Overview
Landsea Homes Corporation (NASDAQ:LSEA) is a rapidly growing homebuilder that has been making strategic moves to expand its geographic footprint and strengthen its position in the market. With a focus on high-growth markets and a commitment to sustainable, energy-efficient home construction, Landsea Homes is well-positioned to capitalize on the robust demand for new homes.Business Overview
Landsea Homes is engaged in the acquisition, development, and sale of homes and lots in six states: Arizona, California, Colorado, Florida, New York, and Texas. The company's operations are organized into six reportable segments, each targeting a wide range of buyer profiles, including first-time, move-up, and luxury homebuyers. Landsea Homes' defining principle, "Live in Your Element®," creates the foundation for its customers to live where they want to live, how they want to live – in a home created especially for them. The company's strategy is focused on maximizing stockholder returns through profitability and efficiency, while balancing appropriate amounts of leverage. Landsea Homes is committed to expanding its community count in current markets, maintaining an appropriate supply of lots, continuing to focus on entry-level product offerings, strengthening its unique brand position through product differentiation, and pursuing geographic expansion and diversification into new markets.Financials
In the fiscal year 2023, Landsea Homes reported annual revenue of $1,209,947,000 and net income of $29,236,000. The company's annual operating cash flow was $59,157,000, and its annual free cash flow was $51,679,000. For the first quarter of 2024, Landsea Homes delivered strong top-line growth, with a 22% increase in home sales revenue to $292.6 million compared to the same period in the prior year. This was driven by a 7% year-over-year increase in home closings and a 14% rise in average sales prices. The company's net income for the quarter was $190,000, or $0.01 per share, compared to $3.2 million, or $0.08 per share, in the first quarter of 2023.Geographical Breakdown
Landsea Homes' operations are divided into six reportable segments, each with its own unique market dynamics and performance.Arizona:
The Arizona segment recorded pretax income of $0.5 million in the first quarter of 2024, compared to $0.2 million in the same period last year. The increase in pretax income was primarily due to an increase in home sales revenue despite the additional incentives required to continue to close homes at the desired pace.California:
The California segment recorded pretax income of $8.2 million for the first quarter of 2024, compared to $2.9 million in the same period last year. The increase in pretax income was primarily due to a comparative increase in deliveries at higher price points.Colorado:
Landsea Homes expanded into the Colorado market in October 2023 with the acquisition of certain assets of Richfield Homes, LLC. The Colorado segment recorded a pretax loss of $1.2 million for the first quarter of 2024 as the assets continue to be incorporated into the company's operations.Florida:
The Florida segment recorded a pretax loss of $0.2 million for the first quarter of 2024, compared to pretax income of $8.2 million in the same period last year. The decrease in profitability was primarily due to slower net new orders during much of 2023, driven by rising mortgage interest rates, resulting in lower deliveries.Metro New York:
The Metro New York segment recorded a pretax loss of $0.5 million for the first quarter of 2024, compared to a pretax loss of $0.6 million in the same period last year, as the company continues to wind up the sales and deliveries activities in this segment.Texas:
The Texas segment recorded a pretax loss of $1.9 million for the first quarter of 2024, compared to a pretax loss of $1.3 million in the same period last year. During the quarter, the Texas segment began delivering homes in new projects from recent land acquisitions.Operational Highlights
Landsea Homes' operational performance in the first quarter of 2024 was strong, with the company delivering 505 homes, a 7% increase from the same period in the prior year. Net new orders were up 23% year-over-year, totaling 612 home sales. The company's average selling communities increased by 7% to 62.6 during the quarter. The company's focus on entry-level and move-up product offerings has been well-received by homebuyers, with strong demand across its markets. However, the higher mortgage interest rates have led to increased sales incentives and discounts, which have weighed on the company's gross margins. Landsea Homes reported a gross margin of 14.9% in the first quarter of 2024, compared to 18.1% in the same period last year.