lgih-20230630

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 June 30, 2023


☐			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)

Delaware

46-3088013

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1450 Lake Robbins Drive,

Suite 430,

The Woodlands,

Texas

77380

(Address of principal executive offices)

(Zip code)

(281)

362-8998

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

LGIH

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 28, 2023, there were 23,546,041 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION
Item 1.	LGI Homes, Inc. Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	4
	Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	5
	Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II - OTHER INFORMATION
Item 1A.	Risk Factors	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

SIGNATURES		38

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LGI HOMES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)


	June 30,		December 31,
	2023		2022
ASSETS
Cash and cash equivalents	$	43,334	$	31,998
Accounts receivable	48,166		25,143
Real estate inventory	2,889,113		2,898,296
Pre-acquisition costs and deposits	26,244		25,031
Property and equipment, net	37,786		32,997
Other assets	75,011		93,159
Deferred tax assets, net	7,867		6,186
Goodwill	12,018		12,018
Total assets	$	3,139,539	$	3,124,828

LIABILITIES AND EQUITY
Accounts payable	$	59,365	$	25,287
Accrued expenses and other liabilities	295,765		340,128
Notes payable	1,053,397		1,117,001
Total liabilities	1,408,527		1,482,416

COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 27,485,513 shares issued and 23,546,041 shares outstanding as of June 30, 2023 and 27,245,278 shares issued and 23,305,806 shares outstanding as of December 31, 2022	275		272
Additional paid-in capital	315,174		306,673
Retained earnings	1,770,585		1,690,489
Treasury stock, at cost, 3,939,472 shares as of June 30, 2023 and December 31, 2022	(355,022)		(355,022)
Total equity	1,731,012		1,642,412
Total liabilities and equity	$	3,139,539	$	3,124,828

See accompanying notes to the consolidated financial statements.

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LGI HOMES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Home sales revenues	$	645,270	$	723,069	$	1,132,627	$	1,269,119

Cost of sales	503,333		491,710		891,874		879,353
Selling expenses	49,225		43,269		92,030		77,667
General and administrative	27,626		29,084		57,586		57,373
Operating income	65,086		159,006		91,137		254,726

Other income, net	(6,323)		(4,006)		(12,620)		(7,836)
Net income before income taxes	71,409		163,012		103,757		262,562
Income tax provision	18,275		39,636		23,661		60,500
Net income	$	53,134	$	123,376	$	80,096	$	202,062
Earnings per share:
Basic	$	2.26	$	5.24	$	3.41	$	8.53
Diluted	$	2.25	$	5.20	$	3.39	$	8.43

Weighted average shares outstanding:
Basic	23,533,097		23,552,883		23,457,615		23,694,241
Diluted	23,608,892		23,745,853		23,615,206		23,968,263

See accompanying notes to the consolidated financial statements.

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LGI HOMES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock		Total Equity
	Shares	Amount
BALANCE—December 31, 2022	27,245,278	$	272	$	306,673	$	1,690,489	$	(355,022)	$	1,642,412
Net income	—	—		—		26,962		—		26,962
Restricted stock units granted for accrued annual bonuses	—	—		206		—		—		206

Compensation expense for equity awards	—	—		3,103		—		—		3,103
Stock issued under employee incentive plans	226,928	3		1,543		—		—		1,546
BALANCE— March 31, 2023	27,472,206	$	275	$	311,525	$	1,717,451	$	(355,022)	$	1,674,229
Net income	—	—		—		53,134		—		53,134

Compensation expense for equity awards	—	—		2,360		—		—		2,360
Stock issued under employee incentive plans	13,307	—		1,289		—		—		1,289
BALANCE— June 30, 2023	27,485,513	$	275	$	315,174	$	1,770,585	$	(355,022)	$	1,731,012

See accompanying notes to the consolidated financial statements.

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LGI HOMES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock		Total Equity
	Shares	Amount
BALANCE—December 31, 2021	26,963,915	$	269	$	291,577	$	1,363,922	$	(259,920)	$	1,395,848
Net income	—	—		—		78,686		—		78,686
Stock repurchase	—	—		—		—		(57,659)		(57,659)
Restricted stock units granted for accrued annual bonuses	—	—		294		—		—		294
Compensation expense for equity awards	—	—		3,570		—		—		3,570
Stock issued under employee incentive plans	223,980	2		2,010		—		—		2,012
BALANCE— March 31, 2022	27,187,895	$	271	$	297,451	$	1,442,608	$	(317,579)	$	1,422,751
Net income	—	—		—		123,376		—		123,376
Stock repurchase	—	—		—		—		(37,443)		(37,443)
Compensation expense for equity awards	—	—		3,545		—		—		3,545
Stock issued under employee incentive plans	24,213	—		1,692		—		—		1,692
BALANCE— June 30, 2022	27,212,108	$	271	$	302,688	$	1,565,984	$	(355,022)	$	1,513,921

See accompanying notes to the consolidated financial statements.

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LGI HOMES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	80,096	$	202,062
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in income of unconsolidated entities	(5,304)		(1,840)
Distributions of earnings from unconsolidated entities	6,257		1,214
Depreciation and amortization	987		730


Gain on disposal of assets	—		(1,564)
Compensation expense for equity awards	5,463		7,115
Deferred income taxes	(1,681)		711
Changes in assets and liabilities:
Accounts receivable	(23,022)		5,803
Real estate inventory	6,435		(547,579)
Pre-acquisition costs and deposits	(1,213)		2,425
Other assets	22,854		19,384
Accounts payable	34,078		25,990
Accrued expenses and other liabilities	(32,115)		22,249
Net cash provided by (used in) operating activities	92,835		(263,300)
Cash flows from investing activities:
Purchases of property and equipment	(271)		(993)
Investment in unconsolidated entities	(9,719)		(1,462)
Return of capital from unconsolidated entities	3,148		—

Net cash used in investing activities	(6,842)		(2,455)
Cash flows from financing activities:
Proceeds from notes payable	144,783		371,177
Payments on notes payable	(205,000)		(20,000)
Proceeds from financing arrangements	42,569		—
Payments on financing arrangements	(54,356)		—

Loan issuance costs	(5,487)		(2,567)
Proceeds from sale of stock, net of offering expenses	2,834		3,704
Stock repurchase	—		(95,102)


Net cash provided by (used in) financing activities	(74,657)		257,212
Net increase (decrease) in cash and cash equivalents	11,336		(8,543)
Cash and cash equivalents, beginning of period	31,998		50,514
Cash and cash equivalents, end of period	$	43,334	$	41,971

See accompanying notes to the consolidated financial statements.

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LGI HOMES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Description of the Business

LGI Homes, Inc., a Delaware corporation (the “Company”, “we,” “us,” or “our”), is headquartered in The Woodlands, Texas. We engage in the development of communities and the design, construction and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania and Maryland.

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The accompanying unaudited consolidated financial statements include all adjustments that are of a normal recurring nature and necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.

The accompanying unaudited financial statements as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022, include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements.

2. REAL ESTATE INVENTORY

Our real estate inventory consists of the following (in thousands):


	June 30,		December 31,
	2023		2022
Land, land under development and finished lots	$	1,934,555	$	1,911,307
Information centers	40,134		35,074
Homes in progress	508,836		287,069
Completed homes	270,357		523,054
Total owned inventory	2,753,882		2,756,504
Real estate not owned	135,231		141,792
Total real estate inventory	$	2,889,113	$	2,898,296

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources. In consideration for this repurchase option, we paid a non-refundable commitment fee. Based on our right to control the ultimate economic outcome of these finished lots, these assets will continue to be held as real estate not owned within our inventory and a corresponding obligation was established within our accrued liabilities as discussed in Note 3 to recognize this relationship. While we are not legally obligated to repurchase the balance of the lots, we will be subject to certain performance obligations, financial and other penalties if the lots are not purchased. We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities.

During the six months ended June 30, 2023, we transferred $5.5 million of home assets from real estate inventory to rental properties within property and equipment, net. We are lessors of the homes representing these home assets. Our leasing contracts are typically for terms of one year.

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3. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued and other liabilities consist of the following (in thousands):


	June 30,		December 31,
	2023		2022
Land banking financing arrangements	$	135,231	$	141,792
Real estate inventory development and construction payable	65,989		73,678
Taxes payable	12,394		47,037
Inventory related obligations	12,920		13,039
Accrued compensation, bonuses and benefits	16,811		12,900
Warranty reserve	12,150		10,750
Accrued interest	10,523		10,906
Contract deposits	5,906		5,545
Lease liability	5,437		5,182
Other	18,404		19,299
Total accrued expenses and other liabilities	$	295,765	$	340,128

Land Banking Financing Arrangements

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns. Principal payments on these financing arrangements will generally coincide with the repurchase of lot takedowns from the land banker. We expect to complete the repurchase of all lots via takedowns associated with these transactions over the course of approximately one to three years.

Inventory Related Obligations

SEC Form 10-Q filed by LGI Homes Inc.