LGI Homes(US:LGIH)2023-10-31 20:46Financial Performance - Home sales revenues increased by 12.9% to $617.5 million from $547.1 million for the three months ended September 30, 2023[90]. - Home closings rose by 13.2% to 1,751 homes compared to 1,547 homes for the same period in 2022[90]. - Average sales price per home closed decreased by 0.3% to $352,678 from $353,635[90]. - Net income decreased by 25.8% to $67.0 million from $90.4 million for the three months ended September 30, 2023[90]. - For the nine months ended September 30, 2023, home sales revenues decreased by 3.6% to $1.75 billion from $1.82 billion[90]. - Net income for the nine months ended September 30, 2023 was $147.1 million, a decrease of $145.3 million, or 49.7%, from $292.5 million for the same period in 2022[118]. - Operating income for the nine months ended September 30, 2023 was $173.4 million, a decrease of $175.9 million, or 50.4%, from $349.3 million for the same period in 2022[115]. Margins and Expenses - Gross margin as a percentage of home sales revenues decreased to 25.7% from 28.5%[90]. - EBITDA as a percentage of home sales revenues decreased to 16.0% from 20.8% for the three months ended September 30, 2023[90]. - Cost of sales increased by $67.5 million, or 17.2%, to $458.7 million for the three months ended September 30, 2023, primarily due to the increase in homes closed[98]. - Selling expenses increased by $15.8 million, or 46.7%, to $49.8 million for the three months ended September 30, 2023, primarily due to increased sales commissions and advertising expenses[99]. - Gross margin for the nine months ended September 30, 2023 was $399.6 million, a decrease of $146.0 million, or 26.8%, from $545.6 million for the same period in 2022[111]. - Selling expenses for the nine months ended September 30, 2023 were $141.8 million, an increase of $30.2 million, or 27.1%, from $111.6 million for the same period in 2022[112]. Market Activity - The company had 106 active communities as of September 30, 2023, up from 93 active communities a year earlier[84]. - The number of net orders increased to 5,646 for the nine months ended September 30, 2023, compared to 4,373 in the same period of 2022, representing a growth of 29.1%[130]. - The ending backlog of homes increased by 9.7% to 1,377 homes as of September 30, 2023, compared to 1,255 homes as of September 30, 2022[129]. - Home sales revenues in the Florida segment increased by $53.4 million, or 78.2%, primarily due to an 81.7% increase in the number of homes closed[102]. - Home sales revenues in the Northwest segment increased by $20.9 million, or 44.7%, due to a 37.9% increase in the number of homes closed[102]. - Home sales revenues in the Southeast reportable segment increased by $69.1 million, or 21.0%, during the nine months ended September 30, 2023[115]. - Home sales revenues in the Florida reportable segment increased by $103.3 million, or 48.0%, during the nine months ended September 30, 2023[115]. Inventory and Lots - The company owned and controlled 72,109 lots as of September 30, 2023, compared to 69,226 lots at June 30, 2023[89]. - The total number of owned or controlled lots increased to 72,109 as of September 30, 2023, from 71,904 as of December 31, 2022[135]. - The company reported 4,971 home closings for the nine months ended September 30, 2023[138]. Cash Flow and Financing - Cash and cash equivalents stood at $47.0 million as of September 30, 2023[143]. - The company has a $1.13 billion revolving credit facility, which can be increased by up to $170 million[149]. - As of September 30, 2023, the borrowing base under the Credit Agreement is $1.8 billion, with $1.4 billion available to borrow[151]. - Net cash used in operating activities was $22.7 million for the nine months ended September 30, 2023, primarily due to a $194.4 million increase in real estate inventory[157]. - Net cash provided by financing activities was $45.3 million for the nine months ended September 30, 2023, driven by net borrowings of $75.9 million[160]. - The company did not repurchase any shares during the nine months ended September 30, 2023, leaving $211.5 million available for future repurchases[156]. Risk and Controls - The company is exposed to market risks related to fluctuations in interest rates on outstanding variable rate indebtedness[175]. - The company does not expect future interest rate risks related to existing indebtedness to materially impact financial position or results of operations[177]. - There have been no material changes to the risk factors previously disclosed in the Annual Report for the fiscal year ended December 31, 2022[182]. - The company’s disclosure controls and procedures are effective as of September 30, 2023, ensuring timely decision-making regarding required disclosures[178]. - No changes in internal control over financial reporting occurred during the three months ended September 30, 2023, that materially affected internal controls[181]. Long-term Outlook - The long-term outlook for new homes remains strong, driven by low inventory and strong household formations, despite current affordability constraints[86]. - The company expects to fund its long-term liquidity needs through cash generated from operations and available borrowing under the Credit Agreement[147]. - The company plans to utilize land banking financing arrangements to maximize long-term liquidity for lot development projects[147]. Inflation and Interest Rates - Inflation has pressured costs, but the company has been able to increase home sales prices to absorb these costs[163]. - As of September 30, 2023, the company had $904.2 million of variable rate indebtedness outstanding under the Credit Agreement[176]. - The interest rate for the variable rate indebtedness was SOFR plus 1.70%, with SOFR at 5.32% as of September 30, 2023[176]. - A hypothetical 100 basis point increase in the average interest rate would increase annual interest costs by approximately $9.0 million[176]. - The company utilizes both fixed-rate debt ($300.0 million aggregate principal amount of the 2029 Senior Notes) and variable-rate debt ($1.13 billion Credit Agreement) for financing operations[174]. - The company does not currently hold derivatives for trading or speculative purposes but may consider doing so in the future[175].