Good afternoon, everyone and welcome to Green Brick’s Partners Earnings Call for the Second Quarter ended June 30, 2021. Following today’s remarks, we will hold a question-and-answer session. And as a reminder, this call is being recorded and will be available for playback. A slideshow supporting today’s presentation will accompany today’s webcast and it is available on Green Brick Partners website, www.greenbrickpartners.com. For listeners joining us by teleconference, go to Investors & Governance, then click on the option that says Reporting, and then scroll down the page until you see the Second Quarter Investor Call Presentation. The company reminds you that during this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including its financial and operational expectations for 2021 and the future and anticipated impact of COVID-19 on our future operations, prospects and other aspects of our business. Investors are cautioned that such forward-looking statements are based on current expectations and subject to risks and uncertainties and could cause actual results or outcomes to differ materially from those set forth in our forward-looking statements. These risks are set forth in our second quarter earnings press release, which was released on Tuesday, August 3, 2021 and the risk factors described in the company’s most recent annual and quarterly filings with the Securities and Exchange Commission. Green Brick Partners undertakes no duty to update any forward-looking statements that are made during this call. In addition, our comments will include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by the Regulation G regarding these metrics can be found in the earnings release that Green Brick issued yesterday in the presentation available on the company’s website. I would now like to turn the conference call over to Green Brick’s CEO, Jim Brickman. Please go ahead, sir.

Thank you. Hi, everyone. With me is Rick Costello, our CFO and Jed Dolson, our COO. Thank you for joining the call. As the operator mentioned, if you are joining us by phone today, the presentation that accompanies this earnings call can be found on our webpage at greenbrickpartners.com. At the top of our webpage click on Investors & Governance, then click on the option that says Reporting and scroll down the page until you see the Second Quarter Investor Call Presentation. I will give everybody a few seconds to do this. With our all-time record results achieved this quarter, Green Brick’s annualized Q2 2021 return on equity hit a new high of 30.2%. Thanks to a great team effort we provided our investors some of the best returns in the industry. Even better, we expect these returns to accelerate. Our total revenues were $1.1 billion on a trailing 12-month basis. From Q1 to Q2, we increased homebuilding revenues by 54% and our EPS doubled. We continue to be confident that our revenues and earnings will continue to grow sequentially each quarter this year. Our core focus on land development and our dominant presence and reputation on our markets has resulted in the 133% increase in our lots owned and controlled from the prior year. Our superior capacity to source new land has allowed us to grow our units under construction an astounding 95% as compared to June 30, 2020 and provides a ready supply of new housing to meet demand. Our gross margin reached 26.8% this quarter. This is up 360 basis points from the prior year and up 140 basis points from the first quarter as Green Brick has achieved pricing power in our core markets of Dallas-Fort Worth and Atlanta. In order to capitalize on rising prices…

Thanks, Jim. On Slide 7, we demonstrate how our investment in land has translated to an increased capacity to generate top line growth. As you can see from the chart on this slide, a key driver behind our strong financial and operational results has been our ability to convert investments in land to future growth in revenue. During the first half of 2021, our lots owned and controlled increased by 6,883 to end at 21,351 total lots, a new all-time high for the company. This is a 48% increase from the start of the year. After including land under option and lots option through joint ventures, we expect nearly 88% of our current inventory of lots owned and controlled to be self-developed by the company. We believe this strong emphasis on land development should allow Green Brick’s margins and returns to continue to represent one of the best growth opportunity profiles among our peers as these self-developed lots avoid expensive premiums charged by third-party land developers. For those of you who are interested, Slide 8 provides additional detail on the attractive submarkets of Dallas – in Dallas-Fort Worth and Atlanta where our lot supply is located. Now, follow me to Slide 9 and you will see that our communities and lots under development hit new all – new highs this quarter. With 42 communities under development, our land pipeline is well established to meet our continued growth trajectory in the next several years. These lots under development will shift towards the entry level market, with over one-third of the lots under development located in more affordable submarkets. In the next 6 months, we expect to complete and release roughly 1,800 lots to our subsidiary homebuilders for new housing starts. During fiscal year 2022, we expect to accelerate our delivery of…

Thanks, Jed. Thank you, everyone for joining us today to review our 2021 second quarter financial results. Before I talk about our record second quarter results, I want to provide some additional context for the remarkable growth this quarter and take a more detailed look at how our Trophy brand is well established for future growth. Slide 11 of our presentation provides an in-depth look at Trophy share of Green Brick’s performance metrics through June 30, 2021. As you can see on this slide, Trophy’s percentage of home closings has grown by 14% from 20% of our full year closings in fiscal year 2020 to 34% for the 6 months ended June 30, 2021. However, with 41% of our starts this year and 65% of our lots owned and controlled related to Trophy, we believe Trophy has a clear runway to continue its growth trajectory in Dallas-Fort Worth. While our lots owned and controlled allocated to Trophy has increased nearly 460% from a year ago, it’s important to note that the nearly 14,000 lots shown as of June 30, 2021 includes two communities with more than 1,000 lots each that will have a much longer lifecycle. So excluding these two communities, Trophy’s share of existing lots is still 54%, which is 20% higher than Trophy’s 34% share of our home deliveries these past 6 months. Slide 12 of our presentation explains why we believe the growth of our Trophy Signature brand has the capacity to scale our bottom line results even faster than our top line results. First, with the average Trophy community expected to be double the size of our other subsidiaries next year in terms of lot count per community, we are able to increase our absorption pace without requiring growth in community count. Second, Trophy’s business model…

Okay. Thanks, Rick. Our record results this quarter are the combination of years of diligent planning and hard work by our subsidiary builders and our corporate team. We believe the outstanding results achieved this quarter are just the first step in Green Brick’s remarkable growth story, as the company swiftly moves to materially exceed $1 billion in revenues this year. We believe Green Brick’s prospects for continued top line and bottom line growth are truly unrivaled in our industry. To better understand how Green Brick has achieved our impressive risk adjusted returns to-date, we invite each of you to join us tomorrow for our Inaugural Virtual Investor Day from 9 a.m. to noon Central Daylight Time. With our Q2 2021 financial and operational results reaching new highs this quarter, we believe this event will provide critical insight into the new inflection point in the company’s growth story and hope that each of you will be able to attend. To register, please go to our website and click Investor Day 2021 under Investors & Governance. I will now turn the call back to the operator for questions.

[Operator Instructions] And our first question is from Michael Rehaut with JPMorgan. Please proceed with your question.

Hi, this is Maggie on for Mike. Thanks for taking my questions. The first thing I would like to dig a little bit more into how you are thinking about sales for the remainder of this year and into next year. After three quarters of the elevated starts levels, do you see this as more of a normalized starts pace going forward. And also, as you look at the back half of the year, you have got the pivot towards the higher absorption, Trophy communities you have got kind of the increased mix of spec homes under construction. But you have also got that competing with the price increases. So, can you talk about how we should kind of balance all of those factors, as we think about the next quarter or two quarters?

Yes. And this is Jim and Jed and Rick can chime in on this. But we are having normalized starts. And really, it’s a little bit more than normalized. We are going to complete – grow starts, particularly in the Trophy brand. We are seeing still very strong demand. I think some investors don’t understand how really strong that demand is, and we have intentionally delayed selling homes, because we know that demand is going to be there. There really aren’t a lot of options for home buyers. We have one community in Atlanta, for example, that is not a big community. And we had 1,200 people show interest on like an 80 lot community that we haven’t even considered really opening up for sales yet. So, we have a lot of indicators like this. The demand is very strong. And that’s why we have not taken orders. We could have probably pre-sold that whole community. But there is no point in doing that. It’s a community that we took a long time to entitle. And there is no point in pre-selling product in an inflationary cost environment would make me capture higher margins down the road. And we have a lot of examples like that.

Got it.

Also Maggie just to continue on that a little bit. We have ticked up from 28% to 33%. spec, that’s 5%, 500 basis point increase was very similar to what D.R. Horton did this quarter as well. There are some builders who have not started to meter their sales. And they are getting fewer and fewer spec homes out there as a percentage of what they do. Our model is not based on having such a large number of backlog homes. We leave money on the table. We can’t tell our customers with certainty when they are going to be closing. We are by selling earlier in the process we are losing out on potential price increases. So for us, we seek to get back to those levels. Yes, we are going to be closing a lot of houses in the back half of this year. But we still want our backlog as it – as a portion of what we have got under construction to go down some.

Okay. Thank you. And second on pricing, could you give us an idea of how much you raised prices during the quarter. And looking forward, how much more runway you think you have to continue raising prices before you start to see some more pushback? And also, if you could maybe give any update on kind of where you think ASP for the year might end up?

Jed, take that since you manage this process.

Sure. We on a monthly basis, we have been raising prices, varying, 3% to 5% per community per month. I think the one thing that we are very excited about is really not price raising, but because we do want to still provide an affordable product to the consumer. But we are very excited about what lumber is doing and how the cost input side of our business is dramatically falling. In some cases, we have seen lumber packs fall $20,000 in the past two months. So, we think there is still some room for that to fall. We are excited about that and that should lead to increased margins going forward.

Got it. And one more if I could sneak it in there. I think you mentioned that Trophy’s gross margins, improved above the company average for the quarter. But on an absolute basis, where are Trophy’s margins versus the rest of the company?

Maggie, we don’t, by brand or by geography, disclose gross margins. We gave about the most information on so many areas in this call that we typically don’t touch as you know. We don’t give guidance. We came about as close as we can to giving guidance telling that we expect the rest of the year to be better. Hopefully, the market has started paying attention to that. But we don’t give gross margins by brand or geography.

Okay. Thank you.

And our next question is from Alex Rygiel with B. Riley. Please proceed with your question.

Thank you. And very nice quarter gentlemen, circling back to one of the earlier questions, talking about building materials costs, understanding that lumber has come down. When might we see sort of the peak of lumber expense goes through your P&L? So therefore, when are we on sort of the backside of the curve? Is that right now or is that a little bit later in the third quarter? And then how should we think about building material costs for all other products going into that?

Okay. I am going to take part of that question. I would like to have Jed chime in later. We were able, I think reacting very quickly to being in really strong markets and strong neighborhoods within our markets. Where the lumber costs that went up, we are able to more than pass on. I have read a number of other conference calls where people are concerned about the lagging effect of those lumber costs and how they are going affect third quarter and fourth quarter margins. We don’t see margin degradation in the third quarter and fourth quarter, because we were able to raise prices very quickly. And so we are not seeing that in the third quarter and fourth quarter this year. In terms of building material costs, I really hope that everyone on this call can attend our Investor Day. Jack Wilkins is in town. He is our National Purchasing Director. All of our purchasing agents are going to be at the Investor Day. And you are going to get really a very granular look on what we expect to see in purchasing and how we are operating our business. But in a nutshell, it’s still a minefield out there in terms of bottlenecks and supply constraints. But we think that we have managed this process really well. And tomorrow on the Investor Day, you can meet the people who are doing that.

That’s great. And then turning over to land sales, obviously, ticked up in the quarter. Can you talk a little bit about your intermediate longer term, land sales strategy?

Sure. And Jed I want that you want to chime in on this. But it was a little bit of an odd month this year. We had one large transaction. And that we sold a retail site and a multifamily site to a multifamily institutional developer, we have done a lot of business with. And we were – how many lots were we left with?

250.

250 lots, after the sales. We made a nice gain on that. We have done business with these people. And what we need to communicate to investors is that these 250 lots that were still left with despite taking a nice land profit. Our basis in these lots on today’s values, these homes should produce higher margins than our company is producing already. So, we really don’t plan on selling any more lots. We may come into a situation where we have a unique opportunity to coordinate a large parcel where we will sell off the retail or multifamily uses, because we don’t do that. But we really don’t plan on selling them anymore left. Jed do you have anything?

No additional comments.

It’s very helpful. Thank you.

[Operator Instructions] And our next question is from Bill Dezellem with Tieton Capital Management. Please proceed with your question.

Great. Thank you. Congratulations on an amazing quarter. I am going to ask a couple of questions from a point of ignorance here, if you will allow. Can you first of all talk about the 604 new home orders in the second quarter being down from the 1,082 new home orders in the first quarter? And I know you have talked about limiting sales, but that’s really quite a dramatic fall off.

Yes. It is a fall off. But it was an intentional fall off. And I think our investors are going to be very pleased at the end of the year when they see the results of that strategy, because as we said, we are seeing great demand. And it doesn’t make sense to sell 1,000. Let’s say we could have sold 1,100, let’s say. But it doesn’t make sense in a rising price environment to sell 1,100 homes, when we can – when we see demand is there, we can harvest 3% or 4% greater margin by delaying that sales process.

Bill, in the first quarter, we sold 1,082 houses and closed 516. That’s more than double. And that just really all it does is add to our backlog on deals that are further out and delivery. Where if we wait until later in the construction process, which is our typical in our business, is not to be a backlog builder. But if we wait until later in the process, we would have gotten even more price increases passed along to our customers. So, it’s going to lead to better margins. It’s going to lead to better control of our construction and the ability to give our customers better visibility on the dates they are actually going to close.

And the homes we started it’s a relatively improved cycle times because we are not dealing with a customer during a lot of this processing.

That’s helpful. So essentially, this is the data point that highlights that what you have been talking about on the call, not only are you doing, but you are doing it in a dramatic way.

Yes.

Okay. Thank you. One more question. Again, this is from a point of ignorance. How do you see, anticipate or accomplish having revenues and earnings growing sequentially? When the backlog units in the start are down versus the first?

We had very strong starts for Q3 last year, Q4, Q1. And we have really not seen that level of closings, including these 757 deliveries. I mean we were over 1,000 starts per quarter for three quarters in a row.

We have the most homes build under construction. I think we have ever had, by a considerable margin. I think that’s one of the things that investors are not really fully comprehending.

And one other things that we have noticed or identified is that the trailing four quarters starts is at a record high as are the under construction units as you pointed out. So, should we be paying more attention to the trailing four quarters start than just any one individual?

I think so and what you have to put in context of those trailing four quarters, as we said it was intentional. Many of those startups we didn’t want to sell, because we would have to sell the house at current prices today. And we think we can pick up margin with not a lot of risk because the demand has remained so strong in selling these homes, two months before they are completed rather than trying to get a pre-sale. And actually and we are still trying to start more and more spec homes, but because of the supply bottlenecks, we just can’t.

Thank you. Congratulations again on a great quarter and for helping us understand how you are managing the pieces of the puzzle. Well done.

Thank you, Bill.

And we have reached the end of the question-and-answer session. I will now turn the call over to management for closing remarks.

I thank everybody for joining the call today. And again, reminder, please go to our website and on our investor page and sign up for tomorrow’s Investor Day. And I think you will find a lot of useful information. Thank you.