Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Green Brick Partners Inc (GRBK, Financial) achieved its best third quarter in company history with 956 new home closings and a 26% year-over-year increase in home closings revenue to $523 million.
- The company has maintained industry-leading gross margins, with a year-to-date home building gross margin of 33.6%, up 290 basis points from the previous year.
- Green Brick Partners Inc (GRBK) has a strong financial position with a net debt to total capital ratio of 12.5% and a total debt to total capital ratio of 16.4%, with a weighted average interest rate of 3.4%.
- The company has a robust land strategy, owning and controlling over 37,000 lots, which positions it well for future growth and provides a five-year lot supply for its builders.
- Green Brick Partners Inc (GRBK) reported a 23.5% increase in net income to $89 million and a 26.9% increase in earnings per share to $1.98, setting a record for any third quarter in its history.
Negative Points
- The average selling price (ASP) for new home orders decreased by 9.8% year over year to $518,000, due to a shift in community mix and a higher percentage of sales from the lower ASP Trophy brand.
- Home building gross margins decreased by 60 basis points year over year to 32.7% in the third quarter, partly due to increased incentives and discounts.
- The backlog value at the end of the third quarter decreased by 6.5% year over year to $582 million.
- The company faces challenges in the current economic environment, with limited demand due to buyer psychology and affordability concerns.
- Green Brick Partners Inc (GRBK) anticipates potential borrowing on its lines of credit due to significant land acquisition and development spending, which may impact its cash flow.
Q & A Highlights
Q: Jim, can you discuss community count growth into '25 and SG&A leverage?
A: (James Brickman, CEO) Community count growth is tied to our spec-heavy model, where starts and sales are closely aligned. Larger trophy communities will have greater sales paces. (Richard Costello, CFO) SG&A is expected to remain constant, with potential benefits from top-line growth.
Q: How does entering the northern part of Austin fit with Green Brick's infill strategy?
A: (James Brickman, CEO) Our entry into Austin, particularly Georgetown, aligns with our infill strategy. It's a desirable location, and many builders view it as an A+ location. We aim to find more opportunities like this despite the competitive land market.
Q: Can you provide insights on October's trends with rising rates?
A: (James Brickman, CEO) Business remains good, but we avoid giving monthly data to prevent setting a precedent. We remain optimistic about our performance.
Q: How does the starts pace relate to delivery volume as business mix shifts?
A: (Richard Costello, CFO) The relationship remains 2 to 3 quarters out from starts pace. Cycle times have improved, and we aim to maintain around 1,000 starts per quarter, adjusting for demand elasticity and incentives.
Q: What levels of pricing adjustments are being made to move homes?
A: (Jed Dolson, COO) We focus on incentives rather than base pricing adjustments. Incentives have averaged around 6% over the past few months, reflecting market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
