Green Brick Partners(US:GRBK)2023-05-04 20:53Financial Data and Key Metrics Changes - The company reported a record net income of $64 million for Q1 2023, with earnings per diluted share increasing by 14% year-over-year to $1.37, both records for any first quarter [22][33]. - Home closings revenue grew by 24% year-over-year to $449 million, also a record for any first quarter [21][37]. - The homebuilding gross margin was 27.6%, up 140 basis points sequentially from Q4 2022, and only 20 basis points lower than the same period last year [3][39]. - The cancellation rate improved significantly to 6.2%, down from 20% in the previous quarter, marking the lowest cancellation rate among public homebuilders [5][16]. Business Line Data and Key Metrics Changes - Home deliveries in Q1 2023 reached a record of 761 units, representing a 16% year-over-year increase, with the average selling price (ASP) growing by 7% to $591,000 [15]. - Net new home orders surged by 78% year-over-year to 1,067 homes, with a sequential increase of 152% from Q4 2022, marking the second highest number of net orders in company history [23][38]. - The backlog value increased by 49% sequentially to $551 million, driven by a 57% increase in backlog years [36]. Market Data and Key Metrics Changes - The Dallas-Fort Worth (DFW) market, the company's largest, created 212,000 new jobs over the last 12 months, contributing to a favorable demographic for homebuyers [6]. - Existing home sales fell by 2.4% in March from the prior month and 22% from a year earlier, allowing new homes to gain a larger market share [32]. Company Strategy and Development Direction - The company emphasized its strategic advantages, including a strong land and lot position, operational execution, and a diverse product line catering to various customer segments [4][9]. - The company plans to focus on infill locations, which are supply constrained and require local expertise, creating a barrier to entry for competitors [26]. - The company is optimistic about capturing market share due to a low existing home inventory and a strong balance sheet, allowing for flexibility in seizing market opportunities [121][122]. Management's Comments on Operating Environment and Future Outlook - Management remains positive about long-term housing supply and demand fundamentals, citing a deficit of approximately 4 million housing units in the country [12]. - The company expects gross margins to be slightly higher in the near term, as demand continues to outpace supply in its sub-markets [18]. - Management acknowledged the volatility in interest rates as a significant challenge but believes the company is well-positioned to navigate this environment [24]. Other Important Information - The company returned $15.4 million to shareholders through a stock buyback program during the quarter, with $33 million remaining under the existing program [4][104]. - The company has a low debt to total capital ratio of 23.8% and a net debt to total capital ratio of 13.3%, indicating a strong balance sheet [11][98]. Q&A Session Summary Question: What drove the sales pace during the quarter? - Management indicated that the order gains were driven by strong demand and not solely by finished homes [49]. Question: What is the outlook for community count and land availability? - Management stated that community count will depend on sales robustness, but they have sufficient land to grow community count through the year [50][52]. Question: How is the company addressing the current lending environment? - Management believes that public builders are less leveraged and will benefit from tighter lending standards, allowing them to gain market share [50]. Question: What percentage of new orders closed this quarter? - Management estimated that over 50% of the sales sold and closed in the quarter were either finished or in the early construction stages [73][75]. Question: What are the expectations for cash flow and capital allocation? - Management indicated that excess cash could be used for stock repurchases or preparing land for development, depending on market conditions [76]. Question: How is the company managing building material costs? - Management noted that while framing costs have fluctuated, other building materials have seen reductions in costs due to improved supply chains [71][91]. Question: What is the company's strategy for new markets? - Management confirmed that the focus will be on existing markets for incremental investments, but they are also exploring opportunities in new markets [64][66].