Earnings call transcript: Green Brick Partners misses Q2 2025 earnings forecast

Green Brick Partners Inc. (GRBK) reported its second-quarter 2025 earnings, revealing a shortfall in both earnings per share (EPS) and revenue compared to market expectations. The company’s EPS stood at $1.85, falling short of the forecasted $2.08, while revenue reached $549.15 million, missing the anticipated $559.95 million. Following the earnings announcement, Green Brick’s stock price decreased by 2.7% to $62.99 in after-hours trading. According to InvestingPro analysis, the company currently trades at an attractive P/E ratio of 7.41x, suggesting potential undervaluation despite recent market reaction. For detailed valuation metrics and more insights, explore Green Brick’s comprehensive Pro Research Report, available exclusively on InvestingPro.

Key Takeaways

• Green Brick Partners’ Q2 2025 EPS and revenue missed market expectations.
• The company’s stock fell by 2.7% in after-hours trading.
• Net income decreased by 22% year-over-year.
• Despite challenges, home closings and new orders saw a 6% increase.
• Green Brick maintains a strong balance sheet with a low debt-to-capital ratio.

Company Performance

In the second quarter of 2025, Green Brick Partners experienced a decline in net income, which fell by 22% year-over-year to $82 million. Despite the financial challenges, the company managed to increase its home closings and net new orders by 6% each, reflecting resilience in its operational activities. The company maintains robust financial health, earning a "GREAT" overall score from InvestingPro, with particularly strong metrics in profitability (4.05/5) and growth (3.81/5). The overall market conditions, including high-interest rates and decreased consumer confidence, presented significant hurdles, though the company’s beta of 1.85 indicates higher market sensitivity than peers.

Financial Highlights

• Revenue: $549.15 million, virtually flat year-over-year.
• Earnings per share: $1.85, a 20% decrease year-over-year.
• Gross margins: 30.4%, maintaining industry-leading levels.
• Cash position: $112 million, with total liquidity at $477 million.

Earnings vs. Forecast

Green Brick’s actual EPS of $1.85 fell short of the forecasted $2.08, marking an 11.06% negative surprise. The revenue of $549.15 million also missed the forecast of $559.95 million by 1.93%. This underperformance contrasts with previous quarters where the company had generally met or exceeded expectations, highlighting the impact of current market challenges.

Market Reaction

Following the earnings release, Green Brick’s stock price dropped by 2.7%, closing at $62.99 in after-hours trading. This decline reflects investor disappointment in the company’s earnings miss, compounded by broader market trends of high-interest rates and increased housing inventory. The stock remains within its 52-week range, with a high of $84.66 and a low of $50.57.

Outlook & Guidance

Looking ahead, Green Brick Partners is focusing on maintaining operational excellence and adapting its pricing strategy to navigate market challenges. The company plans to continue expanding its Trophy Signature Homes brand and selectively pursuing land acquisitions. Future EPS forecasts for upcoming quarters range from $1.46 to $1.82, with annual projections of $6.89 for 2025 and $7.16 for 2026. InvestingPro analysis reveals the company’s strong financial foundation, with a current ratio of 9.81 and moderate debt levels, positioning it well for future growth. Subscribers can access 8 additional ProTips and comprehensive financial metrics through the Pro Research Report.

Executive Commentary

Jim Brickman, CEO, expressed confidence in the company’s ability to navigate current market dynamics, stating, "We believe we are well positioned to navigate these market dynamics more effectively than our peers." Jed Dolson, President and COO, highlighted efforts to address affordability challenges, while CFO Jeff Cox emphasized the strength of Green Brick’s balance sheet as a foundation for future growth.

Risks and Challenges

• High-interest rates impacting consumer demand.
• Increased housing inventory leading to competitive pressures.
• Potential macroeconomic downturn affecting the housing market.
• Supply chain disruptions potentially increasing construction costs.
• Regulatory changes impacting the housing and mortgage sectors.

Q&A

During the earnings call, analysts inquired about the effectiveness of mortgage rate buydowns and the company’s focus on finished spec homes. Executives noted that incentives accounted for 7.7% of revenue and highlighted strong buyer credit quality with minimal expected impact from tariffs.

Full transcript - Green Brick Partners Inc (GRBK) Q2 2025:

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

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: Good afternoon, and welcome to Green Brick Partners’ earnings call for the second quarter ended 06/30/2025. 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 is 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, 07/31/2025, and the company has no obligation to update any forward looking statements it may make. The comments also include non GAAP financial metrics. A 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.

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: 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 $82,000,000 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. For one, we achieved a record for closings by delivering ten forty two homes. And two, we achieved a record for net new orders of nine zero eight, 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 $547,000,000 As Jed 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 four ten 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 $60,000,000 of capital to our shareholders in the 2025 through share repurchases, and we still have another $40,000,000 of authorization remaining under our buyback program. Since 2022, we have repurchased approximately 7,900,000.0 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 in 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 resonates strongly with both first time and move up buyers. The continued expansion of Trophy and 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 and 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.

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: 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 at $547,000,000 and homebuilding gross margins decreased four ten basis points year over year and 80 basis points sequentially to 30.4 due to higher discounts and incentives primarily for mortgage buy downs.

SG and 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 $82,000,000 and diluted earnings per share decreased 20% from our record quarterly earnings in the second quarter twenty twenty four to $1.85 per share. Our effective tax rate also increased to 21.9% from 18.5% due in part to a one time benefit last year associated with stock options exercised in the 2024. Year to date, deliveries increased 8% year over year to nineteen fifty two homes and our average sales price declined 2.5% to 534,000 As a result, we generated home closings revenue of just over $1,000,000,000 which increased 5.3 year to date from the same period in 2024. Homebuilding gross margin decreased three twenty basis points to 30.8%.

Year to date net income attributable to Green Brick decreased 16.8% to $157,000,000 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 $20.24 diluted earnings per share. Net new home orders during the second quarter moderated from a record level of eleven oh six in the 2025, but were up 6.2% year over year to nine zero eight. Year to date, net new home orders increased 4.6 year over year to twenty fourteen. Our average active selling communities remained relatively unchanged year over year at approximately 102, a third of which were trophy communities and our sales pace for the second quarter increased 4.7% to approximately three 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 per owned and controlled community increased 26.3% from the same period last year.

We increased our starts by 10% from the previous quarter to nine fifty to better match our sales pace. The 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 space to manage our inventory levels accordingly. Due to a higher proportion of quick move in sales coupled with a thirteen day improvement in our average construction cycle time, our backlog value at the end of the second quarter decreased 21% year over year to $516,000,000 Backlog average sales price decreased 3.3% to $707,000 due primarily to higher discounts and incentives.

Trophy, our spec homebuilder, 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 $112,000,000 with no outstanding borrowings on our syndicated line of credit.

With total liquidity of $477,000,000 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

Jed Dolson, President and Chief Operating Officer, Green Brick Partners: 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 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 buy downs and closing costs. Incentives for net new orders during the second quarter were higher by three twenty 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 maintain 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 2024, continued to roll out its operations 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 seven forty five 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 as it continues to increase its capture rate, provide 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 five months. This is an improvement of thirteen days from a year ago. In particular, Trocy’s average cycle time in DFW was only three point five 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 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 $49,000,000 on land and lot acquisition and another $85,000,000 on land development, bringing our year to date spend to $109,000,000 and $139,000,000 respectively.

We continue to project approximately $300,000,000 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 and controlled. Excluding approximately 25,000 lots in long term master plan communities, our lot supplies approximately five 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 plan 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

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: 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 in 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.

Conference Operator: Our first question comes from Rohit Seth from B. Riley Securities. Please go ahead. Your line is open.

Rohit Seth, Analyst, B. Riley Securities: Hey, thanks for taking my question. My question first was on the incentive trajectory. Just keeping incentives up to close to 8%. Curious to see, you know, what the incentive run rate is so far in July, and do you expect do you expect further further increases as we go through the year?

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: Yeah. Hi. This is Jim. 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 than anyone else in our business. But talk to me one week. We’re really excited. We think things are picking up.

Incentives are going down. And the next week, it’s a it’s a total change in the neighborhood.

Rohit Seth, Analyst, B. Riley Securities: Yeah. Understood. All right. Second question on gross margins. Can

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: you give

Rohit Seth, Analyst, B. Riley Securities: us a sense of how much the gross margin decline was just pure price incentives versus mix with more sales of Trophy?

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: Sure.

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: Yes. This is Jeff. Most of it was just due to mortgage rate buy downs. 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 that is having a small impact there. But most of it, like I said, is towards the increased incentives for the mortgage rate buy downs.

Conference Operator: Our next question comes from Alex Rygiel from Texas Capital. Please go ahead. Your line is open.

Alex Rygiel, Analyst, Texas Capital: Thanks, gentlemen. Nice quarter. Your starts in the second quarter increased from the first quarter. 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 any direction there would be helpful.

Jed Dolson, President and Chief Operating Officer, Green Brick Partners: Yeah. This is Jed. Thanks, Alex. We’re we’re gonna match starts to sales. So sales have been fairly consistent throughout the year, and we, you know, think our start cadence will be will mirror that.

Alex Rygiel, Analyst, Texas Capital: That’s helpful. And then another way to maybe ask the gross margin question. So homebuilding gross margins were down four ten basis points year over year. Incentives obviously rose three twenty basis points, so 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 product more Trophy product or something else?

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: Yes, Alex, 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 buy downs to close quickly.

Rohit Seth, Analyst, B. Riley Securities: And then last question. How do you

Alex Rygiel, Analyst, Texas Capital: think about your inventory level today?

Jed Dolson, President and Chief Operating Officer, Green Brick Partners: Yeah. This is Jed out. We are seeing the buyer, and this changes, you know, month to month, but 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 wanna we wanna have plenty of finished homes. The buyers wanting that to take out the uncertainty of the mortgage rates and and not frankly, you know, 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, you know, entry level is predominantly all specs right now. Helpful. Thank you very much.

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: We have I’d like to add something excuse me. I’d like to add one thing to that, Alex. You know, 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 gonna be, building as many specs going forward. We we do see the lending environment really getting much more restrictive there.

Conference Operator: We have another question from Alex Rygiel from Texas Capital. Please go ahead. Your line is open.

Alex Rygiel, Analyst, Texas Capital: Thanks, Jim. That was really helpful. 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 they happen to be in.

Jed Dolson, President and Chief Operating Officer, Green Brick Partners: Hey, Alex. This is Jed. I’ll take that. So at the entry level, you know, I’d say a typical trophy community, we have two lot sizes per community. Yeah.

We’re running, say, you know, 14 to 15 finished specs at any one time in that community, which is two lot sizes. And that that averaging typically what our monthly sales are in that community. What so I I I think the way we’re looking at is we wanna have, you know, one to two months of finished inventory for the buyer to move in. And 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 and also our own neighborhoods is we’re seeing very little resale activity within the communities. And, yeah, I think people are the existing residents are happy with their mortgage rates, and so, you know, we’re we are, you know, really able to buy down the rates into the 4.99 range, and that’s you know, we continue to do that, and we continue to have success doing that and fighting very little retail activity.

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: One of the other differentiators that we see is that when we go in our neighborhoods is we’ve never really sold to investors, and our cancellation rate is, you know, single digit. Yeah. We think our backlog even, you know, when we do sign up a buyer, we think it’s a a higher quality. And what was our cancellation rate? 9%, Jeff?

Just under yeah.

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: Just under 10%.

Jim Brickman, Co-Founder and Chief Executive Officer, Green Brick Partners: So I think we can even be more aggressive in writing deals.

Jeff Cox, Interim Chief Financial Officer, Green Brick Partners: Yeah. And this is Jeff. And the 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 the debt to income ratio was 38%. So we haven’t seen a lot of movement there.

And our mortgage company has done a great job of prequalifying buyers so that we know that they can close quickly.

Jed Dolson, President and Chief Operating Officer, Green Brick Partners: Very helpful. Thank you.

Conference Operator: We have no further questions in queue. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.

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