LGI Homes (LGIH) Q2 Revenue Beats Views

Core Insights - LGI Homes reported Q2 fiscal 2025 earnings with revenue of $483.5 million and GAAP earnings per share of $1.36, both exceeding Wall Street estimates but significantly lower than the same quarter last year [1][2] - Management noted improvements in profit margins, with gross margin increasing to 22.9% and adjusted gross margin rising to 25.5%, despite withdrawing the full-year 2025 outlook due to reduced demand visibility [1][5] Financial Performance - Revenue (GAAP) decreased by 19.7% year-over-year from $602.5 million in Q2 2024 to $483.5 million in Q2 2025 [2][5] - GAAP EPS fell by 45.2% from $2.48 in Q2 2024 to $1.36 in Q2 2025 [2] - Home closings dropped to 1,323, down 20.1% from 1,655 in Q2 2024 [2][5] - Average selling price per home increased slightly to $365,446 from $364,047 in Q2 2024 [6] Operational Overview - The absorption rate fell to 3.0 from 4.3 in Q2 2024, indicating weaker buyer activity [7] - Order cancellation rates rose to 24.2% in the first half of 2025, up from 19.5% in the same period last year, attributed to affordability constraints and economic uncertainty [8] - Backlog decreased to 808 homes valued at $322.5 million, down from 1,393 homes totaling $553.6 million in Q2 2024 [8] Strategic Focus - LGI Homes specializes in affordable, move-in ready single-family homes, targeting first-time homebuyers and active adults [3][10] - The company employs strategies such as disciplined land acquisition and efficient construction processes to maintain competitive pricing [4] - Joint ventures and wholesale sales supplement traditional retail business, with a focus on expanding community count and geographic reach [11] Future Guidance - Management withdrew its full-year fiscal 2025 guidance but expects 1,100 to 1,300 home closings in the next quarter, with gross margin projected between 21.5% and 22.5% [12] - Average sales price per home is anticipated to remain between $360,000 and $365,000, with selling, general, and administrative costs expected to be 15.0% to 16.0% of revenue [12] - Investors are advised to monitor demand trends, cancellation rates, and home closing pace as market conditions evolve [13]