LGI Homes (NASDAQ: LGIH) reported Q2 EPS of $2.21, $0.64 better than the analyst estimate of $1.57. Revenue for the quarter came in at $481.6 million versus the consensus estimate of $464.57 million.

Second Quarter 2020 Highlights and Comparisons to Second Quarter 2019

• Net Income increased 20.8% to $55.6 million, or $2.22 Basic EPS and $2.21 Diluted EPS
• Net Income Before Income Taxes increased 13.3% to $68.6 million
• Home Sales Revenues increased 4.3% to $481.6 million
• Home Closings increased 3.1% to 2,005 homes
• Average Home Sales Price increased 1.1% to $240,200
• Gross Margin as a Percentage of Homes Sales Revenues increased 40 basis points to 24.5%
• Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues increased 30 basis points to 26.6%
• Active Selling Communities at June 30, 2020 increased 25.8% to 117
• Total Owned and Controlled Lots decreased to 44,307 lots at June 30, 2020

Management Comments

“The second quarter of 2020 was full of positive surprises that demonstrated the strength of our business model, the uncompromising dedication of our employees and the depth of Americans’ desire for homeownership” said Eric Lipar, the Company’s Chief Executive Officer and Chairman of the Board. “In addition to a record-breaking 2,005 quarterly home closings, the quarter was highlighted by a 4.3% increase in home sales revenues, a 40 basis point increase in our industry leading gross margin, and a record $55.6 million in net income. Our continued focus on cash management in combination with our strong operating results contributed to a net debt to capitalization ratio of 37.0% as of June 30, 2020, our lowest ratio since 2014. We are proud of what we accomplished this quarter and optimistic about our ability to drive continued growth and profitability in 2020.”

“Despite the headwinds created by the ongoing COVID-19 pandemic, a combination of low interest rates, an undersupply of existing homes and a renewed appreciation for the value of homeownership drove strong demand in May and June resulting in our highest backlog ever. This momentum continued in July as evidenced by our net orders increasing over 60% year-over-year. Based on our current view of market conditions and our strong second quarter results, we are providing full year 2020 guidance and anticipate closing between 8,000 to 8,800 homes for the year. Additionally, we expect active selling communities at the end of the year will be between 115 and 125 and expect our average home sales price for 2020 will be in the range of $245,000 to $255,000.”

Mr. Lipar concluded, “Our performance in the second quarter is a testament to our dedicated and talented employees and demonstrates our ability to successfully manage through uncertain times and challenging events. We thank each of you for your continued commitment to helping renters become homeowners during this unprecedented time.”

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

• Home closings will be between 8,000 and 8,800 in 2020
• Active selling communities at the end of 2020 will be between 115 and 125
• Gross margin as a percentage of home sales revenues will be between 24.0% and 25.0%
• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be in the range of 26.0% and 27.0% with capitalized interest accounting for substantially all of the difference between gross margin and adjusted gross margin
• Average home sales price will be between $245,000 and $255,000
• SG&A as a percentage of home sales revenues will be between 10.5% and 11.0%
• Effective tax rate will be between 21.0% and 22.0%

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 third quarter of 2020 and that average home sales price, 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.

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