GRBK - Earnings call transcript Q2 2019 | Green Brick Partners, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and welcome to Green Brick Partners Earnings Call for the Second Quarter Ended June 30, 2019.

Following today's remarks, we will hold a question-and-answer session.

As a reminder, this call is being recorded and will be available for playback. A slideshow supporting today's presentation is available on the Green Brick Partners website, www.greenbrickpartners.com. Go to Investors & Governance, then click on the option that says Reporting, and then scroll down the page until you see the Second Quarter Investor Call Presentation.

States that statements conference the within provisions the you make it Safe reminds Reform of forward-looking Litigation various the United Company during XXXX. call, this will Harbor Act The of Securities Private meaning of such aspects subject Investors other on respect to prospects the current are to based business uncertainties. of expectations statements revenues, are forward-looking with are performance, risks earnings, and cautioned strategies, Partners and that of and Green Brick

to forward-looking with could differ such press factors actual most in on cause X, the annual released indicated read or outcomes Thursday, quarterly the was Commission. from few Securities by Company's and materially recent and A risk forward-looking the the results those Exchange cautionary statements Company's Please and described statements. factors which the filings August statement release, regarding contained in

no to invested financial any during be Brick to net a attributable income this Green margin, average as pre-tax and percentage total income gross of income Today, as non-GAAP EBITDA, revenues, statements made which referring the adjusted call. measures. duty undertakes average Company will equity a percentage on Green that homebuilding pre-tax are are return of capital, Partners update Brick to forward-looking

Green Brick that gross are reconciliation attributable release reconciliation to of pre-tax both gross to adjusted earnings margin net contained yesterday. the Green Green adjusted The Brick of margin homebuilding attributable income income homebuilding in to and the issued Brick to

Brickman. now go call to ahead would over Green Brick's I to Please CEO, Jim turn like conference the sir.

Jim Brickman

our Region. the is Thank our President Texas our Jed call. me and Costello, Dolson, With everybody. Rick Hi you for joining of CFO

click everybody the call our greenbrickpartners.com. the presentation can on to second this a investor scroll the the call says webpage quarter and then page that investors be this then accompanies I'll you'll down At found seconds our presentation. webpage on reporting and get As done. of on give governance, the see click the option and operator mentioned, at few top that

quarter with the of Starting off backlog call, $X.XX, of earnings $XXX we residential of revenue a $XXX tying record record and record million great second a million. had unit

Our from quarter the increased of margin in points first the XXXX XXXX. adjusted of gross XXX to XX.X% XX.X% second quarter in home building basis

growth positively basis. in of We expect earnings starting year-over-year third XXXX quarter inflect to the a on

Due to beyond. XX significantly this will we for XX to communities grow Signatures expect which brand, to over is entry end on XX% of company net XXXX controls to communities great a with XXXX very earnings continue depending accomplished on progress XXXX now This while growth our Trophy XXXX. Further, by from as only capital of June of that the to total level expect either platform we sheet XX.X% home the this January and of X,XXX X, quarter XX, to we Home being debt maintaining weather. the conservative balance or year sites contribute with first community

are Dallas X. Slide markets and the Two markets Atlanta. to core country move the in Please of best of

largest the Dallas of last continued in markets to generating of the be XX months, growth. Atlanta two job During and terms

market. part that starts. XX,XXX our Dallas adding nation largest Home market Atlanta the Springs is you fifth in market the X, and continues operates of Slide housing sixth On the be affiliate see new one about Colorado in can the number to Challenger largest

the States in in these United each to in three of the giving X% for markets the of largest a markets. one growth significant opportunity are We of X% starts

the infrastructure they in sub Burns we by what and for submarkets of have most grades affordable as metropolitan mean proximity has Atlanta Real quality Estate Dallas A-rated jobs, of demonstrates existence as Slide life. variety markets. subjective maps of of factors a of F-market X in desirable where quality an published Consultant through John of on schools, our areas designated most A-market such the and placed the

Green green of those overlaid locations the communities Brick and with have dots. maps We taken our

A-lots As rated desirable lots What how see, the you did submarkets. tell these prior the in still can the graph is not preponderance prime very best communities you is our and are. A-locations supply of in constrained most or

X,XXX or in new the Brick almost lots Atlanta, owns and Green our Signature homebuyers. in controls Dallas Metroplex over A-locations, for builder in and lots primarily first-time X,XXX Trophy X,XXX and the Homes lots these over entry-level of

that X have Slide communities see XX As development. you'll shows, the under we bottom of also

at year either to XX% by to As the the that by of grow count quarter opening, XXXX. we continue I first mentioned the or end community communities XX expect we of will

takes land with and Slide total the see direct in and at at look growth of investment between story you look closer and land our controlled resulting our can related the X and chart revenue and lots a A revenues. correlation in the growth annual owned development. annual growth

and XX%. Over by our grown lots and our the controlled total last owned months, XX% XX revenues by we've

entire work Brick the for thank and their to want great hard Green quarter. second in results I team

Dolson, and Next diversification growth discuss Jed? will Jed our our efforts. Region of Texas our drivers the President

Jed Dolson

best that of Thanks the of more public Drivers. but impressive revenues XXXX space. the chart growth the titled Brick a from homebuilder future. for QX XX-month two-year stories truly Jim. shows QX is over even XXXX Take Green XX% look last is The our the period, at to X in Growth one growth setup of the is Slide in total

backlog grew June the as a both $XXX existence. in last to for XXXX was XX, of any our of our backlog our XXX% and a record million doubling years, two which quarter XXXX Over

communities We our total XX%. months, we number by selling XX lots by owned During these of the XX%. grew and controlled increased also last

increase June on units We months started months focus number the XX% an the X,XXX our let's with XXXX, June to of units XX, XX increased just XXXX. Now started. ending XX by XX, versus ended

an have over QX starting QX we units XXX quarter from through of fact, of XXXX. per In average XXXX of

sorry. under XX, units -- of June XXXX, X,XXX As we have

backlog, dynamic growth. has further sustain inventory starts, units a the Brick Green of lot the construction level to the and construction So under

Slide to land planning, diversification the we our acquisition From townhome our XXXX and of development. we highlight of increased product offerings. years significantly On communities, focus on XX, thanks

in fact, we've the months this single-family XX, by the XX over a months of maintain In A while growth high-quality XX highlighted June XX revenues targeted last the the to a a last our XXXX $XXX helped offering of at Over townhome is robust with XX, age months. period product. million June GHO's revenues from XX% XXXX affordability XX% us affordable more in grown ASP this lower product. has

in by last two the average X.X% Over total. only sales price has risen years, our

our earnings growth by not mix provided of on segments stable that Slide We revenues and all XX any range diversified of our visually grown five demonstrates homebuyer QX homebuyer XXXX. have experienced concentrated segment. revenue into homes consumer one strong which distinct and have now

year see target of can the last You segments the versus pie the easily this of page. chart the on sizes right in various side time. more even The at the

has homebuyers. sales and diversify longer-term risk back XX% year-over-year move our in And Slide are an of mix. reliance Our on you X, product constantly limit of prices are growing desirable a offerings or please target to what to balancing group our most consumer part types important and growth of without single been include additional and saw The strategy Green diversification remember, our of consumer on Brick's communities A-submarkets. located different segments

more our Next will quarter results discuss detail. in our second CFO Rick Costello,

Rick Costello

Thanks Jed.

everybody, issue our was that was First with an there website. I notified

reports. you’re hit and and the under Governance will page our you the Reporting If call about folks I'll and minute the second to Investors on our page that relying down on website. refresh you if filings SEC investor you a website to way presentation see do and quarter go half give

review you joining Thank quarter XXXX us for our financial today second to results.

world of We're established about excited relationship and announce really to let's results, financial debt. that a review Before yesterday closing future one long-term Slide growth. with moving most the reputable to help the we've our in XX institutions fund of to largest first the our

X, million August issued of a yesterday, On in Capital notes Prudential senior with unsecured we placement. Private private $XX

us all cap can than by a cost lower longer builders rate have credit is peers This Our cap attractive you by lines. leverage small notes fixed [NVR term of a rates rates all on slightly than maturities small paid the seven-year to at and metrics allowed in like more Horton] cap long-term than superior long-term large basis stack as higher our the high to the in X.XX%. price VR And rate only and paid builders. see cap at revolving incurred provided, table mid provided credit

to So pretty capital, cost and have cost instead exciting of reduced we our paying higher stuff. of overall therefore our rates, borrowing

to going now to highlights. move I'm financial the it

to please XX. So Slide move

quarter closing XXXX metrics. and For some Net comparisons, key by of XX% of for and for X% XX% increased revenues by the by with revenues for orders increased year-to-date new XX%, increased the closing XXXX with year-to-date. and QX growth. here the operational high-level XX% fantastic are QX of year-to-date versus XX.X% by have home up deliveries up home home by for Home deliveries quarter

under also with The for of homes to earnings $X.XX year-over-year year-over-year our up had positively of any as in our Jim year XX-month a record QX any construction year units growth we and that by the on before, a value Year-over-year a second inflate quarter on our EPS we QX, are toughest XX%. our comp quarter last by to that's dollar of X% started up backlog homes for tied and expect a XXXX, $X.XX basis increased and record a XX% of of mentioned and years. during level basis. and starting was this record

absorption to second X% of XXXX QX, in net to our homes, by than than an of than have an versus XXX compared XX% orders selling on details, greater saw pace of XXX. for was home absorption the grown for per but the absorption active basis net year increase rapid QX and new X.X% the year-to-date XXXX, the XXXX, quarter, so lower QX per the XXXX. community for prior in large XXXX to XX.X% improvement of second quarter Now orders We of XXX with number a sell home community XX.X% just more from relative new greater XXXX,

XXXX. delivered of quarter more the homes for XXX quarter Green the XX% second Brick than of

Brick For year-to-date of XXXX over grew of $XXX Residential increase delivered the an XXXX. XX% over a the were year. Year-to-date quarters XX% homes, quarter, increase first to for XXX units million, of residential versus the XXXX. units XXXX up revenue revenue $XXX million over second last two Green quarter XX%

$XXX,XXX decline the down year-to-date level record homes mix. about was of delivered backlog XX, is homes X% X% the XXXX with of XXX,XXX, a for an approximately of XXXX, average backlog Most backlog. a is price year. segment value of prior quarter a sales of XXX operation sale XX, QX year-to-date just XXXX. of June to $XXX,XXX and for At and of builder was June average increased both increase function total had our million, June in The from the At sold, Again XXXX. the this approximately X% a but an unclosed of XX, $XXX price compared the

XX Now introduce key and on last review let's metrics our some months basis. growth of the

Regarding XX sales, of homes, from after new the X,XXX stand last XXXX. months at orders up the net XX% for end QX of homes X,XXX

the units XX, basis. period closed the this up on revenues last XX% a therefore for and XX% units up total X,XXX, months XX residential Regarding XX-month over ended XXXX months closing, June from are XX last

Green XX an Brick XXXX, selling active QX, XX%. a For increase communities, of year-over-year average of had

XX almost months. X,XXX homes ago of from construction. of lots of accomplished XX% as XX, last the as that's in an XX% controlled the started XX% XXX And of has June number as lots, of In XX, of XXXX, homes we middle to increase homes just starting up year from increase was for of XX, an of compared homes homes and this X,XXX this lots the XX%. lots under XX up months, construction despite about under to year. again under versus last in grown homes owned X,XXX the inventory, Regarding XXXX Homes X,XXX the as X,XXX increased X,XXX June June to period

of second to to During QX, incentives customers pace. QX from in due decline and for promote XXXX declined of that customers. increased homebuilding is margin to XXX of quarter margin But to gross importantly, our a XXXX XX.X% QX QX XXXX this sales incentives of to points XXXX adjusted of attributable primarily basis sales those to sales XX.X% adjusted from improved the from level sequentially improvement

our prior and allocated income From to of in QX reiterated decrease partners, to as XXXX, NCI. builder critical Again, QX of controlling our to in income XXXX it's corresponding the our understand non-controlling declined. non calls,

declined effect declined year-to-date. in by X.X% this So and also expense X.X%

builder. Our our profits income to business capital by sharing high builders model of earns return in incentivize each was Green and after invested established lot on a our rate Brick

impacts which extent the shares builder profitability our in XX%. is operating margin bottom the the the bottom there operating that at margin decline typically operating waterfall line to line of their When interest builders margin compression of compression, last one of in

So with demonstrated our business as model is strong these working results.

XX, our into peers. which well left expenses. consideration two move Slide the income takes as performance critical Now demonstrates operating with pre-tax begins chart of to measures building Pre-tax as our measured on as margins against income The performance.

As can XX margin as income at This pre-tax our or and months. above last of stands puts you see, our the percentage for pre-tax a us mid cap peers. revenues XX.X% small cap far

A second income comfortably return shoulders last on and of peers map cap return the measure for above in XX based our ROIC performance higher our stands small pre-tax months of our than peers. is head as capital. pre-tax on mid XX.X% Again, invested and reflected

line. is the important most Of course, bottom

on QX of months ended that which with mid-cap which for is rest at stands XXXX and line June in of translates return XX.X% XX, per small-cap of for Slide from considered a EPS XXXX Our share that into the flat QX We've XX story. peers. equity XX for our $X.XX the

our As [indiscernible] shown our net lowest the debt on equity to able our the revolving public slide, long-term one it's except financial credit accomplish grow despite shown of We've going be through keeping ratios on that chart. capital. lower or has any of of builder return been increasing been also capital on cost to through now while rapidly and leverage to lines low-cost

an is the our cap cap debt the wrong XX%, that of slide a XX, increased capital small has closely net on we've have shows look mid gradual that of you builders are other left to slide As debt leverage XX.X%. where to and average that side more if of but seven point ratio, the all slide side Note the cash the of or builders. net XXXX increase June the minus peer builders to debt continued where to

for debt net their average an ranges XX%. from ratios of Now, capital to to XX% XX%

the accomplishing than XX% we does levers equity almost on that Brick. a So, at they return similar are are financial with same return equity but Green on more

XXXX. in Now, one XX account see construction in community a corresponding should in our which been annual implication up active as we've selling coming communities. in increase final building expected is note with on starting that revenues to about The we talking begin toward market increase increase something starts QX we another

call up call who to now Q&A. I'll part things prior up turn this opening back to Jim, for the wrap will of the

Jim Brickman

of Well, Rick. our a thanks quarter, did largest job second we to and backlog history. of the Okay, price builders team generate had the wonderful great income in a quarter Brick's managing pace versus net best Green

Unlike its accelerating. I'm most to able tell peers,

end growth a grow XX, a XX.X%. by just will communities this the to XX or is sheet of communities or first from as the capital quarter accomplished to being January XXXX. community net conservative of XX% XXXX balance We at the only is XX maintaining debt while And year discussed Rick very

also leverage. we sheet banking do do peers land that's disguised mention many which kind didn’t that any One Rick is of other don’t balance metric off

largest discussed, a equipment a loan million new we with superior our entire with of As $XX credential. growth term senior X%, brings

builders. our is in most This and utilize at house all advantage huge low history. Operationally, cost by standardization also capital our our have of peers. We our homes of under the of improved operating a construction we now benefits the are margins systems seeing over

with now risk. has great mortgage business title rapidly Our our profitability scaled business to little and are where expanding and

our for want significant Green replicate their Homes a and story that hard to move other off markets. a level the we thank entire start part entry should great expect great growth time work results. to value to Our Brick in I Trophy builder first of and Signature team earnings of be is

the I'll now the call Operator? to operator. turn back

Operator

Instructions] of [Operator question the comes first Your line Rehaut from Michael with JPMorgan.

Your is open. line

Unidentified Analyst

is Maggie this for on Mike. Hi,

next first account I first quarter The the the the community to guidance you of question of year. have reiterated by your end XX is get year, end expectation that to the the on of

think of quarters. happen we down to this nearly said expected kind bit account I that you to have but be actually quarter community little recent a growth saw you that last sit

the next more three growth you two kind quarters? of So, expecting jump a it a be quarter piece expecting or consistent are or are of of to in the third you across

Jim Brickman

Jim Jed is in. This Brickman, chime can

hope demanding a be opening and unless into we challenges difficult expected in of it's closing was to are linear you manner because linear will one communities get We approach of very cities the and we try right now but community understaffed. that acceptance

as to hope cooperate as the is it the as cities possible. make linear with We weather. as plan us our well So,

add to Jed? anything that, have You to

Jed Dolson

linear. be will it No.

Jim Brickman

Okay.

Unidentified Analyst

but sequentially. offset And so on Okay. as that were said the up down year-on-year they you they second, were incentives,

So, quantify their when incentives homes last at And us. for that then, too. that were you I could also the was have wondering if quarter were ordered highest

through should already Have quarter? P&L hit those expect to we in continue third those or your the flowing

Rick Costello

But we $XX,XXX margins. or is you but in the $XX,XXX, its the reflected gross can talking incentives about don’t margins, that in see $XX,XXX we think it number whatever provide whether

improvement, we're We in we seen significantly, encouraged gross see inventory markets that. clearing margin pretty have our by very

our think trending the improvement really the not of now time first and we're the very down see encouraged and rest year. having concessions We can margin throughout degradation we for about

Unidentified Analyst

Okay, thank you.

Operator

from comes question next the Your BTIG. Instructions] Reichardt of with line Carl [Operator

is line Your open.

Carl Reichardt

last you whatever coming cost. the material also the or afternoon a the is. sales guys year been of gross queue both being the or it obviously, higher In but morning, in. change talked Good Thanks. function And incentives about incentives, from lumbers margin

that and labor just bit talk didn’t you note you about Can issue. impact little a an as

year-over-year little get trying on color change more just in margins. a the I'm So, to

Jim Brickman

pretty In market. our Dallas, purchasing in been Well, I it lumbers type across care margins we market our sheet-rocked whether has for are for created a borrow, to else. been it had or tailwind don’t board of anything obviously benefits interesting seeing the by varies well we've all and builders

We we've concrete, across lot across price much more but the not board plumbing. our pretty pressure costs difficult it's lower in are a been improvement been it's little a seeing the able pretty board. to of costs, whether and bit unit well seeing Atlanta, In we're unit Dallas in

engineering And program as tailwind the purchasing cost as made. prior additional we're lower is our over significantly we've periods our national value that's well helping experiencing through rebates decisions

Rick Costello

then is that. Carl, heads joining on call Hey thanks our this we for that up Thanks appreciate too, website and for the Rick. also

Carl Reichardt

Hey, Rick.

Rick Costello

over lot the active started under of been contracts place. our One on the the say homes place and in the XXXX of of were in the like construction. we've as And had things that's last started year pretty having terms as let's cost orders homes, consistent in purchase the had units

lower last our to are our reflected Jim experiencing into and costs an But visibility future. builders which on ability improved basis substantial the a margins is perspective being those a in said

Carl Reichardt

expectation in I that is on, guess ask raise about too. you can meaningful but basis? quarter returned of Incentives any pricing look your plea, across of coming Rick, your I do ability has the I kind see power paying you community if way a are this a

Jed Dolson

Carl this think, is Jed. I

has in getting by bang buck because were more I have think margins. things were included decreasing incentives. for we're that that is we at thing the we a putting base homes the pricing this increasing for price not the but in we getting paid did based now in on increased little we And other currently,

Carl Reichardt

this And store count you alright, more, that thanks if question. Okay answered sense, one makes Jim.

you the for debt not secured on deal this capacity replacement down pay Is a to go-forward use for that secured still will private the that intending basis new on line. to or you? that is credit the are line exist that them placement and a going Just credit

Rick Costello

down across it's Carl, prorate. pretty line actually, it's much Yes, paying the

the pay revolvers our still to fund borrow continue we going is to convert the growth. to up to revolvers and both unsecured, into ability the of essentially our down on All secured --

Jim Brickman

Sorry to interrupt Rick. you,

today probably at debt of We actually investors attractively of Here's with its was way very let's we're a fund for $XXX capital. $XXX at million had end growth think a say could the our but out, quarter second million $XXX I million. price how going simple analyst and look approximately to really

and million of Prudential line, our other have capacity of we $XXX all facilities. facilities the are and unsecured With

earnings million that down where over $XXX our in. So, implies is capital debt using a there capital XX% to available few million capacity about want a total of of years. haven’t is which of maintain drawn the to fund at that we we this that about retained $XXX next we business can low about there cost

And a peers really most story, really growth about. and we great think something can't excited that's we're it's do

Carl Reichardt

Thanks that. Thank Jim, I appreciate you, guys.

Operator

in today's questions This the this There call. are conference no time. at further queue completes

may disconnect. You now

Green Brick Partners (GRBK) 9 Aug 192019 Q2 Earnings call transcript