141,533,546 131,672,652 142,128,786 
 
 
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MARKET DATA BY REPORTING SEGMENT & STATE
(dollars in thousands)
(unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
Reporting Segment:
Maracay170 $559 138 $513 475 $534 318 $522 
Pardee Homes368 680 461 698 987 680 1,028 634 
Quadrant Homes78 927 56 880 170 897 167 976 
Trendmaker Homes235 454 224 459 698 464 628 462 
TRI Pointe Homes292 694 226 685 810 701 749 693 
Winchester Homes160 619 82 569 350 626 236 599 
Total1,303 $634 1,187 $629 3,490 $627 3,126 $618 
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
State:
Arizona170 $559 138 $513 475 $534 318 $522 
California481 726 494 758 1,310 740 1,230 705 
Colorado47 625 62 576 166 593 215 564 
Maryland98 578 66 467 228 567 172 493 
Nevada132 563 131 509 321 534 332 551 
Texas235 454 224 459 698 628 628 462 
Virginia62 684 16 992 122 736 64 885 
Washington78 927 56 880 170 167 167 976 
Total1,303 $634 1,187 $629 3,490 $627 3,126 $618 

 
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MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Reporting Segment:
Maracay244 18.7 157 15.5 646 17.4 571 14.0 
Pardee Homes696 40.0 424 43.0 1,594 41.5 1,379 43.9 
Quadrant Homes78 8.5 68 6.8 309 8.2 210 6.9 
Trendmaker Homes318 30.5 192 37.0 757 30.3 682 38.1 
TRI Pointe Homes422 25.3 293 29.7 1,163 29.2 882 29.7 
Winchester Homes175 11.0 157 15.5 457 12.2 379 14.7 
Total1,933 134.0 1,291 147.5 4,926 138.8 4,103 147.3 
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
State:
Arizona244 18.7 157 15.5 646 17.4 571 14.0 
California895 45.2 526 53.0 2,157 51.1 1,659 53.8 
Colorado72 4.3 50 6.0 181 4.2 187 6.4 
Maryland131 8.0 87 10.8 334 8.8 255 10.2 
Nevada145 15.5 141 13.7 413 15.3 415 13.4 
South Carolina0.3 — — 0.1 — — 
Texas318 30.5 192 37.0 757 30.3 682 38.1 
Virginia44 3.0 70 4.7 123 3.4 124 4.5 
Washington78 8.5 68 6.8 309 8.2 210 6.9 
Total1,933 134.0 1,291 147.5 4,926 138.8 4,103 147.3 

 
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MARKET DATA BY REPORTING SEGMENT & STATE, continued
(dollars in thousands)
(unaudited)
 
 As of September 30, 2020As of September 30, 2019
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Reporting Segment:
Maracay501 $317,887 $635 404 $218,424 $541 
Pardee Homes1,067 696,520 653 753 542,370 720 
Quadrant Homes228 222,394 975 89 77,426 870 
Trendmaker Homes404 184,507 457 367 184,563 503 
TRI Pointe Homes682 461,574 677 451 306,337 679 
Winchester Homes306 184,484 603 248 162,332 655 
Total3,188 $2,067,366 $648 2,312 $1,491,452 $645 
As of September 30, 2020As of September 30, 2019
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
State:
Arizona501 $317,887 $635 404 $218,424 $541 
California1,399 941,768 673 885 669,724 757 
Colorado115 65,576 570 116 65,469 564 
Maryland223 122,133 548 144 75,251 523 
Nevada229 148,899 650 203 113,514 559 
South Carolina1,851 309 — — — 
Texas404 184,507 457 367 184,563 503 
Virginia83 62,351 751 104 87,081 837 
Washington228 222,394 975 89 77,426 870 
Total3,188 $2,067,366 $648 2,312 $1,491,452 $645 


 
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MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
 
September 30,December 31,
20202019
Lots Owned or Controlled(1):
Maracay 3,817 3,730 
Pardee Homes13,706 13,267 
Quadrant Homes932 1,103 
Trendmaker Homes4,445 4,034 
TRI Pointe Homes7,300 6,170 
Winchester Homes1,660 1,725 
Total31,860 30,029 
September 30,December 31,
20202019
Lots Owned or Controlled(1):
Arizona3,817 3,730 
California14,544 14,677 
Colorado1,198 1,033 
Maryland1,000 1,140 
Nevada2,445 2,026 
North Carolina2,708 1,590 
South Carolina111 111 
Texas4,445 4,034 
Virginia660 585 
Washington932 1,103 
Total31,860 30,029 
September 30,December 31,
20202019
Lots by Ownership Type:
Lots owned22,197 22,845 
Lots controlled(1)
9,663 7,184 
Total31,860 30,029 
__________
(1)    As of September 30, 2020 and December 31, 2019, lots controlled included lots that were under land option contracts or purchase contracts.
 
 
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)
In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.
 
Three Months Ended September 30,
2020%2019%
(dollars in thousands)
Home sales revenue$826,036 100.0 %$746,269 100.0 %
Cost of home sales643,456 77.9 %577,627 77.4 %
Homebuilding gross margin182,580 22.1 %168,642 22.6 %
Add:  interest in cost of home sales23,495 2.8 %19,240 2.6 %
Add:  impairments and lot option abandonments315 0.0 %1,029 0.1 %
Adjusted homebuilding gross margin$206,390 25.0 %$188,911 25.3 %
Homebuilding gross margin percentage22.1 % 22.6 % 
Adjusted homebuilding gross margin percentage25.0 % 25.3 % 


Nine Months Ended September 30,
2020%2019%
Home sales revenue$2,187,816 100.0 %$1,931,110 100.0 %
Cost of home sales1,717,772 78.5 %1,573,847 81.5 %
Homebuilding gross margin470,044 21.5 %357,263 18.5 %
Add:  interest in cost of home sales62,118 2.8 %51,502 2.7 %
Add:  impairments and lot option abandonments2,044 0.1 %6,519 0.3 %
Adjusted homebuilding gross margin(1)$534,206 24.4 %$415,284 21.5 %
Homebuilding gross margin percentage21.5 %18.5 %
Adjusted homebuilding gross margin percentage(1)24.4 %21.5 %








Page 12

logoa061.jpg

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
 
The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-net capital. We believe that the ratio of net debt-to-net capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.
 
September 30, 2020December 31, 2019
Loans payable$250,000 $250,000 
Senior notes1,083,254 1,033,985 
Total debt1,333,254 1,283,985 
Stockholders’ equity2,198,088 2,186,530 
Total capital$3,531,342 $3,470,515 
Ratio of debt-to-capital(1)
37.8 %37.0 %
Total debt$1,333,254 $1,283,985 
Less: Cash and cash equivalents(493,585)(329,011)
Net debt839,669 954,974 
Stockholders’ equity2,198,088 2,186,530 
Net capital$3,037,757 $3,141,504 
Ratio of net debt-to-net capital(2)
27.6 %30.4 %
__________
(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.
(2)    The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is total debt less cash and cash equivalents) by the sum of net debt plus stockholders’ equity.




























Page 13

logoa061.jpg
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
 
The following table calculates the non-GAAP financial measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP. EBITDA means net income before (a) interest expense, (b) expensing of previously capitalized interest included in costs of home sales, (c) income taxes and (d) depreciation and amortization. Adjusted EBITDA means EBITDA before (e) amortization of stock-based compensation, (f) impairments and lot option abandonments, (g) early loan termination costs and (h) restructuring charges. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(in thousands)
Net income$78,682 $62,861 $167,093 $89,194 
Interest expense:
Interest incurred20,063 22,405 62,670 67,740 
Interest capitalized(20,063)(22,405)(62,670)(67,740)
Amortization of interest in cost of sales23,538 19,234 62,166 51,674 
Provision for income taxes24,322 21,858 52,286 31,014 
Depreciation and amortization7,020 6,795 19,196 18,356 
EBITDA133,562 110,748 300,741 190,238 
Amortization of stock-based compensation3,477 3,828 10,888 10,614 
Impairments and lot option abandonments315 1,029 2,044 6,519 
Early loan termination costs3,384 — 10,243 — 
Restructuring charges54 — 5,603 — 
Adjusted EBITDA$140,792 $115,605 $329,519 $207,371 
 
 
 
 
 
 
 
 














Page 14

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

 The following table contains information about our operating results reflecting certain adjustments to income before income taxes, provision for income taxes, net income, net income available to common stockholders and earnings per share (diluted). We believe reflecting these adjustments is useful to investors in understanding our recurring operations by eliminating the varying effects of certain non-routine events, and may be helpful in comparing the Company to other homebuilders to the extent they provide similar information.
 

Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
As ReportedAdjustmentsAdjustedAs ReportedAdjustmentsAdjusted
(in thousands, except per share amounts)
Income before income taxes$103,004 $3,438 (1)$106,442 $219,379 $15,846 (1)$235,225 
Provision for income taxes(24,322)(811)(2)(25,133)(52,286)(3,771)(2)(56,057)
Net income$78,682 $2,627 $81,309 $167,093 $12,075 $179,168 
Earnings per share
Diluted$0.61 $0.63 $1.27 $1.36 
Weighted average shares outstanding
Diluted129,515 129,515 131,673 131,673 
Effective tax rate23.6 %23.6 %23.8 %23.8 %
_________
(1)Includes (i) a $3.4 million and $10.2 million charge for the three and nine months ended September 30, 2020, respectively, related to the early extinguishment of a portion of our Senior Notes due 2021, which is included in other (expense) income, net on our consolidated statements of operations, and (ii) a $56,000 and $5.6 million charge for the three and nine months ended September 30, 2020, related to restructuring charges stemming from a workforce reduction plan.
(2)Includes a tax adjustment to reflect the higher pretax earnings associated with the aforementioned adjustments.
Page 15

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