Green Brick (GRBK) Earnings Call Transcript

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DATE

Thursday, October 30, 2025 at 12 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — James Brickman

Chief Financial Officer — Jeffery Cox

President and Chief Operating Officer — Jed Dolson

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TAKEAWAYS

Net Orders -- 898, a 2.4% year-over-year increase and a record for any third quarter.

Homes Closed -- 953 units closed, nearly matching the prior year's third quarter record.

Net Income Attributable -- $78 million net income, a 13% year-over-year decrease.

Diluted Earnings Per Share -- $1.77, down 11% year-over-year.

Home Closings Revenue -- $499 million, a 4.6% decline compared to the prior year.

Homebuilding Gross Margin -- 31.1%, down 160 basis points year-over-year and 70 basis points sequentially, with a $4.8 million warranty reserve reduction contributing a 90 basis point improvement.

Average Sales Price -- $524,000, flat sequentially and down 4.2% year-over-year.

Discounts and Incentives -- 8.1% of residential unit revenue, up from 5% the prior year.

SG&A as Percentage of Revenue -- 11.6%, up 60 basis points year-over-year, attributed to higher personnel and IT investments.

Backlog Value -- $466 million, a 20% year-over-year decrease, driven by a higher share of quick move-in sales and improved construction cycle times.

Backlog Average Sales Price -- $690,000, reflecting a 4.1% decline due to increased incentives.

Home Starts -- 950 new homes started, nearly flat sequentially and down 10% year-over-year.

Units Under Construction -- Approximately 2,200, down 5.5% year-over-year.

Quick Move-In Sales -- An increased proportion contributed to the lower backlog value, alongside a nine-day improvement in average construction cycle time.

Trophy's Share -- Represented 14% of total backlog value but accounted for nearly half of closing volume.

Net Debt to Total Capital -- 9.8%; total debt to capital at 15.8%.

Liquidity Position -- $142 million in cash and $457 million total liquidity, with $315 million undrawn on credit facilities.

Mortgage Operations -- Green Brick Mortgage closed and funded over 350 loans, versus 140 in the prior quarter, with an average FICO of 740 and average debt-to-income ratio of 40%.

Incentives for Net New Orders -- Rose to 8.9%, up 280 basis points year-over-year and 100 basis points sequentially; moderated from July peak as mortgage rates declined.

Cancellation Rate -- 6.7%, improved from 9.9% in the second quarter and 8.5% in 2024, among the lowest in the industry.

Labor and Materials Costs -- Direct construction costs per home decreased by approximately $2,250 compared to the same period last year; labor availability remained stable.

Land Position -- Total lots owned and controlled increased 11% year-over-year to approximately 41,200; approximately 70% attributable to Trophy.

Houston Market Entry -- First model home construction for the Houston market began in October, with sales expected to launch for the upcoming spring season.

Land Development Spend -- $121 million on land/lot acquisition and $73 million on land development; year-to-date totals reached $231 million and $233 million, respectively.

Cycle Times -- Overall construction cycle time improved by nine days year-over-year; Trophy's DFW average fell below 100 days, setting a new internal record.

Average Mortgage Rate Buy-Down Offered -- "Just under 5%," according to CFO Cox.

SUMMARY

Management indicated pricing flexibility stemming from industry-leading gross margins and cost reductions led by lower lumber, labor, and material expenses. The company plans targeted market expansion for its Trophy brand in Texas, with community launches in Austin and Houston expected to drive sales growth in the coming years. Green Brick Mortgage expanded activity significantly, increasing funded loans sequentially and preparing to enter new geographies to support future sales capture. The balance sheet remains conservative, with low leverage and ample liquidity to preserve operational flexibility and enable selective land investment despite macroeconomic uncertainties. Special financing districts are contributing to capital efficiency, as ongoing reimbursements from public infrastructure projects offset land development expenditures.

CEO Brickman credited vertical integration and control over 90% of lot development for the company’s ability to adapt “based upon market demand rather than a land banker's or a land developer's contract terms.”

Management stated there is a “highly diversified brand portfolio” serving first-time and move-up buyers, supporting resilience against shifting macro trends.

Direct cost reductions were evident, with Jed Dolson noting, “Lumber continues to be at a year-long low every new month that occurs,” and trades operating at 65%-70% capacity, allowing for price negotiation.

Management described land and lot costs as “either stabilized or slightly come down in price.”

Trophy’s market expansion in Houston is on track, with management anticipating material growth in closings there in 2027 and Austin volume expected to double in 2026.

INDUSTRY GLOSSARY

Quick Move-In Sales: Inventory homes that are available for near-term purchase and occupancy, not subject to lengthy construction timelines.

Cycle Time: The total number of days elapsed from construction start to completion (home ready for sale or close), a key operational efficiency metric in homebuilding.

Spec Homebuilder: A builder that constructs homes without pre-existing customer orders, selling completed homes to buyers as inventory.

Land Development Spend: Capital invested in preparing raw or entitled land for construction, including grading, infrastructure installation, and permit costs.

Special Financing Districts: Local government-created districts that finance public infrastructure for new developments, later reimbursing some developer costs via special taxes or assessments.

Trophy: Green Brick Partners’ wholly owned spec homebuilder brand focused on high-velocity sales in Texas markets.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Green Brick Partners, Inc. Third Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Thank you. I would now like to turn the conference over to Jeffery Cox, Chief Financial Officer. You may begin.

Jeffery Cox: Good afternoon and welcome to Green Brick Partners earnings call for the third quarter ended September 30, 2025. 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 is James Brickman, Co-Founder and Chief Executive Officer, Jed Dolson, President and Chief Operating 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 2025 and beyond.

In yesterday's press release and SEC filings, the company detailed material risks that may cause its future results to differ from its expectations. The company's statements are as of today, October 30, 2025, and the company has no obligation to update any forward-looking statements it may make. The comments also include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by Regulation G can be found in the earnings release that the company issued yesterday in the aforementioned presentation. With that, I'll turn the call over to James Brickman.

James Brickman: Thank you, Jeff. First, I want to formally recognize Jeff's promotion to Chief Financial Officer effective earlier this month. Jeff joined the company in June 2023 as Senior Vice President of Finance with over two decades of homebuilding experience, and he has been instrumental in helping us establish our wholly owned mortgage company along with refining our financial systems and processes. I am excited to have Jeff join the senior leadership team and add his talent to Green Brick's deep under fifty-year-old talent bench. With that, I am pleased to announce our third quarter results, particularly given that we achieved these results against the backdrop of ongoing and persistent affordability challenges faced by many consumers in this housing market.

Our performance remained resilient despite eroding consumer confidence and an increasing supply of housing inventory. Our builders adapted quickly to a volatile housing market as we continued to balance price and pace to maximize returns in each of our communities. We achieved 898 net orders representing a 2.4% increase year over year, which is a record for any third quarter. We also closed 953 homes in the quarter, just three shy of beating our record third quarter 2024 results. Net income attributable to Green Brick for the third quarter was $78 million or $1.77 per diluted share.

As Jed will discuss in more detail shortly, driving our sales volume required price concessions and other incentives as we address the affordability challenges faced by homebuyers in our market. As expected, these dynamics put downward pressure on our homebuilding gross margins, which declined 160 basis points year over year and 70 basis points sequentially to 31.1%. Our results also reflect a $4.8 million warranty adjustment, which improved our gross margins by 90 basis points. Our gross margins remain the highest in the public homebuilding industry and marked the tenth consecutive quarter in which our gross margins exceeded 30%.

While the macroeconomic landscape presents headwinds for the entire industry, we believe the core strengths that have driven Green Brick's success over the past decade will enable us to continue to navigate any challenges with confidence and flexibility. As always, we will focus on maintaining operational excellence centered on our disciplined approach to land acquisition and development to position us for future growth. We are laser-focused on maintaining an investment-grade balance sheet to support our targeted expansion in high-volume markets. As Jed will discuss in more detail momentarily, we also continue to concentrate on reducing construction costs and cycle times.

We believe we are well-positioned to sustain our return metrics that rank among the very best in the homebuilding industry and create long-term shareholder value. We remain focused on growing our business, particularly our Trophy brand. Trophy's growth in DFW and Austin combined with our planned entry into Houston for the 2026 spring selling season presents significant opportunities for sustained growth over the next few years. This expansion, we believe, allows us to continue serving the critical first-time and move-up buyer segments while further diversifying our revenue base and strengthening our presence in key Texas markets. With our highly diversified brand portfolio, we believe we are well-positioned to capitalize on demand from all homebuyer segments.

While the overall market conditions remain challenging due to macroeconomic and political uncertainty, we remain vigilant in monitoring and responding to shifts in buyer preferences. We believe that our experienced team, robust land pipeline, and desirable infill and infill-adjacent locations will drive continued success in the quarters to come. With that, I'll now turn it over to Jeff to provide more detail about our financial results.

Jeffery Cox: Thank you, Jim. Given the challenging economic conditions and increased supply of housing inventory in our markets, discounts and incentives increased year over year as a percentage of residential unit revenue to 8.1% from 5%. Our average sales price of $524,000 was flat sequentially and down 4.2% year over year. Home closings revenue of $499 million declined 4.6% compared to the third quarter last year, and our homebuilding gross margins decreased 160 basis points year over year and 70 basis points sequentially to 31.1%. As Jim mentioned earlier, we reduced our warranty reserve by $4.8 million during the quarter, which improved our gross margins by 90 basis points for the quarter and 30 basis points year to date.

This adjustment was based on an analysis of our warranty reserve accruals compared to actual warranty spend, which was less than previously anticipated. This adjustment reflects continued improvements in our construction quality and the strength and stability of our trade partners. SG&A as a percentage of residential unit revenue for the third quarter was 11.6%, an increase of 60 basis points year over year driven primarily by higher personnel costs and investments in our IT platforms to enhance operational efficiencies. Net income attributable to Green Brick for the third quarter decreased 13% year over year to $78 million, and diluted earnings per share decreased 11% year over year to $1.77 per share.

Year to date, deliveries increased 5.1% year over year to 2,905 homes, and our average sales price declined 3% to $531,000. As a result, we generated home closings revenue of $1.54 billion, an increase of 2% year to date from the same period in 2024. Homebuilding gross margin decreased 270 basis points to 30.9%. Year to date, net income attributable to Green Brick decreased 15% to $235 million, and diluted earnings per share declined 13.6% to $5.29. As a reminder, we sold our 49.9% interest in Challenger Homes in the first quarter of last year, which had the impact of adding $0.21 to our $2.24 diluted earnings per share.

Net new home orders during the third quarter were up 2.4% year over year to 898 and down sequentially only 1%. Year to date, net new home orders increased 4% year over year to 2,912. Average active selling communities of 103 remained relatively unchanged year over year. Our sales pace for the third quarter increased marginally to 2.9 per month compared to 2.8 per month in the previous year. We started 950 new homes, which was approximately the same as the prior quarter and down 10% year over year. Units under construction at the end of the quarter were approximately 2,200, down 5.5% year over year.

We will continue to monitor market conditions and seasonal trends and align our starts with our sales pace to appropriately manage our investment in spec inventory. Due to a higher proportion of quick move-in sales, coupled with a nine-day improvement in our average construction cycle time, our backlog value at the end of the third quarter was $466 million, a decrease of 20% year over year. Backlog average sales price decreased 4.1% to $690,000 due primarily to higher discounts and incentives. Trophy, our spec homebuilder, represented only 14% of our overall backlog value, down slightly from the previous quarter, but they accounted for nearly half of our closing volume.

We recognize the heightened importance of liquidity in the current period of economic uncertainty and market volatility. Our investment-grade balance sheet and low financial leverage, we believe, provide us with flexibility to navigate and adapt to evolving market conditions, ensuring we have capital available for strategic opportunities as they arise. At the end of the third quarter, our net debt to total capital ratio was 9.8%, and our debt to total capital ratio was 15.8%, among the best of our small and mid-cap public homebuilding peers. Excluding cash and debt from Green Brick Mortgage, our homebuilding debt and net debt to capital ratio at the end of the quarter was 15.3% and 9.5%, respectively.

At the end of the quarter, we maintained a robust cash position of $142 million and total liquidity of $457 million, with $315 million undrawn on our homebuilding credit facilities. We believe we are well-positioned to weather the challenging market conditions, to opportunistically deploy capital to maximize shareholder returns, and to accelerate growth as the housing market improves. With that, I'll now turn it over to Jed.

Jed Dolson: Thank you, Jeff. We continue to see a challenging sales environment within all consumer segments, which have been impacted by affordability challenges and a weakening job market. While we were encouraged to see mortgage rates decline approximately 60 basis points during the quarter, demand remained steady during each of the months during the quarter, even as interest rates remained above 6% throughout the quarter. Our team responded well to the evolving market conditions, as evidenced by our record third quarter sales volume and our low cancellation rate of 6.7% in Q3, which was an improvement from 9.9% in Q2 and 8.5% in 2024.

We continue to have one of the lowest cancellation rates in the public homebuilding industry, and we believe it demonstrates the creditworthiness of our buyers, the quality of our product, and the desirability of our communities. We continue to address the affordability challenges faced by consumers by providing our homebuyers with price concessions, interest rate buy-downs, and closing cost incentives. Incentives for net new orders during the third quarter were higher by 280 basis points year over year and 100 basis points sequentially, increasing to 8.9%. Incentives moderated during the quarter from a peak in July as the average thirty-year mortgage rate declined during the quarter, reducing the cost of interest rate buy-downs.

Rate buy-downs remained a necessary tool to drive traffic and sales, especially with our quick move-in homes. With our superior infill and infill-adjacent communities and industry-leading gross margins, we believe we are well-positioned to adjust price as needed to meet market demand and maintain our sales base. While we recognize the importance of preserving our margins, we also recognize that our industry-leading margins provide us with significant pricing flexibility to compete efficiently in a volatile market. Green Brick Mortgage, our wholly owned mortgage company, closed and funded over 350 loans in the third quarter compared to 140 loans in Q2. The average FICO score was 740, and the average debt-to-income ratio was 40%, consistent with the previous quarter.

We are excited about the future prospects of Green Brick Mortgage as we are preparing to expand into Austin, Atlanta, and Houston later this year and early next year. Green Brick Mortgage continued to increase its capture rate while providing top-tier service to our homebuyers. Operationally, we continue to make meaningful strides in reducing our direct construction costs and enhancing our operational efficiencies. The cost for labor and materials for homes closed this quarter was down approximately $2,250 per home compared to the same period last year. We also continue to reduce our construction cycle times, which were down nine days from a year ago.

Trophy's average cycle time in DFW was under one hundred days, the lowest in their history. Labor availability remains relatively stable across all of our markets. We recognize the concerns surrounding tariffs and continue to work closely with our vendors and suppliers to mitigate any potential impact. We believe tariffs will have a minimal impact on our earnings next year. Although we acknowledge the lack of certainty with respect to final tariff timing, scope, or percentages, makes it impossible to analyze potential tariff impact precisely. As we navigate through various macro challenges, we are carefully recalibrating our capital allocation plan to align both our long-term growth objectives and respond to changing market conditions.

During the quarter, we spent $121 million on land and lot acquisition, excluding cost share reimbursements, and $73 million on land development. This brings the year-to-date spend to $231 million for land acquisition and $233 million for land development, respectively. Many of our land development projects involve special financing districts that provide for reimbursement of public infrastructure costs. As work is completed, we're able to recoup a portion of these costs, which reduced our net land development spend. We continue to project approximately $300 million in land development spending for the full year 2025, which will be partially offset by these reimbursements.

We believe our superior land position provides a competitive advantage that will be the foundation for strong growth in subsequent years. Given the strength of our existing land and lot pipeline, we remain patient and selective with future land opportunities without compromising the ability to grow our business in the near and intermediate term. At the end of the third quarter, our total lots owned and controlled increased by 11% year over year to approximately 41,200 lots, of which over 36,000 lots were owned on our balance sheet and approximately 4,500 were controlled lots. Trophy comprises approximately 70% of our total lots owned and controlled.

Excluding approximately 25,000 lots in long-term master plan communities, our lot supply is approximately five years. Finally, we are on schedule to open our first community in Houston. The construction of our first model home began in October, and we anticipate opening for sales in time for the spring selling season. We're excited about expanding Trophy's footprint in one of the largest homebuilding markets in the U.S. With that, I'll turn it over to Jim for closing remarks.

James Brickman: Thank you, Jed. In short, we remain optimistic about our long-term prospects and believe we are well-positioned to continue producing strong results. We believe our strategic land position, high-quality and diverse product offerings that appeal to multiple segments of the homebuyer market, and strong balance sheet will lay the path to future growth and industry-leading returns for our shareholders. I also want to thank the entire Green Brick team for their passion and dedication to delivering exceptional results in the face of a challenging market. This concludes our prepared remarks, and we will now open the line for questions.

Operator: Your first question comes from the line of Alex Rygiel with Texas Capital. You may go ahead.

Alex Rygiel: You, gentlemen. Nice quarter. Incentives were up in the third quarter for your new orders. Can you talk a little bit about directionally how we should think about gross margins in the fourth quarter versus the third quarter?

James Brickman: Yes. I we can all handle that. A little bit. Thanks for your question. This is James Brickman. We don't give guidance on gross margins quarter to quarter. But I think your question does give me a really good opportunity to talk about Green Brick's strategic advantages as we look at our business, not only next quarter, but many quarters going forward. And I think there are really two components to it. First, we have a very long runway of low-priced lots and infill and infill-adjacent locations. And no matter what's happening, we believe that our lot price advantage in these lots is going to give us industry-leading margins compared to peers. So that's the first point.

And it's really interesting what's happening from my second point is that because we self-develop 90% of our lots, we can deploy capital based upon market demand rather than a land banker's or a land developer's contract terms. And we think that will help us maintain margins in our communities where we're not faced with having to produce excess inventory.

Alex Rygiel: That's helpful. And then you mentioned that incentives moderated through the third quarter. Has that continued in October?

Jeffery Cox: Yes. This is Jeff, Alex. Those incentives moderating during the quarter were really primarily a function of the rates coming down over the last couple of months. You know, we're still utilizing rate buy-downs as an effective tool to drive traffic and get sales. We haven't really gotten a lot more aggressive in terms of the target rate that we've been advertising, which has really helped us able to reduce our incentives and improve margins at this point.

James Brickman: Jed can chime in, Alex. We haven't seen the market get a lot better or a lot worse. It's, you know, it's pretty much steady.

Alex Rygiel: Very helpful. Thank you.

Operator: Your next question comes from the line of Rohit Seth with B. Riley Securities. You may go ahead.

Rohit Seth: Hey, good morning. Thanks for taking my question. Just on the incentives, where are you today in terms of your mortgage rate buy-downs? What's your average rate you guys are offering?

Jeffery Cox: Right. Just under 5%.

Rohit Seth: Under five? Okay. Or buy-down targeted rate.

James Brickman: Okay. And it sounds like with the rates coming down a little bit, it just lessens the cost for you guys. You're not necessarily buying down rates further. Is that correct? From where you were, say,

Jeffery Cox: Okay.

James Brickman: And were these had a but, you know, buy down the four you know, 4%, we have been chased them down that low to generate the sales that we just reported.

Rohit Seth: Okay. And our incentives levels is there is there much difference between DFW and Atlanta?

Jeffery Cox: I'd say DFW, there's you know, the ability to produce more homes. Because it's not as

James Brickman: Yeah. There's a difference because our average price point, at Atlanta is 3 or $400,000 greater. So it's a very different buyer.

Jeffery Cox: Okay. I would just add on to that as well. You know, we do a lot of spec sales here, primarily with Trophy. So they don't have a big backlog of homes that they're necessarily trying to protect. Atlanta, they do a lot of to be built there. So I think we're seeing some higher incentives there generally speaking. Relative to our Texas market.

Rohit Seth: Understood. Okay. And then seems like Trophy, the expansion into Houston's will be a key driver for you. I guess from my seat, looking at the community count, I'm not sure how to size this. As we look to 2026. So if you get any help there.

James Brickman: Well, community count is tough for any analyst right now to look at with us because the new communities we're adding are high velocity, lower priced communities. So and that's many of the communities that we're adding this year. So you know, community growth isn't that great, but that the sales velocity that's coming on the new communities that we're adding should be favorable.

Jeffery Cox: Okay. Yeah. I would just say that we expect Austin to be to basically double from where it was this year and then Houston will really be you know, we'll get sub 100 closings next year, and that'll grow meaningfully the year after that in 2027.

Rohit Seth: Okay. Fantastic. And then, on the mortgage business, this pretty nice uptick sequentially. You're growing the business obviously I mean, do you think this level is sustainable as a go forward run rate for you guys? Where you're at today? Or

Jeffery Cox: Yeah. This is this is Jeff. Yeah. We've been really happy with the progress that the mortgage company has made so far. We're we're trying to take a measured approach in how we roll this out to our Texas builders and communities. But the goal, as Jed mentioned earlier, is to really have that rolled out to the balance of Texas by the end of this year. Targeting Houston and Atlanta. At least by the first part of next year. We've got people and systems in place to be able to really leverage and scale that business at this point. And so we're excited about where we think we can take this.

James Brickman: K. Yeah. I think the other thing we do from bonus financial perspective is that next year, we'll be breaking out financial services separately. And, by doing that, we'll be pulling SG&A or G&A out of our line. Putting it in financial services line that will slightly help our, SG&A.

Rohit Seth: Okay. And then I guess last one is maybe you could just comment on the cost buckets. Where are you seeing any direct cost savings and in your labor, your land costs,

Jeffery Cox: Yeah. This is Jed. I'll take that. We've we're definitely seeing land and lots either stabilized or slightly come down in price. Lumber continues to be at a year-long low every new month that occurs. So that has just fallen every single month this year. Labor is readily available. When we talk to our subs, a lot of them are running at 65 to 70% capacity. So they've been able to negotiate reductions with their staff. So yeah, everything on the vertical side is coming down.

Rohit Seth: Alright. Fantastic. And I guess to do that last one, just 4% ASP decline in the quarter. How much of that was just product mix, plant size, and trophy share versus maybe base pricing?

Jeffery Cox: Yes. Trophy share didn't really change. Year over year, but there was some mix that was impacting the average sales price. Of the 4.3% decline in ASP. I calculate roughly little less than half of that was related to just the mix of closings. Across our builders.

Rohit Seth: Okay. Okay. Alright. I think I'll pass it along. Thank you.

Operator: There are no further questions at this time. I would now like to turn the call back over to James Brickman for closing remarks.

James Brickman: Well, we're always available if anybody wants to visit with any of the speakers, Jeff, myself, or Jed. So send us an email, give us a call, and we'll be happy to do add more color to anything we talked about today.

Rohit Seth: Thank you.

Operator: This concludes today's conference call. You may disconnect.

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