Q2 2024 Green Brick Partners Inc Earnings Call

Thank you for standing by. My name is Angela and I will be your conference operator today. At this time I would like to welcome everyone to the Green Brick Partners INC second quarter conference earnings call.

Operator: Conference operator today.

Operator: At this time, I would like to welcome everyone to the Green Brick Partners Inc. Second Quarter Conference Erning School. 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 far, follow bit, and number one on your telephone keypad. If you would like to withdraw your question, press far one again. All lines have been placed on mute to prevent any background noise.

Operator: Operator today. At this time, I would like to welcome everyone to the Green Brick Partners Inc. second quarter conference earnings call.

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 the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. All lines have been placed on mute to prevent any background noise. I would now like to turn the conference over to Rick Costello, Chief Financial Officer. Please go ahead.

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 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Rick Costello: I would now like to turn the conference over to Rick Costello, Chief Financial Officer. Please go ahead.

Speaker Change: I would now like to turn the conference over to Rick Costello, Chief Financial Officer. Please go ahead.

Rick Costello: Good afternoon and welcome to the Green Brick Partners Erning School for the second quarter and June 30, 2024. Following today's remarks, we will hold a Q&A session. As a reminder, this call is being recorded and will be available for playback.

Richard Costello: Good afternoon, and welcome to the Green Brick Partners earnings call for the second quarter ended June 30, 2024. Following today's remarks, we will hold the Q&A. As a reminder, this call is being recorded and will be available for playback.

Rick Costello: Good afternoon and welcome to the Grain Brick Partners Earnings Call for the second quarter ended June 30, 2024. Following today's remarks, we will hold a Q&A session.

Rick Costello: As a reminder, this call is being recorded and will be available for playback.

Rick Costello: In addition, a presentation will accompany today's webcast and is also available on the company's website at investors.greenbrickpartners.com.

Richard 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 are Jim Brickman, Co-Founder and Chief Executive Officer, Jed Dolson, President and Chief Operating Officer, and myself, Richard 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 its future results to differ from its expectations.

Speaker Change: In addition, a presentation will accompany today's webcast and is also available on the company's website at investors.greenbergpartners.com.

Rick Costello: On the call today is Jim Brickman, co-founder and Chief Executive Officer, Jet 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. In yesterday's press release in SEC filings, the company detailed material risks that may cause its future results to differ from its expectations. The company statements are as of today, August 1, 2024, and the company has no obligation to update any forward-looking statement it may make. The comments also include non-GAAP financial metrics.

Speaker Change: On the call today is Jim Brickman, Co-Founder and Chief Executive Officer, Jed Dolson, President and Chief Operating Officer, and myself, Richard Costello, Chief Financial Officer.

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

Speaker Change: In yesterday's press release and SEC filings, the company detailed material risks that may cause its future results to differ from its expectations.

Richard Costello: The company's statements are as of today, August 1, 2024, and the company has no obligation to update any forward-looking statement it may make. The comments also include non-GAAP financial metrics. 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.

Speaker Change: The company's statements are as of today, August 1st, 2024, and the company has no obligation to update any forward-looking statement it may make.

Speaker Change: The comments also include non-GAAP financial metrics.

Rick Costello: 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.

Speaker Change: 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. Jim?

Rick Costello: With that, I'll turn the call over to Jim.

Jim Brickman: Jim, thank you, Rick. I'm extremely proud of our record performance in the second quarter. During the second quarter, we achieved another set of record-breaking results for the company. First, we delivered a record 987 homes and joined underrated record home closing revenue of 547 million, an increase of 20 percent year over year. Second, our home building gross margin scored to a record 34.5 percent, which is the highest among public home building peers, as shown on slide 4. Year-to-date, the net income attributable to Greenrich grew 35.3 percent, and earnings for share increased 38 percent year over year to $4.14.

James Brickman: Thank you, Rick. I'm extremely proud of our record performance in the second quarter. During the second quarter, we achieved another set of record-breaking results for the company. First, we delivered a record 987 homes and achieved underrated record home closing revenue of $547 million, an increase of 20% year over year. Second, our home building gross margins soared to a record 34.5%, which is the highest among public home building peers, as shown on slide four. Year-to-date, the net income attributable to Green Brick grew 35.3%, and Earnings for Share increased 38% year over year to $4.14. This performance was highlighted by a record quarterly EPS of $2.32, up 42.3% year-over-year.

Jim: Thank you, Rick.

Jim: I'm extremely proud of our record performance in the second quarter.

Jim: During the second quarter, we achieved another set of record-breaking results for the company.

Jim: First, we delivered a record 987 homes and generated record home closing revenue of $547 million, an increase of 20% year-over-year.

Jim: Second, our home building gross margin soared to a record 34.5% which is the highest among public home building peers as shown on slide 4.

Jim: Year-to-date, the net income attributable to Green Rick grew 35.3% and earnings for share increased 38% year-over-year to $4.14.

Jim Brickman: This performance was highlighted by a record quarterly EPS of $2.32, up 42.3 percent year over year. Thanks to the collective effort of our team, we have consistently generated some of the best returns in the industry. We believe that our unique business model will continue to demonstrate its strength and position us for sustainable growth. With our record results, Green Brick's annualized return on equity for the first half of 2024 was 28.3%. Our book value at the end of the quarter increased 26% year-over-year, to $31.21 per share. Equally important, our growth was created on one of the least leverage-balance sheets in one of the lowest costs of debt among our small end-to-get beers.

Jim: This performance was highlighted by a record quarterly EPS of $2.32, up 42.3% year-over-year.

James Brickman: Thanks to the collective effort of our team, we have consistently generated some of the best returns in the industry. We believe that our unique business model will continue to demonstrate its strength and position us for sustainable growth. With our record results, Green Brick's annualized return on equity for the first half of 2024 was 28.3%, and our book value at the end of the quarter increased 26% year over year to $31.21 per share.

Jim: Thanks to the collective effort of our team, we have consistently generated some of the best returns in the industry.

Jim: We believe that our unique business model will continue to demonstrate its strength and position us for sustainable growth.

Jim: With our record results, Greenbrick's annualized return on equity for the first half of 2024 was 28.3%.

Jim: Our book value at the end of the quarter increased 26% year over year to $31.21 per share.

James Brickman: Equally important, our growth was created on one of the least leveraged balance sheets and one of the lowest costs of debt among our small and mid-cap peers. At the end of the second quarter, our total debt-to-total capital ratio was 17.7%, while our net debt-to-total capital ratio was only 10.9%, with a weighted average pay rate of 3.4%.

Jim: Equally important, our growth was created on one of the least leveraged balance sheets and one of the lowest costs of debt among our small and mid-cap peers.

Jim Brickman: At the end of the second quarter, our total debt to total capital ratio was 17.7%, while our net debt to total capital ratio was only 10.9% with a weighted average pay rate of 3.4%. As shown on slide five, since 2022, we have consistently generated exceptional home-building gross margins, achieving margins of more than 30% in all the three quarters. Our extraordinary performance is a result for superior locations in high growth markets, our investment-grade balance sheet, our self-development strategy, and the commitment and expertise of our team. The land-like models has great traction on Wall Street, with many major home builders prioritizing being land-like regardless of the cost and resulting potential degradation of margins.

Jim: At the end of the second quarter, our total debt to total capital ratio was 17.7%, while our net debt to total capital ratio was only 10.9%.

Speaker Change: with a weighted average pay rate of 3.4 percent.

James Brickman: As shown on slide 5, since 2022, we have consistently generated exceptional home building gross margins, achieving margins of more than 30% in all but three quarters. Our extraordinary performance is a result of superior locations in high-growth markets, our investment grade balance sheet, our self-development strategy, and the commitment and expertise of our team. The land light model has gained traction on Wall Street, with many major home builders prioritizing being land light, regardless of the cost and the resulting potential degradation of margins. Green Brick, however, has taken a different approach.

Jim: As shown on slide 5, since 2022, we have consistently generated exceptional home building gross margins, achieving margins of more than 30% in all but three quarters.

Jim: Our extraordinary performance is a result for superior locations in high growth markets, our investment grade balance sheet, our self-development strategy, and the commitment and expertise of our team.

Speaker Change: The land-like model has gained traction on Wall Street, with many major homebuilders prioritizing being land-like regardless of the costs and resulting potential degradation of margins.

Jim Brickman: Green recorders take a different approach. By thoroughly evaluating and understanding our markets, we prioritize acquiring, entitling, and developing land ourselves, allowing us to achieve significant cost savings compared to retail-priced option plots. We understand land risk and compensate for that risk with strong underwriting and a very low leverage balance sheet. Land bankers, known for their sophistication in the real estate industry, often have to maximize their profit by demanding high implicit interest rates and significant earnest money deposits, where the builders assume land development cost and completion risk. Builders agree to these additional costs in order to transfer land risk and financial burden off the home-builder's balance sheet.

James Brickman: By thoroughly evaluating and understanding our markets, we prioritize acquiring, entitling, and developing land ourselves, allowing us to achieve significant cost savings compared to retail price option losses. We understand land risk and compensate for that risk with strong underwriting and a very low leverage balance. Land bankers, known for their sophistication in the real estate industry, often aim to maximize your profit by demanding high implicit interest and Significant Earnest Money Deposits, where the builders assume the land development cost and completion rate.

Speaker Change: Greenbrick, however, has taken a different approach.

Jim: By thoroughly evaluating and understanding our markets, we prioritize acquiring, entitling, and developing land ourselves, allowing us to achieve significant cost savings compared to retail-priced options lots.

Jim: We understand land risk and compensate for that risk with strong underwriting and a very low leverage balance sheet.

Speaker Change: Land bankers, known for their sophistication in the real estate industry, often aim to maximize their profit by demanding high implicit interest rates.

Jim: and significant earnest money deposits where the builders assume land development cost and completion risk.

James Brickman: Builders agree to these additional costs in order to transfer land risk and the financial burden off the homeowner's balance. Given the current interest rate environment, the increasing finished lot costs associated with the land light model make it an unattractive option for us, and we anticipate these dynamics to continue. For Green Brick, we are not experiencing those increased finished lot costs, as Rick will cover shortly. More importantly for Green Brick, being land heavy hasn't translated into an inferior return.

Jim: Builders agree to these additional costs in order to transfer land risk and financial burden off the homeowner's balance sheet.

Jim Brickman: Given the current interest rate environment, the increasing finished lot costs associated with the land-like model make an unattractive option for us, and we anticipate these dynamics to continue. For Greenbrick, we are not experiencing those increased finished lot costs, as Rick will cover shortly. More importantly, for Greenbrick, being land-heavy hasn't translated into inferior returns. In fact, we have produced consistently strong return on assets and equity, as shown on slide 5. Our return on equity since 2022, average 28 percent, and our return on assets average 18 percent. We have been able to significantly increase our lot position while de-leveraging our balance sheet, as shown on slide 11.

Speaker Change: Given the current interest rate environment, the increasing finished lot costs associated with the land light model make it an unattractive option for us, and we anticipate these dynamics to continue.

Jim: For Greenbrick, we are not experiencing those increased finished lot costs, as Rick will cover shortly.

Rick: More importantly, for Greenbrick, being land-heavy hasn't translated into inferior returns.

James Brickman: In fact, we have produced consistently strong returns on assets and equity, as shown on slide five. Our return on equity since 2022 averaged 28%, and a return on assets averaged 18. We have been able to significantly increase our lot position while deleveraging our balance sheet, as shown on slide 11. Additionally, in our largest markets, Dallas, Fort Worth, and Atlanta, there are very few third-party lot developers.

Rick Costello: In fact, we have produced consistently strong return on assets and equity, as shown on slide 5.

Rick Costello: Our return on equity since 2022 averaged 28 percent.

Rick Costello: And the return on assets averaged 18%.

Rick Costello: We have been able to significantly increase our lot position while deleveraging our balance sheet as shown on slide 11.

Jim Brickman: Additionally, in our largest markets, Dallas, Fort Worth, and Atlanta, there are very few third-party lot developers. Being able to self-develop land unlocks access to more land opportunities, especially indesirable intel and indeligation submersion. This approach also allows us to produce finished lots as wholesale prices, as opposed to buying it retail, and control the pace of lot deliveries. We believe our unique strategy in land provides us with strong competitive advantages to continue to gain market share in a capital-efficient manner.

Rick: Additionally, in our largest markets, Dallas, Fort Worth, and Atlanta, there are very few third-party lot developers.

James Brickman: Being able to self-develop land unlocks access to more land opportunities, especially in desirable infill and infill adjacent submarines. This approach also allows us to produce finished lots at wholesale prices as opposed to buying at retail, and Control, the pace of lot delivery. We believe our unique strategy in land provides us with strong competitive advantages to continue to gain market share in a capital efficient manner. In the U.S. housing market, it has been challenging for most homeowners to break free from the golden handcuffs of mortgage rates, as 76% of outstanding mortgages are still locked in at mortgage rates of less than 5%, as shown on slide 6.

Rick Costello: We believe our unique strategy in land provides us with strong competitive advantages to continue to gain market share in a capital efficient manner.

Jim Brickman: To the US housing market, it has been challenging for most homeowners to break free from the golden handcuffs of mortgage rates, as 76% of outstanding mortgages are still locked in at mortgage rates of less than 5%, as shown on slide 6. As a result, existing home inventory continues to remain near historic lows during the second quarter, as shown on slide 7. The lack of supply is more evident in Intel and Intel-adjacent submarkets, where we have consistently generated over 80% of our revenues. Green Brick is strategically poised to capitalize in what we believe are long-term secular demographic shifts.

Speaker Change: To the U.S. housing market, it has been challenging for most homeowners to break free from the golden handcuffs of mortgage rates, as 76% of outstanding mortgages are still locked in at mortgage rates of less than 5%, as shown on slide 6.

James Brickman: As a result, existing home inventory continues to remain near historic lows during the second quarter, as shown on slide seven. The lack of supply is more evident in infill and infill of adjacent submarkets, which will consistently generate over 80% of our revenue. Green Brick is strategically positioned to capitalize on what we believe are long-term secular demographic shifts. As shown on slide eight, a wave of millennials and Gen Z will continue to enter their prime home buying age over the next decade.

Rick Costello: The lack of supply is more evident in infill and infill of adjacent submarkets.

Speaker Change: will get consistently generated over 80% of our revenues.

Greenbrick: Greenbrick is strategically posed to capitalize on what we believe are long-term secular demographic shifts.

Jim Brickman: As shown on slide 8, a wave of millennials and Gen Z continue to enter their prime home buying age over the next decade. Two few homes were built over the years since the late financial crisis, which created a systemic housing shortage, as estimated to be between four to seven million units. An aging housing stock presents another challenge. The average age of owner-occupied homes in the US is estimated to be 40 years old. These dynamics create significant growth opportunity for new home sales, and we believe Green Brick is well positioned to capture additional market share over the longer term.

James Brickman: Two of these homes were built over the years since the Great Financial crisis, which created a systemic housing shortage estimated to be between 4 to 7 million units, and an aging housing stock presents another challenge. The average age of owner-occupied homes in the U.S. is estimated to be 40 years old.

James Brickman: These dynamics create a significant growth opportunity for new home sales, and we believe Green Brick is well positioned to capture additional market share over the longer term. Over the past year, we have focused on securing new land opportunities to fill our pipeline and to deliver any slots to our builders as quickly as possible. Jed will discuss more about our land and lot position shortly. Lastly, I'm excited to announce our strategic decision to establish our wholly owned mortgage company, Green Brick Mortgage, which will replace our existing joint venture in which we own 50%.

Jim Brickman: Over the past year, we have focused on securing new land opportunities to fill our pipeline and develop reduced lives to our builders as quickly as possible. Gen will discuss more about our land and land position shortly.

Jim Brickman: Lastly, I'm excited to announce our strategic decision to establish our wholly owned mortgage company, Green Brick Mortgage, which will replace our existing joint venture in which we own 50%. We expect Green Brick Mortgage to harvest 100% of the mortgage profits in the beginning of 2025. This transition will enhance our control over the mortgage origination process, allow us to optimize our customer experience, improve operational efficiency, and capture more earnings and profitability by aligning our mortgage operations more closely with our overall business strategy and company culture.

James Brickman: We expect Green Brick Mortgage to harvest 100% of the mortgage profits in the beginning of 2025. This transition will enhance our control over the mortgage origination process, allow us to optimize our customer experience, improve operations, and capture more earnings and profitability by aligning our mortgage operations more closely with our overall business strategy and company culture. With that, I'll now turn it over to Rick to provide more detail regarding our financial results. Thank you, Jim.

Speaker Change: We expect Great Brick Mortgage to harvest 100% of the mortgage profits in the beginning of 2025. This transition will enhance our control over the mortgage origination process, allow us to optimize our customer experience,

Speaker Change: improve operational efficiency.

Speaker Change: and capture more earnings and profitability by aligning our mortgage operations more closely with our overall business strategy and company culture.

Rick Costello: With that, I'll turn it over to the rig to provide more detail regarding our financial results.

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

Rick Costello: Thank you, Gen. Please turn to slide 9 of the presentation. As Gen mentioned earlier, the second quarter was a record for Green Brick on multiple fronts. We achieved record home closings revenue of $547 million, of 20.4% year over year, on a record 987 homes closed, an increase of 26%. The increase in deliveries is attributable to limited competition in our info and intel adjacent communities. communities, reduced cycle times, and increased starts leading to higher levels of available specimen tary.

Richard Costello: Please turn to slide nine of the presentation. As Jim mentioned earlier, the second quarter was a record for Green Brick on multiple fronts. We achieved record home closing revenue of $547 million, up 20.4% year over year, on a record 987 homes closed, an increase of 26%. The increase in deliveries is attributable to limited competition in our infill and infill adjacent communities, reduced cycle times, and increased starts leading to higher levels of available speculation.

Rick: Thank you, Jim.

Rick Costello: Please turn to slide 9 of the presentation. As Jim mentioned earlier, the second quarter was a record for Greenbrick on multiple fronts.

Rick Costello: As discussed during our past earnings calls, our shifting community mix from closing out infill communities to opening new communities and surrounding infill adjacent areas, especially under our trophy brand, has moderately lowered our ASP from a year ago. In the second quarter, ASP declined slightly by 4.4% year over year to $554,000. This was our smallest decline in ASP in the past four quarters. We continue to expect ASP to be in the range of $540,000 to $560,000 for the second half of the year, subject to changes in product mix and business conditions.

Richard Costello: As discussed during our past earnings calls, our shift in community mix from closing out infill to opening new communities and surrounding infill adjacent areas, especially under our trophy board, has moderately lowered our ASP from a year ago. In the second quarter, ASP declined slightly by 4.4% year over year to $554,000.

Rick Costello: to open new communities in surrounding infill adjacent areas, especially under our trophy brand, has moderately lowered our ASP from a year ago.

Richard Costello: This was our smallest decline in ASP in the past four quarters. We continue to expect ASP to be in the range of $540,000 to $560,000 for the second half of the year, subject to changes in product mix and business. Another record that we broke this quarter was home building gross margins, which reached 34.5%. Gross margins were up 320 basis points year over year and 110 basis points higher than a previous record of 33.4% achieved last quarter.

Rick Costello: We continue to expect ASP to be in the range of $540,000 to $560,000 for the second half of the year subject to changes in product mix and business conditions.

Rick Costello: Another record that we brought this quarter was Home Building gross margins, which reached 34.5%. Gross margins were up to 320 basis points year over year and 110 basis points higher than a previous record of 33.4% achieved last quarter. More importantly, home building margins were strong across all builder brands, including trophy that primarily built entry-level and first-time move-up homes. As shown on slides 4, we continue to lead our peers in gross margin performance. The gains in gross margins reduced the lower incentives on closed homes year over year as a result of our infill and infill adjacent communities and favorable construction and average lot cost.

Rick Costello: Another record that we broke this quarter was home building gross margins which reached 34.5 percent.

Richard Costello: More importantly, home building margins were strong across all builder brands, including Trophy, which primarily builds entry-level and first time move-up homes. As shown on slide four, we continue to lead our peers in gross margin performance. The gains in gross margins were due to lower incentives on closed homes year over year as a result of our infill and infill adjacent communities, and Favorable Construction and Average Lot Cost. Green Brick expects that over the two years from calendar year 2023 to calendar year 2025, our average developed lot cost, as a percentage of average sales price, is expected to increase only 30 basis points per year.

Rick Costello: Gross margins were up 320 basis points year-over-year in 110 basis points higher than a previous record of 33.4 percent achieved last quarter.

Jim: More importantly, home building margins were strong across all builder brands, including Trophy, that primarily built entry-level and first-time move-up homes.

Jim: As shown on slide 4, we continue to lead our peers in gross margin performance.

Jim: The gains in gross margins were due to lower incentives on closed homes year-over-year as a result of our infill and infill-adjacent communities, and favorable construction and average lot cost.

Rick Costello: Green Brick expects that over the two years from calendar year 2023 to calendar year 2025, our average developed lot cost as a percentage of average sales price is expected to increase only 30 basis points per year. We anticipate that this expected minimal increase in our average developed lot cost will stand in contrast to our land-lied peers, who often pay annual escalators of 6 to 7% to third-party land developers. Even worse for land-lied peers, per John Burns research, brokers indicate that prices rose 11% year over year in Q224 for finished loss and 10% for both undeveloped land and development costs.

Greenbrick: Greenbrick expects that over the two years from calendar year 2023 to calendar year 2025, our average developed lot cost

Jim: as a percentage of average sales price is expected to increase only 30 basis points per year.

Richard Costello: We anticipate that this expected minimal increase in our average developed lot costs will stand in contrast to our landline peers, who often pay annual escalators of 6 to 7% to third-party land developers. Even worse for landline peers, per John Burns' research, brokers indicate that prices rose 11% year-over-year Q2 24 for finish loss and 10% for both undeveloped land and development costs.

Jim: We anticipate that this expected minimal increase in our average developed lot costs will stand in contrast to our landline peers, who often pay annual escalators of 6-7% to third-party land developers.

Jim: Even worse for landline peers, per John Burns research, brokers indicate that prices rose 11% year-over-year in Q2'24 for finish loss.

Jim: and 10% for both undeveloped land and development costs.

Rick Costello: Back to slide 9, SGNA as a percentage of residential units revenue for the second quarter improves 30 basis points year over year to 10.5%. Driven by our record gross margins on record revenues, our net income attributable to Green Brick increased 40% and diluted earnings per share for the second quarter grew 42% to $2.32 per share, both records for any quarter in company history. During the quarter, we benefited from an 11-cent discrete tax benefit for equity compensation and deductions. However, even excluding this discrete tax benefit, we delivered the highest EPS in county history. Net new orders in Q2 were up 4.0% year-over-year to 855 homes, the highest level for any second quarter in company history.

Richard Costello: Back to slide nine, SG&A as a percentage of residential units revenue for the second quarter improved 30 basis points year over year to 10.5%, driven by our record gross margins on record revenue. Our net income attributable to Green Brick increased 40%, and diluted earnings per share for the second quarter grew 42% to $2.32 per share. Both records for any quarter in company history. Additionally, during the quarter, we benefited from an $0.11 discreet tax benefit for equity compensation deduction. However, even excluding this discreet tax benefit, we delivered the highest EPS among companies.

Jim: Back to slide 9, SG&A as a percentage of residential units revenue for the second quarter improves 30 basis points year-over-year to 10.5%.

Jim: Driven by our record gross margins on record revenues.

Jim: Our net income attributable to Greenberg increased 40% and diluted earnings per share for the second quarter grew 42% to $2.32 per share. Both records for any quarter in company history.

Jim: During the quarter, we benefited from an $0.11 discrete tax benefit for equity compensation deductions.

Jim: However, even excluding this discrete tax benefit, we delivered the highest EPS in company history.

Richard Costello: Net new orders in Q2 were up 4.0% year-over-year to 855 homes, the highest level for any second quarter in company history. Jed will discuss our sales pace momentarily. In the second quarter, we continue to expand our footprint to position us to capture additional market share; active selling communities at the end of the period grew 22% year over year to 105. In particular, our ending community count for trophy grew by 41% year-over-year to 38.

Jim: Net new orders in Q2 were up 4.0% year-over-year to 855 homes, the highest level for any second quarter in company history.

Rick Costello: Jed will further discuss our sales pace momentarily. In the second quarter, we continue to expand our footprint to position us to capture additional market share. Active selling communities at the end of the period grew 22% year-over-year to 105. In particular, our ending community count for trophy grew by 41% year-over-year to 38. Our cancellation rate for the second quarter remained low at 9.2%. This was, again, one of the lowest cancellation rates among public home building peers, as shown on slide 12. Our cancel rate remained in a historically low range under 10%, which it has been since 12.31 or 22.

Jim: Chad, we'll further discuss our sales pace momentarily.

Chad: Active selling communities at the end of the period grew 22% year-over-year to 105.

Chad: In particular, our ending community count for trophy grew by 41% year-over-year to 38.

Richard Costello: Our cancellation rate for the second quarter remained low at 9.2%. This was, again, one of the lowest cancellation rates among public home building peers, as shown on slide 12. Our cancellation rate remained in a historically low range, under 10%, which it has been since 1231 of 22.

Chad: Our cancellation rate for the second quarter remained low at 9.2%. This was, again, one of the lowest cancellation rates among public home building peers, as shown on slide 12.

Rick Costello: As shown on slide 10, year-over-year units under construction were up 23% with starts averaging 952 homes for the last four quarters. Year-to-date, we have now sold 1,926 homes, delivered 1,808 homes, and started 1,980 homes, closely matching the sales pace and the production pace. Year-to-date, we delivered 1,808 homes, generating home closings revenue of $990 million, and increased at 9.6% year-over-year. Home building gross margins increased 450 basis points to 34.0%. As a result, net income attributable to Greenberg grew at 35.3% year-to-date to $189 million, and diluted EPS climbed 38.0% to $4.14 for the six-month end in June 30, 2024.

Richard Costello: As shown on slide 10, year-over-year units under construction were up 23%, with starts averaging 952 homes for the last four quarters. Year-to-date, we have now sold 1,926 homes, delivered 1,808 homes, and started 1,980 homes, closely matching the sales pace in production. Year to date, we delivered 1,808 homes, generating home closings revenue of $990 million, an increase of 9.6% year over year.

Chad: As shown on slide 10, year-over-year units under construction were up 23%, with starts averaging 952 homes for the last four quarters.

Chad: Year-to-date, we have now sold 1,926 homes, delivered 1,808 homes, and started 1,980 homes, closely matching the sales pace and the production pace.

Chad: an increase of 9.6% year-over-year.

Chad: Homebuilding gross margins increased 450 basis points to 34.0 percent.

Richard Costello: As a result, net income attributable to Green Brick grew 35.3% year-to-date to $189 million, and diluted EPS climbed 38.0% to $4.14 for the six months ended June 30, 2024. Next, our backlog value at the end of the second quarter increased 11% year over year to $650 million. Backlog is up 17% year to date. Now, as opposed to closing ASP, backlog ASP increased 10.1% to $732,000. Trophy, a spec home builder, continues to represent only 15% of the overall backlog value due to its reduced construction cycle times and quick inventory churn. Spec units under construction as a percentage of total units under construction increased slightly sequentially to 65% at the end of the second quarter as we started more specifications.

Greenberg: As a result, net income attributable to Greenberg grew 35.3% year-to-date to $189 million, and diluted EPS climbed 38.0% to $4.14 for the six months ended June 30, 2024.

Rick Costello: Next, our backlog value at the end of the second quarter increased 11% year-over-year to $650 million. Backlog is up 17% year-to-date. Now, as opposed to closing, ASP backlog ASP increased 10.1% to $732,000. Trophy Aspect Home Builder continues to represent only 15% of the overall backlog value due to its reduced construction cycle times and quick inventory turns. Expect the unit's under construction as a percentage of total units under construction increased slightly sequentially to 65% at the end of the second quarter as we started more spectrums. Our investment-grade balance sheet continues to serve as a strong springboard for future growth.

Chad: Next, our backlog value at the end of the second quarter increased 11% year-over-year to $650 million.

Chad: backlog is up 17% year-to-date.

Chad: Now, as opposed to closing ASP, backlog ASP increased 10.1% to $732,000.

Jim: Trophy, a spec home builder, continues to represent only 15% of the overall backlog value due to its reduced construction cycle times and quick inventory turns.

Jim: Spec units under construction as a percentage of total units under construction increased slightly sequentially to 65% at the end of the second quarter as we started more spec homes.

Richard Costello: Our investment grade balance sheet continues to serve as a strong springboard for future growth. At the end of the second quarter, our net debt to total capital ratio was 10.9%, and our total debt to total capital ratio was only 17.7%. As shown on slide 11, this level of financial leverage is running among the best of our small and mid-cap public home building peers. 100% of our outstanding debt is fixed rate, with a weighted average interest pay rate of 3.4%.

Jim: Our investment grade balance sheet continues to serve as a strong springboard for future growth.

Rick Costello: At the end of the second quarter, our net debt to total capital ratio was 10.9%, and our total debt to total capital ratio was only 17.7%. As shown on slide 11, this level of financial leverage is running among the best of our small and mid-cap public home building peers. 100% of our outstanding debt is fixed rate with a weighted average interest pay rate at 3.4%. Furthermore, at the end of the quarter, we had $133 million of cash on hand readily available for deployment, and $360 million in undrawing lines of credit.

Jim: At the end of the second quarter, our net debt-to-total capital ratio was 10.9%, and our total debt-to-total capital ratio was only 17.7%.

Jim: As shown on slide 11, this level of financial leverage is running among the best of our small and mid-cap public home building peers. 100% of our outstanding debt is fixed rate, with a weighted average interest pay rate of 3.4%.

Richard Costello: Furthermore, at the end of the quarter, we had $133 million of cash on hand readily available for deployment and $360 million in undrawn lines of credit. Finally, we remained active with share buybacks during the second quarter. We bought back approximately 1.5% of our shares outstanding, valued at $38 million, with a weighted average price of $55.58 per share. The remaining dollar value of shares that may yet be purchased under the 2023 repurchase plan was approximately $61.3 million as of June 30, 2024. We continue to weigh and balance investment opportunities with share repurchases, with the goal of delivering best-in-class, risk-adjusted returns for shareholders over the long term. With that, I'll now turn it over to Jed. Jed? Thank you.

Jim: Furthermore, at the end of the quarter, we had $133 million of cash on hand, readily available for deployment, and $360 million in undrawn lines of credit.

Rick Costello: Finally, we remained active with share buybacks during the second quarter. We bought back approximately 1.5% of our shares outstanding, valued at $38 million, with the weighted average price of $55.58 per share. The remaining dollar value of shares that may yet be purchased under the 2023 repurchase plan was approximately $61.3 million as of June 30, 2024. We continue to weigh in balance investment opportunities with share repurchases with the goal of delivering invested class risk-adjusted returns for shareholders over the long term.

Jim: Finally, we remained active with share buybacks during the second quarter. We bought back approximately 1.5% of our shares outstanding, valued at $38 million, with a weighted average price of $55.58 per share.

Jim: The remaining dollar value of shares that may yet be purchased under the 2023 repurchase plan was approximately $61.3 million as of June 30, 2024. We continue to weigh and balance investment opportunities with share repurchases.

Jim: with the goal of delivering best-in-class, risk-adjusted returns for shareholders over the long term.

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

Jed Dolson: Jed? Thank you, Rick. Demand was healthy during the second quarter. Net new orders moderated from a near record level in first quarter of 2024, but very slightly year over year to 855 sales, representing our best Q2 order level in company history. Our sales pace for the second quarter was 8.5 homes per average active selling community, down from 11.4 in Q1, when our backlog was 3.31%, sequentially. In the latter part of the second quarter, we saw sales pace slightly moderate.

Jed Dolson: Thank you, Rick. Demand was healthy during the second quarter. Net new orders moderated from a near record level in the first quarter of 2024 but grew slightly year over year to 855 sales, representing our best Q2 order level in company history. Our sales pace for the second quarter was 8.5 homes per average active selling community, down from 11.4 in Q1 when our backlog grew 31% sequentially. In the latter part of the second quarter, Sales Pay Slightly Moderate. As we exit the spring selling season, we're turning, we believe, to the normal pre-pandemic seasonality that we have traditionally experienced.

Jim: With that, I'll now turn it over to Jed. Jed?

Jed: Thank you, Rick. Demand was healthy during the second quarter. Net new orders moderated from a near record level in the first quarter of 2024.

Jed: but grew slightly year-over-year to 855 sales, representing our best Q2 order level in company history.

Jed: Our sales pace for the second quarter was 8.5 homes per average active selling community, down from 11.4 in Q1 when our backlog grew 31% sequentially.

Jed: and the latter part of the second quarter.

Jed Dolson: As we exited the spring selling season, returning, we believe, to the normal pre-pandemic seasonality that we have traditionally experienced, increased mortgage rates during the quarter and metering of sales in certain infill communities also contributed to moderated orders. However, incentives for new orders picked up only modestly in the second quarter to 4.5% from 3.8% in March. We were still able to raise base prices moderately and approximately a third of our communities due to our footprint of infill and infill-adjacent submarkets where supply is limited from both new homes and existing homes. Incentives were only targeted in select communities where traffic and orders were below desired levels and/or the spec homes at later stages of construction.

Jed: We saw sales pace slightly moderated as we exited the spring selling season, returning, we believe, to the normal pre-pandemic seasonality that we have traditionally experienced.

Jed Dolson: Increased mortgage rates during the quarter and metering of sales in certain infill communities also contributed to moderated orders. However, incentives for new orders picked up only modestly in the second quarter to 4.5 from 3.8% in March. We were still able to raise base prices moderately in approximately a third of our communities due to our footprint of infill and infill adjacent submarkets where supply is limited from both new homes and existing homes. Incentives were only targeted in select communities where traffic and orders were below desired levels and or respect homes at later stages of construction.

Jed: Increased mortgage rates during the quarter and metering of sales in certain infill communities also contributed to moderated orders.

Jed: However, incentives for new orders picked up only modestly in the second quarter to 4.5% from 3.8% in March.

Jed: We were still able to raise base prices moderately in approximately a third of our communities due to our footprint of infill and infill-adjacent submarkets where supply is limited from both new homes and existing homes.

Jed: Incentives were only targeted in select communities where traffic and orders were below desired levels and or with spec homes at later stages of construction. We continue to offer many of our buyers the flexibility to use their incentive package for closing costs.

Jed Dolson: We continue to offer many of our buyers the flexibility to use their incentive package for closing costs, partial rate buydowns, or both. Buyers who closed using our affiliated mortgage company continued to demonstrate strong qualifying profiles with an average FICO score of 741 and a debt-to-income ratio of 38% during the second quarter. With home building gross margins being at an all-time high of 34.5%, we possess an abundance of flexibility in price adjustments if the market shifts.

Jed Dolson: We continued to offer many of our buyers the flexibility to use their incentive package for closing costs, partial rate buy downs, or both. Buyers who close using our affiliated mortgage company continued to demonstrate strong qualifying profiles, with an average bike score of 741 and a debt to income ratio of 38% during the second quarter.

Jed: partial rate buy-downs or both.

Jim: Buyers who closed using our affiliated mortgage company continued to demonstrate strong qualifying profiles with an average FICO score of 741 and a debt-to-income ratio of 38% during the second quarter.

Jed Dolson: With home building, gross margins be at an all-time high of 34.5%; we possess an abundance of flexibility in price adjustments if the market shifts. We remain optimistic that, with our focus on infill and infill-adjacent locations, we are well-positioned to capitalize on long-term secular demographic shifts and rising demand if or when mortgage rates drop. Through the diversification of our seven brands in a wide array of product types and price ranges, we believe Green Brick will appeal to a broad base of home buyers led by the growth of trophy signature homes in the entry-level and move-up segments.

Jim: With home building gross margins being at an all-time high of 34.5%, we possess an abundance of flexibility in price adjustments if the market shifts.

Jed Dolson: We remain optimistic that with our focus on infill and infill adjacent locations, we are well positioned to capitalize on long-term secular demographic shifts and rising demand if or when mortgage rates drop. Through the diversification of our seven brands and a wide array of product types and price ranges, we believe Green Brick will appeal to a broad base of homebuyers, led by the growth of trophy signature homes in the entry level and move up segments.

Jim: We remain optimistic that with our focus on infill and infill-adjacent locations, we are well positioned to capitalize on long-term secular demographic shifts and rising demand if or when mortgage rates drop.

Jim: through the diversification of our seven brands and a wide array of product types and price ranges.

Jim: We believe Greenbrick will appeal to a broad base of homebuyers, led by the growth of trophy signature homes in the entry-level and move-up segments.

Jed Dolson: As Jim mentioned earlier, Green Brick has been able to generate superior returns and growth over the past several years because of our unwavering approach to capital allocation and our land strategy. To propel this growth forward, we have diligently executed under a strategic capital allocation plan that we believe positions us for future success. In the second quarter of 2024, we increased our spending and land acquisition and finish lots to approximately $119 million. We spent another $40 million in land development. Year to date, our total spend has reached over $300 million, and we are on track to meet our original land acquisition and development target of $700 million in total for the full year 2024.

Jed Dolson: As Jim mentioned earlier, Green Brick has been able to generate superior returns and growth over the past several years because of our unwavering approach to capital allocation and our land strategy. To propel this growth forward, we have diligently executed under a strategic capital allocation plan that we believe positions us for future success. In the second quarter of 2024, we increased our spending and land acquisition and finished lots to approximately $119 million.

Jim: As Jim mentioned earlier, Greenbrick has been able to generate superior returns and growth over the past several years because of our unwavering approach to capital allocation and our land strategy.

Jim Brickman: To propel this growth forward, we have diligently executed under a strategic capital allocation plan that we believe positions us for future success.

Jim: In the second quarter of 2024, we increased our spending and land acquisition and finished lots to approximately $119 million.

Jed Dolson: We spent another $40 million on land development. Year-to-date, our total spend has reached over $300 million, and we are on track to meet our original land acquisition and development target of $700 million in total for the full year of 2024. Please recall that this is taking place with a total debt to capital ratio of under 20%.

Jim: We spent another $40 million in land development.

Jed Dolson: Please recall that this is taking place with a total debt to capital ratio of under 20%. We have added close to 10,700 new lots, offset by approximately 3,800 starts, for a net increase of approximately 6,900 lots owned and controlled at 26% increase year over year. Approximately 67% of these lots will be in fill in intel adjacent locations, with the remaining 33% in outlying hybrid corridors. This brings our total lots owned and controlled to over 33,300, a new all-time high for the company and a 16% increase from the start of the year. Excluding 16,700 lots in long-term communities, it provides approximately 5 years of lots of supply based on the start case and non-master communities over the last 12 months.

Jed Dolson: We have added close to 10,700 new lots, offset by approximately 3,800 starts for a net increase of approximately 6,900 lots owned and controlled, a 26% increase year over year. Approximately 67% of these lots will be infill and infill-adjacent locations, with the remaining 33% in outlying high-growth corn. This brings our total of lots owned and controlled to over 33,300, a new all-time high for the company and a 16% increase from the start of the year.

Jim: Approximately 67 percent of these lots will be infill and infill adjacent locations with the remaining 33 percent in outlying high-growth corridors.

Jim: This brings our total of lots owned and controlled to over 33,300, a new all-time high for the company and a 16% increase from the start of the year.

Jed Dolson: Excluding 16,700 lots in long-term communities, it provides approximately five years of lot supply based on the start pace in non-master communities over the last 12 months. Additionally, over 97% of our current inventory of lots owned and controlled are expected to be self-developed. We believe the emphasis on self-development will allow Green Brick to continue generating industry-leading gross margins and performance as these self-developed lots avoid expensive premiums charged by third-party land developers and allow us to control the pace of lot development and delivery as well as start.

Jed Dolson: Over 97% of our current inventory of lots owned and controlled are expected to be self-developed. We believe the emphasis on self-development will allow Grimbrick to continue generating industry-leading gross margins and performance as these self-developed lots avoid expensive premiums charged by third-party land developers and allow to control the pace of lot development and delivery as well as starts. Cycle times now have stabilized in average 5.4 months for homes that completed construction during the second quarter. This was the reduction of more than two months from the second quarter of 2023 and five days shorter than the previous quarter.

Jim: Over 97% of our current inventory of lots owned and controlled are expected to be self-developed.

Jim: We believe the emphasis on self-development will allow Greenbrick to continue generating industry-leading gross margins

Jim: and performance as these self-developed lots avoid expensive premiums charged by third-party land developers and allow us to control the pace of lot development and delivery as well as starts.

Jed Dolson: Cycle times have stabilized at an average of 5.4 months for homes that completed construction during the second quarter. This was a reduction of more than two months from the second quarter of 2023 and five days shorter than the previous quarter.

Jim: Cycle times now have stabilized and averaged 5.4 months for homes that completed construction during the second quarter. This was a reduction of more than two months from the second quarter of 2023 and five days shorter than the previous quarter.

Jed Dolson: As the third largest home builder in Dallas Fort Worth, we see potential to further optimize our cycle times and reduce costs by leveraging our scale.

Jed Dolson: As the third largest home builder in Dallas-Fort Worth, we see potential to further optimize our cycle times and reduce costs by leveraging our scale. Securing high-quality land remains our top priority. Despite persistently high mortgage rates, our land markets remain competitive in most of our key submarkets. We continue to underwrite deals with a minimum of a 21% unleveraged IRR threshold.

Jed Dolson: Securing high-quality land remains our top priority. Fight persistent high mortgage rates are land markets remain competitive in most of our key submarkets. We continue to underwrite deals with a minimum of 21% unleveraged IRR threshold. Our deep local market presents knowledge, relationships, and reputation grants us an unriseable visibility on land opportunities, while a robust balance sheet enables us to act swiftly. Live 13 and 14 provided additional detail on our finish lot pipeline in submarkets of Dallas, Fort Worth, and Atlanta, two of our largest submarkets. We currently have 41 communities under development. Over the next six months, we plan to complete these lots for delivery to our builder brands of approximately 1,700 lots.

Jim: Securing high-quality land remains our top priority.

Jed Dolson: Our deep local market presence, knowledge, relationships, and reputation grants us unrivaled visibility on land opportunities while a robust balance sheet enables us to act swiftly. Slides 13 and 14 provide additional detail on our finished lot pipeline and submarkets in Dallas-Fort Worth and Atlanta, two of our largest submarkets. We currently have 41 communities under development. Over the next six months, we plan to complete these lots for delivery to our builder brands of approximately 1,700 lots.

Jim: Our deep local market presence, knowledge, relationships, and reputation.

Jim: grants us an unrivaled visibility on land opportunities while a robust balance sheet enables us to act swiftly.

Jim: Slides 13 and 14 provide additional detail on our finished lot pipeline and submarkets of Dallas-Fort Worth and Atlanta, two of our largest submarkets.

Jim: We currently have 41 communities under development. Over the next six months, we plan to complete these lots for delivery to our builder brands of approximately 1,700 lots.

Jed Dolson: At the end of 2024, we expect to have an inventory of approximately 4,700 finish lots for our subsidiary home builders, with over 1,900 of those finish lots being allocated to Trophy.

Jed Dolson: By the end of 2024, we expect to have an inventory of approximately 4700 finished lots for our subsidiary home building, with over 1900 of those finished lots being allocated to trophies. Green Brick is well positioned for continued growth into 2025 and beyond, having secured both short and long-term land needs. For the first half of 2024, TROPHY, our entry-level first-time move-up value builder, closed 810 homes, representing approximately 45% of our total number of homes closed, resulting in 34% of our total home closing revenue. We expect this platform, for which the company now controls over 23,500 home sites, to continue contributing significantly to our 24 earnings and beyond. With that, I will turn it over to Jim for his closing remarks.

Jim: By the end of 2024, we expect to have an inventory of approximately 4700 finished lots for our subsidiary homebuilders.

Jim: with over 1,900 of those finished logs being allocated to Trophy.

Jed Dolson: Green Brick is well-positioned for continued growth into 2025 and beyond, having secured both short- and long-term land needs. For the first half of 2024, Trophy are entry-level first-time move up value builder, closed 810 homes, representing approximately 45% of our total number of home closings, resulting in 34% of our total home closing revenue. We expect this platform for which the company now controls over 23,500 homesides to continue contributing significantly to our 24 earnings and beyond.

Jim: Greenbrook is well positioned for continued growth into 2025 and beyond, having secured both short and long-term land needs.

Jim: For the first half of 2024, TROPHY, our entry-level first-time move-up value builder, closed 810 homes, representing approximately 45%

Jim: of our total number of home closings.

Jim: resulting in 34% of our total home closing revenue.

Jim: We expect this platform, for which the company now controls over 23,500 home sites, to continue contributing significantly to our 24 earnings and beyond. With that, I will turn it over to Jim for closing remarks.

Jim Brickman: With that, I will turn it over to Jim for closing remarks.

Jim Brickman: Thank you, Jed.

James Brickman: Thank you, Jed. In closing, I would like to give another round of applause and thanks to our incredible team. Our record-breaking quarter is a direct result of the hard work of our people and years of meticulous planning and execution. These results are just the beginning for Green Brick. With a cooperative economy, our superior investments in land and lot inventory and constantly improving building operations have created a long runway for sustained growth, particularly through trophies. This concludes our prepared remarks, and we will now open the line for questions.

Jim Brickman: In closing, I would like to give another round of applause and thanks to our incredible team. Our record breaking quarter is a direct result of the hard work of our people in years of meticulous planning and execution. These results are just the beginning for Green Brick.

Jim Brickman: Thank you Jed. In closing, I would like to give another round of applause and thanks to our incredible team.

Jim Brickman: Our record-breaking quarter is a direct result of the hard work of our people and years of meticulous planning and execution.

Jim Brickman: With the cooperative economy, our security investments in land and live inventory and constantly improving building operations can create a long-term way for sustained growth, particularly through trophy.

Speaker Change: These results are just the beginning for Greenbrick.

Jim Brickman: With a cooperative economy, our superior investments in land and lot inventory, and constantly improving building operations, have created a long runway for sustained growth, particularly through Trophy.

Operator: This concludes our prepared remarks, and we will now open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To redraw your question, please press star, then one again. At this time, we will pause momentarily to assemble our roster.

Speaker Change: This concludes our prepared remarks and we will now open the line for questions.

Speaker Change: Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star and one again. At this time, we will pause momentarily to assemble our roster. Your first question comes from the line of Carl Reichardt with VTIG. Please go ahead.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To redraw your question, please press star then 1 again. At this time, we will pause momentarily to assemble our roster.

Carl Reichardt: Your first question comes from the line of Carl with chart with BTIG. Please go ahead. Thank you, everybody. Hope you are doing well. Rick, historically, we have talked about your start space and that being a driver to delivery volume six months out, and you have been running 952, I think was the average is what you said. Now trophy is growing, supply change is more normal, lot count is up.

Speaker Change: Your first question comes from the line of Carl Richard with BTIG. Please go ahead.

Carl Reichardt: Thanks, everybody. I hope you're doing well.

Carl Richard: Thanks everybody, hope you're doing well. So Rick, historically we've talked about your start to pace and that being a driver to delivery volume six months out and you've been running 952 I think was the average is what you said. So now Trophy's growing.

Richard Costello: So Rick, historically, we've talked about your starting pace and that being a driver to delivery volume six months out, and you've been running 952, I think was the average, as you said. So now trophies are growing, the supply chain is more normal, and the lot count is up. Can we expect that sort of 950, maybe 1000, starting pace to start picking up as we look quarters out? Or is your anticipation that it'll stay kind of flat from there as we move into 25? Based on what you know now,

Rick Costello: Can we expect that sort of 950, maybe a thousand start pace to start picking up as we look quarters out, or is your anticipation that it will stay kind of flat from there as we move into 25 based on what you know now? Well, it's certainly going to be a function of what happens on the sales floor. We're obviously developing a lot of communities and a lot of lots, but we're not really going to suggest forward beyond what you see. I mean, you're talking about the best indicator, but we're not directionally; eventually, it's going to go up, but from the timing standpoint, we're going to remain silent.

Carl Richard: supply chain is more normal, lot count is up. Can we expect that sort of 950, maybe 1,000 start pace to start picking up as we look quarters out? Or is your anticipation that it'll stay kind of flat from there as we move into 25? Based on what you know now.

Richard Costello: Well, it's certainly going to be a function of what happens on the sales floor. We're obviously developing a lot of communities and a lot of lots, but we're not really going to suggest anything beyond what you see. I mean, you're talking about the best indicator, but directionally, eventually, it's going to go up, but from the timing standpoint, we're going to remain silent.

Speaker Change: Well, it's certainly going to be a function of what happens on the sales floor. We're obviously developing a lot of communities and a lot of lots.

Speaker Change: But, you know, we're not really going to suggest

Speaker Change: forward beyond what you see. I mean, you're talking about the best indicator, but directionally, eventually, it's going to go up. But from the timing standpoint, we're going to remain silent.

Carl Reichardt: Okay, but the relationship, the six-month relationship, you expect that that will continue on a go-forward basis. It won't shorten to five months or go to seven or something like that based on the mix that you plan.

Rick Costello: Okay, but the relationship, the six-month relationship, you expect that that will continue on a go-forward basis. It won't shorten to five months or go to seven or something like that based on the mix that you plan. Five months or seven months of well, cycle time. Are you talking about cycle time? So what I mean is if I look at your starts six months ago, two quarters ago, and I model that as deliveries six months hence, that relationship has held pretty tight, pretty consistently, over a long period of time. So I'm wondering if cycle times are improving, if trophies more, a bigger portion of your mix going forward, does that shrink down to like a five-month lead as opposed to a six?

Speaker Change: Okay, but the relationship, the six-month relationship, you intend, you expect that that will continue on a go-forward basis. It won't shorten to five months or go to seven or something like that based on the mix that you plan.

Carl Reichardt: Five months or seven

Carl Reichardt: What I mean is if I look at your starts six months ago, two quarters ago, and I model that as deliveries six months hence, that relationship has held pretty tight, pretty consistently over a long period of time. So I'm wondering if cycle times are improving, if trophies are more, a bigger portion of your mix going forward, does that shrink down to like a five month lead as opposed to six?

Speaker Change: Five months or seven months of what cycle time? Are you talking about cycle time? So what I mean is if I look at your starts six months ago two quarters ago And I model that as deliveries six months hence that relationship is held pretty tight pretty consistently over a long period of time So I'm wondering if cycle times are improving if trophies trophies more A bigger portion of your mix going forward does that shrink down to like a five month lead as opposed to a six?

Richard Costello: Over time, it will certainly shorten because Trophy's delivering houses in 3.8 months versus 5.3 overall. So yeah, I mean, certainly that is a dynamic, and it's a positive one.

Rick Costello: Over time, it will certainly shorten because trophies delivering houses in 3.8 months versus 5.3 overall. So, yeah, I mean, certainly, that is a dynamic, and it's a positive one.

Speaker Change: Over time, it will certainly shorten because Trophy's delivering houses in 3.8 months versus 5.3 overall. So, yeah, I mean, certainly that is a dynamic and it's a positive one.

Carl Reichardt: Okay, so that answers the question. Okay. And then, can you guys mind at all, Jim, talking a little bit about July?

Rick Costello: Okay, so that answers.

Jim Brickman: Okay, and then can you guys do mind at all, Jim, talking a little bit about July? And as I sort of look at rate movements, have come down a lot. There seems to be a lot of elasticity in the marketplace for demand based on how rates are going. Is your sense that that's still the critical driver to how sales role, or are you seeing any sort of softening related to the consumer being concerned about their job, or the election, or sort of macro things beyond just sort of the mathematics of full ownership? Good question, Carl.

Speaker Change: Okay, so that answers. Okay. And then, can you guys do mind at all, Jim, talking a little bit about

James Brickman: And as I sort of look at rate movements have come down a lot, there seems to be a lot of elasticity in the marketplace for demand based on how rates are going. Is your sense that that's still the critical driver of how sales roll? Or are you seeing any sort of softening related to the consumer being concerned about their job or the election or sort of macro things beyond just sort of the mathematics of home ownership?

Jim Brickman: July and and as I sort of look at rate movements have come down a lot There seems to be a lot of elasticity in the marketplace for demand based on on how rates are going Is your sense that that's still the critical driver to how sales roll or are you seeing any any? Sort of softening related to the consumer being concerned about their job or the election or or sort of macro things beyond just sort of the mathematics of home ownership

James Brickman: Good question, Carl. Let me do a segue on this by saying one of the things CEOs just don't talk about very much anymore because everybody's talking about financial engineering and doing a lot of other stuff. Our goal is to create value by titeling, and developing larger, longer-term neighborhoods that people want to live in, okay, today and tomorrow. For some reason, that whole message of creating neighborhoods that people want to live in is absent from so many investor calls that I have read transcripts of.

Jim Brickman: Let me do a segue on this. And one of the things to EOS just don't talk about for any much anymore because everybody's talking about financial engineering and doing a lot of other stuff is our goal is to create value in pedaling, developing larger, longer duration neighborhoods that people want to live in. Okay, today and tomorrow. For some reason, that whole message of creating neighborhoods that people want to live in is absent from so many investor calls that I read transcripts of. That are really our primary goal. July sales have maintained at a pace that we expected.

Speaker Change: Good question, Carl. Let me do a segue on this. One of the things CEOs just don't talk about very much anymore because everybody's talking about financial engineering and doing a lot of other stuff is

Speaker Change: Our goal

Speaker Change: is the great value.

Speaker Change: Entitling and Developing Larger Longer Duration Neighborhoods That People Want To Live In. Okay? Today and Tomorrow. For some reason that whole message of creating neighborhoods that people want to live in.

Speaker Change: is absent from so many investor calls that I read transcripts of. That's really our primary goal.

James Brickman: That's really our primary goal. July sales have maintained at a pace that we expected. We didn't have to incentivize sales any more than we expected to achieve those sales, and we aren't seeing, really, any diminished demand in any of our businesses, other than one or two neighborhoods in Florida with soft rents.

Speaker Change: July sales have maintained at a pace that we expected.

Jim Brickman: We didn't have to incentivize sales any more than we expected to achieve those sales. And we aren't seeing really any diminished demand in any of our businesses, other than one or two neighborhoods in Florida that are soft right now.

Speaker Change: We didn't have to incentivize sales any more than we expected to achieve those sales and we aren't seeing, really, any diminished demand.

Jim: in any of our businesses other than one or two neighborhoods in Florida are soft right now.

James Brickman: are soft right now.

Carl Reichardt: Okay, I appreciate the answer. Thanks a lot, guys.

Operator: I appreciate the answer. Thanks a lot, guys. Your next.

Speaker Change: I appreciate the answer. Thanks a lot, guys.

Alex Rygiel: Your next question comes from the line of Alex Rijel, with the least go ahead. Alex, how are you in mute? I am sorry about that gentleman.

Operator: Your next question comes from the line of Alex Rygiel with L.A. Please go ahead.

Speaker Change: Your next question comes from the line of Alex Reijel with Raleigh. Please go ahead.

Alex Rygiel: Alex, are you on mute?

Howitzer: Howitzer, are you on mute?

Alex Rygiel: I am sorry about that, gentlemen. With incentives up, and incentives up a bit sequentially, does that suggest some modest headwind to gross margins in the third quarter? And where were or are incentives in July relative to 2Q? Well, we were really

Jed Dolson: With incentives up a bit sequentially, does that suggest some modest headwind to, of course, margins of the third quarter and where are incentives in July relative to Q? Well, we really don't want to talk about that in specificity. We're focusing on the current quarter, but certainly what's happening on the Salesforce translates more quickly with as much spec concentration that we have, particularly in Trophy, where 70-80% of their homes that they close in the quarter were sold the same quarter. So if interest rates are going up, incentives go up; if interest rates are going down, incentives come down, subject to changes in seasonality, which really saw a lot of people take vacations in June and traffic was down.

Alex Reijel: I am, sorry about that gentlemen. With incentives up a bit sequentially, does that suggest some modest headwind to gross margins in the third quarter and where were or are incentives in July relative to QQ?

Richard Costello: Well, we really don't want to talk about that in specificity. We're focusing on the current quarter, but certainly what's happening on the sales floor translates more quickly with as much spec concentration that we have, particularly in Trophy, where 70-80% of their homes that they close in a quarter are sold the same quarter. So if interest rates are going up, incentives go up. If interest rates are going down, incentives go down. Subject to changes in seasonality, which we really saw a lot of people take vacations in June, and traffic was down. So the direct answer is it will be more variable, but it runs in both directions.

Speaker Change: Well, we really don't want to talk about that in specificity. We're focusing on the current quarter, but certainly what's happening on the sales floor translates more quickly with as much spec concentration that we have, particularly in Trophy, where 70-80% of their homes that they close in a quarter were sold the same quarter.

Speaker Change: So if interest rates are going up, incentives go up. If interest rates are going down, incentives come down, subject to changes in seasonality, which we really saw a lot of people take vacations in June and traffic was down.

Jed Dolson: So the direct answer is it will be more variable, but it runs both directions. Good and bad. It's helpful.

Speaker Change: So, I mean, the direct answer is it will be more variable, but it runs both directions.

Speaker Change: Good and bad.

Richard Costello: That's helpful. And then as we think about monthly absorption, clearly the last few years or so, been a notable step up in that absorption, understanding your mix shift and all. But is that sort of kind of the new norm of, you know, let's call it three per month per community. And that's a very comfortable level. And really, when you look at it from a from a year to date

Jed Dolson: And then, as we think about monthly absorption, clearly the last two years or so, we get a notable step up in that absorption and understanding your mixed shift and all. But is that sort of kind of the new norm of, you know, what's called three per month for community? That's a very comfortable level. And really, when you look at it from a year-to-date standpoint, Q1 was a lot quicker from an absorption standpoint. But we also grew backlogs sequentially 31%. And you know, as a predominantly a spec builder, that is not necessarily where we're taking the organization.

Speaker Change: That's helpful. And then as we think about monthly absorption,

Speaker Change: clearly the last two years or so been a notable step up in that absorption and understanding your mix shift and all. But is that sort of kind of the new norm of, you know, let's call it three per month per community?

Richard Costello: That's a very comfortable level, and really, when you look at it from a year-to-date standpoint, Q1 was a lot quicker from an absorption standpoint, but we also grew backlog sequentially by 31%, and as a predominantly spec builder, that is not necessarily where we're taking the organization. So the fact that we're up year-to-date still by 17% is a strong dynamic, which tells you that the year-to-date numbers are very pleasing to us because we have that Equality Between Sales Starts and Closes.

Speaker Change: That's a very comfortable level, and really, when you look at it from a year-to-date standpoint,

Speaker Change: Q1 was a lot quicker.

Speaker Change: from an absorption standpoint.

Speaker Change: but we also group backlog.

Speaker Change: sequentially 31% and, you know, as a

Jed Dolson: So the fact that we're up sequential, sorry, year-to-date still like 17% is a strong dynamic. But which tells you that the year-to-date numbers are very pleasing to us because we have that equality between sales starts and closings. Very helpful. Thank you very much. Okay. Thanks, Alice. Again, if you have questions, please press star, then one.

Jim: are very pleasing to us because we have that equality between sales starts and closings.

Speaker Change: Very helpful. Thank you very much.

Alice: Okay, thanks Alice.

Speaker Change: Again, if you have questions, please press star then 1.

Jay Mccanless: And your next question comes from the line of Jay McCannless with Redbush. Please go ahead. Hey, thanks for sharing my questions. The first one I had, I think Chad, you may have talked about pricing only being able to raise prices in roughly a third of communities during the quarter. I would have thought with the Intel, the heavier weight of Intel, you would have been able to push a little more price and maybe what was going on with that. I think just some seasonality that we exit towards the later part. quarter.

Operator: Again, if you have questions, please press star, then 1. And your next question comes from the line of Jay McCanless with Redbush. Please go ahead.

Speaker Change: And your next question comes from the line of Jay McAnlis with Redbush. Please go ahead.

Jay Mccanless: Hey, thanks for sharing my questions. The first one I have is:

Jay Mccanless: Jed, you may have talked about pricing, only being able to raise prices in roughly a third of communities during the quarter.

Jay McAnlis: Hey, thanks for sharing my questions. The first one I had, I think, Jed, you may have talked about pricing, only being able to raise prices in roughly a third of communities during the quarter. I would have thought with the infill, the heavier weight of infill, you'd have been able to push a little more price, so maybe what was going on with that?

Unknown Executive: Unknown Executive, Jay McCanless, Green Brick Partners Inc.

Unknown Executive: I think just some seasonality that we left toward the later part of And then, I guess.

Jed Dolson: I think just some seasonality that we exited toward the later part of the quarter.

Jay Mccanless: And then I guess with trophy selling and closing 70 to 80 percent of their homes at a given quarter, I guess what's plan B if things start to slow down, if we start to see some job losses, etc. Do you think those homes go into the SFR BTR market or how what's the business plan for those things to slow down from the economy standpoint?

Jay Mccanless: With Trophy selling and closing 70 to 80% of their homes at a given quarter, I guess what's plan B if things start to slow down, if we start to see some job losses, etc.? Do you think those homes will go into the SFR-BTR market, or what's the business plan for those if things do slow down?

Speaker Change: And then, I guess...

Speaker Change: with trophy selling and closing 70% to 80% of their homes at a given quarter.

Speaker Change: I guess, what's plan B if things start to slow down, if we start to see some job losses, etc.?

Speaker Change: Do you think those homes go into the SFR-BTR market, or what's the business plan for those if things do slow down from the economy standpoint?

Jim Brickman: Jay, this is Jim Brickman. No, we don't sell into the build-for-rent market. We focus on creating nicer, longer duration communities, and the people that are moving in those communities are not expecting to move into a rental community. We don't; one of the really huge benefits of making 34.5 percent margins is that we can take a 10 percent margin hit and still have margins that are typical to our peers. And our peers take a 10 percent margin hit; they go negative income. So I don't lose sleep over a few jobs. We're in this business for the long run, and we have plenty of cushion and margin to maintain sales velocity.

James Brickman: Jay, this is Jim Brickman. No, we don't sell into the billed for rent market. We focus on creating nicer, longer-term communities, and the people that are moving into those communities are not expecting to move into a rental community. We don't want to really, the huge benefits of making 34.5% margins are that we can take a 10% margin hit and still have margins that are typical of our peers. And if our peers take a 10% margin hit, they go into negative income, so... I don't lose sleep over a few jobs. You know, we're in this business for the long run, and we have plenty.

Speaker Change: Jay, this is Jim Brickman. No, we don't sell into the built-for-rent market.

Jay McAnlis: We focus on creating nicer, longer duration communities, and the people that are moving in those communities are not expecting to move into a rental community.

Speaker Change: We don't, one of the really...

Speaker Change: huge benefits of making 34.5% margins.

Jed Dolson: is that we can take a 10% margin hit and still have margins that are typical to our peers.

Speaker Change: And if our peers take a 10% margin hit, they go negative income. So, I don't lose sleep over a few jobs. You know, we're in this business for the long run, and we have plenty of cushion and margin to maintain sales velocity.

James Brickman: We have plenty of cushion and margin to maintain sales. Hey Jay, this is Rick.

Richard Costello: One more. I mean, that was answer A and B, but also, in that environment where there are job losses, obviously, the Fed is going to respond with more aggressive rate cuts, and the number of people who will qualify for those rate cuts will exceed the number of people who will be without jobs. So I think that the numbers work pretty well for us, especially being in stronger job markets like Dallas and Atlanta. Okay, great. Thanks for taking my questions. Thanks, Jay.

Rick Costello: Hey, Jay, this is Rick, one more. I mean, that that was answer A and B. But also in that environment where there are job losses, obviously the Fed is going to respond with more aggressive rate cuts, and the number of people who will qualify with those rate cuts exceed the number of people who will be without jobs. So I think that the numbers work pretty well for us, especially being in stronger job markets like Dallas and Atlanta. Okay, great. Thanks so much questions. Thanks, Jay. Again, if you have any questions, please press bar, then one.

Speaker Change: Hey Jay, this is Rick, one more, I mean that was answer A and B, but also in that environment where there are job losses.

Speaker Change: Obviously, the Fed is going to respond with more aggressive rate cuts.

Speaker Change: and the number of people who will qualify with those rate cuts exceed the number of people who will be without jobs. So I think that the numbers work pretty well for us, especially being in stronger job markets like Dallas and Atlanta.

Speaker Change: Okay, great. Thanks for taking my questions.

Jay McAnlis: Thanks Jay.

Operator: Again, if you have any questions, please press star then 1. There are no further questions. And that concludes today's call. Thank you all for joining us. You may now disconnect.

Operator: There are no further questions, and that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: There are no further questions and that concludes today's call. Thank you all for joining. You may now disconnect.