LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the third quarter ended September 30, 2022.
Third Quarter
2022 Highlights and Comparisons
to Third Quarter
2021
- Net Income
decreased 10.1% to $90.4 million, or $3.88 Basic EPS and $3.85
Diluted EPS
- Net Income Before
Income Taxes decreased 14.4% to $108.7 million
- Home Sales Revenues
decreased 27.2% to $547.1 million
- Home Closings
decreased 38.1% to 1,547 homes closed
- Average Sales Price
Per Home Closed increased 17.6% to $353,635
- Gross Margin as a
Percentage of Homes Sales Revenues increased 160 basis points to
28.5%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 130 basis
points to 29.5%
- Active Selling
Communities at September 30, 2022 of 93
Nine Months Ended
September 30, 2022 Highlights and
Comparisons to Nine Months Ended
September 30, 2021
- Net Income
decreased 8.1% to $292.5 million, or $12.42 Basic EPS and $12.29
Diluted EPS
- Net Income Before
Income Taxes decreased 7.0% to $371.3 million
- Home Sales Revenues
decreased 19.2% to $1.8 billion
- Home Closings
decreased 34.7% to 5,173 homes closed
- Average Sales Price
Per Home Closed increased 23.6% to $351,091
- Gross Margin as a
Percentage of Homes Sales Revenues increased 300 basis points to
30.0%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 280 basis
points to 31.2%
- Total Owned and
Controlled lots of 76,453
- Ending backlog of
1,255 homes valued at $428.3 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
$180.0 million at September 30, 2022, including cash and cash
equivalents of $52.7 million and $127.3 million of availability
under the Company’s revolving credit facility
- Net debt to
capitalization of 42.3% at September 30, 2022, compared to
35.1% at December 31, 2021
Management Comments
“Considering the headwinds currently impacting
the housing market, I am pleased to share the strong performance we
delivered in the third quarter,” said Eric Lipar, Chairman and
Chief Executive Officer of LGI Homes.
“We closed 1,547 homes during the quarter,
resulting in $547.1 million dollars in revenue. Despite the decline
in home closings compared to the third quarter of last year,
ongoing cost controls and thoughtful pricing actions, on a
market-by-market basis, enabled us to deliver several third quarter
profitability records including gross margin of 28.5%, adjusted
gross margin of 29.5% and pre-tax net income margin of 19.9%.
“Mortgage rates continued to increase throughout
the quarter, further stretching affordability and sidelining
potential homebuyers. While our marketing efforts have successfully
uncovered buyer demand, particularly for homes available to close
quickly, finding easily qualified buyers remains a headwind. To
begin solving for this affordability gap, we have implemented
numerous financing initiatives and, in select communities, reduced
sales prices to levels that make ownership more achievable. Though
the market remains challenging, we saw positive results from our
efforts, including a 77.8% sequential increase in our net orders
during the quarter. Additionally, we continued to leverage our
strong relationships with single-family rental partners to
supplement our retail home closings.
“Given our performance to date and outlook for
the remainder of the year, we are updating our full year guidance
for 2022. We now expect to close between 6,700 and 7,100 homes at
an average sales price between $340,000 and $350,000 and to end the
year with between 95 and 100 active communities.”
Mr. Lipar concluded, “Despite the current
challenges, we remain positive about the long-term outlook for the
housing market. While demand may ebb and flow for a time, and often
for good reason, people will continue to be drawn to homeownership
and the lifestyle and financial benefits it creates. Mindful of
this, we continue to manage our business with a focus on our
long-term growth and profitability. As we navigate this dynamic
period, our focus remains on the disciplined allocation of capital
to support future community count growth while prioritizing the
strength of our balance sheet to capitalize on attractive
opportunities to enhance our growth and deliver profitable results
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 expects:
- Home closings
between 6,700 and 7,100
- Active selling
communities at the end of 2022 between 95 and 100
- Average sales price
per home closed between $340,000 and $350,000
- Gross margin as a
percentage of home sales revenues between 27.7% and 28.7%
- Adjusted gross
margin (non-GAAP) as a percentage of home sales revenues between
29.0% and 30.0% with capitalized interest accounting for
substantially all the difference between gross margin and adjusted
gross margin as a percentage of home sales revenues
- SG&A as a
percentage of home sales revenues between 11.0% and 12.0%
- Effective tax rate
between 21.0% and 22.0%
This updated outlook assumes that general
economic conditions, including input costs, materials, product and
labor availability, mortgage rates and availability, in the
remainder of 2022 are similar to those experienced so far in the
fourth 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, November 1, 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 revenues 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 quarters ended March 31,
2022, June 30, 2022 and September 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)
|
|
September 30, |
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
52,660 |
|
|
$ |
50,514 |
|
Accounts receivable |
|
|
37,450 |
|
|
|
57,909 |
|
Real estate inventory |
|
|
2,871,900 |
|
|
|
2,085,904 |
|
Pre-acquisition costs and deposits |
|
|
32,109 |
|
|
|
40,702 |
|
Property and equipment, net |
|
|
26,051 |
|
|
|
16,944 |
|
Other assets |
|
|
72,976 |
|
|
|
81,676 |
|
Deferred tax assets, net |
|
|
7,636 |
|
|
|
6,198 |
|
Goodwill |
|
|
12,018 |
|
|
|
12,018 |
|
Total assets |
|
$ |
3,112,800 |
|
|
$ |
2,351,865 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
55,242 |
|
|
$ |
14,172 |
|
Accrued expenses and other liabilities |
|
|
220,476 |
|
|
|
136,609 |
|
Notes payable |
|
|
1,230,101 |
|
|
|
805,236 |
|
Total liabilities |
|
|
1,505,819 |
|
|
|
956,017 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 27,229,758 shares issued and
23,290,286 shares outstanding as of September 30, 2022 and
26,963,915 shares issued and 23,917,359 shares outstanding as of
December 31, 2021 |
|
|
272 |
|
|
|
269 |
|
Additional paid-in capital |
|
|
305,357 |
|
|
|
291,577 |
|
Retained earnings |
|
|
1,656,374 |
|
|
|
1,363,922 |
|
Treasury stock, at cost,
3,939,472 shares and 3,046,556 shares, respectively |
|
|
(355,022 |
) |
|
|
(259,920 |
) |
Total equity |
|
|
1,606,981 |
|
|
|
1,395,848 |
|
Total liabilities and equity |
|
$ |
3,112,800 |
|
|
$ |
2,351,865 |
|
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, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Home sales revenues |
|
$ |
547,074 |
|
|
$ |
751,608 |
|
|
$ |
1,816,193 |
|
|
$ |
2,249,073 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
391,275 |
|
|
|
549,319 |
|
|
|
1,270,628 |
|
|
|
1,642,756 |
|
Selling expenses |
|
|
33,938 |
|
|
|
39,871 |
|
|
|
111,605 |
|
|
|
127,450 |
|
General and
administrative |
|
|
27,284 |
|
|
|
24,480 |
|
|
|
84,657 |
|
|
|
72,479 |
|
Operating income |
|
|
94,577 |
|
|
|
137,938 |
|
|
|
349,303 |
|
|
|
406,388 |
|
Loss on extinguishment of
debt |
|
|
— |
|
|
|
13,314 |
|
|
|
— |
|
|
|
13,976 |
|
Other income, net |
|
|
(14,124 |
) |
|
|
(2,370 |
) |
|
|
(21,960 |
) |
|
|
(6,979 |
) |
Net income before income
taxes |
|
|
108,701 |
|
|
|
126,994 |
|
|
|
371,263 |
|
|
|
399,391 |
|
Income tax provision |
|
|
18,311 |
|
|
|
26,444 |
|
|
|
78,811 |
|
|
|
81,049 |
|
Net income |
|
$ |
90,390 |
|
|
$ |
100,550 |
|
|
$ |
292,452 |
|
|
$ |
318,342 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.88 |
|
|
$ |
4.10 |
|
|
$ |
12.42 |
|
|
$ |
12.85 |
|
Diluted |
|
$ |
3.85 |
|
|
$ |
4.05 |
|
|
$ |
12.29 |
|
|
$ |
12.72 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
23,272,811 |
|
|
|
24,508,134 |
|
|
|
23,552,211 |
|
|
|
24,766,260 |
|
Diluted |
|
|
23,488,325 |
|
|
|
24,824,320 |
|
|
|
23,805,086 |
|
|
|
25,030,161 |
|
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 September 30, |
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Home sales revenues |
|
$ |
547,074 |
|
|
$ |
751,608 |
|
|
$ |
1,816,193 |
|
|
$ |
2,249,073 |
|
Cost of sales |
|
|
391,275 |
|
|
|
549,319 |
|
|
|
1,270,628 |
|
|
|
1,642,756 |
|
Gross margin |
|
|
155,799 |
|
|
|
202,289 |
|
|
|
545,565 |
|
|
|
606,317 |
|
Capitalized interest charged to cost of sales |
|
|
4,617 |
|
|
|
8,603 |
|
|
|
14,865 |
|
|
|
29,718 |
|
Purchase accounting adjustments (1) |
|
|
1,162 |
|
|
|
952 |
|
|
|
5,470 |
|
|
|
3,210 |
|
Adjusted gross margin |
|
$ |
161,578 |
|
|
$ |
211,844 |
|
|
$ |
565,900 |
|
|
$ |
639,245 |
|
Gross margin % (2) |
|
|
28.5 |
% |
|
|
26.9 |
% |
|
|
30.0 |
% |
|
|
27.0 |
% |
Adjusted gross margin %
(2) |
|
|
29.5 |
% |
|
|
28.2 |
% |
|
|
31.2 |
% |
|
|
28.4 |
% |
(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 September 30, 2022 |
|
As of September 30,
2022 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
228,448 |
|
681 |
|
$ |
335,460 |
|
33.0 |
|
6.9 |
|
34 |
Southeast |
|
|
138,478 |
|
419 |
|
|
330,496 |
|
23.3 |
|
6.0 |
|
24 |
Northwest |
|
|
46,774 |
|
95 |
|
|
492,358 |
|
7.0 |
|
4.5 |
|
7 |
West |
|
|
65,064 |
|
155 |
|
|
419,768 |
|
11.0 |
|
4.7 |
|
11 |
Florida |
|
|
68,310 |
|
197 |
|
|
346,751 |
|
18.7 |
|
3.5 |
|
17 |
Total |
|
$ |
547,074 |
|
1,547 |
|
$ |
353,635 |
|
93.0 |
|
5.5 |
|
93 |
|
|
Three Months Ended September 30, 2021 |
|
As of September 30,
2021 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
287,878 |
|
1,072 |
|
$ |
268,543 |
|
34.7 |
|
10.3 |
|
33 |
Southeast |
|
|
146,166 |
|
551 |
|
|
265,274 |
|
24.0 |
|
7.7 |
|
26 |
Northwest |
|
|
148,515 |
|
325 |
|
|
456,969 |
|
12.3 |
|
8.8 |
|
12 |
West |
|
|
90,592 |
|
248 |
|
|
365,290 |
|
12.7 |
|
6.5 |
|
13 |
Florida |
|
|
78,457 |
|
303 |
|
|
258,934 |
|
19.0 |
|
5.3 |
|
19 |
Total |
|
$ |
751,608 |
|
2,499 |
|
$ |
300,764 |
|
102.7 |
|
8.1 |
|
103 |
|
|
Nine Months Ended September 30, 2022 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
Central |
|
$ |
807,400 |
|
2,460 |
|
$ |
328,211 |
|
31.3 |
|
8.7 |
Southeast |
|
|
328,510 |
|
1,018 |
|
|
322,701 |
|
21.0 |
|
5.4 |
Northwest |
|
|
220,440 |
|
429 |
|
|
513,846 |
|
8.6 |
|
5.5 |
West |
|
|
244,603 |
|
598 |
|
|
409,035 |
|
11.2 |
|
5.9 |
Florida |
|
|
215,240 |
|
668 |
|
|
322,216 |
|
19.0 |
|
3.9 |
Total |
|
$ |
1,816,193 |
|
5,173 |
|
$ |
351,091 |
|
91.1 |
|
6.3 |
|
|
Nine Months Ended September 30, 2021 |
|
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average MonthlyAbsorption
Rate |
Central |
|
$ |
924,591 |
|
3,547 |
|
$ |
260,668 |
|
36.7 |
|
10.7 |
Southeast |
|
|
442,431 |
|
1,731 |
|
|
255,593 |
|
25.8 |
|
7.5 |
Northwest |
|
|
372,903 |
|
876 |
|
|
425,688 |
|
11.1 |
|
8.8 |
West |
|
|
252,553 |
|
729 |
|
|
346,438 |
|
11.3 |
|
7.1 |
Florida |
|
|
256,595 |
|
1,033 |
|
|
248,398 |
|
19.8 |
|
5.8 |
Total |
|
$ |
2,249,073 |
|
7,916 |
|
$ |
284,117 |
|
104.7 |
|
8.4 |
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the nine months ended September 30,
2022 and (ii) owned or controlled lots by reportable segment as of
September 30, 2022.
|
|
Nine Months Ended September 30, 2022 |
|
As of September 30, 2022 |
|
|
Home Closings |
|
Owned (1) |
|
Controlled |
|
Total |
Central |
|
2,460 |
|
23,326 |
|
4,512 |
|
27,838 |
Southeast |
|
1,018 |
|
15,687 |
|
4,035 |
|
19,722 |
Northwest |
|
429 |
|
6,814 |
|
2,162 |
|
8,976 |
West |
|
598 |
|
9,698 |
|
1,960 |
|
11,658 |
Florida |
|
668 |
|
5,102 |
|
3,157 |
|
8,259 |
Total |
|
5,173 |
|
60,627 |
|
15,826 |
|
76,453 |
(1) |
|
Of the 60,627 owned lots as of September 30, 2022, 48,516 were
raw/under development lots and 12,111 were finished lots. Finished
lots included 1,541 completed homes, including information centers,
and 2,569 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 |
|
Nine Months Ended September 30, |
2022 (4) |
|
2021 (5) |
Net orders (1) |
|
|
4,373 |
|
|
|
8,044 |
|
Cancellation rate (2) |
|
|
21.0 |
% |
|
|
18.8 |
% |
Ending backlog – homes (3) |
|
|
1,255 |
|
|
|
3,090 |
|
Ending backlog – value (3) |
|
$ |
428,293 |
|
|
$ |
959,786 |
|
(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 September 30, 2022, the Company had 591 units related to
bulk sales agreements associated with its wholesale business. |
(5) |
|
As of September 30, 2021, the Company had 563 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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