Green Brick Partners (NYSE:GRBK) FY Conference Summary Company Overview - **Foundation and History**: Green Brick Partners was founded in 2009 by Jim Brickman and David Einhorn, initially focusing on acquiring land and partnering with homebuilders during the Great Recession [2][3] - **Public Listing**: The company went public in 2014 and has since expanded its operations significantly, with a market cap just under $3 billion [4] - **Current Operations**: Headquartered in Plano, Texas, Green Brick operates in three states with seven brands, delivering 3,800 homes in over 100 communities last year [5] Financial Performance - **Q3 Results**: Home closing revenue decreased due to a decline in average sales price, which fell by approximately 4% to $524,000. Closings were 953, slightly below the record set in Q3 2024 [6] - **Gross Margins**: The company reported gross margins of 31.1%, significantly higher than the peer average of 20.2%. This marks 10 consecutive quarters of maintaining margins in the 30% range [9][10] - **New Orders**: A record of 898 new orders was achieved in Q3 2025, despite a slight year-over-year revenue decline [7] Strategic Direction - **Market Focus**: Green Brick is concentrated in business-friendly states with positive demographics and job growth, primarily in the Dallas-Fort Worth (DFW) area [10][11] - **Land Acquisition Strategy**: The company owns and controls over 41,000 lots, focusing on A and B locations with better access to amenities and employment centers [11][12] - **Product Offering**: The company targets buyers with higher discretionary income, with an average price point of $400,000 for its Trophy brand, which constitutes 50% of its volume [12][21] Operational Insights - **Cancellation Rate**: Green Brick maintains a low cancellation rate of 7%, compared to the industry average of 14%, indicating strong buyer commitment [14] - **Spec Strategy**: The company has adopted a spec strategy to manage inventory effectively, responding to market demand for quick move-ins [26][27] - **Labor Market**: The company reports no significant labor issues, with improvements in cycle time and quality due to an oversupply of labor in the market [33][34] Future Outlook - **Expansion Plans**: Green Brick aims to scale its Trophy brand in DFW, Austin, and Houston, with plans to introduce additional brands in these markets [21][24] - **Financial Services Growth**: The company is expanding its wholly-owned mortgage company, which is expected to enhance operational efficiency and reduce SG&A expenses [25] - **Market Conditions**: The company remains cautiously optimistic about the housing market, focusing on maintaining financial flexibility and operational efficiency [29][30] Key Challenges - **Economic Uncertainty**: The company acknowledges challenges such as elevated interest rates and an oversupply of homes, but remains focused on maintaining margins and strategic growth [9][10] - **Landlight Model**: Green Brick prefers a traditional builder-developer model over the landlight approach, which it views as less favorable in terms of capturing value and margins [19][32] Conclusion Green Brick Partners is strategically positioned in the homebuilding market with a focus on maintaining high gross margins, expanding its footprint in key markets, and leveraging its strong land position to navigate economic uncertainties. The company's commitment to operational efficiency and financial prudence is expected to support its growth trajectory in the coming years.

Financial Data and Key Metrics Changes - The company achieved net income attributable to Green Brick Partners of $78 million or $1.77 per diluted share, a decrease of 13% year over year [8][14] - Home closings revenue was $499 million, down 4.6% compared to the same quarter last year [13][14] - Gross margins decreased by 160 basis points year over year to 31.1%, marking the 10th consecutive quarter with margins exceeding 30% [8][14] - Year-to-date net income attributable to Green Brick Partners decreased 15% to $235 million, with diluted earnings per share declining 13.6% to $5.29 [15] Business Line Data and Key Metrics Changes - The company recorded 898 net orders, a 2.4% increase year over year, and closed 953 homes, just shy of the previous year's record [6][8] - Average sales price was $524,000, flat sequentially but down 4.2% year over year [13] - The average active selling communities remained at 103, with a sales pace of 2.9 per month, slightly up from 2.8 per month in the previous year [15] Market Data and Key Metrics Changes - Discounts and incentives increased to 8.1% of residential unit revenue from 5% year over year, reflecting affordability challenges [13] - The backlog value at the end of the quarter was $466 million, a decrease of 20% year over year, with an average backlog sales price down 4.1% to $690,000 [17] Company Strategy and Development Direction - The company is focused on maintaining operational excellence through disciplined land acquisition and development, targeting expansion in high-volume markets [9][10] - Plans to expand the Trophy Signature Homes brand into Houston by the spring selling season of 2026, aiming to serve first-time and move-up buyers [10][26] - The company is recalibrating its capital allocation plan to align with long-term growth objectives while responding to market conditions [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing affordability challenges and a weakening job market but expressed confidence in the company's ability to navigate these issues [20] - The company remains optimistic about long-term prospects, citing a strong balance sheet and strategic land position as key advantages [28] Other Important Information - The company maintained a robust cash position of $142 million and total liquidity of $457 million at the end of the quarter [18] - The mortgage company closed and funded over 350 loans in the third quarter, with plans to expand into Austin, Atlanta, and Houston [22] Q&A Session Summary Question: How should gross margins be viewed in the fourth quarter? - Management did not provide specific guidance on gross margins but highlighted strategic advantages that could help maintain margins [31][32] Question: What is the current status of mortgage rate buy-downs? - The advertised rate for buy-downs is just under 5%, with a focus on maintaining effective incentives without aggressive reductions [40][41] Question: How do incentives differ between DFW and Atlanta? - There are differences in incentives due to varying average price points and sales strategies in the two markets [42][44] Question: What is the outlook for the mortgage business? - The mortgage business is expected to sustain its growth, with plans for further rollout across Texas [50][51] Question: Are there any direct cost savings in labor and land costs? - Land and lot prices are stabilizing or slightly decreasing, while labor availability remains stable, contributing to cost reductions [52]

Financial Data and Key Metrics Changes - Net income attributable to Green Brick for Q2 2025 was $82 million, or $1.85 per diluted share, a decrease of 22% year over year [5][12] - Revenue for the quarter was virtually flat year over year at $547 million [6][11] - Homebuilding gross margins declined 410 basis points year over year to 30.4% [7][12] - Year-to-date net income decreased 16.8% to $157 million, and diluted earnings per share declined 15% to $3.52 [13] Business Line Data and Key Metrics Changes - Home closings increased by 6% year over year, totaling 1,042 homes [6] - Net new orders also increased by 6% year over year to 908, marking the highest for any second quarter in company history [6][12] - Average sales price declined by 5.3% year over year to $525,000 [11] - The average active selling communities remained relatively unchanged at approximately 102 [13] Market Data and Key Metrics Changes - Discounts and incentives increased as a percentage of residential unit revenue to 7.7% from 4.5% year over year [11] - The cancellation rate for the second quarter increased sequentially to 9.9% from 9.2% in the previous year [18] - The average FICO score for closed loans was 745, with a debt-to-income ratio of 38% [19][48] Company Strategy and Development Direction - The company is focused on maintaining an investment-grade balance sheet while navigating market volatility [8][15] - There is an emphasis on efficient cost controls, innovative home offerings, and targeted expansion in high-volume markets [8] - The expansion of the Trophy Signature Homes brand is a key strategic focus, with plans to enter the Houston market [9][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing affordability challenges due to high interest rates and decreasing consumer confidence [5][17] - The company remains optimistic about its ability to adapt to market conditions and maintain sales volumes [17][19] - Management believes that their investment-grade balance sheet provides a solid foundation for future growth [15][16] Other Important Information - The company returned $60 million of capital to shareholders through share repurchases, reducing outstanding shares by approximately 16% since 2022 [7] - The company plans to spend approximately $300 million on land development for the full year of 2025 [22] Q&A Session Summary Question: What is the incentive trajectory and expectations for July? - Management noted that incentives are currently around 8% and are seeing some leveling out, but conditions vary by neighborhood [26][27] Question: How much of the gross margin decline is due to price incentives versus mix? - Most of the gross margin decline was attributed to mortgage rate buy downs, with a small impact from mix [28][29] Question: What are the expectations for starts in the second half of the year? - Management indicated that starts will match sales, which have been consistent throughout the year [31][33] Question: How does the company view inventory levels today? - The company is focusing on finished homes, as buyers prefer to avoid uncertainty with mortgage rates [37] Question: What is the outlook on inventory levels among competitors? - Management observed little resale activity in their communities, indicating a stable demand for new homes [42][44]