LGI Homes(US:LGIH)2023-02-22 01:53Financial 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]