Green Brick Partners(GRBK) - 2020 Q4 - Annual Report

PART I Item 1. Business Green Brick Partners is a diversified homebuilding and land development company focused on high-growth U.S. metropolitan areas, emphasizing quality and strategic growth - Green Brick Partners, Inc. is a diversified homebuilding and land development company incorporated in Delaware on April 11, 2006[14] - Core markets include Dallas-Fort Worth (DFW), Atlanta, and Treasure Coast, Florida, with a noncontrolling interest in Colorado Springs[15] Builder Operations and Price Ranges | Builder | Market | Products Offered | Price Range | | :----------------------------------- | :------- | :--------------- | :------------------ | | The Providence Group of Georgia LLC ("TPG") | Atlanta | Townhomes, Condominiums, Single family | $330,000 to $1,000,000 | | CB JENI Homes DFW LLC ("CB JENI") | DFW | Townhomes, Single family | $230,000 to $760,000 | | CLH20 LLC ("Centre Living") | DFW | Townhomes, Single family | $320,000 to $780,000 | | SGHDAL LLC ("Southgate") | DFW | Luxury homes | $550,000 to $1,000,000 | | GRBK GHO Homes LLC ("GRBK GHO") | Treasure Coast | Patio homes, Single family | $220,000 to $1,120,000 | | Trophy Signature Homes LLC ("Trophy") | DFW | Single family | $240,000 to $690,000 | Backlog Performance | Metric | Year Ended December 31, 2020 | Year Ended December 31, 2019 | Change (2020 vs 2019) | | :------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Backlog, Units | 1,463 | 786 | +677 (+86.1%) | | Backlog, in thousands | $686,861 | $346,828 | +$340,033 (+98.0%) | - The company targets a debt to total capitalization ratio of approximately 30% to 35%, with the ratio at 25.6% as of December 31, 2020, for growth capital[30] - Effective April 29, 2020, the Company acquired the remaining interests in CB JENI Homes DFW LLC, making it a wholly owned subsidiary[35] - The homebuilding industry experiences seasonal fluctuations, with highest new home order activity typically in spring and summer, leading to more deliveries in the second half of the year[39] - As of December 31, 2020, the company employed approximately 440 individuals, with 400 in homebuilding and 40 in corporate roles[48] Item 1A. Risk Factors The company faces various business, financial, and stock ownership risks, including COVID-19 impacts, industry cyclicality, and regulatory challenges - The COVID-19 pandemic negatively impacted sales in early 2020, though activity significantly rebounded in later quarters[51][54] - The homebuilding industry is cyclical and highly sensitive to economic conditions, risking decreased demand and pricing pressure during downturns[56] - Labor and raw material shortages and price fluctuations can delay construction, increase costs, and impact margins[63][64] - Operations are concentrated in Dallas-Fort Worth, Atlanta, and Treasure Coast, Florida, increasing vulnerability to regional economic downturns[76] - The capital-intensive homebuilding industry faces risks from difficulty in obtaining sufficient capital, potentially hindering land acquisition and development[110][112] - Greenlight Capital, Inc. and James R. Brickman own approximately 34% and 4% of voting power, respectively, exerting significant influence over stockholder approvals[116] - The company does not anticipate paying cash dividends on common stock, requiring investors to rely on stock price appreciation for returns[118] Item 1B. Unresolved Staff Comments No unresolved staff comments exist - None[120] Item 2. Properties The company leases its principal executive office and other operational offices, holding significant property as inventory for homebuilding - The principal executive office is leased in Plano, Texas, with other division offices also in leased spaces[121] - The company and its builders hold significant property as inventory for homebuilding operations[121] Item 3. Legal Proceedings The company is involved in ordinary course litigation, not expecting a material adverse effect on operations or financial position - The company is involved in various claims and litigation arising in the ordinary course of business[122] - Management does not believe these claims will materially adversely affect the company's results of operations or financial position[122] Item 4. Mine Safety Disclosures This item is not applicable - Not Applicable[123] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Green Brick Partners' common stock trades on Nasdaq under "GRBK", with 50.7 million shares outstanding as of February 2021, and no anticipated cash dividends - Common stock trades on The Nasdaq Capital Market under the symbol "GRBK"[126] - As of February 26, 2021, there were 17 stockholders of record and 50,661,919 common shares outstanding[127] - The company has not paid dividends since inception and does not anticipate paying cash dividends, retaining cash for general corporate purposes[128] Item 6. Reserved This item is reserved - This item is reserved[129] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Green Brick Partners' financial condition and results for 2020, highlighting significant growth in revenue, orders, and backlog, alongside improved margins and strong liquidity Key Performance Metric Changes | Metric | Change (YoY) | | :--------------------------- | :----------- | | Home deliveries | +28.4% | | Home closings revenue | +22.8% | | Average sales price of homes delivered | -4.4% | | Net new home orders | +50.0% | - While COVID-19 initially slowed net new home orders in early 2020, sales rebounded significantly from May, accelerating in Q3 (+88.8%) and Q4 (+43.7%) year-over-year[137] Residential Unit Performance | Metric | Year Ended Dec 31, 2020 (in thousands) | Year Ended Dec 31, 2019 (in thousands) | Change (2020 vs 2019) | | :--------------------------- | :----------------------------------- | :----------------------------------- | :-------------------- | | Residential units revenue | $930,176 | $759,830 | +$170,346 (+22.4%) | | New homes delivered | 2,208 | 1,719 | +489 (+28.4%) | | Average sales price of homes delivered | $418.4 | $437.6 | -$19.2 (-4.4%) | New Home Orders and Backlog | Metric | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Change (2020 vs 2019) | | :----------------------------------- | :---------------------- | :---------------------- | :-------------------- | | Net new home orders | 2,885 | 1,923 | +962 (+50.0%) | | Backlog (units) | 1,463 | 786 | +677 (+86.1%) | | Backlog (in thousands) | $686,861 | $346,828 | +$340,033 (+98.0%) | - Residential units gross margin increased to 24.1% in 2020 from 21.3% in 2019, driven by decreased sales incentives, price increases, and lower land costs[146] Land Inventory | Category | Dec 31, 2020 | Dec 31, 2019 | Change (2020 vs 2019) | | :----------------------------------- | :----------- | :----------- | :-------------------- | | Total lots owned | 8,920 | 6,419 | +2,501 | | Total lots controlled | 5,548 | 2,557 | +2,991 | | Total lots owned and controlled | 14,468 | 8,976 | +5,492 | - The debt to total capitalization ratio was 25.6% (net debt 23.8%) as of December 31, 2020, below the 30% to 35% target, indicating significant growth capital capacity[165] Cash Flow Summary | Cash Flow Activity | Year Ended Dec 31, 2020 (in thousands) | Year Ended Dec 31, 2019 (in thousands) | | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash provided by (used in) operating activities | $35,099 | ($22,063) | | Net cash used in investing activities | ($13,298) | ($7,869) | | Net cash (used in) provided by financing activities | ($25,851) | $25,862 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to smaller reporting companies - Not applicable to smaller reporting companies[198] Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements for 2018-2020, with an unqualified opinion from RSM US LLP on financial statements and internal controls, showing increased assets and equity - RSM US LLP issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2020, confirming fair presentation in conformity with GAAP[202] - An unqualified opinion was also expressed on the effectiveness of the Company's internal control over financial reporting as of December 31, 2020[203] Consolidated Balance Sheet Highlights | Metric (in thousands) | Dec 31, 2020 | Dec 31, 2019 | Change (2020 vs 2019) | | :----------------------------------- | :----------- | :----------- | :-------------------- | | Total assets | $988,847 | $875,539 | +$113,308 | | Inventory | $844,635 | $753,567 | +$91,068 | | Total liabilities | $325,895 | $325,533 | +$362 | | Total equity | $649,409 | $536,395 | +$113,014 | Consolidated Statements of Income Highlights | Metric (in thousands) | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Total revenues | $976,021 | $791,660 | $623,647 | | Net income attributable to Green Brick Partners, Inc. | $113,693 | $58,656 | $51,623 | | Basic EPS | $2.25 | $1.16 | $1.02 | | Diluted EPS | $2.24 | $1.16 | $1.02 | Consolidated Statements of Cash Flows Highlights | Cash Flow Activity (in thousands) | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Net cash provided by (used in) operating activities | $35,099 | ($22,063) | ($39,476) | | Net cash used in investing activities | ($13,298) | ($7,869) | ($30,827) | | Net cash (used in) provided by financing activities | ($25,851) | $25,862 | $71,769 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes or disagreements with accountants on accounting and financial disclosure - None[446] Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with an unqualified attestation from RSM US LLP - The CEO and CFO concluded the company's disclosure controls and procedures were effective as of December 31, 2020[447] - Management concluded the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO 2013 framework[449] - No material changes in internal controls occurred during the quarter ended December 31, 2020[451] Item 9B. Other Information None - None[461] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information for Part III, Item 10, is incorporated by reference from the Company's 2021 proxy statement[463] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the company's 2021 Proxy Statement - Information for Part III, Item 11, is incorporated by reference from the Company's Proxy Statement to be filed with the SEC[464] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the company's 2021 Proxy Statement - Information for Part III, Item 12, is incorporated by reference from the Company's Proxy Statement to be filed with the SEC[465] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 Proxy Statement - Information for Part III, Item 13, is incorporated by reference from the Company's Proxy Statement to be filed with the SEC[466] Item 14. Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the company's 2021 Proxy Statement - Information for Part III, Item 14, is incorporated by reference from the Company's Proxy Statement to be filed with the SEC[467] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including a new $125 million note purchase agreement and a $50 million stock repurchase program in early 2021 - Financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K[469] - Financial statement schedules are omitted as not required or included in the consolidated financial statements or notes[470] - A comprehensive list of exhibits, including corporate documents and various agreements, is filed with this Annual Report on Form 10-K or incorporated by reference[471] - On February 25, 2021, the Company entered a Note Purchase Agreement for $125 million in senior unsecured notes due February 25, 2028, at a fixed rate of 3.25% per annum[444] - On March 1, 2021, the Board authorized a new $50 million stock repurchase program, allowing purchases until March 1, 2023[445] Item 16. Form 10-K Summary None - None[475] Signatures The report is signed by the CEO, CFO, and other directors of Green Brick Partners, Inc. on March 8, 2021 - The report was signed by James R. Brickman (CEO) and Richard A. Costello (CFO) on behalf of Green Brick Partners, Inc. on March 8, 2021[478][479]