LGI Homes Q1 Earnings Call Highlights

Key Points

• LGI raised full-year margin guidance after Q1 margins beat prior ranges — adjusted gross margin rose to 23.4% and adjusted EBITDA climbed 30% to $24.4 million, prompting full-year gross margin guidance of 18.5%–20.5% and adjusted gross margin guidance of 22%–24%.
• Backlog surged to 1,699 homes, up 63% year-over-year (highest since Q1 2022), even as the company reported a high cancellation rate of 45.6% driven by buyers unable to secure financing — management says elevated cancellations are expected and view longer time-to-close as a positive for customer outcomes.
• Operationally, LGI delivered 916 homes in the quarter with revenue of about $320 million and average selling price up nearly 3% to roughly $363,000; balance sheet highlights include $1.7 billion of debt and total liquidity of $355 million.

LGI Homes NASDAQ: LGIH reported first-quarter 2026 results that management said generally tracked expectations, while prompting an upward revision to full-year margin guidance amid improving sales activity and a growing backlog.

First-quarter results and operating metrics

Chief Executive Officer and Chairman Eric Lipar said the quarter reflected “disciplined execution across the organization and steady demand,” with sales activity improving as the quarter progressed and supporting “continued backlog growth” heading into the spring selling season.

LGI delivered 916 homes during the quarter. Of those, 881 homes contributed to revenue of $319.7 million (about $320 million), while the remaining 35 closings were currently or previously leased homes, with gains recorded in other income. Average selling price rose nearly 3% year-over-year to $362,924 (about $363,000), which Lipar attributed to the company’s ability to preserve pricing while using “targeted price discounts and financing strategies” to support affordability.

LGI ended the quarter with 142 active communities and averaged 2.2 closings per community per month, consistent with the prior year and in line with expectations. Lipar highlighted the company’s top markets by closings per community per month during the quarter: Charlotte (4.6), Las Vegas (3.2), Phoenix (2.8), and Northern California and Seattle (2.7 each).

Margins and profitability

Chief Financial Officer Charles Merdian said first-quarter gross margin was 18.7%, consistent with the guidance provided on the prior call. Gross margin excluding impairment-related charges was 20.2%, down from 21% a year ago. Merdian said the decline was “primarily attributable to financing incentives and discounts on older inventory,” partially offset by the structural benefit of self-developed lots and a disciplined approach to pricing.

Adjusted gross margin was 23.4%, up 110 basis points sequentially and above the company’s prior guidance. The adjusted figure excluded $10 million of capitalized interest and $389,000 related to purchase accounting, Merdian said.

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 (10.2% of revenue), down from 12% a year earlier, which Merdian attributed primarily to “overall cost efficiencies in advertising spend.” General and administrative expenses were $27.9 million (8.7% of revenue), slightly lower than 8.9% in the prior-year period.

Other income totaled $4.9 million, driven primarily by the sale of 35 leased homes and gains from selling finished lots and commercial land. Adjusted EBITDA rose 30% to $24.4 million, or 7.6% of revenue, compared with 5.3% in the first quarter of last year. Pre-tax income was $4.3 million (1.4% of revenue).

Net income was $2.2 million, or $0.09 per basic and diluted share. Merdian noted the effective tax rate was 50%—above the company’s outlook—due to timing impacts from share-based compensation that vested during the quarter. He said the impact was isolated to the first quarter and that LGI still expects a full-year effective tax rate of about 26.5%. Excluding impairment-related charges and associated tax impacts, net income was $5.6 million, or $0.24 per share.

Orders, cancellations, and backlog

LGI recorded net orders of 1,221 homes and reported a cancellation rate of 45.6%. Lipar said cancellations were driven by buyers “ultimately unable to qualify for financing.” Backlog ended the quarter at 1,699 homes, up 63% year-over-year and 22% sequentially, which management said marked the highest unit backlog since the first quarter of 2022.

When asked about elevated cancellations, Lipar emphasized the company’s closing guidance and the size of the backlog. He said LGI has been working with customers longer—allowing time to save for down payments, pay down debt, or improve credit scores—calling the approach a “positive strategy” for customer experience and for the business. Lipar added the company expects the cancellation rate to remain elevated versus historical levels and described it as “positive and necessary for this point in the cycle.”

In response to a question about time to close, Lipar said it is “generally” elevated as customers work through affordability-related issues. He also said LGI is increasingly selling homes further out in the construction cycle—including homes under construction or with permits pending—which can lengthen the time from contract to closing, but is viewed positively by management.

Land, inventory, and balance sheet

Merdian said LGI owned and controlled 59,028 lots as of March 31, down 12.9% year-over-year and 3% sequentially. He said the decrease reflected a strategy of aligning land investment with current sales trends, investing in markets where demand supports it, and moderating investment while inventory rebalancing continues.

Of total lots, 86.7% were owned (51,193) and 13.3% were controlled (7,835). Among owned lots, 34,168 were raw land or land under development, with about 20% in active development and 80% in engineering or undeveloped land. LGI also had 13,404 finished vacant lots and 3,621 completed homes or homes under construction. Merdian said the company started 1,137 homes during the quarter to support seasonal sales strength.

On costs, Lipar said he had not seen meaningful land development cost increases and did not expect overall house costs to decline. Merdian added that LGI’s 13,000 finished vacant lots provide visibility because many development costs are “pretty locked already.” He said the company runs “just above 20%” of average selling price in finished lot costs and felt confident in that level going forward, with “maybe some potential upside” later in the year and into next year.

EVP of Investor Relations and Capital Markets Josh Fattor said LGI ended the quarter with $1.7 billion of debt outstanding, including $579 million drawn on its revolver. Debt-to-capital was 44.8% and net debt-to-capital was 44%, which Fattor said reflected the company’s typical first-quarter cadence of investing in vertical construction ahead of the spring selling season. Total liquidity was $355 million, including $61 million of cash and $294 million available under the revolver. Equity totaled more than $2.1 billion, translating to book value per share of $90.50, he said.

Outlook: margin guidance raised, core targets reiterated

Heading into spring, Lipar said affordability and consumer confidence remain key considerations “particularly in a volatile rate environment.” He noted an uptick in interest rates late in the quarter tied to geopolitical uncertainty, but said trends remained healthy across most markets and that buyers appear focused on value and the company’s affordability tools.

Lipar said LGI remained “right on track” to achieve previously issued full-year guidance, including:

• Annual closings of 4,600 to 5,400 homes
• 150 to 160 active communities by year-end
• Average selling price of $355,000 to $365,000
• SG&A as a percentage of revenue of 15% to 16%

Based on first-quarter margins coming in above the prior guided range and increased visibility from a growing backlog, Lipar said the company raised full-year gross margin guidance to 18.5% to 20.5% and adjusted gross margin guidance to 22% to 24%.

On the call, Lipar attributed the quarter’s better-than-anticipated margin performance to several factors, including “cost relief,” progress reducing older inventory, the ability to “push pricing” in select communities, and geographic mix. He told analysts LGI generally expects second-quarter adjusted gross margin to be similar to the first quarter, depending on mix and pricing dynamics.

Looking to near-term closings, Lipar said January and February were “tougher closing months,” while March improved on the strength of February sales. He added that the company anticipated closing “between 400 and 450” homes in April, and said April sales trends were similar to March, with no apparent impact from higher rates or geopolitical events.

About LGI Homes NASDAQ: LGIH

LGI Homes, Inc NASDAQ: LGIH is a residential homebuilder primarily focused on serving first-time and first-time move-up homebuyers in the United States. The company specializes in the acquisition, development and sale of affordable single-family homes and townhomes. LGI Homes operates through an integrated model that encompasses land sourcing, lot development, home construction, and post-closing customer support including warranty services.

In addition to its core homebuilding activities, LGI Homes offers ancillary services to streamline the homebuying process for its customers.

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