Q4 2023 Green Brick Partners Inc Earnings Call

Operator: The Ultimate Parody Site! Good afternoon. Thank you for standing by, and welcome to the Green Brick Partners Inc. fourth quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Okay.

Good afternoon. Thank you for standing by and welcome to the Green brick Partners, Inc. Fourth quarter 2023 earnings call.

All lines, just inflation mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone. If you'd like to withdraw your question, again... Press star one. I would now like to turn the conference over to Rick Costello, Chief Financial Officer. Please, go ahead.

Who'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

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Now like to turn the conference over to Rick Costello, Chief Financial Officer. Please go ahead.

Richard A. Costello: Good afternoon, and welcome to Green Brick Partners' earnings call for the fourth quarter ended December 31, 2023. Following today's remarks, we will hold the Q&A. As a reminder, this call is being recorded and will be available for playback.

Good afternoon, and welcome to Green brick partners earnings call for the fourth quarter ended December 31 2023.

In today's remarks, we will hold a Q&A session. As a reminder, this call is being recorded and will be available for playback. In addition, our presentation will accompany today's webcast and is also available on the company's website at investors Dark Green brick partners Dot com.

Richard A. Costello: In addition, a presentation will accompany today's webcast and is also available on the company's website at investors.greenbrickpartners.com. On the call today is Jim Brickman, co-founder and chief executive officer. Jed Dolson, President and Chief Operating Officer, and myself, Rick Costello, Chief Financial Officer. Some of the information discussed on this call is forward-looking, including the company's financial and operational expectations for 2024 and beyond, and yesterday's press release in its SEC filing. The company detailed material risks that may cause our future results to differ from its expectations.

On the call today is Jim Brickman, co founder and Chief Executive Officer.

Jed Dolson, President and Chief operating Officer, and myself were Costello Chief Financial Officer.

Some of the information discussed on this call is forward looking including the company's financial and operational expectations for 2024 and beyond.

In yesterday's press release, and SEC filings the company detailed material risks that may cause our future results to differ from its expectations. The company statements are as of today March one 2024, and the company has no obligation to update any forward looking statements. It may make.

Richard A. Costello: The company's statements are as of today, March 1, 2024, and the company has no obligation to update any forward-looking statement. The comments also include non-GAAP financial... The reconciliation of these metrics and the other information required by Regulation G can be found in the earnings release that the company issued yesterday and in the presentation available on the company's website. With that, I'll turn the call over to Jim.

Our comments also include non-GAAP financial metrics, a reconciliation of these metrics and the other information required by regulation G can be found in the earnings release that the company issued yesterday and in the presentation available on the Companys website with that I'll turn the call over to Jim Jim.

James R. Brickman: Thank you, Rick. 2023 was an absolutely stellar year. We closed out 2023 with record results that reflect our strategic advantages, the Disciplined Approach, and the successful execution of our strategy by our talented and dedicated team. I want to express my deepest gratitude to every employee who has embraced our values, set forth in our acronym HOME, which represents honesty, objectivity, maturity, and efficiency. Our year was highlighted by the following record performance that we set in 2023 for the full year, record home closings revenue for the year of $1.77 billion, record home building gross margin of 30.9%, and Record Diluted EPS at $6.14. We also set a record for the number of homes closed for any fourth quarter at 825 units.

Thank you Rick.

23 was an absolutely stellar year for green brick.

We closed out 2023 with record results that reflect our strategic advantages our disciplined approach and the <unk>.

Execution of our strategy.

I've got a good team members.

I wanted to express my deepest gratitude to every employee well embraced our values set forth in our acronym pulp which represents honesty.

Activity maturity and efficiency.

Our year was highlighted by the following a record performance that we set in 2023 for the full year.

Home closings revenue for the year of $1 77 billion.

Record homebuilding gross margin of 39%.

And record diluted EPS of $6.14.

We also set a record for the number of homes closed for any fourth quarter at 825 years.

James R. Brickman: Significantly, our net new orders for the full year increased over 70% year over year to our record 3,356 homeowners, as you can see in slides 4, 5, and 6. Our net new order growth rate ranked the highest among our public builder home mailing peers. We also again achieved the highest gross margin of the public homebuilders in the fourth quarter and experienced the largest home building revenue growth for the full year. In 2023, we grew our book value by 26% to $27.84 per share. Additionally, we achieved a return on average equity of 24.9% despite having low leverage with a net debt, and total capital of only 11.4%. Looking ahead, we believe that our ability to source and entitle land, rigorous land acquisition on the right, and Continued Operational Improvements at our Division of Management and Land Development will continue to provide superior risk-adjusted returns. Consumer Confidence remained resilient in 2023 despite higher mortality rates.

Significantly our net new orders for the full year increased over 70% year over year.

So a record 3356 homes sold.

As you can see on slides four five and six are net new order growth rate ranked the highest among our public builder homebuilding peers.

We also again achieved the highest gross margin of the public homebuilders in the fourth quarter and experienced the largest home building revenue growth for the full year.

In 2023, we grew our book value by 26% to $27 94 per share.

Additionally, we achieved a return on average equity of 24, 9%, despite getting low leverage with a net debt to total capital of only 11, 4%.

Looking ahead, we believe that our ability to source and entitled land.

Rigorous land underwriting and continued operational improvements at our Division management and land development teams will continue to provide superior risk adjusted returns.

Consumer confidence remained resilient in 2023, despite higher mortgage rates.

James R. Brickman: We continue to see healthy demand for new homes in our markets driven by demographics and the lack of supply of existing homes entering the market. More importantly, DFW, our largest market, representing 71% of home building revenue, has continued to be among the nation's leaders in building starts and economic growth, according to U-Haul based on the rental of one-way U-Haul equipment. Texas netted the largest number of movers in 2023, making it the third consecutive year it has finished at the top, including Dallas and Austin ranking in the top 10 cities with new residents.

We continue to see healthy demand for new homes in our markets driven by demographic children's and the lack of supply of existing homes entering the marketplace.

More importantly, DFW, our largest market representing 71% of homebuilding revenues.

<unk> to be among the nation's leaders in building starts and economic growth.

According to U haul based on the rental one way you haul equipment.

Texas netted the largest number of movers in 2023.

And the third consecutive year. It has finished at the end.

Dallas and Austin ranking in the top 10 cities with new residents.

James R. Brickman: As shown on slide 7, DFW was number one among the nation's 12 largest metropolitan statistical areas in terms of job growth as of November 2023, with almost 140,000 new nonfarm payroll employment added in a trailing 12 month period. EFW had a 3.3% job gain rate that was almost double the 1.8% national rate, being the third largest homebuilder and one of the biggest homebuilding markets. Green Brick continued to benefit from favorable demographic trends and job growth. We also believe there's a large pool of talent.

As shown on slide seven DFW was number one over the nation's 12 largest metropolitan statistical areas in terms of job growth.

Therefore 2023.

With almost 140000, new nonfarm payroll employment added in a trailing 12 month period.

DFW ahead of three 3% job gains rate that was almost double the one 8% national increase.

Being the third largest homebuilder and what are the biggest homebuilding markets green brick continued to benefit from favorable demographic trends in job growth in the region.

We also believe there's a large pool of talent.

James R. Brickman: National Demand with 3 million additional millennials and Gen Z members entering the home building market over the next decade, as reflected on slide 10. We believe that bodes well for DFW Austin and the Atlanta metro areas, all of which have a younger population compared to the U.S. average. According to the U.S. Census, 45% of the U.S. population is under the age of 35.

National demand was 3 million additional millennials and Gen Z members entering the homebuilding market over the next decade.

Collected on slide 10.

We believe that bodes well for DFW Boston.

The Atlanta Metro areas, all of which have a younger population compared to the U S average.

According to the U S census, 45% of the U S population is under the age of 45, the percentages are 49% for DFW, 48% for Austin and 47% for Atlanta.

James R. Brickman: The percentages are 49% for DFW, 48% for U.S. Forty-seven percent. Sales of existing homes in 2023 dropped 19% year over year and fell to the lowest level in almost 30 years. Highlighting the Persistence Golden Hand, http://TheBusinessProfessor.com or a lot, low fixed-rate mortgages they're unwilling to relinquish, is shown on slide 8. The impact is more prominent in desirable infill and infill-adjacent submarkets where we have a strong presence, providing our industry-leading results. Over 80% of our revenues in 2023 were generated in these infill submarines. We believe that Green Brick is uniquely equipped to take advantage of the current market conditions with our strategic advantages in land position and development and entitlement activities. We consider ourselves to have one of the best land positions through years of consistent strategic land acquisitions in infill and infill adjacent submarines.

Sales of existing homes in 2023 dropped 19% year over year and fell to the lowest level in almost 30 years.

Hi, letting the persistent golden handcuffs effect on existing homeowners locked into the low fixed rate mortgages. They are unwilling to relinquish as shown on slide eight.

The impact is more prominent and desirable infill.

Infill adjacent Submarkets, where we have a strong presence broadening our industry leading results.

Over 80% of our revenues in 2023 were generated in these infill submarkets.

We believe the green brick is uniquely equipped to take advantage of the current market conditions with our strategic advantages and land position and development entitlement expertise.

We consider ourselves to have one of the best land positions through years of consistent strategic land acquisitions, and infill and infill adjacent submarkets.

James R. Brickman: A Decentralized Approach to Sourcing LANDx and Land Development has allowed us to unlock more high-quality land and amplify the strength of each bill. Each of our builders is, and has decades of market niche advantages from deep and extensive connections in their local markets that position them to source strong land and lots. Our builders' extensive local knowledge also enables them to address more complicated entitlement, regulatory, and development processes to locate.

Our decentralized approach and sourcing land acquisition and land development has allowed us to unlock more high quality land opportunities.

Amplify the strength of each builder.

Each of our builders is unique and has decades of market niche advantages from deep and extensive connections in their local markets that positions them to source strong land and lot positions.

Our builders extensive local knowledge also enables them to address more complicated entitlement regulatory and development processes.

Locations.

James R. Brickman: We believe that our ability to self-develop in markets where land developers are scarce gives us an advantage in generating the highest home building gross margins in the industry, as well as having better control over lot delivery, scheduling, and cost. As a result, approximately 83% of our total lots were owned on our balance sheet at the end of 2023. We believe we can continue to generate better returns than most peers who adopt land-like models that carry a hidden cost, a high capital paid to the providers of off-balance. On February 1st, 2024, as previously announced, we sold our 49.9% interest and Challenger Homes back to its founder, intending to use the proceeds of that approximately $64 million for investment in our other builders or other potential opportunities in larger markets where Green Brick is the control.

We believe that our ability to self develop and markets where land developers are scarce gives us an upper hand in generating the highest homebuilding gross margins in the industry as well as having better control of a lot delivery scheduling and cost.

As a result, approximately 83% of our total lots are owned on our balance sheet at the end of 2023.

We believe we can continue to generate better returns than most peers, who adopt land light models that carry a hidden cost a high capital paid to providers of off balance sheet financing.

On February one 2024, as previously announced we sold a 49, 9% interest in challenger homes back towards sounder.

We intend to use the proceeds of approximately $64 million for investment in our other builders or other potential opportunities in larger markets for our grain breakfast they control longer.

James R. Brickman: Our current focus is on the growth and expansion of our Trophy Signature Homes brand into the Austin market and other potential new markets. Our goal is to invest in large markets, with strong economic and demographic fundamentals where we can achieve scale and similar operating metrics as we do in our current. With this in mind, we are excited to announce that we just closed our first land transaction in Huffman, Texas, 25 miles northeast of downtown. The neighborhood will be co-developed with one of the largest public builders in the country. The 920 Home Community has excellent access to the newly constructed Grand Parkway, which provides proximity to major employment centers in Arlington, such as the Exxon corporate headquarters. Soapy Signature Homes will have 460 home sites with lot widths ranging from 40 to 50.

Our current focus is on the growth and expansion of our trophy signature homes brand in the Austin market and other potential new markets.

Our goal is to invest in large markets.

Strong economic and demographic fundamentals, where we can achieve scale and.

Similar operational metrics as we do in our current markets.

With this in mind, we're excited to announce that we just closed our first land transaction and Huffman, Texas 25 miles northeast of downtown Houston.

The neighborhood will be co developed with one of the largest public builders in the country. The 920 hope community has excellent access to the newly constructed Grand Parkway, which provides proximity to major employment centers and the oil and gas industries, such as the Exxon corporate headquarters.

Appropriate signature homes will have 460, homesites with lot with <unk>, ranging from 40 to 50 feet.

Richard A. Costello: Construction of the homes is currently scheduled to start in the second quarter of 2025, and we anticipate opening for sales in the late summer of 2025. This is our first community in the Houston market and is in a location into which we have been interested in expanding for several years. Houston, the fourth most populous city in the U.S., was the largest home building market with the most new home construction in 2023. Similar to DFW, Houston has a young and growing population and a strong market that we believe will create demand tailwinds at every level and move up home. Sulfi is in an excellent position to capture this demand with its value-rich products. With that said, I'll now turn it over to Rick to provide more detail regarding our financial results. Rick?

Construction of the homes is currently stated to start in the second quarter of 2025, and we anticipate opening for sales in the late summer of 2025.

This is our first community in the Houston market and it's in a location into which we have been interested in expanding for several years.

Austin the fourth most populous city in the U S, whereas the largest home building market with the most new home construction in 2023.

Similar to DFW, Houston has a young and growing population and a strong market that we believe will create demand tailwind for entry level and move up homes.

Trophy is in an excellent position to capture this demand with their value rich products.

With that I'll now turn it over to Rick to provide more detail regarding our financial results Rick.

Richard A. Costello: Thank you, Jim. Please turn to slides 11 and 12 of the presentation. Home closings revenue for the fourth quarter grew 4.6 percent year over year to $448 million, bringing full year home closings revenues to a record high of $1.77 billion. This represents a growth rate of 4.2%, the highest among public home builders. Our public peers experience an average home closings revenue decline of 5.6%.

Thank you Jim.

Please turn to slides 11, and 12 of the presentation.

Home closings revenue for the fourth quarter grew four six year over year to $448 million, bringing full year home closings revenues to record high of $1 77 billion. This represents a growth rate of four 2% the highest among public homebuilders our public peers.

And the average home closings revenue decline of five 6%.

Richard A. Costello: Revenue growth was driven by a 13% year-over-year increase in homes delivered to 825 units, partially offset by an 8% decline in ASP to $544,000. The anticipated decline in ASP was predominantly driven by year-over-year increases and a percentage of Trophy Signature Homes, closed homes in more perimeter locations, as well as by a change in product mix within Trump. Brophy represented 45% of the total number of closings in 2023 versus 38% in 2022. Additionally, our home building gross margin continued to lead our public home building peers, as shown on slide four. During the fourth quarter, gross margin remained elevated at 31.4%, up 520 basis points year-over-year.

Revenue growth was driven by a 13% year over year increase in homes delivered to 825 units, partially offset by an 8% decline in ASP to $544000.

The anticipated decline in Asps was predominantly driven by year over year increase in the percentage of trophy signature homes closed homes and more perimeter locations as well as by a change in product mix within trophy.

Brokerage represented 45% of the total number of closings in 2023 versus 38% in 2022.

Our homebuilding gross margin continued to lead our public homebuilding peers as shown on slide four.

In the fourth quarter gross margin remained elevated at 31, 4% up 520 basis points year over year.

Richard A. Costello: The sequential decline of 190 basis points from Q3 was due to higher incentives on spec homes when mortgage rates peaked in October. Full year gross margin was 30.9%, the highest full year margin in company history and the highest among our public home building peers. Net income attributable to Green Brick and diluted earnings per share for the fourth quarter increased 31.5% and 33.9%, respectively, to $73 million and $1.58 per share. For the full year, diluted EPS increased 2% year-over-year to $6.14 per share.

Sequential decline of 190 basis points from Q3 was due to higher incentives on spec homes when mortgage rates peaked in October.

Full year gross margin was 39% the highest full year margin in company history, and the highest among our public homebuilding peers.

Net income attributable to green brick and diluted earnings per share for the fourth quarter increased 31, 5% and 33, 9% respectively.

$3 million and $1 58 per share.

Full year diluted EPS increased 2% year over year to $6 14 per share.

Richard A. Costello: During the fourth quarter, net new home orders increased 61% year-over-year to 679 homes sold. For the full year 2023, net new orders increased 70.1% year-over-year to 3,356, the highest growth rate in the home building industry and the highest number of annual new orders in company history. Jed will provide more detail on the sales environment shortly, but limited competition from both existing homes and new construction in our infill and infill-adjacent locations has allowed us to meet the unmet demand in the sought-after locations. Active selling communities at the end of Q4 increased 14% year-over-year to 91, and our quarterly absorption rate increased 38% to 7.6 homes per average active selling community. For the full year, our quarterly absorption rate was 9.9 percent for Average Active Selling Community. Our cancellation rate for the fourth quarter remained low at 7.2 percent, the lowest among public home building peers, as shown on slide 13.

During the fourth quarter net new home orders increased 61% year over year to 679 homes sold.

For the full year 2023, net new orders increased 71% year over year to 3356, the highest growth rate in the homebuilding industry and the highest number of annual new orders in company history.

Ken will provide more detail on the sales environment, shortly but limited competition from both existing homes and new construction in our infill and infill adjacent locations have allowed us to meet the unmet demands in these sought after locations.

Active selling communities at the end of Q4 increased 14% year over year to 91 or.

Our quarterly absorption rate increased 38% to seven six homes per average active selling community for.

For the full year, our quarterly absorption rate was nine nine homes per average active selling community.

Our cancellation rate for the fourth quarter remained low at seven 2% the lowest among public homebuilding peers as shown on slide 13.

Richard A. Costello: Our backlog value at the end of the fourth quarter increased 50% year over year to $555 million, and backlogged ASP slightly increased 4.9% to $721,000. Profi is run as a spec homebuilder with high inventory turn rates and now represents a low percentage of overall backlog value at approximately 10%. The number of spec units under construction as a percentage of total units under construction increased sequentially to 70% at the end of the fourth quarter due to the higher number of specs at trophy, which reflects our intentional strategy to provide homes nearing completion to qualified buyers ready to, as shown graphically on slide 13, satisfy the appetite for homes in our target market. We've ramped up starts further to 948 units during the fourth quarter, over triple the starts in 4-2-20 For the full year, we started 34% more homes year over year for a total of 3,327 starts.

Our backlog value at the end of the fourth quarter increased 50% year over year to $555 million.

Backlog asps slightly increased four 9% to $721000.

Brokerage is one as a spec homebuilder with high inventory turn rates and now represents a low percentage of overall backlog value at approximately 10%.

Units under construction as a percentage of total units under construction increased sequentially to 70% at the end of the fourth quarter.

To the higher number of specs that trophy, which reflects our intentional strategy to provide homes nearing completion to qualified buyers ready to close.

As shown graphically on slide 13 to satisfy the appetite for homes in our target markets. We ramped up starts further to 948 units during the fourth quarter over triple the starts in <unk> 'twenty, two and up 8% sequentially.

For the full year, we started 34% more homes year over year for a total of 3327 starts.

Richard A. Costello: Our home starts for the last nine months have now averaged almost 900 homes per quarter. Our industry-leading results would not have been possible without our financial and Investment Grade Valid. We believe that our strong balance sheet demonstrates our ability to manage capital effectively, operate and execute our strategies efficiently, withstand challenges, and capitalize on opportunities for growth. At the end of the year, our net debt to total capital ratio was 11.4%, and our debt to capital ratio was only 21.1%, one of the lowest among our public home building peers, as shown in the slides. 100% of our data outstanding at year-end is fixed rate and with a weighted average interest rate of 3.3%.

Our home starts for the last nine months have now averaged almost 900 homes per quarter.

Our industry, leading results would not have been possible without our financial discipline and investment grade balance sheet.

We believe that our strong balance sheet demonstrates our ability to manage capital effectively operate and execute our strategies. Additionally, withstand challenges and capitalize on opportunities for growth.

At the end of the year, our net debt to total capital ratio was 11, 4% and our debt to capital ratio was only 21, 1% one of the lowest among our public homebuilding peers as shown on slide six.

100% of our debt outstanding at year end is fixed rate and with a weighted average interest rate of three 3%, our low leverage and cost of debt have enabled us to retain more profits to fund our growth.

Richard A. Costello: Our low leverage and cost of debt have enabled us to retain more profits to fund our growth. Additionally, we have $180 million of cash on hand at the end of the year, ready to deploy for strategic opportunities that we believe will bring strong returns for our shareholders. With that, I'll now turn it over to Jed.

Additionally, we have $180 million of cash on hand at the end of the year ready to deploy for strategic opportunities that we believe will bring strong returns for our shareholders.

With that I'll now turn it over to Jed Jed.

Jed Dolson: Thank you, Rick. Net orders for the full year grew 70% year over year, the highest growth rate in the industry. To achieve this growth, we constantly assess our sales each day in all communities. We monitor demand, mortgage rates, and our competitors, and then adjust pricing and incentives as needed. Incentives peaked in October when mortgage rates hit a 23-year high. However, demand quickly resumed in November and December as some buyers were ready to take advantage of the decline in mortgage rates. As a result, incentives dropped from 6% in October to 5.2% in December. However, net orders remain steady in November and December, despite the typical sales slowdown around the holiday season.

Thank you Rick net orders for the full year grew 70% year over year, the highest growth rate in the industry.

To achieve this growth we constantly assess our sales each day in all communities.

Monitor demand mortgage rates and our competitors and then that just pricing and incentives as needed.

Tenants peaked in October.

When mortgage rates hit a 23 year high however demand quickly resumed in November and December at some buyers were ready to take advantage of the decline in mortgage rates.

As a result incentives dropped from 6% in October to five two in December.

Net orders remained steady in November and December despite the typical sales slowdown around the holiday season.

Jed Dolson: We won't be specific on early 2024 orders other than to say sales velocities thus far in the quarter have meaningfully accelerated from our Q4 level. And, as always, we remain diligent in monitoring any shifts in the market dynamics. The lack of supply in affordable homes has created a favorable backdrop for our value proposition builder, Trophy Signature Homes. Trophy was founded in 2018, and it offers more affordable products that cater to both entry-level and first-time move-out homebuyers. We believe homebuyers targeted by trophy represent a deep and growing pool of potential customers. Census founding the number of trophy homes has grown from 33 closings in 2019 to 1,378 in 2023, as shown on slide 14. It's Sheriff Greenbrick's Revy has also grown from less than 2% in its first year to more than 38% in 2023.

We won't be specific on early 2024 orders other than to say sales velocities, thus far in the quarter have meaningfully accelerated from our Q4 levels.

And as always we remain diligent on monitoring any shifts in the market dynamics.

The lack of supply and affordable homes has created a favorable backdrop for our value proposition and builder trophy signature homes.

<unk> was founded in 2018.

And offers more affordable products that CAGR to both the entry level and first time move up homebuyers.

We believe homebuyers targeted about trophy represent a deep and growing pool of potential customers.

Since its founding trophy has grown from 33 closings in 2019 to 1378 and 2023.

On slide 14.

It's sure Greenberg's revenues has also grown from less than 2% in its first year to more than 38% in 2023.

Jed Dolson: In 2023, Trophy was individually ranked as the 7th largest home builder in DFW, based on the number of SCARs. However, we believe that 2023 was more than just a successful year for Trophy. It can also serve as a springboard for sustainable growth going forward based on our lot inventory, product desirability, operational efficiency, and scalability. Krofi's homes feature airy, open spaces and resonate with customers from a wide-ranging background, especially among our younger buyers. Many features that come standard with Trophy are expensive upgrades with other built-ins. Trophy is also a leading builder in constructing energy efficient homes that bring savings to homebuyers for years to come, including offering, in many homes, fully encapsulated spray foam insulation. Tankless Water Heaters, and Energy Star Appliances

In 2023, Crocheting was individually ranked seventh largest homebuilder in DFW.

Based on number of starts.

We believe that 2023 was more than just a successful year for Turkey.

Can also serve as a spring board for sustainable growth going forward based on a lot of inventory.

Product desirability operational efficiency and scalability.

Turkey is homes feature Aerie open space and resonate with customers from a wide range of backgrounds, especially among our younger buyers.

Any features that come standard with trophy.

Our expensive upgrades with other builders.

Trophy is also a leading builder and constructing energy efficient homes.

It brings savings homebuyers for years to come.

<unk> offering in many homes fully encapsulated spray foam insulation.

Tankless water heaters and energy Star appliances.

Jed Dolson: Trophy is designed to be efficient and spec heavy. This strategy is critical in a mortgage rate environment. As many homebuyers today favor move in, raise home, our streamlined home buying process, including our high-level standard features, eliminates decision fatigue for many buyers. This approach also creates predictability in material selection and cost, enabling Trophy to be efficient in managing the construction process with purchase orders and simplified start packs. As a result, the current cycle time for TROPHY is 3.9 months compared to a peak cycle time of 9 months in 2022. For Green Brick overall, the current cycle time is 5.7 months, down from a peak cycle time of 10 months in 2022. Trophies Construction Model, also highly scalable in location egg mouse.

Trophy is designed to be efficient and spec heavy this strategy is critical in the mortgage rate environment.

As many homebuyers today favor.

Move in rate.

Our streamline home buying process, including a high level standard features.

Its decision fatigue for many buyers.

This approach also creates predictability and material selection and calls.

Enable on trophy to be efficient in managing the construction process with purchase orders some <unk>.

I'd start package.

As a result, the current cycle time for trophy is three nine months compared to a peak cycle time of nine months in 2022.

For Green brick overall, the current cycle time is five seven months downturn peak cycle time of 10 months in 2022.

Trophies construction model is also highly scalable and location agnostic, we were able to successfully plus Turkey playbook across the DFW metroplex as well as Austin, a more challenging market in DFW in 2023.

Jed Dolson: We were able to successfully apply Trophies Playbook across the DFW Metroplex, as well as Austin, a more challenging market than DFW in 2023. We have had great success in Austin since we opened our first community at the end of July 2023. The sales pace in Austin during the fourth quarter averaged 4.5 homes per month, while incentives were consistent with Trophy's DFW mark, and we look to replicate that same success in Houston in 2025. As we look forward, we remain focused on investing in land in a disciplined way.

<unk> had great success in Austin since we opened our first community at the end of July of 2023 sales based in Austin during the fourth quarter averaged four five homes per month, while incentives were consistent with trophies DFW market.

We look to recreate that same success in Houston in 2025.

As we look forward, we remain focused on investing in land in a disciplined way.

Jed Dolson: In 2023, we spent a total of approximately $425 million in purchases of land and finished lots, as well as land development. We expect to ramp up our spend in 2024 for raw land acquisitions, finished lot purchases, and land development to approximately $700 million in total. Ultimately, the strong buyer demand we've seen across all of our brands confirms our belief that strategically located infill and infill adjacent communities represent a significant opportunity for growth and high sales velocity. With strong starts and shorter cycle times, we believe that Green Brick is entering 2024 with a strong platform for generating growth and continuing to provide strong returns to our shareholders. Lastly, during the fourth quarter, we resumed stock buybacks and repurchased approximately 374,000 shares of stock at $47.09 per share. For the full year, we repurchased 1.18 million shares of stock at $38.46 per share for a total of 45.3 million, representing approximately 2% of our shares outstanding.

In 2020, we spent a total of approximately $425 million in purchases of land and finished logs.

As well as land development, we expect to ramp up our spend in 2024 for raw land acquisitions finished lot purchases and land development to approximately $700 million and total ultimately the strong buyer demand, we're seeing across all of our brands confirms our belief that is true.

Strategically located infill and infill adjacent communities represent a significant opportunity for growth and high sales velocity.

With strong starts and shorter cycle times, we believe the Greenberg is entering 2024 with a strong platform for generating growth and continuing to provide strong returns to our shareholders.

Lastly, during the fourth quarter, we resumed stock buybacks and repurchased approximately 374000 shares of stock at $47.09 per share.

For the full year, we repurchased 1.18 million shares of stock at $38 46 per share for a total of $45 3 million reps.

Representing an approximately 2% of our shares outstanding.

James R. Brickman: Share repurchases will remain in our toolbox as we continue to evaluate other investment opportunities as we strive to continue to deliver one of the best risk-adjusted returns in the industry. With that, I'll turn it over to Jim for closing remarks.

Share repurchases will remain our toolbox as we continue to evaluate other investment opportunities as we strive to continue to deliver one of the best risk adjusted returns in the industry.

I'll turn it over to Jim for closing remarks.

Jim.

James R. Brickman: Thank you, Jed. 2023 was a phenomenal year for us, marked by record results despite a challenging high interest rate environment. I would like to extend my heartfelt appreciation to our employees for the collective efforts of delivering exceptional service to thousands of homebuyers, as well as generating industry-leading performance. We remain steadfast in our commitment to delivering long-term value to our shareholders. As we look forward into 2024, the dynamic housing landscape creates many opportunities for our land and latkes. Financial Strength.

Thank you Jed.

23 was a phenomenal year for green brick marked by record results. Despite a challenging high interest rate environment.

I would like to extend my heartfelt appreciation to our employees for their collective efforts are delivering exceptional homes to thousands of home buyers as well as generating industry leading performance.

We remain steadfast in our commitment in delivering long term value to our shareholders.

As we look forward into 2020 for the dynamic housing landscape creates many opportunities.

Our land and lot positions financial strength and highly motivated and experienced employees sets the stage for an exciting future.

Operator: High motivated and experienced employees set the stage for an exciting, In closing, I am extremely pleased with our first quarter results, and we look forward to building on this momentum in the quarters to come. This concludes our prepared remarks, and we will now open the line for questions. Thank you. The floor is now open for questions, so to ask a question this time, please press star then the number 1 on your telephone keypad.

In closing I am extremely pleased with our first quarter results and we look forward to building on this momentum in the quarters to come.

This concludes our prepared remarks, and we will now open the line for questions. Thank you.

The floor is now open for questions. So to ask question. This time. Please press Star then the number one on your telephone keypad.

Operator: At this moment, we'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Alex Rygiel with B Riley. Please go ahead. Thank you and congratulations, gentlemen, on a nice year. A few questions here first. It definitely sounds like sales activity in the early part of this year has started out very, very strong. It appears that the first quarter of the past three years has been your highest new order period throughout the year. So I guess my question here is two parts.

At this moment, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line, Alex Rygiel with B Riley. Please go ahead.

Okay.

Thank you congratulations on a nice year few questions here first.

Definitely sounds like sales activity in the early part of this year has started off very very strong.

It appears that the first quarter over the past three years has been your highest new order period throughout the year. So I guess my question here is.

Jed Dolson: Number one, maybe you can kind of help us to understand that sort of quarterly cadence that you've realized over the last three years and why that is relative to your business. And then, secondly, do you anticipate that the first quarter of 2024 could also be the biggest quarter of the year? No new homework. Hey, Alex, this is Jed Dolson.

Two parts number one.

You can kind of help us to understand.

That sort of quarterly cadence that you've realized over the last three years.

And why that is relative to your business.

And then secondly, do you anticipate that the first quarter of 2024 could also be the biggest quarter of the year for.

Net new home orders.

Hey, Alex this is Jed dolson, yes.

Jed Dolson: Yes, you're correct that this spring is looking a lot like last spring for us, which looks like the spring before that. I think historically, the spring market in real estate has been the biggest quarter. And we're no different than probably other builders and seeing that same trend. Alex, hey, this is Rick Costello.

Yes, you're correct that.

This spring.

Look a lot like last spring for us, which is looks like the spring before that I think historically, the spring market and real estate has been the biggest quarter.

And we're no different than probably other builders and seeing that same trend.

Okay.

Alex This is hey, this is Rick Costello. Thanks, Thanks for joining.

Richard A. Costello: Thanks for joining us. You know, in 2021, early 2021, that's when price wasn't stopping anybody from buying, we were raising prices, and people were just pounding down the doors. Last year, it ended up being the high mark for the year because of what happened to rates in Q2. And, you know, basically, for the last six, seven months of the year, nobody was selling houses. So that was a little bit of an anomaly.

In 2021 early 2021.

When price wasn't stopping anybody from from buying and we were raising price and people were just pounding down the doors.

Last year it ended up being the high Mark for the year because of what happened to rates in Q2, and basically for the last six seven months of the year Nobody was selling houses so that was a little bit of an anomaly.

James R. Brickman: But 2023, the buyers woke up, you know, like Jed said, they've woken up again, certainly the movements and stabilization in rates last year and them actually coming down early this year have been certainly blessings for the buyer. And then secondly, when you think about the increase in land spend, have you witnessed any land price inflation out there in the marketplace, or do you anticipate any? This is Jim.

But 2023, the virus woke up like Jed said.

They've woken up again, certainly the movements and stabilization in rates last year, and some actually coming down early this year, we have been.

Certainly blessings for the buyers.

And then secondly, when you think about the increase in land spend have you witnessed any land price inflation out there in the marketplace or do you anticipate any.

This is Jim we haven't seen land price.

James R. Brickman: We have seen land prices. Inflation. It's a competitive business for the better sites. A lot of the large peers, just like Green Brick, have deal leverage; they have a lot of cash. We think that we still have a strategic advantage in the land side of our business because, particularly in some larger neighborhoods where they have mixed product types that we can put a Southgate Homes in that's a high price point, a CB Jenny that's a townhouse price point, and really, unlike a pure lot developer, when we're going through the entitlement process, we can actually show the municipalities the product that we're going to build. You know, it's not like it's the first time we've built a neighborhood in many of these communities where we're doing entitlement; it may be our, How many communities have we built in Frisco? That's a very difficult community. Jed, 14? Yeah, 14 or 15.

Inflation.

It's a competitive business for the better sites.

A lot of the large peers, just like green brick have deleverage to have a lot of cash.

We think that we still have a strategic advantage in the land side of our business because particularly.

Particularly on some larger neighborhoods, where they have mixed product types that we can put our southgate homes and Thats a high price point.

Jimmy that's a townhouse price point and really unlike a pure lot developer when we're going through the entitlement process, we can actually show.

Municipalities product that we're going to build it's not product that might sell to some other builders, it's a townhouse builder or a volume production builder and we think that's really a huge advantage when youre going through the entitlement process plus.

It's not like it's the first time rebuilt our neighborhood and many of these communities were doing entitlement it may be or.

How many communities, we done in Frisco, and Thats, a very difficult community Jed <unk>.

Richard A. Costello: And so we have a long track record in these larger, very active communities of doing what we say we're going to do, and they have a long, good history with us. Alex, this is Rick again. One of the dynamics here is that Green Brick really is different from most of the homebuilders out there. We're not doing anything off the balance sheet. We don't have a double-digit cost of capital on buying finished lots. When we're talking about land prices, these are deals that are being underwritten now that we're looking at bringing lots to the market in 2025-2026. We have a huge number of lots on our balance sheet that we've been developing. Because we're not buying finished lots, most everything is self-developed. We're not going to see what's happening on the land side until 2025-2026. On the lot side, we're going to look like last year, in terms of the cost perspective. Yeah. Thanks, Alex. I appreciate your question. Our next question comes from the line of Carl Reichardt. B-P-I-G. Peace. Go ahead.

And so we have a long track record and these larger.

Very active communities are doing what we say, we're going to do and they havent.

Good history with us.

Alex This is Rick again, I wonder if the dynamics here.

That green brick really is different from most of the homebuilders out there we're not doing anything off balance sheet. We don't have a double digit cost of capital on buying finished lots when we're talking about land prices. These are not these are deals that are being underwritten now that we're looking at bringing the loss to the market in 2025 2000.

26.

We have a huge number of lots on our balance sheet that we've been developing.

We are not because we're not buying finished lots most everything is self developed.

We're not going to see that.

What's happening on the land side.

And until 'twenty five 'twenty six and on the lot side, we're going to look like last year.

Thanks, Jeremy.

Cost perspective, yes, thanks, Alex I appreciate your questions.

Our next question comes from the line of car braking.

<unk>. Please go ahead.

Carl Edwin Reichardt: Thanks. Hey guys, hope you're doing well. So Jed, or whoever wants to answer this, please do so.

Thanks, Hey, guys hope you're doing well.

So.

Dead or whoever wants to answer this.

Jed Dolson: We've seen a lot of your peers move, over the last few years, pretty aggressively into what will be considered entry-level housing, low-end pricing. So as you look at what they're doing and you contrast Trophy Signature's product and, strategy tactics, however you want to put it. What do you think the relative advantages of Trophy are over the product that other builders are putting up for that similar price? Yeah, sure, Carl. I'll start by just reminding everybody that 60% of our business is non-trophy today and is in, you know, those are infill locations where we face very little competition. 40% is a trophy.

We've seen a lot of your peers move.

Over the last few years pretty aggressively into what will be considered entry level housing low end price point. So as you look at what Theyre doing and you contrast trophy signatures product.

And.

Strategy tactics, however, you want to put in.

What do you think the relative advantages of trophy are over the product that other builders are putting up for that similar consumer.

Yes sure Karl.

Start with just reminding.

Everybody that 60% of our business is non trophy today and is in those are infill locations, where we face very little competition.

40% is correctly.

Jed Dolson: You know, we think the advantages there are that we are infill adjacent, and we have really attractive lot prices and better locations than, say, these D and F locations. Additionally, you know, our homes are very energy efficient compared to most every pier. We utilize, or we get the 45L rebate credit back on about 100% of trophy homes this year. And, you know, the architecture is a little bit newer and fresher than some of the stuff that older builders that have been doing this for a long time have been doing. So, as we mentioned during the call, Trophy's grown to be the seventh biggest builder in DFW, which is the largest housing market in the country. We're very proud of that fact, and we're trying to climb even further up that ranking. Thank you, Carl.

We think the advantages there are that we are infill adjacent.

We're in really attractive lot prices in <unk>.

Better locations and say these D&S locations. Additionally, we.

Our homes are very energy efficient compared to most most every peer.

We utilize.

Get the 45 L rebate credit back on about 100% of trophy homes.

This year.

And.

And you know on the architecture is a little bit newer and fresher than some of the stuff that older builders. They have been doing this for a long time.

<unk> been doing so as we mentioned during.

During the call Trophy has grown to the seventh biggest builder in DFW, which is the largest housing market in the country very proud of that fact, and we're trying to climb even further up.

That ranking.

Yes.

Thank you Karl we were we were we were pleasantly surprised that one of the top.

James R. Brickman: We were, we were, we were pleasantly surprised that one of the top three builders, I'm going to keep putting three in the group, almost kind of dumbed down and copied some of our more contemporary elevations. You know, we found that many millennial buyers really don't want to live in their parents' entry-level home. And that's really been, you know, branding typically is an interesting thing to analyze, but they really don't want to live in their parents' home for the largest builder's home. Yeah, I understand. Thank you for that. I appreciate the comprehensive answer.

Top three builders to keep it at three in the group.

Almost kind of dumb down and copied some of our more contemporary elevations.

We found that many of the millennial buyers really don't want to live in their parents entry level home and Thats really been.

Branding typically is an interesting thing to analyze but they really don't want to live in their parents' home.

For the largest builders hub.

I understand thank you for that and I appreciate that comprehensive answer and then did you also I think it was D. J D. You said something kind of interesting about Austin and its ramp and the sales pace.

Jed Dolson: And then Jed, you also, I think it was you Jed, you said something kind of interesting about Austin and its ramp and the sales space. Strong, but you said that incentives there were kind of consistent with what you saw. I assume you meant with Trophy in Dallas, and it seems like the Dallas market, generally speaking, has held up better sort of if you look at the macro data then then Dallas has, so I'm interested in that dynamic, and then the follow-on related to incentives is a, and I know you're not talking about order cadence for the first quarter yet, but can you Well, we can all take that, Carl. We're actually in Austin right now.

Strong, but you said that incentives there we're kind of consistent with what you saw I assume you meant with with trophy and Dallas and it seems like the Dallas market. Generally speaking has held up better sort of if you look at the macro data than than than Dallas has.

I'm interested in that dynamic and then the follow on related to incentives as I know youre not talking about order cadence in the first quarter, yet, but can you talk about the trend in sales incentives or pricing across the green brick portfolio in the first quarter thus far.

We can all take.

Carl.

We're actually in Austin right now, we do plan on property tours.

James R. Brickman: We went on property tours all day yesterday and looked at some properties we have under contract. And it's tougher than Dallas. Margins are lower than Dallas, but incentives are higher than Dallas. At the same time, we think Austin is the sixth or seventh largest housing market in the country. We're very excited about the long term. You know, I think we look at things differently than many public builders. We aren't trying to juice up any quarter up or any next quarter up.

<unk>.

Day yesterday and looked at some properties, we have under contract and.

Okay.

It's tougher.

Dallas margins are lower than Dallas incentives are higher than ours.

At the same time, we think Austin is sixth or seventh largest housing market in the country. We're very excited about the long term.

I think we look at things differently than many public builders.

We arent trying to juice any quarter up or any next quarter out we're really looking what's best for our business four and five years down the road and so yes incentives or greater here margins are lower here, but we think our trophy is going to be really a top builder here eventually.

James R. Brickman: We're really looking at what's best for our business four and five years down the road. And so, yes, incentives are greater here. Margins are lower here. But we think our trophy is going to be a top builder here eventually, four or five years down the road. Carl, hey, this is Rick.

Four or five years down the road.

Carl.

Richard A. Costello: Thanks for your questions. From a directional standpoint, incentives are down in the first quarter from where they were in Q4. Like Jed said, over 60% of our business is not trophy, which means that it's all in infill-infill adjacent, pretty much. We have seen demand through the first quarter at every single price point, you know; we're selling $300,000 to $2 million. It's not just a trophy story, but certainly from a sales floor standpoint, we have everybody pit and stride with sales success and margin success. Great. Thank you, Rick.

This is Rick thanks for your questions.

From a directional standpoint.

Incentives are down in the first quarter from where they were.

Through Q4.

Like Jeff said over 60% of our business is not trophy and which means that's all in infill infill adjacent pretty much.

We have seen demand through the first quarter and every single price point, we're selling 300000 to $2 million.

And.

So we're it's not just a trophy story, but certainly from a salesforce standpoint, we have everybody pit in stride.

With sales success and margin success.

Great. Thank you Rick I'll get back in queue guys.

Richard A. Costello: I'll get back to you guys. Thanks. Our next question comes from the line of Jay McCanless, Wedbush, please go ahead. Hey, good afternoon, everyone.

Great.

Thanks.

Yes.

Our next question comes from the nine of Jay Mccanless with Wedbush. Please go ahead.

Hey, good afternoon, everyone.

Jay McCanless: The first question I had, you called out the co-broker being up, and that was the reason that CNAD levered. What are those trends doing in the first quarter, similar or getting any better? It's been consistent. Hey Jay, it's Rick.

The first question I had you called out the co broker being up and that was the reason SG&A de levered.

Are those trends doing in the first quarter, similar or getting any better.

Alright, it's been consistent Hey, Jay it's Rick how are you doing.

Richard A. Costello: How are you doing? It's been consistent since Really the end of 22 that we've seen co-broke activity back to where it was, and the payments were back to where they were, so there really were no surprises that our SG&A has been consistently higher throughout 2023, by about a percentage point, maybe a little bit higher for the full year, a little bit less for Q4. You know, I saw you had a comment today. There are no SG&A surprises, but I think that when you look at non-controlling interest, it was a little bit higher in Q4, but year over year, that number is right on top of 22's number in 23. So I think that fall in the bottom line is one of the reasons that you saw a little bit of an earnings differential between the analysts and what Green Brick accomplished.

It's been consistent since.

Really the end of 'twenty two that we've seen we've seen the co broke activity back to where it was in the payments are back towards where they were so there really were no surprises that are our SG&A has been consistently higher throughout 2023.

By about a percentage point.

Maybe a little bit higher for the full year, a little bit less for Q4.

I saw you had a comment today there are no SG&A surprises, but I think that.

When you look at Noncontrolling interest it was a little bit higher in Q4, but year over year that number is.

Right on top of.

20, two's number in 'twenty three.

So I think that that fall to the bottom line is one of the reasons that you saw a little bit of an earnings differential between the analysts and what great Greenberg accomplish.

Richard A. Costello: Also, the other factor there was the average selling price, where we are now. We were 551, I believe, in Q3 and 544 in Q4. We should continue at that level throughout 2024. Mind you, the mix on the close is going to be a little bit higher than a lot of builders will experience, and you might see some variation around that mid-500s number, simply because when you're selling houses from $300 to $2 million, you're going to get that variation.

Also the other factor there was the average selling price.

We're now we were $5 51, I believe in Q3 and $5 44 in Q4, we should continue at that level throughout 2024 mine to mix on the close is going to be.

A little bit higher than a lot of builders will experience and you might see some variation around that mid five hundred's number simply because when you are selling houses from $302 million, you're going to get that variation.

Richard A. Costello: But, you know, we believe we're in a stable environment from a cost standpoint, hopefully depending on interest rates on the incentive side, and we should see a fairly consistent ASP as well. Volumes are looking good. You know, as we've said, we're hitting around 900 starts a quarter right now. So 2024 is looking good. So then, are you saying mid-500s for an ASP is what we should expect? Correct.

But we believe we're in a stable environment from a cost standpoint.

As a.

A stable environment hopefully on the.

Depending on interest rates on the incentive side.

And we should see a fairly consistent asps as well.

But volumes are looking good.

As we've said, we're hitting around 900 a quarter on starts right now so 2024 is looking good.

So what then.

You are saying mid five hundreds for an ASP is what we should expect.

Correct.

Okay.

Richard A. Costello: Now, you won't see that in our ASP on backlog because Trophy is only 10% of our backlog now because it is spec-ready. So we're carrying a lot of homes late in the construction process, houses sold by Trophy, and a lot of them are going straight to the closing table. So that ASP is an anomaly, you know, a trophy sale and closed in the same quarter, 59% of their homes in Q4. You know, so that's a dynamic that you just can't take much of a read from that backlog ASP. And then, in terms of raising prices, have you been able to raise prices at all with Trophy or with some of the infill locations? How is that trending?

Now you won't see that in our ASP on backlog because trophy is only 10% of our backlog now because it is a spec ready model.

So we're carrying a lot of home slate in the construction process. How is the sole by trophy are a lot of them are going straight to the closing table.

So that ASP is an anomaly.

A trophy sold.

And closed in the same quarter, a 59% of our homes in Q4.

That's a dynamic that you just can't take much of a read from that backlog ISP.

Sure.

And then in terms of raising prices have you been able to raise prices at all with trophy <unk> with some of the infill locations.

How is that trending.

James R. Brickman: Yeah, that's, yeah, Jay, this is Jim, and on our infill locations, and it's inversely related to the incentives, our ability to raise prices. We're raising prices very quickly on the AAA infill locations. There are no incentives, and our, what I would consider, our most remote, volume production, exterior perimeter locations, incentives could be seven to eight percent.

Yes, Jade this is Jim.

Our infill locations.

And Bruce you related to the incentives <unk> prices.

We're raising prices very quickly on the AAA infill locations.

There is no incentives.

And our what I would consider our most remote.

Volume production exterior perimeter locations incentives could be 7% to 8%. So there is zero raising.

James R. Brickman: So there's zero chance of raising prices aggressively to maintaining prices and still having to deal with incentives with a much more marginal buyer and trophy perimeter location. But, Jay, we have seen since, you know, I think we mentioned in the script, December incentives were less than October incentives, and that trend has continued through the spring. Okay, that sounds great.

Raising prices aggressively to maintaining prices and still having to deal with incentives with with a much more marginal buyer and trophy perimeter locations.

Jay we have seen.

Yes.

I think we mentioned in the script December incentives were less and October incentives and that trends continued through the spring.

Yes.

Okay.

Okay that sounds great. Thanks for taking my questions.

Jay McCanless: Thank you for taking my question. Thanks, Jay. Our next question comes from the line of Alex Barron with Halsey Research Center. Please go ahead.

Thanks Jay.

Our next question comes from the line of Alex Barron with housing inclusive center.

Please go ahead.

Alex Barron: Yeah, thank you, gentlemen, and great job this year. Best wishes for this new year. So I'm looking at your starts for 2023, and it looks like you guys were over 3,700 units. Obviously, much slower deliveries and orders, so I'm just wondering if that is, you know, in the ballpark of what you guys are expecting for deliveries this year. In other words, is there just basically a lag?

Yes, Thank you gentlemen.

Great job this year.

Best wishes for for this new year.

So I'm looking at your start for 2023 and it looks like you guys were over 700 units.

Obviously, much slower deliveries and orders I'm just wondering if that is in the <unk>.

Ballpark of what you guys are expecting for deliveries. This year in other words is there just basically a lag effect.

James R. Brickman: Yeah, yes, I think that is what we're expecting. We really don't broadcast what we expect, but we're not starting homes that we don't expect to close, and we're still seeing increasing demand for our business. What do you want to add to that, Jed?

Yes, so I think that is what we're expecting we really don't privately broadcast, but we expect we're not starting homes that we don't expect to close.

And we're still seeing increasing demand for our business what do you want to add on that Jed.

Yes, I'd, just say were very excited because.

Jed Dolson: Yeah, I'd just say we're very excited because ever since the start of COVID, we really have been facing lot delivery bottlenecks, and we really feel for the first time that we have all the lots that we need on the ground to execute our business plan for this year. And we have more neighborhoods. Rick, how many more neighborhoods do we have? We have about 90 now. Correct, versus 83 on the average last year, I think you can verify that, right? Yeah. Now, in terms of backlog conversion, you know, you guys hit pretty high numbers throughout 2023. Do you believe there's any reason that wouldn't be similar this year?

Ever since.

The start of Covid, we're really facing.

Yes, a lot.

Lot delivery bottlenecks, and we really feel for the for the first time that we have all of the lots that we need on the ground to execute our business plan for this year.

And we have more neighborhoods Rick how many more neighborhoods do we have we are in about 90 now correct.

Three on the average last year I think.

Verify that Rick yes.

Alright.

Now in terms of.

Backlog conversion you guys.

Hit pretty high numbers throughout 2023.

We believe there is any reason that wouldn't be similar this year.

Richard A. Costello: Alex, we really don't look at backlog conversion in order to figure out what our run rate is going to be. The best thing you can do is look at what our starts are and how those are pacing. With only 10 percent of backlog being in our highest volume builder, it appears that there is a high backlog percentage, but it just doesn't equate. You know, we have a chart in our slide deck that shows quarterly starts for the last eight quarters, and you can see pretty clearly that we're stabilizing in that around 900 number. So that's our expectation from a closing velocity standpoint, rather than looking at backlog. And the other thing I want to add, Alex, is that backlogs are not created equal.

Yes.

Alex we really don't look at backlog conversion in order to figure out what our run rate is going to be the best thing you can do is look at what our starts are and how those are pacing.

Yes.

With only 10% of backlog being in our highest volume builder.

Appears that there is a high backlog percentage, but it just doesn't equate.

We have a chart in our slide deck that shows the quarterly starts for the last eight quarters.

You can see pretty clearly that we're stabilizing in that around 900 number.

So that's that's our expectation from a.

From a closing velocity standpoint, rather than looking at backlog.

And the other thing I want to add to Alex <unk>.

Backlogs are not created equally when you take a look at our backlog.

Richard A. Costello: When you take a look at our backlog, because we take a lot more earnest money deposits from a buyer, even a trophy in Dallas, it's five thousand dollars versus a wish and a prayer by some of our competitors, and we have a very low cancellation rate, so when you look at our backlog, it's a much less risky backlog to analyze in some ways, maybe stated differently. Is your tendency to build more spec, you know, likely to go up or stay the same, and is your build time improving, or is it likely to stay the same? It's improved, you know, a trophy, it's down to about 120 days.

We've taken a lot more earnest money deposits from a buyer even at trophy and Dallas, it's $5 versus a wish and a prayer by some of our competitors.

And we have a very low cancellation rate. So when you look at our backlog its a much less risky backlog to analyze and some peers.

Alright, maybe stated differently.

Is your tendency to build more spec likely could go up or stay the same.

Your bill time, improving or is it likely to stay the same.

It's improved trophy gets down to about 120 days.

Jed Dolson: We don't see a lot of improvement from that going forward. Jed, what are your thoughts? Um, yeah, there's a correlation between whether we sell one story or two stories. You know, we can shave a little bit more time if we're selling one story. If we're selling two stories, we are seeing. You know, with the supply chain, the efficiencies of the move up and second time move up, and buyers which represent, you know, other brands other than Trophy.

We don't see a lot of improvement from that going forward.

What are your thoughts.

Yes, there is a correlation between or we sell in one store or two stores, we can shave a little bit more time, if we're selling one stores we are seeing.

With the supply chain the efficiencies of the move up and second time move up buyers.

Buyers, which represent.

Hi.

Our other brands other than trophy, we're seeing those buyers select the appropriate materials that the design center, the suppliers being able to provide that material, we're able to close those assets. So as we mentioned earlier in our call we're seeing.

Jed Dolson: We're seeing those buyers select the appropriate materials at the design center, the suppliers being able to provide that material, and we're able to close those houses. So, as we mentioned earlier in our call, we're seeing, you know, improvement in the upper end brands as well. Alex, we should remain about where we're at right now.

Improvement in the in the upper end brands as well.

Alex we should remain about where we're at right now when you think when you look at Green brick you have to remember that we have CB journey, the largest town homebuilder in DFW.

Richard A. Costello: When you think when you look at Green Brick, you have to remember that we have CB Jenny, the largest townhome builder in DFW and our builder in Atlanta. The Providence Group builds a lot of townhomes, too. So we've got two townhome models out there as well as Trophy. And all of those, by their nature, are heavy spec.

And our builder in Atlanta, the Providence group builds a lot of Townhomes too. So we've got two townhome models out there as well as trophy and all of those by their nature are heavy spec.

Richard A. Costello: You release a building at a time for sales in a townhouse community, and we're releasing the houses in later stages of construction at Trophy. So we will continue to be a high-spec builder, yes sir. Okay, and if I could ask one more question.

In Europe, you released a building at a time to sales in a townhouse community and we're releasing the houses in late later stages of construction of trophy. So we will continue to be a high <unk>.

<unk> Sir.

Okay, and if I could ask one more obviously you guys left the industry with gross margins this year.

James R. Brickman: Obviously, you guys led the industry in gross margins this year. But at the same time, things kind of slowed in the fourth quarter with mortgage rates hitting 8%. So is there any reason that your margins are going to start contracting from here? Or do you believe they're somewhat sustainable?

At the same time things slowed in the fourth quarter with mortgage rates hitting 8%. So is there any reason.

Your margins are going to start contracting from here or do you believe they are somewhat sustainable.

James R. Brickman: Well, tell us what's going to happen with interest rates. Well, I can tell you that we haven't seen margin degradation going into this year so far, and we're keeping our fingers crossed that that's going to continue. We have a good lot position, and I don't want to give it away in a... 15-minute explanation of how we underwrite lots and how they're stable in the longer life neighborhood. We actually gain ground versus a builder that options lots, but we're still feeling great, confident we're going to have industry-leading margins in 24. Well, thank you very much and best of luck. Thanks, Alex. As a reminder, if you'd like to ask a question again, please press star 1. Looking at the queue, our next question comes from the line of Carl Reichardt with PTI. Thanks.

Well tell us what's going to happen with interest rates I can tell you that we havent seen margin degradation.

Into this year, so far and we're keeping our fingers crossed that thats going to continue we have a good lot positions and I don't want to give them into.

15 million and ex explanation of how we underwrite lots and how they are they are stable and the longer life neighborhood, we actually gained ground versus a builder that options lots, but we're still feeling great.

Continental has industry, leading margins in 'twenty four.

Thank you very much and best of luck.

Thanks, Alex.

Thanks.

Okay.

As a reminder, if you'd like to ask the question again, Please press star one.

Looking at the queue. Our next question comes from the line of car in regard to <unk>.

Please go ahead. Thanks.

Carl Edwin Reichardt: We have a few more follow-ups for you guys. One, just on the number of neighborhoods, I think you were up 16% on average in Q4 versus. I think that's the fastest you've grown since back right after the pandemic. How are you feeling about community count growth in 24, recognizing that you're going to have a few more long-life communities and the mix of stores is different product to product. But in terms of growth rate there, maybe you can give me sort of a sense of what you're thinking through as you look at it? I don't think we're really going to get a guide on that, like you suggested, Carl. It really is very different for TROFI.

Thanks, Ed a few more follow ups for you guys.

One just on <unk>.

A number of neighborhoods.

Were up 16% on average Q4 versus I think thats the fastest you've grown since back right. After the pandemic.

How are you feeling about community count growth in 'twenty, four recognizing that youre going to have a few more long lived communities.

And the mix of stores is.

Different product to product, but.

In terms of growth rate. There, maybe you can give me sort of a sense of what youre thinking through as you look at your book.

I don't think we're really going to guide on that we'd.

We'd like you suggested Carl.

It really is very different for charter we have many more long term communities with multiple phases.

Richard A. Costello: We have many more long-term communities with multiple phases where we're rolling from phase to phase, you know, so for other builders, those might be new communities. But for us, we're just not gapping out. These end up being really long-lived communities.

We're we're rolling from face to face E&S, so and add other builders that those might be new communities.

But for US, we're just not gapping out.

These end up being really long lived communities again, the best thing that you can look at from a growth rate as our starts.

Richard A. Costello: Again, the best thing that you can look at from a growth rate perspective is our starts. Okay, sure. I'm thinking really just more about modeling orders, but fair enough. I'm assuming there'll be growth this year. That'll be the thinking just given what looks like it's in the book in terms of inventory. So that's where I'm headed.

Okay sure I am thinking really just more about modeling orders, but fair enough I'm, assuming there'll be growth. This year that that'd be that'd be the thinking just given what looks like it's in the <unk> and.

In the book in terms of inventory, so that's where I'm headed and then Rick you also mentioned talking about your cash position and opportunities that you might see in the marketplace well. Okay. So we could look at potential acquisitions, we could look at more share repurchase activity jumping up we could look at just continued focus on growing the land pool as you think about the alternate.

Carl Edwin Reichardt: And then, Rick, you also mentioned talking about your cash position and opportunities that you might see in the marketplace. Well, okay, so we could look at potential acquisitions. We could look at more share repurchase activity jumping up, or we could look at just continued focus on growing the land pool. As you think about the alternatives for capital, spare capital that, where would you sort of rank those options right now? Well, actually, we rank them internally, but not externally. So I really can't share them.

<unk> for for your for capital spare capital that you have.

Where would you sort of rank those options right now.

Well actually we rank them internally, but not externally.

James R. Brickman: Here's your chance to do it externally, Jim. Yeah, but, you know, it's an interesting process. And, you know, and I'll give you an example.

So I.

I really can't share here's your chance externally Jim.

Yeah.

It's an interesting process.

James R. Brickman: We were looking at a very large land transaction in Austin yesterday that's unique. We've been working on it for a very long time. We have a very similar deal in Dallas that we've been working on for a very long time. We have a very long-term deal. We've been looking at Atlanta.

Give you. An example, we were looking at a very large land transaction.

Dan.

Austin yesterday, that's unique we've been working on it for a very long time, we have a very similar deal in Dallas that we've been working on for a very long time, we have a very long.

Firm deal we've been looking at Atlanta, we have been trying working round the entitlement for two years and we're waiting to see how all those things play out against buying stock.

James R. Brickman: We've been trying, working on the entitlement for two years, and we're waiting to see how all those things play out against buying stock and investing more in our business. I can say that we probably aren't going to be an acquirer of a private builder. Everybody asks, how is your A&D looking? I look at deals.

And investing more in our business.

I can say that we probably aren't going to be an acquirer of a private builder everybody is how's your A&D looking.

James R. Brickman: Actually, the deal flows have slowed down because I think all of the boutique brokers know that any of the deals that they show us are not going to be accretive to our earnings, so our deal flow from an acquisition of a private builder has virtually stopped. And Carl, as you can see from, I believe Jed mentioned that our land lot, finished lot, and land development spend is going to go up from $430 million to over $700 million or approximately $700 million. You know, that's subject to deals penciling out and getting ready to close, like Jim just mentioned, as these things require constant attention. But that's quite an increase. Our cash flow is exceedingly strong, given our margins, given our increasing volumes, etc. It's a good problem to have. We're still with $180 million on the balance sheet, and nothing drawn on $360 million in lines of credit. We have tremendous liquidity and the ability to move in a moment. So it's clearly a function of what presents itself in terms of being ready to close on the land side.

I look at deals actually the deal flows have slowed down because I think all of the boutique brokers know that any of the deals that they show us are not going to be accretive to our earnings. So our deal flow from an acquisition of a private builder is <unk>.

Virtually stopped.

And Karl as you could see from.

I believe Chad mentioned that our land lot finished lot and.

Land development spend is going to go up from $430 million to us over $700 million of approximately $700 million, that's subject to deals penciling out and getting ready to close.

Like Jim just mentioned.

These things require constant attention, but thats quite an increase our cash flow is exceedingly strong given our margins given our increasing volumes et cetera. So.

It's a good problem to have we are still with $180 million on our balance sheet and nothing drawn on $360 million of lines of credit we have tremendous liquidity and the ability to move in a moment.

So its clearly a function of what presents itself in terms of being ready to close on the land side.

Richard A. Costello: Thanks a lot of sense. All right, fellas. Thanks so much. Thanks, Carl. Since there are no further questions at this time, and thus concludes today's conference call. Thanks so much. I have 6.88%. I know.

That makes a lot of sense alright. Thanks, so much I appreciate the time.

Thanks Carl.

Since there are no further questions at this time and that concludes today's conference call. Thank you. So much and you may now disconnect.

$6 eight 8%.