LGIH LGI Homes Inc

LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the third quarter 2024 and the nine months ended September 30, 2024.

Third Quarter 2024 Highlights

• Home sales revenues increased 5.6% to $651.9 million
• Home closings increased 0.3% to 1,757 homes
• Average sales price per home closed increased 5.2% to $371,004
• Gross margin as a percentage of home sales revenues decreased 60 basis points to 25.1%
• Adjusted gross margin* as a percentage of home sales revenues was 27.2% in both comparable periods
• Net income before income taxes increased 2.7% to $91.9 million
• Net income increased 3.8% to $69.6 million, or $2.96 basic EPS and $2.95 diluted EPS

Nine Months Ended September 30, 2024 Highlights

• Home sales revenues decreased 6.0% to $1.6 billion
• Home closings decreased 9.6% to 4,495
• Average sales price per home closed increased 4.0% to $366,007
• Gross margin as a percentage of home sales revenues increased 190 basis points to 24.7%
• Adjusted gross margin* as a percentage of home sales revenues increased 220 basis points to 26.7%
• Net income before income taxes decreased 0.7% to $191.8 million
• Net income decreased 1.3% to $145.2 million, or $6.17 basic EPS and $6.15 diluted EPS
• Active selling communities at September 30, 2024 of 138
• Ending backlog at September 30, 2024 of 1,088 homes valued at $417.8 million
• Total owned and controlled lots at September 30, 2024 of 68,564

*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 $375.4 million at September 30, 2024, including cash and cash equivalents of $60.9 million and $314.5 million of availability under the Company’s revolving credit facility
• Net debt to capitalization of 42.7% at September 30, 2024

Management Comments

“Our strong third quarter financial results reflect our focus on operational excellence and a commitment to maximize our profitability,” said Eric Lipar, Chairman and Chief Executive Officer of LGI Homes.

“In the third quarter, we delivered 1,757 homes at an average sales price of $371,004, resulting in a 5.6% increase in revenue to $651.9 million. Our community count was 138 at the end of the third quarter, a 30.2% year-over-year increase, keeping us on pace to achieve our goal of approximately 150 communities by year-end. Our disciplined approach to pricing and incentives enabled us to deliver a gross margin of 25.1% and an adjusted gross margin of 27.2%. Both of these results represented sequential increases, exceeded the range of our full year 2024 guidance, and were aligned with our pre-pandemic, historical levels. Finally, pre-tax net income margin in the third quarter was 14.1%, an increase of 130 basis points sequentially and significantly higher than our pre-pandemic average of 12.8%.

“Given our performance to date and market trends observed thus far in the fourth quarter, we are updating our full year guidance for 2024. We now expect to close between 6,100 and 6,400 homes this year. Additionally, we are increasing the range of our gross margin and adjusted gross margin guidance by 50 basis points at both the low and high ends of our prior ranges.”

Mr. Lipar concluded, “While the industry continues to face near-term headwinds, the broader fundamentals of the housing market remain solid, and the appeal of homeownership endures. During this dynamic period, we remain committed to investing in the long-term growth of our business and delivering profitability-focused results for our stockholders.”

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 6,100 and 6,400
• 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 24.0% and 25.0%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between 26.0% and 27.0% 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 14.0% and 14.5%
• Effective tax rate of approximately 24.5%

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, November 5, 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, June 30, 2024 and September 30, 2024 and subsequent filings by the Company with the U.S. 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,
			2024				2023
ASSETS
Cash and cash equivalents		$	60,903			$	48,978
Accounts receivable			49,022				41,319
Real estate inventory			3,439,668				3,107,648
Pre-acquisition costs and deposits			33,676				30,354
Property and equipment, net			62,001				45,522
Other assets			159,399				113,849
Deferred tax assets, net			9,146				8,163
Goodwill			12,018				12,018
Total assets		$	3,825,833			$	3,407,851
LIABILITIES AND EQUITY
Accounts payable		$	53,314			$	31,616
Accrued expenses and other liabilities			229,097				271,872
Notes payable			1,546,459				1,248,332
Total liabilities			1,828,870				1,551,820
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 27,625,950 shares issued and 23,513,488 shares outstanding as of September 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			334,792				321,062
Retained earnings			2,034,917				1,889,716
Treasury stock, at cost, 4,112,462 shares as of September 30, 2024 and 3,939,472 shares as of December 31, 2023			(373,022	)			(355,022	)
Total equity			1,996,963				1,856,031
Total liabilities and equity		$	3,825,833			$	3,407,851

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,
			2024				2023				2024				2023
Home sales revenues		$	651,854			$	617,539			$	1,645,202			$	1,750,166
Cost of sales			488,362				458,734				1,239,425				1,350,608
Selling expenses			55,196				49,781				149,196				141,811
General and administrative			27,991				26,748				90,022				84,334
Operating income			80,305				82,276				166,559				173,413
Other income, net			(11,547	)			(7,173	)			(25,270	)			(19,793	)
Net income before income taxes			91,852				89,449				191,829				193,206
Income tax provision			22,277				22,407				46,628				46,068
Net income		$	69,575			$	67,042			$	145,201			$	147,138
Earnings per share:
Basic		$	2.96			$	2.85			$	6.17			$	6.24
Diluted		$	2.95			$	2.84			$	6.15			$	6.21
Weighted average shares outstanding:
Basic			23,500,349				23,546,061				23,540,620				23,562,374
Diluted			23,579,592				23,640,686				23,611,906				23,696,095

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 September 30,								Nine Months Ended September 30,
			2024				2023				2024				2023
Home sales revenues		$	651,854			$	617,539			$	1,645,202			$	1,750,166
Cost of sales			488,362				458,734				1,239,425				1,350,608
Gross margin			163,492				158,805				405,777				399,558
Capitalized interest charged to cost of sales			12,954				8,580				30,187				24,475
Purchase accounting adjustments (1)			1,157				767				3,134				5,511
Adjusted gross margin		$	177,603			$	168,152			$	439,098			$	429,544
Gross margin % (2)			25.1	%			25.7	%			24.7	%			22.8	%
Adjusted gross margin % (2)			27.2	%			27.2	%			26.7	%			24.5	%

(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 September 30, 2024														As of September 30, 2024
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count		AverageMonthlyAbsorption Rate				Community Count at End of Period
Central		$	164,439		509		$	323,063		45.7		3.7				47
Southeast			155,205		466		333,058			27.3		5.7				29
Northwest			83,061		150		553,740			14.3		3.5				15
West			150,646		361		417,302			23.0		5.2				24
Florida			98,503		271		363,480			23.0		3.9				23
Total		$	651,854		1,757		$	371,004		133.3		4.4				138
		Three Months Ended September 30, 2023														As of September 30, 2023
Reportable Segment		Revenues			Home Closings		ASP			Average Community Count			AverageMonthlyAbsorption 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

		Nine Months Ended September 30, 2024
Reportable Segment		Revenues			Home Closings			ASP		Average Community Count		AverageMonthlyAbsorption Rate
Central		$	441,609		1,363		$	323,998		43.8		3.5
Southeast		407,068			1,231			330,681		26.2		5.2
Northwest		187,253			344			544,340		13.6		2.8
West		351,880			848			414,953		20.7		4.6
Florida		257,392			709			363,035		21.8		3.6
Total		$	1,645,202		4,495		$	366,007		126.1		4.0
		Nine Months Ended September 30, 2023
Reportable Segment		Revenues			Home Closings			ASP		Average Community Count		Average MonthlyAbsorption 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

Owned and Controlled Lots

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

		Nine Months Ended September 30, 2024		As of September 30, 2024
Reportable Segment		Home Closings		Owned (1)		Controlled		Total
Central		1,363		20,283		1,842		22,125
Southeast		1,231		14,072		4,239		18,311
Northwest		344		5,478		2,286		7,764
West		848		9,023		3,754		12,777
Florida		709		5,173		2,414		7,587
Total		4,495		54,029		14,535		68,564

(1) Of the 54,029 owned lots as of September 30, 2024, 38,734 were raw/under development lots and 15,295 were finished lots. Finished lots included 2,491 completed homes, including information centers, and 1,977 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,
		2024 (4)				2023 (5)
Net orders (1)			4,993				5,646
Cancellation rate (2)			21.6	%			22.8	%
Ending backlog – homes (3)			1,088				1,377
Ending backlog – value (3)		$	417,798			$	509,932

(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 September 30, 2024, the Company had 212 units related to bulk sales agreements associated with its wholesale business.

(5) As of September 30, 2023, the Company had 273 units related to bulk sales agreements associated with its wholesale business.

CONTACT:

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