LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the
second quarter 2017 and the six months ended June 30, 2017.
Second Quarter 2017 Results and Comparisons to Second
Quarter 2016
- Net Income increased 55.9% to $32.2 million, or $1.49 Basic EPS
and $1.39 Diluted EPS
- Net Income Before Income Taxes increased 54.9% to $48.6
million
- Home Sales Revenues increased 45.6% to $324.2 million
- Home Closings increased 34.0% to 1,511 homes
- Average Home Sales Price increased 8.7% to $214,545
- Gross Margin as a Percentage of Homes Sales Revenues was 26.6%
as compared to 26.5%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 28.0% as compared to 27.8%
- Ending backlog increased 74.2% to 1,545 units
- Active Selling Communities at June 30, 2017 increased to 71
from 56
- 32,689 Total Owned and Controlled Lots at June 30, 2017
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, 2017 Results and
Comparisons to Six Months Ended June 30, 2016
- Net Income increased 35.9% to $44.0 million, or $2.05 Basic EPS
and $1.91 Diluted EPS
- Net Income Before Income Taxes increased 33.0% to $65.5
million
- Home Sales Revenues increased 26.5% to $487.1 million
- Home Closings increased 15.2% to 2,272 homes
- Average Home Sales Price increased 9.8% to $214,388
- Gross Margin as a Percentage of Homes Sales Revenues was 26.7%
as compared to 26.1%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 28.0% as compared to 27.3%
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 record-setting closings, revenues, average home sales
price, community count, net income and EPS,” stated Eric Lipar, the
Company’s Chief Executive Officer and Chairman of the Board. “Based
on these solid results during the first half of the year, increased
demand for homeownership, and robust orders we believe we are well
positioned to finish the year strong and are updating our guidance.
For the full year 2017, we now anticipate to close more than 5,000
homes. In addition, we are raising the range of our full year EPS
guidance to $4.25 to $4.75 per basic share.”
2017 Second Quarter Results
Home closings during the second quarter of 2017 increased 34.0%
to 1,511 from 1,128 during the second quarter of 2016. Active
selling communities increased to 71 at the end of the second
quarter of 2017, up from 56 communities at the end of the second
quarter of 2016.
Home sales revenues for the second quarter of 2017 were $324.2
million, an increase of $101.5 million, or 45.6% over the second
quarter of 2016. The increase in home sales revenues is due to both
the increase in the number of homes closed and an increase in the
average home sales price.
The average home sales price was $214,545 for the second quarter
of 2017, an increase of 8.7% over the second quarter of 2016. This
increase is largely attributable to changes in product mix, price
points in new markets, and a favorable pricing environment.
Gross margin as a percentage of home sales revenues for the
second quarter of 2017 was 26.6% as compared to 26.5% for the
second quarter of 2016. Adjusted gross margin (non-GAAP) as a
percentage of home sales revenues for the second quarter of 2017
was 28.0% as compared to 27.8% for the second quarter of 2016. This
increase is primarily due to a combination of higher average home
sales prices and construction costs, and to a lesser extent a
one-time reimbursement of costs associated with community
development. 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 $32.2 million, or $1.49 per basic share and $1.39
per diluted share, for the second quarter of 2017 increased $11.5
million, or 55.9%, from $20.7 million for the second quarter of
2016. This increase is primarily attributable to the 34.0% increase
in homes closed and the 8.7% increase in average home sales
price.
Results for the Six Months Ended June 30,
2017
Home closings for the six months ended June 30, 2017
increased 15.2% to 2,272 from 1,972 during the six months ended
June 30, 2016.
Home sales revenues for the six months ended June 30, 2017
increased 26.5% to $487.1 million compared to the six months ended
June 30, 2016. 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 average home sales price was $214,388 for the six months
ended June 30, 2017, an increase of $19,060, or 9.8%, over the
six months ended June 30, 2016. This increase is largely
attributable to changes in product mix, price points in new
markets, and a favorable pricing environment.
Gross margin as a percentage of home sales revenues for the six
months ended June 30, 2017 was 26.7% as compared to 26.1% for
the six months ended June 30, 2016. Adjusted gross
margin (non-GAAP) as a percentage of home sales revenues for the
six months ended June 30, 2017 was 28.0% as compared to 27.3%
for the six months ended June 30, 2016. This increase is
primarily due to a combination of leveraging our construction costs
and lot costs with 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 $44.0 million, or $2.05 per basic share and $1.91
per diluted share, for the six months ended June 30, 2017
increased $11.6 million, or 35.9%, from $32.4 million for the six
months ended June 30, 2016. This increase is primarily
attributable to the 15.2% increase in homes closed and the 9.8%
increase in average home sales price.
Outlook
Subject to the caveats in the Forward-Looking Statements section
of this press release, the Company offers the following updated
guidance for 2017. The Company believes it will have between 75 and
80 active selling communities at the end of 2017, close more than
5,000 homes in 2017, and generate basic EPS between $4.25 and $4.75
per share during 2017. In addition, the Company believes 2017 gross
margin as a percentage of home sales revenues will be in the range
of 25.0% and 27.0% and 2017 adjusted gross margin (non-GAAP) as a
percentage of home sales revenues will be similar to previous years
in the range of 26.5% and 28.5% 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 2017 will be between $210,000 and
$220,000. This outlook assumes that general economic conditions,
including interest rates and mortgage availability, in the
remainder of 2017 are similar to those in the first half of 2017
and that average home sales price, construction costs, availability
of land, land development costs and overall absorption rates for
2017 are consistent with the Company’s recent experience.
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 8, 2017 (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 “57141613”. This replay will be
available until August 15, 2017.
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 and Tennessee. The Company has a notable
legacy of more than 14 years of homebuilding operations, over which
time it has closed over 18,000 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 2017 home
closings, year-end selling communities, basic earnings per share,
gross margins as a percentage of home sales revenues, adjusted
gross margins 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 “believe,” “estimate,” “project,”
“anticipate,” “expect,” “seek,” “predict,” “contemplate,”
“continue,” “possible,” “intent,” “may,” “might,” “will,” “could,”
“would,” “should,” “forecast,” or “assume” 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, 2016, 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, |
|
|
2017 |
|
2016 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
27,300 |
|
|
$ |
49,518 |
|
Accounts
receivable |
|
34,137 |
|
|
17,055 |
|
Real
estate inventory |
|
835,985 |
|
|
717,681 |
|
Pre-acquisition costs and deposits |
|
13,444 |
|
|
10,651 |
|
Property
and equipment, net |
|
1,877 |
|
|
1,960 |
|
Other
assets |
|
6,453 |
|
|
5,631 |
|
Deferred
tax assets, net |
|
466 |
|
|
— |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total
assets |
|
$ |
931,680 |
|
|
$ |
814,514 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
19,007 |
|
|
$ |
12,277 |
|
Accrued
expenses and other liabilities |
|
63,366 |
|
|
46,389 |
|
Deferred
tax liabilities, net |
|
— |
|
|
164 |
|
Notes
payable |
|
442,946 |
|
|
400,483 |
|
Total
liabilities |
|
525,319 |
|
|
459,313 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common
stock, par value $0.01, 250,000,000 shares authorized, 22,615,519
shares issued and 21,615,519 shares outstanding as of June 30, 2017
and 22,311,310 shares issued and 21,311,310 shares outstanding as
of December 31, 2016 |
|
226 |
|
|
223 |
|
Additional paid-in capital |
|
215,524 |
|
|
208,346 |
|
Retained
earnings |
|
207,161 |
|
|
163,182 |
|
Treasury
stock, at cost, 1,000,000 shares |
|
(16,550 |
) |
|
(16,550 |
) |
Total
equity |
|
406,361 |
|
|
355,201 |
|
Total
liabilities and equity |
|
$ |
931,680 |
|
|
$ |
814,514 |
|
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, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Home sales
revenues |
|
$ |
324,178 |
|
|
$ |
222,723 |
|
|
$ |
487,089 |
|
|
$ |
385,186 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
237,830 |
|
|
163,628 |
|
|
357,242 |
|
|
284,722 |
|
Selling expenses |
|
24,193 |
|
|
17,867 |
|
|
40,300 |
|
|
31,958 |
|
General and
administrative |
|
13,680 |
|
|
10,488 |
|
|
24,945 |
|
|
20,440 |
|
Operating income |
|
48,475 |
|
|
30,740 |
|
|
64,602 |
|
|
48,066 |
|
Other income, net |
|
(167 |
) |
|
(668 |
) |
|
(882 |
) |
|
(1,171 |
) |
Net income before
income taxes |
|
48,642 |
|
|
31,408 |
|
|
65,484 |
|
|
49,237 |
|
Income tax
provision |
|
16,443 |
|
|
10,749 |
|
|
21,505 |
|
|
16,878 |
|
Net income |
|
$ |
32,199 |
|
|
$ |
20,659 |
|
|
$ |
43,979 |
|
|
$ |
32,359 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.49 |
|
|
$ |
1.01 |
|
|
$ |
2.05 |
|
|
$ |
1.58 |
|
Diluted |
|
$ |
1.39 |
|
|
$ |
0.96 |
|
|
$ |
1.91 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
21,602,261 |
|
|
20,544,809 |
|
|
21,481,842 |
|
|
20,416,566 |
|
Diluted |
|
23,242,589 |
|
|
21,487,013 |
|
|
23,032,648 |
|
|
21,017,188 |
|
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 the Company’s results, the utility of adjusted
gross margin information as a measure of the Company’s 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):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Home sales
revenues |
|
$ |
324,178 |
|
|
$ |
222,723 |
|
|
$ |
487,089 |
|
|
$ |
385,186 |
|
Cost of sales |
|
237,830 |
|
|
163,628 |
|
|
357,242 |
|
|
284,722 |
|
Gross margin |
|
86,348 |
|
|
59,095 |
|
|
129,847 |
|
|
100,464 |
|
Capitalized interest charged to cost of sales |
|
4,338 |
|
|
2,669 |
|
|
6,413 |
|
|
4,451 |
|
Purchase
accounting adjustments (a) |
|
137 |
|
|
211 |
|
|
172 |
|
|
381 |
|
Adjusted gross
margin |
|
$ |
90,823 |
|
|
$ |
61,975 |
|
|
$ |
136,432 |
|
|
$ |
105,296 |
|
Gross margin % (b) |
|
26.6 |
% |
|
26.5 |
% |
|
26.7 |
% |
|
26.1 |
% |
Adjusted gross margin %
(b) |
|
28.0 |
% |
|
27.8 |
% |
|
28.0 |
% |
|
27.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
- 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 and Closings by
Division(Dollars in thousands) |
|
|
|
Three Months Ended June 30, |
|
|
2017 |
|
2016 |
|
|
Revenues |
|
Closings |
|
Revenues |
|
Closings |
Central |
|
$ |
139,762 |
|
|
679 |
|
|
$ |
115,121 |
|
|
585 |
|
Southwest |
|
63,258 |
|
|
248 |
|
|
42,960 |
|
|
192 |
|
Southeast |
|
51,487 |
|
|
275 |
|
|
31,147 |
|
|
181 |
|
Florida |
|
48,974 |
|
|
245 |
|
|
30,446 |
|
|
159 |
|
Northwest |
|
20,697 |
|
|
64 |
|
|
3,049 |
|
|
11 |
|
Total home sales |
|
$ |
324,178 |
|
|
1,511 |
|
|
$ |
222,723 |
|
|
1,128 |
|
|
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
|
Revenues |
|
Closings |
|
Revenues |
|
Closings |
Central |
|
$ |
204,680 |
|
|
994 |
|
|
$ |
195,564 |
|
|
995 |
|
Southwest |
|
96,384 |
|
|
380 |
|
|
76,883 |
|
|
358 |
|
Southeast |
|
79,334 |
|
|
426 |
|
|
59,061 |
|
|
341 |
|
Florida |
|
73,174 |
|
|
368 |
|
|
50,629 |
|
|
267 |
|
Northwest |
|
33,517 |
|
|
104 |
|
|
3,049 |
|
|
11 |
|
Total home sales |
|
$ |
487,089 |
|
|
2,272 |
|
|
$ |
385,186 |
|
|
1,972 |
|
Backlog(Dollars in thousands) |
|
Backlog Data |
|
Six Months Ended June 30, |
2017 |
|
2016 |
Net orders |
|
3,371 |
|
|
2,336 |
|
Cancellation rate |
|
21.3 |
% |
|
22.2 |
% |
Ending
backlog – homes |
|
1,545 |
|
|
887 |
|
Ending
backlog – value |
|
$ |
352,543 |
|
|
$ |
187,556 |
|
CONTACT: Investor Relations:
Caitlin Stiles, (281) 210-2619
InvestorRelations@LGIHomes.com
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