GlobeNewswire Inc | Feb 23, 2021 07:00AM EST

February 23, 2021

THE WOODLANDS, Texas, Feb. 23, 2021 (GLOBE NEWSWIRE) -- LGI Homes, Inc. (NASDAQ: LGIH) today announced financial results for the fourth quarter and year ended December 31, 2020.

Fourth Quarter 2020 Highlights and Comparisons to Fourth Quarter 2019

-- Net Income increased 110.3% to $136.4 million, or $5.45 Basic EPS and $5.34 Diluted EPS -- Adjusted Net Income* of $132.2 million, or $5.28 Adjusted Basic EPS* and $5.18 Adjusted Diluted EPS* -- Net Income Before Income Taxes increased 96.2% to $166.5 million -- Home Sales Revenues increased 48.2% to $897.4 million -- Home Closings increased 35.5% to 3,408 homes -- Average Sales Price Per Home Closed increased 9.3% to $263,321 -- Gross Margin as a Percentage of Homes Sales Revenues increased 360 basis points to 27.1% -- Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 330 basis points to 28.8% -- Active Selling Communities at December31, 2020 increased 9.4% to 116

Full Year 2020 Highlights and Comparisons to Full Year 2019

-- Net Income increased 81.3% to $323.9 million, or $12.89 Basic EPS and $12.76 Diluted EPS -- Adjusted Net Income* of $294.2 million, or $11.70 Adjusted Basic EPS* and $11.59 Adjusted Diluted EPS* -- Net Income Before Income Taxes increased 58.7% to $367.8 million -- Home Sales Revenues increased 28.8% to $2.4 billion -- Home Closings increased 21.4% to 9,339 homes -- Average Sales Price Per Home Closed increased 6.1% to $253,553 -- Gross Margin as a Percentage of Homes Sales Revenues increased 180 basis points to 25.5% -- Adjusted Gross Margin* as a Percentage of Home Sales Revenues increased 160 basis points to 27.4% -- Owned lots increased to 35,268 and Controlled lots increased to 26,236 for total Owned and Controlled lots of 61,504 at December31, 2020 -- Ending Backlog of 2,964 homes at December 31, 2020, an increase of 140.4% -- Ending Backlog Value of $775.5 million at December 31, 2020, an increase of 167.0%

*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

-- 718,993 shares of common stock repurchased during the year ended December31, 2020 at an average price per share of $66.84 for an aggregate amount of $48.1 million -- Total liquidity of $428.4 million at December31, 2020 including cash and cash equivalents of $35.9 million and $392.5 million of availability under the Companys revolving credit facility -- Net debt to capitalization of 30.6% at December 31, 2020, compared to 43.6% at December 31, 2019

Management Comments

LGI Homes delivered another record-breaking quarter, capping off the best year in our Companys history, stated Eric Lipar, the Companys Chief Executive Officer and Chairman of the Board. During the fourth quarter we closed 3,408 homes, an increase of over 35% year-over-year. For the full year, we closed a record-breaking 9,339 homes and generated approximately $2.4 billion in revenue making 2020 our seventh consecutive year of double-digit top line growth.

Most importantly, we achieved this growth while delivering record profitability. During the year, we increased our industry-leading gross margin 180 basis points to 25.5% and our adjusted gross margin 160 basis points to 27.4%. Our full year pre-tax net income margin was 15.5% and our net income increased over 81% to $323.9 million. As a result of our strong performance throughout 2020, we reduced our net debt to capitalization ratio to 30.6% and increased our return on equity to 32.6%.

Mr. Lipar concluded, Our outstanding results are a testament to the talent and dedication of our people. Together we met the challenges of the past year and successfully delivered on our shared commitment to make our customers dream of homeownership a reality. Their dedication, passion and professionalism have positioned us to achieve our goals in 2021, deliver market leading returns for our shareholders and continue on our path to becoming a top five builder.

2020 Fourth Quarter Results

Home closings during the fourth quarter of 2020 totaled 3,408, an increase of 35.5% from 2,515 home closings during the fourth quarter of 2019.

At the end of the fourth quarter, active selling communities increased to 116, up from 106 communities at the end of the fourth quarter of 2019.

Home sales revenues for the fourth quarter of 2020 were $897.4 million, an increase of $291.7 million, or 48.2%, over the fourth quarter of 2019. The increase in home sales revenues is primarily due to a 35.5% increase in homes closed, a 9% increase in average community count and an increase in the average sales price per home closed during the fourth quarter of 2020.

The average sales price per home closed for the fourth quarter of 2020 was $263,321, an increase of $22,506, or 9.3%, over the fourth quarter of 2019. This increase in the average sales price per home closed was primarily due to a favorable pricing environment, higher price points in certain new markets and changes in product mix.

Gross margin as a percentage of home sales revenues for the fourth quarter of 2020 was 27.1% as compared to 23.5% for the fourth quarter of 2019. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the fourth quarter of 2020 was 28.8% as compared to 25.5% for the fourth quarter of 2019. The increase in gross margin and adjusted gross margin as a percentage of home sales revenues was primarily driven by a favorable pricing environment, operating leverage obtained and product mix in the fourth quarter of 2020 as compared to the fourth 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 fourth quarter of 2020 was $136.4 million, or $5.45 per basic share and $5.34 per diluted share, an increase of $71.6 million, or 110.3%, from $64.9 million, or $2.69 per basic share and $2.52 per diluted share, for the fourth 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 during the fourth quarter of 2020 as compared to the fourth quarter of 2019, as well as $8.3million of federal energy efficient homes tax credits recognized during the fourth quarter of 2020.

Full Year 2020 Results

Home closings for the year ended December 31, 2020 totaled 9,339, an increase of 21.4%, from 7,690 home closings during the year ended December 31, 2019.

Home sales revenues for the year ended December 31, 2020 were $2.4 billion, an increase of $529.8 million, or 28.8%, over the year ended December 31, 2019. The increase in home sales revenues is primarily due to a 21.4% increase in homes closed, a 16.8% increase in average community count and an increase in the average sales price per home closed during the year ended December 31, 2020.

The average sales price per home closed for the year ended December 31, 2020 was $253,553, an increase of $14,521, or 6.1%, over the year ended December 31, 2019. This increase in the average sales price per home closed was primarily due to a favorable pricing environment, increased closings at higher price points in certain markets and changes in product mix.

Gross margin as a percentage of home sales revenues for the year ended December 31, 2020 was 25.5% as compared to 23.7% for the year ended December 31, 2019. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the year ended December 31, 2020 was 27.4% as compared to 25.8% for the year ended December 31, 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 primarily driven by a favorable pricing environment, operating leverage obtained and product mix, partially offset by an increase in wholesale home closings as a percentage of total home closings in the year ended December 31, 2020 as compared to the year ended December 31, 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 year ended December 31, 2020 was $323.9 million, or $12.89 per basic share and $12.76 per diluted share, an increase of $145.3 million, or 81.3%, from $178.6 million, or $7.70 per basic share and $7.02 per diluted share, for the year ended December 31, 2019. The increase in net income is primarily due to overall stronger gross margins driven by the 28.8% increase in home sales revenues, 6.1% higher average sales price per home closed during the year ended December 31, 2020 as compared to the year ended December 31, 2019 and $41.2million of tax benefits relating to the federal energy efficient homes tax credits recognized during the year ended December 31, 2020.

Outlook

Subject to the caveats in the Forward-Looking Statements section of this press release, the Company is providing the following guidance for the full year 2021. The Company believes:

-- Home closings will be between 9,200 and 9,800 -- Active selling communities at the end of 2021 will be between 112 and 120 -- Average sales price per home closed will be between $260,000 and $270,000 -- Gross margin as a percentage of home sales revenues will be between 24.0% and 26.0% -- Adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be between 26.0% and 28.0% with capitalized interest accounting for substantially all the difference between gross margin and adjusted gross margin -- SG&A as a percentage of home sales revenues will be between 10.3% and 10.8% -- Effective tax rate for 2021 will be between 21.5% and 22.5%

This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2021 are similar to those experienced to date in 2021 and that the average sales price per home closed, construction costs, availability of land, land development costs and overall absorption rates in the remainder of 2021 are consistent with the Companys 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, home construction or home sales could negatively impact the Companys ability to achieve this guidance.

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, February23, 2021 (the Earnings Call). The Earnings Call will be hosted by Eric Lipar, Chief Executive Officer and Chairman of the Board, and Charles Merdian, Chief Financial Officer and Treasurer.

Participants may access the live webcast by visiting the Investor Relations section of the Companys website at www.lgihomes.com. The Earnings Call can also be accessed by dialing (855) 433-0929, or (970) 315-0256 for international participants.

An archive of the Earnings Call webcast will be available on the Companys website for approximately 12 months. A replay of the Earnings Call will also be available later that day by calling (855) 859-2056, or (404) 537-3406, and using conference ID 1655901.

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, Virginia and Pennsylvania. Since 2018, LGI Homes has been ranked as the 10th 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 45,000 homes. For more information about the Company and its new home developments, please visit the Companys website at www.lgihomes.com.

Forward-Looking Statements

Any statements made in this press release or on the Earnings Call that are not statements of historical fact, including statements about the Companys 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 projected 2021 home closings, year-end active selling communities, gross margin as a percentage of home sales revenues, adjusted gross margin as a percentage of homes sales revenues, average sales price per home closed, SG&A as a percentage of home sales revenues, effective tax rate, and the impact of the COVID-19 pandemic and its effect on the Company, its business, customers, subcontractors, suppliers and its markets, as well as 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 anticipate, believe, continue, could, estimate, expect, forecast, goal, intend, may, objective, plan, potential, predict, projection, should, will 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including the Cautionary Statement about Forward-Looking Statements subsection within the Risk Factors section, the Risk Factors and Cautionary Statement about Forward-Looking Statements sections in each of the Companys Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, and subsequent filings by the Company with the Securities and Exchange Commission (SEC), including the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2020 when it is filed with the SEC. 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 or listen to the Earnings Call, 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 Companys 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(Unaudited)(In thousands, except share data)

December 31, 2020 2019ASSETS Cash and cash equivalents $ 35,942 $ 38,345 Accounts receivable 115,939 56,390 Real estate inventory 1,569,489 1,499,624 Pre-acquisition costs and deposits 37,213 37,244 Property and equipment, net 3,618 1,632 Other assets 44,882 16,241 Deferred tax assets, net 6,986 4,621 Goodwill 12,018 12,018 Total assets $ 1,826,087 $ 1,666,115 LIABILITIES AND EQUITY Accounts payable $ 13,676 $ 12,495 Accrued expenses and other liabilities 135,008 117,868 Notes payable 538,398 690,559 Total liabilities 687,082 820,922 COMMITMENTS AND CONTINGENCIES EQUITY Common stock, par value $0.01,250,000,000 shares authorized,26,741,554 shares issued and 24,983,561shares outstanding as of December 31, 267 264 2020 and 26,398,409 shares issued and25,359,409 shares outstanding as ofDecember 31, 2019Additional paid-in capital 270,598 252,603 Retained earnings 934,277 610,382 Treasury stock, at cost, 1,757,993shares and 1,039,000 shares, (66,137 ) (18,056 )respectivelyTotal equity 1,139,005 845,193 Total liabilities and equity $ 1,826,087 $ 1,666,115

LGI HOMES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except share and per share data)

Three Months Ended December Year Ended December 31, 31, 2020 2019 2020 2019Home sales $ 897,398 $ 605,649 $ 2,367,929 $ 1,838,154 revenues Cost of sales 654,069 463,435 1,764,832 1,401,675 Selling 50,173 37,395 148,366 131,561 expensesGeneral and 27,599 20,822 90,021 77,380 administrativeOperating 165,557 83,997 364,710 227,538 incomeLoss onextinguishment ? ? ? 169 of debtOther income, (991 ) (874 ) (3,139 ) (4,463 )netNet incomebefore income 166,548 84,871 367,849 231,832 taxesIncome tax 30,120 20,001 43,954 53,224 provisionNet income 136,428 $ 64,870 $ 323,895 $ 178,608 Earnings per share:Basic $ 5.45 $ 2.69 $ 12.89 $ 7.70 Diluted $ 5.34 $ 2.52 $ 12.76 $ 7.02 Weightedaverage shares outstanding:Basic 25,054,454 24,143,124 25,135,077 23,191,595 Diluted 25,531,968 25,718,111 25,380,560 25,430,841

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States (GAAP), the Company has provided information in this press release relating to adjusted gross margin, adjusted net income, and adjusted earnings per share.

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 results, the utility of adjusted gross margin information as a measure of the Companys 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 Companys 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, unaudited):

Three Months Ended December Year Ended December 31, 31, 2020 2019 2020 2019Home sales $ 897,398 $ 605,649 $ 2,367,929 $ 1,838,154 revenuesCost of 654,069 463,435 1,764,832 1,401,675 salesGross 243,329 142,214 603,097 436,479 marginCapitalizedinterestcharged to 13,603 11,336 40,381 35,230 cost ofsalesPurchaseaccounting 1,601 1,067 4,872 3,324 adjustments^ (1)Adjustedgross $ 258,533 $ 154,617 $ 648,350 $ 475,033 marginGrossmargin % ^ 27.1 % 23.5 % 25.5 % 23.7 %(2)Adjustedgross 28.8 % 25.5 % 27.4 % 25.8 %margin % ^(2)

(1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.

(2) Calculated as a percentage of home sales revenues.

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted net income and adjusted earnings per share are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. The Company defines adjusted net income as net income less the retroactive federal energy efficient homes tax credits and adjusted earnings per share as adjusted net income divided by weighted average shares outstanding. Management believes that the presentation of adjusted net income and adjusted earnings per share provides useful information to investors because such measures isolate the impact that material retroactive tax adjustments have on net income and earnings per share. However, because adjusted net income and adjusted earnings per share information excludes the retroactive federal energy efficient homes tax credits, which have real economic effects and could impact results, the utility of adjusted net income and adjusted earnings per share as measures of the Companys operating performance may be limited. In addition, other companies may not calculate adjusted net income and adjusted earnings per share in the same manner that the Company does. Accordingly, adjusted net income and adjusted earnings per share information should be considered only as a supplement to net income and earnings per share information as measures of the Companys performance.The following table reconciles adjusted net income and adjusted earnings per share to net income and earnings per share, respectively, which are the GAAP measures that management believes to be most directly comparable (dollars in thousands, unaudited):

Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Numerator (in thousands):Net income (Numeratorfor basic and diluted $ 136,428 $ 64,870 $ 323,895 $ 178,608earnings per share)Retroactive federalenergy efficient homes 4,219 ? 29,703 ?tax creditsAdjusted net income(Numerator for adjusted $ 132,209 $ 64,870 $ 294,192 $ 178,608basic and dilutedearnings per share)Denominator: Basic weighted average 25,054,454 24,143,124 25,135,077 23,191,595shares outstandingDiluted weightedaverage shares 25,531,968 25,718,111 25,380,560 25,430,841outstanding Basic earnings per $ 5.45 $ 2.69 $ 12.89 $ 7.70shareDiluted earnings per $ 5.34 $ 2.52 $ 12.76 $ 7.02share Adjusted basic earnings $ 5.28 $ 2.69 $ 11.70 $ 7.70per shareAdjusted diluted $ 5.18 $ 2.52 $ 11.59 $ 7.02earnings per share

Home Sales Revenues, Home Closings, Average Sales Price Per Home Closed (ASP), Average Community Count and Average Monthly Absorption Rates by Reportable Segment(Revenues in thousands, unaudited)

Three Months Ended December 31, 2020 Average Average Revenues Home ASP Community Monthly Closings Count Absorption RateCentral $ 329,767 1,354 $ 243,550 37.0 12.2 Southeast 212,071 870 243,760 32.0 9.1 Northwest 140,068 345 405,994 12.4 9.3 West 104,118 351 296,632 13.0 9.0 Florida 111,374 488 228,225 19.3 8.4 Total $ 897,398 3,408 $ 263,321 113.7 10.0

Three Months Ended December 31, 2019 Average Average Revenues Home ASP Community Monthly Closings Count Absorption RateCentral $ 217,030 962 $ 225,603 32.6 9.8 Southeast 126,131 582 216,720 28.6 6.8 Northwest 96,802 260 372,315 13.7 6.3 West 96,993 389 249,339 13.7 9.5 Florida 68,693 322 213,332 15.7 6.9 Total $ 605,649 2,515 $ 240,815 104.3 8.0

Year Ended December 31, 2020 Average Average Revenues Home ASP Community Monthly Closings Count Absorption RateCentral $ 850,375 3,654 $ 232,724 34.6 8.8 Southeast 559,226 2,382 234,772 33.5 5.9 Northwest 389,523 1,000 389,523 11.9 7.0 West 286,130 1,043 274,334 13.9 6.2 Florida 282,675 1,260 224,345 18.0 5.8 Total $ 2,367,929 9,339 $ 253,553 111.9 7.0

Year Ended December 31, 2019 Average Average Home ASP Community Monthly Revenues Closings Count Absorption RateCentral $ 724,981 3,304 $ 219,425 33.0 8.3 Southeast 347,817 1,592 218,478 24.5 5.4 Northwest 304,294 827 367,949 12.4 5.6 West 271,186 1,056 256,805 12.8 6.9 Florida 189,876 911 208,426 13.1 5.8 Total $ 1,838,154 7,690 $ 239,032 95.8 6.7

Owned and Controlled Lots

The table below shows (i) home closings by reportable segment for the year ended December 31, 2020 and (ii) the Companys owned or controlled lots by reportable segment as of December 31, 2020.

Year Ended December 31, As of December 31, 2020 2020Reportable Segment Home Owned ^(1) Controlled Total ClosingsCentral 3,654 16,124 10,739 26,863 Southeast 2,382 10,376 6,992 17,368 Northwest 1,000 3,036 3,183 6,219 West 1,043 3,133 3,092 6,225 Florida 1,260 2,599 2,230 4,829 Total 9,339 35,268 26,236 61,504

(1) Of the 35,268 owned lots as of December31, 2020, 22,132 were raw/under development lots and 13,136 were finished lots.

Backlog Data

As of the dates set forth below, the Companys net orders, cancellation rate, and ending backlog homes and value were as follows (dollars in thousands, unaudited):

Year Ended December 31, 2020 ^(4) 2019 ^(5) 2018 ^(6)Net orders ^(1) 11,070 8,299 6,320 Cancellation rate ^(2) 21.6 % 20.6 % 24.2 %Ending backlog - homes ^ 2,964 1,233 624 (3)Ending backlog - value ^ $ 775,468 $ 290,438 $ 156,109 (3)

(1) Net orders are new (gross) orders for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.

(2) Cancellation rate for a period is the total number of purchase contracts cancelled during the period divided by the total new (gross) orders for the purchase of homes during the period.

(3) Ending backlog consists of homes at the end of the period that are under a purchase contract that has been signed by homebuyers who have met the Companys preliminary financing criteria but have not yet closed and wholesale contracts for which vertical construction is generally set to occur within the next six to twelve months. Ending backlog is valued at the contract amount.

(4) As of December 31, 2020, the Company had 1,139 units related to bulk sales agreements associated with its wholesale business.

(5) As of December 31, 2019, the Company had 481 units related to bulk sales agreements associated with its wholesale business, of which 117 units and values are not included in the table above.

(6) As of December 31, 2018, the Company had 163 units related to bulk sales agreements associated with its wholesale business, of which 92 units and values are not included in the table above.

Joshua D. FattorCONTACT: Vice President of Investor Relations (281) 210-2619 investorrelations@lgihomes.com