Green Brick Partners, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. Green Brick is a homebuilder and land developer operating in Central and Southeast markets.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $393.6 million | $234.5 million | +67.9% |
| Gross profit | $108.4 million | $59.0 million | +83.7% |
| Gross margin | 27.5% | 25.2% | +2.3 percentage points |
| Net income | $64.2 million | $27.8 million | +131.2% |
| Net income attributable to Green Brick | $61.6 million | $26.0 million | +137.1% |
| Diluted earnings per share | $1.20 | $0.51 | +$0.69 |
| Cash used in operating activities | $14.0 million | $8.0 million | Greater cash use |
Residential-unit revenue rose 67.9% to $364.7 million. Deliveries increased 27.5% to 658 homes, and average delivered home price increased 31.7% to $551,800. Homebuilding gross margin improved to 27.8% from 25.4%, which management attributed mainly to higher prices and fewer sales incentives outpacing cost inflation. SG&A declined to 8.7% of revenue from 12.6%, reflecting revenue growth without a comparable increase in overhead.
Demand, backlog, and operating context
- Net new home orders fell 44.5% to 601; absorption was 8.0 homes per average active selling community per quarter, down from 11.3.
- Management said it deliberately metered sales to align orders with delivery capacity and protect margins amid rising input costs. It also reported increasing spec homes to 45% of units under construction, from 28.1% a year earlier, to improve operating efficiency and reduce unmatched construction-cost risk.
- Backlog declined 13.0% to $866.6 million, or 1,423 homes (down 29.9% in units); average backlog price rose 24.1% to $609,000. Management cautions that backlog may not predict future revenue because contracts can be canceled.
- Land and lots revenue increased 67.9% to $29.0 million, principally because of a $27.0 million land sale. Lots revenue fell 76.8% as fewer lots closed, with a greater share developed for internal use.
Liquidity, debt, and cash flows
- Cash and cash equivalents were $66.1 million at quarter-end, down from $78.7 million at December 31, 2021; restricted cash was $14.2 million. Inventory rose to $1.33 billion from $1.20 billion, including a $123.4 million increase reflected in operating cash flows.
- Total debt, net of issuance costs, was approximately $369.6 million: $19.4 million net borrowings on credit lines, $335.5 million senior unsecured notes, and $14.7 million notes payable. Debt to total capitalization was 28.8%; net debt to total capitalization was 25.0%.
- The $300 million unsecured revolver had $22 million outstanding and matures December 14, 2024. The $35 million secured revolver had no borrowings and was extended to May 1, 2025. Senior notes carry fixed rates of 3.25%–4.00%, with maturities from 2026 to 2029.
- Operating cash outflow was $14.0 million, primarily reflecting inventory investment, partly offset by higher accrued expenses. Financing activities provided $1.1 million; the company had $20.0 million of net line-of-credit borrowings and repurchased $25.8 million of stock.
- Management said cash, available credit, and expected operating cash flows should be sufficient to service debt over the next 12 months. It targets debt to capitalization of approximately 30%–35% to support investment and growth. The company reported compliance with its debt covenants.
Outlook, risks, and notable items
The filing provides no specific earnings or revenue guidance. Management expected continued cost increases, skilled-labor constraints, material shortages, and longer delivery lead times. It also identified higher interest rates and inflation as risks to housing demand and buyer mortgage qualification. Management noted seasonal patterns: orders are typically strongest in spring and summer, while deliveries and cash receipts tend to be greater in the second half of the year.
- The board approved a new $100 million share repurchase program on April 27, 2022, after $25.8 million of repurchases in Q1 under the prior program. The new program has no stated end date.
- A February 2022 land acquisition involved a $14.4 million company obligation under a promissory note bearing 0.6% interest and maturing in 2024.
- At March 31, earnest money deposits of $26.5 million were at risk under contracts to purchase 3,905 lots, with an aggregate purchase price of approximately $264.8 million.
- The company reported no community impairment charges in either comparative quarter and said it did not identify selling communities with impairment indicators at March 31. It did not expect legal claims or related contingencies to materially adversely affect results, liquidity, or financial condition.
- The company’s 5.75% Series A cumulative perpetual preferred stock generated $0.7 million of Q1 dividends. A subsequent quarterly dividend was declared after quarter-end.
Important facts for investors to verify
- Whether lower orders and backlog, alongside sales metering, translate into lower future deliveries or revenue.
- Whether home-price realization and gross margins can withstand inflation in labor, materials, and other construction costs.
- Whether inventory growth, land investment, and repurchases remain supportable by operating cash generation and available liquidity.
- Debt balances, covenant compliance, and exposure to higher interest rates on floating-rate credit facilities.
- Terms and execution of the new $100 million repurchase authorization and the $264.8 million lot-purchase commitments.