Green Brick Partners Inc

Previous wording

During the first quarter of 2024, our strong operating results continued to be driven by our superior infill and infill-adjacent locations in high-growth markets, our reduced cycle times, and the strong demand for new homes in our markets. Our average active selling communities increased 17.5% while the average sales price of homes delivered decreased 8.6%, primarily as a result of closing out infill communities and opening new communities in surrounding infill-adjacent areas, with homebuilding gross margins improving from 27.6% to 33.4%.

Current wording

Our strong operating results continued to be driven by our superior infill and infill-adjacent locations in high-growth markets, our reduced cycle times, and the strong demand for new homes in our markets. Our average active selling communities increased 21.7% for the quarter while the average sales price of homes delivered decreased 4.4%, primarily as a result of closing out infill communities and opening new communities in surrounding infill-adjacent areas, with homebuilding gross margins improving from 31.3% to 34.5% for the quarter.

Previous wording

Backlog increased by 31.8% year-over-year, with a 21.0% increase in backlog units and 8.9% increase in the average price of backlog units. As of March 31, 2024, backlog increased 30.7% compared to December 31, 2023. Moreover, our spec units under construction as a percentage of total units under construction decreased from 69.8% as of December 31, 2023 to 60.5% as of March 31, 2024, and compared to 59.2% as of March 31, 2023.

Current wording

Backlog increased by 11.0% with a slight increase in backlog units and a 10.1% increase in the average sales price of backlog units. Moreover, our spec units under construction as a percentage of total units under construction declined from 69.8% as of December 31, 2023 to 65.1% as of June 30, 2024.

Previous wording

Our cancellation rate, which refers to sales contracts canceled divided by sales contracts executed during the relevant period, was 4.1% for the three months ended March 31, 2024, compared to 6.2% for the three months ended March 31, 2023.

Current wording

Our cancellation rate, which refers to sales contracts canceled divided by sales contracts executed during the relevant period, was 9.2% for the three months ended June 30, 2024, compared to 7.4% for the three months ended June 30, 2023. Our cancellation rate remained in a historically low range under 10.0% since December 31, 2022.

Previous wording

Residential units revenue decreased by $7.1 million or 1.6% for the three months ended March 31, 2024 mainly due to a reduction of the average sales price of homes delivered partially offset by an increase in homes delivered. Cost of residential units for the three months ended March 31, 2024 decreased by $30.8 million, or 9.4%, compared to the same period in the previous year due to a combination of lower direct construction costs and lower lot costs associated with the higher mix of deliveries from infill-adjacent communities.

Current wording

Residential units revenue increased by $92.7 million or 20.4% for the three months ended June 30, 2024 mainly due to a an increase in homes delivered of 26.1% partially offset by a decrease in the average sales price of homes delivered. Cost of residential units for the three months ended June 30, 2024 increased by $46.2 million, or 14.8%, compared to the same period in the previous year due to a combination of lower direct construction costs and lower lot costs associated with the higher mix of deliveries from infill-adjacent communities.

Previous wording

Residential units gross margin for the three months ended March 31, 2024 was 33.4%, compared to 27.6% for the three months ended March 31, 2023. The increase in residential units gross margin is attributable to product mix and limited competition in our infill and infill-adjacent community sites.

Current wording

Residential units gross margin for the three months ended June 30, 2024 increased 320 bps to 34.5%, from 31.3% for the three months ended June 30, 2023. The increase in residential units gross margin is attributable to product mix and limited competition in our infill and infill-adjacent community sites.

Previous wording

From time to time we will opportunistically sell finished lots to other homebuilders when we determine that we have excess capacity in specific neighborhoods or submarkets. Lots revenue increased by $2.4 million or 138.6% during the three months ended March 31, 2024, driven by a 250.0% increase in the number of lots closed partially offset by a 31.9% decrease in the average lot price.

Current wording

From time to time we will opportunistically sell finished lots to other homebuilders when we determine that we have excess capacity in specific neighborhoods or submarkets. Lots revenue decreased by $1.1 million or 57.2% during the three months ended June 30, 2024, driven by a 55.6% decrease in the number of lots closed. Land revenue represents sales of two tracts of commercial land during the three months ended June 30, 2024.

Previous wording

Selling, general and administrative expenses for the corporate, other and unallocated non-operating segment for the three months ended March 31, 2024 were $1.3 million, compared to income of $1.4 million for the three months ended March 31, 2023. The increase was driven by higher incentive compensation expense during the three months ended March 31, 2024. Corporate, other and unallocated expenses generally include capitalized overhead adjustments that are not allocated to builder operations segments.

Current wording

Selling, general and administrative expenses for the corporate, other and unallocated non-operating segment for the three months ended June 30, 2024 were $2.4 million, compared to $1.4 million for the three months ended June 30, 2023. Corporate, other and unallocated expenses generally include capitalized overhead adjustments that are not allocated to builder operations segments.

Previous wording

Income tax expense was $24.8 million for the three months ended March 31, 2024 compared to $19.0 million for the three months ended March 31, 2023. The increase was substantially due to higher taxable income.

Current wording

Income tax expense was $23.9 million for the three months ended June 30, 2024 compared to $23.1 million for the three months ended June 30, 2023. The increase was 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. See Note 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion on the Company’s income tax expense for the three months ended June 30, 2024.

Previous wording

The $7.1 million or 1.6% decrease in residential units revenue was primarily driven by an 8.6% decrease in the average sales price of homes delivered offset by a 7.9% increase in new homes delivered for the three months ended March 31, 2024. The increase in new homes delivered was primarily driven by increased levels of finished and finishing spec home inventory entering the quarter. The 8.6% decrease in the average sales price of homes delivered for the three months ended March 31, 2024 was a result of closing out infill communities and opening new communities in surrounding infill-adjacent areas.

Current wording

The $85.6 million increase in residential units revenue was driven by the 17.1% increase in new homes delivered partially offset by a 6.4% decrease in the average sales price of homes delivered for the six months ended June 30, 2024. The increase in new homes delivered was primarily driven by increased levels of active selling communities and home starts and an improvement in cycle times in the current year. The 6.4% decrease in the average sales price of homes delivered for the six months ended June 30, 2024 was a result of closing out infill communities and opening new communities in surrounding infill-adjacent areas.

Previous wording

Net new home orders remained flat year over year at 1,071, the second highest quarterly sales orders in company history. Our absorption rate per average active selling community remained robust at 11.4 per quarter (3.8 per month) despite higher interest rates. Moreover, our net new home orders increased 57.7% sequentially from Q4 2023 due to a 7.7% increase in our active selling communities and strong demand within our markets. The 2.8% decrease in revenue from net new home orders is primarily attributable to a higher mix of sales from newer, in-fill adjacent communities and fewer sales from closed-out, infill communities.

Current wording

Net new home orders increased 2.0% over the prior year period while our average active selling communities increased 19.5%. As a result, our absorption rate per average active selling community decreased 14.8% year over year, which was primarily due to the impact of increased mortgage rates, the metering of sales in certain infill communities, and what we believe is the return of pre-pandemic seasonality during the second quarter. The 3.1% decrease in revenue from net new home orders is primarily attributable to a higher mix of sales from newer, in-fill adjacent communities at lower average selling prices and fewer sales from closed-out, infill communities.

Previous wording

Selling, general and administrative expenses as a percentage of revenue for builder operations increased from 10.2% in the three months ended March 31, 2023 to 11.4% in the three months ended March 31, 2024 due to an increase in incentive compensation. Builder operations expenditures include salary expenses, sales commissions, and community costs such as advertising and marketing expenses, rent, professional fees, and non-capitalized property taxes.

Current wording

Selling, general and administrative expenses as a percentage of revenue for builder operations increased from 10.5% to 10.9% mainly due to an increase in salary expenses. Builder operations expenditures include salary expenses, sales commissions, and community costs such as advertising and marketing expenses, rent, professional fees, and non-capitalized property taxes.

Previous wording

Equity in income of unconsolidated entities decreased to $2.6 million, or 38.6%, for the three months ended March 31, 2024, compared to $4.2 million for the three months ended March 31, 2023. The decrease is mainly due to the sale of our ownership interest in GB Challenger during the three months ended March 31, 2024, wherein, we recognized only one month of net earnings from this investment compared to three months in the prior year. See Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of Green Brick’s share in net earnings by unconsolidated entity.

Current wording

Equity in income of unconsolidated entities decreased to $3.8 million, or 61.9%, for the six months ended June 30, 2024, compared to $9.9 million for the six months ended June 30, 2023. The decrease is mainly due to the sale of our ownership interest in Challenger during the three months ended March 31, 2024, wherein, we recognized only one month of net earnings from this investment compared to six months in the prior year. See Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of Green Brick’s share in net earnings by unconsolidated entity.

Previous wording

Other income, net, increased to $15.4 million for the three months ended March 31, 2024, compared to $4.3 million for the three months ended March 31, 2023. The increase was primarily due to a $10.7 million gain in the sale of our investment in GB Challenger.

Current wording

Other income, net, increased to $21.3 million for the six months ended June 30, 2024, compared to $9.1 million for the six months ended June 30, 2023. The increase was primarily due to a $10.7 million gain in the sale of our investment in Challenger.

Previous wording

The following table presents the lots we owned or controlled, including lot option contracts, as of March 31, 2024 and December 31, 2023. Owned lots are those for which we hold title, while controlled lots are lots past feasibility studies for which we do not hold title but have the contractual right to acquire title.

Current wording

The following table presents the lots we owned or controlled, including lot option contracts, as of June 30, 2024 and December 31, 2023. Owned lots are those for which we hold title, while controlled lots are those for which we have the contractual right to acquire title but we do not currently own.

Previous wording

The following table presents additional information on the lots we owned as of March 31, 2024 and December 31, 2023.

Current wording

The following table presents additional information on the lots we controlled as of June 30, 2024 and December 31, 2023:

Previous wording

As of March 31, 2024 and December 31, 2023, we had $185.9 million and $179.8 million of unrestricted cash and cash equivalents, respectively. Our historical cash management strategy includes redeploying net cash from the sale of home inventory to acquire and develop land and lots that represent opportunities to generate desired margins and returns, and using cash to make additional investments in business acquisitions, joint ventures, or other strategic activities.

Current wording

As of June 30, 2024 and December 31, 2023, we had $133.3 million and $179.8 million of unrestricted cash and cash equivalents, respectively. Our historical cash management strategy includes redeploying net cash from the sale of home inventory to acquire and develop land and lots that represent opportunities to generate desired margins and returns, and using cash to make additional investments in business acquisitions, joint ventures, or other strategic activities.

Previous wording

Our principal uses of capital for the three months ended March 31, 2024 were home construction, land purchases, land development, repayments of debt, operating expenses, and payment of routine liabilities. Historically, we have used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and remain poised for continued growth.

Current wording

Our principal uses of capital for the six months ended June 30, 2024 were home construction, land purchases, land development, repayments of debt, operating expenses, and payment of routine liabilities. Historically, we have used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and remain poised for continued growth.

Previous wording

Effective February 1, 2024, we sold our ownership interest in GB Challenger, LLC (“Challenger”) to the entity that already held the controlling interest in Challenger for approximately $64.0 million in cash. We intend to use the proceeds from the transaction for investment in and expansion of opportunities with those builders in which we hold a controlling or one-hundred percent (100%) ownership interest, particularly including the growth and expansion of our Trophy Signature Homes brand into the Austin and Houston markets and other potential new markets.

Current wording

Effective February 1, 2024, we sold our ownership interest in GB Challenger, LLC (“Challenger”) to the entity that already held the controlling interest in Challenger for approximately $64.0 million in cash. We have been using and intend to continue to use the proceeds from the transaction for investment in and expansion of opportunities with those builders in which we hold a controlling or one-hundred percent (100%) ownership interest, particularly including the growth and expansion of our Trophy Signature Homes brand into the Austin and Houston markets and other potential new markets.

Previous wording

Our debt to total capitalization ratio, which is calculated as the sum of borrowings on lines of credit, the senior unsecured notes, and notes payable, net of debt issuance costs (“total debt”), divided by the total capitalization, which equals the sum of Green Brick Partners, Inc. stockholders’ equity and total debt, was approximately 18.3% as of March 31, 2024.

Current wording

Our debt to total capitalization ratio, which is calculated as the sum of borrowings on lines of credit, the senior unsecured notes, and notes payable, net of debt issuance costs (“total debt”), divided by the total capitalization, which equals the sum of Green Brick Partners, Inc. stockholders’ equity and total debt, was approximately 17.7% as of June 30, 2024.

Previous wording

Additionally, as of March 31, 2024, our net debt to total capitalization ratio, which is a non-GAAP financial measure, remained low at 8.2%. It is our intent to prudently employ leverage to continue to invest in our land acquisition, development and homebuilding activities. We target a debt to total capitalization ratio of up to approximately 30%, which we expect will provide us with significant additional growth capital.

Current wording

Additionally, as of June 30, 2024, our net debt to total capitalization ratio, which is a non-GAAP financial measure, remained low at 10.9%. It is our intent to prudently employ leverage to continue to invest in our land acquisition, development and homebuilding activities.

Previous wording

Our key sources of liquidity were funds generated by operations and provided by borrowings during the three months ended March 31, 2024.

Current wording

The Company’s key sources of liquidity were funds generated by operations and borrowings during the six months ended June 30, 2024.

Previous wording

The following summarizes our primary sources and uses of cash during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023:

Current wording

The following summarizes our primary sources and uses of cash during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023:

Previous wording

•Operating activities. Net cash provided by operating activities for the three months ended March 31, 2024 was $1.0 million, compared to $154.7 million during the three months ended March 31, 2023. The net cash inflows for the three months ended March 31, 2024 were primarily driven by cash generated from business operations of $86.0 million and deferral of expense payments through a $17.8 million increase in accrued expenses, offset primarily by a $124.8 million increase in inventory.

Current wording

•Operating activities. Net cash provided by operating activities for the six months ended June 30, 2024 was $3.2 million, compared to $210.2 million during the six months ended June 30, 2023. The net cash outflows for the six months ended June 30, 2024 were primarily driven by an increase in inventory of $258.2 million, partially offset by $203.3 million of cash generated from business operations, increase in customer deposits of $6.2 million and the deferral of expense payments through a $43.3 million increase in accrued expenses and accounts payable.

Previous wording

•Investing activities. Net cash provided by investing activities for the three months ended March 31, 2024 was $61.3 million, compared to net cash used of $3.1 million for the three months ended March 31, 2023. The cash inflows for the three months ended March 31, 2024 were primarily from proceeds of $64.0 million from the sale of our interest in GB Challenger in February 2024, partially offset by $1.7 million used in other investments in unconsolidated entities.

Current wording

•Investing activities. Net cash provided by investing activities for the six months ended June 30, 2024 was $58.1 million, compared to net cash used of $7.8 million during the six months ended June 30, 2023. The cash inflows for the six months ended June 30, 2024 were primarily from proceeds of $64.0 million from the sale of our interest in Challenger in February 2024, partially offset by $3.5 million used in other investments in unconsolidated entities.

Previous wording

•Financing activities. Net cash used by financing activities for the three months ended March 31, 2024 was $51.3 million, compared to $49.2 million during the three months ended March 31, 2023. The cash outflows were primarily related to repayments of senior unsecured notes of $25.0 million and notes payable of $12.9 million.

Current wording

•Financing activities. Net cash used in financing activities for the six months ended June 30, 2024 was $102.6 million, compared to net cash used of $64.4 million during the six months ended June 30, 2023. The cash outflows were primarily related to share repurchases of $42.6 million, repayments of our senior unsecured notes of $25.0 million and notes payable of $12.9 million.

Previous wording

Secured Revolving Credit Facility – As of March 31, 2024 and December 31, 2023, we had no amounts outstanding under our $350.0 million Secured Revolving Credit Facility. Borrowings under the Secured Revolving Credit Facility bear interest at a floating rate per annum equal to the rate announced by Bank of America, N.A. as its “Prime Rate” less 0.25%, subject to a minimum rate. As amended, this credit agreement matures on May 1, 2025 and carries a minimum interest rate of 3.15%.

Current wording

Secured Revolving Credit Facility – As of June 30, 2024 and December 31, 2023, we had no amounts outstanding under our $35.0 million Secured Revolving Credit Facility. Borrowings under the Secured Revolving Credit Facility bear interest at a floating rate per annum equal to the rate announced by Bank of America, N.A. as its “Prime Rate” less 0.25%, subject to a minimum rate. As amended, this credit agreement matures on May 1, 2025 and carries a minimum interest rate of 3.15%.

Previous wording

Senior Unsecured Notes -As of March 31, 2024, we had four series of senior unsecured notes outstanding that were each issued pursuant to a note purchase agreement. The aggregate amount of senior unsecured notes outstanding was $311.3 million as of March 31, 2024 compared to $336.2 million as of December 31, 2023, net of issuance costs.

Current wording

Senior Unsecured Notes -As of June 30, 2024, we had four series of senior unsecured notes outstanding which were each issued pursuant to a note purchase agreement. The aggregate principal amount of senior unsecured notes outstanding was $311.4 million as of June 30, 2024 compared to $336.2 million as of December 31, 2023, net of issuance costs.

Previous wording

Optional prepayment is allowed with payment of a “make-whole” premium that fluctuates depending on market interest rates. Interest is payable quarterly in arrears.

Current wording

Optional prepayment is allowed with payment of a “make-whole” premium which fluctuates depending on market interest rates. Interest is payable quarterly in arrears.

Previous wording

•a minimum interest coverage (consolidated EBITDA to interest incurred) of no less than 2.0 to 1.0. As of March 31, 2024, our interest coverage on a last 12 months’ basis was 28.63 to 1.0;

Current wording

•a minimum interest coverage (consolidated EBITDA to interest incurred) of no less than 2.0 to 1.0. As of June 30, 2024, our interest coverage on a last 12 months’ basis was 31.09 to 1.0;

Previous wording

•a Consolidated Tangible Net Worth of no less than approximately $862.9 million. As of March 31, 2024, our Consolidated Tangible Net Worth was $1,382.3 million; and

Current wording

•a Consolidated Tangible Net Worth of no less than approximately $913.0 million. As of June 30, 2024, our Consolidated Tangible Net Worth was $1,433.0 million; and

Previous wording

•a maximum debt to total capitalization rolling average ratio of no more than 40.0%. As of March 31, 2024, we had a rolling average ratio of 20.0%.

Current wording

•a maximum debt to total capitalization rolling average ratio of no more than 40.0%. As of June 30, 2024, we had a rolling average ratio of 18.8%.

Previous wording

As of March 31, 2024 and December 31, 2023, was had 2,000,000 Depositary Shares issued and outstanding, each representing 1/1000 of a share of our 5.75% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”). We will pay cumulative cash dividends on our Series A Preferred Stock, when and as declared by the Board, at the rate of 5.75% of the $25,000 liquidation preference per share. Dividends payable quarterly in arrears. During the three months ended March 31, 2024 and 2023, we paid dividends of $0.7 million on our Series A Preferred Stock. On April 25, 2024, the Board declared a quarterly cash dividend of $0.359 per depositary share on our Series A Preferred Stock. The dividend is payable on June 15, 2024 to stockholders of record as of June 1, 2024.

Current wording

As of June 30, 2024 and December 31, 2023 we had 2,000,000 Depositary Shares issued and outstanding, each representing 1/1000 of a share of our 5.75% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”). We will pay cumulative cash dividends on the Series A Preferred Stock, when and as declared by the Board, at the rate of 5.75% of the $25,000 liquidation preference per share. Dividends will be payable quarterly in arrears. During the six months ended June 30, 2024, we paid dividends of $1.4 million on the Series A Preferred Stock. On July 22, 2024, the Board declared a quarterly cash dividend of $0.359 per depositary share on the Series A Preferred Stock. The dividend is payable on September 15, 2024 to stockholders of record as of September 1, 2024.

Previous wording

As of March 31, 2024, we had earnest money deposits of $12.8 million at risk associated with contracts to purchase 2,084 lots past feasibility studies with an aggregate purchase price of approximately $146.1 million.

Current wording

As of June 30, 2024, the Company had earnest money deposits of $11.4 million at risk associated with contracts to purchase raw land and finished lots representing 2,943 total lots past feasibility studies with an aggregate purchase price of approximately $168.8 million.

Previous wording

The homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in spring and summer, although this activity is highly dependent on the number of active selling communities, timing of new community openings, interest rates and other market factors. Since it typically takes five to nine months to construct a new home, we normally deliver more homes in the second half of the year as spring and summer home orders are delivered. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries typically occur during the second half of the year.

Current wording

The homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in spring and summer, although this activity is highly dependent on the number of active selling communities, timing of new community openings, interest rates and other market factors. Since it typically takes five to nine months to construct a new home, we normally deliver more homes in the second half of the year as spring and summer home orders are delivered. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occur typically during the second half of the year.

Previous wording

See Note 1 in the Notes to the Condensed Consolidated Financial Statement included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recent accounting pronouncements.

Current wording

See Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recent accounting pronouncements.