LGI Homes (LGIH) DEF 14ADefinitive proxy

NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS

YOUR VOTE IS IMPORTANT

    Our Board of Directors currently consists of seven members. Our Certificate of Incorporation provides that the authorized number of directors may be changed only by resolution of the Board.

    Each nominee presented below, if elected, will serve as a director until the next annual meeting of stockholders and until such director’s successor is duly elected or appointed and qualified or, if earlier, such director’s death, resignation or removal. All of the nominees listed below have given their consent to be named as nominees for election and have indicated their intention to serve if they are elected. All of the nominees currently serve on the Board. The Board does not anticipate that any of the nominees will be unable to serve as a director, but in the event that any nominee is unable to serve as a director or should otherwise become unavailable, the Board may either propose an alternate nominee, in which case the proxies will be voted for the alternative nominee unless directed to withhold from voting, or the Board may elect to reduce the size of the Board.

    Mr. Smith is the uncle of Mr. Eric Lipar, our Chief Executive Officer and Chairman of the Board. There are no other familial relationships among our directors and executive officers.

    Our Board of Directors believes that it is necessary for each of our directors to possess qualities, attributes and skills that contribute to a diversity of views and perspectives among the directors and enhance the overall effectiveness of the Board. As described under “Corporate Governance - Corporate Governance Matters and Director Independence - Selection and Evaluation of Director Candidates,” our Nominating and Corporate Governance Committee considers all factors it deems relevant when evaluating prospective candidates or current board members for nomination to our Board of Directors, as prescribed in the committee’s charter. All of our directors bring to the Board leadership experience derived from past service. They also all bring a diversity of views and perspectives derived from their individual experiences working in a range of industries and occupations, which provide our Board of Directors, as a whole, with the skills and expertise that reflect the needs of the Company.

    Certain individual experiences, qualifications, and skills of our directors that contribute to the Board’s effectiveness as a whole are described in the table and biographies set forth below.

    Mr. Edone, age 48, has served as a director since November 2014. Mr. Edone is the Chief Financial Officer of Petroleum Wholesale L.P., a distributor of branded and wholesale motor fuel products and operator of retail convenience stores/travel centers across the southwestern United States. Prior to his joining Petroleum Wholesale L.P. in 1999, Mr. Edone was a manager at PricewaterhouseCoopers and a Certified Public Accountant. Mr. Edone is a member of the Board of Directors of Archway Insurance LTD (“Archway”), a captive insurance company. At Archway, Mr. Edone formerly served in roles as the President of the Board and Vice President and Risk Control Chairman of the Board. Mr. Edone is also a member of the ChevronTexaco Petroleum Marketers Association Board. Mr. Edone is the chair of our Audit Committee, and our Board of Directors has determined that Mr. Edone qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K.

    Mr. Edone’s experience as an executive with a multi-state retail and wholesale distribution company enables him to provide both financial and operational expertise to the Company. In addition, Mr. Edone brings insurance and risk management expertise that is valuable to support the continued growth of our business.

    Mr. Lipar, age 51, is our Chief Executive Officer and serves as Chairman of our Board of Directors. He has served as our Chief Executive Officer since 2009, as a director since June 2013 and as Chairman of the Board since July 2013. Previously, Mr. Lipar served as our President from 2003 until 2009. Mr. Lipar has been in the residential land development business since the mid-1990s and is one of our founders. He has overseen land acquisitions, development and the sale of over 55,000 homes since our inception. Mr. Lipar currently serves on the Residential Neighborhood Development Council for the Urban Land Institute and is a member of the Policy Advisory Board for the Harvard Joint Center for Housing Studies. Through his in-depth work experience, Mr. Lipar has obtained a broad background in all aspects of residential construction, development, financing, sales and marketing. Mr. Lipar is responsible for our overall strategic leadership, working closely with our key executives to establish, implement and direct our long-range goals, strategies and policies.

    Mr. Lipar brings extensive leadership, along with industry and operational experience to our Board of Directors. Through his experience, his knowledge of our operations and our markets and his professional relationships within the homebuilding industry, Mr. Lipar is highly qualified to identify important matters for review and deliberation by our Board of Directors and is instrumental in determining our corporate strategy. In addition, by serving as both the Chairman of the Board and our Chief Executive Officer, Mr. Lipar serves as an invaluable bridge between our management and our Board of Directors and ensures that they act with a common purpose.

    Mr. Lipar’s extensive business knowledge, along with his demonstrated leadership capability through the growth of the Company, makes him highly qualified to continue to serve as our Chairman of the Board and our Chief Executive Officer.

    Ms. Parikh, age 41, has served as a Director since December 2021. Since April 2020, Ms. Parikh has been Global Head of Strategy and Solution Development at Aon plc (“Aon”), a leading global professional services firm, where she is responsible for leading strategic planning, solution design and development, and product lifecycle management for Aon’s Health Solutions business. Prior to Ms. Parikh’s current role, she has held various leadership positions within Aon, including Senior Vice President, Aon Business Services from 2017 to 2020; Senior Vice President, Global Service Operation, Aon Hewitt from 2016 to 2017; Chief Financial Officer of EMEA, Aon Hewitt from 2015 to 2016; and Chief of Staff to the Chief Executive Officer of Aon from 2012 to 2015. Ms. Parikh is a proven leader, having managed several transformational initiatives that successfully reshaped the business and delivered enhanced operational and financial outcomes. Prior to her roles with Aon, Ms. Parikh served in various finance leadership capacities, including roles with Reunion Bank of

Florida from 2010 to 2012, BB&T (formerly Colonial Bank) from 2005 to 2010 and within the Investment Banking Division of Morgan Stanley from 2002 to 2004. Ms. Parikh holds an MBA from Stetson University, a BS in Industrial Engineering and a BA in Economics from Northwestern University. Ms. Parikh is a member of our Audit Committee and our Board of Directors has determined that Ms. Parikh qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K.

    Ms. Parikh’s experience as an executive with a global professional services firm and her extensive finance, management, and business strategy expertise make her highly qualified to serve as a member of our Board of Directors and our Audit Committee.

    Mr. Sansbury, age 49, has served as our Lead Independent Director since June 2013. Mr. Sansbury is the Chief Executive Officer, Chairman of the Board of Directors and a founding partner of AEGIS Hedging Solutions, LLC, formerly known as AEGIS Energy Risk, LLC. Prior to September 2017, Mr. Sansbury served as President of Health and Wealth Solutions at Alight Solutions, the former outsourcing business of Aon Hewitt. For over 20 years, Mr. Sansbury held various positions with Aon Hewitt and its affiliates including positions as Chief Operating Officer and Chief Information Officer, President of Emerging Solutions, leader of the Canadian Outsourcing business, and leader of the Pension Outsourcing business in the Southeast region. Mr. Sansbury is a former member of The Woodlands (Texas) Area Economic Development Partnership Board and is a Fellow of the CEO Perspectives program at the Kellogg School of Management at Northwestern University. Mr. Sansbury is the chair of our Compensation Committee and is a member of our Nominating and Corporate Governance Committee.

    Given his extensive business experience, Mr. Sansbury provides our Board of Directors with a unique perspective on business issues impacting the Company as well as corporate governance. His leadership experience in several different capacities also makes him highly qualified to serve as the Lead Independent Director of our Board of Directors and as a member of our Nominating and Corporate Governance Committee.

    Ms. Sharpe’s experience as an executive and human resources professional for various global companies as well as on the board of directors and compensation committee of another publicly traded company, as well as her expertise in corporate governance, real estate, and legal matters makes her highly qualified to serve as a member of our Board of Directors and our Compensation Committee.

    With his wealth of knowledge on issues relating to corporate governance, fiduciary responsibility, risk management, and experience providing counsel to boards of directors, Mr. Smith provides us with a unique perspective on issues affecting the Company. This expertise, combined with his leadership experience as a senior executive, enables Mr. Smith to be a valuable member of our Board of Directors, a member of our Audit Committee, and Chair of our Nominating and Corporate Governance Committee.

    Mr. Vahradian, age 60, has served as a director since June 2013. Mr. Vahradian is a senior managing director of GTIS Partners, LP (“GTIS”), a global real estate investment firm managing residential, retail, industrial, office, hotel and mixed-use properties in the U.S. and Brazil. Mr. Vahradian runs the U.S. investment and asset management activities of GTIS, and is a member of the investment committee of GTIS. Mr. Vahradian joined GTIS in 2006 and has been in the real estate industry since 1986. Previously, Mr. Vahradian was President of Allied Partners, a private real estate investment company and was Chief Operating Officer and principal of The Athena Group, LLC, a residential investment and development company based in New York. Prior to joining The Athena Group, LLC, Mr. Vahradian was a Director in Credit Suisse First Boston’s real estate investment banking and principal groups. Mr. Vahradian is a member of our Nominating and Corporate Governance Committee.

    Through Mr. Vahradian’s vast experience in real estate, residential land development and homebuilding investments, asset management and finance, he is exceptionally well qualified to serve as a member of Board of Directors and our Nominating and Corporate Governance Committee and provides our Board of Directors with valuable insight on real estate and finance matters.

    Ernst & Young was the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2021. At the Annual Meeting, our stockholders will be asked to ratify the appointment of Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, or until such firm’s earlier resignation or removal. While stockholder ratification of the appointment of the Company’s independent registered public accounting firm is not required, we value the opinions of our stockholders and believe that stockholder ratification of our appointment is a good corporate governance practice. Even if the appointment of Ernst & Young is ratified, our Audit Committee retains the discretion to select and appoint a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company.

    We have been advised that a representative of Ernst & Young will be present at the Annual Meeting to answer appropriate questions and will have an opportunity to make a statement, if desired.

    The following table shows the fees paid or accrued by the Company for the audit and other services provided by Ernst & Young for fiscal years 2021 and 2020.

    It is our Audit Committee’s policy to pre-approve all audit, audit related and permissible non-audit services rendered to us by our independent registered public accounting firm. Consistent with such policy, all of the fees listed above that we incurred for services rendered by Ernst & Young were pre-approved by our Audit Committee.

    The report of Ernst & Young relating to our 2021 and 2020 consolidated financial statements did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Moreover, during the fiscal years ended December 31, 2021 and 2020, there were no (i) disagreements with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of Ernst & Young, would have caused either Ernst & Young to make reference to the subject matter of the disagreement(s) in connection with their reports on the consolidated financial statements of LGI Homes, Inc. or (ii) reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).

    The Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2021. Further, the Audit Committee has discussed with Ernst & Young the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, including the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2021, the Company’s independent registered public accounting firm’s responsibility under generally accepted auditing standards, significant accounting policies, management’s judgments and accounting estimates, any audit adjustments, related party transactions and other unusual transactions, other information in documents containing audited financial statements and other matters.

    Finally, the Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young by the applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence, and has discussed the topic of independence with Ernst &Young.

    Based on its review and discussion described above, the Audit Committee has recommended to the Board that the audited consolidated financial statements for the fiscal year ended December 31, 2021 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the SEC.

The affirmative vote of a majority of shares of our common stock entitled to vote at the Annual Meeting which are present in person or by proxy at the Annual Meeting is required to ratify the appointment of Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. Abstentions will be counted toward the tabulation of the shares of our common stock entitled to vote at the Annual Meeting on the ratification of the appointment of Ernst & Young and thus will have the same effect as a negative vote.

    The Company’s core compensation philosophy is to utilize a mixture of base salary and annual and longer-term incentives to align executive compensation with our stockholders’ interests and our annual and long-term performance. This includes linking executives’ pay to their performance and the Company’s overall annual and long-term performance.

    Our Board and the Compensation Committee are dedicated to ensuring that our executive compensation programs reflect best practices in numerous ways, including by making a portion of compensation performance-based to maximize both short- and long-term stockholder value. The Board believes the Company’s compensation programs are well tailored to align executive officers’ interest with those of our stockholders, retain executive talent, and reward performance. We encourage our stockholders to read the “Compensation Discussion and Analysis” section in this Proxy Statement, which describes (i) the processes our Compensation Committee used to determine the structure and amounts of the compensation of our NEOs for 2021 and (ii) how our executive compensation philosophy, policies, and procedures operate and are designed to achieve our compensation objectives. The Compensation Committee and the Board believe that our executive compensation strikes the appropriate balance between utilizing responsible, measured pay practices and effectively incentivizing our NEOs to dedicate themselves to value creation for our stockholders.

The affirmative vote of a majority of shares of our common stock entitled to vote at the Annual Meeting which are present in person or by proxy at the Annual Meeting is required to approve the compensation of our NEOs for 2021, as described in this Proposal 3. Abstentions will be counted toward the tabulation of the shares of our common stock entitled to vote at the Annual Meeting and thus will have the same effect as a negative vote.

    Our Board currently consists of seven members. Our Certificate of Incorporation provides that the authorized number of directors may be changed only by resolution of the Board. Our directors hold office until their successors have been elected or appointed and qualified, or the earlier of their death, resignation or removal. Vacancies on the Board are filled solely by the affirmative vote of a majority of the remaining directors then in office, and not by our stockholders. Each of our directors is elected annually.

    Our Nominating and Corporate Governance Committee oversees the annual assessment of the composition of our Board, including a review of the size of the Board, the skills and qualifications represented on the Board, and a self-assessment of the effectiveness of our Board and its committees and identification of any opportunities for improvement. The findings of the annual review of the Board and its committees are reported to and discussed with the full Board.

    The Nominating and Corporate Governance Committee is responsible for searching for qualified director candidates for election to the Board and filling vacancies on the Board. To facilitate the search process, the Nominating and Corporate Governance Committee may solicit current directors and executive officers of the Company for the names of potentially qualified candidates or ask directors and executive officers to pursue their own business contacts for the names of potentially qualified candidates. The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates, or consider director candidates recommended by our stockholders. Consistent with prior searches, the Nominating and Corporate Governance Committee will endeavor to identify a diverse slate of potential candidates, including diversity in skills and gender, among other factors. Once potential candidates are identified, the Nominating and Corporate Governance Committee reviews the backgrounds of those candidates, evaluates candidates’ independence from the Company and potential conflicts of interest and determines if candidates meet the qualifications desired by the Nominating and Corporate Governance Committee of candidates for election as director.

    The Nominating and Corporate Governance Committee is responsible for reviewing with our Board, on an annual basis, the appropriate characteristics, skills and experience required for the Board as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members) and in recommending candidates for election, the Nominating and Corporate Governance Committee will consider the individual’s experience and characteristics. In addition, the Nominating and Corporate Governance Committee will review the overall composition of the Board to ensure there is an appropriate mix of specific experience, qualifications and skills to promote a diversity of points of view for the effective performance of the Board’s oversight function and representation of stockholders’ interests.

    We believe that appropriate director qualifications and characteristics include having directors with diverse backgrounds, education, experiences, expertise and perspectives. These qualifications and characteristics are discussed below.

    Director candidates recommended by our stockholders will be considered in the same manner as recommendations made by directors, executive officers, outside advisors or search firms.  Any stockholder who intends to recommend a candidate to the Nominating and Corporate Governance Committee for consideration as a director nominee should deliver written notice pursuant to Article III, Section 3.1(a) of our Bylaws, to the Secretary of the Company. Any such notice should be delivered by the date required by such section of the Bylaws in order to permit the Nominating and Corporate Governance Committee to complete its review in a timely fashion.

    Because of the value the Board places on having directors who are knowledgeable about the Company and its operations, there have been no term limits established for directors. In connection with each director nomination recommendation, the Nominating and Corporate Governance Committee shall consider the issue of continuing director tenure.

    Additionally, the Board has determined not to establish a mandatory retirement age for directors. Alternatively, in connection with the director nomination recommendations, the Nominating and Corporate Governance Committee and the Board will review each director’s continuation on the Board upon reaching the age of 73 and each year thereafter.

    To ensure that directors may appropriately discharge their responsibilities, the Board has adopted the policy that any director (including a management director) who (i) has a significant change in business affiliation or position of principal employment or (ii) experiences a disabling health condition that, in each case, adversely affects his or her ability to perform the essential functions and responsibilities of a director will be expected to tender his or her resignation promptly to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, taking into consideration the effect of such change in employment on the director’s qualification to serve as one of the Company’s directors.

    In accordance with our Bylaws, the election of directors requires the approval of a plurality of the votes cast. This means that the seven nominees receiving the highest number of affirmative FOR votes will be elected as directors.

    Our Board is composed of a majority of independent directors in accordance with the NASDAQ listing requirements. All members of our Board, except Mr. Lipar, have been determined by the Board to be independent. In making this determination, the Board has affirmed that each of the independent directors meets the objective requirements for independence set forth by the NASDAQ listing requirements. The independent directors are Ryan Edone, Shailee Parikh, Bryan Sansbury, Maria Sharpe, Steven Smith, and Robert Vahradian. Mr. Lipar is not independent because he serves as our Chief Executive Officer.

    The Independence Standards included in the NASDAQ listing requirements specify the criteria by which the independence of our directors is determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company, its management or its independent registered public accounting firm.

    In evaluating and determining the independence of the directors, the Board considered that the Company may have certain relationships with its directors. Specifically, the Board considered that Mr. Smith is the uncle of Mr. Eric Lipar, our Chief Executive Officer and Chairman of the Board. In addition, the Board considered that the brother of Mr. Smith is employed by the Company in a construction management position but is not an executive officer of the Company. The Board determined that these relationships do not impair Mr. Smith’s independence. The Board also considered the Company’s two land purchase contracts to purchase finished lots in Pasco County, Florida from affiliates of Mr. Vahradian, and the takedowns under such contracts as described under “Certain Relationships and Related Party Transactions - Related Party Transactions - Land Purchases from Affiliates,” and determined that this relationship does not impair Mr. Vahradian’s independence.

    We operate under a written Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Upon employment with us and annually thereafter, all employees are required to affirm in writing their receipt and review of the Code of Business Conduct and Ethics and their compliance with its provisions. In addition, we maintain policies that prohibit employee and director hedging of Company securities, including shares of our common stock.

    The Lead Independent Director coordinates the activities of the other non-employee directors and performs such other duties and functions as directed by our Board from time to time. The Lead Independent Director presides over all meetings of the independent directors. The Lead Independent Director has the authority to call meetings of the independent directors. Mr. Sansbury currently serves as our Lead Independent Director.

    The Board is responsible for overseeing our risk management process, but does not provide day-to-day risk management of the Company, which is the responsibility of our executive management team. The Board oversees the implementation of risk mitigation strategies by management to ensure such strategies focus on both general risk management and management of the Company’s most significant risks. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions. In addition, each of the Board committees is responsible for risk management concerning its area of responsibility, consistent with its charter, and such other responsibilities as may be delegated to it by the Board from time to time.

    Our financing and liquidity positions may fluctuate due to changes in the homebuilding industry, our results of operations and home sales demand. The Board oversees financing and liquidity risk by regularly monitoring our financial and liquidity position to ensure we maintain the financial resources needed to fund our homebuilding operations, projected growth, and other financing and operating expenses. At each quarterly meeting, management reviews information related to the Company’s financial and liquidity position with the Board, which includes projected short- and long-term liquidity needs, availability under our revolving credit facility and other capital sources. We believe these procedures provide adequate risk oversight of financing and liquidity matters affecting the Company.

    The Board is responsible for determining a succession plan for the Chief Executive Officer in the event of an emergency or otherwise. The Nominating and Corporate Governance Committee has been delegated the responsibility to identify and evaluate potential successors, and to report to the Board from time to time on its activities.

    During 2021, our Board met five times, including telephonic meetings and acted three times by unanimous consent. In 2021, all incumbent directors attended more than 75% of the meetings of the Board and the committees on which they served. Our Corporate Governance Guidelines state that Board members are invited and generally expected to attend our annual meeting of stockholders. All but one of our then-current directors attended the 2021 annual meeting of stockholders.

    The Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees reports to the Board as it deems appropriate and as the Board may request. The Board has adopted written charters for each of the committees. From time to time, special committees may be established under the direction of our Board when necessary to address specific issues. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this Proxy Statement.

    Agendas and topics for Board and committee meetings are developed through discussions among management and members of the Board and its committees. Information and data that are important to the issues to be considered are distributed in advance of each meeting. Board meetings and background materials focus on key strategic, operational, financial, governance, risk and compliance matters applicable to us.

    Our Audit Committee consists of Mr. Edone, who serves as chair of the committee, Ms. Parikh and Mr. Smith. The Board has determined that the members of the Audit Committee are independent for purposes of serving on such committee under the NASDAQ listing standards and applicable federal law, including Rule 10A-3 promulgated under the Exchange Act. In addition, the Board has determined that each current member of

the Audit Committee meets the NASDAQ listing standards and that both Mr. Edone and Ms. Parikh qualify as an “audit committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K.

    Our Compensation Committee consists of Mr. Sansbury, who serves as chair of the committee, and Ms. Sharpe. Each of the members of our Compensation Committee is an independent director under the NASDAQ listing standards, qualifies as an “outside director” in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

    The Compensation Committee is responsible for evaluating and approving compensation for our non-employee directors. Our non-employee directors received compensation for 2021 director services, which included the following:

    The number of the RSUs granted is determined based on the grant award amount and the closing stock price of our common stock on the date of grant, rounded up to the next whole share as no fractional shares are issued, with one-year cliff vesting. The RSUs granted to non-employee directors for director services for 2022 were increased to $155,000 from $125,000 for director services for 2021 and were awarded on December 15, 2021. Beginning in 2022, the annual cash retainer paid to the Lead Independent Director and the Chair of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee was increased $5,000 from the retainer paid in 2021.

    The following table contains information with respect to 2021 compensation awarded to or earned by our non-employee directors. Mr. Eric Lipar, our Chief Executive Officer and Chairman of the Board, received no additional compensation for serving on the Board, and his 2021 compensation is disclosed under “Executive Compensation” below.

    In order to evidence the financial alignment of the Company’s directors with the interest of the Company’s stockholders, the Board has established a stock ownership policy for non-employee directors. Under these guidelines, each director is required to own shares of our common stock that have a fair market value (determined as of each annual meeting of the Company’s stockholders) equal to five times (5x) the annual cash retainer paid to the applicable independent director, and each director shall have five (5) years from his or her initial appointment or election to the Board within which to satisfy the foregoing stock ownership policy. The annual cash retainer amount as of December 31, 2021 is $75,000, which results in a director share ownership requirement of approximately 2,539 shares of our common stock determined as of December 31, 2021, based on average of the monthly closing stock prices of $147.71, for the preceding calendar year. As of December 31, 2021, each non-employee director who was a director during the full year of 2021 was in compliance with the policy. Ms. Parikh and Ms. Sharpe will be expected to be in compliance with these requirements by January 1, 2027.

    Mr. Steven Smith, one of our directors, is the uncle of Mr. Eric Lipar, our Chief Executive Officer and Chairman of the Board. Mr. Eric Lipar and Mr. Jack Lipar, our Executive Vice President of Acquisitions, are cousins. There are no other familial relationships among our executive officers and directors.

    Mr. Greg Smith, who is Mr. Eric Lipar’s uncle and Mr. Steven Smith’s brother, joined the Company with extensive homebuilding experience in June 2016 and is currently an employee in a construction management role for one of the Company’s business areas. Mr. Greg Smith’s compensation for 2021 exceeded $120,000 and is expected to exceed that amount for 2022. The Audit Committee, with Mr. Steven Smith abstaining, has approved Mr. Greg Smith’s 2021 compensation as well as his anticipated 2022 compensation.

    The Board has adopted a Related Party Policy, which requires that each director and executive officer promptly advise the chairman of the Audit Committee of any Related Person Transaction, as defined therein, of which he or she becomes aware in which the Company is to be a participant, the amount involved exceeds $120,000 and the applicable Related Person had or will have a direct or indirect material interest, and all material facts with respect thereto. The Related Party Policy defines “Related Person” as (i) an executive officer or director of the Company or a nominee for director of the Company, (ii) a beneficial owner of more than 5% of any class of voting securities of the Company or (iii) an Immediate Family Member (as defined in the policy) of any person identified in clauses (i) or (ii). The Audit Committee (or, if determined by the Audit Committee as advisable, the disinterested members of the Board) shall then consider such Related Person Transaction for approval or ratification.

    In considering whether to approve or ratify any Related Person Transaction, the Audit Committee or the disinterested members of the Board, as the case may be, shall consider all factors that are relevant to the Related Person Transaction, including, without limitation, the following:

    The policy supplements the conflict of interest provisions in our Code of Business Conduct and Ethics.

For the year ended December 31, 2021, we completed a land purchase contract to purchase a total of 110 finished lots in Pasco County, Florida from an affiliate of one of our directors, Mr. Vahradian, for a total base purchase price of approximately $4.0 million. The lots were purchased in takedowns, subject to a maximum price escalation of 6% per annum, and the contract provided for additional payments to the seller at the time of sale to the homebuyer. In August 2019, we purchased our first takedown of 58 lots under the Pasco County contract for a base purchase price of approximately $2.1 million. In April 2021, we purchased the remaining land in a takedown of 52 lots under the Pasco County contract for a base purchase price of approximately $1.9 million.

For the year ended December 31, 2021, we completed a land purchase contract to purchase a total of 25 finished lots in Burnet County, Texas from an affiliate of a family member of our chief executive officer for a total base purchase price of approximately $2.5 million.

For the year ended December 31, 2020, we purchased in three separate transactions a total of 55 finished lots in Montgomery County and Travis County, Texas from an affiliate of a family member of our chief

executive officer for a total base purchase price of approximately $4.7 million.

    In 2016, the Company placed its worker’s compensation and auto insurance policies with Archway, a captive insurance company with more than 200 members. Mr. Edone is a member of the Board of Directors of Archway and was the President of the Archway Board of Directors from September 2016 to September 2018. Scott Garber, the Company’s General Counsel and Corporate Secretary, is also a member of the Board of Directors and of the Executive Committee of Archway. As of December 31, 2021, the Company has approximately $36,000 in Archway stock and $543,898 in security collateral. During 2021, the Company paid approximately $592,551 representing premium and expenses for the policy year ending February 28, 2022.

    Any stockholder or any other interested party who wishes to communicate directly with (i) our Board, (ii) the non-management directors as a group or (iii) the Lead Independent Director, may do so by corresponding with the Lead Independent Director at the following address: Lead Independent Director, LGI Homes, Inc., 1450 Lake Robbins Drive, Suite 430, The Woodlands, Texas 77380, Attn: Corporate Secretary. The Company will forward any such communication to the intended recipients, unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal or similarly inappropriate.

    The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of March 4, 2022, by (i) each of our directors and executive officers, individually and as a group, and (ii) each person known to our management to be the beneficial owner of more than 5% of the outstanding shares of our common stock.

    Our directors, executive officers, and employees are required to comply with our Insider Trading Policy and may not use any strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential decrease of any of our securities or enter into any form of hedging or monetization transaction involving any of our securities. Securities are defined in our Insider Trading Policy to include shares of our common stock, performance-based stock units, restricted stock units, debt securities, and any other type of securities or equity interests that the Company may issue. However, under our Insider Trading Policy, our directors, officers and employees can pledge shares of our common stock as collateral for a loan if the director, officer or employee obtains pre-clearance from the designated compliance officer.

A total of 3,000,000 shares of our common stock have been reserved for issuance under the 2013 Incentive Plan since its inception in 2013. The 2013 Incentive Plan was approved by the Company’s stockholders at the Company’s 2017 Annual Meeting of Stockholders in May 2017. There were 117,874 RSUs outstanding at December 31, 2021, issued at a $0.00 exercise price. At December 31, 2021, there were 215,807 PSUs outstanding that have been granted to certain members of management at a $0.00 exercise price. The number of shares of our common stock underlying the PSUs that will be issued to the recipient may range from 0% to 200% of the base award depending on actual performance metrics as compared to the target performance metrics. See Note 10, “Stock-Based Compensation” to our consolidated financial statements included in our 2021 Annual Report for a description of the 2013 Incentive Plan.

A total of 500,000 shares of our common stock have been reserved for issuance under the LGI Homes, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for employees to make quarterly elections for payroll withholdings to purchase shares of our common stock at a 15% discount from the closing price on the purchase date, which is the last business day of each calendar quarter. See Note 10, “Stock-Based Compensation” to our consolidated financial statements included in our 2021 Annual Report for a description of the ESPP.

The executive officers, vice presidents, directors and certain other personnel are eligible to receive annual bonuses and equity compensation under the 2013 Incentive Plan and the Company’s Annual Bonus Plan. RSU grants to our employees generally provide for three-year cliff vesting, aligned with our commitment to building employee loyalty and long-term value for our stockholders. Our sales and construction personnel are eligible to receive commission and bonuses based on achieving pre-established home closing volumes. Our non-sales employees are also eligible to receive an annual bonus if the Company or their location achieves pre-established home closing volumes.

management of commercial legal matters for various company product lines and divisions. Prior to joining CPChem, Mr. Garber served as Associate General Counsel for United Airlines (formerly Continental Airlines), then the world’s largest airline, where he was responsible for the company’s litigation, antitrust and intellectual property matters. Mr. Garber previously worked at Howrey Simon Arnold & White, a major international law firm, where he specialized in all aspects of intellectual property law. Mr. Garber is a member of the State Bar of Texas and is also admitted to practice before the U.S. Patent & Trademark Office. Mr. Garber is also a member of the Board of Directors and of the Executive Committee of Archway Insurance, Ltd, a captive insurance company.

    Our executive compensation program links the pay of each NEO to his or her performance and advancement of LGI’s overall annual and long-term performance and business strategies.

    Other objectives of our executive compensation program include aligning the interests of our NEOs with those of our stockholders and encouraging high-performing NEOs to remain with LGI over the course of their careers. We believe that LGI’s executive compensation program is effectively attracting executive talent, as well as rewarding performance and promoting retention. We also believe that the amount of compensation paid to each NEO reflects the depth of their experience, quality of their performance and level of service to LGI and our stockholders.

    As discussed further in our 2021 Annual Report, we continued to execute on our business model during 2021, resulting in record breaking home closings, significant growth in revenues, growth in our existing markets, geographically diversifying our revenue base, adding additional price points and wholesale closings in certain markets, and executing on our land acquisition and development strategy.

    We continued to achieve strong operating results generating more than 17% pre-tax income as a percentage of revenues in 2021. Revenues increased due to increases in homes closed and average home sales price. We also maintained our near industry leading gross margins while expanding geographically. These results also reflect our wholesale business during 2021 generating over 1,500 home closings for the year. Although the gross margin for our wholesale closings are slightly lower than our retail sales, operating margins are similar to our retail sales.

     At year-end, we had approximately 23.9 million shares of our common stock outstanding and $817.4 million of borrowings outstanding under our revolving credit facility and our 4.000% Senior Notes due 2029.

    We achieved the following results in 2021, as compared to 2020:

___________________________

    Below we have highlighted certain executive compensation practices applicable to our NEOs that have been implemented to drive performance, and certain practices we have not implemented because we do not believe that they would serve our stockholders’ long-term interests.

    Our executive compensation program directly links the majority of executive compensation opportunity to our financial performance through annual and long-term incentives. The Target Compensation Mix charts below describe each of the compensation elements for the CEO and other NEOs for 2021 as a percentage of total target direct compensation.

    The elements of the NEO compensation program have remained relatively consistent year to year, with target compensation allocated between fixed and variable, cash and non-cash and short-term or long-term components. The Target Compensation Mix charts above include 2021 base salary and award opportunities related to annual and long-term incentive compensation, granted in or with respect to fiscal 2021 and valued at target levels, and do not include any amounts paid with respect to prior years’ incentive award grants.

    The value of our RSUs and PSUs is directly linked to LGI’s stock performance; the settlement value of the PSUs is dependent on our basic earnings per share (“EPS”) for the three-year performance period as discussed under - “What We Paid and Why - Compensation for NEOs - 2021 LTI Program”. Including the annual incentive cash bonus which is dependent on our home closings and financial performance for 2021, these three performance-linked components constitute approximately 82% and 66%, of the total target direct compensation of our CEO and our four other NEOs (on average), respectively.

    Our executive compensation program directly links a substantial portion of annual executive compensation to our performance. These plans are designed to deliver highly competitive compensation for superior company performance. Likewise, when company performance falls short of expectations, these variable incentive programs deliver lower levels of compensation. However, the Compensation Committee endeavors to balance pay for performance objectives with retention considerations so that, even during a temporary downturn in the economy and the homebuilding industry, the program continues to ensure that qualified, successful, performance-driven employees stay committed to increasing our long-term value. Furthermore, to attract and retain highly skilled management, our executive compensation program must remain competitive with those of comparable employers who compete with us for talent.

    We use the following key principles as the framework for our executive compensation philosophy to attract, develop and retain business leaders to drive financial and strategic growth and build long-term stockholder value:

    The Compensation Committee has built our executive compensation program upon a framework that includes the components and objectives listed below. The Compensation Committee routinely reviews each component of the executive compensation program to see how it affects target total pay levels and considers pay ranges for similar executive positions among the median of similarly-sized companies.

    The Compensation Committee, which is comprised entirely of independent directors, is responsible for overseeing our executive compensation program. The Compensation Committee determines and approves all compensation and payment levels for the CEO and our other senior officers, including the other NEOs and the presidents of our homebuilding divisions.

    The Compensation Committee performs an annual review of the CEO’s goals and his performance in achieving such goals in each fiscal year and keeps the Board apprised of such evaluations. Our CEO reviews the performance of our other senior officers, including the NEOs (other than himself), and makes recommendations to the Compensation Committee regarding the compensation for those executive officers.

    The Compensation Committee, with input from Meridian, determines each element of compensation for the CEO. The Compensation Committee also determines each element of compensation for the other NEOs based on consideration of each individual’s leadership qualities, operational performance, business responsibilities, tenure with the Company, current compensation arrangements and long-term potential to enhance stockholder value as well as input from Meridian and the CEO. The Compensation Committee is under no obligation to follow these recommendations. Executive officers and others may participate in discussions with the Compensation Committee when invited to do so.

    The Compensation Committee utilized Meridian to identify the appropriate compensation benchmarking sources, to perform an annual benchmarking of our executive compensation and to assess the competitiveness of our executive compensation program.

    Although the majority of the homebuilder peer group was larger than us, the Compensation Committee considered the Company’s relative size, including revenues, total assets, market capitalization, enterprise value, EBITDA, return on equity, return on assets and total shareholder return (“TSR”) when reviewing the executive compensation market data. Additional factors contemplated by the Compensation Committee included the Company’s 2020 performance, its overall business strategy and business model, its expected growth trajectory and constraints, and the then-current economic environment. As one of the fastest growing homebuilders in the nation based on home closing growth, the Company was at the low end of the peer group for revenues and assets; however, we were closer to the median for market capitalization and above the 75th percentile for most of the other performance measures.

    The mix of fixed and incentive compensation elements at target for the CEO and the other NEOs for 2021 is shown in the charts below.

    We pay base salaries to attract and retain talented executives and to provide a fixed base of cash compensation. The table below shows the annual salary of each NEO:

    STI compensation is designed to offer opportunities for cash compensation directly tied to our performance relative to established performance targets that the Compensation Committee ultimately believes create stockholder value. The Compensation Committee approved the 2021 incentive award opportunities described below for the eligible NEOs pursuant to the Annual Bonus Plan, a sub-plan of the 2013 Incentive Plan.

    Under the 2021 Annual Bonus Plan, each NEO had an annual incentive opportunity based on the following percentages of base salary: 120% for Mr. E. Lipar, 100% for Mr. Snider, 75% for Mr. Merdian, 60% for Mr. J. Lipar and 60% for Ms. Eaton. The total Annual Bonus payment to be earned by each participating NEO was based (i) 75% on the pretax income during 2021 as compared to target and (ii) 25% on the number of home closings during 2021 as compared to the target. The payouts could range from 0% - 200% of the target annual bonus amount depending on the results achieved as compared to the threshold, target, and maximum for each measure, calculated and awarded independently, such that one portion of the award may be earned even if the threshold level of performance for the other measure is not achieved. The performance targets and payout

terms applied to each NEO based on the Compensation Committee’s determination that each is integral to the overall success of the Company.

    Pre-tax income and home closings performance measures and weightings have been used consistently for the Annual Bonus Plan since 2014. In order to set a meaningful target, threshold, and maximum for each performance measure, the Compensation Committee analyzed and considered the Company’s growth projections, expected absorption pace by market, lot development schedule, the Company’s performance relative to its peer group and the current economic climate. Pre-tax income and home closings have been published by the Company since 2014 as key measures of our performance. The Compensation Committee believes that they are an appropriate and balanced method for evaluating the success of management and the Company.

    The threshold, target and maximum performance goals, the weighting for the performance metrics, and the payout rate for the 2021 annual bonus, as well as actual fiscal 2021 performance, are as follows (dollars in thousands):

    The long-term incentives granted by the Compensation Committee for 2021 were designed to provide our NEOs longer-term incentive opportunities that are competitive with our general industry and homebuilder peer groups and reflect our overall executive compensation philosophy of aligning pay with performance. The 2021 LTI provided for 80% of the target value to be awarded in performance share units (PSUs) and 20% of the target value to be awarded in time-based RSUs with a three year cliff vest. The target 2021 LTI dollar value was set by the Compensation Committee at 3.4x base salary for Mr. E. Lipar, 1.9x base salary for Mr. Snider, 1.8x base salary for Mr. Merdian, 0.80x base salary for Mr. J. Lipar and 0.90x base salary for Ms. Eaton. The RSUs and PSUs were valued at $141.00 (the closing stock price of our common stock on the March 15, 2021 grant date).

    The 2021 LTI RSU and PSU grants to our NEOs were approved by the Compensation Committee under our stockholder approved 2013 Incentive Plan. The RSU grant agreements provide for three-year cliff vesting. The 2021 PSU award agreements provide for cliff vesting at the conclusion of the three-year performance period if threshold performance levels are achieved.

    The 2021 PSU awards provide the opportunity for participants to receive shares of our common stock based on the attainment of pre-established financial performance targets based on our cumulative Basic EPS amount over the three-year performance period 2021 - 2023. Each PSU granted to participants represents the right to receive one share of our common stock, but the ultimate number of shares of our common stock to be earned with respect to a participant’s PSUs will be determined at the end of the performance period depending on actual results as compared to the target performance metrics. Payouts could range from 0% to 200% of the target number of PSUs offered to the participant, depending on the cumulative Basic EPS as compared to target Basic EPS for the performance period.

    The terms of the PSUs provide that the payouts will be capped at 100% of the target number of PSUs granted if absolute TSR is negative during the performance period, regardless of Basic EPS performance. The PSUs vest upon the determination date (March 2024) for the actual results at the end of the three-year period and require that the recipients continue to be employed by the Company through the determination date. The PSUs can only be settled in shares of our common stock.

    PSUs, which are contingent on the successful completion of both performance-based and time-based requirements before any payout occurs, further strengthen the link between individual pay opportunities and our performance and enhance our efforts to retain key executives.

    This additional compensation component was added in 2016 to provide an additional fixed level of long-term compensation to balance out the incentive-based compensation. It is designed to encourage retention of the management team. The RSUs cliff vest on the third anniversary of the grant date and can only be settled in shares of our common stock.

    The Compensation Committee believes that the long-term equity mix, including PSUs and time based RSUs, helps to ensure that long-term strategic initiatives are not compromised by having executives focus solely on short-term results through the annual incentive award. Such awards also help focus executives on strategies that increase long-term stockholder value.

    The 2021 incentive compensation program has similar underlying performance metrics as the programs in prior years and the Compensation Committee has determined that continuing a similar mix of PSUs and RSUs for the 2021 LTI grant was appropriate. Existing executive equity ownership levels are not generally a factor in the Compensation Committee’s granting of PSUs and RSUs.    

    Our NEOs are generally eligible to participate in our regular employee benefit programs, which include a tax-qualified defined contribution plan (the “401k Plan”), an employee stock purchase plan, group life insurance, long-term disability coverage, other group welfare benefit plans, and to receive an auto allowance, if applicable. We believe many of these benefits are required to remain competitive with our competitors for executive talent.

    We also provide our CEO with reimbursement of club membership dues. Senior executives, including the NEOs, are encouraged to occasionally have their spouses accompany them at business functions in connection with certain business meetings and other corporate-sponsored events, and the Company pays all expenses associated with their spouses’ travel to and attendance at these business-related functions

    All employees, including our NEOs, are also entitled to receive a discount on the purchase of an LGI home for their personal residence. We believe this program allows our employees to experience the benefit of home ownership while building loyalty and belief in our Company and our products with little impact on our pre-tax income.

    Mr. Eric Lipar, our Chief Executive Officer and Chairman of the Board, has an employment agreement (the “Lipar Employment Agreement”) with the Company. The Lipar Employment Agreement provides for a three-year term that began November 13, 2018 and automatically renews for successive one-year periods on the anniversary of the effective date, a base salary of at least $840,588 plus a discretionary incentive bonus, and includes provisions that govern confidentiality, non-competition, and non-solicitation. See “Executive Compensation - CEO Employment Agreement” for a discussion of the Lipar Employment Agreement. Other than Mr. Lipar, the NEOs do not have any employment or severance agreements other than what is outlined in the 2013 Incentive Plan.

    Section 162(m) of the Code limits the amount of compensation that may be deducted per covered employee to $1.0 million per taxable year. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, this $1.0 million annual deduction limitation applies to compensation paid to any individual who serves as the chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year, and there is no longer any exception to this limitation for qualified performance-based compensation (as was the case for periods prior to 2018). Thus, it is expected that any compensation deductions for any covered employee will be subject to a $1 million annual deduction limitation (other than for certain compensation that satisfies the requirements for grandfathering under the law). The Compensation Committee considers the applicability of Section 162(m) in designing our compensation programs but also considers numerous factors that may in some cases lead to the payment of compensation that is not deductible as result of the application of Section 162(m).

    Ownership of our common stock by our directors and executive officers is very important to align their interests with those of our stockholders. The Board has adopted guidelines requiring that our executive officers acquire and continuously hold a specified minimum level of our common stock. For our executive officers, we express these requirements as a multiple of annual base salary. The minimum stock ownership requirements by level are as follows:

    Upon the appointment or election of a new executive officer, that person will be expected to reach full compliance with these requirements by the date that is five years after his or her appointment or election. Until the targeted ownership levels are attained, executive officers covered by this policy are required to retain at least 50% of the shares of our common stock acquired upon the vesting of share based awards. As of December 31, 2021, each executive officer was in compliance with the policy.

    Annually, the Compensation Committee approves NEO compensation. The base salaries and incentive compensation programs continue to be similar to previous years as discussed above.

    The following table provides information on RSUs and PSUs granted under the 2013 Incentive Plan to each of our NEOs and outstanding at December 31, 2021.

    We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance stockholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees.

    Our CEO to median employee pay ratio is calculated in accordance with the applicable SEC rules and SEC Staff guidance interpreting such rules. We selected December 31, 2021 as the date to identify our median employee, at which time our employee population consisted of 952 persons, of which 55% are on-site sales and support personnel. This population consisted of our full-time, part-time, seasonal and temporary employees. To identify our median employee from our employee population, we used employees’ 2021 gross compensation from our payroll records, which reflects all compensation recorded for our employees for 2021, as our consistently applied compensation measure. We annualized the gross compensation for any full-time or part-time employees who were hired in 2021 but were not employed by us for all of 2021. We then ranked the 2021 gross compensation of all employees, excluding the CEO (a list of 951 employees), from lowest to highest and identified our median employee.

    After identifying our median employee, we combined all of the elements of this employee’s compensation for 2021 in accordance with Item 402(c)(2)(x) of Regulation S-K, resulting in total annual compensation of $123,976. With respect to the annual total compensation of our CEO, we used $6,526,801, the amount reported in the “Total” column of our Summary Executive Compensation Table in this Proxy Statement. Based on this information, the pay ratio of our CEO’s annual total compensation to that of our median employee for 2021 was approximately 53 to 1.

    Since we currently have no separate severance or similar agreements with NEOs or employees other than Mr. Lipar, we have included change of control provisions in the 2013 Incentive Plan and the PSU and RSU grant agreements under the 2013 Incentive Plan that provide for immediate vesting in the event of a change of control; PSUs will pay out at target. The Compensation Committee believes that these provisions will preserve executive morale and productivity and encourage retention in the face of an actual or rumored change in control.

    The Lipar Employment Agreement defines “Cause” as, following written notice to him and his failure to cure such occurrence(s): (i) any act or omission that constitutes a material breach by him under the Lipar Employment Agreement, (ii) conviction or plea which could reflect negatively on the Company, (iii) Mr. Lipar’s misconduct that is injurious to the Company, (iv) Mr. Lipar’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company, (v) Mr. Lipar’s refusal to follow the directions of the Board or (vi) any other willful misconduct by Mr. Lipar which is materially injurious to the financial condition or business reputation of the Company.

    “Good Reason” is defined in the Lipar Employment Agreement to include: (i) a material diminution in Mr. Lipar’s base salary or a failure by the Company to pay material compensation due and payable, (ii) a material diminution in the nature or scope of Mr. Lipar’s authority, duties, responsibilities or title, (iii) requiring Mr. Lipar to be based at any office more than 50 miles from his current office location or (iv) a material breach by the Company of the employment agreement, which includes the failure of any successor entity to the Company to expressly assume the Lipar Employment Agreement.

    Under the Lipar Employment Agreement and the 2013 Incentive Plan, a “Change in Control” is deemed to occur if: (i) any person becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of securities of the Company representing 50% or more of the total voting power of the Company, (ii) a change in the composition of the Board occurring within a one-year period as a result of which fewer than a majority of the directors are Incumbent Directors (as defined in the 2013 Incentive Plan); provided, that any individual whose election or nomination for election by the stockholders was approved by a majority of the then Incumbent

Directors shall be considered an Incumbent Director, with certain exceptions; or (iii) any merger, consolidation or recapitalization of the Company or any sale of substantially all of its assets where the stockholders of the Company prior to the transaction do not, immediately thereafter, own at least 50% of both the equity and voting power of the surviving entity.

    Additionally, Mr. Lipar is entitled to participate in such other employee benefit plans of the Company that may be in effect and available to Company executives of a similar status from time to time.

    Stockholder proposals not intended for inclusion in next year’s proxy materials, but which instead are sought to be presented at the 2023 Annual Meeting must be submitted in accordance with the specific procedures and requirements set forth in Article II, Sections 2.1 of our Bylaws, and any director nominations must be submitted in accordance with the specific procedures and requirements set forth in Article III, Section 3.1(a) of our Bylaws. These procedures require that any nominations or proposals must be delivered to, or mailed and received at, the Company’s principal executive offices no earlier than November 17, 2022 and no later than December 17, 2022, in order to be considered.

    As allowed under the rules of the Exchange Act, the persons named in the proxy for the 2023 Annual Meeting may use discretionary authority to vote with respect to any proposal not included in the Company’s proxy materials that is presented by a stockholder in person at the 2023 Annual Meeting if the stockholder making the proposal has not given notice of the proposal to the Company by February 1, 2023.

    The SEC’s rules permit us to deliver a single Notice of Internet Availability of Proxy Materials or set of proxy materials to one address shared by two or more of our stockholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one Notice of Internet Availability of Proxy Materials or one set of proxy materials to multiple stockholders who share an address, unless we received contrary instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the Notice of Internet Availability of Proxy Materials or proxy materials, as requested, to any stockholder at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the Notice of Internet Availability of Proxy Materials or proxy materials, you can request them from Broadridge Financial Solutions, Inc. at 1-866-540-7095, by mail (Attn: Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717), or by using the internet (www.proxyvote.com). You may also send a written request for Proxy Materials to Investor Relations, LGI Homes, Inc., 1450 Lake Robbins Drive, Suite 430, The Woodlands, Texas 77380.

    If you are currently a stockholder sharing an address with another stockholder and wish to receive only one copy of future Notices of Internet Availability of Proxy Materials or proxy materials for your household, please contact Broadridge Financial Solutions, Inc. at the above phone number.

    We do not know of any matters other than those stated above which are to be brought before the Annual Meeting. However, if any other matters should be properly presented for consideration and voting, it is the intention of the persons named in the proxy to vote on those matters in accordance with their judgment.

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Proxy Statement relating to adjusted gross margin, EBITDA and adjusted EBITDA.

Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes this information is useful because it isolates the impact that capitalized interest and purchase accounting adjustments have on gross margin. However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, 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.

The following table reconciles adjusted gross margin 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 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 net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization, (iv) capitalized interest charged to the cost of sales, (v) loss on extinguishment of debt, (vi) other income, net and (vii) adjustments resulting from the application of purchase accounting included in cost of sales. 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, our 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 a substitute 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. Some of these limitations are:

Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures 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 or adjusted EBITDA. EBITDA and adjusted EBITDA are not intended as alternatives to net income as indicators of our operating performance, as alternatives to any other measure of performance in conformity with GAAP or as alternatives to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA or adjusted EBITDA calculated using these measures.

The following table reconciles EBITDA and adjusted EBITDA to net income, which is the GAAP measure that our management believes to be most directly comparable (dollars in thousands):