LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the first quarter ended March 31, 2021.
First Quarter 2021 Highlights and
Comparisons to First Quarter 2020
- Net Income
increased 132.6% to $99.7 million, or $3.99 Basic EPS and $3.95
Diluted EPS
- Net Income Before
Income Taxes increased 124.6% to $123.3 million
- Home Sales Revenues
increased 55.2% to $706.0 million
- Home Closings
increased 39.6% to 2,561 homes
- Average Sales Price
Per Home Closed increased 11.2% to $275,655
- Gross Margin as a
Percentage of Homes Sales Revenues increased 350 basis points to
26.9%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 300 basis
points to 28.5%
- Owned lots
increased to 38,502 and Controlled lots increased to 28,784 for
total Owned and Controlled Lots of 67,286 lots at March 31,
2021
- Ending Backlog of
5,632 homes at March 31, 2021, an increase of 199.7%
- Ending Backlog
Value of $1.6 billion at March 31, 2021, an increase of
257.6%
*Non-GAAP
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.
Balance Sheet Highlights
- 216,221 shares of
common stock repurchased during the first quarter of 2021 at an
average price per share of $119.45 for an aggregate amount of
$25.8 million
- Total liquidity of
$565.7 million at March 31, 2021 including cash and cash
equivalents of $48.2 million and $517.5 million of availability
under the Company’s revolving credit facility
- Net debt to
capitalization of 23.1% at March 31, 2021, compared to 30.6%
at December 31, 2020
Management Comments
“We delivered another record-breaking quarter
and are off to a great start in 2021,” stated Eric Lipar, Chairman
and Chief Executive Officer of LGI Homes. “During the first four
months of the year we have sold a record-breaking number of homes
and believe the fundamentals driving the ongoing surge in demand
show no signs of abating anytime soon.
“During the first quarter we increased our
closings 39.6% to 2,561 homes, grew revenue 55.2% to $706 million
and set a first quarter record with an average of eight closings
per community, per month. Net orders were the highest in our
history and we finished with a record 5,632 homes in backlog valued
at $1.6 billion, representing year-over-year increases of 199.7%
and 257.6%, respectively. Measures taken to mitigate cost
pressures, including price increases across all our markets, drove
additional expansion of our industry-leading margins, profitability
and returns. Year-over-year, our quarterly gross margin improved by
350 basis points and our pre-tax profit margin by 540 basis points,
all culminating in a 136.5% increase in our diluted earnings per
share. As a result of this strong performance, we delivered
best-in-class return on equity of 36.6% and finished the quarter
with a net debt to capitalization ratio of just 23.1%.
“Based on our performance to date, visibility
into our backlog and our current view of finished lots available to
close in 2021, we are updating our full year guidance. We now
anticipate closing between 9,700 and 10,300 homes, an increase of
500 homes at both ends of our prior guidance range, at an average
sales price between $275,000 and $285,000. We maintain our prior
expectation that active community count at year end will be between
112 to 120. As a result of our strong performance in the first
quarter and our success to date passing through cost pressures, we
are increasing our full year gross margin guidance range by 70
basis points to 24.7% to 26.7% and our adjusted gross margin by 50
basis points to 26.5% and 28.5%.”
Mr. Lipar concluded, “We are currently operating
in the strongest demand environment we have ever experienced. We
are confident that our unique business model, strong balance sheet
and talented team of dedicated employees position us to maintain
our exceptional first quarter momentum throughout the rest of the
year.”
2021 First Quarter Results
Home closings during the first quarter of 2021
totaled 2,561, an increase of 39.6%, from 1,835 home closings
during the first quarter of 2020.
At the end of the first quarter of 2021, active
selling communities decreased to 110, down from 113 at the end of
the first quarter of 2020.
Home sales revenues for the first quarter of
2021 were $706.0 million, an increase of $251.2 million, or 55.2%,
over the first quarter of 2020. The increase in home sales revenues
is primarily due to a 39.6% increase in homes closed and an
increase in the average sales price per home closed during the
first quarter of 2021.
The average sales price per home closed for the
first quarter of 2021 was $275,655, an increase of $27,847, or
11.2%, over the first quarter 2020. This increase in the average
sales price per home closed was primarily due to a favorable
pricing environment, increased closings at higher price points in
certain markets and changes in product mix.
Gross margin as a percentage of home sales
revenues for the first quarter of 2021 was 26.9% as compared to
23.4% for the first quarter of 2020. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the first
quarter of 2021 was 28.5% as compared to 25.5% for the first
quarter of 2020. The increase in gross margin and adjusted gross
margin as a percentage of home sales revenues is primarily due to
an increase in homes closed with a higher average sales price per
home closed, lower capitalized interest and lower overhead expense,
partially offset by higher lot costs in the first quarter of 2021
as compared to the first quarter of 2020. 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 2021 was
$99.7 million, or $3.99 per basic share and $3.95 per diluted
share, an increase of $56.8 million, or 132.6%, from $42.8 million,
or $1.69 per basic share and $1.67 per diluted share, for the first
quarter of 2020. The increase in net income is primarily attributed
to higher gross margins, operating leverage realized from the
increase in home sales revenues, higher average sales price per
home closed and the federal energy efficient homes tax credits
recognized during the first quarter of 2021 as compared to the
first quarter of 2020.
Full Year 2021 Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company is providing
the following updates to its guidance for the full year 2021. The
Company believes:
- Home closings
between 9,700 and 10,300
- Active selling
communities at the end of 2021 between 112 and 120
- Gross margin as a
percentage of home sales revenues between 24.7% to 26.7%
- Adjusted gross
margin (non-GAAP) as a percentage of home sales revenues between
26.5% and 28.5% with capitalized interest accounting for
substantially all the difference between gross margin and adjusted
gross margin
- Average sales price
per home closed between $275,000 and $285,000
- SG&A as a
percentage of home sales revenues between 9.5% and 10.0%
- Effective tax rate
for the remainder of 2021 between 21.0% and 22.0%
This outlook assumes that general economic
conditions, including interest rates and mortgage availability, in
the remainder of 2021 are similar to those experienced in the first
quarter of 2021 and that average sales price per home closed,
construction costs, availability of construction materials,
availability of land, land development costs and overall absorption
rates in the remainder of 2021 are consistent with the Company’s
recent experience. In addition, this outlook assumes that
governmental regulations relating to land development, home
construction and COVID-19 are similar to those currently in place.
Any further COVID-19 governmental restrictions on land development
or home construction could negatively impact the Company’s ability
to achieve this guidance.
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 4, 2021 (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 and Treasurer.
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 Earnings Call 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 and using conference
ID “7574991”. This replay will be available until May 11, 2021.
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,
Virginia and Pennsylvania. Since 2018, LGI Homes has been ranked as
the 10th largest residential builder in the United States based on
units closed. The Company has a notable legacy of more than 18
years of homebuilding operations, over which time it has closed
more than 45,000 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 2021 home
closings, year-end active selling communities, gross margin as a
percentage of home sales revenues, adjusted gross margin as a
percentage of homes sales revenues, average sales price per home
closed, SG&A as a percentage of home sales revenues, effective
tax rate, and 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, 2020,
including the “Cautionary Statement about Forward-Looking
Statements” subsection within the “Risk Factors” section, the “Risk
Factors” and “Cautionary Statement about Forward-Looking
Statements” sections in the Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2021, 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, |
|
|
2021 |
|
2020 |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
48,157 |
|
|
$ |
35,942 |
|
Accounts receivable |
|
59,229 |
|
|
115,939 |
|
Real estate inventory |
|
1,609,693 |
|
|
1,569,489 |
|
Pre-acquisition costs and deposits |
|
39,488 |
|
|
37,213 |
|
Property and equipment, net |
|
6,160 |
|
|
3,618 |
|
Other assets |
|
47,391 |
|
|
44,882 |
|
Deferred tax assets, net |
|
3,350 |
|
|
6,986 |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total assets |
|
$ |
1,825,486 |
|
|
$ |
1,826,087 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
41,552 |
|
|
$ |
13,676 |
|
Accrued expenses and other liabilities |
|
151,348 |
|
|
135,008 |
|
Notes payable |
|
413,948 |
|
|
538,398 |
|
Total liabilities |
|
606,848 |
|
|
687,082 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01, 250,000,000 shares authorized,
26,908,643 shares issued and 24,934,429 shares outstanding as of
March 31, 2021 and 26,741,554 shares issued and 24,983,561 shares
outstanding as of December 31, 2020 |
|
269 |
|
|
267 |
|
Additional paid-in capital |
|
276,398 |
|
|
270,598 |
|
Retained earnings |
|
1,033,935 |
|
|
934,277 |
|
Treasury stock, at cost, 1,974,214 shares and 1,757,993 shares,
respectively |
|
(91,964 |
) |
|
(66,137 |
) |
Total equity |
|
1,218,638 |
|
|
1,139,005 |
|
Total liabilities and equity |
|
$ |
1,825,486 |
|
|
$ |
1,826,087 |
|
LGI HOMES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except share and per share data)
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
Home sales revenues |
|
$ |
705,953 |
|
|
$ |
454,727 |
|
|
|
|
|
|
Cost of sales |
|
516,004 |
|
|
348,163 |
|
Selling expenses |
|
42,783 |
|
|
32,763 |
|
General and
administrative |
|
24,723 |
|
|
19,923 |
|
Operating income |
|
122,443 |
|
|
53,878 |
|
Other income, net |
|
(833 |
) |
|
(1,011 |
) |
Net income before income
taxes |
|
123,276 |
|
|
54,889 |
|
Income tax provision |
|
23,618 |
|
|
12,050 |
|
Net income |
|
$ |
99,658 |
|
|
$ |
42,839 |
|
Earnings per share: |
|
|
|
|
Basic |
|
$ |
3.99 |
|
|
$ |
1.69 |
|
Diluted |
|
$ |
3.95 |
|
|
$ |
1.67 |
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
Basic |
|
24,950,867 |
|
|
25,323,119 |
|
Diluted |
|
25,220,872 |
|
|
25,592,835 |
|
Non-GAAP Measures
In addition to the results reported in
accordance with accounting principles generally accepted in the
United States (“GAAP”), the Company has provided information in
this press release relating to adjusted gross margin.
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, |
|
|
2021 |
|
2020 |
Home sales revenues |
|
$ |
705,953 |
|
|
$ |
454,727 |
|
Cost of sales |
|
516,004 |
|
|
348,163 |
|
Gross margin |
|
189,949 |
|
|
106,564 |
|
Capitalized interest charged to cost of sales |
|
10,672 |
|
|
8,930 |
|
Purchase accounting adjustments (1) |
|
812 |
|
|
623 |
|
Adjusted gross margin |
|
$ |
201,433 |
|
|
$ |
116,117 |
|
Gross margin % (2) |
|
26.9 |
% |
|
23.4 |
% |
Adjusted gross margin %
(2) |
|
28.5 |
% |
|
25.5 |
% |
(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.
(2) Calculated as a percentage of home sales
revenues.
Home Sales Revenues, Home Closings, Average Sales Price
Per Home Closed (ASP), Average Community Count and Average Monthly
Absorption Rates by Reportable Segment
(Revenues in thousands,
unaudited)
|
|
Three Months Ended March 31, 2021 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
Central |
|
$ |
288,750 |
|
|
1,127 |
|
|
$ |
256,211 |
|
|
37.3 |
|
|
10.1 |
|
Southeast |
|
136,551 |
|
|
548 |
|
|
249,181 |
|
|
27.7 |
|
|
6.6 |
|
Northwest |
|
118,191 |
|
|
296 |
|
|
399,294 |
|
|
10.6 |
|
|
9.3 |
|
West |
|
81,148 |
|
|
249 |
|
|
325,896 |
|
|
10.7 |
|
|
7.8 |
|
Florida |
|
81,313 |
|
|
341 |
|
|
238,455 |
|
|
20.0 |
|
|
5.7 |
|
Total |
|
$ |
705,953 |
|
|
2,561 |
|
|
$ |
275,655 |
|
|
106.3 |
|
|
8.0 |
|
|
|
Three Months Ended March 31, 2020 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average MonthlyAbsorption
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 |
|
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the three months ended March 31, 2021
and (ii) owned or controlled lots by reportable segment as of
March 31, 2021.
|
|
Three Months Ended March 31, 2021 |
|
As of March 31, 2021 |
Reportable Segment |
|
Home Closings |
|
Owned (1) |
|
Controlled |
|
Total |
Central |
|
1,127 |
|
|
17,639 |
|
|
9,229 |
|
|
26,868 |
|
Southeast |
|
548 |
|
|
10,783 |
|
|
8,273 |
|
|
19,056 |
|
Northwest |
|
296 |
|
|
3,217 |
|
|
4,052 |
|
|
7,269 |
|
West |
|
249 |
|
|
4,199 |
|
|
4,198 |
|
|
8,397 |
|
Florida |
|
341 |
|
|
2,664 |
|
|
3,032 |
|
|
5,696 |
|
Total |
|
2,561 |
|
|
38,502 |
|
|
28,784 |
|
|
67,286 |
|
(1) Of the 38,502 owned lots as of
March 31, 2021, 26,213 were raw/under development lots and
12,289 were finished lots.
Backlog Data
As of the dates set forth below, the Company’s
net orders, cancellation rate and ending backlog homes and value
were as follows (dollars in thousands, unaudited):
Backlog
Data |
|
Three Months Ended March 31, |
2021 (4) |
|
2020 (5) |
Net orders (1) |
|
5,229 |
|
|
2,481 |
|
Cancellation rate (2) |
|
10.5 |
% |
|
18.3 |
% |
Ending
backlog – homes (3) |
|
5,632 |
|
|
1,879 |
|
Ending backlog – value (3) |
|
$ |
1,595,879 |
|
|
$ |
446,271 |
|
(1) Net orders are new (gross) orders for the
purchase of homes during the period, less cancellations of existing
purchase contracts during the period.
(2) Cancellation rate for a period is the total
number of purchase contracts cancelled during the period divided by
the total new (gross) orders for the purchase of homes during the
period.
(3) Ending backlog consists of homes at the end
of the period that are under a purchase contract that has been
signed by homebuyers who have met preliminary financing criteria
but have not yet closed and wholesale contracts for which vertical
construction is generally set to occur within the next six to
twelve months. Ending backlog is valued at the contract amount.
(4) As of March 31, 2021, the Company had 1,344
units related to bulk sales agreements associated with its
wholesale business.
(5) As of March 31, 2020, the Company had 338
units related to bulk sales agreements associated with its
wholesale business.
CONTACT: |
Joshua D. FattorVice President of Investor Relations(281)
210-2619investorrelations@lgihomes.com |
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