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Green Brick Partners, Inc. Reports Third Quarter 2022 Results

November 2, 2022

DILUTED EPS OF $1.57, UP 65.3%

NET INCOME ATTRIBUTABLE TO GREEN BRICK PARTNERS OF $73.5 MILLION, UP 51.6%

RECORD HOME BUILDING GROSS MARGIN UP 550 BPS TO 32.4%

TOTAL REVENUES OF $407.9 MILLION, UP 19.2%

PLANO, Texas, November 2, 2022 — Green Brick Partners, Inc. (NYSE: GRBK) (“we,” “Green Brick” or the “Company”) today reported results for its third quarter ended September 30, 2022.

“Green Brick delivered third quarter results that were a record for any third quarter with EPS of $1.57, total revenues of $407.9 million, residential units revenue of $396.7 million, and net income attributable to Green Brick of $73.5 million. We also reported a homebuilding gross margin of 32.4% which is a record for any quarter, and we believe this may be the highest among public builders,” said Jim Brickman, CEO and Co-Founder. “These results reflect our continued focus on operational efficiency as we meet a more challenging market going forward.”

“Most of our land and lots are in DFW and Atlanta, two of the best larger markets in the country. Our basis is generally lower than our peers, based on our conservative underwriting and our self-developing most of our lots,” continued Mr. Brickman. “Most of our communities are in more supply-constrained infill and other desirable locations. These are all critical factors for our industry leading 32.4% gross margins. Therefore, it should not be surprising that we currently have no communities on a watch list, meaning we have no indicators of impairment as of September 30, 2022. ”

“Our strong balance sheet with a 28.0% debt-to-total capital ratio and record gross margins gives Green Brick more flexibility than most peers to effectively manage pace versus price decisions going forward. We view the current challenges as a potential opportunity to increase market share,” said Mr. Brickman. “Depending on market conditions, as many peers pull back, we expect to have the opportunity to increase our count of ending active selling communities from September 30, 2022 by 20% to 30% over the next four to five quarters. These new communities with a favorable land/lot basis provide the optionality of pricing aggressively without the overhang of protecting backlog. We believe these new communities will generate favorable sales per community at more traditional gross margins.”

Results for the Quarter Ended September 30, 2022:

(Dollars in thousands, except per share data) Three Months Ended September 30,    
    2022       2021     Change
New homes delivered   650       738     (11.9) %
           
Total revenues $ 407,944     $ 342,340     19.2 %
Total cost of revenues   274,625       251,004     9.4 %
Total gross profit $ 133,319     $ 91,336     46.0 %
Income before income taxes $ 97,596     $ 65,158     49.8 %
Net income attributable to Green Brick Partners, Inc. $ 73,520     $ 48,507     51.6 %
Diluted net income attributable to Green Brick Partners, Inc. per common share $ 1.57     $ 0.95     65.3 %
           
Residential units revenue $ 396,749     $ 338,900     17.1 %
Average sales price of homes delivered $ 607.3     $ 458.1     32.6 %
Homebuilding gross margin percentage   32.4 %     26.9 %   550 bps  
           
Backlog $ 564,026     $ 1,017,220   $ (453,194)    
Homes under construction   2,276       2,555     (10.9) %

Results for the Nine Months Ended September 30, 2022:

For the nine months ended September 30, 2022, our net income attributable to Green Brick per diluted common share reflects a record through the first three quarters of any year since the Company’s inception, as detailed below.

(Dollars in thousands, except per share data) Nine Months Ended September 30,    
    2022       2021     Change
New homes delivered   2,189       2,011     8.9 %
           
Total revenues $ 1,326,704     $ 950,625     39.6 %
Total cost of revenues   916,133       699,324     31.0 %
Total gross profit $ 410,571     $ 251,301     63.4 %
Income before income taxes $ 318,511     $ 174,397     82.6 %
Net income attributable to Green Brick Partners, Inc. $ 236,353     $ 126,739     86.5 %
Diluted net income attributable to Green Brick Partners, Inc. per common share $ 4.82     $ 2.48     94.4 %
           
Residential units revenue $ 1,273,925     $ 889,636     43.2 %
Average sales price of homes delivered $ 579.4     $ 440.8     31.4 %
Homebuilding gross margin percentage   31.1 %     26.5 %   460 bps  
Selling, general and administrative expenses as a percentage of residential units revenue   9.4 %     10.9 %   -150 bps  

Earnings Conference Call:

We will host our earnings conference call to discuss our third quarter ended September 30, 2022 at 12:00 p.m. Eastern Time on Thursday, November 3rd, 2022. The call can be accessed by dialing 1-888-660-6353 for domestic participants or 1-929-203-2106 for international participants and should reference meeting number 3162560. Participants may also join the call via webcast at: https://events.q4inc.com/attendee/570044635

A telephone replay of the call will be available through December 3rd, 2022. To access the telephone replay, the domestic dial-in number is 1-800-770-2030, the international dial-in number is 1-647-362-9199 and the access code is 3162560, or by using the link at investors.greenbrickpartners.com.

GREEN BRICK PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

    Three Months Ended September 30, Nine Months Ended September 30,
      2022       2021     2022       2021
Residential units revenue   $ 396,749     $ 338,900   $ 1,273,925     $ 889,636
Land and lots revenue     11,195       3,440     52,779       60,989
Total revenues     407,944       342,340     1,326,704       950,625
Cost of residential units     268,536       247,899     879,108       654,136
Cost of land and lots     6,089       3,105     37,025       45,188
Total cost of revenues     274,625       251,004     916,133       699,324
Total gross profit     133,319       91,336     410,571       251,301
Selling, general and administrative expenses     (43,251)       (33,709)     (119,314)       (97,182)
Equity in income of unconsolidated entities     5,697       5,555     19,907       14,039
Other income, net     1,831       1,976     7,347       6,239
Income before income taxes     97,596       65,158     318,511       174,397
Income tax expense     16,963       13,898     65,678       37,093
Net income     80,633       51,260     252,833       137,304
Less: Net income attributable to noncontrolling interests     7,113       2,753     16,480       10,565
Net income attributable to Green Brick Partners, Inc.   $ 73,520     $ 48,507   $ 236,353     $ 126,739
         
Net income attributable to Green Brick Partners, Inc. per common share:        
Basic   $ 1.58     $ 0.96   $ 4.86     $ 2.50
Diluted   $ 1.57     $ 0.95   $ 4.82     $ 2.48
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share:        
Basic     46,032       50,732     48,205       50,689
Diluted     46,390       51,079     48,544       51,046

GREEN BRICK PARTNERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

 

  September 30, 2022   December 31, 2021
ASSETS
Cash and cash equivalents $ 48,203     $ 77,166  
Restricted cash   18,739       16,388  
Receivables   7,239       6,871  
Inventory   1,453,056       1,203,743  
Investments in unconsolidated entities   69,250       55,616  
Right-of-use assets – operating leases   3,800       4,596  
Property and equipment, net   2,894       2,812  
Earnest money deposits   25,203       26,008  
Deferred income tax assets, net   15,741       15,741  
Intangible assets, net   473       537  
Goodwill   680       680  
Other assets   12,457       11,709  
Total assets $ 1,657,735     $ 1,421,867  
LIABILITIES AND EQUITY
Liabilities:      
Accounts payable $ 60,984     $ 45,682  
Accrued expenses   99,425       61,351  
Customer and builder deposits   43,622       64,610  
Lease liabilities – operating leases   3,972       4,745  
Borrowings on lines of credit, net   42,902       (738)  
Senior unsecured notes, net   335,729       335,446  
Notes payable   14,638       210  
Total liabilities   601,272       511,306  
Commitments and contingencies      
Redeemable noncontrolling interest in equity of consolidated subsidiary   25,660       21,867  
Equity:      
Green Brick Partners, Inc. stockholders’ equity      
Preferred stock, $0.01 par value: 5,000,000 shares authorized; 2,000 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively   47,696       47,696  
Common stock, $0.01 par value: 100,000,000 shares authorized; 46,037,649 issued and outstanding as of September 30, 2022 and 51,151,911 and 50,759,972 issued and outstanding as of December 31, 2021, respectively   460       512  
Treasury stock, at cost: none as of September 30, 2022 and 391,939 shares as of December 31, 2021   ---       (3,167)  
Additional paid-in capital   261,570       289,641  
Retained earnings   699,514       539,866  
Total Green Brick Partners, Inc. stockholders’ equity   1,009,240       874,548  
Noncontrolling interests   21,563       14,146  
Total equity   1,030,803       888,694  
Total liabilities and equity $ 1,657,735     $ 1,421,867  

GREEN BRICK PARTNERS, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)

 

Residential Units Revenue and New Homes Delivered
(dollars in thousands)
  Three Months Ended September 30,           Nine Months Ended September 30,          
    2022     2021   Change   %   2022     2021   Change   %  
Home closings revenue   $ 394,731   $ 338,075   $ 56,656   16.8 %   $ 1,268,329   $ 886,488   $ 381,841   43.1 %  
Mechanic’s lien contracts revenue     2,018     825     1,193   144.6 %     5,596     3,148     2,448   77.8 %  
Residential units revenue   $ 396,749   $ 338,900   $ 57,849   17.1 %   $ 1,273,925   $ 889,636   $ 384,289   43.2 %  
New homes delivered     650     738     (88)   (11.9) %     2,189     2,011     178   8.9 %  
Average sales price of homes delivered   $ 607.3   $ 458.1   $ 149.2   32.6 %   $ 579.4   $ 440.8   $ 138.6   31.4 %  

 

Land and Lots Revenue
(dollars in thousands)
  Three Months Ended September 30,           Nine Months Ended September 30,          
    2022     2021   Change   %   2022     2021   Change   %  
Lots revenue   $ 3,991   $ 2,126   $ 1,865     87.7 %   $ 18,027   $ 15,184   $ 2,843     18.7 %  
Land revenue     7,204     1,314     5,890     448.2 %     34,752     45,805     (11,053)     (24.1) %  
Land and lots revenue   $ 11,195   $ 3,440   $ 7,755     225.4 %   $ 52,779   $ 60,989   $ (8,210)     (13.5) %  
Lots closed     57     31     26     83.9 %     274     173     101     58.4 %  
Average sales price of lots closed   $ 70.0   $ 68.6   $ 1.4     2.0 %   $ 65.8   $ 87.8   $ (22.0)     (25.1) %  

 

New Home Orders and Backlog
(dollars in thousands)
  Three Months Ended September 30,           Nine Months Ended September 30,          
    2022       2021     Change   %   2022       2021     Change   %  
Net new home orders     404       689       (285)     (41.4) %     1,550       2,375       (825)     (34.7) %  
Revenue from new net home   $ 251,276     $ 380,945     $ (129,669)     (34.0) %   $ 962,497     $ 1,216,845     $ (254,348)     (20.9) %  
Average selling price of net new home orders   $ 622.0     $ 552.9     $ 69.1     12.5 %   $ 621.0     $ 512.4     $ 108.6     21.2 %  
Cancellation rate     17.6 %     6.9 %     10.7 %   155.1 %     11.8 %     6.7 %     5.1 %   76.1 %  
Absorption rate per average active selling community per quarter     5.3       8.2       (2.9)     (35.4) %     6.8       8.8       (2.0)     (22.7) %  
Average active selling communities     76       84       (8)     (9.5) %     76       90       (14)     (15.6) %  
Active selling communities at end of period     74       80       (6)     (7.5) %                      
Backlog   $ 564,026     $ 1,017,220     $ (453,194)     (44.6) %                
Backlog (units)     841       1,827       (986)     (54.0) %                      
Average sales price of backlog   $ 670.7     $ 556.8     $ 113.9     20.5 %                

 

     September 30, 2022   December 31, 2021
Lots owned (1)        
Central   18,998     17,767  
Southeast   2,583     2,472  
Total lots owned   21,581     20,239  
Lots controlled (1)        
Central   3,691     7,321  
Southeast   618     1,061  
Total lots controlled   4,309     8,382  
Total lots owned and controlled (1)   25,890     28,621  
Percentage of lots owned   83.4 %   70.7 %

(1)   Excludes lots with homes under construction.

GREEN BRICK PARTNERS, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)

The following table presents additional information on the lots we owned as of September 30, 2022 and December 31, 2021.

 

  September 30, 2022   December 31, 2021
Total lots owned 21,581     20,239  
Add certain lots included in Total Lots Controlled      
Land under option for future acquisition and development 307     3,826  
Lots under option through unconsolidated development joint ventures 1,718     1,816  
Total lots self-developed 23,606     25,881  
Self-developed lots as a percentage of total lots owned and controlled 91.2 %   90.4 %

Non-GAAP Financial Measures

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating our operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

 

The following table represents the non-GAAP measure of adjusted homebuilding gross margin for the three and nine months ended September 30, 2022 and 2021 and reconciles these amounts to homebuilding gross margin, the most directly comparable GAAP measure.

 

(Unaudited, in thousands):   Three Months Ended September 30,   Nine Months Ended September 30,  
    2022       2021     2022       2021    
Residential units revenue   $ 396,749     $ 338,900     $ 1,273,925     $ 889,636    
Less: Mechanic’s lien contracts revenue     (2,018)       (825)       (5,596)       (3,148)    
Home closings revenue   $ 394,731     $ 338,075     $ 1,268,329     $ 886,488    
Homebuilding gross margin   $ 127,861     $ 90,875     $ 393,940     $ 234,834    
Homebuilding gross margin percentage     32.4 %     26.9 %     31.1 %     26.5 %  
           
Homebuilding gross margin     127,861       90,875       393,940       234,834    
Add back: Capitalized interest charged to cost of revenues     3,105       2,569       10,303       6,915    
Adjusted homebuilding gross margin   $ 130,966     $ 93,444     $ 404,243     $ 241,749    
Adjusted homebuilding gross margin percentage     33.2 %     27.6 %     31.9 %     27.3 %  

About Green Brick Partners, Inc.

Green Brick Partners, Inc. is a diversified homebuilding and land development company that operates in Texas, Georgia, and Florida and has a non-controlling interest in a Colorado homebuilder. Green Brick owns five subsidiary homebuilders in Texas (CB JENI Homes, Normandy Homes, Southgate Homes, Trophy Signature Homes, and a 90% interest in Centre Living Homes), as well as a controlling interest in a homebuilder in Atlanta, Georgia (The Providence Group) and an 80% interest in a homebuilder in Port St. Lucie, Florida (GHO Homes). Green Brick also owns a noncontrolling interest in Challenger Homes in Colorado Springs, Colorado, and retains interests in related financial services platforms, including Green Brick Title and BHome Mortgage. The Company is engaged in all aspects of the homebuilding process, including land acquisition and development, entitlements, design, construction, marketing, and sales for its residential neighborhoods and master-planned communities. For more information about Green Brick Partners Inc.’s subsidiary homebuilders, please visit greenbrickpartners.com/homebuilders.

Forward-Looking and Cautionary Statements:

This press release and our earnings call contain “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts and typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “feel,” “intend,” “plan,” “predict,” “seek,” “strategy,” “target,” “will” or other words of similar meaning. Forward-looking statements in this press release and in our earnings call include statements regarding (i) our position to adapt and succeed in a rapidly changing environment, including our focus on operational efficiency; (ii) our expectations regarding trends in our markets, including future increases in inventory and the peaking of construction costs; (iii) the ability to mitigate future inventory buildup, including reductions in single-family starts; (iv) expected closings of our current backlog, and our ability to manage such closings; (v) our priorities and strategies for growth, the drivers of that growth, and the impact on our future results; (vi) our expectation to sustain our industry-leading margins and debt-to-total capital ratios, as well as the expected impacts of incentives on our margins; (vii) our flexibility to capitalize on market opportunities and grow our market share as well as the impact on our financial and operational performance; (viii) our beliefs that our lot and land positions will support future growth and provide us with advantages on margins and adaptability; (ix) our beliefs that we operate in the most advantageous markets in the U.S. and the resilience of our markets in both stronger and weaker economies; (x) our expectations related to starts in the fourth quarter and into 2023; (xi) our expectations for lot completions and opportunities to increase active selling communities during the remainder of 2022 and into 2023; (xii) our beliefs regarding our position to manage costs, prices and cycle times; and (xiii) our expectation to continue to provide favorable returns on equity to our shareholders. These forward-looking statements reflect our current views about future events and involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement. These risks include, but are not limited to: (1) changes in macroeconomic conditions, including increasing interest rates, inflation, and the COVID-19 pandemic that could adversely impact demand for new homes or the ability of potential buyers to qualify; (2) general economic conditions, seasonality, cyclicality and competition in the homebuilding industry; (3) shortages, delays or increased costs of raw materials and increased demand for materials, or increases in other operating costs, including costs related to labor, real estate taxes and insurance, which in each case exceed our ability to increase prices; (4) a shortage of qualified labor; (5) an inability to acquire land in our current and new markets at anticipated prices or difficulty in obtaining land- use entitlements; (6) our inability to successfully execute our strategies, including an inability to grow our operations or expand our Trophy brand; (7) our inability to implement new strategic investments; (8) a failure to recruit, retain or develop highly skilled and competent employees; (9) government regulation risks; (10) a lack of availability or volatility of mortgage financing; (11) severe weather events or natural disasters; (12) difficulty in obtaining sufficient capital to fund our growth; (13) our ability to meet our debt service obligations; (14) a decline in the value of our inventories and resulting write-downs of the carrying value of our real estate assets; (15) changes in accounting standards that adversely affect our reported earnings or financial condition. For a more detailed discussion of these and other risks and uncertainties applicable to Green Brick please see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Contact:

Benting Hu

Vice President of Finance

(469) 808-1014

IR@greenbrickpartners.com

 


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