LGIH - Earnings call transcript Q4 2020

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Operator

Welcome to the LGI Homes Fourth Quarter 2020 Conference Call. Today's call is being recorded, and a replay will be available on the Company's website later today at www.lgihomes.com.

We have allocated an hour for prepared remarks and Q&A. [Operator Instructions] At this time, I'd like to turn the call over to Joshua Fattor, Vice President of Investor Relations and LGI Homes. Mr. begin. may you Fattor,

Joshua Fattor

and our the fourth financial XXXX. full afternoon, call quarter Homes to year discuss results welcome Good LGI to conference and Thanks. for the

to contain remind statements things, LGI for Homes plans, this Before XXXX. among outlook, regarding listeners strategy, and begin, to such prove that include, I'll call cause estimates and and do involve statements assumptions could we incorrect. reflect will objectives forward-looking management's be that business therefore, All statements to current risks subject expectations, management's uncertainties however, other expectations these that statements guidance and are,

review cause with forward-looking statements risk statements should future actual materially differ our other the anticipated SEC, about factors a of performance. for including and discussion of results these forward-looking to You our These our those forward-looking filings statements. sections risks, are from statement could and in guarantees that cautionary not uncertainties the factors

forward-looking reliance should forward-looking statements undue call. place in these the speak and of not of light only this the as on conference You date consider of related these which statements, risks

later morning and filing be the measures Investors in we with to call. in on for this expect XX, accordance website non-GAAP measures of financial to comparable that GAAP. in prepared found or the GAAP that of most the December considered measures release The This substitute ended is will the not and our our section with in year discussed this XXXX, in report file week. presented with accessible either will earnings on the intended be website. this the Form financial be SEC's SEC isolation a fiscal these issued non-GAAP in be as presentation financial on XX-K press Additionally, information this of we for conference information Reconciliations accordance to the can

Officer and Eric over Board; call the turn Charles Treasurer. today's Financial call for are of the I'll Chief to Lipar, and and Merdian, Officer Homes' Chairman now Chief hosts LGI Eric. Our Executive

Eric Lipar

December on Good we remarkable our Josh. meeting you, participating say I'm We to year today. guidance everyone Putting or and our in increase XX% perspective, exceeding at X,XXX we another that the of homes our our call in homes XXXX, Thank ever. of growth IPO. than in we closed profitability, month closed best an pleased alone, afternoon, to more and of year all in all expectations. welcome of of did December delivered

in comparison, X,XXX closed over was we increase homes, all of for Again, more XX%. quarter, the we than For this of XXXX. closed an homes

deliver processes testament results to extraordinary and our a such is to talent systems-based dedication ability our Our and of the people.

finished a XXX We closing year-over-year we and X,XXX in our year guidance. XXXX, growth. over great year XXXX an and of quarter, increase consecutive with over active of double-digit line guidance, our closings of outperformed an communities, increase XX% result seventh in our homes our with of As the X%

Sarasota, and we within establishing Carolina; year, to markets existing addition in Greenville, in markets the During South Virginia. Daytona and Beach Richmond, our expanded Florida; new

closings per XX per new fourth record. XXXX, quarterly community impressive we averaged company-wide, the of month For an quarter a

DFW and XX top community Seattle was per was XX.X, with Our markets were XX.X%, Sarasota Austin five month, XX.X with was per XX.X. Phoenix closings

per the community annual company-wide, full we seven averaged year, closings record. new For per a month

consecutive marking approximately our of XX% billion double-digit increasing seventh over Most in drove we Austin home an growth DFW XXXX, revenue of XXXX, Antonio generated We were Phoenix with with Our while importantly, per with revenue San XX.X and profitability. Houston of year markets with nine month, this X.X, year top growth. increase this $X.X five with closings our X.X, community sales per X.X.

quarter doubled our and income quarter finished XX.X% We equity the fourth and the net for return XX.X%. over record year more income for the on XX.X% year. full margins XXXX, of were pretax the up than XX% Our in a delivering record net

founding, of resulted prudent cash we Finally, A and balance were of our We strides significant sustainability most as that XX.X%. sheet generation of to additional These one in America's recently customers the designed a ratio affordable flow recognized and success few trusted our highlights, management and our of of net just debt-to-capitalization with other mission. mission been our homes our the dreaming desirable testament reach closed high-quality home, financial WaterSense our ultimately impacts within appliances efficiency. improve price XXX% reduce homes our provide in goal great points we goal at Since recognition of is builders. has last a making to to families their and XXXX. first of the year say this locations we homes that save I'm on money in fixtures, for environment. features Energy proud on homes energy-saving Star of our our the products included this build customers' to made and

to modern presence user this design, evolving the us During our expectations throughout every allows site the on industry-leading focus our we and Utilizing an launched online of delivering website. digital stage journey. enhances new a buyer's fourth customers meet to of experience rapidly quarter, redesigned our

of home closed for a have homeownership. significant landmark XX,XXXth we that families in our us fulfill entrusted for the to December, their Finally, company our and goal

turn record more the over results. our for detail on financial I'll call Now, Charles to

Charles Merdian

Thanks, Eric.

million. totaled quarter fourth press quarter a for the over the XX.X% release year nearly to XX.X% morning, billion, company's the increase revenues this for was our As sales in Home highlighted XXXX. $XXX.X sales history. year-over-year single the revenue $X.X This in increased home best

As year-over-year our of of our XX.X% through sequentially. noted, X,XXX included sold this quarter, homes XXX closings increase XX.X% the in or Eric last year. closings same homes XXX business compared quarter, to we the XX.X% closings total representing XX% wholesale closed record our a Home total quarter during homes, an and of

and closed included over business total closings generating year XX.X% represent prices will total in sales record of increase through period our homes closings X.X% X.X% X,XXX Home a million $XXX,XXX, the representing We same XX% a of the For of sequentially. that closings X.X% $XXX.X the our and this quarter expect year, XX% record sold Average an XXXX. our homes, full a our from revenue. we year-over-year. XXX in increase wholesale last wholesale year, increase was realized closed during homes a to business currently

XX.X% of new sales demand price at of and was price sales year, the of increase and X.X% since year primarily percentage $XXX,XXX, of markets, the our an points costs a XX.X% supported we in driven average margin that quarter to the higher For compared This quarter rising sequentially. the were in points price in average Higher Last favorable of as XXXX basis certain in prices year-over-year of XXXX. basis an XX.X% delivered the points. XXXX. quarter, full Gross communities increases gross XXX closeouts our quarter highest to represented of transitions higher to quarter third sales price was by fourth full a margin increase points compared in XXXX. and and of fourth fourth input markets all our ahead and environment XXX

in quarter Our representing quarter basis increase we together adjusted quarter raise lower was the XX.X% by fourth our year-over-year million quarter resulting prices. quarter lower sequentially. XXX the of of interest XXX to gross gross gross third purchase primarily charged XX.X% XXXX, our of quarter an driven compared in This XX.X% of the was successfully represented leverage, improvement basis margin the related margin fourth highest In points $X.X million to fourth margin cost overhead, the capitalized fourth accounting, $XX.X to and and from and since Adjusted of ability gross excludes Adjusted XXXX. delivered XXXX. points sales interest XXX during operating of points. XXXX of the capitalized to in margin basis and

capitalized of the purchase to basis revenues general the compared cost Adjusted for together gross and of full and an full margin year year increase of an of XXXX, sales Combined basis in margin quarter representing the for compared XX.X% points. points. full XX.X% interest to million year accounting, administrative For the points. X.X% this XX.X% to gross charged XXX was expenses million XXXX, year, margin of sequentially. XXX excludes fourth increase Adjusted was to quarter to and of selling, XXX $XX.X gross XXXX were X.X% year related basis for the compared XX.X% XX.X% $X.X fourth during

the lowest X.X% fourth of the sales were have home $XX.X revenue, the basis for XX the rate the lowest of basis combined general expenses a administrative revenue the XX.X% company. reported Selling as in XX.X% and and public basis compared reported revenues, have a year, we quarter expenses point to For or sales percentage XXXX, as and, compared improvement a prior selling, quarter points full of sequentially improvement. down a or expenses XXX year, million we were $XX.X level public were for X.X% million home of point our Selling as a XXX company. were to

our sales was realized In operating to addition revenue, demand a as quarterly home from advertising increase leverage spend lower of the tailwinds. strong result year-over-year in

XX were compared improvement administrative of that X.X% revenue resulting X.X% revenue or For home revenue, XXXX, of the basis our increased sales fourth year, home last home leverage to from point the selling or improvement. million X.X% point to of and million home compared $XXX.X General basis $XXX.X full sales in expenses expenses a $XX.X million, by in X.X% was revenues. primarily of a sales sales quarter revenue year, or XX operating totaled driven

increase home sales impressive million, XX.X% administrative and, based expenses sales $XXX.X $XX related believe revenue, same in XXXX. point pretax vary Full savings. was Pretax over will over quarter margin quarter XX.X%. EBITDA of our or operating a the $XXX.X available our the million point points year compared savings basis XX.X% the the were primarily certification lesser to identification for full and And last home and federal These XXXX. XXX home full year over We a quarter year, that SG&A costs highest revenue sequentially. a by year-over-year. X.X% and driven a over home X.X% revenue, EBITDA full XXX XX.X% quarter-to-quarter was improvement year basis point period dollars of fourth XX.X% EBITDA period EBITDA home and an quarterly a basis in million, increase the XXX same of the was an XX.X% reduced margin XXX as percentage of and from resulting were for XX.X%, other basis net income For we improvement tax sales sales and partially XXXX for to point energy-efficient $XXX.X on the revenue a margin of continue offset an cost to million, XXXX increase travel and of improvement the income a to in improvement pandemic-related extent, year, an or SG&A of savings record was was and between range our expect by of history. approximately the XX revenue basis XXXX, general of would to credits. leverage

points pretax home $XX.X full of tax And For million, in XX.X% the current at during year annual or available years. we will credits of to and year, home income our history. result of credit tax in pretax revenue, the of the In XXXX. December the between and to outlook range $XX.X through was prior XX.X%. basis we rate energy-efficient full margin estimate Federal year. prior closed year us which time, our information of company's sales totaled this XX.X% million net tax This highest income and related homes XXX an over based was on net effective this increase generated our recognized million $XXX.X tax extended XXXX,

share. XXX.X% or per and fourth per sales $XXX.X XX.X% basic more revenue, share income $X.XX of resulting Our reported increasing of doubled to than earnings home year-over-year, share diluted $X.XX quarter in per net million

related increase increase basis increased XXX of basic $X.XX million income our the tax benefit of revenue, Excluding points XXXX. income per an fourth sales $X.XX and an to XXX.X% retroactive credits, year-over-year. to million adjusted the home or And adjusted over the share, approximately $X.X quarter share fourth our quarter $XXX.X XXX.X% diluted tax was net energy in EPS XX.X% of per

earnings resulting revenues, year XX.X% increased XX.X% full and income diluted full or year to Our per basic $XX.XX million per of share home share net year-over-year of $XX.XX in share. sales reported per $XXX.X

orders increase fourth basic share an year-over-year. $XX.XX an the XX.X% over basis Excluding home the were diluted per And related quarter million energy million of to of increase increase XX.X% Cancellation was the $XX.X points XX.X%. gross $XXX.X year of tax of benefit increased credits, approximately revenue, retroactive per or an income net EPS net share, sales XX.X%. and orders income XXXX. our our quarter XX.X% adjusted X,XXX, to was $XX.XX rate XXX full tax Fourth were for X,XXX, adjusted

And year, demand full began orders X,XXX attractive XXX% of the December our increased year-over-year. quarter, was at to XXXX. growth the a the over backlog backlog the XX.X%. with land a XXXX homes, million, XX.X% our increase increase capital XXX.X% positions support top was remains net value our by XX during and strong of cancellation For a we $XXX.X rate long-term Driven allocation to continued XX,XXX Investment in priority.

As our X,XXX finished raw or with over of update XX, XX.X% the lots sequentially lots our lots, and land year-end And process. vacant cash, real XX% billion fourth homes, our undeveloped quarter, we XX,XXX. million lots of and to has XXXX. XX,XXX billion. or information or compared were We year been new in X,XXX XX,XXX on estate XX% $X.X lots, ended of controlled increased centers the XX% total assets of at added completed which owned our number of ended I'll controlled with never owned a homes owned. were December X.X% of owned consisted our to the of total with XX,XXX $X.X of either our an to lots sheet, conclude of end increase. We controlled balance and stronger. were lots development. And under in portfolio year-over-year X,XXX at inventory in were our the during excess $XX.X and inventory quarter

resulting senior outstanding and $XXX.X $XXX liquidity. our we As XX, of facility, total borrowing revolving $XXX.X available in of December million under had credit total million debt capacity million, and was our notes in

our and results, than our quarter the total at XX.X% billion increase of free XX.X% to year-over-year ended June net equity, manage in utilize ratio This and reported leverage. reflecting year. to with strong conservatively to XX.X%, capitalization our the points successful operations debt sheet, down of debt XXX this a cash XXXX, operating we sequentially to commitment a result net we time since decrease was fund last significantly $X.X of a over As our balance ratio our and book flow lower capitalization lowest basis

leverage the Our in our XX% range current expectation is of maintain to XX%. to

As and Moody's achievements we a of notch BaX. a over recently these upgrade to the result one received other by year,

XXX,XXX of our XXX,XXX of common quarter, During over of an per $XXX.XX a an at bringing of repurchased course fourth price to $XX.XX the the share, at XXXX we shares average share. number shares price repurchased stock total the average of

repurchase XX $XXX.X like back remaining million As of million December XX, over XXXX, to we this point, and we ended had At shares with the share to under outstanding. year our program, call I'd turn Eric. the

Eric Lipar

Thanks, Charles.

to markets unprecedented a quarter homes. off first to from our Our strong start, benefit new continue for is and demand

reported roughly increase we in comp of providing guidance January. With strong XXXX. over closed XXX the for January, homes following we month, earlier last of background, that closings a this XX% an As we're XXX

year-end. XXX between close and at active homes, to expect to to and expect We communities selling X,XXX X,XXX have we XXX

Maryland and suburban markets, we be XXXX, and During geographic our Virginia. will Norfolk, new Baltimore, within as in footprint expanding such existing

expected Our the of in range $XXX,XXX. average be sales to $XXX,XXX price to is

for imbalance XX% market be sale. be of May, market. such adjusted those for and land margin finished not in to in the experienced on I'll available prices supply between XX%. this buy, reflective and are for bid. the this the Since of expected there gross finished cases, influence our year, inventory the lots has margin available current a lots LGI XX% color Where expect shortage will the And in XX%, provide winning will are significant will demand gross deals which sale the and back closings some and up market picked between demand year. We our

our growing cost. profitability maintaining on any at rather focused are than We

during build sheet becoming our close. continue plan we same both and returns underwrite count targeting margin to months to employees, dreams going expand standards will and into close we make high noting all of maintain our to passion our community to most and we expected balance have, our continue reality. Because and successful year these and revenue builder. a XX prudently to always want with a pleased was you we path conservatively deals have with positioned top results significant we XX%. are the professionalism, we our our XXXX, uncertainty. year, profitable personally continue customers' closing to the delivered made our that on after we our of minimums well a return self-development are five and possible. In accomplishments what pursuing goals over our deliver of how opportunities our dedication, view and long-term XX momentum by of your largely to thank of challenges, homeownership to Despite supply been are growth and The we've lots I our achieving last months the manage industry-leading achieve We land to a incredible XXXX and record-breaking as I are profitability. land double-digit nine to margins,

to happy be questions. take we'll Now your

Operator

[Operator Our Hecht question from JMP first line Aaron comes of Securities. the from Instructions]

please. question Your

Aaron Hecht

my question. situation quarter Obviously, Nice weather for energy thanks had really taking Texas has tough and a situation. and

pretty from You would detail Any an Any helpful. this in weather exposure you is annual have impact, on be basis, guys overcome? your this there significant something can view, there.

Eric Lipar

that start. Yes, customers of are Aaron. Thank the are Yes, our LGI weather safe, goodness, living in employees is because Eric. all on no I of LGI. impact in This homes. could the our field

seems to So damage we've homes, well, to and doing far, be things minimal all everyone pretty those heard of considered.

week. we're stepped employees payroll week The sure made here proud was paid all our met really extremely the paid. at with last of The of team trades our this and is on thing getting up last that LGI other schedule all got

got payable, into sure the paid. everybody getting accounts So make office,

and have they of families. their care available, the take dollars would their workers So

our any schedule, a team anything in remarkable So has in like to closings that. hit delays delays no forecasting the job or done no

So, at good all Texas. LGI is in here

Aaron Hecht

great sounded It's situation. hear. to It tough a like

land just that terms result to you in occurred, where the a might market? land right more In normal any which of think the you bit markets really a Is more had there you front noted in in changes you is going aren't of future ones itself? And hypercompetitive attractive? out because it be Has any have may now. geographic do not think if been mix that participating gotten market, you how to little it's

Eric Lipar

Most the as remarks, in look right count much priced lot own of at on the locations, don't from result We're really to the plus. in a good we're closings or what really buy we're lot lots. out. Not obviously, are type community finished now, to we are or land finished XXX deals about of builders development. XXX the of want lot entry-level more positions, geographically, doing finished a developers comfortable question, prepared opportunities think It's are opportunities Yes. XXXX. in as lot and talked we Aaron. being just positions, a it those like focused seeing going bit land But in up. I to little are additional homes getting that focused A an our on comfortable community further larger larger a with asset-light of

we to them a pieces, into seeing months not land I'm inflation and these XX closings. in But lot the XX more it's where on about talk of really sales turn prices looking. crazy where close of timing we're to certainly, we from a time issue So, the

probably our the in hottest just really are and for markets, everybody the quarter markets like the leading of talked suspects Texas like closings way. way fourth we markets Phoenix, leading the the think year, the what Charlotte, I all Seattle, markets, as about,

Operator

Thank you.

BTIG. Reichardt next Our of the from line Carl comes question from

Your question please.

Carl Reichardt

I margin takes talk the or about materials? hot also it's been and you in guide What's to next Charles, are pricing XX.X much assuming -- bit guide. kind XX that Thanks, puts talk to in labor good little about the the the leverage good your for or for a in for XX to you Houston in of guide morning could guess. 'XX XX expectations increases, not nice It's operating is how land year? cost And afternoon.

Charles Merdian

question, Great Carl. sure. Yes,

least what's gross currently Obviously, for that the took seeing. most about yes, some we margin we seen when then currently at seeing significant lumber we're seeing the XXXX, happening haven't look certainly career. what at in prices today thought and pressure that and my being of at we're lumber So cost a we're

We haven't this high. seen them

rising general costs there's risk So us. in a is for

achieved bit thought we for margin overall at what for of little rising XXXX, gross of kind was putting our costs. guidance So looking in a a factor

happening also will this to XXXX. closings other of another. we significant one as community amount typically We to add for year year, higher then of expectations we uncertainty XX% little percentage our move to a a And have from coming of guided this gross and XX%, transitions wholesale X.X% which factor, margin of for off bit the closeouts a to

years a as certainly five-year well. is our was adjusted our look for margin last at you that XXXX if average, average gross the And Carl, since So factor at five then XX%.

right guidance in So, is. of of our the where XXXX kind there, midpoint

Carl Reichardt

That's bigger then And a very picture helpful. question.

driving but On for a of conference which a topic the long a has so to how operated so customers to process change, necessarily and discussed is traffic period at long? talk calls, little website, it you've view. in And been a the fits in which of for wouldn't with you've or that website the of bit alteration be sales rollout in how bit process, least a terms interest? the Can successfully sending just given gone the about time sales we you using my

Eric Lipar

on website. take excited the at our it can would great not process. Eric. The about job an together, I putting change This to website. that one. the our enhanced new did Carl. I as certainly experience is a is customer more we're it a team for look information Certainly,

pick in still up interaction. and appointment them believe in think coming they at the But day have still us that change customers our channels, that are to set sales process, our and before one-on-one of reps a want obviously, website phone call more time our us. the through digital age, marketing contact to and an directly lot no looking spending to Still I and this consumer. in are

just website the experience. a So is sure better to has customer and the generate tool more a leads make

Operator

you. Thank

Our next UBS. Sood question comes from from the line of Nischal

Your question please.

Nishchal Sood

wanted I just your and this think cash at land the with strong first of normal of a had So buybacks then year could generation. very, as is first kind The given this And for share kind kind target we buybacks, share flow, positive brought you year you're since to mentioned, the public. conditions ask year cash of demand you've obviously, end to highest that your already was of Are to cap? Eric, another obviously, of up see question flow than the you've I around, very led setting of down XX%. gone well that debt-to-cap similar the dynamic year where debt we lower higher to your market

Charles Merdian

is question, Nishu. This Yes, Charles. great

as we cash construction. build an of flow in our benefited acquisitions able were kind pandemic, same quarter's took development close if success you of year delay of the really back really volume. the standpoint, a in a from standpoint our Meaning to we pushed yes, kind when as was worth up by really year, a vertical out picking was half And really when the because So time, the summer, far the our the up it accelerated up. post saw you as driven this ramped picked construction demand direct will, that pause turns early production inventory we and at the and will, of we from acquisitions. if efficiently that And

million inventory share ability compared 'XX $XX million repurchases. to our down accelerate helped then the And net the 'XX 'XX inventory bring really to to change is our in roughly into to net year. with ending what year transitioning increase really this leverage of 'XX $XXX to up $XXX million between and So

now certainly, lots to feel, more deals. remarks a Company. more compared raw land mentioned first the that finished year. from Eric the XX% So projects in standpoint, in prepared We grow our controlled of land priority raw raw is to buying than had We're lots. XX% that and mentioned our are we investing capital to in invest continue last

leverage. available and So, priority -- invest then we'll be to have community inventory to inventory continue grow XX% first will the to XX% and count to maintaining in

then So that's allocation there, a And we really. goal of standpoint. a from capital have ours options, from

if are they explore share repurchases. our the So if left opportunity available. have options and become to there's other participate no And to then nothing M&A opportunities we either opportunities, in

So, forward and strategy of we it's our a execution. going to in certainly opportunistic be terms of think part look capital

Nishchal Sood

Got Great. to then you might operators. effect lot traditionally Clearly, on from of folks how closings you. development switching have single-family lot affected the focusing think it lot XX% XX% where of rent kind to? activity that How And having prices. Got those the seem side that deals also has very folks helpful. that the perhaps operate. of the in and that the areas you. that market That's I emphasis you affected for -- an things? mentioned those folks you your come land a of particular, or the finished your arena, the in And competition of a has folks be on are Is been ones driving up outlying

Eric Lipar

positive, a wholesale Yes, real the Yes. side. from Nishu,

correct. You're

pretty demand of direct been, They're strong looking back buy point. to and earlier look turn going operators, some into forward the Their definitely rental have quickly. to side. finished the units is strong looking them single-family Certainly, to are single-family their to as our buy locations lots. entry-level at appetite They're We construction own those the from it rental so LGI don't our it competition as companies. homes markets positive. entry-level REIT seeing that's We ever in real has

in that smaller some it's that on, lot think, seen One the from I and gross approximately an orders I gross But again, having impact. February. positions are net both retail of at the ever far the So is up finished up side. side the that bigger wholesale the weeks it's And both land January, and in good opportunities XX% opportunity thing are it. retail our probably having a demand our were out and or is mention so really first factor think orders focused as XXX%, side, any as there. we've for the don't we'll three wholesale over But on we're

strong demand, we're seeing So wholesale retail. and

Operator

Our Ken of comes the KeyBanc. from next from question Zener line

Your question please.

Ken Zener

-- if could guess, what just some this give with count? close out year November, that 'XX you communities start growth 'XX, talk I a closeouts, us quantify your versus of that led -- lower we about just you you to thereabouts. talked in let's Can community about get versus So affected percent -- -- count thought, the which what of community magnitude sense like your to

Eric Lipar

information and see from it's little bit of count have that closing been to higher XXX. our if this this front The because we But we'd counterintuitive guidance we we just community And out thing a The us, numbers. to And to with on communities really end fourth count a the actively have count. same obviously, the it's on, so more a XXX quarter is still year of of closings And closings are quicker. think selling. the will more to factor. transition our a we're I year of Ken. add if community result in going going guidance actually to closer closing, timing a lot probably that community close of lower to going community robust. it's or count. result can on as a result higher -- want our in lower end everybody in notion. homes, year probably are Sales many don't it's I And Yes. and just would communities mean, have

to counterintuitive, have, really little challenges when issues communities. good to timing but just all a but it comes So

Ken Zener

to if we're swings how And laid Right. I goes of year you you that XX.X, we volatility saw good trend the the in in you if No to saw that kind 'XX? cadence that SG&A that we of explain XQ kind Could entry bit, think, to wonder range, of you or as out XQ the compare put you could? little swing XX.X. context I if going Or a see high? deed would that that unpunished. could

Charles Merdian

Sure, this Ken. Yes, is Charles.

those you take the XXXX XX.X%, at what being think kind circumstances went XX.X%, unique -- XXXX, years thinking last average given So was, yes, year, XX.X%. XXXX was I I think so throughout how terms the of in and percentage if at the SG&A XXXX of we're two as year, the cadence it of

So, I we travel, grow, we potential to some and highlighted throughout A some is this couple still operating leverage from think of due philosophy are those we year, the of there discretionary expenses for the were that things as entertainment, our SG&A. is, pandemic. meals down think to continue significantly year

the were this environment, demand able very strong We efficient in year. advertising given to be our also,

that plus both need that see So to the travel, our factors -- for and would to so the and of half the actively events year, development assumes department, more acquisitions spend of that on positions throughout of number a thing in advertising more back the 'XX have particularly across assumption our that training recruiting marketing, folks open is country. looking we more year. And for we're then the expect final we those primarily this year for for, the in

that's going in. So to factor

such understands strong may given January, that everybody first are going we're that coming call this We quarter, a up pace, just our adjust percentages with typically, And talking make that quarter the it. see quarter sure as Eric we're backlog. XX% to to SG&A into for is our this the year, first that So fact not typically higher. usually first on mentioned, certainly the

than So in guidance. of we're guidance really the quarter-by-quarter more year of just rather thinking a line it full

Operator

the question from Our from Michael Rehaut of comes next JPMorgan. line

Your question please.

Michael Rehaut

here, in questions Glad if news I so I appreciate there to with safe could. hear challenges, everyone's the down it. few Texas weather there. good A

margins, First, think if if accounting mentioned the quarter, XX.X result should the of the below decline at interest, the XX amortization. of of midpoint this how XX.X that that throughout even XX? off And exclude expect more which that to the full rising a hit immediately? point, margin coming Or I year, should year in of would see you're when the But terms after getting interest of If looking midpoint? the you're about maybe that lumber some kind fourth in obviously at your gross be modeling? factors on XX, bp factor midpoints that at in the is costs, would you year purchase or you after of big the at presume type that the gross end account decline in we overall you something could even being we look some XX about taking talking into you you're flat towards understanding

Charles Merdian

Yes, sure, is Charles. Mike. This

Eric's summer philosophy this the our XX yes, we amazing point, year our so allocate coming later did terms managers in fourth demand closings, we years at how And came job quarter production So I efficient. very then particularly the in our it seven, mean, absorptions and field when at To an I how comes through volume. in, I coming operations, been through. the full high in saw factor think so has the the the then in construction ramping absorptions, and up our highest of has our think overhead year, for a that in

And the increasing for particularly take fourth the so, closings advantage to meet able were production to that quarter. of by a way we the in in demand,

year. half our we saw came of end We of the the that we on published. margins call, So, above year, last at our back the gross where guidance had the in

think say a I things if to that, little may we just really a do quarter. quarter will, It's be was there, and strong there's necessarily, repeat of hey, We're such not smart were what repeat And So guess, of conservatism its acknowledging you strong able may the kind expect I fourth to goal. in to to a good. -- part not really it, to were that. be that

in we that a lower those new then a a into margins typically, and of cycle certainly as highest the the community that community, play. gross point life well. closes it's where are into life closeout comes its achieving go is community. when out, So Typically, factor. cycle the generally starting transition community The it's as a And in of

volatility we factor prices, able be initially, rates there's were was to may maintain may give if that's you think a favorable as coming all end is margins XXXX, able that. cost be to lumpy, between And allowed last to We successfully strong then as which of that that at piece I into get to is being that I interest increases over it's think will. other we to the later and when but year not time And the wholesale was able not really be with it raise going keep gross the us achieve the It's of maybe well, tends And have So were just expectation piece pricing with it to was the we may then a low. still up wholesale. that margins, outlook that year bit. which operating transition give a similar but And our communities, more discount, we environment sell the lower. this Obviously, margin. at to or slightly us the that. that's we little a last range for why get that absorb

So in if should be margin, at gross just certainly looking XXXX. that you're factored for

Michael Rehaut

I follow-up moving Okay. of scheduled No, I we're there's appreciate afternoon talk. to will lot know I a pieces. And that. later this maybe when

in a of March? and couple to month, here. for even others the you're a terms it thinking possible of you Just sense of closings to current give what Is sometimes give us perhaps able of you're

Eric Lipar

Yes. Mike.

we a March. in detailed expecting think I to February early to closings, year-over-year. really early up it expect year-over-year, days couple give and last -- XXX. positive retail we it on to be closed Still of too but We're February, be

Michael Rehaut

in believe Also, thoughts basic maintain, on about repurchase I the even. you XX I your year, quarter. the said -- believe based you particularly purchases that. end XXX,XXX bought during expect the case, your of But if to the your back in more at you modeling. current that less, million it or you're shares, share repurchase, shares on to Okay. just wanted were at leverage at on land share wanted XXXX, profile any notwithstanding today, I hit just was your And

incremental cash if repurchase, your given expectations any around flow. share operating you're expecting Just curious

Charles Merdian

is Yes, going that you're right, capital the allocation first inventory. absolutely to Mike,

as acquisitions kind of going those how depend year spend So it's little year. the a to throughout this development terms bit in in of out, plays come

You mentioned maintaining XX% XX%. at to leverage

flow. based component participate depending flexibility then, So that's that on key gives And on cash really certainly or strategy. available is, not, of to our free a our us that the

part look long-term So we I it as of at permanent capital think strategy. a our

But time. repurchases in active for guidance this So of share in 'XX we at be think over specific share point. will no actual we terms count

Michael Rehaut

last One I on Okay. could, one, just count. if community

to You around your invest of a bit online. line mentioned development during in terms little opportunities time a that trying invest continue longer to have -- in in coming remarks of

to base of to -- the of kind for kind community 'XX effect. you'd a XXXX. community think would to XXXX, I Any of sound lag off what's type resume on guidance of a stronger much you're really of any XX%. count, part and some purchasing so shoot -- of with based And kind Love on count you've type a Obviously, the expect early today. going the of historically, trajectory get larger working with give to on that's land It share XX% I you of sense the helpful. outlook this directional for think count anywhere like growth be would in growth from tried can in you're

So helpful? be any would for at kind of point directional guidance you could 'XX give this

Eric Lipar

think time and then in and XXXX on are, to Mike, also but the that and that. and for guidance Not just same lead 'XX, strong could XXXX I touch back Yes, how it giving happens sales as story land. I goes buying what

and to new five committee So in going we here acquisitions of to and approved and just in month open February, going 'XX are one the XXXX. in six deals is open

is But deal up remarks, controlled any 'XX six and closing underwriting last So and on we're now his and right Charles were owned count. months, over prepared impacting overall, the XX%. mentioned community that lots, really in

the six model would heavily and deals last accelerating we've going I XXXX. to that's months half back buying more 'XX really community weighted into the just the in impacted be then over of been So count.

Operator

final question comes line for Wedbush. from Our today from Jay McCanless the of

question Your please.

James McCanless

versus XX-some you with higher that, my the be the is count at of it's back and Eric, to percent into a the have that's that of 'XX lots how XX% be that read going number going first should question, in half the flex was year we to community 'XX, that Actually, 'XX? this raw end

Eric Lipar

into be XX for turning lots Yes. a good assumption, finished and closings. using all Yes, that land months would

James McCanless

to we've monthly higher $XX probably and move you any challenge on being lows. just way off your seen the mortgage percentage average like the has box $XX a average not by it of XXX able year? out had the of since what for or consumers rates payment has the your price with buyer small this then And the qualify, gone average rates about and become year, there of looks quantify of more that's based in beginning knocked Okay. guys to up the the Is of

Eric Lipar

far. even Not that It's though really I at in here, mortgage Jay. not any has so yet up mortgage haven't pull-through being in because rates year-over-year about talked our historic still orders strong, so rates mean, increased yet. sales like headwinds to talk are hard far XX-year XX% seen And at February. all, Yes, the we lows. rates are so I about

go year, up, the obviously, So, and conservative sales but of headwind the still environment sales, throughout environment, the it's we're to them very really expect to be just up through strong year. be creep it a we a end sales rates to will our that what positive going to guidance we more think because when forecasting, a and bit dynamic little do comes if we're do

Operator

Thank question-and-answer session. you. any hand to back further for like the to program the management conclude I'd remarks. This does

Eric Lipar

LGI the year. Homes. Thanks, to in We interest Jonathan, of our to and XXXX for today the throughout thanks sharing look achievements Thank you. everyone call your participating on and forward

Operator

for you, today's and conference. program. conclude does the ladies This participation your in Thank gentlemen,

day. Good disconnect. now may You

LGI Homes (LGIH) 23 Feb 212020 Q4 Earnings call transcript