• LGI Homes Reports Third Quarter 2022 Results and Updates Full Year 2022 Guidance

    المصدر: Nasdaq GlobeNewswire / 01 نوفمبر 2022 06:00:01   America/Chicago

    THE WOODLANDS, Texas, Nov. 01, 2022 (GLOBE NEWSWIRE) -- 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 Average
    Monthly
    Absorption 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 Average
    Monthly
    Absorption 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 Average
    Monthly
    Absorption 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 Monthly
    Absorption 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. Fattor
    Vice President of Investor Relations
    (281) 210-2586
    investorrelations@lgihomes.com

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