[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) Presents the company's unaudited financial statements and management's discussion for the quarter [Item 1. Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20LGI%20Homes%2C%20Inc.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents LGI Homes' unaudited consolidated financial statements for Q1 2023 and 2022, covering balance sheets, operations, equity, cash flows, and notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) - The company's total assets slightly decreased from **$3,124.8 million** at December 31, 2022, to **$3,100.9 million** at March 31, 2023, primarily due to a decrease in real estate inventory and notes payable[12](index=12&type=chunk) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :----- | :---------------------------- | :------------------------------- | :------------------------ | | Total Assets | $3,100,923 | $3,124,828 | -$23,905 (-0.76%) | | Real Estate Inventory | $2,880,520 | $2,898,296 | -$17,776 (-0.61%) | | Total Liabilities | $1,426,694 | $1,482,416 | -$55,722 (-3.76%) | | Notes Payable | $1,045,837 | $1,117,001 | -$71,164 (-6.37%) | | Total Equity | $1,674,229 | $1,642,412 | +$31,817 (+1.94%) | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) - For the three months ended March 31, 2023, home sales revenues decreased by **10.7%** year-over-year, leading to a significant **65.7%** drop in net income, primarily due to lower operating income and higher selling expenses[15](index=15&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | | Cost of sales | $388,541 | $387,643 | +$898 (+0.2%) | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | Basic EPS | $1.15 | $3.30 | -$2.15 (-65.2%) | | Diluted EPS | $1.14 | $3.25 | -$2.11 (-64.9%) | [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity) - Total equity increased from **$1,642.4 million** at December 31, 2022, to **$1,674.2 million** at March 31, 2023, driven by net income and stock issued under employee incentive plans, partially offset by stock repurchases in the prior year[18](index=18&type=chunk)[47](index=47&type=chunk) | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Total Equity | $1,642,412 | $1,674,229 | +$31,817 | | Net income | — | $26,962 | +$26,962 | | Stock issued under employee incentive plans | — | $1,546 | +$1,546 | | Stock repurchase (3 months ended Mar 31, 2022) | — | — | -$57,659 (YoY) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) - The company generated **$77.6 million** in cash from operating activities for the three months ended March 31, 2023, a significant improvement from a net cash outflow in the prior year, primarily due to changes in real estate inventory and other assets. Investing activities used **$4.9 million**, and financing activities used **$61.8 million**, leading to a net increase in cash and cash equivalents of **$11.0 million**[21](index=21&type=chunk) | Cash Flow Activity | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Operating Activities | $77,600 | $(137,787) | +$215,387 | | Investing Activities | $(4,855) | $(1,373) | -$3,482 | | Financing Activities | $(61,777) | $141,971 | -$203,748 | | Net increase in cash and cash equivalents | $10,968 | $2,811 | +$8,157 | | Cash and cash equivalents, end of period | $42,966 | $53,325 | -$10,359 | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [1. Organization and Basis of Presentation](index=9&type=section&id=1.%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) - LGI Homes, Inc. is a Delaware corporation headquartered in The Woodlands, Texas, engaged in the development, design, construction, and sale of new homes across multiple U.S. states[23](index=23&type=chunk) - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and with SEC regulations[24](index=24&type=chunk) [2. Real Estate Inventory](index=9&type=section&id=2.%20REAL%20ESTATE%20INVENTORY) | Inventory Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Land, land under development and finished lots | $1,922,275 | $1,911,307 | | Homes in progress | $350,098 | $287,069 | | Completed homes | $417,575 | $523,054 | | Total owned inventory | $2,726,584 | $2,756,504 | | Real estate not owned | $153,936 | $141,792 | | Total real estate inventory | $2,880,520 | $2,898,296 | - The company uses land banking financing arrangements to acquire finished lots in staged takedowns, limiting risk and minimizing cash use, while retaining control over the economic outcome of these 'real estate not owned' assets[27](index=27&type=chunk) [3. Accrued Expenses and Other Liabilities](index=10&type=section&id=3.%20ACCURRED%20EXPENSES%20AND%20OTHER%20LIABILITIES) | Liability Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Land banking financing arrangements | $153,936 | $141,792 | | Real estate inventory development and construction payable | $68,239 | $73,678 | | Taxes payable | $51,071 | $47,037 | | Warranty reserve | $11,350 | $10,750 | | Total accrued expenses and other liabilities | $340,917 | $340,128 | - The warranty reserve increased from **$10.75 million** at the beginning of the period to **$11.35 million** at March 31, 2023, with a provision of **$1.85 million** and expenditures of **$1.25 million** during the quarter[32](index=32&type=chunk) [4. Notes Payable](index=10&type=section&id=4.%20NOTES%20PAYABLE) | Debt Instrument | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------- | :---------------------------- | :------------------------------- | | 2022 Credit Agreement | $756,241 | $828,350 | | 4.000% Senior Notes due 2029 | $300,000 | $300,000 | | Total notes payable | $1,045,837 | $1,117,001 | - The revolving credit facility was amended on **April 28, 2023**, increasing to **$1.13 billion**, with **$775.0 million** (**68.6%**) of commitments extended to **April 28, 2027**, while the remaining mature on **April 28, 2025**[40](index=40&type=chunk) - As of **March 31, 2023**, the borrowing base under the 2022 Credit Agreement was **$1.4 billion**, with **$1.1 billion** outstanding (including 2029 Senior Notes) and **$315.8 million** available to borrow[37](index=37&type=chunk) [5. Income Taxes](index=12&type=section&id=5.%20INCOME%20TAXES) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Income tax provision | $5,386 | $20,864 | -$15,478 (-74.2%) | | Effective tax rate | 16.7% | 21.0% | -4.3 percentage points | - The lower effective tax rate is primarily due to deductions in excess of compensation cost for share-based payments and the extension of federal energy-efficient homes tax credits[45](index=45&type=chunk) [6. Equity](index=12&type=section&id=6.%20EQUITY) - The Board approved a **$200.0 million** increase to the stock repurchase program in **February 2022**, bringing the total authorization to **$550.0 million**[47](index=47&type=chunk) - No shares were repurchased during the three months ended **March 31, 2023**[47](index=47&type=chunk) - As of **March 31, 2023**, **$211.5 million** remained available under the stock repurchase program[47](index=47&type=chunk) [7. Earnings Per Share](index=13&type=section&id=7.%20EARNINGS%20PER%20SHARE) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Basic EPS | $1.15 | $3.30 | -$2.15 (-65.2%) | | Diluted EPS | $1.14 | $3.25 | -$2.11 (-64.9%) | | Basic weighted average shares outstanding | 23,381,294 | 23,837,170 | -455,876 (-1.9%) | | Diluted weighted average shares outstanding | 23,629,779 | 24,194,321 | -564,542 (-2.3%) | [8. Stock-Based Compensation](index=13&type=section&id=8.%20STOCK-BASED%20COMPENSATION) - Stock-based compensation expense for time-vested Restricted Stock Units (RSUs) was **$1.1 million** for Q1 2023, up from **$0.8 million** in Q1 2022[50](index=50&type=chunk) - Unrecognized compensation cost for unvested RSUs was **$10.7 million** as of **March 31, 2023**, to be recognized over a weighted average period of **2.3 years**[50](index=50&type=chunk) - Stock-based compensation expense for Performance-Based Restricted Stock Units (PSUs) was **$1.6 million** for Q1 2023, down from **$2.3 million** in Q1 2022[54](index=54&type=chunk) [9. Fair Value Disclosures](index=14&type=section&id=9.%20FAIR%20VALUE%20DISCLOSURES) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (significant unobservable inputs)[56](index=56&type=chunk)[57](index=57&type=chunk) | Liability | Fair Value Hierarchy | Carrying Value (Mar 31, 2023, in thousands) | Estimated Fair Value (Mar 31, 2023, in thousands) | | :-------- | :------------------- | :------------------------------------------ | :------------------------------------------------ | | 2029 Senior Notes | Level 2 | $300,000 | $259,334 | [10. Commitments and Contingencies](index=15&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) - Management believes ordinary course claims and environmental matters will not have a material effect on financial statements[60](index=60&type=chunk)[61](index=61&type=chunk) | Commitment | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------- | :---------------------------- | :------------------------------- | | Land deposits and option payments | $24,139 | $22,406 | | Commitments under land purchase contracts | $439,666 | $411,776 | | Lots under land purchase contracts | 12,088 | 13,184 | - Outstanding letters of credit and performance/surety bonds totaled **$361.1 million** at **March 31, 2023**, related to site improvements[67](index=67&type=chunk) [11. Revenues](index=16&type=section&id=11.%20REVENUES) | Revenue Stream | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Retail home sales revenues | $456,177 | $494,206 | -$38,029 (-7.7%) | | Wholesale home sales revenues | $31,180 | $51,844 | -$20,664 (-39.9%) | | Total home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | [12. Segment Information](index=17&type=section&id=12.%20SEGMENT%20INFORMATION) - The company aggregates seven operating segments into five qualifying reportable segments: Central, Southeast, Northwest, West, and Florida[72](index=72&type=chunk) | Segment | Revenues (3 Months Ended Mar 31, 2023, in thousands) | Revenues (3 Months Ended Mar 31, 2022, in thousands) | Net Income (Loss) Before Taxes (3 Months Ended Mar 31, 2023, in thousands) | Net Income (Loss) Before Taxes (3 Months Ended Mar 31, 2022, in thousands) | | :------ | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------------------------------- | :------------------------------------------------------------------------- | | Central | $150,380 | $262,298 | $9,064 | $57,740 | | Southeast | $104,376 | $72,463 | $6,924 | $10,129 | | Northwest | $74,815 | $102,874 | $7,651 | $27,584 | | West | $78,886 | $55,583 | $2,383 | $(231) | | Florida | $78,900 | $52,832 | $7,487 | $5,360 | | Total | $487,357 | $546,050 | $32,348 | $99,550 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of LGI Homes' Q1 2023 financial condition and operational results, covering key metrics, performance, and liquidity [Business Overview](index=18&type=section&id=Business%20Overview) - LGI Homes adapted to market conditions in Q1 2023 by increasing targeted advertising, offering mortgage buy-down programs, and focusing on smaller, more affordable homes[78](index=78&type=chunk) - Demand for homes increased in Q1 2023 compared to Q4 2022, leading to higher net orders and selective increases in construction starts[79](index=79&type=chunk) - Home closings decreased by **14.6%** to **1,366 homes** in Q1 2023 (vs. **1,599** in Q1 2022) due to the slowdown in demand during H2 2022 and ongoing supply chain disruptions[80](index=80&type=chunk) [Recent Developments](index=19&type=section&id=Recent%20Developments) - The revolving credit facility was amended on **April 28, 2023**, increasing to **$1.13 billion**, with **$775.0 million** of commitments extended to **April 28, 2027**[85](index=85&type=chunk) [Key Results](index=19&type=section&id=Key%20Results) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Home sales revenues | $487.4 million | $546.1 million | -10.7% | | Homes closed | 1,366 | 1,599 | -14.6% | | Average sales price per home closed | $356,777 | $341,495 | +4.5% | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | | Net income before income taxes | $32.3 million | $99.6 million | -67.5% | | Net income | $27.0 million | $78.7 million | -65.7% | | EBITDA % (non-GAAP) | 8.1% | 19.1% | -11.0 percentage points | | Adjusted EBITDA % (non-GAAP) | 7.2% | 18.8% | -11.6 percentage points | - The company owned and controlled **69,724 lots** at **March 31, 2023**, a decrease from **71,904 lots** at December 31, 2022[86](index=86&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) - The company experienced a significant decline in operating performance for Q1 2023 compared to Q1 2022, with home sales revenues decreasing by **10.7%** and net income before income taxes dropping by **67.5%**[87](index=87&type=chunk)[98](index=98&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -$58,693 (-10.7%) | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income before income taxes | $32,348 | $99,550 | -$67,202 (-67.5%) | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | | Selling expenses % of revenue | 8.8% | 6.3% | +2.5 percentage points | | General and administrative % of revenue | 6.1% | 5.2% | +0.9 percentage points | [Homes Sales](index=22&type=section&id=Homes%20Sales) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Home sales revenues | $487,357 | $546,050 | -10.7% | | Homes closed | 1,366 | 1,599 | -14.6% | | Average sales price per home closed | $356,777 | $341,495 | +4.5% | | Average community count | 97.7 | 89.0 | +9.8% | | Average monthly absorption rate | 4.7 | 6.0 | -21.7% | - Wholesale revenues decreased significantly to **$31.2 million** (**103 closings**) in Q1 2023 from **$51.8 million** (**213 closings**) in Q1 2022, representing a smaller percentage of total closings (**7.5%** vs. **13.3%**)[92](index=92&type=chunk) [Cost of Sales and Gross Margin](index=23&type=section&id=Cost%20of%20Sales%20and%20Gross%20Margin) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Cost of sales | $388,541 | $387,643 | +$898 (+0.2%) | | Gross margin | $98,816 | $158,407 | -$59,591 (-37.6%) | | Gross margin % | 20.3% | 29.0% | -8.7 percentage points | - The decrease in gross margin percentage was primarily due to higher construction costs, capitalized interest, and the impact of sales incentives[94](index=94&type=chunk) [Selling Expenses](index=23&type=section&id=Selling%20Expenses) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Selling expenses | $42,805 | $34,398 | +$8,407 (+24.4%) | | Selling expenses % of home sales revenues | 8.8% | 6.3% | +2.5 percentage points | [General and Administrative](index=23&type=section&id=General%20and%20Administrative) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | General and administrative | $29,960 | $28,289 | +$1,671 (+5.9%) | | General and administrative % of home sales revenues | 6.1% | 5.2% | +0.9 percentage points | [Other Income](index=23&type=section&id=Other%20Income) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Other income, net | $6,297 | $3,830 | +$2,467 (+64.4%) | [Operating Income and Net Income before Income Taxes](index=23&type=section&id=Operating%20Income%20and%20Net%20Income%20before%20Income%20Taxes) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Operating income | $26,051 | $95,720 | -$69,669 (-72.8%) | | Net income before income taxes | $32,348 | $99,550 | -$67,202 (-67.5%) | - The Central segment contributed **28.0%** (**$9.1 million**) to net income before income taxes, Southeast **21.4%** (**$6.9 million**), Northwest **23.7%** (**$7.7 million**), West **7.4%** (**$2.4 million**), and Florida **23.1%** (**$7.5 million**)[98](index=98&type=chunk) [Income Taxes](index=25&type=section&id=Income%20Taxes) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Income tax provision | $5,386 | $20,864 | -$15,478 (-74.2%) | | Effective tax rate | 16.7% | 21.0% | -4.3 percentage points | [Net Income](index=25&type=section&id=Net%20Income) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | [Non-GAAP Measures](index=25&type=section&id=Non-GAAP%20Measures) - The company provides non-GAAP financial measures, Adjusted Gross Margin, EBITDA, and Adjusted EBITDA, to offer supplemental insights into operating performance by excluding certain non-cash or non-recurring items[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) [Adjusted Gross Margin](index=25&type=section&id=Adjusted%20Gross%20Margin) - Adjusted gross margin is defined as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales[103](index=103&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Gross margin | $98,816 | $158,407 | -$59,591 (-37.6%) | | Capitalized interest charged to cost of sales | $6,757 | $4,513 | +$2,244 (+49.7%) | | Purchase accounting adjustments | $2,036 | $2,282 | -$246 (-10.8%) | | Adjusted gross margin | $107,609 | $165,202 | -$57,593 (-34.8%) | | Adjusted gross margin % | 22.1% | 30.3% | -8.2 percentage points | [EBITDA and Adjusted EBITDA](index=25&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) - EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization, and capitalized interest charged to the cost of sales. Adjusted EBITDA further excludes loss on extinguishment of debt, other income, net, and purchase accounting adjustments[105](index=105&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (YoY) | | :----- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $26,962 | $78,686 | -$51,724 (-65.7%) | | EBITDA | $39,587 | $104,411 | -$64,824 (-62.1%) | | Adjusted EBITDA | $35,326 | $102,863 | -$67,537 (-65.7%) | | EBITDA margin % | 8.1% | 19.1% | -11.0 percentage points | | Adjusted EBITDA margin % | 7.2% | 18.8% | -11.6 percentage points | [Backlog](index=27&type=section&id=Backlog) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | | Net orders | 2,219 | 1,973 | +246 (+12.5%) | | Cancellation rate | 15.9% | 15.6% | +0.3 percentage points | | Ending backlog – homes | 1,555 | 2,429 | -874 (-36.0%) | | Ending backlog – value (in thousands) | $561,422 | $849,117 | -$287,695 (-33.9%) | - The decrease in ending backlog is attributed to lower demand for home sales in Q1 2023 compared to Q1 2022, influenced by increased mortgage rates[113](index=113&type=chunk) [Land Acquisition Policies and Development](index=28&type=section&id=Land%20Acquisition%20Policies%20and%20Development) - The company had **99 active communities** as of **March 31, 2023**[115](index=115&type=chunk) - Total owned or controlled lot inventory decreased to **69,724 lots** at **March 31, 2023**, from **71,904 lots** at December 31, 2022[116](index=116&type=chunk) | Reportable Segment | Home Closings (3 Months Ended Mar 31, 2023) | Owned Lots (As of Mar 31, 2023) | Controlled Lots (As of Mar 31, 2023) | Total Lots (As of Mar 31, 2023) | | :----------------- | :------------------------------------------ | :------------------------------ | :----------------------------------- | :------------------------------ | | Central | 453 | 21,471 | 3,413 | 24,884 | | Southeast | 316 | 14,761 | 2,750 | 17,511 | | Northwest | 159 | 6,553 | 2,010 | 8,563 | | West | 209 | 9,669 | 1,255 | 10,924 | | Florida | 229 | 5,182 | 2,660 | 7,842 | | Total | 1,366 | 57,636 | 12,088 | 69,724 | [Homes in Inventory](index=29&type=section&id=Homes%20in%20Inventory) - As of **March 31, 2023**, the company had **1,628 completed homes** (including information centers) and **2,026 homes** in progress[120](index=120&type=chunk) [Raw Materials and Labor](index=29&type=section&id=Raw%20Materials%20and%20Labor) - The company mitigates risks from material and labor cost increases by contracting at fixed prices for the anticipated construction period[121](index=121&type=chunk) - During Q1 2023, the company experienced delays and cost increases in building materials and construction, which were generally absorbed by increasing home sales prices[121](index=121&type=chunk)[146](index=146&type=chunk) [Seasonality](index=29&type=section&id=Seasonality) - The homebuilding industry is seasonal, with the company typically closing more homes in the second, third, and fourth quarters, leading to quarterly fluctuations in results and higher capital requirements in those periods[122](index=122&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) [Overview](index=29&type=section&id=Overview) - As of **March 31, 2023**, cash and cash equivalents totaled **$43.0 million**[124](index=124&type=chunk) - Principal uses of capital include operating expenses, land/lot purchases, lot development, home construction, interest costs, and stock repurchases[125](index=125&type=chunk) [Short-term Liquidity and Capital Resources](index=29&type=section&id=Short-term%20Liquidity%20and%20Capital%20Resources) - Short-term liquidity is primarily funded by operating cash flows, the Credit Agreement, and land banking financing arrangements[126](index=126&type=chunk) - The company believes it can fund liquidity needs for at least the next twelve months with cash on hand, operating cash, and available credit[127](index=127&type=chunk) [Long-term Liquidity and Capital Resources](index=30&type=section&id=Long-term%20Liquidity%20and%20Capital%20Resources) - Long-term liquidity uses include inventory purchases, stock repurchases, capital expenditures, and principal and interest payments on debt obligations[129](index=129&type=chunk) - Long-term funding sources include operating cash flows, the Credit Agreement, and strategic land banking, with potential for additional debt or equity capital[129](index=129&type=chunk) [Revolving Credit Facility](index=30&type=section&id=Revolving%20Credit%20Facility) - The Credit Agreement provides a **$1.13 billion** revolving credit facility, which can be increased by up to **$170.0 million**[130](index=130&type=chunk) - Lenders with **$775.0 million** (**68.6%**) of commitments extended their maturity to **April 28, 2027**, with the remaining maturing on **April 28, 2025**[130](index=130&type=chunk) - As of **March 31, 2023**, **$315.8 million** was available to borrow under the **$1.4 billion** borrowing base[132](index=132&type=chunk) [Senior Notes Offering](index=30&type=section&id=Senior%20Notes%20Offering) - **$300.0 million** aggregate principal amount of **4.000%** Senior Notes due **July 15, 2029**, were issued on **June 28, 2021**[134](index=134&type=chunk) [Letters of Credit, Surety Bonds and Financial Guarantees](index=30&type=section&id=Letters%20of%20Credit%2C%20Surety%20Bonds%20and%20Financial%20Guarantees) - Outstanding letters of credit, surety bonds, and financial guarantees totaled **$361.1 million** as of **March 31, 2023**[136](index=136&type=chunk) - Management does not believe it is probable that any outstanding letters of credit, surety bonds, or financial guarantees will be drawn upon[138](index=138&type=chunk) [Stock Repurchase Program](index=32&type=section&id=Stock%20Repurchase%20Program) - The stock repurchase program was increased to **$550.0 million** in **February 2022**[139](index=139&type=chunk) - No shares were repurchased in Q1 2023; **$57.7 million** was used to repurchase **475,055 shares** in Q1 2022[139](index=139&type=chunk) - **$211.5 million** remained available under the program as of **March 31, 2023**[139](index=139&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) [Operating Activities](index=32&type=section&id=Operating%20Activities) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) operating activities | $77,600 | $(137,787) | | Net change in real estate inventory | +$15,945 | $(251,612) | | Net income | $26,962 | $78,686 | [Investing Activities](index=32&type=section&id=Investing%20Activities) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash used in investing activities | $(4,855) | $(1,373) | | Investment in unconsolidated entities | $(5,919) | $(380) | [Financing Activities](index=32&type=section&id=Financing%20Activities) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) financing activities | $(61,777) | $141,971 | | Payments on notes payable | $(105,000) | — | | Proceeds from notes payable | $32,890 | $197,617 | | Stock repurchase | — | $(57,659) | [Inflation](index=32&type=section&id=Inflation) - Inflation adversely impacts land, financing, labor, material, and construction costs, and can increase mortgage rates, affecting homebuyer affordability[145](index=145&type=chunk) - The company expects cost pressures from inflation to continue in 2023 but has generally offset them by increasing home sales prices[146](index=146&type=chunk) [Material Cash Requirements](index=33&type=section&id=Material%20Cash%20Requirements) - As of **March 31, 2023**, there have been no material changes to the company's known contractual and other obligations previously disclosed in its 2022 Annual Report on Form 10-K[148](index=148&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No significant changes to critical accounting policies and estimates were identified during Q1 2023 compared to the 2022 Annual Report on Form 10-K[150](index=150&type=chunk) [Cautionary Statement about Forward-Looking Statements](index=33&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) - Forward-looking statements are subject to risks such as adverse economic changes, market volatility, supply chain disruptions, inflation, and changes in mortgage rates[153](index=153&type=chunk) - The company expressly disclaims any intent, obligation, or undertaking to update or revise any forward-looking statements[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to market risks, particularly interest rate fluctuations, and its management strategies for variable-rate debt [Quantitative and Qualitative Disclosures About Interest Rate Risk](index=34&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Interest%20Rate%20Risk) - The company utilizes both fixed-rate debt (**$300.0 million** Senior Notes) and variable-rate debt (**$756.2 million** outstanding under the 2022 Credit Agreement)[157](index=157&type=chunk)[159](index=159&type=chunk) - A hypothetical **100 basis point** increase in the average interest rate above the SOFR floor on variable-rate indebtedness would increase annual interest cost by approximately **$7.6 million**[159](index=159&type=chunk) - Management believes that current interest rate management policies will prevent a material adverse impact on the company's financial position, results of operations, or liquidity[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Addresses the effectiveness of disclosure controls and procedures, reporting on changes in internal control over financial reporting for the quarter [Disclosure Controls and Procedures](index=35&type=section&id=Disclosure%20Controls%20and%20Procedures) - As of **March 31, 2023**, the CEO and CFO concluded that the company's disclosure controls and procedures were effective in ensuring timely and accurate information reporting[161](index=161&type=chunk) - Control systems, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that objectives are met and can be circumvented[162](index=162&type=chunk) [Changes in Internal Controls](index=35&type=section&id=Changes%20in%20Internal%20Controls) - No change in internal control over financial reporting occurred during the three months ended **March 31, 2023**, that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[164](index=164&type=chunk) [PART II - OTHER INFORMATION](index=36&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) Provides additional information including risk factors, recent developments, exhibits, and official signatures [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, noting no material changes except for new concerns regarding financial industry and capital markets turmoil impacting liquidity - No material changes to previously disclosed risk factors, except for new concerns about financial industry and capital markets turmoil[166](index=166&type=chunk) - The failure of other banks could adversely affect liquidity if the company has deposits or if Credit Agreement lenders face issues, potentially limiting access to the full borrowing capacity[167](index=167&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) Reiterates the recent amendment to the 2022 Credit Agreement, detailing the revolving credit facility increase and extended maturity - The 2022 Credit Agreement was amended on **April 28, 2023**, to provide for a **$1.13 billion** revolving credit facility[168](index=168&type=chunk) - Lenders with **$775.0 million**, or **68.6%**, of the commitments agreed to extend the maturity of their commitments to **April 28, 2027**[168](index=168&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all documents filed as exhibits to the Form 10-Q, including corporate governance, amended credit agreement, and officer certifications - Key exhibits include the Third Amendment to Fifth Amended and Restated Credit Agreement, CEO and CFO certifications, and Inline XBRL documents[170](index=170&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) Contains the official signatures of the registrant's authorized officers, certifying the Form 10-Q filing - The report was signed by Eric Lipar (Chief Executive Officer and Chairman of the Board) and Charles Merdian (Chief Financial Officer and Treasurer) on **May 2, 2023**[173](index=173&type=chunk)[174](index=174&type=chunk)

Financial Data and Key Metrics Changes - In 2022, the company reported home closings of 6,621, a significant decrease from over 10,000 in the previous year, leading to disappointment in meeting guidance [5][9] - Revenue for the fourth quarter was $488.3 million, a 39% year-over-year decline, primarily due to a 42.7% decrease in closings [14] - Full-year revenue was $2.3 billion, down 24.4%, with a net income of $326.6 million, or $13.90 per basic share [18][20] - The gross margin for the full year was 28.1%, and adjusted gross margin was 29.2%, both representing new company records [20] Business Line Data and Key Metrics Changes - The wholesale business accounted for 29.8% of total closings in Q4, up from 14.6% in the same period last year [15] - The average selling price increased by 19.2% year-over-year to $348,052, despite a 4.6% decrease from Q3 [18] Market Data and Key Metrics Changes - The Dallas Fort Worth market led with an average of 11 closings per community per month, followed by San Antonio and Charlotte [8] - The cancellation rate for the full year was 24.4%, with a Q4 cancellation rate of 37.5% [21] Company Strategy and Development Direction - The company is focusing on cash flow and preserving capital, ending the year with a net debt to capital ratio below 40% [10] - Plans for 2023 include closing between 6,000 and 7,000 homes, with an average sales price between $335,000 and $350,000 [34] - The company is also targeting a 20% to 30% growth in community count expected in 2024 [34] Management's Comments on Operating Environment and Future Outlook - Management expressed tempered optimism for 2023, citing a significant increase in leads generated and a strong sales pace early in the year [31][34] - The company is cautious about the impact of rising interest rates on affordability and is adjusting pricing strategies accordingly [48][72] Other Important Information - The company reduced its total owned and controlled lots by almost 22% and ended the year with 3,308 completed homes [10][24] - The company has paused stock repurchases to maintain liquidity and focus on land development [26][93] Q&A Session Summary Question: Insights on Q1 expectations and gross margins - Management expects Q1 gross margins to be similar to Q4 due to the need to move inventory and adjust pricing [39] Question: February closings and sales pace - February closings are expected to be approximately 450, showing a significant increase from January [42] Question: Gross margin guidance and pricing strategies - Management indicated that they have raised prices in several communities due to increased demand, but are cautious about affordability [47] Question: Community openings and closings - The company plans to open around 40 to 50 new communities while closing 20 to 30 [58] Question: Impact of interest rates on capitalized interest - Interest costs are expected to tick up slightly over time as projects are developed, but will be capitalized against communities under development [75] Question: Build times and inventory management - Build times are improving slightly, and the company is managing starts to align with projected deliveries [77] Question: Mortgage payments versus rent - The company noted that the difference between mortgage payments and rent has become more pronounced, with ownership becoming more affordable relative to renting [98]

Supply Chain and Operational Challenges - The company has experienced significant supply chain disruptions in 2022, extending land development and homebuilding construction cycles, which are expected to continue impacting operations in 2023[54]. - The company faces significant risks related to labor and raw material shortages, which could delay or increase the cost of home construction[82]. - The company may face increased costs and delays in home construction due to supply chain disruptions and market conditions[142]. - The company has experienced a shift towards acquiring more undeveloped land, resulting in longer lead times for construction[80]. - The company is subject to various environmental regulations that may impact development timelines and costs, particularly in environmentally sensitive areas[56]. - The company is subject to various environmental laws and regulations that may increase costs and delay project completion[125]. - Natural disasters and severe weather conditions may increase costs, cause project delays, and reduce consumer demand for housing, adversely affecting the company's operations[122]. Workforce and Diversity - As of December 31, 2022, the company employed 952 people, with 84 at corporate headquarters and 531 in on-site sales and support roles[60]. - The company maintains a diverse workforce, with 61% of corporate headquarters employees being women and 27% identified as racially or ethnically diverse[62]. - The company has a commitment to diversity and inclusion, actively promoting a respectful workplace culture[63]. Financial Performance and Risks - Home sales revenues for 2022 were $2,304,455, a decrease of 24.4% from $3,050,149 in 2021[328]. - Net income for 2022 was $326,567, down 24.0% from $429,645 in 2021[328]. - Total assets increased to $3,124,828 in 2022, up 32.8% from $2,351,865 in 2021[325]. - Total liabilities rose to $1,482,416 in 2022, an increase of 55.0% from $956,017 in 2021[325]. - Retained earnings grew to $1,690,489 in 2022, up 24.0% from $1,363,922 in 2021[330]. - Cash and cash equivalents decreased to $31,998 in 2022, down 36.8% from $50,514 in 2021[333]. - Operating income for 2022 was $390,107, a decline of 28.8% from $547,698 in 2021[328]. - The company may incur significant inventory impairment charges if market conditions deteriorate[81]. - The company is exposed to risks from rising mortgage interest rates and tightening mortgage lending standards[78]. - The company faces risks from potential changes in tax benefits associated with homeownership, which could decrease demand for new homes[105]. - A prolonged economic downturn in key markets could materially affect the company's business, prospects, liquidity, and financial condition[111]. - The company’s future operating results may be impacted by adverse economic changes, including potential recession and decreases in housing prices[185]. Market Conditions and Competition - The homebuilding industry is highly competitive, with the company competing against numerous national, regional, and local builders[58]. - The housing market began softening in Q2 2022, primarily due to inflationary pricing and rising interest rates, which could adversely affect the company's business and financial condition[106]. - Increased competition could hinder the company's ability to acquire attractive land parcels and may lead to reduced prices and increased selling incentives[109]. - The mortgage banking business is competitive, with significant competitors having greater access to capital and fewer regulations, which may hinder the joint venture's ability to compete effectively[92]. Strategic Initiatives and Investments - The company intends to grow operations through investments in new markets and potential acquisitions, but success is not guaranteed[147]. - The company has established two joint ventures, LGI Mortgage Solutions and LGI Insurance Solutions, with a long-time preferred lender and insurance agency, which may involve risks due to reliance on partners and lack of sole decision-making authority[91]. - The company focuses on acquiring suitable land and constructing primarily single-family homes in various states, including Texas, Arizona, and Florida, among others[111]. Debt and Financing - The company has a $1.1 billion revolving credit facility, with $828.4 million borrowed as of December 31, 2022, and an additional $236.6 million available[154]. - The company had outstanding $300.0 million aggregate principal amount of the 2029 Senior Notes, bearing interest at a fixed rate of 4.000%[161]. - Interest expense on debt may limit the cash available to fund growth strategies, especially if operations do not generate sufficient cash from operations[161]. - The company is dependent on distributions from its subsidiaries to service its debt and pay dividends, with potential restrictions on such distributions due to future financing arrangements[162]. Regulatory and Compliance Issues - The company is subject to warranty and liability claims, which can be costly and impact financial results[86]. - The company faces risks related to compliance with evolving U.S. laws and regulations regarding privacy and data security, which could result in significant compliance costs[173]. - Changes in U.S. tax law, including a corporate minimum tax and a 1% excise tax on stock repurchases, could adversely affect the company's financial position[138]. Marketing and Customer Relations - The company has contributed over $2.7 million in corporate sponsorships and over 20,000 employee service hours to local communities since 2016[67]. - Advertising costs for the years ended December 31 were $18.7 million in 2022, $7.7 million in 2021, and $10.7 million in 2020, indicating a significant increase in advertising expenditure[368]. - Customer deposits typically range from $1,000 to $10,000 and are generally refundable if financing is not obtained, with forfeited deposits recognized as income[364]. Environmental, Social, and Governance (ESG) Considerations - Increased attention to ESG matters may impact the company's business and stock price, with potential reputational harm if expectations are not met[136]. - Unfavorable ESG ratings could lead to negative investor sentiment and affect stock price and capital access[137]. - The company may face liabilities related to past or present use of hazardous materials, which could adversely affect its financial condition[134]. - Unsecured environmental indemnities provided to lenders may expose the company to significant financial risks related to environmental matters[135].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2022 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number 001-36126 LGI HOMES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation ...

LGI Homes, Inc. (NASDAQ:LGIH) Q3 2022 Earnings Conference Call November 1, 2022 12:30 PM ET Company Participants Josh Fattor - Vice President, Investor Relations Eric Lipar - Chief Executive Officer and Chairman Charles Merdian - Chief Financial Officer and Treasurer Conference Call Participants Truman Patterson - Wolfe Research Kenneth Zener - KeyBanc Carl Reichardt - BTIG Jay McCanless - Wedbush Alex Barron - Housing Research Center Operator Welcome to LGI Homes Third Quarter 2022 Conference Call. Today’s ...

Financial Data and Key Metrics Changes - The company closed 2027 homes in Q2 2022, with an average selling price of over $356,000, resulting in revenue of over $723 million, a decline of only 8.6% from the previous year [9][15] - Gross margin reached a record 32%, a 500-basis-point improvement year-over-year, while adjusted gross margin was also a record at 33.1%, a 460-basis-point improvement [11][17] - EBITDA for the quarter was $169.1 million, representing 23.4% of revenue, a 320-basis-point improvement from the same period last year [20] - Reported net income was $123.4 million, or 17.1% of revenue, also a new company record, with earnings per share increasing by 10.3% year-over-year [23] Business Line Data and Key Metrics Changes - Wholesale business accounted for 7.2% of total closings, down from 15.1% in the same quarter last year, due to a strategic shift towards retail sales [14] - Gross orders for the quarter were 1,244, with net orders at 864, reflecting a 57.3% decrease in net orders compared to the previous year [23] Market Data and Key Metrics Changes - Houston was the top market with 13.6 closings per community per month, followed by Charlotte (12), Dallas Fort Worth (11.8), San Antonio (10.7), and Tucson (10.3) [10] - The company operates in 35 markets across 20 states, having recently closed its first home in Maryland [10] Company Strategy and Development Direction - The company is adjusting its full-year guidance to reflect a closing range of 7,500 to 8,300 homes, down from previous expectations, while maintaining a focus on community count growth of 20% to 30% next year [32][33] - The company is optimistic about long-term growth due to supportive demographic trends, strong labor markets, and low inventory levels [36][41] - The company plans to normalize pricing in new communities, targeting gross margins in the 25% to 28% range moving forward [41][96] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite uncertainties in the housing market, citing a solid balance sheet and an attractive land pipeline [12] - The company is increasing marketing spend to drive sales, with nearly 20,000 inquiries about homeownership in July, a 54% increase year-over-year [37][122] - Management acknowledged challenges in the supply chain and development processes but expects improvements in the near future [89] Other Important Information - The company ended the quarter with a backlog of 1,266 homes valued at over $445 million and a land portfolio of 9,984 owned and controlled lots, an 18.5% increase year-over-year [25] - The company repurchased 417,861 shares for $37.4 million during the quarter, with $211.5 million remaining on its stock repurchase program [30] Q&A Session Summary Question: What are the main drivers of gross margin outlook in the back half of the year? - Management indicated that new communities coming online at lower margins, increased wholesale closings, and decreasing costs will influence gross margin [47][49] Question: Have sellers become more willing to negotiate on terms or pricing? - Management noted that while there haven't been significant price decreases in land, they are seeing opportunities for finished lots [50][52] Question: How is demand assessed given selective order acceptance? - Management highlighted that demand remains strong, with orders increasing for four consecutive months, and they are ramping up marketing efforts [118][122] Question: What is the expected community growth for fiscal 2023? - Management is confident in a community count growth of 20% to 30% for 2023, despite delays in development [87] Question: What is the outlook on cancellations? - Cancellations are primarily affordability-related, with some customers unable to qualify due to rising rates [105][108]

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20LGI%20Homes%2C%20Inc.%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Presents LGI Homes' unaudited consolidated financial statements, detailing increased inventory, notes payable, mixed revenue and net income, and negative operating cash flow [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202022%20and%20December%2031%2C%202021) Total assets increased to **$2.87 billion** driven by real estate inventory, while liabilities grew to **$1.36 billion** due to notes payable, and equity rose to **$1.51 billion** Consolidated Balance Sheet Highlights | Account | June 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $42.0M | $50.5M | ($8.5M) | | Real estate inventory | $2,633.7M | $2,085.9M | $547.8M | | **Total Assets** | **$2,873.4M** | **$2,351.9M** | **$521.5M** | | **Liabilities & Equity** | | | | | Notes payable | $1,155.5M | $805.2M | $350.2M | | **Total Liabilities** | **$1,359.4M** | **$956.0M** | **$403.4M** | | **Total Equity** | **$1,513.9M** | **$1,395.8M** | **$118.1M** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) Q2 2022 home sales revenues decreased **8.6%** while net income increased **4.4%**, contrasting with a **15.2%** revenue decline and **7.2%** net income decrease for the six-month period Quarterly Performance (Three Months Ended June 30) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Home sales revenues | $723.1M | $791.5M | -8.6% | | Operating income | $159.0M | $146.0M | +8.9% | | Net income | $123.4M | $118.1M | +4.4% | | Diluted EPS | $5.20 | $4.71 | +10.4% | Year-to-Date Performance (Six Months Ended June 30) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Home sales revenues | $1,269.1M | $1,497.5M | -15.2% | | Operating income | $254.7M | $268.5M | -5.1% | | Net income | $202.1M | $217.8M | -7.2% | | Diluted EPS | $8.43 | $8.66 | -2.7% | [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202022%20and%202021) Total equity increased to **$1.51 billion** by June 30, 2022, driven by **$202.1 million** in net income, partially offset by **$95.1 million** in stock repurchases - For the six months ended June 30, 2022, total equity increased by **$118.1 million**, reflecting net income of **$202.1 million**, offset by stock repurchases totaling **$95.1 million** ($57.7M in Q1 and $37.4M in Q2)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202022%20and%202021) Net cash used in operating activities was **$263.3 million** for H1 2022 due to inventory investment, offset by **$257.2 million** from financing activities, resulting in cash and cash equivalents of **$42.0 million** Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | ($263.3M) | $139.9M | | Net cash used in investing activities | ($2.5M) | ($29.8M) | | Net cash from (used in) financing activities | $257.2M | ($34.3M) | | **Net (decrease) increase in cash** | **($8.5M)** | **$75.8M** | | **Cash at end of period** | **$42.0M** | **$111.7M** | [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail accounting policies, **$2.63 billion** in real estate inventory, a **$1.1 billion** credit facility amendment, increased stock repurchase program to **$550 million**, and segment-level data - Real estate inventory increased to **$2.63 billion** as of June 30, 2022, up from **$2.09 billion** at the end of 2021, with homes in progress seeing a significant jump from **$449.7 million** to **$684.4 million**[31](index=31&type=chunk) - On April 29, 2022, the company amended its credit agreement, increasing commitments by **$250.0 million** to a total of **$1.1 billion** and replacing LIBOR with SOFR as the benchmark interest rate[39](index=39&type=chunk) - In February 2022, the Board of Directors increased the stock repurchase program authorization by **$200.0 million**, bringing the total to **$550.0 million** As of June 30, 2022, **$211.5 million** remained available for repurchases[52](index=52&type=chunk) Segment Revenues | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Central | $316.7M | $348.0M | $579.0M | $636.7M | | Southeast | $117.6M | $159.7M | $190.0M | $296.3M | | Northwest | $70.8M | $106.2M | $173.7M | $224.4M | | West | $124.0M | $80.8M | $179.5M | $162.0M | | Florida | $94.1M | $96.8M | $146.9M | $178.1M | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 market headwinds from rising mortgage rates, impacting demand and cancellations, while highlighting increased ASP and gross margins, and outlining strategic responses and liquidity position [Business Overview and Key Results](index=20&type=section&id=Business%20Overview%20and%20Key%20Results) The housing market faced Q2 2022 headwinds from rising mortgage rates, leading to decreased home closings but increased average sales prices and expanded gross margins, prompting strategic adjustments - In Q2 2022, a rapid increase in mortgage interest rates led to decreased demand and a higher than normal cancellation rate as potential homebuyers paused or reconsidered purchases[85](index=85&type=chunk) - The company's strategy to combat market headwinds includes increasing targeted advertising and slowing the pace of new home starts to match current absorption levels[86](index=86&type=chunk) Key Results - Q2 2022 vs Q2 2021 | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Home Sales Revenues | $723.1M | $791.5M | -8.6% | | Homes Closed | 2,027 | 2,856 | -29.0% | | Average Sales Price | $356,719 | $277,140 | +28.7% | | Gross Margin % | 32.0% | 27.0% | +500 bps | | Net Income | $123.4M | $118.1M | +4.4% | Key Results - H1 2022 vs H1 2021 | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | Home Sales Revenues | $1.3B | $1.5B | -15.2% | | Homes Closed | 3,626 | 5,417 | -33.1% | | Average Sales Price | $350,005 | $276,438 | +26.6% | | Gross Margin % | 30.7% | 27.0% | +370 bps | | Net Income | $202.1M | $217.8M | -7.2% | [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q2 2022 saw an **8.6%** revenue decline due to fewer closings, offset by a **28.7%** ASP increase and improved gross margin to **32.0%**, while H1 2022 revenue fell **15.2%** with G&A expenses rising - The increase in gross margin percentage for both Q2 and H1 2022 was primarily due to raising home prices higher than the increases in input costs[101](index=101&type=chunk)[116](index=116&type=chunk) - General and administrative expenses increased **25.0%** in Q2 and **19.5%** in H1 2022 compared to the prior year, mainly due to increased personnel costs and professional fees[103](index=103&type=chunk)[118](index=118&type=chunk) - Wholesale home sales revenues decreased significantly, from **$94.7 million** (430 homes) in Q2 2021 to **$36.9 million** (146 homes) in Q2 2022, due to a strategic prioritization of retail sales and cost volatility[99](index=99&type=chunk) [Non-GAAP Measures](index=29&type=section&id=Non-GAAP%20Measures) The company presents non-GAAP Adjusted Gross Margin and EBITDA, with Adjusted Gross Margin reaching **33.1%** in Q2 2022 and **31.9%** in H1 2022, reflecting core operating performance Adjusted Gross Margin Reconciliation | | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Gross margin | $231.4M | $214.1M | $389.8M | $404.0M | | Capitalized interest | $5.7M | $10.4M | $10.2M | $21.1M | | Purchase accounting | $2.0M | $1.4M | $4.3M | $2.3M | | **Adjusted gross margin** | **$239.1M** | **$226.0M** | **$404.3M** | **$427.4M** | | **Adjusted gross margin %** | **33.1%** | **28.5%** | **31.9%** | **28.5%** | [Backlog](index=31&type=section&id=Backlog) As of June 30, 2022, backlog decreased **73.6%** to **1,266 homes** valued at **$445.1 million**, with the cancellation rate rising to **20.8%** due to market shifts and strategic changes Backlog and Cancellation Data | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | Net orders | 2,837 | 7,254 | -61.0% | | Cancellation rate | 20.8% | 14.8% | +600 bps | | Ending backlog – homes | 1,266 | 4,801 | -73.6% | | Ending backlog – value | $445.1M | $1,434.4M | -68.9% | - The company modified its timing for entering sales contracts to later in the construction cycle to mitigate cost volatility, which contributed to the lower backlog[134](index=134&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, the company had **$42.0 million** in cash, relying on operating cash flow and its **$1.1 billion** credit facility, with **$203.7 million** available, and repurchased **$95.1 million** in stock - The company's credit facility was increased to **$1.1 billion** in April 2022 As of June 30, 2022, borrowings (including Senior Notes) were **$1.2 billion** against a borrowing base of **$1.4 billion**, with **$203.7 million** available[153](index=153&type=chunk)[155](index=155&type=chunk) - Net cash used in operating activities was **$263.3 million** for H1 2022, primarily due to a **$547.6 million** increase in real estate inventory[161](index=161&type=chunk) - Net cash provided by financing activities was **$257.2 million** for H1 2022, driven by **$371.2 million** in borrowings, which offset **$95.1 million** in stock repurchases[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, impacting mortgage affordability and variable-rate debt costs, with a **100 bps** rate increase potentially raising annual interest costs by **$8.7 million** - The company's main market risk is from interest rate fluctuations, which can impact both housing demand and its own financing costs[176](index=176&type=chunk) - As of June 30, 2022, a hypothetical **100 basis point** increase in interest rates on the **$868.6 million** of variable rate debt would increase annual interest cost by approximately **$8.7 million**[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[181](index=181&type=chunk) - There were no material changes to the company's internal control over financial reporting during the second quarter of 2022[185](index=185&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K have occurred - There have been no material changes to the risk factors from the company's 2021 Form 10-K[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **417,861 shares** for **$37.4 million** under its **$550 million** stock repurchase program, with **$211.5 million** remaining available Share Repurchases for Q2 2022 | Period | Shares Purchased | Average Price Paid | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | April 2022 | 0 | $0.00 | $0 | | May 2022 | 177,761 | $95.63 | $17.0M | | June 2022 | 240,100 | $85.15 | $20.4M | | **Total Q2** | **417,861** | **$89.61** | **$37.4M** | - As of June 30, 2022, approximately **$211.5 million** remained available for purchase under the company's stock repurchase program[188](index=188&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL data, and incorporates previously filed documents by reference - Exhibits filed include Sarbanes-Oxley certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[191](index=191&type=chunk)

LGI Homes, Inc. (NASDAQ:LGIH) Q1 2022 Earnings Conference Call May 3, 2022 12:30 PM ET Company Participants Josh Fattor – Vice President, Investor Relations Eric Lipar – Chief Executive Officer and Chairman Charles Merdian – Chief Financial Officer and Treasurer Conference Call Participants Deepa Raghavan – Wells Fargo Doug Wardlaw – J.P. Morgan Jay McCanless – Wedbush Securities Truman Patterson – Wolfe Research Carl Reichardt – BTIG Alex Barron – Housing Research Ken Zener – KeyBanc Operator Welcome to LG ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2022 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number 001-36126 LGI HOMES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or ...

LGI Homes, Inc. (NASDAQ:LGIH) Q4 2021 Earnings Conference Call February 15, 2022 12:30 PM ET Company Participants Joshua Fattor - Vice President, Investor Relations Eric Lipar - Chairman and Chief Executive Officer Charles Merdian - Chief Financial Officer and Treasurer Conference Call Participants Deepa Raghavan - Wells Fargo Securities Carl Reichardt - BTIG Jay McCanless - Wedbush Securities Mike Rehaut - JPMorgan Truman Patterson - Wolfe Research Disclaimer*: This transcript is designed to be used alongs ...