LGI Homes(US:LGIH)2020-08-04 21:40Financial Data and Key Metrics Changes - In Q2 2020, LGI Homes reported revenues of $481.6 million, a 4.3% increase year-over-year, with net income rising 20.8% to $55.6 million, representing 11.5% of home sales revenue [27][35] - Gross margin as a percentage of sales increased to 24.5%, up from 24.1% in the same quarter last year, primarily due to lower interest costs and construction overhead [28][35] - The company closed a record 2,005 homes during the quarter, with an average sales price of $240,200, reflecting a 1.1% year-over-year increase [27][22] Business Line Data and Key Metrics Changes - The wholesale business accounted for 9.9% of total closings in Q2 2020, up from 4.2% in the same quarter last year, with 199 homes closed through this channel [28][29] - The cancellation rate for the second quarter was 25.3%, with gross orders totaling 3,018 and net orders at 2,253 [36] Market Data and Key Metrics Changes - The company ended Q2 with 117 active communities, a 25.8% increase compared to Q2 2019 [24] - Austin was the top market with an average of nine closings per community per month, followed by Dallas Fort Worth and Houston [23] Company Strategy and Development Direction - The company is focused on entry-level homes in suburban areas, positioning itself to benefit from a renewed interest in homeownership due to the COVID-19 pandemic [16][14] - LGI Homes plans to close between 8,000 and 8,800 homes in 2020, with an average sales price expected to range from $245,000 to $255,000 [44] Management's Comments on Operating Environment and Future Outlook - Management noted a significant shift in consumer sentiment towards homeownership, driven by dissatisfaction with apartment living during the pandemic [14][15] - The company expects to maintain strong gross margins for the remainder of the year, projecting full-year gross margin between 24% and 25% [45] Other Important Information - The company has maintained its workforce without layoffs during the pandemic, emphasizing the importance of retaining talent [46][47] - A $2,000 bonus will be awarded to approximately 750 frontline workers as a token of appreciation for their efforts during the crisis [49] Q&A Session Summary Question: What is the timing for closing the strong July orders? - Management indicated that closings in August would be similar to July, with a strong backlog and increased starts planned to meet demand [54][55] Question: What is the outlook for land development? - Management expressed optimism about land development resuming and expects to ramp up community counts by year-end [64][66] Question: How is the company managing pricing and costs? - Management confirmed that price increases have been implemented to offset rising costs, particularly in lumber, and that gross margins are expected to remain stable [72][78] Question: What is the outlook for controlled lots? - Management anticipates an increase in controlled lots as the company resumes land acquisitions, with a focus on raw land opportunities [86][88] Question: How will SG&A expenses trend in relation to closings? - Management noted that SG&A expenses may increase due to bonuses and preparations for future growth, despite a reduction in marketing spend during Q2 [90][92]