LGI Homes, Inc.

Welcome to LGI Homes third quarter 2023 conference call. Today's call is being recorded and a replay will be available on the company's website at www.lgihomes.com. After management's prepared comments, there will be an opportunity to ask questions. At this time, I'll turn the call over to Joshua Fatter, Vice President of Investor Relations and Capital Markets.

Thanks and good afternoon. I'll remind listeners that this call contains forward-looking statements. including management's views on the company's business strategy, outlook, plans, objectives, and guidance for future periods. Such statements reflect management's current expectations and involve assumptions and estimates that are subject to risks and uncertainties that could cause those expectations to prove to be incorrect. You should review our filings with the SEC for discussion of the risks, uncertainties, and other factors that could cause actual results to differ from those presented today. All forward-looking statements must be considered in light of those related risks, and you should not place undue reliance on such statements, which reflect management's current viewpoints and are not guarantees of future performance. On this call, we'll discuss non-GAAP financial measures that are not intended to be considered in isolation or as substitutes for financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be found in the press release we issued this morning and in our quarterly report on Form 10-Q for the quarter ended September 30th, 2023, that we expect to file with the SEC later today. This filing will be accessible on the SEC's website and in the investor relations section of our website. I'm joined today by Eric Leeper, LGI Homes Chief Executive Officer and Chairman of the Board, and Charles Murdian, Chief Financial Officer and Treasurer. I'll now turn the call over to Eric. Thanks, Josh.

Good afternoon, and welcome to our quarterly earnings call. I'm pleased to share our exceptional performance during the third quarter of 2023. Our strong results built upon the momentum generated in the first half of the year and the positive impact of decisions we made to align our business with unique challenges of today's affordability-constrained market. Demand remains healthy, supported by positive longer-term fundamentals and including strong demographic trends and a low supply of affordable homes. We believe that once the Fed's targets are met and we have a clearer view of the economic landscape, interest rate volatility will subside and the market will likely exhibit more stability, similar to what we experienced in the years prior to the pandemic. However, there's no consensus on whether that takes a couple of quarters or a couple of years. Therefore, we are laser-focused on ensuring that any near-term decisions around pricing, incentives, investments, and community openings are weighed not only in the context of their impact to our company's near-term success, but also 5, 10, and 20 years down the road. A great example of this is the 1,751 homes we closed in the third quarter. This was a 13.2% increase over the same period last year and represented a strong pace of 5.6 closings per community per month. It is possible that if we'd offered significantly more than our typical two to three points of rate buy-down assistance, we may have pushed closings higher. But beating the closing guidance wasn't the goal. Hitting the guide while also protecting and expanding margins was our focus. And that's exactly what we did. delivering adjusted gross margins of 27.2%, representing a sequential improvement of 340 basis points and back within the pre-pandemic range we've been working towards. Additionally, our pre-tax profit margin of 14.5% was also up 340 basis points and was the highest third quarter result in our history outside of the pandemic. During the third quarter, our top market on a closings per community basis was Dallas-Fort Worth with 10.1 closings per month. Next was Charlotte with 9.5 closings, followed by Northern California with 8.9. Rounding out the top five were Fort Pierce with 8.5 and Houston with 7.9. Congratulations to the teams in these markets for their strong performance last quarter. To reiterate, Every decision currently being made is being considered within the context of our systems-based philosophy and represents a careful assessment of its potential to create sustainable, long-term value for our shareholders. Along with margin expansion, our continued community account growth is another highlight. At the end of the quarter, we reported 106 active communities, a 14% increase from a year ago and a 4% increase from the prior quarter. Growing our community count remains a key focus, and we still expect to be active in 115 to 125 communities by the end of 2023. Finally, I'll share my thoughts on an additional highlight from the quarter, the land market. Early in 2020, deals for finished lots began to diminish. By the end of 2020, they were virtually nonexistent. However, we've started to see that shift. During the third quarter, we approved a total of 23 new projects, nine of which were composed entirely of finished lots, many of which will contribute to closings and community count in the back half of 2024. Though still in the early innings, we're encouraged by this recent trend and its potential to impact future returns. Along with attractive land opportunities, we've also seen a meaningful increase in M&A opportunities. The majority of these are small private builders looking to leverage longer dated land pipelines to free up capital to continue to grow their operations. During the quarter, we closed the deal to acquire substantially all of the land assets of Glenwood Homes in North Carolina. The transaction enabled us to acquire over 1,100 lots in one of our best performing regions. On the opposite side of the deal, the seller retained their high margin backlog and received an inflow of capital that has the potential to insulate them from turbulent credit markets and support their continued success as a home builder and developer. The win-win nature of this deal illustrates a positive upside of today's uncertainty. Challenging times can create great opportunities that, if structured thoughtfully, hold real value for both parties. We expect similar opportunities to materialize in the future and plan to pursue those that work within our profitability focus long-term growth strategy. I'll now turn the call over to Charles for more details on our financial results.