Green Brick Partners, Inc. (NASDAQ:GRBK) Q3 2019 Earnings Conference Call - Final Transcript

Nov 08, 2019 • 12:00 pm ET

Previous

Green Brick Partners, Inc. (NASDAQ:GRBK) Q3 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Michael Rehaut from JPMorgan. Your line is open.

Analyst
Maggie

Hi, this is Maggie on for Mike. First, you mentioned that sales incentives were up during the quarter. I was wondering, if you could talk about how those incentives trended sequentially? And also, if you could talk about any other trends that you're seeing in pricing power in your markets.

Executive
James R. Brickman

Sure, I'll take the first part. This is Jim. Jed might want to add some more color to it. And build jobs[Phonetic], our margins were up. We had to increase sales incentives on specs, which pushed our gross margin down slightly. But as you can see, what we gained in that delta was picking up a huge block of revenue. So -- and we think it was a great decision for the business. Inventory levels are very low in all of our markets. So we expect gross margins to really stay about the same and sales incentives to probably decrease going forward.

Jed, do you have anything you want to add?

Executive
Jed Dolson

Hi. Yes, this year, the building industry was more disciplined on starting specs, so we don't have this surplus like we as a industry had last year. We're actually seeing fewer incentives -- although -- quarter-over-quarter we increased our incentives. Year-over-year they're down.

Executive
James R. Brickman

So Maggie, well, I think Jed saying -- we're both saying is that, I think the industry is very disciplined. Inventories are very low. And one of the things why we don't give earnings guidance per se we want to really highlight the fact that at 09/30/19, we had 1,300 homes under construction. Same time in 2018, we only had about 1,100 homes under construction. So we're entering into next year with a lot more inventory to sell.

Analyst
Maggie

Okay. And so just to clarify, you said that the incentives were up quarter-on-quarter, but you expect them to, kind of, trend down going forward.

Executive
James R. Brickman

I think, it stabilizes a better -- I think we're going to maintain about the same here. I think on the spec side of the business, they'll probably be better.

Analyst
Maggie

Okay. All right. And secondly, when talking about Trophy, you mentioned that it's off to a wonderful start, and I was wondering if you could give a little bit more color there and maybe give how many closings Trophy contributed this quarter.

Executive
James R. Brickman

Yeah, Jed could really add a lot of this. But let me take a step backward for you, because a lot of people don't realize how long it takes to really get where we are. And we made the decision to bring Stewart Parker. We really done a wonderful job getting Trophy off the ground. That took place about a year and a half ago. We're just seeing our first closings now. We're really ramping up soon. We have about[Phonetic] 1,600 maybe 1,700 lots right now. We have 150 homes about under construction. We started about 50 homes last month. And really when we