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LGI Homes, Inc. Reports Record Setting Second Quarter and YTD 2016 Results and Increases EPS Guidance

THE WOODLANDS, Texas, Aug. 09, 2016 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the second quarter 2016 and the six months ended June 30, 2016.

Second Quarter 2016 Highlights and Comparisons to Second Quarter 2015

  • Net Income of $20.7 million, or $1.01 Basic EPS and $0.96 Diluted EPS

  • Net Income Before Income Taxes increased 47.8% to $31.4 million

  • Home Closings increased 32.2% to 1,128 homes

  • Home Sales Revenues increased 40.2% to $222.7 million

  • Average Home Sales Price increased 6.0% to $197,450

  • Gross Margin as a Percentage of Home Sales Revenues was 26.5% as compared to 26.8%

  • Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 27.8% as compared to 28.2%

  • Active Selling Communities at quarter-end increased to 56 from 45

  • Total Owned and Controlled Lots increased to 28,040 lots

Please see “Non-GAAP Measures” for a reconciliation of Adjusted Gross Margin to Gross Margin.

Six Months Ended June 30, 2016 Highlights and Comparisons to Six Months Ended June 30, 2015

  • Net Income of $32.4 million, or $1.58 Basic EPS and $1.54 Diluted EPS

  • Net Income Before Income Taxes increased 49.4% to $49.2 million

  • Home Closings increased 29.4% to 1,972 homes

  • Home Sales Revenues increased 37.8% to $385.2 million

  • Average Home Sales Price increased 6.5% to $195,328

  • 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 27.3% as compared to 28.1%

Please see “Non-GAAP Measures” for a reconciliation of Adjusted Gross Margin to Gross Margin.

Management Comments

“We are proud to announce an outstanding second quarter at LGI Homes highlighting record-setting closings, revenues, average sales price, net income and EPS,” stated Eric Lipar, the Company’s Chief Executive Office and Chairman of the Board. “Based on these solid results and our achievements during the first half of the year, we believe we are well positioned to finish the year strong and are updating our guidance. For the full year 2016, we now anticipate closings to be between 4,000 and 4,300 homes and are increasing the range of our average sales price guidance. In addition, we are raising our full year EPS guidance to $3.20 to $3.70 per basic share based on our expectation to produce gross margin between 25.2% and 27.2%, adjusted gross margin between 26.5% to 28.5% and continued SG&A leverage.”

2016 Second Quarter Results

Home closings during the second quarter of 2016 increased 32.2% to 1,128 from 853 home closings during the second quarter of 2015. Active selling communities increased to 56 at the end of the second quarter of 2016, up from 45 communities at the end of the second quarter of 2015.

Home sales revenues for the second quarter of 2016 were $222.7 million, an increase of $63.9 million, or 40.2% over the second 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 $197,450 for the second quarter of 2016, an increase of $11,253, or 6.0%, over the second quarter of 2015. 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 second quarter of 2016 was 26.5% as compared to 26.8% for the second quarter of 2015. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the second quarter of 2016 was 27.8% as compared to 28.2% for the second quarter of 2015. The decreases year over year reflect a combination of increased construction costs and lot costs partially offset by higher average home sales price. Please see "Non-GAAP Measures" for a reconciliation of adjusted gross margin to gross margin.

Net income of $20.7 million, or $1.01 per basic share and $0.96 per diluted share, for the second quarter of 2016 increased $6.7 million, or 47.8%, from $14.0 million for the second quarter of 2015. This increase is primarily attributable to the 32.2% increase in homes closed, the increase in average home sales price, and operating leverage realized related to selling, general and administrative expenses.

Results for the Six Months Ended June 30, 2016

Home closings for the six months ended June 30, 2016 increased 29.4% to 1,972 from 1,524 during the first six months of 2015.

Home sales revenues for the six months ended June 30, 2016 increased 37.8% to $385.2 million compared to the six months ended June 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 $195,328 for the six months ended June 30, 2016, an increase of $11,919, or 6.5%, over the six months ended June 30, 2015. Consistent with our second 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 six months ended June 30, 2016 was 26.1% as compared to 26.5% for the six months ended June 30, 2015. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the six months ended June 30, 2016 was 27.3% as compared to 28.1% for six months ended June 30, 2015. This decrease reflects a combination of increased construction costs and lot costs partially offset by higher average home sales price. Please see "Non-GAAP Measures" for a reconciliation of adjusted gross margin to gross margin.

Net income of $32.4 million, or $1.58 per basic share and $1.54 per diluted share, for the six months ended June 30, 2016 increased $10.7 million, or 49.3%, from $21.7 million for the six months ended June 30, 2015. This increase is primarily attributable to the 29.4% 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.

Updated Outlook
Subject to the caveats in the Forward-Looking Statements section of this press release, the Company offers the following updated guidance for 2016. The Company believes it will have between 62 and 67 active selling communities at the end of 2016, close between 4,000 and 4,300 homes in 2016, and generate basic EPS between $3.20 and $3.70 per basic share during 2016. In addition, the Company believes 2016 gross margin as a percentage of home sales revenues will be in the range of 25.2% and 27.2%, 2016 adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be in the range of 26.5% and 28.5%, and that the average home sales price in 2016 will be between $195,000 and $205,000. This outlook assumes that general economic conditions for the remainder of the year, including interest rates, and mortgage availability in the second half of 2016 are similar to those in the first half of 2016, and that home sales price, construction costs, availability of land, land development costs and overall absorption rates for the second half of 2016 are consistent with the first half of 2016.

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 9, 2016. The 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 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 call will also be available later that day by calling (855) 859-2056, or (404) 537-3406, using conference id “53195264”. This replay will be available until August 16, 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 14,000 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 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. 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, 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)
June 30, December 31,
2016 2015
ASSETS (Unaudited)
Cash and cash equivalents $49,666 $37,568
Accounts receivable 15,073 17,325
Real estate inventory 609,925 531,228
Pre-acquisition costs and deposits 12,718 7,001
Property and equipment, net 1,950 2,108
Other assets 6,005 11,238
Goodwill and intangible assets, net 12,111 12,234
Total assets $707,448 $618,702
LIABILITIES AND EQUITY
Accounts payable $21,993 $24,020
Accrued expenses and other liabilities 47,956 40,006
Deferred tax liabilities, net 2,393 2,726
Notes payable 334,174 304,561
Total liabilities 406,516 371,313
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, par value $0.01, 250,000,000 shares authorized, 22,023,248 shares issued and 21,023,248 shares outstanding as of June 30, 2016 and 21,270,389 shares issued and 20,270,389 shares outstanding as of December 31, 2015 220 213
Additional paid-in capital 196,752 175,575
Retained earnings 120,510 88,151
Treasury stock, at cost, 1,000,000 shares (16,550) (16,550)
Total equity 300,932 247,389
Total liabilities and equity $707,448 $618,702



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,
2016 2015 2016 2015
Home sales revenues $222,723 $158,826 $385,186 $279,516
Cost of sales 163,628 116,253 284,722 205,481
Selling expenses 17,867 13,393 31,958 24,975
General and administrative 10,488 7,943 20,440 16,148
Operating income 30,740 21,237 48,066 32,912
Other income, net (668) (9) (1,171) (55)
Net income before income taxes 31,408 21,246 49,237 32,967
Income tax provision 10,749 7,269 16,878 11,288
Net income $20,659 $13,977 $32,359 $21,679
Earnings per share:
Basic $1.01 $0.70 $1.58 $1.09
Diluted $0.96 $0.66 $1.54 $0.97
Weighted average shares outstanding:
Basic 20,544,809 19,908,482 20,416,566 19,880,569
Diluted 21,487,013 21,246,875 21,017,188 22,536,841



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 June 30, Six Months Ended June 30,
2016 2015 2016 2015
Home sales revenues $222,723 $158,826 $385,186 $279,516
Cost of sales 163,628 116,253 284,722 205,481
Gross margin 59,095 42,573 100,464 74,035
Capitalized interest charged to cost of sales 2,669 1,490 4,451 2,552
Purchase accounting adjustments (a)
211 760 381 1,821
Adjusted gross margin 61,975 44,823 $105,296 $78,408
Gross margin % (b) 26.5% 26.8% 26.1% 26.5%
Adjusted gross margin % (b) 27.8% 28.2% 27.3% 28.1%

(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 June 30,
2016 2015
Revenues Closings Revenues Closings
Texas $115,121 585 $91,712 488
Southwest 42,960 192 28,767 143
Southeast 31,147 181 19,644 121
Florida 30,446 159 18,703 101
Northwest 3,049 11
Total home sales $222,723 1,128 $158,826 853


Six Months Ended June 30,
2016 2015
Revenues Closings Revenues Closings
Texas $195,564 995 $162,485 870
Southwest 76,883 358 43,673 222
Southeast 59,061 341 42,143 264
Florida 50,629 267 31,215 168
Northwest 3,049 11
Total home sales $385,186 1,972 $279,516 1,524


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

Source:LGI Homes Inc.

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