LGIH Q3 Profit, Revenue Plunge; Misses Estimates

**LGI Homes Reports Significant Q3 Financial Decline Amidst Challenging Housing Market**

THE WOODLANDS, TX – LGI Homes Inc. (NASDAQ: LGIH), a leading homebuilder, faced a challenging third quarter, reporting financial results that fell short of Wall Street’s expectations for both profit and revenue. The period, which concluded on September 30, 2023, saw a substantial year-over-year decline, primarily attributed to persistent high interest rates and broader affordability challenges impacting the housing market.

The company posted a net income of $90.9 million, or $3.86 per diluted share, for the third quarter. This represents a significant decrease from the $212.8 million, or $9.00 per share, reported in the same quarter of 2022. Revenue for the quarter also saw a considerable drop, coming in at $687.9 million, down from $1.06 billion generated in the third quarter of the previous year. Analysts had been anticipating stronger performance, with average projections for earnings per share around $3.97 on revenue closer to $753.8 million.

Operationally, LGI Homes closed on 2,125 homes during the quarter, with the average sales price reaching $323,733. The company continues to maintain a broad market presence, operating across 36 different markets in 21 states.

LGI Homes Chairman and CEO Eric Lipar acknowledged the difficult market conditions in a statement accompanying the earnings release. “Higher mortgage rates continued to be a headwind during the third quarter, impacting affordability and dampening demand, particularly among our first-time homebuyers,” Lipar stated. He emphasized the company’s focus on managing inventory and adapting to market realities, noting the strategic importance of their affordable price points in a tightening market. The company reported 307 active selling communities at the end of the quarter, an increase from 293 a year prior, indicating a continued push for market reach despite headwinds.

The homebuilder also noted a decline in its gross margin, which fell to 22.5% in Q3 2023 from 28.5% in Q3 2022. This compression was primarily driven by increased sales incentives offered to buyers and elevated construction costs, reflecting a competitive environment where builders are working to stimulate demand.

Looking ahead, LGI Homes adjusted its full-year 2023 guidance, reflecting the ongoing market uncertainties. The company now expects full-year home closings to be between 8,500 and 8,800, down from the prior range of 8,700 to 9,200. The full-year average sales price is projected to be between $325,000 and $330,000, revised from the earlier range of $330,000 to $340,000. Gross margin for the full year is anticipated to be between 22.5% and 23.5%.

The broader economic landscape, marked by the Federal Reserve’s aggressive interest rate hikes aimed at curbing inflation, has significantly impacted the housing sector. Mortgage rates climbed to multi-decade highs during Q3 and into October 2023, eroding buyer purchasing power and cooling demand. This has forced many homebuilders, including LGI Homes, to offer more incentives to attract buyers and clear inventory.

Shares of LGIH, which closed Monday trading at $136.95 before the earnings announcement on November 7, 2023, after market close, saw a negative reaction from investors. Following the report, the stock experienced a decline in Wednesday trading on November 8, reflecting market concerns over the missed expectations and revised outlook.

LGI Homes specializes in building and selling entry-level homes, a segment particularly sensitive to interest rate fluctuations and affordability challenges. The company’s performance provides a snapshot of the pressures faced by the broader U.S. housing market as it navigates a period of higher borrowing costs and cautious consumer sentiment.

For more information on LGI Homes’ financial performance, visit their investor relations page at https://investors.lgihomes.com/. Details on broader mortgage rate trends can be found via sources like the Federal Reserve Economic Data (FRED) at https://fred.stlouisfed.org/series/MORTGAGE30US.