Good afternoon, everyone, and welcome to Green Brick Partners' Earnings Call for the Fourth Quarter Ended December 31, 2018. Following today's remarks, we will hold a question-and-answer session. As a reminder, this call is being recorded and will be available for playback. A slideshow supporting today's presentation is available on Green Brick Partners website, www.greenbrickpartners.com. Go to Investors & Governance, then click on the option that says Reporting, and then scroll down to the page until you see the fourth quarter investor call presentation. The company reminds you that during this conference call, it will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the business of Green Brick Partners are based on current expectations and are subject to risks and uncertainties. A few factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Please read the cautionary statement regarding forward-looking statements contained in the company's press release, which was released on Monday, March 4, and the risk factors described in the company's most recent annual and quarterly filings with the Securities and Exchange Commission. Green Brick Partners undertakes no duty to update any forward-looking statements that are made during this call. Today, the company will be referring to adjusted EPS and adjusted homebuilding gross margin, which are non-GAAP financial measures. The reconciliation of adjusted EPS to the net income attributable to the Green Brick and adjusted homebuilding gross margin to homebuilding gross margins are contained in the earnings release that Green Brick issued yesterday. I would now like to turn the conference call over to Green Brick's CEO, Jim Brickman. Please go ahead, sir.

Hi, everybody. With me is Rick Costello, our CFO; Jed Dolson, our President of the Texas Region; and Summer Loveland, our CAO. Thank you for joining our call. As the operator mentioned, the presentation that accompanies this earnings call can be found on our webpage at greenbrickpartners.com. At the top of our web page, click on Investors & Governance, then click on the option that says Reporting, and then scroll down the page, until you see the fourth quarter investor call presentation. I'll give everybody a few minutes to do this. I'm excited to announce that our full year adjusted net income attributable to Green Brick of $51.6 million was up 52% year-over-year with an increase in our return on equity to 11.7%, despite having one of the lowest debt to capital ratios among the public builders. Green Brick's total revenues increased 35% in Q4 of 2018 over Q4 2017, and 36% year-over-year. Significantly, our backlog is up 74% year-over-year despite a more competitive environment. As we mentioned last quarter, having GHO Homes join our family of team builders has been a very positive development. In addition to diversifying our offerings to include a lower price point, we have recorded $57.8 million in year-over-year homebuilding revenues from GHO Homes, since inception in late April. And they also added $73.4 million to our backlog as of December 31, 2018, which in total was up $113 million, or over 74%. Even without GHO, our backlog increased 26% year-over-year. Please flip to Slide 5. Two of the best markets in the country are our core markets of Dallas and Atlanta. During the last 12 months, Dallas and Atlanta continued to be two of the largest markets in terms of generating job growth. On Slide 6, you can see the Dallas continues to be…

Thanks Jim. Green Brick is truly one of the best growth stories in the public homebuilder space. Take a look at Slide 10, label growth drivers. The growth in total revenues from 2016 to 2018 is 60% over that two-year period, but even more impressive is our setup for the future. On a year-over-year basis, our backlog grew 74% to $264 million as of year-end. During 2018, we also increased our lots owned and controlled by 30% and grew the average number of selling communities by 22%. During 2018, we increased our number of units started by 31% versus 2017, with an increase up to 1,524 units. In fact, we have average starting over 410 units per quarter from Q2 to Q4 of 2018. As of year-end 2018, we have 1,127 units under construction, an increase of 53% year-over-year from the end of 2017. So Green Brick has the backlog, construction starts and lot inventory to sustain further dynamic growth. On Slide 11, we highlight the diversification of our product offerings. In 2017, we significantly increased our focus on townhome community, thanks to years of planning, land acquisition and development. In fact, we've grown our townhome revenues by 84% over the last two years versus our single-family growth of 40% from 2016 to 2018. Over this period, this has helped us control the growth of our average sales price. Over the last two years, our average sales price has risen by only 2.6% in total. This slide also highlights our significant diversification efforts. In 2018 versus 2017, we saw balanced growth in both product categories, 36% in single-family homes and 26% growth in townhomes. With our purchase of GHO Homes in 2018, we've entered Florida and specifically age targeted - and specifically the age-targeted segments. After just eight months GHO is already 10% of consolidated 2018 homebuilding revenues. During the second half of 2019, we will see our first closings of Trophy Signature Homes offer an entry level price points and affordable first time move price points. In 2018, we grew in three states, with 25% growth in Texas, 11% in Georgia and 10% of our - of new revenues with the introduction of our Florida segment. Slide 12 demonstrates, we have limited our risk by not concentrating on any one home buyer segment. We now address five distinct consumer segments which all experienced strong revenue growth in 2018. Our top three consumer segments saw growth in 2018 ranging from 11% to 23%. But please remember what you saw back on Slide 8, most of our communities are located in the desirable A submarket locations. The additional move to include different consumer segments and product types are part of Green Brick's longer-term strategy to diversify our offerings and limit risk without reliance on constantly growing sales prices of a single group of homebuyers. Next, Rick Costello, our CFO will discuss our fourth quarter results in more detail.

Thanks Jed, and thank you all for joining us today to review our 2018 fourth quarter financial results. First, let's review Slide 13. I'm going to start with highlights and then move into the details. For Q4 of '18 versus Q4 of '17 and for year-over-year comparisons, here are some key operational metrics. Net new orders increased by 5% for the quarter and 31% per year-over-year. Home deliveries increased by 31% with home sales revenues, up by 28% for the quarter, and then for year-over-year home deliveries increased by 30% for all of 2018 with home sales revenues, up by 32%. Year-over-year homes under construction are up 53% like Jed just said, with home started on the last 12 months basis, up by 31%. The total value of units in backlog increased by 74% year-over-year. Our adjusted pre-tax income was flat for the quarter, but up 29% for year-over-year and our adjusted net income was up 24% for the quarter and up 52% for year-over-year. Now for more details. For Q4, the number of net new home orders was 279 homes, an increase of 5% compared to the fourth quarter of 2017. For year-over-year 2018 versus 2017, our net new home orders grew by 31% from 1,063 to 1,397. Green Brick closed 382 homes for the quarter, 31% more than the fourth quarter of 2017 and for year-over-year 2018 versus 2017 Green Brick closed 1,287 homes, a 30% increase over 2017. Get to hear it by 30x percent number, quite a bit here with our growth drivers. Homebuilding revenues were $172 million for the quarter, an increase of 28% over the fourth quarter of 2017. Year-over-year, Green Brick's home sales revenues grew to $578.9 million, up 32% over 2017. Similarly, total revenues grew 35% over Q4 2017 to $185.1 million…

Okay. Thanks, Rick. Slide 16 provides concrete examples of how we can continue to increase our return on equity through financial and operational leverage and through the expansion of financial services. We'll be glad to further discuss any of these drivers during the Q&A session. Going forward, we expect the market to be more competitive. Fortunately, our backlog is up 74% from December 31, 2017, and we still have some of the highest margins in the industry and returns on total invested capital are above many of our mid cap and small cap peers. I also want to remind our investors that we received lot and lending profit before most of our controlled team builders received profits that we share. Hence, only 50% of any margin compression until breakeven is absorbed by Green Brick. In summary, we believe we are in the best markets, we expect continued growth, we have far or less impacted by the more competitive marketplace than many peers because of our business model. We are very excited about the addition of Trophy Signature Homes to our family of builders and believe this will be a very accretive builder over the coming years. I look forward to sharing more of this development and impact in the coming quarters. I'll now turn the call back to the operator for questions. Operator?

[Operator Instructions] Your first question comes from the line of Tim Daley from Deutsche Bank. Your line is open.

So my first one is regarding the volume growth in the quarter. So I was just curious, could you guys help us understand how the growth rates trended when you compare the Central and the Southeast region, if we were to take out the GHO acquisition? And as well, how did a Challenger volumes performed in the quarter?

Challenger had strong performance, one of the things that happened inside the Challenger numbers for the quarter was that they have an earn-out once they exceed a certain return on invested capital. That's not something that we can estimate early in the year, but by the end of the year, they had earned that because their performance was so far above expectations. So our take that fourth quarter share doesn't show as much because they had an earn-out calculation in that quarter, but owing to excellent performance. In terms of relative performance on a quarter-to-quarter basis - your question was related to specifically in each of the...

Yes, the two regions like the organic growth trends in net orders between kind of a central...

This is Jim. The organic growth trends in Dallas are greater than Atlanta right now and they are projected to be greater going into this year than Atlanta. We are very pleased with the Providence Group in Atlanta, they are probably one of the best performing builders in their market. But we have not expanded that platform, nor do we expect to expand that platform as much going into 2019 as we do in Dallas and one of the big drivers in Dallas is going to be Trophy Signature Homes. Jed , how many lots have we bought for Trophy?

Over 1,300.

Yes, so we've invested - we've loaded the rifle with 1,300 lots for Trophy, two communities are going to start coming on stream where we're going to get revenues this year and I think you're really going to see that growth in 2020, whereas in Atlanta, we're not really, I think we're projecting less than 5% growth going into 2020 because of our land position.

And then my second question is regarding the kind of SG&A leverage that we should be thinking about for '19. Obviously very helpful laying out the drivers for the increase and return on equity that in Slide 16 there. So just thinking about the operating leverage that was in the fourth quarter, obviously, wasn't kind of improvement on the year-over-year basis that we were expecting. But were there any one-off in that SG&A expense in the quarter? Or was this kind of the same drag from GHO that we experienced - that we saw you experienced in 3Q '18?

We have a couple of things happening there. There certainly was an impact from the increase in community count on a year-over-year basis and even starting in advance of opening some of the communities that occurs, just organically during the year. But there was also probably a increase in the - our finished units as of the end of the year. We did have an increase in completed specs. But we also had an increase in completed backlog homes that really were because of weather issues and just completion issues did not close in Q4. If those homes had closed, I think, Q4 would have shown even stronger top line growth as well as better SG&A leverage.

And then just thinking about the rest of the year in terms of the SG&A line, obviously, the slide does call out that it's going to be more of kind of growth rather than any sort of synergies given the regional differences across GHO and the other brands. But is it reasonable to assume, as we start lapping the GHO transaction in the latter half of the year that we could see a return to overhead leverage and I see that kind of SG&A as a percent of total revenues come down a bit on a year-over-year basis versus '18? Thanks and thanks for your time.

Absolutely, absolutely. When you see how we've ramped up our construction and just have the communities in place, the lot inventories in place. We feel like we can - and we actually showed this on Slide 16, Green Brick's overhead should not increase anywhere near close to our overall revenue growth rate. So that gives us leverage. And then each of the builders that grew by a dynamic amount in terms of contributing those new units under construction like CB JENI Homes, Normandy Homes, for instance, they should also experience some additional positive SG&A leverage.

This is Jim, again, let me provide just a little bit more color. I think that would help you understand our business, not just quarter-to-quarter, but longer term. We think that we can grow our business $400 million, $500 million of revenue with our home office SG&A on the increasing $4 million plus or minus and that's where over the next four years, where I think we can really start picking up SG&A leverage and moving us to the top of peers. And so our goal is threefold. One is to reverse engineer the business with SG&A leverage like we just talked about; two, the expansion of our financial services; and three, we are finding tremendous cost efficiencies right now, as we've grown to be with Challenger of 2,000 home a year builder and operational and purchasing efficiencies.

Your next question comes from the line of Susan Maklari from Credit Suisse. Your line is open.

This is actually Chris on for Susan. Thanks for taking my questions. My first question is just on the order trends you've seen so far this year. This morning, we've heard from competitor that's orders roughly flat, is that in line with what you've seen? And are you able to breakout the monthly order growth from last quarter?

We are able to break out the monthly order growth, but we don't typically share that breakout. But generally, everybody saw a soft fourth quarter. Our orders and backlog are up - in January, they are up, February up, they're not up as much as we'd like, we've seen sales really start to pick up. Everybody's wondering, I think every investor call I listen to is, what's going to happen with the spring sales. We saw a pretty good pickup over the last two weeks and we just hope that continues.

And then just my second question, is just on the competitive environment on the ground, given that some of your larger peers are going to sacrifice margins to maintain share. Just want to see how is that - how that compares what you are seeing and what ways you're able to address these pressures?

Well, I guess, this is Jim again. It's always pace versus price to some extent. We're a little bit more protected because we're in more supply constrained markets. For example, in Alpharetta, where we're doing some single-family homes in the $600,000 and $700,000 price range. We're expecting - we had a real strong sales of lot concessions. The flipside of that story is in a - what we consider an A minus low market to a B plus market in McKinney, Texas, where we have townhomes that are competing with small lot single-family product. We're having to offer a lot more inducements to homes. So it's pretty much across the board, but the saving grace I guess for our business is that we have some of the highest margins. As we mentioned, a lot of that hit comes off of our builders 50% and we're just - we're going to grow the top line and still have a good bottom line I think this year.

Your next question comes from the line of Michael Rehaut from JPMorgan. Your line is open.

It's Mike Rehaut. Congrats on the results so far. Just was hoping to get a few questions here. First of all, how are you guys thinking about 2019 from a growth perspective? And I understand, obviously, a lot of your peers, just about all of them have refrained on and giving out most of the typical guidance metrics at this point in time, given the flux in demand trends that we've seen over the last few months. But specifically some have been able to kind of maybe start-off giving some thoughts around where you think community count could be by the end of 2019, and directionally how gross margins might be shaping up for the first quarter. So, I was hopeful to see if you could give us some at least directional thoughts around those two metrics, again, community count by '19? And given your backlog, and at this point you're already two months into the first quarter, what you think gross margins might be doing?

I'm going to address community count in Atlanta and Florida. Atlanta, they're about stable. Florida, they're probably going to go up slightly. Jed, why don't you talk about Dallas?

We think Dallas, we have more growth opportunities, as Jim previously mentioned. So I think we could see community count in Dallas grew 15%, 20% year-over-year.

And so with up 15% to 20%, and I apologize, I don't have all the numbers right in front of me. The Dallas community count, I assume is roughly half of the business then you just prorate that for the full year?

Yes, I believe it's a little more than half of our companywide community count.

And then on gross margins for the first quarter, any thoughts around directionally, Jim, I think you mentioned that you do expect 2019 to - in the market to be more competitive and you kind of referenced little bit of an increase in incentives as part of the drivers for the 4Q gross margin. I'm just thinking in terms of where you - your 4Q gross margin you ended it around 20% after interest roughly 21% pre-interest. Should that kind of be the new base as we go into 2019? Or you thinking higher, lower, any directional thoughts there would be helpful?

Well, I wish I had a crystal ball that I could help you with that answer. I think we're going to see two things happening. I think in some markets like McKinney, Texas for example in our townhouse we're going to continue to see a very competitive market and margin compression. We have a large community in Flower Mound supply constrained. I think that's going to produce really great margins for a long time. We have a neighborhood in Coppell, it's a AAA school district that has very little competition and that's going to be a high margin. So I think the net effect is we're hoping that between taking lower margins in some communities and getting some of these new communities ramped up, that we're going to mitigate margin compression. But I can tell you as we - I don't know the answer to that.

And there's certainly price discovery that goes on the consumer side in the competitive side. One of the positive impacts on margin is because starts are down for the competition in Atlanta, for instance, or in some submarkets in Dallas. There is an opportunity to retraits our sub-contractor base and we're constantly doing that. But the big question mark is going to be, what's going to happen with interest rates and ultimately the demand coming back, traffic has been good. So we're optimistic, but our crystal ball is clouded.

Well actually traffic, it's really interesting traffic, is actually up quite a bit and we just got our traffic reports last week and we are seeing more traffic than last year, but the buyers are still wanting a deal and it's affecting pricing and we're waiting to see how that inventory clears in the spring.

One last question on margin and I apologize if I'm pushing the point and then I just had a quick one on sales pace. Just as you look into the first quarter, you obviously have your backlog already set up, you've kind of book the first two months of this quarter. Any thoughts directionally on how 1Q gross margins might be shaping up versus 4Q?

We're probably not going to share the details of that, directionally we still do have that pressure on the portion of backlog that where is not allocated to Q1. I mean you can see what our start pace is, so you can see - you can estimate what our revenues are going to be, but that's harder to say on the margin side.

One last one, your sales pace in the fourth quarter like the industry, it took a tougher hit down 22% for you guys on - for the quarter. You still have a tough comp in the first quarter. And most of the industry has been pointing to some sequential improvement and you referenced that earlier that the pace has picked up over the last couple of weeks, but still down versus 2018 - the spring of 2018, which was viewed as a bit more robust. So the sales pace remaining down year-over-year is that something that we should expect for yourselves similar to other builders?

I think the - like Jim mentioned before, if you take it down to the per average community, February was very similar between 2018 and 2019, but January was not, it was more like Q4. Yet to be seen, but we've got a real tough comp for the rest of the quarter, probably looking a lot more like 2017 and 2018, - yes, 2018, last year was a real tough comp.

[Operator Instructions] Your next question comes from the line of Carl Reichardt from BTIG. Your line is open.

Jed, I wanted to ask a couple of questions about Trophy Signature. I think you said 1,300 lots is what you've got now, I guess that's out of 8,000 in total, is that the base you should be using? So at the end of the quarter, we were 1,300 out of 8,000. And can you talk a little bit about price points and square footage and just sort of the locations and that you're expecting to roll-out this year, where they are and then maybe the plans for 2020, 2021?

Yes, sure. So I - the need to with having a start-up like Trophy is we're opportunistic and we're probably more opportunistic and little bit more nimble than the average builder right now. So our first starts are going to be in Frisco, Texas, we've actually broken ground already. So we'll have in two different communities in Frisco where we've taken advantage of lot resets. We will have revenue streams this year, will also have revenue from - in Q4, from our community in Princeton, Texas and that will be in the low 200s. So Frisco probably a little bit higher ASP than typical just given that is opportunistic situation, but long term, as Jim mentioned, we want Trophy to be entry level and first time move up.

What size last year?

1,800 square foot.

And then when I look at Rick or Jim, when I look at your lot count growth, it's been accelerating to the upside and I'm curious as you're looking at the market today how do you feel about land spend - new land spend for 2019. Do you think that growth trajectory is going to continue. Do you expect it to flatten out this year before a rebound? I'm thinking especially about the sort of the robustness of the backlog. You've got a lot of houses on lots already. So what you're - what's your thinking right now as you look at the market for land spend in '19?

Well, one of the things we're very encouraged about is that many of our peers, particularly those that have 50% and 60% debt to capital aren't really in a position to buy land and they are resorting to land banking and other expensive options that comes out of profit one way or another. And we are very cautiously looking at some land deals right now that we've been working on for a very long time. I'm going to Atlanta tomorrow looking at three deals and deciding on one, two or three of those closing. And we think we're in a really good position on all of those deals, they've have been in the entitlement and planning process for well over a year. And right now we're not seeing as much competition for those kinds of sites by other builders. So we're pretty encouraged about the land side of the business right now. Unlike a lot of guys that also say, well, our new model is land like, which we're not really sure how that operates in the long term, like it's comes out of profit margins somehow at the end of the day, we're pretty excited about 2019 and 2020 in our land book.

And then last question, we haven't talked much about acquisitions. How is the environment look right now in terms of smaller builders? I think we've written a lot about your model being potentially attractive for them. Is that something you're looking at closely now, is that sort of more off the table do you think for '19, how is the - what's the status there? Thanks.

Well, we are constantly looking, we have two builders, we're looking at right now. There is a big spread between bid and asks still and that they are private builders and because they're very leveraged relative to our business. There's just a disconnect and how they look at their business and how we look at the business and that's why we really only made two acquisitions going forward, because we are not going to buy a private builder unless they have high return on invested capital on a trailing basis and we think that it's going to be take that return on capital as we take place going forward. So I would love to say, we're going to have a deal in hand, but would that - there is just a spread between bid and ask right now.

There are no further questions. This concludes today's conference call. Ladies and gentlemen, thank you for your participation. You may now disconnect.