LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the
second quarter 2018 and the six months ended June 30, 2018.
Second Quarter 2018 Results and
Comparisons to Second Quarter 2017
- Net Income increased 47.9% to $47.6 million, or $2.11 Basic EPS
and $1.90 Diluted EPS
- Net Income Before Income Taxes increased 28.8% to $62.7
million
- Home Sales Revenues increased 29.5% to $419.8 million
- Home Closings increased 20.1% to 1,815 homes
- Average Home Sales Price increased 7.8% to $231,321
- Gross Margin as a Percentage of Homes Sales Revenues was 26.1%
as compared to 26.6%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 27.7% as compared to 28.0%
- Active Selling Communities at June 30, 2018 increased to
79 from 71
- 46,855 Total Owned and Controlled Lots at June 30,
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.
Six Months Ended June 30, 2018
Results and Comparisons to Six Months Ended June 30,
2017
- Net Income increased 70.3% to $74.9 million, or $3.34 Basic EPS
and $3.01 Diluted EPS
- Net Income Before Income Taxes increased 43.4% to $93.9
million
- Home Sales Revenues increased 43.5% to $698.9 million
- Home Closings increased 34.6% to 3,059 homes
- Average Home Sales Price increased 6.6% to $228,464
- Gross Margin as a Percentage of Homes Sales Revenues was 25.6%
as compared to 26.7%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 27.2% as compared to 28.0%
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 another quarter of
outstanding performance at LGI Homes,” stated Eric Lipar, the
Company’s Chief Executive Officer and Chairman of the Board. “We
delivered impressive results highlighted by strong closings and
record setting home sales revenues of approximately $420 million.
We also produced record setting average sales price, community
count, net income and earnings per share along with producing
sequential improvement in gross margin and adjusted gross margin of
130 basis points.”
“LGI Homes achieved a record 3,059 closings
through the first half of 2018, an increase of more than 34% over
the first half of 2017. For the second quarter, we averaged an
absorption rate of 7.8 closings per community per month.”
Lipar concluded, “Based on these strong results
in the second quarter, our proven operational performance and the
acquisition of Wynn Homes, we are raising our guidance. We now
anticipate closings, for the full year 2018, to be between 6,400
and 7,000 homes closed. In addition, we expect full year 2018 gross
margin to be in the range of 24.5% and 26.5%, including the impact
of expected purchase accounting, full year 2018 adjusted gross
margin in the range of 26.0% and 28.0% and full year 2018 average
sales price in the range of $225,000 and $235,000. Therefore, we
are raising our full year 2018 basic EPS guidance from $6.00 to
$7.00 per share to $6.50 to $7.25 per share.”
2018 Second Quarter Results
Home closings during the second quarter of 2018
increased 20.1% to 1,815 from 1,511 during the second quarter of
2017. Active selling communities increased to 79 at the end of the
second quarter of 2018, up from 71 communities at the end of the
second quarter of 2017.
Home sales revenues for the second quarter of
2018 were $419.8 million, an increase of $95.7 million, or 29.5%,
over the second 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 $231,321 for
the second quarter of 2018, an increase of 7.8% over the second
quarter of 2017. This increase is primarily due 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 2018 was 26.1% as compared to
26.6% for the second quarter of 2017. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the second
quarter of 2018 was 27.7% as compared to 28.0% for the second
quarter of 2017. These decreases are primarily due to a combination
of higher construction and lot costs, and to a lesser extent due to
103 wholesale home closings during the second quarter of 2018
compared to 65 wholesale home closings during the second quarter of
2017, partially offset by higher average home sales prices.
However, the Company showed improvement in both gross margin and
adjusted gross margin (non-GAAP) as a percentage of home sales
revenues with an increase of 130 basis points over the first
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 $47.6 million, or $2.11 per basic
share and $1.90 per diluted share, for the second quarter of 2018
increased $15.4 million, or 47.9%, from $32.2 million for the
second quarter of 2017. This increase is primarily attributable to
the 20.1% increase in homes closed, the 7.8% increase in average
home sales price, a decrease in the effective tax rate and a
decrease in operating leverage realized related to selling
expenses.
Results for the Six Months Ended
June 30, 2018
Home closings for the six months ended
June 30, 2018 increased 34.6% to 3,059 from 2,272 during the
six months ended June 30, 2017.
Home sales revenues for the six months ended
June 30, 2018 increased 43.5% to $698.9 million compared to
the six months ended June 30, 2017. 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 $228,464 for
the six months ended June 30, 2018, an increase of $14,076, or
6.6%, over the six months ended June 30, 2017. This increase
is 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 six months ended June 30, 2018 was 25.6% as
compared to 26.7% for the six months ended June 30,
2017. Adjusted gross margin (non-GAAP) as a percentage of
home sales revenues for the six months ended June 30, 2018 was
27.2% as compared to 28.0% for the six months ended June 30,
2017. These decreases are primarily due to a combination of higher
construction costs and lot costs offset by higher average home
sales price, and to a lesser extent due to 134 wholesale home
closings during the six months ended June 30, 2018 compared to
72 wholesale home closings during the six months ended
June 30, 2017. 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 $74.9 million, or $3.34 per basic
share and $3.01 per diluted share, for the six months ended
June 30, 2018 increased $30.9 million, or 70.3%, from $44.0
million for the six months ended June 30, 2017. This increase
is primarily attributable to the 34.6% increase in homes closed,
the 6.6% increase in average home sales price, a 38.4% decrease in
the effective tax rate, and improved leverage realized compared to
the same period over the prior year. For the six months ended
June 30, 2018, the Company’s effective tax rate of 20.2% 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 offers the
following updated guidance for 2018. The Company believes it will
have between 85 and 90 active selling communities at the end of
2018, close between 6,400 and 7,000 homes in 2018, and generate
basic EPS between $6.50 and $7.25 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 24.5% and 26.5% and
2018 adjusted gross margin (non-GAAP) as a percentage of home sales
revenues will be in the range of 26.0% and 28.0% 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 $225,000
and $235,000. 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 half of 2018.
This guidance also assumes that none of the Company’s 4.25%
Convertible Notes due November 15, 2019 are converted during the
remainder of 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, August 7, 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 “4879028”.
This replay will be available until August 14, 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,
Oklahoma, Alabama, California and Oregon. The Company has a notable
legacy of more than 15 years of homebuilding operations, over which
time it has closed over 25,000 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 the acquisition of
Wynn Homes and the integration of such assets into the Company’s
operations, 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) |
|
|
|
June 30, |
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
48,886 |
|
|
$ |
67,571 |
|
Accounts
receivable |
|
31,746 |
|
|
44,706 |
|
Real
estate inventory |
|
1,062,696 |
|
|
918,933 |
|
Pre-acquisition costs and deposits |
|
29,562 |
|
|
18,866 |
|
Property
and equipment, net |
|
1,675 |
|
|
1,674 |
|
Other
assets |
|
11,168 |
|
|
14,196 |
|
Deferred
tax assets, net |
|
2,168 |
|
|
1,928 |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total
assets |
|
$ |
1,199,919 |
|
|
$ |
1,079,892 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
19,893 |
|
|
$ |
12,020 |
|
Accrued
expenses and other liabilities |
|
56,805 |
|
|
102,831 |
|
Notes
payable |
|
554,539 |
|
|
475,195 |
|
Total
liabilities |
|
631,237 |
|
|
590,046 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common
stock, par value $0.01, 250,000,000 shares authorized, 23,632,991
shares issued and 22,632,991 shares outstanding as of June 30, 2018
and 22,845,580 shares issued and 21,845,580 shares outstanding as
of December 31, 2017 |
|
236 |
|
|
228 |
|
Additional paid-in capital |
|
233,598 |
|
|
229,680 |
|
Retained
earnings |
|
351,398 |
|
|
276,488 |
|
Treasury
stock, at cost, 1,000,000 shares |
|
(16,550 |
) |
|
(16,550 |
) |
Total
equity |
|
568,682 |
|
|
489,846 |
|
Total
liabilities and equity |
|
$ |
1,199,919 |
|
|
$ |
1,079,892 |
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Home sales
revenues |
|
$ |
419,847 |
|
|
$ |
324,178 |
|
|
$ |
698,871 |
|
|
$ |
487,089 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
310,082 |
|
|
237,830 |
|
|
519,847 |
|
|
357,242 |
|
Selling expenses |
|
29,301 |
|
|
24,193 |
|
|
52,250 |
|
|
40,300 |
|
General and
administrative |
|
18,302 |
|
|
13,680 |
|
|
33,742 |
|
|
24,945 |
|
Operating income |
|
62,162 |
|
|
48,475 |
|
|
93,032 |
|
|
64,602 |
|
Other income, net |
|
(509 |
) |
|
(167 |
) |
|
(866 |
) |
|
(882 |
) |
Net income before
income taxes |
|
62,671 |
|
|
48,642 |
|
|
93,898 |
|
|
65,484 |
|
Income tax
provision |
|
15,063 |
|
|
16,443 |
|
|
18,988 |
|
|
21,505 |
|
Net income |
|
$ |
47,608 |
|
|
$ |
32,199 |
|
|
$ |
74,910 |
|
|
$ |
43,979 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.11 |
|
|
$ |
1.49 |
|
|
$ |
3.34 |
|
|
$ |
2.05 |
|
Diluted |
|
$ |
1.90 |
|
|
$ |
1.39 |
|
|
$ |
3.01 |
|
|
$ |
1.91 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
22,616,085 |
|
|
21,602,261 |
|
|
22,403,266 |
|
|
21,481,842 |
|
Diluted |
|
25,000,647 |
|
|
23,242,589 |
|
|
24,884,628 |
|
|
23,032,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, unaudited):
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Home sales
revenues |
|
$ |
419,847 |
|
$ |
324,178 |
|
$ |
698,871 |
|
$ |
487,089 |
Cost of sales |
|
310,082 |
|
237,830 |
|
519,847 |
|
357,242 |
Gross margin |
|
109,765 |
|
86,348 |
|
179,024 |
|
129,847 |
Capitalized interest charged to cost of sales |
|
6,588 |
|
4,338 |
|
10,900 |
|
6,413 |
Purchase
accounting adjustments (1) |
|
— |
|
137 |
|
(3) |
|
172 |
Adjusted gross
margin |
|
$ |
116,353 |
|
$ |
90,823 |
|
$ |
189,921 |
|
$ |
136,432 |
Gross margin % (2) |
|
26.1% |
|
26.6% |
|
25.6% |
|
26.7% |
Adjusted gross margin %
(2) |
|
27.7% |
|
28.0% |
|
27.2% |
|
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, unaudited) |
|
|
|
Three Months Ended June 30, |
|
|
2018 |
|
2017 |
|
|
Revenues |
|
Closings |
|
ASP |
|
Revenues |
|
Closings |
|
ASP |
Central |
|
$ |
181,268 |
|
|
850 |
|
|
$ |
213,256 |
|
|
$ |
139,762 |
|
|
679 |
|
|
$ |
205,835 |
|
Southwest |
|
73,030 |
|
|
262 |
|
|
278,740 |
|
|
63,258 |
|
|
248 |
|
|
255,073 |
|
Southeast |
|
60,369 |
|
|
298 |
|
|
202,581 |
|
|
51,487 |
|
|
275 |
|
|
187,225 |
|
Florida |
|
55,018 |
|
|
257 |
|
|
214,078 |
|
|
48,974 |
|
|
245 |
|
|
199,894 |
|
Northwest |
|
49,463 |
|
|
145 |
|
|
341,124 |
|
|
20,697 |
|
|
64 |
|
|
323,391 |
|
Midwest |
|
699 |
|
|
3 |
|
|
233,000 |
|
|
— |
|
|
— |
|
|
— |
|
Total home sales
revenues |
|
$ |
419,847 |
|
|
1,815 |
|
|
$ |
231,321 |
|
|
$ |
324,178 |
|
|
1,511 |
|
|
$ |
214,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2018 |
|
2017 |
|
|
Revenues |
|
Closings |
|
ASP |
|
Revenues |
|
Closings |
|
ASP |
Central |
|
$ |
288,766 |
|
|
1,371 |
|
|
$ |
210,624 |
|
|
$ |
204,680 |
|
|
994 |
|
|
$ |
205,915 |
|
Southwest |
|
127,313 |
|
|
459 |
|
|
277,370 |
|
|
96,384 |
|
|
380 |
|
|
253,642 |
|
Southeast |
|
105,477 |
|
|
527 |
|
|
200,146 |
|
|
79,334 |
|
|
426 |
|
|
186,230 |
|
Florida |
|
97,461 |
|
|
466 |
|
|
209,144 |
|
|
73,174 |
|
|
368 |
|
|
198,842 |
|
Northwest |
|
79,155 |
|
|
233 |
|
|
339,721 |
|
|
33,517 |
|
|
104 |
|
|
322,279 |
|
Midwest |
|
699 |
|
|
3 |
|
|
233,000 |
|
|
— |
|
|
— |
|
|
— |
|
Total home sales
revenues |
|
$ |
698,871 |
|
|
3,059 |
|
|
$ |
228,464 |
|
|
$ |
487,089 |
|
|
2,272 |
|
|
$ |
214,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: Investor Relations:Caitlin
Stiles, (281) 210-2619InvestorRelations@LGIHomes.com
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