LGIH - Earnings call transcript Q1 2022

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Operator

Welcome to LGI Homes' First Quarter 2022 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 first call quarter welcome results discuss and the for of afternoon our to conference our Good XXXX. outlook, LGI I'll will remind business regarding contain call and strategy, Homes' forward-looking statements for listeners that include that XXXX. plans, objectives this guidance statements statements expectations. reflect current management's such All

risks to statements and prove incorrect. to to these that could are, therefore, estimates be However, uncertainties and cause involve subject assumptions and management's expectations

SEC, for including about You discussion our those factors to statements. should with forward-looking review uncertainties statement sections our differ these and that our risks, forward-looking the the statements factors could a filings of cautionary from other actual in risk and presented cause results

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

isolation in XX-Q in is XXXX, to will we be for our with Such ended to with be quarter we later comparable earnings be Investor filing This to on on section SEC can morning the today. today's we in the Relations website. measures presented of Additionally, on file call. Form accessible release SEC's expect GAAP. issued prepared XX, in this for that in measures, as most quarterly GAAP, that of and financial found and website the report March our with the the measures accordance Reconciliations discuss non-GAAP not intended will in financial information or financial information the a non-GAAP considered accordance the substitute

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

Eric Lipar

more open Josh. our highlights financial on on quarter, afternoon Charles welcome I'll call. with and to first Good and will details earnings then our provide our Thanks, results.

our outlook in so operational first the of quarter for chain close year. and results. second on the supply our strong Despite the an quarter, update Finally, delivered performance ongoing rest with far I'll we headwinds,

Our average well Antonio for in Dallas-Fort first closings month. with month; on the price XX% of market our per over of month, markets the first Vegas with quarter per quarter eight last top $XXX,XXX, came an over increase per five second average at was year community Worth with was per selling performance. Rounding the was X Nashville community year. XX.X with above period the same closings community per out San Absorptions quarter by Congratulations with an impressive these XX our closings in followed were XX.X. and Houston per X.X teams to top Las X.X X.X.

in margin were all-time quarter XX%. results During all had adjusted continued respectively. our and quarter labor to Gross of processes significantly, profitability deliver the shortages, first the highs metrics. quarter, pricing virtually and also continued XX% impact over and EBITDA record times Despite on record supply at at in were XX%, as and delays. systems-based we inspection these constraints margins first lengthen up a headwinds enabled our coming deliveries, power margin cycle navigated to over gross us

of demand-driven our margin records. and quarter deliver both helped income of continued first disciplined over Finally, were over income net cost which and pretax net efficiencies XX% of margin controls XX%,

last we were than sales XX% with backlog. pace, homes our rate up X,XXX closing and within and releasing dates, to while customers' of ended over eliminates commitment of our costs, homes view they sale of of limits the estimating time improves days the clearest and part quarter in closing. Doing customer backlog more and Despite are interest they prepare a metering to rates risk providing XX exceptional of so accuracy are As when close. service, provides rising orders for our March we

Given low the economy, fundamentals, backlog the the and including interest exposure. of closely demographics, rising new unemployment, tight rising underlying backlog report can over interest inventory, are born out up existing prices Demand supported for higher. preference XX% homeownership Nevertheless, and rate by sales rents, has our move attention pandemic. our a we're monitoring expected the are favorable was homes and and strong on of that rates mortgage of significantly no increased during to in rates, positive quarter strong, the

haven't the a we result, to markets We as our As our demand each hot seeing need monitor carefully the adjust demand not year, XXXX. current unprecedented levels are throughout from that is as last witnessed of and we signs seen normalizing in certainly while course.

XXX In very for closings unsold, at the end cycle to on results. of more longer new With the fact, communities. continues turn be Charles financial to to primary of homes completed homes constraint I'll the and quarter that, few details and only call times with those over our opening

Charles Merdian

Eric. Thanks,

as the a result of active During we communities. year-over-year quarter, fewer decrease a homes, X,XXX closed XX.X%

business, in of those communities above XX.X% averages. our total of same XX.X% closings, Of quarter, or of during quarter XXX total total sold were homes pace absorptions our to our active year. our through the noted, As wholesale representing our homes remained the closings historical last closings XXX in compared

offset a last partially revenue same closings compared prices, fewer was resulting higher of Our and period selling first XX.X% decline the million, in by quarter the average year. to $XXX.X from

XX%, year a capitalized quarter increases The costs in same cost through As margin over X.X% price percentage resulted driven by of a demand offset closings. Eric at cost from record. improvement sales larger same favorable a passing markets. and increases that environment Price came increased in allowed $XXX,XXX. year period a to pass XX.X% of improvement sequentially, in the period last the interest increases, selling a were our to our company through wholesale all by price, average point last lower and average primarily record Gross lower us new this and highlighted, success percentage lot over of our partially a expense, XXX basis as

to also first expenses $X.X sales capitalized General to this Combined primarily improvement by X.X% X.X% the during quarter a including EBITDA $XXX.X compared $XX.X XX.X% quarter Our last and million XXX EBITDA quarter to million Adjusted general of XX million The point quarter point XXXX last was for the and quarter income, XX.X%, of accounting approximately the a was representing our of or and as and accounting million or revenue same approximately X.X% same the or million million year. over revenue $X.X year. time excludes year. point together adjusted gross the last record last our investments quarter basis record. the of of continued of Selling people, cost XX growth. million basis point Adjusted the a increase first to at EBITDA million to our revenue were period driven lower purchase a excludes purchase for points. first decrease $XX.X year. period Pretax basis XXX other margin together overall revenue, X.X% last construction were and the XXXX. million to point quarter company representing was $XX.X new a gross or $XXX.X XX.X% basis or as the related or revenue $X.X selling, revenue, over net quarter period last well period same same of margin for basis charged XX.X% interest and from expenses XX and of revenue points. income administrative XXX million related headcount land improvement $XX.X for compared expenses XX basis acquisition was of or of X.X% during a community Adjusted to same XX.X% new year, of revenue, compared year new compared $XX.X improvement million revenue in administrative totaled the count basis of the record. and additional approximately in quarter first same quarter a development departments was $X.X support of for over the

XX.X% last revenue. reported quarter first A and the same $XX.X effective $X.XX tax were XX% And earnings per and record in first share was million to the diluted or of was per year. first Our in rate basic period of our XX.X% $X.XX compared income net quarter share. our quarter

decrease were of XX.X% a quarter of X,XXX, gross orders a net year-over-year. and decrease orders were XX.X% First X,XXX,

decline noted is orders the process in we time due comps year last limit construction and prior backlog. the record in our to our customer's to later our primarily As quarter, defer sales expected and to decision and

the million in quarter Our a representing was cancellation first quarter XX.X%. rate backlog $XXX first over for X,XXX finished of with value. the homes We

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

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

only and significantly XXXX. compared first the were complete, initiative, Excluding information year the the the in first complete leasing of less last related end quarter X,XXX XXX end at than to to of homes decline at homes our complete and XX.X% centers a homes XXX the homes the of quarter

were resulting XX.X% an of sequentially billion Finally, ended capitalization end, quarter $X converted million and of billion a estate of We of those year-over-year, inventory update in on assets debt and in our XX%. owned. position. $XX.X of billion. the and net nearly over we conclude cash lots, total a with in capitalization as increase debt of debt controlled ratio end an XX.X% X.X% to real at ratio was XX,XXX Total had at $X.X $X.X lots decrease with I'll to quarter more quarter capital

will ratio between We expect our and the XX%. leverage in range remain XX%

that of by XX, had March return agreement same size million million billion. hand the on million, on And $XXX $XXX.X XX, our On we our commitments increased successfully last approximately amendment consisting $X.X period. liquidity to existing $XXX our bringing the million $X.X an over under total credit facility. of equity available of In we XX.X% of and $XXX our $XX.X the to million increased facility through of shareholders total delivered of the year, credit April liquidity cash over billion. As increases total a we to by borrow equity

of the our of shares we have stock. shareholders the quarter, million now with common of remaining program. we stock March And the million returned Since the shares. and X.X ended XXXX, call over Eric. During first as point, quarter XX.X repurchased I'll common repurchase we XX turn back had to million to approximately $XX.X XXX,XXX our repurchase over of $XXX on stock this our million shares through At

Eric Lipar

Thanks, Charles.

chain openings times and communities. cycle supply construction operation, and pressures the continue cost April, bottlenecks delaying slowing new impact our During to of

our that we closings with closely we absorption these quarter challenges for continue to partners is pending municipalities We to on to community and trade in of pace close second fundings, fourth XXX impacts count, were the year. verifications of our XX this a future start average foreseeable closings Despite expect homes absolute solid our these and community working limit the report operate customers. to down off our expect X.X eight-year we the and month to for the due Though are where active historical April. lower in communities exceeded straight headwinds, per

margins our on As outlook release between expect visibility rest this XX.X%. the revising guidance. $XXX,XXX selling the prices the for pricing adjusted range Based XX% a into now and between between to date, full and we XX%, our results XX.X% are press margins be to gross our and for and we year, highlighted in and upward morning, of and $XXX,XXX, year margin gross our backlog in

a recognizes thank hard the unchanged. our year Homes metrics Our one are and our America's to want our commitment customers. LGI named employees' for customer as ethical to recently employees commitment of that their company, trusted work, full most values companies, exceptional to conclude, and To service, for our core other guidance of integrity was our loyalty I to distinction behavior.

for questions. enabled industry and quarter We'll and the now no deliver the outstanding Your challenges dedication results consistently first us was to numerous through call open manage has exception.

Operator

comes Thank the Fargo. Deepa Wells from Instructions] first Our Raghavan with [Operator line you. question of

Deepa Raghavan

works? still – for afternoon Eric, XX,XXX questions. should start Thanks anything given actually higher slower you Hi. everyone. the pretty to Good but just closings X,XXX much start, to given guidance, your the Or chain X think the taking guide to But within you kept about are your the closing. that XX, original just year? end slower risks high-end supply the of assuming keeps we in the

Eric Lipar

the to great a of We solid. Deepa, within way guidance No, Yes, because we're closing off XX to Yes. for X,XXX remains demand solid question. XX,XXX But the selling unchanged, of days we're start. the think closings closing, remains year. houses

rates really of year the end just looks the up on but question of think really seeing it up houses half though built. like. range solid is and we where back what Still in up, the are costs depends demand are a I it's the even our getting

third to We have single-family closing seeing that buy opening our in a demand and will from number of fourth really impact quarters the rental industry new communities solid the number, that houses. still

So for the play sure. in range still is

Deepa Raghavan

strongly we year? by demand measures I but – Charles, the some little here some surprise, How should should at stepped up assume about one your start flow probably not positive starting see turn for this expected, defensive your moderation. and have calling bit of to this How Should end is would you're big maybe take you're the cash year? for you. more to same time, inventory we cash flow Great. than think a a Your

Charles Merdian

Deepa. question. Yes. Thanks, Great

way we count. we're it an from that increase to still thinking is the inventory think our expect about standpoint I community

of So will. absorption, We're vertical of count. accordingly, on in in we're construction, to we based how you terms terms so seeing expected what increases in about kind inventory we we see of if management factoring adjust community our think

community move all they're are committee, coming time we XXXX. owned, and cash are into inventory acquisitions land so we taking still our ready, we've you to that about deal, that as not predominantly deals if XXXX sections are those into talking as will So been seeing, if spend get to to raw count delivering of

describe I'd completed is in of inventory, in vertical terms we right and below in development, mentioned of the it terms we're significantly where land, call, then with we're think be. land So line investing as expectations it our under inventory just normally on I managing would what as

should its things move inventory up normalize, start into see So ranges as completed to normal we

Deepa Raghavan

luck. I the will Good Understood. Thanks pass for color. on. it

Eric Lipar

Thank you.

Charles Merdian

Thank you.

Operator

next line our comes Mike from question And you. Rehaut with the Thank Morgan. of J.P.

Doug Wardlaw

Mike. or guidance? that potential could further in And year? outlook cost on embedded your for just Hi. the was kind how already I color grow the of you the of wondering if is and – Doug throughout remainder much inflation of lumber Wardlaw on cost give some for for the of

Eric Lipar

cost Doug, year. to Yes, to far is This great question. so That's expecting continue Eric. this increase, trend the We're been increase.

often Our all most starts high. recent that costs time and were up, was still

maintain to continue basis to to area costs and but we're strong we're in expect we expecting by pass our a to to guidance those margins gross go gross to raising So did points, like very expecting increase, cost up. costs on margin consumers continue and our XX by we

Doug Wardlaw

a or changing in Awesome. or has future? just Is level on rates Thank you to tapering continue in curious envision thought about rise, then I'm that there in implement you. current And of incentives, your – if that changed to on just especially something maybe of you the rise come that is across kind terms that have guys of demand?

Eric Lipar

demand when now, still do strong all. selling. generally the that in off very as list, we at have all comparisons was, And seeing the environment but coming houses Right to the a few we history. price houses are on still quite they No Not in sell. as change and environment it sales Yes. time of best put very strong

solid. at So now, reason discounting Right we're No doing to all. incentives. still increase

increasing. still no we costs inventory our So and and are no houses finished have

raising still we're So costs. prices to offset

Doug Wardlaw

Thank you guys. Awesome.

Eric Lipar

welcome. You're

Operator

line Jay you. our comes question Thank the Wedbush Securities. And of next from with McCanless

Jay McCanless

questions. hear interest Hi. the your that said that guess, risk. Did has Thanks taking correct? in afternoon XX% Eric, I prepared for comments of my All backlog rate I first question, think no good right, everyone. my I you

Eric Lipar

is correct. That

Jay McCanless

in some it? think institutional the buyers to on So is that about locks consumers mix. Is way as well mortgage as the that

Eric Lipar

customer great our exposure think Correct. sure and way Yes, about and because that closing experience selling, the to also has make that's our a make it. hitting a sure make understand we're interest rate to and having the way we're dates great we And of our not costs. – sure

are our closing, in limit and the rock our within We around day price we until XX exposure. on cycle first we sheet construction which our of sale list doing putting that rate are interest houses by any is can of for days not

within So we house sell XX a of closing. days

in the when the supply lot chain of closing confident out close experience. customer delivering, The we're a we date are that better We has take risk. a

better no experience have have and a We rate interest exposure.

quarter. all So end And our the second those scheduled in that the homes. our most all backlog at of those was close QX are assumption X,XXX of is of or to

everything those the So, then those locked, locked third cash are buyers investors. the that majority and going aren't is of into quarter,

Jay McCanless

mortgage I thank that your coming before with of we've partner most to mean some You heard stole we talked it. it the you locks asked about potentially my for that last whether the I cetera, with question, week available. supply to types seen and unpredictability answering et they're my year on second on programs chain, do guess follow-up I another call with so? have willing are and those have is, extending locks, you lenders one

your partner chain away So just had get and/or any discussions mortgage you? case the issues you've with supply municipal from in

Eric Lipar

third where times. We selling We've not those there, days about They're to because us, in. of our to interest don't we'll like that pipeline approach helps situation. going Jay, exposure. closing cycle rate, at XX but house to just now feel out to just had and worry sell best that rates we really We're to them to our and really write shorten where have was longer have we are in that don't within XX have and I we'll most right scheduled of close the think conclusion are about those be out or And going days discussions, that's the going. builders have and there Yes. customers the that customers rate came fourth to about worry the cycle quarter closing, them a have within good the time, the lock contract current

Jay McCanless

That sounds I Thank great. you. Okay. will it turn over.

Eric Lipar

Jay. you, Thank

Operator

you. our line Research. question from And Wolfe Truman Thank next with of comes Patterson the

Truman Patterson

questions. taking every afternoon or morning and for – my good Good thanks Hi. everyone

the Just you cost Eric, for could think heard rate clarity, on don't that talking interest I answer. locks I about, on just the – those were you prior

Eric Lipar

cost, business. No normal Yes. operating

close our very a we or no we in We to, are need commitments risk pipeline expense. comment of back days little not pipeline rates, XX entire for to rate don't and or forward the XX% expect it, fee interest locking because our going paying to interest additional that within and

Truman Patterson

Okay.

Okay. just do And the of so buyer. but spread targeting? is rents that I'm median mortgage we your of what target some just on rates of monthly moving home higher, to have then rental well. inflation prices, Mortgage a that heavy understand continue compared trying to the also as buyers of payment your degree you're

Eric Lipar

Yes.

I up. think have both going been

on. right You're

of all by is be. it's rental to it offset rates demand Our no higher. demand is, ASPs increasing monthly still homebuyer. and out single-family But of that there's most there. also I strong rental in do and payments going as we're and operators believe strong supply of because houses a why affordable combination from and And that the value-oriented very the up, housing affordable the inventory low going us on seeing not very communities and is rates we're finished being are used up our with first-time as our business it's There's house on and question. And focused still

higher normalized environment. about press couple we in do on put because at going to – we a coming last And sure us, environment, normalized what demand price internally we list, We it, such the are closings demand per return selling release but community six the some eventually moderate, just but point. It's a is in of prepared expect we not and we're back and when houses strong the demand they the I'm from than our XXXX remarks to eventually that, now, off of was used that years seven month. do to believe to the XXXX, per it of very to going have as quickly. for talk is timing been word to So that

Truman Patterson

Okay.

actively the then lost think due that's And it your Okay. selling simply ticked to, trying I some on don't SG&A I noticed know, expenses metrics guidance points Just view leverage your might that? there moving basis and year-over-year. closings if maybe increasing impact that you should I XXXX. are Is how the up, spend? XX to was strategy ad around your through line, marketing and Or like understand we

Charles Merdian

Yes. very in in an Not co-broker. Sure, spend, advertising, revenue, of percentage Truman. advertising similar as is in year-over-year. a advertising our We of Charles. slight terms see This a was did increase spend direct increase

more inventory, historically. As see we frequently brokers on continue we we used to deals than or to have limited

year-over-year. year, variable G&A then So the delevering of demonstrates we And think selling the in rest is through of it's out – so kind being whereas there also certainly think some the of I fixed. predominantly that pacing terms revenue more down predominantly

expected think get I leverage X% year. for XX% our revenue throughout the range to full as see year, there to guidance some the So us original we'll increases of into

Truman Patterson

for right. questions the my luck and good All year. coming in Thanks taking

Charles Merdian

Truman. Thanks,

Eric Lipar

Thanks, Truman.

Operator

you. Thank

next BTIG. line Carl Reichardt Your of comes from question the with

Carl Reichardt

in guys. for Have arms taking opposed as seen rate go question. consumers fixed to any to Hey shift Eric, now? right you the at are Thanks who looking all, my to

Eric Lipar

this arms mortgage our – we – haven’t company at doesn’t offer even point. We

just We’re focused rates. on fixed

Carl Reichardt

of – Okay. family how operators? XX, to housekeeping a much rental of bulk And then the single the as backlog, XX, as that is wholesale just percentage

Eric Lipar

this About the XX%. year, closings come rental we XX% That’s still space. of our approximately is the the family guidance year single for from

Carl Reichardt

just XX that’s backlog And right the think, to if right the before – I XX% on the six wondering begin vertical is construction backlog, you closes you on based year this in that, but footnote now? that am months or that I’m that in in I it’s stuff accelerated release. it’s now,

Eric Lipar

we’d expect close every to this under No, Yes. year. everything Yes. backlog

Carl Reichardt

year. This

Okay.

Eric Lipar

Yes.

Carl Reichardt

more terms talk normalized the you are what moderation then or things sort themselves you’re it before, of that more some think that given change traffic rates you to traffic pace last actual normalization, signs much to having of and other of that is. or is question you’ve related conversion of What Okay. be the slowing from said when of and And giving in more you just has the to not the been that move? what Is function about that’s to are seem element sense a seeing? the product orders frenzy

Eric Lipar

Yes.

to builders similar all from sale, have just the it’s end for Carl, what been other release well. maybe complete. we is sell think said, as When But up them. hot every that but single most such demand. there, but don’t has I we selling we still before cooled unbelievably them sell It we houses market solid they’re one of them, of

not are they waitlists Our waitlists. as going to as our we’re because robust through used be,

we a We’re because still not houses don’t the advertising money for sale. lot of have spending on

So still the necessary. on done. go don’t there But have we’ve when right houses We it turn faucet not to advertising and got any finished can we’re yet. our

So just still signs that it’s slowing off very peak, market. but solid

Carl Reichardt

demand or And still guessing opening you’re really those good last say phases, so, of I’m that really quarter the good openings the that you’ve community sort in seeing done for traffic, new yes?

Eric Lipar

are. three we this results opening to We expect we solid as well. see new communities week are and And

Carl Reichardt

Super.

Eric. Appreciate Thanks, it. Okay.

Eric Lipar

Thanks, Carl. from Research. line of next Housing All Barron right. our you. Thank comes question with Alex the And

Alex Barron

more, base maybe client buyers your and know jump what has from given you mailers feel and guys communities target Thank builders in and from the changed used it coming now or that rates, base historically changing. Is marketing? your in and pricing in you, client basic of Yes. other to you stuff, your a rental I gentlemen. lot interest is send

Eric Lipar

Alex. much have right question, not and We started been pandemic since haven’t Yes, marketing great now sales so because doing robust. the

you direct We nearly haven’t digital went the because has before if will. doing even to as the as we much everything pandemic, wasn’t space mail

alternative digital media, got I that’s rent, monthly afford we and today’s currently smaller we’re of paying And to that up positioned So the customers affordable a that But But think the able buyers get we and across select be an going keep renters rental once increasing ramp well possible. they’re prices country, to have spend. rates floor higher rates ourselves trend think and still with to monthly marketing, future. someone a social that view to continue a renting. as but increasing just more number affordable lot buyers exactly plan payment will same Maybe payment. at we as the internet, marketing for our the as to I

Alex Barron

And I’ll to ask sort it. Got this ask question, try to somebody different in way. else next I a think but

the stay now, right at obviously, but XXX I the let’s to you’ll ramp pace up and seems don’t a big were the guide. for of couple hit the if say in X,XXX It closings So like deliveries that’s know half back the pretty next months, the case.

what starting guys get lot spec you buyers are what to the or So ask. more institutional closings come there, a a I do back you more half lot expect to homes to there gets in us or from is guess, trying I’m

Eric Lipar

Yes.

inventory. get the community increased increased is to account, going us what’s think there I

demand. strong seeing still We’re

yes, seeing construction and get some nationwide because and also as want both get on as to are the built. we’re inventory inventory We retail we demand houses we the some from built because wholesale to many we starting So side. can the our investors need

community is going count us ramp the of push inventory of the to high range. that past get X,XXX number the really it’s to up to end So

that’s we’re to XX,XXX. relief supply the going X,XXX of I need and times think think construction maybe the the in but I it half some on between year. back Maybe chain difference cycle doesn’t, that disruption, happens and

Alex Barron

a Best Got lot. it. right. of luck. All Thanks

Eric Lipar

Thank you.

Operator

Thank you.

next of from Your line Zener Ken KeyBanc. comes the with question

Ken Zener

everybody. Afternoon,

Eric Lipar

Good afternoon.

Charles Merdian

Good afternoon.

Ken Zener

to metrics had. because larger become think you public, of you could respond you unfold, public kind and to it’ll just I guys the some give maybe all I've have how want companies you

units cap, rate terms growth in cetera. the of market et think, I highest

XXXX. year-over-year, XX% March from So about about inventory your is up X%

homes as think an relates clearly think out, it time, almost farther before investors. good I you March do very this rates slower looking put right cycle deceleration what the historically because delayed? that since about moderate Black for the demand times call and order XX% now out I is that looking period, Let’s the construction cycle the have end up you the all overall, provided the manage at, know building very whole about you’re outlook are going think been to public is strong would industry? for you to time in and of are plays lower you What units same building up, industry and because But XX% affordability more but backlog at fact you industry’s XXXX low, how which see Like them in the release how dynamics, that are since of builders deep going to institutional at units the had kind COVID. The to right given, that inventory is Knight I are that? is you’re you out and

Eric Lipar

a it’s great question. Yes,

the the nationwide week I we’re cancellations we’re traffic, monitoring looking we’re looking don’t we is answer every at by closings, think sales, and monitoring future week, what at know everything we’re community holds.

stock But optimistic We’re prices supply has closing about place, And at look going the quarters lot happens inventory M&A of normalize are opportunity, if We’ll the down will with absorptions. with people believe creates if do opportunities. how that’s for high just believe no And and acquisitions because costs we remain a the or question to adjust in strong it’s our our that because just buyback place that couple it’s rates our that accordingly. couple last lots I finished LGI, have slow more in to accordingly. been will really systems high. really We in down, years. systems buying adjust the as deal we slow or opportunity chain. we land We it have with We opportunity remain over will whether a our inventory considerably things think to that. next future. think demand do so what we that And matter over

optimistic in that’s we’re systems So scenario at we at that’s at us. under have any us and to thrown thrown anything the place succeed

Ken Zener

than more because you could your talk we managing closer really of the do risk, And at industries things We order other or construction to you, embedded versus land, about you mean, terms about about obviously margins gives could self-developing gross all later pace six a you’re normal, you’re lot XX. sense of builders, could kind of when We those sooner make in I times. your to hypothetically how about, equity. you’re talk the talk talk cycle four. which

Eric Lipar

Yes, no.

everything’s We that think I XX. continue XX%. and year, north margin gross think pre-pandemic either that’s adjusted our gross adjusted long to margin normalize, being accurate. term XX% think – margin We quarters that’s because of gross don’t going between will above pre last and every

underwriting forward acquisitions. think at that I thing we’re a sure to normalized costs buying make property we’re at looking we’re when the key is land we on When absorptions, decision a elevated deals piece at go also of looking are are the buy. is making on we to

We’re not underwriting, down. costs the to come are going

come either, We’re are estimating are proving the the to but to absorptions over to we looking that absorption price XX not at and the going are historical sales to deals on proceed XX we down ever last based months. closely are absorptions, the closing not

Ken Zener

Thank you very much, gentlemen.

Eric Lipar

welcome. you. Thank You’re

Operator

Wedbush. with line the our Thank Jay comes McCanless next of you. question And from

Jay McCanless

my taking for thanks follow-ups. Hey,

and from the at The first competition for heard your this or year, all had margin are through your year? in that of than rest and margin we’ve gross earnings one I bit be back lower margins of little maybe front guidance trajectory the about earlier like look in expecting you up a or cycle the gross are half the to I what just potentially how you half, some see competitors incentives full when might thinking seeing picks you’re you gross all

Charles Merdian

is question, Yes. This Great Jay. Charles.

right. you’re think I

year of back just half I a think little unknown. the just for us, more it really is bit is the

So the in and the But are fourth feel in quarter third we confident just be very yet to what existing of determined. we see terms backlog.

moving about that talking half. was and back range that normal evolve So to reasonable we’re we’re that occur normalization just into back and that towards I Eric going the may that likely it implies in seems think it or

Jay McCanless

just why not to arm? willing your Okay. wanting to Why it just – with isn’t And I a or offer to partner take do type follow-up buyer environment? rate risk that wanted your ask moving question. Carl’s mortgage base of Is then in guess, to something

Eric Lipar

we said don’t should probably I offer Yes, have arms.

fixed borrowers the rate are in customers always our in that, still are off as that getting we’ve a look the fixed on really company the ran mortgage. of customer if historical to wanted rate. a still Most good. the Rates think I interest fives a getting in are at it better realms but very just rates

it’s it, that think we about our company just, there’s to mortgage for it’s certainly option customers. if someone our better offer a passionate of most So But ability was the has if arms necessary.

Jay McCanless

Okay.

again follow-up. Okay, the great. taking for Thanks

Eric Lipar

You’re welcome.

Operator

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

Eric Lipar

and great a thanks Okay. day. participating Well, we have for everybody’s appreciate and today time

Operator

conference day. first a Homes’ LGI great XXXX This concludes call. Have quarter

LGI Homes (LGIH) 3 May 222022 Q1 Earnings call transcript