LGIH - Earnings call transcript Q3 2021

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Operator

Welcome to LGI Homes Third Quarter 2021 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 will turn the call over to Josh Fattor, Vice President of Investor Relations at LGI Homes.

Josh Fattor

Thank you. to the conference X third September XXXX. welcome our to months and XX, for results quarter afternoon LGI call Homes discuss ended Good and the plans, statements business Today’s for regarding contains updated guidance forward-looking strategy, call outlook, objectives, and XXXX. our only to speak today’s of risks management’s and which based future performance call guarantees are uncertainties. not statements, of are and on as These and expectations, are subject

materially those Reconciliations that XXXX file Homes accessible statements. for update differ about today’s later This a to website most results statements. could including to review revise call we forward-looking to XX, this or of report our in GAAP of quarter the LGI for in Relations any website. actual of are risk September forward-looking no publicly obligation our statement from cautionary and on anticipated non-GAAP forward-looking cause release SEC these accordance our should financial uncertainties and any and sections assumes be discussed the in prepared the You SEC’s section company on in with measures risks, issued filing on SEC, the our the measures quarterly press statement with today. discussion XX-Q that the and filings factors factors morning with Investor to other included will the in comparable Form expect our the ended

and Chief I Officer over and Our Eric. will call Chairman the Charles Chief hosts turn to Financial today Eric are and now Executive Merdian, Officer Treasurer. Lipar,

Eric Lipar

provide details quarter to sharing results. to start before on highlights third our our our Thanks, earnings more Josh. financial to call. by welcome off Good handing Charles it will afternoon of and I

update on full fourth so close will discuss our in our the performance the updated year. I for guidance Finally, with quarter and far an

business replicating company. grow the to our company like country. by was next as across markets of to goal that in anniversary the At new our model time I’d the a eighth our marks recognize week our public IPO, First,

their these proud scalable country. in the is rewards on to our results that company. model am I at attractive annual quadrupled for count, employees attainable for demonstrated metrics, and have we’ve Today, record-setting last our the exception. we X most focused of customers, thank work, we value in in people the I and to the respectively, Reflecting successful XX% builder Over delivered significant of years, operations X,XXX% the unique appreciation in have shareholders, community we rates closings created belief revenues some the hard dedication, makes we industry’s our most of our consistent states of markets. their and have year, profitability and by Because are excellence achieved country, price. across loyalty our and have in and and XX% values, proven XXth Year our all grown quarter entered. consistently successes, our stock have maintained families we our for XX that third that largest every and XX our commitment operating after market homeownership no the with and culture our was

this third with to the supply third a revenue communities. $XXX challenges to prices, record higher chain year quarter, and over During quarter new revenue, for last a lower homes. company in number of increase a our in we drove of closings absorptions despite average and record Closings million. set XX% records sales the X,XXX a XX% ongoing Combined increased active nearly quarter

goal XX.X closings per top was Dallas-Fort by XX.X, closings delivered XX.X. and with achieved our XX of month, month with followed community month. our homeownership and held commitments made per market XX.X Charlotte San gross XX.X%, to value third X record and We customer second to company-wide. we by averaged margin and gross per attainable per markets quarter, our the exceptional of without we pressures, per delivered community of the XX.X% recent Atlanta honoring fast our double-digit buyers since closings per remain keeping focused our Despite During our Austin X.X adjusted of quarter of margins. a our margin absorptions community cost Worth on was XXXX. with each core best Antonio service sacrificing performance

supply extended ratio a chain and expense new all-time development of construction times their third these construction and net cycle manage million. trade to am reached across disruptions to SG&A purchasing drive suppliers and an income work our our $XXX quarter helped have low, record customers. with which to grateful Finally, our I our closely limit impact headwinds markets. to partners and teams who Global

advantage spec keep focused even and strong to the a in to model fit XXX% pivot us current moving pre-select We between homes, construction is finishes enabling and the substitute SKUs of environment. quickly our alternative forward. suppliers Our

model position in the us pace full a these continue, achieving homes and deliver people we early we expected While construction release continue our challenges visibility quarter, year guidance. we had line are large the to operating through the new we to our on to year times costs. and unique closing homes at to Throughout in believe and for backlog work with built sale once

combined in the net year-to-date strong basis, a third our XX% the orders sales, year’s on decline comp, last the pacing As in On last growth quarter was comps to quarter. order we call, backlog with expected to the continue X.X%. high first slower resulted the results in as decline convert quarter all-time remaining last projected and year fourth XXXX. Further declines the compare in and our of in of of we are order

We bringing continue to and communities, the back levels. normal due backlog to release as time waitlists. customers’ of to them the sales our will outpace goal Demand homes with in existing as we our manage of in And of continues it to pace many continue sell-out soon size supply. our to we

we year. However, seeing are that signs normalizing levels are that surge began demand the last from

continues role by and homes supported rates. demand, that return fundamentals. healthy growth as is industry low the through in the long-term environment, moderating a as primary a we we playing to don’t overall be the certainly interest believe it’s by normalized are that these Instead, earlier to driven increases surge should price working demand demand think While affordability deliver, slowly we driver

During consider for meet will be call lots lots financial our at the our increased the maintaining nearly on that demand land quarter, future over details well absorption disciplined and Last in and assumptions, results. XX,XXX us to I criteria positioning made we turn underwriting to our lot to for With to our growth. in to that, more Charles what we normalized the position we over significant come. years XX,XXX, while investments quarter, acquired total

Charles Merdian

Eric. Thanks,

sold our closings the year-over-year million. X.X% of the a wholesale XX.X% in same XX.X% increase representing Our increased our XX.X% closings quarter total quarter closings last XXX record through a X,XXX year. in our revenue homes, third included These homes $XXX to We homes of business, compared total closed to or year-over-year. XX

resulted percentage average partially driven increased markets the XX.X% leverage, wholesale was period same closings. that pass lower XX.X% of cost larger offset offset This to operating higher from a wholesale costs success a the capitalized percentage continued lot same us particularly interest during Our higher by to period by increases this favorable points, through record X.X% price certain as Price increases, higher the point demand through with Gross price XX.X% sales percentage environment revenue in and and closings our year. were XXX increased over $XXX,XXX. quarter Northwest a last and margin expense and compared last improvement of year passing in a sequentially allowed a partially of costs, to basis closings. by

basis XX.X% XXX tightening year-over-year. was Excluding And our margin XX.X%. over XX date, wholesale, points gross of range performance basis margin a to given to to guidance our points up by gross we’re

margin to percentage were or were of point further of operating X.X% representing compared to margin the margin year, to range excludes cost points $XX.X basis XXX resulting charged our revenue higher XX interest year-over-year. basis to are million was our representing last revenue million during demand history, $X a to quarter was XX improvement absorptions wholesale a as XXXX. of accounting, X.X% from quarter This General for the realized XXX leverage basis of adjusted larger and expenses or lowest expenses sales expense million of XX and a XX.X% to XX%. quarter the administrative this same an Adjusted XX.X% totaled in expenses gross highlighting a compared million quarter ratio of our of last The or the approximately strength the to points. revenue. primarily of gross gross for quarter leverage X.X% basis X.X% XX% the the increase for $X.X same administrative of improvement same million to XX.X% improvement. increased X.X% for purchase improvement third Combined during in general operating quarter primarily The of $XX.X to revenue, basis markets. $XX.X related to and point last was closings. we together compared Similar percentage compared the revenue capitalized of third Our the quarter revenue driven adjusted by year, Selling XXX year. point related SG&A continued from across by was basis margin, and guidance period for points revenue the tightening gross selling, of

discount improvement quarter the of purchase the date, Pretax improvement we XXX Adjusted with range basis our of SG&A a issuance million to same of senior period previously X% or notes last quarter associated was the $X approximately are and for million related EBITDA of quarter XX.X% or EBITDA million X.X%. XXX guidance was excludes accounting, revenue, result $XX.X basis over to As costs representing and net to the for between revenue, the redemption and quarter premium, $XXX.X last for million of year. improvement related basis $XXX XXXX. a revenue, point was expense the the debt in XXXX basis capitalized together point our approximately point million our XXX third over EBITDA income XX.X% a XXX period points. a the maintaining or XX.X% $XXX.X same Adjusted over year. performance

energy-efficient for Our recognized points our effective we rate the tax XX.X%. XX in year. to year the the in we guidance effective last And effective tax credit third range full by performance federal are due XX%. and basis was our date, year-over-year of in retroactive quarter between tax to rate homes increase given XX% tightening The to quarter the rate our was tax third

increased XX.X% XX% third Our share income our were basic per and third share. and earnings $XXX.X $X.XX reported diluted million or $X.XX net per year-over-year quarter to revenue, quarter of

would $X.XX per been the have and earnings share. related debt have charges per would been $XXX.X extinguishment, income basic to Excluding diluted in third net million share and quarter $X.XX

were a orders recent net Third a XX.X% our and gross and earlier function XXX, quarter limit were of X,XXX, orders comments, a decrease buyers’ Eric’s decline desire record the time to pacing, backlog Reiterating decrease and of orders sales quarter in our last third comp year. a of XX.X%, year-over-year. a is

we third to sale cancellation for homes quarter to year-over-year. our third Our we a the decrease XX.X% as the XX.X%, X.X% our for sales backlog and compensate The for our expect value and increase occurred work representing was of a homes, quarter $X of continue XX and we billion, of through September released in year-over-year. our rate pace this on backlog fewer new was backlog this would that trend X,XXX expected approximately backlog. of was finished We an with as cancellations

our significant make finished progress strongest support objectives position ever. long-term land to continue quarter acquiring our the growth land to with We and

land quarter with were our finished XX, owned added lots September of We sequentially. land year-over-year lots, ended land or of of and our a raw and and sequentially. almost and X,XXX X% lots year-over-year inventory XX,XXX development. owned an XX,XXX portfolio either to and XX.X% owned a controlled the new consisted of lots, increase our owned XX.X% vacant lots increase X,XXX As increase were XX,XXX under XX%

process. homes. centers we the started During had X,XXX information homes or X,XXX quarter, homes, in as of we And over completed September XX,

the X,XXX the information of of these our XXX homes decline at were Excluding end year. a last XX.X% compared of only homes third quarter completed to centers, complete,

lots XX,XXX increase an Finally, quarter controlled at XX.X% we sequentially. XX.X% had of year-over-year end, and

cash compared Turning the in balance million million $XXX sheet, ended to the last quarter. with we quarter to approximately $XX

issuance senior after last temporary attributable down new pay from our effect Our higher facility. the giving the cash revolving credit proceeds our to balance of quarter XXXX was of notes excess of

costs being to million end available $X.X notes. we of interest redeem senior XXXX our and to During the quarter, a amounts And under facility and $XXX expense XXXX we result, refinancing used saves the XXXX expense. debt by expensed our million facility credit year previously outstanding notes. as financing amortized of with outstanding were our that early million recognized The years credit million total September, revolving we this deferred redemption discounts X on in $X a At and all completion of senior the combined $XX.X in extends our per successfully debt approximately notes. in maturity had and of association our

Our available with liquidity cash capacity million. hand, under approximately quarter total our was on borrowing $XXX facility the of ended Including million. credit we $XXX.X

capitalization Our shareholders’ net to ratio equity $XXX XX.X% last over the million In last year, debt by more to XX.X% billion. $X.X same to than was compared time has our at increased year.

the delivered period on strong and ended profitability, as our XX-month of a results Additionally, a we result XX. operating XX.X% of September return for equity

our have common X.X of $XX.X we repurchased stock the stock. repurchased And During XXXX, quarter, third nearly our shares of shares since for common million million. we XXX,XXX

XX, remaining on $XXX.X outstanding existing repurchase of were million As XX.X stock million September and our program. there shares

systematic expect Eric. as continue the this capital priorities. a reductions the point, turn component our We share and to over broader to back At opportunistic call allocation I’ll of

Eric Lipar

Charles. Thanks,

Our announcing closed that October. strong fundings, we of a quarter. the out line with homes we review into formally expect press and verification tomorrow, in has in continued release our to Subject performance send to expectations, approximately XXX fourth

extended year Moving shortages guided with we end caused and expect the absorptions close out timelines. fewer updated quarter. year communities full than we guidance, earlier than to Elevated to communities to our planned to have last have supply development now

with now end expect XXX the result, XXX to communities. active year to we a As

to continue to is thanks count our the guidance of thereafter. to Year-to-date flat sales the and price a between closing we doing closings We considerable work and in that with to guidance XX,XXX phenomenal remain manage of deliver homes to expectation average increase count expectation $XXX,XXX Similarly, October indicate lower chain a communities slightly is to community year, up purchasing for XXXX teams every our pace unchanged, this supply year. challenges. XX,XXX day our in model the Despite year community construction full are this the $XXX,XXX through on our unchanged.

to XX.X% our XX%. As margin Charles gross to tightening noted, to are range of a margin a XX.X% our adjusted guidance to and gross we range of XX%

The third higher marked fourth prices. expense from of our and quarter quarter as single-digit sales we SG&A closings consecutive benefit average

full in XX%. rate expect now date, to X% a maintaining I’ll say between are how X.X% year SG&A our and we are tax Given and pleased between again our our range guidance and performance an with XX% effective we results.

for well exception we’ve land to new years as markets many in on For we set extremely to was the positioned balance repeatedly markets doubling new of with highs and our the we’re industry-wide our our pursue on Based records, community last come. year expectations goal going results and strong count. no impressive and and deliver our to X deeper date, sheet maintained attractive of this we select our our years, all believe have and of pipeline, we to absorptions strategy quarter quarter challenges, in existing Despite closings, third last revenue. expanding

the We open will call questions. now for

Operator

[Operator comes from Thank Our with McCanless Instructions] first you. Jay question Wedbush.

with proceed question. may You your

Jay McCanless

Thanks my afternoon. questions. good taking Hi, for

first repeat for The Eric, could you community one, what about ‘XX? you said growth please

Eric Lipar

and ‘XX. then down, Yes. we count increase ‘XX, revised a slightly said for count flat we similar, up. we The upper flat in since slightly community saying but to community we’re Jay, ‘XX quarter now Last to considerable in said

Jay McCanless

guys home that. then more might it this some on people is last qualify once canceling of Is who Maybe ready? some And of driven? versus, rate you I is Great. think XX% part this color not the around the part Or out think XX% year. was rate, cancellation you

Eric Lipar

neither It’s The really customers the we of orders. honoring inventory bigger really just we’re to are The build the limited we contracts. math that quarter that house of cases, a It’s orders that our Jay. just lot inflation in we percentage didn’t first to have those, the was we our price. It’s no, core them number. through, and sell. them the though main Since to the we at values that the quarter, sell just if even upholding going equation. this Yes. cancellation integrity. customer we’re a we’re deliver of going in all to But going house, sold told lot coming And enough didn’t through

rate orders, customers. attributable cancellation the So of providing lack and make just to our having is really inventory attributable to to to not good that’s sell lot service we’re of and a sure

Jay McCanless

for Thanks question. great. Okay, taking my

Eric Lipar

Thank you. welcome. are You

Operator

Reichardt Carl question BTIG. comes next from Your with

proceed may your You with question.

Carl Reichardt

I I everybody. to X,XXX finished at said Thanks, or Charles, And wanted you the supply vacant. about ask lot XX,XXX. so think,

can XX,XXX ‘XX percentage you currently communities? expect and associated you’d you’ve percentage that under us And market that got what of at open say, look tell is is what in control, with, beyond? with you and then ‘XX to to If what bring associated

Charles Merdian

that Carl. above what what of Yes, question. those controlled half couple a majority handy, been don’t vast it’s are in talking raw We consistent controlled. land Yes. with last of but Thanks, say, the level we’ve about And them great necessarily the XX,XXX, have are about lots of we detail deals. can right, quarters, the of

So piggybacking ‘XX comment XXXX. off of Eric’s and about

pipeline. of deals a So not seeing just lot we’re in lot our finished

land, putting as And ready pipeline XXXX so communities and or to in we’re our on deliver getting that buying development those into focused raw XXXX.

Carl Reichardt

Okay.

do and operated that’s you’ve the sense. the makes option Is been vast that it lot So you’re not a way – still your finished majority for to going self-developed, while. contracts,

Thanks. Okay.

Charles Merdian

Correct.

Carl Reichardt

a similar the – closings if resistance price made curious given from customer? the seeing And to channel, and you comment pricing that you’re if number of then about wholesale levels of I’m you normalization. had

Eric Lipar

extremely a and of demand is robust. business right described going into I’d extremely strong Carl. is This is is capital wholesale There space Eric, lot Great Yes, question. that say the now.

investors. the to We have very inventory little sell

with So year. we’ve very the this percentage pleased been

going up, to be probably XX% our at to we’re closings year-to-date. it’s end of quarter, coming off after XX.X% XX% last We’re going and

I being pricing. even demand at today’s would wholesale So strong, very as describe business the still

Carl Reichardt

a price standpoint, similar seeing dynamic to in consumer resistance a From you you’re what sense the don’t channel? seeing you’re

Eric Lipar

much, That correct. as is no. Not

Carl Reichardt

lot. Okay, Thanks a great. Appreciate it.

Eric Lipar

you. Thank

Operator

Thank you.

Truman Wolfe Our Research. of Patterson next comes question from

You may proceed with your question.

Truman Patterson

Hey, taking everyone. good afternoon, for Thanks questions. my

the are quarter, you hearing horizontal a shortages side. time or that the kind months. We’ve believe delays First, happened to you mentioned what’s of the and been a XX of lot development and continued on development raw all Last work. I clearly was of all X, doing to could you that was buy X of closings over update into give you just convert there an months? XX land piece it past hoping I muni

Eric Lipar

engineering of on this is depends But start. Eric. I’m closings. in and certainly certainly Truman, XX on it’s taken Yes. and quarter. months Yes, that the market. a sure it’s done can has depends XX time specific piece the the raw getting buy been track. any construction changed It But I much timeline is not not on for average that sales, into turning to It last to a how land quicker. the is good much if

impact, raw buy impact. So have ‘XX won’t impact ‘XX or XXXX and an closings. to it’s land we’re – deal we on not going now any It’s XXXX

Truman Patterson

will month Okay. And count X per traditional your community based on that we’re more XX the a an X expect per pace? elevated, flattish absorption you slightly seeing X.X to call Is assume of that up. question in to month ‘XX? be does kind we it, to that Or housekeeping then just that on

Eric Lipar

‘XX more X, No. nothing strong, and like ‘XX which pace, year. absorption this still be X.X ‘XX, very more normalized is forecasting That would but to

Truman Patterson

XXX% build Could were have me, sort to to of Okay. And during quarter? final you spec drive what strategy. you I one discuss for the just all the you able then remarks spec quarter were per you this XXX believe just said trying because to third month orders going on balance in I’m prepared range? X.X in the absorptions your based completed specs. forward the returned

Charles Merdian

quarter. the Charles. the had is I the September And part early the strong. third been the at at year. this just we’ve has the think X,XXX just X,XXX And about of only It’s last completed XXX% demand over we Truman, from started been Yes, mean been in year. But homes I for spec. end and backlog of half so has the always of the quarter of we XXX is end what quarter starts strong the

Truman Patterson

Yes.

versus to the little pre-sale in let selling Sorry, later. clarify switching bit year, earlier me a

it. Thank all time. Okay. appreciate for you your I

Charles Merdian

Truman. Thanks,

Operator

you. Thank

Our Michael comes next question with JPMorgan. from Rehaut

proceed your You with may question.

Unidentified Analyst

is for This Hi. Maggie on Mike.

the moderated increases. price believe First were I used a had still to being demand, moderate but question, said just you they on bit. they

price and So increase I was over two future quarter give an during the quarters? us increases about next for that the or quarter idea could of wondering saw you you’re you of if thinking how the the potential level

Eric Lipar

can Yes, quarter, elevated I a over Maggie, this demand, by over driven quarters. is for have Eric. or two costs last by start. Great ASP also is but Having question. our the driven $XXX,XXX quarter been

whether had increase have up, our on the all increasing are lumber or development obviously, the we the all of side, the costs all because fees, whether well. land of now costs is prices it’s its So, and are to costs increasing as construction, substantially development

the construction some costs have we So, have other costs in on Lumber moderation increased. has down, come but side. seen

So, projecting the are similar cost QX. while. guidance why environment a I to to higher is think here be That’s remained for ASP be going we our in But unchanged. very

Unidentified Analyst

business. that this up you. you on are XX% at of And expecting Got then said the of I the just wholesale part closings you about Thank to believe end year. it. second, it

of forward you the look overall talk if that might part you or As wholesale you have think target couple business how of business? about the And kind your next years, is you a could of kind of of any where over go? you think

Eric Lipar

Yes.

year XXXX. XXXX yes, pipeline not are wholesale contracts on closed guidance for give We and the getting through business, working to we are our of for our ready

to or quarters going available quarter XXXX. the We inventory start two over for next are looking

was part year, a confident we it of We been are as this to will XX%. going be the by business very our evidenced be there. to demand We it’s thought think XX% accretive –

the place. high the the demand at just I that’s end up end think, to going amplifying are of We in range,

but demand back everybody ‘XX, on part there our still think to a it shareholders. to business the good of to be ‘XX for go will will very or be our and we accretive we So,

Unidentified Analyst

Thank it. you. Got

Operator

Thank you.

comes question Evercore. next Our from Stephen with Kim

with may question. You proceed your

Unidentified Analyst

is This Steve. Thanks Hey. Brian on actually guys. for

orders mentioned So, level the down during you basis, themselves number the significantly well did a of orders you starts the below were was but on year-over-year of just quarter.

analysis gotten broadly significantly We past how during ‘XX. few us oversold say, you have on you to builders almost have in the condition. guys the that quarters. it back your have completely these But some doing two XQ oversold, past slowed so, doing And though looks quarters, been were in as orders and in reversed

positioned level So, are guess is, more sales quarter? normal next question – my to of return you in restrictions now sales near I future absorptions to to positioned and a well lift the possibly

Eric Lipar

a QX. is Yes. This at it closings, we another Eric. way It’s look question, think X,XXX have is great I Yes. And to through X,XXX got Brian.

got have just in and close the backlog, those over homes the We X,XXX in of scheduled vast to QX. majority are

sell available have of a still. we to inventory don’t lot So,

started we are of the providing construction. sure also we that know And make we house start for closing an the where and has now are we deliveries, the want a been January to the for service are starting exceptional to unless house to and not environment operating with until sell know house customer put in an have we certain. cost our environment. doesn’t inflationary And to we then happen until just confident because dealing costs in We because dates, such we construction customers, February are we the sale don’t going also

to deliver are year, houses we of in that going the the those March price starting starting next January, February, November in put just to we are list. are So, on

XX%, QX, percentage environment. believe similar sell. be QX, a So, we to going normalized should our then nothing for to have get quarter orders to are And the to that in first XX% down to we because back order

year very comp the quarter us builders. of because best Now, homebuilding history practically of were it’s last the first in all for was orders a tough

it’s So, for really first orders inventory But back normalized get us. we quarter, will to really, and strong.

Unidentified Analyst

then there. That’s second gears Eric. disruptions. on it. of changing Thanks, my Got color helpful is one, supply And the Okay. chain here, topic really

from wondering another. and/or And chain negative builders, the up sending XQ state We am to so, guess And some reported quantify if siding I pick shipping borders any you if site one projections your your XQ able disruptions? across to include from from have guys tales for other heard impact the or margins that of paint supply to are job impact? workers I

Eric Lipar

Yes.

biggest our impact on construction think than is just of it And running is pre the year. supply on days XX timeline. was chain or I the this kind construction timeline about longer average pre-pandemic

having adjusted XX%, margin quarter quarter in So, are I more our state example guidance, strong stronger the in lot disruption our and getting Certainly, gross we or market is lines. of the And than third I across supplies the the is be. as historical than want in the and as that from think that’s elevated, under then gross think margin, describe, we so to very annual are where field costs but of right biggest and that you different using, out on cost. it for are don’t track we doing right a far fourth

Unidentified Analyst

this if you brought already – that in costs XQ And right? but was this Apologies is probably and working I more. lumber primarily, peak here through one up, guess are

Eric Lipar

Correct. Yes.

was months Our peak four three for upper lumber ago start. cost or months

So, it’s our when from to October September, it’s through right financials. now is come closings. going coming through

Unidentified Analyst

I will lot it guys. Awesome. Thanks pass a on. Okay.

Eric Lipar

Thank you. welcome. You’re

Operator

Thank you.

Our Ken with next Zener question comes KeyBanc. from

your with proceed may You question.

Ken Zener

everybody. Hello

Eric Lipar

Good afternoon.

Ken Zener

units? think out mic. lay it, inventory last was the did I XX am quarter? on just checking actual have I guys missed it but XX, might I you my

Charles Merdian

X,XXX total XXX We about X,XXX did completed, units. We had in WIP.

the last completed as year units with being So, our WIP same number it down. about is was the

Ken Zener

where that’s mean close, inventory, right, Yes. is, essentially reason The I ask I are you starting.

that – saying you normalize as highlighted number I guys think is first second So, What quarter, talk quarter. inventory you about the normalization, should for you are starts.

because, lot, guys back actually you I just that are and those there you analysis, you seven guys seeing? the a are ‘XX, closing, the not six factors, you ‘XX. are rate lot are mean, were – a to of outputs. ‘XX, doing governors you so targeting ‘XX, But lot are undermining different conceptually, to of I Just if a you back trend you grown mean, in There guys regions. is nine what in obviously, on but focused look have in a just obviously, certain what orders, are in

little in mean about a you you have little have eight are kind it that where where think are communities think In cited natural your year? smaller, you that different. are I the walk just the extraordinary next you did of about thought are variances is margins, cadence pace a You you Texas Northwest, so your communities, actually targeting it’s the are talked through causing is that when strong Can there there there gross been, larger. better a – or it’s you about normalization us you they because ‘XX. what

Charles Merdian

a at Sure. And we is to months No, time. think see one around our inventory like Ken. management on any great it’s which to four inventory the philosophy six in I question, is months same, point

So, around at would year, to of units. somewhere see expect a a build pace you X,XXX XX,XXX

into is difference, is heavy we at highlighting coming in WIP. are in roughly X,XXX we want is, to little to I and the think shift where what that is a The just are close total So, be. we

cash customers delivering are very flow. the is we with the which closing good So, and turnover very for houses inventory quickly, and

So, we are very efficient. being

a of in the more a XX-XX I vast is being just or think complete WIP majority see necessarily don’t than would arrangement you rather So, change more WIP. normalization, by much, type total XX-XX of to units of to the but shift what it’s maybe

Ken Zener

of question, you what closing not you under WIP your just is for guidance land, that broken that inventory for out or the Q? is because at and billion, bad Yes, construction, something half in have that out mean, right? Right. I of all. $X.X do comes it’s have Last just your

Charles Merdian

footnote in the It out XX-Q? comes in the

Ken Zener

you have right directional Do Yes. of now happen kind to a breakout right here?

Charles Merdian

I you. I do. got that have for

and in So, homes under $X.X in being $XXX was about We balance finished progress in centers. land, information the with development $XX had land lots, and about billion. in completed million in homes million

Ken Zener

you much. Thank very Great.

Operator

Thank you.

Our with Deepa Wells Securities. next Raghavan from question comes Fargo

question. with You your proceed may

Deepa Raghavan

be next that gross means peaked which margins into cadence we similar, to Two afternoon Good or picture and may margin mentioned think quick or do these should have your you me. year, through quarter, this backlog just XXXX? supply next expect chain you may expectations into starts we XXXX? One, lumber hurt. Hi. better we that delays but as everyone. Would you talk for your questions not then lumber quarter, about benefit closing can How

Eric Lipar

Deepa, Eric. is start. this Yes, I can

We gross buy are that But being do we we ‘XX development. a yet. for how our deals, not to you ready margins said, give lot look if at and of historical margins guidance

described deals, an to have that’s and end are business gross results. historical to are how underwrite we more between and year So, we very been averages, likely XX% The expect wholesale, and margin for buy our margin those about be adjusted XX%. piece to very and margin. that historically the when this we our a adjusted what property that the underwrite above a strong gross including next we we we we that’s producing I have consistency because brings slightly. is to gross good And as of I types And margin future, year, of produced. down in range, of year, expectation, we buying, mean XX% that XX% wholesale gross

that’s gross to historical what similar for we margins, expect. results always So,

Deepa Raghavan

That’s sizes, I and the obviously of or filtering if it into you sizes? staying and mean, increasing community been lots you same? beyond. that’s a even lot, talk your XXXX, are I through benefit lot everything Can like Okay. for calling not your but increased fair. none these XXXX looks per have amount sorry, the mean are lot of to lots

curious, the number community on lots of just it same is per average? So,

Eric Lipar

Yes.

lot and directionally, have larger those and self-develop. And development, from more front think it’s that finished tend the of lots to finish take buying probably a or developer lots, blend higher down compared exact developments think us. because I are we But more numbers don’t The increasing to land self-development. of just is be directionally, the I percentage towards don’t in Charles larger. has those I they positions.

Deepa Raghavan

pass on. Alright. I will Good very it much. Thanks luck.

Eric Lipar

you. Thank

Operator

you. Thank

Our next Research Center. from comes with Alex question Barron Housing

question. your may You with proceed

Alex Barron

to Thanks quarter X,XXX? the give starts sense year’s quarter, you of good just this was hoping also gentlemen compares year-to-date could for I and to and number how get afternoon. last a us for

Charles Merdian

ask I it if and you to see here flipping not, unfortunately. – I Alex, if ahead had Go Just here. back I handy, to which get will see do can

Alex Barron

like are – buyers houses. in I versus mix change seeing you coming other saw? one. of you in There Are was the Okay. buying you change people question the the question in all with been a boomers change you a has guys Great. of wondering if guys traditionally feel what that any who from is, is any baby buyers your has there mix been Yes, there states. other guys That’s Obviously, the are of sudden of seeing? lot talk

are other to you to homes make doing XXXX? development do to is, of the more do as that The to you are similar price the you to size now, land by are deals homes what the these be or XXXX, you question seek something going going or for be to point wise the prices expect are doing are going similar guys affordable

Eric Lipar

I Good Alex. questions, is Eric. up Well, This is numbers. those can Okay. start. Charles looking

all, buyers, One X point history. I is a things. same price year of have the in basically our to have last the Rates First highest for been or got of couple would average years. sales we our

payments that So, higher. our means monthly are

by the making are the So, of of they the is measured our amount ever quality credit their it’s been. buyers and is money best

that been buyers. average a XXX number quarter our that’s XXX. Historically, was credit has been last XXX Our score between and of

from the buyers seeing we increasing. are is average and credit our scores So, and quality income credit wise

bond not seeing I think has but proportion coming houses, to purchasing the we that’s sales And increasing. that’s community past. more direct our wholesale on the to only are side, been average more and it than investor market in activity, a the the elevated price the investors

affordability is always far as goes, development the As important LGI. to

we are buying assumptions drive day even it affordability, it going or larger So, is on year. it. really we one. house more deals acre is land The for last important from land X expensive a X just more was Currently, as expensive than on land standpoint, to years years forward, ago density, then surprise to plans really it’s lots more are us And was density. a to ago. going than per cost not develop Land the is continuously these for looking

believe, maybe three not to four believe as we really So, where or in we public its months been but continue peak just have it’s been months it is operating more a labor, that’s going expensive to from ago, depends on how because historically off materials, company. costs. get house We since fees, doing city business

Charles Merdian

those here. for you got have I Alex, numbers

have starts X,XXX roughly X,XXX second at total the We the started for about quarter year with in year. this

Alex Barron

much. Thanks so

Eric Lipar

Yes.

You bet.

Operator

this you. Thank At am not I questions. time, further showing any

Eric Lipar

interest call, [indiscernible]. participating Alright. Thanks Homes. in on and today’s everybody Have a your go continued for for day great LGI

Operator

quarter you. call. a day. This third XXXX Have Homes’ conference Thank concludes LGI great

LGI Homes (LGIH) 2 Nov 212021 Q3 Earnings call transcript