LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results
for the second quarter 2023 and the six months ended June 30,
2023.
Second Quarter
2023 Highlights
- Net Income of $53.1
million, or $2.26 Basic EPS and $2.25 Diluted EPS
- Net Income Before
Income Taxes of $71.4 million
- Home Sales Revenues
of $645.3 million
- Home Closings of
1,854
- Average Sales Price
per Home Closed of $348,042
- Gross Margin as a
Percentage of Homes Sales Revenues of 22.0%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues of 23.8%
Six Months Ended June 30, 2023
Highlights
- Net Income of $80.1
million, or $3.41 Basic EPS and $3.39 Diluted EPS
- Net Income Before
Income Taxes of $103.8 million
- Home Sales Revenues
of $1.1 billion
- Home Closings of
3,220
- Average Sales Price
per Home Closed of $351,748
- Gross Margin as a
Percentage of Homes Sales Revenues of 21.3%
- Adjusted Gross
Margin* as a Percentage of Home Sales Revenues of
23.1%
- Active Selling
Communities at June 30, 2023 of 102
- Net Orders of
4,156
- Ending Backlog at
June 30, 2023 of 1,638 homes valued at $601.3 million
- Total Owned and
Controlled Lots at June 30, 2023 of 69,226
*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
$384.7 million at June 30, 2023, including cash and cash
equivalents of $43.3 million and $341.4 million of availability
under the Company’s revolving credit facility
- Net debt to
capitalization of 36.8% at June 30, 2023
Management Comments
“We delivered strong results in the second
quarter as we continued to capitalize on the recovery in demand for
new homes and focused on increasing affordability for our customers
and returning profitability to historical levels,” said Eric Lipar,
Chairman and Chief Executive Officer of LGI Homes.
“In the second quarter, we closed 1,854 homes, a
35.7% increase over the first quarter of 2023, and generated over
$645.3 million in revenue. Driving our performance was the strength
of our backlog coming into the second quarter and our ongoing
success at connecting motivated, qualified buyers with our highly
trained sales teams. Our average selling price in the second
quarter was $348,042, a decrease of 2.4%, both year-over-year and
sequentially. Contributing to the decrease was our decision to
start smaller square footage homes with the goal of realigning our
product offering to increase affordability for our customers. The
success of these actions was evident in our second quarter results.
Our net orders increased 124.2% over the same period last year, and
we expect our continued focus on increasing affordability to drive
additional benefits in the coming quarters as more of these smaller
homes become available.
“Increasing profitability remained a key priority during the
quarter and our gross margins reflected that focus. In the second
quarter, our gross margin was 22.0% and our adjusted gross margin
was 23.8%. Both metrics were up 170 basis points over the first
quarter of this year, marking significant progress on the path to
returning our profitability metrics back to historical levels.
“Based on our results to date and our outlook
for the second half of the year, we are raising our full year
closing guidance to a range between 6,500 and 7,200 homes and
raising our full year gross margin guidance to a range between
21.5% and 23.5% and adjusted gross margin guidance to a range
between 23.0% and 25.0%. We are investing in the growth of our
business, bringing new communities online and identifying
opportunities for additional growth in the years to come. We
continue to expect 115 to 125 active communities at year end with
an additional 20% to 30% growth in community count in 2024.”
Mr. Lipar concluded, “Demand trends remain
positive and our performance year to date provides us with
significant momentum as we pursue our goals and objectives for
2023. We are proud of our second quarter results and enter the
second half of the year well positioned with a clear focus on
driving growth, improving profitability and continuing to create
long-term value for our shareholders.”
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 6,500 and 7,200
- 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 21.5% and 23.5%
- Adjusted gross
margin (non-GAAP) as a percentage of home sales revenues between
23.0% and 25.0% with capitalized interest being the primary driver
of 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 24.0% and 25.0%
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 so far in the
third quarter of 2023 and that 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, August 1, 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 65,000 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 Reports on Form 10-Q for the quarters ended March 31,
2023 and June 30, 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) |
|
|
|
June 30, |
|
December 31, |
|
|
2023 |
|
|
2022 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
43,334 |
|
|
$ |
31,998 |
|
Accounts receivable |
|
|
48,166 |
|
|
|
25,143 |
|
Real estate inventory |
|
|
2,889,113 |
|
|
|
2,898,296 |
|
Pre-acquisition costs and deposits |
|
|
26,244 |
|
|
|
25,031 |
|
Property and equipment, net |
|
|
37,786 |
|
|
|
32,997 |
|
Other assets |
|
|
75,011 |
|
|
|
93,159 |
|
Deferred tax assets, net |
|
|
7,867 |
|
|
|
6,186 |
|
Goodwill |
|
|
12,018 |
|
|
|
12,018 |
|
Total assets |
|
$ |
3,139,539 |
|
|
$ |
3,124,828 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Accounts payable |
|
$ |
59,365 |
|
|
$ |
25,287 |
|
Accrued expenses and other liabilities |
|
|
295,765 |
|
|
|
340,128 |
|
Notes payable |
|
|
1,053,397 |
|
|
|
1,117,001 |
|
Total liabilities |
|
|
1,408,527 |
|
|
|
1,482,416 |
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
EQUITY |
|
|
|
|
Common stock, par value $0.01,
250,000,000 shares authorized, 27,485,513 shares issued and
23,546,041 shares outstanding as of June 30, 2023 and 27,245,278
shares issued and 23,305,806 shares outstanding as of December 31,
2022 |
|
|
275 |
|
|
|
272 |
|
Additional paid-in capital |
|
|
315,174 |
|
|
|
306,673 |
|
Retained earnings |
|
|
1,770,585 |
|
|
|
1,690,489 |
|
Treasury stock, at cost,
3,939,472 shares as of June 30, 2023 and December 31, 2022 |
|
|
(355,022 |
) |
|
|
(355,022 |
) |
Total equity |
|
|
1,731,012 |
|
|
|
1,642,412 |
|
Total liabilities and equity |
|
$ |
3,139,539 |
|
|
$ |
3,124,828 |
|
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, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Home sales revenues |
|
$ |
645,270 |
|
|
$ |
723,069 |
|
|
$ |
1,132,627 |
|
|
$ |
1,269,119 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
503,333 |
|
|
|
491,710 |
|
|
|
891,874 |
|
|
|
879,353 |
|
Selling expenses |
|
|
49,225 |
|
|
|
43,269 |
|
|
|
92,030 |
|
|
|
77,667 |
|
General and
administrative |
|
|
27,626 |
|
|
|
29,084 |
|
|
|
57,586 |
|
|
|
57,373 |
|
Operating income |
|
|
65,086 |
|
|
|
159,006 |
|
|
|
91,137 |
|
|
|
254,726 |
|
Other income, net |
|
|
(6,323 |
) |
|
|
(4,006 |
) |
|
|
(12,620 |
) |
|
|
(7,836 |
) |
Net income before income
taxes |
|
|
71,409 |
|
|
|
163,012 |
|
|
|
103,757 |
|
|
|
262,562 |
|
Income tax provision |
|
|
18,275 |
|
|
|
39,636 |
|
|
|
23,661 |
|
|
|
60,500 |
|
Net income |
|
$ |
53,134 |
|
|
$ |
123,376 |
|
|
$ |
80,096 |
|
|
$ |
202,062 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.26 |
|
|
$ |
5.24 |
|
|
$ |
3.41 |
|
|
$ |
8.53 |
|
Diluted |
|
$ |
2.25 |
|
|
$ |
5.20 |
|
|
$ |
3.39 |
|
|
$ |
8.43 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
23,533,097 |
|
|
|
23,552,883 |
|
|
|
23,457,615 |
|
|
|
23,694,241 |
|
Diluted |
|
|
23,608,892 |
|
|
|
23,745,853 |
|
|
|
23,615,206 |
|
|
|
23,968,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Home sales revenues |
|
$ |
645,270 |
|
|
$ |
723,069 |
|
|
$ |
1,132,627 |
|
|
$ |
1,269,119 |
|
Cost of sales |
|
|
503,333 |
|
|
|
491,710 |
|
|
|
891,874 |
|
|
|
879,353 |
|
Gross margin |
|
|
141,937 |
|
|
|
231,359 |
|
|
|
240,753 |
|
|
|
389,766 |
|
Capitalized interest charged to cost of sales |
|
|
9,138 |
|
|
|
5,735 |
|
|
|
15,895 |
|
|
|
10,248 |
|
Purchase accounting adjustments(1) |
|
|
2,708 |
|
|
|
2,026 |
|
|
|
4,744 |
|
|
|
4,308 |
|
Adjusted gross margin |
|
$ |
153,783 |
|
|
$ |
239,120 |
|
|
$ |
261,392 |
|
|
$ |
404,322 |
|
Gross margin %(2) |
|
|
22.0 |
% |
|
|
32.0 |
% |
|
|
21.3 |
% |
|
|
30.7 |
% |
Adjusted gross margin
%(2) |
|
|
23.8 |
% |
|
|
33.1 |
% |
|
|
23.1 |
% |
|
|
31.9 |
% |
(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, 2023 |
|
As of June 30,
2023 |
Reportable Segment |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
|
Community Count at End of Period |
Central |
|
$ |
230,585 |
|
710 |
|
$ |
324,768 |
|
36.3 |
|
6.5 |
|
36 |
Southeast |
|
|
143,649 |
|
448 |
|
|
320,645 |
|
24.7 |
|
6.0 |
|
23 |
Northwest |
|
|
70,404 |
|
143 |
|
|
492,336 |
|
10.0 |
|
4.8 |
|
10 |
West |
|
|
82,739 |
|
214 |
|
|
386,631 |
|
12.3 |
|
5.8 |
|
13 |
Florida |
|
|
117,893 |
|
339 |
|
|
347,767 |
|
18.7 |
|
6.0 |
|
20 |
Total |
|
$ |
645,270 |
|
1,854 |
|
$ |
348,042 |
|
102.0 |
|
6.1 |
|
102 |
|
|
Three Months Ended June 30, 2022 |
|
As of June 30,
2022 |
Reportable Segment |
|
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 |
|
|
Six Months Ended June 30, 2023 |
Reportable Segment |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
AverageMonthlyAbsorption
Rate |
Central |
|
$ |
380,965 |
|
1,163 |
|
$ |
327,571 |
|
35.7 |
|
5.4 |
Southeast |
|
|
248,025 |
|
764 |
|
|
324,640 |
|
24.3 |
|
5.2 |
Northwest |
|
|
145,219 |
|
302 |
|
|
480,858 |
|
9.7 |
|
5.2 |
West |
|
|
161,625 |
|
423 |
|
|
382,092 |
|
12.8 |
|
5.5 |
Florida |
|
|
196,793 |
|
568 |
|
|
346,467 |
|
17.3 |
|
5.5 |
Total |
|
$ |
1,132,627 |
|
3,220 |
|
$ |
351,748 |
|
99.8 |
|
5.4 |
|
|
Six Months Ended June 30, 2022 |
Reportable Segment |
|
Revenues |
|
Home Closings |
|
ASP |
|
Average Community Count |
|
Average MonthlyAbsorption
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and Controlled Lots
The table below shows (i) home closings by
reportable segment for the six months ended June 30, 2023 and
(ii) owned or controlled lots by reportable segment as of
June 30, 2023.
|
|
Six Months EndedJune 30, 2023 |
|
As of June 30, 2023 |
Reportable Segment |
|
Home Closings |
|
Owned(1) |
|
Controlled |
|
Total |
Central |
|
1,163 |
|
21,314 |
|
3,551 |
|
24,865 |
Southeast |
|
764 |
|
14,468 |
|
2,859 |
|
17,327 |
Northwest |
|
302 |
|
6,435 |
|
1,459 |
|
7,894 |
West |
|
423 |
|
9,373 |
|
1,635 |
|
11,008 |
Florida |
|
568 |
|
5,173 |
|
2,959 |
|
8,132 |
Total |
|
3,220 |
|
56,763 |
|
12,463 |
|
69,226 |
(1) |
|
Of the 56,763 owned lots as of June 30, 2023, 43,762 were
raw/under development lots and 13,001 were finished lots. Finished
lots included 1,124 completed homes, including information centers,
and 3,027 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, |
2023(4) |
|
2022(5) |
Net orders(1) |
|
|
4,156 |
|
|
|
2,837 |
|
Cancellation rate(2) |
|
|
20.8 |
% |
|
|
20.8 |
% |
Ending
backlog – homes(3) |
|
|
1,638 |
|
|
|
1,266 |
|
Ending
backlog – value(3) |
|
$ |
601,275 |
|
|
$ |
445,120 |
|
(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, 2023, the Company had 131 units related to bulk
sales agreements associated with its wholesale business. |
(5) |
|
As of June 30, 2022, the Company had 412 units related to bulk
sales agreements associated with its wholesale business. |
CONTACT: |
|
Joshua D.
Fattor |
|
|
Vice President of Investor Relations and Capital Markets |
|
|
(281) 210-2586 |
|
|
investorrelations@lgihomes.com |
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