Good afternoon, everyone, and welcome to the Green Brick Partners' Earnings Call for the Third Quarter Ending September 30, 2019. [Operator Instructions]. As a reminder, this call is being recorded and will be available for a 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 the page until you see the third 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 Thursday, November 7, 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 pretax income attributable to Green Brick; pretax income attributable to Green Brick as a percentage of total revenues; pretax income as a percentage of average invested capital, EBITDA, net income return on average equity and adjusted homebuilding gross margins, which are non-GAAP financial measures. The reconciliation of adjusted homebuilding gross margin to homebuilding gross margin and the reconciliation of net income attributable to Green Brick to adjusted pretax income attributed to Green Brick are both contained in the earnings release that Green Brick issued yesterday. I would now like to turn the conference over to Green Brick's CEO, Jim Brickman. Please go ahead, sir.

Okay. Thank you. Hi, everybody. With me is Rick Costello, our CFO; and Jed Dolson, President of our Texas region. Thanks again for joining our call. It's always great to share some good results with you. As the operator mentioned, the presentation that accompanies this earnings call can be found on our web page at greenbrickpartners.com. At the top of the web page, click on Investors & Governance. Then, click on the option that says Reporting, and then scroll down the page until you see the third quarter investor call presentation. I'll give everybody a few seconds to get this done. Okay. We had a record-setting third quarter with EPS at its highest level at $0.31. This is up 29, and with home closing revenues at a record $197 million, up 44% both compared to the third quarter of 2018. Sales pace is typically a bit slower when opening new neighborhoods. Even though we increased our community count by 13% during the third quarter of 2019, we increased our quarterly sales absorption pace per community by 34% year-over-year. We continue to believe that our selling community count will grow by 21% this year compared to January 1, 2019. Our first-time, move-up and entry-level builder, Trophy Signature Homes, is off to a wonderful start. As a result, we are staged for continued earnings growth in 2020. I want to remind investors that earnings are not created equally. Our earnings growth is possible despite having one of the least leveraged balance sheets in the industry, while we enjoy not only lower levels of debt, but our debt is at a lower cost than almost every small and mid-cap peer. This was evidenced by the $75 million, 4%, 7-year senior unsecured note that closed in the third quarter with Prudential Private Capital. Our…

Thanks, Jim. Green Brick is truly one of the best growth stories in the public homebuilder space. Take a look at Slide 7 labeled Growth Drivers. On a last 12-month basis, total revenues from Q3 of 2017 to Q3 of 2019 have grown 69% over that 2-year period, but even more impressive is our setup for the future. Over the last 2 years, our backlog grew 94% to $320 million as of September 30, 2019, which was almost a doubling of our 2017 backlog. During these last 24 months, we also increased our lots owned and controlled by 63% and grew the average number of selling communities by 53%. Now let's focus on just the last 12 months ending September 30, 2019. Over the last 12 months ending September 30, 2019, we started 1,781 units, which represents a 24% increase versus the 12 months ending September 30, 2018. Notably, after starting an average of 420 units per quarter from Q2 of '18 through Q2 of '19, we saw a spike of 535 units during Q3 of 2019. As of September 30, 2019, we had 1,306 units under construction, an increase of 17% year-over-year from the end of 2018. So Green Brick has the backlog, the construction starts, the level of units under construction, and the lot inventory to sustain further dynamic growth. On Slide 10, we highlight the diversification of our product offerings. In 2018, we significantly increased our focus on townhome communities, thanks to years of planning, land acquisition and development. In fact, we've grown our townhome revenues 41% over the last 24 months. Our robust single-family growth of 88% in the past 24 months is highlighted by GHO's revenues of $110 million over the last 12 months, which were at a lower average sales price with their more affordable age-targeted product. Over this period, this has helped us maintain affordability, while offering a high-quality product. Over the last 2 years, our average sales price has risen by only 2.2% in total. Slide 11 visually demonstrates that our range of homes and diversified homebuyer mix have grown our revenues and provided stable earnings by not concentrating on any one homebuyer segment. We now address 5 distinct consumer segments, which all experienced strong revenue growth into Q3 2019. Looking at the right side of the page, you can easily see the improved diversification of our product types versus even last year at this time. Our 31% year-over-year growth has an important balancing and diversification of our target consumer mix. And please remember what you saw back on Slide 7. Most of our communities are located in 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 or a single group of homebuyers. Next, Rick Costello, our CFO, will discuss our third quarter results in more detail.

Thanks, Jed. Hello, everyone. Thank you for joining us today to review our 2019 third quarter financial results. Please move to Slide 13 first. Before getting into our financial results, we need to reiterate the key Q3 event that we disclosed in August when we reported Q2 results. That's the closing of our senior unsecured notes with Prudential Private Capital. Our $75 million of long-term notes are at a fixed rate of 4.0%. Now this rate is only slightly higher than the long-term rates paid by the lower leveraged large-cap builders like NVR and D.R. Horton, and more attractive than the longer-term rates paid by all small-cap and mid-cap builders. As you can see on the table provided on Slide 13, our small-cap peers have incurred a high cost to stack maturities on a longer-term basis than provided in revolving credit lines. Instead of paying higher rates, Green Brick has reduced our cost of borrowing, and therefore, our overall cost of capital. Now I'm going to move into the financial highlights, so please move to Slide 14. For Q3 of '19 versus Q3 of '18 and for year-to-year comparisons, here are some key operational metrics. Net new orders increased by 47% for the quarter and 19% year-to-date. Home deliveries increased by 42% with residential units revenues up by 43% for the quarter. For year-to-date, home deliveries increased by 33% with residential units revenues up by 32%. Year-over-year, homes under construction are up 17% with homes started on the last 12 months basis up by 24%. Dollar value of units in backlog increased by 3.5% year-over-year. And finally, our EPS was a record for any quarter of 29% versus Q3 of '18. Year-over-year to 3 quarters, EPS is now 12% higher in 2019 than 2018. Now for the details. For the…

Thank you, Rick. As everyone can see, our team builders did a really great job of managing pace versus price to generate the best quarter in our history for net income, total revenues, residential unit revenue and homes under construction. We are also very proud that during the third quarter of 2019, Fortune magazine named Green Brick one of the fastest growing companies in the world. Unlike most peers, our neighborhood count is accelerating. We have evolved from 76 communities on January 1, 2019, to 92 communities by the end of the year or the first quarter of 2020 subject to weather. And this 21% community growth is being accomplished while maintaining a very conservative balance sheet where our net debt-to-capital is only 28.5%. As we discussed, our superior credit metrics allowed us to fund our growth with a new 4%, $75 million senior term loan. This low cost of capital is a huge advantage over our peers. Operationally, we are seeing house margins stabilize, and the benefits of our standardized operating systems that are utilized by all of our builders. Our business is now scaled to where our titled and mortgage business are rapidly expanding and doing this profitably with very little risk. Our entry-level, first-time move-up value builder, Trophy Signature Homes, is off to a great start and should be a significant part of our earnings growth story that we expect to replicate in other markets. I want to thank everybody on the Green Brick team for their really hard work, dedication, and great results. I'll now turn the call back to our operator for questions.

[Operator Instructions]. Your first question comes from the line of Michael Rehaut from JPMorgan. Q –Unidentified Analyst: 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?

Sure, I'll take the first part. This is Jim. Jed, you might want to add some color to it. On build jobs, 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 net delta was picking up a huge block of revenues. So, 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?

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

So, Maggie, what I think Jed is saying -- we're both saying, is that I think the industry is very disciplined, inventories are very low. And one of the things, while we don't give earnings guidance per se, we want to really highlight the fact that at 09/30/2019, 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.

Okay. 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?

I think stabilize is a better word. I think they're going to maintain about the same. We're -- I think on the spec side of the business, they'll probably be better.

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? Maybe give how many closings Trophy contributed this quarter.

Yes. Jed could really add a lot to 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. We made the decision to bring Stewart Parker, who's really done a wonderful job getting Trophy off the ground. That took place about 1.5 years ago. We're just seeing our first closings now. We're really ramping up that business. We have about 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 started the business, our goal was to compete against the giants, and really we're seeing such progress right now. I think our goal is to beat them next spring. So, it will be really interesting to see how that unfolds.

Maggie, we started -- at September 30, we had 7 active selling communities that were Trophy. At the end of the year, we think we'll have 9. Rick mentioned that -- we think our community count will be 92. So, Trophy probably will be approximately 10% of that and we see that trending upward significantly next year.

No. 10 units.

[Operator Instructions]. Your next question comes from the line of Ryan Gilbert from BTIG.

Just another one on Trophy Signature. What was the contribution from the new Trophy openings to your overall order growth in the quarter?

Yes. We don't give detailed disclosure on that. I would tell you that it was modest. That our -- because overall, every single one of our team builders experienced monthly absorption growth on a year-over-year basis. Providence Group and CB JENI were great contributors. Trophy is doing a great job because of those seven communities. They only have two model homes open. But -- and they're above average for Green Brick, but it really was broadly experienced by our builders.

What's happening is, Trophy has about 30 employees right now. It's growing rapidly. So, we are making an investment that we see really great benefit in 2020 and going forward, but it's not contributing to earnings right now.

Got it. And then it sounds like the community count openings for Trophy are going to increase in 2020. Is that predominantly in Dallas and are there other markets that you're operating in where you think it makes sense to expand this type of product offering?

We are looking at two other markets right now.

Okay. Got it. And then, just on backlog conversion, you know really strong improvement in the quarter. Is that -- do you think that's kind of -- at 60% is kind of the new run rate or returning to a new run rate or was there just some inventory cleanups that led to that improvement in backlog conversion?

Well, Ryan, we really don't look at it in terms of a conversion rate. I mean, if the conversion rate has a calculation after everything is done. But if you look at the run rate that we were experiencing around 400 more or less units for 5 quarters in a row and specifically if you look back at Q4 of last year and Q1 of this year, our average was like 403 starts in each quarter. What happened this quarter with 443 closings is we just sold more houses. So, we have standing inventory that we reduced on a quarter-over-quarter basis as our builders were getting rid of some of that overhang of inventory.

Okay, got it. And then just one last one on the M&A environment. How's deal flow looking and what's your appetite for adding another teambuilder to Green Brick versus organically expanding community count?

Well, that's really a great question, and we've looked at a number of builders. I just got through looking at 2 builders, and we have definitely concluded that we are much more interested in growing organically. For one reason, one is culture; and two is that we are not willing to pay the blue sky or the premiums that we see competitors paying to enter markets. We're just -- we're too disciplined to do that, and we think we can make better returns expanding organically.

There are no further questions at this time. Thank you for joining us today. This concludes today's conference call. You may now disconnect.