LGI Homes, Inc. (NASDAQ: LGIH) today announced results for the
first quarter of 2020.
First Quarter 2020 Results and
Comparisons to First Quarter 2019
- Net Income increased 133.7% to $42.8 million, or $1.69 Basic
EPS and $1.67 Diluted EPS
- Net Income Before Income Taxes increased 153.0% to $54.9
million
- Home Sales Revenues increased 58.1% to $454.7 million
- Home Closings increased 49.4% to 1,835 homes
- Average Home Sales Price increased 5.8% to $247,808
- Gross Margin as a Percentage of Homes Sales Revenues increased
30 basis points to 23.4%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues increased 40 basis points to 25.5%
- Active Selling Communities at March 31, 2020 increased
29.9% to 113
- Total Owned and Controlled Lots increased to 50,273 lots at
March 31, 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.
Management Comments
“Coming into the first quarter we saw continued
strong demand for LGI Homes supported by an attractive interest
rate environment and a limited supply of affordable new homes in
the markets where we operate,” said Eric Lipar, the Company’s Chief
Executive Officer and Chairman of the Board. “We delivered
record-breaking closings in January and February and had
significant momentum going into March. However, efforts to control
the spread of COVID-19 resulted in a global economic slowdown,
motivating us to take proactive measures to position our business
for the coming uncertainty. The combined impacts of social
distancing, stay-at-home orders and other COVID-19 related dynamics
in our markets slowed our pace of sales. Despite these headwinds,
our pipeline remained strong and the efforts of our dedicated
employees enabled us to close 795 homes in the month of March and
deliver a record-breaking 1,835 home closings in the first
quarter.”
“Due to the ongoing uncertainty in the US
economy and the effects of COVID-19, the longer-term economic
impacts to our business are impossible to predict at this time.
Therefore, we are withdrawing our previously released 2020
guidance. We expect to provide new annual guidance when we have a
clearer view of the timing of the easing of COVID-19 restrictions
and better visibility to when our markets will stabilize.”
“Despite the challenging environment we
encountered at the end of the first quarter, our business was
stronger in April than we had originally expected and we are seeing
positive momentum in recent sales trends that leads us to believe
the impact from the COVID-19 pandemic may be less severe than we
had originally expected. We are building, selling and closing homes
across the nation every day and our customers are telling us that
they are more ready than ever to move out of densely populated
living situations and into homes that offer more space and privacy.
As a result, our outlook for the coming months is tempered, but
positive.”
Lipar concluded, “On a final note, I want to
thank the dedicated and talented employees of LGI Homes. Because of
your tireless efforts over the last two months, our financial
position is strong and I know we are well positioned to navigate
any additional challenges that emerge.”
2020 First Quarter Results
Home closings during the first quarter of 2020
totaled 1,835, an increase of 49.4%, from 1,228 home closings
during the first quarter of 2019.
At the end of the first quarter, active selling
communities increased to 113, up from 87 communities at the end of
the first quarter of 2019.
Home sales revenues for the first quarter of
2020 were $454.7 million, an increase of $167.1 million, or 58.1%,
over the first 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 first quarter of
2020.
The average home sales price for the first
quarter of 2020 was $247,808, an increase of $13,611, or 5.8%, over
the first quarter of 2019. This increase in the average sales price
per home 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 first quarter of 2020 was 23.4% as compared to
23.1% for the first quarter of 2019. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the first
quarter of 2020 was 25.5% as compared to 25.1% for the first
quarter of 2019. The increase in gross margin and adjusted gross
margin as a percentage of home sales revenues is primarily due to
higher average sales price fueled by our product mix, favorable
pricing environments and operational leverage obtained, partially
offset by an increase in wholesale home closings as a percentage of
total home closings in the first quarter of 2020 as compared to the
first 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 first quarter of 2020 was
$42.8 million, or $1.69 per basic share and $1.67 per diluted
share, an increase of $24.5 million, or 133.7%, from $18.3 million,
or $0.81 per basic share and $0.73 per diluted share, for the first
quarter of 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, largely as a result of higher average home
sales price realized, during the first quarter of 2020 as compared
to the first quarter of 2019.
Outlook
Due to the uncertainty regarding the effects of
the COVID-19 pandemic on both the U.S. economy and the Company’s
business operations and financial performance, the Company has
withdrawn its previously issued guidance for 2020.
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 5, 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.
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 “8699695”.
This replay will be available until May 12, 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. Recently recognized as the 10th largest residential
builder in America, based on units closed, the Company has a
notable legacy of more than 17 years of homebuilding operations,
over which time it has closed more than 35,000 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 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 the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 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)
|
March 31, |
|
December 31, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
118,232 |
|
|
$ |
38,345 |
|
Accounts receivable |
45,006 |
|
|
56,390 |
|
Real estate inventory |
1,481,833 |
|
|
1,499,624 |
|
Pre-acquisition costs and
deposits |
37,448 |
|
|
37,244 |
|
Property and equipment,
net |
1,888 |
|
|
1,632 |
|
Other assets |
20,318 |
|
|
16,241 |
|
Deferred tax assets, net |
2,301 |
|
|
4,621 |
|
Goodwill and intangible
assets, net |
12,018 |
|
|
12,018 |
|
Total assets |
$ |
1,719,044 |
|
|
$ |
1,666,115 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Accounts payable |
$ |
19,066 |
|
|
$ |
12,495 |
|
Accrued expenses and other
liabilities |
95,980 |
|
|
117,868 |
|
Notes payable |
744,393 |
|
|
690,559 |
|
Total liabilities |
859,439 |
|
|
820,922 |
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
EQUITY |
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 26,680,474 shares issued and
25,074,446 shares outstanding as of March 31, 2020 and 26,398,409
shares issued and 25,359,409 shares outstanding as of December 31,
2019 |
266 |
|
|
264 |
|
Additional paid-in
capital |
255,509 |
|
|
252,603 |
|
Retained earnings |
653,221 |
|
|
610,382 |
|
Treasury stock, at cost,
1,606,028 shares and 1,039,000 shares, respectively |
(49,391 |
) |
|
(18,056 |
) |
Total equity |
859,605 |
|
|
845,193 |
|
Total liabilities and
equity |
$ |
1,719,044 |
|
|
$ |
1,666,115 |
|
|
|
|
|
|
|
|
|
LGI HOMES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except share and per share data)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
Home sales revenues |
$ |
454,727 |
|
|
$ |
287,594 |
|
|
|
|
|
Cost of sales |
348,163 |
|
|
221,290 |
|
Selling expenses |
32,763 |
|
|
26,791 |
|
General and
administrative |
19,923 |
|
|
18,438 |
|
Operating income |
53,878 |
|
|
21,075 |
|
Other income, net |
(1,011 |
) |
|
(619 |
) |
Net income before income
taxes |
54,889 |
|
|
21,694 |
|
Income tax provision |
12,050 |
|
|
3,360 |
|
Net income |
$ |
42,839 |
|
|
$ |
18,334 |
|
Earnings per share: |
|
|
|
Basic |
$ |
1.69 |
|
|
$ |
0.81 |
|
Diluted |
$ |
1.67 |
|
|
$ |
0.73 |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
25,323,119 |
|
|
22,744,726 |
|
Diluted |
25,592,835 |
|
|
25,086,183 |
|
|
|
|
|
|
|
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 March 31, |
|
2020 |
|
2019 |
Home sales revenues |
$ |
454,727 |
|
|
$ |
287,594 |
|
Cost of sales |
348,163 |
|
|
221,290 |
|
Gross margin |
106,564 |
|
|
66,304 |
|
|
|
|
|
|
|
Capitalized interest charged
to cost of sales |
8,930 |
|
|
5,394 |
|
Purchase accounting adjustments (1) |
623 |
|
|
630 |
|
Adjusted gross margin |
$ |
116,117 |
|
|
$ |
72,328 |
|
Gross margin % (2) |
23.4 |
% |
|
23.1 |
% |
Adjusted gross margin %
(2) |
25.5 |
% |
|
25.1 |
% |
|
|
|
|
|
|
- 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.
- 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 March 31, 2020 |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly
Absorption Rate |
Central |
$ |
165,775 |
|
|
741 |
|
|
$ |
223,718 |
|
|
34.0 |
|
|
7.3 |
|
Southeast |
88,447 |
|
|
403 |
|
|
219,471 |
|
|
31.0 |
|
|
4.3 |
|
Northwest |
101,948 |
|
|
273 |
|
|
373,436 |
|
|
12.3 |
|
|
7.4 |
|
West |
58,485 |
|
|
236 |
|
|
247,818 |
|
|
14.7 |
|
|
5.4 |
|
Florida |
40,072 |
|
|
182 |
|
|
220,176 |
|
|
16.7 |
|
|
3.6 |
|
Total |
$ |
454,727 |
|
|
1,835 |
|
|
$ |
247,808 |
|
|
108.7 |
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019 |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average Monthly Absorption
Rate |
Central |
$ |
124,197 |
|
|
578 |
|
|
$ |
214,874 |
|
|
32.0 |
|
|
6.0 |
|
Southeast |
52,414 |
|
|
230 |
|
|
227,887 |
|
|
19.0 |
|
|
4.0 |
|
Northwest |
36,254 |
|
|
99 |
|
|
366,202 |
|
|
11.0 |
|
|
3.0 |
|
West |
45,817 |
|
|
179 |
|
|
255,961 |
|
|
11.3 |
|
|
5.3 |
|
Florida |
28,912 |
|
|
142 |
|
|
203,606 |
|
|
11.0 |
|
|
4.3 |
|
Total |
$ |
287,594 |
|
|
1,228 |
|
|
$ |
234,197 |
|
|
84.3 |
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: |
Investor Relations:Joshua Fattor, (281)
210-2619InvestorRelations@LGIHomes.com |
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