LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the fourth quarter and year ended December 31, 2022.
“We are pleased to announce our fourth quarter
and full year financial results,” said Eric Lipar, the Company’s
Chief Executive Officer and Chairman of the Board. “Thanks to our
employees’ dedicated execution in 2022, we delivered a number of
notable successes along with record breaking profitability metrics
for the full year.”
“We closed 1,448 homes in the fourth quarter,
resulting in full year closings of 6,621 homes, revenue of $2.3
billion and one of our most profitable years ever. Our full year
gross margin was 28.1%, adjusted gross margin was 29.2%, pre-tax
net income margin was 18.1% and net income margin was 14.2%. Each
of these metrics was a new Company record. We continued to
right-size our inventory, reducing our owned and controlled lots by
21.7% and ending the year with approximately 3,300 homes in
vertical construction and completed inventory. Finally, we remained
focused on our balance sheet, ending the year with a
net-debt-to-capitalization ratio of 39.8%, representing a 250 basis
point decrease from the third quarter of 2022 and our lowest ratio
of the year.”
Mr. Lipar concluded, “We enter 2023 with
tempered optimism. Recent lead and sales trends have been very
positive. In the first eight weeks of the year, our retail net
orders pace has been 7.2 homes per active community, compared to
2.9 in the fourth quarter of 2022. However, mortgage rates are
again rising and the Fed’s interest rate path is still uncertain.
Therefore, our focus remains on what we control – driving leads
through marketing, controlling input costs, starting affordable,
move-in ready homes at a disciplined pace and maintaining our
strong balance sheet while investing to support our future
growth.”
Fourth Quarter
2022 Highlights and Comparisons
to Fourth Quarter
2021
- Net Income
decreased 69.3% to $34.1 million, or $1.46 basic EPS and $1.45
diluted EPS
- Net Income Before
Income Taxes decreased 67.3% to $46.9 million
- Home Sales Revenues
decreased 39.0% to $488.3 million
- Home Closings
decreased 42.7% to 1,448 homes
- Average Sales Price
Per Home Closed increased 6.3% to $337,198
- Gross Margin as a
Percentage of Homes Sales Revenues decreased 570 basis points to
20.7%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues decreased 550 basis
points to 22.1%
Full Year 2022
Highlights and Comparisons to Full Year
2021
- Net Income
decreased 24.0% to $326.6 million, or $13.90 basic EPS and $13.76
diluted EPS
- Net Income Before
Income Taxes decreased 23.0% to $418.1 million
- Home Sales Revenues
decreased 24.4% to $2.3 billion
- Home Closings
decreased 36.6% to 6,621 homes
- Average Sales Price
Per Home Closed increased 19.2% to $348,052
- Gross Margin as a
Percentage of Homes Sales Revenues increased 130 basis points to
28.1%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues increased 100 basis
points to 29.2%
- Owned Lots
decreased to 58,720 and Controlled Lots decreased to 13,184 for
Total Owned and Controlled lots of 71,904 at December 31,
2022
- Active Selling
Communities at December 31, 2022 decreased 2.0% to 99
- Ending Backlog at
December 31, 2022 decreased 65.8% to 702 homes
- Ending Backlog
Value at December 31, 2022 decreased 61.8% to $252.0
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
- 892,916 shares of
common stock repurchased during 2022 at an average price per share
of $106.49 for an aggregate amount of $95.1 million
- Total liquidity of
$268.6 million at December 31, 2022, including cash and
cash equivalents of $32.0 million and $236.6 million of
availability under the Company’s revolving credit facility
- Net debt to
capitalization of 39.8% at December 31, 2022
Full Year 2023
Outlook
Subject to the caveats in the Forward-Looking
Statements section of this press release, the Company is providing
the following guidance for the full year 2023. The Company
expects:
- Home closings
between 6,000 and 7,000
- Active selling
communities at the end of 2023 between 115 and 125
- Average sales price
per home closed between $335,000 and $350,000
- 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 11.5% and 12.5%
- 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 to date in 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, February 21, 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 Earnings Call webcast will be
available for replay on the Company’s website for one year from the
date of the Earnings 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 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, 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 (“SEC”),
including the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2022 when it is filed with the SEC. 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 and per share data)
|
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
31,998 |
|
|
$ |
50,514 |
|
Accounts receivable |
|
|
25,143 |
|
|
|
57,909 |
|
Real estate inventory |
|
|
2,898,296 |
|
|
|
2,085,904 |
|
Pre-acquisition costs and deposits |
|
|
25,031 |
|
|
|
40,702 |
|
Property and equipment, net |
|
|
32,997 |
|
|
|
16,944 |
|
Other assets |
|
|
93,159 |
|
|
|
81,676 |
|
Deferred tax assets, net |
|
|
6,186 |
|
|
|
6,198 |
|
Goodwill |
|
|
12,018 |
|
|
|
12,018 |
|
Total assets |
|
$ |
3,124,828 |
|
|
$ |
2,351,865 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
25,287 |
|
|
$ |
14,172 |
|
Accrued expenses and other liabilities |
|
|
340,128 |
|
|
|
136,609 |
|
Notes payable |
|
|
1,117,001 |
|
|
|
805,236 |
|
Total liabilities |
|
|
1,482,416 |
|
|
|
956,017 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01, 250,000,000 shares authorized,
27,245,278 shares issued and 23,305,806 shares outstanding as of
December 31, 2022 and 26,963,915 shares issued and 23,917,359
shares outstanding as of December 31, 2021 |
|
|
272 |
|
|
|
269 |
|
Additional paid-in capital |
|
|
306,673 |
|
|
|
291,577 |
|
Retained earnings |
|
|
1,690,489 |
|
|
|
1,363,922 |
|
Treasury stock, at cost, 3,939,472 shares and 3,046,556 shares,
respectively |
|
|
(355,022 |
) |
|
|
(259,920 |
) |
Total equity |
|
|
1,642,412 |
|
|
|
1,395,848 |
|
Total liabilities and equity |
|
$ |
3,124,828 |
|
|
$ |
2,351,865 |
|
LGI HOMES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except share and per share data)
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Home sales revenues |
|
$ |
488,262 |
|
|
$ |
801,076 |
|
|
$ |
2,304,455 |
|
|
$ |
3,050,149 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
387,227 |
|
|
|
589,359 |
|
|
|
1,657,855 |
|
|
|
2,232,115 |
|
Selling expenses |
|
|
33,323 |
|
|
|
42,555 |
|
|
|
144,928 |
|
|
|
170,005 |
|
General and
administrative |
|
|
26,908 |
|
|
|
27,852 |
|
|
|
111,565 |
|
|
|
100,331 |
|
Operating income |
|
|
40,804 |
|
|
|
141,310 |
|
|
|
390,107 |
|
|
|
547,698 |
|
Loss on extinguishment of
debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,976 |
|
Other income, net |
|
|
(6,049 |
) |
|
|
(2,074 |
) |
|
|
(28,009 |
) |
|
|
(9,053 |
) |
Net income before income taxes |
|
|
46,853 |
|
|
|
143,384 |
|
|
|
418,116 |
|
|
|
542,775 |
|
Income tax provision |
|
|
12,738 |
|
|
|
32,081 |
|
|
|
91,549 |
|
|
|
113,130 |
|
Net income |
|
$ |
34,115 |
|
|
$ |
111,303 |
|
|
$ |
326,567 |
|
|
$ |
429,645 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.46 |
|
|
$ |
4.61 |
|
|
$ |
13.90 |
|
|
$ |
17.46 |
|
Diluted |
|
$ |
1.45 |
|
|
$ |
4.53 |
|
|
$ |
13.76 |
|
|
$ |
17.25 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
23,291,372 |
|
|
|
24,142,096 |
|
|
|
23,486,465 |
|
|
|
24,607,231 |
|
Diluted |
|
|
23,513,303 |
|
|
|
24,564,428 |
|
|
|
23,730,770 |
|
|
|
24,908,991 |
|
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 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, unaudited):
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Home sales revenues |
|
$ |
488,262 |
|
|
$ |
801,076 |
|
|
$ |
2,304,455 |
|
|
$ |
3,050,149 |
|
Cost of sales |
|
|
387,227 |
|
|
|
589,359 |
|
|
|
1,657,855 |
|
|
|
2,232,115 |
|
Gross margin |
|
|
101,035 |
|
|
|
211,717 |
|
|
|
646,600 |
|
|
|
818,034 |
|
Capitalized interest charged to cost of sales |
|
|
5,411 |
|
|
|
7,828 |
|
|
|
20,276 |
|
|
|
37,546 |
|
Purchase accounting adjustments (1) |
|
|
1,399 |
|
|
|
1,754 |
|
|
|
6,869 |
|
|
|
4,964 |
|
Adjusted gross margin |
|
$ |
107,845 |
|
|
$ |
221,299 |
|
|
$ |
673,745 |
|
|
$ |
860,544 |
|
Gross margin % (2) |
|
|
20.7 |
% |
|
|
26.4 |
% |
|
|
28.1 |
% |
|
|
26.8 |
% |
Adjusted gross margin %
(2) |
|
|
22.1 |
% |
|
|
27.6 |
% |
|
|
29.2 |
% |
|
|
28.2 |
% |
(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 December 31,
2022 |
Reportable Segment |
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
AverageMonthlyAbsorptionRate |
Central |
|
$ |
204,444 |
|
634 |
|
$ |
322,467 |
|
33.7 |
|
6.3 |
Southeast |
|
|
126,830 |
|
386 |
|
|
328,575 |
|
23.0 |
|
5.6 |
Northwest |
|
|
32,976 |
|
73 |
|
|
451,726 |
|
8.3 |
|
2.9 |
West |
|
|
56,365 |
|
153 |
|
|
368,399 |
|
12.3 |
|
4.1 |
Florida |
|
|
67,647 |
|
202 |
|
|
334,886 |
|
17.0 |
|
4.0 |
Total |
|
$ |
488,262 |
|
1,448 |
|
$ |
337,198 |
|
94.3 |
|
5.1 |
|
|
Three Months Ended December 31,
2021 |
Reportable Segment |
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
AverageMonthlyAbsorptionRate |
Central |
|
$ |
328,191 |
|
1,118 |
|
$ |
293,552 |
|
36.0 |
|
10.4 |
Southeast |
|
|
152,311 |
|
548 |
|
|
277,940 |
|
25.0 |
|
7.3 |
Northwest |
|
|
137,594 |
|
290 |
|
|
474,462 |
|
11.0 |
|
8.8 |
West |
|
|
98,666 |
|
266 |
|
|
370,925 |
|
11.7 |
|
7.6 |
Florida |
|
|
84,314 |
|
304 |
|
|
277,349 |
|
20.0 |
|
5.1 |
Total |
|
$ |
801,076 |
|
2,526 |
|
$ |
317,132 |
|
103.7 |
|
8.1 |
|
|
Year Ended December 31,
2022 |
Reportable Segment |
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
AverageMonthlyAbsorptionRate |
Central |
|
$ |
1,011,844 |
|
3,094 |
|
$ |
327,034 |
|
31.9 |
|
8.1 |
Southeast |
|
|
455,340 |
|
1,404 |
|
|
324,316 |
|
21.5 |
|
5.4 |
Northwest |
|
|
253,416 |
|
502 |
|
|
504,813 |
|
8.5 |
|
4.9 |
West |
|
|
300,968 |
|
751 |
|
|
400,756 |
|
11.5 |
|
5.4 |
Florida |
|
|
282,887 |
|
870 |
|
|
325,157 |
|
18.5 |
|
3.9 |
Total |
|
$ |
2,304,455 |
|
6,621 |
|
$ |
348,052 |
|
91.9 |
|
6.0 |
|
|
Year Ended December 31,
2021 |
Reportable Segment |
|
Revenues |
|
HomeClosings |
|
ASP |
|
AverageCommunityCount |
|
AverageMonthlyAbsorptionRate |
Central |
|
$ |
1,252,782 |
|
4,665 |
|
$ |
268,549 |
|
36.5 |
|
10.7 |
Southeast |
|
|
594,742 |
|
2,279 |
|
|
260,966 |
|
25.6 |
|
7.4 |
Northwest |
|
|
510,497 |
|
1,166 |
|
|
437,819 |
|
11.1 |
|
8.8 |
West |
|
|
351,219 |
|
995 |
|
|
352,984 |
|
11.4 |
|
7.3 |
Florida |
|
|
340,909 |
|
1,337 |
|
|
254,981 |
|
19.8 |
|
5.6 |
Total |
|
$ |
3,050,149 |
|
10,442 |
|
$ |
292,104 |
|
104.4 |
|
8.3 |
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the year ended December 31, 2022 and
(ii) the Company’s owned or controlled lots by reportable segment
as of December 31, 2022.
|
|
Year EndedDecember 31,2022 |
|
As of December 31, 2022 |
Reportable Segment |
|
Home Closings |
|
Owned (1) |
|
Controlled |
|
Total |
Central |
|
3,094 |
|
21,786 |
|
4,788 |
|
26,574 |
Southeast |
|
1,404 |
|
15,160 |
|
2,389 |
|
17,549 |
Northwest |
|
502 |
|
6,741 |
|
2,006 |
|
8,747 |
West |
|
751 |
|
9,861 |
|
1,263 |
|
11,124 |
Florida |
|
870 |
|
5,172 |
|
2,738 |
|
7,910 |
Total |
|
6,621 |
|
58,720 |
|
13,184 |
|
71,904 |
(1) Of the 58,720 owned lots as of
December 31, 2022, 47,857 were raw/under development lots and
10,863 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):
|
|
Year Ended December 31, |
2022 (4) |
|
2021 (5) |
|
2020 (6) |
Net orders (1) |
|
|
5,268 |
|
|
|
9,533 |
|
|
|
11,070 |
|
Cancellation rate (2) |
|
|
24.4 |
% |
|
|
19.3 |
% |
|
|
21.6 |
% |
Ending backlog - homes
(3) |
|
|
702 |
|
|
|
2,055 |
|
|
|
2,964 |
|
Ending backlog - value
(3) |
|
$ |
252,002 |
|
|
$ |
659,234 |
|
|
$ |
775,468 |
|
(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 retail 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 December 31, 2022, the
Company had 157 units related to bulk sales agreements associated
with its wholesale business. |
|
|
(5) |
As of December 31, 2021, the
Company had 481 units related to bulk sales agreements associated
with its wholesale business. |
|
|
(6) |
As of December 31, 2020, the
Company had 1,139 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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