Greetings, and welcome to the TRI Pointe Group’s Fourth 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. It is now my pleasure to introduce your host Mr. Chris Martin, Vice President of Finance and Investor Relations. Thank you, you may begin.

Thank you. Good morning. Welcome to the TRI Pointe Group’s fourth quarter and full year 2015 earnings conference call. Earlier today, the Company released its financial results for the fourth quarter and the full year. Documents detailing these results including a slide deck under the presentations tab 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 which are not historical facts are forward-looking statements that involve risk and uncertainties, a discussion of such risk and uncertainties and other important factors that could cause actual operating results to differ materially from those in the forward-looking statements are detailed in the company’s filings made with the SEC including its most recent annual report on Form 10-K and its quarterly reports on Form 10-Q. 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. Reconciliations of those non-GAAP financial measures to the most comparable measures prepared in accordance of GAAP can be accessed through the company’s website and its filings with the SEC. Hosting the call today is Doug Bauer, the company’s Chief Executive Officer; Mike Grubbs, the company’s Chief Financial Officer and Tom Mitchell, the company’s Chief Operating Officer and President. With that, I will now turn the call over to Doug.

Thank you, Chris, and good morning everyone who has joined us for our review of our fourth quarter and full year 2015 results as well as an update on our homebuilding business. So 2014 was a year of great change for TRI Pointe Group and 2015 was a year that was characterized by great execution. This time last year we issued full year earnings per share guidance in the range of $1.15 to $1.30. As the year went on we refined our guidance to include expectations for homebuilding gross margins, SG&A expense ratio, land sale revenue and quarterly backlog conversion targets. Despite the numerous headwinds, the industry endured over the year including widespread labor shortages, weather induced delays and continued weakness in the Houston market, Tri Pointe Group was able to meet or exceeded its stated guidance on a consistent basis. Culminating with full year results that included new home delivery growth of 31%, homebuilding gross margins of 21.1% and earnings per share of $1.27, a 119% increase compared to 2014. This couldn’t have been possible without our very talented and experienced leadership teams at our six homebuilding brands. We knew that execution risk was one of the main concerns the investment had when the WRECO acquisition closed in July 2014. Our company’s performance in 2015 demonstrated that Tri Pointe Group has the vision and experience to execute through changing market condition and that it can deliver on its business objectives. We have provided some preliminary guidance for 2016 in today’s press release, which Mike will discuss in more detail later on the call. In general I’m very excited about the opportunities that lie ahead for Tri Pointe Group despite the recent turmoil in the financial markets. We are positioned to open over 70 new communities in 2016, which will…

Thanks, Doug and good morning I would also like to welcome everyone to today’s call. I’ll be highlighting some of our results and key financial metrics for the fourth quarter and the full year 2015. And then finish my remarks with an update on our expectations and outlook for the first quarter and full year 2016. I’d like to also refer to our slide deck on our website, which includes charts detailing orders, deliveries and absorption rates by homebuilding company or division for both the fourth quarter and full year ended December 31, 2015. We’ve also provided key operating metrics by state in today’s press release announcing our earnings for the quarter and the full year. Our fourth quarter included strong revenue growth highlighted by the 36% increase in our home sales revenue over the same period in the prior year. Primarily as a result of a 30% increase in our home deliveries and to a lesser extent a 5% increase in our average sales price. Our homebuilding gross margin came in ahead of our guidance at 22.2% thanks to increased deliveries in California. We were also successful in recognizing additional operating leverage improvements during the quarter as reflected in our selling general and administrative expense ratio, which improved to 8.4% as a percentage of home sales revenues compared to 8.9% in the same period a year ago. Our income from continuing operations before income tax was $131 million for the quarter or 14.9% of total revenue. Income taxes for the quarter were $46 million representing an effective tax rate of 35%. This resulted in net income for the quarter of $85.1 million or $0.52 per diluted share compared to $41.4 million or $0.26 per diluted share a year ago. We averaged 113 active selling communities during the quarter, up…

Thank you, Mike. In conclusion I’m very pleased with our company’s performance in 2015. We posted strong improvements to nearly every relevant metric for our business including deliveries, orders, operating margins and pre-tax profit. And our full year return on equity was 13.4%. We also ended the year with 12% more homes in backlog than the previous year setting the table for additional home delivery growth in 2016. While this growth will likely not be as robust as what we experienced in 2015 as we mentioned at our November’s Investor Conference, the longer term outlook for our company has not changed as we remain focused on increasing shareholder value through our homebuilding, land sale, mortgage insurance operations while achieving our goals of annual deliveries of 5,100 to 5,400 homes by 2018. Tri Pointe ended 2015 on a strong note and I’m very excited about what lies ahead. As always I want to thank the hardworking men and women of this company who are behind the great execution that led to such an outstanding year. TRI Pointe Group takes pride in hiring and retaining the best and brightest in our industry as the offer and I am very appreciative of all your efforts. With that it concludes our prepared remarks and I’ll open it up to some questions. Thank you.

Thank you. The floor is now open for questions. [Operator Instructions]. Our first question is coming from Allen Ratner of Zelman & Associates. Please proceed with your question.

Good morning and [Technical Difficulty] in your communities and I think that...

Hey, Allen. You cut out after you said good morning, maybe you could start your question again.

Sorry. Can you hear me now? Okay.

Yeah, we can hear you fine now, but we didn’t hear anything after good morning.

Okay, thanks. Well first off I just was congratulating you guys on the strong execution in the year I know it’s a tough environment. So pretty noteworthy results. So my questions relate to the community count, because you guys are seeing a lot of turnover just in terms of close outs and obviously new openings throughout 2016. So first I was wondering as we think about the close outs here in the fourth quarter and it sounds like you expect to see continued close outs in at least in the first part of this quarter. Is that having any impact on the absorption paste just as you maybe run a little bit lighter on lots remaining in these communities and anything we should consider when we think about the more recent order performance? And then as you see the community count kind of transitioning and opening up these new ones. How should we think about the price point, the portfolio there does it look meaningfully different in terms of products from what you’ve been delivering over the last year or two? And finally what vintage is that land, is this legacy WRECO type assets or are these lots that you put under contract post the merger. Thanks a lot.

Allen, this is Doug. I’ll start, I think there is about three questions there. As far as the orders in the fourth quarter as you recall from our investor conference we had a strong October. Seasonally soften up a little bit November and December. But what really also happen and this is something that you got to dive into the details at the end of the third quarter the fourth quarter our total community counts especially California our ending community count I think was down about 19%. What happens is we had rapid absorption in 2015, we pull those units and did a great job of doing that. But then you are down to the last phase and in California we are a phase builder. So you typically your mix of homes are kind of at the last sell out. So it does slow your pace down and then you start ramping it back up. I will tell you the first eight weeks of this year are on par with last year it’s very good hitting on all cylinders across the country for us. So what we saw in the fourth quarter was little seasonal slowdown, but also the fact that the total amount of communities decreased so much and you were at the mix of those communities that slowed down. I’m sorry, the mix of the those communities had less units to sell and it changes a little bit.

Hey, Allen, this is Tom. In respect to the second part of your question about turnover and what’s the new mix of openings look like. I think it looks very comparable to what we’ve had in the past. Overall we’ve got a strong community count opening for the first quarter and those go pretty much across the board with Maracay, Pardee, Quadrant, Trendmaker and TRI Pointe all contributing new projects opening in the first quarter. Eight of those are in California, we have six of those coming from Maracay. So those are stronger producers and we anticipate similar results to what we’ve had.

And Allen, this is Mike. Just to pile on here, I guess just to put numerically the numbers around it, just on the press release our absorptions were 2.2, we’re now absorbing over 3.3 already in the first seven weeks of this year, which is pretty consistent with last year’s pace we were one of the best absorbing homebuilding companies out there, in the first half of the year we average around 3.5 sales per community. So we’ve seen that pace pickup and we’ve seen the new community that we’ve already opened in January and February opens to pretty good success and high absorption rates and more specifically in Arizona as Doug mentioned in his prepared comments. So as we were disappointed in our absorption pace in November and December I mean we’ve seen a turnaround and we feel good about where we’re at right now.

That’s great to here. And then just a final part to that was just the vintage of lots on the new community openings are these primarily legacy WRECO assets or are these more recent land buys from ‘14?

Yeah Allen they really are more current buys and not related to more legacy party assets. So all pretty current mix of new product in all our markets.

And that’s why when we talk about our margin and our overall margin guidance between a range of 20 to 21 we will see stronger margins than that in the first half of the year because of the California deliveries of our older communities that are in backlog, but then we’re projecting that our margin does moderate a little bit because the new communities that Tom’s is referring to that have been acquired more recently until they actually open and we see the success of the pricing we expect those margin to be closer to 20%.

Understood, thanks and good luck.

Thanks, Alan.

Thank you. Our next question is coming from Nishu Sood of Deutsche Bank. Please proceed with your question.

Hi guys this is Tim Daley on for Nishu. First question I just wanted to touch on Houston a bit so Houston set of orders obviously seeing from 17% to 10% year-over-year closing similar about 14% to 10% and as you mentioned only about 8% of our assets due to your higher option lot strategy, but what I’m saying on the slide deck essentially you haven’t very changed the mix shift for your 2018 closings expectations still to be around 14% for the Trendmaker, kind of similar to what we’ve seen recently. Is this due to essentially the option strategy allowing you to turn the ship a bit faster than other builders in the region and what do you expect for ‘16 and ‘17 the closings out of Trendmaker?

This is Doug Tim, that’s correct I mean our option strategy allows us to renegotiate price and pace of each future lot take downs and that gives us a very flexible business model as we move through each new section. And so we will continue as I mentioned to pursue new community openings because it’s a very asset like model the returns on capital are very significant despite the market headwind, but we are going to continue to reposition ourselves in the best master plan communities because we have this option strategy that effectively we only own -- our land owned is what 3% of our land real estate inventory. So it’s very-very small so it gives us that flexibility to continue to be in the market that team at Trendmaker has always made money in our forecast is they will continue to do so.

Hey Tim this is Tom the other thing that adds to that question really is the fact that we are organically growing into Austin and that is helping us maintain our volume targets there.

All right. And just a follow-up on that essentially this 1.1 to 1.6 absorption pace that you mentioned is this a normal seasonal change for absorptions generally in Houston?

I mean the fourth quarter was slower than normal because of the persistent news on the energy sector at 1.1 we’ve seen better activity and normal is typically around 1.7 to 2 sales orders per community per month. So we’re just about there, but it’s going to be -- there’s a lot of storm clouds obviously in Houston, but we like our business strategy we really feel very confident about our team there and our operation to generate earnings going through these storm clouds.

All right thanks for that. My second question is regarding your SG&A guidance essentially SG&A guided to about up 20 basis points year-over-year is this coming from the 20% community count growth expected in ‘16? And additionally once these community versus seasoned is it correct to assume that SG&A will kind of resume the downward trend to get back to the typical 10% range or so.

Yeah there is actually two things going on there Tim and one which you mentioned which related to the increase in the new communities in over 70 new communities this year. But also our expansion into Austin we’re delivering just very few homes into Austin this year and also the start-up of our LA division related to our activation of our Golden Valley project there is expense associated there without the corresponding revenue, so it’s too fold. And we do expect our SG&A leverage to come down once these communities were open as well.

Alright. And any cadence that you can give us behind that?

Pardon me.

Any quarterly cadence on the SG&A higher than the first half that kind of…

Yeah it’s obviously from an G&A perspective it’s pretty pro rata across the quarters. And when you breakout the split it’s roughly 5.2 to 5.3 for each of those categories for us in G&A. The G&A is going to be pretty much divide that by four and yes it’s going to track with a little bit with closings, but it’s much higher in the first half of the year and much lower in the back half of the year. Third [ph] quarter will be the highest because there is fewer closing.

Perfect, thank you.

Thank you. Our next question is coming from Mark Weintraub of Buckingham Research. Please proceed with your question.

Thank you. The first question, I think just trying to understand a little bit more about the vintages of the land how you expect that to play out over the next couple of years. Because you have a lot of owned lots in California a lot of which I believe are fairly early vintage and presumably would be sustaining very high gross margins as you play those through. And so I understand your comment that you’re going to have a number of new communities that are going to be opening up. But I guess I would have thought that you still would have been having more of the higher gross margin particularly Pardee properties flowing through for the next little while. Is this is a temporary law or how would you kind of talk through how we might expect those lands come through?

Yeah Mark. The other thing that’s happening is obviously Houston we are planning some downward pressure on our margins in Houston year-over-year from ‘15 to ‘16 so that’s impacting our overall margin as well. When you look at California we feel pretty good about our margins in California and the legacy projects that we are opening from the Pardee assets still will contribute very strong margins. We’ve had some pressure on the west side of the Inland Empire on some of the Tri Pointe assets. But other than that I mean I think it’s probably an impact of newer communities coming out with the expectations of our margins being a little bit lower because until we actually go to market and price those products. And the combination of Houston margin being off a couple of hundred basis points.

But ultimately Mark like we’ve discussed once we are able to bring those longer dated Pardee assets into the marketplace I think you’re going to see some great results. And we’re encouraged and very optimistic about what we’ve been doing there and how we’ve been redesigning and planning our development of those projects that are going to lead to even greater economic benefit. And so I think we’re just getting there on the front end as we’re starting to activate as Doug talked about our one Golden Valley asset and that will coming to market early next year. And so we’re encouraged with the progress we’re making on those longer term assets.

And I would also add Mark I mean I think you were at the Investor Day and had a change to tour for examples specific Pacific Highlands Ranch. And Tom you can chime in him here, but you can’t just flood the market with all of those projects in the California Pardee because of the amount of development and entitlement it’s just normal process I should say not entitlement, normal processing and development timeframes for all those assets. So they are going to continue to just drive very nice margins for the next several years as we talked about last November. But we do have broader operation here with other markets that we’re in that do have an impact.

Okay, that’s helpful. And on the share repurchase you have announced $100 million repurchase authorization recently updated thoughts on anything that you might have done and or contemplation on what you might do?

Yeah I mean first of all Mark we’re a homebuilding company and we’re really not in a business to buy stock. Our passion is primary to buy quality land, close to employment centers and transportation corridors entitle and develop that land, design innovative new product, build quality homes for people to raise their families. And so as Dough mentioned our primary focus is to grow our homebuilding business to 5,100 to 5,400 annual deliveries within our existing platform by the end of 2018. So we don’t have any intentions of using our liquidity to purchase stock that would differ us from that goal. But with that being said we’ve also had -- have no intention to sit back and watch our stock continue to trade at below its booked value. Especially when management believes that its book value is already significantly understated due to the nature of the Reverse Morris Trust transaction related to WRECO where their assets came over at their historical basis. So we plan on being opportunistic. We’ve not acquired any stock because we couldn’t until we actually release our earnings and open our blackout period. But we plan on being opportunistic acquire in our stock if those conditions exist and thus primarily using available liquidity.

Okay, thank you. And then just one last one. Any color on where the increase in cancellations was taking place and kind of connected to that it sounded like November and December were little bit weaker than it’s feeling better again in January and the first part of February. Has the guidance you’ve given was that kind of largely set after what you saw November and December has it really incorporated some of this better feel you are seeing in January and February?

The delivery guidance is in line with what we mention at November investor meeting as far as where we -- I mean this isn’t a linear path that we are growing to 5,100 to 5,400 deliveries and we are opening over 70 communities this year and they don’t all unfold during the year. So we are right on plan as far as what we intend to see as our growth over the next three years, which is upwards of 30% in deliveries. So we are right where we want to be we’ve seen very good normal market results this year despite all the financial turmoil. I’m very pleased with the amount of traffic, with our sales basis as we mentioned, we had some recent opening in Tucson and Phoenix to some wonderful sales results at our center point community in Tucson, Rancho Vistoso and Morris and Ranch in particular. So everything is the consumer is fully engaged still despite the headline noise that we are hearing on the macro level.

But that being said Mark, I mean we did come into the year with probably less backlog because of our order pace in November December that fell off in our cancellation rate bumping up. You mentioned cancellation rate it was California and Texas had a fairly high cancellation rate during the quarter as we kind of work through our backlog and the quality of some of our buyers that typically happens in the fourth quarter. But we’ve seen a correction right away in January, our newer communities being open and our resourcing pace jumping right back up. But that certainly did impacted, I mean we are probably off let’s call it 150 orders from what our expectations might have been coming into the year.

Thanks for all help, thank you.

Thank you. Our next question is coming Patrick Kealey of FBR Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my question. So first when we think of fourth quarter I know in the past you’ve given color on the breakout with first-time home buyer. So just curious if you can give us 4Q orders what percentage that was first-time and if you have it maybe in January what that looks like and maybe how that compares to the same period last year?

Yeah, Pat, this is Tom. I mean our order pattern relative to the first-time home buyer has been very consistent probably about 30%, 35% of our orders are in that fire demographic and consistent in fourth quarter and Q1 as well.

Okay. And safe to assume that would look similar when we are thinking about 2016 guidance on closings?

Yes.

Okay, great. And then when we think about land spend for the year, how should we think about your -- looking at versus 2018 expectation, how should we think about new lot purchases between the brands, I mean should we think about it looking relatively consistent to what you have today in your lot inventory or are there kind of opportunities you are seeing in the market today that maybe shift that one way or the other?

I’d say it’s probably pretty consistent to what you are seeing today. I mean clearly we buy most of the land that we buy in California the higher price point and that’s in the TRI Pointe brand. We really don’t acquire much land at all in the Pardee brand with the exception of Nevada. Most of the dollars there is spent on land development. So when we’re looking our $800 million to $1 billion it’s roughly $400 million to $600 million in land acquisitions and lot of that is associated with land that’s already controlled. We’re taking down the lots moving forward. There is probably $200 million to $300 million of that number that are unidentified projects at this point in time for deliveries in 2018 and beyond. And then as its about $400 million of land acquisition dollars and that’s primarily in Pardee and maybe $20 million to $30 million in some of the other land build yeah.

Okay, great. Thank you guys.

Thanks, Pat.

Thank you. Our next question is coming from Will Randow of Citigroup. Please proceed with your question.

Hi good morning this is actually Scott Schrier in for Will. Thanks for taking my questions and congrats on the progress. My first question is I just wanted to ask you about when I look at the backlog price at TRI Pointe it looks like it’s actually decreased significantly from last year while conversely at Pardee I saw the opposite happen where it looks like you have some higher price point homes in backlog. So I just wondered if you can talk about some of the trends going on at the two brands there?

Yeah Scott this is Tom. You’re accurate in your assessment of where the trends are going relative to our backlog price. As it relates to our TRI Pointe brand, we are having a higher mix coming from our more easterly markets in both Southern and Northern California, which is driving that ASP down a little bit. And contrary to that as you look at the Pardee brand particularly in California we’ve got increasing shift in our Inland Empire markets to newer product, which is at a higher price point. Our San Diego communities are delivering comparable price points relative to new products offerings that we have. But we have sold out of one of our higher selling projects there in Alta Del Mar and so that will ultimately trend our average selling price down. In Nevada on our Pardee assets, we are introducing higher price points that have been really well received in the marketplace and very successful.

Thanks for that. And then I want to follow-up I believe you said that you expect Quadrant prices to be up about 15% in 2016 and I just wanted to see how much of that might be price versus how much might be mix and if it’s stronger than you had originally anticipated. Are you kind of catering to maybe design more higher rent homes there to match that demand?

Yeah so this is Doug. A lot of that increase is due to design and repositioning of the product in Core King County. But I’d also say that there is market appreciation that’s going on as well. So it’s combination of both.

Great, thanks appreciate you are taking my questions.

Yeah no problem.

[Operator Instructions]. Our next question is coming from Steven Kim of Barclays. Please proceed with your question.

Hi guys. This is actually Trey Morrish on for Steve. So first thing I want to ask about is, at the midpoint you’re really guiding for your gross margins to be down roughly 60 basis points. I was wondering if you could kind of break that up into a lower mix as indicated by your lower ASP guide land cost and labor cost and any potential offsetting factors to those?

Well I mean for us it’s primarily our new product that’s coming out. And that’s why our margins look like they’re coming in a little bit from the previous year. I mean we still have very strong margin delivery in the first and second quarter of this year. You look at Texas, Texas we do anticipate our margins to come in. Other than that I think we feel like we have a very strong margin and our new communities come into market are going to average around that 20%. One other thing that Tom mentioned is in San Diego, San Diego is a very high margin specifically at one asset and a very high ASP. Those ASPs are because of the new products that we’re releasing there, those ASPs come down significantly. And so it skews the overall weight of our company average margin.

Got you, that’s helpful. And then earlier in your prepared remarks you talked a little bit about similar constraint so I was wondering if you have -- and you mentioned that you see it existing for a while. Could you give us a sense like do you think that’s another quarter or two do you think that labor constraints are really going to be a longer term headwind for the industry looking another couple of years?

Well we’ve always anticipated the labor shortages that we have last year it didn’t affect our conversions in the year, but we’ve also anticipated the labor cost issues as you go forward, how long it last as we mentioned in November at our investor meeting as you continue to see starts and you have seen starts increase in Phoenix and then in Colorado starts to go up in a big stair step and if you were to draw a graph the labor community increases more on a flatter line and it eventually this catches up to start. So you’re going to have this lag effect that eventually the vendors will continue to retool and I’ve talked to number of our key vendors even in California and our guys in Arizona and they are bringing in more of the labor force both skilled and unskilled, but there is a lag effect. How long that is I’m not an economist, I don’t have my pulse on it we’re anticipating it being that way for 2016. But then one starts maybe flatten out then all of a sudden you are cough up. So it’s not perfect recipe but that’s the way we see it right now.

Trey there is some optimism out there that the impacted workers from the oil and gas sectors will begin to shift back into the residential construction sectors. So there’s some optimism, but I think as Doug said we are planning for it to persist certainly throughout 2016.

All right, thanks guys appreciate it.

Thank you. Our next question is coming from Alex Barron of Housing Research Center. Please proceed with your question.

Yes thank you can you hear me okay?

Yes hi Alex.

Hey good morning Doug, hey guys. So I wanted to ask on Houston you’ve alluded to slightly lower margins and you’ve also said you’re kind of expanding into other cities, so I was hoping to get a better idea what you’re seeing as far as the competitive landscape at this point is that just taking shape in the way of more incentives or are you having that compete on price? And then also what kind of community account expansion are you thinking about for I missed what you said I don’t know if you said Austin or San Antonio but what are your plans kind of there over the next couple of years?

Well take the latter half of that question, right now we’re focused on expanding into Austin San Antonio would also be on the radar screen, but we don’t have anything active that we’re pursuing there. As far as Houston our just in time lot inventory model there, which is different than really all the other brands allows us to continuously negotiate lot take downs and price street section. So our focus will be continue to be in the key master plan communities throughout Houston and as other builders that are longer in the two so to speak in land we will continue to negotiate new takedowns at different prices to meet our underwriting criteria of 18% to 22%. So that’s the beauty of the model we have there in Houston and we will continue that going into the year because eventually, I mean the interesting thing about Houston that a lot of people don’t understand or maybe don’t talk about is they had what over 100,000 jobs generated for a couple of years I think it was ‘13 and ‘14 and actually if you break that job growth down it was probably only 30% upwards of 30% let’s say 30,000, 20,000-30,000 that were energy related. I mean the other job growth that has gone on and this is what’s happening we’re feeling right now is you have the healthcare, the ports, the petrochemicals that has also been a very, very big job driver especially in the South and the Northeast. So I’m not saying that’s going to solve all the wows of Houston because it’s dominated by the headline noise right now, but even in our recent community openings we’ve seen some pretty good success that kind of buyer profile.

And then, Mike any guidance I know I missed it on tax rate for this year?

Tax rate 36%.

Okay, great. Thanks and good luck guys.

Thank you. At this time I’d like to turn the floor back over to management for any additional or closing comments.

Well thank you everybody for joining for us a fantastic year that we had in 2015. Again I want to thank all of the team members at the TRI Pointe Group. And we look forward to a very good 2016 and talking to all at the end of the first quarter. Thank you very much.

Ladies and gentlemen thank you for your participation. This concludes today’s teleconference. You may disconnect your lines at this time and have a wonderful day.