LGI Homes, Inc. Reports Third Quarter And YTD 2016 Results

THE WOODLANDS, Texas, Nov. 08, 2016 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the third quarter 2016 and the nine months ended September 30, 2016.

Third Quarter 2016 Highlights and Comparisons to Third Quarter 2015
  • Net Income of $19.5 million, or $0.92 Basic EPS and $0.86 Diluted EPS
  • Net Income Before Income Taxes increased 27.0% to $29.5 million
  • Home Closings increased 12.6% to 1,052 homes
  • Home Sales Revenues increased 24.3% to $216.3 million
  • Average Home Sales Price increased 10.4% to $205,613
  • Gross Margin as a Percentage of Home Sales Revenues was 26.3% as compared to 26.4%
  • Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 27.7% as compared to 27.5%
  • Active Selling Communities at quarter-end increased to 59 from 50
  • Total Owned and Controlled Lots increased to 29,856 lots

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.

Nine Months Ended September 30, 2016 Highlights and Comparisons to Nine Months Ended September 30, 2015
  • Net Income of $51.8 million, or $2.51 Basic EPS and $2.39 Diluted EPS
  • Net Income Before Income Taxes increased 40.1% to $78.7 million
  • Home Closings increased 23.0% to 3,024 homes
  • Home Sales Revenues increased 32.6% to $601.5 million
  • Average Home Sales Price increased 7.8% to $198,905
  • Gross Margin as a Percentage of Home Sales Revenues was 26.1% as compared to 26.5%
  • Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 27.5% as compared to 27.8%

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.

Management Comments

"LGI Homes delivered another impressive quarter of results highlighted by strong year-over-year growth in home closings, revenues, average sales price, net income and earnings per share," said Eric Lipar, the Company's Chief Executive Officer and Chairman of the Board. "With a solid start to the fourth quarter, we maintain an optimistic outlook on the remainder of the year and believe we are well positioned to deliver strong results for the full year 2016."

2016 Third Quarter Results

Home closings during the third quarter of 2016 increased 12.6% to 1,052 from 934 home closings during the third quarter of 2015. Active selling communities increased to 59 at the end of the third quarter of 2016, up from 50 communities at the end of the third quarter of 2015.

Home sales revenues for the third quarter of 2016 were $216.3 million, an increase of $42.3 million, or 24.3%, over the third quarter of 2015. The increase in home sales revenues is primarily due to the increase in the number of homes closed and an increase in the average home sales price.

The average home sales price was $205,613 for the third quarter of 2016, an increase of $19,365, or 10.4%, over the third quarter of 2015. This increase is primarily due to changes in product mix, price points in new markets, and a favorable pricing environment.

Gross margin as a percentage of home sales revenues for the third quarter of 2016 was 26.3% as compared to 26.4% for the third quarter of 2015.  Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the third quarter of 2016 was 27.7% as compared to 27.5% for the third quarter of 2015. 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.

Net income of $19.5 million, or $0.92 per basic share and $0.86 per diluted share, for the third quarter of 2016 increased $4.0 million, or 26.2%, from $15.4 million for the third quarter of 2015. This increase is primarily attributable to the 12.6% increase in homes closed, the increase in average home sales price, and operating leverage realized related to selling, general and administrative expenses, net of increased expenses associated with new communities.

Results for the Nine Months Ended September 30, 2016

Home closings for the nine months ended September 30, 2016 increased 23.0% to 3,024 from 2,458 during the nine months ended September 30, 2015.

Home sales revenues for the nine months ended September 30, 2016 increased 32.6% to $601.5 million compared to the nine months ended September 30, 2015. The increase in home sales revenues is primarily due to the increase in the number of homes closed and an increase in the average home sales price.

The average home sales price was $198,905 for the nine months ended September 30, 2016, an increase of $14,417, or 7.8%, over the nine months ended September 30, 2015. Consistent with our third quarter 2016 results, the increase is primarily due to changes in product mix, price points in new markets, and a favorable pricing environment.

Gross margin as a percentage of home sales revenues for the nine months ended September 30, 2016 was 26.1% as compared to 26.5% for the nine months ended September 30, 2015.  Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the nine months ended September 30, 2016 was 27.5% as compared to 27.8% for nine months ended September 30, 2015. 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.

Net income of $51.8 million, or $2.51 per basic share and $2.39 per diluted share, for the nine months ended September 30, 2016 increased $14.7 million, or 39.7%, from $37.1 million for the nine months ended September 30, 2015. This increase is primarily attributable to the 23.0% increase in homes closed, the increase in average home sales price, and operating leverage realized related to selling, general and administrative expenses, net of increased expenses associated with new communities.

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 8, 2016 (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.

Participants may access the live webcast by visiting the Investor Relations section of the Company's website at www.LGIHomes.com. The Earnings Call can also be accessed by dialing (855) 433-0929, or (970) 315-0256 for international participants.

An archive of the webcast will be available on the Company's website for approximately 12 months. A replay of the Earnings Call will also be available later that day by calling (855) 859-2056, or (404) 537-3406, using conference id "10095800". This replay will be available until November 15, 2016.

About LGI Homes, Inc.

Headquartered in The Woodlands, Texas, LGI Homes, Inc. engages in the design, construction and sale of homes in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington and Tennessee. The Company has a notable legacy of more than 13 years of homebuilding operations, over which time it has closed over 15,000 homes. For more information about the Company and its new home developments 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 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 "believe," "estimate," "project," "anticipate," "expect," "seek," "predict," "contemplate," "continue," "possible," "intent," "may," "might," "will," "could," "would," "should," "forecast," or "assume" or, in each case, their negative, or other variations or comparable terminology. Any discussion of outlook or guidance for full year 2016 discussed on the Earnings Call assumes that general economic conditions for the remainder of the year, including interest rates, and mortgage availability in the last three months of 2016 are similar to those in the first nine months of 2016, and that home sales price, construction costs, availability of land, land development costs and overall absorption rates for the last three months of 2016 are consistent with the first nine months of 2016. 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, 2015, including the "Cautionary Statement about Forward-Looking Statements" subsection within the "Risk Factors" section, 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
(In thousands, except share data)
 
    September 30,   December 31,
    2016   2015
ASSETS   (Unaudited)    
Cash and cash equivalents   $ 45,915     $ 37,568  
Accounts receivable   15,641     17,325  
Real estate inventory   676,917     531,228  
Pre-acquisition costs and deposits   11,450     7,001  
Property and equipment, net   2,037     2,108  
Other assets   4,603     11,238  
Goodwill and intangible assets, net   12,049     12,234  
Total assets   $ 768,612     $ 618,702  
         
LIABILITIES AND EQUITY        
Accounts payable   $ 18,572     $ 24,020  
Accrued expenses and other liabilities   62,779     40,006  
Deferred tax liabilities, net   1,774     2,726  
Notes payable   354,932     304,561  
Total liabilities   438,057     371,313  
         
COMMITMENTS AND CONTINGENCIES        
EQUITY        
Common stock, par value $0.01, 250,000,000 shares authorized, 22,282,514 shares issued and 21,282,514 shares outstanding as of September 30, 2016 and 21,270,389 shares issued and 20,270,389 shares outstanding as of December 31, 2015   223     213  
Additional paid-in capital   206,905     175,575  
Retained earnings   139,977     88,151  
Treasury stock, at cost, 1,000,000 shares   (16,550 )   (16,550 )
Total equity   330,555     247,389  
Total liabilities and equity   $ 768,612     $ 618,702  
 

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,
    2016   2015   2016   2015
Home sales revenues   $ 216,304     $ 173,956     $ 601,490     $ 453,472  
                 
Cost of sales   159,483     127,949     444,205     333,430  
Selling expenses   17,007     14,057     48,965     39,032  
General and administrative   10,715     8,902     31,155     25,050  
Operating income   29,099     23,048     77,165     55,960  
Other income, net   (389 )   (173 )   (1,560 )   (228 )
Net income before income taxes   29,488     23,221     78,725     56,188  
Income tax provision   10,021     7,801     26,899     19,089  
Net income   $ 19,467     $ 15,420     $ 51,826     $ 37,099  
Earnings per share:                
Basic   $ 0.92     $ 0.77     $ 2.51     $ 1.86  
Diluted   $ 0.86     $ 0.76     $ 2.39     $ 1.72  
                 
Weighted average shares outstanding:                
Basic   21,061,874     19,923,079     20,633,200     19,894,859  
Diluted   22,674,021     20,318,537     21,654,284     21,665,289  

Non-GAAP Measures

In addition to the results reported in accordance with U.S. 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 the Company's 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):
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016   2015   2016   2015
Home sales revenues   $ 216,304     $ 173,956     $ 601,490     $ 453,472  
Cost of sales   159,483     127,949     444,205     333,430  
Gross margin   56,821     46,007     157,285     120,042  
Capitalized interest charged to cost of sales   2,980     1,824     7,431     4,376  
Purchase accounting adjustments (a)   73     39     454     1,859  
Adjusted gross margin   $ 59,874     $ 47,870     $ 165,170     $ 126,277  
Gross margin % (b)   26.3 %   26.4 %   26.1 %   26.5 %
Adjusted gross margin % (b)   27.7 %   27.5 %   27.5 %   27.8 %

(a)  Adjustments result from the application of purchase accounting related to prior acquisitions and represent the amount of the fair value step-up adjustments for real estate inventory included in cost of sales.

(b)  Calculated as a percentage of home sales revenues.

Home Sales Revenues and Home Closings by Division (Dollars in thousands)
    Three Months Ended September 30,
    2016   2015
    Revenues   Closings   Revenues   Closings
Texas   $ 113,761     553     $ 93,661     491  
Southwest   41,489     187     30,333     158  
Southeast   24,248     137     26,588     159  
Florida   30,283     155     23,374     126  
Northwest   6,523     20          
Total home sales   $ 216,304     1,052     $ 173,956     934  

    Nine Months Ended September 30,
    2016   2015
    Revenues   Closings   Revenues   Closings
Texas   $ 309,325     1,548     $ 256,146     1,361  
Southwest   118,372     545     74,006     380  
Southeast   83,309     478     68,731     423  
Florida   80,912     422     54,589     294  
Northwest   9,572     31          
Total home sales   $ 601,490     3,024     $ 453,472     2,458  

CONTACT:Investor Relations:Caitlin Stiles, (281) 210-2619InvestorRelations@LGIHomes.com

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