Green Brick Partners, Inc.

Good afternoon and welcome to GreenBrick Partners earnings call for the second quarter ended June 30th, 2023. Following today's remarks, we will 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 also is available on the company 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 operations 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, August 3, 2023, and the company's has no obligation to update any forward-looking statements it may make. The comments also include a 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 and in the presentation available in the company website. With that, I turn the call over to Jim Brickman.

Thank you. I am pleased to report that GreenBrick delivered another outstanding quarter, highlighted by our 27.2% annualized return on book equity for the second quarter. The level of execution displayed by our teams and reflected in our key performance metrics has been extraordinary. During the second quarter, we delivered 783 homes, generating $454 million in home closing revenues. This is the second highest in company history. Most notably, our home building gross margin increased 370 basis points sequentially to 31.3%, the highest among public home builders as shown on slide 5. This is only 110 basis points lower than our record high home building gross margin of 32.4% achieved in Q3 2022. Net income during the second quarter was $75 million. Earnings per diluted share was $1.63, which was up 19% sequentially, and the second highest diluted EPS in company history. We believe our exceptional results are a result of our infill and infill adjacent locations, self-development land strategy, and focus on operational efficiency. Additionally, year-to-date, we've repurchased 803,000 shares of common stock for $27.7 million. representing 1.7% of our total shares outstanding as of December 31, 2022. Strong sales momentum carried into the second quarter as all of our brands experienced demand that was above normal seasonality. Net new homeowners in the second quarter increased 51% year-over-year to 822 homes, the highest of any second quarter in our company's history. Year-to-date, our growth in net new homeowners of 65% reflected the highest percentage increase among our public home-building peers, and this is shown on slide four. Our cancellation rate was down 400 basis points year-over-year to 7.4% and remained the lowest in the industry. There are multiple forces at work fueling the demand for new homes. First, after over a decade of underproduction in housing, our country faces a chronic shortage of approximately 4 million housing units. While at the same time, millennials and Gen Z are entering into stages of life that are propelling them to be a fast-growing segment of the home buying market as shown on slide six. Most significantly, our markets are among the best in the country with significant in-migration and a much younger population who are in their prime home buying years. The fact that existing homeowners are reluctant to sell their homes and forfeit their low interest rate loans has driven existing home inventory in May to a near all-time record low level as seen on slide seven. The current inventory of existing homes is the lowest for the month of May going back to 1999. Many home buyers surprisingly found themselves yet again in bidding wars for existing housing inventory. particularly in infill locations where we have a strong presence. These factors are pushing more buyers toward new home construction as an attractive alternative. The Wall Street Journal reported that new single-family homes as a share of all new homes for sale reached as high as 35% this year, up from single digits a decade ago and historic levels in the teens. We believe one of our strategic long-term advantages is is our entitlement and development expertise. And as a result, our significant land and lot holdings and infill and infill adjacent submarkets were competition from other builders and existing inventories limited. Approximately 80% of our total revenues year to date were generated from self-developed infill and infill adjacent locations. And approximately 75% of our lots finished and to be finished in DFW and Atlanta this year are expected to be in infill and infill adjacent desirable areas shown on slides 12 and 13. As a result of this demand, incentives in our communities peaked in December 2022 and have declined steadily through the first two quarters of 2023. Land acquisition plays a pivotal role and our overall success and is based upon a disciplined approach in site selection and underwriting. We believe our abundant cash reserves and liquidity will continue to open up a wide array of possibilities for us to capitalize on land and lot opportunities in this marketplace. Banks are typically requiring 50% or more equity from only their best customers to fund lot development, with the remaining 50% of capital as debt. which is at a cost of about 10%. Most private builders do not have the balance sheet to self-develop. Our accumulation of $210 million in cash has also allowed us to avoid the high cost of financing in today's much higher interest rate environment and act quickly if we find an attractive investment. At the end of the quarter, as shown on slide four, our debt-to-total capital ratio decreased to 22.9% of primarily long-term and all fixed-rate debt with an average cost of about 3.3%. Further, our net debt-to-total capital was at a historical low of only 10.6%. This gives us significant dry powder as we continue to identify strategic opportunities for growth or expansion that we believe will provide excellent return for GreenBrick and our shareholders. With that, I'll now turn this over to Rick to provide more detail regarding our financials.

Thank you, Jim. Please turn to slide eight of the presentation. Home deliveries in the second quarter declined 11% year-over-year to 783 units, reflecting the fact that we were lapping an all-time high level of deliveries in Q2 of 2022 and the lower levels of starts during the second half of 2022. The ASP of homes delivered remained constant year over year at $580,000. This brought home closings revenue to 454 million for the second quarter, the second highest in company history. Year to date, our home closings revenue grew 3.4% to $904 million. SG&A, as a percentage of residential units revenue, was 10.8% in Q2, up from 8.2% year over year, primarily due to an increase in brokerage commissions. Diluted earnings per share for the second quarter was $1.63 per share, up 19% from the first quarter and the second highest in company history. Our cancellation rate for the second quarter remained near a record low level, improving 400 basis points year over year, to 7.4%. As shown on slide 10, our second quarter cancellation rate was the lowest among the public home builders. As Jim mentioned earlier, sales momentum was above normal seasonality throughout the spring selling season. During the second quarter, net new home orders increased 51% year over year to 822 homes, our highest order level for any second quarter in company history. As shown on slide four, year to date, we continue to lead our public home building peers in year-over-year net orders with a 65% growth rate. Revenues from new home orders in the second quarter was up 38% year-over-year to $489 million. Changes in product mix and slightly higher incentives this year as compared to the prior year period have resulted in an 8% decline in ASP of new orders to $596,000 from a year ago. Active selling communities at the end of Q2 were up 10% year over year to 86. Our quarterly absorption rate per average active selling community was up 39% year over year to 9.9 homes, the third highest in company history. Year to date, net orders are now up 65% year over year on the heels of two of our three best quarters for absorption rate in our history this year. Sequentially, our absorption rate declined from an unsustainable 13.3 units in the first quarter to 9.9 homes in the second quarter. This was attributable to a smaller inventory pipeline as a result of one, a record high sales pace in Q1 of 23, driven by our selling our finished and finishing spec inventory And two, lower levels of starts during the second half of 2022 that impacted the number of units under construction and therefore available to sell in the second quarter of 2023. Our home building gross margin on homes delivered was 31.3% during the second quarter, the highest in the home building industry as shown on slide five. This is 370 basis points higher than Q1 of 23. with all our brands having experienced higher gross margins in Q2. Jed will provide further details shortly on what drove our higher margins. The value of our backlog at the end of the second quarter decreased 17% year-over-year to $586 million due to smaller backlog entering the quarter, while ASP increased 1.7% to $664,000. However, ending backlog represented a significant increase of 59% from the beginning of the year. Sequentially, backlog dollars increased 6.4%. Spec units under construction as a percentage of total units under construction was unchanged from the previous quarter at 59% at the end of the second quarter, which is down from 73.4% at 12-31-22. On the backdrop of strong demand and sales momentum, we increased our starts in the second quarter by 25% sequentially to 833 units. With 783 delivered homes in Q2, units under construction increased modestly during the second quarter from 1,759 to 1,809 units. Lastly, our balance sheet is stronger than ever. As of June 30, 2023, our outstanding debt is 100% fixed rate and 96% long-term. As Jim mentioned, we have $210 million of cash on hand at the end of the second quarter, allowing us to avoid high short-term borrowing costs. Debt-to-total capital ratio decreased 600 basis points from last year and 90 basis points sequentially to 22.9%. Our net debt-to-total capital ratio was at a historic low of 10.6%, down 1,450 basis points from last year, and down 270 basis points from last quarter. With that, I'll now turn it over to Jed. Jed?