Rohit Seth

Rohit Seth with B. Riley Securities inquired about the specific drivers behind Green Brick Partners' gross margin decline, distinguishing between rate buydowns and product mix, current rate buydown levels, and the sequential increase in cost per home. He also asked for insights into the early spring selling season.

Answer

CFO Jeff Cox attributed the gross margin decline primarily to higher incentives and discounts across all regions, with some impact from product mix. President and COO Jed Dolson noted current rate buydowns at $499 for entry-level homes. CEO Jim Brickman added that a quarter-point rate drop equates to one point in incentive cost. Regarding costs, Jed Dolson stated direct costs are decreasing, but new lot prices are higher. Jeff Cox clarified that the main driver of increased cost per home was selling and closing costs, which will be reclassified as contra revenue with future segment reporting. Jim Brickman highlighted the advantage of low debt and no lot banking costs. For the spring selling season, Jim Brickman mentioned January was impacted by a 10-day weather event in Texas, but February showed a good start.

Rohit Seth inquired about the specific drivers behind the Q4 gross margin decline, asking for a breakdown between buydowns and product mix. He also asked about current rate buydown levels, the sequential increase in cost per home (direct vs. land costs), and an update on the spring selling season's traffic and orders.

Answer

CFO Jeff Cox stated that the gross margin decline was primarily due to higher incentives and discounts across all regions, with product mix being a minor factor. President and COO Jed Dolson and CEO Jim Brickman noted current rate buydowns around 4.99% for entry-level homes. Jed Dolson indicated direct costs were decreasing, while Jeff Cox clarified that the increase in cost per home was mainly due to higher selling and closing costs, which will be reclassified as contra-revenue later in the year. Jim Brickman added that low debt capitalization keeps land costs stable. Regarding the spring selling season, Jim Brickman mentioned a challenging January due but expressed encouragement for February's start.

Rohit Seth from B. Riley Securities asked about the recent trajectory of sales incentives and the primary drivers behind the decline in gross margins during the quarter.

Answer

CEO James Brickman noted that while incentives are generally leveling out, market conditions remain inconsistent across different neighborhoods. Interim CFO Jeffery Cox explained that the gross margin decline was predominantly caused by increased mortgage rate buy-downs. He specified that of the approximate 5% drop in average sales price, less than 2% was due to a product mix shift towards Trophy homes, with the remainder attributed to incentives.

Rohit Seth asked about the company's un-implemented pricing actions, including specific products and expected timing. He also requested quantification of the vinyl product line's contribution in 2025 and its projected growth for 2026, and inquired about the certification status of these products.

Answer

CEO José Manuel Daes stated that the company is monitoring market reactions before implementing further price increases, particularly in the residential sector where competitive pressures exist. CFO Santiago Giraldo reported that vinyl products contributed approximately $10 million in 2025 and are expected to grow 2.5 to 3 times in 2026, with potential for further upside, noting that product availability issues have been resolved and the dealer base has expanded over 20%. Santiago Giraldo confirmed that product certification is complete, and the full vinyl product line is ready for market.

Rohit Seth inquired about Tecnoglass's un-implemented pricing actions, including specific products and expected timing, and sought quantification of vinyl product line contribution in 2025 and projections for 2026, along with product certification status.

Answer

José Manuel Daes, Chief Executive Officer, explained that future pricing actions depend on market reaction and competitive dynamics, particularly in the residential sector. Santiago Giraldo, Chief Financial Officer, stated that vinyl revenue was approximately $10 million in 2025, with expectations for 2.5x to 3x growth in 2026, confirming full product availability and an expanded dealer base.

Rohit Seth of B. Riley Securities asked about order trends in July, requested a status update on the new vinyl window product line, and inquired about the current market dynamics for window replacement in Florida.

Answer

CFO Santiago Giraldo described July as a record revenue month with continued strong order flow. CEO José Manuel Daes reported that the new vinyl and legacy lines are selling well in western states, with the complete lines expected by year-end, setting up for a significant ramp-up next year. He also characterized the Florida market as very strong, with developers indicating a comeback in residential construction.

Rohit Seth asked about order trends observed in July, the status of the new vinyl window product line, and the current condition of the window replacement market in Florida.

Answer

CFO Santiago Giraldo described July as a very strong month, marking the highest revenue month in the company's history with robust order flow. CEO José Manuel Daes confirmed that the new vinyl and legacy product lines will be fully available by year-end and have been well-received in western states. He also characterized the Florida market as strong, with residential activity picking up as customers adjust to current mortgage rates.

Rohit Seth from B. Riley Securities inquired about order trends seen so far in July, the status of new vinyl window product certifications, and the current state of the window replacement market in Florida.

Answer

CFO Santiago Giraldo described July as a very strong month with record revenue and robust orders. CEO José Manuel Daes confirmed that the new vinyl and legacy product lines will be fully ready by year-end, with strong market reception in western states fueling excitement for a sales ramp-up next year. Daes also characterized the Florida market as 'really strong' across all segments.

Rohit Seth asked about order trends observed in July, the status of the new vinyl window product line certifications, and the current market conditions for window replacement in Florida.

Answer

CFO Santiago Giraldo described July as the highest revenue month in company history with robust order flow. CEO José Manuel Daes reported that new vinyl lines are already selling in western states, with the full line expected by year-end, anticipating a sales 'catapult' next year. He also affirmed that the Florida market remains very strong, with signs of a residential pickup as consumers adapt to interest rates.

Rohit Seth asked if the litigation expense was a one-time charge, about current incentive levels and changes from Q4 to Q1, the company's inventory positioning, current cycle times and ability to ramp up, and whether government intervention on rates or down payments would be more impactful for customers.

Answer

Allan Merrill, Chairman and CEO, confirmed the litigation charge was a one-time event related to a 2014 community. He noted that margin degradation from Q4 to Q1 was partly due to higher incentives around mix, without providing exact numbers. Merrill described the inventory positioning as very healthy, with a combined spec position in the 6s per community, down from the 7s, and finished inventory well-positioned for spring. He stated that cycle times were reduced by about two calendar weeks in Q1, with further reductions expected, pushing the to-be-built sales cutoff date for fiscal year-end to April or May. For government intervention, Merrill believes a combination of wage growth and monthly payment reduction (through utility and mortgage savings) is more impactful for their buyers than down payment assistance.

Rohit Seth inquired about the nature of the litigation expense (one-time vs. ongoing), the current status of incentives and their impact on Q1 margins, the company's inventory positioning, current cycle times and readiness for a demand snapback, and the potential impact of government intervention on housing (rates vs. down payment).

Answer

Allan Merrill, Chairman and CEO, confirmed the litigation charge was a one-time event from a 2014 community. He noted that Q4 to Q1 margin degradation was partly due to higher incentives around mix. Merrill described inventory as 'very healthy,' with spec homes in the 6s per community, down from the 7s, and finished inventory well-positioned. He stated cycle times were reduced by about two calendar weeks in Q1, improving the ability to close homes within the fiscal year. Merrill believes monthly payment reduction (via utility/mortgage savings) is more impactful for buyers than down payment assistance.

Rohit Seth inquired about Century Communities' community count guidance, specifically the mid-single-digit increase by year-end, which implies a significant ramp-up in the fourth quarter. He also asked for color on consumer behavior and absorption rates, noting the company's expectation of higher incentives in Q4 despite needing fewer in Q3.

Answer

Scott Dixon, Chief Financial Officer, confirmed the year-over-year ending community count target of around 5%, clarifying it's an ending count, not an average, and consistent with expectations. He described the consumer as 'very uncertain,' particularly at the entry-level, and anticipates higher incentives in Q4 as builders compete for year-end closings.

Rohit Seth from B. Riley Securities asked for color on the revised 2025 delivery guidance, July sales trends, performance across different geographic markets, and the outlook for gross margins.

Answer

CFO J. Scott Dixon explained the guidance revision was driven by the current backlog and typical Q3 seasonality, with July and August being slower months. He detailed market performance, noting the West has been strong, Texas is working through affordability issues, and the Southeast has been the strongest region. Dixon stated that incentives will be the largest driver of gross margins, partially offset by direct cost reductions.

Rohit Seth of B. Riley Securities asked about the momentum of order flow into July and August, the development timeline for the Falcon Ranch project in Bastrop, and the reasons for the increase in SG&A expenses.

Answer

President & CEO Duncan Bates responded that the strong dealer-driven revenue growth from Q2 has continued, but landing large community orders is crucial for further growth. Regarding the Bastrop development, he stated the goal is to begin selling lots in 2025, pending the completion of a bridge currently under construction. Bates explained that the SG&A increase was due to unusual year-over-year accrual comparisons for items like warranty and legal expenses, and he expects it to normalize.

Asked for details on the two recent M&A deals, including the markets and dynamics, and requested a status update on the realization of cement synergies.

Answer

The two acquisitions were aggregates-focused bolt-ons in their Florida and Phoenix growth platforms, consistent with their strategy. On synergies, they are on track to realize $40 million or more in 2024 and are confident in delivering the committed $80 million over 2024-2025 and $130 million over time. The synergy focus in 2025 will shift more towards operational improvements.