UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K |
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): November 7, 2017
LGI HOMES, INC. (Exact name of registrant as specified in its charter) | ||
Delaware | 001-36126 | 46-3088013 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||
1450 Lake Robbins Drive, Suite 430, The Woodlands, Texas | 77380 | |
(Address of principal executive offices) | (Zip Code) | |
(281) 362-8998
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 2.02 | Results of Operations and Financial Condition. |
On November 7, 2017, LGI Homes, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
None of the information furnished in this Item 2.02 and the accompanying exhibit will be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor will it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
Item 7.01 | Regulation FD Disclosure. |
The information set forth in Item 2.02 above and in Exhibit 99.1 to this Current Report on Form 8-K is incorporated herein by reference.
None of the information furnished in this Item 7.01 will be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor will it be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits. | |
99.1 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 7, 2017 | ||
LGI HOMES, INC. | ||
By: | /s/ Eric T. Lipar | |
Eric T. Lipar | ||
Chief Executive Officer and Chairman of the Board | ||
EXHIBIT 99.1
LGI Homes, Inc. Reports Record Setting Third Quarter and YTD 2017 Results and Increases 2017 Guidance
THE WOODLANDS, Texas, November 7, 2017 (GLOBE NEWSWIRE) - LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the third quarter 2017 and the nine months ended September 30, 2017.
Third Quarter 2017 Results and Comparisons to Third Quarter 2016
• | Net Income increased 73.0% to $33.7 million, or $1.55 Basic EPS and $1.40 Diluted EPS |
• | Net Income Before Income Taxes increased 72.5% to $50.9 million |
• | Home Sales Revenues increased 69.2% to $365.9 million |
• | Home Closings increased 64.4% to 1,729 homes |
• | Average Home Sales Price increased 2.9% to $211,623 |
• | Gross Margin as a Percentage of Homes Sales Revenues was 25.1% as compared to 26.3% |
• | Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 26.5% as compared to 27.7% |
• | Ending backlog increased 70.9% to 1,328 units |
• | Active Selling Communities at September 30, 2017 increased to 77 from 59 |
• | 37,063 Total Owned and Controlled Lots at September 30, 2017 |
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, 2017 Results and Comparisons to Nine Months Ended September 30, 2016
• | Net Income increased 49.9% to $77.7 million, or $3.60 Basic EPS and $3.32 Diluted EPS |
• | Net Income Before Income Taxes increased 47.8% to $116.4 million |
• | Home Sales Revenues increased 41.8% to $853.0 million |
• | Home Closings increased 32.3% to 4,001 homes |
• | Average Home Sales Price increased 7.2% to $213,193 |
• | Gross Margin as a Percentage of Homes Sales Revenues was 26.0% as compared to 26.1% |
• | Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 27.4% as compared to 27.5% |
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
“This has been a phenomenal year to date and our results have been outstanding,” said Eric Lipar, the Company's Chief Executive Officer and Chairman of the Board. “With a record-setting 1,729 home closings during the third quarter, we continued our trend of strong results and profitability highlighted by above average absorption of 7.6 closings per community per month. These results are a direct reflection of the dedication of our employees and our effective systems and processes that have enabled us to expand and replicate our success.” Lipar concluded, “Based on our solid results during the first nine months of the year, we are well positioned to end the year very strong and are therefore raising our guidance. For the full year 2017, we now anticipate to close more than 5,400 homes and believe basic EPS will be in the range of $4.75 to $5.15 per basic share.”
2017 Third Quarter Results
Home closings during the third quarter of 2017 increased 64.4% to 1,729 from 1,052 during the third quarter of 2016. Active selling communities increased to 77 at the end of the third quarter of 2017, up from 59 communities at the end of the third quarter of 2016.
Home sales revenues for the third quarter of 2017 were $365.9 million, an increase of $149.6 million, or 69.2% over the third quarter of 2016. The increase in home sales revenues is due to both the increase in the number of homes closed and an increase in the average home sales price.
The average home sales price was $211,623 for the third quarter of 2017, an increase of 2.9% over the third quarter of 2016. This increase is largely attributable 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 2017 was 25.1% as compared to 26.3% for the third quarter of 2016. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the third quarter of 2017 was 26.5% as compared to 27.7% for the third quarter of 2016. This decrease is primarily due to a combination of higher construction costs, and to a lesser extent due to 96 wholesale home closings during the third quarter of 2017, partially offset by higher average home sales prices. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.
Net income of $33.7 million, or $1.55 per basic share and $1.40 per diluted share, for the third quarter of 2017 increased $14.2 million, or 73.0%, from $19.5 million for the third quarter of 2016. This increase is primarily attributable to the 64.4% increase in homes closed, the 2.9% increase in average home sales price, and operating leverage realized related to selling, general, and administrative expenses.
Results for the Nine Months Ended September 30, 2017
Home closings for the nine months ended September 30, 2017 increased 32.3% to 4,001 from 3,024 during the nine months ended September 30, 2016.
Home sales revenues for the nine months ended September 30, 2017 increased 41.8% to $853.0 million compared to the nine months ended September 30, 2016. 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 $213,193 for the nine months ended September 30, 2017, an increase of $14,288, or 7.2%, over the nine months ended September 30, 2016. This increase is largely attributable 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, 2017 was 26.0% as compared to 26.1% for the nine months ended September 30, 2016. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the nine months ended September 30, 2017 was 27.4% as compared to 27.5% for the nine months ended September 30, 2016. This decrease is primarily due to a combination of higher construction costs and lot costs offset by higher average home sales price, and to a lesser extent due to 168 wholesale home closings during the nine months ended September 30,2017. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.
Net income of $77.7 million, or $3.60 per basic share and $3.32 per diluted share, for the nine months ended September 30, 2017 increased $25.8 million, or 49.9%, from $51.8 million for the nine months ended September 30, 2016. This increase is primarily attributable to the 32.3% increase in homes closed, the 7.2% increase in average home sales price, and operating leverage realized related to selling, general, and administrative expenses.
Outlook
Subject to the caveats in the Forward-Looking Statements section of this press release, the Company offers the following updated guidance for 2017. The Company believes it will have between 75 and 80 active selling communities at the end of 2017, close more than 5,400 homes in 2017, and generate basic EPS between $4.75 and $5.15 per share during 2017. In addition, the Company believes 2017 gross margin as a percentage of home sales revenues will be in the range of 25.0% and 27.0% and 2017 adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be
similar to previous years in the range of 26.5% and 28.5% with capitalized interest accounting for substantially all of the difference between gross margin and adjusted gross margin. The Company also believes that the average home sales price in 2017 will be between $210,000 and $220,000. This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2017 are similar to those in the first nine months of 2017 and that average home sales price, construction costs, availability of land, land development costs and overall absorption rates for 2017 are consistent with the Company’s recent experience.
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 7, 2017 (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 “7299719”. This replay will be available until November 14, 2017.
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 and Minnesota. The Company has a notable legacy of more than 14 years of homebuilding operations, over which time it has closed over 20,000 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 2017 home closings, year-end selling communities, basic earnings per share, gross margins as a percentage of home sales revenues, adjusted gross margins as a percentage of home sales revenue and average home sales price, 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 “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. 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, 2016, 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
(Unaudited)
(In thousands, except share data)
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 47,968 | $ | 49,518 | ||||
Accounts receivable | 32,716 | 17,055 | ||||||
Real estate inventory | 902,568 | 717,681 | ||||||
Pre-acquisition costs and deposits | 14,159 | 10,651 | ||||||
Property and equipment, net | 1,862 | 1,960 | ||||||
Other assets | 9,452 | 5,631 | ||||||
Deferred tax assets, net | 2,189 | — | ||||||
Goodwill | 12,018 | 12,018 | ||||||
Total assets | $ | 1,022,932 | $ | 814,514 | ||||
LIABILITIES AND EQUITY | ||||||||
Accounts payable | $ | 26,071 | $ | 12,277 | ||||
Accrued expenses and other liabilities | 86,149 | 46,389 | ||||||
Deferred tax liabilities, net | — | 164 | ||||||
Notes payable | 464,058 | 400,483 | ||||||
Total liabilities | 576,278 | 459,313 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY | ||||||||
Common stock, par value $0.01, 250,000,000 shares authorized, 22,737,859 shares issued and 21,737,859 shares outstanding as of September 30, 2017 and 22,311,310 shares issued and 21,311,310 shares outstanding as of December 31, 2016 | 227 | 223 | ||||||
Additional paid-in capital | 222,129 | 208,346 | ||||||
Retained earnings | 240,848 | 163,182 | ||||||
Treasury stock, at cost, 1,000,000 shares | (16,550 | ) | (16,550 | ) | ||||
Total equity | 446,654 | 355,201 | ||||||
Total liabilities and equity | $ | 1,022,932 | $ | 814,514 | ||||
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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Home sales revenues | $ | 365,896 | $ | 216,304 | $ | 852,985 | $ | 601,490 | ||||||||
Cost of sales | 274,000 | 159,483 | 631,242 | 444,205 | ||||||||||||
Selling expenses | 26,018 | 17,007 | 66,318 | 48,965 | ||||||||||||
General and administrative | 15,431 | 10,715 | 40,376 | 31,155 | ||||||||||||
Operating income | 50,447 | 29,099 | 115,049 | 77,165 | ||||||||||||
Other income, net | (430 | ) | (389 | ) | (1,312 | ) | (1,560 | ) | ||||||||
Net income before income taxes | 50,877 | 29,488 | 116,361 | 78,725 | ||||||||||||
Income tax provision | 17,190 | 10,021 | 38,695 | 26,899 | ||||||||||||
Net income | $ | 33,687 | $ | 19,467 | $ | 77,666 | $ | 51,826 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.55 | $ | 0.92 | $ | 3.60 | $ | 2.51 | ||||||||
Diluted | $ | 1.40 | $ | 0.86 | $ | 3.32 | $ | 2.39 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 21,668,585 | 21,061,874 | 21,544,747 | 20,633,200 | ||||||||||||
Diluted | 24,050,385 | 22,674,021 | 23,413,467 | 21,654,284 | ||||||||||||
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 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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Home sales revenues | $ | 365,896 | $ | 216,304 | $ | 852,985 | $ | 601,490 | ||||||||
Cost of sales | 274,000 | 159,483 | 631,242 | 444,205 | ||||||||||||
Gross margin | 91,896 | 56,821 | 221,743 | 157,285 | ||||||||||||
Capitalized interest charged to cost of sales | 5,135 | 2,980 | 11,548 | 7,431 | ||||||||||||
Purchase accounting adjustments (a) | 54 | 73 | 226 | 454 | ||||||||||||
Adjusted gross margin | $ | 97,085 | $ | 59,874 | $ | 233,517 | $ | 165,170 | ||||||||
Gross margin % (b) | 25.1 | % | 26.3 | % | 26.0 | % | 26.1 | % | ||||||||
Adjusted gross margin % (b) | 26.5 | % | 27.7 | % | 27.4 | % | 27.5 | % | ||||||||
(a) | 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. |
(b) | Calculated as a percentage of home sales revenues. |
Home Sales Revenues and Closings by Division
(Dollars in thousands)
Three Months Ended September 30, | ||||||||||||||
2017 | 2016 | |||||||||||||
Revenues | Closings | Revenues | Closings | |||||||||||
Central | $ | 165,870 | 830 | $ | 113,761 | 553 | ||||||||
Southwest | 66,002 | 255 | 41,489 | 187 | ||||||||||
Southeast | 54,331 | 284 | 24,248 | 137 | ||||||||||
Florida | 56,171 | 288 | 30,283 | 155 | ||||||||||
Northwest | 23,522 | 72 | 6,523 | 20 | ||||||||||
Total home sales | $ | 365,896 | 1,729 | $ | 216,304 | 1,052 | ||||||||
Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | |||||||||||||
Revenues | Closings | Revenues | Closings | |||||||||||
Central | $ | 370,550 | 1,824 | $ | 309,325 | 1,548 | ||||||||
Southwest | 162,386 | 635 | 118,372 | 545 | ||||||||||
Southeast | 133,665 | 710 | 83,309 | 478 | ||||||||||
Florida | 129,345 | 656 | 80,912 | 422 | ||||||||||
Northwest | 57,039 | 176 | 9,572 | 31 | ||||||||||
Total home sales | $ | 852,985 | 4,001 | $ | 601,490 | 3,024 | ||||||||
Backlog
(Dollars in thousands)
Backlog Data | Nine Months Ended September 30, | |||||||
2017 | 2016 | |||||||
Net orders | 4,883 | 3,278 | ||||||
Cancellation rate | 24.1 | % | 23.7 | % | ||||
Ending backlog – homes | 1,328 | 777 | ||||||
Ending backlog – value | $ | 308,131 | $ | 164,971 | ||||
CONTACT: Investor Relations:
Caitlin Stiles, (281) 210-2619
InvestorRelations@LGIHomes.com
Source: LGI Homes