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Good afternoon, and welcome to the Green Brick Partners Second Quarter 2025 Earnings Conference Call. I would now like to turn the call over to Jeff Cox, Interim Chief Financial Officer. Thank you. Please go ahead.

Good afternoon, and welcome to Green Brick Partners' Earnings Call for the Second Quarter ended June 30, 2025. 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 and is also available on the company's website at investors.greenbrickpartners.com. On the call today is Jim Brickman, Co-Founder and Chief Executive Officer; Jed Dolson, President and Chief Operating Officer; and myself, Jeff Cox, Interim Chief Financial Officer. Some of the information discussed on this call are forward-looking, including a discussion of the company's financial and operational expectations for 2025 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, July 31, 2025. 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'll turn the call over to Jim.

Thank you, Jeff. I'm pleased to announce our second quarter results particularly given the ongoing and persistent affordability challenges faced by many consumers in this housing market. Net income attributable to Green Brick for the second quarter was $82 million or $1.85 per diluted share. As we exited the spring selling season, our performance remained strong despite high interest rates and decreasing consumer confidence. We were focused on balancing price and pace to maximize returns in each of our communities. Our builders and their sales teams were able to adapt quickly to changing market conditions to drive traffic and sales. As a result, we set several company records during the quarter. One, we achieved a record for closings by delivering 1,042 homes; and two, we achieved a record for net new orders of 908, which was the highest for any second quarter in company history. Year-over-year, both home closings and net new orders increased approximately 6%, though revenue for the quarter was virtually flat year-over-year at $547 million. As Jeff will discuss in more detail, maintaining that sales volume required price concessions and other incentives as we address the affordability challenges raised in this high interest rate environment. As expected, these dynamics put downward pressure on our homebuilding gross margins, which declined 410 basis points year-over-year and 80 basis points sequentially to 30.4%. Nonetheless, our gross margins remain the highest in the public homebuilding industry and marked the ninth consecutive quarter in which our gross margins exceeded 30%. Additionally, we returned $60 million of capital to our shareholders in the first half of 2025 through share repurchases, and we still have another $40 million of authorization remaining under our buyback program. Since 2022, we have repurchased approximately 7.9 million shares, reducing our outstanding share count by approximately 16%. Looking ahead, our strategic focus remains on maintaining operational excellence while navigating ongoing market volatility. We are laser-focused on maintaining an investment- grade balance sheet with our disciplined approach and land acquisition while at the same time ensuring that we are well positioned for future growth. Our continued emphasis on efficient cost controls, innovative home offerings and targeted expansion in high-volume markets supports our goal of sustaining industry-leading profitability metrics and creating long-term shareholder value. We are particularly encouraged by the positive reception of our Trophy Signature Homes brand, which continues to outperform expectations and resonate strongly with both first-time and move-up buyers. We continued expansion of Trophy in DFW in Austin, along with the upcoming entry into the Houston market later this year, presents significant opportunities as we believe it will allow us to further diversify our revenue base, strengthen our presence in key Texas markets and provide a runway for sustained growth over the next few years. As we remain vigilant in monitoring macroeconomic trends and adapting to shifts in buyer preferences, we believe that our experienced team and robust land pipeline in desirable infill and infill adjacent locations will drive continued success in the quarters to come. With that, I'll now turn it over to Jeff to provide more detail regarding our financial results.

Thank you, Jim. As Jim mentioned earlier, we achieved a couple of new records this quarter for home closings and net new orders. Given the challenging economic conditions and increased supply of housing inventory in our markets, discounts and incentives increased year-over-year as a percentage of residential unit revenue to 7.7% from 4.5%. Our average sales price also declined by 5.3% year-over-year to $525,000 as our affiliated builders adjusted quickly to meet market demand. Home closings revenue was virtually unchanged compared to the same period last year of $547 million and homebuilding gross margins decreased 410 basis points year- over-year and 80 basis points sequentially to 30.4% due to higher discounts and incentives, primarily from mortgage buydowns. SG&A as a percentage of residential unit revenue for the second quarter increased by 40 basis points year-over-year to 10.9% as we continue to invest in our future growth. As a result of lower average sales prices and gross margins, net income attributable to Green Brick for the second quarter decreased 22% year-over-year to $82 million, and diluted earnings per share decreased 20% from our record quarterly earnings in the second quarter of 2024 to $1.85 per share. Our effective tax rate also increased to 21.9% from 18.5% due in part to a onetime benefit last year associated with stock options exercised in the second quarter of 2024. Year-to-date, deliveries increased 8% year-over-year to 1,952 homes and our average sales price declined 2.5% to $534,000, as a result, we generated home closings revenue of just over $1 billion, which increased 5.3% year-to-date from the same period in 2024. Homebuilding gross margin decreased 320 basis points to 30.8%. Year-to-date net income attributable to Green Brick decreased 16.8% to $157 million and diluted earnings per share declined 15% to $3.52. As a reminder, we sold our 49.9% interest in Challenger Homes in the first quarter last year, which had the impact of adding $0.21 to 2024 diluted earnings per share. Net new home orders during the second quarter moderated from a record level of 1,106 in the first quarter of 2025, but were up 6.2% year-over-year to 908. Year-to-date, net new home orders increased 4.6% year-over-year to 2014. Our average active selling communities remained relatively unchanged year-over-year at approximately 102, 1/3 of which were Trophy communities, and our sales pace for the second quarter increased 4.7% and approximately 3 homes per month compared to 2.8 homes per month in the previous year. With our continued investment in land and in particular, larger master plan communities, our average lot count for owned and controlled community increased 26.3% from the same period last year. We increased our starts by 10% from the previous quarter to 950 to better match our sales pace, but year-over-year starts still declined by 3.4%. Units under construction at the end of the quarter were down marginally by 1.1% to approximately 2,200 units. We will continue to monitor market conditions and adjust our start pace to manage our inventory levels accordingly. Due to a higher proportion of quick move-in sales, coupled with a 13-day improvement in our average construction cycle time our backlog value at the end of the second quarter decreased 21% year-over-year to $516 million. Backlog average sales price decreased 3.3% to $707,000 due primarily to higher discounts and incentives. Trophy, our spec home builder represented only 15% of our overall backlog value, consistent with previous quarters, but they accounted for nearly half of our closing volume. Lastly, we believe our investment-grade balance sheet continues to serve as a solid foundation for future growth, providing us with exceptional financial strength to navigate market headwinds and deploy capital opportunistically. At the end of the second quarter, our net debt to total capital ratio declined to 9.4% and our debt to total capital ratio was only 14.4%, the lowest level since 2015 and among the best of our small and mid-cap public homebuilding peers. Our long-term notes bear interest at a low average fixed rate of 3.4%, at the end of the quarter, we maintained a robust cash position of $112 million with no outstanding borrowings on our syndicated line of credit. With total liquidity of $477 million we believe we are well positioned to weather more challenging market conditions to opportunistically deploy capital to maximize shareholder returns and to accelerate growth as the housing market improves. With that, I'll now turn it over to Jed.

Thank you, Jeff. We believe a combination of high interest rates, seasonality and weakened consumer confidence contributed to a more challenging quarter compared to the prior year. Demand was impacted across all of our markets, but especially within our Trophy brand, as interest rates ticked up over 7% for portions of April and May. However, our builders were quick to adapt to the evolving market conditions and regained traction in sales volumes in the latter part of the quarter. Trophy in particular, which represented 52% of net new orders by volume, saw its orders grow by 9.3% year-over-year. While our cancellation rate for the second quarter increased sequentially to 9.9% from 9.2% in the previous year, it continued to remain among the lowest in the public homebuilding industry, and we believe it demonstrates the creditworthiness of our buyers, quality of our product and desirability of the land and lot positions where we build. We continue to address the affordability challenges faced by consumers by providing our homebuyers with price concessions and allowances towards interest rate buydowns and closing costs. Incentives for net new orders during the second quarter were higher by 320 bps year-over-year and 100 bps sequentially, increasing to 7.7%. These tools proved effective in driving traffic and sales velocity, especially with our quick move-in homes, with our superior infill and infill adjacent communities and industry-leading gross margins, we believe we are well positioned to adjust pricing as needed to meet market demand and maintaining our sales pace. While we recognize the importance of preserving our margins, we also recognize that our industry-leading margins provide us with significant additional pricing flexibility to compete effectively in a volatile market. Green Brick mortgage, which launched in the latter half of 2024, continue to roll out its operation within our DFW community and planned expansion into Austin, Atlanta and Houston later this year and early next year. Green Brick Mortgage closed and funded over 140 loans during the second quarter with an average FICO score of 745 and an average debt-to-income ratio of 38%, consistent with the previous quarter. We are excited about the future prospects of our wholly owned mortgage company is that it continues to increase its capture rate, provides top-tier service to our home buyers and gives us increased visibility into our backlog. Operationally, we continue to make meaningful strides in reducing costs and enhancing our operational efficiency. The cost for labor and materials for homes closed this quarter was down approximately 4,000 homes compared to the same period last year. Furthermore, we achieved a major milestone by reducing our average construction cycle times to just under 5 months. This is an improvement of 13 days from a year ago. In particular, Trophy's average cycle time in DFW was only 3.5 months. Labor availability remains relatively stable across all of our markets. We recognize the concerns surrounding tariffs and continue to work closely with our vendors and suppliers to mitigate any potential impact. We believe tariffs will have a minimal impact on our closings and our earnings this year, although we acknowledge that the lack of certainty with respect to final tariff timing, scope or percentages make it impossible to analyze potential tariff impact with precision. As we navigate through various macro challenges, we are carefully recalibrating our capital allocation plan to align both our long-term growth objectives and respond to challenging market conditions. During the quarter, we spent $49 million on land and lot acquisition and another $85 million on land development, bringing our year- to-date spend to $109 million and $139 million, respectively. We continue to project approximately $300 million in land development spending for the full year of 2025, which we believe is laying the foundation for strong growth in subsequent years. Given the strength of our existing land pipeline, we remain patient and selective with future land opportunities without compromising the ability to grow our business in the near and intermediate term. At the end of the second quarter, we grew our total lots owned and controlled by 21% year-over-year to 40,200, of which over 35,000 were owned on our balance sheet and approximately 5,000 were controlled. Trophy comprises approximately 70% of our total lots under owned and controlled. Excluding approximately 25,000 lots and long-term master plan communities, our lot supply is approximately 5 years. Lastly, we are on schedule to open our first community in Houston. The construction of our first model home will begin in August with our grand opening planned this fall. We are excited about expanding Trophy's footprint into one of the largest homebuilding markets in the U.S. With that, I'll turn it over to Jim for closing remarks.

Thank you, Jed. As the housing market continues to evolve, we believe we are well positioned to navigate these market dynamics more effectively than our peers, and strategically position ourselves for future growth. I also want to thank our dedicated employees for their hard work and contributions. Their tireless efforts, expertise and dedication have been instrumental and driving our company's success even in the face of challenging market conditions. This concludes our prepared remarks, and we will now open the line for questions.

[Operator Instructions] Our first question comes from Rohit Seth from B. Riley Securities.

First one is on the incentive trajectory. Just 2Q incentives up to close to 8%. Curious to see what the incentive run rate is so far in July and we expect to further increases as we go through the year?

Yes. This is Jim. We don't forward look July. We're just trying to explain June right now. But generally, we're seeing things level out, but things are still very spotty by neighborhood. We look at our sales report every morning and try Jed's more active than this than anyone else in our business. But talk to me 1 week, we're really excited. We think things are picking up. Incentives are going down in the next week, it's a total change in the neighborhood.

Understood. All right. And second question on gross margins. Can you give us a sense of how much the gross margin decline was just pure price incentives versus mix with the more sales of Trophy?

Sure. Yes, this is Jeff. Yes. Most of it was just due to mortgage rate buydowns. That seems to be the most effective tool that we have right now of the overall, roughly 5% decline in average sales price. I would say that a little under 2% was related to mix. Trophy's closing volume did increase year-over-year by about 4%. So it is having a small impact there. But most of it, like I said, is towards the increased incentives for the mortgage rate buydowns.

Our next question comes from Alex Rygiel from Texas Capital.

Your starts in the second quarter increased in the first quarter. How do you -- how do you think about your starts in the second half of the year? And I know you don't project things like that. But given last year's kind of seasonality of pretty meaningful strength in the quantity of communities and whatnot that you're opening. Any direction there would be helpful?

Yes. This is Jed. Thanks, Alex. We're going to match starts to sales. So sales have been fairly consistent throughout the year, and we think our starts cadence will mirror that.

That's helpful. And then another way to maybe ask the gross margin question. So homebuilding gross margins were down 410 basis points year-over-year. Incentives obviously rose 320 basis points, and that's probably the majority of the gross margin weakness. What was the remaining sort of 90 basis points of margin headwind. It sounds like building materials were lower. So was the remaining margin headwind due to a shift in mix of more Trophy product or something else?

Yes, Alex, this is Jeff again. The balance is primarily due to mix. Trophy's margins are still relatively in line with the rest of our brands in the company, but their mix did increase. And as you know, Trophy targets primarily the first time, first move-up buyer. And when rates were over 7% last quarter, we really had to continue to incentivize our homes to get some traction and get those sold and closed. Great news is we were very effective in doing so the number of quick move-in homes that we had this year that both sold and closed in the quarter was around 50% versus in the prior year. It was around 40%. So we're seeing a lot of buyers taking advantage of the mortgage rate buydowns to close quickly.

Then last question. How do you think about your inventory level today?

Yes, this is Jed. We are seeing the buyer, and this changes month-to-month, currently, we're seeing the buyer really focused on finished homes across all of our brands with the exception of our Florida division. So we want to have plenty of finished homes. The buyers wanting that to take out the uncertainty of the mortgage rates and not, frankly, for reasons we don't completely understand not go through the build process. So we are still selling some build jobs, especially at our upper end line, but entry level is predominantly all specs right now.

I'd like to add 1 thing to that, Alex. One of the things we are seeing -- and one of the advantages of having an investment-grade balance sheet in some of our public peers that are very strong financially is that we think that many of the more leveraged extended private builders or even some of the weaker public builders are not going to be building as many specs going forward. We do see the lending environment really getting much more restrictive there.

We have another question from Alex Rygiel from Texas Capital.

I had another question. I was on a pretty significant building materials distributor call earlier today. And there was sort of maybe a suggestion out there that inventory levels might be a little high across the industry itself. So I was wondering if you could maybe comment on inventory levels amongst maybe some of your competitors or in your unique geographies that you happen to be in?

Alex, this is Jed. I'll take that. So at the entry level, I'd say a typical Trophy community, we have 2 lot sizes per community. Yes, we're running, say 14 to 15 finished specs at any one time in that community, which has 2 lot sizes, and that's averaging typically what our monthly sales are in that community. So I think the way we're looking at is we want to have 1 to 2 months of finished inventory for the buyer to move in. And something that's interesting that we're seeing is we're spending a lot of time out in the field looking at our competitors and also our own neighborhoods is we're seeing very little resale activity within the communities. And I think people are -- the existing residents are happy with their mortgage rates. And so we are really able to buydown the rates into the 4.99% range, and that's we continue to do that, and we continue to have success doing that and fighting very little retail activity.

One of the other differentiators that we see is that when you go into our neighborhoods is we've never really sold to investors. And our cancellation rate is single digit. We think our backlog even when we do sign up a buyer, we think it's a higher quality. And what was your cancellation rate? 9%, Jeff?

Yes. Just under 10%.

So I think we can even be more aggressive in writing deals.

Yes. This is Jeff. And the credit quality, to Jim's point, of our buyers has continued to be very strong. Average FICO scores on closings last quarter was 745 and our debt-to-income ratio was 38%. So we haven't seen a lot of movement there. And our mortgage company is doing a great job of prequalifying buyers so that we know that they can close quickly.