- Earnings call transcript Q3 2022

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Operator

Welcome to LGI Homes Third 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] I will turn the call over to Josh Fattor, Vice President, Investor Relations at LGI Homes.

Josh Fattor

Thank you and good afternoon. that on will outlook, LGI and for listeners including forward-looking plans, remind guidance views management’s Homes’ XXXX. will this contain call statements objectives I business strategy, estimates expectations that uncertainties cause management’s to involve current risks prove could management’s to incorrect. reflect subject to statements assumptions Such and be that expectations are and and

of other cause You should cautionary the forward-looking place of statements performance. must about not those statements, as results statements forward-looking be related on with this risks, statements today. reliance from a the the date and considered those discussion which could not are including in conference All should review the of SEC our factors management’s and viewpoints uncertainties light of guarantees differ to you and future sections such actual reflect filings and Risk that risks undue for of call presented Factors

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

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

Eric Lipar

calls, congratulating normalize. afternoon, Good prior on LGI team third have by preparing for market accomplishments the I Thanks, to said our housing open the quarter. were welcome in call. In the we we everyone our to will earnings Josh. and

pendulum has swung that indeed pivoting and to country challenging. the demand game mortgage our and who has clear rates considerably. to pleased is qualified past and teams town. are motivated and cooled line buyers in With Now, it’s higher, across expectations report doubling Finding move am the meet normal could we new charging competencies our challenge. confidence. this And forward with I the in core are enthusiasm are both with

the their In being we and on last quarter. needs up are our to selling call pivot we information our possible the model focused the that training. for said The our looking To team I for interested customers focused focused on results are equity global commend marketing Instead, meet are is skills of if the currently they positivity focus needs, successfully in each center executed want information every drilled nation. demonstrate refreshed, are our and day. commitment, and across our rehearsed, thank company customers’ us discover understand them. on homeownership built their for to who differentiate the saw our qualified we and salespeople find to on or positive I everyday we markets of XX% and success leads, treasury yields, for our we ramped we instability. want in our increase families over to with with homeownership. As prior and ability in marketing an their have third call, centers, buyers. to over This efforts quarter continued connecting quickly XX,XXX

driving information to demand seen centers. our have considerable success We

make many the monthly affordable. buyer reach is pushed prices, of ownership more higher qualification. designed headwind renters. affordability beyond main this, payments combined has the of However, we have with incentives address a To stretched further implemented selling rates number and Higher to

our efforts in price backlog ongoing, existing our reductions, per month results closing are historical of pace a community, been rolled third net of communities matching as at normalizing, positive with gross quarter we are as input per community. costs where X.X homes margin orders homes per communities to-date at These third selective have but have margins quarter space well X.X high risk where ranges. in out Additionally, isn’t while in maintaining

single-family wholesale As to our this noted powerful channel and on selling quarter no previous homes calls, is to space rental was exception. the volume drive a lever

During the and at additional and homes delivered quarter, wholesale XXX channel end. we into contracts XXX quarter backlog added this our

LGI billion results. Living Our beginning wholesale revenue over Congratulations to discuss call to of generated over during XXXX. this to their turn cumulative that, now milestone quarter. the in and accomplishments impressive financial our since the on Charles team $X business has on With I’ll operations the

Charles Merdian

Thanks, Eric.

homes, the comp. closed record to primarily count we and community lower to During related compared X,XXX last year’s XX.X% quarter, a of decline absorptions

expenses noted, lower point the same pass primarily higher Eric our third in over quarter prices offset period last supply expense year, and basis XX.X%, partially was reportable Gross segments business, quarter cost markets. XXX same quarter offset and for million Adjusted advertising period increase Adjusted and record. new improvement were new margin of of compared and through the by million to due maintaining and our or gross by and primarily excludes partially purchase overhead ability a administrative the related were sold lot $XX.X quarter costs year. representing Selling was total totaled a as primarily higher of revenue as of terminated primarily X.X% backlog, the Combined, our was As X.X% to of backlog input general was as million basis as were of quality to to and year percentage the million expenses our related for third resulted $X.X to XXX constrained in or lower $XX.X to improvement for well approximately closings record. excessive of The and points. quarter increased also third last our selling $XXX,XXX. sales the compared and related accounting increase home during margin and by our basis to same last X.X% a XXX increase through quarter to XXXX. third revenues XXX and capitalized this revenue other compared our in average a quarter quarter million our our same increased representing costs. price. quarter last homes of interest success selling decline closings X% period to commissions. spend The was of of was interest our closings in margin driven this the year of from costs XX.X%, XX.X% year. capitalized together all percentage Selling of XX.X% driven expenses a compared during $XXX the lower cost quarter outside in and charged administrative Revenue of revenue increase fewer The total General deal last or last million, XX.X% a XX.X% wholesale point sales expenses prices by $XX.X expenses closings a in prices selling, average of XX.X% over third gross from the $X.X a year. XXX the

XXX our income current for a the quarter revenue our revenue based results to to of other in to-date, one-time adjusted a now our full expenses between expect home million in of over associated year expect in was community, of on and together cap increase income, to to of million XX% year reflecting XX.X% the to basis $XXX.X Pre-tax its percentage year-over-year a with navigate homebuilding We and undertaken points. income sold EBITDA last gain SG&A a expiration. approximately and was EBITDA excludes $X.X improvement uncertainty. basis on SG&A the as point new market with XX%. representing be revenue initiatives EBITDA decrease revenue, range not a associated on a a Based sale in The sites and $XXX.X attributable point basis record. interest Income in entities vary quarter quarter million was we number quarterly net and a percentage or $XXX.X and XXX a increase improvement the was million third year core over $XX.X XXX in same representing other last same XX.X% unconsolidated revenue, the North of a period XX.X% year-over-year. million operations. an million of investment Carolina an of an rate accounting third new basis $XX.X XXX point our EBITDA or as to or purchase decrease prior period of related revenue, Adjusted record. acreage Adjusted the

driven federal will quarter our XX.X% The including by the be credits credits and and XXXX. first plan We impact full qualified XX%. Our to the effective to effective of to tax the tax credits year the energy tax rate the the was closings decrease third on quarter rate between related reinstatement last in in XX.X% was during range of estimate now compared of fourth XX% receive additional homes, in tax half efficient retroactive year.

in third a spend the well Our driving third needed year, were were of our the $X.XX qualify or more quarter our orders an quarter per the last the to in third to advertising was Net share illustrating more up per third to and income resulting were basic due share. were combinations X,XXX, $XX.X incentives in implement XX.X% primarily quarter XX.X% leads sequentially, Net of share sales as our limit diluted modest revenue. XX.X% customers. of through net quarter Gross to comp. as increased Earnings reported decision year, ability million $X.XX in success right of X,XXX. orders orders per year increase over

the and wholesale retail were Excluding up XX% quarter, sequentially. XX.X% contracts written net orders year-over-year during

for XX.X% last rate and last cancellation to XX.X% was XX.X% Our third quarter. the quarter compared year

of homes, quarter of $XXX.X Our valued backlog consisted million. end at at the the X,XXX third

lots, of of actively or X% the were owned one-third to We lots, development of and lots, and Of the September with with under a current owned XX,XXX an of to lots, pace XX,XXX approximately Turning lots. decrease finished as vacant and raw XX,XXX were XX.X% XX.X% quarter position, owned sequentially. We controlled of land were slowed portfolio year-over-year our demand. ended lots, our vertical XX,XXX and increase a our our our under XX, owned of consisted land of decrease either year-over-year of inventory Of align development. land our sequentially. the remaining quarter during XXXX starts those XX%

we XXX At X,XXX centers started homes, over the starts to XX, we had or a last completed homes and information amount similar year process. quarter. homes September time compared During last quarter, X,XXX approximately in this

and information homes X,XXX had homes. we in Excluding completed centers process,

from end, XX.X% or lots, future. the an sequentially. controlled in where longer we The in of and decrease Finally, no the XX.X% of met our believe a we walk same from that could piece assessment opportunistic we and resulted decrease of deals lots to primarily at criteria pipeline year-over-year XX,XXX similar prices quarter controlled acquire more land decision our the or at ongoing

$X.X approximately in of resulted During the terminations quarter, million costs. these

we nearly Turning to a in $X.X sheet, in debt $XX.X assets at of real billion $X.X Total end debt capitalization XX.X% estate in cash, XX.X%. million $X.X quarter the of total balance to with ended was of quarter billion, a ratio and billion. resulting over debt capitalization and the net to ratio inventory

had million million liquidity XX, and total $XXX.X available of on cash credit As we September borrow $XXX hand our the of of under of to $XX.X consisting facility. million

pace line cash balance will end will vertical demand enhance year. to liquidity the of the additional We with create sheet positive the expect as by flow continue generate our And each rebalances, our in in inventory community. to and adjust we inventory that further of

drive developing not XXXX conditions, the will over the the on Given XXXX. chose I this community to during count to our stock current repurchase growth will in At and instead Eric. point, turn we back quarter, call third land that market focusing

Eric Lipar

Thanks, Charles.

end October. in expect shortages we for at to for Supply and communities. parts we now continue may the uncertain our manage to we remain XX X,XXX and environment. While Based market while, year verifications that closed our XXX we will in approximately and $XXX,XXX homes keep $XXX,XXX year. this the expect timelines business in between and today, Pending report mind the to of fundings an a is will we XXX of we rates question control how about active between no our development now our extend on to closings with full the homes there business climbing to and close average X,XXX expect price selling

between are gross and of gross tightening guidance range XX.X% margin to XX%. the and between and range margin our We adjusted XX.X% XX% a

that reliable, future. people honest more and XX% we year I by business, briefly communication longer tough, can approximately is our calls, in be closings. manage headwinds calls, roles, need business. term and how When will exact now of closings To we organization national wholesale talking start and our importantly, the times on the the corporate updates Finally, other our the plans management our Homes’ regularly get to people the to feel quarterly about about for conclude steps business organization What taking weekly are they and and through in full to employee and of markets, confront situation. specific about our an is expect retreats. uncertain the employees updating LGI outlook our end, the a local all to at meetings the number calls, sales

for years housing Additionally, to growth outlook the focus and continue hosting market that to and the markets not quarters, many teams they their our we for in to Houston but positive on local updates, long-term profitability just the about training and in forward the a remain for back future. with around senior manage business look We coming country. next here the our leadership week will development in take additional

investing XX% and XX% our this, commitment to We in uncertain and community loyal to are during their grow. in our employees We do our this people plan our grow XXXX actively retain time. count to thank additional to XX% employees XXXX. we for To need in to and support XX% hire another enthusiasm development

of on and model, systems in customers, quarter to future. behalf with our Your positive last spec-focused the culture results success continue XXX% our determined drive combined our efforts will and delivered

We Question-and-Answer questions. will the now call open Session for

Operator

comes Please from you. Our from go Michael Thank [Operator ahead. first Instructions] Rehaut question JPMorgan.

Unidentified Analyst

to new on the see for question. wanted despite guys everyone. pricing guidance the Andrew margin next haven’t my great ask gross Thanks How ahead Mike. of their is you to the should for market. taking it’s builder communities quarters Hi, thinking your about [indiscernible] for to three spec that being I quarter. This Congrats we you as lowered and a adjusting be opening? two are prices on

Eric Lipar

year for and year’s normalizing. assuming good we margin. question, I gross now next I guidance this getting is great are guidance think margins Andrew our are Yes, But Yes, think morning. into for

We are last margin lowering solid peer are are in around a we by pricing pricing really gross is we of QX then margins byproduct – us current at community in looking really into market. adjusting margins our and history gross appraisal group community and on a is lowering Most highest and prices to level get QX, prices, quarter’s of challenges.

margin end But yes, that’s are the our be pricing part of gross incentive our to So guidance will to great pleased we and year are with market a we program. with. gross and that margin

Unidentified Analyst

more And quarter, new that’s percentage helpful. existing the of communities a you would at just or the about pricing, and then That’s it’s speak adjustments great between speaking at online looking whether communities you be provide can pricing kind due pricing? to of can that’s if that kind next coming to gap so if implied

Eric Lipar

Yes.

at XXX,XXX. is backlog Our

priced is lower in to price coming We is getting Also, off with of I think industry. our wholesale bulk AFPs are couple lowering which things be a our and increased. and though margins our going single-family that would price. is newer discount sell margins, the forward. normal there retail One the going impact point communities houses online They ASP. the rental the to normalize also mix has the of to a communities lead

rate are environments, we So line headwind were ASP what where in choosing of to our but floor gross has LGI. to impact also that’s this not important ASP. then accretive plans. And on a and And surprising is seeing and higher bottom are the very an payments that customers margin, smaller

well. $XX,XXX ASP, a we house, floor foot smaller of So there in also square same we in select the in chooses for a $XX,XXX chose they of instead X,XXX smaller to if probably community, close for are and foot the the because number a house plan qualifies square floor delta and as is introducing customer on example, and X,XXX plans communities

Unidentified Analyst

Okay, that’s quarter and coming good luck the really helpful. on Congrats in quarters. the

Eric Lipar

Appreciate it. you. Thank

Charles Merdian

Thanks.

Operator

ahead. Thank you. next Truman from [Operator Our Instructions] Please with go Research. Wolfe comes question Patterson

Truman Patterson

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

bit the us gross help your but hoping understand gross First, I housekeeping delta question, reported between margin a adjusted can and am you of margin.

to quadruple the mentioned implies get interest hoping here about believe fourth cap a interest maybe it quarter amortized clarity an I there? so, third think in quarter? something going you from I rate the quarter versus is your prepared to in And triple fourth that remarks, little the selling

Charles Merdian

speaking. Yes. Sure, Truman. This is this Charles

So between margin we expecting gross to relatively adjusted delta the stay are gross and margins similar.

I points think spread. basis XXX we gave

The third about at quarter came in points. XXX basis

we what to based tightened bit that a little to similar So, XXX past from that in have said far the seen what on we XXX we so have year-to-date. up

what other was and have like it as interest rate early had $X.X should spread November is we the impact in through back cap coming the income. rate sold we value and calls. So XXXX in sale is was million then consistent interest good cap on This in And said the a other that previous to of with quarter be income purchased term third felt the we expiring in XXXX.

for So right like monetize the that to time quarter. interest us cap the was felt during it we

Truman Patterson

also in And homebuyer then of for Okay, level, the the move for compared call hoping okay. base pricing including Thanks earlier then And year. to in that. incentive the to to product compared September to needed adjustments core and the you it orders, understand discuss incentive we your levels could channel? I kind wholesale your am will

Eric Lipar

side, One this mean, is Eric. in I I higher. are rates sure. is a incentives on few Yes, put the mortgage different obviously buckets.

alternative We business to the are an in rent. of affordable offering

by payment rates. So, mostly impacted is monthly important and

of not route. commitments through spending that partner mortgage on the went dollars forward a or down big going road have the We of lot

into rate fixed as We incentive discount weekend. low get week points as X X to every an that going possible are every to doing as

works incentive in by much really community community the many are how is, depends on pricing we mortgage how what the So, nationwide. XX% that’s is on gross are then part also community buying mix a are been of business on XX% the of to And appetite as normalizing wholesale It through gross and side. for rolling the the that’s is to rental in our usual. our very way And the not backlog prices some community, It’s their still big both adjusted from reduce part just a inventory the at off strong. business the price communities move parties. start houses is channel. is to as to us and part And industry necessarily working excess our left margin that important the single-family But that business. new are houses what still then the margins and retail way in then a out

Truman Patterson

Okay, if I rate can okay. your in, And more I dropped Thanks for points, quarter-over-quarter. sneak almost XX think could that. one

in I think scrubbing that. you help more are through what that or to aggressively the your backlog buyers just you locks you first you as adjust did drove Can pricing report result as all will builder well? think us rate buy-downs

Eric Lipar

Yes, handle in is think normal. builders no, I describe other the from I can says builder. our cancellation ago spec back We I we The anymore. don’t from that all at Eric, – And rate sales have and did can through our quarters XXX% are I new. us would not one. backlog to this is difference flowing pricing backlog adjust the between We is backlog all.

forward still impact closings are next days are going closing. XX and XX sell sales to QX our going the to to really going be what our we over So,

of to the I managing in But So, cancellations expect range as normal, normal great a for pipeline. our think year I well. doing cancellation team back rate would job that rates next is

Truman Patterson

it. you. thank Alright, Appreciate

Eric Lipar

are Truman. you Yes, welcome,

Operator

comes Instructions] KeyBanc. from ahead. Our go Thank Kenneth you. question next Zener Please [Operator from

Kenneth Zener

gentlemen. morning, Good

Eric Lipar

Good morning.

Kenneth Zener

two Hopefully questions I have here.

to you in about I XXX what I talked means demand I about you. think to you level don’t heard. really out. As the communities want range of But can sequentially, paraphrase the talk that matching And we activity driving what that’s are starts,

versus don’t and I impressive it want for to to sequentially I I get an – guidance, – trying year-over-year. not So is just number am looking am

answer where that of or terms that I appreciate So that, could is if in would demand give – yes, what you is you illuminate it?

Eric Lipar

and resale rates side just demand on that’s where we inventory affordability. now the side, me, on to where demand had didn’t they think – I lot with need excuse is Yes, just right the houses. is And of the ground, are retail Ken, we a where start about and already XXX

and won’t X, ahead I according the went have So when ourselves, we got all side the interest from building slowed rates are demand it – X.X, the up from to retail of because we say X, to the demand way considerably. houses

of amount is X,XXX. need pace X,XXX inventory mean, we We to number construction. And just be. is got that under where the So, necessary. that got X,XXX have now we down we at that houses to highest its are we I total right running probably total not

Kenneth Zener

this And in together, question I to they about then want Good. but one that. be sorry tie

flow? That how already think be you. your XX%? you think growth count well XX%, cash if that’s about you us you broad elements? a thoughts you down that of lot sure kind going talk varied Thank your can of SG&A, there impacts I to said some XX% just have leverage as capital. to people I community run-rate XX%, those you mentioned up because how that XX% might between And or XX%, do you am – Are versus give obviously right You because considered and And now? and it’s obviously impacting requires see as going

Charles Merdian

bet, Ken. This is you Yes, Charles.

think think So is way the it we components. starting, breaking into two down I the it about

of expense post-pandemic. advertising limited several selling benefits we been a the we just as on the pandemic So quarters went have the of through last the through and over side, spend kind talking about

start revenue, as see And year for as in tick we really we selling this that’s implied guidance leverage much up, do count, community would selling of actually you also full grow expect for a there. where expenses year. to our back not So, percentage the see opposite SG&A expenses

have will opportunity some than in G&A And think rather the percentage as future. then we do inch you I on the a up see for So, selling side, leverage that leverage. where is

short-term. muted be would it think in more the I

But of on just guidance XXXX, the date. at thinking raw expenses, side, leverage question And the be think tends future. the part more land it are in we for there that that that fixed the is for G&A have second developing in community a where give about the We some been later the to where is XXXX, I of opportunity obviously will resulting most in purchased that how cash are we deals on over time. that count we flow, ‘XX, growth, are acquisitions in and deals then

to point. up So most been the ready this of cost lots those to get have incurred

we have our So, lots of about third do a that were under active development.

majority incurred of have communities those are the getting So, costs been online. as those we

our we sections, deliver So, in we expect as generate inventory costs particularly as cash adjust short as we the well. to our mentioned, as vertical development we taper those will which flow some run

Kenneth Zener

Thank you.

Charles Merdian

You’re welcome.

Operator

you. Instructions] with question next Our Please Reichardt Thank comes BTIG. Carl ahead. go from [Operator

Carl Reichardt

X,XXX couple ratio to you kind you or to you as in being construction, your running think based sheet the number be of you think vertical And off about model? finished? you two-thirds of sort at, construction I that highest given the this handle is now. under years. I can specs? much everybody. think want balance which Hey, run to Eric, you I X,XXX assume right that Did of how quarter, think the units do business had finished of And mentioned the for a model that little kind of one-third finished, were over Thanks that ideal a Is X,XXX

Charles Merdian

Yes. Sure. Carl, this Charles. is

it. really thinking are about We

six a from supply. inventory about thinking really months are We

us make X,XXX pace. to So, a year at X,XXX sense a would

houses the back have experienced back are the and complete, thinking But about is have about completed to we show pre-pandemic, we ground really should go getting into, the years. the of X,XXX half which over going at end they that had the of to we to on it are About what normal, be ability inventories. look, of the salespeople you our house where couple If customer, not last move XXXX.

five, So, get half six, we start six, then about type of that back close are so complete production. and rotational of five, And close under back flow. start we half into management closing, in to that what about and then aspect start get inventory would

Carl Reichardt

Okay.

back So, kind cycle you trades model this a more cans? times any has and construction and Obviously, quarter over encouraging, like labor now, or partially heard are balance is available seeing the of a Are have side. in availability? feels on of X,XXX to more little improvement also getting front end the been that so the we sales a it the last or are you your little function

Charles Merdian

No, to its the I similar. terms of would and – not them marginally production getting better. front be are that is in seems of but terms that are think I the you We costs think from a slightly really significantly aspect nominal are way. describe we in you flow improvement would And end describe feedback better, accurate the but as better, hopefully headed

Carl Reichardt

in will Great. queue. Okay. Thanks. back get I

Operator

Thank you. [Operator The from comes Wedbush. Instructions] next question from Jay McCanless Please go ahead.

Jay McCanless

Good everyone. afternoon Hi.

of just had given days guys that if so are XX all to closing off, or going in on you the and still what’s we within you limiting question, are sales First market? take

Eric Lipar

Eric, sales. We are is Jay, this good limiting afternoon.

And comfortable time can are so just that most be dates. XX-day We have construction. at will house with we limiting sales the of closing started the

good a the know want experience. great So, day, – have have the customer to as we a have as closing long

environment. instead in days XX So, this of days XX current

Jay McCanless

when made is reason not you two I that the of guess maybe cans or up, those change, that related? are that part have the gone

Eric Lipar

went think really cans Yes. are down year-over-year. rates, related the it a really and lot I they don’t

So, has the normalized. cancellation rate around XX%

too now I that. into much look So,

Jay McCanless

‘XX. needs you we other it. right is think XX% and that pretty now go vertical said the growth much Got because to builder, pretty seems get then XX% given development have ‘XX to development. What horizontal I guess talked to that ambitious and every community to goal right, And to that for I said guys than harder still you

Eric Lipar

far. dates. have better Yes. is we today’s it’s have gotten we current But Jay and get have been market We embedded got conditions thought so in to and we difficult those wrong it’s It contingency hopefully going enough very and worse.

development. you disappear. communities As They are they down delay. still started the been seen, adjusted where just It’s But And our community we under year. count guidance have we didn’t They everybody have still as owned. are those from still coming. – are

‘XX in the are So, all those have All count got own we the be growth conservative. projects schedules and think in. should land. today’s development. We or environment community on opportunity we We correct ‘XX that based we in communities any We on opportunities M&A that no additional additional buy that any had and number. built to not has in an add built to have that built see

So, those count are conservative community be we should that think in and we growth. numbers confident

Jay McCanless

in back Okay. Great. will the jump Thank I queue. you.

Eric Lipar

Thank you.

Operator

with comes Research Barron Thank from ahead. next Please Alex you. [Operator Our Center. go Housing question Instructions]

Alex Barron

gentlemen. Thank I wanted just correctly. I Yes. make sure you, to heard

be You next the years fund will are what to is it guys kind leverage expected Is maximum the And are to be XX%? willing for you be looking you with how thinking so, to correct, you debt? to of If that’s mainly XX% to going growth few if carry? said it?

Eric Lipar

XX%, growth community Yes. I that count was It let will And XX%. Charles questions. of handle

Charles Merdian

our Sure. ratio, between and target we Yes. leverage as stated, XX%. so previously XX% Alex, have has been

been positive year’s short spent. the as on flow in expect vertical by costs incurred run. next communities have of the our to some already I we mentioned, development So, cash bring lowering And generate inventory, most to

is that on So, sheet balance already.

have communities, we We and we move we open feel the section sizes as cash flow. generating those that online. comfortable will very So, into with start coming

our we today. like reflected investment portion already feel been on made of that So, XXXX has both and sheet and is XXXX balance a good for

Alex Barron

as costs as to it and have pricing up gone seems stuff. a going cuts soon. And adjusted But margins trades with forward still look way to I forward, as cost like it. guys pertains mean and rates Got And like of margins trending orders stabilize kind other have obviously, we that responding you offset as it then feel Are so, cuts finding price somehow, you if a up are to the point? well at going this and you all with guys pretty result.

Eric Lipar

Yes.

I think margins Alex definitely are normalizing.

of of Like the margins to trending couple in margin to very You gross still booked the where go channel. are margin the quarter, that gross That from our as on were the in to is our or the margin. more said quarter-over-quarter the historically. expecting fourth getting lowers obviously, after communities, XX% to in XX% we wholesale historical are down. be as don’t back But Last back gross we business to we robust lower years earlier, XX% XX% to XX% well. out see to range. margin it’s our getting we been given we plan the expect margins of and pandemic, gross And then gross new roll but we business. a factoring with Based type on guidance, anticipate then we range adjusted historical We wholesale below environment. the through

Alex Barron

guess this are question Okay. my from of point subs offset was, getting at you type or guys some I yet? not

Eric Lipar

yet. Not

will We seeing Obviously, the start come and it’s a down. costs market-by-market. community-by-community to

down. relief, strong some just, the market think see So, for is forward, starting is the to we weak or how lumber obviously, is come cost out going us. of are And where pricing really it’s I all going and to

Alex Barron

it. Got

Thanks and luck. Okay. best of

Eric Lipar

you. Thank

Charles Merdian

Thank you.

Operator

BTIG. go Thank Please you. ahead. from [Operator Reichardt question comes Instructions] Carl with next Our

Carl Reichardt

line? so time. year in follow-up quarter I written G&A if costs walk $X.X it’s full those the million think dirt the the and of you Charles, away SG&A on for Does diligence off and due include in said much? you option any fourth how more costs guidance Hey. in of Thanks types put

Charles Merdian

We the in quarter through we may pretty see as be controlled we There are already. to left significantly the fourth some, as what not much probably Yes. saw queue quarter. in should down pull as third some the in brought

about, really is standpoint, what that we offset the of from QX. training see getting some more reduction things going to will some QX is majority to back doing from we are any normal in think guidance expenses, of the I of meetings, to the talked in of initiatives a you that terms implied the hosting

Carl Reichardt

Eric Okay. business, for inclusive in you and comment then expect so just clarify that. what Thank is then that to you margin, from And factoring the XX% or the last what to XX%, comes adjusted gross normalized of wholesale? to from wholesale made

Eric Lipar

really of business. don’t lot that’s factor into ‘XX of applied just I the a land separately. here, guidance about well talking want for of And You our forward, generally going then get we And year. what think the development. do end as how we to we the need that to guidance. And types That’s am

that profit to some need be capturing we development well. of as So,

Carl Reichardt

Yes.

Okay. Thanks so guys. Appreciate it much.

Eric Lipar

welcome. You’re

Charles Merdian

You’re welcome.

Operator

comes Please next Kenneth KeyBanc. Our [Operator from you. question with Instructions] Thank Zener go ahead.

Kenneth Zener

appetite could rates your to made of their interest around is like cap part interested market specifically wholesale I the what cap shifting comments again. What I buyers? wonder you that are a based rates rates your as if how the is on? changing? just you guys or talk perspective. expand obviously, from am Because Can cap to on Hello, in to you related rates see change understanding well, of

Eric Lipar

high it This demand, And Interest And type of at customers. it’s still our impacted but been with discovery Cap of I’ll Ken. rates but price with is we there from large investors. take investors is single-family when work changed. will a rates some a REITs private number work to Yes, equity smaller different there big, we have them. very for Eric. us. is wholesale positive have level,

to ago, did So months part or also less but for of a the pay they year that’s they looking X are normalization. houses than

So get I headwind. to a both margins to that it or are whether houses don’t really as selling to we normal have look wholesale. back selling retail We the at

get are So, getting it’s Right it. to starting retail to we close forward, and to construction industry. a single-family the lot also going more going rental we we at how etcetera. environment, now, them that are moving back minded open to finish and and once negotiation starting inventory we our the of it’s balanced But to we inventory build selling current look go to are of

as So going well. to more be pricing it’s normalized

deals and the getting unfinished single-family industry going it have we if all make think are those. we that in be to limited we aggressive us can rental in with of inventory are I operators

put dent our down our on have are inventory. inventory we coming in dollars about earlier Inventory big talked We a like the call. in units

Kenneth Zener

you. Thank

Eric Lipar

welcome. You are

Operator

Instructions] Thank from Patterson Please comes go Truman Research. next with question ahead. Wolfe you. Our [Operator

Truman Patterson

my taking Hey, thanks follow-up. for

just midpoint gross from – reported anywhere implies a wide the new adjusted range? trying openings I understand And gross your XX% quarter all am Just community margin that to guide together get it’s an tie you little that XX% in level, and level? to upper get to all a your would XX.X% at the wanted fourth of clarity, hoping with I believe but to am to coming bands to of margin XX% I XX%. what guide lower it pretty like the implies

Eric Lipar

Yes.

I think, Truman, it’s a great question.

range range more more I end think the And gross of exactly then of from and with coming lower assumes sales the end tougher higher think the opposite margin. on higher the environment the just I business incentives. is the our wholesale percentage channel of

Truman Patterson

Okay, alright. Thank you.

Eric Lipar

You are welcome.

Operator

At of time, you. this Thank Q&A further showing am not any I End questions.

Eric Lipar

LGI interest great Thank on your a Alright. Astros. Homes. day today’s for for in and you Have participating call go and continued

Operator

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

LGI Homes (LGIH) 1 Nov 222022 Q3 Earnings call transcript