Homebuilder LGI Homes Achieves Record Growth and Expansion in 2023

2024-02-23

LGI Homes, a prominent homebuilder in the United States, conducted its earnings call on February 20, 2024, under the leadership of Chairman and Chief Executive Officer Eric Lipar. During the call, the company shared insights into its performance, strategies, and future outlook.

In 2023, LGI Homes surpassed expectations, delivering 6,729 homes, which was at the high end of their initial guidance. The company also achieved a revenue of $2.4 billion, marking a 2.3% increase. Notably, the gross margin exceeded projections, with an adjusted gross margin of 24.7%. In the fourth quarter, the pre-tax net income stood at $68.5 million, equivalent to 11.3% of revenue.

Since its IPO in 2013, LGI Homes has experienced remarkable growth. Initially operating in eight markets across four states, the company has expanded significantly and now operates in 36 markets spanning 21 states. In 2023, LGI Homes added Salt Lake City, Utah, to its portfolio, enhancing its market presence. The year concluded with 117 active communities and a total of 71,081 lots under the company's ownership and control.

Despite its rapid expansion, LGI Homes has maintained a strong track record by never incurring an inventory impairment. This underscores the company's effective inventory management and community development strategies. LGI Homes' success can be attributed to its focus on capturing development profit, providing customer incentives, and safeguarding gross margins.

Looking forward to 2024, LGI Homes is optimistic about its prospects. The company anticipates double-digit growth in closings, with plans to deliver between 7,000 and 8,000 homes. The community count is projected to increase by 25% to 30%, culminating in approximately 150 active selling communities by the year-end. The average sales price is expected to range between $350,000 and $360,000.

To achieve its growth targets, LGI Homes is ramping up investments in advertising and expanding its community count. The company has observed a surge in leads and traffic since the start of February, driven by targeted advertising efforts and innovative solutions to address affordability challenges for customers. Despite potential obstacles such as higher land costs, LGI Homes aims to either maintain or enhance its gross margin. The company intends to prudently manage inventory and community development in alignment with projected closing outcomes.

Furthermore, LGI Homes is actively addressing the issue of affordability in homeownership. By boosting advertising expenditure, attracting more leads to their communities, and offering smaller square footage houses, the company aims to sustain a steady absorption rate. In 2023, 29% of the homes sold by LGI Homes were under 1,500 square feet, underscoring their commitment to providing affordable housing options.

In conclusion, LGI Homes witnessed a robust year of growth and expansion in 2023. With solid financial performance, strategic investments, and a focus on affordability, the company is well-positioned for sustained success in the future.