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    Green Brick Partners (GRBK)

    Q1 2024 Earnings Summary

    Reported on May 3, 2025 (After Market Close)
    Pre-Earnings Price$55.03Last close (May 2, 2024)
    Post-Earnings Price$57.07Open (May 3, 2024)
    Price Change
    $2.04(+3.71%)
    • Improved Efficiency and Faster Inventory Turnover: Management highlighted that Trophy homes now have a cycle time of under 4 months, contributing to an overall reduction from previous averages (from 8.6 to 5.5 months)—a sign of enhanced operational efficiency that accelerates revenue recognition.
    • Sustained High Gross Margins with Disciplined Cost Management: Executives emphasized maintaining an industry-leading gross margin of 33.4% by leveraging a self-development strategy—with 86%–88% of lots self-developed—and stable lot costs despite mix shifts. This disciplined approach supports robust profitability.
    • Robust Demand and Strong Market Absorption: The team noted healthy market dynamics such as a higher sales absorption rate (with performance at 3.8 sales per month compared to peers) and growing backlogs, which signal sustained demand and support future revenue growth.
    • Lack of Forward Guidance on Growth Metrics: Management refrained from providing specific guidance on future community count and starts, creating uncertainty about whether the strong sequential growth in these metrics can continue.
    • Rising SG&A Expenses Risking Margin Pressure: Executives indicated growing staffing and payroll costs tied to increased starts and community count, which may not scale proportionally with revenue growth, potentially compressing margins.
    • Margin Vulnerability from Shifting Product Mix: The transition from infill to infill‐adjacent communities has been associated with lower ASPs (down nearly $100,000 year‑over‑year in some cases) that could put pressure on gross margins if market conditions deteriorate. ** **
    1. Margin Outlook
      Q: Any near-term change to gross margins?
      A: Management indicated that gross margins remain strong at 33.4% and they expect margins to hold steady, with no material change anticipated in the near term.

    2. Infill Mix & Margins
      Q: How does infill mix affect margins?
      A: They noted that over 80% of revenues come from infill/infill-adjacent locations, keeping ASP between $540K–$560K and supporting their robust margins.

    3. Growth Outlook
      Q: Will community count and starts continue growing?
      A: While they provided no specific guidance, management emphasized a strong sequential growth in starts and community expansion, particularly driven by Trophy, signaling continued momentum.

    4. Lot Cost Stability
      Q: What is the trend in lot price inflation?
      A: The team reported stable lot and development costs, noting that development cost increases are minimal—around 1-2%—even with a year-over-year ASP decline of about $100K due to mix shifts.

    5. Self-Development
      Q: What percentage of lots are self-developed?
      A: Management confirmed that approximately 86-88% of their lots are self-developed, underscoring a robust in-house land strategy.

    6. Cycle Times
      Q: Is the 5.5-month cycle time expected to improve?
      A: They explained that while the overall cycle time averages 5.5 months, Trophy homes have a shorter cycle of under 4 months, and further improvements are expected as Trophy grows.

    7. SG&A Leverage
      Q: Will SG&A costs improve with higher revenues?
      A: Management expects that as revenue growth materializes from increased starts and communities, SG&A leverage will improve despite recent staffing additions.

    8. Sales Absorption
      Q: Why did sales absorption decline year-over-year?
      A: The lower sales absorption was attributed to reduced finished inventory compared to last year, although strong sales cadence (at 3.8 homes/month) helps maintain overall performance.

    9. Pricing & Incentives
      Q: What adjustments were made to prices and incentives in April?
      A: They reported robust April demand with modest tweaks, including price increases in about two-thirds of communities and slightly lower incentives, expecting the trend to continue into May.

    10. Spec Home Ratio
      Q: Will the spec home percentage change significantly?
      A: Management expects little change, maintaining a spec homes-under-construction ratio around 60% in the near term.

    11. Lot Sales Strategy
      Q: Do you sell lots to other builders?
      A: Although they primarily self-develop, management occasionally evaluates selling lots if it aligns with strategic benefits; however, they usually continue to develop in-house.

    Research analysts covering Green Brick Partners.