[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]

Green Brick Partners, Inc. (NYSE:GRBK) Q1 2023 Earnings Conference Call May 3, 2023 12:00 PM ET Company Participants Jim Brickman - Co-Founder and Chief Executive Officer Rick Costello - Chief Financial Officer Jed Dolson - Chief Operating Officer Conference Call Participants Jay McCanless - Wedbush Carl Reichardt - BTIG Alex Rygiel - B. Riley Operator Good afternoon, and welcome to the Green Brick Partners' Earnings Call for the First Quarter ended March 31, 2023. Following today's remarks, we will hold a ...

[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," ...

Financial Data and Key Metrics Changes - Total revenues grew 25% year-over-year to $1.76 billion with a gross margin of 29.8% [6] - Earnings per share increased 62% to $6.02, and return on equity rose 550 basis points to 31.4% [6] - Net income attributable to Green Brick was $56 million, with diluted EPS at $1.18, down 4.8% year-over-year [31] Business Line Data and Key Metrics Changes - Home closing revenue grew 2.3% year-over-year to $429 million, driven by a 16% increase in average selling prices to $590,000, despite a 12% decline in the number of closings to 727 homes [24][31] - The cancellation rate increased to 20% in Q4 but was one of the lowest among peers, with a full-year cancellation rate of 14% [25] - The quarterly absorption rate for active selling communities was 5.5 homes in Q4, up from 5.3 in Q3 [26] Market Data and Key Metrics Changes - Sales momentum picked up in December, with sales up 43% over the average of the prior six months [7] - Job growth in key markets like Dallas and Atlanta was strong, with Dallas adding 235,000 jobs and Atlanta adding 126,000 jobs in 2022 [14] - Existing home inventory remains tight, with roughly one-third of homeowners mortgage-free, disincentivizing them from selling [11] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet and capital efficiency while managing inventory [22] - Green Brick aims to have approximately 6,000 finished lots by the end of 2023, with 75% located in desirable areas [15] - The company is exploring acquisitions and share repurchases as part of its capital allocation strategy [72][88] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the spring selling season based on increased demand, which is subject to interest rate fluctuations [21] - The company believes it is well-positioned for a market rebound due to its high-quality land pipeline and strategic advantages in key markets [15][18] - Management noted that the current housing cycle is different from the 2008 crisis, citing stronger mortgage market conditions and low supply of single-family homes [9][10] Other Important Information - The company amended its unsecured revolving credit agreement, increasing total commitments by $25 million to $325 million [37] - Construction costs have been reduced by an average of approximately $40,000 per home for homes started in December or later [48] - The company is expanding into Austin, with new home construction beginning in February [50] Q&A Session Summary Question: Thoughts on 2023 closings and gross margin - Management noted that sales pace has picked up significantly since December, maintaining pricing power due to infill locations [57][58] Question: Improvement in January and February sales - Management refrained from providing specific monthly sales numbers but confirmed significant improvement [68] Question: Capital allocation priorities for 2023 - Management is evaluating share repurchases, potential acquisitions, and expansion into new markets [72][88] Question: Mix of fixed and variable in SG&A - SG&A is a mix of fixed and variable, with higher volumes of closings leading to lower SG&A [75] Question: Average selling price outlook - Demand remains strong in A and B locations, with some incentives still necessary in C locations [77][79] Question: Percentage of out-of-market buyers - There has been a slight decrease in out-of-market buyers, with more in-state buyers this year [84] Question: Potential acquisition details - Management is exploring a low-probability off-market deal and sees opportunities due to banks being more restrictive [88][89]

PART I [ITEM 1. BUSINESS](index=4&type=section&id=Item%201.%20Business) Green Brick Partners is a diversified homebuilding and land development company operating in high-growth U.S. metropolitan areas, focusing on disciplined land acquisition and superior designs - Green Brick Partners, Inc. is a diversified homebuilding and land development company operating in high-growth U.S. metropolitan areas including Dallas-Fort Worth, Austin, Atlanta, Treasure Coast, Florida, and Colorado Springs[17](index=17&type=chunk) - The company's business strategy includes a consistent land acquisition program with disciplined underwriting, focusing on markets with favorable growth outlook and strong demand fundamentals (e.g., sunbelt states with double-digit population growth), strategically increasing market positions, delivering superior designs and broad product ranges, disciplined investment with prudent use of leverage, and targeted expansion into adjacent markets[21](index=21&type=chunk)[26](index=26&type=chunk) Builder Operations Overview | Builder | Ownership | Market | Products Offered | Price Range | | :--- | :--- | :--- | :--- | :--- | | Trophy Signature Homes LLC ("Trophy") | 100% | DFW and Austin | Single family | $270,000 to $1,080,000 | | CB JENI Homes DFW LLC ("CB JENI") | 100% | DFW | Townhomes | $270,000 to $630,000 | | Normandy Homes ("Normandy") | 100% | DFW | Single family | $450,000 to $1,150,000 | | SGHDAL LLC ("Southgate") | 100% | DFW | Luxury homes | $760,000 to $1,570,000 | | CLH20 LLC ("Centre Living") | 90% | DFW | Townhomes and Single Family | $380,000 to $930,000 | | The Providence Group of Georgia LLC ("TPG") | 50% | Atlanta | Townhomes, Condominiums and Single Family | $360,000 to $1,200,000 | | GRBK GHO Homes LLC ("GRBK GHO") | 80% | Treasure Coast | Patio homes and Single Family | $340,000 to $2,290,000 | | GB Challenger, LLC ("Challenger") | 49.9% | Colorado Springs and Denver | Townhomes and Single Family | $330,000 to $820,000 | Selling Communities and Backlog (as of December 31, 2022) | Builder | Selling Communities | Backlog, Units | Backlog, in thousands | | :--- | :--- | :--- | :--- | | Trophy | 28 | 143 | $78,840 | | CB JENI (includes Normandy Homes) | 16 | 121 | $72,395 | | Southgate | 4 | 38 | $44,045 | | Centre Living | 3 | 22 | $12,352 | | TPG | 20 | 111 | $77,431 | | GRBK GHO | 9 | 102 | $84,032 | | Total | 80 | 537 | $369,095 | - As of December 31, 2022, the company owned or controlled approximately **25,500 home sites**, with a land inventory strategy focused on a multi-year supply of lots while limiting excess supply to mitigate market cycle risk[19](index=19&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The company offers a preferred lender referral program through its mortgage joint venture (BHome Mortgage) and retains **100% ownership** in Green Brick Title, providing integrated financial services to homebuyers[35](index=35&type=chunk)[37](index=37&type=chunk) - The homebuilding industry is seasonal, with highest new home order activity in spring and summer, leading to more home deliveries in the second half of the year, though recent high demand has made seasonal patterns less evident[39](index=39&type=chunk) - As of December 31, 2022, Green Brick Partners had approximately **550 full-time employees**, with a focus on attracting and retaining talent, fostering a supportive culture, and promoting diversity and inclusion[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [ITEM 1A. RISK FACTORS](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to the cyclical nature of the homebuilding industry, macroeconomic conditions, and real estate market fluctuations, alongside operational and financial risks - The homebuilding industry is cyclical and highly sensitive to general economic conditions, including employment levels, consumer confidence, financing availability, interest rates, and inflation, which can lead to higher cancellation rates, decreased demand, and reduced sales prices[49](index=49&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) - Operational success depends on the availability and performance of subcontractors, and the company faces risks from labor and raw material shortages and price fluctuations, which can delay construction and increase costs[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Long-term success is tied to the ability to acquire suitable undeveloped and developed land at reasonable prices, a process that is highly competitive and subject to factors like land availability, zoning, and regulatory requirements[61](index=61&type=chunk)[62](index=62&type=chunk) - Geographic concentration in DFW, Austin, Atlanta, and Treasure Coast markets means a downturn in these specific areas could disproportionately affect the company[66](index=66&type=chunk) - Demand for homes is highly dependent on the cost and availability of mortgage financing, with rising interest rates or stricter lending standards potentially reducing sales and increasing cancellation rates[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company's capital resources and liquidity could be adversely affected by difficulty in obtaining sufficient capital, limitations and restrictions in debt instruments, or the need to repurchase equity interests in controlled subsidiaries[109](index=109&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - Large stockholders (Greenlight Capital, Inc. and James R. Brickman) own a **significant percentage of voting power**, which could influence corporate decisions and potentially cause market price decreases if they sell substantial amounts of shares[117](index=117&type=chunk)[118](index=118&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - No unresolved staff comments[119](index=119&type=chunk) [ITEM 2. PROPERTIES](index=21&type=section&id=Item%202.%20Properties) The company leases its principal executive office in Plano, Texas, and other division offices in its operating markets, holding significant property as homebuilding inventory - The principal executive office is leased at 2805 Dallas Parkway, Suite 400, Plano, Texas, 75093[120](index=120&type=chunk) - Homebuilding and title division offices are located in leased spaces within their respective markets[120](index=120&type=chunk) - The company and its builders hold significant amounts of property as inventory for homebuilding[120](index=120&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various claims and litigation in the ordinary course of business but does not believe these will have a material adverse effect on its operations or financial position - The company is involved in various claims and litigation arising in the ordinary course of business[121](index=121&type=chunk) - Management does not believe any such claims and litigation will have a material adverse effect on results of operations or financial position[121](index=121&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[122](index=122&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=22&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Green Brick Partners' common stock trades on the NYSE under 'GRBK', with 46 million shares outstanding as of February 2023, and no dividends anticipated - Common stock trades on The New York Stock Exchange under the ticker symbol "GRBK"[125](index=125&type=chunk) - As of February 22, 2023, there were **59 stockholders of record** and **46,032,886 common shares outstanding**[126](index=126&type=chunk) - The company has not paid any dividends on common stock since its inception and does not anticipate declaring or paying any cash dividends in the foreseeable future, intending to retain available cash for general corporate purposes[127](index=127&type=chunk) [ITEM 6. RESERVED](index=22&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - This item is reserved[129](index=129&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Green Brick Partners experienced significant revenue growth in 2022, driven by increased home deliveries and average sales prices, despite a decrease in net new home orders and a higher cancellation rate due to rising interest rates and inflation [Overview and Outlook](index=24&type=section&id=Overview%20and%20Outlook) In 2022, Green Brick Partners saw a 30.0% increase in home closings revenue and a 2.9% increase in home deliveries, with average sales prices rising by 26.3%, despite a 30.8% decrease in net new home orders due to rising interest rates and inflation Key Financial and Operating Metrics (Year Ended December 31, 2022 vs. 2021) | Metric | December 31, 2022 Change | | :--- | :--- | | Home deliveries | Increased by 2.9% | | Home closings revenue | Increased by 30.0% | | Average sales price of homes delivered | Increased by 26.3% | | Net new home orders | Decreased by 30.8% | - Revenue expansion was primarily driven by strong performance in the Trophy division, growth in average selling prices, macroeconomic factors, and an influx of millennial first-time homebuyers in the first half of 2022[136](index=136&type=chunk) - Increased demand for new homes led to higher costs and decreased availability of skilled labor and key materials, while rising interest rates and inflation impacted buyer qualification and consumer confidence, reducing new home orders[136](index=136&type=chunk) [2022 Developments](index=24&type=section&id=2022%20Developments) DFW and Atlanta markets experienced significant home appreciation (13.5% and 14.9% respectively) and strong job growth in 2022, reinforcing Green Brick Partners' belief in favorable conditions for future growth - Homes in DFW and Atlanta markets appreciated by **13.5% and 14.9% respectively** from October 2021 to October 2022, outperforming the **8.6% average** for 20 major U.S. metropolitan areas[137](index=137&type=chunk) - Dallas and Atlanta areas ranked **third and sixth**, respectively, in annual job growth among the 12 largest metropolitan areas from November 2021 to November 2022[137](index=137&type=chunk) - The company believes increasing demand and supply constraints in its target markets create favorable conditions for future growth[137](index=137&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) In 2022, residential units revenue increased by 30.1% to $1.7 billion, driven by a 26.3% rise in average sales price and a 2.9% increase in homes delivered, despite a 30.8% decrease in net new home orders and a 63.7% drop in backlog units Residential Units Revenue and New Homes Delivered (in thousands) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Home closings revenue | $1,696,911 | $1,305,620 | $391,291 | 30.0% | | Mechanic's lien contracts revenue | $7,040 | $4,067 | $2,973 | 73.1% | | Residential units revenue | $1,703,951 | $1,309,687 | $394,264 | 30.1% | | New homes delivered | 2,916 | 2,834 | 82 | 2.9% | | Average sales price of homes delivered | $581.9 | $460.7 | $121.2 | 26.3% | New Home Orders and Backlog (in thousands, except rates) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net new home orders | 1,973 | 2,851 | (878) | (30.8)% | | Revenue from new net home orders | $1,210,315 | $1,488,613 | $(278,298) | (18.7)% | | Average selling price of net new home orders | $613.4 | $522.1 | $91.3 | 17.5% | | Cancellation rate | 13.8% | 7.7% | 6.1% | 79.2% | | Absorption rate per average active selling community per quarter | 6.5 | 8.2 | (1.7) | (20.7)% | | Backlog | $369,095 | $869,856 | $(500,761) | (57.6)% | | Backlog units | 537 | 1,480 | (943) | (63.7)% | | Average sales price of backlog | $687.3 | $587.7 | $99.6 | 16.9% | Residential Units Gross Margin (in thousands) | Metric | 2022 Amount | 2022 % | 2021 Amount | 2021 % | | :--- | :--- | :--- | :--- | :--- | | Home closings revenue | $1,696,911 | 100.0% | $1,305,620 | 100.0% | | Cost of homebuilding units | $1,190,782 | 70.2% | $961,115 | 73.6% | | Homebuilding gross margin | $506,129 | 29.8% | $344,505 | 26.4% | | Residential units gross margin | $507,037 | 29.8% | $345,323 | 26.4% | Land and Lots Revenue (in thousands) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Lots revenue | $19,090 | $24,866 | $(5,776) | (23.2)% | | Land revenue | $34,752 | $68,323 | $(33,571) | (49.1)% | | Land and lots revenue | $53,842 | $93,189 | $(39,347) | (42.2)% | | Lots closed | 288 | 323 | (35) | (10.8)% | | Average sales price of lots closed | $66.3 | $77.0 | $(10.7) | (13.9)% | Selling, General and Administrative Expenses (in thousands) | Segment | 2022 Amount | 2021 Amount | 2022 % of Revenue | 2021 % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Builder operations | $166,816 | $135,464 | 9.7% | 10.1% | | Land development | $621 | $880 | 1.3% | 1.4% | | Corporate, other and unallocated (income) expense | $(3,494) | $(2,075) | —% | —% | | Total SG&A | $163,943 | $134,269 | 9.3% | 9.6% | - Equity in income of unconsolidated entities increased by **30.0% to $25.6 million** in 2022, primarily due to increased earnings from GB Challenger[152](index=152&type=chunk) - Other income, net, increased to **$11.8 million** in 2022, mainly due to forfeited customer deposits[153](index=153&type=chunk) - Income tax expense rose to **$82.5 million** in 2022, driven by a reduced benefit from the Energy Efficient Tax Homes Tax Credit, changes in state tax rates, and higher taxable income[154](index=154&type=chunk) [Lots Owned and Controlled](index=28&type=section&id=Lots%20Owned%20and%20Controlled) As of December 31, 2022, Green Brick Partners owned or controlled 25,527 lots, a decrease from 28,621 in 2021, with the percentage of owned lots increasing to 84.2% Lots Owned and Controlled (as of December 31, 2022 and 2021) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total lots owned | 21,481 | 20,239 | | Total lots controlled | 4,046 | 8,382 | | Total lots owned and controlled | 25,527 | 28,621 | | Percentage of lots owned | 84.2% | 70.7% | - Land held for future development increased significantly to **6,575 lots** in 2022, from none in 2021[157](index=157&type=chunk) - Self-developed lots as a percentage of total lots owned and controlled increased to **91.3%** in 2022 from **90.4%** in 2021[160](index=160&type=chunk) [Liquidity and Capital Resources Overview](index=28&type=section&id=Liquidity%20and%20Capital%20Resources%20Overview) Green Brick Partners maintained $76.6 million in unrestricted cash as of December 31, 2022, with debt to total capitalization ratios below target, indicating ample growth capital Cash and Debt to Capitalization (as of December 31, 2022) | Metric | Amount (in millions) | | :--- | :--- | | Unrestricted cash | $76.6 | | Debt to total capitalization ratio | 25.7% | | Net debt to total capitalization ratio | 21.5% | - The company's cash management strategy includes redeploying net cash from home sales to acquire and develop land, and make additional investments in business acquisitions and joint ventures[161](index=161&type=chunk) - The company targets a debt to total capitalization ratio of approximately **30% to 35%**, which is expected to provide significant additional growth capital[165](index=165&type=chunk) [Reconciliation of a Non-GAAP Financial Measure](index=29&type=section&id=Reconciliation%20of%20a%20Non-GAAP%20Financial%20Measure) The company provides a reconciliation of net debt to total capitalization ratio, a non-GAAP financial measure, to the GAAP debt to total capitalization ratio, showing a net debt to total capitalization ratio of 21.5% as of December 31, 2022 - Net debt to total capitalization ratio is a non-GAAP financial measure calculated as total debt less cash and cash equivalents, divided by the sum of total Green Brick Partners, Inc. stockholders' equity and total debt less cash and cash equivalents[166](index=166&type=chunk) Net Debt to Total Capitalization Ratio Reconciliation (as of December 31, 2022, in thousands) | Metric | Gross | Cash and cash equivalents | Net | | :--- | :--- | :--- | :--- | | Total debt, net of debt issuance costs | $367,842 | $(76,588) | $291,254 | | Total Green Brick Partners, Inc. stockholders' equity | $1,061,907 | — | $1,061,907 | | Total capitalization | $1,429,749 | $(76,588) | $1,353,161 | | Debt to total capitalization ratio | 25.7% | — | — | | Net debt to total capitalization ratio | — | — | 21.5% | [Key Sources of Liquidity](index=29&type=section&id=Key%20Sources%20of%20Liquidity) The primary sources of liquidity for Green Brick Partners in 2022 were funds generated by operations and borrowings - Key sources of liquidity were funds generated by operations and provided by borrowings during the year ended December 31, 2022[169](index=169&type=chunk) [Debt Instruments](index=29&type=section&id=Debt%20Instruments) As of December 31, 2022, Green Brick Partners had $17.4 million in net borrowings on lines of credit and $335.8 million in senior unsecured notes outstanding, while remaining in compliance with all financial covenants Borrowings on Lines of Credit, Net (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Secured Revolving Credit Facility | $0 | $2,000 | | Unsecured Revolving Credit Facility | $20,000 | $0 | | Debt issuance costs, net of amortization | $(2,605) | $(2,738) | | Total borrowings on lines of credit, net | $17,395 | $(738) | - The Secured Revolving Credit Facility's maturity date was extended to **May 1, 2025**, and the minimum interest rate reduced to **3.15%**[170](index=170&type=chunk) - The Unsecured Revolving Credit Facility's commitments increased to **$325.0 million**, and its termination date was extended to **December 14, 2025**, with the benchmark interest rate replaced by SOFR[171](index=171&type=chunk) Senior Unsecured Notes Outstanding (as of December 31, 2022, in millions) | Series | Original Amount | Interest Rate | Maturity Date | Principal Repayment Schedule | | :--- | :--- | :--- | :--- | :--- | | 2026 Notes | $75.0 | 4.00% | August 8, 2026 | $12.5M (Aug 2024, Aug 2025), $50.0M (Aug 2026) | | 2027 Notes | $37.5 | 3.35% | August 26, 2027 | Due August 26, 2027 | | 2028 Notes | $125.0 | 3.25% | May 25, 2028 | $25.0M annually (Feb 2024-2028) | | 2029 Notes | $100.0 | 3.25% | December 28, 2029 | $30.0M (Dec 2028), $70.0M (Dec 2029) | - The company was in compliance with all financial covenants as of December 31, 2022, including an interest coverage ratio of **24.1 to 1.0**, a Consolidated Tangible Net Worth of **$1,060.6 million**, and a maximum debt to total capitalization rolling average ratio of **27.1%**[173](index=173&type=chunk) [Preferred Equity](index=30&type=section&id=Preferred%20Equity) As of December 31, 2022, Green Brick Partners had 2,000,000 Depositary Shares of 5.75% Series A Cumulative Perpetual Preferred Stock outstanding, with $2.8 million in dividends paid in 2022 - As of December 31, 2022, **2,000,000 Depositary Shares**, each representing 1/1000th of a share of **5.75% Series A Cumulative Perpetual Preferred Stock**, were outstanding[174](index=174&type=chunk) - Cumulative cash dividends are paid quarterly at a rate of **5.75%** of the **$25,000 liquidation preference** per share[174](index=174&type=chunk) - Dividends paid on Series A Preferred Stock totaled **$2.8 million** during the year ended December 31, 2022[174](index=174&type=chunk) [Registration Statements](index=31&type=section&id=Registration%20Statements) In December 2020, Green Brick Partners filed a shelf registration statement on Form S-3, allowing for the issuance of up to $500 million in various securities - In December 2020, the company filed a shelf registration statement on Form S-3, registering up to **$500 million** of securities, including common stock, preferred stock, or debt securities[175](index=175&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) In 2022, net cash provided by operating activities was $90.7 million, a significant improvement from a $92.4 million use of cash in 2021, while investing and financing activities used $6.5 million and $84.5 million respectively Cash Flow Summary (Year Ended December 31, 2022 vs. 2021, in millions) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $90.7 | $(92.4) | | Net cash used in investing activities | $(6.5) | $(2.0) | | Net cash (used in) provided by financing activities | $(84.5) | $154.3 | - Operating cash inflows in 2022 were primarily from business operations (**$314.0 million**), partially offset by an increase in inventory (**$217.6 million**)[180](index=180&type=chunk) - Increased investing cash outflows were mainly due to a **$3.6 million capital contribution** to the GBTM Sendera joint venture[180](index=180&type=chunk) - Financing cash outflows were primarily driven by **$101.5 million in share repurchases**, partially offset by **$18.0 million in net borrowings** from lines of credit[180](index=180&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) Green Brick Partners uses land and lot option contracts, with $24.6 million in earnest money deposits at risk for contracts to purchase 2,923 lots with an aggregate price of $219.8 million as of December 31, 2022 - The company enters into land purchase and option contracts with third-party developers to acquire lots, typically requiring earnest money deposits[177](index=177&type=chunk)[178](index=178&type=chunk) - As of December 31, 2022, **$24.6 million in earnest money deposits** were at risk for contracts to purchase **2,923 lots** with an aggregate purchase price of approximately **$219.8 million**[181](index=181&type=chunk) - The company generally has the right to terminate obligations under these contracts by forfeiting the earnest money deposit[181](index=181&type=chunk) [Critical Accounting Policies](index=32&type=section&id=Critical%20Accounting%20Policies) The most critical accounting policy is the impairment of inventory, which involves significant management judgment and estimates regarding future market conditions, development costs, and sales prices, with inventory valued at cost unless its carrying value is not recoverable - The most critical accounting policy is the impairment of inventory, which requires management to use judgment and make estimates that affect reported asset amounts[184](index=184&type=chunk)[185](index=185&type=chunk) - Inventory is valued at cost unless the carrying value is determined to be not recoverable, in which case it is written down to fair value[185](index=185&type=chunk) - Impairment evaluations involve analyzing estimated remaining undiscounted future cash flows against the asset's carrying value, with fair value determined by discounted cash flows and market comparable transactions[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) [Recent Accounting Pronouncements](index=33&type=section&id=Recent%20Accounting%20Pronouncements) The company has determined that recently adopted accounting pronouncements did not have a material impact on its consolidated financial statements, and future pronouncements are not expected to have a material impact - Recently adopted accounting pronouncements did not have a material impact on the company's consolidated financial statements[297](index=297&type=chunk) - All recent accounting pronouncements not yet adopted are not applicable or are not expected to have a material impact[297](index=297&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Green Brick Partners is sensitive to interest rate fluctuations, as increases in mortgage rates can negatively impact housing demand, revenues, and margins, affecting its variable-rate lines of credit but not fixed-rate senior unsecured notes - The company's operations are interest rate sensitive; significant increases in mortgage interest rates can adversely affect housing demand, revenues, gross margins, and net income[195](index=195&type=chunk) - Variable interest rates on lines of credit (with **$20.0 million outstanding** as of December 31, 2022) are subject to increases, while fixed-rate debt (senior unsecured notes) impacts fair value but not earnings or cash flows[196](index=196&type=chunk) Senior Unsecured Notes Maturity and Interest Rates (as of December 31, 2022, in thousands) | Year | Principal Repayments | Weighted Average Interest Rate | | :--- | :--- | :--- | | 2023 | $0 | 3.43% | | 2024 | $37,500 | 3.43% | | 2025 | $37,500 | 3.42% | | 2026 | $75,000 | 3.37% | | 2027 | $62,500 | 3.27% | | 2028 | $55,000 | 3.25% | | 2029 | $70,000 | 3.25% | | Total | $337,500 | 3.38% | - The company does not engage in swaps, forward or option contracts on interest rates or commodities, or other derivative financial instruments for trading, hedging, or speculative purposes[198](index=198&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of Green Brick Partners, Inc. for the years ended December 31, 2022, 2021, and 2020, along with comprehensive notes detailing significant accounting policies, financial instrument fair values, debt, equity, and other financial disclosures - The independent registered public accounting firm, RSM US LLP, issued an **unqualified opinion** on the consolidated financial statements for the period ended December 31, 2022, and on the effectiveness of the company's internal control over financial reporting[202](index=202&type=chunk)[203](index=203&type=chunk) - A critical audit matter identified was the evaluation of inventory for impairment, due to the high degree of auditor judgment involved in assessing management's assumptions regarding market conditions and fair value[207](index=207&type=chunk)[209](index=209&type=chunk) [Consolidated Balance Sheets](index=37&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2022, Green Brick Partners reported total assets of $1.66 billion, an increase from $1.42 billion in 2021, with inventory rising to $1.42 billion and total equity to $1.08 billion Consolidated Balance Sheet Highlights (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total assets | $1,655,675 | $1,421,867 | | Cash and cash equivalents | $76,588 | $77,166 | | Inventory | $1,422,680 | $1,203,743 | | Investments in unconsolidated entities | $74,224 | $55,616 | | Total liabilities | $543,621 | $511,306 | | Borrowings on lines of credit, net | $17,395 | $(738) | | Senior unsecured notes, net | $335,825 | $335,446 | | Total Green Brick Partners, Inc. stockholders' equity | $1,061,907 | $874,548 | | Total equity | $1,082,815 | $888,694 | [Consolidated Statements of Income](index=38&type=section&id=Consolidated%20Statements%20of%20Income) For the year ended December 31, 2022, Green Brick Partners reported total revenues of $1.76 billion, up from $1.40 billion in 2021, with net income attributable to Green Brick Partners, Inc. increasing to $291.9 million ($6.07 basic EPS) Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total revenues | $1,757,793 | $1,402,876 | $976,021 | | Total gross profit | $523,025 | $362,059 | $234,604 | | Selling, general and administrative expenses | $(163,943) | $(134,269) | $(112,134) | | Income before income taxes | $396,465 | $256,986 | $142,813 | | Net income attributable to Green Brick Partners, Inc. | $291,900 | $190,210 | $113,693 | | Basic EPS | $6.07 | $3.75 | $2.25 | | Diluted EPS | $6.02 | $3.72 | $2.24 | [Consolidated Statements of Changes in Stockholders' Equity](index=39&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Green Brick Partners' total stockholders' equity increased to $1.06 billion as of December 31, 2022, from $874.5 million in 2021, driven by net income of $291.9 million, partially offset by share repurchases and preferred stock dividends Changes in Stockholders' Equity (in thousands, except share data) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Green Brick Partners, Inc. Stockholders' Equity | $1,061,907 | $874,548 | | Net income | $291,900 | $190,210 | | Share repurchases | $(101,463) | $0 | | Dividends | $(2,812) | $0 | | Preferred stock | $47,696 | $47,696 | | Common stock shares outstanding | 46,032,930 | 51,151,911 | [Consolidated Statements of Cash Flows](index=41&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the year ended December 31, 2022, net cash provided by operating activities was $90.7 million, a significant improvement from a $92.4 million use in 2021, while investing activities used $6.5 million and financing activities used $84.5 million Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $90,676 | $(92,382) | $35,135 | | Net cash used in investing activities | $(6,477) | $(2,033) | $(13,334) | | Net cash (used in) provided by financing activities | $(84,483) | $154,334 | $(25,851) | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(284) | $59,919 | $(4,050) | | Cash and cash equivalents, end of period | $76,588 | $77,166 | $19,479 | | Restricted cash, end of period | $16,682 | $16,388 | $14,156 | - Operating cash flows in 2022 were positively impacted by net income of **$314.0 million**, partially offset by a **$217.6 million increase in inventory**[224](index=224&type=chunk) - Financing cash outflows in 2022 were primarily driven by **$101.5 million in share repurchases**, partially offset by **$18.0 million in net borrowings** from lines of credit[224](index=224&type=chunk) [1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=43&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines Green Brick Partners' significant accounting policies, including consolidation, use of estimates, cash, receivables, inventory valuation, capitalization of costs and interest, investments, and revenue recognition - The consolidated financial statements are prepared in accordance with GAAP and include Green Brick Partners, Inc., its controlled subsidiaries, and variable interest entities where it is the primary beneficiary (e.g., TPG)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Inventory, including undeveloped land, land under development, and homes, is valued at cost unless the carrying value is not recoverable, in which case it is written down to fair value, with costs like land development, direct overhead, interest, and property taxes capitalized[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[242](index=242&type=chunk) - Revenue from residential units is recognized upon completion and transfer of legal title, land and lots revenue upon closing and title transfer, and mechanic's lien contracts revenue based on the input method (progress toward completion)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) - The company capitalizes interest costs incurred during land development, home construction, and other qualifying activities, charging them to cost of revenues upon closing, while interest on undeveloped land is expensed[251](index=251&type=chunk)[284](index=284&type=chunk) - Share-based compensation for employees and directors is expensed over the vesting period, with RSAs granted to EOs being **100% vested** on the grant date[288](index=288&type=chunk)[373](index=373&type=chunk) [2. INTANGIBLE ASSETS, GOODWILL, AND REDEEMABLE NONCONTROLLING INTEREST](index=51&type=section&id=2.%20INTANGIBLE%20ASSETS%2C%20GOODWILL%2C%20AND%20REDEEMABLE%20NONCONTROLLING%20INTEREST) Green Brick Partners recognized $0.7 million in goodwill from the GRBK GHO acquisition and amortizes intangible assets related to acquired trade names, with no impairment recorded in Q4 2022, and the 20% minority interest in GRBK GHO classified as a redeemable noncontrolling interest - Intangible assets consist of the acquired trade name from the GHO Homes Corporation acquisition in April 2018, amortized over ten years[298](index=298&type=chunk)[299](index=299&type=chunk) Estimated Amortization Expense for Acquired Trade Name (in thousands) | Year | Amount | | :--- | :--- | | 2023 | $85 | | 2024 | $85 | | 2025 | $85 | | 2026 | $85 | | 2027 | $85 | | Thereafter | $27 | | Total | $452 | - Goodwill of **$0.7 million** was recognized from the GRBK GHO acquisition. The company performed its annual goodwill impairment testing in Q4 2022 and did not record any impairment[301](index=301&type=chunk)[302](index=302&type=chunk) - The **20% ownership interest** in GRBK GHO held by the minority partner is classified as a redeemable noncontrolling interest due to a put/call agreement starting in April 2024[303](index=303&type=chunk)[304](index=304&type=chunk) Changes in Redeemable Noncontrolling Interest (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Redeemable noncontrolling interest, beginning of period | $21,867 | $13,543 | | Net income attributable to redeemable noncontrolling interest partner | $4,617 | $2,586 | | Distributions of income to redeemable noncontrolling interest partner | $0 | $(106) | | Change in fair value of redeemable noncontrolling interest | $2,755 | $5,844 | | Redeemable noncontrolling interest, end of period | $29,239 | $21,867 | [3. VARIABLE INTEREST ENTITIES](index=52&type=section&id=3.%20VARIABLE%20INTEREST%20ENTITIES) Green Brick Partners consolidates The Providence Group of Georgia LLC (TPG) as a Variable Interest Entity (VIE) due to its 50% equity interest and control over TPG's operations, with aggregated assets of $190.1 million and liabilities of $164.1 million as of December 31, 2022 - CB JENI became an indirect wholly owned subsidiary in April 2020 and is no longer considered a VIE[305](index=305&type=chunk) - The Providence Group of Georgia LLC (TPG), a controlled builder with **50% equity interest**, is considered a VIE and is consolidated due to Green Brick's ability to control its activities through the board of managers[307](index=307&type=chunk)[308](index=308&type=chunk) TPG Aggregated Carrying Amounts (in millions) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | $190.1 | $162.0 | | Liabilities | $164.1 | $146.6 | - The company evaluates all land and lot option contracts for VIE status but concluded it was not the primary beneficiary in any related VIEs as of December 31, 2022 and 2021[311](index=311&type=chunk)[312](index=312&type=chunk) [4. INVENTORY](index=53&type=section&id=4.%20INVENTORY) Green Brick Partners' total inventory increased to $1.42 billion as of December 31, 2022, from $1.20 billion in 2021, primarily driven by increases in land and lots under development, and the company recorded a $6.0 million impairment charge for certain land held for future development Inventory Summary (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Homes completed or under construction | $603,953 | $544,258 | | Land and lots - developed and under development | $768,194 | $620,129 | | Land held for future development | $48,369 | $0 | | Land held for sale | $2,164 | $39,356 | | Total inventory | $1,422,680 | $1,203,743 | Interest Costs (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Interest capitalized at beginning of period | $19,950 | $17,520 | $18,596 | | Interest incurred | $16,454 | $13,340 | $9,823 | | Interest charged to cost of revenues | $(13,652) | $(10,910) | $(10,899) | | Interest capitalized at end of period | $22,752 | $19,950 | $17,520 | | Capitalized interest as a percentage of inventory | 1.6% | 1.7% | N/A | - The company recorded a **$6.0 million impairment charge** in 2022 to reduce the carrying value of certain land held for future development to fair value[314](index=314&type=chunk) [5. INVESTMENTS IN UNCONSOLIDATED ENTITIES](index=54&type=section&id=5.%20INVESTMENTS%20IN%20UNCONSOLIDATED%20ENTITIES) Green Brick Partners' investments in unconsolidated entities increased to $74.2 million as of December 31, 2022, from $55.6 million in 2021, with its share in net earnings from these entities totaling $25.6 million in 2022, primarily from GB Challenger Investments in Unconsolidated Entities (in thousands) | Entity | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | GB Challenger, LLC | $49,897 | $37,737 | | GBTM Sendera, LLC | $14,319 | $9,854 | | EJB River Holdings, LLC | $8,554 | $6,130 | | Green Brick Mortgage, LLC | $307 | $715 | | BHome Mortgage, LLC | $1,147 | $1,180 | | Total investment | $74,224 | $55,616 | - The company's share in net earnings of unconsolidated entities was **$25.6 million** in 2022, with GB Challenger contributing **$20.9 million**[321](index=321&type=chunk)[332](index=332&type=chunk) - The Green Brick Mortgage joint venture was terminated in 2022, resulting in a de minimis loss[328](index=328&type=chunk) - The company provided a limited **$2.0 million guarantee** for EJB River Holdings' debt, with a maximum potential loss exposure of **$10.6 million** for its involvement with EJB[325](index=325&type=chunk)[327](index=327&type=chunk) [6. PROPERTY AND EQUIPMENT, NET](index=56&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) As of December 31, 2022, Green Brick Partners' net property and equipment totaled $2.9 million, slightly up from $2.8 million in 2021, with depreciation expense for 2022 at $2.3 million Property and Equipment, Net (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Model home furnishings and capitalized sales office costs | $7,496 | $7,140 | | Office furniture and equipment | $596 | $489 | | Leasehold improvements | $1,979 | $2,060 | | Computers and equipment | $560 | $498 | | Vehicles and field trailers | $998 | $790 | | Total | $11,629 | $10,977 | | Less: accumulated depreciation | $(8,710) | $(8,165) | | Total property and equipment, net | $2,919 | $2,812 | - Depreciation expense for the years ended December 31, 2022, 2021, and 2020 totaled **$2.3 million**, **$2.7 million**, and **$3.6 million**, respectively[333](index=333&type=chunk) [7. ACCRUED EXPENSES](index=56&type=section&id=7.%20ACCRUED%20EXPENSES) Green Brick Partners' total accrued expenses increased to $91.3 million as of December 31, 2022, from $61.4 million in 2021, primarily due to increases in real estate development reserve to complete and warranty reserve Accrued Expenses Summary (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Real estate development reserve to complete | $28,793 | $14,551 | | Warranty reserve | $17,945 | $9,378 | | Accrued compensation | $13,917 | $8,493 | | Other accrued expenses | $30,626 | $28,929 | | Total accrued expenses | $91,281 | $61,351 | Warranty Activity (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Warranty accrual, beginning of period | $9,378 | $6,407 | | Warranties issued | $8,295 | $6,174 | | Changes in liability for existing warranties | $4,559 | $(357) | | Settlements made | $(4,287) | $(2,846) | | Warranty accrual, end of period | $17,945 | $9,378 | [8. DEBT](index=57&type=section&id=8.%20DEBT) As of December 31, 2022, Green Brick Partners had $371.9 million in total aggregated annual principal payments for debt instruments over the next five years, including $17.4 million in net borrowings on lines of credit and $335.8 million in senior unsecured notes Aggregated Annual Principal Payments (in thousands) | Year | Amount | | :--- | :--- | | 2023 | $0 | | 2024 | $51,928 | | 2025 | $57,500 | | 2026 | $75,000 | | 2027 | $62,500 | | Thereafter | $125,000 | | Total | $371,928 | Borrowings on Lines of Credit, Net (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Secured Revolving Credit Facility | $0 | $2,000 | | Unsecured Revolving Credit Facility | $20,000 | $0 | | Debt issuance costs, net of amortization | $(2,605) | $(2,738) | | Total borrowings on lines of credit, net | $17,395 | $(738) | - The Secured Revolving Credit Facility was amended in February 2022, extending its maturity to **May 1, 2025**, and reducing the minimum interest rate to **3.15%**[338](index=338&type=chunk) - The Unsecured Revolving Credit Facility was amended in December 2022, increasing commitments to **$325.0 million** and extending the termination date to **December 14, 2025**, with interest accruing at SOFR plus **2.5%**[344](index=344&type=chunk)[345](index=345&type=chunk) - The company had four series of senior unsecured notes outstanding totaling **$335.8 million** as of December 31, 2022, with fixed interest rates ranging from **3.25% to 4.00%** and various maturity dates between 2026 and 2029[172](index=172&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk) - A Promissory Note agreement for **$28.8 million** was entered into in February 2022 for land acquisition, maturing on **February 7, 2024**, with an annual fixed rate of **0.6%**[355](index=355&type=chunk) [9. STOCKHOLDERS' EQUITY](index=59&type=section&id=9.%20STOCKHOLDERS'%20EQUITY) As of December 31, 2022, Green Brick Partners had 46,032,930 common shares outstanding and 2,000 shares of 5.75% Series A Cumulative Perpetual Preferred Stock, having completed a $50.0 million share repurchase program and initiated a new $100.0 million program - As of December 31, 2022, there were **46,032,930 shares of common stock** issued and outstanding[356](index=356&type=chunk) - The company issued **2,000 shares of 5.75% Series A Cumulative Perpetual Preferred Stock** for **$50.0 million** in December 2021, paying cumulative cash dividends quarterly[359](index=359&type=chunk) - Dividends paid on Series A preferred stock totaled **$2.8 million** during the year ended December 31, 2022[364](index=364&type=chunk) - The company completed its **$50.0 million 2021 Share Repurchase Program** in April 2022, repurchasing **2,423,644 shares**[365](index=365&type=chunk)[366](index=366&type=chunk) - A new **$100.0 million 2022 Share Repurchase Program** was approved in April 2022, under which **2,420,915 shares** were repurchased for **$51.3 million** by December 31, 2022, with **$48.7 million remaining**[367](index=367&type=chunk)[368](index=368&type=chunk) [10. SHARE-BASED COMPENSATION](index=61&type=section&id=10.%20SHARE-BASED%20COMPENSATION) Green Brick Partners' 2014 Omnibus Equity Incentive Plan authorizes 2,350,956 shares for awards, with 1,252,096 shares remaining available for future grants as of December 31, 2022, and share-based compensation expense totaling $3.5 million in 2022 - The 2014 Omnibus Equity Incentive Plan authorizes **2,350,956 shares** for awards to attract and retain key personnel[370](index=370&type=chunk) - As of December 31, 2022, **1,252,096 shares** remained available for future grant of awards under the 2014 Equity Plan[372](index=372&type=chunk) Share-Based Awards Activity (in thousands, except per share data) | Metric | Number of Shares | Weighted Average Grant Date Fair Value per Share | | :--- | :--- | :--- | | Nonvested, December 31, 2021 | 28 | $23.21 | | Granted (2022) | 171 | $22.47 | | Vested (2022) | (153) | $22.17 | | Forfeited (2022) | (8) | $23.84 | | Nonvested, December 31, 2022 | 38 | $23.94 | - Share-based compensation expense was **$3.5 million** in 2022, with a recognized tax benefit of **$0.8 million**[378](index=378&type=chunk) - As of December 31, 2022, **$0.4 million in unamortized share-based compensation expense** related to unvested RSAs is expected to be recognized over a weighted-average period of **0.7 years**[379](index=379&type=chunk) [11. REVENUE RECOGNITION](index=63&type=section&id=11.%20REVENUE%20RECOGNITION) Green Brick Partners' total revenues for 2022 were $1.76 billion, primarily from residential units ($1.70 billion) and land and lots ($53.8 million), with most revenue recognized at a point in time Disaggregation of Revenue by Product Type (in thousands) | Product Type | 2022 Revenue | 2021 Revenue | 2020 Revenue | | :--- | :--- | :--- | :--- | | Residential units | $1,703,951 | $1,309,687 | $930,176 | | Land and lots | $53,842 | $93,189 | $45,845 | | Total revenues | $1,757,793 | $1,402,876 | $976,021 | Disaggregation of Revenue by Timing of Recognition (in thousands) | Timing of Revenue Recognition | 2022 Revenue | 2021 Revenue | 2020 Revenue | | :--- | :--- | :--- | :--- | | Transferred at a point in time | $1,696,911 | $1,305,620 | $923,901 | | Transferred over time (mechanic's lien contracts) | $7,040 | $4,067 | $6,275 | | Total revenues | $1,703,951 | $1,309,687 | $930,176 | - As of December 31, 2022, the aggregate transaction price allocated to remaining performance obligations on land sale and lot option contracts was **$7.0 million**, expected to be recognized in 2023[385](index=385&type=chunk) [12. SEGMENT INFORMATION](index=64&type=section&id=12.%20SEGMENT%20INFORMATION) Green Brick Partners operates through three reportable segments: Builder operations Central (Texas), Builder operations Southeast (Georgia and Florida), and Land development, with Builder operations Central generating $1.18 billion in revenue and $393.7 million in gross profit in 2022 - The company has three reportable segments: Builder operations Central (Texas), Builder operations Southeast (Georgia and Florida), and Land development[387](index=387&type=chunk) Segment Revenues (in thousands) | Segment | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Builder operations Central | $1,181,393 | $940,021 | $645,475 | | Builder operations Southeast | $529,921 | $398,211 | $287,257 | | Land development | $46,479 | $64,644 | $43,289 | | Total revenues | $1,757,793 | $1,402,876 | $976,021 | Segment Gross Profit (in thousands) | Segment | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Builder operations Central | $393,697 | $271,799 | $172,341 | | Builder operations Southeast | $156,840 | $110,181 | $77,121 | | Land development | $13,393 | $9,385 | $10,877 | | Total gross profit | $523,025 | $362,059 | $234,604 | Segment Inventory (in thousands) | Segment | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Builder operations Central | $515,981 | $460,796 | | Builder operations Southeast | $293,787 | $258,759 | | Land development | $570,065 | $449,654 | | Total inventory | $1,422,680 | $1,203,743 | [13. INCOME TAXES](index=66&type=section&id=13.%20INCOME%20TAXES) Green Brick Partners' total income tax expense increased to $82.5 million in 2022 from $52.6 million in 2021, with an effective tax rate of 20.8%, primarily due to a reduced benefit from the Energy Efficient Homes Tax Credit and state tax rate changes Income Tax Expense (in thousands) | Category | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total current income tax expense | $83,175 | $52,970 | $25,130 | | Total deferred income tax expense (benefit) | $(707) | $(365) | $(114) | | Total income tax expense | $82,468 | $52,605 | $25,016 | Effective Income Tax Rate Reconciliation (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Tax on pre-tax book income | $83,258 | $53,967 | $29,991 | | Tax credits | $(5,861) | $(3,629) | $(8,088) | | Total income tax expense | $82,468 | $52,605 | $25,016 | | Effective income tax rate | 20.8% | 20.5% | 17.5% | - The change in the effective tax rate for 2022 relates primarily to a decreased rate benefit in the Energy Efficient Homes Tax Credit and impacts of state tax rate changes for Florida and Colorado[398](index=398&type=chunk) Deferred Income Taxes (in thousands) | Category | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Deferred tax assets, net | $17,796 | $17,167 | | Deferred tax liabilities | $(1,348) | $(1,426) | | Total deferred income tax assets, net | $16,448 | $15,741 | [14. EMPLOYEE BENEFITS](index=68&type=section&id=14.%20EMPLOYEE%20BENEFITS) Green Brick Partners contributed $1.3 million to its 401(k) defined contribution plan in 2022, providing discretionary matching contributions to employees - The company has a qualifying 401(k) defined contribution plan covering all employees[405](index=405&type=chunk) - Matching contributions to the 401(k) plan were **$1.3 million** in 2022, **$1.0 million** in 2021, and **$0.9 million** in 2020[405](index=405&type=chunk) [15. EARNINGS PER COMMON SHARE](index=68&type=section&id=15.%20EARNINGS%20PER%20COMMON%20SHARE) For 2022, Green Brick Partners reported basic net income attributable to common stockholders of $289.0 million, resulting in basic EPS of $6.07 and diluted EPS of $6.02, compared to $3.75 and $3.72 in 2021 Earnings Per Common Share (in thousands, except per share amounts) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net income attributable to Green Brick Partners, Inc. | $291,900 | $190,210 | $113,693 | | Cumulative preferred stock dividends | $(2,875) | $(71) | $0 | | Net income applicable to common stockholders | $289,025 | $190,139 | $113,693 | | Weighted-average common shares outstanding - basic | 47,648 | 50,700 | 50,568 | | Basic net income attributable to Green Brick Partners, Inc. per common share | $6.07 | $3.75 | $2.25 | | Weighted-average common shares outstanding - diluted | 47,987 | 51,060 | 50,795 | | Diluted net income attributable to Green Brick Partners, Inc. per common share | $6.02 | $3.72 | $2.24 | [16. FAIR VALUE MEASUREMENTS](index=69&type=section&id=16.%20FAIR%20VALUE%20MEASUREMENTS) Green Brick Partners' financial instruments are categorized into a three-tiered fair value hierarchy, with Level 1 instruments approximating fair value, Level 2 including senior unsecured notes with an estimated fair value of $306.1 million, and a $6.0 million inventory impairment recorded using Level 3 measurements in 2022 - Level 1 financial instruments (cash, restricted cash, receivables, etc.) are estimated to have fair values that do not materially differ from their carrying values due to their short-term nature[408](index=408&type=chunk) - Level 2 financial instruments include borrowings on lines of credit (carrying amounts approximate fair value) and senior unsecured notes, which had an estimated fair value of **$306.1 million** as of December 31, 2022[409](index=409&type=chunk) - A **$6.0 million inventory impairment charge** was recorded in 2022, using Level 3 measurements based on third-party broker quotes to estimate fair value[410](index=410&type=chunk) [17. RELATED PARTY TRANSACTIONS](index=69&type=section&id=17.%20RELATED%20PARTY%20TRANSACTIONS) Green Brick Partners engages in related party transactions, including office space leases and title closing services with entities affiliated with the president of GRBK GHO, and Trevor Brickman, son of the CEO, is President of Centre Living - Trevor Brickman, son of Green Brick's CEO, is the President of Centre Living, a **90% owned and consolidated subsidiary**[413](index=413&type=chunk) - GRBK GHO leases office space from affiliated entities, incurring **$0.2 million in lease costs** in 2022[414](index=414&type=chunk) - GRBK GHO also receives de minimis title closing services from an entity affiliated with its president[415](index=415&type=chunk) [18. COMMITMENTS AND CONTINGENCIES](index=69&type=section&id=18.%20COMMITMENTS%20AND%20CONTINGENCIES) Green Brick Partners had $5.0 million in letters of credit and performance bonds outstanding as of December 31, 2022, with future undiscounted cash flows of $3.98 million for operating leases and $6.24 million for a new corporate headquarters lease - Letters of credit and performance bonds outstanding were **$5.0 million** as of December 31, 2022[416](index=416&type=chunk) Future Annual Undiscounted Cash Flows for Operating Leases (in thousands) | Year | Amount | | :--- | :--- | | 2023 | $1,450 | | 2024 | $590 | | 2025 | $560 | | 2026 | $500 | | 2027 | $440 | | Thereafter | $410 | | Total future lease payments | $3,980 | | Present value of lease liabilities | $3,580 | - A new corporate headquarters lease was signed in October 2022 for a facility in Plano, Texas, with total future lease payments of **$6.24 million**[420](index=420&type=chunk) - The company is involved in various legal claims and regulatory matters but believes their disposition will not have a material adverse effect on its results of operations, cash flows, or financial condition[421](index=421&type=chunk)[423](index=423&type=chunk) [19. SUBSEQUENT EVENTS](index=72&type=section&id=19.%20SUBSEQUENT%20EVENTS) There are no subsequent events to report - No subsequent events[425](index=425&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=72&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in and disagreements with accountants on accounting and financial disclosure[426](index=426&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) Green Brick Partners' management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with an unqualified opinion from the independent registered public accounting firm - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022[427](index=427&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[429](index=429&type=chunk) - RSM US LLP, the independent registered public accounting firm, issued an **unqualified attestation report** on the effectiveness of the company's internal control over financial reporting[430](index=430&type=chunk)[435](index=435&type=chunk) - There were no changes in internal controls that materially affected or are reasonably likely to have a material effect on internal control over financial reporting during the quarter ended December 31, 2022[431](index=431&type=chunk) [ITEM 9B. OTHER INFORMATION](index=74&type=section&id=Item%209B.%20Other%20Information) This item is not applicable - Not applicable[442](index=442&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=74&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable - Not applicable[443](index=443&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=74&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference to the proxy statement for the 2023 annual meeting of stockholders[445](index=445&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=74&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement to be filed with the SEC[446](index=446&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=74&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of certain beneficial owners and management, along with related stockholder matters, is incorporated by reference from the company's 2023 Proxy Statement, with 538,479 securities to be issued upon exercise of outstanding options and 713,617 shares remaining available for future issuance - Information is incorporated by reference to the company's Proxy Statement to be filed with the SEC[447](index=447&type=chunk) Equity Compensation Plan Information (as of December 31, 2022, in thousands, except exercise price) | Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in first column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders (2014 Omnibus Equity Incentive Plan) | 538,479 | $7.49 (1) | 713,617 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 538,479 | | 713,617 | [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement to be filed with the SEC[448](index=448&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=74&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference to the company's Proxy Statement to be filed with the SEC[449](index=449&type=chunk) PART IV [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=75&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K, with financial statements included in Part II, Item 8, and schedules omitted as not required - Financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K[451](index=451&type=chunk) - Financial statement schedules are omitted because they are not required or applicable, or the information is included in the consolidated financial statements or notes[452](index=452&type=chunk) - A list of exhibits, including corporate documents, agreements, and certifications, is filed with this Annual Report on Form 10-K or incorporated by reference[453](index=453&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=77&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[457](index=457&type=chunk)