LGI Homes, Inc. Q2 FY2025 earnings call

• Delivered 1,323 homes in Q2 with revenue $484M and average sales price $365,000.
• Adjusted gross margin was 25.5%, up 190 basis points sequentially, at the high end of guidance range.
• Focused on operating efficiency, cost discipline, and optimizing advertising investments.
• Held annual Service Impact Day with teams volunteering over 8,500 hours with 60+ organizations.

In the second quarter, LGI Homes delivered 1,323 homes with revenue of $484 million. The average sales price was $365,000. Adjusted gross margin was 25.5%, up 190 basis points sequentially. Pretax net income margin was 8.7% and earnings per share were $1.36. Of total closings, 237 homes were sold through the wholesale channel, representing 17.9% of closings.

• For Q3 2025, expects to close between 1,100 and 1,300 homes with ASP between $360,000 to $365,000.
• Gross margin expected to range between 21.5% and 22.5%, adjusted gross margin between 24% and 25%.
• SG&A expense range is 15% to 16%, and tax rate is approximately 24.5%.

• Economic uncertainty creating a softer sales environment.
• Elevated mortgage rates affecting entry-level buyer affordability.
• Challenges in rebalancing inventory in select markets to meet sales trends.

Q: Trevor Allinson of Wolfe Research asked about pace, price, and minimum absorption pace.

A: Eric Lipar said it's a balance, leaning into incentives on aged inventory while capitalizing on land development profit.

Q: Trevor Allinson asked about encouraging trends in late June and July.

A: Eric Lipar said it's due to better rate environment and team's focus on digital leads.

Q: Andrew Azzi of JPMorgan asked about June and July sales trends.

A: Eric Lipar said it's a combination of better rates and team efforts.

Q: Kenneth Zener of Seaport asked about orders pace and year-end inventory.

A: Eric Lipar expected better results than Q2; Charles Merdian said they'll start fewer homes than closed in Q3 and aim for 6-7 months supply.

Q: Alex Rygiel of Texas Capital Securities asked about sale of finished lots and cancellation rate.

A: Charles Merdian said finished lot sales were lighter, cancellation rate affected by gross order pace and a canceled wholesale contract.

Q: Jay McCanless of Wedbush asked about SG&A, community count, and share repurchases.

A: Charles Merdian said SG&A relates to revenue leverage; Eric Lipar said community count should increase; Joshua Fattor said delevering is a focus.

Q: Alex Barron of Housing Research Center asked about margins and affordability.

A: Eric Lipar said focus is on pace, with efforts on incentives and smaller square footage homes to improve affordability.