Good afternoon, and welcome to the Green Brick Partners' Earnings Call for the First Quarter ended March 31, 2023. 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 and is also available on the Company's website at investors.greenbrickpartners.com. Joining us on the call today is Jim Brickman, Co-Founder and Chief Executive Officer; Rick Costello, Chief Financial Officer; and Jed Dolson, Chief Operating Officer. Some of the information discussed on this call is forward-looking, including the Company's financial and operational expectations for 2023 and beyond. In yesterday's press release and SEC filings, the company detailed material risks that may cause its future results to differ from its expectations. The company's statements are as of today, May 4th 2023, and the Company has no obligation to update any forward-looking statements 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 presentation available on the company's website. With that, I will now turn the call over to Jim Brickman.

Thank you. I am extremely pleased to report that Green Brick started 2023 with the best first quarter results in our history. During the first quarter of 2023, we delivered 761 homes, which was a record number for any first quarter and led to a 24% year-over-year growth in home closing revenues of $449 million. This revenue level was also a record for any first quarter. As opposed to margin degradation seen among many of the public homebuilders, Green Brick was able to sustain a homebuilding gross margin of 27.6%, one of the highest among homebuilders and up 140 basis points sequentially from Q4, 2022. Net income during the first quarter was $64 million and earnings per diluted share grew 14% year-over-year to $1.37. Again, both income measures were records for any first quarter. Our strong land and lot position and operational execution yield and an annualized return on equity of 24.4%. Additionally, we returned $15.4 million back to shareholders during the quarter through our stock buyback repurchase program. Sales momentum was exceptionally strong during the first quarter. Net orders accelerated across all builders brands, and that 1,067 homes were up 78% year-over-year, and 152% sequentially, the second highest number of net orders of any quarter in our company history. Furthermore, our cancellation rate improved significantly dropping 14% each points from Q4, 2022 to 6.2% in the first quarter; the lowest in the industry. Jed will provide more color and sales activity shortly. While we are encouraged by the string and sales pace, the volatility and interest rates remains the biggest winning target in the homebuilding industry. However, we believe Green Brick possesses multiple strategic advantages that position us for industry leading performance as summarized on slide four of the presentation. Our first advantage is a significant footprint in markets…

Thank you, Jim. Please turn to slide eight of the presentation. Home deliveries in the first quarter grew 16% year-over-year to a Q1 record of 761 units, with ASP growing 7% year-over-year to $591,000. Home closings revenue broke our record for any first quarter and climbed 24% year-over-year to $449 million. SG&A as a percentage of residential unit revenue was 10.2%, up from 9.4% year-over-year, due to an increase in brokerage commissions. Net income attributable to Green Brick and diluted earnings per share were up 4% and 14% year-over-year, growing to $64 million and $1.37 per share respectively. Again, both were records for any first quarter. Our cancellation rate improved 180 basis points year-over-year to 6.2%, which was a significant improvement from 20% last quarter. As shown on slide nine, our Q1 cancellation rate was the lowest among the public homebuilders as we are the sole builder with a single digit cancellation rate in Q1. As Jim mentioned earlier, demand for our homes has remained remarkably strong since November. Net new home orders in the first quarter rose 78% year-over-year to 1,067. As shown on slide four, we are one of the two public homebuilders that reported a positive year-over-year change in net orders. In fact, as seen on slide four, the other public homebuilders had an average decline of 21% in year-over-year net orders. Sequentially, net new orders were up 152% over Q4, 2022. Revenue from net new homeowners was up 75% over Q1, 2022 to a record $631 million. Active selling communities at the end of Q1 were up 4% year-over-year to 79. Our quarterly absorption rate per average active selling community increased to a record level for any quarter of 13.3 homes, up 143% from 5.5 homes last quarter and up 66% from 8.0 homes last year.…

Thank you, Rick. As Jim mentioned earlier, we're extremely pleased with our sales performance, especially given that all our builder brands and all price points have seen strong sales in our supply constrained infill markets. So we are optimistic as we move into the heart of the spring selling season. The disruption from changes in mortgage rates is softening as our homebuyers have adapted to a higher interest rate environment as a new norm. But we believe our story is unique to our markets and with our business model. We believe unmet demand will continue in our infill locations further our healthy job markets, favorable demographics and reduce competition from existing homes for sale. We expect sales to moderate from the record levels we saw at the beginning of the year as we will have fewer finished and finishing homes available to sell. But we expect the unmet demand to continue to create healthy sales orders for Green Brick and DFW and Atlanta through the remainder of the year. In the first quarter, because of exceptional demand, overall discounts and incentives for new orders moderated sequentially down to 4.4%, an improvement of 330 bps from 7.5 last quarter. Additionally, we selectively raised prices, and started metering sales in a few communities where we were selling faster than we could build. We continue to be cautious with purchasing land as prices are proving to be sticky. While we made no new land acquisitions during the first quarter, we are constantly on the hunt for good land deals that hit our return thresholds. We currently own and control 25,000 lots with 84% of them on our balance sheet. We remain confident with the quality and expected returns of those lots and believe our land philosophy and underwriting process is poised to continue…

Thank you, Jed. Finally, I want to express my gratitude to our employees and staff that are the backbone of our company and the primary reason for our performance. My goal is to continue to attract and retain top talent at our business. We continue to evaluate expansion opportunities for Trophy Signature Homes and we'll keep you posted on this progress. We are encouraged by the results of the first quarter and as we look ahead, we will remain confident in our ability to execute on our strategic initiatives to continue to deliver long-term value for our shareholders. We appreciate your continued support and interest in our company and look forward to speaking with you again next quarter. This concludes our prepared remarks. We will now open the line for your questions. Thank you.

Thank you. [Operator Instructions] We'll take our first question from Jay McCanless with Wedbush.

Hey, good morning. I guess, wondering about the sales pace during the quarter, was the order gains driven by a lot of finished homes that you had? Or were you trying to sell maybe at the beginning of the quarter to generate some extra cash flow and then decided to slow things as you started to see traffic and demand get even better?

Jed, why don't you take that? You do with it everyday.

Yes, sure. Jay. So, we entered the year with a slightly more finished specs than we would have liked. And although we had a good November and December sales, we wanted to make sure, we started the quarter out great. So, we had a little more incentives in the January sale, and then we've tighten those through the remainder of the quarter. And the incentives have tightened through the remainder of the quarter and we continue to see very strong demand.

And then I guess, what, because there's a lot of people, lot of your competitors saying the same thing you guys have said that potentially tighter lending standards later this year are going to create some opportunities. But I guess, kind of when do you think that's going to happen, Jim. And if it doesn't happen what's plan B? Do you feel like you have enough land to grow the community count through the rest of this year? And then also maybe do you have enough land in hand to grow it into next year if those bank driven opportunities don't appear?

Well, first of all, I don't think, this is Jim. I don't think we really need things to improve. We just hope they stay the same. We had a fantastic quarter. And we're seeing really even into May, the first few days that it's continuing. So, improvement isn't necessary to have a great year. In terms of bank lending out there, I think what you're going to see is the public builders are generally the least leveraged. They don't rely on banks. And they're going to benefit. That we continue to gain market share every cycle. And I think you're really going to see that by all builders. And we think particularly by us, because we have the best locations of any of the public builders.

And Jay, hey, this is Rick. Thanks for the questions. One of the things from the buyer side is that we're still seeing very consistent credit scores, credit quality from our buyers, and the 750 range. But we are also seeing the buyers who are acknowledging the existence of the higher rate mortgage loans that are available are simply allocating more dollars from a personal standpoint to their housing component. The back end ratios are obviously still conforming, just higher and it's because everybody needs a house. And that's why it really makes a difference where you're selling like Jed said, we think we have a unique story, not just being in the best markets in the country, but being in the best sub markets with our infill and infill adjacent communities.

Got it. And actually, Rick, I was going to throw a couple to you. I guess the first one I had for you is, with this large amount of say, closings in the first quarter, should we expect a sequential decline in closings? And then also maybe talk about where you think the community count could go this year?

Yes. Community count is especially challenging right now from the standpoint of, it's going to be very dependent on how robust sales are on a go forward basis. We're still going to have the lot count. We've reiterated that fact on some of the maps that we're showing. From a closing cadence standpoint we've really done a good job on building our backlog. So in that regard, we're happy to enter Q2 with much better backlog than we entered Q1. It's really, to answer your question on a timing basis between quarters is going to be a function of cycle time and how much improvement we see there. If the cycle times are improving you're essentially getting more houses that are available to close in Q2 and Q3. And we're hoping that some of the houses that we're going to start in Q4 are able to complete and closed by the end of 2023. So it's really a TBD, we shall say.

[Indiscernible] Q2.

No, no, I'm talking about Q4. We restart houses in Q2 that are going to be ready by the end of the year. Yes.

Okay, great. Thanks for taking my questions.

Thanks, Jay.

Okay. Next we'll go to Carl Reichardt with BTIG. Your line is open.

Thanks, everybody. So following on Jay's question, I think Rick, for you, so 1,067 orders this quarter. What percentage of those orders also closed this quarter? And then what percentage of those orders were on to be built i.e. not even trenching house hasn't started?

Wow. That's a really good question. Carl this is Jed. I'll take. We may need to get back with you on the exact answers on that. I can tell you on the second part of your question, very few of the homes sold were to be built. Most of them were either finished or were coming out of the ground already.

Okay.

And I would say, if I had to guess I would say, over 50% of the sales sold and closed in the quarter.

Okay. Thank you, Jed. Appreciate that. And then -- so because of the unusual nature of the quarter, your cash flow statement looks like we typically see in the foreground. But don't I think you've ever generated more operating cash in any quarter than you did in this unusual first quarter. So you're sitting with $100 million more in cash than you had. You have a new authorization out there. But at the same time, we sort of talked about starts being given the strength you've seen little behind maybe where you want them. So when modeling that out for the course of this year, what do we expect you to do with that excess cash? Would this be back in the share repurchase or would it be more getting dirt ready, whip [ph], et cetera as you as you look at the market?

This is Jim, Carl.

Hey Jim.

Hey. I probably should have added. We had five strategic advantages that I mentioned when we went through the first part of the earnings call. I think we really have a six and that's when it becomes really how we look at evaluating stock purchases, and repurchases of our stock versus investing in land deals or other opportunities. David Einhorn is our Chairman. He's also our biggest shareholder. I've known David for 21 years. We have a really nice tight financial team here. But David is very helpful to us, as we evaluate, looking at stock repurchases versus internal rates of return, and whether it's buying a land deal or investing more in whip. And it's really a very fluid process. So I don't have an answer to that. All I can tell you is that David is very involved in this. And I think he makes some really great decisions for our business when it comes to this.

Fair enough.

Hey, Carl, this is Rick. I will add on to that. Certainly, one of the things that we're going to be doing with this kind of sales pace is increasing starts. And I said as much during the prepared remarks. We have had a drawdown in whip on our balance sheet, that's fairly obvious with the decline in the units under construction. I mean, hopefully, we can keep the units under construction low because our cycle times are improving. But we certainly expect to then be building and spending more quickly on the whip side and getting our rate of starts up higher to hopefully where we have seen it in the past. So certainly you'll see that on the whip side. On the land side it's a TBD.

Okay, thank you, Rick. And if I can squeeze one more in just on. Sometimes I ask on new markets, Jim. And again, you built a lot of share in Dallas now. Share in Atlanta is pretty good. You've got Austin coming online. Is it still the way I should think about this as the incremental dollar of investment for Green Brick is more likely to go into existing markets than it is to go into new markets? Is that still the right way to think about things?

No, no.

Good. I'm glad I asked then.

Well, first of all, Trophy is, they do 1200 houses a year in Dallas. Dallas is pretty consistently a 40,000 stock market. Obviously, most of those are the bell curve, the Trophy in and so there's a big runway for Trophy. We're looking at a number of land deals right now. We think it's an opportunistic time, just because A&D lending is going to get cut back, due to the regulatory problems and lather lending problems have nothing to do with single family homes that banks are incurring. The other thing we're kind of excited about is that the cost of capital for land bankers has gone up, basically two-fold from a year ago. They are looking at a 10% debt component and their cost of capital typically right now, they're going to be much more conservative on how they look at deals. And we think there are going to be land opportunities in Dallas, we're already looking at some in Austin and we're looking at one deal with an experienced partner and another new market that I hope fingers crossed maybe I'll be giving you positive news, but don't count on the next call.

All right. I appreciate that. Thanks for the clarity. And thanks a lot, guys. Thanks for the time today.

Thanks, Carl.

[Operator Instructions] Next we'll go Alex Rygiel with B. Riley. Your line is open.

Thank you. Great quarter gentleman. Couple quick questions here. First, how many communities are you actually metering right now?

Yes, this is Jed. Alex. I'll take that. We're metering probably less than 10% right now.

Okay. And then as it relates to incentives through April/May, couldn't see incentive look like compared to the first quarter?

Well, we're not going to give forward guidance, but I can tell you that we are selling -- we have fewer and fewer finished specs right now. And so, we're seeing a lot of our sales happen early to mid cycle in the homebuilding process. So just coming out of the granite slab or just finishing mechanicals. So, we don't want -- we're going to be not in a hurry to incentivize sales as quickly as we would or our competitors would if the homes were finished.

And then, are you seeing building material cost other than framing declined at all yet?

Sorry. Are we saying building material prices?

Yes. Are you seeing them decline at all other than the framing.

Well, I think if you look at the spot market for framing, it's kind of been oscillating month-to-month and plus 5%, minus 5% market this year. So I think framing costs really bottomed in February, and they've kind of been bouncing along the bottom in the past couple of months. The building materials.

Yes, my question was -

Go ahead. Yep.

My question was more about the other materials?

Yes. So the other materials were in a different situation than we were a year ago. We're thankful to have materials now, so we can build our homes, which is evidenced by our reduced cycle times. We see that getting better and better. A lot of the materials had -- we are seeing quite reductions in the cost of those materials, because they were a -- lot of them were foreign bought and had shipping container surcharges and those have gone away. And we can -- a lot of that suppliers have relocated the supplies either domestically or to Mexico. And we're seeing -- so we're getting the products cheaper than we were a year ago.

Thank you very much.

Yep.

Showing no further questions. I'd now like to turn the call back over to our presenters for any additional or closing remarks.

Thank you for joining the call. Thank you for your investment support. We will continue to try to do the best we can from a return standpoint. Have a good day.

And this concludes today's conference call. You may now disconnect.