LGI Homes, Inc. Reports Fourth Quarter and Full Year 2023 Results and Issues Guidance for 2024


THE WOODLANDS, Texas, Feb. 20, 2024 (GLOBE NEWSWIRE) -- 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
 Average
Monthly
Absorption
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
 Average
Monthly
Absorption
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
 Average
Monthly
Absorption
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
Monthly

Absorption
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.




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