• LGI Homes Reports Third Quarter 2023 Results and Updates Full Year 2023 Guidance

    Source: Nasdaq GlobeNewswire / 31 Oct 2023 06:00:00   America/Chicago

    THE WOODLANDS, Texas, Oct. 31, 2023 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the third quarter and nine months ended September 30, 2023.

    Third Quarter 2023 Highlights

    • Net Income of $67.0 million, or $2.85 Basic EPS and $2.84 Diluted EPS
    • Net Income Before Income Taxes of $89.4 million
    • Home Sales Revenues of $617.5 million
    • Home Closings of 1,751
    • Average Sales Price per Home Closed of $352,678
    • Gross Margin as a Percentage of Homes Sales Revenues of 25.7%
    • Adjusted Gross Margin* as a Percentage of Home Sales Revenues of 27.2%

    Nine Months Ended September 30, 2023 Highlights

    • Net Income of $147.1 million, or $6.24 Basic EPS and $6.21 Diluted EPS
    • Net Income Before Income Taxes of $193.2 million
    • Home Sales Revenues of $1.8 billion
    • Home Closings of 4,971
    • Average Sales Price per Home Closed of $352,075
    • Gross Margin as a Percentage of Homes Sales Revenues of 22.8%
    • Adjusted Gross Margin* as a Percentage of Home Sales Revenues of 24.5%  
    • Active Selling Communities at September 30, 2023 of 106
    • Net Orders of 5,646
    • Ending Backlog at September 30, 2023 of 1,377 homes valued at $509.9 million
    • Total Owned and Controlled Lots at September 30, 2023 of 72,109

    *Non-GAAP

    Please see “Non-GAAP Measures” for a reconciliation of Adjusted Gross Margin (a non-GAAP measure) to Gross Margin, the most directly comparable GAAP measure.

    Balance Sheet Highlights

    • Total liquidity of $243.2 million at September 30, 2023, including cash and cash equivalents of $47.0 million and $196.2 million of availability under the Company’s revolving credit facility
    • Net debt to capitalization of 38.8% at September 30, 2023

    Management Comments

    “Our outstanding results in the third quarter, including the significant progress we made on increasing our profitability metrics, demonstrate the success of our operational initiatives and the resilience of our business model in the face of challenging market conditions,” said Eric Lipar, Chairman and Chief Executive Officer of LGI Homes.

    “Along with double-digit, year-over-year growth in closings, revenue and community count, we made significant progress on our profitability objectives. I am pleased to report that our gross margins are back in-line with their pre-pandemic, historical levels. In the third quarter, we delivered gross margins of 25.7% and adjusted gross margins of 27.2%. The 340 basis point sequential improvement in our adjusted gross margins outperformed the 150 basis point guidance we provided last quarter. Additionally, we delivered a pre-tax profit margin of 14.5%, also representing a 340 basis point sequential improvement and higher than any other third quarter result delivered prior to the pandemic. These outstanding results are a testament to the focused execution of our teams around the country. Undeterred by volatile rate movements and market uncertainty, our dedicated employees continue to construct, sell and close homes while delivering the best service in the industry.”

    Mr. Lipar concluded, “Despite the current headwinds, the fundamentals underlying the housing market remain strong and our long-term outlook for the industry is positive. Based on our performance year to date and a strong start to the fourth quarter, we are well-positioned to achieve all of our goals and objectives for 2023 and beyond.”

    Full Year 2023 Outlook

    Subject to the caveats in the Forward-Looking Statements section of this press release, the Company is providing the following updates to its guidance for the full year 2023. The Company now expects:

    • Home closings between 6,700 and 7,000
    • Active selling communities at the end of 2023 between 115 and 125
    • Average sales price per home closed between $350,000 and $355,000
    • Gross margin as a percentage of home sales revenues between 23.0% and 23.5%
    • Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between 24.5% and 25.0% with capitalized interest accounting for the majority of the difference between gross margin and adjusted gross margin
    • SG&A as a percentage of home sales revenues of approximately 13.0%
    • Effective tax rate of approximately 24.0%

    This outlook assumes that general economic conditions, including input costs, materials, product and labor availability, interest rates and mortgage availability, in the remainder of 2023 are similar to those experienced so far in the fourth quarter of 2023 and that construction costs, availability of land and land development costs in the remainder of 2023 are consistent with the Company’s recent experience. In addition, this outlook assumes that governmental regulations relating to land development and home construction are similar to those currently in place.

    Earnings Conference Call

    The Company will host a conference call via live webcast for investors and other interested parties beginning at 12:30 p.m. Eastern Time on Tuesday, October 31, 2023 (the “Earnings Call”).

    Participants may access the live webcast by visiting the Investor Relations section of the Company’s website at www.lgihomes.com.

    An archive of the webcast will be available for replay on the Company’s website for one year from the date of the conference call.

    About LGI Homes, Inc.

    Headquartered in The Woodlands, Texas, LGI Homes, Inc. is a pioneer in the homebuilding industry, successfully applying an innovative and systematic approach to the design, construction and sale of homes across 36 markets in 21 states. As one of America’s fastest growing companies, LGI Homes has closed over 65,000 homes since its founding in 2003 and has delivered profitable financial results every year. Nationally recognized for its quality construction and exceptional customer service, LGI Homes was named to Newsweek’s list of the Worlds’s Most Trustworthy Companies. LGI Homes’ commitment to excellence extends to its more than 1,000 employees, earning the Company numerous workplace awards at the local, state and national level, including the Top Workplaces USA 2023 Award. For more information about LGI Homes and its unique operating model focused on making the dream of homeownership a reality for families across the nation, please visit the Company’s website at www.lgihomes.com.

    Forward-Looking Statements

    Any statements made in this press release or on the Earnings Call that are not statements of historical fact, including statements about the Company’s beliefs and expectations, are forward-looking statements within the meaning of the federal securities laws, and should be evaluated as such. Forward-looking statements include information concerning projected 2023 home closings, active selling communities, average sales price per home closed, gross margin as a percentage of home sales revenues, adjusted gross margin as a percentage of homes sales revenues, SG&A as a percentage of home sales revenues and effective tax rate, as well as market conditions and possible or assumed future results of operations, including descriptions of the Company’s business plan and strategies. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or, in each case, their negative, or other variations or comparable terminology. For more information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements please refer to the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including the “Cautionary Statement about Forward-Looking Statements” subsection within the “Risk Factors” section, the “Risk Factors” and “Cautionary Statement about Forward-Looking Statements” sections in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023 and subsequent filings by the Company with the Securities and Exchange Commission. The Company bases these forward-looking statements or projections on its current expectations, plans and assumptions that it has made in light of its experience in the industry, as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances and at such time. As you read and consider this press release or listen to the Earnings Call, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although the Company believes that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect the Company’s actual results to differ materially from those expressed in the forward-looking statements and projections. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If the Company does update one or more forward-looking statements, there should be no inference that it will make additional updates with respect to those or other forward-looking statements.

     
    LGI HOMES, INC.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)
    (In thousands, except share data)
     
      September 30, December 31,
       2023   2022 
    ASSETS    
    Cash and cash equivalents $46,981  $31,998 
    Accounts receivable  35,651   25,143 
    Real estate inventory  3,056,966   2,898,296 
    Pre-acquisition costs and deposits  34,661   25,031 
    Property and equipment, net  41,872   32,997 
    Other assets  97,238   93,159 
    Deferred tax assets, net  9,624   6,186 
    Goodwill  12,018   12,018 
    Total assets $3,335,011  $3,124,828 
         
    LIABILITIES AND EQUITY    
    Accounts payable $67,289  $25,287 
    Accrued expenses and other liabilities  274,681   340,128 
    Notes payable  1,190,366   1,117,001 
    Total liabilities  1,532,336   1,482,416 
         
    COMMITMENTS AND CONTINGENCIES    
    EQUITY    
    Common stock, par value $0.01, 250,000,000 shares authorized, 27,503,340 shares issued and 23,563,868 shares outstanding as of September 30, 2023 and 27,245,278 shares issued and 23,305,806 shares outstanding as of December 31, 2022  275   272 
    Additional paid-in capital  319,795   306,673 
    Retained earnings  1,837,627   1,690,489 
    Treasury stock, at cost, 3,939,472 shares as of September 30, 2023 and December 31, 2022  (355,022)  (355,022)
    Total equity  1,802,675   1,642,412 
    Total liabilities and equity $3,335,011  $3,124,828 
     


     
    LGI HOMES, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)
    (In thousands, except share and per share data)
     
      Three Months Ended September 30, Nine Months Ended September 30,
       2023   2022   2023   2022 
    Home sales revenues $617,539  $547,074  $1,750,166  $1,816,193 
             
    Cost of sales  458,734   391,275   1,350,608   1,270,628 
    Selling expenses  49,781   33,938   141,811   111,605 
    General and administrative  26,748   27,284   84,334   84,657 
    Operating income  82,276   94,577   173,413   349,303 
    Other income, net  (7,173)  (14,124)  (19,793)  (21,960)
    Net income before income taxes  89,449   108,701   193,206   371,263 
    Income tax provision  22,407   18,311   46,068   78,811 
    Net income $67,042  $90,390  $147,138  $292,452 
    Earnings per share:        
    Basic $2.85  $3.88  $6.24  $12.42 
    Diluted $2.84  $3.85  $6.21  $12.29 
             
    Weighted average shares outstanding:        
    Basic  23,546,061   23,272,811   23,562,374   23,552,211 
    Diluted  23,640,686   23,488,325   23,696,095   23,805,086 
     

    Non-GAAP Measures

    In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company has provided information in this press release relating to adjusted gross margin.

    Adjusted Gross Margin

    Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. The Company defines adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales. Management believes this information is useful because it isolates the impact that capitalized interest and purchase accounting adjustments have on gross margin. However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact results, the utility of adjusted gross margin information as a measure of operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that the Company does. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of the Company’s performance.

    The following table reconciles adjusted gross margin to gross margin, which is the GAAP financial measure that management believes to be most directly comparable (dollars in thousands, unaudited):

      Three Months Ended September 30, Nine Months Ended September 30,
       2023   2022   2023   2022 
    Home sales revenues $617,539  $547,074  $1,750,166  $1,816,193 
    Cost of sales  458,734   391,275   1,350,608   1,270,628 
    Gross margin  158,805   155,799   399,558   545,565 
    Capitalized interest charged to cost of sales  8,580   4,617   24,475   14,865 
    Purchase accounting adjustments (1)  767   1,162   5,511   5,470 
    Adjusted gross margin $168,152  $161,578  $429,544  $565,900 
    Gross margin % (2)  25.7%  28.5%  22.8%  30.0%
    Adjusted gross margin % (2)  27.2%  29.5%  24.5%  31.2%


     (1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
     (2) Calculated as a percentage of home sales revenues.
        

    Home Sales Revenues, Home Closings, Average Sales Price Per Home Closed (ASP), Average Community Count, Average Monthly Absorption Rates and Closing Community Count by Reportable Segment

    (Revenues in thousands, unaudited)

      Three Months Ended September 30, 2023 As of September 30, 2023
    Reportable Segment Revenues Home
    Closings    		 ASP Average
    Community
    Count    		 Average
    Monthly
    Absorption
    Rate    		 Community
    Count at End of
    Period
    Central $183,615 561 $327,299 34.7 5.4 34
    Southeast  149,593 452  330,958 23.7 6.4 24
    Northwest  67,666 131  516,534 11.0 4.0 11
    West  94,950 249  381,325 14.3 5.8 15
    Florida  121,715 358  339,986 20.0 6.0 22
    Total $617,539 1,751 $352,678 103.7 5.6 106
     


      Three Months Ended September 30, 2022 As of September 30, 2022
    Reportable Segment Revenues Home
    Closings    		 ASP Average
    Community
    Count    		 Average
    Monthly
    Absorption
    Rate    		 Community
    Count at End of
    Period
    Central $228,448 681 $335,460 33.0 6.9 34
    Southeast  138,478 419  330,496 23.3 6.0 24
    Northwest  46,774 95  492,358 7.0 4.5 7
    West  65,064 155  419,768 11.0 4.7 11
    Florida  68,310 197  346,751 18.7 3.5 17
    Total $547,074 1,547 $353,635 93.0 5.5 93
     


      Nine Months Ended September 30, 2023
    Reportable Segment Revenues Home
    Closings    		 ASP Average
    Community
    Count    		 Average
    Monthly
    Absorption
    Rate
    Central $564,580 1,724 $327,483 35.3 5.4
    Southeast  397,618 1,216  326,988 24.1 5.6
    Northwest  212,885 433  491,651 10.1 4.8
    West  256,575 672  381,808 13.3 5.6
    Florida  318,508 926  343,961 18.3 5.6
    Total $1,750,166 4,971 $352,075 101.1 5.5
     


      Nine Months Ended September 30, 2022
    Reportable Segment Revenues Home
    Closings    		 ASP Average
    Community
    Count    		 Average
    Monthly
    Absorption
    Rate
    Central $807,400 2,460 $328,211 31.3 8.7
    Southeast  328,510 1,018  322,701 21.0 5.4
    Northwest  220,440 429  513,846 8.6 5.5
    West  244,603 598  409,035 11.2 5.9
    Florida  215,240 668  322,216 19.0 3.9
    Total $1,816,193 5,173 $351,091 91.1 6.3
     

    Owned and Controlled Lots

    The table below shows (i) home closings by reportable segment for the nine months ended September 30, 2023 and (ii) owned or controlled lots by reportable segment as of September 30, 2023.

      Nine Months Ended
    September 30, 2023    		 As of September 30, 2023
    Reportable Segment Home Closings Owned (1) Controlled Total
    Central 1,724 21,048 3,624 24,672
    Southeast 1,216 14,756 4,907 19,663
    Northwest 433 5,981 2,138 8,119
    West 672 9,176 2,195 11,371
    Florida 926 5,340 2,944 8,284
    Total 4,971 56,301 15,808 72,109


     (1) Of the 56,301 owned lots as of September 30, 2023, 42,618 were raw/under development lots and 13,683 were finished lots. Finished lots included 1,471 completed homes, including information centers, and 3,009 homes in progress.
        

    Backlog Data

    As of the dates set forth below, the Company’s net orders, cancellation rate and ending backlog homes and value were as follows (dollars in thousands, unaudited):

    Backlog Data

    		 Nine Months Ended September 30,
    2023 (4) 2022 (5)
    Net orders (1)  5,646   4,373 
    Cancellation rate (2)  22.8%  21.0%
    Ending backlog – homes (3)  1,377   1,255 
    Ending backlog – value (3) $509,932  $428,293 


     (1) Net orders are new (gross) orders for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.
     (2) Cancellation rate for a period is the total number of purchase contracts cancelled during the period divided by the total new (gross) orders for the purchase of homes during the period.
     (3) Ending backlog consists of homes at the end of the period that are under a purchase contract that has been signed by homebuyers who have met preliminary financing criteria but have not yet closed and wholesale contracts with varying terms. Ending backlog is valued at the contract amount.
     (4) As of September 30, 2023, the Company had 273 units related to bulk sales agreements associated with its wholesale business.
     (5) As of September 30, 2022, the Company had 591 units related to bulk sales agreements associated with its wholesale business.


    CONTACT: Joshua D. Fattor
      Vice President of Investor Relations and Capital Markets
      (281) 210-2586
      investorrelations@lgihomes.com

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