LGIH - Earnings call transcript Q1 2024

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Operator

Hello, and welcome to LGI Homes First Quarter 2024 Conference Call. Today's call is being recorded, and a replay will be available on the company's website at www.lgihomes.com. [Operator Instructions] I would now like to hand the conference over to Executive Vice President of Investor Relations and Capital Markets, Josh Fattor.

Joshua Fattor

Thanks, and good afternoon. I'll remind listeners that this call contains forward-looking statements, including management's views on the company's business strategy, outlook, plans, objectives and guidance for future periods. be current to involve could risks expectations prove management's that and cause reflect to subject are and to statements expectations assumptions and estimates those Such incorrect. uncertainties that

comparable press the XXXX, Form website. the the which non-GAAP undue those statements, viewpoints intended with should are statements You that be the LGI today. Chief the Financial Investor accordance we measures are non-GAAP report today later Board; on ended with XX-Q the be issued in over such Merdian, presented should isolation Charles the current uncertainties Officer on to file in and expect Eric. in reflect this quarterly must that reliance those accordance SEC the This can and and results be XX, other March we morning call information release and and quarter Chief filing financial will and presented in to of GAAP SEC and our not prepared Officer our most not the accessible actual in of a and I'll for in with not found that of management's Executive SEC's Lipar, website this cause differ discussion With financial Homes' performance. On Relations or with on in turn now me considered section future measures Eric call, risks, are Chairman could Treasurer. the of related for Reconciliations as factors to review you to of for today. considered place risks to filings guarantees and our financial of from be we'll All substitute light discuss measures GAAP. forward-looking

Eric Lipar

earnings Thanks, of in average afternoon, our over quarter the in welcome million. price first Josh. quarter sales $XXX We resulting total at first revenue an and X,XXX call. delivered of homes to Good $XXX,XXX,

X.X and trends a on the X. with to March. quarter. our closings second Despite in D.C. last saw closings, Resulting accelerated fourth lead quarter in the slower a backlog us in followed XXX quarter. with top the X.X February month, much position orders homes in During the closings X,XXX allowed and for in market we per the finish we when these Randgold sales with homes basis improved was per to further backlog compared entering quarter, the start markets results first closings California Washington, community quarter net increase with in Southern teams to the Congratulations the ended us putting stronger in in by

performance now fundamentals, not accumulating these long-term increasing points points margins affordable line Along It's including over working points trends give basis quarter year our strong and controlling demographic acquired also positive last and was protecting to price remains solely incentives. supply through slowly limited first the our and trends of gross healthy, the margin at us over balance XXX costs a increasing with training demand our in XX.X% closings fourth last up basis to or Much and development and in supported marketing was success our years the on of of basis worth compared leads beginning land we another historical been homes. our with results. is few Adjusted that's through XXX noting by These year and that sales, deliver last sheet line margin a XX.X% recent We sequentially. XX through delivered highlight accomplished that up with were in in sales quarter. margins. gross and improvements confidence discounting positive

positive faster overall impacts pace come these return a metrics. in increasingly to grow deals of inventory at to online, expect performance land our revenue more we and resulting As than

Finally, highest XX% we our is count over of prior the history. Active in an year. the the This quarter ended community with Communities, increase XXX

In they deliver addition, our I'll more XX we They call closings. to results. turn now financial will to the for over as opened count new Charles March. be community details added communities on in

Charles Merdian

Thanks, Eric.

As closings, year. through mentioned the by was in earlier, on channel, based XX.X% quarter in X.X% at ASPs. increase a closed our was $XXX.X closings revenue in representing XX.X% compared million X.X% The of price our by total decline an of wholesale decline offset XXX year-over-year X,XXX average were last sales Of partially X.X% first total driven to homes $XXX,XXX. closings a

margins margin cost $X.X adjusted XX.X%, XXX and gross gross XXX the and first points Gross basis quarter charged compared of basis XXX margin gross year. year. gross points same together basis margins XX.X%. last purchase XXX period improved $XXX,XXX was margin to excluded improved capitalized to Our was adjusted to and related interest sales compared of last basis million accounting, representing Adjusted points points to

compared Selling XX.X% same same last revenue. to goods year. were result X.X% X.X% through of X.X% purchase by the or of expenses XX.X% were and partially period revenue in the in the primarily general million quarter cost adjustments. or $XX.X costs totaled selling, coming borrowing Administrative elevated last the The lower of million and year. of or of expenses $XX.X for $XX.X our first sold, Combined offset accounting to compared increase Expenses period revenue administrative General was million

the a well to leads communities. to and spend as the expenses percentage due year quarter, amplified advertising investments SG&A of was revenue as other are volumes of lower made support this drive always new While first this increased as to higher opening in

of expectations in was we original still First for SG&A Therefore, our we percentage year. the range full expect to year with and when full as revenue expense our XX.X% a quarter performance the guidance SG&A we provided between line held XX.X%.

quarter income revenue. of for Pretax net $XX.X X.X% the or million, was

higher effective rate last rate the and XX.X% taxes. costs the Our payments to XX.X% related state was compensation to timing and tax share-based was higher year, compared of for slightly

we of $XX.X per year rate tax $X.XX between and or full will our generated be XX%. range income expect the basic and to continue net in million diluted share. We Overall, XX%

We rate with orders And the homes or million First $XXX quarter those quarter ended our orders with rental partners. our of were homes million. single-family XX.X%. XX.X% related our were were valued wholesale to X,XXX total gross X,XXX. contracts $XXX.X X,XXX backlog of and Net at was backlog in cancellation

Turning to our land position.

land XXXX in finished At centers lots, the March progress. owned owned, owned Of and vacant our homes, were XX,XXX land homes and owned and to were controlled. XX.X% lots, XX,XXX or X,XXX Of development either lots, XX, information those portfolio ]. were consisted lots were remaining owned lots, completed [ controlled of XX,XXX our lots. were XX,XXX raw Of or XX,XXX and

over quarter, to ensure Josh current discussion for openings. the homes available we X,XXX turn capital demand started new I'll community During our of and position. a the is call meet completed that, for to With inventory

Joshua Fattor

Thank including you, of outstanding, Charles. debt-to-capital quarter, resulting was $XXX.X XX.X%. facility ended coming expect capital credit million, and $XX borrow of on million the cash and million of to liquidity end for we allocate $XX We XX.X% quarters. repurchased quarter during million at ratio facility. in of share debt including drawn with of additional our We the the on $XXX.X Total the the in $XXX.X ratio shares credit net our quarter repurchases under $X.X million just billion a and XX,XXX to available debt-to-capital to

same was equity XX.X% March and last the $X.XX $XX.XX, our over an With billion, to share was value Finally, per increase of the at turn over stockholders' I'll year. book period call our XX, back Eric. that,

Eric Lipar

Thanks, Josh.

interest to year the new was full shared leads closed understood March is in I'm say pleased in we resulting XXX added April month. slower witnessed continued quarter the in The experienced call. rates, Friday, the trends expect XXX positive approximately March guidance second into the positive Despite uptick On on start the Active and to The in in our Communities year to off in over new and into the to record. positive uptick communities, us Despite continued nationwide, to we month X recent momentum last XX,XXX that each net start. April homes the we we a bringing company a interest report rates, factored of in April.

over visibility result, continue our last and in average confident between target months, our per are selling the we've closing an $XXX,XXX sales see, original price homes at to XXX between we for demand net strong a month $XXX,XXX. a reflecting per of into approximately generated X we homes backlog community clear As month. With and pace of X,XXX X X,XXX the per and

full XX%. Our year XX% remains and XX.X% and XX.X% gross between margin between adjusted guidance margin gross and

XXX approximately communities final Our the outstanding at to continue getting online and are doing one job expect new recently I'll coming with communities sales. new ready active as be sales openings to managers well and sales reps as for welcomed the to year-end. March opened in additional and support XX We close teams in XX around thought. in months country an communities

Homes especially LGI Workplace has year, those based the USA recognition Award. that on judge results are meaningful consecutive is entirely our to fourth best the received success What of the Top views employees. positioned our the makes For this

to to value around value We company they country our our just We'll people open Thank that our the are questions. as satisfying now LGI commitment to customers. of Homes continued call and know to all much. our for immensely and you teams the for your

Operator

question our from of first the Rehard Michael [Operator Instructions] comes JPMorgan. with And line

Andrew Azzi

land the to contracted the just Andrew the actually get maybe maybe with sense that's land you part start us could I how difference today? between help just maybe part? development wanted right for the start for and wondered terms in pipeline And is is land now of looking I Mike. Azzi This trying -- for a on raw to inflation understand

Eric Lipar

start is can This Andrew. and to. Thanks, if Eric. Sure. Charles add cares I can he

competitive. we has I United strong the buying across being price, being in it's in increase selective, diligent to the we're market States. make We're the land think sure continued land are demand,

and lot in We land we're And costs land rise. years. historical in we have to do come the lot we to our of to right we market able our on underway shape and believe under think in of going what a our the we the will loss as have bought maintain over we're projects be are all lots have projects margins development. now, development. through in basis a continuing scripted said good the gross We Development remarks,

Andrew Azzi

And go it's was year? growth to to that as next more as get hoping your maybe that through we And have the on thinking an thoughts kept maybe we nice update count I guys any and updated community move see just been year? to initial how you're guide. into granularity you

Eric Lipar

is release on we'll wanted XXX which make most Sure. added salespeople, call. to right these ended one communities a Yes, active promotions. exciting official, about new hiring involves is new of X, all the at quarter LGI a lot We managers, Friday of lot communities, the a new new happening new but which at of on a record. things and lot Community It We of count, talk company this it now.

we'll XXX right April So the puts of will with be on record the by for end which XXX obviously track us another end active that year. and company communities,

I XXX that hit right milestone. spaced XXX, think from equally pretty and rest out throughout of to the to on track year and exciting the probably

Operator

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

Carl Reichardt

can Guys, side. nice you. to talk the -- Charles, on SG&A i to just

you least expense So dollars, sort me just And you to have guide turning to come you selling this costs that to to are as the sense on Can of of down confidence related side, not year? last communities what these a are bit. out? at ramp give advertising the a get going little going expenses sort your you some to gives need units that selling

Charles Merdian

Yes. Great Carl. question,

we in million So total quarter yes, spend. in advertising about first the spent $X.X

we that into to to per absolute of be that we terms dollars, relatively expect the remainder a on as expect go in we of tick community basis year, the up So similar. but

the same. think more the rest I the we're seeing everything for of of year is

selling coming be year. a monitoring pretty But sure from have of spending count still make of move I sales of where relatively will community an the that through right being to our the that places people standpoint, the in we the rest and we're spending advertising of absolute we're information we're overall and and standpoint, the and center the year. then in new the it nominal So rest new managers our salespeople how think most in with impact throughout should we're our sure money we're -- the be what dollars most effective making confident we from the as people money to we're on that

Carl Reichardt

Okay.

the on the it's go So as a deliveries side year than leverage typical you and better ramp. selling expense through

Okay. And price, back relatively then the average the right, think, I if into high. number, order was I

even orders, incoming a up shifts whether maybe to talk shifts some was geographic about the mix price I the you that point Terrata? you Can up and not XX% during orders or sequentially. think quarter little it over of some bit were or saw

Eric Lipar

Yes. Yes. question. Yes, Carl, it's a great

Our end reported. our pipeline range. top ASP the than the certainly of is already We're higher at

we up labor, we to to development, because think going are it's go materials, to First, continuing our continue go do see apples-to-apples are all whether up. costs comparison, continue go costs prices to up,

So $XXX,XXX mix that's through, to We is to our component at left to believe alone going that. there through the a guide we flow $XXX,XXX because pricing.

individuals We are in square houses. still seeing customers smaller our pick footage

a Coast So longer square the XXXX, have That XX% first generally quarter towards West feet skewed homes markets. longer example, went a pipeline XX% quarter lead our also of were that is XXXX, X,XXX build first of that the in of to closed and expensive time. from under more time XX%.

ASP ASP guide it the is the is. than reason other So backlog that's higher be we're that pretty keeping the closing been current consistent where

Operator

next Research [Operator Alex our line Housing of Center. with the question Instructions] from comes Barrón And

Alex Barrón

up a versus late, you just in say least year, shift? in this, I step the out if Sorry already of was last inventory? the were so incentives? caused where couple dramatic at sales XXX what but did months the don't -- I reporting sold I you of guess, you earlier joined know you've Or changed what understand were Or closings to, the little you I you covered trying

Eric Lipar

ramping is going our leadership and each absorption fourth over orders. month of training pretty -- up opening It's averaging where back holidays X question. Yes, team Yes, communities really advertising doing for getting The sales the additional helped. quarter into we Eric. the on about in great XXX pace May and about is Alex, this great new April still spend. a incentives job January that field. a them The to us excited orders in then and No want be of through just and

team March So job it's training of and really that, just great a of to team and both great marketing job. in leadership April, great doing over still how job is with about out constraint, inquiring leads our driving work people of just and team demand the doing there. XX,XXX a a we but doing showing months the our have is really is strong the affordability homeownership through

Alex Barrón

months? in days? to start Okay. the between Great. what's words, like it roughly In it the other these And Is lag is a and sale going X May? up closing showing

Eric Lipar

start Yes. the after It on XX, orders showing later up XX days average. will

Alex Barrón

same? Okay. I of are And out other at you that's guys of incentives, the in Perfect. that guys helping terms of you lots doing incentives you imagine builders advertising what type low the moment? rates, are are Or finding interest

Eric Lipar

than we're the Alex, around pricing. rate, Similar, That lower certainly the from it incentives around monthly I you playbook. Yes. playing think payment incentives more value same gives all

like rates fixed those builders basis, lower a incentives, the of buy-downs, rate are doing. So on weekly just type other

Operator

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

James McCanless

pace? assuming talk thinking communities during or like want is anything it those lines? opened there little anything in April, guys X.X per month at Is it in there that X those of along to looks closings you accelerate, when bit a was April about quarter? about type for March. deceleration to And gave roughly maybe looking I'm see what versus but you're there of will a the out So say second numbers small the to you pace type

Eric Lipar

match average they're of closing, new closing. It's on X- Jay, We're just them April it's closings [indiscernible] No, first orders. closings X communities, think only X-month Eric. lag to to our some of definitely I be the they the Yes, those X because had our starting expecting really to going or X a of month that. closings probably Yes. just caveat

a going for to XXX But we to to going it's a ramp net communities So X XXX month, orders selling or take up. those month result is a month. closings if keep in that

James McCanless

accelerate dollars, when Got faster And than prepared kick then starting to Okay. inventory we revenue talking in? it. were comments you expect that the should dollars in when to about

Charles Merdian

the is Jay, think I Charles. the I see going to year. this Yes, remainder it you're mean of throughout

counts spending dollars I new back spread to you'll the get year. of throughout but half still our think to it the weighted -- end the community think on deliver to communities out XXX year, by the year, but the we're I it's focused heavier to of see

James McCanless

Eric, cost. having there? about to then, price And offset offset? to I percentage talking pushing you percentage you were here? what type are Like of Or mean low we what to targeting single-digit do are pricing

Eric Lipar

Yes.

increase nominal seen our Jay, that we've year. costs think so I far pretty in this

We expect to that increase.

on increases United So price would I apples-to-apples digits the expectations, single think across right be States. low for

Operator

Carl question a from of with Reichardt have we follow-up line the And BTIG.

Carl Reichardt

you, question opening these Just a homes like new stores, X you're a at grand typically for do that you pragmatic have opening? finished grand But when X many doing available Eric. of how

Eric Lipar

X X pace, another between that to X range. X and of to and supply, were X X next X which that XX of most then could and the Usually months usually that days close that in behind X that of started these another closing X to and current X to in behind

Carl Reichardt

about are And X you're training in who sales then is coming sort ago sales of with terms the a importance folks? focused environment -- you're question, doing X training or you working or talked softer Great. sort the you of process Okay. anything given differently of today's what years on. on you of or the And new and you new can but folks this versus when hire

Eric Lipar

type salespeople, of a Carl. the We're that salespeople have no, same Generally, record of success. for looking track proven

with speed, up lot what we in been, to more with payment, doing to of now, really but now, year our But environment people, co-signers them working process salespeople a credit normal. But a and in to leads our on in challenge in these overall people big a nothing's individuals comfortable be as it's them and as work getting training get working for get on right challenge comfortable our than through them a patients. our program with great credit, trained a work no in training always individuals hiring going speed, It's are their right our takes call it we challenge position. that to backlog, XXX-day think but are resolve job, changed their up I teams new some our the the and take to program. really

Operator

follow-up question with another have we Alex And the Research Barron Center. of Housing from line

Alex Barrón

again, hoping where going apologize What build you lowering forward? if your it. you quarter-over-quarter? could -- days? already the time there build comment these I was I is what mentioned time to there was And keep any room -- is improvement And

Charles Merdian

Great Yes. question.

Now the the from range Terrata across XXX XX and mean been markets a and anywhere the a in times relatively days can times for be the build country. based month particularly build how But low flow the many longest is we've seeing orders. same starts bit we're We I Texas, particularly same. what our in of inventory each on are on factor side, of end terms going generally little doing are the the we're have we to some into longer. of but like it

quarter would X,XXX the describe right track. as at being we ending So on roughly units

Alex Barrón

correctly be by I And Okay. you year-end? you to saying did hear expect XXX at communities that

Eric Lipar

from last guidance confident guidance Same number. and reiterated in quarter as that well, and Correct. our we're

Alex Barrón

a recent bit? historical pace sales that community experience? the could you goes count compress your or to has remain will similar And do Or believe up,

Eric Lipar

be that salespeople we sales of success have going we're in, has the of And what Alex, guidance. that add track believe built the that are on a last months that. to continue and when and happens, guidance all lot our on the our to seen our side, company of to plan our right is to into for going that leads similar process, we keep all coming over couple doing follow we Well,

it's to So be an going unbelievable year.

Operator

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

Eric Lipar

Have continued today's interest you, great participating call for in Thank afternoon. and LGI a Homes. for your everybody, on

Operator

great This concludes Have a Quarter Conference day. LGI Homes XXXX Call. First

LGI Homes (LGIH) 30 Apr 242024 Q1 Earnings call transcript