Green Brick Partners(GRBK) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Green Brick Partners, Inc ITEM 1. FINANCIAL STATEMENTS 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 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] Condensed Consolidated Statements of Income 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] - 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] Condensed Consolidated Statements of Changes in Stockholders' Equity 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] Condensed Consolidated Statements of Cash Flows 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][135] - 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] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for the financial statements, covering accounting policies, inventory, debt, and equity 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][18] - 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][20] - Recent accounting pronouncements did not have a material impact on the condensed consolidated financial statements[23] 2. INVENTORY 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] - No impairment adjustments were recorded for communities or land inventory for the three and nine months ended September 30, 2023 and 2022[25] 3. INVESTMENT IN UNCONSOLIDATED ENTITIES 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] - 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][107] 4. ACCRUED EXPENSES 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] | 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 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][36][137][138] | 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][140] 6. REDEEMABLE NONCONTROLLING INTEREST 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] - On March 23, 2023, the put and purchase options for GRBK GHO were extended from April 2024 to April 2027[45] | 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 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] - 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][49] - 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] - 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] 8. SHARE-BASED COMPENSATION 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] - 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] 9. REVENUE RECOGNITION 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][64] - 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] 10. SEGMENT INFORMATION 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] - Land development revenue and gross profit significantly decreased for both periods, reflecting opportunistic sales to other homebuilders[67] 11. INCOME TAXES 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] 12. EARNINGS PER SHARE 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] - 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] 13. FAIR VALUE MEASUREMENTS 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] - 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] 14. RELATED PARTY TRANSACTIONS 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] - 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][80] 15. COMMITMENTS AND CONTINGENCIES 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] | 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][88] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] - 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] Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022 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 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] New Home Orders and Backlog 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] - The cancellation rate significantly decreased to 6.1% from 17.6% in the prior year, indicating improved market stability[96][99] Residential Units Gross Margin 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] Land and Lots Revenue 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] Selling, General and Administrative Expenses 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][105] Equity in Income of Unconsolidated Entities 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] Other Income, Net 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] Income Tax Expense 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] Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022 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 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] New Home Orders 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] - The cancellation rate decreased to 6.5% from 11.8% in the prior year period[112][113] Residential Units Gross Margin 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] Land and Lots Revenue 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] Selling, General and Administrative Expenses 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][118] Equity in Income of Unconsolidated Entities 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] Other Income, Net 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] Income Tax Expense 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] Lots Owned and Controlled 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] - 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] Liquidity and Capital Resources Overview 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] - 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][133] - The Company targets a debt to total capitalization ratio of approximately 30% to 35% to provide significant additional growth capital[131] Reconciliation of a Non-GAAP Financial Measure 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] | (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 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] - Net cash used in investing activities increased to $10.0 million, primarily for investments in unconsolidated entities[135] - 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][136] Debt Instruments 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][138] - Aggregate principal amount of senior unsecured notes outstanding was $336.1 million as of September 30, 2023[139] - 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] Preferred Equity 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] - Dividends of $2.2 million were paid on Series A Preferred Stock during the nine months ended September 30, 2023[142] - A quarterly cash dividend of $0.359 per depositary share was declared on October 26, 2023, payable on December 15, 2023[142] Off-Balance Sheet Arrangements and Contractual Obligations 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][144] - 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] - The Company generally has the right to terminate these contracts by forfeiting the earnest money deposit[146] 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] - More homes are typically delivered in the second half of the year, and cash receipts from home deliveries primarily occur during this period[148] Critical Accounting Policies 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] Recent Accounting Pronouncements 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] ITEM 4. CONTROLS AND PROCEDURES 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 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] Changes in Internal Control over Financial Reporting 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] PART II. OTHER INFORMATION This section includes additional information not covered in Part I, such as insider trading arrangements and a list of exhibits ITEM 5. OTHER INFORMATION 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] ITEM 6. EXHIBITS 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] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents are submitted electronically[156] 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]