Green Brick Partners (GRBK) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Co-Founder and Co-Chief Executive Officer - James R. Brickman
• Chief Executive Officer - Jed Dolson
• Chief Financial Officer - Jeffery Cox

TAKEAWAYS

• Net Income -- $59.2 million, a decrease of 24% year over year reflecting lower home closing revenue and higher incentives.
• Diluted EPS -- $1.35, representing a 24% decline versus the previous year due to reduced net income.
• Home Closing Revenue -- $437 million, down 9.8% primarily due to a lower average selling price.
• Average Selling Price (ASP) -- $446,700, a 12.1% decrease reflecting increased mortgage rate buydowns and a product mix shift toward the Trophy brand.
• Homebuilding Gross Margin -- 28.0%, a decline of 410 basis points due to higher incentives and base price adjustments to drive sales pace.
• Net New Home Orders -- 926, an increase of 3.1% year over year supported by a 5.8% increase in active selling communities.
• New Home Deliveries -- 978, growing 2.6% compared to the prior year period.
• Incentives on New Orders -- 11% of home closing revenue, elevated to maintain sales volume in a high interest rate environment.
• Trophy Signature Homes Mix -- 60% of total company orders and deliveries, reflecting the expansion of this brand in Texas markets.
• Trophy Sales Pace -- 5.2 sales per month per community, significantly higher than the company-wide average of 2.8.
• Financial Services Revenue -- $11.2 million, up 52% year over year driven by growth in mortgage and title operations.
• Financial Services Pretax Income -- $5.6 million, an increase of 69% compared to the third quarter of 2025.
• Mortgage Capture Rate -- 66%, impacted by the rollout to new communities with preexisting outside lender relationships.
• Book Value Per Share -- $46.10, representing a 14% increase year over year.
• Total Lot Pipeline -- 51,435 lots, including 40,869 owned lots and 10,566 controlled under contract.
• Master-Planned Lots -- 38,000 lots, which management intends to develop in multiple phases over five to 10 years.
• Homebuilding Debt to Total Capital -- 13.1%, down from 15.3% year over year as the company reduced leverage.
• Share Repurchases -- $17.9 million, used to buy back 264,000 shares during the quarter.
• Construction Cycle Time -- 116 days, representing an improvement of 25 days versus the prior year.
• Planned Land Investment -- $780 million for 2026, revised downward from $850 million as management remains patient on new acquisitions.
• Backlog Revenue -- $379.3 million, down 17% year over year reflecting a higher mix of Trophy homes and elevated incentives.
• Liquidity -- $325 million, consisting of $100 million in cash and $225 million available under the credit facility.

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RISKS

• Brickman stated that labor constraints in trades such as masonry, electrical, and drywall are increasing due to immigration enforcement activity, noting that a replacement workforce is not readily available despite competitive wages.
• Dolson stated, "That middle market from, say, $500 thousand to $800 thousand is very soft," noting challenges in areas with heavy tech cultural buyers like Atlanta and North Dallas.

SUMMARY

Green Brick Partners, Inc. (NYSE:GRBK) reported third quarter results that management attributed to the performance of its affordable Trophy Signature Homes brand and its self-developed land strategy. The company reported a 3.1% increase in net new home orders and a 2.6% increase in deliveries despite a challenging interest rate environment and affordability pressures. Management maintained a homebuilding gross margin of 28.0% while utilizing mortgage rate buydowns and base price adjustments to sustain sales volume. Financial services revenue rose 52%, and the company continued to invest in its land pipeline while reducing debt and repurchasing $17.9 million of common stock.

• Management reported that Trophy Signature Homes now accounts for 60% of total company orders and deliveries.
• Co-CEO Dolson noted that construction cycle times for Trophy Dallas averaged 88 days, which is nine days shorter than the previous year.
• The company repaid the remaining $50 million of principal on its 4.00% senior notes maturing in 2026.
• Management indicated that they are cautious regarding land spending, requiring underwriting models to include 10% elevated incentives to justify new deals.
• The company plans to expand its mortgage operations to Atlanta to support The Providence Group, likely in 2027.
• Co-CEO Brickman stated that the company's 28.0% gross margin provides a significant buffer for profitability even if incentives must be increased to maintain sales pace.

INDUSTRY GLOSSARY

• Trophy Signature Homes: Green Brick's brand focused on providing attainable, high-efficiency housing for entry-level and first move-up buyers.
• Rate Buydown: A financial incentive where a builder pays a fee to the lender to reduce the homebuyer's mortgage interest rate for a specific period or the life of the loan.
• Capture Rate: The percentage of a homebuilder's customers who choose to use the builder's internal mortgage or title services.
• Spec Home: A residential property constructed by a builder without a signed purchase contract in place, typically intended for buyers seeking a quick move-in.
• Infill: The development or redevelopment of vacant or underutilized land parcels within established urban or suburban areas.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us and welcome to the Green Brick Partners Inc. Third Quarter 26 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Jeffery Cox, Chief Financial Officer. Jeffery, please go ahead.

Jeffery Cox: Good afternoon, and welcome to Green Brick Partners' earnings call for the third quarter ended 09/30/2026. Following today's remarks, we will hold a question-and-answer session. As a reminder, this call is being recorded and will be available for playback. In addition, a presentation will accompany today's webcast, which is available on the company's Investor Relations website at investors.greenbrickpartners.com On the call today are Jim Brickman, Co-Founder and Co-Chief Executive Officer Jed Dolson, Chief Executive Officer and myself, Jeffery Cox, Chief Financial officer. Some of the information discussed on this call is forward looking, including a discussion of the company's financial and operational expectations for 2026 and beyond.

In yesterday's press release, the company detailed material risks that may cause future results to differ from its expectations. The company's statements are as of today, 10/29/2026, and the company has no obligation to update any forward looking statement it may make. Our comments today also include non GAAP financial metrics, Reconciliations of these metrics and the other information required by Regulation G can be found in yesterday's earnings release and in the accompanying presentation. With that, I will turn the call over to Jim.

James R. Brickman: Thank you, Jeffery. Before discussing the quarter, I want to recognize Jed Dolson's promotion to co chief executive officer. As we previously announced, Jed assumed his new role on October 15. Jed has been an integral part of Green Brick since before we became a public company. His leadership, commitment to our home values, and focus on long term value creation have contributed meaningfully to our growth and success. I am excited to work alongside him in his expanded role as we continue to execute our strategy, build on our foundation, and develop the next generation of Green Brick leadership. Turning to the quarter, I am pleased with the results our team achieved in a difficult housing market.

Marked by high mortgage interest rates and economic uncertainty causing many potential homebuyers to reevaluate the timing of their purchase decisions. Despite these affordability pressures, we sold 978 homes, an increase of 2.6% from a year ago. Generating home closing revenue of $437 million with a homebuilding gross margin of 28%. We generated net income of $59 million or $1.35 per diluted share. Net new homeowners increased 3.1% compared to the third quarter of 25 to 926. Orders increased each month of the quarter even as mortgage rates steadily rose during the quarter. These results demonstrate the resilience of Green Brick's differentiated operating model.

Even as many first time buyers continue to require significant incentives to purchase a home, increased orders and deliveries while maintaining the highest homebuilding gross margin among our public homebuilding peers. This quarter highlights 3 important advantages of our business. The strength of our margins and balance sheet, our owned and self developed land strategy, and the strength of our primary growth engine, Trophy Signature Homes. We recognize that the current housing market conditions are challenging. At the same time, we also believe that cyclical downturns create opportunities. Specifically for Green Brick, we believe these potential opportunities include capturing market share, and laying the foundation for sustained growth when the housing market inevitably improves.

Our strong balance sheet and low leverage provide us with the financial flexibility to navigate current market conditions, and invest selectively in attractive opportunities. Our homebuilding debt to total capital declined to 13.1% from 15.3% year over year and our net home billing debt to total capital was relatively unchanged. At 9.6%. Book value per share increased 14% year over year to $46.10. We continue to view growth in book value per share as an important indicator of the value we are creating for shareholders over time complemented by opportunistically repurchasing shares. Our strong margins and significant land pipeline allow us to remain patient and disciplined in deploying capital.

The foundation of our performance begins with our owned and self developed land strategy, which remains the primary driver of our industry leading margins. At September 30, we owned 40.9 thousand lots, and controlled another 10.6 thousand lots under contract. Giving us a total pipeline of 51.4 thousand lots. We believe owning land gives us greater control over lot cost the timing of development, and the pace at which we bring homes to market. Approximately 38 thousand of our total lots are part of our large master plan communities, that will be developed in multiple phases over 5 to 10 years or longer.

By securing these parcels well in advance of home delivery, we believe we have locked in our lot acquisition basis and minimized exposure to cost inflation and escalating fees that many builders incur purchasing finished lots from third party developers. 1 of the primary differentiators from many of our peers is that we do not rely on land banking arrangements with high interest costs that can distort a builder's economic leverage and risk and that can give a land banker indirect control over a builder's lot purchase timing. We believe this approach is particularly valuable in the current environment. Trophy signature homes is a key driver of Green Brick's long term growth strategy.

By combining attainable home prices with our land development capabilities, efficient construction platform, Trophy expands our ability to serve the large pool of first time and first move up buyers. We believe that Trophy Scale is the third largest builder in DFW, and its continued expansion in Austin and Houston provide a clear path to grow deliveries. Broaden our revenue base, and strengthen our presence in our key Texas markets over the next few years. Our focus remains on translating that growth into attractive returns that deliver long term shareholder value. Green Brick Mortgage continues to grow rapidly, driving third quarter financial services revenue to $11.2 million, an increase of 52%. While pretax income increased 69% to $5.6 million.

For the first 9 months, financial services pretax income increased 92% to $15.6 million. Our mortgage, title, and insurance operation helps us support buyers in a market in which monthly payments remain critical to the purchase decision. Our goal is to consistently deliver attractive risk adjusted returns to our shareholders. Over the past 12 months, we returned $57 million to shareholders through stock repurchases while continuing to invest significantly in land acquisition and development to position us for future growth. Even with our land to be balance sheet, and macroeconomic headwinds for the 12 months ended September 30, our return on assets was 10.6%. And our return on equity was 14.5%.

Which remains among the very best of our public peers. For the most recently available trailing 12-month period, of our public homebuilding peers, the median return on assets 3.9% and the median return on equity was 6.2%. Our disciplined returns focused approach and our experienced team of operators position us well to create long term shareholder value. With that, I will now turn it over to Jed to discuss current buyer trends and operating results.

Jed Dolson: Thank you, Jim. I appreciate the confidence of our board and Jim as I began serving as co CEO. Having helped build Green Brick alongside this team for many years and through different home building market cycles. I am excited about our future and remain committed to the disciplined operating and capital allocation principles that have driven our success. As Jim discussed, affordability remained the defining factor in buyer behavior during the third quarter. Buyers remain highly sensitive to monthly payment amounts and rate buydowns. Closing cost assistance and targeted price reductions continue to be the critical tools, particularly for first time homebuyers.

Trophy's ability to meet these buyers' needs showed in our results for the first time, Trophy generates 60% of both total company orders and deliveries in the quarter, a testament to Trophy's operating model and leadership team. Net new orders increased 3.1% year over year to 926 supported by a 5.8% increase in average active selling communities to 109. Monthly sales pace was 2.8 per community compared with 2.9 a year ago. Our industry leading gross margins provide flexibility to use pricing and incentives capture demand while balancing community level returns. Our cancellation rate was 8.2%. Compared with 6.7% last year and remained relatively low compared to our peers.

Green Brick Mortgage continues to work closely with our sales teams to help buyers qualify by identifying financing solutions earlier in the sales. Green Brick Mortgage funded 499 loans during the quarter, an increase of 42% year over year. Total origination principle was approximately $185 million, a 36% increase year over year. The average FICO score was 734, and the average debt to income ratio was 41.1%. Mortgage capture rate was 66% for the quarter despite facing the headwind of rolling out to new communities. Adoption can often take time to ramp up. We remain focused on increasing our mortgage capture rate in Texas communities.

Our mortgage team is also implementing technology initiatives and aiming to broaden the products it offers to improve efficiency. Enhance customer service, and support growth and capture. Based on current market conditions, we continue to fine tuning our mortgage operations within our Texas markets before expanding to Atlanta to support the Providence Group which may occur in 2027. While capture rates declined slightly, reflecting the continued expansion of the captive mortgage business, into new communities, many of which are preexisting outside lender relationships. We expect our long term capture rate to be approximately 70% supporting additional loan volume and revenue.

We continue to make progress on construction efficiency as our average construction cycle declined to 116 days 25 days shorter than last year. Trophy Dallas' cycle time averaged 88 days compared with 97 days a year ago. While we are seeing a modest effect of labor availability among some construction trades as a result of increased immigration and customs enforcement activity in certain of our markets. We have not experienced a measurable impact on our operations to date. We started 954 homes for the quarter, essentially flat with the prior year. We ended September with 2.18 thousand homes under construction, down 1% year over year. And 562 completed spec homes, within our target of 1 to 2 months of supply.

We are aligning starts with sales pace while maintaining quick move in inventory for homebuyers seeking near term delivery and rate certainty. We continue to invest in land and development to support future growth. Through September 30, our investment in land acquisition and land development totaled approximately $597 million including $323 million for land development. Excluding reimbursements, and $274 million for land and lot acquisitions. For 2026, we expect land and lot acquisitions of approximately $350 million and land development outflows of approximately $430 million excluding reimbursements. Our total 2026 plan land investment of $780 million is down from the $850 million we communicated on our last call.

As we remain patient and selective on new acquisitions, while preserving our ability to grow in a near and intermediate term. With that, I will now turn it over to Jeffery to provide more details regarding our financial results and our capital position.

Jeffery Cox: Thank you, Jed. Net income attributable to Green Brick for the third quarter was $59.2 million, a decrease of 24% from the same period last year. Diluted earnings per share was $1.35, also down 24%. We delivered 978 homes, up 2.6% from 953 homes in the prior year quarter. With 48% of our third quarter closings also having been sold during the quarter. Reflecting buyers' continued preference for quick move in homes. Home closing revenue declined 9.8%, to $437 million primarily due to a 12.1% year over year decrease in average selling price approximately $447 thousand. Which reflected increased incentives, primarily through mortgage rate buydowns and a continued shift toward Trophy's more affordable product.

Homebuilding gross margin was 28%, down 410 basis points year over year in part to higher incentives, which increased 180 basis points from the third quarter of 25 to 9.9% of home closing revenue. SG&A expense declined approximately 6% for the quarter to $51.8 million. As a percentage of residential units revenue, SG&A increased 40 basis points to 11.8% mainly due to lower revenue. We ended the quarter with 629 homes in backlog, down 6.8% year over year representing backlog revenue of $379 million. The average selling price in backlog declined 11% year over year to approximately $603 thousand reflecting a higher mix of trophy homes and elevated incentives. Turning to capital allocation.

We repurchased 264 thousand shares during the quarter, approximately $17.9 million. At September 30, $132.7 million remained available under our repurchase authorization. Our liquidity at the end of the quarter was $325 million, consisting of $100 million of cash and $225 million available under our $330 million unsecured revolving credit facility. We also repaid the remaining $50 million of principal on our 2026 4% senior notes. Total debt, excluding our warehouse facilities, was $305 million, with $63 million of senior notes maturing in the next 12 months. Our home building debt to total capital ratio of 13.1% and net homebuilding debt to capital ratio of 9.6% remain among the lowest of public homebuilders.

We believe our liquidity and financing capacity provides substantial flexibility to fund our operations while continuing to invest in opportunities that meet our return criteria. With that, I will now turn it back to Jim for closing remarks.

James R. Brickman: Thank you, Jeffery. In closing, we remain confident in Green Brick's long term outlook our differentiated operating model and financial strength position us to navigate current market conditions and pursue opportunities for sustainable growth. While affordability pressures and elevated incentives continue to challenge the industry, our focus remains on disciplined execution, prudent capital allocation, and creating long term value for our shareholders. I would like to thank our employees and trade partners for their continued commitment to Green Brick and our homebuyers. This concludes our prepared remarks. We will now open the line for questions.

Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Rohit Seth with B. Riley. Please go ahead. Your line is now open.

Rohit Seth: Hey. Thanks for taking my question. How's the market obviously challenging during the quarter? You talked over with increase in rates. I am just wondering if you could comment on how demand progressed through the quarter and how we should be thinking about incentives as we enter the fourth quarter?

James R. Brickman: Yeah. Hi. This is Jim Brickman. If you can tell me which way interest rates are going to go, I will tell you which way our incentives are gonna go because a lot of our incentives relate to mortgage buy downs. So it is very hard to predict know, we watched the 10-year bond very closely. But big picture, I think 1 of the most important messages we wanna leave investors with is that when we enter a market like this that is challenging, and you have 28% gross margins and 11% or 12% SG&A, it is a huge advantage, and there is almost very little debt.

Huge advantage because we are seeing many peers right now where their GAAP gross margin is about the same as their SG&A. We do not wanna give up any margin, but we have a lot to give. If we need to and still remain very profitable. We are seeing peers have nothing left to give. And we, you know, we do not like being in a tough market like this, but we think we really have a huge competitive advantage if incentives increase.

Jeffery Cox: And Seth, this is Jeffery. I will just add on to that based on your follow-up or your other question. Regarding sales throughout the quarter. I would say that they followed the typical seasonal patterns September was certainly tough, but we saw sequential increase in sales from July through September, so a little encouraged by that. But it is tough, like Jim mentioned.

Rohit Seth: Okay. As you think about the pace and price trade off, are you making any adjustments as we as we go into 2027?

James R. Brickman: We make adjustments every day. Jed, why do not you talk about that?

Jed Dolson: Yeah. I mean, we are in the business of selling homes with Jim mentioned we have the buffer and the gross margins to provide increased incentives. We are seeing when we do make changes to our incentive packages as rates go down or rates go up that we sell more houses. So it is you know, we are gonna continue to balance price versus pace and we feel, you know, it there is no doubt this is a challenging market, but feel like we can execute very well in this market.

Rohit Seth: Okay and you are buying. Still buying down to about 5.5%. Is that is that right?

Jed Dolson: Yeah. Varying on the day in the community, somewhere in the mid-5% to 5.5%.

Rohit Seth: Okay. Great. I will pass it on. Thank you and congratulations, Chad.

Jed Dolson: Oh, thank you very much.

Operator: The next question comes from the line of Ryan Gilbert with BTIG. Go ahead. Your line is now open.

Ryan Gilbert: Hi, thanks. I appreciate the time. First question is on, I guess, just the. You know, your philosophy around land investment in the current market. I know you pulled down the 2026 investment spend guides incrementally, but how are you thinking about, I guess, the trade off between you know, continued you know, elevated land investment relative to, you know, to prior years versus you know, pulling back some of that spend and waiting for potentially improved opportunities in the event that the market gets weaker from here. So just how are how are you thinking about land spend here?

James R. Brickman: Cautious. Very cautious. In order to have us do a significant land spend our underwriting criteria now has to include you know, 10% elevated incentives into modeling and just it is hard to find land deals that work and provide, you know, the internal rate of returns we want today. So I do not expect that to change. it is interesting in that the high margin land deals are still hard to find. Low margin c minus, d location deals are plentiful. We are seeing peers just rearrange deck chairs in the Titanic trading these assets amongst each other.

I do not know why they do that. it is not gonna help 1 or the other at the end of the day. But we are not playing that game. But we find a land deal that makes sense, we will move on it. They are just harder to find.

Ryan Gilbert: Okay. So it sounds like land prices are not really resetting to any material degree. As of now.

James R. Brickman: They are on lots we do not want.

Ryan Gilbert: Okay. Got it. And then second question on gross margin. It looks like maybe around half of the year over year decline was related to incentives. What would you attribute the other half of the decline to?

Jeffery Cox: I would say. This is Jeffery. The other half is really probably 2 things. it is the continued shift towards Trophy who is much more you know, their buyer segment's much more rate sensitive. The other thing that gets lost within the incentive number when we look at it year over year it is just the change in base prices that our operators have had to make year over year. So that is really probably the balance of the difference Yeah.

Jed Dolson: Trophy is continuing to look at traffic every single week. And if they need to also reduce base prices to continue to drive traffic, they will do that. You know? And they will continue to lean heavily on mortgage rate buy downs is what you are really seeing in the incentive Got it.

Ryan Gilbert: So are the base are, I guess, individual home base price reductions included in incentives, or is it just any base price cut regardless of whether it is individual home or community wide base price cuts?

Jeffery Cox: that is all excluded from the incentive number. When we have a reduction in base price, that will flow through to existing inventory. And so you will not see elevated incentives necessarily when those sales come through from Got it.

Ryan Gilbert: And Correct. Okay. Got it. that is that is helpful. And underlying land inflation, just is like, ballpark where are you seeing that on a percentage basis?

James R. Brickman: it is very low for us because our interest costs are so low. That we are not capitalizing interest into our land inventory or a lot inventory. And because we do not land bank, we are not incurring a debt asset that is 15% or 10% of the lot cost that is debt money. And paying a land manager 8% to 12%. That know, has to get paid somewhere, and that is getting reflected in lot prices per a lot of our land like peers.

Jeffery Cox: Yeah. We are seeing a car. Our lot prices percentage of revenue is you know, like everybody, it is ticking up, but it is it is ticking up at a much slower pace than our peers.

Ryan Gilbert: Okay. Great. Thank you.

Operator: Your next question comes from the line of Jay McCanless with Citizens Bank. Please go ahead.

Jay McCanless: Good morning, guys. First question I had with the mix of Trophy now being nearly 60%, is the ASP we saw this quarter, is that likely to repeat in the fourth quarter? Or could it move down a little more as you are bringing more trophy communities online?

James R. Brickman: It will move down, Jed. How much do think?

Jed Dolson: We are not gonna give a number, but it could you know, it could slightly move down. In Q4.

Jay McCanless: Okay. And then what is trophy right now on a on a sales absorption basis?

Jeffery Cox: what is what is Trophy averaging in the. In Dallas, you think? So Jay, this is Jeffery.

Jed Dolson: Trophy, similar to last quarter, they are running about 85% higher than the rest of our brands. Their pace in Q3 was about 5.2 sales per month. When the average pay for the company, as you know, is 2.8. So they are they are moving quite a bit faster.

Jay McCanless: Gotcha. And then the next question I had, incentives into the quarter, under 10%. Have thus far in the quarter, have you had to move the incentive level above that to keep your sales pace?

Jed Dolson: We have we have. This is Jed. Jay, we have seen a little bit of pickup with the mortgage rates. You know, they got really nasty at the end of the quarter, and they backed off a little bit. So know, so many. We are spending so much money as our peers are on mortgage rate buy downs. So you know, it is we are those buydowns are costing a little less than they were 2 weeks ago.

Jay McCanless: Gotcha. And then the last 1 for me, just any commentary on it, Lynn. I know I asked about it last quarter, seen a little bit of sales headwind there. Maybe talk about what you saw this quarter and you are thinking about the end of the year for Atlanta?

Jed Dolson: Yeah. This is Jed again, Jay. I will answer it, you know, Atlanta and then North Dallas as well. You know, the areas where we had a you know, heavy tech cultural buyer are challenging right now. That middle market from, say, $500 thousand to $800 thousand is very soft. Very pleased with the results under $500 thousand. We are pleased with our brands that are executing you know, $900 thousand and above. That, you know, $500 thousand to $800 thousand range where which the majority of Atlanta falls into. it is a challenge right now. I think, you know, Toll Brothers has mentioned it on their call. It just a tough market.

Jay McCanless: No. I hear you. Okay. Well, thank you, guys. I appreciate it.

James R. Brickman: Welcome.

Operator: Your next question comes from the line of Alexander Rygiel with Texas Capital Bank. Please go ahead.

Alex Wiegall: Thank you, and really nice quarter in a difficult market. Could you talk a little bit more about what you are seeing in Houston and how that is progressing over the last 6 months since you opened?

Jed Dolson: Yeah. This is Jed. I mean, Houston is a small market for us at this point in time. We have 1 community open in Houston. We will have 2 more at the end of next year. So we are not a good barometer for the Houston market, but we are pleased with just the overall results of Houston. it is a know, it is a it is blue collar industrial town. We are selling very affordable houses, and we think we are gonna do well there long term just like we have in Dallas.

James R. Brickman: This is Jim. When you get down to land spend, that is 1 market we are looking at very cautiously, though. It does not underwrite We are not gonna expand just to generate revenue.

Alex Wiegall: That makes sense. And then transitioning over to cycle times, they have improved a lot. And probably industry leading right now. Do you see more opportunities for improvement And then sort of a second question is, do you see any opportunities to kind of value engineer your homes to take some cost out?

James R. Brickman: Let me answer that first, Jed. And we do not see a lot of cycle time improving a lot. Matter of fact, we are seeing the first sign of immigration headwinds where we are seeing labor constraints. Particularly in Austin. We have had there is been a lot of increased activity in, in masonry, electrical, drywall, that is putting cost pressures that we have not seen for the first time before. Framers. And it is it is interesting because these are. These undocumented workers that are being picked up it is not like there is a replacement workforce even though the wage is well above minimum wage. So you know, I think that has bottomed.

And, we are not gonna see a lot of improvement in either value engineering or the labor side of our business.

Alex Wiegall: Thank you.

Operator: Your next question comes from the line of Ryan Gilbert with BTIG. Please go ahead.

Ryan Gilbert: Thanks for taking my follow-up, guys. I had a question on absorption. Appreciate the breakout that you gave between Trophy Signature and the rest of the business. And when we were going to the quarter, I think we expected the continued mix shift towards trophy signature to drive more or, I guess, to drive positive absorption growth rather than the slight absorption decline that we saw, you know, even in a even in a weaker market. But it sounded like just based on your on your commentary, like, the trophy signature business sold pretty well throughout the quarter.

So wondering if you could compare the year over year change in absorption between what you saw in Trophy Signature versus the other builders. I am just wondering if there was just you know, a much deeper decline in absorption for the for the move up builders than Trophy?

Jed Dolson: Yeah. Ryan, I will take this. it is Jed. Hey. I think you kind of answered the question. The decline in trophy absorption was less than the decline in the other parts of our business. That $500 thousand to $800 thousand part of our market, that is where that is where we really saw. Huge declines. In sales.

Jeffery Cox: And this is Jeffery. I will just add on to that. The decline that Jeffery's referring to is just the sequential quarter decline. If you look year over year, Trophy has actually increased its sales pace. From 4.7 last year to 5.2. So they had an 11% increase in their pace. The really challenging areas that we are seeing are more with the second, third move-up buyers that Jed mentioned earlier. We saw more declines there year over year with Trophy really helping to kind of carry the torch.

Ryan Gilbert: Okay. Got it. And is that I guess, is there a. Are you able to just to be able to offer better incentives or more incentives on Trophy? Or are those second and third move up buyers having trouble selling their existing home and that is or why they, you know, they do not wanna acquire the acquire the new home or just sentiment issues? Just would be curious on any additional details you could provide.

Jed Dolson: We are just seeing the suburban we are just seeing the suburban second and third time move up. Buyers, especially the cultural buyer, just really frozen. Right now. So it is -- okay. You know, like I have previously mentioned, over $900 thousand we are very happy with. Know, under $500 thousand and really under $400 thousand where we are really just you know, hitting the entry level buyer. We are we are very pleased with how that business is going in this very tough environment. We are just you know, it is limited lot supply at that $500 thousand to $800 thousand and we are just gonna value.

You know, we do not wanna burn through our lots at the second, you know, lower margins. At the expense of lower margins.

Ryan Gilbert: Got it. Yeah. No. That makes sense. Thanks again, guys.

Operator: There are no further questions at this time. I will now turn the call back to Jim Brickman, CEO, for closing remarks.

James R. Brickman: Thank you, everybody, for attending our phone call. We would encourage anybody that wants to visit us in Dallas to see our communities because we think that is a big differentiator. We really look at our business different than our peers. And if we took you on a tour, I think you would see that firsthand. So hopefully, you will come visit us. Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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