LGI Homes, Inc. Q1 FY2026 earnings call

• Disciplined execution across the organization with steady demand for homes. Sales activity improved across most markets, enabling backlog growth. - Average selling price increased. Gross margin before inventory-related charges and adjusted gross margin were above full-year outlook. - Net orders and backlog figures. - Land position: Owned and controlled 59,028 lots, with specific breakdown of raw land, finished lots, etc. - Capital position: Debt outstanding, debt-to-cap ratio, liquidity, and equity details. - Confidence in long-term housing market fundamentals with 100% SPAC entry-level focused model and strong land pipeline.

During the first quarter, LGI Homes delivered a total of 916 homes. Of this total, 881 homes contributed directly to revenue of $320 million. The remaining 35 closings were currently or previously leased homes, gains from which were in other income. Average selling price increased nearly 3% to approximately $363,000. Gross margin before inventory-related charges was 20.2% and adjusted gross margin was 23.4%. Net orders were 1,221 homes, cancellation rate was 45.6%. Backlog at quarter end was 1,699 homes, a 63% increase year over year and 22% increase sequentially.

• Annual closings between 4,600 and 5,400 homes. - 150 to 160 active communities by year end. - Average selling price between $355,000 and $365,000. - SG&A as a percentage of revenue between 15% and 16%. - Raised full year gross margin to a range between 18.5% and 20.5%, and adjusted gross margin between 22% and 24%.

Q: On gross margin, better than anticipated and raising full year guidance, talk about what drove better gross margin and improved outlook.

A: Eric said cost relief, reducing older inventory, pricing in select communities, and geographic mix drove it.

Q: On demand trends, impact of March rates increase and Iran conflict, trend in April.

A: Eric said January and February were tough, March recovered, anticipate closing 400 - 450 in April, sales trends in April similar to March with no impact from war or higher rates.

Q: Revisiting gross margin factors, which was more driving upside.

A: Eric said cost relief, pricing power, mix all played roles.

Q: On second quarter adjusted gross margin outlook.

A: Eric said depends on mix, pricing, generally expect second quarter adjusted gross margin similar to first.

Q: On cancellation rate impact.

A: Eric said focus on closing guide, backlog is high, managing pipeline, working with customers, cancellation rate likely to remain elevated.

Q: On backlog increase, time to close.

A: Alex was told time to close could be elevated due to customers saving for down payment, sales relative to under construction houses increasing.

Q: On Northwest and West average sales price increase, one-off or representative.

A: Eric said community specific, new communities opening affecting lot cost and ASP.

Q: On land and lumber costs.

A: Eric said no significant land development cost decreases expected, house costs likely to go up. Charles added on finished vacant lots.

Q: On order ASP increase, driver.

A: Eric said elevated due to West results.

Q: On wholesale business breakdown.

A: Charles said wholesale closings were 12.6% of total closings in Q1, backlog over 400 units related to wholesale, order activity limited in Q1 from wholesale.

Q: On other income line item.

A: Charles said it's variable, around $5 million over last few quarters, combination of selling lots, commercial land, and profit from previously leased homes.