Green Brick Partners, Inc. (NYSE:GRBK) kicked off 2024 with an impressive first quarter, showcasing the strength of its strategic positioning and operational execution. The company reported record-breaking financial and operational metrics, solidifying its position as a leading homebuilder in high-growth markets.

Financials

For the full year 2023, Green Brick Partners reported annual net income of $284.6 million, annual revenue of $1.78 billion, annual operating cash flow of $213.3 million, and annual free cash flow of $205.5 million. These robust financial results demonstrate the company's ability to consistently deliver value for its shareholders.

In the first quarter of 2024, Green Brick Partners continued to build on its momentum, reporting diluted earnings per share of $1.82, a new record for any first quarter in the company's history. The solid performance was driven by the company's superior locations in high-growth markets, strong demand for its new homes, its investment-grade balance sheet, and excellent execution by its hardworking teams.

Homebuilding Gross Margin Reaches New Heights

One of the standout achievements in the first quarter was Green Brick Partners' industry-leading homebuilding gross margin of 33.4%, which broke the previous record of 33.3% set in the third quarter of 2023. This impressive margin expansion was driven by the company's strategic focus on infill and infill-adjacent communities, where supply and competition are more limited, as well as its disciplined land underwriting and self-development strategy.

By primarily targeting infill and infill-adjacent submarkets, Green Brick Partners has been able to capitalize on the strong demand in these desirable locations, where existing home inventory remains near historical lows. Additionally, the company's self-development approach has allowed it to better control its lot costs and development timelines, mitigating some of the inflationary pressures faced by its peers.

Robust Demand and Backlog Growth

Despite the higher interest rate environment, Green Brick Partners experienced robust demand during the first quarter, selling 1,071 net new homes, the second-highest in company history. The company's cancellation rate for the quarter reached a new low of 4.1%, further demonstrating the strength of its customer base and the desirability of its communities.

As a result of the strong sales performance, Green Brick Partners' backlog value at the end of the first quarter increased 32% year-over-year and 31% sequentially to $725 million. The backlog ASP also increased 8.9% to $711,000, as the company's backlog was underweight its lower-priced Trophy homes, which operate primarily as a spec builder.

Business Overview

Diversified Homebuilding Brands and Expansion Initiatives

Green Brick Partners' diversified homebuilding brands, including its Trophy Signature Homes division, have allowed the company to cater to a wide range of homebuyer needs and price points. The company is particularly focused on growing its Trophy brand, both in its existing Dallas market and in the newer markets of Austin and Houston.

In Dallas-Fort Worth, Trophy owned and controlled almost 21,000 lots at the end of the first quarter, with approximately 16,000 of those home sites in longer-life communities and submarkets with long-term growth potential and more affordable prices. This strong land pipeline positions Trophy well to capture demand among first-time and first-time move-up buyers with its value-rich products.

In Austin, Green Brick Partners has further expanded its pipeline, with over 2,000 lots owned and controlled as of the end of the first quarter, nearly double the size from a year ago. The company is also actively seeking additional land opportunities in Houston, where it recently closed on a 460-lot acquisition, as it simultaneously looks to build a strong local team.

Liquidity

Disciplined Capital Allocation and Liquidity

Green Brick Partners' financial discipline and prudent capital allocation have been key drivers of its success. At the end of the first quarter, the company's net debt to total capital ratio stood at just 8.2%, one of the lowest among its public homebuilding peers. Additionally, 100% of the company's debt was fixed-rate at an average coupon of 3.4%, providing a significant advantage over highly leveraged peers that have recently issued debt at rates above 9%.

With $186 million in cash on hand and $360 million in undrawn amounts under its lines of credit, Green Brick Partners is well-positioned to continue investing in growth opportunities that align with its long-term strategic vision. The company's strong liquidity and balance sheet flexibility will allow it to capitalize on market conditions and further strengthen its competitive position.

Outlook

Looking ahead, Green Brick Partners remains bullish on the housing market, particularly in its high-growth markets, where it believes the demographic shifts and systemic housing shortage will continue to sustain a healthy demand environment. The company's strategic advantages, including its footprint in desirable infill and infill-adjacent submarkets, superior lot and land positions, unique operational structure, and strong balance sheet, position it well to capture pent-up demand and grow market share.

The company's focus on disciplined growth and creating shareholder value is evident in its capital allocation decisions. During the first quarter, Green Brick Partners completed over $3.7 million in stock repurchases, and the remaining dollar value of shares that may yet be purchased under the 2023 repurchase plan was approximately $99.7 million as of March 31, 2024.

Conclusion

Green Brick Partners' exceptional first quarter performance underscores the strength of its business model and the execution capabilities of its management team. The company's industry-leading gross margins, robust demand, and disciplined capital allocation have positioned it for continued growth and value creation.

As the housing market navigates the challenges of higher interest rates, Green Brick Partners' strategic focus on high-growth, supply-constrained markets and its unique operational advantages make it well-equipped to capitalize on the opportunities ahead. Investors should closely monitor the company's progress as it continues to execute on its long-term growth strategies and deliver superior returns.