LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the
fourth quarter 2018 and the twelve months ended December 31,
2018.
Fourth Quarter 2018 Results and
Comparisons to Fourth Quarter 2017
- Net Income increased 19.7% to $42.7 million, or $1.89 Basic EPS
and $1.72 Diluted EPS
- Net Income Before Income Taxes increased 2.1% to $56.2
million
- Home Sales Revenues increased 5.0% to $425.2 million
- Home Closings increased 0.4% to 1,852 homes
- Average Home Sales Price increased 4.5% to $229,568
- Gross Margin as a Percentage of Homes Sales Revenues remained
approximately the same at 24.4%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues increased to 26.2% from 25.8%
- Active Selling Communities at December 31, 2018 increased
to 88 from 78
- 51,442 Total Owned and Controlled Lots at December 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.
Full Year 2018 Results and Comparisons
to Full Year 2017
- Net Income increased 37.1% to $155.3 million, or $6.89 Basic
EPS and $6.24 Diluted EPS
- Net Income Before Income Taxes increased 16.2% to $199.1
million
- Home Sales Revenues increased 19.6% to $1.5 billion
- Home Closings increased 11.4% to 6,512 homes
- Average Home Sales Price increased 7.3% to $231,020
- Gross Margin as a Percentage of Homes Sales Revenues was 25.3%
as compared to 25.5%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues increased to 27.0% from 26.9%
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 extremely pleased with the results of
2018 and our record setting performance during the fourth quarter,”
said Eric Lipar, the Company's Chief Executive Officer and
Chairman of the Board. “We finished the year with a record-breaking
6,512 homes closed, we achieved significant growth in revenues,
active community count and average home sales price, and we
increased basic earnings per share more than 31% over 2017.”
“We believe we are poised to take advantage of
continued growth and believe we are well positioned to continue to
increase our revenues, community count and earnings per share,
allowing LGI Homes to achieve our long-term goals and objectives of
market leading returns for our stockholders.”
“As we turn our attention to 2019, we remain
focused on delivering strong results. Our sales to date in 2019
have been solid and we believe these sales will fuel our future
closings over the next few months. As a result, we maintain our
positive outlook for the year. Assuming that general economic
conditions, including interest rates and mortgage availability, in
2019 are similar to those experienced so far in the first quarter
of 2019, we expect to close between 6,900 and 7,800 homes and end
the year between 105 and 115 active communities, and we believe
basic EPS will be in the range of $7.00 to $8.00 per share,” Lipar
concluded.
2018 Fourth Quarter Results
Home closings during the fourth quarter of 2018
increased 0.4% to 1,852 from 1,844 during the fourth quarter of
2017. At the end of the fourth quarter of 2018, active selling
communities increased to 88, up from 78 communities at the end of
the fourth quarter of 2017.
Home sales revenues for the fourth quarter of
2018 were $425.2 million, an increase of $20.2 million, or 5.0%,
over the fourth quarter of 2017. The increase in home sales
revenues is primarily due to the increase in the average home sales
price during the fourth quarter of 2018 and an increase in the
number of homes closed.
The average home sales price was $229,568 for
the fourth quarter of 2018, an increase of 4.5% over the fourth
quarter of 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 fourth quarter of 2018 remained approximately the
same as the fourth quarter of 2017 at 24.4%. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the fourth
quarter of 2018 increased to 26.2% from 25.8% for the fourth
quarter of 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 $42.7 million, or $1.89 per basic
share and $1.72 per diluted share, for the fourth quarter of 2018
increased $7.0 million, or 19.7%, from $35.6 million for the fourth
quarter of 2017. The increase in net income is primarily due to the
decrease in the effective tax rate.
2018 Full Year Results
Home closings for the twelve months ended
December 31, 2018 increased 11.4% to 6,512 from 5,845 during
the twelve months ended December 31, 2017.
Home sales revenues for the twelve months ended
December 31, 2018 increased 19.6% to $1.5 billion compared to
the twelve months ended December 31, 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 $231,020 for
the twelve months ended December 31, 2018, an increase of
$15,800, or 7.3%, from the average home sales price of $215,220 for
the twelve months ended December 31, 2017. This increase is
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 twelve months ended December 31, 2018 was
25.3% as compared to 25.5% for the twelve months ended
December 31, 2017. This decrease is primarily due to a
combination of higher construction costs and lot costs partially
offset by higher average home sales price, and to a lesser extent
due to 466 wholesale home closings during the twelve months ended
December 31, 2018 compared to 201 wholesale home closings
during the twelve months ended December 31, 2017. However,
adjusted gross margin (non-GAAP) as a percentage of home sales
revenues for the twelve months ended December 31, 2018
increased to 27.0% from 26.9% for the twelve months ended
December 31, 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 $155.3 million, or $6.89 per basic
share and $6.24 per diluted share, for the twelve months ended
December 31, 2018 increased $42.0 million, or 37.1%, from
$113.3 million for the twelve months ended December 31, 2017.
This increase is primarily attributable to the 11.4% increase in
homes closed, an increase in average home sales price, and a
decrease in the effective tax rate compared to the twelve months
ended December 31, 2017.
Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company offers the
following guidance for 2019. 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 so far in the
first 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, February 26, 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 “3055219”.
This replay will be available until March 5, 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, and Nevada. The Company has
a notable legacy of more than 15 years of homebuilding operations,
over which time it has closed over 29,000 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(In thousands, except share
data)
|
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
46,624 |
|
|
$ |
67,571 |
|
Accounts
receivable |
|
42,836 |
|
|
44,706 |
|
Real
estate inventory |
|
1,228,256 |
|
|
918,933 |
|
Pre-acquisition costs and deposits |
|
45,752 |
|
|
18,866 |
|
Property
and equipment, net |
|
1,432 |
|
|
1,674 |
|
Other
assets |
|
15,765 |
|
|
14,196 |
|
Deferred
tax assets, net |
|
2,790 |
|
|
1,928 |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total assets |
|
$ |
1,395,473 |
|
|
$ |
1,079,892 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
9,241 |
|
|
$ |
12,020 |
|
Accrued
expenses and other liabilities |
|
76,555 |
|
|
102,831 |
|
Notes
payable |
|
653,734 |
|
|
475,195 |
|
Total liabilities |
|
$ |
739,530 |
|
|
$ |
590,046 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01, 250,000,000 shares authorized,
23,746,385shares issued and 22,707,385 shares outstanding as of
December 31, 2018 and22,845,580 shares issued and 21,845,580 shares
outstanding as of December 31,2017 |
|
237 |
|
|
228 |
|
Additional paid-in capital |
|
241,988 |
|
|
229,680 |
|
Retained
earnings |
|
431,774 |
|
|
276,488 |
|
Treasury
stock, at cost 1,039,000 shares and 1,000,000 shares,
respectively |
|
(18,056 |
) |
|
(16,550 |
) |
Total equity |
|
655,943 |
|
|
489,846 |
|
Total liabilities and equity |
|
$ |
1,395,473 |
|
|
$ |
1,079,892 |
|
LGI HOMES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except share and per
share data)
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
Home sales revenues |
|
$ |
425,160 |
|
|
$ |
404,975 |
|
|
$ |
1,504,400 |
|
|
$ |
1,257,960 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
321,602 |
|
|
306,298 |
|
|
1,124,484 |
|
|
937,540 |
|
Selling expenses |
|
29,320 |
|
|
28,639 |
|
|
109,460 |
|
|
94,957 |
|
General and
administrative |
|
18,809 |
|
|
15,286 |
|
|
70,345 |
|
|
55,662 |
|
Operating income |
|
55,429 |
|
|
54,752 |
|
|
200,111 |
|
|
169,801 |
|
Loss on extinguishment
of debt |
|
— |
|
|
— |
|
|
3,599 |
|
|
— |
|
Other income, net |
|
(780 |
) |
|
(289 |
) |
|
(2,586 |
) |
|
(1,601 |
) |
Net income before
income taxes |
|
56,209 |
|
|
55,041 |
|
|
199,098 |
|
|
171,402 |
|
Income tax provision |
|
13,556 |
|
|
19,401 |
|
|
43,812 |
|
|
58,096 |
|
Net income |
|
$ |
42,653 |
|
|
$ |
35,640 |
|
|
$ |
155,286 |
|
|
$ |
113,306 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.89 |
|
|
$ |
1.65 |
|
|
$ |
6.89 |
|
|
$ |
5.24 |
|
Diluted |
|
$ |
1.72 |
|
|
$ |
1.43 |
|
|
$ |
6.24 |
|
|
$ |
4.73 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
22,737,294 |
|
|
21,783,604 |
|
|
22,551,762 |
|
|
21,604,932 |
|
Diluted |
|
24,743,108 |
|
|
24,992,512 |
|
|
24,892,274 |
|
|
23,933,122 |
|
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 December 31, |
|
Year Ended December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Home sales revenues |
|
$ |
425,160 |
|
|
$ |
404,975 |
|
|
$ |
1,504,400 |
|
|
$ |
1,257,960 |
|
Cost of sales |
|
321,602 |
|
|
306,298 |
|
|
1,124,484 |
|
|
937,540 |
|
Gross margin |
|
103,558 |
|
|
98,677 |
|
|
379,916 |
|
|
320,420 |
|
Capitalized interest charged to cost of sales |
|
7,226 |
|
|
5,852 |
|
|
24,311 |
|
|
17,400 |
|
Purchase
accounting adjustments (a) |
|
561 |
|
|
20 |
|
|
1,408 |
|
|
246 |
|
Adjusted gross
margin |
|
$ |
111,345 |
|
|
$ |
104,549 |
|
|
$ |
405,635 |
|
|
$ |
338,066 |
|
Gross margin % (b) |
|
24.4 |
% |
|
24.4 |
% |
|
25.3 |
% |
|
25.5 |
% |
Adjusted gross margin %
(b) |
|
26.2 |
% |
|
25.8 |
% |
|
27.0 |
% |
|
26.9 |
% |
(a) 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.(b) Calculated as a
percentage of home sales revenues.
Home Sales Revenues, Closings, Average Community Count
and Average Monthly Absorption Rates by Reportable
Segment
(Revenues in thousands,
unaudited)
|
|
Three Months Ended December 31, 2018
(a) |
|
|
Revenues |
|
Closings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly AbsorptionRate |
Central |
|
$ |
182,613 |
|
|
865 |
|
|
$ |
211,113 |
|
|
31.3 |
|
|
9.2 |
|
Northwest |
|
62,676 |
|
|
171 |
|
|
366,526 |
|
|
11.3 |
|
|
5.0 |
|
Southeast |
|
92,089 |
|
|
445 |
|
|
206,942 |
|
|
21.0 |
|
|
7.1 |
|
Florida |
|
44,739 |
|
|
215 |
|
|
208,088 |
|
|
12.7 |
|
|
5.7 |
|
West |
|
43,043 |
|
|
156 |
|
|
275,917 |
|
|
9.0 |
|
|
5.8 |
|
Total |
|
$ |
425,160 |
|
|
1,852 |
|
|
$ |
229,568 |
|
|
85.3 |
|
|
7.2 |
|
|
|
Three Months Ended December 31, 2017
(a) |
|
|
Revenues |
|
Closings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly AbsorptionRate |
Central |
|
$ |
162,704 |
|
|
792 |
|
|
$ |
205,434 |
|
|
28.7 |
|
|
9.2 |
|
Northwest |
|
79,225 |
|
|
225 |
|
|
352,111 |
|
|
11.0 |
|
|
6.8 |
|
Southeast |
|
49,757 |
|
|
263 |
|
|
189,190 |
|
|
17.0 |
|
|
5.2 |
|
Florida |
|
70,388 |
|
|
358 |
|
|
196,615 |
|
|
11.7 |
|
|
10.2 |
|
West |
|
42,901 |
|
|
206 |
|
|
208,257 |
|
|
10.0 |
|
|
6.9 |
|
Total |
|
$ |
404,975 |
|
|
1,844 |
|
|
$ |
219,618 |
|
|
78.3 |
|
|
7.8 |
|
|
|
Year Ended December 31, 2018 (a) |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly AbsorptionRate |
Central |
|
$ |
623,751 |
|
|
2,937 |
|
|
$ |
212,377 |
|
|
30.7 |
|
|
8.0 |
|
Northwest |
|
277,567 |
|
|
760 |
|
|
365,220 |
|
|
10.3 |
|
|
6.1 |
|
Southeast |
|
271,073 |
|
|
1,324 |
|
|
204,738 |
|
|
18.7 |
|
|
5.9 |
|
Florida |
|
180,950 |
|
|
864 |
|
|
209,433 |
|
|
11.6 |
|
|
6.2 |
|
West |
|
151,059 |
|
|
627 |
|
|
240,923 |
|
|
9.3 |
|
|
5.6 |
|
Total |
|
$ |
1,504,400 |
|
|
6,512 |
|
|
$ |
231,020 |
|
|
80.6 |
|
|
6.7 |
|
|
|
Year Ended December 31, 2017 (a) |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
AverageCommunityCount |
|
Average Monthly AbsorptionRate |
Central |
|
$ |
533,254 |
|
|
2,616 |
|
|
$ |
203,843 |
|
|
26.2 |
|
|
8.3 |
|
Northwest |
|
215,421 |
|
|
629 |
|
|
342,482 |
|
|
10.3 |
|
|
5.1 |
|
Southeast |
|
183,422 |
|
|
973 |
|
|
188,512 |
|
|
15.0 |
|
|
5.4 |
|
Florida |
|
199,733 |
|
|
1,014 |
|
|
196,975 |
|
|
11.5 |
|
|
7.3 |
|
West |
|
126,130 |
|
|
613 |
|
|
205,759 |
|
|
10.1 |
|
|
5.1 |
|
Total |
|
$ |
1,257,960 |
|
|
5,845 |
|
|
$ |
215,220 |
|
|
73.1 |
|
|
6.7 |
|
(a) Beginning in the fourth quarter of 2018, we changed from six
reportable segments to five reportable segments: Central,
Northwest, Southeast, Florida, and West. These segments reflect the
way the Company evaluates its business performance and manages its
operations. Prior year information has been restated for
corresponding items of our segment information.
CONTACT: Investor
Relations:
Caitlin Stiles, (281)
210-2619
InvestorRelations@LGIHomes.com
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