Green Brick Partners, Inc. (GRBK) Q1 2026 Earnings Call Transcript

Hello, and welcome to the Greenbrick Partners, Inc. first quarter 2026 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, and if you would like to ask a question, please press star 1 on your telephone keypad. I would now like to turn the conference over to Jeff Cox, Chief Financial Officer. Please go ahead.

Good afternoon, and welcome to Green Brick Partners' earnings call for the first quarter ended March 31, 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. In addition, a presentation will accompany today's webcast, which is available on the company's investment 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's statements are as of today, April 30, 2026, 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 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'll turn the call over to Jim.

Thank you, Jeff. I'm pleased to announce our first quarter results, particularly given that we achieved these results against a backdrop of ongoing and persistent affordability challenges faced by many consumers in the housing market, as well as increasing uncertainty and volatility for consumers caused by domestic and global events and trends ranging from increasing gas prices to job concerns in this new AI era. Despite these challenges, our team's effort and disciplined approach led to another excellent quarter for our business and our shareholders. Net income attributable to Greenbrick for the first quarter was $61 million, or $1.39 per diluted share, on total revenues of $465 million. We delivered 908 homes in the quarter, only two less than in q1 2025 and we had 1037 net new orders we achieved this despite as we mentioned on our last call losing about seven selling days in january due to inclement weather in dfw our largest market orders increase sequentially each month of the quarter with marked sales outpacing the same period in 2025. This was more in line with a normal spring selling season. We believe our ingrescent grade balance sheet and low financial leverage provide us with the flexibility to navigate and takes advantage of evolving market conditions. At the end of Q1, our home building debt to total capital ratio decreased to 11.5% and our net home building debt to total capital ratio decreased to 5.5% among the lowest of our public home building peers. We also have $475 million in available liquidity. Our industry-leading home building gross margins of 28.9% give us the flexibility to profitably adjust the pricing of our homes to respond to market conditions. We believe the foundation of our industry-leading gross margin starts with our commitment to owning and developing land. We remain highly disciplined in how we control and purchase land. One of the primary differentiators from many of our peers is that we do not engage in off-balance sheet, high-interest cost land banking arrangements 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. At the end of the first quarter, 77% of our approximately 49,000 lots are owned. We have 3,400 lots owned or under contract in four joint ventures with other home builders or landowners. These joint ventures account for 7% of our total lots owned and controlled and only 2.9% of our total assets. These joint ventures are evaluated with the same underwriting criteria as our other land investments to ensure that we remain focused on attractive, risk-adjusted returns and protect shareholder value. As many of you who follow our company know, this disciplined approach to land acquisition and development is not a new philosophy for our company. We have always believed that a self-development-focused strategy provides us with better capital efficiency and returns, allowing us to make higher margins, lower costs, and enhance inventory control so that we can better determine the pace of land and lot deliveries. We generated strong operating cash flows of $56 million for the quarter. In the last 12 months, we generated $201 million in operating cash flows and returned $74 million to shareholders through repurchases. Even with our land-heavy balance sheet and macroeconomic headwinds, we delivered strong returns during the quarter of 9.6% return on assets and 13.1 return on equity, among the very best of public home building peers. Our disciplined returns-focused approach and our experienced team of operators position us well for future value creation. This quarter, we begin reporting on financial service operations as a separate segment due to the strong growth of our wholly-owned mortgage company. Greenbrick Mortgage was founded in 2024 and funded its first loan in the first quarter of 2025. During 2025, Greenbrick Mortgage grew rapidly and by the end of Q1-2026 was serving all of our tax communities. For the first quarter, revenues for Greenbrick Mortgage increased from $1.3 million to $5.6 million year-over-year as the number of funded loans increased by almost 250%. Pre-tax income from our financial services segment increased year-over-year by 139% in Q1 to $4.3 million. While the macroeconomic landscape prevents short-term headwinds for the entire industry, we believe the core strengths that have driven Greenbrick's success over the past decade will enable us to continue to navigate any challenges with confidence and flexibility. As always, we will focus on maintaining operational excellence centered on our disciplined approach to land acquisition and development to position us for future growth and ensuring we continue to build out our team of experienced, dedicated employees who drive our growth and provide a quality home and buyer experience for our customers. We believe we are well positioned to sustain our peer-leading return metrics and provide long-term value to our shareholders. We remain focused on growing our business, particularly our trophy brand. Trophy's continued growth in DFW in Austin, combined with our first community opening in Houston Q1, presents significant opportunities for sustained growth for the 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. With that, I'll now turn it over to Jeff to provide more detail regarding our financial results.

Thank you, Jim. I want to take a few minutes to address the Form 8Ks that were filed yesterday in which we concluded that certain closing cost incentives offered to our buyers had been previously incorrectly classified as cost of residential units rather than as a reduction of the transaction price. After evaluating these issues under ASC 606, we determined that we will restate our previously issued audited consolidated statements of income for the year's end of December 31st, 2023, 2024, and 2025 included in the annual report on Form 10-K and the unaudited, condensed, consolidated statements of income for the quarters ended in 2025 and 2024 to reflect the reclassification of closing cost incentives as a reduction in revenue rather than as a cost of residential units. This reclassification of closing cost incentives will not impact any prior period's reported gross profits, operating income, net income, earnings per share, cash flow, debt covenant compliance, shareholders' equity, or the strong underlying economics of the company's operations and business. The impact will be a reduction in home sales revenues and associated average sales prices and an improvement to our gross margins. We are currently in the process of completing the restatement of our prior period financial statements and expect to file an amended annual report on Form 10-K. However, our comments today reflect these changes for prior periods referenced. We have also filed an 8-K that sets forth our preliminary assessments of the impact of this reclassification for the years ended December 31, 2023, 2024, and 2025, as well as each of the quarters in 2025 and 2024. Our first quarter 2026 results are not affected by the pending restatement. Net income attributable to green brick for the first quarter decreased 18.8% year-over-year to $61 million and diluted earnings per share decreased 16.8% year-over-year to $1.39 per share. SG&A as a percentage of residential unit revenue for the first quarter was 11.7%, an increase of 80 basis points year over year, driven primarily by mix and higher discounts and incentives. Given the challenging economic conditions and oversupply of housing inventories in our markets, discounts and incentives increased year over year as a percentage of home closing revenue to 10.1% from 6.8%. Our average sales price of $493,000 was down 4.1% sequentially and down 6.9% year-over-year. Home closings revenue of $448 million on 908 deliveries declined 7.1% compared to the same period last year, and our home building gross margins decreased 320 basis points year-over-year and 140 basis points sequentially to 28.9%. 63% of our Q1 closings were sold during the quarter, driven largely by our Trophy Signature Homes brand. We started 979 new homes, an increase of 13% year-over-year and 11% sequentially due to increasing buyer demand in the quarter. Units under construction at the end of the quarter were 2,119, down 7.7% year-over-year, but were up 3.5% sequentially as we increased starts in Q1 to better match our sales base. We ended the quarter with 419 completed specs, an average of 4.1 per community, a reduction of 13% from Q4. We will continue to monitor market conditions and seasonal trends and align our stars with our sales pace to appropriately manage our investment and spec inventory. Our goal is to maintain approximately 1.5 months of supply of completed specs in our communities. Primarily due to adverse weather in January, we saw a 7.1% decline in traffic year-over-year during the quarter. Net new home orders during the first quarter were 1,037, down 6.2% year-over-year. Average active selling communities of 103 were down 1% year-over-year. As a result, our sales pace of the first quarter decreased slightly to 3.4 per month compared to 3.5 per month in the previous year. As noted in our prior call, we still expect community count to increase in the second half of the year. Our backlog at the end of the first quarter was 649 units with backlog revenue of $381 million, a 35% decrease year over year. We experienced a significant shift because Trophy Signature Homes represented 40% of our backlog units compared to 27% in Q1 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, backlog ASP decreased 13% to $587,000. In Q1, we repurchased 114,000 shares of our common stock for approximately $7 million, with $160 million remaining in authorized share repurchases. We will continue to refer to shares opportunistically as part of our disciplined capital allocation strategy and efforts to return value to our shareholders. During Q1, we terminated our secured revolving credit facility, and as of quarter end, we had no outstanding borrowings on our $330 million unsecured revolving credit facility. At the end of the quarter, we maintained a robust cash position of $145 million and total liquidity of $475 million. We believe we are well positioned to weather the challenging market conditions and ongoing volatility to opportunistically deploy capital to maximize shareholder returns and to accelerate growth as the housing market improves. With that, I'll now turn it over to Jed.

Thank you, Jed. We continue to see a challenging sales environment within all our consumer segments, but we are encouraged by the positive response we have seen from first-time homebuyers who are most impacted by affordability challenges and a weakening job market. Our team responded well to these conditions, as evidenced by a relatively strong first quarter sales volume and low cancellation rate of 7.7% during the quarter, which continues to be one of the lowest cancellation rates in the public home building industry. We believe it demonstrates the creditworthiness of our buyers, quality of our product, and desirability of our communities. Rate buy-downs remain a necessary tool to drive traffic and sales, especially with first-time homebuyers and quick move-in homes. And we helped address the affordability challenges faced by many consumers by providing our homebuyers with price concessions, interest rate buy-downs, and closing cost incentives. Incentives for net new orders during the quarter were 9.9%, an increase of 320 basis points year-over-year, although a decrease of 30 basis points from the prior quarter. With our superior infill and infill-adjacent communities and industry-leading gross margins, we believe we are strategically positioned to adjust pricing as needed to meet market demand and maintain our sales pace. While we recognize the importance of preserving our margins, we also recognize that our industry-leading margins provide us with significant pricing flexibility to compete effectively in a volatile market and drive sales pace when appropriate. We are also excited about the progress of our wholly-owned mortgage company. During the first quarter, Greenbrick Mortgage closed and funded over 360 loans. The average FICO score was 742, and the average debt-to-income ratio was just under 40%, consistent with the previous quarter. We completed the rollout of Greenbrick Mortgage to all of our Texas communities in the quarter, and we expect to roll out Greenbrick Mortgage to the Providence Group, our Atlanta builder, in the latter part of 2026. As Greenbrick Mortgage continues to expand its service to most of our communities, we anticipate that by year-end, its capture rate will range from 70% to 80%, which should generate additional revenue as we increase the number of loans funded through our mortgage company. We continue to reduce our construction cycle times, which were down 25 days from a year ago, to under 130 days. Trophy's average cycle time in Dallas-Fort Worth was under 90 days, the lowest in their history, and a testament to the efficiency and quality of our construction teams and trade partner base. While labor availability remains relatively stable across all our markets, we are monitoring potential cost increases related to the rise in oil prices. We remain engaged with our trade partners to monitor potential cost pressures and will adjust as necessary. As part of our efforts to position ourselves for future growth, during the quarter we invested approximately $89 million in land and lot acquisitions and $78 million in land development, excluding reimbursements. For 2026, we expect land and lot acquisitions of approximately $400 million and land development outflows of approximately $420 million, excluding reimbursements. We believe our superior land position provides a competitive advantage that will be the foundation for strong growth in subsequent years. Approximately 38,000 of our lots are owned, with approximately 11,000 lots under option contracts. Approximately 75% of our total lots owned and under contract are allocated to Trophy Signature Homes. Excluding approximately 25,000 lots in long-term master plan communities, our lot supply is approximately six years. With approximately 49,000 lots owned and under contract, we remain patient and selective with future land opportunities without compromising the ability to grow our business in the near and intermediate term. With that, I'll turn it over to Jim for closing remarks.

Thank you, Jed. In closing, we remain confident in our long-term outlook and our ability to continue to deliver excellent operational and financial results. Our land strategy, diversified product portfolio, and strong balance sheet continue to differentiate Greenbrick from our peers and support attractive returns for our shareholders over the long term. Like the rest of our industry, we continue to navigate a challenging environment, but I am hopeful that the market is starting to find a more stable footing in normalization. I believe that 2026 will be a year that we lay a foundation so that we can execute our strategy and accelerate our growth in the coming years. With all of these challenges, I would like to recognize our team for their disciplined execution and resilience successfully navigating this market. Our results would not be possible without their focus, leadership, and commitment. This concludes our prepared remarks, and we will now open the line for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. We ask that you limit yourself to one question and one follow-up and rejoin the queue if needed. Your first question comes from Ryan Gilbert of BTIG. Your line is open.

Hey, thanks, guys. Definitely encouraging to hear that, you know, I guess demand improved throughout the quarter. Can you give us an update on how things are looking so far in April in terms of traffic and maybe sales space?

Yeah, Jed, why don't you take that?

Yeah, I would say April is looking very similar to March. We're still in a strong spring season.

Okay, got it. And then just around your commentary around the challenging sales environment, but you're still seeing a consumer response to the incentives that you're offering. And I'm just curious, you know, Jim or maybe Jed, if you could maybe expand on, I guess, how long you think this can last or if you expect a weakening labor market to pressure first-time homebuyers. It doesn't seem like that's been the case so far, but, you know, just kind of looking ahead, what you're thinking.

Yeah, this is Jim. Well, we're seeing strong demand. it's very elastic demand meaning that the buyers are very educated and a small movement in pricing can really accelerate sales velocity and really one of the things we're very encouraged about because our pre-tax margins are so high they're running around 17% or just under that we have tremendous flexibility if we need to get a buyer that wants a slight discount in home even from current levels. Pretty much we're not seeing that happening right now. We think that things may have bottomed but if you can predict interest rates I'll tell you what our margins are going to look like because they're highly correlated right now and we're not getting a lot of relief from the interest rate front. Jed, do you have anything you want to add to that?

I would just say you know the past week you know this the past week has been rough on the mortgage rates, and that can cause just a little change in mortgage rates can cause a 1% decline in gross margin for us.

Okay, got it. Thank you, guys.

Your next question comes from Jay McCandless with Citizens Bank. Your line is open.

Hey, good afternoon, everyone. First question I had, what are you seeing in the land market right now? Land prices still continuing to go up, or you've seen some areas where maybe you're getting a little bit of a break or maybe land inflation slowing down a little bit?

That's a good question, Jay. What we're seeing is on C-minus and delocation lots, builders are wanting to pedal those. Obviously, the only buyer are other builders, and if a builder wants to pedal a lot in a C-minus or delocation, he wants to do it because he's not making margins so it's really not attractive to another builder to buy and it's not distressed enough to have us get interested so that's what's taking place really in the perimeter locations of the further out perimeter locations interestingly and And conversely, high margin land in the more infill or employment-centric locations is still in high demand. And one of the things we're very excited about, we bought a large tract yesterday that we had been working on for how long, Jed? You know, it was complicated, had a lot of moving parts. We're really excited about it because we have the balance sheet to take this down, other people don't. We have the management team to do the entitlement, sewer, water, and all of the other challenges that come with a large master plan property. And we feel really good about that because it's a barrier to entry. All these landlite guys just couldn't pull that kind of transaction off. That's good to hear. um speaking of infill versus trophy and and some of your higher end brands versus trophy i guess who which which performed better during the quarter was it move up was it entry level what were you seeing in terms of of demand between the different buyer segments it was spotty i think is the best way to define it um trophy was a star We found that, and Jed can elaborate on that, that there is a very large pool of buyers, sub $350,000, and a trophy can meet that price point and still make really nice margins. Florida did good. Atlanta slowed down in its market that we were surprised because Atlanta was traditionally very strong, even in the infield markets. And, Chad, what do you want to add, Chad?

Yeah, I would just say that, you know, some of the kind of not luxury, you know, luxury continued to do well for us. And for us, that's homes priced in the $900 and up range. We saw, you know, spottiness in, say, the $500 to $800 range where we had some good months, some bad months, depending on what sub-market. We're really encouraged in Dallas that in March and April, we really hit good numbers with that buyer, which is typically a cultural buyer. So we're encouraged about that. But so to kind of sum it all up, I'd say we feel really good about luxury and we feel really good about entry level and the stuff in the middle is more challenging.

Yeah, Jay, and some of the stuff in the middle that Jed was talking about, this $500,000 to $800,000 price point, one of the reasons why we think it's so much slower are our immigration policies. Many of those homes are sold to physicians, higher income people, and the current administration is making it uncertain for those people. and it's impacting housing as a result any and that's great color jim thank you any any concerns or issues with other builders maybe having built a little too much at that price point and having to be more aggressive on the discounting there i think it's in some markets i think it's fairly isolated judge and i were talking about it this morning that uh it can affect some markets generally i don't i'm not worried about it and again one of the reasons i'm not worried about it is because if we're making a 17 pre-tax margin and we're competing against a builder that's making a three percent pre-tax margin uh down the street that's land light those guys have given about all they can give and we're just kind of waiting and seeing what happens okay great and then just the the last one i had um congrats on on starting in houston i guess over time how how many communities do you think green brick can have in that market and is it always just going to be a trophy market or are you guys going to look to do some some infill properties right now it's is let's talk strategically basically what we want to do is enter any market that it really has to be a top 10 to 12 city market because a trophy is going to be our scalable brand that goes into that market to be effective we're still going to self-develop and we want to have a really experienced land team and a land acquisition team that has strategic advantages so if that's going to make us really enter larger markets we're looking at san antonio right now and um i think the probability of us bringing other brands there is probably unlikely at this point but you never and shouldn't say never.

Okay, let's all head.

Once again, if you have a question, it is star one on your telephone keypad. Your next question comes from Alex Riegel with Texas Capital. Your line is open.

Thank you. Given the mix of backlog of trophy homes, should we model ASPs declining through 2026?

I think it's a mixed issue more than a back... This is Jed. I think it's a mixed issue more than a backlog issue. So, you know, like we mentioned, we're seeing very strong demand at the entry level. If that becomes a bigger percentage of our sales, then the ASP would go down.

And how do sales in the Houston market affect ASPs?

They're going to be – Houston will continue to bring ASP down. You know, when you look at the, you know, Zonda put out the biggest markets based on Q1 starts, and, you know, DFW is the largest, Alex, and Houston was the second, and there was a huge drop-off to Phoenix, which was third, and Dallas were the third biggest by units, and we think we'll probably end up being the second biggest this year by revenue trailing only D.R. Horton. So those are really big markets, but to have really big markets, you need, you know, very affordable housing. So the ASP in Houston will be lower than the Dallas, but those are two very strong markets that, you know, we're going to continue to grow our market share in Dallas, and we're excited about the early success in Houston, and we look forward to, you know being able to you know in the near future uh be a more dominant player there and then as it relates to your comments about april being uh sort of in line with march is is that typical historically it yeah we've gone we've gone and looked at a lot of historical trends recently and you know there's how so much of it correlates with you know what interest rates where you get for every April versus every March going forward, but going backwards. But for the most part, yes, what we typically see is April is just a little bit weaker than March, and then May is because of graduations and so forth, and then beginning of summer. You know, the spring season really kind of concludes in May, and then you enter the summer season.

Thank you.

Your next question comes from Rohit Seth with the Riley Securities. Your line is open. Rohit, perhaps your line is on mute.

Hey, thanks for taking my question. Just on sales page, you had a good turnout in the first quarter. It looks like you have some levers with your strong margins. Do you think you can maintain sort of the sales pace that you had in the prior year from 2Q to Q4s, kind of average about three homes per month?

Seth, this is Jeff. I think that's very doable when we look at the historical trends that Jed mentioned earlier. We were about 2.97 last year in Q2 and 2.91 in Q3. When we look at how we performed this quarter compared to last year, we're down a little bit. But keep in mind, we did have that weather event that Jim referenced earlier in his remarks. So we tend to be trending generally with the same pace as last year.

And can you remind me the spread between Trophy homes? I know there's a faster sales pace there in the rest of the book.

So Trophy was 51%, 52% of our sales in Q1. And we expect them to continue to increase that pace as we continue to grow the brand and expand in Houston and Austin. 75%, I believe, of our lost owner-controlled are allocated towards Trophy. So that will continue to increase over time.

Is Trophy moving something like five units a month, something like that?

It's really neighborhood-dependent. I mean, I'll answer it this way. We have some communities that have two different lot sizes, where in Q1 we averaged 20 sales a month. So that was, you know, as defined by community count, that would be 10 sales. And then we had others where, you know, we averaged three or four. So we can pull some better data for you for our next call on that.

Yeah, some of our communities, you know, that are particularly in the last phases where we've had success, and phasing out, we are milking margin intentionally and maintaining slower sales pace.

Is there maybe a margin floor where you guys are not willing to breach?

No, we don't look at it that way, really. We look at basically we're always modeling internal rate of return and sales pace and price. So it's a little bit more complex than that because we also want to get our capital returned on our lots and looking at, you know, that redeployment of that capital. So it's a little more complicated than just saying we will sell houses based upon margin. It's the sales pace that comes with the margin and the capital that comes in from that lot sale into calculus.

But obviously when we're reporting 28.9% gross margins and we have peers that are reporting 15, 16, We feel excited about the coming months, and we feel excited about our ability to adjust prices as needed.

Understood. It's a good position. Thanks for taking my question.

This concludes the question and answer session. I will turn the call to Jim Brickman for closing remarks.

Well, thank you, everybody, for attending our call. We're always delighted to have anybody call Jeff, Jed or myself with follow-up questions and really would encourage you to do that. And we can get into a little bit more detail about some of the master plan communities we're really excited about. Thank you for the call.

This concludes today's conference call. Thank you for joining. You may now...