William Lyon Homes (WLH) Reports In-Line Q3 EPS, Revenues Miss; Offers FY18 Revenue Outlook Below Consensus

William Lyon Homes (NYSE: WLH) reported Q3 EPS of $0.68, in-line with the analyst estimate of $0.68. Revenue for the quarter came in at $533.5 million versus the consensus estimate of $568.84 million.

• Net income available to common stockholders of $26.6 million, or $0.68 per diluted share
• Pre-tax income of $40.8 million
• Net new home orders of 1,001, up 29%
• Units in backlog of 1,596, up 32%
• New home deliveries of 1,053 homes, up 24%
• Dollar value of homes in backlog of $800.6 million, up 14%
• Dollar value of orders of $457.6 million, up 8%
• Average sales locations of 116, up 35%
• Average sales price (ASP) of new homes delivered of $506,700 versus $576,200
• Home sales revenue of $533.5 million, up 9%
• Homebuilding gross margin percentage of 18.2%
• Adjusted homebuilding gross margin percentage of 23.0%
• SG&A percentage of 11.0%
• Adjusted EBITDA of $66.2 million, down 2%

“We are pleased with our financial results for the third quarter, with homebuilding revenues of $533.5 million, up 9% and new home deliveries of 1,053, up 24%,” said Matthew R. Zaist, President and Chief Executive Officer. “During the quarter, our GAAP homebuilding gross margins were 18.2%, which is a 10 basis point improvement over the third quarter of 2017, and a 30 basis point improvement sequentially from the second quarter of this year. We expect our sequential margin improvement to carry into the fourth quarter with GAAP gross margins anticipated to expand approximately 40 to 60 basis points over the third quarter. Our third quarter net new home orders were up 29% year-over-year, to 1,001, and our average number of sales locations for the third quarter was 116, up from 86 in the third quarter of 2017.”

Mr. Zaist continued, “While the long-term fundamentals remain positive in the broader economy as well as our local markets, the cost of home ownership has increased with the significant price appreciation in several of our markets over the last few years, combined with the recent rise in mortgage interest rates. As a result, and most notably in Northern California and Seattle, we have experienced some sales pace moderation, which has led us to adjust our expectations for our fourth quarter results. Overall, in the face of some challenging market conditions, our strong backlog of 1,596 units with a dollar value of over $800 million still puts us in position to finish the year strongly and achieve another year of profitability growth for the Company and a record year in revenue and deliveries. The Company expects fourth quarter results to include backlog conversion of 85% to 92.5%, which we believe will contribute significant cash in-flows in the fourth quarter, enabling us to make further progress on our debt reduction for the year and keep us on track toward our long-term balance sheet goals, including targeting 40% debt-to-cap by 2020. Looking forward, our new community openings over the next several quarters will be focused on affordable price points below the market medians with an emphasis on the entry level and active adult buyer segments, which we believe will help to address affordability concerns and drive continued growth for William Lyon Homes.”

GUIDANCE:

William Lyon Homes sees FY2018 revenue of $2.11-2.165 billion, versus the consensus of $2.27 billion.

For earnings history and earnings-related data on William Lyon Homes (WLH) click here.

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