Green Brick Partners, Inc. Q4 FY2025 earnings call

• Performance remained resilient despite affordability challenges and housing inventory supply. Builders adapted to volatile market, balancing price and pay. - Net income and home deliveries/orders had strong fourth quarter results. - Home building gross margin affected by incentives and product mix. - Focus on operational excellence, disciplined land acquisition/development. - GreenBrick Mortgage expanding to more communities. - Reduced construction cycle times, with Trophy's average cycle time in DFW under 90 days. - Land acquisition and development spending in 2025: $267 million for land and $323 million for land development. - Changed definition of lots controlled to lots under contract, with total lots owned and under contract up 10% year over year to ~48,800.

For the fourth quarter, net income attributable to GreenBrick was $78 million or $1.78 per diluted share. Delivered 1,038 homes, a 1.9% year-over-year increase and a record fourth quarter. Achieved 883 net orders, also a record fourth quarter. Home building gross margin declined 490 basis points year over year and 170 basis points sequentially to 29.4% due to higher incentives and product mix changes. For the full year, deliveries increased 4.2% to 3,943 homes, home closings revenue was $2.1 billion (up 1% from 2024), home building gross margin decreased 330 basis points to 30.5%, net income decreased 18% to $313 million, diluted earnings per share declined 16.3% to $7.07. Discounts and incentives as a percentage of residential unit revenue increased to 9.2% in Q4 from 5.2% year ago. GreenBrick Mortgage closed and funded over 380 loans in Q4, average FICO score 746, average debt-to-income ratio 40%.

• In 2026, believe financial services platform will generate more pre-tax income than interest cost on all debt. - Expect to complete rollout of GreenBrick Mortgage to all DFW communities by end of Q1 2026, to Houston when first community opens in spring 2026 selling season, and to Atlanta by middle of 2026. - Anticipate GreenBrick Mortgage's capture rate to range from 75% to 85% by year end. - Goal to continue increasing community count by end of 2026. - Expect to see an increase in starts given planned community count increase, though may not benefit from all deliveries immediately. - If able to pull back on incentives and maintain momentum in February, may adjust accordingly.

• Macro-economic and political uncertainty affecting overall market conditions. - Affordability challenges faced by consumers. - Eroding consumer confidence. - Increased supply of housing inventory. - Concerns surrounding tariffs and potential impact on earnings, still assessing Supreme Court's ruling against Trump administration's tariffs and administration's potential response.

Q: Just on Q2, last quarter you broke out the gross margin decline between buy-downs and NICs. Can you give us a sense of the puts and takes on the gross margin and the drivers there?

A: Jeff said looked at mix ratio, most driven by higher incentives and discounts, compression across board, some anomalies in smaller builders due to community mix.

Q: Where are you guys buying down rates to at this point?

A: Jim Brickman said buying 499 with 321s on entry level, rates ran down, every quarter of a point about in buy down one point in incentive cost.

Q: Just on your costs, it looks like sequentially the cost per home went up a few points. Can you just give us a sense of that coming from direct costs and land costs?

A: Chad said direct costs continue to go down, new lot prices higher, lot costs relatively stable, biggest driver is increase in selling and closing costs.

Q: Can you talk a little bit about your inventory level as well as the broader inventory level across your markets?

A: Jed said seeing high desire for finished specs, carrying higher inventory levels, Jeff added at end of year carrying roughly five finished specs per community, half belong to Trophy, sales pace of finished inventory equates to about a month to one and a half months supply, middle of the pack in inventory compared to competitors.

Q: Any directional guidance on community account growth in 2026?

A: Jeff said ticked down in 2025 vs 2024, aggressively adding to lot pipeline, hard to predict community count but goal is to increase by end of 2026, Jed added adding horizontal development dollars to get community count up higher in coming years.

Q: First questions on deliveries, and I guess the trajectory of deliveries in 2026.

A: Jeff said pulled back on starts in Q4 to right size inventory, goal is to start roughly same number of homes as sell each period, expect increase in starts with planned community count increase, may not benefit from all deliveries immediately but looking to grow community count and closings in future years.

Q: I wanted to ask about spec strategy as well.

A: Jed said at Trophy seeing great success with higher profile buyers wanting immediate move-in, as an industry putting product on ground that consumers want, will continue to put specs on ground as buyers desire, Jeff added in industry making good job of putting product with right packages, and that with high margins, demand is elastic so can view spec inventory differently than low margin peers.

Q: Could you talk about what type of pricing power you had during the quarter and maybe what you've seen into the spring? What percentage of your communities were you able to raise prices?

A: Jed said very few communities able to raise prices, quality of backlog good with only ~7% cancellation rate, traffic good on all above with February off to record start.

Q: When you look at new deals that are coming to market and maybe some stuff that's being retraded, are you all seeing some better pricing on land in the markets you all want to acquire land?

A: Jim said on land not wanted, weak demand and lower prices, on land wanted for high margins, prices very sticky and expected to remain so.

Q: Just asking on incentives, and thank you for the color on backlog where you talked about Trophy only being 14% of the backlog. If you look at that other 86%, what is the incentive load on that now versus maybe where it was a year ago?

A: Jed said on million-dollar-plus build jobs, having to give higher design center monies than a year ago, on six to $700,000 houses, having to do closing cost incentives, rate buy downs etc. Jeff added incentives on closing during quarter were 9.2% up from 5.2% year ago, incentives on new orders during quarter picked up to 10.2%, but if can pull back on incentives and maintain momentum in February, may adjust accordingly.