Green Brick Partners, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with FY2021. This is an annual filing, not a standalone fourth-quarter report. Green Brick develops land and builds homes through brands operating mainly in Texas, Georgia, and Florida, with an unconsolidated investment in Colorado. It reported approximately 25,527 owned or controlled lots.
Financial and operating performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total revenue | $1,757.8 million | $1,402.9 million | +25.3% |
| Residential units revenue | $1,704.0 million | $1,309.7 million | +30.1% |
| Homes delivered | 2,916 | 2,834 | +2.9% |
| Average delivered home price | $581,900 | $460,700 | +26.3% |
| Total gross profit | $523.0 million | $362.1 million | +44.5% |
| Net income attributable to Green Brick | $291.9 million | $190.2 million | +53.5% |
| Diluted earnings per share | $6.02 | $3.72 | +61.8% |
| Cash from operating activities | $90.7 million provided | $92.4 million used | Improved |
Margins: Residential units gross margin expanded to 29.8% from 26.4%, as home price increases outpaced cost increases. Total gross margin was approximately 29.7% of revenue. Net income attributable to Green Brick was approximately 16.6% of revenue, compared with 13.6% in FY2021.
Liquidity and debt: Year-end unrestricted cash was $76.6 million, with $16.7 million of restricted cash. Debt, net of issuance costs, totaled approximately $367.8 million, including $335.8 million of senior unsecured notes, $17.4 million of revolving-credit borrowings, and $14.6 million of notes payable. Debt to total capitalization was 25.7%; net debt to total capitalization was 21.5%. Management said cash, available credit capacity, and expected operating cash flows would be sufficient for the next 12 months. The company was in compliance with debt covenants.
Other metrics: Inventory rose to $1,422.7 million from $1,203.7 million. The company recorded a $6.0 million impairment on land held for future development. Income tax expense was $82.5 million, with a 20.8% effective rate. Equity-method income increased to $25.6 million from $19.7 million.
Material changes versus FY2021
- Net new home orders fell 30.8% to 1,973; the cancellation rate rose to 13.8% from 7.7%, and absorption declined 20.7%.
- Year-end backlog fell 57.6% in value to $369.1 million and 63.7% in units to 537. Management attributed the decline to weaker orders, increased cancellations, and buyers’ preference for near-completion inventory homes.
- Land and lots revenue declined 42.2% to $53.8 million, including lower land sales and fewer lot closings.
- Operating cash flow moved from a $92.4 million use to a $90.7 million source, despite a $217.6 million cash investment in inventory.
- Financing activities used $84.5 million, primarily reflecting $101.5 million of share repurchases; the company repurchased and retired approximately 4.8 million shares.
Outlook, commentary, and risks
Management emphasized its land position, disciplined underwriting, and growth in its core markets, and continued its Trophy Signature Homes expansion into Austin, begun in February 2022. The filing gives no specific numerical earnings or revenue guidance. Management noted that backlog was expected to deliver mainly during 2023, subject to cancellations.
The company cited rapidly rising mortgage rates, inflation’s impact on buyer purchasing power, lower traffic, and weaker consumer confidence as headwinds. It also reported construction-material delays, reduced skilled-labor availability, and input-cost increases. Key risks include housing-market cyclicality, affordability and mortgage availability, cancellations, land and inventory impairment, subcontractor and material constraints, geographic concentration, weather and regulatory exposure, and execution of expansion plans.
Unusual or notable items include the $6.0 million inventory impairment, $101.5 million of stock repurchases, and a limited $2.0 million guarantee related to an unconsolidated joint venture; no liability was recorded for the guarantee. Ordinary-course litigation was disclosed, with management stating it did not expect a material adverse effect. The auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Whether 2023 deliveries and earnings can be sustained as backlog and net orders declined sharply and cancellations increased.
- Whether home prices and gross margins can hold up against affordability pressures, incentives, and construction-cost changes.
- Inventory quality and assumptions underlying the $6.0 million impairment assessment, given $1.42 billion of inventory and the auditor’s critical audit matter on inventory impairment.
- Liquidity, available borrowing capacity, covenant headroom, and scheduled debt principal payments, including maturities beginning in 2024.
- Cash deployment after $101.5 million of repurchases, remaining authorization under the repurchase plan, and the absence of anticipated common-stock dividends.
- Exposure from land-option deposits, performance bonds and letters of credit, joint ventures, and the $2.0 million guarantee.