Good morning and welcome to the LGI Homes Second Quarter 2015 Conference Call. Today's call is being recorded and a replay will be available on the Company's website later today at www.lgihomes.com. We have allocated an hour for prepared remarks and Q&A. [Operator Instructions] At this time, I would like turn the call over to Rachel Eaton, Chief Marketing Officer at LGI Homes. Ms. Eaton, you may begin.

Thank you. Hello and welcome to the LGI Homes conference call discussing our results for the second quarter of 2015. Today's conference call will contain forward-looking statements that include among other things, statements regarding LGI's business strategy, outlook, plans, objectives and updated guidance for 2015 home closings and basic earnings per share. All such statements reflect current expectations. However, they do involve assumptions, estimates and other risks and uncertainties that could cause our expectations to prove to be incorrect. You should review our filings with the SEC, including our risk factors and cautionary statements about forward-looking statements for a discussion of the risks, uncertainties and other factors that could cause our actual results to differ materially from those anticipated. These forward-looking statements are not guarantees of future performance. You should consider these forward-looking statements in light of the related risks and you should not place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Additionally, certain non-GAAP financial measures will be discussed. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are included in the earnings press release that we issued this morning and in our quarterly report on Form 10-Q for the second quarter of 2015 that we expect to file with the SEC later today. This filing will be accessible on the SEC’s website and in the Investors section of our website at www.lgihomes.com. Joining me today are Eric Lipar, LGI Homes’ Chief Executive Officer and Chairman of the Board; Charles Merdian, the Company's Chief Financial Officer, Secretary and Treasurer; and Meg Britton, the Company's Chief Administrative Officer. With that, I will now turn the call over to Eric.

Thank you, Rachel, and hello everyone. We appreciate you joining us today. At LGI Homes, we have had an exceptional first half of the year. During our call, I’ll discuss highlights from our second quarter and 2015 year-to-date. Then Charles with follow-up to discuss our financial results in more detail. After he is done, I will conclude with comments on how the third quarter is unfolding and our expectations for the remainder of 2015 and then we will open the call for questions. LGI Homes delivered outstanding results with another record setting quarter for closings and revenue, paving the way for 2015 to be another year of solid growth and performance. We set a new quarterly record with 853 homes closed and $158.8 million of homes sales revenue which represents a 29% increase in closings and 49% increase in revenue over the second quarter of 2014. Contributing to this record breaking quarter was an all-time record for home closings during a single month with 331 closings in June of 2015. We finished the first six months of the year with a total of 1,524 homes closed, which represents 33% increase over the first six months of 2014. For the quarter, our average sales price reached a new high at $186,200. We ended the quarter with 45 active communities, which is an increase of 14 communities or 45% over the second quarter of 2014. Looking now at some of our market highlights. We are excited to announce that we moved in our 10,000th LGI family during the second quarter. This home closing milestone occurred at our Trails at Seabourne Parke community, one of our top performing projects in the Houston market. Overall, our presence in Texas is very strong and that’s our leading division representing approximately 57% of our closings. During…

Thanks, Eric. Home sales revenues for the quarter were $158.8 million, based on 853 homes closed, which represented a 49.3% increase over the second quarter of 2014. Our average sales price was $186,200 for the second quarter, a 15.8% year-over-year increase. Increased average home sale prices have contributed to our strong revenue performance. Average sales prices have increased in each of our divisions and companywide, we realized a 3.5% increase compared to the previous quarter. This increase in average sales price reflects changes in product mix, a favorable pricing environment and new or replacement communities, added during 2014 and the first six months of 2015 that have higher price points. Sales prices realized from homes closed during the second quarter of 2015 range from the low 100s to the 440s. This includes the closings of seven Toronto brand homes during the second quarter, which had an average net sales price of approximately $410,000. Excluding Toronto homes, we experienced a second quarter year-over-year price appreciation of 14.7%. Adjusted gross margin was 28.2% for the quarter, 30 basis points higher than the second quarter of 2014. Adjusted gross margin excludes $760,000 of purchase accounting included in cost of sales for the quarter, of which approximately $310,000 was related to Oakmont acquisition and approximately $450,000 was from the GTIS Acquisitions. On the balance sheet, we have approximately $1.3 million of step up remaining, primarily on land and land under development, which we expect to come through the income statement gradually over the next couple of years. In addition, adjusted gross margin excludes approximately $1.5 million of capitalized interest charged to cost of sales during the quarter, representing 94 basis points and we expect this to range between 90 to 125 basis points over the remainder of the year. Our financial gross margin for…

Thanks, Charles. In summary, we had another impressive quarter. Let me provide some guidance and thoughts on what we are seeing for this quarter and looking ahead into the remainder of 2015. The third quarter is off to a strong start with 311 closings, up from 174 closings in July of 2014, which is a 79% year-over-year increase. As we are looking back at July of 2014, we reflected back on how far we have come in the last five years. In July of 2010, we closed 18 homes and five communities compared to 311 homes closed this year in 49 communities. As previously discussed home closings were strong in Texas during the first half of 2015 and have continued to be solid thus far in the third quarter. Our performance has now been impacted negatively by the weak oil and gas sector in the Texas and Houston economies or the weather during the May and June. In fact, July absorption in Houston was very strong averaging 9 closings per community with 72 closings spread throughout our 8 active communities. We increased our community count by 4 in July, bringing our total active community count to 49. The 6.3 closings per community in July compared very favorable to the 5.3 closings per community in July of 2014. We are still expecting to end 2015 with between 50 and 55 active communities. In early July, we are able to dramatically increase our land position in the Denver, Colorado market. We acquired approximately 400 lots including finished lots in undeveloped land from Jack Fisher Homes. On previous calls, we mentioned our plan to expand into the Seattle, Nashville, Jacksonville and Raleigh-Durham markets. Our expansion into Seattle is underway. We plan to close the acquisition of our first project in August and start…

Thank you. [Operator Instructions] Our first question comes from Nishu Sood of Deutsche Bank. Your line is now open.

Thanks and terrific quarter and July news guys.

Thanks.

Thanks.

So, I think what is probably most surprising about your results is that from the vast majority of builders, investors have been hearing about inability to get homes started, even having to curtail releases and sales and particularly just the backup on the trade side of things. So, I guess my first question is you folks are more exposed to Texas and you’re average builder and with the spec-based model, more exposed to construction schedules as well. So, my first question is, how have you been managing through that, why isn’t that showing up in your results? You’re actually taking up your closings guidance on the terrific pace in the last month or two. So, if you can just shed some light on that and whether there are any implications for the remainder of the year that would be very helpful.

Yeah. Nishu, this is Eric, I’ll comment on that and Charles can add to if he like to, but from getting the houses complete, the strength of the sales is really made up for any challenges we’ve had in that area. Our closings would have actually been better if we could have built the houses faster. Now, that being said, I do think LGI has an advantage on finding trade partners and finding the subcontractors to build their houses, because in our experience, the trade partners are looking for consistent work and with our spec approach and our absorption rates of consistently being in that five, six closings a month, that means we can give the subs on average five to six, seven starts per month and they like that consistency of having work. Also, LGI since 2003, we have never and not paid a trade partner. We never negotiated on their terms. We paid consistently on every two weeks when the work is complete. So, I do think we have an advantage when it comes to working with subcontractors.

Got it. Now, that’s helpful. And it doesn’t sound like it from your gross margin guidance, but it doesn’t sound like there would be any potential pricing pressure from the trades constraint that is being seen in some of the key Texas markets?

That is correct.

Okay, got it. And my second question I wanted to ask was the -- I think after last month, you mentioned that June was a big -- I think was a record closings month for you folks and you may have ended June with a little bit less inventory in the ground because of the strong sales base, but July looks like there was really strong as well and you mentioned it might have even been stronger. So, can you just walk us through that a little bit? I mean, July was very strong on a year-over-year basis. Didn’t show any let down from the lack of inventory. So, it really almost seem like you saw an acceleration in demand. So, any color on that would be helpful as well.

Yeah. I think we just reiterated an issue that demand has been very strong. [Technical Difficulty] we closed 331 homes in June, 311 in July. July was an easier comp. So, the percentage was greater on our increase. And in August of last year, we only closed 183. So, it’s going to be a very strong comp in August again this year. But like we said, and the reason we increased our guidance is sales, demand, everything has been very strong and we see that continuing through the end of the year.

Got it. Just a real quick clarification question. Charles, you said, for SG&A that would be 13% to 14.5%. Is that for the entire year, because last time you talked about the entire year being 14.5% or 15.5%, or is it just the second half?

Right, that’s just each quarter on the second half. So, that would put the year somewhere down in just south of 14% to just north of 14% for the year.

Great. Thanks for the color guys.

You bet.

Thank you. Our next question comes from Michael Rehaut of JPMorgan. Your line is now open.

Thanks. Good morning everyone and nice results.

Thank you.

First question, I just wanted to make sure I fully understood in terms of the raised guidance. It appears that given that you reiterated the community count outlook that the raised closings obviously more driven by better sales per month or closings per month outlook and that that’s really also what’s flowing through and resulting in the raised EPS guidance. Is that the right way to think of it that there is no other drivers at work?

Yeah, that’s how we’re thinking about it and we got a very good visibility on the pipeline for 2015. So, we just get them built and close to finish the year strong.

Right. And so, no real change obviously then from an EPS perspective in terms of the gross margin or SG&A outlook?

Now, the ranges are still consistent. I mean, we’re seeing consistent gross margins. I think we’re seeing some performance. Eric had mentioned in his comments about the performance out of state. So, I think we’re getting some depth in those newer markets. We’re starting to realize some of that performance in our closings per community.

Okay. So then, that kind of drives me to the second line of questioning. In terms of the improved closings per community, I guess, you started to say in terms of the delta of closings, is it -- we’re talking about better performance or better than expected performance in the non-Texas communities or a bit of both and if we can get more granular perhaps in terms of if outside of Texas if that’s the driver, what’s coming along faster than expected?

This is Eric, Mike. Definitely the increased absorption is getting the out-of-state markets up to speed and that’s what we expected and Texas remaining strong, but the increased absorption pace has really come from Texas or excuse me outside of Texas and we pointed out Charlotte and Denver because we averaged now 10 closings per month per community in the Charlotte market in the second quarter and a very solid absorption rate of about six in the Denver market. So those two markets really stood out as driving the overall absorption rate.

And I guess longer term when you think about the non-Texas markets, is there anything then to think that aside from perhaps ASP driven mix related issues that you shouldn’t be able to continue to bridge the gap between Texas and non-Texas?

I think that will continue to bridge the gap as we get more experience in our communities that we are in now. So Charlotte, Denver, Albuquerque, Phoenix, the Florida markets, they should continue to improve with everything else being equal. And then we will add the new markets of Seattle and Raleigh and Colorado Springs. In those markets, we are modeling a little bit more conservative and then they would ramp up into full production, if you will.

Okay. Just one last one if I could. The ASP you mentioned would be similar to – in the back half would be similar to 2Q. You also said 185 to 190, so maybe the midpoint just being a hair above 2Q. In terms of thinking about ’16, given the different growth rates, the different regions and I’d assume you still pursue obviously a more aggressive expansion out of Texas. How would that affect the trajectory of ASP growth? Would it perhaps continue to moderate given the mix of geographies or maybe we get back to that more typical 1% to 2% sequential improvement that I think you talked about previously?

This is Eric again. Yeah, we saw a big drop in the second quarter in year-over-year price increases really to be added throughout our homes and got into Denver with its average sales price being higher. For 2016 we haven’t given average sales price guidance but my feel is that it’s really going to be dependent on the markets, what drives that. We are anticipating Seattle and Colorado Springs being higher priced markets, Nashville not so much. So it’s really -- I don’t want to be vague, but I would say real unclear on 2016, but the third and fourth quarter, because the pipeline we got very good visibility and that’s going to be pretty flat from average sales price standpoint.

Great. Thanks, guys.

You are welcome.

[Operator Instructions] Our next question comes from Sam Doctor of Fundstrat. Your line is now open.

Thanks and congrats on a really good quarter. I had a couple of questions that I wanted to dive into on the Southeast. Sequentially Southeast closings were down, so I just wanted to understand that a little bit more and also the ASP growth in that market was single digits year-on-year compared to mid-to-high double digits for the other markets. So I just wanted a little more color on that.

Yeah, I will take the first part on the Southeast being down. Charlotte didn’t close quite as many homes in the second quarter as the first quarter, working through the Oakmont acquisition. But certainly close to 60 in the second quarter in Charlotte is really good production. And then you have to repeat the second part of your question.

I was just wondering about the ASP mix as well, because the Southeast ASPs were up 5% year-on-year, your other markets were all up 11% to almost 20%.

Yeah, I think the other markets, the reasons vary. They are Terrata Homes in the Texas market with an average sales price above $400,000. Denver is influencing the Southwest market with their high average sales price. So Southeast meaning, Charlotte, Atlanta really didn’t have anything to propel that other than just natural price appreciation.

Okay. Another question I would have on the communities, last year, I think 36% of your new communities were in the Southeast, which is obviously in terms of new communities the largest new market for you last year. How does your land inventory look relative to the mix of sales you are getting right now? Is the absorption rate in that market comparable or are you sort of -- I am just trying to understand the sort of discrepancy between the rate of new community openings and overall closings.

Yeah, I think I would describe it to as all of our – most of our growth is going to come from out of the state of Texas. Texas is going to be very strong market for us and I think we commented during the script that over 80% of our increase in home closings came from outside of Texas. So as we are opening up new communities in the future, I mean looking at our boarding and all the deals we got coming online, we believe that trend is going to continue and most of our new community openings will be outside of the state of Texas.

Okay. Great, thank you.

Thank you.

Thank you. And at this time, I am showing there are no further questions in the queue. I would like to turn the call over to CEO and Chairman of the Board, Mr. Eric Lipar.

Thanks everyone for participating on the call and for your interest in LGI Homes. We look forward to sharing our achievements as we finish out the rest of the year. Have a great day.

Ladies and gentlemen, thank you for your participation on today’s conference. This concludes your program. You may now disconnect. Everyone have a great day.