Editor's note: Seeking Alpha is proud to welcome Alem Capital as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more » skynesher Introduction On one hand, Green Brick Partners (NYSE:GRBK) stands out in the vast American real estate market as a company with promise and potential. Operating strategically in Colorado, Florida, Texas, and Georgia, GRBK has successfull ...

Financial Data and Key Metrics Changes - Net new orders increased 95% year-over-year to 788 homes in Q3, with year-to-date growth of 73% [4][55] - Homebuilding gross margins reached a record high of 33.3%, up 90 basis points from the previous record [13][38] - Net income for Q3 was $72 million, or $1.56 per diluted share, with a return on average book equity of 25.3% year-to-date [81] Business Line Data and Key Metrics Changes - Home closings revenue grew 5.3% to $416 million, driven by a 16% increase in home closing units to 754 homes delivered [54][81] - The average selling price (ASP) for homes declined by 9% to $551,000, influenced by a higher percentage of lower-priced Trophy Signature Homes [54][56] - The cancellation rate decreased to 6.1%, the second lowest in company history, reflecting strong demand and limited competition [40][57] Market Data and Key Metrics Changes - The company continues to lead public homebuilding peers in new order growth, with a backlog value increasing 10% year-over-year to $623 million [55][57] - Existing home inventory remains low, with many markets having three or fewer months of supply, contributing to demand for new homes [14][40] - The average FICO score for Q3 closings was 748, indicating strong buyer credit quality despite higher mortgage rates [24] Company Strategy and Development Direction - The company is focused on acquiring prime land opportunities and has closed several opportunistic land deals, including a notable acquisition in Austin [17][84] - The strategy includes managing capital efficiently and maintaining operational efficiencies to improve cycle times and market share [16][33] - The company aims to expand its market presence in supply-constrained infill and adjacent submarkets, leveraging its strong balance sheet and gross margins [18][84] Management's Comments on Operating Environment and Future Outlook - Management noted that despite higher mortgage rates, demand remains strong, particularly in infill locations, with an increase in cash deals [24][35] - The company is adapting to the current market by adjusting pricing and offering incentives to address affordability concerns [35][57] - Management expressed optimism about future opportunities due to capital constraints faced by smaller builders and developers [30][84] Other Important Information - The company holds over 26,200 lots owned and controlled, positioning it well for future growth [18] - The average pay rate for fixed-rate debt is 3.3%, with a debt-to-total-capital ratio of 21.8%, indicating a strong balance sheet [33] - The company is building more ENERGY STAR-certified homes to enhance eligibility for future tax credits [39] Q&A Session Summary Question: Insights on ASP for Trophy Signature Homes - Management indicated a dip in ASP from approximately $480,000 to $450,000 over the past two quarters [5][6] Question: Future ASP Trends for Trophy - Management suggested that the ASP could continue to trend lower, especially if consumer preferences shift towards smaller homes [6] Question: Performance of Higher-End Communities - Management reported continued strong demand in higher-end segments, with complex homes selling at a satisfactory pace [48] Question: Land Acquisition Opportunities - Management discussed capital availability as a key driver for land acquisition opportunities, noting favorable economics for cash transactions [30][31] Question: Average Consumer Statistics - The average FICO score was reported at 743, with down payments varying significantly by location [69][72] Question: Use of Incentives - Management confirmed that incentives averaged 4.4% of sales price, with variations based on community and market conditions [57][68]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Green Brick Partners, Inc [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of Green Brick Partners, Inc. for the periods ended September 30, 2023, and December 31, 2022, including balance sheets, statements of income, changes in stockholders' equity, and cash flows, along with detailed notes on significant accounting policies, inventory, investments, debt, equity, and revenue recognition [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and equity as of September 30, 2023, and December 31, 2022 | ASSETS (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :---------------------- | :----------- | :----------- | | Cash and cash equivalents | $223,453 | $76,588 | | Restricted cash | $22,708 | $16,682 | | Inventory | $1,462,264 | $1,422,680 | | Total assets | $1,866,646 | $1,655,675 | | **LIABILITIES AND EQUITY** | | | | Total liabilities | $569,763 | $543,621 | | Total equity | $1,261,647 | $1,082,815 | | Total liabilities and equity | $1,866,646 | $1,655,675 | - Total assets increased by **$210.97 million** (12.7%) from December 31, 2022, to September 30, 2023, primarily driven by a significant increase in cash and cash equivalents[7](index=7&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Details the company's revenues, gross profit, net income, and earnings per share for the three and nine months ended September 30, 2023 and 2022 | (in thousands, except per share data) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $418,978 | $407,944 | $1,327,328 | $1,326,704 | | Total gross profit | $139,013 | $133,319 | $406,554 | $410,571 | | Income before income taxes | $98,086 | $97,596 | $289,470 | $318,511 | | Net income attributable to Green Brick Partners, Inc. | $72,156 | $73,520 | $211,606 | $236,353 | | Basic EPS | $1.58 | $1.58 | $4.60 | $4.86 | | Diluted EPS | $1.56 | $1.57 | $4.55 | $4.82 | - For the three months ended September 30, 2023, total revenues increased by **2.7% YoY**, while net income attributable to Green Brick Partners, Inc. decreased by **1.9% YoY**. Basic EPS remained flat at **$1.58**[9](index=9&type=chunk) - For the nine months ended September 30, 2023, total revenues saw a marginal increase of **0.05% YoY**, but net income attributable to Green Brick Partners, Inc. decreased by **10.47% YoY**, and diluted EPS decreased by **5.6% YoY**[9](index=9&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Outlines changes in stockholders' equity, including net income, stock repurchases, and distributions, for the periods ended September 30, 2023 and 2022 | (in thousands, except share data) | Sep 30, 2023 (3 months) | Sep 30, 2022 (3 months) | | :-------------------------------- | :---------------------- | :---------------------- | | Balance at June 30 | $1,190,225 | $963,495 | | Net income | $75,439 | $78,979 | | Distributions | $(3,000) | $0 | | Balance at September 30 | $1,261,647 | $1,030,803 | | (in thousands, except share data) | Sep 30, 2023 (9 months) | Sep 30, 2022 (9 months) | | :-------------------------------- | :---------------------- | :---------------------- | | Balance at Dec 31 | $1,082,815 | $888,694 | | Net income | $221,185 | $249,488 | | Stock repurchases | $(27,991) | $(101,463) | | Distributions | $(14,056) | $(5,718) | | Balance at September 30 | $1,261,647 | $1,030,803 | - Total equity increased from **$1,082,815 thousand** at December 31, 2022, to **$1,261,647 thousand** at September 30, 2023, primarily due to net income, partially offset by stock repurchases and distributions[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022 | (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $232,699 | $31,340 | | Net cash used in investing activities | $(9,999) | $(4,946) | | Net cash used in financing activities | $(69,809) | $(53,006) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $152,891 | $(26,612) | | Cash and cash equivalents and restricted cash, end of period | $246,161 | $66,942 | - Net cash provided by operating activities significantly increased to **$232.7 million** for the nine months ended September 30, 2023, compared to **$31.3 million** in the prior year, primarily driven by cash generated from business operations[15](index=15&type=chunk)[135](index=135&type=chunk) - Cash and cash equivalents and restricted cash at the end of the period increased substantially to **$246.2 million**, up from **$66.9 million** in the prior year[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the financial statements, covering accounting policies, inventory, debt, and equity [1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the key accounting principles and methods used in preparing the financial statements, including consolidation and recent pronouncements - The financial statements are prepared in accordance with GAAP and SEC regulations, reflecting all normal, recurring adjustments. Operating results for the reported periods are not necessarily indicative of future results due to seasonal variations[17](index=17&type=chunk)[18](index=18&type=chunk) - The Company consolidates its controlled subsidiaries and VIEs where it is the primary beneficiary, using the equity method for unconsolidated entities with significant influence[19](index=19&type=chunk)[20](index=20&type=chunk) - Recent accounting pronouncements did not have a material impact on the condensed consolidated financial statements[23](index=23&type=chunk) [2. INVENTORY](index=9&type=section&id=2.%20INVENTORY) Details the composition and valuation of inventory, including homes, land, and lots, and reports on impairment assessments | Inventory (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :----------------------- | :----------- | :----------- | | Homes completed or under construction | $535,334 | $603,953 | | Land and lots - developed and under development | $874,436 | $768,194 | | Land held for future development | $48,991 | $48,369 | | Land held for sale | $3,503 | $2,164 | | Total inventory | $1,462,264 | $1,422,680 | - Total inventory increased by **$39.58 million** (2.8%) from December 31, 2022, to September 30, 2023, primarily due to an increase in land and lots under development[24](index=24&type=chunk) - No impairment adjustments were recorded for communities or land inventory for the three and nine months ended September 30, 2023 and 2022[25](index=25&type=chunk) [3. INVESTMENT IN UNCONSOLIDATED ENTITIES](index=9&type=section&id=3.%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) Reports on the company's investments in unconsolidated entities and its share of their net earnings, including details on joint ventures | Investment (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | GB Challenger, LLC | $49,186 | $49,897 | | GBTM Sendera, LLC | $19,530 | $14,319 | | EJB River Holdings, LLC | $10,398 | $8,554 | | BHome Mortgage, LLC | $1,096 | $1,147 | | Green Brick Mortgage, LLC | $0 | $307 | | Total investment | $80,210 | $74,224 | | Company's Share in Net Earnings (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | GB Challenger, LLC | $(71) | $5,196 | $7,441 | $16,282 | | EJB River Holdings, LLC | $770 | $203 | $1,844 | $1,587 | | BHome Mortgage, LLC | $646 | $145 | $1,980 | $1,055 | | Green Brick Mortgage, LLC | $0 | $153 | $0 | $983 | | Total net earnings from unconsolidated entities | $1,345 | $5,697 | $11,265 | $19,907 | - The Green Brick Mortgage joint venture was terminated as of September 30, 2023, resulting in a de minimis loss upon dissolution[27](index=27&type=chunk) - Equity in income of unconsolidated entities decreased significantly by **76.4%** for the three months ended September 30, 2023, primarily due to inventory impairments recorded by GB Challenger, LLC[29](index=29&type=chunk)[107](index=107&type=chunk) [4. ACCRUED EXPENSES](index=11&type=section&id=4.%20ACCRUED%20EXPENSES) Provides a breakdown of accrued expenses, including reserves for real estate development, warranties, and property taxes | Accrued Expenses (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------ | :----------- | :----------- | | Real estate development reserve to complete | $31,692 | $28,790 | | Warranty reserve | $22,009 | $17,940 | | Accrued property tax payable | $17,186 | $4,040 | | Accrued compensation | $16,407 | $13,910 | | Other accrued expenses | $23,615 | $26,570 | | Total accrued expenses | $110,909 | $91,280 | - Total accrued expenses increased by **$19.63 million** (21.5%) from December 31, 2022, to September 30, 2023, largely driven by increases in real estate development reserve to complete and accrued property tax payable[31](index=31&type=chunk) | Warranty Accrual Activity (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Warranty accrual, beginning of period | $20,824 | $12,065 | $17,945 | $9,378 | | Warranties issued | $2,568 | $1,923 | $7,489 | $6,134 | | Payments made | $(1,440) | $(1,161) | $(4,033) | $(3,101) | | Warranty accrual, end of period | $22,009 | $14,906 | $22,009 | $14,906 | [5. DEBT](index=11&type=section&id=5.%20DEBT) Details the company's debt structure, including revolving credit facilities and senior unsecured notes, and confirms compliance with financial covenants | Borrowings on Lines of Credit (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------------- | :----------- | :----------- | | Secured Revolving Credit Facility | $0 | $0 |\ | Unsecured Revolving Credit Facility | $0 | $20,000 | | Debt issuance costs, net of amortization | $(1,983) | $(2,605) | | Total borrowings on lines of credit, net | $(1,983) | $17,395 | - The Company had no outstanding amounts under its Secured Revolving Credit Facility (**$35.0 million** commitment) and Unsecured Revolving Credit Facility (**$325.0 million** commitment) as of September 30, 2023[35](index=35&type=chunk)[36](index=36&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) | Senior Unsecured Notes (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | 4.00% 2026 Notes | $75,000 | $75,000 | | 3.35% 2027 Notes | $37,500 | $37,500 | | 3.25% 2028 Notes | $125,000 | $125,000 | | 3.25% 2029 Notes | $100,000 | $100,000 | | Debt issuance costs, net | $(1,388) | $(1,670) | | Total senior unsecured notes, net | $336,112 | $335,820 | - The Company was in compliance with all specific financial covenants as of September 30, 2023, including an interest coverage ratio of **29.34 to 1.0** (minimum 2.0 to 1.0) and a debt to total capitalization rolling average ratio of **22.8%** (maximum 40.0%)[42](index=42&type=chunk)[140](index=140&type=chunk) [6. REDEEMABLE NONCONTROLLING INTEREST](index=13&type=section&id=6.%20REDEEMABLE%20NONCONTROLLING%20INTEREST) Explains the nature and changes in the redeemable noncontrolling interest, including net income attribution and fair value adjustments - The redeemable noncontrolling interest relates to a **20%** minority interest in GRBK GHO Homes, LLC[44](index=44&type=chunk) - On March 23, 2023, the put and purchase options for GRBK GHO were extended from April 2024 to April 2027[45](index=45&type=chunk) | Redeemable Noncontrolling Interest (in thousands) | Sep 30, 2023 (3 months) | Sep 30, 2022 (3 months) | Sep 30, 2023 (9 months) | Sep 30, 2022 (9 months) | | :------------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Beginning of period | $32,995 | $22,001 | $29,239 | $21,867 | | Net income attributable | $1,672 | $1,654 | $5,131 | $3,345 | | Distributions of income | $0 | $0 | $(1,840) | $0 | | Change in fair value | $569 | $2,005 | $2,706 | $448 | | End of period | $35,236 | $25,660 | $35,236 | $25,660 | [7. STOCKHOLDERS' EQUITY](index=13&type=section&id=7.%20STOCKHOLDERS%27%20EQUITY) Discusses changes in stockholders' equity, including share repurchase programs and dividends paid on preferred stock - The Company completed its 2021 Share Repurchase Program in April 2022, repurchasing 1,193,037 shares for approximately **$25.8 million**[47](index=47&type=chunk) - Under the 2022 Repurchase Plan, the Company repurchased 803,591 shares for approximately **$27.7 million** during the nine months ended September 30, 2023. As of September 30, 2023, **$21.0 million** remained available under this plan[48](index=48&type=chunk)[49](index=49&type=chunk) - A new 2023 Repurchase Plan was approved on April 27, 2023, authorizing an additional **$100.0 million** in share repurchases upon completion of the 2022 plan[50](index=50&type=chunk) - Dividends paid on Series A preferred stock were **$0.7 million** for the three months and **$2.2 million** for the nine months ended September 30, 2023[53](index=53&type=chunk) [8. SHARE-BASED COMPENSATION](index=14&type=section&id=8.%20SHARE-BASED%20COMPENSATION) Details share-based award activity, including grants, vesting, and forfeiture, and reports on related compensation expense | Share-Based Award Activity (in thousands) | Number of Shares | Weighted Average Grant Date Fair Value per Share | | :---------------------------------------- | :--------------- | :--------------------------------------------- | | Nonvested, December 31, 2022 | 38 | $23.94 | | Granted | 184 | $33.78 | | Vested | (129) | $31.15 | | Forfeited | (1) | $32.35 | | Nonvested, September 30, 2023 | 92 | $33.38 | - Share-based compensation expense was **$0.3 million** for the three months and **$6.3 million** for the nine months ended September 30, 2023, an increase from **$0.2 million** and **$3.3 million** respectively in the prior year periods[59](index=59&type=chunk) - As of September 30, 2023, **$2.0 million** of unamortized share-based compensation expense remains, expected to be recognized over a weighted-average period of 1.8 years[60](index=60&type=chunk) [9. REVENUE RECOGNITION](index=16&type=section&id=9.%20REVENUE%20RECOGNITION) Provides a disaggregation of total revenues by residential units and land/lots, highlighting changes in revenue streams and customer deposits | Revenue Disaggregation (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Residential units revenue | $415,923 | $396,749 | | Land and lots revenue | $3,055 | $11,195 | | Total revenues | $418,978 | $407,944 | | Revenue Disaggregation (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Residential units revenue | $1,320,730 | $1,273,925 | | Land and lots revenue | $6,598 | $52,779 | | Total revenues | $1,327,328 | $1,326,704 | - Residential units revenue increased by **4.8%** for the three months and **3.7%** for the nine months ended September 30, 2023, while land and lots revenue significantly decreased by **72.7%** and **87.5%** respectively[62](index=62&type=chunk)[64](index=64&type=chunk) - Customer and builder deposits increased from **$29.1 million** at December 31, 2022, to **$47.2 million** at September 30, 2023, reflecting timing differences between payments and home delivery[65](index=65&type=chunk) [10. SEGMENT INFORMATION](index=18&type=section&id=10.%20SEGMENT%20INFORMATION) Presents disaggregated financial data for the company's operating segments, including builder operations (Central and Southeast) and land development | Revenues by Segment (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Builder operations - Central | $293,640 | $259,033 | $960,258 | $885,611 | | Builder operations - Southeast | $122,758 | $144,961 | $360,947 | $395,677 | | Land development | $2,580 | $3,950 | $6,123 | $45,416 | | Total revenues | $418,978 | $407,944 | $1,327,328 | $1,326,704 | | Gross Profit by Segment (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Builder operations - Central | $108,699 | $94,122 | $318,982 | $311,694 | | Builder operations - Southeast | $40,931 | $47,493 | $120,128 | $116,543 | | Land development | $737 | $1,610 | $2,283 | $12,852 | | Corporate, other and unallocated | $(11,354) | $(9,906) | $(34,839) | $(30,518) | | Total gross profit | $139,013 | $133,319 | $406,554 | $410,571 | - Central builder operations revenue and gross profit increased for both three and nine-month periods, while Southeast builder operations revenue and gross profit decreased[67](index=67&type=chunk) - Land development revenue and gross profit significantly decreased for both periods, reflecting opportunistic sales to other homebuilders[67](index=67&type=chunk) [11. INCOME TAXES](index=19&type=section&id=11.%20INCOME%20TAXES) Reports on income tax expense and the effective tax rate, explaining the factors influencing changes in tax rates | Income Tax (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $20,975 | $16,963 | $63,154 | $65,678 | | Effective tax rate | 21.4% | 17.4% | 21.8% | 20.6% | - The effective tax rate increased for both the three and nine months ended September 30, 2023, primarily due to changes in the benefit of the 45L Energy Efficient Home Credit, with fewer homes qualifying in 2023[69](index=69&type=chunk) [12. EARNINGS PER SHARE](index=19&type=section&id=12.%20EARNINGS%20PER%20SHARE) Details basic and diluted earnings per share calculations and the factors affecting changes in EPS for the reported periods | EPS (in thousands, except per share amounts) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income applicable to common stockholders | $71,437 | $72,801 | $209,450 | $234,197 | | Basic EPS | $1.58 | $1.58 | $4.60 | $4.86 | | Diluted EPS | $1.56 | $1.57 | $4.55 | $4.82 | - Basic EPS remained flat at **$1.58** for the three months ended September 30, 2023, compared to the prior year, while diluted EPS slightly decreased[72](index=72&type=chunk) - For the nine months ended September 30, 2023, basic EPS decreased by **$0.26** and diluted EPS decreased by **$0.27** compared to the prior year[72](index=72&type=chunk) [13. FAIR VALUE MEASUREMENTS](index=20&type=section&id=13.%20FAIR%20VALUE%20MEASUREMENTS) Describes the fair value hierarchy and measurements for financial instruments, including cash, receivables, and debt - The fair value of Level 1 financial instruments (cash, receivables, deposits, payables, accrued expenses) does not materially differ from their carrying values due to their short-term nature[74](index=74&type=chunk) - Level 2 financial instruments include borrowings on lines of credit, senior unsecured notes, and notes payable. The estimated fair value of senior unsecured notes was **$311.1 million** as of September 30, 2023, compared to an aggregate principal balance of **$337.5 million**[75](index=75&type=chunk) [14. RELATED PARTY TRANSACTIONS](index=21&type=section&id=14.%20RELATED%20PARTY%20TRANSACTIONS) Discloses transactions with related parties, including a subsidiary where the CEO's son is president, and services from affiliated entities - Green Brick's CEO's son is the President of CLH20, LLC (Centre Living), in which Green Brick holds a **90%** ownership and voting control[78](index=78&type=chunk) - GRBK GHO leases office space and receives title closing services from affiliated entities, incurring de minimis rent and fees for the three and nine months ended September 30, 2023[79](index=79&type=chunk)[80](index=80&type=chunk) [15. COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=15.%20COMMITMENTS%20AND%20CONTINGENCIES) Outlines the company's commitments, including letters of credit, operating lease obligations, and legal claims - Outstanding letters of credit and performance bonds were **$10.0 million** as of September 30, 2023, up from **$5.0 million** at December 31, 2022[81](index=81&type=chunk) | Future Annual Undiscounted Cash Flows for Operating Leases (in thousands) | | :---------------------------------------------------------------------- | | Remainder of 2023: $161 | | 2024: $1,225 | | 2025: $1,618 | | 2026: $1,533 | | 2027: $1,501 | | Thereafter: $4,287 | | Total future lease payments: $10,325 | - The Company accrues for legal claims and regulatory matters when probable and estimable, believing their disposition will not materially adversely affect operations or financial condition[87](index=87&type=chunk)[88](index=88&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial performance and condition, highlighting key operating metrics, revenue and gross margin trends, and liquidity. It details the drivers behind changes in residential unit sales, new home orders, and land sales, and discusses the Company's capital resources and debt management strategies [Overview and Outlook](index=24&type=section&id=Overview%20and%20Outlook) Provides a high-level summary of key financial and operating metrics, highlighting performance drivers and market conditions | Key Financial and Operating Metrics | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :---------------------------------- | :------------------------------ | :----------------------------- | | Home deliveries | Increased by 16.0% | Increased by 5.0% | | Home closings revenue | Increased by 5.3% | Increased by 4.0% | | Average sales price of homes delivered | Decreased by 9.2% | Decreased by 0.9% | | Net new home orders | Increased by 95.0% | Increased by 72.7% | - Strong performance in home deliveries, home closings revenue, and net new home orders is attributed to superior infill locations, reduced cycle times, and low housing supply[94](index=94&type=chunk) - The decrease in average sales price of homes delivered is due to an increased percentage of Trophy Signature Homes closed and changes in product mix[94](index=94&type=chunk) [Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022](index=24&type=section&id=Three%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030%2C%202022) Analyzes the company's financial performance for the three-month period, comparing key revenue, order, and expense metrics year-over-year [Residential Units Revenue and New Homes Delivered](index=24&type=section&id=Residential%20Units%20Revenue%20and%20New%20Homes%20Delivered) Examines the drivers of residential unit revenue, including changes in new home deliveries and average sales prices | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :---------- | :---------- | :---------- | :------- | | Home closings revenue | $415,827 | $394,731 | $21,096 | 5.3% | | Residential units revenue | $415,923 | $396,749 | $19,174 | 4.8% | | New homes delivered | 754 | 650 | 104 | 16.0% | | Average sales price of homes delivered | $551.5 | $607.3 | $(55.8) | (9.2)% | - The **4.8%** increase in residential units revenue was primarily driven by a **16.0%** increase in new homes delivered, partially offset by a **9.2%** decrease in the average sales price[95](index=95&type=chunk) [New Home Orders and Backlog](index=25&type=section&id=New%20Home%20Orders%20and%20Backlog) Discusses trends in net new home orders, cancellation rates, and the resulting impact on the sales backlog | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :---------- | :---------- | :---------- | :------- | | Net new home orders | 788 | 404 | 384 | 95.0% | | Revenue from net new home orders | $452,436 | $251,276 | $201,160 | 80.1% | | Average selling price of net new home orders | $574.2 | $622.0 | $(47.8) | (7.7)% | | Cancellation rate | 6.1% | 17.6% | (11.5)% | (65.3)% | | Backlog | $622,560 | $564,026 | $58,534 | 10.4% | | Backlog units | 916 | 841 | 75 | 8.9% | - Net new home orders increased by **95.0%** year-over-year, driven by limited competition, improved homebuyer sentiment, and low inventory[96](index=96&type=chunk) - The cancellation rate significantly decreased to **6.1%** from **17.6%** in the prior year, indicating improved market stability[96](index=96&type=chunk)[99](index=99&type=chunk) [Residential Units Gross Margin](index=26&type=section&id=Residential%20Units%20Gross%20Margin) Analyzes the residential units gross margin, identifying factors influencing profitability, such as sales and construction costs | (dollars in thousands) | 2023 | % | 2022 | % | | :--------------------- | :---------- | :---------- | :---------- | :---------- | | Home closings revenue | $415,827 | 100.0% | $394,731 | 100.0% | | Cost of homebuilding units | $277,400 | 66.7% | $266,870 | 67.6% | | Homebuilding gross margin | $138,427 | 33.3% | $127,861 | 32.4% | | Residential units gross margin | $138,477 | 33.3% | $128,213 | 32.3% | - Residential units gross margin increased to **33.3%** for the three months ended September 30, 2023, up from **32.3%** in the prior year, driven by strong sales, lower construction costs, and limited competition[101](index=101&type=chunk) [Land and Lots Revenue](index=26&type=section&id=Land%20and%20Lots%20Revenue) Reviews the performance of land and lots revenue, including changes in sales volume and average sales prices | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :---------- | :---------- | :---------- | :------- | | Lots revenue | $2,026 | $3,991 | $(1,965) | (49.2)% | | Land revenue | $1,029 | $7,204 | $(6,175) | (85.7)% | | Land and lots revenue | $3,055 | $11,195 | $(8,140) | (72.7)% | | Lots closed | 19 | 57 | (38) | (66.7)% | | Average sales price of lots closed | $106.6 | $70.0 | $36.6 | 52.3% | - Land and lots revenue decreased by **72.7%**, primarily due to a **66.7%** decrease in lots closed, partially offset by a **52.3%** increase in the average sales price of lots closed[102](index=102&type=chunk) [Selling, General and Administrative Expenses](index=27&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Examines the trends in selling, general and administrative expenses and their impact on overall revenue percentage | (dollars in thousands) | 2023 | % of Revenue | 2022 | % of Revenue | | :--------------------- | :---------- | :----------- | :---------- | :----------- | | Total SG&A expenses | $46,884 | 11.2% | $43,251 | 10.6% | - Selling, general and administrative expenses as a percentage of revenue increased by **0.6%** for the three months ended September 30, 2023, mainly due to an increase in brokerage commissions[104](index=104&type=chunk)[105](index=105&type=chunk) [Equity in Income of Unconsolidated Entities](index=27&type=section&id=Equity%20in%20Income%20of%20Unconsolidated%20Entities) Reports on the company's share of income from unconsolidated entities and the factors affecting its changes - Equity in income of unconsolidated entities decreased by **76.4%** to **$1.3 million**, primarily due to inventory impairments recorded by GB Challenger, LLC[107](index=107&type=chunk) [Other Income, Net](index=27&type=section&id=Other%20Income%2C%20Net) Details the components of other income, net, including interest income and forfeited customer deposits - Other income, net, increased to **$4.6 million** from **$1.8 million**, driven by higher interest income and forfeited customer deposits[108](index=108&type=chunk) [Income Tax Expense](index=27&type=section&id=Income%20Tax%20Expense) Discusses the income tax expense and the factors influencing its changes, such as tax credits - Income tax expense increased to **$21.0 million** from **$17.0 million**, primarily due to the recognition of additional Section 45L credits in the prior year period following the Inflation Reduction Act of 2022[109](index=109&type=chunk) [Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022](index=28&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202023%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030%2C%202022) Provides a comprehensive analysis of the company's financial performance for the nine-month period, comparing key metrics year-over-year [Residential Units Revenue and New Homes Delivered](index=28&type=section&id=Residential%20Units%20Revenue%20and%20New%20Homes%20Delivered) Analyzes the drivers of residential unit revenue, including changes in new home deliveries and average sales prices | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :------------ | :------------ | :------------ | :------- | | Home closings revenue | $1,319,393 | $1,268,329 | $51,064 | 4.0% | | Residential units revenue | $1,320,730 | $1,273,925 | $46,805 | 3.7% | | New homes delivered | 2,298 | 2,189 | 109 | 5.0% | | Average sales price of homes delivered | $574.1 | $579.4 | $(5.3) | (0.9)% | - Residential units revenue increased by **3.7%** for the nine months ended September 30, 2023, driven by a **5.0%** increase in new homes delivered, partially offset by a **0.9%** decrease in average sales price due to product mix[111](index=111&type=chunk) [New Home Orders](index=28&type=section&id=New%20Home%20Orders) Discusses trends in net new home orders, absorption rates, and cancellation rates for the nine-month period | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :------------ | :------------ | :------------ | :------- | | Net new home orders | 2,677 | 1,550 | 1,127 | 72.7% | | Revenue from net new home orders | $1,572,859 | $962,497 | $610,362 | 63.4% | | Average selling price of net new home orders | $587.5 | $621.0 | $(33.5) | (5.4)% | | Cancellation rate | 6.5% | 11.8% | (5.3)% | (44.9)% | - Net new home orders increased by **72.7%** year-over-year, and the absorption rate per average active selling community increased by **58.8%**, attributed to limited competition, increased spec homes, and improved homebuyer sentiment[112](index=112&type=chunk) - The cancellation rate decreased to **6.5%** from **11.8%** in the prior year period[112](index=112&type=chunk)[113](index=113&type=chunk) [Residential Units Gross Margin](index=29&type=section&id=Residential%20Units%20Gross%20Margin) Examines the residential units gross margin, identifying factors influencing profitability, such as sales and construction costs | (dollars in thousands) | 2023 | % | 2022 | % | | :--------------------- | :------------ | :---------- | :------------ | :---------- | | Home closings revenue | $1,319,393 | 100.0% | $1,268,329 | 100.0% | | Cost of homebuilding units | $914,749 | 69.3% | $874,389 | 68.9% | | Homebuilding gross margin | $404,644 | 30.7% | $393,940 | 31.1% | | Residential units gross margin | $405,130 | 30.7% | $394,817 | 31.0% | - Residential units gross margin for the nine months ended September 30, 2023, was **30.7%**, a slight decrease from **31.0%** in the prior year[114](index=114&type=chunk) [Land and Lots Revenue](index=29&type=section&id=Land%20and%20Lots%20Revenue) Reviews the performance of land and lots revenue, including changes in sales volume and average sales prices | (dollars in thousands) | 2023 | 2022 | Change | % Change | | :--------------------- | :---------- | :---------- | :------------ | :------- | | Lots revenue | $5,569 | $18,027 | $(12,458) | (69.1)% | | Land revenue | $1,029 | $34,752 | $(33,723) | (97.0)% | | Land and lots revenue | $6,598 | $52,779 | $(46,181) | (87.5)% | | Lots closed | 55 | 274 | (219) | (79.9)% | | Average sales price of lots closed | $101.3 | $65.8 | $35.5 | 54.0% | - Land and lots revenue decreased by **87.5%** for the nine months ended September 30, 2023, primarily due to a **79.9%** decrease in lots closed and a **97.0%** decrease in land revenue[115](index=115&type=chunk) [Selling, General and Administrative Expenses](index=29&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Examines the trends in selling, general and administrative expenses and their impact on overall revenue percentage | (dollars in thousands) | 2023 | % of Revenue | 2022 | % of Revenue | | :--------------------- | :------------ | :----------- | :------------ | :----------- | | Total SG&A expenses | $142,058 | 10.7% | $119,314 | 9.0% | - Selling, general and administrative expenses as a percentage of revenue increased by **1.7%** for the nine months ended September 30, 2023, mainly due to an increase in brokerage commissions[117](index=117&type=chunk)[118](index=118&type=chunk) [Equity in Income of Unconsolidated Entities](index=30&type=section&id=Equity%20in%20Income%20of%20Unconsolidated%20Entities) Reports on the company's share of income from unconsolidated entities and the factors affecting its changes - Equity in income of unconsolidated entities decreased by **43.4%** to **$11.3 million**, primarily due to inventory impairments at GB Challenger, LLC[120](index=120&type=chunk) [Other Income, Net](index=30&type=section&id=Other%20Income%2C%20Net) Details the components of other income, net, including interest income and forfeited customer deposits - Other income, net, increased to **$13.7 million** from **$7.3 million**, driven by higher interest income and forfeited customer deposits[121](index=121&type=chunk) [Income Tax Expense](index=30&type=section&id=Income%20Tax%20Expense) Discusses the income tax expense and the factors influencing its changes, such as tax credits - Income tax expense decreased to **$63.2 million** from **$65.7 million**, primarily due to lower taxable income and return to provision differences[122](index=122&type=chunk) [Lots Owned and Controlled](index=31&type=section&id=Lots%20Owned%20and%20Controlled) Provides an overview of the company's land inventory, including owned and controlled lots, and the percentage of self-developed lots | Lots Owned and Controlled | Sep 30, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Total lots owned | 21,159 | 21,481 | | Total lots controlled | 5,060 | 4,046 | | Total lots owned and controlled | 26,219 | 25,527 | | Percentage of lots owned | 80.7% | 84.2% | | Self-developed lots as a percentage of total lots owned and controlled | 94.8% | 91.3% | - Total lots owned and controlled increased to **26,219** as of September 30, 2023, from **25,527** at December 31, 2022, with a notable increase in controlled lots[125](index=125&type=chunk) - The percentage of self-developed lots as a percentage of total lots owned and controlled increased to **94.8%** from **91.3%**, indicating a greater focus on internal development[127](index=127&type=chunk) [Liquidity and Capital Resources Overview](index=31&type=section&id=Liquidity%20and%20Capital%20Resources%20Overview) Summarizes the company's liquidity position, including cash, debt, and capitalization ratios, and outlines capital management strategies - Unrestricted cash and cash equivalents increased significantly to **$223.5 million** as of September 30, 2023, from **$76.6 million** at December 31, 2022[128](index=128&type=chunk) - The Company's debt to total capitalization ratio was **21.8%**, and the net debt to total capitalization ratio was **9.0%** as of September 30, 2023, indicating a strong financial position[131](index=131&type=chunk)[133](index=133&type=chunk) - The Company targets a debt to total capitalization ratio of approximately **30% to 35%** to provide significant additional growth capital[131](index=131&type=chunk) [Reconciliation of a Non-GAAP Financial Measure](index=32&type=section&id=Reconciliation%20of%20a%20Non-GAAP%20Financial%20Measure) Provides a reconciliation of net debt to total capitalization, a non-GAAP financial measure, and explains its relevance - Net debt to total capitalization ratio is a non-GAAP measure used to evaluate the Company's financing structure and compare it with industry peers[132](index=132&type=chunk) | (in thousands) | Gross | Cash and cash equivalents | Net | | :------------- | :------------ | :------------------------ | :------------ | | Total debt, net of debt issuance costs | $347,127 | $(223,453) | $123,674 | | Total Green Brick Partners, Inc. stockholders' equity | $1,245,216 | $0 | $1,245,216 | | Total capitalization | $1,592,343 | $(223,453) | $1,368,890 | | Debt to total capitalization ratio | 21.8% | | | | Net debt to total capitalization ratio | | | 9.0% | [Cash Flows](index=32&type=section&id=Cash%20Flows) Details the sources and uses of cash from operating, investing, and financing activities for the nine-month period - Net cash provided by operating activities for the nine months ended September 30, 2023, was **$232.7 million**, a significant increase from **$31.3 million** in the prior year[135](index=135&type=chunk) - Net cash used in investing activities increased to **$10.0 million**, primarily for investments in unconsolidated entities[135](index=135&type=chunk) - Net cash used in financing activities was **$69.8 million**, mainly due to share repurchases (**$28.0 million**), net repayments of lines of credit (**$20.0 million**), and distributions to noncontrolling interests (**$14.1 million**)[135](index=135&type=chunk)[136](index=136&type=chunk) [Debt Instruments](index=33&type=section&id=Debt%20Instruments) Provides an overview of the company's debt instruments, including revolving credit facilities and senior unsecured notes, and confirms covenant compliance - The Company had no outstanding amounts under its Secured Revolving Credit Facility (**$35.0 million** commitment) and Unsecured Revolving Credit Facility (**$325.0 million** commitment) as of September 30, 2023[137](index=137&type=chunk)[138](index=138&type=chunk) - Aggregate principal amount of senior unsecured notes outstanding was **$336.1 million** as of September 30, 2023[139](index=139&type=chunk) - The Company was in compliance with all debt covenants, including an interest coverage ratio of **29.34 to 1.0** and a maximum debt to total capitalization rolling average ratio of **22.8%**[140](index=140&type=chunk) [Preferred Equity](index=33&type=section&id=Preferred%20Equity) Details the outstanding Series A Cumulative Perpetual Preferred Stock and the dividends declared and paid - As of September 30, 2023, 2,000,000 Depositary Shares of **5.75%** Series A Cumulative Perpetual Preferred Stock were outstanding[141](index=141&type=chunk) - Dividends of **$2.2 million** were paid on Series A Preferred Stock during the nine months ended September 30, 2023[142](index=142&type=chunk) - A quarterly cash dividend of **$0.359** per depositary share was declared on October 26, 2023, payable on December 15, 2023[142](index=142&type=chunk) [Off-Balance Sheet Arrangements and Contractual Obligations](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) Describes the company's off-balance sheet arrangements, including land purchase and option contracts, and associated earnest money deposits - The Company uses land purchase and option contracts to acquire lots, typically requiring earnest money deposits and contingent upon development entitlements[143](index=143&type=chunk)[144](index=144&type=chunk) - As of September 30, 2023, the Company had **$15.8 million** in earnest money deposits at risk for 3,937 lots with an aggregate purchase price of approximately **$223.6 million**[146](index=146&type=chunk) - The Company generally has the right to terminate these contracts by forfeiting the earnest money deposit[146](index=146&type=chunk) [Seasonality](index=34&type=section&id=Seasonality) Explains the seasonal nature of the homebuilding industry, affecting new home orders and deliveries - The homebuilding industry experiences seasonal fluctuations, with highest new home order activity in spring and summer[148](index=148&type=chunk) - More homes are typically delivered in the second half of the year, and cash receipts from home deliveries primarily occur during this period[148](index=148&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) Refers to the detailed critical accounting policies outlined in the company's most recent Annual Report on Form 10-K - Critical accounting policies are detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[149](index=149&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) States that recent accounting pronouncements did not have a material impact on the condensed consolidated financial statements - Recent accounting pronouncements did not have a material impact on the condensed consolidated financial statements[150](index=150&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=35&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=35&type=section&id=Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures as assessed by management - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023, providing reasonable assurance for timely and accurate reporting[151](index=151&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports on any material changes in internal control over financial reporting during the quarter - No changes in internal control over financial reporting occurred during the three months ended September 30, 2023, that materially affected or are reasonably likely to materially affect internal control[152](index=152&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II%20OTHER%20INFORMATION) This section includes additional information not covered in Part I, such as insider trading arrangements and a list of exhibits [ITEM 5. OTHER INFORMATION](index=36&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section reports on insider trading arrangements and policies, confirming no new arrangements were adopted or terminated by directors or officers during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023[155](index=155&type=chunk) [ITEM 6. EXHIBITS](index=36&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO under the Sarbanes-Oxley Act and XBRL-related documents - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[156](index=156&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents are submitted electronically[156](index=156&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) This section contains the required signatures of the registrant's Chief Executive Officer and Chief Financial Officer, certifying the report's submission - The report is duly signed by James R. Brickman, Chief Executive Officer, and Richard A. Costello, Chief Financial Officer, on October 31, 2023[161](index=161&type=chunk)

1 2023 Second Quarter Forward Looking Statements This presentation and our conference 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," "s ...

Financial Data and Key Metrics Changes - The company reported a net income of $75 million for the second quarter, with earnings per diluted share at $1.63, reflecting a 19% sequential increase and the second highest diluted EPS in company history [38][62] - Homebuilding gross margin increased by 370 basis points sequentially to 31.3%, the highest among public homebuilders, and only 110 basis points lower than the record high of 32.4% achieved in Q3 2022 [79][86] - The debt to total capital ratio decreased to 22.9%, and the net debt to total capital ratio reached a historic low of 10.6%, providing significant liquidity for future opportunities [12][44] Business Line Data and Key Metrics Changes - Home deliveries in Q2 declined 11% year-over-year to 783 units, attributed to a high level of deliveries in Q2 2022 and lower starts in the latter half of 2022 [8] - The cancellation rate improved by 400 basis points year-over-year to 7.4%, remaining the lowest in the industry [9][80] - Net new home orders increased by 51% year-over-year to 822 homes, marking the highest order level for any second quarter in company history [4][85] Market Data and Key Metrics Changes - The company noted that existing home inventory reached near all-time record low levels, which has driven demand for new home construction [5][50] - Approximately 80% of total revenues year-to-date were generated from self-developed infill and infill-adjacent locations, indicating a strong market presence in desirable areas [6][66] - The company is well-positioned to capture market share due to a strong balance sheet and ample high-quality finished lots in infill locations [52][66] Company Strategy and Development Direction - The company emphasizes its strategic long-term advantage in entitlement and development expertise, focusing on infill and infill-adjacent submarkets where competition is limited [59][82] - The management believes that ongoing operational improvements and scale as the third largest homebuilder in DFW will enhance competitive pricing and maintain industry-leading margins [14][66] - The company plans to capitalize on land and lot opportunities in the current marketplace, supported by abundant cash reserves [82] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience and strength of the housing market, indicating that they are well-positioned to meet the large demand for single-family homes [70] - The company noted that high interest rates have had limited impact on slowing housing demand in most communities [13] - Management highlighted the chronic shortage of approximately 4 million housing units in the country, which is expected to drive demand for new homes [58] Other Important Information - The company repurchased 803,000 shares of common stock for $27.7 million year-to-date, representing 1.7% of total shares outstanding as of December 31, 2022 [57] - The average selling price (ASP) of new orders declined by 8% year-over-year to $596,000, influenced by changes in product mix and slightly higher incentives [63] Q&A Session Summary Question: How is the performance of mid-to-high-end homes compared to Trophy Signature products? - Management noted that the high-end market is supply constrained, leading to high demand, while entry-level homes face more competition [28] Question: Has the reluctance of existing homeowners to sell benefited Green Brick? - Management confirmed that their infill locations have indeed benefited from this trend, as existing homeowners are hesitant to forfeit low-interest loans [22][32] Question: Can you break down the 8% decline in average order price between incentives and mix? - Management explained that incentives in A locations are typically lower than in peripheral locations, affecting the overall average order price [24] Question: Are there signs of increased activity among private builders considering selling? - Management indicated that they have observed some private builders facing challenges due to high costs of capital, which may lead to increased activity in the market [91]

TABLE OF CONTENTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-Q ___________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33530 Green Brick Partners, Inc. (Exact name of registrant as specified in its c ...

Financial Performance - Residential units revenue increased by 23.5% year-over-year to $450.4 million in Q1 2023[41], a record for any first quarter - Diluted EPS was up 14.2% year-over-year to $1.37 in Q1 2023[42], a record for any first quarter - Homebuilding gross margin decreased slightly by 20 bps year-over-year to 27.6%, but increased sequentially by 140 bps[10] - Incentives on new orders in Q1 were reduced by 330bps sequentially[46] Strategic Positioning - Approximately 75% of the company's finished lots as of 12/31/23 are expected to be located in infill locations[48] - The company has one of the lowest debt-to-total capital ratios among peers at 23.8% as of 3/31/23[37], with a net debt-to-total capital ratio of 13.3%[37] - Average sales price of homes delivered was up 7.0% year-over-year to $590.6K, and average sales price of backlog was up 7.2% year-over-year to $653.1K as of 3/31/2023[9] Market Dynamics - Net new home orders increased 77.5% year-over-year in Q1 2023[61] - Cancellation rate dropped significantly from Q4 2022 to 6.2% in Q1 2023[13] - The company expects population segment growth to be approximately 3 million over the next 10 years[6]

Financial Data and Key Metrics Changes - The company reported a record net income of $64 million for Q1 2023, with earnings per diluted share increasing by 14% year-over-year to $1.37, both records for any first quarter [22][33]. - Home closings revenue grew by 24% year-over-year to $449 million, also a record for any first quarter [21][37]. - The homebuilding gross margin was 27.6%, up 140 basis points sequentially from Q4 2022, and only 20 basis points lower than the same period last year [3][39]. - The cancellation rate improved significantly to 6.2%, down from 20% in the previous quarter, marking the lowest cancellation rate among public homebuilders [5][16]. Business Line Data and Key Metrics Changes - Home deliveries in Q1 2023 reached a record of 761 units, representing a 16% year-over-year increase, with the average selling price (ASP) growing by 7% to $591,000 [15]. - Net new home orders surged by 78% year-over-year to 1,067 homes, with a sequential increase of 152% from Q4 2022, marking the second highest number of net orders in company history [23][38]. - The backlog value increased by 49% sequentially to $551 million, driven by a 57% increase in backlog years [36]. Market Data and Key Metrics Changes - The Dallas-Fort Worth (DFW) market, the company's largest, created 212,000 new jobs over the last 12 months, contributing to a favorable demographic for homebuyers [6]. - Existing home sales fell by 2.4% in March from the prior month and 22% from a year earlier, allowing new homes to gain a larger market share [32]. Company Strategy and Development Direction - The company emphasized its strategic advantages, including a strong land and lot position, operational execution, and a diverse product line catering to various customer segments [4][9]. - The company plans to focus on infill locations, which are supply constrained and require local expertise, creating a barrier to entry for competitors [26]. - The company is optimistic about capturing market share due to a low existing home inventory and a strong balance sheet, allowing for flexibility in seizing market opportunities [121][122]. Management's Comments on Operating Environment and Future Outlook - Management remains positive about long-term housing supply and demand fundamentals, citing a deficit of approximately 4 million housing units in the country [12]. - The company expects gross margins to be slightly higher in the near term, as demand continues to outpace supply in its sub-markets [18]. - Management acknowledged the volatility in interest rates as a significant challenge but believes the company is well-positioned to navigate this environment [24]. Other Important Information - The company returned $15.4 million to shareholders through a stock buyback program during the quarter, with $33 million remaining under the existing program [4][104]. - The company has a low debt to total capital ratio of 23.8% and a net debt to total capital ratio of 13.3%, indicating a strong balance sheet [11][98]. Q&A Session Summary Question: What drove the sales pace during the quarter? - Management indicated that the order gains were driven by strong demand and not solely by finished homes [49]. Question: What is the outlook for community count and land availability? - Management stated that community count will depend on sales robustness, but they have sufficient land to grow community count through the year [50][52]. Question: How is the company addressing the current lending environment? - Management believes that public builders are less leveraged and will benefit from tighter lending standards, allowing them to gain market share [50]. Question: What percentage of new orders closed this quarter? - Management estimated that over 50% of the sales sold and closed in the quarter were either finished or in the early construction stages [73][75]. Question: What are the expectations for cash flow and capital allocation? - Management indicated that excess cash could be used for stock repurchases or preparing land for development, depending on market conditions [76]. Question: How is the company managing building material costs? - Management noted that while framing costs have fluctuated, other building materials have seen reductions in costs due to improved supply chains [71][91]. Question: What is the company's strategy for new markets? - Management confirmed that the focus will be on existing markets for incremental investments, but they are also exploring opportunities in new markets [64][66].

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's analysis of financial condition and operations, and an assessment of internal controls and procedures [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2023, detailing the balance sheet, income statement, equity changes, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $177,271 | $76,588 | | Inventory | $1,373,014 | $1,422,680 | | **Total assets** | **$1,706,456** | **$1,655,675** | | **Liabilities & Equity** | | | | Total liabilities | $549,563 | $543,621 | | Total equity | $1,126,602 | $1,082,815 | | **Total liabilities and equity** | **$1,706,456** | **$1,655,675** | Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $452,061 | $393,616 | | Total gross profit | $124,606 | $108,356 | | Income before income taxes | $87,172 | $82,633 | | Net income | $68,141 | $64,196 | | Diluted EPS | $1.37 | $1.20 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $154,707 | $(13,994) | | Net cash used in investing activities | $(3,101) | $(448) | | Net cash (used in) provided by financing activities | $(49,189) | $1,123 | | **Net increase (decrease) in cash** | **$102,417** | **$(13,319)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies, inventory, debt, segment performance, and share repurchase activities, providing context for the financial statements Inventory Breakdown (in thousands) | Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Homes completed or under construction | $525,571 | $603,950 | | Land and lots - developed and under development | $796,826 | $768,190 | | **Total inventory** | **$1,373,014** | **$1,422,680** | Debt Summary (in thousands) | Debt Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Borrowings on lines of credit, net | $(2,453) | $17,395 | | Senior unsecured notes, net | $335,920 | $335,825 | | Notes payable | $14,607 | $14,622 | - During Q1 2023, the company repurchased **467,875 shares** for approximately **$15.4 million** under its 2022 Repurchase Plan. As of March 31, 2023, **$33.3 million** remained available for repurchase under the plan[53](index=53&type=chunk) Segment Revenues (in thousands) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Builder operations - Central | $344,464 | $261,690 | | Builder operations - Southeast | $105,898 | $103,050 | | Land development | $1,699 | $28,860 | | **Total revenues** | **$452,061** | **$393,610** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Q1 2023 performance drivers, including increased home deliveries and orders, and the company's financial position and debt strategy Key Operating Metrics (Q1 2023 vs Q1 2022) | Metric | Change | | :--- | :--- | | Home deliveries | Increased by 15.7% | | Home closings revenue | Increased by 23.8% | | Average sales price of homes delivered | Increased by 7.0% | | Net new home orders | Increased by 77.5% | - The absorption rate per average active selling community reached an **all-time high of 13.3 homes** for the quarter, a **66.3% increase** year-over-year[103](index=103&type=chunk) - The company's cancellation rate improved, decreasing to **6.2%** in Q1 2023 from **8.0%** in Q1 2022[103](index=103&type=chunk)[106](index=106&type=chunk) - The company maintains a low net debt to total capitalization ratio of **13.3%** as of March 31, 2023, and targets a ratio of **30% to 35%** to fund future growth[126](index=126&type=chunk)[128](index=128&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of March 31, 2023[146](index=146&type=chunk) - No changes in internal controls that materially affected or are reasonably likely to materially affect internal control over financial reporting occurred during the quarter ended March 31, 2023[147](index=147&type=chunk) [PART II OTHER INFORMATION](index=31&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides details on unregistered sales of equity securities, including share repurchases, and lists the exhibits filed with the report [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity for Q1 2023, including shares repurchased and remaining authorization under the plan Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 2023 | — | $— | $48,683,000 | | Feb 2023 | — | $— | $48,683,000 | | Mar 2023 | 467,875 | $32.81 | $33,345,000 | [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[151](index=151&type=chunk) - XBRL Instance, Schema, Calculation, Definition, Label, and Presentation documents are submitted electronically with the filing[151](index=151&type=chunk) [Signatures](index=32&type=section&id=Signatures) The Form 10-Q report was officially signed and authorized on May 3, 2023, by the Chief Executive Officer and Chief Financial Officer - The report was signed by CEO **James R. Brickman** and CFO **Richard A. Costello**[156](index=156&type=chunk) - The signing date of the report is **May 3, 2023**[156](index=156&type=chunk)

2022 Fourth Quarter l | --- | --- | |-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | | | | | | This presentation of 1995. These expressions "expect," ...