Green Brick Partners, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2021. Green Brick is a homebuilder and land developer operating primarily in Central and Southeast markets. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions where appropriate.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $342.3M | $275.8M | $950.6M | $721.9M |
| Gross profit | $91.3M | $67.9M | $251.3M | $170.8M |
| Net income attributable to Green Brick | $48.5M | $34.8M | $126.7M | $84.4M |
| Diluted EPS | $0.95 | $0.68 | $2.48 | $1.66 |
| Residential units gross margin | 26.9% | 24.8% | 26.5% | 23.8% |
- Q3 revenue increased 24.1% year over year; nine-month revenue increased 31.7%. Q3 residential units revenue rose 28.4%, while land and lots revenue fell 71.2%.
- Q3 deliveries were 738 homes, up 18.6%; nine-month deliveries were 2,011, up 23.9%. Average delivered home price rose 8.6% in Q3 and 5.5% year to date.
- SG&A was $33.7M in Q3 and $97.2M for nine months. Management attributed lower SG&A as a share of revenue to operating leverage.
- Equity-method income was $5.6M in Q3 and $14.0M for nine months. Nine-month other income was $6.2M, compared with $3.0M, including increased title and settlement activity and prior-year COVID-related option-cost allowances.
Cash flow, balance sheet and debt
- Nine-month operating cash flow was negative $114.5M, versus positive $64.1M in 2020. The primary use was a $325.1M increase in inventory; higher accrued expenses and customer deposits partly offset the outflow.
- Investing cash outflow was $1.8M; financing cash inflow was $135.7M, primarily reflecting $125.0M of senior-note issuance and net line-of-credit borrowings. Cash and restricted cash totaled $53.0M at September 30, including $21.6M unrestricted cash and $31.4M restricted cash.
- Inventory was $1,170.3M, up from $844.6M at year-end 2020. Total assets were $1,347.3M; stockholders’ equity attributable to Green Brick was $766.8M.
- Debt, net of issuance costs, comprised $122.7M of line-of-credit borrowings, $235.7M of senior unsecured notes and $0.2M of notes payable. Debt to total capitalization was 31.9%; net debt to total capitalization was 30.5% (non-GAAP).
- The company reported compliance with debt covenants, including 18.07x trailing interest coverage and a 31.7% rolling-average debt-to-capitalization ratio against a 40% maximum. Management said cash, credit availability and expected operating cash flows should be sufficient to service debt over the next 12 months.
Operating changes and outlook
- Q3 net new home orders declined 16.3% to 689; the nine-month total increased 16.6% to 2,375. The Q3 cancellation rate improved to 6.9% from 11.7%; nine-month rate was 6.7% versus 14.7%.
- Quarter-end backlog was $1,017.2M, up 83.9%, representing 1,827 homes, up 52.3%. Average backlog price increased 20.8% to $556,800. Management cautioned that backlog may not predict future revenue because contracts can be canceled.
- Management said it deliberately metered sales—limiting sales per community and withholding homes—to align orders with delivery capacity and build spec inventory amid strong demand and rising input costs.
- Management cited COVID-era demand, low interest rates, first-time buyers and suburban demand as supportive factors. It also expected continued labor cost increases and reduced skilled-labor availability, along with material cost increases, shortages and extended delivery lead times.
- No specific earnings or revenue guidance was provided. The company targets a debt-to-capitalization ratio of approximately 30%–35% and stated its intention to use prudent leverage to fund land acquisition, development and homebuilding.
Risks, contingencies and notable items
- Principal risks include material and labor shortages or cost inflation, interest-rate and mortgage-financing changes, housing demand and cancellations, land acquisition and entitlement challenges, weather, inventory impairment, and access to capital and debt service.
- Earnest money deposits of $24.0M were at risk on contracts for 5,865 lots with an aggregate purchase price of approximately $319.1M. The company generally may terminate land purchase or option contracts by forfeiting deposits.
- Letters of credit and performance bonds outstanding totaled $3.8M; management did not expect material claims. The filing describes routine legal and regulatory matters and states their disposition is not expected to materially adversely affect results, liquidity or financial condition.
- Prior-year nine-month income tax expense benefited from $6.7M of federal energy-efficient-home tax credits; this contributed to the year-over-year increase in 2021 tax expense alongside higher taxable income. No inventory impairment was recorded in 2021.
Important facts for investors to verify
- Whether higher home prices and improved residential margins can persist as labor, materials and other input costs rise.
- Whether the large backlog converts to closings on schedule, given delivery capacity, contract cancellations and financing conditions.
- How inventory investment and land acquisition affect operating cash flow, liquidity and leverage in subsequent quarters.
- Current unused borrowing capacity and upcoming facility maturities, including the secured facility’s May 2022 maturity and revolving commitments extending into 2022–2023.
- Whether demand, orders and margins remain resilient if interest rates rise or housing affordability weakens.