Green Brick Partners(US:GRBK)2023-03-01 03:28Financial Data and Key Metrics Changes - Total revenues grew 25% year-over-year to $1.76 billion with a gross margin of 29.8% [6] - Earnings per share increased 62% to $6.02, and return on equity rose 550 basis points to 31.4% [6] - Net income attributable to Green Brick was $56 million, with diluted EPS at $1.18, down 4.8% year-over-year [31] Business Line Data and Key Metrics Changes - Home closing revenue grew 2.3% year-over-year to $429 million, driven by a 16% increase in average selling prices to $590,000, despite a 12% decline in the number of closings to 727 homes [24][31] - The cancellation rate increased to 20% in Q4 but was one of the lowest among peers, with a full-year cancellation rate of 14% [25] - The quarterly absorption rate for active selling communities was 5.5 homes in Q4, up from 5.3 in Q3 [26] Market Data and Key Metrics Changes - Sales momentum picked up in December, with sales up 43% over the average of the prior six months [7] - Job growth in key markets like Dallas and Atlanta was strong, with Dallas adding 235,000 jobs and Atlanta adding 126,000 jobs in 2022 [14] - Existing home inventory remains tight, with roughly one-third of homeowners mortgage-free, disincentivizing them from selling [11] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet and capital efficiency while managing inventory [22] - Green Brick aims to have approximately 6,000 finished lots by the end of 2023, with 75% located in desirable areas [15] - The company is exploring acquisitions and share repurchases as part of its capital allocation strategy [72][88] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the spring selling season based on increased demand, which is subject to interest rate fluctuations [21] - The company believes it is well-positioned for a market rebound due to its high-quality land pipeline and strategic advantages in key markets [15][18] - Management noted that the current housing cycle is different from the 2008 crisis, citing stronger mortgage market conditions and low supply of single-family homes [9][10] Other Important Information - The company amended its unsecured revolving credit agreement, increasing total commitments by $25 million to $325 million [37] - Construction costs have been reduced by an average of approximately $40,000 per home for homes started in December or later [48] - The company is expanding into Austin, with new home construction beginning in February [50] Q&A Session Summary Question: Thoughts on 2023 closings and gross margin - Management noted that sales pace has picked up significantly since December, maintaining pricing power due to infill locations [57][58] Question: Improvement in January and February sales - Management refrained from providing specific monthly sales numbers but confirmed significant improvement [68] Question: Capital allocation priorities for 2023 - Management is evaluating share repurchases, potential acquisitions, and expansion into new markets [72][88] Question: Mix of fixed and variable in SG&A - SG&A is a mix of fixed and variable, with higher volumes of closings leading to lower SG&A [75] Question: Average selling price outlook - Demand remains strong in A and B locations, with some incentives still necessary in C locations [77][79] Question: Percentage of out-of-market buyers - There has been a slight decrease in out-of-market buyers, with more in-state buyers this year [84] Question: Potential acquisition details - Management is exploring a low-probability off-market deal and sees opportunities due to banks being more restrictive [88][89]