Green Brick Partners, Inc.

And welcome to Greenbrick Partners earnings call for the first quarter ended March 31st, 2023. Following today's remarks, we'll hold a Q&A session. As a reminder, this call is being recorded and will be available for playback. In addition, a presentation will accompany today's webcast and is also available on the company's website at investors.greenbrickpartners.com. Joining us on the call today is Jim Brickman, co-founder and chief executive officer of Rick Costello, Chief Financial Officer, and Jed Dolson, Chief Operating Officer. Some of the information discussed on this call is forward-looking, including the company's financial and operational expectations for 2023 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, May 4, 2023, and the company has no obligation to update any forward-looking statement it may make. The comments also include non-GAAP financial metrics. The reconciliation of these metrics and other information required by Regulation G can be found in the earnings release that the company issued yesterday and in the presentation available on the company's website. With that, I'll turn the call over to Jim Rickman.

Thank you. I'm extremely pleased to report that GreenBrick started 2023 with the best first quarter results in our history. During the first quarter of 2023, we delivered 761 homes, which was a record number for any first quarter and led to a 24% year-over-year growth in home closing revenues of $449 million. This revenue level was also a record for any first quarter. As opposed to margin degradation seen among many of the public homebuilders, GreenBrick was able to sustain a homebuilding gross margin of 27.6%, one of the highest among homebuilders, and up 140 basis points sequentially from Q4 2022. Net income during the first quarter was $64 million, and earnings per diluted share grew 14% year-over-year to $1.37. Again, both income measures were records for any first quarter. Our strong land and lot position and operational execution yielded an annualized return on equity of 24.4%. Additionally, we returned $15.4 million back to shareholders during the quarter through our stock buyback repurchase program. Sales momentum was exceptionally strong during the first quarter. Net orders accelerated across all builders' brands and at 1,067 homes were up 78% year-over-year and 152% sequentially, the second highest number of net orders of any quarter in our company history. Furthermore, our cancellation rate improved significantly, dropping 14% each points from Q4 2022 to 6.2% in the first quarter, the lowest in the industry. JED will provide more color on sales activity shortly. While we are encouraged by the strength in sales pace, the volatility in interest rates remains the biggest moving target in the homebuilding industry. However, we believe GreenBrick possesses multiple strategic advantages that position us for industry-leading performance, as summarized on slide four of the presentation. Our first advantage is a significant footprint in markets with some of the biggest job growth and best demographics in the nation. DFW, our biggest market, has been leading the way in job creation by creating 212,000 new jobs during the last 12 months. A booming job market, lower cost of living, no state income taxes, and a warmer climate make DFW an appealing destination for young professionals resulting in a younger demographic or in their prime home buying years as compared to the U.S. average. We believe these favorable trends will continue to drive more housing demand over a long time horizon. Our second advantage is our superior land and lot pipeline and the disciplined approach we have undertaken at underwriting and acquiring our land deals. Approximately 80% of our total revenues were generated from infill locations in Q1. As we have previously disclosed, at the end of 2023, approximately 75% of our finish slots in DFW and Atlanta are expected to be in infill and adjacent desirable areas, as seen in slides 11 and slides 12. Our infill submarkets are typically supply constrained with less competition and require greater expertise and local knowledge to develop, creating a barrier of entry. Our third advantage is the high level of control over our finished lot cost and lot delivery schedules because of our emphasis on self-development in our land business. This also has allowed us to maintain exceptional home building gross margin that have been consistently among the highest of our peers, as shown on slide five. We also enjoy great flexibility in terms of our ability to control lot delivery cadence as market conditions change. enabling us to start the construction of more homes without an outlay of cash to purchase finished lots. If sales momentum continues to be strong throughout the spring selling season, we believe we will have the ability to quickly ramp up home construction and future phases of land development. Our fourth advantage is the diversity of our product lines. We are one of the few public home builders that offer a range of various price points, lot sizes, and product types that serve a wide range of customer segments and needs. This is possible through a subsidiary and affiliate builder brands, each of whom has its own strategic and market niche advantages. Our fifth advantage is our people and culture, which are essential for our growth and success story. Our experienced teams bring a wealth of knowledge, skills, and expertise that drive innovation, efficiency, and operational excellence. Real estate is a local business. All of our builders have deep roots in the communities they serve and decades-long relationships with local landowners and political, subcontractor, and realtor networks. We take pride in the history and the culture of our brands. While each of our home builders is locally branded and managed, all of them are united by our common center values we call HOME, which stands for honesty, objectivity, maturity, and efficiency. Our supportive and collaborative work culture continues to help us retain and attract top talent in the industry. Finally, we possess a strong balance sheet with one of the lowest debt-to-total capital ratios among our peers at 23.8% at the end of the first quarter, as shown on slide four. And at the end of Q1, our net debt to total capital ratio was only 13.3%. Our strong balance sheet, low-cost fixed-rate debt structure, and our ability to react quickly will provide us extraordinary flexibility to take advantage of market opportunities. We remain positive about the long-term housing supply and demand fundamentals. We have an approximately 4 billion housing unit deficit in the country. As shown on slide six, an estimated three million of additional millennials and Gen Zs will age into the optimal home buyer age over the next decade. Our largest market of DFW in Atlanta will likely get a greater share of these population segments compared to other cities as both markets boost a lower overall average age than the national average and are desirable to lower cost of living and very healthy job markets. We believe we are well positioned to capture that pent up demand. In the meantime, housing supply remains lower than demand, especially in the infill locations where GreenBrick has a competitive advantage. High interest rates have kept existing homeowners on the sidelines as many are unwilling to give up their low rate mortgages. This has led to a tight resale market as shown on slide seven. Existing home sales which make up Most of the housing market fell 2.4% in March from the prior month and 22% from a year earlier. New homes had gained a larger portion of the home buyer pie from buyers with limited options to purchase an existing home. In March, about one-third of single-family homes for sale were new homes versus existing homes, up from the historical norm, which has run north of 10% new homes. We expect the lack of competition from existing homes to continue as approximately 70% of all mortgages bear an interest cost of less than 4%, making the cost of a new mortgage to this segment comparatively unappealing. We believe all of the strategic advantages discussed above will give us an edge to continue to grab market share from the resale market. With that, I'll turn it over to Rick. to provide more detail regarding financial results.

Rick? Thank you, Jim. Please turn to slide eight of the presentation. Home deliveries in the first quarter grew 16% year over year to a Q1 record of 761 units, with ASP growing 7% year over year to $591,000. Home closings revenue broke our record for any first quarter and climbed 24% year-over-year to $449 million. SG&A as a percentage of residential unit revenue was 10.2% up from 9.4% year-over-year due to an increase in brokerage commissions. Net income attributable to Greenberg and diluted earnings per share were up 4% and 14% year-over-year, growing to $64 million and $1.37 per share, respectively. Again, both were records for any first quarter. Our cancellation rate improved 180 basis points year-over-year to 6.2%, which was a significant improvement from 20% last quarter. As shown on slide 9, our Q1 cancellation rate was the lowest among the public homebuilders, as we are the sole builder with a single-digit cancellation rate in Q1. As Jim mentioned earlier, demand for our homes has remained remarkably strong since November. Net new home orders in the first quarter rose 78% year-over-year to 1,067. As shown on slide four, we are one of the two public home builders that reported a positive year-over-year change in net orders. In fact, as seen on slide four, the other public home builders had an average decline of 21% in year-over-year net orders. Sequentially, net new orders were up 152% over Q4 2022. Revenue from net new homeowners was up 75% over Q1 2022 to a record $631 million. Active selling communities at the end of Q1 were up 4% year over year to 79. Our quarterly absorption rate per average active selling community increased to a record level for any quarter of 13.3 homes, up 143% from 5.5 homes last quarter, and up 66% from 8.0 homes last year. Our home building gross margin on homes delivered was 27.6% during the first quarter, one of the highest in the industry as shown on slide five. This is only 20 basis points lower than the same period last year when demand was still near peak levels. Sequentially, home building gross margin for deliveries increased by 140 basis points. In fact, our gross margin on new orders increased each month during the quarter, and for March, we're up 440 basis points from the December 2022 lows. Looking ahead, based on our experience of lower construction costs on new starts, and with demand outpacing supply in our submarkets, we believe that the gross margin bottom is behind us. as we expect gross margins to be slightly higher in the near term. Due to our exceptional sales pace and our significantly lower cancellation rate, backlog value at the end of the quarter increased 49% sequentially to $551 million. This was driven by a 57% increase in backlog units. Spec units under construction as a percentage of total units under construction decreased from 73% at the end of last quarter to a more desirable level of 59% at the end of Q1. A notable trend we are seeing is that not only did we see strong demand in move-in ready homes, but we also experienced an uptick in demand for both build jobs and homes in the early construction stages. While we are excited about our sales performance and our delivery pace, we would like to remind everyone that our recent cadence of closings could be bumpier for the rest of the year. As shown on slide nine, for each of the past five quarters, our trailing 12 months closings averaged approximately 3,000 units, ranging from 2,900 to 3,100 units. Even though we ramped up our starts in the first quarter of 2023 to 667 homes, a more than double sequentially from 304 starts in Q4 of 2022. Our starts over the trailing 12 months are now down 29% year-over-year. This decline is due to a drop in year-over-year starts over the past three quarters. As a result, our units under construction have declined to 1,759 homes as of March 31, 2023, a drop of 30% from 2,516 homes a year earlier. But with the decreased demand, we have increased our significantly at the end of Q1 and now into Q2. Moving to our balance sheet during the first quarter, we paid off the remaining balances of our revolving credit lines, leaving us with 100% fixed rate debt at a weighted average interest rate of 3.3%. Therefore, our debt to total capital ratio was further reduced by 500 basis points from last year, to 23.8%, and our net debt to total capital ratio was 13.3%, down 1,170 basis points from last year due to accumulation of cash from closings and fewer home starts. We remain committed to maintaining the strength of our balance sheet while evaluating opportunities to deploy our accumulated cash plus access or lines of credit when appropriate. With that, I'll now turn it over to Jed.