Green Brick Partners, Inc.

Good afternoon, everyone, and welcome to GreenBrick Partners earnings call for the second quarter ended June 30th, 2021. Following today's remarks, we will hold a question and answer session. And as a reminder, this call is being recorded and will be available for playback. A slideshow supporting today's presentation will accompany today's webcast, and it is available on GreenBrick Partners website, www.greenbrickpartners.com, for listeners joining us by teleconference. Go to investors and governance, then click on the option that says reporting. and then scroll down the page until you see the second quarter investor call presentation. The company reminds you that during this conference call, it will make various forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including its financial and operational expectations for 2021, and the future and anticipated impact of COVID-19 on our future operations, prospects, and other aspects of our business. Investors are cautioned that such forward-looking statements are based on current expectations and are subject to risk and uncertainties and could cause actual results or outcomes to differ materially from those set forth in our forward-looking statements. These risks are set forth in our second quarter earnings press release, which was released on Tuesday, August 3rd, 2021, and the risk factors described in the company's most recent annual and quarterly filings with the Securities and Exchange Commission. Green Brick Partners undertakes no duty to update any forward-looking statements that are made during this call. In addition, our comments will include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by the Regulation G regarding these metrics can be found in the earnings released that GreenBrick issued yesterday in the presentation available on the company's website. I would now like to turn the conference call over to GreenBrick's CEO, Jim Brickman. Please go ahead, sir.

Thank you. Hi, everyone. With me is Rick Costello, our CFO, and Jed Dolson, our COO. Thank you for joining the call. As the operator mentioned, if you're joining us by phone today, the presentation and the companies this earnings call can be found on our webpage at greenbrickpartners.com. At the top of our webpage, click on Investors and Governance, then click on the option that says Reporting, and scroll down the page until you see the second quarter investor call presentation. I'll give everybody a few seconds to do this. With our all-time record results achieved this quarter, Greenbrick's annualized Q2 2021 return on equity hit a new high of 30.2%. Thanks to a great team effort, we provided our investors some of the best returns in the industry. Even better, we expect these returns to accelerate. Our total revenues were $1.1 billion on a trailing 12-month basis. From Q1 to Q2, we increased home building revenues by 54%, and our EPS doubled. We continue to be confident that our revenues and earnings will continue to grow sequentially each quarter this year. Our core focus on land development and our dominant presence and reputation in our markets has resulted in a 133% increase in our lots owned and controlled from a prior year. Our superior capacity to source new land has allowed us to grow our units under construction an astounding 95% as compared to June 30, 2020, and provides a ready supply of new housing to meet demand. Our gross margin reached 26.8% this quarter. This is up 360 basis points from the prior year and up 140 basis points from the first quarter as GreenBrick has achieved pricing power in the core markets of Dallas, Fort Worth, and Atlanta. In order to capitalize on rising prices and demand, we have paced sales by limiting our available homes for sale to generally those with at least the slab foundation board. We have also achieved price increases in excess of rising input costs. We believe this focus on price over pace will sustain our industry leading margins and strong financial performance through the remainder of 2021. In addition to our prepared remarks on the call, we will plan to provide more detailed insights into our growth strategy, capital planning, and operational initiatives driving the record results this quarter. This event will also provide a unique opportunity to field questions to our division presidents and purchasing teams. The Investor Day webcast will stream from 9 a.m. to 12 p.m. Central Daylight Time, and we encourage all of our attendees on today's call to register for this event through the investor day 2021 option under the investors and governance section in our webpage. Please flip to slide four of our presentation. We are a diversified builder with eight brands and four major markets with a wide array of product types and price ranges. We believe the stratification of products will continue to appeal to a broad base of home buyers and expect that our entry-level segment will continue to rapidly expand through the growth of our trophy signature and CB Jenny brands. As we have discussed in previous calls, Greenbrick operates under a much simpler ownership structure than seen in prior years, as approximately 70% of our top-line revenues are now generated by wholly-owned builders, and another 10% of our total revenues are generated by subsidiaries with a 10 to 20% minority interest. The markets where GreenBrick operates benefit from significant economic and demographic trends, which we will explore in detail in the next two slides. Slide five quantifies the strong population growth over the past decade seen in Texas, Colorado, Florida, and Georgia per the 2020 census data. Out of the 25 largest states in the United States, these four states showed some of the highest percentage increases from their populations versus 10 years ago. Texas led the nation with its resident population expanding just under 4 million people this decade. Colorado, Florida, and Georgia all show double-digit growth over the same period, while the population for the U.S. grew only 7.3%. We believe this positive population growth is evidence that our concentration in the Sun Belt and Sun Belt adjacent states is a winning strategy. We expect that in-migration to these states from California and the northeastern United States and the strong demographic profiles of the Sun Belt will continue to generate positive population growth for many more years and will preserve robust housing demand in our future years. On slide six, we highlight the economic strength of our core markets and present the decline in active home listings seen in June 2021 from the prior year. Like every other economy in the country, the COVID-19 pandemic created a major disruption in commercial activity and led to a significant rise in unemployment early last year. However, as shown on the right side of the graph on this page, Atlanta and Dallas-Fort Worth have remained remarkably resilient, with Atlanta and Dallas-Fort Worth achieving the lowest and third lowest unemployment rates in May 2021. It is evident that our core markets continue to sustain a strong job market and labor force. We believe these economic strengths will continue to support the strong demographic trends in our markets and reinforce housing demand for years to come. Looking at the left side of the graph, you can see that Dallas, Fort Worth, and Atlanta had the largest 12-month decline in active listings as of June 30, 2021, of the 10 largest MSAs, with listings down 59% and 53%, respectively. This remarkable drop in listings is evidence of the booming housing demand in our markets and is an indicator of the pricing power Greenbrick has in 2021 the cap laced on inventory shortages of existing homes. We expect this imbalance between housing demand and supply in our markets to persist through 2022, providing GreenBrick with continued pricing power to offset or even more than offset rising costs. With 87% of our ending active communities in DFW and Atlanta, we believe that GreenBrick is well positioned to succeed in 2021 and beyond. Additionally, we believe that the strong bounce back from the high unemployment seen in April 2020 and the rapid uptick in demand is further proof that our focus on business-friendly, pro-growth markets is the correct and best choice that will continue to differentiate us from peers. Jed Dolson, our Chief Operating Officer and Executive Vice President, will now speak in greater detail to our growth drivers and land position. Jed.

Thanks, Jim. On slide seven, we demonstrate how our investment in land has translated to an increased capacity to generate top line growth. As you can see from the chart on this slide, a key driver behind our strong financial and operational results has been our ability to convert investments in land to future growth in revenue. During the first half of 2021, our lots owned and controlled increased by 6,883 to end at 21,351 total lots, a new all-time high for the company. This is a 48% increase from the start of the year. After including land under option and lots optioned through joint ventures, we expect nearly 88% of our current inventory of lots owned and controlled to be self-developed by the company. We believe this strong emphasis on land development should allow Greenbrick's margins and returns to continue to represent one of the best growth opportunity profiles among our peers as these self-developed lots avoid expensive premiums charged by third-party land developers. For those of you who are interested, slide 8 provides additional detail on the attractive submarkets in Dallas-Fort Worth and Atlanta where our lot supply is located. Now follow me to slide nine and you will see that our communities and lots under development hit new highs this quarter. With 42 communities under development, our land pipeline is well established to meet our continued growth trajectory in the next several years. These lots under development will shift towards the entry level market with over one third of the lots under development located in more affordable sub markets. In the next six months, we expect to complete and release roughly 1,800 lots to our subsidiary home builders for new housing starts. During fiscal year 2022, we expect to accelerate our delivery of finished lots by finishing 4,600 lots during the year. With both our long-term and short-term landings met, we are confident Greenberg should be able to continue growing through fiscal year 2023. Slide 10 highlights our ending units under construction. Our units under construction are up 40% over the past six months and 95% over the past 12 months. While we have seen growth at virtually all our brands and price points, our unit growth was primarily driven by starts in our Trophy brand, which increased its ending units under construction by 315% during the 12 months ended June 30, 2021. As we go forward, we expect the continued expansion of the Trophy Brand to establish larger communities with higher absorption rates and unit density. Additionally, our pivot to these larger communities focused on entry-level buyers has not been at the cost of increased risk. For Q2 2021, Home Closing saw an average FICO score of 750, with 85% of our fundings exceeding a FICO score of 700 per data from Greenbrick's Mortgage Ventures. The creditworthiness of our average buyer profile is a fundamental strength of many of the A markets where we operate, which we believe we will continue to mitigate risk for our business. In summary, we feel we have a very strong land position in some of the best markets in America with strong demand from low-risk buyers, all while maintaining a conservative debt-to-capital ratio and achieving industry-leading margins. Next, Rick Costello, our CFO, will discuss our second quarter and annual results in more detail.