LGI Homes Reports Second Quarter 2024 Results and Updates Full Year 2024 Guidance

Rhea-AI Summary

LGI Homes (NASDAQ: LGIH) reported strong Q2 2024 results and updated its full-year guidance. Key highlights include:

- Home sales revenues of $602.5 million with 1,655 home closings
- Average sales price of $364,047 per home
- Gross margin of 25.0%, up 300 basis points year-over-year
- Net income of $58.6 million, or $2.48 diluted EPS
- Active selling communities increased to 128, up 25.5% from last year

The company raised its 2024 guidance, now expecting to close between 6,400 and 7,200 homes at an average selling price of $360,000 to $370,000. Gross margin guidance was increased to 23.5%-24.5%.

Positive

• Home sales revenues increased to $602.5 million in Q2 2024
• Gross margin improved to 25.0%, up 300 basis points year-over-year
• Net income reached $58.6 million, with diluted EPS of $2.48
• Active selling communities grew by 25.5% compared to last year
• Company raised full-year 2024 guidance for home closings and average selling price
• Gross margin guidance increased to 23.5%-24.5% for 2024

Negative

• None.

Insights

Financial Analyst

LGI Homes' Q2 2024 results demonstrate resilience in a challenging housing market. The company's home sales revenues of $602.5 million and 1,655 home closings indicate steady demand despite affordability concerns. The average sales price of $364,047 reflects a strategic balance between maintaining profitability and addressing market conditions.

Notably, the gross margin of 25.0% and adjusted gross margin of 27.0% are impressive, showing a significant improvement from the previous year and aligning with pre-pandemic levels. This suggests effective cost management and pricing strategies. The net income of $58.6 million and diluted EPS of $2.48 represent solid profitability in a competitive environment.

The company's focus on community count growth, reaching 128 active selling communities, is a positive indicator for future revenue potential. However, investors should monitor the ending backlog of 1,393 homes valued at $553.6 million, which may suggest some softening in near-term demand.

LGI Homes' updated guidance for 2024, projecting 6,400 to 7,200 home closings at a higher average selling price, reflects cautious optimism. The increased gross margin guidance suggests confidence in maintaining profitability despite market challenges.

Overall, LGI Homes appears well-positioned to navigate the current housing market, with strong financial metrics and a strategic focus on community growth and profitability.

Real Estate Market Analyst

LGI Homes' Q2 results offer valuable insights into the current state of the U.S. housing market. The company's ability to increase its average sales price to $364,047 while maintaining strong sales volumes suggests that demand for affordable housing remains robust, despite rising interest rates and inflationary pressures.

The 25.5% year-over-year growth in active selling communities is particularly noteworthy. This expansion indicates that LGI Homes is successfully identifying and developing new markets, which could be a key driver of future growth. However, the strategy also carries risks, as overexpansion in a potentially cooling market could lead to inventory challenges.

The company's focus on self-developed, higher-margin communities is a savvy move in the current environment. By controlling more of the development process, LGI Homes can better manage costs and maintain profitability, as evidenced by their impressive gross margin figures.

The updated guidance for 2024, with a higher expected average selling price range of $360,000 to $370,000, suggests that LGI Homes anticipates continued strength in housing demand and pricing power. This optimism, however, should be tempered with caution, as affordability concerns and potential economic headwinds could impact the housing market in the latter half of the year.

Investors should closely monitor LGI Homes' ability to maintain its sales pace while continuing to grow its community count, as this will be important for sustaining long-term growth in a potentially challenging market environment.

THE WOODLANDS, Texas, July 30, 2024 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the second quarter 2024 and the six months ended June 30, 2024.

Second Quarter 2024 Highlights

• Home sales revenues of $602.5 million
• Home closings of 1,655
• Average sales price per home closed of $364,047
• Gross margin as a percentage of home sales revenues of 25.0%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues of 27.0%
• Net income before income taxes of $76.9 million
• Net income of $58.6 million, or $2.49 basic EPS and $2.48 diluted EPS

Six Months Ended June 30, 2024 Highlights

• Home sales revenues of $993.3 million
• Home closings of 2,738
• Average sales price per home closed of $362,801
• Gross margin as a percentage of home sales revenues of 24.4%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues of 26.3%
• Net income before income taxes of $100.0 million
• Net income of $75.6 million, or $3.21 basic EPS and $3.20 diluted EPS
• Active selling communities at June 30, 2024 of 128
• Ending backlog of 1,393 homes valued at $553.6 million
• Total owned and controlled lots at June 30, 2024 of 69,904

*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 $405.9 million at June 30, 2024, including cash and cash equivalents of $51.1 million and $354.8 million of availability under the Company’s revolving credit facility
• Net debt to capitalization of 43.0% at June 30, 2024
• 83,763 shares of common stock repurchased during the second quarter of 2024 for an aggregate amount of $8.0 million

Management Comments

“We delivered solid results in the second quarter, including continued growth in our community count and outstanding profitability metrics that exceeded the high end of our guidance,” said Eric Lipar, Chairman and Chief Executive Officer of LGI Homes.

“During the quarter, we delivered 1,655 homes at an average sales price of $364,047, resulting in $602.5 million dollars of revenue. In May, we hit a new record of 130 communities and ended June with 128 communities, up 25.5% over last year and right on track to reach our goal of 150 communities by year end.

“We delivered a gross margin of 25.0%, up 300 basis points from last year, and an adjusted gross margin of 27.0%, up 320 basis points from last year. Notably, both results are in line with our pre-pandemic performance. Driving this outperformance was our ability to offset the impact of mortgage buydown incentives and cost inflation by raising prices along with the benefits of opening more self-developed, higher margin communities. Additionally, we delivered a pre-tax profit margin of 12.8%, up 170 basis points from last year and similarly in line with our results prior to the pandemic. Taken together, these achievements contributed to diluted earnings per share of $2.48, an increase of 10.2% compared to the same period last year.

“On the momentum of these results, we now turn our attention to the remainder of 2024. Based on our performance to date, current backlog, and view on the inventory available to close this year, we are adjusting our guidance. We now expect to close between 6,400 and 7,200 homes this year at a higher average selling price of between $360,000 and $370,000. Additionally, we have increased our gross margin guidance range to between 23.5% and 24.5% and adjusted gross margin to between 25.5% and 26.5%.”

Mr. Lipar concluded, “Our strong second quarter results are a testament to the focused execution of our teams and our success at managing affordability challenges while still delivering outstanding margins that reflect our commitment to increasing profitability and driving higher returns.”

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 updates to its guidance for the full year 2024. The Company now expects:

• Home closings between 6,400 and 7,200
• Active selling communities at the end of 2024 of approximately 150
• Average sales price per home closed between $360,000 and $370,000
• Gross margin as a percentage of home sales revenues between 23.5% and 24.5%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between 25.5% and 26.5% with capitalized interest accounting for substantially all of the difference between gross margin and adjusted gross margin
• SG&A as a percentage of home sales revenues between 13.0% and 14.0%
• 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 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, July 30, 2024 (the “Earnings Call”).

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

An archive of the Earnings Call 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 70,000 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 2024 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, 2023, 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, 2024 and June 30, 2024 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)
		June 30,				December 31,
		2024				2023
ASSETS
Cash and cash equivalents		$	51,071			$	48,978
Accounts receivable			43,213				41,319
Real estate inventory			3,360,265				3,107,648
Pre-acquisition costs and deposits			34,004				30,354
Property and equipment, net			56,345				45,522
Other assets			137,968				113,849
Deferred tax assets, net			7,043				8,163
Goodwill			12,018				12,018
Total assets		$	3,701,927			$	3,407,851
LIABILITIES AND EQUITY
Accounts payable		$	66,745			$	31,616
Accrued expenses and other liabilities			209,975				271,872
Notes payable			1,501,365				1,248,332
Total liabilities			1,778,085				1,551,820
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 27,612,742 shares issued and 23,500,280 shares outstanding as of June 30, 2024 and 27,521,120 shares issued and 23,581,648 shares outstanding as of December 31, 2023			276				275
Additional paid-in capital			331,246				321,062
Retained earnings			1,965,342				1,889,716
Treasury stock, at cost, 4,112,462 shares as of June 30, 2024 and 3,939,472 shares as of December 31, 2023			(373,022	)			(355,022	)
Total equity			1,923,842				1,856,031
Total liabilities and equity		$	3,701,927			$	3,407,851

LGI HOMES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Home sales revenues		$	602,497			$	645,270			$	993,348			$	1,132,627
Cost of sales			451,613				503,333				751,063				891,874
Selling expenses			52,872				49,225				94,000				92,030
General and administrative			30,491				27,626				62,031				57,586
Operating income			67,521				65,086				86,254				91,137
Other income, net			(9,362	)			(6,323	)			(13,723	)			(12,620	)
Net income before income taxes			76,883				71,409				99,977				103,757
Income tax provision			18,310				18,275				24,351				23,661
Net income		$	58,573			$	53,134			$	75,626			$	80,096
Earnings per share:
Basic		$	2.49			$	2.26			$	3.21			$	3.41
Diluted		$	2.48			$	2.25			$	3.20			$	3.39
Weighted average shares outstanding:
Basic			23,543,378				23,533,097				23,560,977				23,457,615
Diluted			23,603,311				23,608,892				23,635,116				23,615,206

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 June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Home sales revenues		$	602,497			$	645,270			$	993,348			$	1,132,627
Cost of sales			451,613				503,333				751,063				891,874
Gross margin			150,884				141,937				242,285				240,753
Capitalized interest charged to cost of sales			10,632				9,138				17,233				15,895
Purchase accounting adjustments (1)			1,174				2,708				1,977				4,744
Adjusted gross margin		$	162,690			$	153,783			$	261,495			$	261,392
Gross margin % (2)			25.0	%			22.0	%			24.4	%			21.3	%
Adjusted gross margin % (2)			27.0	%			23.8	%			26.3	%			23.1	%

(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 Rate and Closing Community Count by Reportable Segment

(Revenues in thousands, unaudited)

		Three Months Ended June 30, 2024												As of June 30, 2024
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		Average Monthly Absorption Rate		Community Count at End of Period
Central		$	173,434		535		$	324,176		44.0		4.1		44
Southeast			135,418		410			330,288		24.7		5.5		23
Northwest			68,125		132			516,098		14.3		3.1		14
West			128,155		308			416,088		22.0		4.7		23
Florida			97,365		270			360,611		23.3		3.9		24
Total		$	602,497		1,655		$	364,047		128.3		4.3		128

		Three Months Ended June 30, 2023												As of June 30, 2023
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		Average Monthly Absorption Rate		Community Count at End of Period
Central		$	230,585		710		$	324,768		36.3		6.5		36
Southeast			143,649		448			320,645		24.7		6.0		23
Northwest			70,404		143			492,336		10.0		4.8		10
West			82,739		214			386,631		12.3		5.8		13
Florida			117,893		339			347,767		18.7		6.0		20
Total		$	645,270		1,854		$	348,042		102.0		6.1		102

		Six Months Ended June 30, 2024
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		Average Monthly Absorption Rate
Central		$	277,170		854		$	324,555		42.8		3.3
Southeast			251,863		765			329,233		25.7		5.0
Northwest			104,192		194			537,072		13.2		2.4
West			201,234		487			413,211		19.5		4.2
Florida			158,889		438			362,760		21.3		3.4
Total		$	993,348		2,738		$	362,801		122.5		3.7

		Six Months Ended June 30, 2023
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		Average Monthly Absorption Rate
Central		$	380,965		1,163		$	327,571		35.7		5.4
Southeast			248,025		764			324,640		24.3		5.2
Northwest			145,219		302			480,858		9.7		5.2
West			161,625		423			382,092		12.8		5.5
Florida			196,793		568			346,467		17.3		5.5
Total		$	1,132,627		3,220		$	351,748		99.8		5.4

Owned and Controlled Lots

The table below shows (i) home closings by reportable segment for the six months ended June 30, 2024 and (ii) the Company’s owned or controlled lots by reportable segment as of June 30, 2024.

		Six Months Ended June 30, 2024		As of June 30, 2024
Reportable Segment		Home Closings		Owned (1)		Controlled		Total
Central		854		20,588		2,104		22,692
Southeast		765		14,177		4,274		18,451
Northwest		194		5,411		2,218		7,629
West		487		9,131		3,365		12,496
Florida		438		5,055		3,581		8,636
Total		2,738		54,362		15,542		69,904

(1)	Of the 54,362 owned lots as of June 30, 2024, 39,284 were raw/under development lots and 15,078 were finished lots. Finished lots included 2,032 completed homes, including information centers, and 2,639 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		Six Months Ended June 30,
		2024 (4)				2023 (5)
Net orders (1)			3,541				4,156
Cancellation rate (2)			19.5	%			20.8	%
Ending backlog – homes (3)			1,393				1,638
Ending backlog – value (3)		$	553,604			$	601,275

(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 June 30, 2024, the Company had 181 units related to bulk sales agreements associated with its wholesale business.
(5)	As of June 30, 2023, the Company had 131 units related to bulk sales agreements associated with its wholesale business.

CONTACT:

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

FAQ

What were LGI Homes' (LGIH) key financial results for Q2 2024?

LGI Homes reported home sales revenues of $602.5 million, 1,655 home closings, an average sales price of $364,047 per home, and a gross margin of 25.0% for Q2 2024. Net income was $58.6 million, with diluted EPS of $2.48.

How did LGI Homes' (LGIH) community count change in Q2 2024?

LGI Homes' active selling communities increased to 128 at the end of Q2 2024, representing a 25.5% increase compared to the same period last year.

What is LGI Homes' (LGIH) updated guidance for full-year 2024?

LGI Homes updated its 2024 guidance, expecting to close between 6,400 and 7,200 homes at an average selling price of $360,000 to $370,000. The company also increased its gross margin guidance to 23.5%-24.5% for the year.

How did LGI Homes' (LGIH) gross margin perform in Q2 2024?

LGI Homes' gross margin as a percentage of home sales revenues was 25.0% in Q2 2024, representing a 300 basis point increase compared to the same quarter last year.