LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the first quarter ended March 31, 2023.
First Quarter 2023
Highlights
- Net Income of $27.0
million, or $1.15 Basic EPS and $1.14 Diluted EPS
- Net Income Before
Income Taxes of $32.3 million
- Home Sales Revenues
of $487.4 million
- Home Closings of
1,366 homes
- Average Sales Price
Per Home Closed increased 4.5% from the first quarter of 2022 to
$356,777
- Gross Margin as a
Percentage of Homes Sales Revenues of 20.3%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues of
22.1%
- Total Owned and
Controlled lots of 69,724
- Net Orders
increased 12.5% from the first quarter of 2022 to 2,219
- Ending Backlog of
1,555 homes valued at $561.4 million
*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
- Total liquidity of
$358.8 million at March 31, 2023, including cash and cash
equivalents of $43.0 million and $315.8 million of availability
under the Company’s revolving credit facility
- Net debt to
capitalization of 37.5% at March 31, 2023
Management Comments
“We are pleased with the results of our first
quarter and encouraged to see that demand trends appear to be
returning to normalized levels,” said Eric Lipar, Chairman and
Chief Executive Officer of LGI Homes.
“In the first quarter, we closed 1,366 homes and
generated over $487 million in revenue, despite starting with
limited homes in inventory and our lowest backlog in four years. As
demand increased and buyers responded to modest rate incentives,
smaller product offerings, lower, more stable interest rates and
our targeted marketing, we pivoted from a cash generation focus to
driving order growth. The success of our efforts was highlighted by
a 12.5% increase in net orders in the first quarter compared to
last year’s strong comp, and a 148% increase in net orders from the
fourth quarter of 2022. Notably, the pace of net orders in the
first quarter was 7.6 homes per community, per month, the highest
pace we have delivered since the first quarter of 2021. These
outstanding results have allowed us to raise prices in many of our
communities as we pivot to expanding our margins throughout the
course of the year.
“Our balance sheet is in great shape. We ended
the quarter with total liquidity of $359 million and our net
debt-to-capitalization ratio was 37.5%. This marked our second
consecutive quarter of deleveraging. We remain focused on our
capital and expect to continue investing in our business as we
increase community count throughout this year and next.”
Mr. Lipar concluded, “Recent demand trends are
encouraging and we remain optimistic on the long-term outlook for
the housing market. We are confident that our unique business
model, entry-level spec focus, strong balance sheet and dedicated
employees position us to capitalize on these trends and deliver
strong results throughout the rest of the year.”
Full Year 2023 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 2023. The
Company now expects:
- Home closings
between 6,300 and 7,100
- Active selling
communities at the end of 2023 between 115 and 125
- Average sales price
per home closed between $345,000 and $360,000
- Gross margin as a
percentage of home sales revenues between 21.0% and 23.0%
- Adjusted gross
margin (non-GAAP) as a percentage of home sales revenues between
22.5% and 24.5% with capitalized interest accounting for
substantially all the difference between gross margin and adjusted
gross margin
- SG&A as a
percentage of home sales revenues between 12.5% and 13.5%
- Effective tax rate
between 23.5% and 24.5%
This outlook assumes that general economic
conditions, including input costs, materials, product and labor
availability, interest rates and mortgage availability, in the
remainder of 2023 are similar to those experienced in the first
quarter of 2023 and that the average sales price per home closed,
construction costs, availability of land and land development costs
in the remainder of 2023 are consistent with the Company’s recent
experience. In addition, this outlook assumes that governmental
regulations relating to land development and home construction are
similar to those currently in place.
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 2, 2023 (the “Earnings
Call”).
Participants may access the live webcast by
visiting the Investor Relations section of the Company’s website at
www.lgihomes.com.
An archive of the webcast will be available for
replay on the Company’s website for one year from the date of the
conference call.
About LGI Homes, Inc.
Headquartered in The Woodlands, Texas, LGI
Homes, Inc. is a pioneer in the homebuilding industry, successfully
applying an innovative and systematic approach to the design,
construction and sale of homes across 35 markets in 20 states. As
one of America’s fastest growing companies, LGI Homes has closed
over 64,000 homes since its founding in 2003 and has delivered
profitable financial results every year. Nationally recognized for
its quality construction and exceptional customer service, LGI
Homes was named to Newsweek’s list of America’s Most Trustworthy
Companies for the second consecutive year. LGI Homes’ commitment to
excellence extends to its more than 1,000 employees, earning the
Company numerous workplace awards at the local, state and national
level, including the Top Workplaces USA 2023 Award. For more
information about LGI Homes and its unique operating model focused
on making the dream of homeownership a reality for families across
the nation, 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 2023 home
closings, active selling communities, average sales price per home
closed, gross margin as a percentage of home sales revenues,
adjusted gross margin as a percentage of homes sales revenues,
SG&A as a percentage of home sales revenues 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, 2022, 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, 2023
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, |
|
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
42,966 |
|
|
$ |
31,998 |
|
Accounts receivable |
|
|
21,870 |
|
|
|
25,143 |
|
Real estate inventory |
|
|
2,880,520 |
|
|
|
2,898,296 |
|
Pre-acquisition costs and deposits |
|
|
26,425 |
|
|
|
25,031 |
|
Property and equipment, net |
|
|
35,273 |
|
|
|
32,997 |
|
Other assets |
|
|
76,724 |
|
|
|
93,159 |
|
Deferred tax assets, net |
|
|
5,127 |
|
|
|
6,186 |
|
Goodwill |
|
|
12,018 |
|
|
|
12,018 |
|
Total assets |
|
$ |
3,100,923 |
|
|
$ |
3,124,828 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
39,940 |
|
|
$ |
25,287 |
|
Accrued expenses and other liabilities |
|
|
340,917 |
|
|
|
340,128 |
|
Notes payable |
|
|
1,045,837 |
|
|
|
1,117,001 |
|
Total liabilities |
|
|
1,426,694 |
|
|
|
1,482,416 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 27,472,206 shares issued and
23,532,734 shares outstanding as of March 31, 2023 and 27,245,278
shares issued and 23,305,806 shares outstanding as of December 31,
2022 |
|
|
275 |
|
|
|
272 |
|
Additional paid-in capital |
|
|
311,525 |
|
|
|
306,673 |
|
Retained earnings |
|
|
1,717,451 |
|
|
|
1,690,489 |
|
Treasury stock, at cost,
3,939,472 shares as of March 31, 2023 and December 31, 2022 |
|
|
(355,022 |
) |
|
|
(355,022 |
) |
Total equity |
|
|
1,674,229 |
|
|
|
1,642,412 |
|
Total liabilities and equity |
|
$ |
3,100,923 |
|
|
$ |
3,124,828 |
|
LGI HOMES, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In thousands, except
share and per share data) |
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Home sales revenues |
|
$ |
487,357 |
|
|
$ |
546,050 |
|
|
|
|
|
|
Cost of sales |
|
|
388,541 |
|
|
|
387,643 |
|
Selling expenses |
|
|
42,805 |
|
|
|
34,398 |
|
General and
administrative |
|
|
29,960 |
|
|
|
28,289 |
|
Operating income |
|
|
26,051 |
|
|
|
95,720 |
|
Other income, net |
|
|
(6,297 |
) |
|
|
(3,830 |
) |
Net income before income
taxes |
|
|
32,348 |
|
|
|
99,550 |
|
Income tax provision |
|
|
5,386 |
|
|
|
20,864 |
|
Net income |
|
$ |
26,962 |
|
|
$ |
78,686 |
|
Earnings per share: |
|
|
|
|
Basic |
|
$ |
1.15 |
|
|
$ |
3.30 |
|
Diluted |
|
$ |
1.14 |
|
|
$ |
3.25 |
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
Basic |
|
|
23,381,294 |
|
|
|
23,837,170 |
|
Diluted |
|
|
23,629,779 |
|
|
|
24,194,321 |
|
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, |
|
|
|
2023 |
|
|
|
2022 |
|
Home sales revenues |
|
$ |
487,357 |
|
|
$ |
546,050 |
|
Cost of sales |
|
|
388,541 |
|
|
|
387,643 |
|
Gross margin |
|
|
98,816 |
|
|
|
158,407 |
|
Capitalized interest charged to cost of sales |
|
|
6,757 |
|
|
|
4,513 |
|
Purchase accounting adjustments (1) |
|
|
2,036 |
|
|
|
2,282 |
|
Adjusted gross margin |
|
$ |
107,609 |
|
|
$ |
165,202 |
|
Gross margin % (2) |
|
|
20.3 |
% |
|
|
29.0 |
% |
Adjusted gross margin %
(2) |
|
|
22.1 |
% |
|
|
30.3 |
% |
(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, Average Monthly
Absorption Rates and Closing Community Count by Reportable
Segment
(Revenues in thousands,
unaudited)
|
|
Three Months Ended March 31, 2023 |
|
As of March 31, 2023 |
Reportable Segment |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
150,380 |
|
453 |
|
$ |
331,965 |
|
35.0 |
|
4.3 |
|
35 |
Southeast |
|
|
104,376 |
|
316 |
|
|
330,304 |
|
24.0 |
|
4.4 |
|
24 |
Northwest |
|
|
74,815 |
|
159 |
|
|
470,535 |
|
9.3 |
|
5.7 |
|
10 |
West |
|
|
78,886 |
|
209 |
|
|
377,445 |
|
13.4 |
|
5.2 |
|
14 |
Florida |
|
|
78,900 |
|
229 |
|
|
344,541 |
|
16.0 |
|
4.8 |
|
16 |
Total |
|
$ |
487,357 |
|
1,366 |
|
$ |
356,777 |
|
97.7 |
|
4.7 |
|
99 |
|
|
Three Months Ended March 31, 2022 |
|
As of March 31, 2022 |
Reportable Segment |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average MonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
262,298 |
|
844 |
|
$ |
310,780 |
|
30.0 |
|
9.4 |
|
29 |
Southeast |
|
|
72,463 |
|
238 |
|
|
304,466 |
|
20.0 |
|
4.0 |
|
21 |
Northwest |
|
|
102,874 |
|
201 |
|
|
511,811 |
|
10.3 |
|
6.5 |
|
9 |
West |
|
|
55,583 |
|
142 |
|
|
391,430 |
|
10.0 |
|
4.7 |
|
10 |
Florida |
|
|
52,832 |
|
174 |
|
|
303,632 |
|
18.7 |
|
3.1 |
|
19 |
Total |
|
$ |
546,050 |
|
1,599 |
|
$ |
341,495 |
|
89.0 |
|
6.0 |
|
88 |
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the three months ended March 31, 2023
and (ii) owned or controlled lots by reportable segment as of
March 31, 2023.
|
|
Three Months Ended March 31, 2023 |
|
As of March 31, 2023 |
Reportable Segment |
|
Home Closings |
|
Owned (1) |
|
Controlled |
|
Total |
Central |
|
453 |
|
21,471 |
|
3,413 |
|
24,884 |
Southeast |
|
316 |
|
14,761 |
|
2,750 |
|
17,511 |
Northwest |
|
159 |
|
6,553 |
|
2,010 |
|
8,563 |
West |
|
209 |
|
9,669 |
|
1,255 |
|
10,924 |
Florida |
|
229 |
|
5,182 |
|
2,660 |
|
7,842 |
Total |
|
1,366 |
|
57,636 |
|
12,088 |
|
69,724 |
(1) Of the 57,636 owned lots as of March 31,
2023, 46,633 were raw/under development lots and 11,003 were
finished lots. Finished lots included 1,628 completed homes,
including information centers, and 2,026 homes in progress.
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, |
2023 (4) |
|
2022 (5) |
Net orders (1) |
|
|
2,219 |
|
|
|
1,973 |
|
Cancellation rate (2) |
|
|
15.9 |
% |
|
|
15.6 |
% |
Ending backlog – homes (3) |
|
|
1,555 |
|
|
|
2,429 |
|
Ending backlog – value (3) |
|
$ |
561,422 |
|
|
$ |
849,117 |
|
(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, 2023, the Company had 130
units related to bulk sales agreements associated with its
wholesale business.
(5) As of March 31, 2022, the Company had 374
units related to bulk sales agreements associated with its
wholesale business.
CONTACT: |
|
Joshua D.
FattorVice President of Investor Relations and Capital Markets(281)
210-2586investorrelations@lgihomes.com |
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