Greetings. And welcome to the TRI Pointe Group’s Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Chris Martin, Investor Relations for TRI Pointe. Thank you, Mr. Martin. You may now begin.

Good morning. Welcome to TRI Pointe’s second quarter 2015 earnings conference call. Earlier today, the company released its financial results for the quarter. Documents detailing these results are available on the company’s Investor Relations website at www.tripointegroup.com. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and constitute forward-looking statements. These statements are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in these forward-looking statements. I refer you to the company’s filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement made today. The company undertakes no duty to update these forward-looking statements that are made during the course of this call. Additionally, non-GAAP financial measures will be discussed on this conference call. The company’s presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through TRI Pointe’s website and the filings with the SEC at www.sec.gov. Earlier today we posted a slide deck in the Investors section of our website under the Presentations tab reflecting our results and key financial metrics for the second quarter. Hosting the call today is Doug Bauer, the company’s Chief Executive Officer; and Mike Grubbs, the company’s Chief Financial Officer. With that, I will now turn the call over to Doug.

Thank you, Chris, and good morning, everyone. TRI Pointe Group turned in a strong performance with excellent results in the second quarter of 2015. We posted significant increases to our top and bottomline, thanks to great execution by our homebuilding teams at each one of our six brands, and the closing of the Pacific Highlands Ranch commercial site, a valuable non-strategic asset, which we have referenced on previous calls. We continue to sell homes in excellent pace, averaging 3.5 orders per community per month for the quarter. The team also delivered on our previously stated guidance from homebuilding gross margins and backlog conversion, and continued the growth of our mortgage finance subsidiary, TRI Pointe Connect, which is now operating all of our markets except for California. These achievements are further evidence that the combination of legacy TRI Pointe Homes and the WRECO homebuilding operations has resulted in a more complete inefficient company that should grow shareholder value for years to come. At the macro level the fundamental drivers of our business continue to trend in a positive direction, with steady employment gains, a limited supply of existing housing inventory and improving consumer confidence provide a favorable backdrop for housing. While these factors have led to a rebound in single-family starts and permits, the current level of new home construction activity remains well below historical norms. As a result, I believe that we are still in the early innings of this housing recovery and that well-positioned, well-capitalized homebuilders such as the Tri Pointe Group will benefit from the continued increase in household formations and jobs leading to further increases in both top and bottomline growth. Now let me share some details about the performance of each of our brands during the quarter. The Pardee Homes brand continues to deliver excellent results…

Thank you, Doug. Good morning. I would also like to welcome everybody to today’s call. I am going to highlight some of our results and key financial metrics for the second quarter and then finished my remarks with an update on our expectations, and outlook for both the third quarter and full year 2015. Once again, as a reminder, our merger with WRECO was accounted for the reverse acquisition, with WRECO as a accounting acquirer and legacy Tri Pointe as a accounting acquiring. As a result, the consolidated financial statements for all periods prior to the closing of the merger will only reflect the historical financial statements of WRECO and will not include legacy Tri Pointe operations. Accordingly, legacy Tri Pointe results for the three-month and six-month ended June 30, 2014, are not included in the GAAP results. As part of our press release and in the slide deck to Chris mentioned our website, we've included supplemental selected financial data of the combined company adjusted to add back legacy Tri Pointe operations. This should be the last time I will discuss the reverse acquisition accounting, because moving forward into the third quarter, everything will be comparative with the exception of seven days of activity for legacy Tri Pointe for the periods July 1 through the closing date of July 7, 2014. Our second quarter included strong topline growth, highlighted by 38% increase in our home sales revenue over the previous year, as a result of 27% increase in home deliveries and a 9% increase in our average selling price. Our homebuilding gross margin came in consistent with our guidance at 20%. During the quarter, we also recorded land and lot sales revenue of $67.5 million, highlighted by the closing of Pacific Highlands Ranch commercial site for $53 million, which represented…

Thanks, Mike. In conclusion, I am very pleased with our company’s performance this quarter and remain optimistic about the future for the TRI Pointe Group. Our monthly sales absorption rate of 3.5 homes per community ranked as one of the best sales spaces among the publicly-traded homebuilders this reporting season. Our quarter end backlog of 1,998 homes positions us well to deliver strong results in the back half of the year. Finally, the closing of the Pacific Highlands Ranch commercial site highlights our focus to unlock the embedded value in our California land holdings. I want to thank all of our employees for a job well done this quarter. Our goal is to be a best-in-class homebuilder in every facet of the business and that starts with having the right people in place, who are passionate about delivering a great customer experience and building quality homes. You are the foundation of this company and I truly appreciate your efforts. This concludes our prepared remarks. And I now will open the call up for any questions.

[Operator Instructions] Our first question is from Allen Ratner of Zelman and Associates. Please go ahead.

Hey, good morning, guys. Nice quarter. Thanks for taking my question. Doug, I wanted to just pick your brain a little bit on California. We're seeing the last month or two, we’ve seen a slowdown in absorptions in some of the coastal markets, whereas the inland market seemed to be holding up pretty well, in fact accelerating a bit. And I know you guys are big in both coastal and inland. So I was curious the dynamics you’re seeing there right now. Is the coastal buyer -- when you think about foreign nationals, have you see any impact from the volatility going on in Asia on that buyer? And on the inland side, presumably there's more entry-level exposure there. I know you guys are not huge at entry-level. But just generally, what type of trends you're seeing at entry-level within California and any improvement there? Thanks.

Thanks, Allen. There has been some discussion about the Chinese buyer, but frankly we’re not seeing any material change in the international buyer along coastal California. Frankly, these areas continue to be one of the strongest absorbing communities that we have in the company. So it’s just -- right now, it’s not translating to any issues in coastal California. As I look at the Inland Empire, I kind of break it into two sections, the I-15 and Freeway from Vegas down to San Diego kind of separates the Inland Empire. West to the 15, you see generally a higher price point that caters to Orange County and that market is definitely very competitive. In the east to the 15, where we are selling in Beaumont, Banning and Lake Elsinore, frankly Pardee is really controlling that market, seen a very strong market conditions, very strong absorption levels, and a reemergence of the entry-level buyer which is primarily our focus out there east of the 15. As I think I mentioned in the last call, the reduction in the FHA insurance premium and the reemergence of the Boomerang buyer, all which has contributed to seeing even some of the millennials come back into the new home market. So we're definitely seeing that buyer come back in the Inland Empire.

That’s good to here. Thanks. And then on the land spend budget, the $900 million to $1 billion, has been any shift in how you’re thinking about the allocation of that between price points, companywide obviously your price point continues to move higher? But is there any more thought you increasing your exposure to entry-level, I guess as you look out into '17 and beyond?

We remain very opportunistic in our land spend. We remain disciplined in how we look at land acquisition. Obviously, our ASP keeps us in more of the premium markets, but we will continue to look at all price points. Our teams have that, those abilities from entry-level all way to move up, and we tend to continue to focus on a 3 to 5-year inventory as we look forward into our business plan. So again, it's very opportunistic, focus on location, close to employment corridors, close to good schools and maintain our underwriting criteria and discipline throughout the process.

Okay. Thanks a lot. Good luck.

Thanks, Allen.

Thank you. The next question is from Nishu Sood of Deutsche Bank. Please go ahead.

Thanks. First question I wanted to ask was about the gross margin. Mike, so the slight increase in the third quarter and the 21% for the year implies quite a significant uptick than for the fourth quarter, which I imagine is a lot of the newer California closings coming on. So is that then a seasonal pattern as well? Or if we end the year at a much higher gross margin, should we then be expecting a drop as we head into '16? I am not looking for exact guidance. Just a sense of, do we hit a higher level and then stay there? Or is there some sort of seasonal pattern that is going to be a part of the new combined entity?

Yes. Sure, Nishu. I mean, again, we are guiding to the 21% year-over-year and we should see some increase to that on a year-over-year basis. But our margin is pretty heavily impacted based on the California mix. This year for instance our California mix is more heavily weighted to the back half of the year. I think we closed 36% of our deliveries in California in the second quarter. That starts edging up to 40% to roughly 44% in the third and fourth quarter. So, I mean, it’s just heavily dependent on our California deliveries.

Got it. But we’re getting to a higher level of California closings mix and we should stay at that higher level going forward, right. Like there's no reason it should suddenly drop off again.

No, but there maybe quarter-over-quarter where you have fewer California deliveries in one quarter that could bring the margin down slightly and then it be higher the next quarter because there is more California deliveries.

Got it. Great. And in terms of absorptions and orders, Doug your commentary sounds like demand is coming in strong, the fact that you're shying away a bit from guiding to communities because you're closing out faster than expected. It sounds like orders and absorptions, and I think you even directly this, have been coming in as you expect or even a little bit better. But when we look at it from the outside, investors were taking your -- the huge surge in orders you have in the first quarter and were saying we’re looking at it and seeing the drop from 1Q to 2Q. So how do you reconcile those two? Was it the case that you know as you adjusted to -- as you integrated the operations, there was some pull-forward or there were some concentration of sales in the first quarter, because it really was a huge jump, but it doesn’t look like that’s the kind of sustainable going forward. So how do we reconcile those two perspectives?

Nishu, it’s Mike. I am a little confused, because you said a huge drop in absorption. So we’re still absorbing 3.5 for community per month for both quarters. So what you’re specifically referring to?

I'm sorry. I didn’t mean to say you drop. I am saying there was a drop in absorptions from 1Q to 2Q, whereas people looking at the seasonality were probably expecting some increase from 1Q to 2Q.

Maybe you’re misreading that. There's not a drop in absorptions. I mean, absorption pace is pretty much dead on the same and we actually had more net orders in the second quarter than the first quarter. So I'm still kind of confused by the question.

Yes. I mean, normally there would be a more substantial increase from just based on the seasonality of WRECO and I think you're own results as well from 1Q to 2Q. We can follow up on that. That's fine.

Yes. I mean, I think having sales issue at 3.5 is very strong for both, obviously first and second quarter. And we’re maintaining that pace and obviously manage each project in each location based on price pacing, price point of product and so for. So we feel very good about the 3.5 pace going to the second quarter.

Okay. Thanks for the color.

Thank you. The next question is from [Mike Weintraub] [ph] of Buckingham Research. Please go ahead.

Thank you. Couple questions. First, a quick follow-on. On the land sales and particularly the commercial side, is that eligible for 1031 exchanges, or because it’s a commercial site it really wouldn’t be for you?

No, it’s not.

Okay. And then second kind of bigger, broader question. Now that you’ve owned the WRECO assets for a full year, can you give us kind of updated thoughts on what your surprises to the upside might have been, and perhaps any challenges that exist to a greater extent than you might have first expected?

Well, I think, Mark, it’s Doug. I guess the surprises to the upside, the party operation, especially in the Inland Empire, and the reemergence of the entry-level buyer, I don’t know if it’s surprising because we all expect entry-level buyer to come back, but that's a nice pace, a nice avenue for growth for the company. We’ve got a nice land position there that provides us a lot of optionality. The other nice surprise is activating this 490 unit project in Santa Clarita here coming into 2016 and ’17. We're very excited about that. It's a very, very constrained market up in that area and it’s a very well located project. I think that the biggest concern we have and I have is really adjusting and making do with the market conditions, continue to refine operational efficiencies in the mid-Atlantic and then continue to work through the Houston market. We really like our land positions in Houston and some of the best master plan communities. It doesn't require a lot of capital. So despite the negative headline noise and jobs and the oil prices, that team is very well run and contribute solidly to the bottomline. So in summary, all the parts are doing very well. Quadrant up in Seattle is really on par to really have a very strong ‘16 and ‘17 as we reposition the brand and also the product, which you’ll see more of which going into ‘16 and ‘17. There’s a lot of runway for us to work with in these six brands and I’m very excited. We’re delivering as we have forecasted, and I'm very proud of the teams to kind of move into that public operating arena and really hit it on all cylinders. So it's very exciting for us.

That's really helpful. And sort of lead into actually my last question, which would be, you've noted that your sales have been ahead of plan. You're not changing delivery guidance. So is it fair to read that the setup for ‘16 is looking better than you might have anticipated? And I guess you mentioned the Santa Clarita, are there any other places where the setup is looking stronger than you might have originally anticipated?

Well, I mean, we've had strong sales, but we've also had weaker sales in the mid-Atlantic and Houston compared to our own expectations internally. So those pluses and minuses somewhat offset themselves. The Santa Clarita opportunity doesn't deliver closings until 2017. And we’re not in a position to give guidance for ‘16 yet, but we still believe we’re in the early innings of this housing recovery. And with jobs and household formation continued increase, I think we’re very well-positioned to continue to see an increase in orders and deliveries in ‘16 and ‘17.

Right. Appreciate it.

Thank you. The next question is from Patrick Kealey of FBR. Please go ahead.

Good morning. Thanks for having me on. So first question, just really wanted your thoughts on kind the M&A environment in the space. And now that you’ve had sometime to digest WRECO, how should we think about capital allocation for you guys between regular way land purchases and maybe potential acquisitions?

Hi, Pat. We’ve really been focused on operating the six home building brands, although we do obviously get attention from the bankers in the space because of the WRECO acquisition. As I've stated earlier, we’re organically growing in Austin and we’ll continue to look selectively at opportunities as we look forward into the future. Most notably, we have operations on the East Coast and that could provide a runway for further opportunities in the future. But currently, we’re really focused on delivering the results that we have in the second half of this year while still being opportunistic both on the landside and the M&A side if an opportunity should occur.

Okay. Great. And actually sticking with the East Coast, you kind of talked about the market backdrop there with Winchester, but you guys did see a nice jump in absorption. So maybe talk about kind of what you guys did this quarter to drive that and maybe your expectations for that market over the next 12, 24 month?

Pat, it’s Mike. I mean, I think when you look at the absorptions and again, when you see it on the slide deck, people question us because we talk about our concern about the East Coast and then you look at the increase in the overall order pace, I mean that’s really because of the comp that was so low in the previous year. I mean, if you remember what was happened in DC in the first and second quarter of 2014, but we’d like to see absorption increase over that 2.5 pace.

Great. Thank you.

Thank you. The next question is from Jay McCanless of Sterne Agee. Please go ahead.

Good morning, everyone. First question I had, in terms of land sales, could you give us any color on how much more on the dollar basis you guys expect to sell for the rest of this year? And I think, you said that with this activation Santa Clarita there might be some opportunity for land sales, could you give us the numbers around that as well?

Yeah. Jay, it's Mike. I mean, again for the balance of this year, we’ve said all along that our number this year would be roughly around $100 million. So, I think, you’ll see most of that, the balance of that happen in the fourth quarter. And then the opportunity to have land sales, I mean, you guys were looking at roughly five different product types in the site in Santa Clarita and we’re looking to potentially sell a couple of those to other builders and build a couple of those parts or so. Those opportunities would be in 2016. We’re not really given an overall guidance number on land sales yet for 2016 until we get a little bit closer.

Okay. And then the second question I had with some volatility in your average closing price between the first quarter and the second quarter?

Yeah.

What should we expect going into 3Q and 4Q’s are going to be basically? It sounds from what you guys are saying, its sounds like its going to be flat 3Q with a nice pop high in 4Q, is that how we should model it?

Well, no, I mean, as we said from the beginning of the year, we think our full year average sales price was roughly around $550,000. We told people that peak to trop there shouldn't be too many radical adjustments in our ASP. I think we delivered $560,000 in the first quarter and it dropped down to $535,000 this quarter. Again, next quarter you should see it, probably, a little bit above to $550,000 and maybe slightly higher than that in the fourth quarter all being driven, primarily by again the California mix of product.

And then the last question I had, I think, you guys talked about Maracay’s July results, but could you talk about July results across the company? And also have you been able to start getting some of the neighborhoods open as it drying out in Colorado and Texas to the point where you’re start going to neighborhood count again?

Overall, Jay, July, we build-in seasonality and we expect a little bit softening in August. As I mentioned, July was a strong month for Maracay. It was also a good month really across the Board. Trendmaker in Houston continues to be the soft spot through July, but the rest of the operations continue to sell well. We had 355 orders

355 orders that was 39% increase year-over-year from July to previous year. Again, Maracay was up 121%. They had a very good strong July. We don't see that in Arizona in July. TRI Pointe California was very strong as well, north of 100%, increase year-over-year. Really the outliers is Houston, as our expectations would be, we’re down 15% in Houston for the month, which is pretty consistent with where our run rate is right now annually for Trendmaker.

Jay, we also had a good month in July in Mid-Atlantic, started to see an increase in traffic and order activity about 35% year-over-year. So that was encouraging to see in the month of July. And hopefully with the back-to-school activity happening in latter part of August, typically, September and October end up being pretty good months also.

Okay. And then just on the weather, I mean, are you guys through most of the weather issues now, you find them able to start getting watched, developed and get the community count growth back on track?

Yes. We are, but in Houston, we had several of our model opening we had pushing in the first quarter, I think, is about four of them, Mike, if I remember on top my head. And we also had expectations of some higher deliveries in Colorado, even though we’re increasing our deliveries 3x, we -- that's a very good market, but it was a fairly wet May right in the prime building season. So it affecting our plan internally, but it’s still going to turn into a very strong year for our team in Colorado. So, I think, the weather is behind us. Now we’re bracing for El Niño here in California in the winter.

Understood. Thanks, guys.

Thank you. The next question is from Alex Barron of Housing Research Center. Please go ahead.

Thank you. Good morning, guys. I was hoping, you could comment on your land sales for the remainder of the year. What should we expect there, obviously, which part was pretty high let’s just in terms of revenues or profits, what should we kind of look for the balance of the year?

Yeah. Alex, its Mike. Again, as I said previously, I mean, we had guided to roughly around $100 million of the land sales for the year. I think that’s still kind of what our guidance is. I mean, we certainly don't want to extrapolate the kind of margin that you've seen of the run rate so far through the first part of the year. And then most of the balances of those lands sales are happening in the fourth quarter. There is not much activity in the third quarter at all.

Okay. Thanks. And then, as far as, backlog conversion Mike, so…

Yeah.

It’s been around 50% this quarter and you are guiding to about the same next quarter, which would imply a big jump in the fourth quarter. But as I look at the last year, it looks like it was more under 60 plus percent range. So what accounts for the lower range this quarter and the next quarter? Is it a change in your spec and builds order mix or is it delay or what’s kind of the main factor there?

Well, some of this were the delays and -- I mean, we are building less spec units than we had previously. And then I think we’re as California becomes the bigger part of our delivery mix, those houses typically are higher price points and take a little bit longer to build.

Got it. Okay. Thanks guys.

Thank you. [Operator Instruction] And then next question is from Susan Berliner of J.P. Morgan. Please go ahead.

Hi. Good morning.

Good morning, Susan.

I guess, I just want to start with Trendmaker. I was wondering, if you could provide a little more details with regard to what’s going on in Houston. A lot of your competitors have been talking about that 350 price points being kind of this office. And if you can talk about your portfolio and is that accurate and also have you seen any cancellation due to job losses in that market?

Hi Susan, it’s Doug. The short answer to both is, we build our ASP as roughly a little under $500,000, in Houston. So we’re in that premium price point that it contributes a significant amount of profitability. But pace in activity has definitely soften year-over-year. And as far as cancellations, we have seen an increase in cancellation rate and it is due to job concerns. In some cases, it has been necessarily due to the weather. We did have a tough season there but through on both accounts, I mean, the upper end of the market is very competitive, little softer and cancellation rates have increased due to job uncertainty.

Great. And Mike just one question for you, I think last quarter you talked about not looking to, I guess, refinancing revolver. I think you are still expecting to pay a lot of that down with in the fourth quarter. Is that still correct?

Well, we have a lot of land and land development activity in the balance of the year and we guided at $900 to $1 billion of activity. There is significant amount of land acquisitions that occur in the third and fourth quarter. But we still think we will be paying down a nominal amount of the debt at year end.

Okay. So you are still going to just run with outstanding of your revolver?

Correct.

Okay. Thank you very much.

Thank you. The next question is from Will Randow of Citigroup. Please go ahead.

Hey, good morning, guys and congrats on the progress.

Thanks Will.

Just had two follow-ups from prior questions and apologize if I missed something, I jumped on the call over late. But on Houston market, the contraction you are seeing, are you seeing any decline in closing price relative to list price, and any other signs that you’ll see incremental slowing or you think this is kind of a run rate today?

I think if I understand your question, incentives have continued to be strong in that marketplace. So they run roughly 9% to 10% of sales price. I think a year ago they were probably in the 7% range. I have some data on that, but look it up real quick. So, it continues to be very competitive in that marketplace as I mentioned earlier. In the fourth quarter -- from the fourth quarter 2014, incentives as a percentage of revenue has increased from 8% to 9.6%.

Thanks for that. And then just a follow-up on the last sort of questions. In terms of your revolver, you are looking at anyway to opportunistically term that went out into notes or are we thinking about shrinking the balance sheet I think as you indicated?

I mean, Will, you know it’s pretty well, we’re always opportunistic when we are looking at a potentially placing debt. Right now, our current expectations are to run with our revolver for the balance of the year. Again, we do have some additional land sales. Some land sales going into 2016, which do generate cash flow. And we are closing a lot of units in the back half of the year. We closed roughly 1,450 units so far and we are going to close another roughly 2,650 units that generates a lot of cash flow in the back of the year. So right now our expectations just hang on with our revolver.

Thank you, guys, and congrats again.

Thanks Will.

Thanks Will.

Thank you. At this time, I would like to turn the conference back over to Mr. Bauer for closing comments.

Well, thanks everyone for attending today's call. We’re very pleased with our results in the second quarter and look forward to continue delivering very strong third and fourth quarter housing deliveries. So, I appreciate everybody attending today’s call and we’ll talk to you next quarter. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.