LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the three
months ended March 31, 2018.
First Quarter 2018 Results and
Comparisons to First Quarter 2017
• Net Income
increased 131.8% to $27.3 million, or $1.23 Basic EPS and $1.10
Diluted EPS
• Net Income Before
Income Taxes increased 85.4% to $31.2 million
• Home Sales Revenues
increased 71.3% to $279.0 million
• Home Closings
increased 63.5% to 1,244 homes
• Average Home Sales
Price increased 4.8% to $224,296
• Gross Margin as a
Percentage of Homes Sales Revenues was 24.8% as compared to
26.7%
•
Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 26.4% as compared to 28.0%
• Active Selling
Communities at March 31, 2018 increased to 79 from 69
• 45,321 Total Owned
and Controlled Lots at March 31, 2018
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 very pleased with the results of the
first quarter,” stated Eric Lipar, the Company's Chief Executive
Officer and Chairman of the Board. “The first quarter provided a
solid start to the year with 1,244 homes closed. This 63.5%
increase in closings, over the first quarter of last year, was a
result of robust sales and a heightened focus on inventory
management. In addition, gross margin increased 40 basis points
quarter-over-quarter and our average sales price for the quarter
reached an all-time high at $224,296.”
“Starting the second quarter with great
momentum, we maintain our positive outlook on the remainder of 2018
and reaffirm our guidance. For the year, we expect to close
between 6,000 and 7,000 homes, believe average sales price will be
between $220,000 and $230,000, and believe basic EPS will be in the
range of $6.00 to $7.00 per share,” Lipar concluded.
2018 First Quarter Results
Home closings during the first quarter of 2018
increased 63.5% to 1,244 from 761 during the first quarter of 2017.
Active selling communities increased to 79 at the end of the first
quarter of 2018, up from 69 communities at the end of the first
quarter of 2017.
Home sales revenues for the first quarter of
2018 were $279.0 million, an increase of $116.1 million, or 71.3%
over the first quarter of 2017. 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 $224,296 for
the first quarter of 2018, an increase of 4.8% over the first
quarter of 2017. This increase is largely attributable to changes
in product mix, price points in certain new markets, and a
favorable pricing environment.
Gross margin as a percentage of home sales
revenues for the first quarter of 2018 was 24.8% as compared to
26.7% for the first quarter of 2017. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the first
quarter of 2018 was 26.4% as compared to 28.0% for the first
quarter of 2017. This decrease is primarily due to a combination of
higher construction and lot costs partially offset by higher
average home sales prices. 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 $27.3 million, or $1.23 per basic
share and $1.10 per diluted share, for the first quarter of 2018
increased $15.5 million, or 131.8%, from $11.8 million for the
first quarter of 2017. This increase is primarily attributable to
the 63.5% increase in homes closed, the 4.8% increase in average
home sales price, a 58.2% decrease in the effective tax rate and a
decrease in operating leverage realized related to selling,
general, and administrative expenses. For the three months ended
March 31, 2018, the Company’s effective tax rate of 12.6% was lower
than the statutory rate primarily as a result of the deductions in
excess of compensation cost (“windfalls”) for share-based
payments.
Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company reaffirms the
following guidance for 2018. The Company believes it will have
between 85 and 90 active selling communities at the end of 2018,
close between 6,000 and 7,000 homes in 2018, and generate basic EPS
between $6.00 and $7.00 per share during 2018. In addition, the
Company believes 2018 gross margin as a percentage of home sales
revenues will be in the range of 24.0% and 26.0% and 2018 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 2018 will be between $220,000 and
$230,000. This outlook assumes that general economic conditions,
including interest rates and mortgage availability, and average
home sales price, construction costs, availability of land, land
development costs and overall absorption rates in the remainder of
2018 are similar to those in the first quarter of 2018. This
guidance also assumes that no additional Convertible Notes are
converted during 2018.
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, May 8, 2018 (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 “6699055”.
This replay will be available until May 15, 2018.
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 and
Oklahoma. The Company has a notable legacy of more than 15 years of
homebuilding operations, over which time it has closed over 23,000
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 2018 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, average home
sales price, and effective tax rate, 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, 2017, 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) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
52,024 |
|
|
$ |
67,571 |
|
Accounts
receivable |
|
21,660 |
|
|
44,706 |
|
Real
estate inventory |
|
1,040,351 |
|
|
918,933 |
|
Pre-acquisition costs and deposits |
|
24,609 |
|
|
18,866 |
|
Property
and equipment, net |
|
1,647 |
|
|
1,674 |
|
Other
assets |
|
17,403 |
|
|
14,196 |
|
Deferred
tax assets, net |
|
1,142 |
|
|
1,928 |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total assets |
|
$ |
1,170,854 |
|
|
$ |
1,079,892 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
25,737 |
|
|
$ |
12,020 |
|
Accrued
expenses and other liabilities |
|
54,489 |
|
|
102,831 |
|
Notes
payable |
|
571,718 |
|
|
475,195 |
|
Total liabilities |
|
651,944 |
|
|
590,046 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common
stock, par value $0.01, 250,000,000 shares authorized, 23,615,146
shares issued and 22,615,146 shares outstanding as of March 31,
2018 and 22,845,580 shares issued and 21,845,580 shares outstanding
as of December 31, 2017 |
|
236 |
|
|
228 |
|
Additional paid-in capital |
|
231,434 |
|
|
229,680 |
|
Retained
earnings |
|
303,790 |
|
|
276,488 |
|
Treasury
stock, at cost, 1,000,000 shares |
|
(16,550 |
) |
|
(16,550 |
) |
Total equity |
|
518,910 |
|
|
489,846 |
|
Total liabilities and equity |
|
$ |
1,170,854 |
|
|
$ |
1,079,892 |
|
LGI HOMES, INC.CONSOLIDATED STATEMENTS
OF OPERATIONS(Unaudited)(In thousands,
except share and per share data) |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2018 |
|
2017 |
Home sales
revenues |
|
$ |
279,024 |
|
|
$ |
162,911 |
|
|
|
|
|
|
Cost of sales |
|
209,765 |
|
|
119,412 |
|
Selling expenses |
|
22,949 |
|
|
16,107 |
|
General and
administrative |
|
15,440 |
|
|
11,265 |
|
Operating income |
|
30,870 |
|
|
16,127 |
|
Other income, net |
|
(357 |
) |
|
(715 |
) |
Net income before
income taxes |
|
31,227 |
|
|
16,842 |
|
Income tax
provision |
|
3,925 |
|
|
5,062 |
|
Net income |
|
$ |
27,302 |
|
|
$ |
11,780 |
|
Earnings per
share: |
|
|
|
|
Basic |
|
$ |
1.23 |
|
|
$ |
0.55 |
|
Diluted |
|
$ |
1.10 |
|
|
$ |
0.52 |
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
Basic |
|
22,188,121 |
|
|
21,360,167 |
|
Diluted |
|
24,772,027 |
|
|
22,787,652 |
|
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 March 31, |
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
Home sales
revenues |
|
$ |
279,024 |
|
|
$ |
162,911 |
|
Cost of sales |
|
209,765 |
|
|
119,412 |
|
Gross margin |
|
69,259 |
|
|
43,499 |
|
Capitalized interest charged to cost of sales |
|
4,312 |
|
|
2,075 |
|
Purchase
accounting adjustments (a) |
|
(3 |
) |
|
35 |
|
Adjusted gross
margin |
|
$ |
73,568 |
|
|
$ |
45,609 |
|
Gross margin % (b) |
|
24.8% |
|
|
26.7% |
|
Adjusted gross margin %
(b) |
|
26.4% |
|
|
28.0% |
|
- 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(Revenues in thousands)
|
|
Three Months Ended March 31, |
|
|
2018 |
|
2017 |
|
|
(Unaudited) |
|
|
Revenues |
|
Closings |
|
ASP |
|
Revenues |
|
Closings |
|
ASP |
Central |
|
$ |
107,498 |
|
|
521 |
|
|
$ |
206,330 |
|
|
$ |
64,918 |
|
|
315 |
|
|
$ |
206,089 |
|
Southwest |
|
54,283 |
|
|
197 |
|
|
275,548 |
|
|
33,126 |
|
|
132 |
|
|
250,955 |
|
Southeast |
|
45,108 |
|
|
229 |
|
|
196,978 |
|
|
27,847 |
|
|
151 |
|
|
184,417 |
|
Florida |
|
42,443 |
|
|
209 |
|
|
203,077 |
|
|
24,200 |
|
|
123 |
|
|
196,748 |
|
Northwest |
|
29,692 |
|
|
88 |
|
|
337,409 |
|
|
12,820 |
|
|
40 |
|
|
320,500 |
|
Midwest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total home sales
revenues |
|
$ |
279,024 |
|
|
1,244 |
|
|
$ |
224,296 |
|
|
$ |
162,911 |
|
|
761 |
|
|
$ |
214,075 |
|
CONTACT:
Investor Relations:Caitlin Stiles, (281)
210-2619InvestorRelations@LGIHomes.com
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