Green Brick Partners delivered a company-record 2,916 homes for 2022, driving 25.3% year-over-year growth in total revenue to $1.76 billion. As a result, the company reported an annual gross margin of 29.8% and a return on equity of 31.4%.
CEO and co-founder Jim Brickman said the company delivered 727 homes to help achieve a record fourth quarter home closing revenue of $429 million. Green Brick Partners also delivered a record level of fourth quarter gross profit at $112 million.
Chief financial officer Richard Costello said the revenue boost in the quarter was driven by a 16% increase in the average selling price of closed homes, offset by a 12% decline in the number of closings.
Despite the strong year, Brickman said demand was negatively impacted by interest rates and inflation during the second half of the year. As a result, net new-home orders in the fourth quarter decreased 11.1% year over year to 423. However, he noted sales began to regain momentum since the end of November, with December sales up 43% compared with the average of the past six months.
“Sales activity in the first two months of 2023 continued to be very strong,” Brickman said on the company’s fourth quarter earnings call. “We believe our sales success is based upon our geographic footprint with desirable lots in supply-constrained locations such as Dallas, Atlanta, and Florida. These markets have some of the strongest demographic tailwinds and job growth in the country.”
Cancellations, Incentives, and Spec Homes
Green Brick Partners reported a cancellation rate of 20%, up from the third quarter. However, Costello noted the cancellation rate decreased sequentially in each month of the fourth quarter. For the full year, the company’s cancellation rate was 14%, much lower than many industry peers, according to Costello.
Jed Dolson, chief operating officer and executive vice president, said discounts and incentives for new net orders during the fourth quarter were approximately 7.5% on average, a sequential increase from 4.2% in the third quarter.
The company sequentially started 38% fewer homes in the fourth quarter and said it will continue to align starts to match sales pace on a community-by-community basis, according to Dolson. Spec units under construction as a percentage of total units under construction was 73% at the end of the fourth quarter, according to Costello.
Advantageous Land Locations
Dolson said the company made no new land acquisitions during the fourth quarter, and Green Brick Partners renegotiated terms on a number of lot purchase contracts. During the call, Brickman highlighted how 80% of the company’s closing revenues and 75% of finished lots are located in infill locations.
“There is already a scarcity of land in those communities, which translates to fewer new-home competitors,” Brickman said. “With a much lower percentage of existing home owners selling, Green Brick faces far less competition than prior to the pandemic, when new-home sales were only about 10% to 12% of total homes.”
Green Brick Partners is a diversified home building and land development company that operates in Texas, Georgia, and Florida and has a noncontrolling interest in a Colorado home builder, Challenger Homes. The company owns five subsidiary home builders in Texas—CB JENI Homes, Normandy Homes, Southgate Homes, Trophy Signature Homes, and a 90% interest in Centre Living Homes— as well as a controlling interest in The Providence Group in Atlanta and an 80% interest in GHO Homes in Port St. Lucie, Florida.
