Green Brick Partners, Inc 2026 Q3 Earnings Call

Jeff, please go ahead. Good afternoon and welcome to Green Brick Partners earnings call for the third quarter ended September 30, 2026.

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 are Jim Brickman, Co-founder and Co-Chief Executive Officer, Jed Dolson, Co-Chief Executive Officer, and myself, Jeff 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 2026 and beyond. In yesterday's press release, the company detailed material risks that may cause future results to differ from its expectations.

The company's statements are as of today, October 29, 2026, and the company has no obligation to update any forward-looking statement it may make. Our comments today also include non-GAAP financial metrics. Reconciliations of these metrics and the other information required by Regulation G can be found in yesterday's earnings release and in the accompanying presentation. With that, I will turn the call over to Jim.

Thank you, Jeff. Before discussing the quarter, I want to recognize Jed Dolson's promotion to Co-Chief Executive Officer. As we previously announced, Jed assumed his new role on October 15. Jed has been an integral part of Green Brick since before we became a public company. His leadership, commitment to our core values, and focus on long-term value creation have contributed meaningfully to our growth and success. I am excited to work alongside him in his expanded role as we continue to execute our strategy, build on our foundation, and develop the next generation of Green Brick leadership. Turning to the quarter, I am pleased with the results our team achieved in a difficult housing market marked by high mortgage interest rates and economic uncertainty, causing many potential homebuyers to reevaluate the timing of their purchase decisions.

Despite these affordability pressures, we delivered 978 homes, an increase of 2.6% from a year ago, generating home closing revenue of $437 million, with a homebuilding gross margin of 28%. We generated net income of $59 million or $1.35 per diluted share. Net new home orders increased 3.1% compared to the third quarter of 2025 to 926. Orders increased each month of the quarter, even as mortgage rates steadily rose during the quarter. These results demonstrate the resilience of Green Brick's differentiated operating model. Even as many first-time buyers continued to require significant incentives to purchase a home, we increased orders and deliveries while maintaining the highest homebuilding gross margin among our public homebuilding peers. This quarter highlights three important advantages of our business: the strength of our margins and balance sheet, our owned and self-developed land strategy, and the strength of our primary growth engine, Trophy Signature Homes.

We recognize that the current housing market conditions are challenging. At the same time, we also believe that cyclical downturns create opportunities. Specifically for Green Brick, we believe these potential opportunities include capturing market share and laying the foundation for sustained growth when the housing market inevitably improves. Our strong balance sheet and low leverage provide us with the financial flexibility to navigate current market conditions and invest selectively in attractive opportunities. Our homebuilding debt to total capital declined to 13.1% from 15.3% year over year, and our net homebuilding debt to total capital was relatively unchanged at 9.6%. Book value per share increased 14% year over year to $46.10. We continue to view growth in book value per share as an important indicator of the value we are creating for shareholders over time, complemented by opportunistically repurchasing shares.

Our strong margins and significant land pipeline allow us to remain patient and disciplined in deploying capital. The foundation of our performance begins with our owned and self-developed land strategy, which remains the primary driver of our industry-leading margins. At September 30th, we owned 40,869 lots and controlled another 10,566 lots under contract, giving us a total pipeline of 51,435 lots. We believe owning land gives us greater control over lot cost, the timing of development, and the pace at which we bring homes to market. Approximately 38,000 of our total lots are part of our large master plan communities that will be developed in multiple phases over 5 to 10 years or longer.

By securing these parcels well in advance of home delivery, we believe we have locked in our lot acquisition basis and minimized exposure to cost inflation and escalating fees that many builders incur when purchasing finished lots from third-party developers. One of the primary differentiators from many of our peers is that we do not rely on land banking arrangements with high interest costs that can distort a builder's economic leverage and risk, and that can give a land banker indirect control over a builder's lot purchase timing. We believe this approach is particularly valuable in the current environment. Trophy Signature Homes is a key driver of Green Brick's long-term growth strategy. By combining attainable home prices with our land development capabilities and efficient construction platform, Trophy expands our ability to serve the large pool of first-time and first-move-up buyers.

We believe that Trophy's scale as the third-largest builder in DFW and its continued expansion in Austin and Houston provide a clear path to grow deliveries, broaden our revenue base, and strengthen our presence in our key Texas markets over the next few years. Our focus remains on translating that growth into attractive returns that deliver long-term shareholder value. Green Brick Mortgage continues to grow rapidly, driving third quarter financial services revenue to $11.2 million, an increase of 52%, while pre-tax income increased 69% to $5.6 million. For the first nine months, financial services pre-tax income increased 92% to $15.6 million. Our mortgage, title, and insurance operation helps us support buyers in a market in which monthly payments remain critical to the purchase decision. Our goal is to consistently deliver attractive risk-adjusted returns to our shareholders.

Over the past 12 months, we returned $57 million to shareholders through stock repurchases while continuing to invest significantly in land acquisition and development to position us for future growth. Even with our land-heavy balance sheet and macroeconomic headwinds, for the 12 months ended September 30th, our return on assets was 10.6% and our return on equity was 14.5%, which remains among the very best of our public peers. For the most recently available trailing 12-month period of our public home building peers, the median return on assets was 3.9%, and the median return on equity was 6.2%. Our disciplined, returns-focused approach and our experienced team of operators position us well to create long-term shareholder value. With that, I now turn it over to Jed to discuss current buyer trends and operating results.

Thank you, Jim. I appreciate the confidence of our board and Jim as I begin serving as Co-CEO. Having helped build Green Brick alongside this team for many years and through different home building market cycles, I am excited about our future and remain committed to the disciplined operating and capital allocation principles that have driven our success. As Jim discussed, affordability remained the defining factor in buyer behavior during the third quarter. Buyers remain highly sensitive to monthly payment amounts and rate buydowns. Closing cost assistance and targeted price continue to be the critical tools, particularly for first-time home buyers. Trophy's ability to meet these buyers' needs showed in our results. For the first time, Trophy generated 60% of both total company orders and deliveries in the quarter, a testament to Trophy's operating model and leadership team.

Net new orders increased 3.1% year-over-year to 926, supported by a 5.8% increase in average active selling communities to 109. Monthly sales pace was 2.8 per community, compared with 2.9 a year ago. Our industry-leading gross margins provide flexibility to use pricing and incentives to capture demand while balancing community-level returns. Our cancellation rate was 8.2%, compared with 6.7% last year, and remained relatively low compared to our peers. Green Brick Mortgage continues to work closely with our sales teams to help buyers qualify by identifying financing solutions earlier in the sales process. Green Brick Mortgage funded 499 loans during the quarter, an increase of 42% year-over-year. Total origination principal was approximately $185 million, a 36% increase year-over-year. The average FICO score was 734, and the average debt-to-income ratio was 41.1%.

Our mortgage capture rate was 66% for the quarter, despite facing the headwind of rolling out to new communities, where adoption can often take time to ramp up. We remain focused on increasing our mortgage capture rate in Texas communities. Our mortgage team is also implementing technology initiatives and aiming to broaden the products it offers to improve efficiency, enhance customer service, and support growth and capture. Based on current market conditions, we continue fine-tuning our mortgage operations within our Texas markets before expanding to Atlanta to support The Providence Group, which may occur in 2027. While capture rates declined slightly, reflecting the continued expansion of the captive mortgage business into new communities, many of which have preexisting outside lender relationships. We expect our long-term capture rate to be approximately 70%, supporting additional loan volume and revenue.