LGI Homes (NASDAQ: LGIH) reported Q1 EPS of $0.81, $0.06 worse than the analyst estimate of $0.87. Revenue for the quarter came in at $287.6 million versus the consensus estimate of $288.06 million.

First Quarter 2019 Results and Comparisons to First Quarter 2018

Net Income of $18.3 million, or $0.81 Basic EPS and $0.73 Diluted EPS
Net Income Before Income Taxes of $21.7 million
Home Sales Revenues increased 3.1% to $287.6 million
Home Closings remained similar at 1,228
Average Home Sales Price increased 4.4% to $234,197
Gross Margin as a Percentage of Homes Sales Revenues was 23.1% as compared to 24.8%
Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 25.1% as compared to 26.4%
Active Selling Communities at March 31, 2019 increased to 87 from 79
50,700 Total Owned and Controlled Lots at March 31, 2019

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

“The first quarter provided a solid start to the year with 1,228 homes closed,” said Eric Lipar, the Company’s Chief Executive Officer and Chairman of the Board. “LGI Homes continues to benefit from our strategic focus on the entry-level buyer. Throughout the quarter we saw continued demand for affordable homes coupled with a positive response from buyers to lower interest rates resulting in an 8% increase in net orders over the first quarter of last year.”

“First quarter performance, year-over year, was impacted by lower overall margins, our acquisition of Wynn Homes, and increased construction overhead due to our targeted growth. Although revenues were similar we incurred additional costs primarily associated with marketing and personnel related to our geographic and community count expansion.”

“Overall, we remain optimistic on industry dynamics and are encouraged by the strength of our sales in recent months. We are confident in our ability to deliver robust results and believe we are on track to meet our goal of 6,900 to 7,800 home closings in 2019 and generate basic EPS in the range of $7.00 to $8.00 per share,” Lipar concluded.

GUIDANCE:

LGI Homes sees FY2019 EPS of $7.00-$8.00, versus the consensus of $6.94.

Subject to the caveats in the Forward-Looking Statements section of this press release, the Company reaffirms its prior 2019 guidance. The Company believes it will have between 105 and 115 active selling communities at the end of 2019, close between 6,900 and 7,800 homes in 2019, and generate basic EPS between $7.00 and $8.00 per share during 2019. In addition, the Company believes 2019 gross margin as a percentage of home sales revenues will be in the range of 23.5% and 25.5% and 2019 adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be in the range of 25.5% and 27.5% 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 2019 will be between $235,000 and $245,000. This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2019 are similar to those experienced in the first quarter of 2019 and that average home sales price, construction costs, availability of land, land development costs and overall absorption rates in the remainder of 2019 are consistent with the Company’s recent experience. In addition, this outlook assumes that none of the Company’s 4.25% Convertible Notes due 2019 ($70.0 million aggregate principal amount currently outstanding) are converted prior to their maturity on November 15, 2019.

For earnings history and earnings-related data on LGI Homes (LGIH) click here.