Green Brick Partners, Inc. (GRBK) CEO Jim Brickman on Q1 2021 Results - Earnings Call Transcript

Green Brick Partners, Inc. (NYSE:GRBK) Q1 2021 Earnings Conference Call May 5, 2021 12:00 PM ET

Company Participants

Rick Costello - CFO

Jim Brickman - CEO

Jed Dolson - COO

Conference Call Participants

Maggie Wellborn - JPMorgan

Carl Reichardt - BTIG

Alex Rygiel - B. Riley

Alex Barrón - Housing Research Center

Tom Bishop - BI Research

Bill Dezellem - Tieton Capital

Operator

Yes, you may begin.

Rick Costello

Thank you. Good to do the operator's part. We apologize for the delay in commencement. The operator had connection issues.

Good afternoon, everyone, and welcome to Green Brick's Partners Earnings Call for the First Quarter ended March 31, 2021. 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 slide show supporting today's presentation is available on Green Brick Partners website, greenbrickpartners.com. Go to Investors & Governance, then click on the option that says Reporting, and then scroll down the page until you see the First Quarter Investor Call Presentation.

The Company reminds you that during this conference call, we'll make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including its financial and operational expectations for 2021 and the future and anticipated impact of COVID-19 on our future operations, prospects and other aspects of our business. Investors are cautioned that such forward-looking statements are based on current expectations and subject to risks and uncertainties and could cause actual results or outcomes to differ materially from those set forth in our forward-looking statements. These risks are set forth in our first quarter earnings press release, which was released yesterday, Tuesday, May 4, 2021 and the risk factors described in our 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.

In addition, our comments will include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by Regulation G regarding these metrics can be found in the earnings release that Green Brick issued yesterday in the presentation available on the Company's website.

I would now like to turn the conference call over to Green Brick's CEO, Jim Brickman. Go ahead, Jim.

Jim Brickman

Okay. Hi, everyone. With me is Rick, our CFO; Jed Dolson, COO. Thanks for joining the call. As the Operator mentioned, Rick, a 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 scroll down the page until you see the First Quarter Investor Call Presentation. I'll give everybody a quick second to do this.

I'm happy to report that the tremendous demand that we saw last year accelerated throughout the first quarter of 2021. For years, we have planned diligently to have the best lots and the best housing markets in the nation with a best-in-class operating structure. And last quarter, thanks to that positioning, combined with the strong fundamentals in today's housing market, Green Brick has achieved its strongest first quarter results in the Company's history.

By design, we were ready to capitalize on favorable market conditions of positive demographic trends, a persistent deficit in for-sale housing inventories and sustained low-interest rates to continue to accomplish record results. Highlighting that point, net income attributable to Green Brick over the last 12 months reached $123.7 million. This is a 100% increase over the prior 12-month period. I want to thank all of the Green Brick team and the hard work involved in doubling an already strong net income.

Likewise, our first quarter net orders of 1,082 homes and ending backlog of $996 million, both represent all-time records for the Company, up 28% and 45% over Q4 2020 record levels. To meet the unprecedented demand, Green Brick started a record 2,043 homes in the last six months and ended the quarter with 2,303 homes under construction, a 62% increase from a year ago. We feel confident that our efforts will produce heightened earnings beginning next quarter and each successive quarter for the rest of this year.

This rapid uptick in sales and starts has not been at the cost of our land pipeline. We believe the Green Brick's capability to source highly profitable land without straining our balance sheet will continue to propel our operating and financial results well beyond the bar set this quarter. During the quarter, we acquired approximately 5,600 home sites, expanding our total lots owned and controlled by 118% over the past 12 months and 31% in the past three months alone. This increase was achieved while starting a record number of homes and maintaining a debt to total capital ratio of 26.4%, one of the lowest among public homebuilders. Our record starts of 1,039 homes this quarter were despite the severe snowstorm in Texas that impacted construction schedules, leading to the deferral of approximately 40 home closings in the second quarter.

Please flip to Slide 4 of our presentation. We are a diversified builder with eight brands in four major markets with a wide array of product types and price ranges. We believe this stratification of products will continue to appeal to a broad base of homebuyers and expect that our entry-level segment will continue to rapidly expand through growth in our Trophy Signature and CB JENI brands.

As we have discussed in our previous earnings call, Green Brick operates under a much simpler owner structure than in prior years, where more than two-thirds of our top line revenues are now generated by wholly owned builders. The markets where Green Brick operates benefit from significant economic and demographic trends, which we will explore in detail in the next two slides.

Slide 5 quantifies the strong population growth over the past decades seen in Texas, Colorado, Florida and Georgia for the 2020 census data released last week. Out of the 25 largest states in the United States, these four states showed some of the highest percentage increases from their population 10 years ago. Texas led the nation with its resident population expanding just under 4 million people this decade. Colorado, Florida and Georgia, all showed double-digit growth over the same period, while the population of the US grew only 7.3%.

We believe this positive population growth is evidence that our concentration in Sunbelt and Sunbelt adjacent states is a winning strategy. We expect that in-migration to these states from California and the Northeastern United States and the strong demographic profiles of the Sunbelt will continue to generate positive population growth for many more years and we'll preserve robust housing demand in our future years.

On Slide 6, we highlight the economic strength of our core markets and present the decline in active listings seen in April 2021 from the prior year. Like every other economy in the country, the COVID-19 pandemic created a major disruption in commercial activity and led to a significant rise in unemployment earlier last year. However, as shown on the right slide, excuse me, right side of the graph, Atlanta and Dallas-Fort Worth have remained remarkably resilient. When compared to employment levels as of February 2020, Atlanta and Dallas-Fort Worth are down only 2.5% and 4.1% respectively, which represents the smallest declines out of the 10 largest metro areas in the United States.

Looking at the left side of the graph, you can see that Dallas-Fort Worth and Atlanta had the largest 12 month decline in active listings as of April 30, 2021 of the 10 largest MSAs with listings down 70% and 63% respectively. This remarkable drop in listings is evidence of the booming demand in our markets and indicative of the pricing power Green Brick has in 2021 to capitalize on inventory shortages of existing homes. We expect this imbalance between housing demand and supply in our markets to persist through 2022 providing Green Brick with continued pricing power to offset or even more than offset rising costs.

With 87% of our ending active communities in DFW in Atlanta, we believe that Green Brick is well-positioned to succeed in 2021 and beyond. Additionally, we believe the strong bounce back from the high unemployment seen in April 2020 and the rapid uptick in demand is further proof that our focus on business-friendly pro-growth markets is the correct and best choice, will continue to differentiate us from peers.

Jed Dolson, our Chief Operating Officer and an Executive Vice President will now speak in greater detail to our growth drivers and our land position. Jed?

Jed Dolson

Thanks, Jim. On Slide 7, we demonstrate how our investment in land has translated into an increased capacity to generate top line growth. As you can see from the chart on this slide, a key driver behind our strong financial and operational results has been our ability to convert investments in land to future growth in revenue.

During the first quarter, our lots owned and controlled increased by 4,471 to end at 18,939 lots, total lots, an all-time high for the Company. This is a 31% increase sequentially from the start of the year. As you review the chart on this slide, you may also notice a significant shift in our controlled lot position. This increase was primarily driven by increase in land under option of over 5,000 lots from Q4 2020 to Q1 2021, more than two-thirds of our lots added, related to a roughly 1,700-acre master plan community, about 35 miles south of downtown Dallas. The land for these lots was placed under contract in Q1 2021 and was acquired in April 2021. Due to its size and required planning, this neighborhood will not start producing revenue until 2024. We expect a significant portion of the infrastructure costs will be funded by municipal development bonds that are non-recourse to Green Brick and at a low cost of capital.

After including land under option and lots option through joint ventures, we expect nearly 86% of our current inventory of lots owned and controlled will be self-developed by the Company. We believe this strong emphasis on land development should allow Green Brick's margins and returns to remain competitive with our peers, as these self-developed lots avoid expensive premiums charged by third-party land developers.

Slide 8 compares our year-over-year growth in Green Brick's total lots owned and control against available data for other public builders. As the chart shows, our 118% growth in total lots significantly outpaces our public peers. Over the past nine months, we have added over 12,000 owned and controlled lots to our land pipeline. Despite the significant ramp up in land acquisition, we actually saw our debt to capital ratio dropped 140 basis points over the same period, decreasing from 27.8% on June 30, 2021, sorry, 2020 to 26.4% on March 31, 2021. We believe our ability to source land while maintaining our low financial leverage will facilitate continued top line and bottom line growth for the next several years.

Slide 10 highlights are ending units under construction. Our units under construction are up 69% over the past six months. While we have seen significant -- while we have seen growth at virtually all of our brands and price points, our unit growth was primarily driven by starts in our Trophy brand, which increased its ending units under construction by 236% during the six months ended March 31, 2021. As we go forward, we expect the continued expansion of the Trophy brand to establish larger communities with higher absorption rates and unit density. In fact, because of our continued expansion of Trophy, our Q1 2021 quarterly sales absorption have 11.3 units per active selling community with the highest in the Company's history.

Additionally, our pivot to these larger communities focused on entry-level buyers has not been at the cost of increased risk. Our Q1 2021 home closings saw an average FICO score of 754 with 88% of fundings exceeding a FICO score of 700 per data from Green Brick Mortgage ventures. The creditworthiness of our average buyer profile is a fundamental strength for many of our A markets where we operate, which we believe will continue to mitigate risk for our business.

I will now outline Green Brick's growth to illustrate where we stand today and where we expect to be in future quarters. Let's start by going back two years to Q1 2018. We grew our lots owned and controlled from about 6,300 total loss as of March 31, 2018 to about 9,200 loss as of June 30, 2019. So over the span of five quarters, we grew lots by 45%. Because of this acquisition and subsequent development activity, we were able to grow our community count by 33% from 75 selling communities as of June 30, 2019 to 100 communities as of September 30, 2020.

Over the last three quarters, we have grown our backlog by 123% to $1 billion. And as I've just reviewed with you, our units under construction are up 69% over the past six months. The second quarter will begin the next phase of our growth story as we will increase our closing pace of our homes. And by the way, our most recent growth in total lots with over 12,000 lots, added over the past nine months provides Green Brick excellent visibility to continued and substantial growth in revenues into and beyond 2023. We expect that our average community size will continue to grow at future price points, so unit growth should exceed community growth.

In summary, we feel we have a very strong land position and some of the best markets in America with strong demand from low-risk buyers, all while maintaining a conservative debt to capital ratio.

Next, Rick Costello, our CFO will discuss our fourth quarter results and annual results in more detail.

Rick Costello

Thanks, Jed, and thank you for joining us. Again, thank you for joining us today to review our 2021 first quarter financial results.

Look at Slide 11 of our presentation, which shows the year-over-year growth in our home closings and home closings revenue for both the quarter in the last 12 months basis. On the last 12 months basis, our closings grew 27%, while related revenues grew 22% year-over-year. The gap between unit revenue growth is primarily due to our shift to the entry level price point during this period. However, as seen in the quarterly comparison, our year-over-year growth in units revenue have narrowed to 15% versus 14%, respectively, demonstrating the impact of strong price increases starting in Q4 2020. In fact, and this is interesting, we have instituted base house price increases that averaged 19% for our three large Team Builders in DFW, and 9% average in Atlanta on an unweighted basis from the end of November through today. So over that five-month period, base prices have increased strongly, and at Trophy Signature Homes, our largest builder, it's up by a remarkable 25% on an unweighted average over that period.

While Slide 11 looks at our historical revenues, Slide 12 points pivots to our future closings and shows the year-over-year increases in net new orders in our current backlog. With the net new orders up 71% year-over-year and the dollar value of our ending backlog at quarter end up 133% year-over-year, we fully expect home closings and home closing revenues to accelerate strongly beginning next quarter and it pushes Green Brick's overall profitability considerably higher.

Now move to Slide 13 related to our financial highlights. Homebuilding gross margin for Q1 2021 was up 230 basis points over Q1 2020 and adjusted homebuilding gross margin was similarly up 200 basis points quarter-over-quarter. From Q4 to Q1 of this year, Q4 2020 to Q1 2021, gross margin was up 30 basis points. So we continue to raise prices faster than costs rise. We expect therefore gross margin to continue to rise sequentially during the balance of 2021.

Turning to operating leverage. Our SG&A expense was flat for Q1 2021 with the prior year quarter at 12.6%. Q1 2021 leverage was impacted negatively by the 40 closings pushed into Q2 due to weather delays, but with increasing top line revenues expecting during the balance of the year from Q1 levels, we expect quarterly and full-year operating leverage to improve, as will be reflected in a decline in our SG&A expense from Q1 levels. Interest coverage of 12.7 for Q1 2021, represents a 49% growth over Q1 2020 and clearly demonstrates our capacity to generate positive cash flow well above our needs.

Bottom line, our Q1 2021 diluted EPS of $0.51 for the quarter was an increase of 65% over Q1 2020, and our annualized net income return on average book equity grew from 11.9% in Q1 2020 to 15.9% during Q1 2021, an increase of 400 basis points. Combined with our low debt leverage our risk-adjusted returns are truly remarkable.

Please move to Slide 14 of our presentation where we compare our Q1 gross margins with available peer data. As you can see, our gross margin reported for the quarter was 25.4%, up 230 basis points as I said over Q1 of last year. This chart demonstrates that our performance is among the best in the industry. We believe our superior margin experience is evidence of our conservative land underwriting and prudent planning. This is a winning strategy that has well prepared us to manage pace and price during the remainder of 2021 and beyond. As I mentioned, we expect gross margin to continue to rise sequentially during 2021, as we continue to raise prices faster than costs rise.

Slide 15 visually demonstrates that we have grown our revenues and provided stable earnings by concentrating on several home buyer segments. For the 12 months ended March 31, 2019, two years ago, two segments accounted for about 70% of our revenues. Fast forward two years and we now address six distinct and significant customer segments, which all experienced strong revenue growth and sales volumes through March 31, 2021. For the last 12 months ended 3/31/21, our entry-level segment, plus our first-time move-up segment, now combined to represent 36% of home closing revenues, an increase of 1,900 basis points over two years ago when they combine to represent 17% of home closings revenues. This expansion of our more affordable inventory was created through intentional reallocation of capital to our Trophy Signature Homes brand. We continue to -- we expect to continue to expand our entry-level segment in the remainder of this year, which we believe should position Green Brick to capture an even greater portion of today's housing demand.

Please turn to Slide 16. Here we have compared our performance versus our small and mid-cap peers to demonstrate why we believe that our risk-adjusted growth and returns are uniquely strong. We've provided six measures here. Five of the measures cover the last 12 months ended 3/31/21 or the nearest period for other builders. And those five measures are growth in homebuilding revenues, gross margin percentage, interest coverage, pre-tax income return on invested capital and growth in lots owned and controlled and the other measure which is debt to capital is as of a point in time at March 31, 2021.

With the strength of Green Brick's results for each of these metrics, Green Brick continues to perform at or near the top of our peer group. In fact, our high gross margin and growth in total lots rival even some of the large cap peers, as we discussed earlier in our remarks. With our expected growth in homebuilding revenues commencing in the second quarter, we expect income returns on capital to additionally elevate during the balance of the year.

Lastly, please look at Slide 17, which focuses on our lower leverage and as Jim and Jed have both stressed, we were able to achieve our record-setting results while maintaining one of the lowest debt to capital ratios among public builders.

I'll now turn the call back to Jim, who will wrap up our part of the call prior to opening things up for Q&A. Jim?

Jim Brickman

Okay. Thanks, Rick. Thanks, everyone. As we move forward in 2021, we expect that our revenues, margins and profitability to all improve significantly beginning next quarter, as the record sales order growth we saw last year and again during Q1 converts into higher closing volumes. At the same time, we have continued increasing prices across all price points to better match our sales pace with our construction cycle.

Beginning in March 2021, we began limiting our for-sale inventory to units that have been completed framing in most of our communities. By limiting sales until framing is completed, we will reduce our risk by shortening the time between contract and completion, where we expose to uncertain and rising input costs. Further, delaying sales will enable us to capture more price increases as pricing continues to steadily rise.

Over the past five years, Green Brick has established itself as a billion-dollar company that can achieve strong risk-adjusted returns. Today, we are announcing that we will have our Inaugural Virtual Investor Day on August 6th, 2021. At that event, we will provide additional insights into our growth plans, operating strategy and our efforts to achieve environmental and social goals over a multi-year period.

I'll now turn the call back to the operator for questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Michael Rehaut of JP Morgan.

Maggie Wellborn

Hi. Congrats on the quarter. This is Maggie Wellborn on for Mike. My first question is just around how to think about ASP for the year? You pointed to some solid -- like very solid price increases across all of the segments, but at the same time, there is the ongoing faster growth at the entry-level segment. So how or where do you think ASP could end up and also separately, how much more pricing power do you think you have at the Trophy brand, while being mindful of maintaining the affordability there?

Jim Brickman

I'll chime in the first part and Rick, you can finish parts of it. But one of the things that some of our ASP, if you take a look at the backlog numbers, it's distorted a little bit on the high-end because GHO Homes for example, almost builds exclusively as a backlog builder in Florida, they have a higher price point. And so the backlog ASP may be higher than the actual closing ASP, which is just kind of an anomaly the way our business operates.

But Rick, you want to take the rest of the question about ASP?

Rick Costello

Sure. I guess Maggie, one of the things that limits your -- our ability to raise it as fast as might be reflected in the price increases that have averaged 19% in Dallas and 7% or 9% in Atlanta, is the fact that we entered the year with almost $700 million of backlog. Now, all that backlog is certainly under construction by now and most of it is going to close this year. So the price increases over this five-month period that we've talked about are definitely going to raise that faster than the increase in the first-time homebuyer segment. So I wouldn't be surprised to see our ASP go up $30,000 to $40,000 from where it was at the end of last year.

Maggie Wellborn

Got it. Thank you. And next on community count, I mean obviously, you're shifting toward the higher density Trophy communities, so maybe fewer larger communities, but you're also, with the strong demand probably selling out faster. So can you give us any sense of where you see community count? I mean where you see it going this year and kind of how to think about that number?

Jim Brickman

Jed? Rick, you want to take the community count?

Rick Costello

Yeah. I think we intimated, outright said, started saying during last quarter's call that we really are focused more now on the larger, longer-lasting higher absorption communities [Indiscernible] Trophy. So we really don't expect to see much in the way at all of community growth, but none of it is a limiting factor on our sales growth because we are in larger communities where we do not have to replenish them. I mean, if you really were able to dive into the details, you will see that a lot of our older communities had really a low community count in them and those are being replaced with communities that have several hundred lots in them and that serves to give us the staying power where we also don't have these -- those situations of having to grow into sales absorption, but rather to continue the momentum that you have there in the sales floor.

Maggie Wellborn

Got it. Thanks. And if I can just sneak one more in, and I apologize if I missed this, but did you break down orders by -- order growth by buyer segment this quarter?

Rick Costello

We did not.

Maggie Wellborn

Okay. Thank you.

Rick Costello

Thanks, Maggie.

Operator

Your next question is from Carl Reichardt of BTIG.

Carl Reichardt

Thanks. Hey, guys. How are you?

Jim Brickman

Hi, Carl.

Rick Costello

Great.

Carl Reichardt

Good. Looking at our model and thinking about cash flow, operating cash flow this year and I think if we've got it right, it's going to be pretty substantial relative to what we've seen in the path and given that you think or it seems like you're pretty happy with your leverage ratio. Can you talk a little bit about what your intentions are for the cash you will generate in terms of reinvestment in the business shares or whatever else?

Rick Costello

Sure. Hey, Carl. Thanks for joining in and thanks for the questions. We will produce substantial cash flow because of the significant investment that we have made in prior years, however, because of our growth, we're continuing to reinvest in land, lots and development in a major way. Our spend in that regard could approach $500 million to $600 million depending on what deal is actually close and what we underwrite over the balance of the year. So we may take our leverage up slightly because of those acquisitions, but it's still going to be in our comfort range where we really don't want to go much past on a gross basis of 32% to 35%.

Carl Reichardt

Okay. So the right way of thinking about this is cash goes back into land. So that kind of leads me to my second question, which is based on the comments you made on the new deal, which we had heard about and some other hints you've given, my sense is that the reinvestment, as you look at it is likely to be in the markets where you already got a reasonable presence, some size, some scale. And I'm interested in your -- the potential for you to begin to start to look outside these core markets or additional growth opportunities, given the cash you're generating and given that your concentration level is pretty high in Dallas and Atlanta among other places.

Jim Brickman

Yeah. We typically don't announce our plans, but I think it's going to be fairly well known. We have a 49% interest in Challenger Homes. It's just been a wonderful investment and a relationship with everybody at Challenger Homes. They are the second largest builder in the Colorado Springs area. Challenger expanded to Denver, recently, this year in some small communities and we hope to expand Trophy into Denver where Green Brick Partners would be a land developer for both Challenger and Trophy Homes in 2022. So that would be a very synergistic relationship with a guy that is the CEO of Challenger Homes, ran a large mid-cap builder in Denver for 12 years. He has great land relationships there, we have good local engineering and other entitlement teams in place there and we're going to start sniffing around that market very diligently this summer.

Carl Reichardt

Great, Jim. I appreciate that. Thanks for letting us know. And then just last question, can you talk if you have -- I may have missed it about how trends have looked in April and into early May in terms of traffic in particular and also just orders? Thanks.

Jim Brickman

Jed?

Jed Dolson

Yeah. Carl, the traffic has been great. We, like most builders, are limiting our sales so that we don't outpace production. So we're still seeing very strong traffic and sales in April and the pricing to go along with it.

Carl Reichardt

Okay. Thanks, Jed. Thanks, Jim. Thanks, Rick.

Rick Costello

Thanks, Carl.

Operator

Your next question is from Alex Rygiel of B. Riley.

Alex Rygiel

Thank you. A follow-up on that last question, so since you are limiting your sales, are you

suggesting that a new order activity in the second quarter could be down a little bit from the first quarter?

Rick Costello

Yes, that would be a good takeaway. And we've got $1 billion of backlog and we've started a ton of houses. So we really have to pace down. We had a lot of price increases that we were able to get while we were doing all those sales in Q1, but we are definitely wanting to catch-up to our...

Jim Brickman

And the first quarter was in terms of a comp, it was really kind of an outrageously high comp. It was over 1,000 home sales and we intentionally could never maintain that on a consistent basis. I think it was 1,082 actually in the first quarter. So the second quarter is going to be down sequentially from that on purpose.

Alex Rygiel

Understandable. And then how has your build cycle time changed over the past three months, and what -- where is it at today?

Jim Brickman

It's extended about a month. Jed, why don't you kind of -- and it varies little bit by product type, but, Jed, you're our operating guy, why don't you answer that?

Jed Dolson

Yeah. If you look companywide where it's about seven months right now, we are seeing Trophy build significantly faster, we're seeing our -- and as you see Trophy become more of our, a larger share of our closings that that cycle time should be going down. So we -- it really hasn't gotten that much worse in the past three months. We had a little hiccup like everybody did with the Texas weather storms in February where we had snow for quite some time, but it hasn't changed measurably from January 1.

Alex Rygiel

Very helpful. Thank you.

Jim Brickman

Thanks, Alex.

Operator

Your next question is from Alex Barron of Housing Research Center.

Alex Barron

Yeah. Thanks, gentlemen. Yeah, I guess my question was similar to the last one. Just wanted to confirm that the cycle time hadn't changed that much and that the deliveries were mainly impacted because of Texas. Are you guys pretty much caught up on delivering any of those homes and are supply chain issues back to normal, or are you guys still kind of feeling the effects of that?

Jim Brickman

Supply chain issues are not back to normal. I think we're just getting more accustomed to managing that process where we really now expect to have some bottleneck occur in our business and it's a different bottleneck at any different point in time. But in the aggregate, as we said, it's extending our cycle time about a month and we think that's what the foreseeable future looks like.

Alex Barron

Got it. And...

Jed Dolson

Yeah. We still have some manufacturers that are dealing with material shortages and/or ramping back some of the Texas suppliers from the winter freezes, but for the most part, we are just doing a better job of ordering our materials way in advance and so, like Jim said, it's about 30 days, so it's not catastrophic.

Alex Barron

Okay. And then second question, when you guys were talking about 20% price increases, was that meant versus a year ago, right, it wasn't versus last quarter? And then part two is, are you guys as a result expecting margins to continue trending higher in the back half of the year because of those price increases?

Rick Costello

The price increase -- the relative price increases were from price lists as of November 30 to

today. So basically a five-month period is covered by that price increase. So it is quite recent. And the second question, we refer to that, we do expect to see increasing gross margins based on the fact that we've been able to increase prices, which is on 100% including land cost, which is fixed and the gross margin versus the cost increases, which are occurring on sticks and bricks being about 50% of your house price. So it's -- our crystal ball is only as good as it can be. But what we're seeing so far suggests that we should be able to maintain and increase gross margin.

Alex Barron

Got it. If I could ask one last one, what should we model in for tax rate as you guys see it for the remainder of the year?

Jim Brickman

Well, that's a really great question. I don't know really what's between Washington DC and the other things I would model right now. Just like we are until we know different, but obviously, there is the potential to have higher corporate taxes, but I don't know whether it's going to be retroactive or how that's -- what that's going to look like?

Rick Costello

The tax rates that we experienced in Q1 is representative of what we should have because it's after the benefit of the energy tax credits which were extended into this year, but it's obviously, like Jim's saying, it's on current federal rates.

Alex Barron

Okay. Thank you, gentlemen. Best of luck.

Rick Costello

Thank you.

Operator

Your next question is from Tom Bishop of BI Research.

Tom Bishop

You mentioned a couple of times that the growth would accelerate next quarter. And do I take that to mean Q3?

Rick Costello

Q2.

Tom Bishop

So that's this quarter, you meant to say?

Rick Costello

Well, we are reporting on Q1, so it would, yeah.

Jim Brickman

It's semantical, but, yes, we're in the period ending June 30th.

Tom Bishop

Good. I just wanted to clarify that. Also the -- this -- I'm amazed that the stock is off 11% today. And I'm wondering if you have, I'm sure you've thought of it, wondered, why and if you have any thoughts on that and what investors are getting wrong? I see a good year and good prospects and I'm really confused by that.

Jim Brickman

Well, I was confused by it too. I think the builders are kind of down 2% overall and seeing your own stock down 11.5%, you figure it well that I say something bad on the earnings call or whatever but yeah, I'm surprised because our backlog is unbelievably strong, our margins are improving and our business has never been better. But the only thing I can figure out is that our stock did go up quite a bit in the last three weeks. And maybe that's just an adjustment, but my job is to run a homebuilding company, if I could figure out stock prices, I would probably have a different job title.

Rick Costello

Well, that's my job and I can't figure it out.

Jim Brickman

Yeah, because really our backlog has never been better. Our prospects have never been better.

Our FICO scores are the best they've ever been. Our deposits in terms of risk on the Homes has never been larger. So when we do sell a home, the likelihood of its closing has never been better. And really it's -- everything seems to be good today until I look at the stock chart.

Rick Costello

Tom, that's -- it's an interesting question. I think we would all say that we're a buy right now, a strong buy, but that we're also very prejudiced in that regard, but I think, Jed, really put the story very well when he spoke about, hey, first, we got the lots under contract and then develop them, and then opened a bunch of communities, and then we sold just a ton of houses and built our backlog, and then we started a bunch of houses over $1,000 a quarter for the last two quarters. And you see us with 516 closings in Q1. And it's just not what a lot of other builders showed in their numbers in terms of what they closed in Q1, but just wait till next quarter is really what we can say, and that's what we've been trying to say, that's what we messaged ahead of time. But I guess, sell the news, I guess.

Jim Brickman

Yeah, it's very odd. When you take a look, we have about $1 billion backlog. And the only thing that must be implied is then we say that we don't see degradation in our gross margin that some people are not believing that...

Tom Bishop

What was that?

Jim Brickman

[Indiscernible].

Tom Bishop

The thing that I saw also was the -- that the closings were a little soft -- the growth was what, 14%, 15% do I recall.

Jim Brickman

Yes.

Tom Bishop

And that definitely lagged others, but now it's going to accelerate next quarter, so maybe investors should be looking ahead instead of in the rearview mirror.

Rick Costello

I think we'd agree with you.

Jed Dolson

We lost about 40 closings to weather.

Tom Bishop

Yeah. Okay. Well, thank you. Hopefully, we'll bounce back from here.

Rick Costello

Thanks for you're question.

Tom Bishop

Cringing to see the inside of buying as well.

Rick Costello

Yeah.

Operator

[Operator Instructions] Your next question comes from Bill Dezellem of Tieton Capital.

Bill Dezellem

Thank you. I wanted to start with the delayed closings. Would it be the correct math that the 40 delayed closings using the average share price of $400,000-plus gets you roughly $16.5 million of revenue that was pushed into the second quarter, and then we would simply take the average gross margin? Or is there an incremental gross margin that's higher that we should be using so the benefit to the bottom line would have been even greater than...

Jim Brickman

There is an incremental gross margin because a lot of our SG&A costs are fixed. So those incremental sales drop more to the bottom line than typically if you just take a look at our gross margin. And so yeah, there should be more incremental benefit on those additional closings that would have produced more income.

Bill Dezellem

Jim, what do you consider your incremental gross margin to be?

Jim Brickman

Well, we can't say, because we don't know. It's variable depending on what that income level is. If it was $40 million, it would be even more than $20 million, because we have fixed costs that are being spread over a bigger number. So, I'm not trying to avoid the question, but it just gets around operating leverage.

Bill Dezellem

Understood. But either way, there was $0.05 to $0.10, probably closer to $0.10 of earnings that were pushed from the first quarter into the second quarter.

Jed Dolson

Yes, we agree with your assessment.

Bill Dezellem

Great. Thank you. And then, you've talked about the coming quarters seeing, I mean it sounds like a pop in earnings. Do you see that sequential improvement to be larger in the second quarter versus the first quarter? Or is there even a further acceleration in Q3 versus Q2 so you would expect that the sequential increase there to be even larger?

Jim Brickman

Good question. We're hopeful that it will be larger Q3 than Q2. We don't want to go out on a limb and say that. Obviously the risk, as you get further in the time here, as you take more input costs risk in determining that profitability as you stretch the model out, but yes, we think that Q3 can be a quite better than Q2, as long as input costs don't go up more than we're expecting.

Bill Dezellem

And Jim, are you answering that question in the sense of the rate of growth of sequential growth being greater in Q3 or simply the third quarter being absolute better quarter than Q2?

Jed Dolson

Absolute better. So we think we'll do extremely well with our Q2 results and then we think we will exceed those as we march toward the end of the year on an absolute basis.

Bill Dezellem

Great. Thank you. And last question, the share repurchases, did you have any in the first quarter? And if so, what was the level?

Rick Costello

We had none in Q1.

Bill Dezellem

Great. Thank you all. Great quarter.

Rick Costello

Thanks, Bill. Thank you.

Operator

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