Green Brick Partners, Inc. (GRBK) 2026 Q3 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to the Green Brick Partners, Inc. third quarter 2026 earnings call. (Operator Instructions)

I will now hand the conference over to Jeff Cox, Chief Financial Officer. 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 home values, and focus on long-term value creation have contributed meaningfully to our growth and success. I'm 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 the homebuilding gross margin of 28%.

We generated net income of $59 million or $1.35 per diluted share. Net new homeowners 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 Bricks' differentiated operating model.

Even as many first-time buyers continue to require significant incentives to purchase a home, we increased orders and deliveries while maintaining the highest homebuilding gross margin among our public home building 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 effective 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 30, 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 the lot in our lot acquisition basis and minimize 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 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 is 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 net 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 30, our return on assets was 10.6%. And a 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 homebuilding 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 share over 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 began serving as co-CEO. Having helped build Green Brick alongside this team for many years and through different homebuilding 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 buy bounds. Closing cost assistance and targeted price continue to be the critical tools, particularly for first-time homebuyers.

Trophy's ability to meet these buyers' needs showed in our results. For the first time, Trophy generates 60% of both total company orders and deliveries in the quarter, a testament to the 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 pre-existing outside lender relationships, we expect our long-term capture rate to be approximately 70% supporting additional loan volume and revenue. We continue to make progress on construction efficiency as our average construction cycle declined to 116 days, 25 days shorter than last year.

Trophy Dallas' cycle time averaged 88 days compared with 97 days a year ago. While we are seeing a modest effect of labor availability among some construction trades as a result of increased immigration and customs enforcement activity in certain of our markets, we have not experienced a measurable impact on our operations today.

We started 954 homes for the quarter, essentially flat with the prior year. We ended September with 2,181 homes under construction, down 1% year-over-year and 562 completed spec homes within our target of one- to two months of supply. We are aligning starts with sales pace while maintaining quick move-in inventory for homebuyers seeking near-term delivery and rate certainty.

We continue to invest in land and development to support future growth. Through September 30, our investment in land acquisition and land development totaled approximately $597 million, including $323 million for land development, excluding reimbursements and $274 million for land and lot acquisitions.

For 2026, we expect land and lot acquisitions of approximately $350 million and land development outflows of approximately $430 million, excluding reimbursements. Our total 2026 planned land investment of $780 million is down from the $850 million we communicated on our last call as we remain patient and selective on new acquisitions while preserving our ability to grow in the near- and intermediate term.

With that, I will now turn it over to Jeff to provide more details regarding our financial results and our capital position.

Thank you, Jed. Net income attributable to Green Brick for the third quarter was $59.2 million, a decrease of 24% from the same period last year. Diluted earnings per share were $1.35, also down 24%. We delivered 978 homes, up 2.6% from 953 homes in the prior year quarter, with 48% of our third quarter closings also having been sold during the quarter, reflecting buyers' continued preference for quick move-in homes.

Home closing revenue declined 9.8% to $437 million primarily due to a 12.1% year-over-year decrease in average selling price to approximately $447,000, which reflected increased incentives, primarily through mortgage rate buydowns, and a continued shift toward Trophy's more affordable product.

Homebuilding gross margin was 28%, down 410 basis points year-over-year due in part to higher incentives, which increased 180 basis points from the third quarter of 2025 to 9.9% of home closing revenue. SG&A expense declined approximately 6% for the quarter to $51.8 million. As a percentage of residential units revenue, SG&A increased 40 basis points to 11.8%, mainly due to lower revenue.

We ended the quarter with 629 homes in backlog, down 6.8% year-over-year, representing backlog revenue of $379 million. The average selling price in backlog declined 11% year-over-year to approximately $603,000, reflecting a higher mix of Trophy homes and elevated incentives.

Turning to capital allocation, we repurchased 264,000 shares during the quarter for approximately $17.9 million. At September 30, $132.7 million remained available under our repurchase authorization. Our liquidity at the end of the quarter was $325 million, consisting of $100 million of cash and $225 million available under our $330 million unsecured revolving credit facility. We also repaid the remaining $50 million of principal on our 2026 4% senior notes.

Total debt, excluding our warehouse facilities, was $305 million with $63 million of senior notes maturing in the next 12 months. Our homebuilding debt to total capital ratio of 13.1% and net homebuilding debt to capital ratio of 9.6% remain among the lowest of public homebuilders. We believe our liquidity and financing capacity provide substantial flexibility to fund our operations while continuing to invest in opportunities that meet our return criteria.

With that, I will now turn it back to Jim for closing remarks.

Thank you, Jeff. In closing, we remain confident in Green Brick's long-term outlook, our differentiated operating model, and financial strength position us to navigate current market conditions and pursue opportunities for sustainable growth. While affordability pressures and elevated incentives continue to challenge the industry, our focus remains on disciplined execution, prudent capital allocation, and creating long-term value for our shareholders.

I would like to thank our employees and trade partners for their continued commitment to Green Brick and our homebuyers.

This concludes our prepared remarks. We will now open the line for questions.

(Operator Instructions)

Rohit Seth, B Riley.

Hey, thanks for taking my question. How's the market obviously challenging during the quarter early into October with the increase in rates? Just wondering if you could comment on how demand progressed through the quarter and how we should be thinking about incentives as we enter the fourth quarter?

Hi, this is Jim Brickman. If you can tell me which way interest rates are going to go, I'll tell you which way our incentives are going to go because a lot of our incentives relate to mortgage buy outs. So it's very hard to predict. We watch the 10-year bond very closely.

But big picture, I think, one of the most important messages we want to leave investors with is that when we enter a market like this that is challenging, and you have 28% gross margins and 11% or 12% SG&A, it's a huge advantage, and almost very little debt. It's a huge advantage because we are seeing many peers right now, where their gap gross margin is about the same as their SG&A.

We don't want to give up any margins, but we have a lot to give if we need to and still remain very profitable. We're seeing peers have nothing left to give. And we don't like being in a tough market like this, but we think we really have a huge competitive advantage if incentives increase.

And Seth, this is Jeff. I'll just add on to that based on your follow-up for your other question regarding sales throughout the quarter. I would say that they followed the typical seasonal patterns.

September was certainly tough, but we saw a sequential increase in sales from July through September. So a little encouraged by that, but it's tough like Jim mentioned.

And as you think about the pace and price trade-off, are you making any adjustments as we go into 2027?

We make adjustments every day. Jed, why don't you talk about that?

I mean, we're in the business of selling homes. Jim mentioned we have the buffer and the gross margins to provide increased incentives. We're seeing when we do make changes to our incentive packages as rates go down or rates go up that we sell more houses. So it's -- we're going to continue to balance price versus pace and we feel -- there's no doubt this is a challenging market, but we feel like we can execute very well in this market.

And you're still buying down to about 5%, is that right?

Yeah, varying on the day in the community, somewhere in the range of 5% to 5.5%.

Great. I'll pass it on. Thank you. And congratulations, Jed.

Thank you very much.

Ryan Gilbert, BTIG.

Hi, thanks. Appreciate the time. First question is on, I guess, just your philosophy around land investment in the current market. And I know you pulled down the 2026 investment spend guides incrementally. But how are you thinking about, I guess, the trade-off between continued -- elevated land investment relative to prior years versus pulling back some of that spend and waiting for potentially improved opportunities in the event that the market gets weaker from here. So just how are you thinking about land spend here?

Cautious, very cautious. In order to have us do a significant land spend, our underwriting criteria now has to include 10% elevated incentives into the modeling. And it's hard to find land deals that work and provide the internal rate of returns we want today. So I don't expect that to change.

It's interesting in that the high margin land deals are still hard to find. Low margin C minus D location deals are plentiful. We're seeing peers just rearrange deck chairs in the Titanic trading these assets amongst each other. I don't know why they do that. It's not going to help one or the other at the end of the day, but we're not playing that game. But if we find a land deal that makes sense, we will move on it. They're just harder to find.

Okay. So it sounds like land prices aren't really resetting to any material.

They are on lots we don't want.

And then second question on gross margin, it looks like maybe around half of the year-over-year decline was related to incentives. What would you attribute the other half of the decline to?

I would say -- this is Jeff. The other half is really probably two things. It's the shift towards Trophy, who is much more -- their buyer segment is much more rate sensitive. And the other thing that gets lost within the incentive number when we look at it year-over-year is just the change in base prices that our operators have had to make year-over-year. So that is really probably the balance of the difference.

Trophy is continuing to look at traffic every single week. And if they need to also reduce base prices to continue to drive traffic, they'll do that. And they'll continue to lean heavily on mortgage rate buy downs, which is what you're really seeing in the incentives.

Got it. So are the base -- I guess individual home base price reductions included in incentives or is it just any base price cut regardless of whether it's individual home or community-wide base price cuts that's all excluded from the incentive number?

When we have a reduction in base price that will flow through to existing inventory. And so you won't see elevated incentives necessarily when those sales come through.

Okay, got it. That's helpful. And underlying land inflation just is like ballpark, where are you seeing that on a percentage basis?

It's very low for us because our interest costs are so low that we're not capitalizing interest into our land inventory or a lot inventory. And because we don't land bank, we're not incurring a debt asset that's 15% or 10% of the lot cost that's debt money and paying a land banker 8% to 12%. It has to get paid somewhere. And it's getting reflected in lot prices for a lot of our land light [years].

We're saying our lot prices percentage of revenue is -- like everybody, it's ticking up, but it's ticking up at a much slower pace than our peers.

Okay, great. Thank you.

Jay McCanless, Citizens Bank.

Hey, good morning, guys. First question I had with the mix of Trophy now being nearly 60%. Is the ASP we saw this quarter, is that likely to repeat in the fourth quarter or could it move down a little more as you're bringing more trophy communities online?

It will move down. Jed, how much do you think?

We're not going to give a number, but it could slightly move down in Q4.

And then what is Trophy right now on a sales absorption basis? What's Trophy averaging in Dallas, you think?

So, Jay, this is Jeff. Trophy, similar to last quarter, they're running about 85% higher than the rest of our brands. They're paid in Q3 was about 5.2% sales per month when the average pay for the company is 2.8%. So they're moving quite a bit faster.

And then the next question I had, incentives into the quarter just under 10%. Thus far in the quarter, have you had to move the incentive level above that to keep your sales pace?

This is Jed. We've seen a little bit of pickup with the mortgage rates. They got really nasty at the end of the quarter and they've backed off a little bit. So many -- we're spending so much money as our peers are on mortgage rate buy downs. So those buy downs are costing a little less than they were two weeks ago.

And then the last one for me, just any commentary on it, Lynn, I know I asked about it last quarter. Seen a little bit of sales headwind there. Maybe talk about what you saw this quarter and how you are thinking about the end of the year for Atlanta.

Yeah, this is Jed again, Jay. I'll answer it. Atlanta and then North Dallas as well. The areas where we had a heavy tech cultural buyer are challenging right now. That middle market from say $500,000 to $800,000 is very soft. We're very pleased with the results under $500,000. We're pleased with our brands that are executing $900,000 and above that $500,000 to $800,000 range, which the majority of Atlanta falls into. It's a challenge right now.

I think Toll Brothers mentioned it on their call. It's just a tough market.

Well, thank you, guys. I appreciate it.

Alex Weigel, Texas Capital Bank.

Thank you, and a really nice quarter in a difficult market. Could you talk a little bit more about what you're seeing in Houston and how that's progressing over the last six months since you opened?

Yeah, this is Jed. I mean, Houston is a small market for us at this point in time. We have one community open in Houston. We'll two more at the end of next year. So we're not a good barometer for the Houston market, but we're pleased with just the overall results of Houston. It's a blue collar industrial town. We're selling very affordable houses and we think we're going to do well there long-term just like we have in Dallas.

This is Jim. When you get down to land spend, that's one market we're looking at very cautiously though. It doesn't underwrite -- we're not going to expand just to generate revenue.

Makes sense. And then transitioning over to settle times, they've improved a lot and probably industry leading right now. Do you see more opportunities for improvement? And then sort of a second question is, do you see any opportunities to kind of value engineer your homes to take the cost out?

Let me answer that at first, Jed. And we don't see a lot of cycle time improving a lot. Matter of fact, we're seeing the first sign of immigration headwinds where we're seeing labor constraints, particularly in Austin. There's been a lot of increased activity in masonry, electrical, drywall that's putting cost pressures that we haven't seen for the first time before.

Framers.

Framers. And it's interesting because these undocumented workers that are being picked up. It's not like there's a replacement workforce, even though the wage is well above minimum wage. So I think that that has bottomed. We're not going to see a lot of improvement in either value engineering or the labor side of our business.

Thank you.

Ryan Gilbert, BTIG.

Hi, thanks for taking my follow-up, guys. I had a question on absorption and appreciate the breakout that you gave between Trophy Signature and the rest of the business. And when we were going into the quarter, I think we expected the continued mix shift toward Trophy Signature to drive more, or I guess to drive positive absorption growth rather than the slight absorption decline that we saw even in a weaker market.

But it sounded like -- just based on your commentary, like the Trophy Signature business sold pretty well throughout the quarter. So I'm wondering if you could compare the year-over-year change in absorption between what you saw in Trophy Signature versus the other builders. I'm just wondering if there was just a much deeper decline in absorption for the move-up builders than Trophy?

I'll take this. It's Jed. I think you kind of answered the question. The decline in Trophy absorption was less than the decline in the other parts of our business. That 500- to 800 part of our market, that's where we really saw huge declines in sales.

And this is Jeff. I'll just add on to that. The decline that Jed is referring to is just the quarter-over-quarter decline. If you look year-over-year, Trophy has actually increased its sales pace from 4.7% last year to 5.2%. So they had an 11% increase in their pace. The really challenging areas that we're seeing are more with the second-, third movement of buyers that Jed mentioned earlier. We saw more declines there year-over-year with Trophy really helping to carry the torch.

Okay, got it. And is that -- I guess, is there a -- are you even just able to offer better incentives or more incentives on Trophy or are those segmentary move-up buyers having trouble selling their existing home and that's -- or why they don't want to acquire the new home or just sentiment issues? Just would be curious on any of any insights you guys could provide.

We're just seeing the suburban second and third time move up buyer, especially the cultural buyer, just really frozen right now. So it's -- like I previously mentioned, over $900,000, we're very happy with under $500,000 and really under $400,000, where we're really just hitting the entry-level buyer, we're very pleased with how that business is going in this very tough environment.

We're just -- it's limited lot supply at $500,000 to $800,000, and we're just going to value -- we don't want to burn through our lot at the second lower margins, at the expense of lower margins.

Got it. Yeah, that makes sense. Thanks again, guys.

There are no further questions at this time. I will now turn the call back to Jim Brickman, CEO for closing remarks.

Thank you for everybody for attending our phone call. We would encourage anybody that wants to visit us in Dallas to see our communities because we think that's a big differentiator. We really look at our business different than our peers. And if we took you on a tour, I think you'd see that firsthand. So hopefully you'll come visit us. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.