GRBK - Earnings call transcript Q2 2024 | Green Brick Partners, Inc.

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Operator

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

Richard Costello

welcome for and Green Partners' Brick Good Second to Quarter Call the XXXX. ended Earnings afternoon, the June XX,

remarks, a hold we today's Q&A Following session. will

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

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

and Jim Financial and Officer; myself, Costello, Chief today On and Executive Operating the is call Officer; Chief Chief Officer. Co-Founder Brickman, Jed Dolson, President Rick

update financial the company's operational The Regulation call Some press and, has may is X, reconciliation metrics. The the that, information material the to information forward-looking, its on issued be company's the these and it I'll forward-looking results XXXX Jim. any company's of beyond. expectations company risks differ include website. With company future also discussed no call non-GAAP required and statement expectations. The August the obligation can other Jim? the XXXX, the statements for comments available this release the on including financial the and company over that and may presentation, to as In that yesterday's are today, turn by from metrics its SEC cause and filings, of [indiscernible] to G detailed in make. of yesterday

James Brickman

of Thank second you, proud Rick. I'm in our the performance record extremely quarter.

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

an XX% homes record of XXX revenue underrated million, record $XXX join a and delivered we First, increase closing of year-over-year. home

have Green EPS XX.X% This highlighted which earnings the some peers our shown up of the sustainable XX% and for a demonstrate our as performance Green Second, believe increased XXXX was record collective attributable will generated year-over-year. net Brick's X. Year-to-date, $X.XX, to our showed annualized the our homebuilding XX.X% us business first $X.XX. in Brick record returns public by to and equity for industry. We homebuilding highest growth. With return on unique position among record grew XX.X%. of to margin half its consistently quarterly of strength that best was share a the to is on of gross per team, we model Thanks the effort year-over-year to Slide continue XX.X%, results, income the

quarter the share. Equally $XX.XX total XX.X% to at important, our created end cost our was value average small and At year-over-year leveraged and mid-GAAP the of of on the end the of to capital was book one among increased pay lowest our growth weighted XX% of peers. Our while debt net per balance total XX.X%, sheets of with least of second to a total rate X.X%. only the was ratio the quarter, debt our debt ratio capital one

achieving on XXXX, quarters. since the in Slide have of homebuilding more exceptional XX% consistently margins As X, gross X generated shown we all margins, than

and margins. Green investment-grade degradation the understanding the superior locations transfer many sheet. where very financial earnest additional the significant demanding homebuilders' land burden and allowing land has sheet, compared land By sophistication for with and low developing risk our land a achieve our maximize taken land aim in being approach. strategy the result retail money regardless from costs cost evaluating known has balance is our performance and completion like real we with profit deposits savings their extraordinary homeowners underwriting interest industry of often rates the cost balance for high-growth Street builders entitling understand different and of and light markets, strong to of expertise option that Our bankers development thoroughly priced to to costs compensate potential by and assume in land acquiring, significant sheet. Land risk these lots. We estate markets, of to the and self-development leverage a a risk. Builders agree implicit gained balance high team. The our on prioritizing to and in Wall traction commitment major model and prioritize resulting order us risk Brick ourselves,

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

For those finished will we Brick, Rick cover costs lot Green as are shortly. experiencing not increased

for being importantly, More Green into land heavy translated hasn't returns. Brick inferior

and return In consistently we on strong produced Slide X. shown fact, have assets on equity, as

on Our averaged return averaged XXXX return on and the assets equity XX% since XX%.

while as able XX. sheet, We shown increase Slide have deleveraging our been on position our significantly to land balance

to and self-develop Worth Additionally, infill finished share approach in through in a to desirable land opposed Avana Dallas-Fort third-party capital-efficient allows being retail control unlocks We pace and also opportunities, to our access gain more land our the provides as with lots advantages especially to prices strong our largest unique in deliveries. lot submarkets. This at to us competitive few market strategy at produce land to of us and and continue buying believe wholesale markets, infill developers able very lot adjacent manner.

housing homes has U.S. challenging for as to it So, in outstanding shown Slide on are less at mortgage break the mortgages locked handcuffs still mortgage X% XX% than at most golden X. the from of of market, free rates been of rates

a adjacent over As on lows generated continues infill revenues. get Green lack in believe supply our submarkets of shifts. Brick evident are X. The we has to on what posed invent XX% is will result, and consistently secular near home during shown second to demographic remain capitalize Slide the long-term quarter, more strategically inventory existing historic of as

built share years million another market over home additional millennials to created forms shown financial challenge. average million X housing U.S. we growth be crisis, be to The opportunity dynamics is the for These of estimated shortage units. An great create term. owner-occupied over longer of Green As estimated stock the Brick which and old. to decade. new and a housing X presents between in years over XX aging home the loans age positioned continues wave their sales, Slide systemic to Gen believe Z enter is to prime on well capture since Two age significant buying the next X, were the

and fill year, more in builders position lot the and past our lots develop on to quickly about we land discuss pipeline shortly. opportunities securing possible. new Over have will our as land focused Jed our as to

Lastly, owned company, to decision our announce wholly our Green Mortgage, I'm venture excited mortgage we will XX%. Rick replace which our own which establish strategic to joint in existing

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

Richard Costello

Jim. of Slide turn Please you, X Thank presentation. to the

XX%. The Brick XXX for record home As Jim second the a homes achieved closings spec earlier, closed, infill levels limited $XXX to cycle deliveries million, of on attributable record on is inventory. increased in an for starts infill-adjacent was We increase of and of fronts. quarter leading year-over-year multiple reduced communities, mentioned increase record competition up revenue in higher a available our Green times XX.X% and

$XXX,XXX. X has year from during from new past smallest ASP in areas, our second under by communities infill-adjacent community quarter, mix and the ago. In to closing communities X.X% past ASP quarters. in infill was This Trophy As decline a out especially moderately slightly earnings in surrounding our ASP brand, our our opening calls, the year-over-year shift our to declined lowered discussed

ASP We range half in to continue to of in and the to expect for the $XXX,XXX subject to product the $XXX,XXX be conditions. mix of year, second changes business

than Gross reached this that and quarter. quarter XX.X%. margins which were previous homebuilding our XX.X% Another margins, was points of we basis points higher achieved year-over-year basis gross record record up XXX broke last XXX

importantly, and move-up were Trophy that including strong More brands, homebuilding builder across margins build homes. primarily entry-level first-time all

both XX of on from gains lead a to in in diluted over on to X% percentage to that annual undeveloped years prices anticipate SG&A lots XX% X% year-over-year for our of cost. Green our calendar pay X stand finished land basis developed per to contrast our is gross and our land to earnings XXXX Slide average as this expected of light favorable margins net costs. Back often percentage for year. We average margins land quarter only as revenue for any continue year-over-year the per homes costs to construction points John shown in a XX.X%. Driven Green land records average grew to and share, peers to communities Slide of improved gross due developers. Even average and our increased our for peers share XX% performance. The XXXX, for increase we as sales to that Brick light our in minimal infill peers to development company and XX lot closed for infill-adjacent brokers will record $X.XX points research, the lower and lot quarter Brick calendar third-party year on for X, and year-over-year expects to price lot QX the developed who cost record that both expected 'XX year As escalators were increase attributable history. XX% result incentives in income X. revenues, margin second second units' a residential worse basis rose per gross quarter in indicate by Burns' XX%

from compensation During equity tax $X.XX the we an discrete for benefited quarter, benefit deductions.

second additional XXX the our QX excluding position year-over-year homes, the orders were highest momentarily. In pace tax to history. Net to highest in for footprint second to continued this we us delivered history. sales any even discrete capture in further will quarter quarter, in X.X% share. Jed discuss company company we EPS benefit, However, new level the to market up our expand

XX% XX% particular, ending of the selling to for Asset XX%. period community count year-over-year end grew by In grew Trophy at the to communities XXX. year-over-year our

of cancellation as the remained was the at on homebuilding peers, rate Slide shown X.X%. XX. This quarter rates low cancellation for again second Our lowest among public one

since a Our been cancel of has in low which 'XX. under rate remained XX/XX it historically XX%, range

million, we in averaging homes, As units phase. Year-to-date, X.X% gross last margins XX%, of shown year-over-year. were XXX we delivered XXX points the have which on delivered X,XXX matching started homes the home closely Slide and X Homebuilding under homes, up sales increase Year-to-date, for sold starts basis to the X,XXX of homes, homes production XX, quarters. generating X,XXX increased revenue closing XX.X%. X,XXX construction pace now $XXX an year-over-year

ended to the XX, income XX.X% a to grew months net June came $X.XX XXXX. Green EPS to XX.X% diluted for X million Brick As and result, year-to-date attributable $XXX

end backlog value $XXX million. of year-over-year up Backlog second XX% year-to-date. to increased quarter is the the our at XX% Next,

ASP XX% quick we as quarter turns. Spec started inventory construction sequentially continues of ASP Now, builder to as opposed reduced cycle increased backlog value to Trophy, due total construction a a percentage under to of times spec spec at the $XXX,XXX. the more XX% slightly XX.X% increased and second of backlog, home as to only overall under represent to units units closing construction the end homes.

sheet strong XX.X%. total investment-grade total a to net capital growth. of the total the was ratio to ratio only capital At Our debt continues serve quarter, for balance and end to as second was future our springboard our debt XX.X%,

As weighted rate debt is of Slide a $XXX this on of public million in the of leverage on we of shown average our our homebuilding running $XXX of interest peers. rate cash the outstanding for XX, at best among hand XXX% readily mid-cap undrawn small end of lines and the quarter, of and level X.X%. Furthermore, is million financial fixed credit. available pay with had deployment

the dollar of our that valued shares million average approximately remained million XXXX be share. share remaining was purchased during approximately plan we $XX value under quarter. We Finally, yet X.X% second of of June repurchase weighted $XX.XX with as The XXXX. may at back price $XX.X per the bought a buybacks of with outstanding shares XX, active

repurchases over continue Jed. shareholders share returns for to and investment the that, balance risk-adjusted turn for the with opportunities of I'll over weigh to best-in-class now our delivering long goal it term. With Jed? We

Jed Dolson

first Rick. level was record Net slightly from new the of XXX grew but you, representing moderated second near in XXXX, during a quarter healthy year-over-year in our Thank company QX to best quarter. orders Demand level order sales, history.

quarter the latter moderated down slightly we we of returning, the exited X.X part paced also of infill during selling XX% spring pace sales homes metering our contributed quarter, community, the as average traditionally sequentially. grew certain QX pre-pandemic and for mortgage seasonality that second communities moderate to we on In was per believe, saw sales from to active the season, the orders. sales in have we normal experienced. Increased when selling rates quarter XX.X% backlog the For second

to X/X quarter However, only in were picked stages limited is modestly from only submarkets existing due in incentives to traffic targeted and desired and X.X% base second orders for supply later levels new homes with communities the were up to March. We raise infill still able homes X.X% of both and/or moderately at where of footprint our from construction. in and our in prices of new were spec orders select infill-adjacent homes. Incentives where communities below approximately

many flexibility Brick continued X remain offer the secular or profiles shifts focus rate locations, to infill-adjacent downs and closing base our Homes for mortgage company in average incentive buyers margins on of of and or brands We their mortgage to our buys drop. Through using XX.X%, continue of move-up product of XXX be optimistic partial debt-to-income with high the declassed positioned our level array costs, segments. both. FICO demonstrate during and rising with capitalize to of an by to qualifying price that gross we the possess strong will if Green flexibility entry and when use of we on homebuyers and wide Signature our package a diversification demand homebuilding long-term FICO of an all-time appeal ratio the if and led market the shifts. We quarter. With of second to believe score price well a infill abundance rates growth ranges, at broad we an a of adjustments XX% affiliate Trophy are the demographic and and types

and and we been success. In increased mentioned approach strategic land our plan and under Brick total we $XXX Jim are land quarter to able land several over meet another we past generate total have target allocation XXXX. Please, taking full unwavering ratio and in We track million. As our funding to forward, our XX%. million has propel of XXXX, believe our year capital allocation over has strategy. To million, growth earlier, of acquisition finished the on place spent $XXX debt-to-capital lots capital second returns approximately executed Year-to-date, this because acquisition $XX diligently original we million reached is us total of to $XXX a a for in years superior that for our and land this of development. of development recall positions and growth under the Green future the spend that with to

owned for close to of year-over-year. Approximately by a X,XXX X,XXX our lots for XX,XXX increase We of be lots, approximately the the XX,XXX, offset and infill total with This have these a net lots and infill-adjacent of new will approximately XX% to increase a added controlled, charge lots a locations remaining XX% start all-time the the in owned and corridors. controlled year. from new outlying high-growth increase high brings and XX% over XX% company

of times supply long-term in in lot provides years well on it will avoid lots XX date our allow XX,XXX the developers community, over a days Excluding XXXX approximately of X the homes Over XX% as communities during and previous current premiums than performance the and start Brick owned Green inventory as to land of last second completed development months. construction non-master the based of gross starts. Cycle and averaged the shorter was on and delivery generating be This self-developed. We continue lots X.X from self-development X emphasis self-developed that months more quarter the third-party expected these X of by us lot stabilized are the than reduction and believe months of now pace margins quarter. to control will second allow for expensive charged as to controlled and industry-leading lots quarter.

cycle submarkets. remain most largest by potential top times high-quality land our leveraging homebuilder our we Despite of third optimize see scale. Securing our the and As land rates, persistent to our competitive in costs mortgage remains Worth, key in high further Dallas-Fort markets priority. our reduce

minimum unleveraged IRR We deals a underwrite XX% threshold. continue of to with

land additional XX visibility enables Dallas-Fort submarkets. act have balance un-risible on some local market presence, pipeline our grants development. under in of sheet lot finished communities opportunities, reputation to XX X provide Our us and XX Atlanta, of on largest relationships knowledge, swifter. Slides robust and while a We and Worth us deep an our markets detail currently

allocated these an complete the brands our short- those having land for and plan lots with needs. into approximately have we we homebuilders, lots months, finished X,XXX of Brick well growth over lots. By approximately X for next X,XXX and inventory XXXX, the Trophy. of X,XXX long-term XXXX expect end of our for Over Green delivery to positioned finished to subsidiary of beyond, continued is both lots builder being to secured to

of home half intra-level closing in Trophy, representing first value our first-time home our of total the XXXX, closed move-up For homes, number XXX total XX% of of our resulting XX% builder, revenue. approximately closings,

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

James Brickman

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

Our record-breaking of for of are planning direct the our hard land and in years long results particularly prepared open a Brick. With result people through economy, beginning sustained Green the a for superior investments questions. quarter line Trophy. This of just constantly execution. These cooperative and we is our and now the work building growth, meticulous and remarks, created will operations improving lot inventory runway for and concludes a our have

Operator

from Your first BTIG. line Carl comes Instructions] the [Operator of Reichardt question with

Carl Reichardt

So, average months you been delivery is being Rick, think, the your talked that was and pace a what historically, said. to running and we've XXX, volume start you've X I out, about driver

sort move chain will of is Or quarters stay count up normal So, based XXX, flat know you there now as we what as start paces it into now? up. Can start of from expect is kind growing, supply out? anticipation Trophy's look more maybe lot we your that we on picking 'XX to that X,XXX

Richard Costello

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

Carl Reichardt

continue expect It you shorten a like relationship, X-month to will that or based go-forward that go plan? basis. won't on months that the X But mix you the X or on that, to something

Richard Costello

time. talking months Are about you Five X months or cycle time? cycle

Carl Reichardt

what your of quarters months as tight, X period long X has pretty that if deliveries pretty relationship consistently held X ago, So, is, starts and that months at model I mean a I I hence, over time. look ago,

mix shrink So, X? a I'm that X-month going improving, of your does to to as Trophy's if cycle lead if wondering like forward, opposed times portion a are bigger down

Richard Costello

shorten will X.X it houses certainly trophies X.X because time, in Over versus overall. delivering months

I dynamic, a that yes, So, mean, is certainly, one. it's and positive a

Carl Reichardt

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

James Brickman

question, Good Carl.

financial a everybody a of one of And this. doing me about segue stuff lot anymore much about and engineering because CEOs talk things just Let is don't very other on is. talking do the

tomorrow. to Our people live in, to neighborhoods and goal entitling developing that larger, today want create value longer-duration and is

so other demand any neighborhoods investor Florida whole many our to now. we that that X in diminished seeing sales For goal. July transcripts our than didn't pace to at to message want zone. We people calls sales neighborhoods that And that achieve sales. incentivize some read are is maintained expected. those a any I we That's absent creating really reason, in of more than X right primary aren't in of we soft had from or businesses expected any really have live

Operator

Your comes the Riley. from Alex next of line with question Rygiel B.

Alexander Rygiel

quarter? does in our where headwind July the sequentially, bit incentives XQ? some we were And modest gross in a margins relative up incentives With to to third suggest that

James Brickman

much talk sales were homes that don't what's quickly happening particularly in the the about on XX%, Well, on sold quarter. concentration focusing that I more quarter. quarter the they floor have, certainly, same spec to want translates were in current specificity. we in Trophy But closed the XX% really as with their of We're that

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

Good I but So, it the mean it direct is, will be more answer and directions. variable, bad. both runs

Alexander Rygiel

the at it, of, been in sort we all. then about community. shift your as the But month years per of understanding X% let's and X absorption that step-up clearly, absorption, think mix that is And a so norm or call per notable monthly kind of new last

James Brickman

That's but spec that standpoint. at And was look we're as QX a when grew also standpoint, is lot an absorption taking organization. predominantly quicker very comfortable sequentially builder year-to-date a backlog from really, from X%. And level. a where a we you it the necessarily a not

numbers that XX% up that are because closings. that starts us to sales quality and year-to-date between we year-to-date fact still tells we're pleasing have the like which But is very strong So, the a you dynamic.

Operator

comes [Operator your next line McCanless with And Wedbush. from the Jay of Instructions] question

James McCanless

The thought been quarter. prices I what you with of going a the to had, you first communities the X/X with during was able may price would more of able have push being talked infill, to that? about and pricing have have would in heavier maybe raise one Jed, roughly little think, I only weight I on

Jed Dolson

the some think later I seasonality part of quarter. exited towards that we just the

James McCanless

what's Or from to slowdown those see business think some to do And losses, quarter. in closing XX% cetera. things if start the go you then, SFR/BTR down of what's things I the we start homes Trophy if XX% economy job into I guess, given et B slow guess plan for solemn their with standpoint. the plan homes those market? to a if Do

James Brickman

Jay, this Brickman. Jim is

community. to creating moving are into sell move don't on rental we market. in build-to-rent that focus are a those Now, longer-duration the communities We expecting people not the into nicer communities and

can the XX% negative hit margins margin typical of a they margins a margin yet, that making XX.X% XX% take peers. benefits are to we is have and really still that our huge income. our And One peers take of go

over So, margin maintain a jobs. of velocity. to sales plenty lose this and we run, for I sleep the in business cushion few in long don't We're have

Richard Costello

and is One But Hi, number Rick. environment those mean that was more to obviously, are the Jay, also is more. will B. with A there job jobs. where that answer rate in be exceed with I this people people rate the the cuts who cuts who of aggressive respond qualify will FED losses, going and the number of without

I numbers well a that the like work pretty job So, Dallas for us, markets Atlanta. being stronger in think especially and

Operator

Instructions] no that you call. for [Operator concludes and all There are joining. Thank further today's questions,

now may You disconnect.

Green Brick Partners (GRBK) 1 Aug 242024 Q2 Earnings call transcript