LGIH 10-K & 10-Q changes, risk factors and insider trading
LGI Homes, Inc. · Nasdaq · Operative Builders · CIK 1580670 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Operational and Construction Risks”
New heading “Strategic and Financial Risks”
New heading “Changing sentiments with respect to sustainability matters may impact our business, financial results or stock price.”
Removed heading “Operational Risks Related to Our Business”
Removed heading “Inflation could adversely affect our business and financial results.”
Removed heading “Strategic Risks Related to Our Business”
Largest changes
“The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors and trades people and supplies of materials such as insulation, drywall, cement, steel and lumber. These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic disruptions. …”see in full comparison
“The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors and tradespeople and supplies of materials such as insulation, drywall, cement, steel and lumber. These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic disruptions. …”see in full comparison
“We rely on accounting, financial, operational, management and other information systems, including the Internet and third-party hosted services, to conduct our operations, store personal data and sensitive data, process financial information and results of operations for internal reporting purposes and comply with financial reporting, legal and tax requirements. …”see in full comparison
“We rely on accounting, financial, operational, management and other information systems, including the Internet and third-party hosted services, to conduct our operations, store personal data and sensitive data, process financial information and results of operations for internal reporting purposes and comply with financial reporting, legal and tax requirements. …”see in full comparison
“If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S. …”see in full comparison
“If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S presidential administration, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects …”see in full comparison
Full comparison: every changed paragraph (117)
•Operational Risks Related to Our Business:
◦labor and raw material shortages and price fluctuations that could delay or increase the cost of home construction or land development;
◦a significantSignificant downturn in our housing markets or in the homebuilding industry;
◦Inflation could adversely affect our business and financial results;
◦increasing attention to environmental, social and governance matters;
•Operational and Construction Risks:
◦Labor and raw material shortages, price fluctuations and supply chain constraints that could delay or increase the cost of home construction or land development;
•Strategic and Financial Risks:
◦Our efforts to expand into new markets or increase operations may not achieve expected results and could expose us to additional operational and financial risk;
•Strategic Risks Related to Our Business:
◦our growth or expansion strategies may not be successful;
•Risks Related to Our Organization and Structure Risks:
◦weWe may be subject to litigation, arbitrationarbitration, governmental investigations or other claims;
◦complexComplex and evolving U.S. laws and regulations regarding privacy and data protection; and ◦access to financing sources may not be available on favorable terms, or at all.
◦Changing sentiments with respect to sustainability, matters; and ◦Access to financing sources may not be available on favorable terms, or at all.
Operational Risks Related to Our Business
The long-term sustainability of our operations as well as future growth depends in large part on the price at which we are able to obtain suitable finished lots and land parcels for development to support our homebuilding operation. Our ability to acquire finished lots and land parcels for new single-family homes and other projects may be adversely affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning, regulations that limit housing density, the ability to obtain building permits, environmental requirements and other market conditions and regulatory requirements. If suitable lots or land at reasonable prices become less available, the number of homes we may be able to build and sell could be reduced, and the cost of land could be increased substantially, which could adversely impact us. As competition for suitable land increases, the cost of undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at acceptable prices may decline, which could adversely impact us. The availability of suitable land assets could also affect the success of our land acquisition strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our revenues and margins, and achieve or maintain profitability. Additionally, developing undeveloped land is capital intensive and time consuming and we may develop land based upon forecasts and assumptions that prove to be inaccurate, resulting in projects that are not economically viable.
Risks inherent in controlling, purchasing, holding and developing land for new home construction are substantial. The risks inherent in purchasing and developing land parcels increase as consumer demand for housing decreases and the holding period increases. As a result, we may buy and develop land parcels on which homes cannot be profitably built and sold. In certain circumstances, a grant of entitlements or development agreement with respect to a particular parcel of land may include restrictions on the transfer of such entitlements to a buyer of such land, which would negatively impact the price of such entitled land by restricting our ability to sell it for its full entitled value. In addition, inventory carrying costs can be significant and can result in reduced margins or losses in a poorly performing community or market. Developing land and constructing homes takes a considerable amount of time and requires a substantial cash investment. Land development is a key part of our operations and we develop land in most of our markets. The time and investment required for development may adversely impact our business. We have substantial real estate inventories that regularly remain on our balance sheet for significant periods of time prior to their sale, during which time we are exposed to the risk of adverse market developments. Real estate investments are relatively difficult to sell quickly. As a result, our ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial and investment conditions may be limited, and we may be forced to hold non-income producing properties for extended periods of time. Our business model is based on building homes before a sales contract is executed and a customer deposit is received. Because interest and other expenses are capitalized only during the development of land and home construction, we incur interest subject to capitalization criteria and recognize maintenance expenses on unsold completed homes in inventory. As of December 31, 2024, we had 2,512 completed homes in inventory and 1,358 homes in progress in inventory. In the event there is a continued downturn in home sales in our markets, our inventory of completed homes could increase, leading to additional financing costs and lower margins, which could have a material adverse effect on our financial results and operations. In the event of significant changes in economic or market conditions, we may have to sell homes at significantly lower margins or at a loss, if we are able to sell them at all. Additionally, deteriorating market conditions could cause us to record significant inventory impairment charges. The recording of a significant inventory impairment could negatively affect our reported earnings per share and negatively impact the market perception of our business.
The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors and tradespeople and supplies of materials such as insulation, drywall, cement, steel and lumber. These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic disruptions. In addition, pricing for labor and raw materials can be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws or their enforcement, trends in labor migration and tariffs. For example, the federal government previously imposed, and has recently proposed, new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them). Such government-imposed tariffs and trade regulations on imported building supplies, and retaliatory measures by other countries, may in the future have significant impacts on the cost to construct our homes and on our customers’ budgets, including by causing disruptions or shortages in our supply chain. We cannot predict what changes to trade policy will be made by the current presidential administration, the U.S. Congress or other governments, including whether existing tariff policies will be maintained or modified or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict the effects that any such changes would have on our business. We have also experienced labor shortages, price fluctuations and increased labor costs, including as a result of inflation or wage increases, particularly over the past few years, before stabilizing recently, due to historic inflation rates in the United States. It is uncertain whether these conditions will continue as is, improve or worsen. Further, our success in recently-entered markets or those we may choose to enter in the future depends substantially on our ability to source labor and local materials on terms that are favorable to us. Our markets may exhibit a reduced level of skilled labor relative to increased homebuilding demand in these markets. In the event of shortages in labor or raw materials in such markets, local subcontractors, tradespeople and suppliers may choose to allocate their resources to homebuilders with an established presence in the market and with whom they have longer-standing relationships. Labor and raw material shortages, price increases for labor and raw materials and supply chain constraints could cause delays in and increase our costs of home construction or land development, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
We engage subcontractors to perform the construction of our homes and the development of our raw land and, in many cases, to select and obtain the raw materials used for such work. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors. While we anticipate being able to obtain sufficient materials and reliable subcontractors and believe that our relationships with subcontractors are good, we do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will be available at reasonable rates and in our markets. In addition, as we expand into new markets, we typically must develop new relationships with subcontractors in such markets, and there can be no assurance that we will be able to do so in a cost-effective and timely manner, or at all. The inability to contract with skilled subcontractors at reasonable rates on a timely basis could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Despite our quality control and jobsite safety efforts, we may discover from time to time that our subcontractors have engaged in improper construction or safety practices or have installed defective materials in our homes or subdivisions. When we discover these issues, we typically utilize our subcontractors to repair the defects. The adverse costs of repairing such defects or satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs from subcontractors, suppliers and insurers, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations. We may also suffer reputational damage, and may be exposed to potential liability, from the actions of subcontractors or their failure to comply with applicable laws, including matters that are beyond our control. Attempts at mitigation may not be successful, and we could be subject to claims relating to actions of, or matters relating to, our subcontractors.
Before a community generates any revenue, time and material expenditures are required to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities and sales facilities. It can take several years from the time we acquire control of an undeveloped property to the time we make our first home sale on the site. Delays in the development of communities, including delays associated with subcontractors performing the development activities or entitlements, labor and raw material shortages or supply chain disruptions, expose us to the risk of changes in market conditions for homes. A decline in our ability to develop and market one of our new undeveloped communities successfully and to generate positive cash flow from these operations in a timely manner could have a material adverse effect on our business and results of operations and on our ability to service our debt and to meet our working capital requirements. In addition, higher than expected absorption rates in existing communities may result in lower than expected inventory levels until the development for replacement communities is completed.
We maintain, and require our subcontractors to maintain, general liability insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance and generally seek to require our subcontractors to indemnify us for liabilities arising from their work. While these insurance policies, subject to deductibles and other coverage limits, and indemnities protect us against a portion of our risk of loss from claims related to our land development and homebuilding activities, we cannot provide assurance that these insurance policies and indemnities will be adequate to address all our home and other warranty, product liability and construction defect claims in the future, or that any potential inadequacies will not have an adverse effect on our business, financial condition or results of operations. Further, the coverage offered by, and the availability of, general liability insurance for completed operations and construction defects are currently limited and costly. We cannot provide assurance that coverage will not be further restricted, increasing our risks and financial exposure to claims, and/or become costlier.
Our homes are constructed by employees of subcontractors and other third parties. We do not have the ability to control what these parties pay their employees or the rules they impose on their employees. However, various governmental agencies have taken actions to hold parties like us responsible for violations of wage and hour laws and other labor laws by subcontractors. Governmental rulings that hold us responsible for labor practices by our subcontractors could create substantial exposures for us under our subcontractor relationships, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.
We are often required to provide bonds, letters of credit or guarantees to governmental authorities and others to ensure the completion of our projects. As a result of market conditions, some surety providers have been reluctant to issue new bonds and providers may require credit enhancements, such as cash deposits or letters of credit, in order to maintain existing bonds or to issue new bonds. If we are unable to obtain required bonds in the future for our projects, or if we are required to provide credit enhancements with respect to our current or future bonds or in place of bonds, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected.
In addition, our LGI Mortgage Solutions joint venture involves additional risks associated with the mortgage banking business. The mortgage banking business is competitive, and competitors include mortgage lenders, such as national, regional and local mortgage banks and other financial institutions. Some of these competitors are subject to fewer governmental regulations and have greater access to capital than our joint venture does, and some of them may operate with different criteria than our joint venture does. These competitors may offer a broader or more attractive array of financing and other products and services to potential customers than our joint venture does. For these reasons, our joint venture may not be able to compete effectively in the mortgage banking business. Further, the mortgage banking business is subject to numerous federal, state and local laws and regulations, which, among other things: prohibit discrimination and establish underwriting guidelines; provide for audits and inspections; require appraisals and/or credit reports on prospective borrowers and disclosure of certain information concerning credit and settlement costs; establish maximum loan amounts; prohibit predatory lending practices; and regulate the referral of business to affiliated entities. The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits, examinations and investigations in the industry. The 2008 housing downturn resulted in numerous changes in the regulatory framework of the financial services industry. Any changes or new enactments could result in more stringent compliance standards, which could adversely affect our financial condition and results of operations and the market perception of our business. Additionally, if we are unable to originate mortgages for any reason going forward, such as a cyberattack on our joint venture partners, our customers may experience significant mortgage loan funding issues, which could have a material impact on our homebuilding business and our consolidated financial statements.
Inflation could adversely affect our business and financial results.
Inflation could adversely affect our business and financial results by increasing the costs of land, raw materials and labor needed to operate our business. Inflation may also accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby decreasing demand for our homes. Historically, we have experienced a significant increase in land, labor, materials and costs related to construction. In an inflationary environment, such as the economic environment we have experienced recently, depending on the homebuilding industry and other economic conditions, we may be unable to raise the sales prices of our homes enough to offset the increasing costs of our operations, which would decrease our profit margins. Furthermore, if we need to lower the sales prices of our homes to meet demand, the value of our land inventory may decrease. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult and/or more expensive to maintain sufficient funds to operate our business.
Higher mortgage interest rates, tightening of mortgage lending standards and mortgage financing requirements, and untimely or incomplete mortgage loan originations for our homebuyershomebuyers, could adversely affect the availability of mortgage loans for potential purchasers of our homes and thereby materially and adversely affect our business, prospects, liquidity, financial conditioncondition, and results of operations.
The availability and affordability of mortgage loans, including mortgage interest rates for such loans, could also be adversely affected by a scaling back or termination of the federal government’s mortgage loan-related programs or policies. Because Fannie Mae-, Freddie Mac-, FHA-, USDA- and VA-backed mortgage loans have been an important factor in marketing and selling many of our homes, any limitations or restrictions in the availability of, or higher consumer costs for, such government-backed financing could adversely affect our business, prospects, liquidity, financial conditioncondition, and results of operations. The elimination or curtailment of state bonds to assist homebuyers could materially and adversely affect our business, prospects, liquidity, financial conditioncondition, and results of operations.
In addition, certain current regulations impose, and future regulations may strengthen or impose new, standards and requirements relating to the origination, securitization and servicing of residential consumer mortgage loans, which could further restrict the availability and affordability of mortgage loans and the demand for such loans by financial intermediaries and, as a result, adversely affect our home sales, financial conditioncondition, and results of operations. Further, if, due to credit or consumer lending market conditions, reduced liquidity, increased risk retention or minimum capital level obligations and/or regulatory restrictions related to certain regulations, laws or other factors or business decisions, these lenders refuse or are unable to provide mortgage loans to our homebuyers, or increase the costs to borrowers to obtain such loans, the number of homes we close and our business, prospects, liquidity, financial conditioncondition, and results of operations may be materially adversely affected.
First-time homebuyers are generally more affected than other potential homebuyers by the availability of mortgage financing thanand other potentialcosts homebuyers.of homeownership such as insurance and taxes. These homebuyers are a key source of demand for our new homes. A limited availability of suitable mortgage financing may adversely affect the volume and sales price of our home sales.homes.
We cannot predict whether and to what extent the housing markets in the geographic areas in which we operate will grow, particularly if interest rates for mortgage loans, land costs, and construction costs continue to rise or stay at similar levels. Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or impacts from U.S. presidential administration policies, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums, homeowners’ insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.
If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S. presidential administration, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition, and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed, cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.
We operate in a very competitive environment that is characterized by competition from a number of other homebuilders and land developers in each market in which we operate. Additionally, there are relatively low barriers to entry into our business. We compete with large national and regional homebuilding companies, some of which have greater financial and operational resources than us, and with smaller local homebuilders and land developers, some of which may have lower administrative costs than us. We may be at a competitive disadvantage with regard to certain of our large national and regional homebuilding competitors whose operations are more geographically diversified than ours, as these competitors may be better able to withstand any future regional downturns in the housing market. Furthermore, our market share in certain of our markets may be lower as compared to some of our competitors. In addition, the homebuilding industry has been subject to increasing consolidation, which could result in existing competitors increasing their market share. Such changes have the potential to increase competitive dynamics in affected markets. Many of our competitors also have longer operating histories and longstanding relationships with subcontractors and suppliers in the markets in which we operate or to which we may expand. This may give our competitors an advantage in marketing their products, securing materials and labor at lower prices and allowing their homes to be delivered to customers more quickly and at more favorable prices. We compete for, among other things, homebuyers, desirable land parcels, financing, raw materials and skilled management and labor resources. Our competitors may independently develop land and construct homes that are substantially similar to our products.
If we are unable to compete effectively in our markets, our business could decline disproportionately to our competitors, and our results of operations and financial condition could be adversely affected. We can provide no assurance that we will be able to continue to compete successfully in any of our markets. Our inability to continue to compete successfully in any of our markets could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.
Our business strategy is focused on the acquisition of suitable land and the design, construction and sale of primarily single-family homes in residential subdivisions, including planned communities, in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland and Utah. A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. Our communities in our West segment are especially susceptible to restrictive government regulations and environmental laws.
If adverse conditions in these markets develop in the future, it could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. Furthermore, if buyer demand for new homes in these markets decreases, home prices could decline, which would have a material adverse effect on our business.
Our business can be substantially affected by adverse changes in general and local economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; housing demand from population growth, household formation and other demographic changes, among other factors (which may be driven by birth rate changes, economic factors or U.S. immigration policies); availability and pricing of mortgage financing for homebuyers; housing affordability; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes, the cost of homeowners’ insurance and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; and interest of financial institutions or other businesses in purchasing wholesale homes or their ability to do so. Adverse changes in these conditions may affect our business nationally or may be more prevalent or concentrated in particular submarkets in which we operate. Inclement weather, natural disasters (such as earthquakes, hurricanes, tornadoes, floods, prolonged periods of precipitation, droughts and fires), other calamities and other environmental conditions can delay the delivery of our homes and/or increase our costs. Civil unrest or acts of terrorism can also have a negative effect on our business. The homebuilding industry is cyclical in nature and if it experiences another significant or sustained downturn as a result of factors described above or otherwise, it would materially adversely affect our business and results of operations in future years.
In 2022, the Federal Reserve’s aggressive actions to stem inflation caused mortgage interest rates to increase significantly. The resulting increased costs of borrowing negatively impacted customer sentiment and accelerated existing affordability constraints for potential homebuyers. Although mortgage interest rates have declined in subsequent years, many homebuyers continue to delay their home purchasing decisions.
While tax laws generally permit significant expenses associated with homeownership, primarily mortgage interest expense and real estate taxes, to be deducted for the purpose of calculating an individual’s federal and, in many cases, state taxable income, the ability to deduct mortgage interest expense and real estate taxes for federal income tax purposes is limited. The federal government or a state government may change its income tax laws by eliminating, limiting or substantially reducing these income tax benefits without offsetting provisions, which may increase the after-tax cost of owning a new home for many of our potential homebuyers. Any such future changes may have an adverse effect on the homebuilding industry in general. For example, the loss or reduction of homeowner tax deductions could decrease the demand for new homes. Any such future changes could also have a material adverse impact on our business, prospects, liquidity, financial conditioncondition, and results of operations.
We cannot predict whether and to what extent the housing markets in the geographic areas in which we operate will grow, particularly if interest rates for mortgage loans, land costs, and construction costs continue to rise or stay at similar levels. Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or impacts from the change in U.S. presidential administration, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums, homeowners’ insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.
If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S presidential administration, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed, cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.
Our business can be substantially affected by adverse changes in general economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; housing demand from population growth, household formation and other demographic changes, among other factors (which may be driven by birth rate changes, economic factors or U.S. immigration policies); availability and pricing of mortgage financing for homebuyers; housing affordability; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; interest of financial institutions or other businesses in purchasing wholesale homes; and real estate taxes. Adverse changes in these conditions may affect our business nationally or may be more prevalent or concentrated in particular submarkets in which we operate. Inclement weather, natural disasters (such as earthquakes, hurricanes, tornadoes, floods, prolonged periods of precipitation, droughts and fires), other calamities and other environmental conditions can delay the delivery of our homes and/or increase our costs. Civil unrest or acts of terrorism can also have a negative effect on our business. If the homebuilding industry experiences another significant or sustained downturn, it would materially adversely affect our business and results of operations in future years.
In 2022, the Federal Reserve’s aggressive actions to stem inflation caused mortgage interest rates to increase significantly. The resulting increased costs of borrowing negatively impacted customer sentiment and accelerated existing affordability constraints for potential homebuyers. As a result, many homebuyers paused their home purchasing decisions.
We operate in a very competitive environment that is characterized by competition from a number of other homebuilders and land developers in each market in which we operate. Additionally, there are relatively low barriers to entry into our business. We compete with large national and regional homebuilding companies, some of which have greater financial and operational resources than us, and with smaller local homebuilders and land developers, some of which may have lower administrative costs than us. We may be at a competitive disadvantage with regard to certain of our large national and regional homebuilding competitors whose operations are more geographically diversified than ours, as these competitors may be better able to withstand any future regional downturns in the housing market. Furthermore, our market share in certain of our markets may be lower as compared to some of our competitors. In addition, the homebuilding industry has been subject to increasing consolidation, which could result in existing competitors increasing their market share. Such changes have the potential to increase competitive dynamics in affected markets. Many of our competitors also have longer operating histories and longstanding relationships with subcontractors and suppliers in the markets in which we operate or to which we may expand.
This may give our competitors an advantage in marketing their products, securing materials and labor at lower prices and allowing their homes to be delivered to customers more quickly and at more favorable prices. We compete for, among other things, homebuyers, desirable land parcels, financing, raw materials and skilled management and labor resources. Our competitors may independently develop land and construct homes that are substantially similar to our products.
If we are unable to compete effectively in our markets, our business could decline disproportionately to our competitors, and our results of operations and financial condition could be adversely affected. We can provide no assurance that we will be able to continue to compete successfully in any of our markets. Our inability to continue to compete successfully in any of our markets could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Our business strategy is focused on the acquisition of suitable land and the design, construction and sale of primarily single-family homes in residential subdivisions, including planned communities, in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland and Utah. A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. Our communities in our West segment are especially susceptible to restrictive government regulations and environmental laws.
If adverse conditions in these markets develop in the future, it could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. Furthermore, if buyer demand for new homes in these markets decreases, home prices could decline, which would have a material adverse effect on our business.
The homebuilding and land development industries are subject to significant variability and fluctuations in real estate values. As a result, we may be required to write-down the book value of our real estate assets in accordance with GAAP, and some of those write-downs could be material. Any material write-downs of assets could have a material adverse effect on our business, prospects, liquidity, financial conditioncondition, and results of operations.
Any future government shutdowns or slowdowns may materially adversely affect our business or financial results. We can make no assurances that potential home closings affected by any suchfuture shutdown or slowdown will occur after the shutdown or slowdown has ended.
Our homebuilding operations are located in areas that are subject to natural disasters, severe weather or adverse geological conditions. These include, but are not limited to, hurricanes, tornadoes, droughts, floods, storm surge, coastal erosion, sea level rise, brushfires,brush fires, wildfires, prolonged periods of precipitation, landslides, soil subsidence, earthquakesearthquakes, and other natural disasters. The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our projects, reduce consumer demand for housing, increase mortgage default risk, and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability. In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets, affect the desirability of our land or projects or result in potential buyers facing higher costs for, or being unable to obtain, fire, flood or other hazard insurance coverage in certain areas, thereby reducing the number of potential buyers who can afford, or are willing, to purchase homes in those areas, adversely affecting our ability to market homes or sell land in those areas and possibly increasing the costs of homebuilding completion. For example, the incidence of large wildfires in California has substantially increased in recent years, and the risk of future wildfires is expected to increase. The housing markets in areas affected by California’s recent wildfires have been adversely affected by increased insurance costs and difficulties in obtaining homeowners’ insurance, which we expect to be exacerbated by the recent wildfires in Los Angeles. These natural events could also prompt governmental authorities to adopt more stringent building codes, which would likely increase development costs in affected areas and negatively impact home affordability and/or demand. Furthermore, the occurrence of natural disasters, severe weatherweather, and other adverse geological conditions has increased in recent years due to climate change and may continue to increase in the future. Climate change may have the effect of making the risks described above occur more frequently and more severely, which could amplify the adverse impact on our business, prospects, liquidity, financial conditioncondition, and results of operations.
There are some risks of loss for which we may be unable to purchase insurance coverage. For example, losses associated with hurricanes, floods, landslides, prolonged periods of precipitation, earthquakesearthquakes, and other weather-related and geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable. A sizeablesizable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial conditioncondition, and results of operations.
We are subject to numerous local, state, federal and other statutes, ordinances, rulesrules, and regulations concerning zoning, development, building design, construction, accessibility, anti-discriminationanti-discrimination, and other matters, which, among other things, impose restrictive zoning and density requirements, the result of which is to limit the number of homes that can be built within the boundaries of a particular area. We may encounter issues with entitlement, not identify all entitlement requirements during the pre-development review of a project site, or encounter zoning changes that impact our operations. Projects for which we have not received land use and development entitlements or approvals may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations. We may also be subject to periodic delays or incur additional costs or may be precluded entirely from developing in certain communities due to building moratoriums or zoning changes. Such moratoriums generally relate to availability of utilities, such as insufficient water supplies, sewage facilities and delays in utility hook-ups, or inadequate road capacity within specific market areas or subdivisions. Local governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction. Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development. As a result of any of these statutes, ordinances, rules or regulations, the timing of our home sales could be delayed, the number of our home sales could decline and/or our costs could increase, which could have a material adverse effect on our business, prospects, liquidity, financial conditioncondition, and results of operations.
We are subject to a variety of local, state, federal and other laws, statutes, ordinances, rules and regulations concerning the environment, hazardous materials, the discharge of pollutantspollutants, and human health and safety. The particular environmental requirements that apply to any given site vary according to multiple factors, including the site’s location, whether the site contains wetlands or other features that may create burdensome permitting requirements, its environmental conditions, the present and former uses of the site, the presence or absence of endangered plants or animals or sensitive habitats, and environmental conditions at adjoining or nearby properties. We may not identify all of these concerns during any pre-acquisition or pre-development review of project sites. Environmental requirements and conditions may result in delays, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict development and homebuilding activity in environmentally sensitive regions or in areas contaminated by others before we commence development. In some instances, regulators from different governmental agencies do not concur on development, remedial standards or property use restrictions for a project, and the resulting delays or additional costs can be material for a given project.
There is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, and will continue to cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters. Government mandates, standards and regulations enacted in response to these projected climate change impacts and concerns could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs.
There is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, and will continue to cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters. Government mandates, standards and regulations enacted in response to these projected climate change impacts and concerns could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs. On January 20, 2021, President Biden signed an instrument that led to the United States’ reentry into the Paris Agreement, which requires countries to review and “represent a progression” in their intended nationally determined contributions, which set greenhouse gas emission reduction goals, every five years. The Paris Agreement requires the parties to complete a global stocktake, assessing members’ collective efforts and achievements in reducing greenhouse gas emissions and adapting to the impacts of climate change, every five years. On December 13, 2023, the 28th annual UN Climate Change Conference (“COP 28”) issued its first global stocktake, which calls on parties, including the United States, to contribute to transitioning away from fossil fuels, reduce methane emissions, and increase renewable energy capacity, amongst other things, to achieve net zero by 2050. Despite the issuance of an executive order on January 20, 2025 initiating the process to withdraw the United States from the Paris Agreement, we anticipate that a variety of legislation may be enacted or considered for enactment at the state and local levels relating to climate change and energy. This legislation could relate to, for example, matters such as greenhouse gas emissions control and building and other codes that impose energy efficiency standards or require energy saving construction materials. On June 1, 2022, the Biden Administration launched the National Initiative to Advance Building Codes, an initiative to modernize building codes, improve climate resilience, and reduce energy costs and the Inflation Reduction Act of 2022 (the “IRA 2022”), through various grants and tax incentives, encourages municipalities to adopt stricter energy codes, both of which could increase the cost to construct homes and cause delays. Pursuant to an executive order issued on January 20, 2025, the disbursement of funds appropriated under the IRA 2022 and the Infrastructure Investment and Jobs Act was paused.
Certain state and local governments in areas such as California have passed, or are considering, legislation banning the use of natural gas-fired appliances in new homes, which could affect our costs to construct homes as well as consumer demand for the homes we construct. New building or other code requirements that impose stricter energy efficiency standards or requirements for building materials could significantly increase our cost to construct homes. As climate change concerns continue to grow, legislation, regulations, mandates, standardsstandards, and other requirements of this nature are expected to continue to be enacted and become costlier for us to comply with. Similarly, energy-related initiatives affect a wide variety of companies throughout the United States and because our operations are heavily dependent on significant amounts of raw materials, such as lumber, steel, and concrete, these initiatives could have an adverse impact on our operations and profitability to the extent the manufacturers and suppliers of our materials are burdened with expensive cap and trade or similar energy-related regulations.
Furthermore, we could incur substantial costs, including cleanup costs, fines, penalties and other sanctions and damages from third-party claims for property damage or personal injury, as a result of our failure to comply with, or liabilities under, applicable environmental laws and regulations. These matters could adversely affect our business, prospects, liquidity, financial conditioncondition, and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Gross Margin Excluding Inventory impairment and Adjusted Gross Margin”
New heading “EBITDA and Adjusted EBITDA”
New heading “Net Debt to Capital Ratio”
New heading “Adjusted Net Income, Adjusted Basic Earnings per Share, and Adjusted Diluted Earnings per Share”
New heading “Net Debt to Capital Ratio”
New heading “LGI Living Loan Agreement”
Removed heading “Adjusted Gross Margin”
Largest changes
“As of December 31, 2025, our net debt to capital ratio was 43.2%. We use this ratio as a supplemental measure of financial leverage and capital efficiency. This ratio is calculated as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our net debt to capital ratio reflects our balanced approach to financing growth while maintaining liquidity. We continue to monitor leverage levels in light of evolving market conditions to keep an eye on capital efficiency and shareholder value. …”see in full comparison
“The loan is unconditionally guaranteed as to payment and performance by LGI Living - ER FIN, LLC, as the direct owner of the equity interests in LGI Living SFR, but recourse under such guaranty is limited to LGI Living - ER FIN, LLC’s equity interests in LGI Living SFR, which are pledged as collateral for the loan. The loan is also secured by a security interest in all assets of LGI Living SFR, including a mortgage lien on certain of LGI Living SFR’s real property. …”see in full comparison
“Adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define adjusted net income as net income less inventory impairment charges. We define adjusted basic earnings per share as adjusted net income divided by weighted average basic shares outstanding. We define adjusted diluted earnings per share as adjusted net income divided by weighted average diluted shares outstanding. …”see in full comparison
“Gross Margin Excluding Inventory impairment and Adjusted Gross Margin”see in full comparison
“Real estate inventory is evaluated for indicators of impairment by each community during each reporting period. In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have been closed, communities with slow moving inventory, projected margins on future home sales over the life of the community, and the estimated fair value of the land. …”see in full comparison
see in full comparisonAdjustedGross margin excluding inventory impairment and adjusted gross marginis aare non-GAAP financialmeasuremeasures used by management asasupplementalmeasuremeasures in evaluating operating performance. We define gross margin excluding inventory impairment as gross margin less inventory impairment charges. We define adjusted gross margin as gross margin excluding inventory impairments, less capitalizedinterestinterest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believesthisgrossinformationmarginisexcluding inventory impairment and adjusted gross margin are useful becauseittheyisolatesisolate the impact that capitalizedinterest andinterest, purchase accountingadjustmentsadjustments, and inventory impairment have on gross margin. However, because gross margin excluding inventory impairment and adjusted gross margininformation excludesexclude capitalizedinterest andinterest, purchase accounting adjustments, and inventory impairment, which have real economic effects and could impact our results, the utility of gross margin excluding inventory impairment and adjusted gross margininformationasa measuremeasures of our operating performance may be limited. In addition, other companies may not calculate gross margin excluding inventory impairment and adjusted gross margininformationin the same manner that we do. Accordingly, gross margin excluding inventory impairment and adjusted gross margininformationshould be considered only asa supplementsupplements to gross margininformationas a measure of our performance.
Full comparison: every changed paragraph (90)
•Homes closed decreased 10.4% to 6,028 homes from 6,729 homes. Including the bulk sale of 103 leased, single-family homes, homes closed decreased 8.9% to 6,131 homes from 6,729 homes.
•Average sales price per homeHomes closed increaseddecreased 4.2%22.3% to $365,3944,685 homes from $350,510.6,028 homes.
•Gross margin as a percentage of home sales revenues increased to 24.2% from 23.0%.
•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 26.3% from 24.7%.
•Net income before income taxes decreased 1.1% to $258.9 million from $261.8 million.
•NetAverage incomesales price per home closed decreased 1.6%0.4% to $196.1 million$364,035 from $199.2 million.$365,394.
•EBITDAGross (non-GAAP)margin as a percentage of home sales revenues increaseddecreased to 13.8%20.7% from 12.6%.24.2%.
•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 24.0% from 26.3%.
•Net income before income taxes decreased 62.0% to $98.5 million from $258.9 million.
•Net income decreased 63.0% to $72.6 million from $196.1 million.
•EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 8.7% from 13.8%.
•Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 9.1% from 13.8%.
•Active communities at the end of 20242025 increaseddecreased 29.1%4.6% to 151144 from 117.151.
For reconciliations of the non-GAAP financial measures of adjusted gross marginmargin, EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”
(3)Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define gross margin excluding inventory impairment as gross margin less inventory impairment charges. We define adjusted gross margin as gross margin excluding inventory impairment, less capitalized interestinterest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes thisadjusted informationgross margin is useful because it isolates the impact that capitalized interest andinterest, purchase accounting adjustments and inventory impairment have on gross margin. However, because adjusted gross margin information excludes capitalized interest andinterest, purchase accounting adjustments,adjustments and inventory impairment, which have real economic effects and could impact our results, the utility of adjusted gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that we do. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance. Please see “—Non-GAAP Measures” for a reconciliation of adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.
(4)EBITDA isand aadjusted EBITDA are non-GAAP financial measuremeasures used by management as a supplemental measuremeasures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA providesand anadjusted indicatorEBITDA provide indicators of general economic performance that isare not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that thisthese measuremeasures isare useful for comparing general operating performance from period to period. Other companies may define thisthese measuremeasures differently and, as a result, our measuremeasures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as a financial measuremeasures to assess the performance of our business, the use of thisthese measuremeasures is limited because itthey doesdo not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitutesubstitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider thisthese measuremeasures in isolation or as a substitutesubstitutes for analysis of our results as reported under GAAP. Please see “—Non-GAAP Measures” for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.
HomesHome Sales. Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the years ended December 31, 20242025 and 2023,2024, and our community count by reportable segment as of December 31, 20242025 and 2023,2024, were as follows (revenues in thousands):
Home Sales Revenues. Home sales revenues for the year ended December 31, 20242025 were $2.2$1.7 billion, a decrease of $156.0$497.1 million, or 6.6%,22.6%, from $2.4$2.2 billion for the year ended December 31, 2023.2024. The decrease in home sales revenues was primarily due to a 10.4%22.3% decrease in the number of homes closed,closed offsetand bya an increasedecrease in the average sales price per home closed,closed during the year ended December 31, 20242025 as compared to the year ended December 31, 2023. We closed 6,028 homes during 2024, as compared to 6,729 homes closed during 2023.2024. The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community countcount, during the year ended December 31, 20242025 as compared to the year ended December 31, 2023. Our average community count at December 31, 2024 increased to 130.5 from 103.9 at December 31, 2023.2024. The overall increase in average community count is related to timing associated with new community openings, offset by the close out of some communities and transition between certain active communities during the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The average sales price per home closed during the year ended December 31, 20242025 was $365,394,$364,035, ana increasedecrease of $14,885,$1,359, or 4.2%,0.4%, from the average sales price per home closed of $350,510$365,394 for the year ended December 31, 2023.2024. The increasedecrease in the average sales price per home closed was primarily due to geographic mix and a favorable pricing environment. The overall decrease in absorption rate generally relates to the impact of ongoing affordability constraints, new community openings, and the overallan increase in communitywholesale count.home closings and to a lesser extent geographic mix.
The overall decrease in absorption rate generally relates to the impact of ongoing affordability constraints, new community openings, and the overall increase in community count.
Included within our home sales revenues for the year ended December 31, 2025 was $230.3 million in wholesale revenues resulting from 737 home closings, representing 15.7% of the 4,685 total number of homes closed during the year ended December 31, 2025. Included within our home sales revenues for the year ended December 31, 2024 was $164.1 million in wholesale revenues resulting from 552 home closings, representing 9.2% of the 6,028 total number of homes closed during the year ended December 31, 2024. IncludedThe withinincrease in home closings as a percentage of revenues through our homewholesale sales revenues for the year ended December 31, 2023channel was $202.3primarily millionrelated into higher demand from our wholesale revenueschannel resulting from 679 home closings, representing 10.1% of the 6,729 total homes closedcustomers during the year ended December 31, 2023.2025 as compared to the year ended December 31, 2024.
•Home sales revenues in our Central reportable segment decreased by $166.1$145.4 million, or 22.7%,25.7%, during the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily due to a 21.6%23.7% decrease in the number of homes closed and a slight2.6% decrease in the average sales price per home closed. The decrease in home closings was primarily the result of a lower absorption rate, partially offset by an increase in the average community count.
•Home sales revenues in our Southeast reportable segment decreased by $18.6$66.0 million, or 3.3%,12.3%, during the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily due to a 4.7%12.5% decrease in the number of homes closed, partially offset by a slightan increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by a 9.7%an increase in the average community count.
•Home sales revenues in our Northwest reportable segment increased by $7.2 million, or 2.9%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an 8.8% increase in the average sales price per home closed, partially offset by a 5.5% decrease in the number of homes closed. The decrease in the number of homes closed was the result of a lower absorption rate, offset by a 40.2% increase in the average community count.
•Home sales revenues in our West reportable segment increased by $91.6 million, or 24.0%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 14.9% increase in the number of homes closed and a 7.9% increase in the average sales price per home closed. The increase in home closings was the result of a 55.0% increase in the average community count, partially offset by a lower absorption rate.
•Home sales revenues in our FloridaNorthwest reportable segment decreased by $70.1$69.4 million, or 16.0%,26.9%, during the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily due to a 20.2%20.5% decrease in the number of homes closed,closed partiallyand offsetan by8.0% a 5.3% increasedecrease in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by a 17.2%an increase in the average community count.
•Home sales revenues in our West reportable segment decreased by $85.4 million, or 18.1%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to a 22.9% decrease in the number of homes closed, partially offset by a 6.2% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
•Home sales revenues in our Florida reportable segment decreased by $130.8 million, or 35.5%, during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to a 35.7% decrease in the number of homes closed, partially offset by a 0.4% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales decreased for the year ended December 31, 20242025 towas $1.7$1.4 billion, a decrease of $147.1$317.4 million, or 8.1%,19.0%, from $1.8$1.7 billion for the year ended December 31, 2023.2024. This overall decrease was primarily due to a 10.4%22.3% decrease in the number of homes closed. Gross margin for the year ended December 31, 20242025 was $533.3$353.5 million, a decrease of $8.9$179.7 million, or 1.6%,33.7%, from $542.2$533.3 million for the year ended December 31, 2023.2024. Gross margin as a percentage of home sales revenues (inclusive of an inventory impairment charge) was 20.7% for the year ended December 31, 2025 and 24.2% for the year ended December 31, 2024 and 23.0% for the year ended December 31, 2023.2024. The increasedecrease in gross margin as a percentage of home sales revenues during the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily due to a higherlower average sales price per home closed, partially offset by a combinationhigher number of wholesale closings, higher house costs, higher lot costs andcosts, higher capitalized interest and higher indirect overhead as a percentage of revenuerevenue, as well as thean impactinventory impairment charge of $6.7 million, of which $3.9 million was related to our Florida reportable segment and $2.8 million was related to our Central reportable segment. This was partially offset by a decrease in warranty related costs as well as a decrease in sales incentives offered during the year ended December 31, 2024 as compared to the year ended December 31, 2023.2025.
Selling Expenses. Selling expenses for the year ended December 31, 20242025 were $200.0$162.1 million, ana increasedecrease of $8.4$37.8 million, or 4.4%,18.9%, from $191.6$200.0 million for the year ended December 31, 2023.2024. The increasedecrease in selling expenses was primarily due to an increase in advertising expense and an increase in personnel costs as a result of an increase in communities, offset by a decrease in salesthe commissions.number of homes closed for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Sales commissions decreased to $66.4 million during the year ended December 31, 2025 from $95.8 million for the year ended December 31, 2024 from $102.8 million for the year ended December 31, 20232024, primarily due to a decrease in homethe salesnumber revenuesof duringhomes 2024 as compared to 2023.closed. Selling expenses as a percentage of home sales revenues were 9.1%9.5% and 8.1%9.1% for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in selling expenses as a percentage of home sales revenues was primarily due to highera advertisingdecrease expenses, fewer wholesalein home closingssales and higher other personnel expenses incurredrevenues during the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024.
General and Administrative. General and administrative expenses for the year ended December 31, 20242025 were $121.2$111.6 million, ana increasedecrease of $3.8$9.6 million, or 3.3%,7.9%, from $117.4$121.2 million for the year ended December 31, 2023.2024. The increasedecrease in the amount of general and administrative expenses was primarily due to a resultdecrease ofin increasedbonuses and indirect overhead expenses and professional fees,costs, partially offset by aan decreaseincrease in payrollother relatedgeneral costsand foradministrative the year ended December 31, 2024 as compared to the year ended December 31, 2023.expense. General and administrative expenses as a percentage of home sales revenues were 5.5%6.5% and 5.0%5.5% for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in general and administrative expenses as a percentage of home sales revenues reflectswas ourprimarily increaseddue personnelto andlower associatedhome overheadsales costs, partially offset by a decrease in payroll related costsrevenues during the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024.
Other Income.Income, Net. Other income, net of other expenses was $18.7 million for the year ended December 31, 2025, a decrease of $28.1 million from $46.8 million for the year ended December 31, 2024, an increase of $18.3 million from $28.5 million for the year ended December 31, 2023.2024. The increasedecrease in other income, net of other expenses, primarily reflects gains realized fromreflected the bulkdecrease in the gain on sale of 103assets, leased,income single-familyassociated homeswith our investment in unconsolidated entities, and the saledecrease ofin residentialinterest lots for the year ended December 31, 2024 as compared to the year ended December 31, 2023.income.
Operating Income and Net Income before Income Taxes. Operating income for the year ended December 31, 20242025 was $212.1$79.8 million, a decrease of $21.1$132.4 million, or 9.1%,62.4%, from $233.3$212.1 million for the year ended December 31, 2023.2024. Net income before income taxes for the year ended December 31, 20242025 was $258.9$98.5 million, a decrease of $2.8$160.4 million, or 1.1%,62.0%, from $261.8$258.9 million for the year ended December 31, 2023.2024. The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate, andlower highergross advertisingmargin, andthe increase in other costs associated with the increase in average community countcount, and an inventory impairment charge during the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The followingOur reportable segments contributed to net income before income taxes during the year ended December 31, 20242025 as follows: Central - $66.7$23.8 million, or 25.8%24.1%; Southeast - $85.3$47.7 million, or 32.9%48.4%; Northwest - $25.9$3.2 million, or 10.0%3.2%; West - $52.2$33.5 million, or 20.2%34.0%; and Florida - $30.4$(6.5) million, or 11.7%.(6.6)%.
Income Taxes. Income tax provision for the year ended December 31, 20242025 was $62.8$25.9 million, ana increasedecrease of $0.3$36.9 million, or 0.5%,58.7%, from income tax provision of $62.5$62.8 million for the year ended December 31, 2023.2024. The decrease in our income tax provision was primarily due to the overall decrease in net income before income taxes. The increase in our effective tax rate to 24.3%26.3% for the year ended December 31, 2025 from 23.9%24.3% for the year ended December 31, 2024 was primarily duea toresult of an increase in the rate for the deductions in excess of compensation cost for share-based payments, and the rate for state income taxes, net of the federal benefit, offsetthe bycompensation a decreasecost in theexcess rateof deductions for share-based payments, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the year ended December 31, 2024 as compared to the year ended December 31, 2023.amended.
Net Income. Net income for the year ended December 31, 20242025 was $196.1$72.6 million, a decrease of $3.2$123.5 million, or 1.6%,63.0%, from $199.2$196.1 million for the year ended December 31, 2023.2024. The decrease in net income was primarily attributed to overall lower number of homes closed andclosed, lower home sales revenues,revenues partially offset by a higherand gross marginmargin, as well as an inventory impairment charge during the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024.
In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Annual Report on Form 10-K relating to adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, gross margin excluding inventory impairment, adjusted gross margin, EBITDA, adjusted EBITDA, and EBITDA.net debt to capital ratio.
Gross Margin Excluding Inventory impairment and Adjusted Gross Margin
Adjusted Gross Margin
AdjustedGross margin excluding inventory impairment and adjusted gross margin is aare non-GAAP financial measuremeasures used by management as a supplemental measuremeasures in evaluating operating performance. We define gross margin excluding inventory impairment as gross margin less inventory impairment charges. We define adjusted gross margin as gross margin excluding inventory impairments, less capitalized interestinterest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes thisgross informationmargin isexcluding inventory impairment and adjusted gross margin are useful because itthey isolatesisolate the impact that capitalized interest andinterest, purchase accounting adjustmentsadjustments, and inventory impairment have on gross margin. However, because gross margin excluding inventory impairment and adjusted gross margin information excludesexclude capitalized interest andinterest, purchase accounting adjustments, and inventory impairment, which have real economic effects and could impact our results, the utility of gross margin excluding inventory impairment and adjusted gross margin information as a measuremeasures of our operating performance may be limited. In addition, other companies may not calculate gross margin excluding inventory impairment and adjusted gross margin information in the same manner that we do. Accordingly, gross margin excluding inventory impairment and adjusted gross margin information should be considered only as a supplementsupplements to gross margin information as a measure of our performance.
The following table reconciles gross margin excluding inventory impairment and adjusted gross margin to to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
EBITDA and Adjusted EBITDA
EBITDA
EBITDA isand aadjusted EBITDA are non-GAAP financial measuremeasures used by management as a supplemental measuremeasures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA providesand anadjusted indicatorEBITDA provide indicators of general economic performance that isare not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that thisthese measuremeasures isare useful for comparing general operating performance from period to period. Other companies may define thisthese measuremeasures differently and, as a result, our measuremeasures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as a financial measuremeasures to assess the performance of our business, the use of thisthese measuremeasures is limited because itthey doesdo not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitutesubstitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider thisthese measuremeasures in isolation or as a substitutesubstitutes for analysis of our results as reported under GAAP. Some of these limitations are:
(i) itthey doesdo not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;
(ii) itthey doesdo not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA doesand adjusted EBITDA do not reflect any cash requirements for such replacements or improvements;
(iv) itthey doesdo not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;
(v) itthey doesdo not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and (vi) other companies in our industry may calculate itthem differently than we do, limiting itstheir usefulness as a comparative measure.
Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as a measuremeasures of discretionary cash available to us to invest in the growth of our business or as a measuremeasures of cash that will be available to us to meet our obligations. We compensate for these limitations by using our EBITDA and adjusted EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance. These GAAP measures include operating income, net income and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA and adjusted EBITDA. EBITDA isand adjusted EBITDA are not intended as an alternativealternatives to net income as an indicatorindicators of our operating performance,performance,as as an alternativealternatives to any other measure of performance in conformity with GAAP or as an alternativealternatives to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA and adjusted EBITDA calculated using these measures.
The following table reconciles EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
Net Debt to Capital Ratio
Net debt to capital ratio is a non-GAAP financial measure used by management as a supplemental measure in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing. We define net debt to capital ratio as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our management believes that the presentation of net debt to capital ratio provides useful information to investors regarding our financial leverage and our ability to meet long-term obligations. By excluding cash and cash equivalents from total debt, the ratio offers a clearer view of our capital structure and financial flexibility. Our management uses this metric to monitor our capital efficiency and to evaluate the effectiveness of our capital management strategies over time. Other companies may define this measure differently and, as a result, our measure of net debt to capital ratio may not be directly comparable to the measures of other companies.
The following table reconciles net debt to capital ratio (a non-GAAP financial measure) to debt to capital ratio, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
(1) Net debt to capital ratio is calculated as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity.
Adjusted Net Income, Adjusted Basic Earnings per Share, and Adjusted Diluted Earnings per Share
Adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define adjusted net income as net income less inventory impairment charges. We define adjusted basic earnings per share as adjusted net income divided by weighted average basic shares outstanding. We define adjusted diluted earnings per share as adjusted net income divided by weighted average diluted shares outstanding. Our management believes that the presentation of adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share provides useful information to investors because such measures isolate the impact that inventory impairment charges have on net income and earnings per share. However, because adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share exclude the inventory impairment charge, which has real economic effects and could impact the results, the utility of adjusted net income. adjusted basic earnings per share, and adjusted diluted earnings per share as measures of our operating performance may be limited. In addition, other companies may not calculate adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share in the same manner that we do. Accordingly, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share should be considered only as supplements to net income, basic earnings per share, and earnings per share, respectively, as measures of our performance.
The following table reconciles adjusted net income to net income, which is the GAAP financial measure that our management believes to be most directly comparable, and adjusted basic earnings per share and adjusted diluted earnings per share are calculated by dividing adjusted net income by basic or diluted weighted average shares outstanding, respectively (dollars in thousands, except earnings per share):
We sell our homes under standard purchase contracts, which generally require a homebuyer to pay a deposit at the time of signing the purchase contract. The amount of the required deposit is minimal (typically $1,000 to $10,000). We permit our retail homebuyers to cancel the purchase contract and obtain a refund of their deposit in the event mortgage financing cannot be obtained within a certain period of time, as specified in their purchase contract. Typically, our retail homebuyers provide documentation regarding their ability to obtain mortgage financing within 14 days after the purchase contract is signed. If we determine that the homebuyer is not qualified to obtain mortgage financing or is not otherwise financially able to purchase the home, we will terminate the purchase contract. If a purchase contract has not been cancelled or terminated within 14 days after the purchase contract has been signed, then we have assumed the homebuyer haswill metmeet the preliminary criteria to obtain mortgage financing. Only purchase contracts that are signed by homebuyers who have met the preliminary criteria to obtain mortgage financing are included in new (gross) orders.
Net orders for the year ended December 31, 2025 were 5,549 homes, a decrease of 8.1% from 6,037 homes for the year ended December 31, 2024, reflecting continued affordability pressures and higher mortgage rates. The cancellation rate increased to 32.8% in 2025 from 22.8% in 2024, primarily due to financing challenges and buyer sensitivity to market conditions. Ending backlog grew to 1,394 homes, with an aggregate value of $501.3 million at December 31, 2025, compared to 599 homes valued at $236.5 million at December 31, 2024, which represented increases of 132.7% in units and 112.0% in value. The increases were driven by slower conversion of homes under contract to closings and a higher volume of homes under contract at year end. A significant portion of backlog relates to homes further along in construction and expected to close in the near term. However, conversion to revenue remains subject to construction timing, buyer financing, and incentive levels. Elevated cancellation rates and changes in market conditions could affect the pace of backlog conversion and future gross margins.
Our net orders decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the increase in new communities which typically open at a slower sales pace and lower overall demand compared to 2023. Our wholesale orders increased 143.3% to 146 units at December 31, 2024 from 60 units at December 31, 2023. The number of homes in our backlog at December 31, 2024 increased 1.5% compared to December 31, 2023.
As of the dates set forth below, our net orders, cancellation rate,rate and ending backlog homes and value were as follows (dollars in thousands):
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
Largest changes
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“Homebuilding Costs and Homebuilding Gross Margin (homebuilding revenues less homebuilding costs). Homebuilding costs for the six months ended June 30, 2026 were $661.9 million, an increase of $11.3 million, or 1.7%, from $650.6 million for the six months ended June 30, 2025. This overall increase was primarily due to higher house costs, higher lot costs, higher capitalized interest and higher indirect overhead. Homebuilding gross margin for the six months ended June 30, 2026 was $159.3 million, a decrease of $25.0 million, or 13.6%, from $184.3 million for the six months ended June 30, 2025. …”see in full comparison
“Operating Income (Loss) and Net Income before Income Taxes. Operating loss for the three months ended March 31, 2026 was $(0.6) million, a decrease of $0.8 million, or 473.4%, from operating income of $0.2 million for the three months ended March 31, 2025. Net income before income taxes for the three months ended March 31, 2026 was $4.3 million, a decrease of $1.4 million, or 24.5%, from $5.7 million for the three months ended March 31, 2025. …”see in full comparison
see in full comparisonNetSellingIncome.Expenses.NetSellingincomeexpenses for the three months endedMarchJune31,30, 2026waswere$2.2$44.1 million,aandecreaseincrease of$1.8$2.5 million, or45.1%,6.0%, from$4.0$41.6 million for the three months endedMarchJune31,30, 2025. Thedecreaseincrease innetsellingincomeexpensesduringwas primarily due to an increase in the number of homes closed for the three months endedMarchJune31,30, 2026 as compared to the three months endedMarchJune31,30,20252025.wasSales commissions increased to $19.2 million for the three months ended June 30, 2026 from $18.9 million for the three months ended June 30, 2025, primarilyattributeddue to anoverall decreaseincrease in the number of homesclosed,closed.homeSellingsalesexpenses as a percentage of total revenues were 8.6% andgross8.5%margin,for the three months ended June 30, 2026 and 2025, respectively. The increase in selling expenses aswella percentage of total revenues was primarily due to higher advertising expenses during the three months ended June 30, 2026 asan inventory impairment charge of $4.7 million, of which $2.4 million was relatedcompared toourtheFloridathreereportablemonthssegmentendedandJune$2.330,million was related to our Central reportable segment.2025.
“Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the three months ended March 31, 2026 was $259.8 million, a decrease of $17.9 million, or 6.4%, from $277.7 million for the three months ended March 31, 2025. This overall decrease was primarily due to an 11.5% decrease in the number of homes closed. Gross margin for the three months ended March 31, 2026 was $59.9 million, a decrease of $13.8 million, or 18.7%, from $73.7 million for the three months ended March 31, 2025. …”see in full comparison
“Net cash used in operating activities was $55.5 million during the three months ended March 31, 2026. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development. …”see in full comparison
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We delivered positive firstsecond quarter 2026 results that were in line with our expectations, despite a macroeconomic backdrop that remains challenging. Throughout the quarter, we continued executing on our strategy of delivering affordable homes to entry-level buyers across our markets. Persistently high mortgage rates continue to be a key pressure point for entry-level buyers. During the quarter, mortgage rates trended upward, driven by ongoing inflation, economic uncertainty, and geopolitical developments, including the conflict in the Middle East. Additionally, subdued consumer sentiment continues to impact buyers’ willingness to purchase new homes. In response to these dynamics, we continued offering affordable, move-in ready homes supported by compelling financial incentives and targeted discounts on older completed inventory. These strategies are designed to bridge the ongoing affordability gap and make homeownership accessible to as many customers as possible.
For the three months ended MarchJune 31,30, 2026, we closed 9161,440 homes, including 3575 currently and previously leased single-family homes. Excluding the 3575 currently or previously leased single-family homes, our average sales price per home closed was $362,924.$367,407. For the three months ended MarchJune 31,30, 2025, we closed 9961,323 homes with an average sales price per home closed of $352,831.$365,446.
For the six months ended June 30, 2026, we closed 2,356 homes, including 110 currently and previously leased single-family homes. Excluding the 110 currently or previously leased single-family homes, our average sales price per home closed was $365,649. For the six months ended June 30, 2025, we closed 2,319 homes with an average sales price per home closed of $360,028.
We sell homes under the LGI Homes and Terrata Homes brands. Our 142151 active communities at MarchJune 31,30, 2026 included 1816 Terrata Homes communities. At MarchJune 31,30, 2025, we had 146 active communities, including 1716 Terrata Homes communities.
Recent Developments
On July 9, 2026, we commenced the dual listing and trading of our common stock on Nasdaq Texas, LLC under the trading symbol “LGIH”.
Key financial results as of and for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025, were as follows:
•Home salesHomebuilding revenues decreasedincreased 9.0%3.7% to $319.7$501.5 million from $351.4$483.5 million.
•Homes closed decreasedincreased 11.5%3.2% to 8811,365 homes from 9961,323 homes.
•GrossHomebuilding gross margin as a percentage of home saleshomebuilding revenues decreased to 18.7%19.8% from 21.0%.22.9%.
•Adjusted homebuilding gross margin (non-GAAP) as a percentage of home saleshomebuilding revenues decreased to 23.4%23.2% from 23.6%.25.5%.
•EBITDA (non-GAAP) as a percentage of home salestotal revenues increaseddecreased to 4.8%10.5% from 4.2%.11.2%.
For reconciliations of the non-GAAP financial measures of adjusted homebuilding gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”
Key financial results as of and for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, were as follows:
•Homebuilding revenues decreased 1.6% to $821.2 million from $834.9 million.
•Homes closed decreased 3.1% to 2,246 homes from 2,319 homes.
•Average sales price per home closed increased 1.6% to $365,649 from $360,028.
•Homebuilding gross margin as a percentage of homebuilding revenues decreased to 19.4% from 22.1%.
•Adjusted homebuilding gross margin (non-GAAP) as a percentage of homebuilding revenues decreased to 23.3% from 24.7%.
•Net income before income taxes decreased 14.4% to $40.9 million from $47.8 million.
•Net income decreased 18.0% to $29.1 million from $35.5 million.
•EBITDA (non-GAAP) as a percentage of total revenues increased to 8.2% from 8.0%.
For reconciliations of the non-GAAP financial measures of adjusted homebuilding gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”
We owned and controlled 57,406 lots at June 30, 2026 as compared to 59,028 lots at March 31, 2026 as compared toand 60,842 lots at December 31, 2025.
The following table sets forth our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025:
(1)GrossHomebuilding gross margin is home saleshomebuilding revenues less costhomebuilding of sales.costs.
(2)Calculated as a percentage of home saleshomebuilding revenues.
(3)Adjusted homebuilding gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define homebuilding gross margin excluding inventory impairment as homebuilding gross margin less inventory impairment charges. We define adjusted homebuilding gross margin as homebuilding gross margin excluding inventory impairment, less capitalized interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes adjusted homebuilding gross margin is useful because it isolates the impact that capitalized interest, purchase accounting adjustments and inventory impairment have on homebuilding gross margin. However, because adjusted homebuilding gross margin excludes capitalized interest, purchase accounting adjustments and inventory impairment, which have real economic effects and could impact our results, the utility of adjusted homebuilding gross margin as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted homebuilding gross margin in the same manner that we do. Accordingly, adjusted homebuilding gross margin should be considered only as a supplement to homebuilding gross margin as a measure of our performance. Please see “—Non-GAAP Measures” for a reconciliation of adjusted homebuilding gross margin to homebuilding gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.
(4)EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest chargedamortized to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, stock-based compensation, purchase accounting adjustments, and dead deal costs, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, management believes that these measures are useful for comparing general operating performance from period to period. Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as substitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP. Please see “—Non-GAAP Measures” for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.
(5)Calculated as a percentage of total revenues.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
Homes Sales. Our home saleshomebuilding revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the three months ended MarchJune 31,30, 2026 and 2025, and our community count by reportable segment as of MarchJune 31,30, 2026 and 2025, were as follows (revenues in thousands):
HomeHomebuilding salesRevenues. Homebuilding revenues for the three months ended MarchJune 31,30, 2026 were $319.7$501.5 million, aan decreaseincrease of $31.7$18.0 million, or 9.0%,3.7%, from $351.4$483.5 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease in home saleshomebuilding revenues was primarily due to ana 11.5%3.2% decreaseincrease in the number of homes closed during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. The overall decreaseincrease in home closings was a result of fewergreater wholesale closings and a lower absorption rate during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. The decreaseincrease in wholesale closings was primarily driven by home deliveries related to lowera institutionalpreviously demandcontracted bulk sales agreement during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. The decrease in absorption rate was generally related to the impact of ongoing affordability constraints. The average sales price per home closed during the three months ended MarchJune 31,30, 2026 was $362,924,$367,407, an increase of $10,093,$1,961, or 2.9%,0.5%, from the average sales price per home closed of $352,831$365,446 for the three months ended MarchJune 31,30, 2025. The increase in the average sales price per home closed was primarily due to geographic mix and a decrease in sales incentives, partially offset by a higher volume of wholesale closings and discounted older inventory.
Included within our home saleshomebuilding revenues for the three months ended MarchJune 31,30, 2026 was $29.8$73.5 million in wholesale revenues resulting from 111295 home closings, representing 12.6%21.6% of the 8811,365 total number of homes closed during the three months ended MarchJune 31,30, 2026. Included within our home saleshomebuilding revenues for the three months ended MarchJune 31,30, 2025 was $54.5$71.4 million in wholesale revenues resulting from 179237 home closings, representing 18.0%17.9% of the 9961,323 total number of homes closed during the three months ended MarchJune 31,30, 2025. The decreaseincrease in home closings as a percentage of revenues through our wholesale channel was primarily related to lowera institutionalpreviously demandcontracted bulk sales agreement during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025.
•Home salesHomebuilding revenues in our Central reportable segment decreasedincreased by $12.0$14.8 million, or 11.9%,13.1%, during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to a 10.3%16.4% decreaseincrease in the number of homes closedclosed, andpartially offset by a decrease in the average sales price per home closed. The decreaseincrease in home closings was the result of a lowerhigher absorption rate and aan decreaseincrease in the average community count.
•Home salesHomebuilding revenues in our Southeast reportable segment decreased by $29.4$42.0 million, or 28.9%,28.0%, during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to a 29.8%29.2% decrease in the number of homes closed, partially offset by an increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate.
•Home salesHomebuilding revenues in our Northwest reportable segment increased by $2.8$6.1 million, or 8.1%,11.4%, during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to a 1.5%21.0% increase in the number of homes closedclosed, andpartially offset by a 6.5%7.9% increasedecrease in the average sales price per home closed. The increase in home closings was the result of a slightly higher absorption rate,rate partiallyand offsetan by a decreaseincrease in the average community count.
•Home salesHomebuilding revenues in our West reportable segment increased by $8.9$34.3 million, or 13.3%,34.2%, during the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to ana 8.2%30.0% increase in the number of homes closed and a 4.7%3.2% increase in the average sales price per home closed. The increase in home closings was the result of a higher absorption rate.
•Home salesHomebuilding revenues in our Florida reportable segment decreasedincreased by $2.0$4.8 million, or 4.2%,7.2%, during the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025, primarily due to a 1.5%14.7% decreaseincrease in the number of homes closedclosed, andpartially offset by a 2.7%6.5% decrease in the average sales price per home closed. The decreaseincrease in home closings was the result of a decrease in the average community count, partially offset by a slightly higher absorption rate.
Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the three months ended March 31, 2026 was $259.8 million, a decrease of $17.9 million, or 6.4%, from $277.7 million for the three months ended March 31, 2025. This overall decrease was primarily due to an 11.5% decrease in the number of homes closed. Gross margin for the three months ended March 31, 2026 was $59.9 million, a decrease of $13.8 million, or 18.7%, from $73.7 million for the three months ended March 31, 2025. Gross margin as a percentage of home sales revenues was 18.7% for the three months ended March 31, 2026 and 21.0% for the three months ended March 31, 2025. The decrease in gross margin as a percentage of home sales revenues was primarily due to inventory-related impairment charges, price discounts on older inventory, higher capitalized interest, and higher indirect overhead costs, partially offset by a lower volume of wholesale home closings and lower house costs as a percentage of revenue during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
Selling Expenses. Selling expenses for the three months ended March 31, 2026 were $32.7 million, a decrease of $9.7 million, or 22.9%, from $42.3 million for the three months ended March 31, 2025. The decrease in selling expenses was primarily due to a decrease in the number of homes closed for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Sales commissions decreased to $12.5 million for the three months ended March 31, 2026 from $14.0 million for the three months ended March 31, 2025, primarily due to a decrease in the number of homes closed. Selling expenses as a percentage of home sales revenues were 10.2% and 12.0% for the three months ended March 31, 2026 and 2025, respectively. The decrease in selling expenses as a percentage of home sales revenues was primarily due to a decrease in home sales revenues and overall cost efficiencies in advertising expense during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
General and Administrative. General and administrative expenses for the three months ended March 31, 2026 were $27.9 million, a decrease of $3.3 million, or 10.7%, from $31.2 million for the three months ended March 31, 2025. General and administrative expenses as a percentage of home sales revenues were 8.7% and 8.9% during the three months ended March 31, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of home sales revenues was due to a one-time sales incentive fee in the prior period and reduced spending related to meetings, entertainment and travel during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
OtherLand Income, Net.and Other income,Revenues. netLand ofand other expensesrevenues for the three months ended MarchJune 31,30, 2026 waswere $4.9$14.5 million, aan decreaseincrease of $0.7$9.7 millionmillion, or 202.1%, from $5.6$4.8 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease in otherland income, net ofand other expenses,revenues was primarily reflectsdue theto decreasegreater inlot income associated with our investment in unconsolidated entities and the decrease in interest income recognized.sales.
Homebuilding Costs and Homebuilding Gross Margin (homebuilding revenues less homebuilding costs). Homebuilding costs for the three months ended June 30, 2026 were $402.1 million, an increase of $29.2 million, or 7.8%, from $372.9 million for the three months ended June 30, 2025. This overall increase was primarily due to a 3.2% increase in the number of homes closed. Homebuilding gross margin for the three months ended June 30, 2026 was $99.4 million, a decrease of $11.2 million, or 10.1%, from $110.6 million for the three months ended June 30, 2025. Homebuilding gross margin as a percentage of homebuilding revenues was 19.8% for the three months ended June 30, 2026 and 22.9% for the three months ended June 30, 2025. The decrease in homebuilding gross margin as a percentage of homebuilding revenues was primarily due to higher lot costs, higher capitalized interest, and higher vertical costs during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.
Operating Income (Loss) and Net Income before Income Taxes. Operating loss for the three months ended March 31, 2026 was $(0.6) million, a decrease of $0.8 million, or 473.4%, from operating income of $0.2 million for the three months ended March 31, 2025. Net income before income taxes for the three months ended March 31, 2026 was $4.3 million, a decrease of $1.4 million, or 24.5%, from $5.7 million for the three months ended March 31, 2025. The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate, lower gross margin, other costs associated with the decrease in average community count, and $4.7 million of impairment changes related to inventory during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Our reportable segments contributed to net income before income taxes during the three months ended March 31, 2026 as follows: Central - $3.1 million, or 72.4%; Southeast - $3.7 million, or 85.9%; Northwest - $(1.6) million, or (37.5)%; West - $3.3 million, or 77.2%; and Florida - $(3.8) million, or (87.6)%.
Income Taxes. Income tax provision for the three months ended March 31, 2026 was $2.2 million, an increase of $0.4 million, or 23.1%, from income tax provision of $1.7 million for the three months ended March 31, 2025. The increase in our income tax provision was primarily due to the increase in our effective tax rate. The increase in our effective tax rate to 50.0% for the three months ended March 31, 2026 from 30.2% for the three months ended March 31, 2025 was primarily a result of an increase in the rate for the compensation cost in excess of deductions for share-based payments, state income taxes, net of the federal benefit, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.
NetSelling Income.Expenses. NetSelling incomeexpenses for the three months ended MarchJune 31,30, 2026 waswere $2.2$44.1 million, aan decreaseincrease of $1.8$2.5 million, or 45.1%,6.0%, from $4.0$41.6 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease in netselling incomeexpenses duringwas primarily due to an increase in the number of homes closed for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 20252025. wasSales commissions increased to $19.2 million for the three months ended June 30, 2026 from $18.9 million for the three months ended June 30, 2025, primarily attributeddue to an overall decreaseincrease in the number of homes closed,closed. homeSelling salesexpenses as a percentage of total revenues were 8.6% and gross8.5% margin,for the three months ended June 30, 2026 and 2025, respectively. The increase in selling expenses as wella percentage of total revenues was primarily due to higher advertising expenses during the three months ended June 30, 2026 as an inventory impairment charge of $4.7 million, of which $2.4 million was relatedcompared to ourthe Floridathree reportablemonths segmentended andJune $2.330, million was related to our Central reportable segment.2025.
General and Administrative. General and administrative expenses for the three months ended June 30, 2026 were $28.6 million, a decrease of $0.8 million, or 2.7%, from $29.4 million for the three months ended June 30, 2025. General and administrative expenses as a percentage of total revenues were 5.5% and 6.0% during the three months ended June 30, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of total revenues was due to higher revenues and lower overall other general and administrative expenses during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.
Other Income, Net. Other income, net of other expenses for the three months ended June 30, 2026 was $7.6 million, an increase of $4.2 million from $3.4 million for the three months ended June 30, 2025. The increase in other income, net of other expenses, primarily reflects the increase in income associated with our investment in unconsolidated entities and the increase in interest income recognized.
Net Income before Income Taxes. Net income before income taxes for the three months ended June 30, 2026 was $36.6 million, a decrease of $5.4 million, or 12.9%, from $42.0 million for the three months ended June 30, 2025. The overall decrease in net income before income taxes was primarily due to overall increases in cost of sales related to lot costs, capitalized interest costs, and house costs, offset by an increase in other income, net. Our reportable segments contributed to net income before income taxes during the three months ended June 30, 2026 as follows: Central - $12.8 million, or 35.0%; Southeast - $7.9 million, or 21.6%; Northwest - $1.1 million, or 3.0%; West - $15.2 million, or 41.5%; and Florida - $(1.0) million, or (2.7)%.
Income Taxes. Income tax provision for the three months ended June 30, 2026 was $9.6 million, a decrease of $0.9 million, or 8.6%, from income tax provision of $10.5 million for the three months ended June 30, 2025. The decrease in our income tax provision was primarily due to the overall decrease in net income before income taxes. The increase in our effective tax rate to 26.3% for the three months ended June 30, 2026 from 25.0% for the three months ended June 30, 2025 was primarily a result of an increase in the rate for the compensation cost in excess of deductions for share-based payments, state income taxes, net of the federal benefit, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.
Net Income. Net income for the three months ended June 30, 2026 was $27.0 million, a decrease of $4.5 million, or 14.3%, from $31.5 million for the three months ended June 30, 2025. The decrease in net income during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 was primarily attributed to overall lower homebuilding gross margin.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Our homebuilding revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the six months ended June 30, 2026 and 2025, and our community count by reportable segment as of June 30, 2026 and 2025, were as follows (revenues in thousands):
Homebuilding Revenues. Homebuilding revenues for the six months ended June 30, 2026 were $821.2 million, a decrease of $13.7 million, or 1.6%, from $834.9 million for the six months ended June 30, 2025. The decrease in homebuilding revenues was primarily due to a decrease in the number of homes closed during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The overall decrease in home closings was a result of a lower average community count, partially offset by a higher average sales price per home closed, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The overall decrease in average community count related to timing associated with new community openings, offset by the close out of some communities and transition between certain active communities during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The average sales price per home closed during the six months ended June 30, 2026 was $365,649, an increase of $5,621, or 1.6%, from the average sales price per home closed of $360,028 for the six months ended June 30, 2025. The increase in the average sales price per home closed was primarily due to geographic mix. The absorption rate remained unchanged.
Included within our homebuilding revenues for the six months ended June 30, 2026 was $103.3 million in wholesale revenues resulting from 423 home closings, representing 18.8% of the 2,246 total number of homes closed during the six months ended June 30, 2026. Included within our homebuilding revenues for the six months ended June 30, 2025 was $125.9 million in wholesale revenues resulting from 416 home closings, representing 17.9% of the 2,319 total number of homes closed during the six months ended June 30, 2025. The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to higher demand from our wholesale channel customers related to a previously contracted bulk sales agreement during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
•Homebuilding revenues in our Central reportable segment increased by $2.8 million, or 1.3%, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a 3.6% increase in the number of homes closed, offset by a 2.2% decrease in the average sales price per home closed. The increase in home closings was the result of a higher absorption rate, partially offset by a decrease in the average community count.
•Homebuilding revenues in our Southeast reportable segment decreased by $71.3 million, or 28.3%, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a 29.4% decrease in the number of homes closed, partially offset by an increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate and a decrease in the average community count.
•Homebuilding revenues in our Northwest reportable segment increased by $8.9 million, or 10.1%, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a 13.3% increase in the number of homes closed, partially offset by a 2.8% decrease in the average sales price per home closed. The increase in home closings was the result of a higher absorption rate, offset by a decrease in the average community count.
•Homebuilding revenues in our West reportable segment increased by $43.2 million, or 25.8%, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a 21.1% increase in the number of homes closed and a 3.9% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count and a higher absorption rate.
LGIH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding LGIH (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 580,630 | $37.0M | 0.02% | Added 2198% |
| Millennium Management (Israel Englander) | 2026-06-30 | 357,824 | $22.8M | 0.02% | Reduced 36% |
| Two Sigma Investments | 2026-06-30 | 304,216 | $19.4M | 0.01% | Reduced 5% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 238,666 | $15.2M | 0.01% | Added 167% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 71,200 | $4.5M | 0.01% | Reduced 24% |
| D. E. Shaw & Co. | 2026-06-30 | 32,384 | $2.1M | 0.0% | Added 231% |