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DATE

Tuesday, April 28, 2026 at 12:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer and Chairman — Eric Thomas Lipar
  • Chief Financial Officer and Treasurer — Charles Michael Merdian
  • Vice President, Investor Relations — Joshua D. Fattor

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TAKEAWAYS

  • Home Closings -- 916 total homes delivered, with 881 contributing to revenue; 35 homes sold were previously or currently leased, affecting other income.
  • Revenue -- $319.7 million, representing a 9% decrease, linked to an 11.5% drop in closings partially offset by a 2.9% increase in average selling price to $362,924.
  • Wholesale Channel -- 111 closings, or 12.6% of total closings, down from 179 closings and 18% last year.
  • Gross Margin -- 18.7% as reported; 20.2% before inventory-related charges; adjusted gross margin 23.4%, a sequential increase of 110 basis points and above guidance.
  • SG&A Expenses -- $60.5 million, 18.9% of revenue, a 200 basis-point improvement year over year; selling expenses were $32.7 million (10.2% of revenue), mainly due to advertising efficiencies.
  • Adjusted EBITDA -- $24.4 million, up 30%, equivalent to 7.6% of revenue compared to 5.3% last year.
  • Pretax Net Income -- $4.3 million, or 1.4% of revenue; net income $2.2 million ($0.09 per share), or $5.6 million ($0.24 per share) excluding impairment-related charges and taxes.
  • Order and Cancellation Trends -- 1,221 net orders with a 45.6% cancellation rate, mainly from financing-qualification issues.
  • Backlog -- 1,699 homes, a 63% year over year and 22% sequential increase, noted as the highest since 2022.
  • Active Communities -- 142 at period end, with an average of 2.2 closings per community per month, matching last year’s pace.
  • Land Position -- 59,028 lots owned or controlled, a 12.9% yearly and 3% sequential decrease; 86.7% owned, 13.3% controlled; raw/development, finished, and under-construction lot composition specified.
  • Debt and Leverage -- $1.7 billion total debt, $579 million drawn on revolver, with a debt-to-cap ratio of 44.8% and net debt-to-cap of 44%.
  • Liquidity and Equity -- $355 million total liquidity, including $61 million cash and $294 million revolving credit availability; equity marked at $2.1 billion, with book value per share at $90.50.
  • Guidance Updates -- Raised full-year gross margin to 18.5%-20.5%, and adjusted gross margin to 22%-24%; annual expectations restated for closings (4,600-5,400 homes), active communities (150-160), ASP ($355,000-$365,000), and SG&A-to-revenue (15%-16%).
  • Backlog Composition -- Over 400 units in backlog relate to wholesale, up 70% from last year; order activity in wholesale for the quarter described as “pretty limited.”
  • Inventory Dynamics -- 2,100 completed units and 1,300 started; completed units "a little heavier" than desired, but expected to trend toward balance as older inventory is reduced.
  • Market and Segment Notes -- Average sales price in the West and Northwest rose 5%-7%, with West having outsized impact due to higher pricing and mix; Terrata Homes brand supported move-up segment, comprising about 10% of communities.
  • Operational Approach -- Company reiterated 100% spec, entry-level focus and nearly fully on-balance-sheet land pipeline; emphasized efficiency gains via self-development and transparency to investors in capital structure.

SUMMARY

Management explicitly raised its full-year gross margin and adjusted gross margin outlooks due to first-quarter results exceeding guidance, citing cost relief and strength in pricing. The year-over-year increase in backlog to its highest since 2022, despite a high cancellation rate, contributed to a strong foundation entering the spring selling season. Executives maintained all prior guidance for home closings, active communities, and average selling price, reinforcing confidence in underlying demand trends. The proportion of closings in the wholesale channel declined significantly, affecting revenue mix. Adjusted EBITDA rose 30%, and SG&A expenses improved as a percentage of revenue, driven by efficiencies in advertising and cost management.

  • Charles Michael Merdian stated the effective tax rate reached 50%, isolated to the quarter due to share-based compensation vesting, while longer-term guidance remains at 26.5%.
  • Eric Thomas Lipar described cancellation rates as likely to remain elevated relative to historical for the last couple of years, viewing this as a necessary adaptation to current affordability challenges.
  • Finished lot costs remain stable, with approximately 20% of ASP allocated, and development cost exposure primarily affecting communities 12-18 months out, minimizing near-term volatility in margins.
  • The company anticipated 400–450 April closings, consistent with last year's levels; sales trends in April were reported as steady, with no material impact from geopolitical or interest-rate shifts.

INDUSTRY GLOSSARY

  • Spec (Speculative) Home: A residence constructed by a builder without a committed buyer at the start of construction, aimed at the entry-level market for immediate sale.
  • Adjusted Gross Margin: Gross margin calculated after excluding impairment-related charges, capitalized interest, and purchase accounting impacts to present core profitability from home sales.
  • Wholesale Channel: Business model involving construction and sale of homes directly to corporate buyers or institutional investors, rather than individual retail buyers.
  • EBITDA: Earnings before interest, taxes, depreciation, and amortization, used as a measure of operating performance.
  • Backlog: Total number of homes under contract but not yet closed by the reporting date.
  • Debt-to-Cap Ratio: Total debt divided by total capitalization (debt plus equity), representing leverage.
  • ASP (Average Selling Price): The mean price at which homes are sold over a defined period.

Full Conference Call Transcript

I am joined today by Eric Thomas Lipar, LGI Homes, Inc.’s chief executive officer and chairman of the board, and Charles Michael Merdian, chief financial officer and treasurer. I will now turn the call over to Eric.

Eric Thomas Lipar: Thanks, Josh. Good afternoon, and welcome to our earnings call. The first quarter played out largely as we expected, reflecting disciplined execution across the organization and steady demand for our homes. As the quarter progressed, sales activity improved across most of our markets, enabling continued backlog growth and providing a solid foundation as we have transitioned into the spring selling season. During the quarter, we delivered a total of 916 homes. Of this total, 881 homes contributed directly to our revenue of $320 million. The remaining 35 closings were currently or previously leased homes, the gains from which were reflected in other income.

Notably, our average selling price increased nearly 3% to approximately $363,000, demonstrating our ability to preserve pricing while continuing to support affordability through targeted price discounts and financing strategies. We ended the quarter with 142 active communities and averaged 2.2 closings per community per month. This was consistent with the pace achieved last year and in line with our expectations for the period. During the first quarter, our top five markets on a closings-per-community basis were Charlotte with 4.6, Las Vegas with 3.2, Phoenix with 2.8, and Northern California and Seattle each with 2.7 closings per community per month.

Our gross margin before inventory-related charges of 20.2% and adjusted gross margin of 23.4% were both modestly above the high end of our full-year outlook, highlighting the benefits of self-development, the durability of our operating model, and the strategic choices we continue to make around pricing incentives and inventory management. Sales activity during the quarter was positive. Net orders were 1,221 homes and our cancellation rate was 45.6%, driven by buyers who were ultimately unable to qualify for financing. Our backlog at quarter end was 1,699 homes, which represents a 63% increase year over year, a 22% increase sequentially, and marks the highest number of units in backlog since 2022.

Before turning the call over to Charles, I want to emphasize our confidence in the long-term fundamentals of the housing market. The persistent undersupply of attainable housing, coupled with favorable demographic trends, continues to support a long runway of demand for homeownership. LGI Homes, Inc.’s 100% spec, entry-level-focused business model, centered on providing an affordable alternative to renting, is purpose built for this backdrop. Underpinning that model is a strong, low-cost land pipeline which is nearly 100% on balance sheet, providing investors full transparency into our capital structure, driving margin durability by capturing the developer’s economic value, and minimizing reliance on external partners whose priorities may not align with the long-term value creation we are focused on.

These advantages underpin our confidence as we focus on execution today while investing to drive durable, long-term growth for many years to come. With that, I will invite Charles to provide additional details on our financial results.

Charles Michael Merdian: Thank you, Eric, and good afternoon. Revenue in the first quarter was $319.7 million, based on 881 homes closed at an average sales price of $362,924, up 2.9% year over year, primarily driven by geographic mix and a lower volume of wholesale closings. The 9% year-over-year decrease in revenue was driven by an 11.5% decline in closings, partially offset by higher ASP. Of our total closings, 111 were through our wholesale channel, representing 12.6% of total closings, compared to 179 or 18% during the same period last year. Our first quarter gross margin was 18.7%, in line with the guidance provided on our last call.

Gross margin, excluding impairment-related charges, was 20.2%, compared to 21% in the same period last year. The year-over-year decline was primarily attributable to financing incentives and discounts on older inventory, partially offset by the structural margin benefit of our self-developed lot positions and our disciplined approach to pricing. Adjusted gross margin was 23.4%, up 110 basis points sequentially, in line with our result last year, and above the guidance we provided on our last call. Adjusted gross margin excluded $10 million of capitalized interest and $389,000 related to purchase accounting. Combined selling, general, and administrative expenses totaled $60.5 million, or 18.9% of revenue, an improvement of 200 basis points year over year.

Selling expenses were $32.7 million, or 10.2% of revenue, compared to 12% in the same period last year. The decrease was primarily due to overall cost efficiencies in advertising spend. General and administrative expenses were $27.9 million, or 8.7% of revenue, compared to 8.9% in the same period last year. Other income was $4.9 million, driven primarily by the sale of 35 currently or previously leased homes and gains from the sale of finished lots and commercial land. Adjusted EBITDA increased 30% to $24.4 million, representing 7.6% of revenue, compared to 5.3% in the first quarter of last year. Pretax net income was $4.3 million, or 1.4% of revenue.

The effective tax rate in the first quarter was 50%, above our outlook, and reflects the timing impact of share-based compensation expenses that vested during the quarter. This impact is isolated to the first quarter and we continue to expect our full-year effective tax rate to be approximately 26.5%, in line with our previously issued guidance. First quarter net income was $2.2 million, or $0.09 per basic and diluted share. Excluding impairment-related charges and associated tax impacts, net income was $5.6 million, or $0.24 per basic and diluted share. Turning to our land position, at March 31, we owned and controlled 59,028 lots, a decrease of 12.9% year over year and 3% sequentially.

The decrease reflects our continued strategy of aligning land investment with current sales trends, acquiring lots in markets where demand supports it, and moderating investment where inventory rebalancing is still underway. Of our total lots, 51,193, or 86.7%, were owned. 7,835 lots, or 13.3%, were controlled. Of our owned lots, 34,168 were raw land or land under development, approximately 20% of which were in active development and 80% were in engineering or undeveloped land. Of the remaining 17,025 owned lots, 13,404 were finished vacant lots, and 3,621 were completed homes or homes under construction. During the quarter, we started 1,137 homes to support the seasonal uplift in sales trends.

I will now turn the call over to Josh for a discussion of our capital position.

Joshua D. Fattor: Thanks, Charles. We ended the quarter with $1.7 billion of debt outstanding, including $579 million drawn on our revolver, resulting in a debt-to-cap ratio of 44.8% and a net debt-to-cap ratio of 44%. The slight increase sequentially reflects our typical first-quarter cadence as we invest in vertical construction ahead of the spring selling season. We remain focused on reducing leverage as we work through older inventory and selectively monetize lot positions, with a long-term objective of maintaining a ratio of total debt to cap near the midpoint of our 35% to 45% target range.

Total liquidity at the end of the quarter was $355 million, including $61 million of cash on hand and $294 million available under our revolving credit facility. We ended the quarter with over $2.1 billion in equity, equating to a book value per share of $90.50. At this point, I will turn the call back over to Eric.

Eric Thomas Lipar: Thanks, Josh. We are encouraged by what we are experiencing in the market as we transition into the spring selling season. As always, affordability and consumer confidence remain important considerations for buyers, particularly in a volatile rate environment. However, despite an uptick in interest rates late in the quarter driven by geopolitical uncertainty, recent trends have remained healthy across most of our markets, suggesting many buyers are looking beyond short-term rate movements and focusing on value and the impact of the tools we are using to support affordability.

Buyers continue to inquire about homeownership and engage with our sales teams, and we are right on track to achieve the full-year guidance metrics we provided on our last call, including annual closings between 4,600 and 5,400 homes, 150 to 160 active communities by year end, an average selling price between $355,000 and $365,000, and SG&A as a percentage of revenue between 15% and 16%. However, based on first-quarter margins exceeding the range of our previous guidance, and our visibility into our growing backlog, we are raising our full-year gross margin to a range between 18.5% and 20.5%, and adjusted gross margin between 22% and 24%.

We believe we are executing well on the elements of our business that we can control, and we are positive about our ability to achieve our full-year expectations. Finally, I want to thank our team members for their ongoing dedication to our company and our customers. Being recognized for the sixth consecutive year as a Top Workplaces USA employer based on direct employee feedback is a significant honor and underscores the strength of our culture as experienced by our people. Thank you for your hard work and for ensuring that LGI Homes, Inc. is providing the best customer experience in the industry. We will now open the call for questions.

Operator: Thank you. If you would like to ask a question, please press 11. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Trevor Scott Allinson with Wolfe Research. Your line is open.

Trevor Scott Allinson: First one is on gross margin, better than you were anticipating. You are raising your full-year guidance as well, so that is encouraging, heading in the right direction. You talked about some strategic decisions around pricing incentives. Can you talk about what drove the better gross margin than what you were anticipating and what is driving your improved outlook for the year? And then second is on demand trends through the quarter. It sounds like those were still relatively healthy. Did you see any impact in March—rates went up and you had the Iran conflict really start to take off—and then how has demand trended so far in April, perhaps relative to seasonality?

I am not sure if I heard an April closing number, as well as any color so far on how April is shaping up as well.

Eric Thomas Lipar: Yes, Trevor. Thanks. I can start. I think the driver of gross margin is a couple of different things. One is we are seeing cost relief consistently throughout the quarter. The team is doing a great job of reducing our older inventory, so our newer inventory that is closing in the quarter. We were able to push pricing in a number of select communities across the country in the quarter. And also, geographic mix always plays a part in gross margin as well. Because of the success in the first quarter, we thought it was prudent to raise gross margin for the year, and we are comfortable with that new range. On demand, January and February were tougher closing months.

March recovered based on the strength of February sales, and that strength continued into March. We anticipate closing between 400 and 450 in April. It is still a little early; we are waiting for all of our final underwriting and mortgage commitments to get everything scheduled over the next couple of days here, but it should be similar to March, similar to last year—somewhere in that 400 to 450 range for the month of April. I would say sales trends in April have been similar to March. There does not seem to be an impact because of war or higher rates.

There is a little bit of seasonality built in, but we continue to spend money on marketing, we are continuing to see demand, and our teams continue to do a great job with that customer experience—working with them on affordability, working with them on down payment, paying off debt, whatever is needed to get them into the house. It is still a challenging time, but our teams are doing a great job dealing with those challenges of affordability and really working hard and producing results that, relative to the last couple of years, are more positive.

Trevor Scott Allinson: [inaudible] Good luck moving forward. Thank you. Appreciate it.

Operator: Our next question comes from Michael Rehaut with JPMorgan. Your line is open.

Michael Rehaut: Good afternoon. Thanks for taking my questions. Just also, obviously going to be a lot of focus on the gross margin. So just to kind of revisit that, if I may, Eric, I think you cited cost relief, some pricing power, and some mix. I just wanted to clarify, are those factors all what played out to the upside relative to your original expectations when you provided guidance for the quarter? Or was there one particular factor that more drove the upside versus others? And then also, as we think about the rest of the year for this metric, I believe you took up the adjusted gross margin outlook to a range of 22% to 24%.

So in the first quarter, excluding purchase accounting, you were closer to the high end of that range—23.4%. How should we think about the second quarter coming up, and are there any factors that might push you more towards the middle of the range, which would imply maybe the rest of the year on average being slightly below the first quarter? Lastly, the cancellation rate being somewhat elevated the last couple of quarters, I am just curious on what impact that might have on the operations.

Eric Thomas Lipar: I think it all played a factor, Michael. Also, the way we focus on guidance, we want to be conservative with our guidance. We were not sure going into the year where gross margin was going to be exactly, so it was probably a conservative guide to start with, which we hope is still conservative, but we are comfortable with the number for now. A lot of the strength in our gross margin ties back to the strength of our balance sheet and the value of our land. LGI Homes, Inc. does a lot of self-development across the United States, so our gross margin should be higher than the peer group.

We have to make sure we are capturing that developer profit inside of gross margin as well as providing incentives to our customers to keep up with the competition. We are still leaning into incentives, but increasing gross margin at the same time. On the second quarter, it is going to depend on mix and other factors on pricing, but generally we expect the second-quarter adjusted gross margin to be similar to first, which is why we are right in the middle or just above the mid part of our range on our annual guidance. Regarding cancellations, the emphasis should be on our closing guide, and the closing guide remains the same.

Our backlog is the highest since 2022, which we are excited about. From this point forward, it is really just managing the pipeline. Because of the challenging affordability situation and the challenging absorption rate, we have been working with customers. We have had a lot more flexibility keeping customers on the houses longer as they are saving up for down payment, working on paying off some debt, working on their credit scores. We think that has been a positive strategy and a great customer experience as well as benefiting LGI Homes, Inc.

As that backlog has grown, that may not be a tool that is needed; we will look at that and analyze it community by community across the United States. We need to continue to work with those customers and continue to follow up. Our team of 400-plus salespeople across the United States—that is one of the benefits of LGI Homes, Inc. and our strength—is that we have the team in place to keep in contact with these customers. We are still dealing with affordability-challenged markets, but we believe we are up for that challenge. The team is doing a great job. Leadership is doing a great job.

We anticipate the cancellation rate remaining elevated relative to historical for the last couple of years, but we think that is a positive and necessary for this point in the cycle.

Operator: Our next question comes from Alexander Rygiel with Texas Capital Securities. Your line is open.

Alexander Rygiel: Thank you. Backlog has increased sequentially. Has the time to close on this also increased? And do you see any evidence that time to close could be improving? And are you still seeing an improvement in the move-up buyers?

Eric Thomas Lipar: I would say, generally, yes. We do not have the information in front of us, but time to close with customers saving for down payment, as an example, is going to be elevated. The other thing that is happening in our business, which is positive, is sales relative to the amount of houses we have under construction is increasing. So we are selling more customers further out—customers going on houses that are under construction or going on houses where we have permits in hand or permits pending that we have not started construction on. That is going to lengthen the time under contract to close, but we also think that is positive as well.

On move-up, the overall business is so focused on the entry-level buyer that it is tough to judge, but we are seeing success in our Trada brand. It is about 10% of our community count nationwide, around 15 communities. But the overall market, like we said in our scripted remarks, is still a challenging market. We are dealing with some economic uncertainty and consumer confidence. All those headwinds are still there. Our optimism comes from being relative to expectations. We feel really good where we are, and we feel really good with our guidance for the year.

Operator: Our next question comes from Jay McCanless with Citizens Bank. Your line is open.

Jay McCanless: Hey, good afternoon, everyone. First question: really good gains in the Northwest—average sales price up 7%. The West was up 5%. Was this more of a one-off thing, or is this representative of what you have sitting in backlog right now and maybe helps you get to the high end of that ASP guide for the year? And if you think about price/cost right now, it sounds like you are seeing a little lower direct cost, but what are you seeing for land, and especially with lumber prices starting to move up? How are you feeling about that for the balance of the year?

Also, in your prepared comments, you talked about how the age of some of the specs you are selling now are younger. Do you have any type of data around what the average age of your homes in the field are now versus where they were a year ago?

Eric Thomas Lipar: I think it is community specific, Jay. We have opened up some new communities. The whole industry is going to be facing this: as new communities come online, our lot cost is going to be higher. That directly impacts ASP. So there is going to be a geographical mix component in our average ASP for the year. Certainly, the West has the highest average sales price, so the percentage the West represents compared to the rest of the company for the year will dictate where we are in the ASP range or even exceeding it. On costs, we have not seen a lot of land development cost increases.

In house cost increases, with oil where it is right now, we do not expect our house cost to go down. We do not really forecast costs going down over the next few quarters or years. We tell all of our employees we believe house prices are going up because every component of building a house and developing land is likely to be higher over the next few quarters and next few years. So that is going to continually drive our ASP higher.

Charles Michael Merdian: The other thing I would add, Jay, is we have 13,000 finished vacant lots. So the development costs that we are seeing are really going to affect most of those communities 12 to 18 months out. Another reason why we feel very strongly about our balance sheet, our land, and inventory is because those costs are generally pretty locked already as those sections have been developed. We run just above 20% of our ASP in finished lot costs and feel pretty confident in that number going forward, with maybe some potential upside as we get into the later part of the year and next year.

Eric Thomas Lipar: On the age of specs, I do not have anything quantifiable.

Charles Michael Merdian: What I would say is we are running about 2,100 completed units right now, Jay, and that is a little heavier than we typically would like on our overall inventory. We have about 1,300 that we have started. We did not start a lot in January, but that trend is increasing as we get into the summer. As we continue to work on our older inventory, we would expect our completed inventory units to start to work their way down into a more balanced level. Typically, we would want to see about half of our inventory complete and about half of our inventory in progress.

We are still a little bit heavier weighted to complete, but that is a focus we have been working on, and we expect that to trend down.

Jay McCanless: Okay. Great. That is all I had. Thanks, guys.

Operator: Our next question comes from Alex Barron with Housing Research Center. Your line is open.

Alex Barron: Hi. Good afternoon. I just wanted to confirm your order ASP seems to have gone up in the quarter. I am getting that from looking at the ASP in the backlog relative to last quarter. What drove that? Did you have a big change in mix, or is there another explanation there? And in terms of the wholesale business, do you have any sort of breakdown as far as what percentage of the orders came from that versus just regular sales? Also, do you have any guidance or suggestions on how to think about the other income line item?

Eric Thomas Lipar: I think the backlog ASP is elevated primarily because of the results in the West. In the West, we tend to sell further out, with not as much spec inventory on the ground. So that probably comes down a little bit in the future and is consistent with our annual guidance for ASP. On wholesale, the closings through the wholesale business were 12.6% of our closings in Q1.

Charles Michael Merdian: I would add the backlog at the end of the quarter has just over 400 units related to wholesale. We had a fairly large transaction in the fourth quarter that we booked, and not a lot of activity in the first quarter. So I would say the order activity in the first quarter was pretty limited from the wholesale business, but we do have a decent backlog—over 400 is up 70% from last year’s first quarter—so we feel good about the units we have under contract going in. As the wholesale market starts to evolve as the year goes on, we will be able to evaluate where the full-year results are going to end up.

On other income, it is pretty variable. Over the last few quarters, we have been around the $5 million number, and that is a combination of selling lots and commercial land and also the profit from our previously leased homes. There is potential for that to bounce around a little bit, but for modeling purposes, if you look at what we have done over the last several quarters and extend that out, that is a reasonable guess at this point.

Alex Barron: Alright. Thank you so much.

Operator: Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Eric Thomas Lipar for closing remarks.

Eric Thomas Lipar: Thanks, everyone, for participating on today’s call and for your interest in LGI Homes, Inc. Have a great day.

Operator: Thank you. This concludes LGI Homes, Inc. first quarter 2026 conference call. Have a great day.