LGI Homes, Inc. (LGIH)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operation, references to “we,” “our,” “us” or similar terms refer to LGI Homes, Inc. and its subsidiaries.

Business Overview

Our management team has been in the residential land development business since the mid-1990s. Since commencing home building operations in 2003, we have constructed and closed over 80,000 homes.

We are engaged in the design, construction and sale of new homes in the following markets:

We delivered positive second 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 June 30, 2026, we closed 1,440 homes, including 75 currently and previously leased single-family homes. Excluding the 75 currently or previously leased single-family homes, our average sales price per home closed was $367,407. For the three months ended June 30, 2025, we closed 1,323 homes with an average sales price per home closed of $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 151 active communities at June 30, 2026 included 16 Terrata Homes communities. At June 30, 2025, we had 146 active communities, including 16 Terrata Homes communities.

For additional discussion regarding our business and operations, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. For additional discussion regarding risks associated with our business and operations, see Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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”.

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Key Results

Key financial results as of and for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, were as follows:

•Homebuilding revenues increased 3.7% to $501.5 million from $483.5 million.

•Homes closed increased 3.2% to 1,365 homes from 1,323 homes.

•Average sales price per home closed increased 0.5% to $367,407 from $365,446.

•Homebuilding gross margin as a percentage of homebuilding revenues decreased to 19.8% from 22.9%.

•Adjusted homebuilding gross margin (non-GAAP) as a percentage of homebuilding revenues decreased to 23.2% from 25.5%.

•Net income before income taxes decreased 13.0% to $36.6 million from $42.0 million.

•Net income decreased 14.3% to $27.0 million from $31.5 million.

•EBITDA (non-GAAP) as a percentage of total revenues decreased to 10.5% from 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 and 60,842 lots at December 31, 2025.

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Results of Operations

The following table sets forth our results of operations for the three and six months ended June 30, 2026 and 2025:

(1)Homebuilding gross margin is homebuilding revenues less homebuilding costs.

(2)Calculated as a percentage of homebuilding 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

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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 amortized 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, s

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our historical consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K contain additional information that should be referred to when reviewing this material. This section covers fiscal years 2025 and 2024 and discusses the results of operations for fiscal year 2025 compared to fiscal year 2024. The discussion of fiscal year 2023 and the results of operations for fiscal year 2024 compared to fiscal year 2023 is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on February 26, 2025, and is incorporated by reference into this Annual Report on Form 10-K. For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operation, references to “we,” “our,” “us” or similar terms refer to LGI Homes, Inc. and its subsidiaries.

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Key Results

Key financial results as of and for the year ended December 31, 2025, as compared to the year ended December 31, 2024, were as follows:

•Home sales revenues decreased 22.6% to $1.7 billion from $2.2 billion.

•Homes closed decreased 22.3% to 4,685 homes from 6,028 homes.

•Average sales price per home closed decreased 0.4% to $364,035 from $365,394.

•Gross margin as a percentage of home sales revenues decreased to 20.7% from 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 2025 decreased 4.6% to 144 from 151.

•Total owned and controlled lots decreased 14.2% to 60,842 lots at December 31, 2025 from 70,899 lots at December 31, 2024.

For reconciliations of the non-GAAP financial measures of adjusted gross margin, EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”

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Results of Operations

The following table sets forth our results of operations for the years ended December 31, 2025, 2024, and 2023.

(1)Gross margin is home sales revenues less cost of sales.

(2)Calculated as a percentage of home sales revenues.

(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 interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes adjusted gross margin is useful because it isolates the impact that capitalized interest, purchase accounting adjustments and inventory impairment have on gross margin. However, because adjusted 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 gross margin as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin in the same manner that we do. Accordingly, adjusted gross margin should be considered only as a supplement to gross margin 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 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 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 and adjusted EBITDA provide indicators of

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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.

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Home 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, 2025 and 2024, and our community count by reportable segment as of December 31, 2025 and 2024, were as follows (revenues in thousands):

Home Sales Revenues. Home sales revenues for the year ended December 31, 2025 were $1.7 billion, a decrease of $497.1 million, or 22.6%, from $2.2 billion for the year ended December 31, 2024. The decrease in home sales revenues was primarily due to a 22.3% decrease in the number of homes closed and a decrease in the average sales price per home closed during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. The overall increase 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 year ended December 31, 2025 as compared to the year ended December 31, 2024. The average sales price per home closed during the year ended December 31, 2025 was $364,035, a decrease of $1,359, or 0.4%, from the average sales price per home closed of $365,394 for the year ended December 31, 2024. The decrease in the average sales price per home clo

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