LGI Homes Reports Record Breaking Second Quarter 2021 Results
LGI Homes reported significant financial growth for Q2 2021, with net income rising 112.4% to $118.1 million, translating to $4.71 diluted EPS. Home sales revenues increased 64.3% to $791.5 million, driven by a 15.4% rise in average sales price. Home closings also saw a 42.4% uptick, totaling 2,856 homes. Despite a 10.1% decline in net orders, the company raised its full-year guidance, anticipating 10,000-10,500 home closings and a higher expected average sales price of $285,000-$295,000.
- Net income surged 112.4% to $118.1 million, or $4.71 diluted EPS.
- Home sales revenues increased by 64.3% to $791.5 million.
- Home closings rose 42.4% to 2,856 homes.
- Gross margin improved to 27.0%, up 250 basis points year-over-year.
- Adjusted gross margin increased to 28.5%, up 190 basis points year-over-year.
- Raised full-year guidance to 10,000-10,500 home closings.
- Net orders declined 10.1% compared to the previous year due to lot constraints.
THE WOODLANDS, Texas, Aug. 03, 2021 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the second quarter and six months ended June 30, 2021.
Second Quarter 2021 Highlights and Comparisons to Second Quarter 2020
- Net Income increased
112.4% to$118.1 million , or$4.75 B asic EPS and$4.71 Diluted EPS - Net Income Before Income Taxes increased
117.4% to$149.1 million - Home Sales Revenues increased
64.3% to$791.5 million - Home Closings increased
42.4% to 2,856 homes - Average Sales Price Per Home Closed increased
15.4% to$277,140 - Gross Margin as a Percentage of Homes Sales Revenues increased 250 basis points to
27.0% - Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 190 basis points to
28.5% - Active Selling Communities at June 30, 2021 decreased
9.4% to 106 - Owned lots increased to 42,492 and Controlled lots increased to 33,418 for total Owned and Controlled lots of 75,910 at June 30, 2021
- Ending Backlog of 4,801 homes at June 30, 2021, an increase of
125.7% - Ending Backlog Value of
$1.4 billion at June 30, 2021, an increase of157.1%
*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.
Six Months Ended June 30, 2021 Highlights and Comparisons to Six Months Ended June 30, 2020
- Net Income increased
121.2% to$217.8 million , or$8.75 B asic EPS and$8.66 Diluted EPS - Net Income Before Income Taxes increased
120.6% to$272.4 million - Home Sales Revenues increased
59.9% to$1.5 billion - Home Closings increased
41.1% to 5,417 homes - Average Sales Price Per Home Closed increased
13.4% to$276,438 - Gross Margin as a Percentage of Homes Sales Revenues increased 300 basis points to
27.0% - Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 240 basis points to
28.5%
*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
$826.2 million at June 30, 2021 including cash and cash equivalents of$111.7 million and$714.5 million of availability under the Company’s revolving credit facility - Net debt to capitalization of
26.8% at June 30, 2021, compared to30.6% at December 31, 2020 - 335,000 shares of common stock repurchased during the second quarter of 2021 at an average price per share of
$166.50 for an aggregate amount of$55.8 million - On June 28, 2021, the Company completed its offering of
$300.0 million of4.000% Senior Notes due 2029. Subsequent to the end of the quarter, on July 15, 2021, the Company redeemed all of its outstanding6.875% Senior Notes due 2026 resulting in the principal payment of$300.0 million and a redemption premium of$10.3 million . Additionally, the Company expensed$3.0 million of deferred financing costs and discounts that were being previously amortized in association with the6.875% Senior Notes due 2026.
Management Comments
“We are pleased to announce our results for the second quarter of 2021” stated Eric Lipar, Chairman and Chief Executive Officer of LGI Homes. “We delivered the strongest second quarter performance in our history, exceeding our expectations and setting new Company records for revenue, closings, absorptions and virtually all our profitability metrics.
“Our second quarter highlights include a
Mr. Lipar continued, “During the quarter our net orders declined
“Based on our accomplishments year-to-date and our positive outlook for the remainder of 2021, we are raising our full year guidance. We now expect to close between 10,000 and 10,500 homes at a higher expected average selling price of
Mr. Lipar concluded, “We are extremely pleased with our record setting accomplishments during the second quarter and expect the positive momentum we have generated to date to carry into second half of the year. We are positioned to meet all of our targets in 2021 and remain focused on delivering the homes in our backlog, maintaining our best-in-class margins and acquiring land that supports our growth objectives and meets our profitability and return thresholds.”
2021 Second Quarter Results
Home closings during the second quarter of 2021 totaled 2,856, an increase of
At the end of the second quarter of 2021, active selling communities decreased to 106 from 117 communities at the end of the second quarter of 2020. The decrease in community count is due to close out of or transition between certain active communities for the second quarter of 2021 as compared to the second quarter of 2020.
Home sales revenues for the second quarter of 2021 were
The average sales price per home closed for the second quarter of 2021 was
Gross margin as a percentage of home sales revenues for the second quarter of 2021 was
Net income for the second quarter of 2021 was
Results for the Six Months Ended June 30, 2021
Home closings during the six months ended June 30, 2021 totaled 5,417, an increase of
Home sales revenues for the six months ended June 30, 2021 were
The average sales price per home closed for the six months ended June 30, 2021 was
Gross margin as a percentage of home sales revenues for the six months ended June 30, 2021 was
Net income for the six months ended June 30, 2021 was
Updated Full Year 2021 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 2021. The Company believes:
- Home closings between 10,000 and 10,500
- Active selling communities at the end of 2021 between 112 and 120
- Average sales price per home closed between
$285,000 and$295,000 - Gross margin as a percentage of home sales revenues between
26.0% and28.0% - Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between
27.5% and29.5% 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
9.0% and9.5% - Effective tax rate for the remainder of 2021 between
20.5% and21.5%
This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2021 are similar to those experienced so far in the third quarter of 2021 and that average sales price per home closed, construction costs, availability of construction materials, availability of land, land development costs and overall absorption rates in the remainder of 2021 are consistent with the Company’s 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 restrictions related to COVID-19 or other governmental restrictions on land development or home construction 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, August 3, 2021 (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. The Earnings Call can also be accessed by dialing (855) 433-0929, or (970) 315-0256 for international participants.
An archive of the Earnings Call 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 and using conference ID “7269003”. This replay will be available until August 10, 2021.
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, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia and Pennsylvania. Since 2018, LGI Homes has been ranked as the 10th largest residential builder in the United States based on units closed. The Company has a notable legacy of more than 18 years of homebuilding operations, over which time it has closed more than 50,000 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 projected 2021 home closings, year-end 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, 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, 2020, 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, 2021 and June 30, 2021, 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, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 111,704 | $ | 35,942 | ||||
| Accounts receivable | 69,522 | 115,939 | ||||||
| Real estate inventory | 1,750,860 | 1,569,489 | ||||||
| Pre-acquisition costs and deposits | 38,817 | 37,213 | ||||||
| Property and equipment, net | 8,570 | 3,618 | ||||||
| Other assets | 61,249 | 44,882 | ||||||
| Deferred tax assets, net | 6,097 | 6,986 | ||||||
| Goodwill | 12,018 | 12,018 | ||||||
| Total assets | $ | 2,058,837 | $ | 1,826,087 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | 57,578 | $ | 13,676 | ||||
| Accrued expenses and other liabilities | 131,197 | 135,008 | ||||||
| Notes payable | 583,656 | 538,398 | ||||||
| Total liabilities | 772,431 | 687,082 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY | ||||||||
| Common stock, par value | 269 | 267 | ||||||
| Additional paid-in capital | 281,808 | 270,598 | ||||||
| Retained earnings | 1,152,069 | 934,277 | ||||||
| Treasury stock, at cost, 2,309,214 shares and 1,757,993 shares, respectively | (147,740 | ) | (66,137 | ) | ||||
| Total equity | 1,286,406 | 1,139,005 | ||||||
| Total liabilities and equity | $ | 2,058,837 | $ | 1,826,087 | ||||
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, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Home sales revenues | $ | 791,512 | $ | 481,602 | $ | 1,497,465 | $ | 936,329 | ||||||||
| Cost of sales | 577,433 | 363,629 | 1,093,437 | 711,792 | ||||||||||||
| Selling expenses | 44,796 | 29,960 | 87,579 | 62,723 | ||||||||||||
| General and administrative | 23,276 | 20,179 | 47,999 | 40,102 | ||||||||||||
| Operating income | 146,007 | 67,834 | 268,450 | 121,712 | ||||||||||||
| Loss on extinguishment of debt | 662 | — | 662 | — | ||||||||||||
| Other income, net | (3,776 | ) | (763 | ) | (4,609 | ) | (1,774 | ) | ||||||||
| Net income before income taxes | 149,121 | 68,597 | 272,397 | 123,486 | ||||||||||||
| Income tax provision | 30,987 | 12,973 | 54,605 | 25,023 | ||||||||||||
| Net income | $ | 118,134 | $ | 55,624 | $ | 217,792 | $ | 98,463 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 4.75 | $ | 2.22 | $ | 8.75 | $ | 3.91 | ||||||||
| Diluted | $ | 4.71 | $ | 2.21 | $ | 8.66 | $ | 3.88 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 24,844,644 | 25,074,826 | 24,897,462 | 25,198,952 | ||||||||||||
| Diluted | 25,061,812 | 25,153,076 | 25,138,691 | 25,366,106 | ||||||||||||
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, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Home sales revenues | $ | 791,512 | $ | 481,602 | $ | 1,497,465 | $ | 936,329 | ||||||||
| Cost of sales | 577,433 | 363,629 | 1,093,437 | 711,792 | ||||||||||||
| Gross margin | 214,079 | 117,973 | 404,028 | 224,537 | ||||||||||||
| Capitalized interest charged to cost of sales | 10,442 | 8,684 | 21,115 | 17,614 | ||||||||||||
| Purchase accounting adjustments (1) | 1,446 | 1,252 | 2,258 | 1,875 | ||||||||||||
| Adjusted gross margin | $ | 225,967 | $ | 127,909 | $ | 427,401 | $ | 244,026 | ||||||||
| Gross margin % (2) | 27.0 | % | 24.5 | % | 27.0 | % | 24.0 | % | ||||||||
| Adjusted gross margin % (2) | 28.5 | % | 26.6 | % | 28.5 | % | 26.1 | % | ||||||||
(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 June 30, 2021 | |||||||||||||||||
| Revenues | Home Closings | ASP | Average Community Count | Average Monthly Absorption Rate | |||||||||||||
| Central | $ | 347,963 | 1,348 | $ | 258,133 | 38.0 | 11.8 | ||||||||||
| Southeast | 159,714 | 632 | 252,712 | 25.7 | 8.2 | ||||||||||||
| Northwest | 106,197 | 255 | 416,459 | 10.3 | 8.3 | ||||||||||||
| West | 80,813 | 232 | 348,332 | 10.7 | 7.2 | ||||||||||||
| Florida | 96,825 | 389 | 248,907 | 20.3 | 6.4 | ||||||||||||
| Total | $ | 791,512 | 2,856 | $ | 277,140 | 105.0 | 9.1 | ||||||||||
| Three Months Ended June 30, 2020 | |||||||||||||||||
| Revenues | Home Closings | ASP | Average Community Count | Average Monthly Absorption Rate | |||||||||||||
| Central | $ | 167,924 | 747 | $ | 224,798 | 34.0 | 7.3 | ||||||||||
| Southeast | 128,577 | 559 | 230,013 | 37.3 | 5.0 | ||||||||||||
| Northwest | 56,369 | 153 | 368,425 | 11.3 | 4.5 | ||||||||||||
| West | 60,592 | 236 | 256,746 | 15.3 | 5.1 | ||||||||||||
| Florida | 68,140 | 310 | 219,806 | 18.0 | 5.7 | ||||||||||||
| Total | $ | 481,602 | 2,005 | $ | 240,200 | 116.0 | 5.8 | ||||||||||
| Six Months Ended June 30, 2021 | |||||||||||||||||
| Revenues | Home Closings | ASP | Average Community Count | Average Monthly Absorption Rate | |||||||||||||
| Central | $ | 636,713 | 2,475 | $ | 257,258 | 37.6 | 11.0 | ||||||||||
| Southeast | 296,265 | 1,180 | 251,072 | 26.7 | 7.4 | ||||||||||||
| Northwest | 224,388 | 551 | 407,238 | 10.5 | 8.7 | ||||||||||||
| West | 161,961 | 481 | 336,717 | 10.7 | 7.5 | ||||||||||||
| Florida | 178,138 | 730 | 244,025 | 20.2 | 6.0 | ||||||||||||
| Total | $ | 1,497,465 | 5,417 | $ | 276,438 | 105.7 | 8.5 | ||||||||||
| Six Months Ended June 30, 2020 | |||||||||||||||||
| Revenues | Home Closings | ASP | Average Community Count | Average Monthly Absorption Rate | |||||||||||||
| Central | $ | 333,699 | 1,488 | $ | 224,260 | 34.0 | 7.3 | ||||||||||
| Southeast | 217,024 | 962 | 225,597 | 34.2 | 4.7 | ||||||||||||
| Northwest | 158,317 | 426 | 371,636 | 11.8 | 6.0 | ||||||||||||
| West | 119,077 | 472 | 252,282 | 15.0 | 5.2 | ||||||||||||
| Florida | 108,212 | 492 | 219,943 | 17.3 | 4.7 | ||||||||||||
| Total | $ | 936,329 | 3,840 | $ | 243,836 | 112.3 | 5.7 | ||||||||||
Owned and Controlled Lots
The table below shows (i) home closings by reportable segment for the six months ended June 30, 2021 and (ii) owned or controlled lots by reportable segment as of June 30, 2021.
| Six Months Ended June 30, 2021 | As of June 30, 2021 | |||||||||||
| Reportable Segment | Home Closings | Owned (1) | Controlled | Total | ||||||||
| Central | 2,475 | 19,110 | 13,529 | 32,639 | ||||||||
| Southeast | 1,180 | 11,944 | 7,201 | 19,145 | ||||||||
| Northwest | 551 | 3,685 | 4,899 | 8,584 | ||||||||
| West | 481 | 4,942 | 4,776 | 9,718 | ||||||||
| Florida | 730 | 2,811 | 3,013 | 5,824 | ||||||||
| Total | 5,417 | 42,492 | 33,418 | 75,910 | ||||||||
(1) Of the 42,492 owned lots as of June 30, 2021, 29,885 were raw/under development lots and 12,607 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):
| Backlog Data | Six Months Ended June 30, | |||||||
| 2021 (4) | 2020 (5) | |||||||
| Net orders (1) | 7,254 | 4,734 | ||||||
| Cancellation rate (2) | 14.8 | % | 21.8 | % | ||||
| Ending backlog – homes (3) | 4,801 | 2,127 | ||||||
| Ending backlog – value (3) | $ | 1,434,382 | $ | 558,007 | ||||
(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, 2021, the Company had 940 units related to bulk sales agreements associated with its wholesale business.
(5) As of June 30, 2020, the Company had 208 units related to bulk sales agreements associated with its wholesale business.
CONTACT: Joshua D. Fattor
Vice President of Investor Relations
(281) 210-2619
investorrelations@lgihomes.com
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