LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the second quarter 2022 and the six months ended June 30, 2022.
Second Quarter 2022 Highlights and
Comparisons to Second Quarter 2021
- Net Income
increased 4.4% to $123.4 million, or $5.24 Basic EPS and $5.20
Diluted EPS
- Net Income Before
Income Taxes increased 9.3% to $163.0 million
- Home Sales Revenues
decreased 8.6% to $723.1 million
- Home Closings
decreased 29.0% to 2,027 homes closed
- Average Sales Price
increased 28.7% to $356,719
- Gross Margin as a
Percentage of Homes Sales Revenues increased 500 basis points to
32.0%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 460 basis
points to 33.1%
- Active Selling
Communities at June 30, 2022 of 92
Six Months Ended June 30, 2022
Highlights and Comparisons to Six Months ended June 30,
2021
- Net Income
decreased 7.2% to $202.1 million, or $8.53 Basic EPS and $8.43
Diluted EPS
- Net Income Before
Income Taxes decreased 3.6% to $262.6 million
- Home Sales Revenues
decreased 15.2% to $1.3 billion
- Home Closings
decreased 33.1% to 3,626 homes closed
- Average Sales Price
increased 26.6% to $350,005
- Gross Margin as a
Percentage of Homes Sales Revenues increased 370 basis points to
30.7%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 340 basis
points to 31.9%
- Total Owned and
Controlled lots of 89,984
- Ending backlog of
1,266 homes valued at $445.1 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
$245.7 million at June 30, 2022, including cash and cash
equivalents of $42.0 million and $203.7 million of availability
under the Company’s revolving credit facility
- Net debt to
capitalization of 42.4% at June 30, 2022, compared to 35.1% at
December 31, 2021
- 417,861 shares of
common stock repurchased during the second quarter of 2022 for an
aggregate amount of $37.4 million
Management Comments
“I am pleased to announce the results of another
outstanding quarter that included record setting results in every
profitability metric we track,” stated Eric Lipar, Chairman and
Chief Executive Officer of LGI Homes.
“During the quarter we closed 2,027 homes,
resulting in $723.1 million dollars in revenue. Absorptions
continued to exceed our historical average, coming in at 7.4
closings, per community, per month. Despite fewer closings compared
to last year’s record comp, our commitment to executing on our
systems, combined with continued pricing power, enabled us to
deliver the most profitable quarter in our history. In addition to
new Company records in pre-tax income and net income, we delivered
a 500 basis point improvement in our gross margin to 32.0% and a
460 basis point improvement in our adjusted gross margin to an
impressive 33.1%.
“The interest rate hikes at the end of the second quarter caused
some buyers to pause and see if rates return to more familiar
levels. Given the uncertainty this and other macro events have
created, we are updating our full year guidance. We now expect to
close between 7,500 and 8,300 homes at an average sales price
between $345,000 and $360,000. SG&A as a percentage of revenue
is now expected in a range between 10.0% and 11.0% and we expect to
end the year with between 100 and 110 active communities. Finally,
we are maintaining our prior guidance for gross margins between
27.0% and 29.0%, adjusted gross margins between 28.5% and 30.5% and
an effective tax rate between 23.5% and 24.5%.”
Mr. Lipar concluded, “After a two-year boom
market unlike any other in history, the housing market sits at a
pivotal moment. The short-term view is that homes are more
expensive, consumer prices are up, and mortgage rates have nearly
doubled. However, the longer-term outlook reveals a solid
foundation for multi-year growth. Demographic trends remain
supportive of demand, strong labor markets are fueling wage growth,
tight rental supply is pushing up rents, and the inventory of homes
available for sale remains historically low. At LGI, we're taking
the long-term view and remain optimistic about our business. Our
operating model was built to thrive in challenging environments and
we believe our people, systems, culture and 100% spec-focused model
will continue to drive our success and differentiate our business,
regardless of market conditions, for many years to come.”
Full Year 2022 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 2022. The
Company now believes:
-
Home closings between 7,500 and 8,300
- Active selling
communities at the end of 2022 between 100 and 110
- Average sales price
per home closed between $345,000 and $360,000
- Gross margin as a
percentage of home sales revenue between 27.0% and 29.0%
- Adjusted gross
margin (non-GAAP) as a percentage of home sales revenue between
28.5% and 30.5% with capitalized interest accounting for
substantially all the difference between gross margin and adjusted
gross margin as a percentage of home sales revenue
- SG&A as a
percentage of home sales revenue between 10.0% and 11.0%
- Effective tax rate
between 23.5% and 24.5%
This updated outlook assumes that general
economic conditions, including input costs, materials, product and
labor availability, interest rates and mortgage availability, in
the remainder of 2022 are similar to those experienced so far in
the third quarter 2022 and that construction costs, availability of
land, and land development costs in the remainder of 2022 are
consistent with the Company’s most 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, home construction or home sales 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, August 2, 2022 (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.
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.
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. As one of
America’s fastest growing companies, LGI Homes has a notable legacy
of more than 19 years of homebuilding excellence, over which time
it has closed more than 50,000 homes and has been profitable every
year. Headquartered in The Woodlands, Texas, LGI Homes has
operations across 35 markets in 20 states and, since 2018, has been
ranked as the 10th largest residential builder in the United States
based on units closed. Nationally recognized for its quality
construction and exceptional customer service, LGI Homes’
commitment to excellence extends to its more than 900 employees,
earning the Company numerous workplace awards at the local, state
and national level, including Top Workplaces USA’s 2022 Cultural
Excellence 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 2022 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 revenue and 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, 2021, 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, 2022
and June 30, 2022 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)
|
|
June 30, |
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
41,971 |
|
|
$ |
50,514 |
|
Accounts receivable |
|
|
52,106 |
|
|
|
57,909 |
|
Real estate inventory |
|
|
2,633,706 |
|
|
|
2,085,904 |
|
Pre-acquisition costs and deposits |
|
|
38,277 |
|
|
|
40,702 |
|
Property and equipment, net |
|
|
20,311 |
|
|
|
16,944 |
|
Other assets |
|
|
69,481 |
|
|
|
81,676 |
|
Deferred tax assets, net |
|
|
5,487 |
|
|
|
6,198 |
|
Goodwill |
|
|
12,018 |
|
|
|
12,018 |
|
Total assets |
|
$ |
2,873,357 |
|
|
$ |
2,351,865 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
40,162 |
|
|
$ |
14,172 |
|
Accrued expenses and other liabilities |
|
|
163,811 |
|
|
|
136,609 |
|
Notes payable |
|
|
1,155,463 |
|
|
|
805,236 |
|
Total liabilities |
|
|
1,359,436 |
|
|
|
956,017 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 27,212,108 shares issued and
23,272,636 shares outstanding as of June 30, 2022 and 26,963,915
shares issued and 23,917,359 shares outstanding as of December 31,
2021 |
|
|
271 |
|
|
|
269 |
|
Additional paid-in capital |
|
|
302,688 |
|
|
|
291,577 |
|
Retained earnings |
|
|
1,565,984 |
|
|
|
1,363,922 |
|
Treasury stock, at cost,
3,939,472 shares and 3,046,556 shares, respectively |
|
|
(355,022 |
) |
|
|
(259,920 |
) |
Total equity |
|
|
1,513,921 |
|
|
|
1,395,848 |
|
Total liabilities and equity |
|
$ |
2,873,357 |
|
|
$ |
2,351,865 |
|
LGI HOMES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except share and per share data)
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Home sales revenues |
|
$ |
723,069 |
|
|
$ |
791,512 |
|
|
$ |
1,269,119 |
|
|
$ |
1,497,465 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
491,710 |
|
|
|
577,433 |
|
|
|
879,353 |
|
|
|
1,093,437 |
|
Selling expenses |
|
|
43,269 |
|
|
|
44,796 |
|
|
|
77,667 |
|
|
|
87,579 |
|
General and
administrative |
|
|
29,084 |
|
|
|
23,276 |
|
|
|
57,373 |
|
|
|
47,999 |
|
Operating income |
|
|
159,006 |
|
|
|
146,007 |
|
|
|
254,726 |
|
|
|
268,450 |
|
Loss on extinguishment of
debt |
|
|
— |
|
|
|
662 |
|
|
|
— |
|
|
|
662 |
|
Other income, net |
|
|
(4,006 |
) |
|
|
(3,776 |
) |
|
|
(7,836 |
) |
|
|
(4,609 |
) |
Net income before income
taxes |
|
|
163,012 |
|
|
|
149,121 |
|
|
|
262,562 |
|
|
|
272,397 |
|
Income tax provision |
|
|
39,636 |
|
|
|
30,987 |
|
|
|
60,500 |
|
|
|
54,605 |
|
Net income |
|
$ |
123,376 |
|
|
$ |
118,134 |
|
|
$ |
202,062 |
|
|
$ |
217,792 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
5.24 |
|
|
$ |
4.75 |
|
|
$ |
8.53 |
|
|
$ |
8.75 |
|
Diluted |
|
$ |
5.20 |
|
|
$ |
4.71 |
|
|
$ |
8.43 |
|
|
$ |
8.66 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
23,552,883 |
|
|
|
24,844,644 |
|
|
|
23,694,241 |
|
|
|
24,897,462 |
|
Diluted |
|
|
23,745,853 |
|
|
|
25,061,812 |
|
|
|
23,968,263 |
|
|
|
25,138,691 |
|
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 net
income and adjusted earnings per share.
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 June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Home sales revenues |
|
$ |
723,069 |
|
|
$ |
791,512 |
|
|
$ |
1,269,119 |
|
|
$ |
1,497,465 |
|
Cost of sales |
|
|
491,710 |
|
|
|
577,433 |
|
|
|
879,353 |
|
|
|
1,093,437 |
|
Gross margin |
|
|
231,359 |
|
|
|
214,079 |
|
|
|
389,766 |
|
|
|
404,028 |
|
Capitalized interest charged to cost of sales |
|
|
5,735 |
|
|
|
10,442 |
|
|
|
10,248 |
|
|
|
21,115 |
|
Purchase accounting adjustments(1) |
|
|
2,026 |
|
|
|
1,446 |
|
|
|
4,308 |
|
|
|
2,258 |
|
Adjusted gross margin |
|
$ |
239,120 |
|
|
$ |
225,967 |
|
|
$ |
404,322 |
|
|
$ |
427,401 |
|
Gross margin %(2) |
|
|
32.0 |
% |
|
|
27.0 |
% |
|
|
30.7 |
% |
|
|
27.0 |
% |
Adjusted gross margin
%(2) |
|
|
33.1 |
% |
|
|
28.5 |
% |
|
|
31.9 |
% |
|
|
28.5 |
% |
(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, Average Monthly
Absorption Rates and Closing Community Count by Reportable
Segment
(Revenues in thousands,
unaudited)
|
|
Three Months Ended June 30, 2022 |
|
As of June 30, 2022 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
316,654 |
|
935 |
|
$ |
338,667 |
|
31.0 |
|
10.1 |
|
32 |
Southeast |
|
|
117,569 |
|
361 |
|
|
325,676 |
|
19.7 |
|
6.1 |
|
20 |
Northwest |
|
|
70,792 |
|
133 |
|
|
532,271 |
|
8.3 |
|
5.3 |
|
8 |
West |
|
|
123,956 |
|
301 |
|
|
411,814 |
|
12.7 |
|
7.9 |
|
12 |
Florida |
|
|
94,098 |
|
297 |
|
|
316,828 |
|
19.6 |
|
5.1 |
|
20 |
Total |
|
$ |
723,069 |
|
2,027 |
|
$ |
356,719 |
|
91.3 |
|
7.4 |
|
92 |
|
|
Three Months Ended June 30, 2021 |
|
As of June 30, 2021 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
347,963 |
|
1,348 |
|
$ |
258,133 |
|
38.0 |
|
11.8 |
|
40 |
Southeast |
|
|
159,714 |
|
632 |
|
|
252,712 |
|
25.7 |
|
8.2 |
|
25 |
Northwest |
|
|
106,197 |
|
255 |
|
|
416,459 |
|
10.3 |
|
8.3 |
|
11 |
West |
|
|
80,813 |
|
232 |
|
|
348,332 |
|
10.7 |
|
7.2 |
|
10 |
Florida |
|
|
96,825 |
|
389 |
|
|
248,907 |
|
20.3 |
|
6.4 |
|
20 |
Total |
|
$ |
791,512 |
|
2,856 |
|
$ |
277,140 |
|
105.0 |
|
9.1 |
|
106 |
|
|
Six Months Ended June 30, 2022 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
Central |
|
$ |
578,952 |
|
1,779 |
|
$ |
325,437 |
|
30.5 |
|
9.7 |
Southeast |
|
|
190,032 |
|
599 |
|
|
317,249 |
|
19.8 |
|
5.0 |
Northwest |
|
|
173,666 |
|
334 |
|
|
519,958 |
|
9.3 |
|
6.0 |
West |
|
|
179,539 |
|
443 |
|
|
405,280 |
|
11.3 |
|
6.5 |
Florida |
|
|
146,930 |
|
471 |
|
|
311,953 |
|
19.3 |
|
4.1 |
Total |
|
$ |
1,269,119 |
|
3,626 |
|
$ |
350,005 |
|
90.2 |
|
6.7 |
|
|
Six Months Ended June 30, 2021 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average MonthlyAbsorption
Rate |
Central |
|
$ |
636,713 |
|
2,475 |
|
$ |
257,258 |
|
37.6 |
|
11.0 |
Southeast |
|
|
296,265 |
|
1,180 |
|
|
251,072 |
|
26.7 |
|
7.4 |
Northwest |
|
|
224,388 |
|
551 |
|
|
407,238 |
|
10.5 |
|
8.7 |
West |
|
|
161,961 |
|
481 |
|
|
336,717 |
|
10.7 |
|
7.5 |
Florida |
|
|
178,138 |
|
730 |
|
|
244,025 |
|
20.2 |
|
6.0 |
Total |
|
$ |
1,497,465 |
|
5,417 |
|
$ |
276,438 |
|
105.7 |
|
8.5 |
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the six months ended June 30, 2022 and
(ii) owned or controlled lots by reportable segment as of
June 30, 2022.
|
|
Six Months Ended June 30, 2022 |
|
As of June 30, 2022 |
Reportable Segment |
|
Home Closings |
|
Owned(1) |
|
Controlled |
|
Total |
Central |
|
1,779 |
|
24,231 |
|
9,199 |
|
33,430 |
Southeast |
|
599 |
|
16,591 |
|
5,186 |
|
21,777 |
Northwest |
|
334 |
|
6,909 |
|
4,079 |
|
10,988 |
West |
|
443 |
|
9,065 |
|
5,960 |
|
15,025 |
Florida |
|
471 |
|
5,097 |
|
3,667 |
|
8,764 |
Total |
|
3,626 |
|
61,893 |
|
28,091 |
|
89,984 |
(1) |
Of the 61,893
owned lots as of June 30, 2022, 49,595 were raw/under
development lots and 12,298 were finished lots. Finished lots
included 722 completed homes, including information centers, and
4,095 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 |
|
Six Months Ended June 30, |
2022(4) |
|
2021(5) |
Net orders(1) |
|
|
2,837 |
|
|
|
7,254 |
|
Cancellation rate(2) |
|
|
20.8 |
% |
|
|
14.8 |
% |
Ending
backlog – homes(3) |
|
|
1,266 |
|
|
|
4,801 |
|
Ending
backlog – value(3) |
|
$ |
445,120 |
|
|
$ |
1,434,382 |
|
(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 June 30, 2022, the
Company had 412 units related to bulk sales agreements associated
with its wholesale business. |
(5) |
As of June 30, 2021, the
Company had 940 units related to bulk sales agreements associated
with its wholesale business. |
CONTACT:Joshua D. FattorVice President of Investor
Relations(281) 210-2586investorrelations@lgihomes.com
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