Jim Brickman - Chief Executive Officer Rick Costello - Chief Financial Officer Jed Dolson - President, Texas Summer Loveland - Chief Accounting Officer

Ken Ling - Citi Chase Basta - AWH Capital

Hi, everyone. Thanks for joining our call.

With me is Rick Costello, our CFO; Jed Dolson, our President of the Texas region; and Summer Loveland, our Chief Accounting Officer. As the operator mentioned, a presentation that accompanies this earnings call can be found on our webpage at www.greenbrickpartners.com.

At the top of our webpage click on Investors and Governance, then click on the option that says Reporting, then scroll down the page until you see the first quarter investor call presentation. I will give everyone a second to open the presentation.

I am very excited to announce that our pretax income of $14.5 million was an increase from Q1 2017 of 45% with revenues up 29%. So once again, our growth in income is outpacing our revenue growth.

Our backlog grew 56% year-over-year and homebuilding gross margins came in 50 basis points higher than in Q1 2017. On Friday, Builder Magazine named Green Brick as the third fastest growing public builder in the Builder 100.

Please flip to Slide 4. Two of the best markets are our core markets of Dallas and Atlanta.

During the last 12 months, Dallas and Atlanta continue to be two of the largest markets in terms of generating job growth. On Slide 5, you can see that Dallas continues to be the number one new housing market in the country, adding over 33,000 starts.

Atlanta is the fourth largest market and our Challenger Homes subsidiary operates in the Colorado Springs, part of the seventh largest housing market. Slide 6 shows that starts and closings in Dallas are still expanding, but still well below 2006 peak activity of more than 50,000 housing starts.

Slide 7 shows that in Dallas, the lot inventory levels are a very healthy 19.2 month supply. What the graph does not tell you is how supply constraints lots are in the most prime AAA locations.

Green Brick owns or controls nearly 4,600 lots in the Dallas Metroplex in AAA locations like Frisco, McKinney and Allen. Slide 8 shows that Atlanta, despite double-digit growth in starts and closings, is still above 60% below peak.

Most of this growth is attributable to the north where all of Green Brick’s Atlanta communities are located. On Slide 11, we discuss our recently closed acquisition of GH Homes.

GHO is a market cheerleader on Florida’s Treasure Coast, located north of Palm Beach, east of Orlando. GHO builds homes retirees and move-up buyers, primarily in the Vero Beach market.

Bill Handler, who will remain president, has made a significant side-by-side investment with Green Brick in a low leverage business. We bought control of GHO because Bill and his father have run a profitable building business since 1983.

And because we believe that GHO has the lot position and experienced team to produce a high return on total invested capital going forward. When I asked Bill’s head of construction how long he had worked with Bill?

He said, a long time. He was a quiet guy, when I asked again, how long that was?

He said well, I drove Bill to college. At Green Brick and all of our team builders, people matter.

GHO is like all of our team builders. They each have their own brand, culture, and mission statement but they are connected to Green Brick based upon common values that we call home.

I want to share what home means with you. H in home is for honesty.

Honesty and integrity are the foundation of any lasting business, and we strive each day to treat our customers, employees and shareholders like we would want to be treated. O is for objectivity.

Objectivity drives our business practices and our decisions are always made on best practices and market driven information. M is for maturity.

The emotional intelligence of our staff is integral to our success. To accomplish our common goals, we must be solution driven and deal every challenge as an opportunity.

Emotionally intelligent employees see the bigger picture and strive each day to work collaboratively towards a shared story of success. Finally, E is for efficiency.

Efficiency as a result of competent, hard-working people who perform with a competitive spirit to produce rapid and consistent results, we continually evaluated our processes and systems to ensure we remain the most efficient in our industry. Next, Rick Costello, our CFO, will discuss our first quarter results in more detail.

Please turn to Slide 14 for a summary of those results.

Thanks, Jim and thank you all for joining us today to review our 2018 first quarter financial results. First, as shown on Slide 14, our significant growth in revenues and earnings has been accomplished despite keeping one of the lowest net debt-to-capital ratios of any public builder.

We have been in the enviable position of utilizing the net operating losses of our predecessor company and thereby not pay federal income taxes. And as a result, we have been able to grow rapidly by slowly increasing our financial leverage through low interest rate revolving lines of credit.

As of March 31, 2018, we have continued that gradual increase to the point where our net debt-to-capital ratio where net debt is debt minus cash, has increased to 20.5%, which is up from 9.3% as of March 31, 2017 a year earlier. This compares to an average of 40% for public builder peers and our eventual target of 30% to 35%.

In the second quarter of 2018, with the closing of our acquisition of GHO Homes, we will have further increased our financial leverage by funding that transaction through low interest borrowings under our lines of credit. Now, let’s review Slide 15.

I am going to start with the highlights and then move into the details. For Q1 ‘18 versus Q1 ‘17 comparison, here are some key operational metrics.

Net new orders increased by 51% for the quarter; home deliveries increased by 18% with homes sales revenues up by 29% for the quarter; year-over-year homes under construction are up 22% with home started up 20%; the dollar value of units in backlog increased by 56% year-over-year; and our pretax income was up 45% for the quarter. Now for more details, for the first quarter, the number of net new home orders was a record 434 homes, an increase of 51% compared to the first quarter of 2017.

Green Brick delivered 267 homes for the quarter, 18% more than the first quarter of 2017. Home sales revenues were $120.4 million for the quarter, an increase of 29% over the first quarter of 2017.

The ASP average sales price of homes delivered was $451,000 for the quarter, up 9% over the first quarter of 2017. As of the end of the first quarter, Green Brick had a total of 54 active selling communities, a year-over-year increase of 4%.

Now we do expect the pace of community openings to increase over the balance of the year. Homes under construction increased 22% to 760 units as of March 31 compared to 625 units as of March 31, 2017.

Now, we are going to review some of these metrics on a last 12 months basis. Regarding construction, in the last 12 months, we started 1,188 homes versus 993 homes as of March 31, 2017 and that’s an increase of 20%.

And as a result, we now have 22% more units under construction. Regarding sales, net new orders for the last 12 months stand at 1,210 homes, up 31% from the end of the first quarter of 2017.

Regarding closings, units closed for the last 12 months totaled 1,031 homes, up 13% from 12 months ended March 31, 2017. Regarding lot inventory, the number of lots owned and controlled has grown to approximately 6,300 lots, up from about 5,000 lots from a year ago period for an increase of 27% as of March 31, 2018 and this was accomplished despite starting almost 1,200 homes in the last 12 months.

And as we have rung the bell on a few times here, our backlog is up 56% year-over-year. Our homebuilding gross margin increased to 21.5% for the first quarter of 2018 from 21.0% for Q1 2017, an increase of 50 basis points.

For the last 12 months ended March 31, 2018, the adjusted homebuilding gross margin increased sequentially to 22.2% from 22.1%. On a net basis, our pretax income margin performance, which takes into consideration, building margins as well as operating expenses has improved on the last 12 months basis from 11.4% to 12.6% as a percentage of homebuilding revenues from Q1 of 2017 to Q1 of 2018.

Balancing sales velocity and margin is something we monitor daily. We expect that our gross margin will remain as one of the highest in the industry.

And as I remind you, each quarter, please recall that our cost of sales includes the cost of sales commissions. This diverge us from the majority of other public builders who include commissions in SG&A versus stand-alone line item.

So in any period presented, you can add about 4% to our reported margins to increase them, and thereby, make them comparable to most other public builders. At March 31, 2018, our Builder Operations segment had a backlog of 477 sold but unclosed homes with a total value of approximately $226.5 million, an increase of 56% from the prior year end – I am sorry from the prior March 31, ‘17 I should say.

At March 31, the ASP of homes in backlogs was approximately $475,000 a decrease of 2.5% compared to the prior year, but this change in the ASP is not indicative of a trend as this metric fluctuates. Most importantly is the bottom line.

Income before taxes attributable to Green Brick were $14.5 million for the first quarter of 2018 compared to $10.1 million for the first quarter of 2017, an increase of 45%. Adjusted EPS was $0.29 per share for the first quarter of ‘18 versus $0.21 per share for the first quarter of ‘17, an increase of 38%.

Finally, to put our performance in perspective, with homebuilding revenues up 29% for the quarter, our pretax income is up 45%. Literally, our earnings performance is expanding faster than our revenue growth rate resulting in markedly improved operating leverage and therefore return on total invested capital.

I will now turn the call back to Jim who will wrap up our part of the call prior to opening up things for Q&A. Thank you.

Jim?

Okay. Thanks, Rick.

I am very proud of the entire Green Brick team. They have really worked hard to produce this great quarter.

This is a record opening quarter for our company where we not only had record first quarter revenues and pretax income, but our gross margin also improved to 21.5%. This is a builder’s trifecta.

Based on our record backlog, we continued sales momentum through April we believe the future will be even better. We are geographically diversified have 7 building brands operating in four markets at various price points.

This diversity is seen on the map on Slide 10 in the presentation. We continue to focus on operational excellence to deliver high level of customer satisfaction.

We are currently working on several land investments to grow the business. We are also currently evaluating a mortgage joint venture opportunity to harvest additional income.

Finally, while all this record growth was taking place, I want to give a special shout-out to everyone in our corporate office whose dedication and hard work helped made this great quarter possible. So thank everyone for your help and support.

I will now turn the call over to the operator for questions.

Good morning and congrats on the progress.

Thanks, Ken. Good to talk to you.

Good job from you guys too. So we have heard from other builders about the inflationary environment in both in material and labor cost as well as competition for land and lots.

Just curious how you guys are balancing pricing power and your markets to kind of offset those?

Okay, this is Jim. First of all, because we are in the best housing markets in the country, we have been very fortunate and that we have been able to pass through the cost of increased labor and materials on to our consumer.

And as we noted, our gross margins actually grew, so we are actually able to do more than just pass the cost, we have made incremental profits despite these rising costs. We think that probably the greatest differentiator in Green Brick Partners and peers is our ability to entitle and profitably develop land and lots, because this is the field land and lots fuels future profitability and we have a number of deals that are going to close in the next few weeks.

And unlike some peers, we do not see degradation in gross margins from these new deals that we are going to be putting in place and we think that our decades-long experience in each one of our markets will allow us to continue to keep that pipeline full. Anything you want to add to that, Rick?

It’s actually a great position to be in, because we provide about 80% of our lots to our own builders. Therefore, we are not paying somebody else that lot profit we are paying it to ourselves and it’s why our margins run very strong, because we have that land profit as part of that formula.

So, that’s a big piece of the ASP is the land cost.

Ken, one of the deals we are going to announce soon is a neighborhood called Pratt Stacks in Atlanta. This is the kind of neighborhood that I think we are uniquely qualified to entitle, develop, build and sell profitably, it’s 150 homes in the Grant Park neighborhood.

It’s the core neighborhood. It’s rejuvenated neighborhood in Atlanta.

It was a very complex zoning that the Providence Group did where there was the bell play authority that we are adjacent to, a neighborhood group, the city of Atlanta, coordinating all these things with a complicated process was something that really the Providence Group and only a handful of other builders in Atlanta could accomplish.

Great. Thank you for all my color.

The second question is around your recent acquisitions, it seems like GHO is good diversified geographically. Can we just get update on Challenger as well?

Has that met your expectations so far? And for GHO Homes, will there be any change in terms of the strategy around types of home built or options offered?

First, no, first of all, on GH Homes, what we liked about their business is that they can be really directly across the street from some of the giant names that you cover. And for many decades, they have been successfully able to get incremental pricing because of their ability to customize homes.

These are the last homes many of these people will ever buy, and they are willing to pay a premium to get what they want. They can’t get a premium well out of range from what some of the giant builders that we compete against are offering next door, but GH Homes has demonstrated over decades that people will pay for what they want.

In terms of Challenger Homes, Brian Bahr, Tom Hennessy and his team have exceeded all of our expectations. It’s been very exciting for us to see our builder partner operate in the entry level and move up buyers and very effectively compete in that marketplace and expand their business at high margin.

So in Colorado Springs, their starts and sales are way ahead of our plan. And we are really excited about expanding our business with them and they have actually setup another entity to cautiously look at expanding into Denver.

That sounds really great. Thank you for that.

And last question for me, Jim, interesting comment on evaluating the mortgage JV, why do you think it makes sense now? And also, was that comment meant for a specific market or all of the markets that you play in?

Thank you.

It was meant primarily for Dallas and Atlanta first, because that’s where we have our largest scale of operations. We would expect to roll – our goal is to roll this out in Dallas in the third quarter, roll it out in the Atlanta in the fourth quarter.

In Florida, for example, 50% of Bill’s buyers are cash buyers. So, the capture rate is going to be quite low there, but really its Dallas first, Atlanta second and we think that we are going to harvest a little bit of income in the mortgage platform.

More importantly, it’s going to give us a lot of information about our customers and are allowing us to sell homes better and service our customers better.

Good luck.

Hi, good morning guys. Thanks for taking the questions.

Hey, Chase. How are you?

I am good. The new orders and backlog numbers look to be up quite a bit more than is typical for Q1.

Can you kind of help us understand what drove that strength and how you see that progressing?

Well, one of the coolest things about that performance is that it was done with really minimal movement in our active selling communities. If you go on to our builders’ websites and you see the grand openings that are just now happening or happening soon, we expect that community count to move forward, but we did this without much of an increase at all.

So, it’s really execution at the builder level. They are understanding what their price point competition is on a dynamic basis.

They are making sure that if somebody is making the sales at its Green Brick making the sales.

I think the other thing is in a community like Bellmoore, sales have really accelerated there. We have – Bellmoore was about 610-home community.

When you open a community like that, we spent a tremendous amount of money on the amenity centers and other infrastructure. And now when you drive in there, it really looks like a big community with lot of people living there and no one is pioneering there, so we are able to sell many more homes at a faster rate and at a better margin.

And the good news is we still have about 400 home sites there.

Great. And then we have heard some other Texas-centric companies comment on weather being a limiting factor during the quarter, do you guys see any meaningful impact from weather days in the Dallas area?

Well, Jed can talk about that because he puts our lots on the ground. So Jed?

Yes, we suffered basically the same weather pattern in Atlanta as in Dallas. And Q1, I think, we lost 40% of the working days maybe 50% due to weather and cold.

You can’t pour concrete at the freezing temperatures. So, we see frenzy right now in the trades of trying to get starts and pavement down right now.

But luckily, everybody gets paid on unit prices on completions, so everybody is working hard over time to get those lots and slabs forward. And we are one of the biggest land and lot developers in Dallas, which is the biggest housing market in the country and we have a lot of vendors, subcontractors and stuff that now we pay right away we pay on time have a long relationship and hopefully, we are first in line when the bottleneck occurs.

Okay. And we have heard from some of your builder competitors to spend a lot of time talking about strong demand they are seeing in first-time homebuyers and retirees.

Are you guys seeing the same things in your markets and how do you think about your positioning to benefit from those changes?

Well, in Dallas, in CB JENI, for example, we will probably see more first-time buyers. We don’t see first-time buyers like LGI and some of these other people see.

We don’t have a credit repair shop for those types of buyers. So, most of our buyers are a little bit more fluent, probably have a little bit higher credit scores, but really just across – whether it’s a $300,000 townhouse.

We saw it was interesting that the higher price point of about $700,000 did slow down for us in our Southgate Homes in February and March and that’s really picked up again in April. So we are seeing pretty broad demand at all price points right now.

Okay. Thanks.

That’s helpful. Appreciate it, guys.