Green Brick Partners 2026 Q2 Earnings Call

Good afternoon, welcome to Green Brick Partners' earnings call for the second quarter ended June 30th, 2026. 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. 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 is Jim Brickman, Co-founder and Chief Executive Officer, Jed Dolson, President and Chief Operating 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 its future results to differ from its expectations.

The company statements are as of today, July 30th, 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. 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 aforementioned presentation. With that, I will turn the call over to Jim.

Thank you, Jeff. Before I talk about second quarter results, I wanted to speak to the press release that was issued this morning announcing the promotion of Jed Dolson to Co-CEO to take place this October. One of the most important responsibilities of a Co-founder and CEO is attracting, developing, and retaining outstanding leaders. One of the greatest joys I have is recognizing talented people and sharing the credit for Green Brick's success. At Green Brick, we use the acronym HOME to describe the values we expect from all employees: honest, objective, mature, and efficient. Our current President, Jed Dolson, has been with us since before we became a public company and has been a primary driver of our success. Jed has consistently demonstrated the leadership, judgment, and values that have helped shape Green Brick into the company it is today.

It is my profound pleasure to announce that effective October 15th, Jed will join me as Co-CEO. Jed, thank you for your partnership, leadership, and commitment to Green Brick. Congratulations on this well-deserved promotion. I am confident that Jed will help drive Green Brick's continued growth and will contribute to even greater success in the years ahead. Turning to the second quarter, I am very pleased with the strong second quarter results achieved by the Green Brick team, even as affordability pressures and economic uncertainty continue to weigh on buyers. Interest rates remained elevated in the second quarter, with concerns about employment growth and the cost of living dampening consumer confidence. Despite these challenges, we achieved a 19% increase in net new orders year-over-year.

Our average selling community count grew 6% year-over-year to 108. Our monthly sales pace increased 10% year-over-year to 3.3. The growth in orders was driven primarily by Trophy Signature Homes as we continued to see strong demand for affordable homes targeting the first-time buyer, particularly in the DFW market, where Trophy is now the third-largest builder by volume. Sales for each month for the quarter were higher than in the same month in 2025. With this sales velocity, we were still able to attain homebuilding gross margins of 29.8%, the highest reported among our homebuilding peers. Net income attributed to Green Brick for the second quarter was $74 million, or $1.70 per diluted share on total revenues of $494 million. We delivered 1,047 homes during the quarter, including our first deliveries in a Riviera Pines community in Houston.

We believe our investment-grade balance sheet and low financial leverage provide us with the flexibility to navigate and take advantage of evolving market conditions and seize on opportunities when prudent. At the end of Q2, our homebuilding debt to total capital ratio was 11.2%. Our net homebuilding debt to total capital ratio was 6.1%, among the lowest of our homebuilding peers. We grew book value 16% year-over-year to $44.82. We remain highly disciplined in how we control and purchase land, which remains the primary driver of our industry-leading margins. One of the primary differentiators from many of our peers is that we do not engage in high-interest cost land banking relationships that can distort a builder's economic leverage and risk. That can give a land banker indirect control over a builder's lot purchase timing.

At the end of the second quarter, 76% of our approximately 52,000 lots are owned. We currently have 3,300 lots owned or under contract in four joint ventures with other home builders or landowners. These joint ventures account for 6% of our total lots owned and under contract. Only 3% of our total assets. These joint venture arrangements are evaluated with the same underwriting criteria as our other land investments to ensure that we remain focused on attractive risk-adjusted returns and improving shareholder value. We have always believed that a self-development focused strategy provides us with better control in determining the pace of land and lot deliveries and higher margins and returns. We generated operating cash flows of $117 million over the last 12 months, while continuing to invest significantly in land acquisition and development to position us for future growth.

We also returned $39 million to shareholders through stock repurchases. Even with our land-heavy balance sheet and macroeconomic headwinds, our return on assets for the second quarter was 11.8%, while the median return on assets of our home building peers was 4.7%. Our return on equity for the quarter was 16%, as our returns remain among the very best of our public home building peers. Our disciplined return focus approach and our experienced team of operators position us well for value creation. Green Brick Mortgage continues to grow rapidly with funded loans up 257% year-over-year. 43% sequentially. 65% of Green Brick Mortgage loans in the second quarter were to first-time homebuyers. Second quarter revenues in our financial services segment increased to $12 million, compared to $6.3 million in the second quarter of 2025.

Pre-tax income from our financial services segment increased year-over-year by 91% in Q2 to $5.7 million. One of our most important growth drivers remains Trophy Signature Homes. Trophy continues to strengthen its position in DFW while building momentum in Houston and Austin. Trophy's ability to deliver affordably priced homes, supported by an efficient land and construction platform, provides us with a runway for growth over the next few years. This expansion allows us to continue serving the critical first time and first move up buyer segments while further diversifying our revenue base and strengthening our presence in key Texas markets. Our strategy is built around disciplined capital allocation, local market expertise, operational excellence, and a long-term focus on returns. Our builders manage each community with discipline and diligence to ensure pace, price, and inventory levels meet our buyers' demand and maximize the returns for our shareholders.

Although current market conditions remain challenging, those principles continue to guide our decision-making, generating sustainable returns, and position us to capitalize on opportunities as they emerge. While near-term housing conditions present headwinds for the entire industry, we are encouraged by the resilience of demand in many of our communities and by the strength of our operating platform and land and lot positions in high-demand markets. Our focus remains unchanged, growing book value, generating attractive returns, and prudently investing capital where we see the greatest long-term opportunity. With this approach and our underlying financial strength, we also believe remain able to pivot and adjust to market conditions as they evolve. With that, I now turn it over to Jeff to provide more detail regarding our financial results.

Thank you, Jim. Net income attributable to Green Brick for the second quarter decreased 9.5% year-over-year to $74 million, and diluted earnings per share decreased 8% year-over-year to $1.70 per share. We delivered 1,047 homes during the quarter and generated home closings revenue of $472 million, resulting in an average sales price of $450,000. While deliveries were essentially unchanged from the same period last year, home closings revenue declined 11.4% due primarily to a higher mix of deliveries from our Trophy Signature Homes brand. Notably, 55% of our Q2 closings were sold during the quarter, driven largely by the growth of Trophy. Discounts and incentives as a percentage of home closings revenue increased year-over-year by 180 basis points to 8.8% from 7%. As a result, our home building gross margins decreased 150 basis points year-over-year, but increased 90 basis points sequentially to 29.8%.

During the quarter, we reduced our warranty reserve by $2.7 million, which improved gross margins by 60 basis points for the quarter. Our actual warranty spend was less than expected due to a continued focus on improving construction quality and maintaining a stable base of quality trade partners. Net new home orders during the quarter were 1,079, up 19% year-over-year. Order growth was driven by both higher community count and improved sales pace. Average active selling communities of 108 were up 6% year-over-year, and our sales pace for the second quarter increased by 10% to 3.3 per month, compared to three per month in the previous year. Backlog at the end of the quarter was 681 units, with backlog revenue of $387 million, a 24% decrease year-over-year.

Trophy Signature Homes continued to gain backlog share in the quarter, representing 44% of our backlog units, compared to 26% in Q2 of 2025. As a result of the increased mix of Trophy orders in our backlog, along with continued elevated discounts and incentives across all of our brands, the average sales price of our backlog decreased 18% to $569,000. Due to strong sales in the quarter, we started 1,133 new homes, an increase of 19% year-over-year and 16% sequentially. Units under construction at the end of the quarter were 2,205, flat year-over-year and up 4.1% sequentially as we increased starts to align with our sales pace. We ended the quarter with 410 completed specs, an average of 3.8 per community. We will continue to monitor market conditions and seasonal trends and align our starts with our sales pace to appropriately manage our investment in spec inventory.

Our goal is to maintain approximately one to two months of supply of completed specs in our communities. Our SG&A expenses declined 5% year-over-year during the quarter. However, as a percentage of residential units revenue, SG&A increased 60 basis points to 11.3%, primarily due to lower home closings revenue. We repurchased approximately 143,000 shares of our common stock for $9.4 million during the quarter. With $151 million remaining in authorized share repurchases, we will continue to repurchase shares opportunistically as part of our disciplined capital allocation strategy and efforts to return value to our shareholders. At June 30th, we had total liquidity of $462 million, including cash of $132 million, with no outstanding borrowings on our $330 million unsecured revolving credit facility. Total debt, excluding our warehouse facilities, was $252 million, with $75 million of senior notes maturing in the next 12 months.