Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $351.4 million, a 10.1% decrease year-over-year, driven by an 8% decline in home closings and a 2.2% decline in average sales price (ASP) [10][11] - Gross margin for Q1 2025 was 21%, down from 23.4% in the same period last year, primarily due to a one-time expense related to the forward commitment incentive program [11][12] - Net income for Q1 2025 was $4 million, or $0.17 per share, compared to a higher figure in the previous year [14] Business Line Data and Key Metrics Changes - The company delivered 996 homes in Q1 2025 at an average sales price of $352,831 [5][10] - The company recognized a one-time expense of $8.6 million related to the forward commitment incentive program, impacting revenue and gross margins [10][11] - The cancellation rate for Q1 was 16.3%, slightly improved from 16.8% in the same period last year [14] Market Data and Key Metrics Changes - The company ended Q1 with 1,040 homes in backlog, representing over $406.2 million [14] - The top markets based on closings per community were Richmond (5.3), Charlotte (4.6), Raleigh (4.3), Atlanta (3.8), and Nashville (3.6) [6] Company Strategy and Development Direction - The company is focused on addressing the persistent shortage of entry-level homes, which is seen as a societal challenge and a long-term growth opportunity [9] - The company plans to maintain its full-year guidance of closing between 21,000 to 23,000 homes, with an average selling price between $360,000 and $370,000 [18] - The company is adjusting its gross margin expectations downward by 100 to 150 basis points due to anticipated cost increases from tariffs and market uncertainties [18] Management's Comments on Operating Environment and Future Outlook - Management noted that affordability remains the biggest challenge for buyers, with rate volatility affecting their purchasing confidence [4][5] - Despite recent headwinds, management expressed confidence in the long-term outlook for the housing market, citing strong underlying demographic fundamentals [9] - Management highlighted that the sales pace improved in March, indicating a potential recovery as the spring selling season began [5][36] Other Important Information - The company ended Q1 with $1.6 billion in debt and a debt-to-cap ratio of 44.3% [16] - The company repurchased 41,685 shares for $3.1 million during the quarter, with $177.7 million remaining on its stock buyback authorization [16][72] Q&A Session Summary Question: Can you provide more details on the gross margin trajectory for the upcoming quarters? - Management indicated that gross margins are expected to ramp up as volume increases, with adjustments made due to tariffs and market conditions [21][22][85] Question: What is driving the need for increased incentives? - Management noted that the competitive market dynamics and the need to assist buyers with closing costs and rate buy-downs are driving the increase in incentives [26][29] Question: How confident is the company in achieving its full-year closing targets? - Management expressed confidence in achieving the closing targets, citing improved sales trends in March and ongoing demand [36][39] Question: How is the company responding to competitors cutting prices? - Management stated that the company is cautious about discounting prices and focuses on providing value through incentives rather than steep discounts [78][81] Question: What interest rates are being offered through the forward commitment program? - Management mentioned that they are currently buying down rates to the mid-5% range for FHA loans with good credit [80]

LGI Homes (LGIH) Q1 2025 Earnings Call April 29, 2025 12:30 PM ET Company Participants Joshua Fattor - Executive Vice President of Investor Relations & Capital MarketsEric Lipar - Chairman & CEOCharles Merdian - CFO & TreasurerMichael Rehaut - Executive DirectorTrevor Allinson - Director - Equity ResearchCarl Reichardt - Managing Director - Equity ResearchJay McCanless - SVP - Equity ResearchAlex Barron - President Conference Call Participants Kenneth Zener - Senior Analyst Operator Welcome to LGI Homes Fir ...

Financial Data and Key Metrics Changes - In Q1, the company delivered over 6,500 homes, achieving gross margins of 27.5%, with net income of $523 million, translating to $2.57 per share, down from $663 million or $3.10 per share in Q1 2024 [10][36][37] - The trailing 12-month return on equity was reported at 25.4% [10] - Home sale revenues totaled $3.7 billion, a decrease of 2% from $3.8 billion in the previous year [24] Business Line Data and Key Metrics Changes - Net new orders totaled 7,765 homes, a decrease of 7% year-over-year, with a 10% decrease in net new orders per store [21] - The average spend on options and lot premiums per home increased to $110,000 in Q1, up from $102,000 and $107,000 in the first and fourth quarters of the previous year [13] - The cancellation rate increased slightly to 11% compared to 10% in the prior year [21] Market Data and Key Metrics Changes - The company noted that 20% of its divisions were able to increase prices due to a drop in the 30-year mortgage rate below 7% [13] - The financial strength of move-up and active adult home buyers led to 60% of the portfolio being aligned to serve these key buyer groups [14] Company Strategy and Development Direction - The company aims to balance price and pace to drive high returns, prioritizing price over volume in the current environment [29][45] - The land investment for 2025 is expected to be approximately $5 billion, reflecting a more prudent approach in the current market [39][46] - The company plans to deliver between 29,000 and 30,000 homes for the full year, slightly below prior guidance of 31,000 [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand dynamics within the housing industry, despite current macroeconomic uncertainties [48] - The company is prepared to adjust land spending in response to changes in buyer demand, while maintaining a strong financial position [40][42] - Management acknowledged the volatility in consumer demand due to economic concerns but remains optimistic about future sales [17][90] Other Important Information - The company reported a gross margin of 27.5% in Q1, flat sequentially but down from the previous year [32] - SG&A expenses for Q1 were $393 million, or 10.5% of home sale revenues, compared to $358 million, or 9.4% of home sale revenues in the prior year [33] Q&A Session Summary Question: Second half margin expectations and tariff impact - Management confirmed that the incentive load for orders in Q1 was consistent with the 8% realized in deliveries, and the tariff impact is estimated at 1% of average sales price, approximately $5,000 [56][57] Question: Share repurchases - The company repurchased $300 million in shares during the quarter and has $1.9 billion remaining under its share repurchase authorization [60][61] Question: Cash flow guidance - The cash flow guide of $1.4 billion assumes homes needed to meet the delivery target, with adjustments made for land spend [64][66] Question: Market conditions and demand - Management acknowledged persistent demand but noted that exceeding this demand could require significant price reductions [73][76] Question: Tariff impact and guidance changes - The tariff impact is expected primarily in the fourth quarter, with specific categories identified, and the guidance reflects adjustments based on current market conditions [108][109] Question: Land spend and growth intentions - The reduction in land spend to $5 billion signals a prudent approach, with no impact on long-term growth plans [112][116]