LGI Homes, Inc. Reports Fourth Quarter and Full Year 2023 Results and Issues Guidance for 2024
- Strong performance in Q4 2023 and met all 2023 guidance targets
- Full-year closings of 6,729 homes and revenue of $2.4 billion
- Gross margin at 23.0% and adjusted gross margin at 24.7%
- Increased community count by 18.2% to 117 active communities
- Net income before taxes increased 46.3% in Q4 2023
- Net income increased 52.7% in Q4 2023
- Positive outlook for 2024 with a focus on growth and profitability
- Decrease in gross margin and adjusted gross margin compared to the previous year
- Decrease in net income before taxes and net income for full year 2023
- Challenges related to inflation and uncertainty in interest rates and the broader economy
Insights
Analyzing the reported financial results from LGI Homes, Inc., the increase in home sales revenue of 24.6% and the number of homes closed by 21.4% in the fourth quarter are significant figures that indicate the company's strong performance in a typically cyclical industry. The average sales price per home closed also saw a modest increase, which suggests that the company has been able to pass on some of the cost inflation to consumers without significantly dampening demand.
However, the full year figures present a mixed picture. While there was a growth in home sales revenue and the number of homes closed, the gross margin as a percentage of home sales revenues saw a significant decrease, which could be indicative of rising costs and potential inefficiencies that may need to be addressed. The decline in net income before taxes and net income by over 37% and 39% respectively could be concerning to stakeholders, as it reflects a substantial impact on profitability despite the revenue growth.
The reported net debt to capitalization ratio of 39.3% offers insights into the company's financial leverage. While this ratio is within a reasonable range, it's crucial to monitor this metric closely, especially in an environment where interest rates may fluctuate. The company's total liquidity position, including cash and available credit, is robust, which provides it with a cushion to navigate potential market downturns or invest in strategic opportunities.
The increase in active selling communities and the control over a substantial number of lots indicate a strategic positioning for future growth. However, investors may exhibit caution given the uncertain economic outlook, particularly in relation to interest rates which can significantly affect the housing market. The company's forward-looking statements about improving profitability and controlling costs will be key factors to watch in the coming year.
LGI Homes' performance and outlook must be contextualized within the broader economic landscape. The housing market is sensitive to macroeconomic factors such as interest rates and inflation. The company's acknowledgment of the unpredictability of inflation and interest rates is a nod to the current economic volatility. The ability to increase leads through targeted marketing and maintaining a strong balance sheet in such an environment is commendable and suggests a strategic approach to risk management.
Additionally, the company's future guidance focusing on increasing community count and closings, coupled with improving profitability, reflects a growth-oriented strategy. However, the success of this strategy will largely depend on the broader economic conditions, including housing demand dynamics and material costs, which are influenced by global supply chain issues and monetary policy.
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
“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 b asic 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 b asic 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% and24.1% - Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between
25.0% and26.0% 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% and13.5% - Effective tax rate between
24.0% and25.0%
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 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. |
CONTACT:
Joshua D. Fattor
Vice President of Investor Relations
(281) 210-2586
investorrelations@lgihomes.com
FAQ
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