LGI Homes, Inc. (NASDAQ: LGIH) today announced financial
results for the second quarter and six months ended June 30, 2020.
Second Quarter 2020 Highlights and
Comparisons to Second Quarter 2019
- Net Income increased 20.8% to $55.6 million, or $2.22 Basic EPS
and $2.21 Diluted EPS
- Net Income Before Income Taxes increased 13.3% to $68.6
million
- Home Sales Revenues increased 4.3% to $481.6 million
- Home Closings increased 3.1% to 2,005 homes
- Average Home Sales Price increased 1.1% to $240,200
- Gross Margin as a Percentage of Homes Sales Revenues increased
40 basis points to 24.5%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues increased 30 basis points to 26.6%
- Active Selling Communities at June 30, 2020 increased
25.8% to 117
- Total Owned and Controlled Lots decreased to 44,307 lots at
June 30, 2020
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, 2020
Highlights and Comparisons to Six Months Ended June 30,
2019
- Net Income increased 52.9% to $98.5 million, or $3.91 Basic EPS
and $3.88 Diluted EPS
- Net Income Before Income Taxes increased 50.2% to $123.5
million
- Home Sales Revenues increased 24.9% to $936.3 million
- Home Closings increased 21.1% to 3,840 homes
- Average Home Sales Price increased 3.2% to $243,836
- Gross Margin as a Percentage of Homes Sales Revenues increased
30 basis points to 24.0%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues increased 30 basis points to 26.1%
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
“The second quarter of 2020 was full of positive
surprises that demonstrated the strength of our business model, the
uncompromising dedication of our employees and the depth of
Americans’ desire for homeownership” said Eric Lipar, the Company’s
Chief Executive Officer and Chairman of the Board. “In addition to
a record-breaking 2,005 quarterly home closings, the quarter was
highlighted by a 4.3% increase in home sales revenues, a 40 basis
point increase in our industry leading gross margin, and a record
$55.6 million in net income. Our continued focus on cash management
in combination with our strong operating results contributed to a
net debt to capitalization ratio of 37.0% as of June 30, 2020, our
lowest ratio since 2014. We are proud of what we accomplished this
quarter and optimistic about our ability to drive continued growth
and profitability in 2020.”
“Despite the headwinds created by the ongoing
COVID-19 pandemic, a combination of low interest rates, an
undersupply of existing homes and a renewed appreciation for the
value of homeownership drove strong demand in May and June
resulting in our highest backlog ever. This momentum continued in
July as evidenced by our net orders increasing over 60%
year-over-year. Based on our current view of market conditions and
our strong second quarter results, we are providing full year 2020
guidance and anticipate closing between 8,000 to 8,800 homes for
the year. Additionally, we expect active selling communities at the
end of the year will be between 115 and 125 and expect our average
home sales price for 2020 will be in the range of $245,000 to
$255,000.”
Mr. Lipar concluded, “Our performance in the
second quarter is a testament to our dedicated and talented
employees and demonstrates our ability to successfully manage
through uncertain times and challenging events. We thank each of
you for your continued commitment to helping renters become
homeowners during this unprecedented time.”
2020 Second Quarter Results
Home closings during the second quarter of 2020
totaled 2,005, an increase of 3.1% from 1,944 home closings during
the second quarter of 2019. At the end of the second quarter,
active selling communities increased to 117, up from 93 communities
at the end of the second quarter of 2019.
Home sales revenues for the second quarter of
2020 were $481.6 million, an increase of $19.8 million, or 4.3%,
over the second quarter of 2019. 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 2020.
The average home sales price for the second
quarter of 2020 was $240,200, an increase of $2,633, or 1.1%, over
the second quarter of 2019. This increase in the average home sales
price was primarily due to changes in product mix, higher price
points in certain new markets and a favorable pricing
environment.
Gross margin as a percentage of home sales
revenues for the second quarter of 2020 was 24.5% as compared to
24.1% for the second quarter of 2019. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the second
quarter of 2020 was 26.6% as compared to 26.3% for the second
quarter of 2019. The increase in gross margin and adjusted gross
margin as a percentage of home sales revenues is primarily due to
operating leverage and lower capitalized interest costs recognized
in the second quarter of 2020 as compared to the second quarter of
2019. Please see “Non-GAAP Measures” for a reconciliation of
adjusted gross margin (non-GAAP) to gross margin, the most
comparable GAAP measure.
Net income for the second quarter of 2020 was
$55.6 million, or $2.22 per basic share and $2.21 per diluted
share, an increase of $9.6 million, or 20.8%, from $46.1 million,
or $2.01 per basic share and $1.82 per diluted share, for the
second quarter of 2019. The increase in net income is primarily
attributed to operating leverage realized from the increase in home
sales revenues, higher average home sales price and retroactive tax
benefit recognized during the second quarter of 2020 as compared to
the second quarter of 2019.
Results for the Six Months Ended June 30,
2020
Home closings for the six months ended June 30,
2020 totaled 3,840, an increase of 21.1%, from 3,172 home closings
during the six months ended June 30, 2019.
Home sales revenues for the six months ended
June 30, 2020 were $936.3 million, an increase of $186.9 million,
or 24.9%, over the six months ended June 30, 2019. 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
six months ended June 30, 2020.
The average home sales price for the six months
ended June 30, 2020 was $243,836, an increase of $7,574, or 3.2%,
over the six months ended June 30, 2019. This increase in the
average home sales price was primarily due to changes in product
mix and higher price points in certain new markets, partially
offset by additional wholesale home closings.
Gross margin as a percentage of home sales
revenues for the six months ended June 30, 2020 was 24.0% as
compared to 23.7% for the six months ended June 30, 2019. Adjusted
gross margin (non-GAAP) as a percentage of home sales revenues for
the six months ended June 30, 2020 was 26.1% as compared to 25.8%
for the six months ended June 30, 2019. The increase in gross
margin and adjusted gross margin as a percentage of home sales
revenues is primarily due to higher average home sales price fueled
by our product mix, a favorable pricing environment and operating
leverage obtained, partially offset by an increase in wholesale
home closings as a percentage of total home closings in the six
months ended June 30, 2020 as compared to the six months ended June
30, 2019. Please see “Non-GAAP Measures” for a reconciliation of
adjusted gross margin (non-GAAP) to gross margin, the most
comparable GAAP measure.
Net income for the six months ended June 30,
2020 was $98.5 million, or $3.91 per basic share and $3.88 per
diluted share, an increase of $34.1 million, or 52.9%, from $64.4
million, or $2.82 per basic share and $2.55 per diluted share, for
the six months ended June 30, 2019. The increase in net income is
primarily attributed to an increase in the number of homes closed
with an overall higher gross margin percentage, as a result of
higher average home sales price and retroactive tax benefit
recognized during the six months ended June 30, 2020 as compared to
the six months ended June 30, 2019.
OutlookSubject to the caveats
in the Forward-Looking Statements section of this press release,
the Company offers the following guidance for the full year 2020.
The Company believes:
- Home closings will be between 8,000 and 8,800 in 2020
- Active selling communities at the end of 2020 will be between
115 and 125
- Gross margin as a percentage of home sales revenues will be
between 24.0% and 25.0%
- Adjusted gross margin (non-GAAP) as a percentage of home sales
revenues will be in the range of 26.0% and 27.0% with capitalized
interest accounting for substantially all of the difference between
gross margin and adjusted gross margin
- Average home sales price will be between $245,000 and
$255,000
- SG&A as a percentage of home sales revenues will be between
10.5% and 11.0%
- Effective tax rate will be between 21.0% and 22.0%
This outlook assumes that general economic
conditions, including interest rates and mortgage availability, in
the remainder of 2020 are similar to those experienced so far in
the third quarter of 2020 and that average home sales price,
construction costs, availability of land, land development costs
and overall absorption rates in the remainder of 2020 are
consistent with the Company’s recent experience. In addition, this
outlook assumes that governmental regulations relating to land
development, home construction and COVID-19 are similar to those
currently in place. Any further COVID-19 governmental
restrictions on land development or home construction could
negatively impact our ability to achieve this guidance.
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 4, 2020 (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 and Treasurer.
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 Earnings Call 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, and using conference
ID “3156759”. This replay will be available until August 11,
2020.
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, West Virginia and
Virginia. LGI Homes secured its place as the 10th largest
residential builder in United States in 2018 based on units closed
and remains there today. The Company has a notable legacy of more
than 17 years of homebuilding operations, over which time it has
closed more than 40,000 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 2020 home
closings, year-end active selling communities, gross margin as a
percentage of home sales revenues, adjusted gross margin as a
percentage of homes sales revenues, average home sales price,
SG&A as a percentage of home sales revenues, effective tax
rate, and the impact of the COVID-19 pandemic and its effect on the
Company, its business, customers, subcontractors, and its markets,
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, 2019, including the “Cautionary Statement
about Forward-Looking Statements” subsection within the “Risk
Factors” section, the “Risk Factors” section in each of the
Company’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2020 and June 30, 2020, 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, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
49,102 |
|
|
$ |
38,345 |
|
Accounts receivable |
58,230 |
|
|
56,390 |
|
Real estate inventory |
1,458,258 |
|
|
1,499,624 |
|
Pre-acquisition costs and
deposits |
30,761 |
|
|
37,244 |
|
Property and equipment,
net |
1,876 |
|
|
1,632 |
|
Other assets |
22,443 |
|
|
16,241 |
|
Deferred tax assets, net |
3,687 |
|
|
4,621 |
|
Goodwill and intangible
assets, net |
12,018 |
|
|
12,018 |
|
Total assets |
$ |
1,636,375 |
|
|
$ |
1,666,115 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Accounts payable |
$ |
15,410 |
|
|
$ |
12,495 |
|
Accrued expenses and other
liabilities |
114,202 |
|
|
117,868 |
|
Notes payable |
587,981 |
|
|
690,559 |
|
Total liabilities |
717,593 |
|
|
820,922 |
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
EQUITY |
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 26,695,179 shares issued and
25,089,151 shares outstanding as of June 30, 2020 and 26,398,409
shares issued and 25,359,409 shares outstanding as of December 31,
2019 |
267 |
|
|
264 |
|
Additional paid-in
capital |
259,061 |
|
|
252,603 |
|
Retained earnings |
708,845 |
|
|
610,382 |
|
Treasury stock, at cost,
1,606,028 shares and 1,039,000 shares, respectively |
(49,391 |
) |
|
(18,056 |
) |
Total equity |
918,782 |
|
|
845,193 |
|
Total liabilities and equity |
$ |
1,636,375 |
|
|
$ |
1,666,115 |
|
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, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Home sales revenues |
$ |
481,602 |
|
|
$ |
461,830 |
|
|
$ |
936,329 |
|
|
$ |
749,424 |
|
|
|
|
|
|
|
|
|
Cost of sales |
363,629 |
|
|
350,519 |
|
|
711,792 |
|
|
571,809 |
|
Selling expenses |
29,960 |
|
|
33,890 |
|
|
62,723 |
|
|
60,681 |
|
General and
administrative |
20,179 |
|
|
18,980 |
|
|
40,102 |
|
|
37,418 |
|
Operating income |
67,834 |
|
|
58,441 |
|
|
121,712 |
|
|
79,516 |
|
Loss on extinguishment of
debt |
— |
|
|
169 |
|
|
— |
|
|
169 |
|
Other income, net |
(763 |
) |
|
(2,263 |
) |
|
(1,774 |
) |
|
(2,882 |
) |
Net income before income
taxes |
68,597 |
|
|
60,535 |
|
|
123,486 |
|
|
82,229 |
|
Income tax provision |
12,973 |
|
|
14,480 |
|
|
25,023 |
|
|
17,840 |
|
Net income |
$ |
55,624 |
|
|
$ |
46,055 |
|
|
$ |
98,463 |
|
|
$ |
64,389 |
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
2.22 |
|
|
$ |
2.01 |
|
|
$ |
3.91 |
|
|
$ |
2.82 |
|
Diluted |
$ |
2.21 |
|
|
$ |
1.82 |
|
|
$ |
3.88 |
|
|
$ |
2.55 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
25,074,826 |
|
|
22,926,156 |
|
|
25,198,952 |
|
|
22,835,920 |
|
Diluted |
25,153,076 |
|
|
25,357,396 |
|
|
25,366,106 |
|
|
25,226,062 |
|
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
the Company’s performance.
The following table reconciles adjusted gross
margin to gross margin, which is the GAAP financial measure that
management believes to be most directly comparable (dollars in
thousands, unaudited):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Home sales revenues |
$ |
481,602 |
|
|
$ |
461,830 |
|
|
$ |
936,329 |
|
|
$ |
749,424 |
|
Cost of sales |
363,629 |
|
|
350,519 |
|
|
711,792 |
|
|
571,809 |
|
Gross margin |
117,973 |
|
|
111,311 |
|
|
224,537 |
|
|
177,615 |
|
Capitalized interest charged
to cost of sales |
8,684 |
|
|
8,989 |
|
|
17,614 |
|
|
14,383 |
|
Purchase accounting adjustments (1) |
1,252 |
|
|
956 |
|
|
1,875 |
|
|
1,586 |
|
Adjusted gross margin |
$ |
127,909 |
|
|
$ |
121,256 |
|
|
$ |
244,026 |
|
|
$ |
193,584 |
|
Gross margin % (2) |
24.5 |
% |
|
24.1 |
% |
|
24.0 |
% |
|
23.7 |
% |
Adjusted gross margin %
(2) |
26.6 |
% |
|
26.3 |
% |
|
26.1 |
% |
|
25.8 |
% |
(1) 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.
(2) 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, 2020 |
|
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly
Absorption Rate |
Central |
|
$ |
167,924 |
|
|
747 |
|
|
$ |
224,798 |
|
|
34.0 |
|
|
7.3 |
|
Southeast |
|
128,577 |
|
|
559 |
|
|
230,013 |
|
|
37.3 |
|
|
5.0 |
|
Northwest |
|
56,369 |
|
|
153 |
|
|
368,425 |
|
|
11.3 |
|
|
4.5 |
|
West |
|
60,592 |
|
|
236 |
|
|
256,746 |
|
|
15.3 |
|
|
5.1 |
|
Florida |
|
68,140 |
|
|
310 |
|
|
219,806 |
|
|
18.0 |
|
|
5.7 |
|
Total |
|
$ |
481,602 |
|
|
2,005 |
|
|
$ |
240,200 |
|
|
116.0 |
|
|
5.8 |
|
|
|
Three Months Ended June 30, 2019 |
|
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly
Absorption Rate |
Central |
|
$ |
189,894 |
|
|
888 |
|
|
$ |
213,845 |
|
|
33.3 |
|
|
8.9 |
|
Southeast |
|
77,820 |
|
|
360 |
|
|
216,167 |
|
|
24.0 |
|
|
5.0 |
|
Northwest |
|
78,996 |
|
|
214 |
|
|
369,140 |
|
|
11.0 |
|
|
6.5 |
|
West |
|
66,933 |
|
|
248 |
|
|
269,891 |
|
|
13.0 |
|
|
6.4 |
|
Florida |
|
48,187 |
|
|
234 |
|
|
205,927 |
|
|
11.7 |
|
|
6.7 |
|
Total |
|
$ |
461,830 |
|
|
1,944 |
|
|
$ |
237,567 |
|
|
93.0 |
|
|
7.0 |
|
|
|
Six Months Ended June 30, 2020 |
|
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly
Absorption Rate |
Central |
|
$ |
333,699 |
|
|
1,488 |
|
|
$ |
224,260 |
|
|
34.0 |
|
|
7.3 |
|
Southeast |
|
217,024 |
|
|
962 |
|
|
225,597 |
|
|
34.2 |
|
|
4.7 |
|
Northwest |
|
158,317 |
|
|
426 |
|
|
371,636 |
|
|
11.8 |
|
|
6.0 |
|
West |
|
119,077 |
|
|
472 |
|
|
252,282 |
|
|
15.0 |
|
|
5.2 |
|
Florida |
|
108,212 |
|
|
492 |
|
|
219,943 |
|
|
17.3 |
|
|
4.7 |
|
Total |
|
$ |
936,329 |
|
|
3,840 |
|
|
$ |
243,836 |
|
|
112.3 |
|
|
5.7 |
|
|
|
Six Months Ended June 30, 2019 |
|
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly Absorption
Rate |
Central |
|
$ |
314,091 |
|
|
1,466 |
|
|
$ |
214,250 |
|
|
32.7 |
|
|
7.5 |
|
Southeast |
|
130,234 |
|
|
590 |
|
|
220,736 |
|
|
21.5 |
|
|
4.6 |
|
Northwest |
|
115,250 |
|
|
313 |
|
|
368,211 |
|
|
11.0 |
|
|
4.7 |
|
West |
|
112,750 |
|
|
427 |
|
|
264,052 |
|
|
12.2 |
|
|
5.8 |
|
Florida |
|
77,099 |
|
|
376 |
|
|
205,051 |
|
|
11.3 |
|
|
5.5 |
|
Total |
|
$ |
749,424 |
|
|
3,172 |
|
|
$ |
236,262 |
|
|
88.7 |
|
|
6.0 |
|
CONTACT:Joshua Fattor, Vice President of Investor Relations(281)
210-2619InvestorRelations@LGIHomes.com
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