LGIH LGI Homes Inc

LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the fourth quarter and year ended December 31, 2023.

“We delivered a strong performance in the fourth quarter and successfully achieved all of our guidance targets for 2023,” said Eric Lipar, Chairman and Chief Executive Officer of LGI Homes. “At the same time, we laid the foundation for profitable growth for years to come.

“Our strong execution in the fourth quarter resulted in full year closings of 6,729 homes and revenue of $2.4 billion. We believe these results make us one of just a few homebuilders to have delivered growth in both of these metrics in 2023. We made considerable progress in growing our community count and ended the year with 117 active communities, an increase of 18.2%. Our full year gross margin was 23.0% and our adjusted gross margin was 24.7%, both in line with our guidance and at the high end or above the guidance we provided at the beginning of 2023.

“Our priorities this year are reflected in our full year 2024 guidance and include increasing community count, growing closings and revenue, and further improving profitability. While inflation has moderated, current levels may prove to be more stubborn than previously expected, making the outlook for interest rates and the broader economy impossible to determine with certainty. Therefore, our focus remains on increasing leads through targeted marketing, controlling costs, efficiently building affordable, move-in ready homes at a disciplined pace, maintaining our strong balance sheet, and identifying opportunities to enhance our long-term growth and profitability.”

Mr. Lipar concluded, “Our success navigating last year’s headwinds and delivering profitable results demonstrates the effectiveness of our systems and people and gives us confidence as we head into 2024. We thank our employees for their commitment and enthusiasm, and we look forward to all that we will accomplish together this year.”

Fourth Quarter 2023 Highlights (comparisons to fourth quarter 2022)

• Home sales revenues increased 24.6% to $608.4 million
• Homes closed increased 21.4% to 1,758 homes
• Average sales price per home closed increased 2.6% to $346,083
• Gross margin as a percentage of home sales revenues increased 270 basis points to 23.4%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased 300 basis points to 25.1%
• Net income before income taxes increased 46.3% to $68.5 million
• Net income increased 52.7% to $52.1 million, or $2.21 basic EPS and $2.19 diluted EPS

Full Year 2023 Highlights (comparisons to full year 2022)

• Home sales revenues increased 2.3% to $2.4 billion
• Homes closed increased 1.6% to 6,729 homes
• Average sales price per home closed increased 0.7% to $350,510
• Gross margin as a percentage of home sales revenues decreased 510 basis points to 23.0%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased 450 basis points to 24.7%
• Net income before income taxes decreased 37.4% to $261.8 million
• Net income decreased 39.0% to $199.2 million, or $8.48 basic EPS and $8.42 diluted EPS
• Active selling communities at December 31, 2023 increased 18.2% to 117
• Owned lots of 55,331 and controlled lots of 15,750, resulting in total owned and controlled lots of 71,081 at December 31, 2023
• Ending backlog at December 31, 2023 of 590 homes
• Ending backlog value at December 31, 2023 of $224.9 million

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

• Net debt to capitalization of 39.3% at December 31, 2023
• Total liquidity of $403.8 million at December 31, 2023, including cash and cash equivalents of $49.0 million and $354.8 million of availability under the Company’s revolving credit facility

Full Year 2024 Outlook

Subject to the caveats in the Forward-Looking Statements section of this press release and the assumptions noted below, the Company is providing the following guidance for the full year 2024. The Company expects:

• Home closings between 7,000 and 8,000
• Active selling communities at the end of 2024 of approximately 150
• Average sales price per home closed between $350,000 and $360,000
• Gross margin as a percentage of home sales revenues between 23.1% and 24.1%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between 25.0% and 26.0% with capitalized interest accounting for substantially all the difference between gross margin and adjusted gross margin
• SG&A as a percentage of home sales revenues between 12.5% and 13.5%
• Effective tax rate between 24.0% and 25.0%

This outlook assumes that general economic conditions, including input costs, materials, product and labor availability, interest rates and mortgage availability, in the remainder of 2024 are similar to those experienced to date in 2024 and that the average sales price per home closed, construction costs, availability of land and land development costs in the remainder of 2024 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, February 20, 2024 (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 Earnings Call webcast will be available for replay on the Company’s website for one year from the date of the Earnings 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 World’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 2024 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 (“SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 when it is filed with the SEC. 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 and per share data)

		December 31,
			2023				2022
ASSETS
Cash and cash equivalents		$	48,978			$	31,998
Accounts receivable			41,319				25,143
Real estate inventory			3,107,648				2,898,296
Pre-acquisition costs and deposits			30,354				25,031
Property and equipment, net			45,522				32,997
Other assets			113,849				93,159
Deferred tax assets, net			8,163				6,186
Goodwill			12,018				12,018
Total assets		$	3,407,851			$	3,124,828
LIABILITIES AND EQUITY
Accounts payable		$	31,616			$	25,287
Accrued expenses and other liabilities			271,872				340,128
Notes payable			1,248,332				1,117,001
Total liabilities			1,551,820				1,482,416
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 27,521,120 shares issued and 23,581,648 shares outstanding as of December 31, 2023 and 27,245,278 shares issued and 23,305,806 shares outstanding as of December 31, 2022			275				272
Additional paid-in capital			321,062				306,673
Retained earnings			1,889,716				1,690,489
Treasury stock, at cost, 3,939,472 shares as of December 31, 2023 and December 31, 2022			(355,022	)			(355,022	)
Total equity			1,856,031				1,642,412
Total liabilities and equity		$	3,407,851			$	3,124,828

LGI HOMES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except share and per share data)

		Three Months Ended December 31,								Year Ended December 31,
			2023				2022				2023				2022
Home sales revenues		$	608,414			$	488,262			$	2,358,580			$	2,304,455
Cost of sales			465,785				387,227				1,816,393				1,657,855
Selling expenses			49,771				33,323				191,582				144,928
General and administrative			33,016				26,908				117,350				111,565
Operating income			59,842				40,804				233,255				390,107
Other income, net			(8,706	)			(6,049	)			(28,499	)			(28,009	)
Net income before income taxes			68,548				46,853				261,754				418,116
Income tax provision			16,459				12,738				62,527				91,549
Net income		$	52,089			$	34,115			$	199,227			$	326,567
Earnings per share:
Basic		$	2.21			$	1.46			$	8.48			$	13.90
Diluted		$	2.19			$	1.45			$	8.42			$	13.76
Weighted average shares outstanding:
Basic			23,565,640				23,291,372				23,507,136				23,486,465
Diluted			23,737,448				23,513,303				23,648,548				23,730,770

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 the Company’s 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 December 31,								Year Ended December 31,
			2023				2022				2023				2022
Home sales revenues		$	608,414			$	488,262			$	2,358,580			$	2,304,455
Cost of sales			465,785				387,227				1,816,393				1,657,855
Gross margin			142,629				101,035				542,187				646,600
Capitalized interest charged to cost of sales			8,893				5,411				33,368				20,276
Purchase accounting adjustments (1)			981				1,399				6,492				6,869
Adjusted gross margin		$	152,503			$	107,845			$	582,047			$	673,745
Gross margin % (2)			23.4	%			20.7	%			23.0	%			28.1	%
Adjusted gross margin % (2)			25.1	%			22.1	%			24.7	%			29.2	%

(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 and Average Monthly Absorption Rates by Reportable Segment

(Revenues in thousands, unaudited)

		Three Months Ended December 31, 2023
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		AverageMonthlyAbsorption Rate
Central		$	166,108		517		$	321,292		36.7		4.7
Southeast			159,190		500			318,380		27.0		6.2
Northwest			38,286		78			490,846		10.3		2.5
West			124,527		320			389,147		16.0		6.7
Florida			120,303		343			350,738		22.3		5.1
Total		$	608,414		1,758		$	346,083		112.3		5.2

		Three Months Ended December 31, 2022
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		AverageMonthlyAbsorption Rate
Central		$	204,444		634		$	322,467		33.7		6.3
Southeast			126,830		386			328,575		23.0		5.6
Northwest			32,976		73			451,726		8.3		2.9
West			56,365		153			368,399		12.3		4.1
Florida			67,647		202			334,886		17.0		4.0
Total		$	488,262		1,448		$	337,198		94.3		5.1

		Year Ended December 31, 2023
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		AverageMonthlyAbsorption Rate
Central		$	730,688		2,241		$	326,054		35.7		5.2
Southeast			556,808		1,716			324,480		24.8		5.8
Northwest			251,171		511			491,528		10.2		4.2
West			381,102		992			384,175		14.0		5.9
Florida			438,811		1,269			345,793		19.2		5.5
Total		$	2,358,580		6,729		$	350,510		103.9		5.4

		Year Ended December 31, 2022
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		Average MonthlyAbsorption Rate
Central		$	1,011,844		3,094		$	327,034		31.9		8.1
Southeast			455,340		1,404			324,316		21.5		5.4
Northwest			253,416		502			504,813		8.5		4.9
West			300,968		751			400,756		11.5		5.4
Florida			282,887		870			325,157		18.5		3.9
Total		$	2,304,455		6,621		$	348,052		91.9		6.0

Owned and Controlled Lots

The table below shows (i) home closings by reportable segment for the year ended December 31, 2023 and (ii) the Company’s owned or controlled lots by reportable segment as of December 31, 2023.

		Year Ended December 31, 2023		As of December 31, 2023
Reportable Segment		Home Closings		Owned (1)		Controlled		Total
Central		2,241		20,606		3,093		23,699
Southeast		1,716		14,563		5,429		19,992
Northwest		511		5,934		1,652		7,586
West		992		9,049		2,747		11,796
Florida		1,269		5,179		2,829		8,008
Total		6,729		55,331		15,750		71,081

(1)	Of the 55,331 owned lots as of December 31, 2023, 41,155 were raw/under development lots and 14,176 were finished lots.

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):

		Year Ended December 31,
		2023 (4)				2022 (5)				2021 (6)
Net orders (1)			6,617				5,268				9,533
Cancellation rate (2)			25.4	%			24.4	%			19.3	%
Ending backlog - homes (3)			590				702				2,055
Ending backlog - value (3)		$	224,851			$	252,002			$	659,234

(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 retail 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 December 31, 2023, the Company had 60 units related to bulk sales agreements associated with its wholesale business.
(5)	As of December 31, 2022, the Company had 157 units related to bulk sales agreements associated with its wholesale business.
(6)	As of December 31, 2021, the Company had 481 units related to bulk sales agreements associated with its wholesale business.

CONTACT: Joshua D. FattorVice President of Investor Relations(281) 210-2586investorrelations@lgihomes.com