Green Brick Partners(GRBK) - 2024 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The company presents its unaudited condensed consolidated financial statements for the periods ended June 30, 2024 Condensed Consolidated Balance Sheets Total assets grew to $2.06 billion, driven by increased inventory, while total equity rose to $1.46 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $133,294 | $179,756 | | Inventory | $1,792,056 | $1,533,223 | | Total assets | $2,064,402 | $1,902,832 | | Liabilities & Equity | | | | Total liabilities | $561,766 | $548,684 | | Total equity | $1,463,753 | $1,318,013 | Condensed Consolidated Statements of Income Total revenues and net income increased significantly in Q2 and H1 2024 compared to the prior-year periods Statement of Income Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $560,631 | $456,289 | $1,007,969 | $908,350 | | Total Gross Profit | $189,666 | $142,935 | $337,923 | $267,541 | | Net Income Attributable to GRBK | $105,358 | $75,270 | $188,659 | $139,450 | | Diluted EPS | $2.32 | $1.63 | $4.14 | $3.00 | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity grew to $1.46 billion, driven by net income and partially offset by stock repurchases - Total Green Brick Partners, Inc. stockholders' equity grew to $1.439 billion at June 30, 2024, up from $1.301 billion at December 31, 2023[13] - During the six months ended June 30, 2024, the company executed stock repurchases amounting to $42.6 million and retired treasury stock[13] Condensed Consolidated Statements of Cash Flows Operating cash flow decreased sharply due to inventory investment, while financing activities used cash for repurchases Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,179 | $210,168 | | Net cash provided by (used in) investing activities | $58,148 | $(7,832) | | Net cash used in financing activities | $(102,610) | $(64,404) | | Net (decrease) increase in cash | $(41,283) | $137,932 | Notes to Condensed Consolidated Financial Statements Notes detail inventory growth, a significant asset sale, share repurchases, and segment performance Inventory Breakdown (in thousands) | Inventory Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Homes completed or under construction | $646,153 | $559,488 | | Land and lots - developed and under development | $1,123,602 | $921,241 | | Total inventory | $1,792,056 | $1,533,223 | - Effective February 1, 2024, the company sold its ownership interest in GB Challenger, LLC for approximately $64.0 million in cash, recognizing a gain of $10.7 million[27][28] - Under the 2023 Repurchase Plan, the company repurchased 697,499 shares for $38.7 million during the first six months of 2024, with $61.3 million remaining available[50][51] - The effective tax rate for the first six months of 2024 was 19.1%, down from 22.0% in the prior year period, due to energy efficiency tax credits[73] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Strong performance was driven by strategic locations and high demand, resulting in higher margins and a strong liquidity position Key Performance Metrics vs. Prior Year | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Home deliveries | Increased by 26.1% | Increased by 17.1% | | Home closings revenue | Increased by 20.4% | Increased by 9.6% | | Net new home orders | Increased by 4.0% | Increased by 2.0% | | Homebuilding gross margin % | Increased by 320 bps | Increased by 450 bps | - The company's debt to total capitalization ratio was 17.7% as of June 30, 2024, with a net debt to total capitalization ratio of 10.9%[133][134][136] - Total lots owned and controlled increased to 33,313 at June 30, 2024, from 28,681 at year-end 2023, with 97.2% of these lots being self-developed[128][129] Results of Operations - Three Months Ended June 30, 2024 Q2 2024 revenue grew on higher home deliveries, which offset a lower average sales price, significantly improving gross margin Q2 2024 vs Q2 2023 Performance | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Residential units revenue | $547,138k | $454,445k | +20.4% | | New homes delivered | 987 | 783 | +26.1% | | Average sales price | $554.2k | $580.0k | -4.4% | | Homebuilding gross margin | 34.5% | 31.3% | +320 bps | | Net new home orders | 855 | 822 | +4.0% | - The increase in residential units gross margin is attributed to product mix and limited competition in the company's infill and infill-adjacent community sites[103] - Selling, general and administrative (SG&A) expenses as a percentage of revenue decreased to 10.3% from 10.8% due to better leveraging of overhead costs[106] Results of Operations - Six Months Ended June 30, 2024 H1 2024 revenue rose on increased deliveries, expanding gross margin, while other income was boosted by an asset sale H1 2024 vs H1 2023 Performance | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Residential units revenue | $990,422k | $904,807k | +9.5% | | New homes delivered | 1,808 | 1,544 | +17.1% | | Average sales price | $547.6k | $585.2k | -6.4% | | Homebuilding gross margin | 34.0% | 29.5% | +450 bps | | Net new home orders | 1,926 | 1,889 | +2.0% | - The cancellation rate remained low at 6.5% for H1 2024, compared to 6.7% in H1 2023[115] - Other income, net, increased to $21.3 million from $9.1 million, primarily due to a $10.7 million gain on the sale of the investment in Challenger[125] Liquidity and Capital Resources The company maintains a strong balance sheet and liquidity, with capital primarily used for inventory and share repurchases - Cash and cash equivalents stood at $133.3 million as of June 30, 2024[130] - Net cash from operating activities was $3.2 million, a significant decrease from $210.2 million in the prior year, mainly due to a $258.2 million increase in inventory[137][138] - The company had no outstanding borrowings under its $35.0 million Secured Revolving Credit Facility or its Unsecured Revolving Credit Facility as of June 30, 2024[140] - The company is in compliance with its most restrictive debt covenants, including interest coverage (31.09 to 1.0) and debt to capitalization (18.8%)[142] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Based on an evaluation, the CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period[153] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[154] PART II OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 691,739 shares in Q2 2024, with $61.3 million remaining available under its repurchase plan Common Stock Repurchases (Q2 2024) | Period | Total Shares Purchased | Average Price Paid | Approx. Value Remaining for Purchase | | :--- | :--- | :--- | :--- | | April 2024 | 116,560 | $54.00 | $93,391,000 | | May 2024 | 271,855 | $55.66 | $78,268,000 | | June 2024 | 303,324 | $56.12 | $61,255,000 | | Total | 691,739 | $55.58 | $61,255,000 | - The 2022 Repurchase Plan was completed on March 15, 2024, with subsequent repurchases made under the $100 million 2023 Repurchase Plan[156] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the second quarter of 2024 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2024[157] Item 6. Exhibits This section lists required CEO and CFO certifications and interactive data files filed as exhibits with the report - The report includes required certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[158] - Interactive Data Files (XBRL) are submitted electronically with this report[158]