LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the third
quarter 2017 and the nine months ended September 30, 2017.
Third Quarter 2017 Results and
Comparisons to Third Quarter 2016
- Net Income increased 73.0% to $33.7 million, or $1.55 Basic EPS
and $1.40 Diluted EPS
- Net Income Before Income Taxes increased 72.5% to $50.9
million
- Home Sales Revenues increased 69.2% to $365.9 million
- Home Closings increased 64.4% to 1,729 homes
- Average Home Sales Price increased 2.9% to $211,623
- Gross Margin as a Percentage of Homes Sales Revenues was 25.1%
as compared to 26.3%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 26.5% as compared to 27.7%
- Ending backlog increased 70.9% to 1,328 units
- Active Selling Communities at September 30, 2017 increased
to 77 from 59
- 37,063 Total Owned and Controlled Lots at September 30,
2017
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.
Nine Months Ended September 30,
2017 Results and Comparisons to Nine Months Ended
September 30, 2016
- Net Income increased 49.9% to $77.7 million, or $3.60 Basic EPS
and $3.32 Diluted EPS
- Net Income Before Income Taxes increased 47.8% to $116.4
million
- Home Sales Revenues increased 41.8% to $853.0 million
- Home Closings increased 32.3% to 4,001 homes
- Average Home Sales Price increased 7.2% to $213,193
- Gross Margin as a Percentage of Homes Sales Revenues was 26.0%
as compared to 26.1%
- Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales
Revenues was 27.4% as compared to 27.5%
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
“This has been a phenomenal year to date and our
results have been outstanding,” said Eric Lipar, the Company's
Chief Executive Officer and Chairman of the Board. “With a
record-setting 1,729 home closings during the third quarter, we
continued our trend of strong results and profitability highlighted
by above average absorption of 7.6 closings per community per
month. These results are a direct reflection of the dedication of
our employees and our effective systems and processes that have
enabled us to expand and replicate our success.”
Lipar concluded, “Based on our solid results
during the first nine months of the year, we are well positioned to
end the year very strong and are therefore raising our
guidance. For the full year 2017, we now anticipate to close
more than 5,400 homes and believe basic EPS will be in the range of
$4.75 to $5.15 per basic share.”
2017 Third Quarter Results
Home closings during the third quarter of 2017
increased 64.4% to 1,729 from 1,052 during the third quarter of
2016. Active selling communities increased to 77 at the end of the
third quarter of 2017, up from 59 communities at the end of the
third quarter of 2016.
Home sales revenues for the third quarter of
2017 were $365.9 million, an increase of $149.6 million, or 69.2%
over the third quarter of 2016. 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 $211,623 for
the third quarter of 2017, an increase of 2.9% over the third
quarter of 2016. This increase is largely attributable 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 third quarter of 2017 was 25.1% as compared to
26.3% for the third quarter of 2016. Adjusted gross margin
(non-GAAP) as a percentage of home sales revenues for the third
quarter of 2017 was 26.5% as compared to 27.7% for the third
quarter of 2016. This decrease is primarily due to a combination of
higher construction costs, and to a lesser extent due to 96
wholesale home closings during the third quarter of 2017, partially
offset by higher average home sales prices. 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 $33.7 million, or $1.55 per basic
share and $1.40 per diluted share, for the third quarter of 2017
increased $14.2 million, or 73.0%, from $19.5 million for the third
quarter of 2016. This increase is primarily attributable to the
64.4% increase in homes closed, the 2.9% increase in average home
sales price, and operating leverage realized related to selling,
general, and administrative expenses.
Results for the Nine Months Ended
September 30, 2017
Home closings for the nine months ended
September 30, 2017 increased 32.3% to 4,001 from 3,024 during
the nine months ended September 30, 2016.
Home sales revenues for the nine months ended
September 30, 2017 increased 41.8% to $853.0 million compared
to the nine months ended September 30, 2016. 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 $213,193 for
the nine months ended September 30, 2017, an increase of
$14,288, or 7.2%, over the nine months ended September 30,
2016. This increase is largely attributable 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 nine months ended September 30, 2017 was
26.0% as compared to 26.1% for the nine months ended
September 30, 2016. Adjusted gross margin (non-GAAP) as
a percentage of home sales revenues for the nine months ended
September 30, 2017 was 27.4% as compared to 27.5% for the nine
months ended September 30, 2016. This decrease is 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 168 wholesale home closings during the nine months ended
September 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 $77.7 million, or $3.60 per basic
share and $3.32 per diluted share, for the nine months ended
September 30, 2017 increased $25.8 million, or 49.9%, from
$51.8 million for the nine months ended September 30, 2016.
This increase is primarily attributable to the 32.3% increase in
homes closed, the 7.2% increase in average home sales price, and
operating leverage realized related to selling, general, and
administrative expenses.
Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company offers the
following updated guidance for 2017. The Company believes it will
have between 75 and 80 active selling communities at the end of
2017, close more than 5,400 homes in 2017, and generate basic EPS
between $4.75 and $5.15 per share during 2017. In addition, the
Company believes 2017 gross margin as a percentage of home sales
revenues will be in the range of 25.0% and 27.0% and 2017 adjusted
gross margin (non-GAAP) as a percentage of home sales revenues will
be similar to previous years in the range of 26.5% and 28.5% 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 2017
will be between $210,000 and $220,000. This outlook assumes that
general economic conditions, including interest rates and mortgage
availability, in the remainder of 2017 are similar to those in the
first nine months of 2017 and that average home sales price,
construction costs, availability of land, land development costs
and overall absorption rates for 2017 are consistent with the
Company’s recent experience.
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, November 7, 2017 (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 “7299719”.
This replay will be available until November 14, 2017.
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 and Minnesota. The
Company has a notable legacy of more than 14 years of homebuilding
operations, over which time it has closed over 20,000 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 2017 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 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 “believe,” “estimate,” “project,”
“anticipate,” “expect,” “seek,” “predict,” “contemplate,”
“continue,” “possible,” “intent,” “may,” “might,” “will,” “could,”
“would,” “should,” “forecast,” or “assume” 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, 2016, 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) |
|
|
|
September 30, |
|
December 31, |
|
|
2017 |
|
2016 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
47,968 |
|
|
$ |
49,518 |
|
Accounts
receivable |
|
32,716 |
|
|
17,055 |
|
Real
estate inventory |
|
902,568 |
|
|
717,681 |
|
Pre-acquisition costs and deposits |
|
14,159 |
|
|
10,651 |
|
Property
and equipment, net |
|
1,862 |
|
|
1,960 |
|
Other
assets |
|
9,452 |
|
|
5,631 |
|
Deferred
tax assets, net |
|
2,189 |
|
|
— |
|
Goodwill |
|
12,018 |
|
|
12,018 |
|
Total
assets |
|
$ |
1,022,932 |
|
|
$ |
814,514 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
26,071 |
|
|
$ |
12,277 |
|
Accrued
expenses and other liabilities |
|
86,149 |
|
|
46,389 |
|
Deferred
tax liabilities, net |
|
— |
|
|
164 |
|
Notes
payable |
|
464,058 |
|
|
400,483 |
|
Total
liabilities |
|
576,278 |
|
|
459,313 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common
stock, par value $0.01, 250,000,000 shares authorized, 22,737,859
shares issued and 21,737,859 shares outstanding as of September 30,
2017 and 22,311,310 shares issued and 21,311,310 shares outstanding
as of December 31, 2016 |
|
227 |
|
|
223 |
|
Additional paid-in capital |
|
222,129 |
|
|
208,346 |
|
Retained
earnings |
|
240,848 |
|
|
163,182 |
|
Treasury
stock, at cost, 1,000,000 shares |
|
(16,550 |
) |
|
(16,550 |
) |
Total
equity |
|
446,654 |
|
|
355,201 |
|
Total
liabilities and equity |
|
$ |
1,022,932 |
|
|
$ |
814,514 |
|
|
LGI HOMES, INC. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Unaudited) |
(In thousands, except share and per share
data) |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Home sales
revenues |
|
$ |
365,896 |
|
|
$ |
216,304 |
|
|
$ |
852,985 |
|
|
$ |
601,490 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
274,000 |
|
|
159,483 |
|
|
631,242 |
|
|
444,205 |
|
Selling expenses |
|
26,018 |
|
|
17,007 |
|
|
66,318 |
|
|
48,965 |
|
General and
administrative |
|
15,431 |
|
|
10,715 |
|
|
40,376 |
|
|
31,155 |
|
Operating income |
|
50,447 |
|
|
29,099 |
|
|
115,049 |
|
|
77,165 |
|
Other income, net |
|
(430 |
) |
|
(389 |
) |
|
(1,312 |
) |
|
(1,560 |
) |
Net income before
income taxes |
|
50,877 |
|
|
29,488 |
|
|
116,361 |
|
|
78,725 |
|
Income tax
provision |
|
17,190 |
|
|
10,021 |
|
|
38,695 |
|
|
26,899 |
|
Net income |
|
$ |
33,687 |
|
|
$ |
19,467 |
|
|
$ |
77,666 |
|
|
$ |
51,826 |
|
Earnings per
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.55 |
|
|
$ |
0.92 |
|
|
$ |
3.60 |
|
|
$ |
2.51 |
|
Diluted |
|
$ |
1.40 |
|
|
$ |
0.86 |
|
|
$ |
3.32 |
|
|
$ |
2.39 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
21,668,585 |
|
|
21,061,874 |
|
|
21,544,747 |
|
|
20,633,200 |
|
Diluted |
|
24,050,385 |
|
|
22,674,021 |
|
|
23,413,467 |
|
|
21,654,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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):
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Home sales
revenues |
|
$ |
365,896 |
|
|
$ |
216,304 |
|
|
$ |
852,985 |
|
|
$ |
601,490 |
|
Cost of sales |
|
274,000 |
|
|
159,483 |
|
|
631,242 |
|
|
444,205 |
|
Gross margin |
|
91,896 |
|
|
56,821 |
|
|
221,743 |
|
|
157,285 |
|
Capitalized interest charged to cost of sales |
|
5,135 |
|
|
2,980 |
|
|
11,548 |
|
|
7,431 |
|
Purchase
accounting adjustments (a) |
|
54 |
|
|
73 |
|
|
226 |
|
|
454 |
|
Adjusted gross
margin |
|
$ |
97,085 |
|
|
$ |
59,874 |
|
|
$ |
233,517 |
|
|
$ |
165,170 |
|
Gross margin % (b) |
|
25.1 |
% |
|
26.3 |
% |
|
26.0 |
% |
|
26.1 |
% |
Adjusted gross margin %
(b) |
|
26.5 |
% |
|
27.7 |
% |
|
27.4 |
% |
|
27.5 |
% |
(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 and Closings by
Division
(Dollars in thousands)
|
|
|
|
|
Three Months Ended September 30, |
|
|
2017 |
|
2016 |
|
|
Revenues |
|
Closings |
|
Revenues |
|
Closings |
Central |
|
$ |
165,870 |
|
|
830 |
|
|
$ |
113,761 |
|
|
553 |
|
Southwest |
|
66,002 |
|
|
255 |
|
|
41,489 |
|
|
187 |
|
Southeast |
|
54,331 |
|
|
284 |
|
|
24,248 |
|
|
137 |
|
Florida |
|
56,171 |
|
|
288 |
|
|
30,283 |
|
|
155 |
|
Northwest |
|
23,522 |
|
|
72 |
|
|
6,523 |
|
|
20 |
|
Total home sales |
|
$ |
365,896 |
|
|
1,729 |
|
|
$ |
216,304 |
|
|
1,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
|
Revenues |
|
Closings |
|
Revenues |
|
Closings |
Central |
|
$ |
370,550 |
|
|
1,824 |
|
|
$ |
309,325 |
|
|
1,548 |
|
Southwest |
|
162,386 |
|
|
635 |
|
|
118,372 |
|
|
545 |
|
Southeast |
|
133,665 |
|
|
710 |
|
|
83,309 |
|
|
478 |
|
Florida |
|
129,345 |
|
|
656 |
|
|
80,912 |
|
|
422 |
|
Northwest |
|
57,039 |
|
|
176 |
|
|
9,572 |
|
|
31 |
|
Total home sales |
|
$ |
852,985 |
|
|
4,001 |
|
|
$ |
601,490 |
|
|
3,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog(Dollars in
thousands)
|
|
|
Backlog Data |
|
Nine Months Ended September 30, |
2017 |
|
2016 |
Net orders |
|
4,883 |
|
|
3,278 |
|
Cancellation rate |
|
24.1 |
% |
|
23.7 |
% |
Ending
backlog – homes |
|
1,328 |
|
|
777 |
|
Ending
backlog – value |
|
$ |
308,131 |
|
|
$ |
164,971 |
|
|
|
|
|
|
|
|
|
|
CONTACT: Investor Relations:Caitlin Stiles, (281)
210-2619InvestorRelations@LGIHomes.com
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