An LGI model in Florida.
An LGI model in Florida.

LGI Homes, Inc., The Woodlands, Texas (Nasdaq:LGIH) on Tuesday morning reported net income of $46.1 million, or $1.82 per diluted share, for the second quarter of 2019 ended June 30. The gain was down 3.3% from $47.6 million, or $1.90 per diluted share, for the second quarter of 2018. Wall Street was expecting a gain of $1.63 per share.

The decline in net was attributed primarily to lower gross margin percentage, increased advertising and additional costs realized from the increase of personnel associated with the increase of community count, higher capitalized interest costs recognized and purchase accounting, partially offset by a higher average sales price realized during the second quarter of 2019 as compared to the second quarter of 2018.

Home closings during the second quarter of 2019 totaled 1,944, an increase of 7.1%, up from 1,815 home closings during the second quarter of 2018. This increase was largely due to increases in home closings in the company’s West, Southeast and Central reportable segments. The increase was partially offset by decreases in home closings in the company’s Northwest and Florida reportable segments during the second quarter of 2019 as compared to the second quarter of 2018, which were largely due to close out of or transition between, and to a lesser extent available inventory in certain of their respective active communities. At the end of the second quarter active selling communities increased to 93, up from 79 communities at the end of the second quarter of 2018.

Home sales revenues for the second quarter of 2019 were $461.8 million, an increase of $42.0 million, or 10.0%, over the second quarter of 2018. The increase in home sales revenues is primarily due to the increase in home closings and an increase in the average home sales price during the second quarter of 2019.

The average home sales price for the second quarter of 2019 was $237,567, an increase of $6,246, or 2.7%, over the second quarter of 2018. This increase in average home sales price was primarily due to changes in product mix, higher price points in new markets and a favorable pricing environment.

Gross margin as a percentage of home sales revenues for the second quarter of 2019 was 24.1% as compared to 26.1% for the second quarter of 2018. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the second quarter of 2019 was 26.3% as compared to 27.7% for the second quarter of 2018. This decrease in gross margin as a percentage of home sales revenues is primarily due to higher capitalized interest costs recognized, purchase accounting, and to a lesser extent, increased construction costs, offset by an increase in homes closed for the second quarter of 2019 as compared to the second quarter of 2018.

The company late Monday reported 672 homes closed in July 2019, up from 538 home closings in July 2018, representing year-over-year growth of 24.9%.

The company ended the first seven months of 2019 with 3,844 home closings, a 6.9% increase over 3,597 home closings during the first seven months of 2018.

As of the end of July 2019, LGI Homes had 101 active selling communities.

“We are proud to announce an outstanding quarter at LGI Homes highlighting new records in home closings, home sales revenues, average home sales price, and active community count,” stated Eric Lipar, CEO and chairman. “In addition, we achieved a record 3,172 home closings through the first half of 2019 and successfully launched our Complete Home™ initiatives.”

“Throughout the quarter we continued to see demand for affordable homes, coupled with community count expansion and positive response from buyers to lower interest rates, resulting in a 38% increase in net orders over the second quarter of last year.”