• Revenue: $351.4 million, a 10.1% decrease year-over-year.
• Homes Closed: 996 homes at an average sales price of $352,831.
• Gross Margin: 21%, down from 23.4% in the same period last year.
• Adjusted Gross Margin: 23.6%, compared to 25.3% last year.
• Net Income: $4 million, or $0.17 per basic and diluted share.
• SG&A Expenses: $73.5 million, or 20.9% of revenue.
• Pre-tax Net Income: $5.7 million, or 1.6% of revenue.
• Effective Tax Rate: 30.2%, compared to 26.2% last year.
• Backlog: 1,040 homes, representing $406.2 million.
• Debt Outstanding: $1.6 billion, with a debt-to-cap ratio of 44.3%.
• Total Liquidity: $360 million, including $57.6 million of cash.
• Stock Buyback: 41,685 shares repurchased for $3.1 million.
• Book Value Per Share: $87.27.

• Warning! GuruFocus has detected 7 Warning Signs with LGIH.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LGI Homes Inc (NASDAQ:LGIH) delivered 996 homes in the first quarter, generating revenue of $351.4 million.
• The company ended the first quarter with 146 communities, marking a 22% increase over the prior year.
• LGI Homes Inc (NASDAQ:LGIH) signed 1,437 net contracts in the first quarter, ending March with a backlog of 1,040 homes valued at over $406 million.
• The company is investing in intensive sales training for its sales leaders to enhance performance and agility in a challenging market.
• LGI Homes Inc (NASDAQ:LGIH) successfully recast its credit agreement, extending maturity to 2029, which strengthens its financial position.

Negative Points

• Revenue decreased by 10.1% year-over-year due to an 8% decline in home closings and a 2.2% decline in average sales price.
• The company recognized a one-time expense of $8.6 million related to its Forward Commitment Incentive Program, impacting revenue and gross margins.
• Gross margin decreased to 21% from 23.4% in the same period last year, affected by increased wholesale closings and higher construction overhead.
• The effective tax rate increased to 30.2% from 26.2% in the same period last year, impacting net income.
• LGI Homes Inc (NASDAQ:LGIH) adjusted its full-year gross margin expectations downward by 150 basis points at the low end due to tariffs and market uncertainties.

Q & A Highlights

Q: Can you provide more details on the gross margin trajectory and the impact of tariffs on your guidance? A: Eric Lipar, CEO, explained that the gross margin adjustment is due to three main factors: anticipated tariff-related cost increases, general cost increases, and the results of Q1. They are also leaning into customer incentives, which are averaging 5% to 6% of the average sales price (ASP). These factors led to the decision to adjust the gross margin guidance.

Q: How are you managing the balance between sales pace and pricing, especially with the adjusted gross margin guidance? A: Eric Lipar, CEO, noted that incentives are similar to last quarter, focusing on closing cost assistance, rate buy-downs, and price discounting for older inventory. The demand remains strong, but affordability is a challenge. They are monitoring market conditions closely to maintain a balance between sales pace and pricing.

Q: What is your confidence level in achieving the full-year closings target, given the slow start to the year? A: Eric Lipar, CEO, expressed confidence in meeting the full-year closing target, noting that March sales were strong, and they expect the sales pace to improve. The company is targeting a four closings per month absorption pace for the rest of the year.

Q: How are you addressing the competitive market and potential price cuts by competitors? A: Eric Lipar, CEO, stated that they are focusing on providing compelling value through incentives rather than steep price cuts. They are cautious with discounting, especially for standing inventory, and aim to maintain a competitive offering without racing to the bottom.

Q: Can you elaborate on the impact of the forward commitment expense on your financials? A: Charles Merdian, CFO, clarified that the $8.6 million forward commitment expense was split into $6.5 million affecting revenue and $2.1 million impacting SG&A. This one-time expense influenced the gross margin and overall financial results for the quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.