LGI Homes Inc.

11/03/2026 | Press release | Distributed by Public on 11/03/2026 15:31

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of this Management's Discussion and Analysis of Financial Condition and Results of Operations, references to "we," "our," "us" or similar terms refer to LGI Homes, Inc. and its subsidiaries.
Business Overview
Our management team has been in the residential land development business since the mid-1990s. Since commencing home building operations in 2003, we have constructed and closed over 80,000 homes.
We are engaged in the design, construction and sale of new homes in the following markets:
West Northwest Central Midwest Florida Southeast Mid-Atlantic
Arizona Washington Central Texas Minnesota Central Florida Georgia Maryland
New Mexico Oregon Dallas/Ft Worth East Florida North Carolina Pennsylvania
Nevada Colorado Houston West Florida South Carolina Virginia
Northern California Oklahoma Alabama West Virginia
Southern California Tennessee
Utah
We delivered positive third quarter 2026 financial results that were in line with our previously announced guidance, despite a macroeconomic backdrop that remains challenging. Throughout the quarter, we continued executing on our strategy of delivering affordable homes to entry-level buyers across our markets. Persistently high mortgage rates continue to be a key pressure point for entry-level buyers. During the quarter, mortgage rates trended upward to approximately 7% for a 30-year fixed loan, and the 10-year U.S. Treasury yield rose to approximately 5%, driven by ongoing inflation, economic uncertainty, and geopolitical developments, including the conflict in the Middle East, which, together with subdued consumer sentiment, continued to pressure affordability and make it harder for entry-level buyers to qualify for a mortgage. These pressures weighed on demand: net orders for the nine months ended September 30, 2026 decreased 30.0% to 2,869 homes, with the decline more pronounced in the third quarter, and our cancellation rate rose to 48.9% as more buyers were unable to secure or retain mortgage financing. As a result, our ending backlog declined 47.5% to 685 homes.
For the three months ended September 30, 2026, we closed 1,222 homes, including 33 currently and previously leased single-family homes. Excluding the 33 currently or previously leased single-family homes, we closed 1,189 homes at an average sales price per home closed of $367,962. For the three months ended September 30, 2025, we closed 1,107 homes, including 42 currently and previously leased single-family homes. Excluding the 42 currently or previously leased single-family homes, we closed 1,065 homes with an average sales price per home closed of $372,424.
For the nine months ended September 30, 2026, we closed 3,578 homes, including 143 currently and previously leased single-family homes. Excluding the 143 currently or previously leased single-family homes, we closed 3,435 homes at an average sales price per home closed of $366,449. For the nine months ended September 30, 2025, we closed 3,426 homes, including 42 currently or previously leased single-family homes. Excluding the 42 currently or previously leased single-family homes, we closed 3,384 homes with an average sales price per home closed of $363,929.
We had 151 active communities at September 30, 2026. At September 30, 2025, we had 141 active communities.
For additional discussion regarding our business and operations, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. For additional discussion regarding risks associated with our business and operations, see Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Recent Developments
On October 9, 2026, we entered into the Seventh Amendment, which amended the 2025 Credit Agreement. The Seventh Amendment, among other things, (a) extended the maturity of the commitments of certain lenders under the Credit Agreement to October 9, 2030, (b) provided for aggregate revolving commitments in an amount of approximately $1.166 billion with a $175.0 million incremental facility, and (c) modified borrowing base values and certain financial and other covenants. The
Credit Agreement matures on October 9, 2030 with respect to $855.0 million, or 73.3%, of the approximately $1.166 billion of commitments thereunder, on April 28, 2029 with respect to 18.4% of the commitments thereunder and on April 28, 2028 with respect to 8.3% of the commitments thereunder. For additional information on the Credit Agreement (including defined terms used in this paragraph), see Note 4, "Notes Payable" to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Key Results
Key financial results as of and for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, were as follows:
•Homebuilding revenues increased 10.3% to $437.5 million from $396.6 million.
•Homes closed increased 11.6% to 1,189 homes from 1,065 homes.
•Average sales price per home closed decreased 1.2% to $367,962 from $372,424.
•Homebuilding gross margin as a percentage of homebuilding revenues decreased to 20.2% from 21.5%.
•Adjusted homebuilding gross margin (non-GAAP) as a percentage of homebuilding revenues decreased to 23.7% from 24.5%.
•Net income before income taxes increased 24.7% to $33.3 million from $26.7 million.
•Net income increased 24.6% to $24.6 million from $19.7 million.
•EBITDA (non-GAAP) as a percentage of total revenues increased to 11.2% from 9.6%.
For reconciliations of the non-GAAP financial measures of adjusted homebuilding gross margin and EBITDA to the most directly comparable GAAP financial measures, please see "-Non-GAAP Measures."
Key financial results as of and for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, were as follows:
•Homebuilding revenues increased 2.2% to $1.3 billion from $1.2 billion.
•Homes closed increased 1.5% to 3,435 homes from 3,384 homes.
•Average sales price per home closed increased 0.7% to $366,449 from $363,929.
•Homebuilding gross margin as a percentage of homebuilding revenues decreased to 19.7% from 21.9%.
•Adjusted homebuilding gross margin (non-GAAP) as a percentage of homebuilding revenues decreased to 23.4% from 24.6%.
•Net income before income taxes decreased 0.3% to $74.2 million from $74.5 million.
•Net income decreased 2.8% to $53.7 million from $55.2 million.
•EBITDA (non-GAAP) as a percentage of total revenues increased to 9.2% from 8.5%.
For reconciliations of the non-GAAP financial measures of adjusted homebuilding gross margin and EBITDA to the most directly comparable GAAP financial measures, please see "-Non-GAAP Measures."
We owned and controlled 58,400 lots at September 30, 2026 as compared to 57,406 lots at June 30, 2026 and 60,842 lots at December 31, 2025.
Results of Operations
The following table sets forth our results of operations for the three and nine months ended September 30, 2026 and 2025:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
(dollars in thousands, except per share data and average home sales price)
Statement of Income Data:
Revenues
Homebuilding revenues $ 437,507 $ 396,632 $ 1,258,754 $ 1,231,537
Land and other revenues 6,957 6,869 34,634 43,594
Total revenues 444,464 403,501 1,293,388 1,275,131
Cost of sales
Homebuilding costs 349,018 311,520 1,010,942 962,104
Land and other costs 6,262 4,712 30,437 37,441
Total cost of sales 355,280 316,232 1,041,379 999,545
Selling expenses 35,757 35,661 112,556 119,602
General and administrative 26,298 27,967 82,730 88,570
Other income, net (6,180) (3,060) (17,496) (7,051)
Net income before income taxes 33,309 26,701 74,219 74,465
Income tax provision 8,753 6,997 20,519 19,234
Net income $ 24,556 $ 19,704 $ 53,700 $ 55,231
Basic earnings per share $ 1.05 $ 0.85 $ 2.31 $ 2.38
Diluted earnings per share $ 1.05 $ 0.85 $ 2.31 $ 2.37
Other Financial and Operating Data:
Average community count (1)
152.0 142.0 147.4 145.3
Community count at end of period (2)
151 141 151 141
Home closings (3)
1,189 1,065 3,435 3,384
Average sales price per home closed 367,962 372,424 366,449 363,929
Homebuilding gross margin (4)
88,489 85,112 247,812 269,433
Homebuilding gross margin % (5)
20.2 % 21.5 % 19.7 % 21.9 %
Adjusted homebuilding gross margin (6)
103,661 97,115 295,046 303,390
Adjusted homebuilding gross margin % (5)(6)
23.7 % 24.5 % 23.4 % 24.6 %
EBITDA (7)
49,595 38,883 119,474 108,625
Net income margin % (8)
5.5 % 4.9 % 4.2 % 4.3 %
EBITDA margin % (7)(8)
11.2 % 9.6 % 9.2 % 8.5 %
Adjusted EBITDA (7)
52,703 42,039 135,734 121,429
Adjusted EBITDA margin % (7)(8)
11.9 % 10.4 % 10.5 % 9.5 %
(1)Average community count is calculated as the sum of active communities at the end of each month in the period divided by the number of months in the period. Because communities open and close throughout a period, average community count better reflects the selling capacity available during the period than the period-end figure, and is used with average monthly absorption rate to explain changes in home closings. Management uses average community count together with absorption rate to evaluate the sales productivity of our communities and to forecast closings and revenues.
(2)Community count at end of period is the number of active communities as of the last day of the period. The number of communities is a leading indicator of our capacity to sell homes and of our potential future closings and revenues, and indicates the pace at which we are opening and closing out communities. Management uses community count to plan land acquisition and development, allocate sales and construction resources, and set expectations for future growth.
(3)Home closings represents the number of homes for which title has transferred to the buyer of a home during the period and for which we have recognized homebuilding revenues. Home closings is the primary driver of our homebuilding revenues and, together with average sales price per home closed, explains changes in revenues period over period. Management tracks closings against sales and
production plans, uses closings to evaluate the pace of delivery by reportable segment, and incorporates closings into forecasts and capital allocation decisions.
(4)Homebuilding gross margin is homebuilding revenues less homebuilding costs.
(5)Calculated as a percentage of homebuilding revenues.
(6)Adjusted homebuilding gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define homebuilding gross margin excluding inventory impairment as homebuilding gross margin less inventory impairment charges. We define adjusted homebuilding gross margin as homebuilding gross margin excluding inventory impairment, less capitalized interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes adjusted homebuilding gross margin is useful because it isolates the impact that capitalized interest, purchase accounting adjustments and inventory impairment have on homebuilding gross margin. However, because adjusted homebuilding gross margin excludes capitalized interest, purchase accounting adjustments and inventory impairment, which have real economic effects and could impact our results, the utility of adjusted homebuilding gross margin as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted homebuilding gross margin in the same manner that we do. Accordingly, adjusted homebuilding gross margin should be considered only as a supplement to homebuilding gross margin as a measure of our performance. Please see "-Non-GAAP Measures" for a reconciliation of adjusted homebuilding gross margin to homebuilding gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.
(7)EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest amortized to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, stock-based compensation, purchase accounting adjustments, and dead deal costs, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, management believes that these measures are useful for comparing general operating performance from period to period. Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as substitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP. Please see "-Non-GAAP Measures" for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.
(8)Calculated as a percentage of total revenues.
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
Our homebuilding revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the three months ended September 30, 2026 and 2025, and our community count by reportable segment as of September 30, 2026 and 2025, were as follows (revenues in thousands):
Three Months Ended September 30, 2026 As of September 30, 2026
Reportable Segment Homebuilding Revenues Home Closings ASP Average Community Count Average Monthly Absorption Rate Community Count at End of Period
Central $ 103,495 342 $ 302,617 50.3 2.3 49
Southeast 109,238 335 326,084 30.0 3.7 30
Northwest 60,125 115 522,826 18.0 2.1 18
West 108,581 239 454,314 29.3 2.7 29
Florida 56,068 158 354,861 24.4 2.2 25
Total $ 437,507 1,189 $ 367,962 152.0 2.6 151
Three Months Ended September 30, 2025 As of September 30, 2025
Reportable Segment Homebuilding Revenues Home Closings ASP Average Community Count Average Monthly Absorption Rate Community Count at End of Period
Central $ 99,355 307 $ 323,632 45.0 2.3 45
Southeast 101,419 299 339,194 32.3 3.1 32
Northwest 49,408 109 453,284 14.7 2.5 14
West 91,699 203 451,719 25.7 2.6 25
Florida 54,751 147 372,456 24.3 2.0 25
Total $ 396,632 1,065 $ 372,424 142.0 2.5 141
Homebuilding Revenues. Homebuilding revenues for the three months ended September 30, 2026 were $437.5 million, an increase of $40.9 million, or 10.3%, from $396.6 million for the three months ended September 30, 2025. The increase in homebuilding revenues was primarily due to an 11.6% increase in the number of homes closed during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. The overall increase in home closings was a result of greater wholesale closings during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. The increase in wholesale closings was primarily driven by higher demand from our wholesale channel customers during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. The average sales price per home closed during the three months ended September 30, 2026 was $367,962, a decrease of $4,462, or 1.2%, from the average sales price per home closed of $372,424 for the three months ended September 30, 2025. The decrease in the average sales price per home closed was primarily due to geographic mix and discounted older inventory.
Included within our homebuilding revenues for the three months ended September 30, 2026 was $80.8 million in wholesale revenues resulting from 215 home closings, representing 18.1% of the 1,189 total number of homes closed during the three months ended September 30, 2026. Wholesale closings exclude previously leased homes. Included within our homebuilding revenues for the three months ended September 30, 2025 was $54.5 million in wholesale revenues resulting from 163 home closings, representing 15.3% of the 1,065 total number of homes closed during the three months ended September 30, 2025. The increase in homebuilding revenue generated by our wholesale channel was primarily related to a higher number of homes delivered related to a large wholesale contract with one of our single-family rental partners during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
•Homebuilding revenues in our Central reportable segment increased by $4.1 million, or 4.2%, during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to an 11.4% increase in the number of homes closed, partially offset by a 6.5% decrease in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count.
•Homebuilding revenues in our Southeast reportable segment increased by $7.8 million, or 7.7%, during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to a 12.0% increase in the number of homes closed, partially offset by a 3.9% decrease in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of a higher absorption rate.
•Homebuilding revenues in our Northwest reportable segment increased by $10.7 million, or 21.7%, during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to a 5.5% increase in the number of homes closed and a 15.3% increase in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count.
•Homebuilding revenues in our West reportable segment increased by $16.9 million, or 18.4%, during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to a 17.7% increase in the number of homes closed and a 0.6% increase in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count.
•Homebuilding revenues in our Florida reportable segment increased by $1.3 million, or 2.4%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to a 7.5% increase in the number of homes closed, partially offset by a 4.7% decrease in the average sales price per home closed,
which included an increase in sales incentives. The increase in home closings was the result of a higher absorption rate.
Land and Other Revenues. Land and other revenues for the three months ended September 30, 2026 were $7.0 million, an increase of $0.1 million, or 1.3%, from $6.9 million for the three months ended September 30, 2025.
Homebuilding Costs and Homebuilding Gross Margin (homebuilding revenues less homebuilding costs). Homebuilding costs for the three months ended September 30, 2026 were $349.0 million, an increase of $37.5 million, or 12.0%, from $311.5 million for the three months ended September 30, 2025. This overall increase was primarily due to an 11.6% increase in the number of homes closed. Homebuilding gross margin for the three months ended September 30, 2026 was $88.5 million, an increase of $3.4 million, or 4.0%, from $85.1 million for the three months ended September 30, 2025. Homebuilding gross margin as a percentage of homebuilding revenues was 20.2% for the three months ended September 30, 2026 and 21.5% for the three months ended September 30, 2025. The decrease in homebuilding gross margin as a percentage of homebuilding revenues was primarily due to higher lot costs, higher wholesale closings, higher capitalized interest, and higher vertical costs during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Selling Expenses. Selling expenses for the three months ended September 30, 2026 were $35.8 million, an increase of $0.1 million, or 0.3%, from $35.7 million for the three months ended September 30, 2025. The increase in selling expenses was primarily due to an increase in the number of homes closed for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. Sales commissions increased to $15.8 million for the three months ended September 30, 2026 from $15.2 million for the three months ended September 30, 2025, primarily due to an increase in the number of homes closed. Selling expenses as a percentage of total revenues were 8.0% and 8.8% for the three months ended September 30, 2026 and 2025, respectively. The decrease in selling expenses as a percentage of total revenues was primarily due to higher home closings during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
General and Administrative. General and administrative expenses for the three months ended September 30, 2026 were $26.3 million, a decrease of $1.7 million, or 6.0%, from $28.0 million for the three months ended September 30, 2025. General and administrative expenses as a percentage of total revenues were 5.9% and 6.9% during the three months ended September 30, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of total revenues was primarily due to lower indirect overhead, lower headcount, and lower legal expenses and an increase in total revenues during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Other Income, Net. Other income, net of other expenses for the three months ended September 30, 2026 was $6.2 million, an increase of $3.1 million from $3.1 million for the three months ended September 30, 2025. The increase in other income, net, primarily reflected the increase in income associated with our investment in unconsolidated entities and the increase in interest income recognized.
Net Income before Income Taxes. Net income before income taxes for the three months ended September 30, 2026 was $33.3 million, an increase of $6.6 million, or 24.7%, from $26.7 million for the three months ended September 30, 2025. The overall increase in net income before income taxes was primarily due to an increase in homebuilding gross margin, an increase in other income, net, and a decrease in general and administrative expenses. Our reportable segments contributed to net income before income taxes during the three months ended September 30, 2026 as follows: Central - $8.3 million, or 24.8%; Southeast - $8.7 million, or 26.2%; Northwest - $3.2 million, or 9.6%; West - $11.4 million, or 34.3%; and Florida - $(1.0) million, or (3.0)%.
Income Taxes. Income tax provision for the three months ended September 30, 2026 was $8.8 million, an increase of $1.8 million, or 25.1%, from income tax provision of $7.0 million for the three months ended September 30, 2025. The increase in our income tax provision was primarily due to the overall increase in net income before income taxes. The increase in our effective tax rate to 26.3% for the three months ended September 30, 2026 from 26.2% for the three months ended September 30, 2025 was primarily a result of state income taxes, net of the federal benefit, the compensation cost in excess of deductions for share-based payments, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and other nondeductible expenses.
Net Income. Net income for the three months ended September 30, 2026 was $24.6 million, an increase of $4.9 million, or 24.6%, from $19.7 million for the three months ended September 30, 2025. The increase in net income during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 was primarily attributed to an increase in homebuilding gross margin, an increase in other income, net, and a decrease in general and administrative expenses.
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Our homebuilding revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the nine months ended September 30, 2026 and 2025, and our community count by reportable segment as of September 30, 2026 and 2025, were as follows (revenues in thousands):
Nine Months Ended September 30, 2026 As of September 30, 2026
Reportable Segment Homebuilding Revenues Home Closings ASP Average Community Count Average Monthly Absorption Rate Community Count at End of Period
Central $ 320,432 1,057 $ 303,152 49.1 2.4 49
Southeast 289,706 877 330,338 29.8 3.3 30
Northwest 156,736 302 518,993 16.4 2.0 18
West 319,040 710 449,352 28.2 2.8 29
Florida 172,840 489 353,456 23.9 2.3 25
Total $ 1,258,754 3,435 $ 366,449 147.4 2.6 151
Nine Months Ended September 30, 2025 As of September 30, 2025
Reportable Segment Homebuilding Revenues Home Closings ASP Average Community Count Average Monthly Absorption Rate Community Count at End of Period
Central $ 313,487 997 $ 314,430 47.8 2.3 45
Southeast 353,211 1,067 331,032 31.8 3.7 32
Northwest 137,132 274 500,482 15.8 1.9 14
West 258,994 592 437,490 25.3 2.6 25
Florida 168,713 454 371,615 24.6 2.1 25
Total $ 1,231,537 3,384 $ 363,929 145.3 2.6 141
Homebuilding Revenues. Homebuilding revenues for the nine months ended September 30, 2026 were $1.3 billion, an increase of $27.2 million, or 2.2%, from $1.2 billion for the nine months ended September 30, 2025. The increase in homebuilding revenues was primarily due to an increase in the number of homes closed during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. The overall increase in home closings was a result of a higher average community count during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. The overall increase in average community count related to timing associated with new community openings, offset by the close out of some communities and transition between certain active communities during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. The average sales price per home closed during the nine months ended September 30, 2026 was $366,449, an increase of $2,520, or 0.7%, from the average sales price per home closed of $363,929 for the nine months ended September 30, 2025. The increase in the average sales price per home closed was primarily due to geographic mix. The absorption rate remained unchanged.
Included within our homebuilding revenues for the nine months ended September 30, 2026 was $184.1 million in wholesale revenues resulting from 621 home closings, representing 18.1% of the 3,435 total number of homes closed during the nine months ended September 30, 2026. Included within our homebuilding revenues for the nine months ended September 30, 2025 was $180.4 million in wholesale revenues resulting from 579 home closings, representing 17.1% of the 3,384 total number of homes closed during the nine months ended September 30, 2025. Wholesale closings exclude previously leased homes. The increase in home closings as a percentage of total closings through our wholesale channel was primarily related to higher demand from our wholesale channel customers during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
•Homebuilding revenues in our Central reportable segment increased by $6.9 million, or 2.2%, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a 6.0%
increase in the number of homes closed, offset by a 3.6% decrease in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count.
•Homebuilding revenues in our Southeast reportable segment decreased by $63.5 million, or 18.0%, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a 17.8% decrease in the number of homes closed. The decrease in home closings was the result of a lower absorption rate and a decrease in the average community count.
•Homebuilding revenues in our Northwest reportable segment increased by $19.6 million, or 14.3%, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a 10.2% increase in the number of homes closed and a 3.7% increase in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count.
•Homebuilding revenues in our West reportable segment increased by $60.0 million, or 23.2%, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a 19.9% increase in the number of homes closed and a 2.7% increase in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of an increase in the average community count and a higher absorption rate.
•Homebuilding revenues in our Florida reportable segment increased by $4.1 million, or 2.4%, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a 7.7% increase in the number of homes closed, partially offset by a 4.9% decrease in the average sales price per home closed, which included an increase in sales incentives. The increase in home closings was the result of a higher absorption rate.
Land and Other Revenues. Land and other revenues for the nine months ended September 30, 2026 were $34.6 million, a decrease of $9.0 million, or 20.6%, from $43.6 million for the nine months ended September 30, 2025. The decrease in land and other revenues was primarily due to fewer lot sales.
Homebuilding Costs and Homebuilding Gross Margin (homebuilding revenues less homebuilding costs). Homebuilding costs for the nine months ended September 30, 2026 were $1.0 billion, an increase of $48.8 million, or 5.1%, from $962.1 million for the nine months ended September 30, 2025. This overall increase was primarily due to higher house costs, higher lot costs, higher capitalized interest and higher indirect overhead. Homebuilding gross margin for the nine months ended September 30, 2026 was $247.8 million, a decrease of $21.6 million, or 8.0%, from $269.4 million for the nine months ended September 30, 2025. Homebuilding gross margin as a percentage of homebuilding revenues (inclusive of an inventory impairment charge) was 19.7% for the nine months ended September 30, 2026 and 21.9% for the nine months ended September 30, 2025. The decrease in homebuilding gross margin as a percentage of homebuilding revenues during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 was primarily due to higher lot costs, higher capitalized interest and higher indirect overhead, as well as an inventory impairment charge of $4.7 million, of which $2.4 million was related to our Florida reportable segment and $2.3 million was related to our Central reportable segment.
Selling Expenses. Selling expenses for the nine months ended September 30, 2026 were $112.6 million, a decrease of $7.0 million, or 5.9%, from $119.6 million for the nine months ended September 30, 2025. The decrease in selling expenses was primarily due to a decrease in personnel costs, advertising expenses, and commissions for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. Sales commissions decreased to $47.5 million during the nine months ended September 30, 2026 from $48.1 million for the nine months ended September 30, 2025, primarily due to a decrease in external commissions. Selling expenses as a percentage of total revenues were 8.7% and 9.4% for the nine months ended September 30, 2026 and 2025, respectively. The decrease in selling expenses as a percentage of total revenues was primarily due to lower overall expenses and an increase in total revenues during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
General and Administrative. General and administrative expenses for the nine months ended September 30, 2026 were $82.7 million, a decrease of $5.8 million, or 6.6%, from $88.6 million for the nine months ended September 30, 2025. The decrease in general and administrative expenses was primarily due to a decrease in other general and administrative expenses and indirect overhead costs, partially offset by an increase in bonuses. General and administrative expenses as a percentage of total revenues were 6.4% and 6.9% for the nine months ended September 30, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of total revenues was primarily due to lower overall expenses and an increase in total revenues during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Other Income, Net. Other income, net of other expenses was $17.5 million for the nine months ended September 30, 2026, an increase of $10.4 million from $7.1 million for the nine months ended September 30, 2025. The increase in other income, net of other expenses, primarily reflected the increase in income associated with our investment in unconsolidated entities.
Net Income before Income Taxes. Net income before income taxes for the nine months ended September 30, 2026 was $74.2 million, a decrease of $0.2 million, or 0.3%, from $74.5 million for the nine months ended September 30, 2025. The overall decrease in net income before income taxes was primarily due to overall higher homebuilding costs and an inventory impairment charge, offset by higher homebuilding revenues, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. Our reportable segments contributed to net income before income taxes during the nine months ended September 30, 2026 as follows: Central - $24.2 million, or 32.6%; Southeast - $20.3 million, or 27.4%; Northwest - $2.7 million, or 3.6%; West - $30.0 million, or 40.4%; and Florida - $(5.8) million, or (7.8)%.
Income Taxes. Income tax provision for the nine months ended September 30, 2026 was $20.5 million, an increase of $1.3 million, or 6.7%, from income tax provision of $19.2 million for the nine months ended September 30, 2025. The increase in our income tax provision was primarily due to the increase in our effective tax rate. The increase in our effective tax rate to 27.6% for the nine months ended September 30, 2026 from 25.8% for the nine months ended September 30, 2025 was primarily a result of state income taxes, net of the federal benefit, the compensation cost in excess of deductions for share-based payments, the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and other nondeductible expenses.
Net Income. Net income for the nine months ended September 30, 2026 was $53.7 million, a decrease of $1.5 million, or 2.8%, from $55.2 million for the nine months ended September 30, 2025. The decrease in net income was primarily attributed to lower homebuilding gross margin, as well as an inventory impairment charge during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Non-GAAP Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we have provided information in this Quarterly Report on Form 10-Q relating to homebuilding gross margin excluding inventory impairment, adjusted homebuilding gross margin, EBITDA, adjusted EBITDA, net debt to capital ratio, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share.
Homebuilding Gross Margin Excluding Inventory Impairment and Adjusted Homebuilding Gross Margin
Homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define homebuilding gross margin excluding inventory impairment as homebuilding gross margin less inventory impairment charges. We define adjusted homebuilding gross margin as homebuilding gross margin excluding inventory impairments, less capitalized interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin are useful because they isolate the impact that capitalized interest, purchase accounting adjustments, and inventory impairment have on homebuilding gross margin. However, because homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin exclude capitalized interest, purchase accounting adjustments, and inventory impairment, which have real economic effects and could impact our results, the utility of homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin as measures of our operating performance may be limited. In addition, other companies may not calculate homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin in the same manner that we do. Accordingly, homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin should be considered only as supplements to homebuilding gross margin as a measure of our performance.
The following table reconciles homebuilding gross margin excluding inventory impairment and adjusted homebuilding gross margin to homebuilding gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Homebuilding revenues $ 437,507 $ 396,632 $ 1,258,754 $ 1,231,537
Homebuilding costs 349,018 311,520 1,010,942 962,104
Homebuilding gross margin $ 88,489 $ 85,112 $ 247,812 $ 269,433
Inventory impairment
- - 4,681 -
Homebuilding gross margin excluding inventory impairment $ 88,489 $ 85,112 $ 252,493 $ 269,433
Capitalized interest amortized to cost of sales 14,723 11,004 41,171 31,107
Purchase accounting adjustments (1)
449 999 1,382 2,850
Adjusted homebuilding gross margin $ 103,661 $ 97,115 $ 295,046 $ 303,390
Homebuilding gross margin % (2)
20.2 % 21.5 % 19.7 % 21.9 %
Homebuilding gross margin % excluding inventory impairment (2)
20.2 % 21.5 % 20.1 % 21.9 %
Adjusted homebuilding gross margin % (2)
23.7 % 24.5 % 23.4 % 24.6 %
(1)Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
(2)Calculated as a percentage of homebuilding revenues.
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest amortized to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, stock-based compensation, purchase accounting adjustments, and dead deal costs, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, 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 substitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:
(i) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;
(ii) they do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements or improvements;
(iv) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;
(v) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
(vi) other companies in our industry may calculate them differently than we do, limiting their usefulness as a comparative measure.
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 net income and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA and adjusted EBITDA. EBITDA 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 and adjusted EBITDA calculated using these measures.
The following table reconciles EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Net income $ 24,556 $ 19,704 $ 53,700 $ 55,231
Income tax provision 8,753 6,997 20,519 19,234
Depreciation and amortization 1,563 1,178 4,084 3,053
Capitalized interest amortized to cost of sales 14,723 11,004 41,171 31,107
EBITDA $ 49,595 $ 38,883 $ 119,474 $ 108,625
Inventory impairment - - 4,681 -
Stock-based compensation 2,371 1,606 6,975 6,993
Purchase accounting adjustments 449 999 1,382 2,850
Dead deal costs 288 551 3,222 2,961
Adjusted EBITDA $ 52,703 $ 42,039 $ 135,734 $ 121,429
Net income margin (1)
5.5 % 4.9 % 4.2 % 4.3 %
EBITDA margin % (1)
11.2 % 9.6 % 9.2 % 8.5 %
Adjusted EBITDA margin % (1)
11.9 % 10.4 % 10.5 % 9.5 %
(1)Calculated as a percentage of total revenues.
Net Debt to Capital Ratio
Net debt to capital ratio is a non-GAAP financial measure used by management as a supplemental measure in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing. We define net debt to capital ratio as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our management believes that the presentation of net debt to capital ratio provides useful information to investors regarding our financial leverage and our ability to meet long-term obligations. By excluding cash and cash equivalents from total debt, the ratio offers a clearer view of our capital structure and financial flexibility. Our management uses this metric to monitor our capital efficiency and to evaluate the effectiveness of our capital management strategies over time. Other companies may define this measure differently and, as a result, our measure of net debt to capital ratio may not be directly comparable to the measures of other companies.
The following table reconciles net debt to capital ratio to debt to capital ratio, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
September 30, 2026 December 31, 2025
Total debt (Notes payable)
$ 1,544,466 $ 1,656,803
Total equity
2,160,426 2,096,289
Total capital
$ 3,704,892 $ 3,753,092
Debt to capital ratio
41.7 % 44.1 %
Total debt (Notes payable)
$ 1,544,466 $ 1,656,803
Less: Cash and cash equivalents
69,437 61,247
Net debt
$ 1,475,029 $ 1,595,556
Total equity
2,160,426 2,096,289
Total net capital
$ 3,635,455 $ 3,691,845
Net debt to capital ratio (1)
40.6 % 43.2 %
(1) Net debt to capital ratio is calculated as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity.
Adjusted Net Income, Adjusted Basic Earnings per Share, and Adjusted Diluted Earnings per Share
Adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define adjusted net income as net income less inventory impairment charges. We define adjusted basic earnings per share as adjusted net income divided by weighted average basic shares outstanding. We define adjusted diluted earnings per share as adjusted net income divided by weighted average diluted shares outstanding. Our management believes that the presentation of adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share provides useful information to investors because such measures isolate the impact that inventory impairment charges have on net income and earnings per share. However, because adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share exclude the inventory impairment charge, which has real economic effects and could impact the results, the utility of adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share as measures of our operating performance may be limited. In addition, other companies may not calculate adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share in the same manner that we do. Accordingly, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share should be considered only as supplements to net income, basic earnings per share, and diluted earnings per share, respectively, as measures of our performance.
The following table reconciles adjusted net income to net income, which is the GAAP financial measure that our management believes to be most directly comparable, and adjusted basic earnings per share and adjusted diluted earnings per share are calculated by dividing adjusted net income by basic or diluted weighted average shares outstanding, respectively (dollars in thousands, except earnings per share):
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Net income $ 24,556 $ 19,704 $ 53,700 $ 55,231
Basic weighted average number of shares outstanding 23,331,728 23,056,904 23,210,620 23,223,736
Basic earnings per share $ 1.05 $ 0.85 $ 2.31 $ 2.38
Diluted weighted average number of shares outstanding 23,466,066 23,149,005 23,281,055 23,289,280
Diluted earnings per share $ 1.05 $ 0.85 $ 2.31 $ 2.37
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Net income $ 24,556 $ 19,704 $ 53,700 $ 55,231
Inventory impairment - - 4,681 -
Tax impact due to above reconciling item - - (1,225) -
Adjusted net income $ 24,556 $ 19,704 $ 57,156 $ 55,231
Basic weighted average number of shares outstanding 23,331,728 23,056,904 23,210,620 23,223,736
Adjusted basic earnings per share $ 1.05 $ 0.85 $ 2.46 $ 2.38
Diluted weighted average number of shares outstanding 23,466,066 23,149,005 23,281,055 23,289,280
Adjusted diluted earnings per share $ 1.05 $ 0.85 $ 2.46 $ 2.37
Backlog
We sell our homes under standard purchase contracts, which generally require a homebuyer to pay a deposit at the time of signing the purchase contract. The amount of the required deposit is minimal (typically $1,000 to $10,000). We permit our retail homebuyers to cancel the purchase contract and obtain a refund of their deposit in the event mortgage financing cannot be obtained within a certain period of time, as specified in their purchase contract. Typically, our retail homebuyers provide documentation regarding their ability to obtain mortgage financing within 14 days after the purchase contract is signed. If we determine that the homebuyer is not qualified to obtain mortgage financing or is not otherwise financially able to purchase the home, we will terminate the purchase contract. If a purchase contract has not been cancelled or terminated within 14 days after the purchase contract has been signed, then we have assumed the homebuyer will meet the preliminary criteria to obtain mortgage financing. Only purchase contracts that are signed by homebuyers who have met the preliminary criteria to obtain mortgage financing are included in new (gross) orders.
Our "backlog" consists of homes that are under a purchase contract that has been signed by homebuyers who have met the preliminary criteria to obtain mortgage financing but have not yet closed and wholesale contracts with varying terms. Since our business model is generally based on building move-in ready homes before a purchase contract is signed, the majority of our homes in backlog are currently under construction or complete. Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less cancellations) generated during the current period minus the number of homes closed during the current period. Our backlog at any given time will be affected by cancellations, the number of our active communities and the timing of home closings. Homes in backlog are generally closed within one to two months, although home closings have been, and may continue to be, delayed. In addition, we may experience cancellations of purchase contracts at any time prior to closing. It is important to note that net orders, backlog and cancellation metrics are operational, rather than accounting data, and should be used only as a general gauge to evaluate performance. Backlog may be impacted by customer cancellations for various reasons that are beyond our control, and in light of our minimal required deposit, there is little negative impact to the potential homebuyer from the cancellation of the purchase contract.
Net orders for the nine months ended September 30, 2026 were 2,869 homes, a decrease of 30.0% from 4,098 homes for the nine months ended September 30, 2025, reflecting continued affordability pressures and higher mortgage rates. The cancellation rate increased to 48.9% in 2026 from 28.1% in 2025, primarily due to financing challenges and buyer sensitivity to market conditions. Ending backlog declined to 685 homes, with an aggregate value of $273.7 million at September 30, 2026, compared to 1,305 homes valued at $498.7 million at September 30, 2025, which represented decreases of 47.5% in units and 45.1% in value. The decreases were driven by lower net orders and elevated cancellation rates. A significant portion of backlog relates to homes further along in construction and expected to close in the near term. However, conversion to revenue remains subject to construction timing, buyer financing, and incentive levels. Elevated cancellation rates and changes in market conditions could affect the pace of backlog conversion and future homebuilding gross margins.
As of the dates set forth below, our net orders, cancellation rate and ending backlog homes and value were as follows (dollars in thousands):
Nine Months Ended September 30,
Backlog Data
2026 (4)
2025 (5)
Net orders (1)
2,869 4,098
Cancellation rate (2)
48.9 % 28.1 %
Ending backlog - homes (3)
685 1,305
Ending backlog - value (3)
$ 273,711 $ 498,713
(1)Net orders are new (gross) orders for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.
(2)Cancellation rate for a period is the total number of purchase contracts cancelled during the period divided by the total new (gross) orders for the purchase of homes during the period.
(3)Ending backlog consists of retail homes at the end of the period that are under a purchase contract that has been signed by homebuyers who have met our preliminary financing criteria but have not yet closed and wholesale contracts with varying terms. Ending backlog is valued at the contract amount.
(4)As of September 30, 2026, we had 85 units related to bulk sales agreements associated with our wholesale business.
(5)As of September 30, 2025, we had 60 units related to bulk sales agreements associated with our wholesale business.
Land Acquisition Policies and Development
We had 151 and 144 active communities as of September 30, 2026 and December 31, 2025, respectively. Generally, it takes us three to four years to turn raw or undeveloped land into an active community. To mitigate our exposure to real estate inventory risks, we have utilized, on a limited and strategic basis, land banking financing arrangements.
Our lot inventory decreased to 58,400 owned or controlled lots as of September 30, 2026 from 60,842 owned or controlled lots as of December 31, 2025, primarily related to our discipline in the evaluation and selective approval of new land deals and strategic lot sales in select markets. Owned lots are lots for which we have acquired ownership and hold title to the underlying real property. Controlled lots are lots that we do not own but for which we have a contractual right to acquire the underlying real property, generally through a land or lot option agreement, land banking arrangement, purchase and sale agreement, or other contractual arrangement. Together, owned and controlled lots represent lots available to us or that we have the contractual right to acquire for future homebuilding.
We had land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources. In consideration for this repurchase option, we paid a non-refundable commitment fee. Based on our right to control the ultimate economic outcome of these finished lots, these assets continued to be held as real estate not owned within our inventory, and a corresponding obligation was established within our accrued liabilities, as discussed in Note 3, "Accrued Expenses and Other Liabilities" to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, to recognize this relationship. Although we were not legally obligated to repurchase the balance of the lots, we were subject to certain performance obligations, financial and other penalties if the lots were not purchased. We did not have any ownership interest or title to the assets that we had sold to the land banker and we did not guarantee any of the land banker's liabilities. As of June 30, 2026, we had completed the repurchase of all lots via takedowns associated with these transactions.
The table below shows (i) home closings by reportable segment for the nine months ended September 30, 2026 and (ii) our owned or controlled lots by reportable segment as of September 30, 2026.
Nine Months Ended September 30, 2026 As of September 30, 2026
Reportable Segment Home Closings
Owned (1)
Controlled Total
Central 1,057 17,813 671 18,484
Southeast 877 12,602 2,119 14,721
Northwest 302 5,879 1,012 6,891
West 710 8,947 3,111 12,058
Florida 489 5,029 1,217 6,246
Total 3,435 50,270 8,130 58,400
(1)Of the 50,270 owned lots as of September 30, 2026, 34,119 were raw/under development lots and 16,151 were finished lots.
Homes in Inventory
When entering a new community, we intend to build a sufficient number of move-in ready homes to meet our budgets. We base future home starts on home closings. As homes are closed, we start more homes to maintain our inventory. As of September 30, 2026, we had a total of 2,147 completed homes, including information centers, and 1,626 homes in progress.
Raw Materials and Labor
When constructing homes, we use various materials and components. We generally contract for our materials and labor at a fixed price for the anticipated construction period of our homes. This allows us to mitigate the risks associated with increases in building materials and labor costs between the time construction begins on a home and the time it is closed. Typically, the raw materials and most of the components used in our business are readily available in the United States. We purchase some components and materials centrally to achieve volume discounts, a practice that often reduces costs and ensures timely deliveries. We typically do not store significant inventories of construction materials, except for work in progress materials for homes under construction. In addition, the majority of our raw materials are supplied to us by our subcontractors and are included in the price of our contract with such subcontractors. Most of the raw materials necessary for our subcontractors are standard items carried by major suppliers. Our construction work is substantially completed by third-party subcontractors, most of whom are non-unionized. We continue to monitor the supply markets to achieve the best prices available. Typically, the price changes that most significantly influence our operations are price increases in labor, commodities and lumber. In future quarters, we could see various cost pressures associated with inflation similar to the cost pressures experienced in the last few years. Generally, we have successfully increased the sales prices of our homes to absorb these increased costs or have successfully made cost-effective changes as we endeavor to keep our homes affordable.
Seasonality
In all of our reportable segments, we have historically experienced similar variability in our results of operations and in capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry. We generally close more homes in our second, third and fourth quarters. Thus, our revenues may fluctuate on a quarterly basis and we may have higher capital requirements in our second, third and fourth quarters in order to maintain our inventory levels. Our revenues and capital requirements are generally similar across our second, third and fourth quarters.
As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular quarter, especially the first quarter, are not necessarily representative of the results we expect at year end. We expect this seasonal pattern to continue in the long term.
Liquidity and Capital Resources
Overview
As of September 30, 2026, we had $69.4 million of cash and cash equivalents. Cash flows for each of our active communities depend on the status of the development cycle and can differ substantially from reported earnings.
Our principal uses of capital are operating expenses, land and lot purchases, lot development, home construction, interest costs on our indebtedness and the payment of various liabilities. In addition, we may purchase land, lots, homes under construction or other assets as part of an acquisition and repurchase shares of our common stock. Early stages of development or expansion require significant cash outlays for land acquisitions, land development, plats, vertical development, construction of information centers, general landscaping, and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of homebuilding revenues. In the later stages of an active community, cash inflows may exceed homebuilding revenues reported for financial statement purposes, as the costs associated with home and land construction were previously incurred.
Net Debt to Capital Ratio
As of September 30, 2026, our net debt to capital ratio was 40.6%. We use this ratio as a supplemental measure of financial leverage and capital efficiency. This ratio is calculated as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our net debt to capital ratio reflects our balanced approach to financing growth while maintaining liquidity. We continue to monitor leverage levels in light of evolving market conditions, with a focus on capital efficiency. At September 30, 2026, we were in compliance with all of the covenants contained in the 2025 Credit Agreement, including minimum tangible net worth, maximum leverage ratio, minimum liquidity amount, and minimum EBITDA to interest expense ratio, and with all of the covenants contained in the LGI Living Loan Agreement (as defined herein). As of September 30, 2026, $378.3 million was available to borrow under the 2025 Credit Agreement, providing ample liquidity to support operations and growth initiatives.
Short-term Liquidity and Capital Resources
We generally rely on our ability to finance our operations by generating operating cash flows and borrowing under the Credit Agreement to adequately fund our short-term working capital obligations and to purchase land and other assets, develop lots and homes and repurchase shares of our common stock. As needed, we will consider accessing the debt and equity capital markets as part of our ongoing financing strategy. We rely on our ability to obtain performance, payment and completion surety bonds as well as letters of credit to finance our projects. Furthermore, we utilize, on a limited and strategic basis, land banking financing arrangements to access short-term liquidity.
As of the date of this Quarterly Report on Form 10-Q, we believe that we will be able to fund our current and foreseeable liquidity needs for at least the next twelve months with our cash on hand, cash generated from operations and cash expected to be available from the Credit Agreement or through accessing debt or equity capital, as needed. However, our ability to engage in the transactions described above may be constrained by volatile or tight economic, capital, credit and financial market conditions, as well as moderated investor or lender interest or capacity and our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions.
Long-term Liquidity and Capital Resources
We believe that our long-term principal uses of liquidity and capital resources will be inventory related purchases concerning land, lot development, repurchases of shares of our common stock, other capital expenditures, and principal and interest payments on our debt obligations maturing between 2028 and 2032. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available to borrow under the Credit Agreement or through accessing debt or equity capital, as needed, although no assurance can be provided that such additional debt or equity capital will be available when needed or on terms that we find attractive. Additionally, we may further utilize, on
a limited and strategic basis, land banking financing arrangements to maximize long-term liquidity for lot development projects where we have sufficient finished lot availability in certain markets. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance our indebtedness, or dispose of certain assets to fund our operating activities and capital needs.
Revolving Credit Facility
On October 9, 2026, we entered into a Seventh Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions and Wells Fargo Bank, National Association, as administrative agent (the "Seventh Amendment"), which amended the 2025 Credit Agreement (as so amended by the Seventh Amendment, the "Credit Agreement"). The Credit Agreement provides for a $1.166 billion revolving credit facility, which can be increased at the request of the Company by up to $175.0 million, subject to the terms and conditions of the Credit Agreement. The Credit Agreement matures on October 9, 2030 with respect to $855.0 million, or 73.3%, of the approximately $1.166 billion of the commitments thereunder, on April 28, 2029 with respect to 18.4% of the commitments thereunder and on April 28, 2028 with respect to 8.3% of the commitments thereunder.
Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date. The Credit Agreement is guaranteed by, among others, each of our subsidiaries that have gross assets of at least $0.5 million, other than subsidiaries whose sole purpose is to own and operate single-family rental homes.
The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 8.750% Senior Notes due 2028 (the "2028 Senior Notes"), our 4.000% Senior Notes due 2029 (the "2029 Senior Notes") and our 7.000% Senior Notes due 2032 (the "2032 Senior Notes"), may not exceed the borrowing base under the Credit Agreement. The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by the Company and its subsidiaries that guarantee the obligations under the Credit Agreement. As of September 30, 2026, the borrowing base under the 2025 Credit Agreement was $1.9 billion, of which the maximum available to borrow was $1.9 billion. As of September 30, 2026, borrowings under the 2025 Credit Agreement and the outstanding principal amount of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes totaled approximately $1.5 billion, $23.7 million of letters of credit were outstanding and $378.3 million was available to borrow under the 2025 Credit Agreement.
Borrowings under the Credit Agreement bear interest, payable monthly in arrears, at the Company's option, at either (1) the Adjusted Term SOFR (defined as a term SOFR that is based on a fixed 1, 3 or 6 month interest period, as selected by the Company, plus a 10, 15 or 25 basis point adjustment, respectively), which rate is subject to a 50 basis point floor, plus an applicable margin ranging from 145 basis points to 210 basis points (the "Applicable Margin") based on the Company's leverage ratio as determined in accordance with a pricing grid, or (2) the Base Rate (defined as a term SOFR that is based on a daily variable 1 month interest period plus a 10 basis point adjustment), subject to a 50 basis point floor, plus the Applicable Margin. At September 30, 2026, the Applicable Margin was 1.75% (1.85% including the 0.10% credit spread adjustment), and SOFR was 3.90%, subject to the 0.50% SOFR floor as included in the 2025 Credit Agreement.
The Credit Agreement contains various financial covenants, including a minimum tangible net worth, a maximum leverage ratio and a minimum EBITDA to interest expense ratio. The Credit Agreement contains various covenants that, among other restrictions, (i) limit the amount of our additional debt and our ability to make certain investments and (ii) restrict the repurchase of shares and payment of dividends through December 31, 2026. At September 30, 2026, we were in compliance with all of the covenants contained in the 2025 Credit Agreement.
LGI Living Loan Agreement
On July 23, 2025, the Company's wholly owned special purpose subsidiary LGI Living - SFR 1, LLC ("LGI Living SFR") entered into a Loan Agreement (the "LGI Living Loan Agreement") with Evergreen Residential Capital, LLC, as lender. The LGI Living Loan Agreement provides for a secured non-recourse loan for up to $50.0 million, which can be increased at the request of LGI Living SFR by up to $75.0 million (for a total of $125.0 million), subject to the terms and conditions of the LGI Living Loan Agreement.
As of September 30, 2026, the total amount of borrowings outstanding under the LGI Living Loan Agreement was $50.0 million. The loan matures on July 8, 2030 and bears interest at a rate of 6.433% per annum, which may be adjusted in connection with an increase in the amount of the loan. The loan is unconditionally guaranteed as to payment and performance by the Company under a limited recourse guaranty with respect to (i) certain losses and liabilities to the extent such losses or liabilities are actually incurred by the lender and (ii) the entire amount of the loan upon the occurrence of certain events. The LGI Living Loan Agreement requires that the Company, as guarantor, maintain (i) liquidity of not less than 15% of the loan amount and (ii) net worth in excess of 50% of the loan amount.
The loan is unconditionally guaranteed as to payment and performance by LGI Living - ER FIN, LLC, as the direct owner of the equity interests in LGI Living SFR, but recourse under such guaranty is limited to LGI Living - ER FIN, LLC's equity interests in LGI Living SFR, which are pledged as collateral for the loan. The loan is also secured by a security interest in all
assets of LGI Living SFR, including a mortgage lien on certain of LGI Living SFR's real property. The LGI Living Loan Agreement includes certain restrictive covenants that may limit LGI Living SFR's ability to, among other things, incur additional indebtedness or make certain investments. The LGI Living Loan Agreement contains representations and warranties, affirmative covenants, and events of default, all of which the Company believes are customary for special purpose subsidiary real estate secured loan agreements. If an event of default exists under the LGI Living Loan Agreement, the lender will be able to accelerate the maturity of the loan and exercise other rights and remedies. At September 30, 2026, we were in compliance with all of the covenants contained in the LGI Living Loan Agreement.
Senior Notes Offering
On November 15, 2024, we issued $400.0 million aggregate principal amount of the 2032 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S ("Regulation S") under the Securities Act. Interest on the 2032 Senior Notes accrues at a rate of 7.000% per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The 2032 Senior Notes mature on November 15, 2032. The terms of the 2032 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fifth Supplemental Indenture thereto, dated as of November 15, 2024, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Regions Bank, as trustee.
On November 21, 2023, we issued $400.0 million aggregate principal amount of the 2028 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S. Interest on the 2028 Senior Notes accrues at a rate of 8.750% per annum, payable semi-annually in arrears on June 15 and December 15 of each year. The 2028 Senior Notes mature on December 15, 2028. The terms of the 2028 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fourth Supplemental Indenture thereto, dated as of November 21, 2023, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Regions Bank, as trustee.
On June 28, 2021, we issued $300.0 million aggregate principal amount of the 2029 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S. Interest on the 2029 Senior Notes accrues at a rate of 4.000% per annum, payable semi-annually in arrears on January 15 and July 15 of each year. The 2029 Senior Notes mature on July 15, 2029. The terms of the 2029 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Third Supplemental Indenture thereto, dated as of June 28, 2021, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Wilmington Trust, National Association, as trustee.
Letters of Credit, Surety Bonds and Financial Guarantees
We are often required to provide letters of credit and surety bonds to secure our performance under construction contracts, development agreements and other arrangements. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit.
Under these letters of credit, surety bonds and financial guarantees, we are committed to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit, surety bonds and financial guarantees under these arrangements totaled $416.8 million as of September 30, 2026. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and surety bonds are not generally released until all development and construction activities are completed. We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of September 30, 2026 will be drawn upon.
Stock Repurchase Program
In February 2022, our Board of Directors (the "Board") approved a $200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws. During the three and nine months ended September 30, 2026, we did not repurchase any shares of our common stock. During the three months ended September 30, 2025, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2025, we repurchased 409,253 shares of our common stock at a total cost, including commissions and excise taxes, of $23.6 million, to be held as treasury stock. A total of 3,656,592 shares of our common stock has been repurchased since our stock repurchase program commenced in 2018. As of September 30, 2026, we may purchase up to $157.3 million of shares of our common stock under our stock repurchase program. The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general
market and economic conditions and legal requirements. Our stock repurchase program may be modified, discontinued or suspended at any time.
Cash Flows
Operating Activities
Net cash provided by operating activities was $98.0 million during the nine months ended September 30, 2026. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development. Net cash provided by operating activities during the nine months ended September 30, 2026 was primarily driven by the $51.2 million increase in accounts payable and the $19.1 million increase in the net change related to compensation expense for equity awards, pre-acquisition costs and deposits, inventory impairment, partially offset by cash outflow of $52.5 million in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity.
Net cash used in operating activities was $226.7 million during the nine months ended September 30, 2025. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development. Net cash used in operating activities during the nine months ended September 30, 2025 was primarily driven by cash outflow from the $318.1 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity and a $12.8 million decrease in the net change in accrued expenses and other liabilities, and $16.5 million increase in the net change in other assets, partially offset by the $22.9 million increase in the net change related to pre-acquisition costs and deposits, accounts receivable, and compensation expense for equity awards.
Investing Activities
Net cash provided by investing activities was $31.8 million during the nine months ended September 30, 2026, primarily due to $37.0 million in proceeds from the sale of property and equipment, partially offset by an additional $3.4 million investment in unconsolidated entities.
Net cash provided by investing activities was $14.3 million during the nine months ended September 30, 2025, primarily due to $10.2 million in proceeds from the sale of property and equipment and $8.6 million in return of capital, partially offset by an additional $3.6 million investment in unconsolidated entities.
Financing Activities
Net cash used in financing activities was $121.6 million during the nine months ended September 30, 2026, primarily driven by $352.0 million of repayments on the 2025 Credit Agreement and payments of $8.1 million related to a financing arrangement with a third-party land banker, offset by $235.5 million of borrowings under the 2025 Credit Agreement.
Net cash provided by financing activities was $221.2 million during the nine months ended September 30, 2025, primarily driven by $594.6 million of borrowings under our credit agreement then in effect, offset by $323.0 million of repayments on our credit agreement then in effect and payments of $24.2 million related to a financing arrangement with a third-party land banker. In addition, during the nine months ended September 30, 2025, we repurchased $23.6 million of shares of our common stock under our stock repurchase program to be held as treasury stock.
Inflation
Our business can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. See "Industry and Economic Risks-Inflation could adversely affect our business and financial results" in Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Material Cash Requirements
As of September 30, 2026, there have been no material changes to our known contractual and other obligations appearing in the "Material Cash Requirements" section of Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, management evaluates such estimates and judgments and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future.
We believe that there have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2026 as compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Cautionary Statement about Forward-Looking Statements
From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "will" or other similar words.
We have based our forward-looking statements on our management's beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may, and often do, vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
The following are some of the factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements:
•adverse economic changes either nationally or in the markets in which we operate, including, among other things, potential impacts from political uncertainty, civil unrest, increases in unemployment, volatility of mortgage interest rates, supply chain disruptions (including due to the conflict between Russia and Ukraine and the wide-ranging sanctions the United States and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials and the conflict in the Middle East), inflation, the possibility of recession and decreases in housing prices;
•a slowdown in the homebuilding industry or changes in population growth rates in our markets;
•volatility and uncertainty in the credit markets and broader financial markets;
•elevated mortgage interest rates for prolonged periods, disruption in the terms or availability of mortgage financing or increase in the number of foreclosures in our markets;
•disruptions in global trade, including as a result of tariffs, trade restrictions, retaliatory trade measures or the effect of such actions on trading relationships between the United States and other countries;
•the cyclical and seasonal nature of our business;
•our future operating results and financial condition;
•our business operations;
•changes in our business and investment strategy;
•the success of our operations in recently opened new markets and our ability to expand into additional new markets;
•our ability to successfully extend our business model to building homes with higher price points, developing larger communities and producing and selling multi-unit products, town houses, wholesale products, and acreage home sites;
•our ability to develop our projects successfully or within expected timeframes;
•our ability to identify potential acquisition targets, close such acquisitions and realize the benefits of such acquisitions;
•increases in taxes or government fees;
•decline in the market value of our land portfolio;
•our ability to successfully integrate any acquisitions with our existing operations;
•availability of land to acquire and our ability to acquire such land on favorable terms or at all;
•availability, terms and deployment of capital and ability to meet our ongoing liquidity needs;
•decisions of the Credit Agreement lender group;
•the cost and availability of insurance and surety bonds;
•shortages of or increased prices for labor, land, or raw materials used in land development and housing construction, including due to tariffs or trade restrictions imposed by the U.S. government, and any effect on trading relationships between the United States and other countries;
•delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control;
•uninsured losses in excess of insurance limits;
•our leverage and future debt service obligations;
•changes in, liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental, privacy and security laws and regulations;
•the timing of receipt of regulatory approvals and the opening of projects;
•the degree and nature of our competition;
•information system failures, cyber incidents or breaches in security;
•our ability to retain our key personnel;
•the impact of an epidemic or pandemic and its effect on us, our business, customers, subcontractors and suppliers (including associated supply chain disruptions);
•negative publicity or poor relations with the residents of our projects;
•existing and future litigation, arbitration or other claims;
•availability of qualified personnel and third-party contractors and subcontractors;
•the impact on our business of any future U.S. government shutdown;
•other risks and uncertainties inherent in our business;
•other factors we discuss under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations"; and
•the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by law. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Quarterly Report on Form 10-Q.
LGI Homes Inc. published this content on November 03, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 03, 2026 at 21:44 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]