Meritage Homes Corporation
10/30/2026 | Press release | Distributed by Public on 10/30/2026 14:32
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
| Management's Discussion and Analysis of Financial Condition and Results of Operations |
Overview and Outlook
The homebuilding sector continued to experience an increasingly challenging demand environment in the third quarter of 2026, due to rising interest rates and persistent geopolitical and macroeconomic uncertainty. While U.S demographics continue to support housing demand from the millennial, Gen Z and baby boomer generations experiencing life events that typically precede a housing change, these buyers are increasingly concerned about market uncertainty and personal financial security, which is reducing their urgency to commit to a near-term purchase. Our ability to offer financing incentives, including interest rate locks and buy-downs to improve monthly payment affordability, remains a key differentiator when compared to resale homes, as individual sellers are typically not able to provide such incentives. We believe that the current environment will remain challenging and will require higher incentive utilization and we will look to optimize every asset and prioritize liquidity until market conditions stabilize.
We believe we have several opportunities to minimize the impact of the increasing incentive environment. Our construction cycle times remained under 110 calendar days, below our historical normalized time of approximately 120 days, delivering carrying cost savings. Our all-spec strategy also minimizes variability and creates efficiencies through repeatability. Although land costs remain elevated following years of historically high land acquisition and development costs, our larger scale and purchasing power allow us to secure volume discounts from national vendors for our construction materials as the market has re-aligned its capacity needs, helping offset some of this pressure.
We believe that the execution of our all-spec strategy of affordable, move-in ready homes appropriately focuses on our key financial goals of home closing revenue and home closing gross margin preservation, controlling selling, and general and administrative costs, and maintaining sufficient liquidity.
Summary Company Results
Home closing volume of 3,187 homes in the three months ended September 30, 2026 was down 13.5% from 3,685 homes in the same prior year period. Lower closing volume combined with a 4.0% decrease in average sales price ("ASP") on closings resulted in $1.2 billion in home closing revenue, a 16.9% decrease from $1.4 billion in the three months ended September 30, 2025. The reduced ASP on home closings is primarily due to increased use and cost of financing incentives in third quarter of 2026, as well as geographic mix. Home closing gross profit was $202.6 million in the three months ended September 30, 2026 compared to $267.0 million in the comparable prior year period. Home closing gross margin in the three months ended September 30, 2026 was 17.4%, down 170 basis points compared to 19.1% in the prior year period. The decrease in home closing gross profit and margin was attributable to higher incentives and lot costs and lost leverage on lower home closing revenue, all of which were only partially offset by savings in direct costs, lower performance-based compensation expense and fewer impairment and deal termination charges in the third quarter of 2026. Financial services profit of $4.8 million in the three months ended September 30, 2026 was relatively flat compared to $4.5 million in the prior year period. Commissions and other sales costs of $82.4 million in the three months ended September 30, 2026 decreased $17.3 million due primarily to lower home closing revenue. General and administrative expenses of $45.2 million in the three months ended September 30, 2026 decreased $6.6 million from the same period of 2025, largely due to savings in performance-based compensation expense and intentional reductions in discretionary expenses. Earnings before income taxes for the three months ended September 30, 2026 of $84.8 million decreased $43.4 million year over year from $128.2 million in the same period of 2025. The effective income tax rate of 20.1% for the three months ended September 30, 2026 reflected acquired below-market transferable tax credits which led to the decrease from 22.6% in the comparable period of 2025. The decrease in year-over-year volume and profitability resulted in net earnings of $67.8 million in the three months ended September 30, 2026 versus $99.3 million in the three months ended September 30, 2025.
For the nine months ended September 30, 2026, home closing volume and ASP on closings decreased 12.4% and 4.2%, respectively, for a combined decrease in home closing revenue of 16.0%. Home closing gross margin of 17.8% declined 290 basis points year over year, for a $253.9 million decrease in home closing gross profit for the same reasons noted above. Year to date, commissions and other sales costs decreased $49.6 million from the comparable 2025 period due to the lower home closing revenue. General and administrative expenses for the nine months ended September 30, 2026 decreased $15.0 million year over due to lower performance-based compensation expense and intentional reduction in discretionary spending. Lower
home closing revenue, gross margin and profitability, and an effective tax rate of 23.1% led to net income of $213.7 million for the nine months ended September 30, 2026, compared to $369.0 million for the comparable 2025 period.
Home orders of 3,083 for the three months ended September 30, 2026 declined 15.2% from 3,636 home orders in the prior year quarter due to a 21.1% decrease in orders pace to 3.0 net homes per month, offset by a 6.5% increase in average active communities. Home order value for the three months ended September 30, 2026 of $1.2 billion decreased 16.7% year-over-year, due to lower order volume and a 1.7% decrease in ASP on orders caused by the same factors discussed previously. Our cancellation rate of 13% in the three months ended September 30, 2026 increased from 11% in the comparable 2025 period, reflecting the tougher selling environment.
For the nine months ended September 30, 2026, home orders and home order value decreased 9.7% and 12.5%, respectively, over the prior year and the cancellation rate of 12% rose from 10% in the comparable prior year period. We ended the third quarter of 2026 with 1,611 homes in backlog valued at $637.2 million, decreases of 5.2% and 4.9%, respectively, from September 30, 2025. The decrease in backlog units is due to lower order volume and high backlog conversion rates.
We ended the third quarter of 2026 with 348 active communities, up from 334 at September 30, 2025 and 336 at December 31, 2025. We purchased approximately 6,500 lots for $410.9 million, spent $601.4 million on land development, net of reimbursements, and started construction on 9,895 homes during the nine months ended September 30, 2026.
Company Positioning
We believe that our long-term focus on growth, our move-in ready homes with a 60-day closing ready commitment, and our partnership with external realtors create a differentiated strategy that has aided us in the highly competitive new home market.
Our strategy includes the following strategic initiatives:
•Embracing external realtor relationships, as we view realtors as a strategic partner who assists with sourcing homebuyers, particularly first-time homebuyers who view the realtor as a trusted advisor;
•Offering our customers affordable, move-in ready homes with a 60-day closing ready commitment, aligned with their expectations for traditional resale housing timelines;
•Delivering affordable homes through simplification of production processes and maintaining levels of spec inventory that are aligned with our strategy;
•Continuously improving the overall home buying experience through simplification and innovation;
•Offering energy-efficient homes that are cleaner and healthier than resale homes; and
•In the longer term, increase our mix of first-move up offerings, meeting market demand and increasing product diversification.
In addition to these strategic initiatives, we also remain committed to the following:
•Carefully managing our liquidity and maintaining a strong balance sheet. We ended the third quarter of 2026 with a 26.9% debt-to-capital ratio and an 18.9% net debt-to-capital ratio;
•Achieving or maintaining a top market position in all of our markets, and maintaining our status as a top national builder (based on homes closed in 2025);
•Balancing return of capital to our stockholders with internal growth goals, utilizing both dividend payments and share repurchases;
•Managing construction efficiencies and costs through national and regional vendor relationships with a focus on timely, quality construction and warranty management;
•Maintaining our home closing gross profit and managing costs by growing closing volume when and where possible, allowing us to better leverage our direct overhead;
•Targeting a strong, yet sustainable, orders pace through the use of consumer and market research to ensure that we build homes that offer our buyers their desired features and amenities; and
•Promoting a positive environment for our employees through our commitment to inclusion, culture, and belonging, and providing market-competitive benefits in order to develop and motivate our employees, minimize turnover and maximize recruitment efforts.
Critical Accounting Estimates
The critical accounting estimates that we deem to involve the most difficult, subjective or complex judgments include real estate valuation and cost of home closings and warranty reserves. There have been no significant changes to our critical accounting estimates during the nine months ended September 30, 2026 compared to those disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2025 Annual Report.
Home Closing Revenue, Home Orders and Order Backlog
The composition of our closings, home orders and backlog is constantly changing and is based on a changing mix of communities with various price points between periods as new projects open and existing projects wind down and close-out. Further, individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots (e.g. cul-de-sac, view lots, greenbelt lots). These variations affect the comparability between our home orders, closings and backlog due to the changing mix between periods. The tables on the following pages present operating and financial data that we consider most critical to managing our operations (dollars in thousands):
| Home Closing Revenue | Three Months Ended September 30, | Quarter over Quarter | ||||||||||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Dollars | $ | 1,162,352 | $ | 1,399,335 | $ | (236,983) | (16.9) | % | ||||||||||||||||||
| Homes closed | 3,187 | 3,685 | (498) | (13.5) | % | |||||||||||||||||||||
| Average sales price | $ | 364.7 | $ | 379.7 | $ | (15.0) | (4.0) | % | ||||||||||||||||||
| West Region | ||||||||||||||||||||||||||
| Dollars | $ | 341,836 | $ | 420,658 | $ | (78,822) | (18.7) | % | ||||||||||||||||||
| Homes closed | 710 | 883 | (173) | (19.6) | % | |||||||||||||||||||||
| Average sales price | $ | 481.5 | $ | 476.4 | $ | 5.1 | 1.1 | % | ||||||||||||||||||
| Central Region | ||||||||||||||||||||||||||
| Dollars | $ | 383,964 | $ | 443,086 | $ | (59,122) | (13.3) | % | ||||||||||||||||||
| Homes closed | 1,170 | 1,260 | (90) | (7.1) | % | |||||||||||||||||||||
| Average sales price | $ | 328.2 | $ | 351.7 | $ | (23.5) | (6.7) | % | ||||||||||||||||||
| East Region | ||||||||||||||||||||||||||
| Dollars | $ | 436,552 | $ | 535,591 | $ | (99,039) | (18.5) | % | ||||||||||||||||||
| Homes closed | 1,307 | 1,542 | (235) | (15.2) | % | |||||||||||||||||||||
| Average sales price | $ | 334.0 | $ | 347.3 | $ | (13.3) | (3.8) | % | ||||||||||||||||||
| Nine Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Dollars | $ | 3,658,085 | $ | 4,357,148 | $ | (699,063) | (16.0) | % | ||||||||||||||||||
| Homes closed | 9,879 | 11,271 | (1,392) | (12.4) | % | |||||||||||||||||||||
| Average sales price | $ | 370.3 | $ | 386.6 | $ | (16.3) | (4.2) | % | ||||||||||||||||||
| West Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,078,774 | $ | 1,449,499 | $ | (370,725) | (25.6) | % | ||||||||||||||||||
| Homes closed | 2,221 | 3,046 | (825) | (27.1) | % | |||||||||||||||||||||
| Average sales price | $ | 485.7 | $ | 475.9 | $ | 9.8 | 2.1 | % | ||||||||||||||||||
| Central Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,206,990 | $ | 1,336,048 | $ | (129,058) | (9.7) | % | ||||||||||||||||||
| Homes closed | 3,586 | 3,821 | (235) | (6.2) | % | |||||||||||||||||||||
| Average sales price | $ | 336.6 | $ | 349.7 | $ | (13.1) | (3.7) | % | ||||||||||||||||||
| East Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,372,321 | $ | 1,571,601 | $ | (199,280) | (12.7) | % | ||||||||||||||||||
| Homes closed | 4,072 | 4,404 | (332) | (7.5) | % | |||||||||||||||||||||
| Average sales price | $ | 337.0 | $ | 356.9 | $ | (19.9) | (5.6) | % | ||||||||||||||||||
| Home Orders (1) | Three Months Ended September 30, | Quarter over Quarter | ||||||||||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Dollars | $ | 1,179,266 | $ | 1,415,089 | $ | (235,823) | (16.7) | % | ||||||||||||||||||
| Homes ordered | 3,083 | 3,636 | (553) | (15.2) | % | |||||||||||||||||||||
| Average sales price | $ | 382.5 | $ | 389.2 | $ | (6.7) | (1.7) | % | ||||||||||||||||||
| West Region | ||||||||||||||||||||||||||
| Dollars | $ | 352,026 | $ | 426,509 | $ | (74,483) | (17.5) | % | ||||||||||||||||||
| Homes ordered | 706 | 867 | (161) | (18.6) | % | |||||||||||||||||||||
| Average sales price | $ | 498.6 | $ | 491.9 | $ | 6.7 | 1.4 | % | ||||||||||||||||||
| Central Region | ||||||||||||||||||||||||||
| Dollars | $ | 396,999 | $ | 468,690 | $ | (71,691) | (15.3) | % | ||||||||||||||||||
| Homes ordered | 1,132 | 1,289 | (157) | (12.2) | % | |||||||||||||||||||||
| Average sales price | $ | 350.7 | $ | 363.6 | $ | (12.9) | (3.5) | % | ||||||||||||||||||
| East Region | ||||||||||||||||||||||||||
| Dollars | $ | 430,241 | $ | 519,890 | $ | (89,649) | (17.2) | % | ||||||||||||||||||
| Homes ordered | 1,245 | 1,480 | (235) | (15.9) | % | |||||||||||||||||||||
| Average sales price | $ | 345.6 | $ | 351.3 | $ | (5.7) | (1.6) | % | ||||||||||||||||||
| Nine Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Dollars | $ | 3,956,044 | $ | 4,520,704 | $ | (564,660) | (12.5) | % | ||||||||||||||||||
| Homes ordered | 10,322 | 11,426 | (1,104) | (9.7) | % | |||||||||||||||||||||
| Average sales price | $ | 383.3 | $ | 395.7 | $ | (12.4) | (3.1) | % | ||||||||||||||||||
| West Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,187,516 | $ | 1,450,859 | $ | (263,343) | (18.2) | % | ||||||||||||||||||
| Homes ordered | 2,366 | 2,961 | (595) | (20.1) | % | |||||||||||||||||||||
| Average sales price | $ | 501.9 | $ | 490.0 | $ | 11.9 | 2.4 | % | ||||||||||||||||||
| Central Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,294,180 | $ | 1,433,125 | $ | (138,945) | (9.7) | % | ||||||||||||||||||
| Homes ordered | 3,707 | 3,952 | (245) | (6.2) | % | |||||||||||||||||||||
| Average sales price | $ | 349.1 | $ | 362.6 | $ | (13.5) | (3.7) | % | ||||||||||||||||||
| East Region | ||||||||||||||||||||||||||
| Dollars | $ | 1,474,348 | $ | 1,636,720 | $ | (162,372) | (9.9) | % | ||||||||||||||||||
| Homes ordered | 4,249 | 4,513 | (264) | (5.8) | % | |||||||||||||||||||||
| Average sales price | $ | 347.0 | $ | 362.7 | $ | (15.7) | (4.3) | % | ||||||||||||||||||
(1)Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer's existing home or a mortgage pre-approval as a sales contract until the contingency is removed.
|
Order Backlog (1)
|
At September 30, | Quarter over Quarter | ||||||||||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Dollars | $ | 637,167 | $ | 670,007 | $ | (32,840) | (4.9) | % | ||||||||||||||||||
| Homes in backlog | 1,611 | 1,699 | (88) | (5.2) | % | |||||||||||||||||||||
| Average sales price | $ | 395.5 | $ | 394.4 | $ | 1.1 | 0.3 | % | ||||||||||||||||||
| West Region | ||||||||||||||||||||||||||
| Dollars | $ | 170,668 | $ | 176,493 | $ | (5,825) | (3.3) | % | ||||||||||||||||||
| Homes in backlog | 330 | 350 | (20) | (5.7) | % | |||||||||||||||||||||
| Average sales price | $ | 517.2 | $ | 504.3 | $ | 12.9 | 2.6 | % | ||||||||||||||||||
| Central Region | ||||||||||||||||||||||||||
| Dollars | $ | 217,191 | $ | 232,018 | $ | (14,827) | (6.4) | % | ||||||||||||||||||
| Homes in backlog | 578 | 612 | (34) | (5.6) | % | |||||||||||||||||||||
| Average sales price | $ | 375.8 | $ | 379.1 | $ | (3.3) | (0.9) | % | ||||||||||||||||||
| East Region | ||||||||||||||||||||||||||
| Dollars | $ | 249,308 | $ | 261,496 | $ | (12,188) | (4.7) | % | ||||||||||||||||||
| Homes in backlog | 703 | 737 | (34) | (4.6) | % | |||||||||||||||||||||
| Average sales price | $ | 354.6 | $ | 354.8 | $ | (0.2) | (0.1) | % | ||||||||||||||||||
(1)Our backlog represents net home orders that have not closed.
Active Communities and Cancellation Rates
| Active Communities | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Ending | Average | Ending | Average | Ending | Average | Ending | Average | ||||||||||||||||||||||||||||||||||||||||
| Total | 348 | 344.0 | 334 | 323.0 | 348 | 343.0 | 334 | 307.5 | |||||||||||||||||||||||||||||||||||||||
| West Region | 92 | 90.5 | 85 | 85.0 | 92 | 88.2 | 85 | 86.7 | |||||||||||||||||||||||||||||||||||||||
| Central Region | 104 | 101.5 | 97 | 91.0 | 104 | 105.6 | 97 | 88.6 | |||||||||||||||||||||||||||||||||||||||
| East Region | 152 | 152.0 | 152 | 147.0 | 152 | 149.2 | 152 | 132.2 | |||||||||||||||||||||||||||||||||||||||
|
Cancellation Rates (2)
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Total | 13 | % | 11 | % | 12 | % | 10 | % | ||||||||||||||||||
| West Region | 12 | % | 9 | % | 9 | % | 8 | % | ||||||||||||||||||
| Central Region | 13 | % | 10 | % | 13 | % | 10 | % | ||||||||||||||||||
| East Region | 13 | % | 12 | % | 13 | % | 10 | % | ||||||||||||||||||
(2)Cancellation rates are computed as the number of canceled units for the period divided by the gross sales units for the same period.
Operating Results
Companywide. In the three months ended September 30, 2026, we closed 3,187 homes, 13.5% lower than 3,685 closings in the three months ended September 30, 2025. The decrease in home closing volume combined with a 4.0% lower ASP on closings resulted in home closing revenue of $1.2 billion for the three months ended September 30, 2026, 16.9% lower than the same period in 2025. Home order volume in the three months ended September 30, 2026 of 3,083 homes declined 15.2% from 3,636 homes in the three months ended September 30, 2025, due to a 21.1% decrease in orders pace to 3.0 net homes per month in the three months ended September 30, 2026 which was partially offset by a 6.5% increase in average active communities. Our orders pace and demand have been adversely impacted by deteriorating housing affordability and weak consumer confidence that has been exacerbated by economic and geo-political events, and we are intentionally focused on preserving margins rather than pursuing a higher orders pace. Home order value of $1.2 billion for the three months ended September 30, 2026 declined 16.7% from $1.4 billion in the prior year period, due to the lower home order volume combined with 1.7% lower ASP on orders. The decline in ASP on both closings and orders was caused by an increase in utilization and cost of financing incentives and shift in geographic mix. Order cancellations of 13% for the three months ended September 30, 2026 were up from 11% in the comparable 2025 period, reflective of the challenging selling environment.
For the nine months ended September 30, 2026, home closing volume of 9,879 closings was 12.4% lower than the prior year period, and ASP on closings decreased 4.2%, generating home closing revenue of $3.7 billion, a 16.0% decline from $4.4 billion in the prior year period. Home order volume of 10,322 for the nine months ended September 30, 2026 was down 9.7% over the prior year period, which combined with a 3.1% lower ASP on orders led to a 12.5% decrease in home order value of $4.0 billion. The decline in ASP on both closings and orders was caused by an increase in utilization and cost of financing incentives and a shift in geographic mix. We ended the third quarter of 2026 with 348 actively selling communities, up from 334 at September 30, 2025. The third quarter of 2026 ended with 1,611 homes in backlog valued at $637.2 million, compared to 1,699 units valued at $670.0 million at September 30, 2025. The year over year decrease in backlog homes is due to lower order volume and high backlog conversion rates.
West. The West Region generated $341.8 million in home closing revenue in the three months ended September 30, 2026, an 18.7% decrease compared to $420.7 million in the prior year period. The lower revenue was due almost entirely to 19.6% lower closing volume of 710 homes in the three months ended September 30, 2026, compared to 883 homes in the prior year, as ASP on closings was relatively flat year over year. Home orders for the three months ended September 30, 2026 of 706 were down 18.6% from 867 in the prior year period, due largely to the 23.5% decrease in orders pace, which was partially offset by a 6.5% increase in average active communities. The orders pace of 2.6 homes per month in the three months ended September 30, 2026 is reflective of a tougher selling environment in most of the West Region's markets, and compares to 3.4 homes per month in the same period of the prior year. Home order value of $352.0 million for the three months ended September 30, 2026 decreased 17.5% due entirely to the lower order volume, as ASP on orders was relatively flat year over year. The West Region had the lowest cancellation rate in the Company, at 12% for the three months ended September 30, 2026, up from 9% in the prior year period.
For the nine months ended September 30, 2026, home closing revenue of $1.1 billion decreased 25.6% due to a 27.1% decrease in home closing volume offset in part by a 2.1% higher ASP on closings. Home order volume in the West Region of 2,366 decreased 20.1% due to a 21.1% decrease in orders pace to 3.0 net homes per month, as the number of average actively selling communities was fairly consistent year over year. Home order value of $1.2 billion was down 18.2% as the lower volume was partially offset by a 2.4% increase in ASP. The higher ASP for both closings and orders was due to geographic mix within the region. The year-to-date cancellation rate of 9% was up slightly from 8% in the prior year period. The West Region ended the third quarter of 2026 with 330 homes in backlog valued at $170.7 million, compared to 350 units valued at $176.5 million at September 30, 2025. The 5.7% decrease in backlog units is the result of entering the third quarter of 2026 with fewer homes in backlog combined with fewer orders in the third quarter of 2026.
Central. The Central Region closed 1,170 homes in the three months ended September 30, 2026, down 7.1% from 1,260 in the prior year period. Home closing revenue of $384.0 million in the three months ended September 30, 2026 was 13.3% lower than $443.1 million in the prior year period due to the combined impact of lower home closing volume and a 6.7% decrease in ASP on closings. The decline in ASP on closings is due to increased utilization and cost of financing incentives and geographic mix within the region. In addition, closing ASP in the third quarter of 2026 was negatively impacted by closings with institutional build-for-rent partners in a few select markets where we took a discounted price to guarantee an exit and quick return of capital because near-term improvement was unlikely. Home order volume decreased 12.2% to 1,132 homes in the three months ended September 30, 2026 due to a 21.3% decline in orders pace to 3.7 net homes per month, partially offset by an 11.5% increase in average active community count. The decrease in orders volume combined with a 3.5% lower ASP on orders led to home order value of $397.0 million in the three months ended September 30, 2026, 15.3% lower than the prior
year period. The Central Region cancellation rate of 13% in the three months ended September 30, 2026 was up from 10% in the prior year period.
The Central Region generated home closing revenue of $1.2 billion for the nine months ended September 30, 2026, 9.7% lower than the prior year due to a 6.2% decline in closing volume of 3,586 homes and a 3.7% decrease in ASP on closings. Year-to-date ASP on closings decreased due to geographic mix within the region and higher usage and cost of financing incentives. Home order volume for the nine months ended September 30, 2026 of 3,707 homes decreased 6.2%, due to a 22.0% decrease in orders pace of 3.9 net homes per month, offset by a 19.2% increase in average active communities. Home order value was $1.3 billion for the nine months ended September 30, 2026, down 9.7% from $1.4 billion, in the prior year period, due to the lower order volume and a 3.7% reduction in ASP on orders. The year-to-date cancellation rate of 13% was up from 10% in the prior year period. The Central Region ended the third quarter of 2026 with 578 units in backlog, down 5.6% from prior year due to the lower order volume in the third quarter of 2026, which was offset by a lower backlog conversion rate of 190% in the third quarter of 2026, compared to 216% in the same prior year period. The lower backlog units combined with a relatively flat ASP led to backlog value of $217.2 million as of September 30, 2025, down 6.4% from the prior year period.
East. During the three months ended September 30, 2026, the East Region closed 1,307 homes, generating $436.6 million in home closing revenue, down 15.2% and 18.5%, respectively from 1,542 closings and $535.6 million in the comparable prior year period. ASP on home closings for the three months ended September 30, 2026 was 3.8% lower than the prior year period due to geographic mix within the region and increased usage and cost of financing incentives. Home order volume of 1,245 homes for the three months ended September 30, 2026 declined 15.9%, due to a lower orders pace of 2.7 net homes per month, as compared to 3.4 net homes per month in the prior year period, which was partially offset by a 3.4% higher average active community count. Home order value of $430.2 million in the three months ended September 30, 2026 decreased 17.2% from $519.9 million in the prior year period due to the lower home order volume and a 1.6% decrease in ASP on orders year over year, as noted previously. The East Region cancellation rate of 13% in the three months ended September 30, 2026 was up slightly from 12% in the same prior year period.
For the nine months ended September 30, 2026, the East Region had home closing volume of 4,072 homes for $1.4 billion in home closing revenue. The 7.5% lower order volume combined with a 5.6% decrease in ASP on closings resulted in a 12.7% decrease in home closing revenue compared to the 2025 period. The lower ASP on closings is due to increased usage and cost of financing incentives. Home order volume of 4,249 homes for the nine months ended September 30, 2026 decreased 5.8% from the prior year, due to a 15.8% lower orders pace of 3.2 net homes per month, which was partially offset by a 12.9% increase in average active communities. The higher average active community count reflects continued growth in our newer markets in Alabama and Mississippi. The lower order volume combined with 4.3% decrease in ASP on orders led to a 9.9% decrease in home order value of $1.5 billion. ASP on both closings and orders declined due to increased utilization and cost of financing incentives. The East Region's year-to-date cancellation rate of 13% increased from 10% in the prior year period. The East Region ended the third quarter of 2026 with 703 homes in backlog valued at $249.3 million, down 4.6% and 4.7%, respectively, due to having lower orders in the third quarter of 2026 and a high backlog conversion rate.
Land Closing Revenue and Gross Profit (in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Land closing revenue | $ | 6,081 | $ | 16,068 | $ | 28,162 | $ | 39,766 | |||||||||||||||
| Land closing gross profit | $ | 124 | $ | 192 | $ | 379 | $ | 2,638 | |||||||||||||||
From time to time, we may sell certain lots or land parcels to other homebuilders, developers or investors if we feel the sale will provide a greater economic benefit to us than continuing home construction or where we are looking to diversify our land positions in a specific geography or divest of assets that no longer align with our strategy. Therefore, the timing of land closings is not typically consistent between periods.
Other Operating Information (dollars in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | ||||||||||||||||||||||||||||||||||||||||
|
Home Closing Gross Profit (1)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 202,606 | 17.4 | % | $ | 266,957 | 19.1 | % | $ | 650,017 | 17.8 | % | $ | 903,935 | 20.7 | % | |||||||||||||||||||||||||||||||
| Add: Real estate-related impairments | 6,639 | 8,693 | 12,648 | 8,693 | |||||||||||||||||||||||||||||||||||||||||||
|
Add: Write-off of terminated land deals (3)
|
(643) | 5,799 | 1,006 | 11,437 | |||||||||||||||||||||||||||||||||||||||||||
|
Adjusted Home Closing Gross Profit (2)
|
$ | 208,602 | 17.9 | % | $ | 281,449 | 20.1 | % | $ | 663,671 | 18.1 | % | $ | 924,065 | 21.2 | % | |||||||||||||||||||||||||||||||
| West | $ | 61,411 | 18.0 | % | $ | 82,447 | 19.6 | % | $ | 201,251 | 18.7 | % | $ | 301,880 | 20.8 | % | |||||||||||||||||||||||||||||||
| Add: Real estate-related impairments | 1,735 | 543 | 1,735 | 543 | |||||||||||||||||||||||||||||||||||||||||||
| Add: Write-off of terminated land deals | 30 | 2,544 | 256 | 3,667 | |||||||||||||||||||||||||||||||||||||||||||
|
Adjusted Home Closing Gross Profit (2)
|
$ | 63,176 | 18.5 | % | $ | 85,534 | 20.3 | % | $ | 203,242 | 18.8 | % | $ | 306,090 | 21.1 | % | |||||||||||||||||||||||||||||||
| Central | $ | 67,771 | 17.7 | % | $ | 94,816 | 21.4 | % | $ | 221,721 | 18.4 | % | $ | 292,132 | 21.9 | % | |||||||||||||||||||||||||||||||
| Add: Real estate-related impairments | 3,973 | 1,243 | 7,437 | 1,243 | |||||||||||||||||||||||||||||||||||||||||||
| Add: Write-off of terminated land deals | 7 | 104 | 499 | 663 | |||||||||||||||||||||||||||||||||||||||||||
|
Adjusted Home Closing Gross Profit (2)
|
$ | 71,751 | 18.7 | % | $ | 96,163 | 21.7 | % | $ | 229,657 | 19.0 | % | $ | 294,038 | 22.0 | % | |||||||||||||||||||||||||||||||
| East | $ | 73,424 | 16.8 | % | $ | 89,694 | 16.7 | % | $ | 227,045 | 16.5 | % | $ | 309,923 | 19.7 | % | |||||||||||||||||||||||||||||||
| Add: Real estate-related impairments | 931 | 6,907 | 3,476 | 6,907 | |||||||||||||||||||||||||||||||||||||||||||
|
Add: Write-off of terminated land deals (3)
|
(680) | 3,151 | 251 | 7,107 | |||||||||||||||||||||||||||||||||||||||||||
|
Adjusted Home Closing Gross Profit (2)
|
$ | 73,675 | 16.9 | % | $ | 99,752 | 18.6 | % | $ | 230,772 | 16.8 | % | $ | 323,937 | 20.6 | % | |||||||||||||||||||||||||||||||
(1)Home closing gross profit represents home closing revenue less cost of home closings, including impairments, if any. Cost of home closings includes land and associated development costs, direct home construction costs, an allocation of common community costs (such as architectural, legal and zoning costs), interest, sales tax, impact fees, warranty, construction overhead and closing costs.
(2)Adjusted Home closing gross profit is a non-GAAP measure and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operating results and may be helpful in comparing the Company with other companies in the homebuilding and other industries to the extent they provide similar information.
(3)In the third quarter of 2026, we recovered deposits on certain terminated deals that were previously written-off, resulting in a net recovery versus charge.
Companywide. Home closing gross profit for the three months ended September 30, 2026 was $202.6 million, with a home closing gross margin of 17.4% down 170 basis points from 19.1% in the three months ended September 30, 2025. For the nine months ended September 30, 2026, home closing gross profit was $650.0 million, or 17.8% gross margin, down 290 basis points from 20.7% in the nine months ended September 30, 2025. The margin decline for both the three and nine months ended September 30, 2026 was due to the combined impact of higher incentives, reduced leverage of fixed costs on lower home closing revenue and higher lot costs, all of which were partially offset by savings in direct costs and lower performance-based compensation expense. Excluding real estate-related impairments and charges related to terminated land contracts, adjusted home closing gross margin was 17.9% and 20.1% for the three months ended September 30, 2026 and 2025, respectively, and was 18.1% and 21.2% for the nine months ended September 30, 2026 and 2025, respectively.
West. The West Region had home closing gross margin of 18.0% for the three months ended September 30, 2026, down 160 basis points from 19.6% in the three months ended September 30, 2025. For the nine months ended September 30, 2026,
the West Region home closing gross margin of 18.7% declined 210 basis points from 20.8% in the same prior year period. The decline in home closing gross margin for both the three and nine month periods ended September 30, 2026 was due to higher incentives and lot costs and lost leverage on lower home closing revenue, which were partially offset by savings in direct costs and lower performance-based compensation expense. Excluding impairment charges and land deal terminations, adjusted home closing gross margin was 18.5% and 20.3% for the three months ended September 30, 2026 and 2025, respectively, and was 18.8% and 21.1% for the nine months ended September 30, 2026 and 2025, respectively.
Central. The Central Region home closing gross margin of 17.7% for the three months ended September 30, 2026 decreased 370 basis points from 21.4% in the prior year period due to higher incentives and reduced leverage on lower home closing revenue, partially offset by lower performance-based compensation expense and savings in direct costs. Real estate-related impairments negatively impacted home closing gross margin by 100 basis points for the three months ended September 30, 2026. Excluding these charges, adjusted home closing gross margin was 18.7% and 21.7% for the three months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026, the Central Region home closing gross margin of 18.4% declined 350 basis points from 21.9%, due to less leverage on lower home closing revenue and higher lot costs, offset by savings in direct costs and performance-based compensation expense. Excluding real estate-related impairments and contract termination charges for the nine months ended September 30, 2026 and 2025, adjusted home closing gross margin was 19.0% and 22.0%, respectively.
East. The East Region home closing gross margin of 16.8% for the three months ended September 30, 2026 was relatively flat with 16.7% in the same prior year period, due to increased incentives and lost leverage on lower home closing revenue in the third quarter of 2026 as compared to the prior period. Also impacting home closing gross margin were impairments of $0.9 million in third quarter of 2026 compared to $6.9 million in the third quarter of 2025. For the nine months ended September 30, 2026, the East Region home closing gross margin of 16.5% decreased 320 basis points from 19.7% in the same period of 2025, due to lost leverage on lower home closing revenue and higher lot costs, which more than offset the savings in direct costs and lower performance-based compensation expense. Excluding real estate-related impairments and write-off of terminated land deals, adjusted home closing gross margin was 16.9% and 18.6% for the three months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025, adjusted home closing gross margin excluding impairments and terminated land deals was 16.8% and 20.6%, respectively.
Financial Services Profit (in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Financial services profit | $ | 4,759 | $ | 4,480 | $ | 13,579 | $ | 13,654 | |||||||||||||||
Financial services profit represents the net profit of our financial services operations, including the operating profit generated by our wholly-owned title and insurance companies, Carefree Title and Meritage Insurance, respectively, as well as our portion of earnings from our mortgage joint ventures. Results from financial services are closely tied to the number of home closings in each of our markets where we have financial services operations. Despite lower home closing volume, financial services profit for the three and nine months ended September 30, 2026 was relatively flat compared to the same prior year periods due to fewer charges in the current year related to expired interest rate forward commitments.
Selling, General and Administrative Expenses and Other Expenses (dollars in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Commissions and other sales costs | $ | (82,441) | $ | (99,722) | $ | (253,718) | $ | (303,272) | |||||||||||||||
| Percent of Home closing revenue | 7.1 | % | 7.1 | % | 6.9 | % | 7.0 | % | |||||||||||||||
| General and administrative expenses | $ | (45,170) | $ | (51,787) | $ | (148,952) | $ | (163,967) | |||||||||||||||
| Percent of Home closing revenue | 3.9 | % | 3.7 | % | 4.1 | % | 3.8 | % | |||||||||||||||
| Interest expense | $ | (1,352) | $ | - | $ | (4,126) | $ | - | |||||||||||||||
| Other income, net | $ | 6,289 | $ | 8,128 | $ | 20,724 | $ | 28,479 | |||||||||||||||
| Provision for income taxes | $ | (17,031) | $ | (28,951) | $ | (64,180) | $ | (112,485) | |||||||||||||||
Commissions and Other Sales Costs. Commissions and other sales costs are comprised of internal and external commissions and related sales and marketing expenses such as advertising and sales office and completed spec home inventory costs. For the three months ended September 30, 2026, these costs decreased $17.3 million, to $82.4 million, and for the nine months ended September 30, 2026, these costs decreased $49.6 million, to $253.7 million. The decreased spend for both
periods is due to lower commissions paid on lower home closing revenue and lower maintenance and utility costs associated with having less spec homes in inventory. As a percentage of home closing revenue, commissions and other sales costs were relatively consistent across all periods.
General and Administrative Expenses. General and administrative expenses represent corporate and divisional overhead expenses such as salaries and bonuses, occupancy, insurance and travel expenses. For the three months ended September 30, 2026, general and administrative expenses of $45.2 million decreased $6.6 million, and for the nine months ended September 30, 2026, decreased $15.0 million to $149.0 million. The lower spend for both the three and nine months ended September 30, 2026 is due to lower performance-based compensation expense and intentional reductions in discretionary spend, partially offset by increased spend on technology. General and administrative expenses as a percentage of home closing revenue were 3.9% and 4.1% for the three and nine months ended September 30, 2026, respectively, up from 3.7% and 3.8% in the same prior year periods, due to reduced leverage of fixed costs on lower home closing revenue.
Interest Expense. Interest expense is comprised of interest incurred, but not capitalized, on our senior and convertible senior notes and loans payable and other borrowings, including our Credit Facility. We recognized interest expense of $1.4 million and $4.1 million for the three and nine months ended September 30, 2026, respectively. There was no interest expense in the same periods of 2025 as all interest incurred was capitalized to qualifying assets.
Other Income, Net. Other income, net, primarily consists of (i) sublease income, (ii) interest earned on our cash and cash equivalents, (iii) payments and awards related to legal settlements and (iv) our portion of pre-tax income or loss from non-financial services joint ventures. Other income, net was $6.3 million and $8.1 million for the three months ended September 30, 2026 and 2025, respectively, and decreased primarily due to less interest income earned on lower cash balances. Other income, net was $20.7 million and $28.5 million for the nine months ended September 30, 2026 and 2025, respectively, and decreased due to less interest income earned on lower cash balances as well as a favorable legal settlement recognized in the prior year period.
Income Taxes. Our effective tax rate was 20.1% and 22.6% for the three months ended September 30, 2026 and 2025, respectively, and was 23.1% and 23.4% for the nine months ended September 30, 2026 and 2025, respectively. The rate for the three months ended September 30, 2026 reflected acquired below-market transferable clean fuel production tax credits.
Liquidity and Capital Resources
Overview
We have historically generated cash and funded our operations primarily from cash flows from operating activities. Additional sources of funds may include additional debt or equity financing and borrowing capacity under our Credit Facility. We exercise strict controls and believe we have a prudent strategy for Company-wide cash management, including those related to cash outlays for land acquisition and development and spec home construction. Our principal uses of cash include acquisition and development of land and lots, home construction, operating expenses, share repurchases and the payment of interest, routine liabilities and dividends. We may also opportunistically repurchase our senior notes.
Cash flows for each of our communities depend on their stage of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, zoning plat and other approvals, community and lot development, and construction of model homes, roads, utilities, landscape and other amenities. Because these costs are a component of our real estate inventory and are not recognized in our income statement until a home closes, we incur significant cash outlays prior to recognition of earnings. In the later stages of a community, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. We strive to align our capital allocation and cash outlays with current market conditions. In times of community count growth, we incur significant outlays of cash through the land purchase, development and community opening stages whereas in in times of community count stability, these cash outlays are incurred in a more even-flow cadence with cash inflows from actively selling communities that are contributing closing volume and home closing revenue. Conversely, in a down turn environment, cash outlays for land and community count growth may be scaled back to preserve liquidity and we may curtail community count.
At September 30, 2026, we had $677.5 million of cash and cash equivalents and $896.7 million available under the Credit Facility, thereby providing approximately $1.6 billion of total available capacity.
Short-term Liquidity and Capital Resources
Over the course of the next twelve months, we expect that our primary demand for funds will be for the construction of homes, as well as acquisition and development of both new and existing lots, operating expenses, including general and administrative expenses, interest and dividend payments and share repurchases. Although we don't anticipate any early redemptions in the near term, we may opportunistically retire or redeem a portion of our senior notes. We expect to meet these short-term liquidity requirements primarily through our cash and cash equivalents on hand and the net cash flows provided by our operations.
Between our cash and cash equivalents on hand combined with the availability of liquidity from our Credit Facility, we believe that we currently have sufficient liquidity. Nevertheless, in the future, we may seek additional capital to strengthen our liquidity position, enable us to acquire additional land inventory in anticipation of improving market conditions, and/or strengthen our long-term capital structure.
Long-term Liquidity and Capital Resources
Beyond the next twelve months, our principal demands for funds will be for the construction of homes, land acquisition and development activities needed to maintain our lot supply and active community count, payments of principal and interest on our senior and convertible senior notes as they become due or mature, dividend payments and share repurchases. We expect our existing and future generated cash will be adequate to fund our ongoing operating activities as well as provide capital for investment in future land purchases and related development activities. To the extent the sources of capital described above are insufficient to meet our long-term cash needs, we may also conduct additional public offerings of our securities, refinance or secure new debt or dispose of certain assets to fund our operating activities. There can be no assurances that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing stockholders or increase our interest costs.
Material Cash Requirements
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact both short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on our unaudited consolidated balance sheets as of September 30, 2026, while others are considered future commitments for materials or services not yet provided. Our contractual obligations primarily consist of principal and interest payments on our senior and convertible senior notes, loans payable and other borrowings, including our Credit Facility, letters of credit and surety bonds and operating leases. We have no senior notes or convertible senior notes maturing until 2027. We also have requirements for certain short-term lease commitments, funding working capital needs of our existing unconsolidated joint ventures and other purchase obligations in the normal course of business. Other material cash requirements include land acquisition and development costs, home construction costs and operating expenses, including our selling, general and administrative expenses, as previously discussed. We plan to fund these commitments primarily with cash flows generated by operations, but may also utilize additional debt or equity financing and borrowing capacity under our Credit Facility. Except for specific performance land purchase contracts, our maximum exposure to loss on our purchase and option agreements is generally limited to non-refundable deposits and capitalized or committed pre-acquisition costs.
For information about our loans payable and other borrowings, including our Credit Facility and senior and convertible senior notes, reference is made to Notes 5 and 6 in the notes to unaudited consolidated financial statements included in this report and are incorporated by reference herein. For information about our lease obligations, reference is made to Note 4 - Leases in the consolidated financial statements included in our Annual Report.
Reference is made to Notes 1, 3, 4, and 15 in the notes to unaudited consolidated financial statements included in this report and are incorporated by reference herein. These Notes discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items. In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in connection with the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be obligated, if any.
We do not engage in commodity trading or other similar activities. We had no derivative financial instruments that required derivative accounting under ASC 815-10, Derivatives and Hedging, at September 30, 2026 or December 31, 2025.
Operating Cash Flow Activities
During the nine months ended September 30, 2026, net cash provided by operating activities totaled $259.5 million, and for the nine months ended September 30, 2025, net cash used in operating activities totaled $125.4 million. Net cash provided by operating activities for the nine months ended September 30, 2026 consisted largely of cash generated from net earnings of $213.7 million and a $58.7 million decrease in real estate. Net cash used in operating activities for the nine months ended September 30, 2025 consisted primarily of a $413.2 million increase in real estate, offset in part by cash generated from net earnings of $369.0 million.
Investing Cash Flow Activities
During the nine months ended September 30, 2026 and 2025, net cash used in investing activities totaled $34.6 million and $41.0 million, respectively. Cash used in investing activities in both periods was mainly attributable to investments in unconsolidated entities and purchases of property and equipment.
Financing Cash Flow Activities
During the nine months ended September 30, 2026, net cash used in financing activities totaled $322.6 million, consisting of $285.0 million of share repurchases and $94.2 million of dividends paid, offset in part by $59.9 million in proceeds from liabilities related to consolidated real estate not owned. During the nine months ended September 30, 2025, net cash provided by financing activities of $243.8 million primarily reflects the net proceeds of $492.1 million from the issuance of our 5.650% Senior Notes due 2035, offset in part by $145.0 million of share repurchases and $91.8 million of dividends paid. See 'Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds' for more information about our authorized share repurchase program.
We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. Debt-to-capital and net debt-to-capital are calculated as follows (dollars in thousands):
| As of | ||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||
| Senior and convertible senior notes, net and loans payable and other borrowings | $ | 1,851,752 | $ | 1,829,054 | ||||||||||
| Stockholders' equity | 5,044,358 | 5,195,643 | ||||||||||||
| Total capital | $ | 6,896,110 | $ | 7,024,697 | ||||||||||
|
Debt-to-capital (1)
|
26.9 | % | 26.0 | % | ||||||||||
| Senior and convertible senior notes, net, and loans payable and other borrowings | $ | 1,851,752 | $ | 1,829,054 | ||||||||||
| Less: cash and cash equivalents | (677,498) | (775,157) | ||||||||||||
| Net debt | $ | 1,174,254 | $ | 1,053,897 | ||||||||||
| Stockholders' equity | 5,044,358 | 5,195,643 | ||||||||||||
| Total net capital | $ | 6,218,612 | $ | 6,249,540 | ||||||||||
|
Net debt-to-capital (2)
|
18.9 | % | 16.9 | % | ||||||||||
(1)Debt-to-capital is computed as senior and convertible senior notes, net and loans payable and other borrowings divided by the aggregate of total senior and convertible senior notes, net and loans payable and other borrowings and stockholders' equity.
(2)Net debt-to-capital is considered a non-GAAP financial measure, and is computed as net debt divided by the aggregate of net debt and stockholders' equity. Net debt is comprised of total senior and convertible senior notes, net and loans payable and other borrowings, less cash and cash equivalents. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing.
Dividends
During the three months ended September 30, 2026 and 2025, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $0.48 and $0.43 per share, respectively. Quarterly dividends paid during the nine months ended September 30, 2026 and 2025, totaled $1.44 and $1.29 per share, respectively.
Credit Facility Covenants
Borrowings under the Credit Facility are unsecured, but availability is subject to, among other things, a borrowing base. The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $3.5 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%. We were in compliance with all Credit Facility covenants as of September 30, 2026. Our actual financial covenant calculations as of September 30, 2026 are reflected in the table below.
| Financial Covenant (dollars in thousands): | Covenant Requirement | Actual | |||||||||
| Minimum Tangible Net Worth | > $3,610,498 | $4,995,489 | |||||||||
| Leverage Ratio | < 60% | 17.1% | |||||||||
| Investments other than defined permitted investments | < $1,523,647 | $64,225 | |||||||||
Seasonality
Historically, we have experienced seasonal variations in our quarterly operating results and capital requirements. We typically take orders for more homes in the first half of the year than in the second half, which has created additional working capital requirements in the first and second quarters to build our inventories to satisfy seasonally higher demand associated with our 60-day closing ready commitment. While we expect the seasonal orders pattern to continue over the long term, a higher backlog conversion rate and our all-spec strategy may shift the timing of home closings and capital requirements to build our inventories to earlier in the year. Additionally, seasonality may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.
Recent Accounting Pronouncements
See Note 1 to our unaudited consolidated financial statements included in this report for discussion of recent accounting pronouncements.
Meritage Homes Corporation published this content on October 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 30, 2026 at 20:32 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]