LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the
second quarter 2019 and the six months ended June 30, 2019.
Second Quarter 2019 Results and
Comparisons to Second Quarter 2018
- Net Income of $46.1 million, or $2.01 Basic EPS and $1.82
Diluted EPS
- Net Income Before Income Taxes of $60.5 million
- Home Sales Revenues increased 10.0% to $461.8 million
- Home Closings increased 7.1% to 1,944
- Average Home Sales Price increased 2.7% to $237,567
- Gross Margin as a Percentage of Homes Sales Revenues was 24.1%
as compared to 26.1%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 26.3% as compared to 27.7%
- Active Selling Communities at June 30, 2019 increased
17.7% to 93
- 54,191 Total Owned and Controlled Lots at June 30,
2019
Please see “Non-GAAP Measures” for a
reconciliation of Adjusted Gross Margin (a non-GAAP measure) to
Gross Margin, the most directly comparable GAAP measure.
Six Months Ended June 30, 2019
Results and Comparisons to Six Months Ended June 30,
2018
- Net Income of $64.4 million, or $2.82 Basic EPS and $2.55
Diluted EPS
- Net Income Before Income Taxes of $82.2 million
- Home Sales Revenues increased 7.2% to $749.4 million
- Home Closings increased 3.7% to 3,172
- Average Home Sales Price increased 3.4% to $236,262
- Gross Margin as a Percentage of Homes Sales Revenues was 23.7%
as compared to 25.6%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 25.8% as compared to 27.2%
Please see “Non-GAAP Measures” for a
reconciliation of Adjusted Gross Margin (a non-GAAP measure) to
Gross Margin, the most directly comparable GAAP measure.
Management Comments“We are
proud to announce an outstanding quarter at LGI Homes highlighting
new records in home closings, home sales revenues, average home
sales price, and active community count,” stated Eric Lipar, the
Company's Chief Executive Officer and Chairman of the Board. “In
addition, we achieved a record 3,172 home closings through the
first half of 2019 and successfully launched our Complete
Home™ initiatives.”
“Throughout the quarter we continued to see demand for
affordable homes, coupled with community count expansion and
positive response from buyers to lower interest rates, resulting in
a 38% increase in net orders over the second quarter of last
year.”
“We remain optimistic on industry dynamics and
believe we are well positioned to finish the year strong. We are
confident in our ability to deliver consistent results and believe
we are on track to meet our goal of 6,900 to 7,800 home closings in
2019 and generate basic EPS in the range of $7.00 to $8.00 per
share,” Lipar concluded.
2019 Second Quarter Results
Home closings during the second quarter of 2019
totaled 1,944, an increase of 7.1%, up from 1,815 home closings
during the second quarter of 2018. This increase was largely due to
increases in home closings in the Company’s West, Southeast and
Central reportable segments. The increase was partially
offset by decreases in home closings in the Company’s Northwest and
Florida reportable segments during the second quarter of 2019 as
compared to the second quarter of 2018, which were largely due to
close out of or transition between, and to a lesser extent
available inventory in certain of their respective active
communities. At the end of the second quarter active selling
communities increased to 93, up from 79 communities at the end of
the second quarter of 2018.
Home sales revenues for the second quarter of
2019 were $461.8 million, an increase of $42.0 million, or 10.0%,
over the second quarter of 2018. The increase in home sales
revenues is primarily due to the increase in home closings and an
increase in the average home sales price during the second quarter
of 2019.
The average home sales price for the second
quarter of 2019 was $237,567, an increase of $6,246, or 2.7%, over
the second quarter of 2018. This increase in average home sales
price was primarily due to changes in product mix, higher price
points in new markets and a favorable pricing environment.
Gross margin as a percentage of home sales
revenues for the second quarter of 2019 was 24.1% as compared to
26.1% for the second quarter of 2018. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the second
quarter of 2019 was 26.3% as compared to 27.7% for the second
quarter of 2018. This decrease in gross margin as a percentage of
home sales revenues is primarily due to higher capitalized interest
costs recognized, purchase accounting, and to a lesser extent,
increased construction costs, offset by an increase in homes closed
for the second quarter of 2019 as compared to the second quarter of
2018. Please see “Non-GAAP Measures” for a reconciliation of
adjusted gross margin (non-GAAP) to gross margin, the most
comparable GAAP measure.
Net income of $46.1 million, or $2.01 per basic
share and $1.82 per diluted share, for the second quarter of 2019
decreased $1.5 million, or 3.3%, from $47.6 million, or $2.11 per
basic share and $1.90 per diluted share, for the second quarter of
2018. The decrease in net income is primarily attributed to lower
gross margin percentage, increased advertising and additional costs
realized from the increase of personnel associated with the
increase of community count, higher capitalized interest costs
recognized and purchase accounting, partially offset by a higher
average sales price realized during the second quarter of 2019 as
compared to the second quarter of 2018.
Results for the Six Months Ended
June 30, 2019
Home closings for the six months ended
June 30, 2019 increased 3.7% to 3,172 from 3,059 during the
six months ended June 30, 2018.
Home sales revenues for the six months ended
June 30, 2019 increased 7.2% to $749.4 million compared to the
six months ended June 30, 2018. The increase in home sales
revenues is primarily due to the increase in the number of homes
closed and an increase in the average home sales price. The
increase in home closings was largely due to increased home
closings in the Company’s West, Central and Southeast reportable
segments, partially offset by decreased home closings in the
Company’s Northwest and Florida reportable segments which were
largely due to close out of or transition between, and to a lesser
extent available inventory in certain of their respective active
communities.
The average home sales price was $236,262 for
the six months ended June 30, 2019, an increase of $7,798, or
3.4%, over the six months ended June 30, 2018. This increase
is primarily due to changes in product mix, higher price points in
certain new markets and increases in sales prices in existing
communities.
Gross margin as a percentage of home sales
revenues for the six months ended June 30, 2019 was 23.7% as
compared to 25.6% for the six months ended June 30,
2018. Adjusted gross margin (non-GAAP) as a percentage of
home sales revenues for the six months ended June 30, 2019 was
25.8% as compared to 27.2% for the six months ended June 30,
2018. These decreases are primarily due to a combination of higher
construction costs, construction overhead, lot costs, capitalized
interest, and to lesser degree purchase accounting, partially
offset by higher average home sales price. Please see “Non-GAAP
Measures” for a reconciliation of adjusted gross margin (non-GAAP)
to gross margin, the most comparable GAAP measure.
Net income of $64.4 million, or $2.82 per basic
share and $2.55 per diluted share, for the six months ended
June 30, 2019 decreased $10.5 million, or 14.0%, from $74.9
million for the six months ended June 30, 2018. This decrease
is primarily attributable to lower gross margin percentage,
increased advertising and additional costs realized from the
increase of personnel associated with the increase of community
count, higher capitalized interest cost recognized, purchase
accounting and start-up costs in the Company’s Southeast reportable
segment, partially offset by a higher average sales price realized
during the six months ended June 30, 2019 as compared to the six
months ended June 30, 2018.
Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company reaffirms its
prior 2019 guidance. The Company believes it will have between 105
and 115 active selling communities at the end of 2019, close
between 6,900 and 7,800 homes in 2019, and generate basic EPS
between $7.00 and $8.00 per share during 2019. In addition, the
Company believes 2019 gross margin as a percentage of home sales
revenues will be in the range of 23.5% and 25.5% and 2019 adjusted
gross margin (non-GAAP) as a percentage of home sales revenues will
be in the range of 25.5% and 27.5% with capitalized interest
accounting for substantially all of the difference between gross
margin and adjusted gross margin. The Company also believes that
the average home sales price in 2019 will be between $235,000 and
$245,000. This outlook assumes that general economic conditions,
including interest rates and mortgage availability, in the
remainder of 2019 are similar to those experienced in the second
quarter of 2019 and that average home sales price, construction
costs, availability of land, land development costs and overall
absorption rates in the remainder of 2019 are consistent with the
Company’s recent experience. In addition, this outlook assumes that
none of the Company’s 4.25% Convertible Notes due 2019 ($70.0
million aggregate principal amount currently outstanding) are
converted prior to their maturity on November 15, 2019.
Earnings Conference Call
The Company will host a conference call via live
webcast for investors and other interested parties beginning at
12:30 p.m. Eastern Time on Tuesday, August 6, 2019 (the
“Earnings Call”). The Earnings Call will be hosted by Eric Lipar,
Chief Executive Officer and Chairman of the Board, and Charles
Merdian, Chief Financial Officer.
Participants may access the live webcast by
visiting the Investor Relations section of the Company’s website at
www.LGIHomes.com. The Earnings Call can also be accessed by dialing
(855) 433-0929, or (970) 315-0256 for international
participants.
An archive of the webcast will be available on
the Company’s website for approximately 12 months. A replay of the
Earnings Call will also be available later that day by calling
(855) 859-2056, or (404) 537-3406, using conference id “1462049”.
This replay will be available until August 13, 2019.
About LGI Homes, Inc.
Headquartered in The Woodlands, Texas, LGI
Homes, Inc. engages in the design, construction and sale of homes
in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North
Carolina, South Carolina, Washington, Tennessee, Minnesota,
Oklahoma, Alabama, California, Oregon, Nevada and West Virginia.
Recently recognized as the 10th largest residential builder in
America, based on units closed, the Company has a notable legacy of
more than 16 years of homebuilding operations, over which time it
has closed more than 32,000 homes. For more information about the
Company and its new home developments, please visit the Company’s
website at www.LGIHomes.com.
Forward-Looking Statements
Any statements made in this press release or on
the Earnings Call that are not statements of historical fact,
including statements about the Company’s beliefs and expectations,
are forward-looking statements within the meaning of the federal
securities laws, and should be evaluated as such. Forward-looking
statements include information concerning projected 2019 home
closings, year-end selling communities, basic earnings per share,
gross margin as a percentage of home sales revenues, adjusted gross
margin as a percentage of home sales revenue, and average home
sales price, as well as market conditions and possible or assumed
future results of operations, including descriptions of the
Company’s business plan and strategies. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “forecast,” “goal,”
“intend,” “may,” “objective,” “plan,” “potential,” “predict,”
“projection,” “should,” “will” or, in each case, their negative, or
other variations or comparable terminology. For more information
concerning factors that could cause actual results to differ
materially from those contained in the forward-looking statements
please refer to the “Risk Factors” section in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2018,
including the “Cautionary Statement about Forward-Looking
Statements” subsection within the “Risk Factors” section, and
subsequent filings by the Company with the Securities and Exchange
Commission. The Company bases these forward-looking statements or
projections on its current expectations, plans and assumptions that
it has made in light of its experience in the industry, as well as
its perceptions of historical trends, current conditions, expected
future developments and other factors it believes are appropriate
under the circumstances and at such time. As you read and consider
this press release or listen to the Earnings Call, you should
understand that these statements are not guarantees of future
performance or results. The forward-looking statements and
projections are subject to and involve risks, uncertainties and
assumptions and you should not place undue reliance on these
forward-looking statements or projections. Although the Company
believes that these forward-looking statements and projections are
based on reasonable assumptions at the time they are made, you
should be aware that many factors could affect the Company’s actual
results to differ materially from those expressed in the
forward-looking statements and projections. The Company undertakes
no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
If the Company does update one or more forward-looking statements,
there should be no inference that it will make additional updates
with respect to those or other forward-looking statements.
LGI HOMES,
INC.CONSOLIDATED BALANCE
SHEETS(Unaudited)(In thousands,
except share data)
|
|
June 30, |
|
December 31, |
|
|
2019 |
|
2018 |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
37,555 |
|
|
$ |
46,624 |
|
Accounts receivable |
|
43,207 |
|
|
42,836 |
|
Real estate inventory |
|
1,328,699 |
|
|
1,228,256 |
|
Pre-acquisition costs and deposits |
|
45,991 |
|
|
45,752 |
|
Property and equipment, net |
|
1,429 |
|
|
1,432 |
|
Other assets |
|
15,146 |
|
|
15,765 |
|
Deferred tax assets, net |
|
2,015 |
|
|
2,790 |
|
Goodwill and intangible assets, net |
|
12,018 |
|
|
12,018 |
|
Total assets |
|
$ |
1,486,060 |
|
|
$ |
1,395,473 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
22,562 |
|
|
$ |
9,241 |
|
Accrued expenses and other liabilities |
|
73,340 |
|
|
76,555 |
|
Notes payable |
|
664,923 |
|
|
653,734 |
|
Total liabilities |
|
760,825 |
|
|
739,530 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01, 250,000,000 shares authorized,
23,978,883 shares issued and 22,939,883 shares outstanding as of
June 30, 2019 and 23,746,385 shares issued and 22,707,385 shares
outstanding as of December 31, 2018 |
|
240 |
|
|
237 |
|
Additional paid-in capital |
|
246,888 |
|
|
241,988 |
|
Retained earnings |
|
496,163 |
|
|
431,774 |
|
Treasury stock, at cost, 1,039,000 shares |
|
(18,056 |
) |
|
(18,056 |
) |
Total equity |
|
725,235 |
|
|
655,943 |
|
Total liabilities and equity |
|
$ |
1,486,060 |
|
|
$ |
1,395,473 |
|
|
|
|
|
|
|
|
|
|
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, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Home sales revenues |
|
$ |
461,830 |
|
|
$ |
419,847 |
|
|
$ |
749,424 |
|
|
$ |
698,871 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
350,519 |
|
|
310,082 |
|
|
571,809 |
|
|
519,847 |
|
Selling expenses |
|
33,890 |
|
|
29,301 |
|
|
60,681 |
|
|
52,250 |
|
General and
administrative |
|
18,980 |
|
|
18,302 |
|
|
37,418 |
|
|
33,742 |
|
Operating income |
|
58,441 |
|
|
62,162 |
|
|
79,516 |
|
|
93,032 |
|
Loss on extinguishment of
debt |
|
169 |
|
|
365 |
|
|
169 |
|
|
540 |
|
Other income, net |
|
(2,263 |
) |
|
(874 |
) |
|
(2,882 |
) |
|
(1,406 |
) |
Net income before income
taxes |
|
60,535 |
|
|
62,671 |
|
|
82,229 |
|
|
93,898 |
|
Income tax provision |
|
14,480 |
|
|
15,063 |
|
|
17,840 |
|
|
18,988 |
|
Net income |
|
$ |
46,055 |
|
|
$ |
47,608 |
|
|
$ |
64,389 |
|
|
$ |
74,910 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.01 |
|
|
$ |
2.11 |
|
|
$ |
2.82 |
|
|
$ |
3.34 |
|
Diluted |
|
$ |
1.82 |
|
|
$ |
1.90 |
|
|
$ |
2.55 |
|
|
$ |
3.01 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
22,926,156 |
|
|
22,616,085 |
|
|
22,835,920 |
|
|
22,403,266 |
|
Diluted |
|
25,357,396 |
|
|
25,000,647 |
|
|
25,226,062 |
|
|
24,884,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
In addition to the results reported in
accordance with U.S. GAAP, the Company has provided information in
this press release relating to adjusted gross margin.
Adjusted gross margin is a non-GAAP financial
measure used by management as a supplemental measure in evaluating
operating performance. The Company defines adjusted gross margin as
gross margin less capitalized interest and adjustments resulting
from the application of purchase accounting included in the cost of
sales. Management believes this information is useful because it
isolates the impact that capitalized interest and purchase
accounting adjustments have on gross margin. However, because
adjusted gross margin information excludes capitalized interest and
purchase accounting adjustments, which have real economic effects
and could impact results, the utility of adjusted gross margin
information as a measure of operating performance may be limited.
In addition, other companies may not calculate adjusted gross
margin information in the same manner that the Company does.
Accordingly, adjusted gross margin information should be considered
only as a supplement to gross margin information as a measure of
performance.
The following table reconciles adjusted gross
margin to gross margin, which is the GAAP financial measure that
the Company believes to be most directly comparable (dollars in
thousands):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Home sales revenues |
|
$ |
461,830 |
|
|
$ |
419,847 |
|
|
$ |
749,424 |
|
|
$ |
698,871 |
|
Cost of sales |
|
350,519 |
|
|
310,082 |
|
|
571,809 |
|
|
519,847 |
|
Gross margin |
|
111,311 |
|
|
109,765 |
|
|
177,615 |
|
|
179,024 |
|
Capitalized interest charged to cost of sales |
|
8,989 |
|
|
6,588 |
|
|
14,383 |
|
|
10,900 |
|
Purchase accounting adjustments (1) |
|
956 |
|
|
— |
|
|
1,586 |
|
|
(3 |
) |
Adjusted gross margin |
|
$ |
121,256 |
|
|
$ |
116,353 |
|
|
$ |
193,584 |
|
|
$ |
189,921 |
|
Gross margin % (2) |
|
24.1 |
% |
|
26.1 |
% |
|
23.7 |
% |
|
25.6 |
% |
Adjusted gross margin %
(2) |
|
26.3 |
% |
|
27.7 |
% |
|
25.8 |
% |
|
27.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
- Adjustments result from the application of purchase accounting
for acquisitions and represent the amount of the fair value step-up
adjustments included in cost of sales for real estate inventory
sold after the acquisition dates.
- Calculated as a percentage of home sales revenues.
Home Sales Revenues, Home Closings, Average Home Sales
Price (ASP), Average Community Count and Average Monthly Absorption
Rates by Reportable Segment
(Revenues in thousands,
unaudited)
|
|
Three Months Ended June 30, 2019 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly Absorption Rate |
Central |
|
$ |
189,894 |
|
|
888 |
|
|
$ |
213,845 |
|
|
33.3 |
|
|
8.9 |
|
Northwest |
|
78,996 |
|
|
214 |
|
|
369,140 |
|
|
11.0 |
|
|
6.5 |
|
Southeast |
|
77,820 |
|
|
360 |
|
|
216,167 |
|
|
24.0 |
|
|
5.0 |
|
Florida |
|
48,187 |
|
|
234 |
|
|
205,927 |
|
|
11.7 |
|
|
6.7 |
|
West |
|
66,933 |
|
|
248 |
|
|
269,891 |
|
|
13.0 |
|
|
6.4 |
|
Total |
|
$ |
461,830 |
|
|
1,944 |
|
|
$ |
237,567 |
|
|
93.0 |
|
|
7.0 |
|
|
|
Three Months Ended June 30, 2018 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly Absorption Rate |
Central |
|
$ |
181,967 |
|
|
853 |
|
|
$ |
213,326 |
|
|
30.7 |
|
|
9.3 |
|
Northwest |
|
85,233 |
|
|
239 |
|
|
356,623 |
|
|
9.3 |
|
|
8.6 |
|
Southeast |
|
60,369 |
|
|
298 |
|
|
202,581 |
|
|
17.0 |
|
|
5.8 |
|
Florida |
|
55,018 |
|
|
257 |
|
|
214,078 |
|
|
11.7 |
|
|
7.3 |
|
West |
|
37,260 |
|
|
168 |
|
|
221,786 |
|
|
9.3 |
|
|
6.0 |
|
Total |
|
$ |
419,847 |
|
|
1,815 |
|
|
$ |
231,321 |
|
|
78.0 |
|
|
7.8 |
|
|
|
Six Months Ended June 30, 2019 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly Absorption Rate |
Central |
|
$ |
314,091 |
|
|
1,466 |
|
|
$ |
214,250 |
|
|
32.7 |
|
|
7.5 |
|
Northwest |
|
115,250 |
|
|
313 |
|
|
368,211 |
|
|
11.0 |
|
|
4.7 |
|
Southeast |
|
130,234 |
|
|
590 |
|
|
220,736 |
|
|
21.5 |
|
|
4.6 |
|
Florida |
|
77,099 |
|
|
376 |
|
|
205,051 |
|
|
11.3 |
|
|
5.5 |
|
West |
|
112,750 |
|
|
427 |
|
|
264,052 |
|
|
12.2 |
|
|
5.8 |
|
Total |
|
$ |
749,424 |
|
|
3,172 |
|
|
$ |
236,262 |
|
|
88.7 |
|
|
6.0 |
|
|
|
Six Months Ended June 30, 2018 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly Absorption Rate |
Central |
|
$ |
289,465 |
|
|
1,374 |
|
|
$ |
210,673 |
|
|
30.0 |
|
|
7.6 |
|
Northwest |
|
142,406 |
|
|
394 |
|
|
361,437 |
|
|
9.8 |
|
|
6.7 |
|
Southeast |
|
105,477 |
|
|
527 |
|
|
200,146 |
|
|
17.0 |
|
|
5.2 |
|
Florida |
|
97,461 |
|
|
466 |
|
|
209,144 |
|
|
11.5 |
|
|
6.8 |
|
West |
|
64,062 |
|
|
298 |
|
|
214,973 |
|
|
9.2 |
|
|
5.4 |
|
Total |
|
$ |
698,871 |
|
|
3,059 |
|
|
$ |
228,464 |
|
|
77.5 |
|
|
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: |
|
Investor Relations:Caitlin Stiles, (281)
210-2619InvestorRelations@LGIHomes.com |
|
|
|
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