Good afternoon, everyone and welcome to Green Brick’s Partners Earnings Call for the Third Quarter ended September 30, 2021. 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. A slideshow supporting today’s presentation will accompany today’s webcast and 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 Third Quarter Investor Call Presentation. The company reminds you that during this conference call, it 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 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 third quarter earnings press release, which was released on Tuesday, November 2, 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 and the presentation available on the company’s website. I would now like to turn the conference over to Green Brick’s CEO, Jim Brickman. Please go ahead, sir.

Thank you, operator. 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 Third Quarter Investor Call Presentation. I will give everybody a few seconds to do this. Our third quarter income of $48.5 million was a record for any third quarter and up nearly 40% from the prior year. Year-to-date, our net income is up 50% versus the first nine months of 2020. Thanks to a great team effort, we provided our investors some of the best returns in the industry. Our return on equity was 26.1% for the quarter, bringing our year-to-date return on equity to 24%, which compares to 19.9% year-to-date 2020. After we saw the huge upward shift in demand in June 2020, our land teams did a fantastic job of quickly pivoting to acquire well-located land. As a result, during the last 12 months our lot position grew over 100% to 24,354 owned and controlled lots. While these additional 12,000-plus lots acquired over the last year did not meaningfully contribute to our bottom line in 2021. These lots will contribute to us growing significantly in the future – in our future earnings. Our gross margin reached 26.9% this quarter, up 580 basis points from two years ago, up 210 basis points from the prior year quarter and up 150 basis points from the first quarter of 2021 and up marginally compared to the last quarter as Green Brick achieve pricing…

Thanks, Jim. On slide eight, we demonstrate how our investment in land has translated to an increased capacity to generate topline 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. Year-to-date, our lots owned and controlled increased by 9,886 to end at 24,354 total lots, a new all-time high for the company. This is a 68% increase from the start of the year. After including land under option and lots option through joint ventures, we expect about 90% 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 nine provides additional detail on the attractive submarkets in DFW and Atlanta where our lot supply is located. Now, follow me to slide 10 and you will see that our communities and lots under development hit new highs this quarter. With 55 communities under development versus 42 last quarter, our land pipeline is well-established to meet our continued growth trajectory over 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 three months, we expect to complete and release roughly 900 lots to our subsidiary homebuilders for new housing starts. During fiscal year 2022, we expect to accelerate our delivery of finished lots by finishing 3,700 lots during the year. With…

Thanks, Jed. And thank you all for joining us to review our 2021 third quarter financial results. Slide 14 of our presentation shows the continuation of our high levels of year-over-year growth in our home closings and home closings revenue. Year-to-date, our closings have grown by 24%, while related revenues grew 31% year-over-year. Quarter-over-quarter, our closings grew by 19% and our home closing revenues grew by 29%. While side 14 looks at our historical closings in revenues, slide 15 points and pivots to our future closings and shows the year-over-year increases in net new orders and a record backlog. While net new orders are up 52% versus the first nine months of 2020, our Q3 2021 net orders were down 16%, as the company metered sales to better match construction schedules and buyer expectations and improve our ability to capture price increases throughout the construction cycle. Interestingly, with our average sales price of $542,000 in net new orders, is up nearly 22% in Q3 on a year-over-year basis, our sales revenues for net new orders in the quarter was up 2% over last year, despite the 16% drop in order numbers. Year-to-date sales revenue is up 34% with orders up 17% and the average sales price up 15%. The absorption rate per average active selling community per quarter of 8.8 homes during the nine months ended September 30, 2021, exceeds the 6.9 net new home orders per quarter during the nine months ended 9/30 of 2020 by 27.5%. That said, our absorption pace in Q3 of 2021 of 8.2 net homes per quarter is over 50% higher than Q3 of 2019, two years ago. By metering sales during the last six months, we've been able to increase our spec homes under construction by nearly 50%, which will enable us to…

Great. Thanks, Rick. Really great results this quarter, or the culmination of years of diligent planning and hard work by our subsidiary builders in our corporate team. We believe that the results achieved this quarter are just the next step in Green Bricks remarkable growth story, as the company swiftly moves to materially exceed $1 billion in revenues this year. We believe Green Bricks prospects for continued top-line and bottom-line growth are truly unrivalled in our industry. I'll now turn the call back over the operator for your questions. Thank you.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from line of Michael Rehak [ph] with JPMorgan. Please proceed with your question.

Hi. This is Maggie on for Mike. Thanks for taking my questions. You talked about your focus on price over pace and also pointed to the continued pricing power that you're seeing. Could you talk about this quarter the pace and magnitude of price increases maybe compared to earlier this year? And looking forward how you're thinking about the potential for further price increases particularly, being mindful of affordability as you can take continue to pivot towards the entry level segment.

Sure. This is Jim Brickman. Obviously, this is a major topic that everybody wants to discuss. And Jed Dolson, our Chief Operating Officer is probably best prepared to really answer that in detail because he deals with this question on almost a daily basis with our builder. So Jed, do you want to talk about price versus pace pricing strategy or margins?

Yes, Maggie, we were very aggressive our price increases this quarter in Q3 more so than in Q2 Two. And we think those results will show up later in further quarters.

And hey, Maggie, it's Rick. Thanks for your question. And also, just in terms of magnitude, our backlog ASP grew by 7%, from quarter to quarter. And that was largely driven by the ASP on our new orders, which was up by 10%, from Q2 to Q3.

Got it? Thank you. And then the second question is, on your gross margin outlook over the next couple of quarters. Can you remind us when you expect to see peak lumber costs flowing through the P&L and then also talk about how you're thinking about other inflation into 2022? And then lastly, at your Investor Day, you highlighted some of your programs in operational efficiency -- initiatives that are helping you manage through the current environment. So, you could you talk about how those are also factoring into your outlook over the next couple of quarters?

Sure, Maggie. This is Jim Brickman. Most of the lumber cost, the big lumber price increases, we're going to run through the income statement by the end of the fourth quarter. Really, the challenge right now is what's happening, are we going to give up some of those lumber cost benefits as lumber prices they retreat slower than they then they go up. But we're going to give some of those increases back next year? And we're watching that very closely. We think we read prices nicely where we can still have margin growth. Next week, for example, Jed and I are talking to all of our division Presidents and each one of our purchasing departments and operating managers and we are -- we have basically nine stages of construction. We're going through each stage of the construction and reviewing input cost today and projections tomorrow. And really, it's just an ongoing process. We feel good about it, but it's very volatile.

Got it. Thank you.

Our next question comes from line of Susan Maklari with Goldman Sachs. Please proceed with your question. Q – Unidentified Analyst: Hey, everyone, this is Charles Peron [ph] in Susan. Thanks for taking my questions. First, I would like to talk about the land market and what you're seeing in there? Seems like you were able to secure further your land position this quarter and to support growth for the coming years. But can you talk about the competition that you're seeing for those lots, both from the public and the private builders? And how does this impact the margin trajectory in the coming years?

Okay, Charles. This Jim Brickman. I'm going to take that at a high level and then try to answer it a little bit more on a granular level. First of all, my job as CEO is to manage risk, and create a culture that manages risk. And I think we've done a really good job of doing that. And we're going to continue to do that. At the same time. You know, we recognize the profit starts with land, and the greatest risk is in land. And I'd like to leave kind of our audience with two points about off balance sheet, land banking risk, margin return. And one is that, land banking comes at a very high cost of capital. Two is that, land bankers are some of the smartest people in the homebuilding space. And three, I've been really perplexed by this. And that is that the idea that to please Wall Street that land risk can be magically shifted to land bankers, that are some of the smartest people in the room, I think, is a little disingenuous. Lots are very low supply in all of our markets. There are very few developers in our markets. We have been the biggest land developer in our markets for a very long time. And we are going to use our strong balance sheet, low lot supply to continue to develop lots because generally, we think these lots are going to provide at least a 5% margin advantage over auction lots. So does that answer your question and kind of a broad basis and a margin basis? Q – Unidentified Analyst: Yeah, yeah – it does. I appreciate the collar on that, Jim. And then my follow up. I was wondering if you can talk a little bit more about the supply chain -- mix that you've seen over the quarter. Obviously, a lot of your competitors have reported a very challenging supply chain environment right now. But I will be curious to know how it is impacted your business over the course of the quarter. And where do you see the most pressure right now?

Jed, why don't you take that?

Yes, Charles. The biggest problem with the supply chain right now is the lack of predictability about what is going to be the next shortage, whether it be labor or material. So just the uncertainty about what is around the band, after we finished the next stage of construction. We are ordering materials way in advance now. We have labor lined up way in advance. But frankly, labor is having to touch the homes more frequently, they're having to come back on return trips, because they don't have all the materials that are needed when they make the first trip out. So it's in material barriers shortage -- material shortages vary market-by-market. For example, in Atlanta, we are having cabinet and window issues. In Dallas, we're having less of that. But we're having more brick shortages here. So it's really a sub-market by sub-market issue. Q – Unidentified Analyst: I appreciate the color. Thanks for the time and good luck.

Thank you.

Our next question comes from the line of Carl Reichardt with BTIG. Please proceed with your question.

Thanks. Hey, Jim, Rick, Jed. Hope you are all well. I had a couple for you guys, one on deliveries. Was there -- if you look at your internal budget for 3Q, did you have some deliveries that shifted out of 3Q into 4Q due to those delays, Jed? And then second, you mentioned of the 2,500 plus homes that you have under construction, you thought most of those would close in the next three quarters. I'm just trying to get a definition of most, is 90% kind of the right numeric to attach the most?

Yes. This is Jed, Carl. Yes to answer your last question first. Yes, you could assume 90% of the 2,500 will close in the next three quarters. And on -- and then yes, we did have several last minute material shortages. We had a lot of flooring issues in Dallas in Q3 that did push some closings into Q4.

Okay. Thank you. And then on orders. Could you talk about maybe the percentage of communities that your metering sales instill and it seemed to me that your order is actually from an absorption or community perspective will be pretty good. There I mean, there are up. And so sort of anti-seasonally in 3Q weeks we've heard or they're obviously we've seen other builders whose numbers have been sort of off anti-seasonally. I'm just kind of curious your thinking on whether or not the orders surprise you to the upside given the metering, given the price increases and given the relatively flat communities sequentially?

Let me kind of answer that a backwards way in that. Q3, we were a little disappointed with our cycle time. We thought with the drier weather, we would have finished more homes like we just alluded to, but we had labor and material shortages that prevented that. So I think as you look forward in Q4, I think you'll see us tap the brakes a little bit on sales compared to Q3. As you mentioned, we sold more homes in Q3 than we did in Q2 of this year. So, Q4 we're going to tap the brakes a little, the demand is off the charts, strong. We're metering sales in 80% plus of our communities.

And again, we have a lot more spec inventory that's going to be available to sell the first and second quarter of 2022.

Okay. Thanks Jed and Jim. And then last on pricing, are you noting in your sense -- Jim kind of may alluded to this in terms of specs, but is your sense that your pricing power in Trophy signature right now is greater than it is in the remainder of the brands and products? And then like I asked almost every quarter, any sense as to whether or not you're looking at expanding Trophy signature more aggressively sooner in the market outside Dallas? Thanks.

No, our greatest pricing power is in the very supply constrained markets like Frisco, Alpharetta -- Frisco, Texas; Alpharetta, Georgia where we are the largest builder in those sub markets, and there's very limited competition from other builders and unbelievably, low existing house supply. So, that's where really we have unbelievable pricing power. At Trophy, it's still very good. Jed can talk more about limiting sales, but what we do when many Trophy communities is, we'll say, well, we're going to only take four or five sales and just limit sales after that totally. But take those four sales and obviously, the highest margins we can harvest.

Other markets?

Other markets, unbelievably strong. Colorado Springs--

Expansion of Trophy--

Yes, on the expansion of Trophy, we are -- we continue to really keep our eye on two markets. And we think we're making good progress in those two markets.

Okay, thanks guys. Appreciate the time as always.

Thank you, Carl.

Our next question comes from line of Alex Rygiel with B. Riley. Please proceed with your question.

Thank you for taking my question. As it relates to average selling price, if we look out over the next few quarters, given the product shift, how should we model that?

Alex, this is Jed. Was the question, how should we model average sales price over the next few quarters?

Yes, you know, average selling price for the total company, understanding that there's going to be some mix shift in there over time?

I think it'd be pretty consistent with what we're seeing right now in our new orders. I mean, you can really take a lot out of the overall trend and the backlog dollars, which is on an ASP basis is up year-over-year now 21%. And that's for the near-term, the general direction, that you should see our prices travelling. I mean, it's not to suggest that it's going to fully go up that distance, because it's come a long way so far, but directionally, it's been pretty, pretty smooth on that basis.

The modelling question--.

Alex, just to put some numbers to that. I would just say in Q1, our ASP was approximately 420 and we see a pathway for that getting to around 500.

That's helpful. And then as we think about an effective tax rate for 2022. I assume it could be slightly higher than this year, any broader thoughts on that?

Well, certainly depends on if anything happens coming out of Washington. But absent that, we should continue on. If the tax credits are the same, it would be at the 23.5% the tax credits are certainly moving target right now in Washington.

Thank you.

Thanks, Alex.

Our next question comes from line of David Papson with CDT Capital. Please proceed with your question.

Hi, and good afternoon, everyone. My question is regarding the guidance for finished landlords, for 2022. Looks like it's come down quite substantially quarter-over-quarter with that expectation, there's not a 900 lot Delta. Just kind of curious, what kind of causing that? Is it really just supply chain loads and labor works – is a bit helpful?

Well, David – our communities that we do deliver they are – as we mentioned, they're continuing to increase the number of lots. We did you know, we're, we're seeing development delays, just like we're seeing homebuilding delays. So we have from a community count perspective, we did see community account just dip a little bit. But those communities are higher velocity, higher number of lot communities, which we had forecasted. So we – as I think we gave some pretty good numbers during our – during the call about what we you know how many loss – anticipate delivering over the next three to four quarters.

Yeah, David, that delta is certainly was a function of communities going from the end of Q4 of 2022 to the beginning of Q3 2023. So it wasn't a big delta, it was one community basically

One community. All right, that's helpful. And then just going forward, I guess, more broadly, is the company more in terms of growth of acquiring new land? Is it – is the company more in growth mode? Is it in state stability mode is a kind of harvesting mode now that the number of laws in inventory has doubled? Any guidance around, what we should expect for land acquisition going forward? Maybe not specific numbers, but incremental numbers might be helpful?

This is Jim. Well, first of all, I think we pivoted very quickly and alertly after, as we said in the call in May and June of 2020, and moved on a lot of land positions ahead of the pack. So we're in a really good position in terms of lots in 2022 and beyond. So we don't need to be aggressive on the land side to allow significant growth in our homebuilding revenues. We don't predict what that growth is going to be. But we have the lock position, and the price position on those lots of we're bought opportunistically to grow our business. And we're just going to continue to manage that the best we can.

That's helpful. Thank you for taking my question.

Our next question comes from line of Bill Dezellem with Tieton Capital. Please proceed with your question.

Thank you. I want to start out just by asking you to repeat what you said about the fourth quarter revenues versus the third quarter revenues, if you would please, and any additional color you'd like to put around it?

Rick?

Hey, Bill. This is Rick. We really just said that we expect sequential revenue growth from Q3 to Q4. We really didn't provide any incremental color than that.

And you don't want to take this opportunity now to do that?

Nope.

Alright, fair enough. I thought I'd give you the opportunity, anyhow.

Sure.

So let me jump to home price. And really, you'd answered the question, I think, very early on in the Q&A, but I wanted to make sure that what we're seeing in terms of the backlog price being up or higher than the homes delivered price, that that is really a function of pricing in the market, rather than the mix of homes; meaning fewer starter homes, more second time move up, etcetera, or anything like that. It -- did we understand that correctly?

Yes. This -- it's a Rick, again, Bill. Our backlog ASP is up 22%, which is greater than the units are up. You can see, that's a trend indicator, if you will. It's not that the ASP is going to get to that level, because if you look in our history, it's indicative of the actual homes that are in backlog, not the entirety of our mix, because you will always have backlog with some of the more custom homes, populating your backlog, your built-to-suit jobs, etcetera, of Southgate Homes, etcetera.

And Bill, this is Jim. Really, we don't expect people to track community by community by neighborhoods. But really, if we think for the next 90 days, if you tracked some of our Frisco communities with Trophy or our Alpharetta communities with TPG, you can actually just watch those prices increase pretty significantly in those neighborhoods.

So, bottom line, part of what we are seeing with the backlog of prices being above homes delivered prices is price. Part of it is also a function of – well, and I presume, even will be more of a function going forward of the number of spec homes, which will influence that price of homes delivered relative to backlog also.

Yes.

Okay, that's helpful. And then lastly, when are you anticipating that your start will begin to ramp again, is looking at the – at the chart where you're showing your lots purchased or excuse me, a lots owned and controlled. And that's been increasing for a while. But in the past you have said there's a couple year lag, but I think you've done some things to accelerate that, would you put all those pieces of the puzzle together for us and help us understand when you – when you're anticipating that start curve to turn up?

Well, we don't predict starts in the future. But I can tell you that, you know, the backlog is huge, it’s kind of picked through the Python [ph] until we get the backlog starting to reduce materially and closings, just because of capacities internally with our own builders and externally with a subs and vendors. We don't want to start more homes, because we're just competing against ourselves.

Thank you all for the perspective.

Our final question comes from Alex Barron with Housing Research Center. Please proceed with your question.

Thanks, gentlemen. Just wanted to ask in terms of limiting sales to fix the backlog, is that something you think is just going to go through the end of this year, or do you think it will extend into the early part of next year as well?

I think that's a great question. And I wish I could give a good answer. This is Jim. And I really think what we're monitoring very closely is the capacity of our sub base and our trade base. And that's going to really dictate the answer to your question. We just don't know that yet.

Got it. And I'm not sure if I missed it. But do you guys give a number as far as how many homes you guys started this quarter? And just trying to get a sense of, you know, how many – how much you're trying to start ahead of sales versus sales.

Yeah, we're pulling that for you right now.

You can usually divide that when you see our ending units under construction, you would add the starts and subtract the closing, since you know the beginning and ending and the closing, so you can kind of induce it. But the starts in Q3 were 807.

Got it. Thanks and best of luck.

Thank you. Appreciate it.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And this concludes today's conference. You may disconnect your lines at this time. Thank you all.