Green Brick Partners, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Green Brick Partners, Inc. first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, press star one. I will now hand today's call over to Rick Costello, CFO. Please go ahead, sir.

Welcome to GreenBrick Partners earnings call for the first quarter ended March 31, 2024. 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 is also available on the company's website at investors.greenbrickpartners.com. On the call today is Jim Berkman, co-founder and chief executive officer. Jed Dolson, President and Chief Operating Officer, and myself, Rick Costello, Chief Financial Officer. Some of the information discussed on this call is forward-looking, including the company's financial and operational expectations for 2024 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 2, 2024, 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 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. Jim?

Thank you, Rick. I'm pleased to share that Green Break kicked off 2024 with excellent first quarter results highlighted by diluted earnings per share of $1.82. That was a record for any first quarter in company history. We also achieved a record home building gross margin of 33.4%, which again was the highest in the home building industry as shown on slide four. The solid performance was driven by our superior locations and high growth markets, strong demand for our new homes, our investment grade balance sheet, and most importantly, excellent execution by our hardworking teams. Our book value grew 27% from a year ago to $29.67 per share at the end of the first quarter of 2024. As we again generated an attractive return on equity, of 25.5% for the quarter on an annualized basis. Our accomplishments were achieved with a balance sheet that is stronger than ever. Due to strong cash flow, equity growth in the earnings, net of stock buybacks during the last 12 months, and $38 million of debt paid out, our debt to total capital ratio decreased 550 basis points to 18.3% at the end of the quarter, while our net debt to total capital ratio dropped to 8.2%. This is even more impressive considering that we carry over 86% of our owned and controlled lots on our balance sheet. Unlike most peers, we do not rely on land banking to acquire or develop lots. We believe this strategy puts us in a stronger position due to our lower cost of capital and a greater ability to minimize potential cost escalation between phases. Because we self-develop most of our lots, we avoid paying retail lot prices on contracts that typically have 6% annual price escalators and have better control of the development costs and timing for our finished lots. We believe this approach can mitigate some of the lot inflation pressure that our peers are facing. Our industry leading gross margins have been earned in part from our self-development strategy, disciplined land underwriting, and the diligence, expertise, and hard work of our land acquisition teams. Our unique land strategy has led to a top quality land pipeline that has fueled our growth. Not only do we operate some of the best markets in the country, but we also primarily target infill and infill adjacent sub markets where supply and competition are more limited. Sourcing and acquiring high quality of land in these desirable locations requires unique skill set and extensive local knowledge. We take pride in our long standing reputation for quality communities and close-knit relationships with local landowners and sellers. This is exemplified by our recent joint venture with the Hirsch Family Investments and a new community with approximately 2,000 lots in the booming subgroup of Salina, Texas. With our diversified home building brands, unlike many peers, we can offer a variety of products in the community to cater to different home buyer needs and price points. With a limited supply in infill and infill adjacent communities, we experienced solid demand across our markets and brands as we entered the spring selling season. Despite higher interest rates, we sold 1,071 net new homes Q1 2024. This is the second highest in company history, just shy of the COVID-fueled 1,082 orders in the first quarter of 2021, and with a record low cancellation rate. As shown on slide five, continued high interest rates have kept existing home inventory near historical lows headed into 2024. Additionally, close to 80% of outstanding mortgages are locked in at rates less than 5%, as shown on slide six. The golden handcuff effect has proven to be more pronounced in infill and infill adjacent submarkets where we have a strong presence and have historically generated over 80% of our revenues, including in Q1 2024. Even as higher mortgage rates persist, potentially tempering demand, we remain bullish and believe that democratic shifts in our strong high growth markets, together with the systemic housing shortage, will continue to sustain a healthy housing market in the cities where we operate. Additionally, as shown on slide seven, with a growing population of millennials aging into prime home buying age, the urgency and necessity to buy a home should continue to grow even if mortgage rates remain elevated. Many home buyers who are waiting on the sidelines need a more permanent housing solution as they hit their next life milestone, whether that's getting married, having children, or changing jobs. To conclude, we believe we are well-positioned to capture pent-up demand and grow market share with our strategic advantages shown on slide 8, which are, one, our footprints in infill and infill adjacent submarkets within high-growth metropolitan areas. Two, superior lot of land positions. Three, a unique and efficient operational structure. Four, a strong balance sheet. remain laser focused on executing our long-term goals for disciplined growth and creating shareholder value with that i'll now turn it over to rick to provide more detail regarding our financial results thank you jim please turn to slide nine of the presentation during the first quarter we delivered 821 homes an increase of eight percent year over year