LGIH - Earnings call transcript Q4 2024

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Operator

Welcome to the LGI Homes Fourth 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'll now turn the call over to Josh Fattor, Executive Vice President

Joshua Fattor

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

. You of cause and today. uncertainties that could the actual those our to other with from SEC the filings review risks, should for discussion differ results a factors presented

forward-looking considered place risks, reliance reflect All be performance. and you are on which related must light of future and statements in statements, guarantees viewpoints should undue management's of not not current such

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

the Board; Merdian, Eric by today Charles Lipar, LGI Chairman Homes' and joined of Officer Financial I'm Treasurer. Executive Officer Chief Chief and and

call turn the now over to . Eric. I'll

Eric Lipar

to earnings afternoon, welcome Good and our Josh. Thanks, call.

of progress begin details we fourth XXXX. by significant the want our the I in the to into getting of objectives Before made on many highlighting quarter,

never and persistence further shifts challenges, year mortgage challenging accelerated affordability. input anticipated policy costs relief about cutting Year-end the heightening after around of began The the only the rates expected. than straining . and compounded back, economy potential concerns anyone Instead, more rising climb their rates uncertainties the in Fed proved materialized. inflation. Looking these

we our met even many and community of including strategic exceeded margins expanding our increasing gross this, our key XXXX, Despite and goals for count.

community guidance SG&A our full Additionally, the and full significantly closings, of ASP the at exceeded our beginning latest we record-breaking the year year ASP, line delivered provided in margins margins guidance with year. count, and and

we of drive the Finally, goals. affordability investments making ahead. strategic mixed backdrop the our growth and progress to our continued in face and growth continued in is years to long-term profitability our relentless a macroeconomic pursuit to team's challenges testament This of

fourth to and commitment our Our results. again in growth driving evident quarter profitability was

delivered bulk guidance the sale our in in this homes. we During here closings of within was we our an year. homes included community call on Houston. provided in and the Included number November is established last the was total for factored XXX This X,XXX leased quarter, the sale X,XXX fully in single-family into

bulk of billion these resulted average closings full total the in in of closings revenue fourth $XXX,XXX, resulted X,XXX an closings over year Excluding sale, in at price of over quarter were sales X,XXX XXXX. $X.X homes homes

pace compared lower the our current closings the results per to historical The affordability. reflects month X.X around last year community averaged prior We year. per and challenges

we in to strength geographies. However, continue key see

the and peers with with this markets your Washington, X Vegas Congratulations on and was teams Charlotte outstanding month; X Las X.X these were surrounding per was community top X.X closings results. in Raleigh per year Our and X.X; D.C. X.X. markets to areas

of active information a year. which communities. replaced the community the highlight XXXX, last increase existing This of XX year-over-year growth. this record-breaking major centers communities XX% installed We additional opened end Another year to XXX count communities represented that of a the XX and new XX brought and over at total in was XXX

openings, new the fully adopt and communities support to their processes, hires talented these the recruiting, hiring time coming invested to group require we've of success we're see our We're new excited and new individuals. training about year. will eager these materialize over they These in systems opportunities a and To and bring. excited

our were basis up margin Regarding gross points full income and and year. and margin prior adjusted pretax was respectively, year up points, margin profitability, the gross XXX from XX our basis net XXX

on but by the and with strong XXXX qualified to Therefore, for can buyers are year the remain likely what in managing people. up and targeted outlook starting ready homes wrap current I'll hiring affordable, that move-in control, our talented dynamics maintaining costs, we certain experienced noting the balance sheet. challenging is focused continue. connecting through marketing, we anything

market Longer a many to housing for point strong persistent term, undersupply trends employment, Resilient our the years and favorable outlook environment optimistic. come. demographic to homes demand remains for of

We into investments our in and future. make continue platforms of and land, sustainable growth the support inventory to drive affordability to operating homes the

quarter With turn financial results. that, . on fourth call for to I'll information the our additional over Charles

Charles Merdian

million, X.X% reflecting to $XXX,XXX. the our homes wholesale $XXX.X the decrease driven our of X% We down sequentially were total average the Revenue of or fourth by the prices our quarter, in XXX closings was Average quarter of in in in last XX.X% higher partially compared and total representing selling increase price homes levels closings XX% closed a quarter. year-over-year, incentives our XXX by in Eric. on offset X.X% business selling delivered quarter a homes XX.X% Thanks, year. in fourth of fourth homes a fourth through and closings decrease of X,XXX to

same basis year, from Adjusted Gross gross level percentage interest XXX sales excluded the given accounting quarter was cost fourth incentives $XXX,XXX charged same year. period capitalized Adjusted XX.X%, related the XX purchase compared basis of up margin last offered this of and points in expectations higher to line from $XX.X margin in to the together margin to last. last quarter in our the million of with as of gross points. representing was down year and sales a but XX.X% the slightly fourth just period

increase to Selling revenues expenses X.X% revenue. or by percentage personnel of lesser XXXX. to quarter as a extent, administrative driven of selling, increased expenses primarily due primarily closings. percentage XX.X% a was same X.X% revenue Combined advertising of fourth expenses million in wholesale higher lower community $XX.X the revenue expenses were on and of to and a The driven and in of spending to X.X% last compared the and of an higher general and of were year, overhead $XX.X the due in home count operating in X.X% count to revenue administrative General quarter period community increase or compared costs totaled of growth. by revenue million fourth

XX.X% sale and resulting the million gain the the revenue basic million quarter. during homes was $X.XX per a income in net same Included in $X.XX $XX.X share in was diluted or Pretax other Fourth last leased per year. XXX income $XX compared the $XX.X income or is net for period of quarter quarter of share. million XX% to fourth

Revenue XX.X% few a the sales decrease a year home full year decrease in billion, X.X% price a offset Highlighting increase was closings driven by in by results. $XXX,XXX. $X.X a and of X.X% full to average

During generating total X.X% our business, revenue. representing the million and $XXX.X wholesale XXX we year, homes in closings of our through closed

of XX% we wholesale conditions, will market total approximately expect represent in closings our our Given business XXXX.

expenses basis gross and to XXX revenue, and general was margin driven and advertising points, was and XX.X%, Combined administrative XX.X% points increases of year an XXX were primarily selling, basis year-over-year representing margin by XXXX respectively. of increase adjusted XX.X% basis full of gross XXX Our points higher compared spending.

year. Our was prior basis income $XXX.X of points XX from revenue, the pretax for up the net year XX.X% million or

XXXX our and income share. net Finally, million share was $X.XX or per $XXX.X basic per diluted $X.XX

X,XXX, were XX.X% the the XX% last orders orders gross net during the period year. X,XXX and quarter during cancellation rate quarter Fourth compared were was to same

at X,XXX of The the lower X,XXX. cancellation quarter primarily than We rate homes gross the sequential the number from orders with and $XXX.X historical transition XXX ended mortgage a resulting Net homes orders higher backlog the For our and decrease was the softer million. in was environment the slightly closeout fourth in and full between to demand communities rates. backlog were in due in year average. year, were XX.X%, valued

to finished were and increase X.X% XX,XXX year-over-year control X.X% lots, which We more lots the information were raw the land vacant in and land XX,XXX under and and we Of ended lots, owned total homes and At or lots, and decrease XX,XXX were lots with a a under owned were XX,XXX X,XXX remaining XX% slight approximately our December development our development, sequentially quarter. position. of X,XXX quarter year-over-year, land brought decrease a engineering. were active the owned Of as sequentially. owned centers. were X.X% of a fourth lots, Turning XX, in completed in XX% controlled but of

started we the and year X,XXX with homes progress. quarter, the ended X,XXX During in homes

increase an lots, XX,XXX controlled we XX.X% XX, December at Finally, of year-over-year.

discussion position. turn to With Josh over that, for capital I'll the a our call of

Joshua Fattor

Charles. available drawn revolving on billion ended resulting hand net XX.X% million million on nearly of with borrow our $XXX.X of our XX.X%. outstanding, of a the million, $XXX.X of cash to Total debt-to-capital revolver debt-to-capital We liquidity and in ratio Thanks, year ratio $XXX.X was including a credit $XX.X $X.X including debt under and million facility.

notes and pay the are X% net callable XXXX we mature notes down November, issued used to proceeds beginning million revolver. on senior in The in In $XXX of XXXX. borrowings unsecured and our

on authorization had we $XXX.X at million shares current repurchased XXX,XXX and of our year-end. stock the year, common During for remaining $XX.X million our

$X billion book book and the $XX.XX. of was Finally, exceeded value our our equity share value per

At this to I'll point, turn over call Eric. the

Eric Lipar

January experienced both Josh. to mortgage impacted increase backlog. January, year. off X% XXXX and our to quarter end has start. were and rates Thanks, in a into softness October and November of slower compared in the continued closings The gotten first rates in exceeding down mortgage at last The the orders year-end With

in in improved outlook this last for still I'll have February, those year. orders mind, compared trend to time XXXX. With points While the is share incrementally subdued our

expect X,XXX we close end between year, X,XXX to active to full XXX XXX the communities. selling XXXX to For and with homes and

actual is and muted in midpoint. of including While we believe if closings our year. current for absorption the January our rate remain than infer conditions Behind the the market, assumption view last at to this attainable X.X% range similar an around the what is on is year, it of duration higher does our closings were the

to still full backlog, our to product and margins of average between community $XXX,XXX. openings, sustaining we year the prices last guiding expected expected the we will be a most and focus on on year as similar are while product in customers. Selling price our sales cost Based mix, to affordable XXX,XXX inflation offering face

continue policy have that We costs. on monitor potential to the impacts changes may

chain as extensions for our of Similar the construction product an COVID, during entry-level our believe offerings inconveniences minimizing to during builder time times room supply cycle gives spec we mitigating customers. disruptions substitute experience us our real to position in our and

we will incentives including discounts to rate buyers, to entry-level To incentives, neighborhoods. select address our continue lean inventory affordability and interest in challenges and confronting older closing costs into prices reducing

home We X are investing approximately offer per our currently to or incentives around to points to these average on customers. X $XX,XXX

However, and XX.X%. even gross year XX.X% impact these with we between and the margin adjusted XX.X% incentives, currently between gross and XX.X% expect of full margin

keeping is margins that that the profit. what our the to near capture of projects tools developer's expected historical top finally, and would margins were be is communities affordability. the majority XX% to underwritten our we self-developed results that expense in group Part expect the result XX.X%. these full peer line between the overall or rate This And higher this that while of is in range SG&A fact higher approximately were of are naturally at guidance with the using XX%. year even to tax at support

want team through operational expertise year, challenging for the confident them a long-term on committed outcomes economic and for I course in dedication to they and to navigate successful against discipline This thank well and we whatever believe in I'm positioning our positioned their maintaining LGI our we again the members conclusion, to are to are XXXX. the arise and staying sustainable profitability growth. challenges talent Homes In and of congratulate backdrop. team delivered remain

Operator, for questions. please line open the

Operator

. [Operator question Trevor Instructions] Research. of from first be coming Allinson Our will Wolfe

Trevor Allinson

the where start year gross full quite to came of left year into are you midpoint bit only here gross where want there despite probably I your The off. modestly down a on guide implies Eric, kind into margins of lower we coming margins XXXX. margin than XXXX

the for whether the reduced from get year offsets, any to else a moving as there? some land of would cost seeing trying feel costs? some Are pricing parts on of anything these that there that offset or perhaps and be just inflations likely potentially you're vertical goes any incentives from So

Eric Lipar

now, think that around where gross customers incentives in range even costs, year-over-year. $XX,XXX offering similar said we're development -- being we're It's our in yes, with to for X%, to profit, be do municipalities continue We to capture our that's believe expect running our States. XX% development question. to adjusted we pricing land labor we're our we buydowns. is well. to across sticks than through Right with we're to to up, different those X% prepared to we rate Yes, to with And developer bricks gross United need house doing also related, doing cost, business for a the Trevor, margin, the as cost customers costs and fees. to help have our margin go of on like we expect We average yes, thanks cost. the a be historical to But offset though lot of average all going cost whether remarks, incentives that

Trevor Allinson

you then makes making XQ slow Clearly, be that helpful. Is Or a to even a you expecting talked in be be in on the would call, time? are just changed sense. your higher there seeing XXXX. absorption question talk on Yes, commentary would affordability your aggressive rates guys a view competitors about tougher? about of you lower year-over-year see on And Can in target more had second is basis. bit not Any since here, incentives? lot that your what's pace move

Eric Lipar

of little openings. been to is Yes, 'XX. question, factors. higher certainly hopefully, anticipating That being conservative as we're couple a but Trevor. new 'XX sales slower One community year. are of pace has start compared to in off versus guide, last it's year a a And A slower to lot great a a this rates, we contributed also

sales and the system last managers the course, in of be getting organization, off XXXX, those new of our processes But year means years. new up to it's in in learning the of XXXX. for a reps and of think individuals going our lot One really really was and and pay of a a speed going up to But XX% headwind opening going XXXX . communities. first that, that's I later year the to lot highlights taking new

that's another think conservative I So we're reason absorption. on

little a outstanding absorption, strong lower but community this year, and yes, be an similar year But margins, should in growth on strong ASP, count XXXX. bit it

Operator

coming be will Zener, question Kenneth analyst. next Our from

Kenneth Zener

the I the numbers, think Could all. units you I outline under construction? but not got one of

-- what did the in construction, the So end started units not quarter you under fourth and with, up uncomplete sold?

Charles Merdian

X,XXX Sure. in completed, in Ken, had roughly this is Charles. We centers. had units just rest total X,XXX homes progress the over inventory. information about X,XXX and We were

Kenneth Zener

Great. you for think, regards the pace of be Or regarding number starts . a that have to that. the was level, referring that Really same? then start what And that Charles, which orders, Was mentioned in might starts? was specifically? I Or to appreciate can X.

Charles Merdian

the X,XXX about than had quarter. We in during less Sure. closed we quarter, fourth starts which what the was

inventory X,XXX. our it a X,XXX about so down over from down to down brought bringing by units, just So we few hundred

Kenneth Zener

-- pulling then less the seeing think obviously. the obviously just you something strength, is to the you do people have it relationship Or of How And data downs less else? be at why efficient incentives, more you of mortgage when in, been level that that less seen confident are saying you consumer because confluence the weakness. those do leaning talked incentives you Okay. Or But people -- jobs? entry the think? the -- efficiency a buy opposed is you're in efficiencies, as on about demand, between work does there's i.e., about

Eric Lipar

can is take this it. Eric. I Ken, Yes,

on in and still and and that in LGI the coming demand leads think do is in interest is walking what an we we calling e-mailing are have and there focus because I communities. our

their the worried those about jobs, in that's jobs. customers So not their are have homeownership. They interest

ASP the homebuyer is biggest qualified whether in it's challenge our mortgage. rates, I customer is that rest it affordability, their first-time peer And currently challenging think Affordability from resonates and #X apartment an And the the headwind, our still a affordability. LGI, become getting for for first situation through for is that's group, looking to rental of home. or and our especially buy primarily

So incentive is a broad word.

expense that and pool, And a more between price whether on homes on more buydowns. for States. in a interest for for community, incentives incentivize market finished by the people that we behalf when where move, it's bringing is theory, it or those pay United house, the customer looking the at the we to into should paying of the monthly are lowers you and that of the Obviously, down you rates are community buy course, we're And rate, market many balance that qualify to payment. more the by how people looking of are across but the

Operator

question coming BTIG. Instructions] next Willem Rooney will be [Operator of from Our

Willem Robert Rooney

whole. the First one about ask was to a guidance as

You mentioned if amount terms that you seeing would particular Curious do greatest today? there where think guide to you would conservative might the improve be in the within of easier of surpass it. of have conservatism what what is most as there's some being conditions you're any beyond or if highlight that aspects currently you to were flexibility, the

Eric Lipar

Yes.

see than I cost a bit ASP, our we're probably little XXXX. here is some backlog think our ASP higher going guidance. in And inflation I to think

like point our XXXX. So going balance have to believe conservative is It's go the in most incentives the those continue raise we to to a go. likely I'd rates to offset price we where ASP But because to probably where also that's costs. is to to sales because and think guidance likely probably just that be demand believe We most we the to conservative. closings is our there

Willem Robert Rooney

for believe, X% community Okay. midpoint. is guidance, at growth the Appreciate I that. follow-up, And count my then

weighted you're if in come if wondering strong XXXX of the there. Just or it's stores . more to back online the Just it's expecting to half split? equally if be towards cadence about curious

Eric Lipar

Yes.

XXXX. at we half a had went year. the say, probably we ramp the of XXX of to then down lot of And more to to end So would weighted I back the up XXX,

Operator

Wedbush. next coming will question Jay of be our McCanless And from

James McCanless

out Washington, D.C. is the Eric, called markets of you better one 'XX. in

if are the the Just all area. any you seen impact headlines that around layoffs we've seeing the D.C. wondering that around from guys and

Eric Lipar

district. are actually Yes. and us that's not community I working mean, individuals for successful West number. driving commuting out government of have Not in necessarily more working Washington, the real the it's the D.C., are further forth locations, Jay. a is for that in the necessarily, that not primarily back It's Virginia,

would I So say yet not anything. haven't seen and

James McCanless

Okay. to either I hear. the affordability the how center good sales the had, That's at some there? big guess you the incentives much multifamily -- look getting customer question then things that are is this and the year knowing into challenge, And harder is are customer I or that website, it second respond core pull a you're guess, to that what to putting you to how to I seeing out of

Eric Lipar

Yes.

think I there. is the demand

demand situation for rental going a always and there. homeownership I will from be think the

rents never between kind been that paying has I now. to really to gap our dollars and will payment qualify individuals are be to customers, the have will, is on their of more monthly for we wider. more to a having industry through known expensive that That's that it's That customer, and find to item, customer we go line expense you gap mortgage. than think we it's what get to if spend relevant SG&A more and that because is ever what had challenging

acceptable . additional pace spending hit absorption on and make those margins our we're profitability. marketing additional to sure maintain we leads and an So drive to money

James McCanless

the you've you this the wanted on Okay. to to in expand ask is on year, I expansion going then focusing are some the terms Got to looking guys to where are . keep And got new you ground? SG&A MSAs of already it. this community your about one last the year? Or markets

Eric Lipar

Right got country focusing on community markets is here on. on leadership across and in XX exactly. focused those really a in. those in markets lot. count Now markets going great We've the markets place all the in deeper we're through

Operator

like time, for to further remarks. Eric this I'm . questions. not now to showing back turn any call I the At would closing

Eric Lipar

day. for and and today Thank Have call you, thanks, great everyone, LGI on Homes. interest participating the a your in

Operator

for conference. and today's thank in participating you Ladies gentlemen,

may You now disconnect.

LGI Homes (LGIH) 25 Feb 252024 Q4 Earnings call transcript