GRBK Green Brick Partners Inc

Green Brick Partners, Inc. (NYSE: GRBK) (“we,” “Green Brick” or the “Company”) today reported results for its third quarter ended September 30, 2022.

“Green Brick delivered third quarter results that were a record for any third quarter with EPS of $1.57, total revenues of $407.9 million, residential units revenue of $396.7 million, and net income attributable to Green Brick of $73.5 million. We also reported a homebuilding gross margin of 32.4% which is a record for any quarter, and we believe this may be the highest among public builders,” said Jim Brickman, CEO and Co-Founder. “These results reflect our continued focus on operational efficiency as we meet a more challenging market going forward.”

“Most of our land and lots are in DFW and Atlanta, two of the best larger markets in the country. Our basis is generally lower than our peers, based on our conservative underwriting and our self-developing most of our lots,” continued Mr. Brickman. “Most of our communities are in more supply-constrained infill and other desirable locations. These are all critical factors for our industry leading 32.4% gross margins. Therefore, it should not be surprising that we currently have no communities on a watch list, meaning we have no indicators of impairment as of September 30, 2022. ”

“Our strong balance sheet with a 28.0% debt-to-total capital ratio and record gross margins gives Green Brick more flexibility than most peers to effectively manage pace versus price decisions going forward. We view the current challenges as a potential opportunity to increase market share,” said Mr. Brickman. “Depending on market conditions, as many peers pull back, we expect to have the opportunity to increase our count of ending active selling communities from September 30, 2022 by 20% to 30% over the next four to five quarters. These new communities with a favorable land/lot basis provide the optionality of pricing aggressively without the overhang of protecting backlog. We believe these new communities will generate favorable sales per community at more traditional gross margins.”

Results for the Quarter Ended September 30, 2022:

(Dollars in thousands, except per share data)	Three Months Ended September 30,
		2022				2021			Change
New homes delivered		650				738			(11.9		)%
Total revenues	$	407,944			$	342,340				19.2	%
Total cost of revenues		274,625				251,004				9.4	%
Total gross profit	$	133,319			$	91,336				46.0	%
Income before income taxes	$	97,596			$	65,158				49.8	%
Net income attributable to Green Brick Partners, Inc.	$	73,520			$	48,507				51.6	%
Diluted net income attributable to Green Brick Partners, Inc. per common share	$	1.57			$	0.95				65.3	%
Residential units revenue	$	396,749			$	338,900				17.1	%
Average sales price of homes delivered	$	607.3			$	458.1				32.6	%
Homebuilding gross margin percentage		32.4	%			26.9	%		550 bps
Backlog	$	564,026			$	1,017,220			$	(453,194	)
Homes under construction		2,276				2,555			(10.9		)%

Results for the Nine Months Ended September 30, 2022:

For the nine months ended September 30, 2022, our net income attributable to Green Brick per diluted common share reflects a record through the first three quarters of any year since the Company’s inception, as detailed below.

(Dollars in thousands, except per share data)	Nine Months Ended September 30,
		2022				2021			Change
New homes delivered		2,189				2,011			8.9	%
Total revenues	$	1,326,704			$	950,625			39.6	%
Total cost of revenues		916,133				699,324			31.0	%
Total gross profit	$	410,571			$	251,301			63.4	%
Income before income taxes	$	318,511			$	174,397			82.6	%
Net income attributable to Green Brick Partners, Inc.	$	236,353			$	126,739			86.5	%
Diluted net income attributable to Green Brick Partners, Inc. per common share	$	4.82			$	2.48			94.4	%
Residential units revenue	$	1,273,925			$	889,636			43.2	%
Average sales price of homes delivered	$	579.4			$	440.8			31.4	%
Homebuilding gross margin percentage		31.1	%			26.5	%		460 bps
Selling, general and administrative expenses as a percentage of residential units revenue		9.4	%			10.9	%		-150 bps

Earnings Conference Call:

We will host our earnings conference call to discuss our third quarter ended September 30, 2022 at 12:00 p.m. Eastern Time on Thursday, November 3rd, 2022. The call can be accessed by dialing 1-888-660-6353 for domestic participants or 1-929-203-2106 for international participants and should reference meeting number 3162560. Participants may also join the call via webcast at: https://events.q4inc.com/attendee/570044635

A telephone replay of the call will be available through December 3rd, 2022. To access the telephone replay, the domestic dial-in number is 1-800-770-2030, the international dial-in number is 1-647-362-9199 and the access code is 3162560, or by using the link at investors.greenbrickpartners.com.

GREEN BRICK PARTNERS, INC.CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data)(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
			2022				2021				2022				2021
Residential units revenue		$	396,749			$	338,900			$	1,273,925			$	889,636
Land and lots revenue			11,195				3,440				52,779				60,989
Total revenues			407,944				342,340				1,326,704				950,625
Cost of residential units			268,536				247,899				879,108				654,136
Cost of land and lots			6,089				3,105				37,025				45,188
Total cost of revenues			274,625				251,004				916,133				699,324
Total gross profit			133,319				91,336				410,571				251,301
Selling, general and administrative expenses			(43,251	)			(33,709	)			(119,314	)			(97,182	)
Equity in income of unconsolidated entities			5,697				5,555				19,907				14,039
Other income, net			1,831				1,976				7,347				6,239
Income before income taxes			97,596				65,158				318,511				174,397
Income tax expense			16,963				13,898				65,678				37,093
Net income			80,633				51,260				252,833				137,304
Less: Net income attributable to noncontrolling interests			7,113				2,753				16,480				10,565
Net income attributable to Green Brick Partners, Inc.		$	73,520			$	48,507			$	236,353			$	126,739
Net income attributable to Green Brick Partners, Inc. per common share:
Basic		$	1.58			$	0.96			$	4.86			$	2.50
Diluted		$	1.57			$	0.95			$	4.82			$	2.48
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share:
Basic			46,032				50,732				48,205				50,689
Diluted			46,390				51,079				48,544				51,046

GREEN BRICK PARTNERS, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share data)(Unaudited)

	September 30, 2022			December 31, 2021
ASSETS
Cash and cash equivalents	$	48,203		$	77,166
Restricted cash		18,739			16,388
Receivables		7,239			6,871
Inventory		1,453,056			1,203,743
Investments in unconsolidated entities		69,250			55,616
Right-of-use assets - operating leases		3,800			4,596
Property and equipment, net		2,894			2,812
Earnest money deposits		25,203			26,008
Deferred income tax assets, net		15,741			15,741
Intangible assets, net		473			537
Goodwill		680			680
Other assets		12,457			11,709
Total assets	$	1,657,735		$	1,421,867
LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	60,984		$	45,682
Accrued expenses		99,425			61,351
Customer and builder deposits		43,622			64,610
Lease liabilities - operating leases		3,972			4,745
Borrowings on lines of credit, net		42,902			(738	)
Senior unsecured notes, net		335,729			335,446
Notes payable		14,638			210
Total liabilities		601,272			511,306
Commitments and contingencies
Redeemable noncontrolling interest in equity of consolidated subsidiary		25,660			21,867
Equity:
Green Brick Partners, Inc. stockholders’ equity
Preferred stock, $0.01 par value: 5,000,000 shares authorized; 2,000 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		47,696			47,696
Common stock, $0.01 par value: 100,000,000 shares authorized; 46,037,649 issued and outstanding as of September 30, 2022 and 51,151,911 and 50,759,972 issued and outstanding as of December 31, 2021, respectively		460			512
Treasury stock, at cost: none as of September 30, 2022 and 391,939 shares as of December 31, 2021		—			(3,167	)
Additional paid-in capital		261,570			289,641
Retained earnings		699,514			539,866
Total Green Brick Partners, Inc. stockholders’ equity		1,009,240			874,548
Noncontrolling interests		21,563			14,146
Total equity		1,030,803			888,694
Total liabilities and equity	$	1,657,735		$	1,421,867

GREEN BRICK PARTNERS, INC.SUPPLEMENTAL INFORMATION(Unaudited)

Residential Units Revenue and New Homes Delivered(dollars in thousands)		Three Months Ended September 30,													Nine Months Ended September 30,
			2022			2021		Change				%				2022			2021		Change			%
Home closings revenue		$	394,731		$	338,075		$	56,656			16.8	%		$	1,268,329		$	886,488		$	381,841		43.1	%
Mechanic’s lien contracts revenue			2,018			825			1,193			144.6	%			5,596			3,148			2,448		77.8	%
Residential units revenue		$	396,749		$	338,900		$	57,849			17.1	%		$	1,273,925		$	889,636		$	384,289		43.2	%
New homes delivered			650			738			(88	)		(11.9	)%			2,189			2,011			178		8.9	%
Average sales price of homes delivered		$	607.3		$	458.1		$	149.2			32.6	%		$	579.4		$	440.8		$	138.6		31.4	%

Land and Lots Revenue(dollars in thousands)		Three Months Ended September 30,												Nine Months Ended September 30,
			2022			2021		Change			%				2022			2021		Change				%
Lots revenue		$	3,991		$	2,126		$	1,865		87.7	%		$	18,027		$	15,184		$	2,843			18.7	%
Land revenue			7,204			1,314			5,890		448.2	%			34,752			45,805			(11,053	)		(24.1	)%
Land and lots revenue		$	11,195		$	3,440		$	7,755		225.4	%		$	52,779		$	60,989		$	(8,210	)		(13.5	)%
Lots closed			57			31			26		83.9	%			274			173			101			58.4	%
Average sales price of lots closed		$	70.0		$	68.6		$	1.4		2.0	%		$	65.8		$	87.8		$	(22.0	)		(25.1	)%

New Home Orders and Backlog(dollars in thousands)		Three Months Ended September 30,															Nine Months Ended September 30,
			2022				2021			Change				%				2022				2021			Change				%
Net new home orders			404				689				(285	)		(41.4	)%			1,550				2,375				(825	)		(34.7	)%
Revenue from new net home orders		$	251,276			$	380,945			$	(129,669	)		(34.0	)%		$	962,497			$	1,216,845			$	(254,348	)		(20.9	)%
Average selling price of net new home orders		$	622.0			$	552.9			$	69.1			12.5	%		$	621.0			$	512.4			$	108.6			21.2	%
Cancellation rate			17.6	%			6.9	%			10.7	%		155.1	%			11.8	%			6.7	%			5.1	%		76.1	%
Absorption rate per average active selling community per quarter			5.3				8.2				(2.9	)		(35.4	)%			6.8				8.8				(2.0	)		(22.7	)%
Average active selling communities			76				84				(8	)		(9.5	)%			76				90				(14	)		(15.6	)%
Active selling communities at end of period			74				80				(6	)		(7.5	)%
Backlog		$	564,026			$	1,017,220			$	(453,194	)		(44.6	)%
Backlog (units)			841				1,827				(986	)		(54.0	)%
Average sales price of backlog		$	670.7			$	556.8			$	113.9			20.5	%

		September 30, 2022			December 31, 2021
Lots owned (1)
Central		18,998			17,767
Southeast		2,583			2,472
Total lots owned		21,581			20,239
Lots controlled (1)
Central		3,691			7,321
Southeast		618			1,061
Total lots controlled		4,309			8,382
Total lots owned and controlled (1)		25,890			28,621
Percentage of lots owned		83.4	%		70.7	%

———————————————————

(1)   Excludes lots with homes under construction.

GREEN BRICK PARTNERS, INC.SUPPLEMENTAL INFORMATION(Unaudited)

The following table presents additional information on the lots we owned as of September 30, 2022 and December 31, 2021.

	September 30, 2022			December 31, 2021
Total lots owned	21,581			20,239
Add certain lots included in Total Lots Controlled
Land under option for future acquisition and development	307			3,826
Lots under option through unconsolidated development joint ventures	1,718			1,816
Total lots self-developed	23,606			25,881
Self-developed lots as a percentage of total lots owned and controlled	91.2	%		90.4	%

Non-GAAP Financial Measures

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating our operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following table represents the non-GAAP measure of adjusted homebuilding gross margin for the three and nine months ended September 30, 2022 and 2021 and reconciles these amounts to homebuilding gross margin, the most directly comparable GAAP measure.

(Unaudited, in thousands):		Three Months Ended September 30,								Nine Months Ended September 30,
			2022				2021				2022				2021
Residential units revenue		$	396,749			$	338,900			$	1,273,925			$	889,636
Less: Mechanic’s lien contracts revenue			(2,018	)			(825	)			(5,596	)			(3,148	)
Home closings revenue		$	394,731			$	338,075			$	1,268,329			$	886,488
Homebuilding gross margin		$	127,861			$	90,875			$	393,940			$	234,834
Homebuilding gross margin percentage			32.4	%			26.9	%			31.1	%			26.5	%
Homebuilding gross margin			127,861				90,875				393,940				234,834
Add back: Capitalized interest charged to cost of revenues			3,105				2,569				10,303				6,915
Adjusted homebuilding gross margin		$	130,966			$	93,444			$	404,243			$	241,749
Adjusted homebuilding gross margin percentage			33.2	%			27.6	%			31.9	%			27.3	%

About Green Brick Partners, Inc.

Green Brick Partners, Inc. is a diversified homebuilding and land development company that operates in Texas, Georgia, and Florida and has a non-controlling interest in a Colorado homebuilder. Green Brick owns five subsidiary homebuilders in Texas (CB JENI Homes, Normandy Homes, Southgate Homes, Trophy Signature Homes, and a 90% interest in Centre Living Homes), as well as a controlling interest in a homebuilder in Atlanta, Georgia (The Providence Group) and an 80% interest in a homebuilder in Port St. Lucie, Florida (GHO Homes). Green Brick also owns a noncontrolling interest in Challenger Homes in Colorado Springs, Colorado, and retains interests in related financial services platforms, including Green Brick Title and BHome Mortgage. The Company is engaged in all aspects of the homebuilding process, including land acquisition and development, entitlements, design, construction, marketing, and sales for its residential neighborhoods and master-planned communities. For more information about Green Brick Partners Inc.’s subsidiary homebuilders, please visit greenbrickpartners.com/homebuilders.

Forward-Looking and Cautionary Statements:

This press release and our earnings call contain “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts and typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “feel,” “intend,” “plan,” “predict,” “seek,” “strategy,” “target,” “will” or other words of similar meaning. Forward-looking statements in this press release and in our earnings call include statements regarding (i) our position to adapt and succeed in a rapidly changing environment, including our focus on operational efficiency; (ii) our expectations regarding trends in our markets, including future increases in inventory and the peaking of construction costs; (iii) the ability to mitigate future inventory buildup, including reductions in single-family starts; (iv) expected closings of our current backlog, and our ability to manage such closings; (v) our priorities and strategies for growth, the drivers of that growth, and the impact on our future results; (vi) our expectation to sustain our industry-leading margins and debt-to-total capital ratios, as well as the expected impacts of incentives on our margins; (vii) our flexibility to capitalize on market opportunities and grow our market share as well as the impact on our financial and operational performance; (viii) our beliefs that our lot and land positions will support future growth and provide us with advantages on margins and adaptability; (ix) our beliefs that we operate in the most advantageous markets in the U.S. and the resilience of our markets in both stronger and weaker economies; (x) our expectations related to starts in the fourth quarter and into 2023; (xi) our expectations for lot completions and opportunities to increase active selling communities during the remainder of 2022 and into 2023; (xii) our beliefs regarding our position to manage costs, prices and cycle times; and (xiii) our expectation to continue to provide favorable returns on equity to our shareholders. These forward-looking statements reflect our current views about future events and involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement. These risks include, but are not limited to: (1) changes in macroeconomic conditions, including increasing interest rates, inflation, and the COVID-19 pandemic that could adversely impact demand for new homes or the ability of potential buyers to qualify; (2) general economic conditions, seasonality, cyclicality and competition in the homebuilding industry; (3) shortages, delays or increased costs of raw materials and increased demand for materials, or increases in other operating costs, including costs related to labor, real estate taxes and insurance, which in each case exceed our ability to increase prices; (4) a shortage of qualified labor; (5) an inability to acquire land in our current and new markets at anticipated prices or difficulty in obtaining land- use entitlements; (6) our inability to successfully execute our strategies, including an inability to grow our operations or expand our Trophy brand; (7) our inability to implement new strategic investments; (8) a failure to recruit, retain or develop highly skilled and competent employees; (9) government regulation risks; (10) a lack of availability or volatility of mortgage financing; (11) severe weather events or natural disasters; (12) difficulty in obtaining sufficient capital to fund our growth; (13) our ability to meet our debt service obligations; (14) a decline in the value of our inventories and resulting write-downs of the carrying value of our real estate assets; (15) changes in accounting standards that adversely affect our reported earnings or financial condition. For a more detailed discussion of these and other risks and uncertainties applicable to Green Brick please see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Contact: Benting HuVice President of Finance(469) 808-1014IR@greenbrickpartners.com