Sekisui House U.S. Inc.

11/12/2026 | Press release | Distributed by Public on 11/12/2026 16:19

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

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are based upon management's experiences, observations, and analyses. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2025 and this Quarterly Report on Form 10-Q.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2026 2025 2026 2025
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues
$ 1,238,759 $ 1,531,183 $ 3,777,605 $ 4,782,583
Land sale revenues 6,025 6,864 15,877 11,429
Other revenues - 108 - 8,197
Total revenues 1,244,784 1,538,155 3,793,482 4,802,209
Home cost of sales
(1,035,826) (1,269,048) (3,176,698) (3,987,013)
Inventory impairments
(41,950) (45,050) (46,450) (60,253)
Total home cost of sales (1,077,776) (1,314,098) (3,223,148) (4,047,266)
Land cost of sales (4,438) (4,830) (11,795) (8,300)
Other cost of sales - (517) - (6,946)
Total cost of sales (1,082,214) (1,319,445) (3,234,943) (4,062,512)
Gross margin 162,570 218,710 558,539 739,697
Selling, general and administrative expenses
(178,755) (193,241) (562,561) (589,008)
Interest and other income
2,352 4,384 6,187 17,756
Other expense (1,437) (4,811) (6,019) (14,192)
Homebuilding pretax income (loss) (15,270) 25,042 (3,854) 154,253
Financial Services:
Revenues
30,247 41,347 90,059 129,128
Expenses
(22,800) (27,002) (69,806) (84,922)
Other income, net 3,485 3,308 9,487 11,250
Financial services pretax income 10,932 17,653 29,740 55,456
Income (loss) before income taxes (4,338) 42,695 25,886 209,709
Benefit (provision) for income taxes 2,632 (8,572) (6,677) (40,948)
Net income (loss) $ (1,706) $ 34,123 $ 19,209 $ 168,761
Cash provided by (used in):
Operating Activities
$ 59,581 $ (395,174) $ 137,728 $ (861,710)
Investing Activities
$ (7,752) $ (10,924) $ (27,117) $ 75,811
Financing Activities
$ (59,729) $ 208,365 $ (307,420) $ 126,896
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Overview
Industry Conditions and Outlook for SHUS*
Overall housing demand remained challenging during the third quarter of 2026, with continuing affordability concerns including an increase in mortgage loan interest rates. Further, the macroeconomic backdrop remains challenging given continuing uncertainty related to geopolitical tensions. As a result, we experienced a decrease in our sales absorption rate during the three months ended September 30, 2026 compared to the same period in the prior year.
We believe that we are well equipped to navigate the current market conditions given our strong financial position. We ended the quarter with total cash and cash equivalents of $163.9 million, a debt-to-capital ratio of 23.7% and no senior note maturities until 2030.
Three Months Ended September 30, 2026
For the three months ended September 30, 2026, our net income (loss) was $(1.7) million, a 105% decrease compared to net income of $34.1 million for the same period in the prior year. This was driven by a decrease in pretax income of both our homebuilding business and financial services business. Our homebuilding pretax income decreased $40.3 million, or 161% year-over-year. Our financial services pretax income decreased $6.7 million, or 38%, compared to the same period in the prior year. The decrease in homebuilding pretax income was primarily due to a 19% decrease in home sale revenues, 180 basis point increase in our selling, general and administrative expenses as a percentage of home sale revenues and a 120 basis point decrease in gross margin from home sales. The decrease in gross margin from home sales was driven largely by increased incentive levels, and to a lesser extent, increased land costs. The decrease in financial services pretax income was driven by both our mortgage operations and other financial services operations. The decrease in pretax income for our mortgage operations was driven by decreased loan origination volume due to the decrease in homes closed. The decrease in pretax income for our other financial services operations was due to a decrease in home closings. Our homebuilding businesses saw a decrease in interest income due to decreases in cash and short-term investments year-over-year.
Nine Months Ended September 30, 2026
For the nine months ended September 30, 2026, our net income was $19.2 million, an 89% decrease compared to net income of $168.8 million for the same period in the prior year. This was driven by a decrease in pretax income of both our homebuilding business and financial services business. Our homebuilding pretax income decreased $158.1 million, or 102% year-over-year. Our financial services pretax income decreased $25.7 million, or 46%, compared to the same period in the prior year. The decrease in homebuilding pretax income was primarily due to a 21% decrease in home sale revenues, a 70 basis point decrease in gross margins from home sales and a 260 basis point increase in our selling, general and administrative expenses as a percentage of home sale revenues. The decrease in gross margin from home sales was driven largely by increased incentive levels, and to a lesser extent, increased land costs, which was partially offset by a decrease of $13.8 million in inventory impairments year over year. The decrease in financial services pretax income was driven by both our mortgage operations and other financial services operations. The decrease in pretax income for our mortgage operations was driven by decreased loan origination volume due to the decrease in homes closed as well as special financing programs offered on loans locked during the respective periods. The decrease in pretax income for our other financial services operations was due to a decrease in home closings. Our financial services and homebuilding businesses each saw a decrease in interest income due to decreases in cash and short-term investments year-over-year.
* See "Forward-Looking Statements" below.
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Homebuilding
Pretax Income (Loss):
Three Months Ended
Nine Months Ended
September 30,
Change
September 30,
Change
2026 2025
Amount
%
2026 2025
Amount
%
(Dollars in thousands)
Pacific Northwest $ 8,595 $ 14,056 $ (5,461) (39) % $ 13,131 $ 30,607 $ (17,476) (57) %
California (46,818) (897) (45,921) (5,119) % (53,087) 12,085 (65,172) (539) %
Desert 8,841 1,844 6,997 379 % 11,056 32,895 (21,839) (66) %
Mountain 7,772 15,713 (7,941) (51) % 16,647 58,868 (42,221) (72) %
Texas 9,433 15,983 (6,550) (41) % 23,536 37,149 (13,613) (37) %
East (7,384) (15,698) 8,314 53 % (27,337) (17,471) (9,866) (56) %
Corporate
4,291 (5,959) 10,250 172 % 12,200 120 12,080 10,067 %
Total Homebuilding pretax income (loss) $ (15,270) $ 25,042 $ (40,312) (161) % $ (3,854) $ 154,253 $ (158,107) (102) %
For the three months ended September 30, 2026, we recorded homebuilding pretax income (loss) of $(15.3) million, a decrease of 161% from $25.0 million for the same period in the prior year. The decrease was due to a $292.4 million decrease in home sale revenues, a 180 basis point increase in our selling, general and administrative expenses as a percentage of revenue and a 120 basis point decrease in gross margin from home sales.
Our Pacific Northwest, California, Mountain and Texas segments decrease in pretax income was driven by an increase in our selling, general and administrative expenses as a percentage of home sales revenue, which in Pacific Northwest, Mountain and Texas was partially offset by an increase in gross margin from home sales. Our California segments decrease in pretax income was also driven by a decrease in gross margin from home sales due to inventory impairments during the quarter. Our Desert and East segments increase in pretax income was driven by an increase in gross margin from home sales, with the East segment being offset partially by an increase in our selling, general and administrative expenses as a percentage of home sales revenues. Our Corporate segment experienced a $10.3 million increase in pretax income driven by a change in the allocation of the Corporate segments fees in supporting the homebuilding segments.
For the nine months ended September 30, 2026, we recorded homebuilding pretax income (loss) of $(3.9) million, a decrease of 102% from $154.3 million for the same period in the prior year. The decrease was due to a $1.00 billion decrease in home sale revenues, a 70 basis point decrease in gross margins from home sales and a 260 basis point increase in our selling, general and administrative expenses as a percentage of revenue.
Our Pacific Northwest, California, Desert, Mountain, Texas and East segments decrease in pretax income was driven by an increase in our selling, general and administrative expenses as a percentage of home sale revenues, and for California and Desert segments a decrease in gross margins from home sales. Our Corporate segment experienced a $12.1 million increase in pretax income driven by a change in the allocation of the Corporate segments fees in supporting the homebuilding segments.
Assets:
September 30,
2026 		December 31,
2025
Change
Amount
%
(Dollars in thousands)
Pacific Northwest $ 1,214,492 $ 1,222,938 $ (8,446) (1) %
California 1,797,080 1,720,250 76,830 4 %
Desert 1,654,569 1,697,152 (42,583) (3) %
Mountain 993,378 1,059,501 (66,123) (6) %
Texas 1,203,607 1,150,647 52,960 5 %
East 846,847 890,772 (43,925) (5) %
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Corporate
234,831 481,229 (246,398) (51) %
Total homebuilding assets
$ 7,944,804 $ 8,222,489 $ (277,685) (3) %
Total homebuilding assets decreased 3% from December 31, 2025 to September 30, 2026. The decrease in the Corporate segment was driven by a decrease in cash and cash equivalents due to repayments on the related party line of credit, which was partially offset by borrowings on our revolving credit facility during the nine months ended September 30, 2026.
The decrease in assets within our Desert, Mountain and East homebuilding segments were due to changes in inventories due to decreased land acquisition during the current year. The increase in assets within our California and Texas homebuilding segments were driven by an increase in inventories due to increased land acquisition during the current year.
New Home Deliveries & Home Sale Revenues:
Changes in home sale revenues are impacted by changes in the number of new homes delivered and the average selling price of those delivered homes. Commentary for each of our segments on significant changes in these two metrics is provided below.
Three Months Ended September 30,
2026 2025 % Change
Homes Home Sale
Revenues 		Average
Price 		Homes Home Sale
Revenues 		Average
Price 		Homes Home
Sale
Revenues 		Average Price
(Dollars in thousands)
Pacific Northwest 386 $ 223,755 $ 579.7 528 $ 297,857 $ 564.1 (27) % (25) % 3 %
California 301 205,341 682.2 432 302,847 701.0 (30) % (32) % (3) %
Desert 539 308,845 573.0 465 253,004 544.1 16 % 22 % 5 %
Mountain 274 175,699 641.2 467 286,918 614.4 (41) % (39) % 4 %
Texas 460 217,744 473.4 587 261,606 445.7 (22) % (17) % 6 %
East 245 107,375 438.3 272 128,951 474.1 (10) % (17) % (8) %
Total 2,205 $ 1,238,759 $ 561.8 2,751 $ 1,531,183 $ 556.6 (20) % (19) % 1 %
Nine Months Ended September 30,
2026 2025 % Change
Homes Home Sale
Revenues 		Average
Price 		Homes Home Sale
Revenues 		Average
Price 		Homes Home
Sale
Revenues 		Average Price
(Dollars in thousands)
Pacific Northwest 1,186 $ 689,283 $ 581.2 1,449 $ 834,407 $ 575.9 (18) % (17) % 1 %
California 944 645,627 683.9 1,236 847,522 685.7 (24) % (24) % 0 %
Desert 1,550 873,311 563.4 1,780 932,647 524.0 (13) % (6) % 8 %
Mountain 983 589,103 599.3 1,637 971,445 593.4 (40) % (39) % 1 %
Texas 1,390 653,493 470.1 1,620 715,936 441.9 (14) % (9) % 6 %
East 724 326,788 451.4 1,093 480,626 439.7 (34) % (32) % 3 %
Total 6,777 $ 3,777,605 $ 557.4 8,815 $ 4,782,583 $ 542.6 (23) % (21) % 3 %
For the three months ended September 30, 2026, the decrease in new home deliveries for all homebuilding segments except the Desert and East segment was due to a decrease in net home sales during the period. The decrease in new home deliveries for the East segment was driven by an increase in ending backlog during the period. The increase in new home deliveries for the Desert segment is due to an increase in beginning backlog at the beginning of the period. The increase in average sales price in the Pacific Northwest, Desert, Mountain and Texas homebuilding segments were driven by a change in mix to higher priced communities. The decrease in the average sales price in the East homebuilding segment was driven by a change in mix in backlog that closed during the 3 months ended September 30, 2026.
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For the nine months ended September 30, 2026, the decrease in new home deliveries for all homebuilding segments was due to a decrease in net home sales during the period and for all segments except for the East segment a decrease in beginning backlog at the beginning of the respective periods. The increase in average sales price in our Desert, Mountain, Texas, East and Pacific Northwest homebuilding segments were driven by a change in mix to higher priced communities.
Gross Margin from Home Sales:
Our gross margin from home sales for the three months ended September 30, 2026 decreased 120 basis points year-over-year from 14.2% to 13.0%. Our gross margin from home sales for the nine months ended September 30, 2026 decreased 70 basis points year-over-year from 15.4% to 14.7%. The decrease in gross margin from home sales for the three and nine months ended September 30, 2026 was largely due to increased incentive levels, and to a lesser extent, increased land costs. For the nine months ended September 30, 2026, this was partially offset by a decrease in inventory impairments.
Our gross margin from home sales is impacted by our historical land buying strategy, where we have targeted an owned and optioned lot supply of approximately two to three years worth of home closings. As a result, our land associated with homes closed are represented by more recent market values.
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Inventory Impairments:
Inventory impairments recognized by segment for the three and nine months ended September 30, 2026 and 2025 are shown in the table below.
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
(Dollars in thousands)
(Dollars in thousands)
Housing Completed or Under Construction:
Pacific Northwest $ - $ - $ 560 $ 4,689
California 30,770 8,483 30,770 10,914
Desert - 3,545 1,450 3,545
Mountain - 4,952 - 4,952
Texas - 661 - 1,761
East - 6,616 2,014 7,366
Subtotal
30,770 24,257 34,794 33,227
Land and Land Under Development:
Pacific Northwest - 450 140 3,661
California 11,180 10,467 11,180 13,489
Desert - 1,655 - 1,655
Mountain - 1,823 - 1,823
Texas - 389 - 389
East - 6,009 336 6,009
Subtotal
11,180 20,793 11,656 27,026
Total Inventory Impairments $ 41,950 $ 45,050 $ 46,450 $ 60,253
The table below provides quantitative data, for the periods presented, where applicable, used in determining the fair value of the impaired inventory.
Impairment Data
Quantitative Data
Three Months Ended
Number of Subdivisions Impaired
Inventory
Impairments
Fair Value of
Inventory After Impairments
Discount Rate
(Dollars in thousands)
September 30, 2026 4 41,950 53,818 15% - 18%
March 31, 2026 4 4,500 23,441 15%
Total $ 46,450
September 30, 2025 11 45,050 120,423 12% - 18%
June 30, 2025 8 15,203 55,679 12% - 15%
Total $ 60,253
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Selling, General and Administrative Expenses:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 Change 2026 2025 Change
(Dollars in thousands)
General and administrative expenses $ 93,046 $ 97,501 $ (4,455) $ 291,748 $ 288,027 $ 3,721
General and administrative expenses as a percentage of home sale revenues
7.5 % 6.4 % 110 bps 7.7 % 6.0 % 170 bps
Marketing expenses $ 40,270 $ 43,567 $ (3,297) $ 132,109 $ 134,556 $ (2,447)
Marketing expenses as a percentage of home sale revenues
3.3 % 2.8 % 50 bps 3.5 % 2.8 % 70 bps
Commissions expenses $ 45,439 $ 52,173 $ (6,734) $ 138,704 $ 166,425 $ (27,721)
Commissions expenses as a percentage of home sale revenues
3.7 % 3.4 % 30 bps 3.7 % 3.5 % 20 bps
Total selling, general and administrative expenses $ 178,755 $ 193,241 $ (14,486) $ 562,561 $ 589,008 $ (26,447)
Total selling, general and administrative expenses as a percentage of home sale revenues
14.4 % 12.6 % 180 bps 14.9 % 12.3 % 260 bps
General and administrative expenses decreased for the three months ended September 30, 2026 due to a decrease in compensation related costs as a result of a decrease in headcount. General and administrative expenses increased for the nine months ended September 30, 2026 due to certain overhead costs previously incurred by the Parent that are now incurred by the Company subsequent to the acquisition of Woodside in December 2025 and Chesmar and Holt in January 2026.
Marketing expenses decreased for the three and nine months ended September 30, 2026 compared to the prior year periods driven by a decrease in deferred marketing amortization due to lower closing volume and maintenance and utility costs as a result of having less spec homes in inventory. These decreases were offset by increased advertising spend during the periods as a result of the increased community count.
Commissions expenses decreased for the three and nine months ended September 30, 2026 compared to the prior year periods due to decreases in home sale revenues, partially offset by an increase in external broker commissions driven by higher participation.
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Other Homebuilding Operating Data
Net New Orders and Active Subdivisions:
Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the average selling price of those homes. The dollar value and average selling prices of net new orders do not include financing incentives, as these forward commitments are entered into prior to the home sales and are not specific to an individual home. Commentary for each of our segments on significant changes in these two metrics is provided below.
Three Months Ended September 30,
2026 2025 % Change
Homes Dollar
Value 		Average
Price 		Monthly
Absorption
Rate * 		Homes Dollar Value Average Price Monthly
Absorption Rate * 		Homes Dollar Value Average Price Monthly
Absorption
Rate
(Dollars in thousands)
Pacific Northwest 346 $ 205,902 $ 595.1 1.80 460 $ 272,991 $ 593.5 2.13 (25) % (25) % - % (15) %
California 265 188,091 709.8 1.34 365 251,522 689.1 2.39 (27) % (25) % 3 % (44) %
Desert 438 256,094 584.7 1.59 504 294,993 585.3 2.27 (13) % (13) % - % (30) %
Mountain 232 154,281 665.0 1.06 446 284,997 639.0 2.25 (48) % (46) % 4 % (53) %
Texas 413 191,923 464.7 1.25 532 247,733 465.7 1.69 (22) % (23) % - % (26) %
East 279 133,145 477.2 1.75 264 128,271 485.9 2.10 6 % 4 % (2) % (16) %
Total 1,973 $ 1,129,436 $ 572.4 1.44 2,571 $ 1,480,507 $ 575.8 2.09 (23) % (24) % (1) % (31) %
Nine Months Ended September 30,
2026 2025 % Change
Homes Dollar
Value 		Average
Price 		Monthly
Absorption
Rate * 		Homes Dollar Value Average Price Monthly
Absorption Rate * 		Homes Dollar Value Average Price Monthly
Absorption
Rate
(Dollars in thousands)
Pacific Northwest 1,328 $ 794,880 $ 598.6 2.20 1,552 $ 915,316 $ 589.8 2.54 (14) % (13) % 1 % (13) %
California 1,099 781,847 711.4 2.00 1,290 895,901 694.5 2.81 (15) % (13) % 2 % (29) %
Desert 1,716 1,004,458 585.3 2.07 1,831 1,015,725 554.7 2.91 (6) % (1) % 6 % (29) %
Mountain 1,043 662,658 635.3 1.63 1,647 1,024,392 622.0 2.95 (37) % (35) % 2 % (45) %
Texas 1,427 693,204 485.8 1.47 1,745 817,042 468.2 1.92 (18) % (15) % 4 % (24) %
East 869 412,673 474.9 1.97 1,137 525,703 462.4 3.16 (24) % (22) % 3 % (38) %
Total 7,482 $ 4,349,720 $ 581.4 1.86 9,202 $ 5,194,079 $ 564.5 2.61 (19) % (16) % 3 % (29) %
*Calculated as total net new orders (gross orders less cancellations) in period ÷ average active communities during period ÷ number of months in period.
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Average Active Subdivisions
Average Active Subdivisions
Active Subdivisions
Three Months Ended
Nine Months Ended
September 30,
%
September 30,
%
September 30,
%
2026 2025
Change
2026 2025
Change
2026 2025
Change
Pacific Northwest 63 76 (17) % 64 72 (11) % 67 68 (1) %
California 65 52 25 % 66 51 29 % 61 51 20 %
Desert 86 80 8 % 92 74 24 % 92 70 31 %
Mountain 74 68 9 % 73 66 11 % 71 62 15 %
Texas 110 103 7 % 110 105 5 % 108 101 7 %
East 52 45 16 % 53 42 26 % 49 40 23 %
Total 450 424 6 % 458 410 12 % 448 392 14 %
For the three months ended September 30, 2026 for the Pacific Northwest, California, Desert, Mountain and Texas homebuilding segments and for all homebuilding segments for the nine months ended September 30, 2026, the decrease in the number of net new orders was primarily the result of a decrease in the monthly sales absorption rate, offset partially by an increase in average active subdivisions for all homebuilding segments except Pacific Northwest. The decrease in the monthly sales absorption rate is due to decreased demand as a result of current market conditions. For the three months ended September 30, 2026 the increase in net sales for the East homebuilding segment was driven by an increase in average active subdivisions, partially offset by a decrease in the monthly sales absorption rate. The increase in average selling price for the three months ended September 30, 2026 in the Mountain and California homebuilding segments and nine months ended September 30, 2026 for all homebuilding segments was driven by a change in mix to higher priced communities.
Cancellation Rate:
Cancellations as a Percentage of Gross Sales Cancellations as a Percentage of Gross Sales
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Pacific Northwest 13 % 10 % 10 % 11 %
California 18 % 15 % 13 % 13 %
Desert 20 % 12 % 15 % 15 %
Mountain 15 % 14 % 13 % 14 %
Texas 19 % 18 % 15 % 15 %
East 19 % 19 % 16 % 16 %
Total 18 % 15 % 14 % 14 %
Our cancellation rate as a percentage of gross sales increased year-over-year during the three months ended September 30, 2026 as a result of a decrease in gross sales with consistent cancellation levels driven by the increase in mortgage interest rates during the quarter.
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Backlog:
September 30,
2026 2025 % Change
Homes Dollar
Value 		Average
Price 		Homes Dollar
Value 		Average
Price 		Homes Dollar
Value 		Average
Price
(Dollars in thousands)
Pacific Northwest 405 $ 248,051 $ 612.5 448 $ 256,888 $ 573.4 (10) % (3) % 7 %
California 338 277,772 821.8 323 246,586 763.4 5 % 13 % 8 %
Desert 381 269,593 707.6 316 218,404 691.2 21 % 23 % 2 %
Mountain 210 152,780 727.5 202 131,578 651.4 4 % 16 % 12 %
Texas 471 260,772 553.7 600 313,744 522.9 (22) % (17) % 6 %
East 229 123,352 538.7 128 67,567 527.9 79 % 83 % 2 %
Total 2,034 $ 1,332,320 $ 655.0 2,017 $ 1,234,767 $ 612.2 1 % 8 % 7 %
At September 30, 2026, we had 2,034 homes in backlog with a total value of $1.33 billion. This represented a 1% increase in the number of homes in backlog and an 8% increase in the dollar value of those homes in backlog from September 30, 2025. The increase in average selling price in each of the homebuilding segments is due to a change in mix to higher priced communities. The dollar value and average selling prices of homes in backlog do not include financing incentives, as these forward commitments are entered into prior to the home sales and are not specific to an individual home.
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Homes Completed or Under Construction (WIP lots):
September 30,
%
2026 2025
Change
Unsold:
Completed
1,843 2,743 (33) %
Under construction
1,952 2,838 (31) %
Total unsold started homes
3,795 5,581 (32) %
Sold homes under construction or completed
1,755 1,821 (4) %
Model homes under construction or completed
790 762 4 %
Total homes completed or under construction
6,340 8,164 (22) %
The decrease in unsold completed homes and unsold homes under construction is due to a decrease of home starts during the period and the strategic shift to more build to order homes.
Lots Owned and Optioned (including homes completed or under construction):
September 30, 2026 September 30, 2025
Lots
Owned 		Lots
Optioned 		Total Lots
Owned 		Lots
Optioned 		Total Total
%
Change
Pacific Northwest 7,874 1,309 9,183 8,785 2,617 11,402 (19) %
California 5,643 712 6,355 6,008 2,001 8,009 (21) %
Desert 6,702 822 7,524 7,951 1,343 9,294 (19) %
Mountain 4,938 544 5,482 5,509 1,449 6,958 (21) %
Texas 7,762 2,619 10,381 7,911 3,086 10,997 (6) %
East 5,125 769 5,894 5,067 2,609 7,676 (23) %
Total 38,044 6,775 44,819 41,231 13,105 54,336 (18) %
Our total owned and optioned lots at September 30, 2026 were 44,819, which represented an 18% decrease year-over-year. We believe that our total lot supply is sufficient to meet our operating needs. See "Forward-Looking Statements" below.
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Financial Services
Three Months Ended
Nine Months Ended
September 30,
Change
September 30,
Change
2026 2025
Amount
%
2026 2025
Amount
%
(Dollars in thousands)
Financial services revenues
Mortgage operations $ 17,947 $ 25,257 $ (7,310) (29) % $ 52,714 $ 79,843 $ (27,129) (34) %
Other 12,300 16,090 (3,790) (24) % 37,345 49,285 (11,940) (24) %
Total financial services revenues $ 30,247 $ 41,347 $ (11,100) (27) % $ 90,059 $ 129,128 $ (39,069) (30) %
Financial services pretax income
Mortgage operations $ 3,174 $ 6,161 $ (2,987) (48) % $ 7,189 $ 20,841 $ (13,652) (66) %
Other 7,758 11,492 (3,734) (32) % 22,551 34,615 $ (12,064) (35) %
Total financial services pretax income $ 10,932 $ 17,653 $ (6,721) (38) % $ 29,740 $ 55,456 $ (25,716) (46) %
For the three months ended September 30, 2026, our financial services pretax income was $10.9 million, a 38% decrease compared to pretax income of $17.7 million for the same period in the prior year. For the nine months ended September 30, 2026, our financial services pretax income was $29.7 million, a 46% decrease compared to pretax income of $55.5 million for the same period in the prior year. The decrease during both periods in financial services pretax income was due to both our mortgage operations and other financial services operations. Both financial services segments pretax income was impacted by the decrease in homes closed year-over-year as well as mortgage operations incurring a decrease in interest income due to decreases in cash and short-term investments year-over-year. This was partially offset in mortgage operations by a gain in the mortgage servicing sale during the quarter. Further, for the nine months ended September 30, 2026, the decrease in mortgage operations was largely due to special financing programs offered on loans locked during the quarter.
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The following table sets forth information for our mortgage operations segment relating to mortgage loans originated and capture rate.
Three Months Ended % or
Percentage 		Nine Months Ended % or
Percentage Change
September 30, September 30,
2026 2025 Change 2026 2025
(Dollars in thousands)
Total Originations (including transfer loans):
Loans 1,624 2,109 (23) % 5,094 6,863 (26) %
Principal $ 783,376 $ 1,009,937 (22) % $ 2,461,538 $ 3,256,192 (24) %
Capture Rate Data:
Capture rate as % of all homes delivered 74 % 76 % (2) % 75 % 78 % (3) %
Mortgage Loan Origination Product Mix:
FHA loans 26 % 27 % (1) % 26 % 31 % (5) %
Other government loans (VA & USDA) 18 % 16 % 2 % 18 % 17 % 1 %
Total government loans 44 % 43 % 1 % 44 % 47 % (3) %
Conventional loans 56 % 57 % (1) % 56 % 53 % 3 %
100 % 100 % - % 100 % 100 % - %
Loan Type:
Fixed rate 89 % 89 % - % 89 % 97 % (8) %
ARM 11 % 11 % - % 11 % 3 % 8 %
Credit Quality:
Average FICO Score 744 743 - % 743 742 - %
Other Data:
Average Combined LTV ratio 85 % 85 % - % 86 % 85 % 1 %
Full documentation loans 100 % 100 % - % 100 % 100 % - %
Loans Sold to Third Parties:
Loans 1,696 2,109 (20) % 5,122 7,074 (28) %
Principal $ 822,568 $ 1,003,484 (18) % $ 2,480,445 $ 3,333,603 (26) %
Income Taxes
The Company is included in the Sekisui House US Holdings, LLC (parent of SH Residential Holdings, LLC) ("SHUSH") consolidated tax group for U.S. federal income tax purposes. Although the Company's post-merger results are included in the Sekisui House consolidated return, our income tax provision is calculated primarily as though we were a separate taxpayer for the full year. However, under certain circumstances, transactions between the Company and Sekisui House are assessed using consolidated tax return rules and any difference in liability between the separate company method will be addressed in a future tax sharing arrangement.
Our overall effective income tax rates were 60.7% and 25.8% for the three and nine months ended September 30, 2026 and 20.1% and 19.5% for the three and nine months ended September 30, 2025, respectively. The rates for the three and nine months ended September 30, 2026 resulted in an income tax benefit (expense) of $2.6 million and $(6.7) million, respectively, compared to $(8.6) million and $(40.9) million for the three and nine months ended September 30, 2025, respectively. The year-over-year increase in our effective tax rate for the three months ended September 30, 2026 is primarily due to the impact of IRC 45L credits on the benefit for the period. The year-over-year increase in our effective tax rate for the nine months ended September 30, 2026 is due to the impacts of interest related to uncertain tax positions, changes in state rate and true-ups related to prior period filings, partially offset by the impacts of IRC 45L credits.
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CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the 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. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates if conditions are significantly different in the future. See "Forward-Looking Statements" below.
Our critical accounting estimates and policies have not changed from those reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.
LIQUIDITY AND CAPITAL RESOURCES
We use our liquidity and capital resources to (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, Revolving Credit Facility (as defined below) and Mortgage Repurchase Facilities (as defined below).
Material Cash Requirements
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of September 30, 2026, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our Mortgage Repurchase Facilities, payments due on our Revolving Credit Facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which are secured by letters of credit or surety bonds) and operating leases. Other material cash requirements include land acquisition and development costs not yet contracted for, home construction costs, operating expenses, including our selling, general and administrative expenses, investments and funding of capital improvements and dividend payments.
At September 30, 2026, we had outstanding senior notes with varying maturities totaling an aggregate principal amount of $1.50 billion, with none payable within 12 months. Future interest payments associated with the notes total $1.06 billion, with $64.2 million payable within 12 months. As of September 30, 2026, we had $54.0 million of required operating lease future minimum payments.
At September 30, 2026, we had deposits of $79.3 million in the form of cash and $5.4 million in the form of letters of credit that secured option contracts to purchase 6,775 lots for a total estimated purchase price of $722.0 million.
At September 30, 2026, we had outstanding surety bonds and letters of credit totaling $765.9 million and $137.9 million, respectively, including $99.1 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately $363.9 million and $118.2 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit. We have made no material guarantees with respect to third-party obligations.
Capital Resources
Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders' equity; (2) long-term financing, represented by our 3.850% senior notes due 2030, 2.500% senior notes due 2031, 6.000% senior notes due 2043, and 3.966% senior notes due 2061; (3) our Revolving Credit Facility; and (4) our Mortgage Repurchase Facilities. Because of our current balance of cash and cash equivalents, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facilities, we believe that our capital resources are adequate to satisfy our
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short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See "Forward-Looking Statements" below.
We may from time to time seek to retire or purchase our outstanding senior notes through cash purchases, whether through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facilities
Senior Notes. Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries (including newly added subsidiaries of Woodside, Chesmar and Holt in March 2026). We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.
Revolving Credit Facility. On November 19, 2024 the Company entered into an amended and restated unsecured revolving credit agreement ("Revolving Credit Facility") with a group of lenders, which may be used for general corporate purposes. On October 15, 2025, the Company entered into the First Amendment to Credit Agreement ("First Amendment") to its Revolving Credit Facility. The First Amendment increased the Aggregate Commitment to $1.40 billion (the "Commitment") and extended the Facility Termination Date of $1.36 billion of the facility commitments to October 15, 2029, with the remaining $40.0 million commitment continuing to terminate on November 17, 2028. The First Amendment also provides that the aggregate amount of the commitments may increase to an amount not to exceed $1.90 billion (the "accordion" feature) upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. The Revolving Credit Facility includes a $185.0 million sublimit for letters of credit.
Borrowings under the Revolving Credit Facility bear interest at a floating rate equal to Term SOFR or Daily Simple SOFR (in each case as defined in the Revolving Credit Facility), plus an applicable margin between 1.125% and 1.625% per annum, or if selected by the Company, a base rate plus an applicable margin between 0.125% and 0.625% per annum. The "applicable margins" described above are determined by a schedule based on the leverage ratio of the Company, as defined in the Revolving Credit Facility. The Revolving Credit Facility also provides for customary fees including commitment fees payable to each lender ranging from 0.15% to 0.30% per annum based on the Company's leverage ratio.
The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries (including newly added subsidiaries of Woodside, Chesmar and Holt in March 2026). The term of the guarantees is through the termination of the Revolving Credit Facility. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. In the case of a default, the guarantors would be required to perform under the agreement. The financial covenants include a consolidated leverage test and interest coverage test, along with a consolidated tangible net worth covenant, all as defined in the Revolving Credit Facility.
The Revolving Credit Facility also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any event of default, the Administrative Agent, with the consent or at the direction of the required lenders, may accelerate the payment of the obligations thereunder and exercise various other customary default remedies. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of September 30, 2026.
We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At September 30, 2026 and December 31, 2025, there were $21.2 million and $35.5 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At September 30, 2026 and December 31, 2025, we had $229.0 million and $0.0 million, respectively, outstanding under the Revolving Credit Facility. As of September 30, 2026, availability under the Revolving Credit Facility was approximately $1.15 billion.
Mortgage Repurchase Facilities. Our Mortgage Operations enter into Mortgage Repurchase Facilities with various lenders, which provide liquidity by providing for the sale of eligible mortgage loans with an agreement by our Mortgage Operations to repurchase the mortgage loans at a future date. HomeAmerican is party to mortgage repurchase facilities with two lenders, which provide HomeAmerican with committed repurchase facilities of up to an aggregate of $300.0 million as of September 30, 2026 (subject to increase by up to $150.0 million under certain conditions with respect to one of the lenders). CLM
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is party to mortgage repurchase facilities with one lender, which provides CLM with committed repurchase facilities of up to an aggregate of $75.0 million as of September 30, 2026.
At September 30, 2026 and December 31, 2025, HomeAmerican and CLM had $120.6 million and $177.2 million, respectively, of mortgage loans that they were obligated to repurchase under the Mortgage Repurchase Facilities. Mortgage loans that our Mortgage Operations are obligated to repurchase under the mortgage repurchase facilities are accounted for as a debt financing arrangement and are reported as mortgage repurchase facilities in the consolidated balance sheets. Pricing under the mortgage repurchase facilities are based on SOFR.
Effective April 16, 2025, HomeAmerican entered into a Waiver and Consent agreement with USBNA, in which USBNA as agent waived any events of default under the Mortgage Repurchase Facility arising with respect to an event of default as HomeAmerican was not in compliance by permitting the Adjusted Tangible Net Worth to be less than $21.0 million for the month ending February 28, 2025.
The Mortgage Repurchase Facilities have varying short term maturity dates through March 3, 2027. The Mortgage Repurchase Facilities contain various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the mortgage repurchase facilities. We believe our Mortgage Operations were in compliance with the representations, warranties and covenants included in the mortgage repurchase facilities as of September 30, 2026.
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Consolidated Cash Flow
During the nine months ended September 30, 2026, net cash provided by operating activities was $137.7 million compared with net cash used in operating activities of $861.7 million in the prior year period. During the nine months ended September 30, 2026, we generated net income of $19.2 million compared to $168.8 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2026, included in net income was $46.5 million of inventory impairments, compared to $60.3 million during the prior year period. During the nine months ended September 30, 2026, cash used in the increase in inventory was $64.2 million compared to $1.29 billion during the prior year period. The decrease in 2026 compared to 2025 was the result of reduced lot acquisitions during the period compared to 2025. Cash provided by the increase in trade and other receivables for the nine months ended September 30, 2026 was $17.4 million compared to cash used in the decrease in trade and other receivables of $15.3 million for the nine months ended September 30, 2025. The increase during the nine months ended September 30, 2026 was driven by an increase of homes closed at the end of the period compared to a decrease of homes closed at the end of the prior year period. Cash provided by the change in mortgage loans held-for-sale, net for the nine months ended September 30, 2026 was $31.7 million compared to $72.8 million for the nine months ended September 30, 2025. The decrease in the cash provided by the nine months ended September 30, 2026 was due to a a higher level of originations compared to loan sales, compared to higher level of loan sales compared to originations during the same period in the prior year. The cash provided by the increase of accounts payable and accrued and other liabilities was $29.3 million during the nine months ended September 30, 2026 compared to $51.9 million during the same period in the prior year. The change in accounts payable and accrued liabilities was due to decreased construction spend during the the nine months in 2026 as a result of the year-over-year decrease in the number of homes under construction during the period.
During the nine months ended September 30, 2026, net cash used in investing activities was $27.1 million, driven by purchases of property and equipment during the nine months ended September 30, 2026. This is compared to the net cash provided by investing activities of $75.8 million during the nine months ended September 30, 2025, due to the decrease in receivable from cash pooling arrangement with Parent of $108.9 million.
During the nine months ended September 30, 2026 the net cash used in financing activities was $307.4 million compared to cash provided by financing activities of $126.9 million during the nine months ended September 30, 2025. Cash used in draws on mortgage repurchase facility, net was $56.6 million during the nine months ended September 30, 2026 compared to $51.3 million during the same period in 2025. The decrease in cash provided by draws on mortgage repurchase facility, net during the nine months ended September 30, 2026 was due to an decrease in cash used versus the facility to fund loans as of September 30, 2026. Cash provided by draws on homebuilding line of credit, net was $229.0 million during the nine months ended September 30, 2026 compared to $85.0 million during the same period during 2025. Payments on related party line of credit from cash pooling arrangement with Parent was $442.8 million compared to advances on related party line of credit from cash pooling arrangement with Parent of $333.2 million during the same period in the prior year. The payment on the related party line of credit during 2026 was due to the maturity and discontinuance of the cash pooling arrangement with the Parent. Cash used in dividend payments was $37.0 million during the nine months ended September 30, 2026 compared to $138.6 million during the same period during the prior year. The decrease is driven by a decrease in net income during fiscal year 2026 as compared to fiscal year 2025.
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OTHER
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases and oral statements made by our officials in the course of presentations about the Company, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as "likely," "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue," or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us are contained under the caption "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and Item 1A of Part II of this Quarterly Report on Form 10-Q.
Sekisui House U.S. Inc. published this content on November 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 12, 2026 at 22:19 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]