Green Brick Partners(GRBK) - 2022 Q4 - Annual Report

PART I ITEM 1. BUSINESS 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] - 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][26] 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][31][32] - 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][37] - 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] - 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][42][43] ITEM 1A. RISK FACTORS 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][50][52] - 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][55][56] - 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][62] - Geographic concentration in DFW, Austin, Atlanta, and Treasure Coast markets means a downturn in these specific areas could disproportionately affect the company[66] - 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][72][73] - 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][111][112][113] - 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][118] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the SEC - No unresolved staff comments[119] ITEM 2. PROPERTIES 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] - Homebuilding and title division offices are located in leased spaces within their respective markets[120] - The company and its builders hold significant amounts of property as inventory for homebuilding[120] ITEM 3. LEGAL PROCEEDINGS 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] - Management does not believe any such claims and litigation will have a material adverse effect on results of operations or financial position[121] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not Applicable[122] 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 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] - As of February 22, 2023, there were 59 stockholders of record and 46,032,886 common shares outstanding[126] - 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] ITEM 6. RESERVED This item is reserved and contains no information - This item is reserved[129] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] - 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] 2022 Developments 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] - 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] - The company believes increasing demand and supply constraints in its target markets create favorable conditions for future growth[137] Results of Operations 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] - Other income, net, increased to $11.8 million in 2022, mainly due to forfeited customer deposits[153] - 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] Lots Owned and Controlled 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] - Self-developed lots as a percentage of total lots owned and controlled increased to 91.3% in 2022 from 90.4% in 2021[160] Liquidity and Capital Resources Overview 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] - The company targets a debt to total capitalization ratio of approximately 30% to 35%, which is expected to provide significant additional growth capital[165] Reconciliation of a Non-GAAP Financial Measure 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] 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 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] Debt Instruments 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] - 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] 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] Preferred Equity 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] - Cumulative cash dividends are paid quarterly at a rate of 5.75% of the $25,000 liquidation preference per share[174] - Dividends paid on Series A Preferred Stock totaled $2.8 million during the year ended December 31, 2022[174] Registration Statements 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] Cash Flows 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] - Increased investing cash outflows were mainly due to a $3.6 million capital contribution to the GBTM Sendera joint venture[180] - 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] Off-Balance Sheet Arrangements 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][178] - 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] - The company generally has the right to terminate obligations under these contracts by forfeiting the earnest money deposit[181] Critical Accounting Policies 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][185] - 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] - 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][189][190] Recent Accounting Pronouncements 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] - All recent accounting pronouncements not yet adopted are not applicable or are not expected to have a material impact[297] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - 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] 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] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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][203] - 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][209] Consolidated Balance Sheets 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 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 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 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] - 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] 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][230][231][307][308] - 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][239][240][242] - 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][270][271][272] - 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][284] - 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][373] 2. INTANGIBLE ASSETS, GOODWILL, AND REDEEMABLE NONCONTROLLING INTEREST 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][299] 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][302] - 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][304] 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 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] - 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][308] 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][312] 4. INVENTORY 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] 5. INVESTMENTS IN UNCONSOLIDATED ENTITIES 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][332] - The Green Brick Mortgage joint venture was terminated in 2022, resulting in a de minimis loss[328] - 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][327] 6. PROPERTY AND EQUIPMENT, NET 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] 7. ACCRUED EXPENSES 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 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] - 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][345] - 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][349][351][352][353] - 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] 9. STOCKHOLDERS' EQUITY 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] - 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] - Dividends paid on Series A preferred stock totaled $2.8 million during the year ended December 31, 2022[364] - The company completed its $50.0 million 2021 Share Repurchase Program in April 2022, repurchasing 2,423,644 shares[365][366] - 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][368] 10. SHARE-BASED COMPENSATION 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] - As of December 31, 2022, 1,252,096 shares remained available for future grant of awards under the 2014 Equity Plan[372] 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] - 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] 11. REVENUE RECOGNITION 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] 12. SEGMENT INFORMATION 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] 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 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] 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 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] - 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] 15. EARNINGS PER COMMON SHARE 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 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] - 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] - 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] 17. RELATED PARTY TRANSACTIONS 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] - GRBK GHO leases office space from affiliated entities, incurring $0.2 million in lease costs in 2022[414] - GRBK GHO also receives de minimis title closing services from an entity affiliated with its president[415] 18. COMMITMENTS AND CONTINGENCIES 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] 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] - 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][423] 19. SUBSEQUENT EVENTS There are no subsequent events to report - No subsequent events[425] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 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] ITEM 9A. CONTROLS AND PROCEDURES 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] - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[429] - 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][435] - 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] ITEM 9B. OTHER INFORMATION This item is not applicable - Not applicable[442] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This item is not applicable - Not applicable[443] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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] ITEM 11. EXECUTIVE COMPENSATION 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] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 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] 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 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] ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 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] PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 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] - 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] - 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] ITEM 16. FORM 10-K SUMMARY This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[457]