Press release·07/31/2024 21:22:52

Overview and Outlook

Green Brick Partners, Inc. is a leading homebuilder and land developer that operates primarily in high-growth markets in Texas and Georgia. The company’s key financial and operating metrics include home deliveries, home closings revenue, average sales price of homes delivered, and net new home orders.

In the second quarter of 2024, Green Brick’s home deliveries increased by 26.1% and home closings revenue increased by 20.4% compared to the same period in 2023. However, the average sales price of homes delivered decreased by 4.4% as the company closed out higher-priced infill communities and opened new communities in surrounding infill-adjacent areas. Net new home orders increased by 4.0% during the quarter.

For the first half of 2024, home deliveries increased by 17.1% and home closings revenue increased by 9.6% year-over-year. The average sales price of homes delivered decreased by 6.4% during this period. Net new home orders increased by 2.0% in the first six months of 2024 compared to the prior year.

The company’s strong operating results were driven by its superior infill and infill-adjacent locations in high-growth markets, reduced cycle times, and continued strong demand for new homes. Homebuilding gross margins improved significantly, increasing by 320 basis points to 34.5% in Q2 2024 and 450 basis points to 34.0% in the first half of the year.

Residential Units Revenue and New Homes Delivered

In the second quarter of 2024, residential units revenue increased by 20.4% to $547.1 million, driven by a 26.1% increase in new homes delivered partially offset by a 4.4% decrease in the average sales price of homes delivered. For the first six months of 2024, residential units revenue increased by 9.5% to $990.4 million, with a 17.1% increase in new homes delivered and a 6.4% decrease in average sales price.

The increase in new home deliveries was attributable to the limited competition in Green Brick’s infill and infill-adjacent community sites, improved cycle times, and continued low supply of existing and new home inventory in the company’s markets. The decrease in average sales price was a result of closing out higher-priced infill communities and opening new communities in surrounding infill-adjacent areas.

New Home Orders and Backlog

Net new home orders increased by 4.0% in Q2 2024 and 2.0% in the first half of the year compared to the prior year periods. However, the absorption rate per average active selling community decreased by 14.1% in Q2 and 14.8% in the first six months, primarily due to the impact of higher mortgage rates, metering of sales in certain infill communities, and a return to pre-pandemic seasonality.

Backlog increased by 11.0% as of June 30, 2024 compared to the prior year, with a slight increase in backlog units and a 10.1% increase in the average sales price of backlog units. The company’s cancellation rate remained in a historically low range under 10.0% during the first half of 2024.

Residential Units Gross Margin

Residential units gross margin increased by 320 basis points to 34.5% in Q2 2024 and by 450 basis points to 34.0% in the first six months of the year. This improvement was attributable to product mix and limited competition in Green Brick’s infill and infill-adjacent community sites, as well as lower direct construction costs and lot costs associated with the higher mix of deliveries from infill-adjacent communities.

Land and Lots Revenue

Lots revenue decreased by 57.2% in Q2 2024 and increased by 36.7% in the first half of the year, driven by changes in the number of lots closed. Land revenue of $12.7 million in Q2 and the first half of 2024 represented sales of two tracts of commercial land.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses as a percentage of revenue decreased by 0.5% in Q2 2024 to 10.3%, due to better leveraging of overhead costs as builder operations revenue increased. For the first six months of 2024, SG&A expenses as a percentage of revenue increased slightly to 10.7% compared to 10.5% in the prior year period, primarily due to higher salary expenses.

Equity in Income of Unconsolidated Entities

Equity in income of unconsolidated entities decreased by 79.2% in Q2 2024 and 61.9% in the first half of the year, mainly due to the sale of Green Brick’s ownership interest in Challenger during the first quarter of 2024.

Other Income, Net

Other income, net, increased to $5.9 million in Q2 2024 and $21.3 million in the first six months of the year, primarily due to a $10.7 million gain on the sale of the Challenger investment.

Income Tax Expense

Income tax expense increased to $23.9 million in Q2 2024 and $48.7 million in the first half of the year, substantially due to higher taxable income, partially offset by a lower effective tax rate, lower state tax rates, and a discrete tax benefit for equity compensation deductions.

Lots Owned and Controlled

As of June 30, 2024, Green Brick owned 28,519 lots and controlled an additional 4,794 lots through third-party option contracts, land under option for future acquisition, and lots under option through unconsolidated development joint ventures. This represents a total of 33,313 lots owned and controlled, with 97.2% of those lots being self-developed.

Liquidity and Capital Resources

As of June 30, 2024, Green Brick had $133.3 million in unrestricted cash and cash equivalents. The company’s debt to total capitalization ratio was 17.7%, and its net debt to total capitalization ratio, a non-GAAP measure, was 10.9%.

Green Brick’s key sources of liquidity were funds generated by operations and borrowings. Net cash provided by operating activities was $3.2 million in the first half of 2024, compared to $210.2 million in the prior year period. The decrease was primarily driven by an increase in inventory, partially offset by cash generated from business operations, increased customer deposits, and higher accrued expenses and accounts payable.

Net cash provided by investing activities was $58.1 million in the first six months of 2024, primarily from the $64.0 million in proceeds from the sale of the Challenger investment. Net cash used in financing activities was $102.6 million, mainly for share repurchases, repayments of senior unsecured notes, and repayments of notes payable.

Green Brick has access to a $35.0 million secured revolving credit facility and a $325.0 million unsecured revolving credit facility, both of which were undrawn as of June 30, 2024. The company also has $311.4 million in senior unsecured notes outstanding, with various maturity dates and interest rates.

Outlook and Analysis

Green Brick’s strong financial and operational performance in the first half of 2024 demonstrates the company’s ability to navigate the current market environment. The company’s focus on high-growth, infill and infill-adjacent markets, combined with its efficient operations and disciplined land acquisition strategy, have allowed it to maintain robust margins and profitability.

However, the company is not immune to the broader industry challenges, such as the impact of higher mortgage rates and the return of pre-pandemic seasonality, which have contributed to a decline in absorption rates. Additionally, the sale of the Challenger investment has reduced the company’s equity income, which was a significant contributor to its overall profitability.

Looking ahead, Green Brick’s focus on expanding its Trophy Signature Homes brand into new markets, such as Austin and Houston, presents an opportunity for continued growth and diversification. The company’s strong balance sheet and low leverage provide it with the financial flexibility to capitalize on strategic opportunities and weather any potential market volatility.

Overall, Green Brick’s performance in the first half of 2024 demonstrates its ability to adapt to changing market conditions and maintain its position as a leading homebuilder and land developer in its core markets. The company’s focus on operational efficiency, disciplined capital allocation, and strategic growth initiatives position it well for continued success in the future.