Green Brick Partners(US:GRBK)2024-03-01 20:02Financial Data and Key Metrics Changes - The company reported record home closings revenue for 2023 of $1.77 billion, with a gross margin of 30.9% and diluted EPS of $6.14, marking significant year-over-year growth [6][25]. - Net income attributable to Green Brick for Q4 increased by 31.5% to $73 million, while diluted EPS rose by 33.9% to $1.58 [26]. - The company achieved a return on average equity of 24.9% and a net debt to total capital ratio of only 11.4% [9][29]. Business Line Data and Key Metrics Changes - Net new orders for the full year increased over 70% year-over-year to a record 3,356 homes sold, with Q4 net new orders up 61% to 679 homes [7][26]. - The company experienced a 13% year-over-year increase in homes delivered, with a total of 825 units closed in Q4 [18][24]. - The cancellation rate for Q4 remained low at 7.2%, the lowest among public homebuilding peers [27]. Market Data and Key Metrics Changes - The Dallas-Fort Worth (DFW) market, representing 71% of homebuilding revenues, continued to lead in job growth, with almost 140,000 new non-farm payroll jobs added in the past year [10][11]. - Sales of existing homes dropped 19% year-over-year, indicating a lack of supply in the market, which benefits new home builders like Green Brick [12][13]. - Over 80% of the company's revenues in 2023 were generated in infill submarkets, where competition is limited [13]. Company Strategy and Development Direction - The company plans to invest approximately $700 million in land acquisitions and development in 2024, up from $425 million in 2023 [39][99]. - Green Brick aims to expand its Trophy Signature Homes brand into new markets, including Austin and Houston, leveraging its strategic land positions and development expertise [15][17]. - The company emphasizes its ability to self-develop in markets where land developers are scarce, which enhances its competitive advantage [14][20]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumer demand for new homes, driven by demographic trends and a lack of existing home supply [9][12]. - The company anticipates continued strong performance in 2024, supported by a solid backlog and favorable market conditions [40][42]. - Management highlighted the importance of maintaining financial discipline and a strong balance sheet to capitalize on growth opportunities [29][30]. Other Important Information - The company resumed stock buybacks, repurchasing approximately 1.18 million shares for a total of $45.3 million in 2023 [41]. - Green Brick's builders have extensive local knowledge, enabling them to navigate complex entitlement and regulatory processes effectively [14][20]. Q&A Session Summary Question: Sales activity in early 2024 - Management noted that early 2024 sales activity is strong, similar to previous years, with the spring market historically being the biggest quarter for new orders [46][48]. Question: Land price inflation - Management acknowledged that land price inflation is present due to competition for desirable sites, but emphasized their strategic advantages in land acquisition [51][53]. Question: Trends in sales incentives - Management indicated that incentives have decreased from Q4 levels, with a stable demand across various price points [64][66]. Question: Backlog conversion and delivery expectations - Management stated that backlog conversion is not the best indicator for run rate; instead, they focus on starts and pacing, expecting to stabilize around 900 starts per quarter [80][81]. Question: Future margin sustainability - Management expressed optimism about maintaining high margins, citing a strong lot position and effective underwriting practices [89].