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01/09 22:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates several negative factors: declining revenue, reduced gross margins, higher expenses, and missed EPS expectations. The slight improvement in cancellation rate and share repurchase plan are positive but insufficient to offset concerns. The Q&A revealed management's vague responses on gross margins and tariffs, suggesting uncertainty. The market may react negatively, especially with a 10.1% revenue decline and increased costs. Given the company's small market cap, these factors are likely to result in a stock price decline of -2% to -8% over the next two weeks.
Revenue $351.4 million (10.1% decrease year-over-year) driven by an 8% decline in home closings and a 2.2% decline in average sales price.
Gross Margin 21% (decrease from 23.4% year-over-year) primarily due to a one-time expense related to the forward commitment incentive program, an increase in wholesale closings, and higher construction overhead.
Adjusted Gross Margin 23.6% (decrease from 25.3% year-over-year) excluding $8.3 million of capitalized interest and $809,000 related to purchase accounting.
Selling, General, and Administrative Expenses (SG&A) $73.5 million (20.9% of revenue) compared to 18.6% in the same period last year, with selling expenses increasing due to higher advertising and personnel costs.
Net Income $4 million or $0.17 per share (compared to expectations of $0.75) impacted by lower revenue and higher expenses.
Debt-to-Capital Ratio 44.3% with $1.6 billion of debt outstanding, including $544.4 million drawn on the revolver.
Net Debt-to-Capital Ratio 43.4%.
Total Liquidity $360 million, including $57.6 million of cash and $302.4 million of availability under the credit facility.
Stockholders’ Equity Over $2 billion with a book value per share of $87.27.
Cancellation Rate 16.3% compared to 16.8% in the same period last year.
Backlog 1,040 homes representing $406.2 million.
Communities: We ended the first quarter with 146 communities, a 22% increase over the prior year.
Backlog: We ended March with 1,040 homes in our backlog, representing over $406 million.
Sales Contracts: We signed 1,437 net contracts in the first quarter.
Home Deliveries: We delivered 996 homes in the first quarter at an average sales price of $352,831.
Gross Margin: Our first quarter gross margin was 21% compared to 23.4% during the same period last year.
SG&A Expenses: Combined selling, general, and administrative expenses for the first quarter totaled $73.5 million or 20.9% of revenue.
Sales Training: We welcomed our sales leaders to our corporate headquarters for intensive sales training.
Market Positioning: We are proactively trimming our full-year gross margin expectations by 150 basis points at the low end and 100 basis points at the high end.
Earnings Expectations: LGI Homes, Inc. missed earnings expectations with reported EPS of $0.17 compared to expectations of $0.75.
Affordability Challenges: Affordability remains the biggest challenge for buyers, affecting their ability to purchase homes and their confidence in moving forward.
Mortgage Rate Volatility: Higher mortgage rates have weighed on year-end backlog and affected the pace of sales, leading to a slow start in Q1.
Supply Chain Issues: The company is monitoring tariffs and potential impacts of higher costs on margins, particularly from suppliers utilizing components from China.
Gross Margin Adjustments: The company proactively trimmed full-year gross margin expectations by 150 basis points at the low end and 100 basis points at the high end due to additional costs and market uncertainty.
Cancellation Rate: The cancellation rate was 16.3%, slightly improved from 16.8% in the same period last year, indicating potential volatility in customer commitments.
Debt Levels: The company ended the quarter with $1.6 billion of debt outstanding, which may pose risks if market conditions worsen.
Sales Training Initiative: Earlier this month, we welcomed our sales leaders to our corporate headquarters for intensive sales training that they will roll out to our sales teams across the country.
Community Count Growth: We ended the first quarter with 146 communities, a 22% increase over the prior year.
Focus on Entry-Level Homes: The persistent shortage of entry-level homes across the country represents a societal challenge and underscores the importance of affordable, new residential construction.
Full-Year Home Closings Guidance: We remain confident in our original closing target of between 6,200 and 7,000 homes.
Active Communities Guidance: We expect to have 160 to 170 active communities by year-end.
Average Selling Price Guidance: We anticipate an average selling price between $360,000 and $370,000.
Gross Margin Expectations: We now expect a full-year gross margin between 21.7% and 23.2% and adjusted gross margin between 24% and 25.5%.
Share Repurchase: During the quarter, we repurchased 41,685 shares of our common stock for $3.1 million and ended the quarter with $177.7 million remaining on our current stock buyback authorization.
The earnings call presents mixed signals. While there's an increase in net orders and backlog, margins have declined, and SG&A expenses remain high. The company is managing land inventory and has a positive outlook on ASP. The Q&A reveals cautious optimism, with no major strategy shifts. Market cap suggests moderate volatility, so the stock price is likely to remain stable in the short term.
The earnings call presents mixed signals: while community growth and sales initiatives are promising, there are concerns about high cancellation rates and lower gross margin guidance. The Q&A highlighted management's focus on incentives and debt reduction but avoided specifics on improving trends. The market cap indicates moderate volatility, leading to a neutral prediction. Without clear positive catalysts or strong negative trends, the stock price is likely to remain stable.
The earnings call indicates several negative factors: declining revenue, reduced gross margins, higher expenses, and missed EPS expectations. The slight improvement in cancellation rate and share repurchase plan are positive but insufficient to offset concerns. The Q&A revealed management's vague responses on gross margins and tariffs, suggesting uncertainty. The market may react negatively, especially with a 10.1% revenue decline and increased costs. Given the company's small market cap, these factors are likely to result in a stock price decline of -2% to -8% over the next two weeks.
The earnings call revealed several negative factors: a 10.1% revenue decline, increased SG&A expenses, and a reduction in gross margins. Despite the share repurchase plan, the Q&A section highlighted concerns about tariffs, price competition, and lack of clear guidance on gross margin recovery. The market cap suggests moderate sensitivity to these results. Overall, the combination of declining financial metrics, cautious management responses, and market uncertainties points to a negative stock price movement.
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