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Green Brick Partners, Inc. (GRBK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue and EPS beat consensus: revenue $499.091M vs $456.642M* consensus; diluted EPS $1.77 vs $1.475* consensus. Homebuilding gross margin was 31.1% (−160 bps YoY; +70 bps seq), marking a 10th consecutive quarter ≥30% .
  • Demand held up despite affordability headwinds: net new orders 898 (+2.4% YoY; record Q3), cancellations 6.7% (−180 bps YoY, −320 bps seq), sales pace ~2.9/month/community; incentives for new orders rose to 8.9% (↑280 bps YoY; ↑100 bps seq; moderated late in quarter as rates fell) .
  • Balance sheet remains a differentiator: debt-to-capital 15.8% (homebuilding 15.3%), net debt-to-capital 9.8% (homebuilding 9.5%), cash $142M, total liquidity $457M .
  • Strategic expansion on track: Trophy’s first Houston community broke ground; model home construction began in October with sales targeted for the spring selling season; Austin expected to “basically double” in 2026; Houston <100 closings in 2026 (growing meaningfully in 2027) .

What Went Well and What Went Wrong

  • What Went Well

    • Sustained industry-leading margins: “For the tenth consecutive quarter, our gross margins remained above 30%,” with Q3 homebuilding gross margin at 31.1% (helped by a $4.8M warranty reserve adjustment adding ~90 bps) .
    • Demand resilience and low churn: Record Q3 net orders (898, +2.4% YoY) and cancellation rate of 6.7%, among the lowest in public peers; sales pace increased slightly YoY to just under 3.0 per community .
    • Cycle-time and cost execution: Cycle times improved by nine days YoY; Trophy’s DFW cycle time under 100 days (lowest in its history); labor/material costs down ~$2,250 per home YoY .

  • What Went Wrong

    • Revenue and EPS declined YoY: revenue −4.7% YoY; diluted EPS −10.6% YoY as incentives and pricing actions addressed affordability pressure .
    • Pricing/incentive pressure: ASP for delivered homes fell 4.2% YoY to $523.7K; incentives for net new orders rose to 8.9% (↑280 bps YoY; ↑100 bps seq) .
    • Backlog contracted: backlog revenue $465.589M (−20.0% YoY) and backlog units 675 (−16.6% YoY), reflecting a higher proportion of quick move-ins and faster cycle times .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$497.621 $549.147 $499.091
Diluted EPS ($)$1.67 $1.85 $1.77
Homebuilding Gross Margin %31.2% 30.4% 31.1%
SG&A % of Residential Units Revenue11.1% 10.9% 11.6%
Net Income Attributable to GRBK ($USD Millions)$75.059 $81.948 $77.853
New Homes Delivered (units)910 1,042 953
Avg Sales Price of Homes Delivered ($USD Thousands)$544.3 $525.1 $523.7

Actual vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($USD Millions)$456.642*$499.091
Diluted EPS ($)$1.475*$1.77
Number of Estimates2*—

Values marked with * were retrieved from S&P Global.

Revenue Mix

MetricQ1 2025Q2 2025Q3 2025
Residential Units Revenue ($USD Millions)$495.317 $547.109 $499.091
Land and Lots Revenue ($USD Millions)$2.304 $2.038 $0.000

Key Operating KPIs

KPIQ1 2025Q2 2025Q3 2025
Net New Home Orders (units)1,106 908 898
Cancellation Rate (%)6.1% 9.9% 6.7%
Absorption Rate (per avg active selling community, per quarter)10.6 8.9 8.7
Avg Active Selling Communities (count)104 102 103
Backlog Revenue ($USD Millions)$594.171 $516.183 $465.589
Backlog Units (units)864 730 675
Avg Selling Price of Net New Orders ($USD Thousands)$536.7 $516.7 $499.4
Avg Sales Price of Backlog ($USD Thousands)$687.7 $707.1 $689.8
Homes Under Construction (units)2,296 2,204 2,202

Notes: Q3 gross margin benefited from a $4.809M warranty reserve adjustment (+90 bps); YTD impact +30 bps .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Land Development Spend (net of reimbursements)FY 2025“About $300M” (Q2 commentary) “Approximately $300M for FY 2025” Maintained
Mortgage Company ExpansionLate 2025 / Early 2026n/aExpand GRBK Mortgage to Austin, Atlanta, Houston by late 2025/early 2026 New detail
Houston Market Entry (Trophy)2025–2026First model homes expected Nov 2025 Sales targeted for spring selling season Timing affirmed
SG&A Reporting (Financial Services)2026n/aBreak out financial services separately next year; slightly helps reported SG&A New disclosure
Series A Preferred Dividend (Depositary Shares)Q4 2025n/a$0.35938 per depositary share payable Dec 15, 2025; record date Dec 1, 2025 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Incentives & AffordabilityQ1: Incentives ended at 6.3% in March; Q2: incentives for new orders 7.7% (↑320 bps YoY) Net new order incentives 8.9% (↑280 bps YoY; ↑100 bps seq), peaked in July then moderated as rates fell Elevated but moderating late in Q3
Gross MarginQ1 31.2%; Q2 30.4% 31.1%; +90 bps from $4.8M warranty reserve adjustment Resilient ≥30%
Cycle Times & CostsQ2 average cycle <5 months; Trophy ~3.5 months Cycle times −9 days YoY; Trophy DFW <100 days; labor/materials −$2,250/home YoY Improving
Mortgage Platform (GRBK Mortgage)n/a>350 loans in Q3 vs 140 in Q2; FICO ~740, DTI ~40%; expansion planned to Austin, Atlanta, Houston Scaling rapidly
TariffsQ1: monitoring potential impacts Expect minimal impact on next year’s earnings (uncertainty on timing/scope) Manageable
Geographic ExpansionQ1: expanding to Austin & Houston Houston model started in Oct; sales targeted for spring; Austin to “basically double” in 2026 Accelerating
Liquidity/LeverageQ1 net debt/cap 9.8%; cash $103M ; Q2 net debt/cap 9.4% Net debt/cap 9.8%; debt/cap 15.8%; cash $142M; liquidity $457M Strong, conservative

Management Commentary

  • “For the tenth consecutive quarter, our gross margins remained above 30%, continuing to lead the public homebuilding industry.” — Jim Brickman, CEO
  • “Incentives for net new orders… increased to 8.9%. Incentives moderated during the quarter from a peak in July as the average 30-year mortgage rate declined.” — Jed Dolson, President & COO
  • “Our backlog value… decreased 20% YoY due to a higher proportion of quick move-in sales coupled with a nine-day improvement in average construction cycle time.” — Jeff Cox, CFO
  • “We believe tariffs will have a minimal impact on our earnings next year…” — Jed Dolson
  • “We expect Austin to basically double from where it was this year. Houston will… get sub 100 closings next year and that’ll grow meaningfully in 2027.” — Jim Brickman
  • “Next year we’ll be breaking out financial services separately… That will slightly help our SG&A.” — Jim Brickman

Q&A Highlights

  • Gross margin outlook: Company does not guide quarterly gross margin; stressed strategic advantages from low-cost, self-developed infill lots to support industry-leading margins despite volatility .
  • Incentives and mortgage rate buy-downs: Advertised target rate “just under 5%”; cost of buy-downs eased as rates fell; company did not chase to 4% buy-downs .
  • Market/region dynamics: Higher incentives generally in Atlanta relative to Texas due to different buyer mix; Trophy’s spec model enables flexibility without large backlog protection needs .
  • Growth roadmap: Austin expected to double in 2026; Houston <100 closings in 2026, scaling in 2027; GRBK Mortgage rollout to balance of Texas by YE 2025 and to Houston/Atlanta early 2026 .
  • Cost buckets: Land/lot prices stabilizing to slightly down; lumber at year-long lows; labor availability improved; subs at ~65%–70% capacity .

Estimates Context

  • Q3 2025 actuals vs S&P Global consensus: Revenue $499.091M vs $456.642M*; EPS $1.77 vs $1.475*; both on two estimates* .
  • Implication: Street likely raises near-term revenue/EPS marks modestly given strong beat and >30% margin durability despite incentive pressure; note that backlog declined and incentives remain elevated, which could temper out-year gross margin assumptions .

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Clear beat on both revenue and EPS, with a 10th straight quarter of ≥30% gross margin despite affordability headwinds; margin aided by warranty reserve release but underpinned by self-developed infill lot advantage .
  • Demand quality remains high: record Q3 orders, low cancellations, stable sales pace—suggesting pricing power to balance pace vs. margin even as incentives normalize with rates .
  • Backlog contraction reflects deliberate quick move-in strategy and faster cycle times—supportive for near-term closings but implies less revenue visibility; watch order intake and starts alignment .
  • GRBK Mortgage is scaling quickly and broadening to new markets, potentially improving capture and offering rate flexibility to support sales while slightly reducing reported SG&A in 2026 .
  • Texas expansion (Austin, Houston) is a multi-year volume catalyst; 2026–2027 outlook benefits from a five-year lot supply and strong Trophy share, with Austin doubling and Houston ramping .
  • Balance sheet strength (net debt/cap 10%, $457M liquidity) provides dry powder to invest through cycles and support opportunistic land development ($300M FY25 maintained) .
  • Near-term trading: Positive set-up on beats and >30% margin narrative; monitor incentive trajectory, order momentum into 4Q, and any tariff/commodity reversals that could affect 2026 margin assumptions .