GRBK - Earnings call transcript Q3 2019 | Green Brick Partners, Inc.

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Operator

Good afternoon, everyone, and welcome to the Green Brick Partners' Earnings Call for the Third Quarter Ending September 30, 2019. [Operator Instructions].

As a reminder, this call is being recorded and will be available for a playback. A slideshow supporting today's presentation is available on 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 third quarter investor call presentation.

The company reminds you that during this conference call, it will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. based such prospects with the and and Green Partners that earnings, to business uncertainties. cautioned and Brick strategies, expectations performance, other are are forward-looking to respect statements revenues, of are Investors subject current risks on aspects of

the and and in those Thursday, undertakes the company's the Green A X, from on cautionary was this any forward-looking factors risk contained cause in the during statement press differ filings could forward-looking Partners made release, released such update factors call. most results or regarding described quarterly by few and to statements. company's which outcomes November actual forward-looking with materially recent indicated are statements no Brick Exchange annual duty to Please read the that Securities statements Commission.

measures. of Today, attributable income of reconciliation the pretax Brick revenues; both which attributable financial as Green that of contained Green the yesterday. Brick; income margin adjusted and pretax the The company gross Green a non-GAAP of to reconciliation average margins, net percentage equity as net percentage gross adjusted adjusted referring invested will to to to income homebuilding earnings release total Brick to attributed are to homebuilding pretax and income homebuilding margin in are Green Brick issued attributable gross income return be average to pretax capital, on Brick EBITDA, Green income a

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

James Brickman

It's of me for Thanks our results share and you. our Dolson, everybody. joining always President CFO; some to again With you. Thank good Costello, region. Rick great with Hi, Okay. our call. is Texas Jed

of give on everybody call accompanies Then, Reporting, web done. third option mentioned, the Governance. the At our top get page, operator to the be investor found a the I'll this that says see the that the few this on down and quarter until click & call page at page scroll greenbrickpartners.com. Investors you web seconds As presentation. earnings on then click presentation the can

Okay. typically by is million, slower Sales bit we EPS XXXX. pace with to opening third quarter though up with XX% quarter absorption is XX% We at the community neighborhoods. $XXX quarter the record both its increased $X.XX. and This XX% at a third home count compared new our increased Even when year-over-year. had a sales per our highest closing during community a record-setting XXXX, up pace level of quarterly we by revenues third XX, at of

by community believe continue our selling to XX% to We will compared count January that XXXX. grow this X, year

Our wonderful first-time, start. Signature Trophy move-up and a to is Homes, off builder, entry-level

As staged for a result, are XXXX. earnings growth continued we in

remind to want investors not equally. that created earnings I are

third sheets we X-year leveraged quarter the one is a is Our closed the balance earnings having least with note enjoy the debt, This possible lower growth lower the almost Private only in $XX of senior than industry, Capital. while evidenced by peer. small our was and levels debt at Prudential every unsecured mid-cap cost of million, not X%, that despite in but

incurred, the of over Xx about typical Our small-cap interest builder small-cap Xx is interest which next and double coverage the nearly of that our peer. that is

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

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

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

starts the us growth. the the significant opportunity markets States, giving United to X% three for largest X% of of are We in in

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

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

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

owns lots Over X,XXX Atlanta, locations. primarily in lots for XX Dallas in entry-level At bottom you of the over lots Signature that or our communities of over new the Brick controls development. homebuilder. Trophy will and Slide Green have builder the under we are X,XXX X,XXX A first-time in X, the see Metroplex Homes, and move-up

year mentioned XXXX. I continue community end we grow or communities quarter first we will XX% As count XX have expect in that X this last by the quarters, of the the will to to of by

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

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

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

growth President our Dolson, of and Jed the diversification. Texas region, will Next, driver our discuss our

Jed Dolson

one of public Jim. in at look growth Green best Growth a homebuilder the X labeled Drivers. truly the stories Slide is Brick Take space. Thanks,

future. X-year XX% XXXX On our XX-month a QX QX of setup over for have basis, last impressive from grown even revenues the total is of more that period, but to XXXX

was last as grew million a of backlog. XX, X which years, to backlog XXXX, almost $XXX September of XXXX our Over our doubling XX% the

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

focus let's ending September last XX, just on Now the months XX XXXX.

XXXX. units, an starting started during XXX spike average 'XX XXX of which 'XX, of XXXX, QX of represents ending XX a the of increase ending we September XX a after X,XXX September of months quarter XX% the units from units we versus XXXX. Over QX last saw Notably, XX, per QX through XX, months

September XX, X,XXX the increase of XXXX, of from end under As had XXXX. units of construction, year-over-year XX% an we

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

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

revenues the townhome our grown we've months. fact, over last XX XX% In

of price million affordable with months, offering age-targeted were maintain product. while which affordability, more robust is average months in XX revenues highlighted GHO's a helped the this lower their the this Over sales has last high-quality product. single-family Our over $XXX XX growth past of period, XX% a by us at

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

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

at right this diversification of the you can see at of even Looking time. types side page, our versus easily the year product last the improved

of important XX% Our has an mix. consumer growth balancing our and diversification target year-over-year

The communities offerings Green and Brick's on what remember part sales, reliance diversify single group back different Most segments include product are strategy risk our saw additional consumer and constantly locations. or on of And longer-term to move A our submarket of homebuyers. limit you located of to X. types in a without desirable growing please Slide are prices

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

Richard Costello

move results. our Thanks, Please third to Jed. today to Slide Hello, review everyone. Thank quarter XXXX you for financial joining XX first. us

that event results. getting Private unsecured key Before our when disclosed That's into reported August of we need results, financial QX we we closing our reiterate senior Capital. to in the with Prudential the notes QX

long-term rate of a fixed Our at $XX notes X.X%. million are of

rate than the long-term lower than paid is leveraged NVR small-cap and only the longer-term and by builders. large-cap more paid all D.R. this Now like rates by slightly rates mid-cap attractive the and Horton, builders higher

As cost higher credit on our rates, basis has high have small-cap and to a you stack revolving on reduced maturities provided overall of our capital. therefore, Brick can XX, incurred table cost in a of our lines. the peers Instead on Green than cost borrowing, longer-term of paying see provided Slide

Slide so to the to highlights, Now move financial I'm move going into please XX.

QX 'XX for metrics. year-to-year Home quarter. for key up deliveries by increased increased and with of by Net revenues versus the by XX% comparisons, 'XX operational new XX% here QX XX% are units some orders For residential the year-to-date. of quarter for XX% and

year-to-date, home increased by For deliveries revenues with XX%. units residential up by XX%

XX% now the with XX% Year-over-year, in X.X% 'XX. units construction last XX by up value are versus than finally, X homes up EPS increased a quarters, on Year-over-year quarter record of by basis months for XX%. to of XXXX was our EPS any backlog year-over-year. started in XXXX. homes is And Dollar of QX under XX% higher

for details. the Now

the home the number third was quarter an of orders XXX compared new the homes, For to of increase third quarter, XXXX. net of XX%

versus QX XXXX our improvement active selling XXXX. year-to-date orders X,XXX. from that grown have in new relative by For XXXX, X,XXX absorption of to home per XX% QX each year saw to community We XX% with prior was net than

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

sales Residential homes, year-to-date, XXXX. increase year-to-date, XX% XX% For over Brick's grew the over increase quarter, units the of the before, Brick price were a $XXX.X delivered delivered $XXX.X average up months. Jed versus of revenues XXXX, the XX% of units And said X,XXX an quarter Green for but for was third and XXXX. over million of Green moved up year-to-date quarter versus about last residential XXXX. XXXX of to down homes XX first X million, revenues the 'XX, X% of first over XXXX. quarters QX from X $XXX,XXX quarters The hardly $XXX,XXX Like it's year-to-date, the

unclosed September price to million, homes, segment the XXX was average homes our the At a backlog September of increase compared approximately decrease $XXX.X prior XX, approximately of an September $XXX,XXX, backlog X.X% flat. of Operations total XX, had just sales a XXXX, from sold, Builder At a with XX, year, X.X% value of in XXXX. of but

a months growth Let's introduce review last basis. and on our of XX key some metrics

orders 'XX. as X,XXX of for at months the QX XX% XX last the new up Net sales. homes, stand of Regarding of from end X,XXX homes

Units closings. XX% the up Residential for was over last homes, revenues XX closed up similarly the this XX% ended on for X,XXX totaled Regarding last units the months period XX, basis. September months XX-month XXXX. XX

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

September an For the XXXX, XX% count average represented selling basis. increase our XX, on a of year-over-year ended months community X

X,XXX of increase inventory, months. over the number And X,XXX lots the year owned ago an was XX accomplished about has grown to starting X,XXX XX% homes for X/XX/XX. controlled in of Regarding and as of just lots, despite up this almost period from last lots from the lots

the in to increased units finally, XX% X,XXX started units as as last versus September September months, of of X,XXX XXXX, of construction we've to XX homes as XXXX. under increase XX, homes compared September XX%. Homes X,XXX X,XXX XX, XX, an of And

revenue our of As of and really important, quarters an for units Jed XXX from through mentioned, 'XX. of to future this starting average After growth. per QX quarter is for X QX prospects XXXX

our we in XX%. XXXX, increase XXX started starts an of rate QX of During units,

During XX.X% communities opened sales and of QX, third is gross margin due gross our XX.X% the margin, with to But pace. of QX from prices customers adjusted year-to-date for XXXX our margin for to our XXXX of QX increased of to to adjusted new to declined initial incentives XX.X%. XX.X% promote quarter consistent sales importantly, homebuilding margin on

the measures against look performance takes margins as as consideration critical left, on as Now pretax our building demonstrates measured chart Slide take Pretax at XX. begins X with our income It well performance. expenses. operating income into of peers. The a

see, can at our small-cap revenues, return us you and for and pretax respectively, at puts XX.X% stands last X.X% As of of a far medians pretax who on mid-cap much or lower. peers, percentage revenues are the income XX above as much, months. That margin X.X%

peers return performance And almost on the is XX is higher at income small-cap the XX.X% our ROIC Our Green our And again, months of invested than ROIC peers, capital. for on measure return pretax adjusted X.X%. the X.X% double. XX.X% last double Brick's median mid-cap second of at is XX% of based median

is was record per a bottom 'XX. of EPS Green Of up QX share, the XXXX QX in course, line, most important Brick's and XX% $X.XX over

the on net on Chart X side XX. income Our equity shown of bars return is on the right

able consider ROE the for ROE of the of more X% months as our to debt-to-capital XX% on rate grow We've below ratios at shown on leverage is for peers, of median stands one which and our any story. revolving Slide accomplished XX, the net lowest look only credit. Slide small-cap XX despite increasing been equity lines Our But let's our at debt-to-capital, of peers. our And XX.X% the above return mid-cap last which builder. X/XX/XX, is and XX ended that low rapidly, public closely been financial of keeping the has rest interest through while

small-cap have builders increased to other increase to peer that XX, capital XX% net other more an peer than ROE we risk-adjusted chart, the point our Brick. this ratios As ratio, shows debt-to-capital debt debt is builders. to of average have debt and strong had builders our XX%. financial the wrong chart, are is September more mid-cap on left the peers XX% leveraged on side peers. cash, XXXX, almost or remarkable has rates clear net continued of the where to from and of The In that our of words, is with of of a gradual XX% highly-leveraged XX.X%. all equity on look accomplishing XX%. return a that to performance net are our range of X conclusion chart Note The on an leverage peers basis, slide the of the that their Green those closely, minus each where versus But for average side X

in XX toward rate our start note for expected for of another did with we annual our is increasing the increase communities, Indeed, increase revenues community we marked QX's active final XX%. count implication in starts selling in building starts, have to seeing which One increase begun XXXX. corresponding on construction

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

James Brickman

Thank you, Rick.

everyone quarter revenue under see, did unit the pace construction. a versus of best team price for job managing to and history As our builders great income, net our can generate homes revenues, really in residential total

companies very also is of Fortune most count Brick third are growing the world. Unlike Green peers, in neighborhood the magazine proud accelerating. fastest named the We that one quarter during our of XXXX,

the communities We very XXXX is only is And end growth of have the evolved subject debt-to-capital sheet community XX.X%. of from or XX where by net a while X, maintaining the weather. XXXX, accomplished our to to year balance XX% January on XX communities quarter first being this conservative

X%, This As new our allowed our of growth with we superior a our $XX fund us loan. a senior advantage cost over peers. metrics to discussed, capital low million huge credit is term

our utilized Operationally, all standardized we are systems seeing that benefits builders. are house of operating the margins our stabilize, of by and

where expanding business with scaled rapidly profitably and very Our our doing to business mortgage little is this now titled risk. and are

earnings Our should we to first-time is in builder, Trophy move-up entry-level, markets. significant value Homes, replicate Signature of expect a be off a story that great our and to part growth other start

to work, and the their Green results. to team I'll turn questions. Brick really back for our now the operator for want everybody dedication, thank on great hard I call

Operator

[Operator Instructions].

Michael comes Your of Rehaut first question the from JPMorgan. from line

Q –Unidentified Analyst

for on This is Maggie Mike.

other First, seeing how in about pricing were any your incentives was you about power the talk also that trends during I if mentioned that you in talk sales could quarter. markets? if those up trended sequentially? And you incentives could wondering you're

James Brickman

is part. might sales you block were the our it. to add in up to on delta Jim. huge slightly. as margin take our gross specs, increase was margins to some revenues. jobs, I'll gained pushed we of Jed, picking On first want which incentives a color what down build We see, up. can This you net But Sure, had

a all levels business. decision of great was Inventory it So, think very low are in we for markets. the our

to expect stay you have So, add? probably incentives anything the really and Jed, margins decrease gross to going do forward. we about sales same, to you want

Jed Dolson

we, fewer so although industry -- surplus This We're down. have specs, was our don't quarter-over-quarter, increased like last they're disciplined we industry, year-over-year, incentives, seeing year. on an as building actually had we this year, more Yes. the starting

James Brickman

low. I is think very industry under had inventories construction. guidance Maggie, about saying the saying, So, want XXXX, the And both give we construction. X,XXX that X,XXX what -- Jed very we had earnings one in the while disciplined, really only homes things, homes we're is under don't highlight of XX/XX/XXXX, per we is think at I that se, fact Same we time to are

a into inventory sell. more next with lot entering year to So, we're

Unidentified Analyst

Okay.

So clarify, them trend down you that incentives just you quarter-on-quarter, of to were up said to forward? kind expect the but going

James Brickman

a better is word. stabilize think I

going to spec on side be of the We're they're the probably I maintain the think think business, they'll I about same. -- better.

Unidentified Analyst

secondly, Maybe And closings many Trophy, give little talking this wonderful right. that quarter. was you could about more wondering All when contributed off Trophy mentioned Okay. a if to there? and you I color a bit it's how start, give

James Brickman

could bring closings job to Jed who's take to really where made for long we about Parker, a ground. getting because Trophy first place takes decision We're seeing how We really years realize backward a lot wonderful But really just let Yes. a to Stewart that That our add it a ramping are. you, really lot people this. We're ago. of step the now. get don't up took the done X.X off me business.

have right X,XXX, We now. maybe X,XXX about lots

about last started XXX homes month. homes have XX under We construction. about We

And compete really progress the and we goal was giants, started really when such to now. seeing right we're the our business, against

think goal is to our beat spring. them I next

So, it see interesting that will be unfolds. really how to

Jed Dolson

be -- we the our X that at we communities Rick had have selling XX, X. At September think end year, think of mentioned -- were that XX. we Trophy. we'll started community we active count the will Maggie,

So, will year. trending that and next XX% Trophy significantly probably approximately of be upward see that we

James Brickman

No. XX units.

Operator

Instructions]. [Operator

comes next Gilbert line from the Your Ryan of BTIG. question from

Ryan Gilbert

Trophy quarter? Trophy order on the openings to Just the the growth Signature. was new your another What overall from one contribution in

Richard Costello

experienced builders monthly and on give you that. year-over-year because would was our one Group tell -- Providence CB our That I on Yes. absorption every detailed basis. overall, only model doing of our disclosure that team a homes Trophy above modest. We it -- and have it of They builders. don't JENI experienced single they're average two by job for open. is but seven was those a great were Green Brick, But contributors. communities. really broadly because growth great

James Brickman

about Trophy right is, employees growing has happening XX rapidly. What's now. It's

are investment it's that we but not see right making an forward, earnings now. contributing XXXX benefit really going in So, we and great to

Ryan Gilbert

other then it it are in to sounds that like Dallas this you're increase expand count operating product Got you And for going predominantly community where that it. to think openings XXXX. there sense Is and in the makes offering? are in Trophy of type markets

James Brickman

right at looking two now. are We other markets

Ryan Gilbert

know then, -- you that you that And rate just conversion? returning improvement at quarter. really new of that's was rate kind run think -- that to some run led just improvement the backlog or is cleanups conversion, it. Got Is of Okay. XX% on in new backlog or do strong to in kind a inventory the there

Richard Costello

Ryan, it around done. Well, look X you at mean, we year XXX if we or calculation and we don't average has a quarter for a at I XXX run at was were like just But if year, of that this look units rate. of everything XXX starts QX after rate quarter. with specifically really quarters conversion and terms in a the experiencing closings our row sold less happened conversion is you What is houses. more rate in back in the last QX if each look of this more

were rid quarter-over-quarter standing of basis inventory on some that So, we inventory. have a overhang reduced of getting our of that as we builders

Ryan Gilbert

versus the community for appetite environment. count? another to then organically looking M&A Green expanding one what's one Okay, last and flow it. on deal adding got How's your just Brick And teambuilder

James Brickman

just a organically. builders. interested are we that's Well, growing a have definitely X more I at we've much concluded looked that we and in and great builders, number question, at through really looking got of

blue we're can We're that that, For paying better to are willing markets. premiums is or competitors is enter that returns and pay one make see we -- we to one disciplined expanding we we do just the too reason, the sky to not two and culture; think organically.

Operator

concludes this are for conference joining questions time. us today. There at you call. no further Thank today's This

disconnect. now may You

Green Brick Partners (GRBK) 8 Nov 192019 Q3 Earnings call transcript