Q4 2024 Green Brick Partners Inc Earnings Call
Unknown Executive: Sir, please go ahead. Good afternoon, and welcome to Green Brick Partners earnings call for the fourth quarter and full year ended December 31, 2024. Following today's remarks, we will hold the Q&A session.
Good afternoon, and welcome to Greenberg partners earnings call for the fourth quarter and full year ended December 31 2024.
Following today's remarks, we will hold a Q&A session.
Unknown Executive: As a reminder, this call is being recorded and will be available for playback on the company's website. In addition, a presentation will accompany today's webcast, and it's also available on the company's website at investors.greenbrickpartners.com.
As a reminder, this call is being recorded and will be available for playback on the company's website.
In addition, our presentation will accompany today's webcast and is also available on the company's website at investors Dot Greenberg partners Dot com.
Rick Costello: 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 2025 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's statements are as of today, February 27, 2025, and the company has no obligation to update any forward-looking statements it may make. These comments also include non-GAAP financial metrics.
Jim Brickman: On the call today is Jim Brickman, co founder and Chief Executive Officer.
Rick Costello: Jed Dolson, President and Chief operating Officer, and myself, Rick Costello, Chief Financial Officer.
Rick Costello: The information discussed on this call is forward looking including the company's financial and operational expectations for 2025, and beyond and yesterday's press release, and our SEC filings. The company detailed material risks that may cause future results to differ from its expectations. The company's statements are as of today.
Rick Costello: February 27 in 2025, and the company has no obligation to update any forward looking statements. It may make.
Rick Costello: These 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.
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.
Rick Costello: With that, I'll turn the call over to Jim. Thank you, Rick.
Jim Brickman: With that I'll turn the call over to Jim Jim.
Jim Brickman: Thank you Rick we are extremely pleased to report record fourth quarter and full year 2024 results as we celebrate green bricks 10th anniversary as a public company.
Jim Brickman: We are extremely pleased to report record fourth quarter and full year 2024 results as we celebrate Green Brick's 10th anniversary as a public company. During the fourth quarter, we closed a record 1,019 homes and grew home closing revenue by 24% year over year to the $557 million, over 80% of which were once again generated from infill and infill adjacent submarkets. Year over year net sales orders in the fourth quarter increased 29% while average selling communities grew 19%. Net income attributable to Green Brick during the fourth quarter grew 42% to $104 million, and diluted EPS increased 46% year over year to $2.31, both records for any fourth quarter in the company's history.
Jim Brickman: During the fourth quarter, we closed a record 1019 homes and grew home closing revenue by 24% year over year to $557 million over 80% of which were once again generated from infill and infill adjacent submarkets.
Jim Brickman: Year over year net sales orders in the fourth quarter increased 29%, while average selling communities grew 19%.
Jim Brickman: Net income attributable to green brick during the fourth quarter grew 42% to 104 million and diluted EPS increased 46% year over year to $2 31, both records for any fourth quarter in the company's history two.
Jim Brickman: 2024 was the best year in company history, as we achieved several milestones despite a challenging mortgage rate environment. Our diluted annual EPS of 845 beat last year's record EPS by 38%. Since 2015, Green Brick has been able to achieve substantial growth and expansion.
Jim Brickman: <unk> 2024 was the best year in company history, as we achieved several milestones despite the challenging mortgage rate environment.
Jim Brickman: Our diluted annual EPS of 845 beat last year's record EPS by 38%.
Speaker Change: Since 2015 Green brick has been able to achieve substantial growth and expansion here are some of our achievements.
Jim Brickman: Here are some of our achievements. Home closings grew almost sixfold from 665 units in 2015 to 3,783 in 2024, generating home closing revenues that exceeded $2 billion for the first time. full year home building gross margins improved from 20.6% in 2015 to 33.8% in 2024, representing a 64% improvement to a level that is the highest gross margin performance among our public home building peers. Diluted EPS grew from 38 cents in 2015 to $8.45 in 2024, with adjusted diluted EPS of $8.21 after excluding the 24% after tax impact of a warranty reserve reversal that were recorded in Q4, both resulting in a compounded annual growth rate of 41%.
Speaker Change: Home closings grew almost six fold from 665 units in 2015 to 3783 in 2024 generating home closing revenues that exceeded $2 billion for the first time.
Speaker Change: Okay.
Speaker Change: Full year homebuilding gross margins improved from 26% in 2015 to 33, 8% in 2024, representing a 64% improvement to a level that is the highest gross margin performance among all public homebuilding peers.
Speaker Change: Diluted EPS grew from 38 in 2015 to $8 45.
Speaker Change: In 2024 with adjusted diluted EPS of $8 21.
Speaker Change: After excluding the 24% after tax impact of a warranty reserve reversal that we recorded in Q4, both resulting in a compound annual growth rate of 41%.
Jim Brickman: We are the third largest home builder in DFW, the nation's largest housing market based on the annual starts. Trophy Signature Homes, which started in 2018 and closed its first home in 2019, is now on its own as sixth largest builder in DFW. Furthermore, we have significantly strengthened our land and lot position. Total land inventory has grown almost eightfold, increasing from approximately 4,700 lots at the end of 2015 to over 37,800 lots at the end of 2024. This expansion was achieved while maintaining a low debt to total capital ratio of 17.2% at the end of 2024, which was the lowest year-end level since 2015.
Speaker Change: We are the third largest homebuilder in DFW the nations largest housing market based on the annual starts trophy signature homes, which started in 2018 and closed its first half of 2019 is now in its cone the sixth largest builder in DFW.
Speaker Change: We have significantly strengthened our land and lot position.
Speaker Change: Total land inventory has grown almost eightfold, increasing from approximately 4700 lots at the end of 2015 to over 37800 jobs at the end of 2020 for.
Speaker Change: This expansion was achieved while maintaining a low debt to total capital ratio of 17, 2% at the end of 2024, which was the lowest year end levels since 2015.
Speaker Change: These achievements reflect the strength of our business model and balance sheet, the quality of our product and services and the dedication of our exceptional team.
Jim Brickman: These achievements reflect the strength of our business model and balance sheet, the quality of our product and services, and the dedication of our exceptional team. Our workforce has expanded significantly, from approximately 200 employees in 2015 to 650 in 2024. Their commitment has played a crucial role in our success, and I would like to express my sincere gratitude for their invaluable contribution.
Speaker Change: Our workforce has expanded significantly from approximately 200 employees in 2015 to 650 in 2024.
Speaker Change: Their commitment is played a crucial role in our success and I would like to express my sincere gratitude for their invaluable contributions.
Jim Brickman: While favorable housing fundamentals have provided general tailwinds for the industry, we believe there are several key factors specific to Green Brick that have driven our success and exceptional performance. Land has always been the cornerstone of our business and one of our biggest strategic advantages. Over the last several years, we believe we have assembled one of the best land and lot positions in our industry. As with any real estate asset, location matters the most. Our footprints are concentrated in some of the fastest growing residential markets in the country, notably Dallas-Fort Worth and Atlanta, which both benefit from robust demographic trends and healthy job markets.
Speaker Change: Both favorable housing fundamentals that provided general tailwind for the industry. We believe there are several key factors specific to green brick that have driven our success and exceptional performance.
Speaker Change: Land has always been the cornerstone of our business and one of our biggest strategic advantages.
Speaker Change: Over the last several years, we believe we have assembled one of the best land and lot positions in our industry.
As with any real estate asset location matters the most.
Speaker Change: Footprints are concentrated in some of the fastest growing residential markets in the country, notably Dallas Fort worth and Atlanta.
Speaker Change: Both benefit from the robust demographic trends and healthy job markets.
Speaker Change: Additionally, we have focused primarily on infill and intelligent submarkets, where supply is more constrained competition is more limited and homes are more desirable.
Jim Brickman: Additionally, we have focused primarily on infill and infill adjacent submarkets where supply is more constrained, competition is more limited, and homes are more desirable. Secondly, we own 86% of our land on our balance sheet. and we self-develop over 95% of our lives. The scarcity of land developers with the ability to develop large residential master plan communities in our markets creates significant opportunities for Green Brick and our subsidiary builders. by avoiding retail prices on land, which is often associated with the land light operating We have been able to effectively control our lot costs and development and delivery timelines, which are key drivers of our industry leading gross margins and return.
Secondly, we own 86% of our land and our balance sheet.
Speaker Change: And we self develop over 95% of our lots.
Speaker Change: The scarcity of land developers with the ability to develop large residential master planned communities in our markets create significant opportunities for green brick and our subsidiary builders.
Speaker Change: By avoiding retail prices on land, which is often associated with a land light operating.
Speaker Change: We have been able to effectively control our loss costs.
Speaker Change: And development and delivery timelines, which are key drivers of our industry, leading gross margins and returns.
Jim Brickman: Since the start of 2022, we have generated home-building gross margins in excess of 30%, with the exception of only three quarters. Our full year return on equity in 2024 was 26.8% and return on assets was 18.2%. Return on equity and return on assets over the last five years averaged 25.7% and 16.2% respectively.
Speaker Change: Since the start of 2022, we have generated homebuilding gross margins in excess of 30% with the exception of only three quarters.
Speaker Change: Our full year return on equity in 2024 was 26, 8%.
Speaker Change: And return on assets was 18, 2%.
Speaker Change: Return on equity and return on assets over the last five years averaged 25, 7% and 16, 2% respectively.
Lastly, our superior returns have not been achieved at the expense of our community quality.
Jim Brickman: Lastly, our superior returns have not been achieved at the expense of our community quality. We aspire to be more than just another homebuilder in our sub-market. We allocate significant capital in community development, emphasizing superior design, enhanced common area amenities, better landscaping, and other aesthetic features that contribute to long-term value appreciation. Over the years, our builders have won numerous prestigious awards in the industry and earned the reputation of building superior products. This strong reputation has proven invaluable in navigating the competitive land market and the complexities of entitlement and the development process.
Speaker Change: We aspire to be more than just another homebuilder in our submarkets.
Speaker Change: We allocated significant capital and community development emphasizing superior design.
Speaker Change: Enhanced common area amenities, better landscaping and ever aesthetic features that contribute to long term value appreciation.
Speaker Change: Over the years are bill Lis, everyone numerous prestigious awards in the industry and earned the reputation of building superior products.
Speaker Change: This strong reputation has proven invaluable in navigating the competitive land market and.
Speaker Change: The complexities of entitlement and development process.
Speaker Change: It fosters trust among ran sellers municipalities and local governments, establishing green brick as a reliable partner and a preferred builder developer.
Jim Brickman: It fosters trust among landsellers, municipalities, and local governments, establishing Green Brick as a reliable partner and a preferred builder-developer.
Jim Brickman: As we enter our second decade, we remain optimistic about the long-term housing demand, despite the current challenges posed by elevated mortgage rates. We expect that the entry of millennials and Gen Z into the prime home buying years will continue to fuel significant demand. Furthermore, the housing market remains undersupplied by an estimated 4 to 7 million units, while the existing home market inventory levels remain at historic lows. We are well positioned to further capitalize on this incremental demand, leveraging our superior land positions, particularly through our trophy brand that specializes in more affordable housing options that cater to the largest segment of the potential homebuyer market.
Speaker Change: As we enter our second decade, we remain optimistic about the long term housing demand. Despite the current challenges posed by elevated mortgage rates.
Speaker Change: We expect that the entry of millennials and Gen Z.
Speaker Change: I'm home buying years will continue to fuel significant demand.
Furthermore, the housing market remains under supplied by an estimated four to 7 million units, while the existing home market inventory levels remain at historic lows.
Speaker Change: We are well positioned to further capitalize on this incremental demand leveraging our superior land positions, particularly through our trophy brand that specializes in more affordable housing options that cater to the largest segment of the potential homebuyer market.
Rick Costello: With that, I'll now turn it over to Rick, who will provide more detail regarding our financial results. Rick?
Speaker Change: With that I'll now turn it over to Rick who will provide more detail regarding our financial results Rick.
Rick Costello: Thank you Jim home closings revenue for the fourth quarter increased 24% year over year to $557 million a company record record revenues were driven by the highest volume of closings in company history of a 1019 units up 23, 5% year over year.
Rick Costello: Thank you, Jim. Home closings revenue for the fourth quarter increased 24% year over year to $557 million, a company record. Record revenues were driven by the highest volume of closings in company history of 1019 units, up 23.5% year over year. Closing ASP was essentially flat in Q4 versus Q4 2023 at $547,000 as Trophy represented 51% of Green Brick's total closings in 4Q24. Trophy sales reflected an ASP below the company average, as Trophy sells more first-time buyer and first-time move-up buyer inventory and perimeter location. We continue to generate strong gross margins during the fourth quarter of 34.3%, up 290 basis points year over year.
Rick Costello: Closing ASP was essentially flat in Q4 versus Q4 2023 at $547000 as trophy represented 51% of Green brakes total closings in <unk> 'twenty for sure.
Rick Costello: Rafi sales reflected an ASP below the company average as trophy sells more first time buyer and first time move up buyer inventory and perimeter locations.
Rick Costello: We continue to generate strong gross margins during the fourth quarter of 34, 3% up 290 basis points year over year.
Rick Costello: During the fourth quarter, we reduced our estimated warranty reserve, which resulted in a positive impact of $13.2 million, or 230 basis points, to our quarterly home building gross margin. This adjustment was based on analysis of our warranty reserve accruals compared to actual warranty spend, which was less than previously anticipated. This adjustment also reflects reductions in our risk exposures due to various factors, including a reduction of our structural warranty periods due to legislative changes, and enhancements to our insurance compliance program with our subcontractors. Even after these adjustments, our warranty reserves remain at the high end of our peers based on estimated reserves versus actual warranty spend level.
Rick Costello: During the fourth quarter, we reduced our estimated warranty reserve, which resulted in a positive impact of $13 $2 million or 230 basis points to our quarterly homebuilding gross margin.
Rick Costello: This adjustment with based on analysis of our warranty reserve accruals compared to actual warranty spend which was less than previously anticipated.
Rick Costello: This adjustment also reflects reductions in our risk exposures due to various factors, including a reduction of our structural warranty periods due to legislative changes and enhancements to our insurance compliance program with our subcontractors.
Rick Costello: Even after these adjustments our warranty reserves remain at the high end of our peers based on estimated reserves versus actual warranty spend levels.
Rick Costello: The positive impact of the warranty adjustment was partially offset by slightly higher incentives in Q4 due to elevated mortgage rates. SG&A as a percentage of residential unit revenue for the fourth quarter improved 50 basis points year over year to 10.9%. Net income attributable to Green Brick increased 42% year over year to $104 million and diluted earnings per share for the quarter grew 46% to $2.31 per share, both company records for any fourth quarter. For the full year, we delivered 3,783 homes, which was 21.1% more units than 2023, generating home closings revenues of $2.07 billion, a record for the company and representing growth of 17.1% year over year.
Rick Costello: The positive impact of the warranty adjustment was partially offset by slightly higher incentives in Q4 due to elevated mortgage rates.
Rick Costello: G&A as a percentage of residential unit revenue for the fourth quarter improved 50 basis points year over year to 10, 9%.
Rick Costello: Net income attributable to green brick increased 42% year over year to $104 million and diluted earnings per share for the quarter grew 46% to $2 31 per share both company records for any fourth quarter.
Rick Costello: For the full year, we delivered 3783 homes, which was 21, 1% more units in 2023 generating home closings revenues of 2.07 billion a.
Rick Costello: A record for the company and representing growth of 17, 1% year over year.
Rick Costello: Homebuilding gross margin increased 290 basis points to 33.8% for the full year, which was also a record. Net income attributable to Green Brick increased 34.1% year over year to $382 million. and diluted EPS grew 37.6% over 2023 to $8.45 per share, the highest in company history. Net new home orders during the fourth quarter grew 29.3% year over year to $878,000, one of the highest growth rates among public home builders. For the full year 2024, our net new home sales totaled $3,681, an increase of 9.7% year over year. backlog revenue at the end of the fourth quarter decreased 10.7% year over year to $496 million.
Rick Costello: Homebuilding gross margin increased 290 basis points to 33, 8% for the full year, which was also a record.
Rick Costello: Net income attributable to green brick increased 34, 1% year over year to $382 million.
Rick Costello: And diluted EPS grew 37, 6% over 2023 to $8 45 per share the highest in company history.
Rick Costello: Net new home orders during the fourth quarter grew 29, 3% year over year to 878, one of the highest growth rates amongst public homebuilders.
Rick Costello: For the full year 2024, our net new home sales totaled 3681, an increase of nine 7% year over year.
Rick Costello: Backlog revenue at the end of the fourth quarter decreased 10, 7% year over year to $496 million.
Rick Costello: Trophy continue to represent a low percentage of overall backlog revenue at less than 14% as scruffy has continued to increase the percentage of spec homes that builds to meet the needs of its buyers as a result backlog ASP of $742000 remained higher than our average sales per.
Rick Costello: Trophy continued to represent a low percentage of overall backlog revenue at less than 14%. S-Trophy has continued to increase the percentage of spec homes it builds to meet the needs of its buyers. As a result, backlog ASP of $742,000 remained higher than our average sales price on delivered homes. Our community count at the end of 2024 increased 17% year over year to 106 active selling community 35% of which were trophy community. Sales pace for the fourth quarter was 8.3 homes per average active selling community, which was up 9.2% over Q4 of 23. Our cancellation rate for the fourth quarter remained low at 7.8%, one of the lowest among public home building peers.
Rick Costello: On delivered homes.
Rick Costello: Our community count at the end of 2024 increased 17% year over year to 106 active selling communities, 35% of which were trophy communities.
Rick Costello: Sales pace for the fourth quarter was $8 three homes per average active selling community, which was up nine 2% over Q4 of 'twenty three.
Rick Costello: Our cancellation rate for the fourth quarter remained low at seven 8% one of the lowest among public homebuilding peers.
Rick Costello: We started 22% more homes in 2024 than the previous year, with 4067 total starts in 2024. Total units under construction increased 14% at year-end to 2,341 homes. At the end of the fourth quarter, our net debt to total capital ratio was 10.7%, and our total debt to total capital ratio was only 17.2%, which was down 390 basis points year-over-year to the lowest year-end level since 2015. This was among the lowest leverage ratios of our small and mid-cap public home building peers. As of December 31, 2024, 93% of our outstanding debt is fixed rate with an interest rate of 3.3%.
Rick Costello: We started 22% more homes in 2024 than the previous year with 4067 total starts in 2024.
Rick Costello: Total units under construction increased 14% at year end to 2341 homes.
Rick Costello: At the end of the fourth quarter, our net debt to total capital ratio was 10, 7%.
Rick Costello: And our total debt to total capital ratio was only 17, 2%, which was down 390 basis points year over year to the lowest year end level since 2015.
Rick Costello: This was among the lowest leverage ratios of our small and mid cap public homebuilding peers.
Rick Costello: As of December 31, 2024, 93% of our outstanding debt is fixed rate with an interest rate of three 3%.
Jed Dolson: With that, I'll now turn it over to Jed. Jed? Thank you, Rick. Our fourth quarter net new orders increased 29% year over year to 878, a record for any fourth quarter in company history. Demand in October and November was robust, but decelerated in December due to both seasonality and the impact of rising mortgage rates. We responded to the softening of demand with more aggressive incentives in December. Overall, for the fourth quarter, incentives averaged 6.4% up from 5.9% the previous quarter. During the fourth quarter, Trophy continued to exhibit strong performance. contributing 54% of net new orders by volume.
Speaker Change: With that I'll now turn it over to Jed Jed.
Jed: Thank you Rick our fourth quarter net new orders increased 29% year over year to 878, a record for any fourth quarter in company history.
Jed: And in October and November was robust, but decelerated in December due to both seasonality and the impact of rising mortgage rates.
Jed: We responded to the softening of demand with more aggressive incentives in December.
Jed: Overall for the fourth quarter incentives averaged six 4% up from five 9% the previous quarter.
Jed: During the fourth quarter Trophy continued to exhibit strong performance contributing 54% of net new orders by volume the cancellation rate for trophy was only six 7% slightly lower than the company average.
Jed Dolson: The cancellation rate for Trophy was only 6.7%, slightly lower than the company average. The DFW housing market continued to perform well. Incentive levels for Southgate and Normandy homes, which cater to higher end move up buyers, decreased sequentially, reflecting the persistent mortgage lock-in effect on the existing home market in infill suburbs. This trophy, which primarily targets entry-level and first-time move-up homebuyers, experienced a more pronounced impact from the rising mortgage rate. necessitating an increase in incentives and rate buy-down programs in most of its communities. Similar trends were observed in the Austin market, where Trophy currently sells homes priced to entry-level homebuyers.
Jed: DFW housing market continued to perform well.
Jed: <unk> levels for Southgate, enormity homes, which cater to higher end move up buyers decreased sequentially, reflecting the persistent mortgage lock in effect on the existing home market in infill submarkets.
Jed: Profi, which primarily targets entry level and first time move up homebuyers experienced a more pronounced impact from the rising mortgage rates, necessitating an increase in incentives and rate buy down programs and most of its communities similar trends were observed in the Austin market.
Jed: Perfect currently sell some surprise to entry level homebuyers.
Jed Dolson: Atlanta remained healthy with strong orders and a modest incentive increase.
Jed: Atlanta remained healthy with strong orders and a modest incentive increases.
Jed Dolson: As we enter the spring selling season, we're diligently monitoring our spec inventory, sales pace, incentive levels, and starts. We believe our industry-leading gross margins will provide us with greater flexibility to adjust home prices and incentives as needed. Our buyers' financial profiles remained healthy. Applicants that closed using our prior mortgage joint venture, which ceased accepting new applications in the fourth quarter, had an average FICO score of 742 and a debt-to-income ratio of 37% during the fourth quarter. New applications through our new wholly owned mortgage subsidiary with anticipated closings in the first quarter of 2025 demonstrate comparable financial resilience.
Jed: As we enter the spring selling season, we are diligently monitoring our spec inventory sales pace incentive levels in starts.
Jed: I'll leave our industry, leading gross margins will provide us with greater flexibility to adjust home prices and incentives as needed.
Jed: Our buyers financial profiles remained healthy Apple handset close using our prior mortgage joint venture, which ceased accepting new applications on the fourth quarter had an average FICO score of 742 and a debt to income ratio of 37% during the fourth quarter.
New applications through our new wholly owned mortgage subsidiary with anticipated closings in the first quarter of 2025 demonstrate comparable financial resilience.
Jed Dolson: Turning to capital allocation, our full year spend on land acquisition finished lots was over $375 million, with over $200 million spent on land development. In 2025, we plan to increase our spend on land development by 46% to approximately $300 million. As Jim mentioned earlier, we enter 2025 with a strong land position. Year over year, we have added 13,000 new lots on a gross base. On a net basis, total lots owned and controlled at the end of the year increased by 32% to over 37,800 lots, with approximately 92% of those in Texas, 5% in Georgia, and 3% in Florida.
Jed: Turning to capital allocation, our full year spend on land acquisition and finished lots was over $375 million with over $200 million spent on land development in 2025, we plan to increase our spend on land development by 46% to approximately $300 million.
Jed: As Jim mentioned earlier, we enter 2025 with our strong land position year over year. We have added 13000, new lots on a gross basis on a net basis total lots owned and controlled at the end of the year increased by 32% to over 37800 lots.
Jed: With approximately 92% of those in Texas, 5% in Georgia, and 30% in Florida.
Jed Dolson: Trophy, our primary growth engine, owns approximately 70% of total lots. Excluding our 21,600 lots in long-term communities, our current pipeline provides approximately five years of lot supply based on start pace in non-mastered communities over the last 12 months. Additionally, over 97% of our current inventory of lots owned and controlled are expected to be self-developed. At the end of the year, we had approximately 4,800 finished lots, over 80% of which are infill and infill adjacent areas. With our existing land and lot position, we're taking a more opportunistic approach on land acquisitions within the current competitive land market, where land prices have remained sticky.
Jed: Trophy, our primary growth engine owns approximately 70% of total loss, excluding our 21600 lots and long term communities. Our current pipeline provides approximately five years of lot supply based on start pace and non master communities.
Jed: Over the last 12 months. Additionally, over 97% of our current inventory of lots owned and controlled are expected to be self developed.
Jed: At the end of the year, we had approximately 4800 finished lots over 80% of which are infill and infill adjacent areas.
Jed: With our existing land and lot position, we're taking a more opportunistic approach on land acquisitions within the current competitive land market, where land prices have remained sticky.
Jed Dolson: We will continue to evaluate our capital allocation strategy with the objective of maximizing shareholder value.
We will continue to evaluate our capital allocation strategy with the objective of maximizing shareholder value.
Jed Dolson: Commensurate with the strategy, our board recently authorized a new share repurchase plan to buy back up to $100 million of common shares. We also continue to expand our geographic footprint through the Trophy brand. In 2024, Trophy closed over 100 homes in Austin. We currently have two active selling communities in the market. Furthermore, we're making substantial progress in our newest market, Houston. We anticipate completing the first phase of lots this summer, and Trophy is expected to open for sales in its inaugural Houston community this fall. We are excited about expanding the Trophy Brands presence in one of the largest home building markets in the United States.
Jed: Commensurate with this strategy our board recently authorized a new share repurchase plan to buyback up to $100 million of common shares.
Jed: We also continue to expand our geographic footprint through the trophy brand in 2024 terrific closed over 100 homes in Austin. We currently have two active selling communities in the market.
Jed: Furthermore, we are making substantial progress in our newest market Houston, we anticipate completing the first phase of lots. This summer in trophy is expected to open for sales in its inaugural Houston community. This fall.
Jed: We are excited about expanding the trophy brands presence in one of the largest homebuilding markets in the United States.
Jed Dolson: Lastly, we are pleased with the progress on the construction side. With housing starts declining in many of our markets, we are still seeing bargaining power on labor and materials in certain trades and in some markets. Not only are overall construction costs stable, but cycle times for homes completed in the fourth quarter averaged approximately 5.3 months. Trophy cycle time was only 3.4 months in Dallas, about two weeks shorter than at the beginning of the year.
Jed: Lastly, we are pleased with the progress on the construction side with housing starts declining in many of our markets. We are still same bargaining power on labor and materials and certain trades and in some markets.
Jed: Not only our overall construction cost stable our cycle times for homes completed in the fourth quarter averaged approximately five three months Trophy cycle time was only three four months in Dallas about two weeks shorter than at the beginning of the year with that I'll turn it over to Jim for closing remarks.
Jim Brickman: With that, I'll turn it over to Jim for closing remarks. Thank you, Jed. Let me conclude by saying that I'm incredibly proud of our team's hard work that has resulted in this record breaking year, despite operating in an elevated mortgage rate environment that creates affordability challenges for many homebuyers.
Jim Brickman: Thank you Chad, let me conclude by saying that I'm incredibly proud of our team's hard work that has resulted in this record breaking year. Despite operating in an elevated mortgage rate environment that creates affordability challenges for many homebuyers.
Jim Brickman: Our success in the past decade as a public company provides us with a strong foundation for future growth. We will continue to invest in our team and business to deliver exceptional value to our shareholders.
Jim Brickman: Our success in the past decade, as a public company provides us with a strong foundation for future growth, we will continue to invest in our team and business to deliver exceptional value to our shareholders.
Jim Brickman: Thank you for your continued support.
Jim Brickman: Thank you for your continued support this concludes our prepared remarks, and we now open the line for questions.
Unknown Executive: This concludes our prepared remarks and we now open the line for questions. Thank you.
Jim Brickman: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star one on your Touchtone phone any reason you met your hands being raised should you wish to withdraw. Please press star one again, if you are using a speaker phone.
Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 in your touchtone phone, and you will hear a prompt that your hand has been raised. Should you wish to withdraw, please press star 1 again.
Unknown Executive: If you are using a speakerphone, please leave the handset before pressing any key.
Jim Brickman: Please proceed with your handset before pressing entities.
Speaker Change: Our question comes from the line of Carl from P. J.
Carl Reichardt: Our question comes from the line of Carl from PBTIG, sir, please go ahead. Thanks. Hey guys, nice to talk to you. Thanks for taking the questions. I am curious, first of all, Jed or Jim or Rick, how trends in January and February have been on the sales perspective, particularly related to incentives. We had a peer this morning who talked a little bit about incentives beginning to come in, some of that seasonal, some of that builders having worked through specs. So how are you guys seeing things shape up order-wise so far in the first quarter?
Sir Please go ahead.
Carl: Thanks, Hey, guys nice to talk to you thanks for taking the questions.
Speaker Change: I am curious first of all dead or Jim where Rick how trends in January and February have been on the sales perspective, particularly related to incentives. We had appeared this morning, you talked a little bit about incentives beginning to come in some of that seasonal some of that builders having worked through spec. So how are you guys seeing things shape up.
Carl: Otherwise so far in the first quarter.
Jed Dolson: Jed? Yeah, sure.
Carl: Jeff.
Carl: Yes, sure good morning Carl.
Jed Dolson: Good morning, Carl. I'd say we're off to a very similar start. from last year on the sales front so far. Mortgage rates have dropped in February, so incentives have actually ticked down because it's not costing as much to buy down the rate currently. But yeah, we're seeing a spring.
Carl: I'd say, we're off to a very similar start.
Carl: From last year on the sales front, so far mortgage rates have dropped in February so incentives have actually ticked down because it's not costing us much to buy down the rate currently.
Carl: But yes, we're seeing a spring.
Jim Brickman: fairly similar to what Okay, I appreciate that. If you drew a circle around all of our markets. The inner circle of AAA location incentives are still very low. We move into a B or B plus mark, the next circle. There could be 5, 6%. And if you go into a C location, it could be 10 or 12%.
Fairly similar to last year.
Speaker Change: Okay I appreciate that Thats helpful.
Carl: Yes.
Carl: If you drew a circle around all of our market initiatives.
Carl: Inner circle of AAA location incentives are still very low.
Carl: Moving to a b or B plus mark over the next circle.
Carl: There could be five 6% and if you go into a C location that could be 10 or 12%.
Rick Costello: Yeah, Okay. Thank you Jim I appreciate that.
Carl Reichardt: Okay, thank you, Jim. I appreciate that.
Carl Reichardt: And then I wanted to ask a little bit about the development spend. So 46% is a really big increase for you all. And I assume that's not 46% more lots and I assume that's not the same number of lots with 46% cost inflation.
Speaker Change: And then I wanted to ask a little bit about the development spend so 46% is a really big increase for you all and I assume that's not 46% more lots and I assume that's not the same number of lots with 46% cost inflation. So could you break down that that $100 million increase a little bit does that mean, a substantial number of <unk>.
Jed Dolson: So could you break down that $100 million increase a little bit? Does that mean a substantial number of lot deliveries sort of late in the year, which could lead to community count growth? Or is this sort of in process land that we'll see in 26? It's a really big increase for you guys. And it does certainly seem to indicate some substantial growth coming for you. But I just don't know if it's going to be late this year or into 2626.
Speaker Change: Deliveries sort of late in the year, which could lead to community count growth or is this sort of in process land that we'll see in 2006, it's a really big increase for you guys and it does certainly seem to indicate some substantial growth coming for you, but I just don't know if it's going to be late this year or into 'twenty six 'twenty seven.
Speaker Change: That's a really good question, Carl and I think at the highest level investors to have a difficult time understanding how long it takes from contracting a lot to getting revenues from a lot. So.
Jed Dolson: That's a really good question, Carl. And I think at the highest level. investors have a difficult time understanding how long it takes from contracting a lot to getting revenues from a lot. Unfortunately for an analyst, it doesn't create a linear progression of our business and how things grow. It's lumpy, and it takes about three years from when we contract a lot in land to getting revenues from that. And our prior investments in land, the reason our land spend is so high, is that's all coming to fruition right now. We're spending a lot of dollars in land development.
Speaker Change: Unfortunately for an analyst it doesn't create a linear progression of our business and how things grow it's lumpy and it takes about three years from when we contract a lot and land too.
Speaker Change: Getting revenues from the <unk>.
Speaker Change: Our prior investments in land the reason our land spend is so high is that.
Thats all coming to fruition right now we're spending a lot of dollars and land development Jed do you want to.
Jed Dolson: Jed, do you want to... that color to that? Yeah, we bought a lot of land and 23 and and 24. Carl, we're putting the development dollars on that land this year, that will flow a little bit into next year or two. And you're right that we will at some point in the very near future start seeing community. but it's a lagging, it's a lagging investor. Yeah, that makes sense.
Speaker Change: Net color to that we bought a lot of land in 'twenty three and then 24, Carl we're putting the development dollars on that land. This year that will flow a little bit into next year or two and you are right that we will at some point in the very near future start seen community count go up but.
Speaker Change: It's a lagging its a lagging.
Speaker Change: Investment.
Speaker Change: Yes that makes sense, alright, I will get back in queue. Thanks, a lot fellas.
Unknown Executive: All right, I'll get back in queue. Thanks a lot, fellas. Thank you. Again, should you have a question, please press star followed by the number one.
Speaker Change: Thank you again should you have a question. Please press star followed by the number one.
Okay.
Speaker Change: Our question comes from the line of Carl <unk>.
Carl Reichardt: Our question comes from the line of Carl, sir, please go ahead. Oh, I wasn't expecting that. Okay, I'll do one more then. So on the, or maybe three more. On the SG&A side, I'm curious as to whether or not you guys think that into 2025, you might begin to get a little bit better leverage there. Knowing the store count grew a lot, you're still able to get some leverage off of revenue this year. So how are you thinking about, you talked about headcount, how are you thinking about headcount moving into 25 and into 26? And how much leverage you might anticipate getting there?
Speaker Change: Sir Please go ahead.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: No I wasn't expecting that okay I'll do one more then.
Speaker Change: [laughter], maybe three months ago.
Speaker Change: On the SG&A side, I am curious as to whether or not you guys think that into 2025, you might begin to get a little bit better leverage there knowing the store count grew a lot youre still able to get some leverage off of revenue. This year. So how are you thinking about you talked about head count how are you thinking about head count moving into 'twenty, five and into 'twenty six and how much leverage you may.
Speaker Change: Anticipate getting there.
Rick Costello: That's for Rick, I guess, is probably the person to ask. Yeah, it's It's kind of a tale of two different situations. One is, we're going to probably continue with more predominance in our numbers of trophy, which means that they're such an efficient operation, that as a percentage of the total as they grow, we will, you know, certainly over time see that. Improvement. We're not in a high growth mode from a personnel standpoint right at this time, but it's kind of related to the land story that Jim and Jed were just describing. There's going to be a delayed impact of when those increase in houses and closing.
Speaker Change: That's it for Rick I guess is probably the person to ask.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: It's kind of a.
Speaker Change: Tale of two different situations. One is we're going to probably continue with.
Speaker Change: More predominant in our numbers of trophy.
Speaker Change: Which means that theres, such an efficient operation that as a percentage of the total as they grow we will see.
Speaker Change: Certainly over time to see that.
Speaker Change: Improvement, we're not in a high growth mode from a personnel standpoint.
Speaker Change: At this time.
But.
Speaker Change: It's kind of related to the land story that Jimmy Jed, we're just describing theres going to be a delayed impact of windows.
Speaker Change: The increase in houses and closings will happen.
Rick Costello: So a little bit of a modest increase there. And really, the unanswerable is, on the interest rate side, is that move to being more trophy, which can have a more interest rate sensitive buyer, have to create higher incentives? Or are we going to see the rates continue to come down and we have lower incentives? So will there be an offset in margin? No idea.
Speaker Change: <unk>.
Speaker Change: Little bit of modest increase there.
Speaker Change: And really.
Speaker Change: The unanswerable is on the interest rate side is that move to being more trophy, which can have more interest rate sensitive buyer have to create higher <unk> or are we going to see the rates continue to come down and we have lower incentives. So while there'll be an offset in March and no idea.
Rick Costello: Carl, the other thing that we really talked about... Carl, when you look at us, one of the things that we have never really pointed out in prior calls... You know, we're developing close to 90% of the lots that we're building on right now. And a lot of those costs are embedded in SG&A, so when you compare us... We're still having, you know, 10.4% SG&A, some of those costs are capital. Our SG&A includes. Big Land Development Group that some other companies are not having, particularly as they go.
Speaker Change: Currently okay.
Speaker Change: Excuse me.
Speaker Change: Apparel when you go ahead press.
Speaker Change: One of the things that we have never really pointed out in prior calls is that we are developing close to 90% of the lots that we're building on right now and a lot of those costs are embedded in SG&A. So when you compare us we're still in 10, 4% SG&A some of those costs are capitalized, but our SG&A.
Speaker Change: <unk> includes <unk>.
Speaker Change: A big land development group that some other companies are not having particularly as they go land light.
Rick Costello: And what one other impact here. is on the financial services side, Carl. If you look at the range of peers who have full-on financial services with both title and mortgage companies, the average is probably about 1% of revenues, but we're just in the nascent stages of opening up our mortgage companies. And so we're going to get some positive impact from that going forward. That's not part of the SG&A, but it is something that as we particularly move into 2026, you'll see an additional revenue source that really wasn't.
Speaker Change: And one other impact here.
Speaker Change: He.
He is on the financial services side Carl.
Speaker Change: If you look at the range of peers, who have full on financial services with both title and mortgage companies.
Speaker Change: <unk>.
Speaker Change: The average is probably about 1% of.
Speaker Change: Of revenues.
But the.
Speaker Change: We're just in the nascent stages of <unk>.
Speaker Change: <unk> up our mortgage company.
Speaker Change: And so we're going to get some positive impact from that going forward, that's not part of the SG&A, but it is something that as we particularly move into 2026, you will see.
Speaker Change: An additional revenue source that really wasn't there.
Speaker Change: Okay. Thank you Rick and then just on that sort of idea of trophy is 25 likely to be sort of a similar 50 50 mix split between core green brick and trophy because I know Houston is coming on.
Carl Reichardt: Okay, thank you, Rick.
Jed Dolson: And then just on that sort of idea of trophy, is 25 likely to be sort of a similar 50-50 mixed split between CORE, Green Brick, and Trophy? Because I know Houston's coming on. And let's assume that that incentives are similar throughout the course of the year. Would you project a similar sort of half and half mixed split between the two for 25 as you hear today? Yeah, Carl, this is Jed. Yeah, we're we're projecting similar volumes at Trophy this year compared to last. Okay, all right.
Speaker Change: And let's assume that incentives are similar throughout the course of the year would you projected a similar sort of half and half mix split between the two for 25% as you sit here today.
Yeah.
Speaker Change: Yes, Darryl this is Jed yes.
Speaker Change: We're projecting similar volumes at trophy this year compared to last year.
Speaker Change: Okay, Alright, thank you very much guys I appreciate it.
Carl Reichardt: Thank you very much, guys. I appreciate it. Thanks, Carl. Thank you.
Speaker Change: Thanks Carl.
Speaker Change: Thank you that concludes or Italy again, if you have any question. Please press star followed by the number one.
Unknown Executive: That concludes, or by the way, again, if you have any questions, please press star followed by the number one. There are no questions at this time.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: There are no questions at this time.
Unknown Executive: That concludes our conference call. Thank you for joining today. You may now disconnect.
Speaker Change: That concludes our conference call. Thank you for joining today you may now disconnect.
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