LGI Homes (LGIH -0.88%), a national homebuilder focused on entry-level buyers, released its second quarter fiscal 2025 earnings on August 5, 2025. The most notable news was that Both revenue and earnings per share (GAAP) beat Wall Street estimates, with revenue (GAAP) reported at $483.5 million (vs. $477.4 million consensus) and GAAP earnings per share at $1.36 (vs. $1.28 consensus). Despite these beats, both figures (GAAP) fell sharply from the same quarter last year. Management described sequential improvement in profit margins, with gross margin (GAAP) increasing to 22.9% and adjusted gross margin (non-GAAP) rising to 25.5% and careful cost control. However, Management withdrew its full-year 2025 outlook, citing reduced demand visibility. Overall, the period revealed ongoing pressures but also resilience in several financial metrics.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.36 | $1.28 | $2.48 | (45.2%) |
| Revenue (GAAP) | $483.5 million | $477.4 million | $602.5 million | (19.7%) |
| Gross Margin (%) | 22.9% | 25.0% | (2.1 pp) | |
| Adjusted Gross Margin (%) | 25.5% | 27.0% | (1.5 pp) | |
| Home Closings | 1,323 | 1,655 | (20.1%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
LGI Homes is a national homebuilder specializing in selling affordable, move-in ready single-family homes, with a heavy emphasis on serving first-time homebuyers as well as active adults seeking new residences.
The business pursues several core strategies. It acquires and develops land positioned near transportation corridors but typically farther from city centers, allowing for lower land costs and more competitive pricing. LGI Homes targets entry-level buyers with its core brand and luxury buyers with its Terrata Homes brand, aiming to balance large-scale land positions, efficient building, and strong marketing. Key success factors include disciplined land acquisition, effective management of inventory, efficient construction processes, and a focused approach to marketing and sales. Diversification through joint ventures and wholesale sales supplements its traditional retail business.
Quarter in Review: Results, Operations, and Key Developments
During the quarter, the company’s sales and profitability figures presented a mixed picture. Revenue (GAAP) came in just above analyst expectations, but dropped approximately 19.8% compared to the same period last year. The number of homes closed slipped to 1,323, down 20.1% year-over-year. Gross margin (GAAP)—the portion of revenue remaining after direct costs to build and sell homes—improved 1.9 percentage points from the prior quarter to 22.9%, but still trailed the 25.0% gross margin (GAAP) posted in Q2 2024.
Average selling price per home (GAAP) was $365,446, up slightly from $364,047 in Q2 2024. The Central region dropped to 360 closings, down from 535 in Q2 2024, while the Florida region reported 177 closings (down from 270). Corresponding revenues reflected these trends, with the Central and Florida regions reporting GAAP home sales revenues of $113.0 million and $66.6 million.
Absorption rate—a metric tracking the number of home sales per community per month—fell to 3.0 from 4.3 in Q2 2024, underscoring weaker buyer activity. Despite this, the number of active communities continued to grow, reaching 146 at quarter-end versus 128 in the prior year (Q2 2024).
The company faced higher order cancellation rates, with 24.2% of homebuyers ending contracts in the first half of 2025, up from 19.5% in the first half of 2024. Management attributed this rise to affordability constraints and economic uncertainty. Backlog, which measures homes under contract but not yet closed, dropped to 808 valued at $322.5 million, down from 1,393 homes totaling $553.6 million in Q2 2024. As a response to valuation, Share buybacks increased sharply, with 367,568 shares repurchased for $20.6 million. Liquidity remains strong, with $322.6 million available across cash and credit lines.
Product Families and Segment Performance
LGI Homes’ core offerings are detached and attached single-family homes under its LGI Homes and Terrata Homes brands. Entry-level homes are its mainstay, designed for first-time buyers or those seeking affordable moves. These homes are marketed as ready for immediate move-in and include standardized features to control costs.
The company leverages joint ventures and a wholesale business model as additional sales channels. For example, Bulk sales into rental portfolios accounted for 91 homes in backlog, a drop from 181 in Q2 2024. By segment, every region posted lower unit sales versus last year. The Southeast region delivered the highest closings (456 homes), while Northwest had the highest average selling price at $534,870 per home. Community count and geographic reach have expanded, yet illustrating ongoing challenges in demand per site.
Looking Ahead: Guidance and Upcoming Priorities
Management withdrew its full-year fiscal 2025 guidance, citing a lack of visibility into buyer demand for the fourth quarter. The company did, however, issue guidance for the next quarter: it expects 1,100 to 1,300 home closings, with gross margin (GAAP) projected in the range of 21.5% to 22.5%, and average sales price per home closed (GAAP) is expected to remain between $360,000 and $365,000. Selling, general, and administrative costs are expected to be 15.0% to 16.0% of revenue, and the effective tax rate is guided at approximately 24.5%.
In the coming periods, investors are likely to focus on demand trends, cancellation rates, and the pace of home closings. Management stated it will “reintroduce annual guidance when market conditions stabilize.” underscoring the importance of affordability and economic clarity for the company’s outlook. Watch for continued adjustments in land inventory levels, absorption rates, and incentives, as these measures will provide insight into how effectively LGI Homes balances risk, inventory, and profitability as the housing market continues to evolve.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
