THE WOODLANDS, Texas, Nov. 03, 2020 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the third quarter and nine months ended September 30, 2020.

Third Quarter 2020 Highlights and Comparisons to Third Quarter 2019

• Net Income increased 80.4% to $89.0 million, or $3.55 Basic EPS and $3.52 Diluted EPS
• Adjusted Net Income* of $61.9 million, or $2.47 Adjusted Basic EPS* and $2.45 Adjusted Diluted EPS*
• Net Income Before Income Taxes increased 20.2% to $77.8 million
• Home Sales Revenues increased 10.6% to $534.2 million
• Home Closings increased 4.4% to 2,091 homes
• Average Home Sales Price increased 5.9% to $255,477
• Gross Margin as a Percentage of Homes Sales Revenues increased 120 basis points to 25.3%
• Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 100 basis points to 27.3%
• Active Selling Communities at September 30, 2020 increased 6.8% to 110

* Non-GAAP

Please see “Non-GAAP Measures” for a reconciliation of Adjusted Net Income and Adjusted Earnings Per Share (non-GAAP measures) to Net Income and Earnings Per Share, the most directly comparable GAAP measures, and Adjusted Gross Margin (a non-GAAP measure) to Gross Margin, the most directly comparable GAAP measure.

Nine Months Ended September 30, 2020 Highlights and Comparisons to Nine Months Ended September 30, 2019

• Net Income increased 64.8% to $187.5 million, or $7.45 Basic EPS and $7.40 Diluted EPS
• Adjusted Net Income* of $160.9 million, or $6.39 Adjusted Basic EPS* and $6.35 Adjusted Diluted EPS*
• Net Income Before Income Taxes increased 37.0% to $201.3 million
• Home Sales Revenues increased 19.3% to $1.5 billion
• Home Closings increased 14.6% to 5,931 homes
• Average Home Sales Price increased 4.1% to $247,940
• Gross Margin as a Percentage of Homes Sales Revenues increased 60 basis points to 24.5%
• Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 50 basis points to 26.5%
• Total Owned and Controlled Lots increased to 57,185 lots at September 30, 2020
• Ending Backlog of 3,580 homes at September 30, 2020, an increase of 119.0%
• Ending Backlog Value of $932.7 million at September 30, 2020, an increase of 127.2%

* Non-GAAP

Please see “Non-GAAP Measures” for a reconciliation of Adjusted Net Income and Adjusted Earnings Per Share (non-GAAP measures) to Net Income and Earnings Per Share, the most directly comparable GAAP measures, and Adjusted Gross Margin (a non-GAAP measure) to Gross Margin, the most directly comparable GAAP measure.

Balance Sheet

• Cash and cash equivalents at September 30, 2020 of $46.3 million, compared to $38.3 million at December 31, 2019
• Net debt to capitalization of 36.1% at September 30, 2020, compared to 43.6% at December 31, 2019

Management Comments

“We are proud to report another outstanding quarter for LGI Homes,” stated Eric Lipar, the Company's Chief Executive Officer and Chairman of the Board. “As we moved past the early impacts of the COVID-19 pandemic, we saw unprecedented levels of demand across our markets, driven by continued low interest rates, an undersupply of homes available for sale and a desire for the space, flexibility and convenience that single-family homes in suburban locations offer. Our results this quarter provide clear evidence that LGI Homes’ 100% spec, entry-level focused model is especially well-positioned to meet the needs of today’s buyers.”

“Given all the positive industry news, it should come as no surprise that this was a quarter for breaking records. During the quarter we closed 2,091 homes, bringing our year-to-date total to a record 5,931 closings. Compared to the third quarter of 2019, our home sales revenues were up 10.6%, our industry-leading gross margin was up 120 basis points and we generated $89.0 million in net income. Excluding the impact of retroactive energy tax credits, our quarterly adjusted net income was $61.9 million compared to net income of $49.3 million in the third quarter of 2019.”

“We saw strong demand across our markets during the quarter. Net orders in July, August and September set all-time Company records and collectively were up 78% over last year. As a result, we ended the quarter with a record 3,580 homes in backlog, a year-over-year increase of 119%. During the quarter we started approximately 3,500 homes and invested significantly to add new land and lots to our portfolio. In the three months ended September 30^th, we added almost 3,000 new lots to our owned inventory and nearly doubled our number of controlled lots. At the same time, our strong operating results enabled us to reduce our net debt to capitalization ratio to 36.1%, our lowest ratio since June 2014.”

Mr. Lipar concluded, “Our third quarter and year-to-date results are a testament to the passion and dedication of our employees. We are proud of what we have accomplished together as an organization and believe we are well-positioned to hit all of our key metrics in 2020.”

2020 Third Quarter Results

Home closings during the third quarter of 2020 totaled 2,091, an increase of 4.4% from 2,003 home closings during the third quarter of 2019. At the end of the third quarter, active selling communities increased to 110, up from 103 communities at the end of the third quarter of 2019.

Home sales revenues for the third quarter of 2020 were $534.2 million, an increase of $51.1 million, or 10.6%, over the third quarter of 2019. The increase in home sales revenues is primarily due to the increase in home closings and an increase in the average sales price per home closed during the third quarter of 2020.

The average sales price per home closed for the third quarter of 2020 was $255,477, an increase of $14,298, or 5.9%, over the third quarter of 2019. This increase in the average sales price per home closed was primarily due to changes in product mix, higher price points in certain new markets and a favorable pricing environment.

Gross margin as a percentage of home sales revenues for the third quarter of 2020 was 25.3% as compared to 24.1% for the third quarter of 2019. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the third quarter of 2020 was 27.3% as compared to 26.3% for the third quarter of 2019. The increase in gross margin and adjusted gross margin as a percentage of home sales revenues is primarily due to an increase in homes closed with a higher average sales price per home closed, lower capitalized interest and lower overhead offset by higher lot costs for the third quarter of 2020 as compared to the third quarter of 2019. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.

Net income for the third quarter of 2020 was $89.0 million, or $3.55 per basic share and $3.52 per diluted share, an increase of $39.7 million, or 80.4%, from $49.3 million, or $2.15 per basic share and $1.93 per diluted share, for the third quarter of 2019. The increase in net income is primarily attributed to operating leverage realized from the increase in home sales revenues, higher average sales price per home closed and $29.4 million of federal energy efficient homes tax credits recognized during the third quarter of 2020 as compared to the third quarter of 2019.

Results for the Nine Months Ended September 30, 2020

Home closings for the nine months ended September 30, 2020 totaled 5,931, an increase of 14.6%, from 5,175 home closings during the nine months ended September 30, 2019.

Home sales revenues for the nine months ended September 30, 2020 were $1,470.5 million, an increase of $238.0 million, or 19.3%, over the nine months ended September 30, 2019. The increase in home sales revenues is primarily due to the increase in home closings and an increase in the average sales price per home closed during the nine months ended September 30, 2020.

The average sales price per home closed for the nine months ended September 30, 2020 was $247,940, an increase of $9,775, or 4.1%, over the nine months ended September 30, 2019. This increase in the average sales price per home closed was primarily due to changes in product mix and higher price points in certain markets, partially offset by additional wholesale home closings.

Gross margin as a percentage of home sales revenues for the nine months ended September 30, 2020 was 24.5% as compared to 23.9% for the nine months ended September 30, 2019. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the nine months ended September 30, 2020 was 26.5% as compared to 26.0% for the nine months ended September 30, 2019. The increase in gross margin and adjusted gross margin as a percentage of home sales revenues is primarily due to an increase in homes closed with a higher average sales price per home closed, which was driven by product mix, favorable pricing environments and operating leverage obtained, partially offset by an increase in wholesale home closings as a percentage of total home closings in the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.

Net income for the nine months ended September 30, 2020 was $187.5 million, or $7.45 per basic share and $7.40 per diluted share, an increase of $73.7 million, or 64.8%, from $113.7 million, or $4.97 per basic share and $4.49 per diluted share, for the nine months ended September 30, 2019. The increase in net income is primarily attributed to operating leverage realized from the increase in home sales revenues, higher average sales price per home closed and $32.9 million of federal energy efficient homes tax credits recognized during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Stock Repurchase Program

On October 30, 2020, our Board of Directors approved an increase in our stock repurchase program by an additional $300.0 million. We established our initial $50.0 million stock repurchase program in November 2018. As of September 30, 2020, there was $17.2 million of remaining availability under the program. With the increase, we have increased the available authorization under the program to purchase up to $317.2 million of shares of our common stock. The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements. Our stock repurchase program may be modified, discontinued or suspended at any time.

Outlook

Subject to the caveats in the Forward-Looking Statements section of this press release, the Company updates its guidance for the full year 2020. The Company believes:

• Home closings between 8,400 and 9,000
• Active selling communities at the end of 2020 between 115 and 120
• Gross margin as a percentage of home sales revenues between 24.0% and 25.0%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues between 26.0% and 27.0% with capitalized interest accounting for substantially all the difference between gross margin and adjusted gross margin
• Average sales price per home closed between $245,000 and $255,000
• SG&A as a percentage of home sales revenues between 10.3% and 10.8%
• Effective tax rate for 2020 between 10.0% and 12.0%

This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2020 are similar to those experienced so far in the fourth quarter of 2020 and that average sales price per home closed, construction costs, availability of land, land development costs and overall absorption rates in the remainder of 2020 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 COVID-19 governmental restrictions on land development or home construction could negatively impact our ability to achieve this guidance.

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 and Virginia. Since 2018, LGI Homes has been ranked as the 10^th largest residential builder in the United States based on units closed. The Company has a notable legacy of more than 17 years of homebuilding operations, over which time it has closed more than 40,000 homes. For more information about the Company and its new home developments, please visit the Company’s website at www.lgihomes.com.