Executive Summary

Q2 2025 was resilient operationally with record deliveries (1,042, +5.6% YoY) and net new orders (908, +6.2% YoY), but profitability compressed; diluted EPS of $1.85 declined 20.3% YoY on lower ASPs and higher incentives, while homebuilding gross margin fell 410 bps YoY to 30.4% and 80 bps sequentially .
Revenue was $549.1M, down 2.0% YoY; versus S&P consensus, revenue beat (+$10.6M), while EPS missed (–$0.09) as mortgage rate buy-downs and mix towards Trophy weighed on margins; estimates were based on two analysts* .
Balance sheet strength remained a differentiator: debt-to-capital 14.4% and net debt-to-capital 9.4%, lowest since 2015; cash was $112M with total liquidity of ~$477M supporting opportunistic capital deployment and buybacks ($44M in Q2; $40M authorization remaining) .
Management reaffirmed ~$300M land development spend for FY25 and highlighted operational wins (cycle times <5 months; Trophy at 3.5 months), while noting affordability headwinds and higher incentive rates (7.7%) to sustain pace; Houston entry remains on track for fall openings .
Potential stock catalysts: durable double-digit ROIC profile with margins still >30%, ongoing buybacks, and Texas footprint expansion (dual listing on NYSE Texas; Houston communities) despite macro pressures .

What Went Well and What Went Wrong

What Went Well

Record operational throughput: 1,042 deliveries (+5.6% YoY) and 908 net new orders (+6.2% YoY), with sales pace ~3.0 per community and absorptions 8.9 per quarter; Trophy orders +9.3% YoY, evidencing resilient demand in focus markets .
Industry-leading margins sustained: homebuilding gross margin remained above 30% for the ninth consecutive quarter, underpinned by infill/infill-adjacent mix (~80% of revenue) and self-development advantages .
Execution and balance sheet: cycle times improved to <5 months (Trophy 3.5 months), cash of $112M, no line-of-credit borrowings, and net debt-to-capital of 9.4% with 3.4% weighted average notes rate; continued buybacks with $40M authorization remaining .

What Went Wrong

Profitability compression: diluted EPS fell to $1.85 (–20.3% YoY) and gross margin to 30.4% (–410 bps YoY, –80 bps QoQ) due to higher incentives and lower ASPs (–5.3% YoY to $525k) .
Backlog deterioration and cancellation rate uptick: backlog revenue fell 20.6% YoY to $516M and cancellation rate rose to 9.9%, reflecting affordability challenges and increased reliance on quick move-ins .
Mix/incentive headwinds: management cited mortgage rate buy-downs as the primary driver of margin pressure, with some mix effect from Trophy; SG&A rose 40 bps to 10.9% of residential revenue as the company invests for growth .

Financial Results

Summary vs Prior Quarters

Metric	Q4 2024	Q1 2025	Q2 2025
Total Revenues ($USD Millions)	$567.3M	$497.6M	$549.1M
Residential Units Revenue ($USD Millions)	$556.9M	$495.3M	$547.1M
Land & Lots Revenue ($USD Millions)	$10.5M	$2.3M	$2.0M
Diluted EPS ($)	$2.31	$1.67	$1.85
Homebuilding Gross Margin %	34.3%	31.2%	30.4%
SG&A % of Residential Revenue	10.9%	11.1%	10.9%
New Homes Delivered (Units)	1,019	910	1,042
Avg Sales Price Delivered ($000s)	$546.5	$544.3	$525.1
Backlog Revenue ($USD Millions)	$495.9M	$594.2M	$516.2M
Backlog Units (Units)	668	864	730
Cancellation Rate (%)	7.8%	6.1%	9.9%
Absorptions per Community per Quarter	8.3	10.6	8.9
Incentives on New Orders (%)	6.4%	6.7%	7.7%
Homes Under Construction (Units)	2,341	2,296	2,204
Debt to Total Capital (%)	17.2%	14.5%	14.4%
Net Debt to Total Capital (%)	10.7%	9.8%	9.4%

Q2 2025 vs Prior Year and Estimates

Metric	Q2 2024	Q2 2025 Actual	S&P Consensus*	Beat/Miss
Total Revenues ($USD Millions)	$560.6M	$549.1M	$538.6M*	Beat
Diluted EPS ($)	$2.32	$1.85	$1.935*	Miss
Homebuilding Gross Margin %	34.5%	30.4%	n/a	Margin down YoY

Note: Values with asterisks retrieved from S&P Global (Capital IQ).

Segment/Revenue Mix

Revenue Type	Q4 2024	Q1 2025	Q2 2025
Residential Units Revenue ($USD Millions)	$556.9M	$495.3M	$547.1M
Land & Lots Revenue ($USD Millions)	$10.5M	$2.3M	$2.0M

Non-GAAP

Metric	Q4 2024	Q1 2025	Q2 2025
Adjusted Homebuilding Gross Margin %	32.7%	31.7%	30.9%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Land Development Spend	FY 2025	~$300M (reaffirmed in Q1 2025)	~$300M (reaffirmed in Q2 2025)	Maintained
Houston Market Entry (Trophy)	2H 2025	First phase lots in June; first community opening fall 2025	Model construction starts Aug; grand opening planned fall 2025	On schedule
Incentive Strategy	2025	Incentives trending ~6.7% in Q1, ending March at 6.3%	Incentives increased to 7.7% in Q2; pricing flex to sustain pace	Raised (tactical)
Tariff Impact	2025	Monitoring; uncertain duration/extent	Expected minimal impact to closings/earnings in 2025	Clarified minimal
Share Repurchases	Ongoing	Authorization raised to $100M in Feb; $38.3M repurchased YTD through Apr	$44M repurchased in Q2; $60M YTD; $40M remaining authorization	Continued
Preferred Dividend (Series A Depositary Shares)	Q3 2025	n/a	$0.35938 per depositary share payable Sept 15, 2025	Announced

Earnings Call Themes & Trends

Topic	Q-2 (Q4 2024)	Q-1 (Q1 2025)	Current (Q2 2025)	Trend
Affordability & Rates	Incentives 6.4% with rising rates; cancellations 7.8%	Incentives 6.7%; cancellations 6.1%	Incentives 7.7%; cancellations 9.9%	Incentives up; cancellations up
Margins >30%	Record FY gross margin 33.8%	31.2% HB margin	30.4% HB margin; nine straight quarters >30%	Downward pressure but >30% sustained
Trophy Signature Homes	53.6% of Q4 orders	Expansion plans into Houston	Orders +9.3% YoY; cycle time 3.5 months; Houston on track	Scaling despite macro
Cycle Times & Ops	n/a	Ops momentum; mortgage launch	Cycle times <5 months; cost down per home; robust liquidity	Efficiency improving
Tariffs & Supply Chain	General risk disclosures	Monitoring tariffs; uncertain impact	Minimal impact expected in 2025; vendor engagement	Risk moderated
Mortgage Platform	n/a	>100 loans closed in Q1; expansion planned	~140 loans closed; avg FICO ~745; DTI ~38%	Scaling and contributing
Land Pipeline & Self-Development	Lots owned+controlled up 31.9% YoY	>40.5k lots; ~98% self-developed	~40.2k lots; ~98.4% self-developed	Strategic lot control sustained
Balance Sheet & Buybacks	Debt-to-cap 17.2%; authorization to $100M	Net debt-to-cap 9.8%; cash $103M	Net debt-to-cap 9.4%; cash $112M; $44M repurchased	Stronger leverage metrics

Management Commentary

“Second quarter net income…was $82 million or $1.85 per diluted share…New homes delivered increased 5.6% YoY…home closings revenue of $547 million…Homebuilding gross margins of 30.4% decreased 410 bps YoY and 80 bps sequentially…we have successfully maintained gross margins in excess of 30% for nine consecutive quarters.” — Jim Brickman, CEO .
“Incentives for new orders rose 320 bps YoY and 100 bps sequentially to 7.7%. Operationally, we achieved a major milestone by reducing our average construction cycle times to under 5 months. In particular, Trophy’s average cycle time was only 3.5 months.” — Jim Brickman .
“Given…increased supply…discounts and incentives increased…to 7.7%…ASP declined by 5.3% YoY to $525k…homebuilding gross margins decreased…to 30.4…net income…decreased 22% YoY to $82M…effective tax rate increased to 21.9%.” — Jeff Cox, Interim CFO .
“We believe tariffs will have a minimal impact on our closings and earnings this year… we continue to project approximately $300M in land development spending for the full year of 2025.” — Jed Dolson, President & COO .

Q&A Highlights

Incentive trajectory: Management avoided forward-looking color on July but noted week-to-week volatility by neighborhood; overall seeing things “level out,” emphasizing dynamic pricing actions .
Margin drivers: CFO attributed most margin decline to mortgage rate buy-downs; mix effect (Trophy) was a smaller component of ASP decline (<2%) .
Starts cadence: Starts will match sales; increased sequentially in Q2 (+10% QoQ to ~950) to align with pace .
Inventory strategy and competitive dynamics: Focus on finished specs (1–2 months supply); limited resale activity in communities; stronger balance sheet enabling spec building versus more leveraged peers .
Buyer credit quality: Avg FICO ~745 and DTI ~38% on Q2 closings via Green Brick Mortgage, enabling quick closings and lower cancellation risk .

Estimates Context

Metric	Q2 2025 Actual	S&P Global Consensus*	# of Estimates*	Outcome
Revenue ($USD)	$549,147,000	$538,581,000*	2*	Beat
Primary EPS ($)	$1.85	$1.935*	2*	Miss

Note: Values marked with asterisks retrieved from S&P Global (Capital IQ).

Where estimates may need adjustment: The combination of higher incentive rates (7.7%), lower ASP (–5.3% YoY), and management’s tactical pricing to maintain pace suggests near-term EPS estimates could drift lower unless incentives abate; revenue trajectory will be driven by starts aligned to sales and Houston/community openings .

Key Takeaways for Investors

Operational strength with industry-leading margins sustained (>30%) despite affordability headwinds; tactical incentives are preserving sales velocity at the expense of near-term EPS .
Revenue beat vs consensus but EPS miss underscores sensitivity of earnings to incentive rates and mix; expect EPS estimate recalibrations if elevated buy-downs persist* .
Backlog and cancellations deteriorated (backlog –20.6% YoY; cancellations 9.9%), highlighting reliance on quick move-ins and the importance of inventory turn for Q3/Q4 .
Balance sheet optionality remains a core advantage: net debt-to-cap 9.4%, $112M cash, ~$477M total liquidity, enabling ongoing buybacks and selective land deployment .
Trophy continues to scale (orders +9.3% YoY; 3.5-month cycle times), and Houston expansion this fall provides incremental volume runway into 2026 .
Strategic focus on infill/infill-adjacent markets (~80% of revenue) supports margin leadership and pricing flexibility versus peers .
Ancillary platforms (Green Brick Mortgage) are maturing (140+ loans in Q2, robust borrower credit metrics), enhancing capture rate and backlog visibility .