LGI Homes Inc

Previous wording

The housing market remains healthy, with overall demand supported by strong fundamentals, including household formation and migration trends, the ongoing impact of years of underproduction, and a lock-in effect limiting the supply of existing homes available for sale. On top of these dynamics are a resilient employment market and our customers’ positive outlook on the stability of their jobs. On the other side of the demand equation is constrained affordability, which remains the main challenge for our customers. During the six months ended June 30, 2024, we had 2,738 home closings, compared to 3,220 home closings during the six months ended June 30, 2023.

Current wording

The housing market remains healthy, with overall demand supported by strong fundamentals, including household formation and migration trends, the ongoing impact of years of underproduction, and a lock-in effect limiting the supply of existing homes available for sale. On top of these dynamics are a resilient employment market and our customers’ positive outlook on the stability of their jobs. On the other side of the demand equation is constrained affordability, which remains the main challenge for our customers. During the nine months ended September 30, 2024, we had 4,495 home closings, compared to 4,971 home closings during the nine months ended September 30, 2023.

Previous wording

At June 30, 2024, we had 128 active communities, including 17 Terrata Homes communities. At June 30, 2023, we had 102 active communities, including 11 Terrata Homes communities.

Current wording

We sell homes under the LGI Homes and Terrata Homes brands. Our 138 active communities at September 30, 2024 included 18 Terrata Homes communities. At September 30, 2023, we had 106 active communities, including 11 Terrata Homes communities.

Previous wording

For a further description of the Credit Agreement, please refer to Note 4, “Notes Payable” to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

On October 9, 2024, we entered into the Fifth Amendment, which amended the 2023 Credit Agreement. The Fifth Amendment, among other things, (a) amended the negative covenant in the Credit Agreement relating to housing inventory and (b) extended the maturity of the commitments of certain lenders under the Credit Agreement to April 28, 2028. For additional information on the Credit Agreement (including defined terms used in this paragraph), see Note 4, “Notes Payable” to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 26.3% from 23.1%.

Current wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues was 27.2% in both comparable periods.

Previous wording

Key financial results as of and for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, were as follows:

Current wording

Key financial results as of and for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

Previous wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 27.0% from 23.8%.

Current wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 26.7% from 24.5%.

Previous wording

We owned and controlled 69,904 lots at June 30, 2024 as compared to 70,145 lots at March 31, 2024 and 71,081 lots at December 31, 2023.

Current wording

We owned and controlled 68,564 lots at September 30, 2024 as compared to 69,904 lots at June 30, 2024 and 71,081 lots at December 31, 2023.

Previous wording

The following table sets forth our results of operations for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Home sales revenues for the three months ended June 30, 2024 were $602.5 million, a decrease of $42.8 million, or 6.6%, from $645.3 million for the three months ended June 30, 2023. The decrease in home sales revenues was primarily due to a 10.7% decrease in homes closed, partially offset by an increase in the average sales price per home closed during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The overall decrease in home closings was a result of an overall lower absorption rate, partially offset by a higher average community count, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease in home closings is due to continued pressure on affordability due to inflation and mortgage rates which continue to be elevated. The overall increase in average community count relates to timing associated with the close out of some higher performing communities, new openings that are still in the early stages, or transition between certain active communities during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The average sales price per home closed during the three months ended June 30, 2024 was $364,047, an increase of $16,005, or 4.6%, from the average sales price per home closed of $348,042 for the three months ended June 30, 2023. The increase in the average sales price per home closed was primarily due to geographic mix and a favorable pricing environment.

Current wording

Home sales revenues for the three months ended September 30, 2024 were $651.9 million, an increase of $34.3 million, or 5.6%, from $617.5 million for the three months ended September 30, 2023. The increase in home sales revenues was primarily due to an increase in the average sales price per home closed and a slight increase in homes closed during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The average sales price per home closed during the three months ended September 30, 2024 was $371,004, an increase of $18,326, or 5.2%, from the average sales price per home closed of $352,678 for the three months ended September 30, 2023. The increase in the average sales price per home closed was primarily due to geographic mix, largely in our Northwest and West segments, and a favorable pricing environment. The overall increase in home closings was a result of a higher average community count during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The overall increase in average community count relates to timing associated with new community openings, offset by the close out of some communities and transition between certain active communities during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The overall decrease in absorption rate generally relates to the impact of ongoing affordability constraints, new community openings, and the overall increase in community count.

Previous wording

Included within our home sales revenues for the three months ended June 30, 2024 was $35.7 million in wholesale revenues resulting from 117 home closings, representing 7.1% of the 1,655 total homes closed during the three months ended June 30, 2024. Included within our home sales revenues for the three months ended June 30, 2023 was $41.9 million in wholesale revenues resulting from 139 home closings, representing 7.5% of the 1,854 total homes closed during the three months ended June 30, 2023.

Current wording

Included within our home sales revenues for the three months ended September 30, 2024 was $49.5 million in wholesale revenues resulting from 160 home closings, representing 9.1% of the 1,757 total homes closed during the three months ended September 30, 2024. Included within our home sales revenues for the three months ended September 30, 2023 was $43.3 million in wholesale revenues resulting from 139 home closings, representing 7.9% of the 1,751 total homes closed during the three months ended September 30, 2023.

Previous wording

•Home sales revenues in our Central reportable segment decreased by $57.2 million, or 24.8%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to a 24.6% decrease in the number of homes closed and a slight decrease in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Current wording

•Home sales revenues in our Central reportable segment decreased by $19.2 million, or 10.4%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to a 9.3% decrease in the number of homes closed and a 1.3% decrease in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Previous wording

•Home sales revenues in our Southeast reportable segment decreased by $8.2 million, or 5.7%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to an 8.5% decrease in the number of homes closed, partially offset by a 3.0% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate while community count remained flat.

Current wording

•Home sales revenues in our Southeast reportable segment increased by $5.6 million, or 3.8%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to a 3.1% increase in the number of homes closed and a 0.6% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Previous wording

•Home sales revenues in our Northwest reportable segment decreased by $2.3 million, or 3.2%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to a 7.7% decrease in the number of homes closed, partially offset by a 4.8% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Current wording

•Home sales revenues in our Northwest reportable segment increased by $15.4 million, or 22.8%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to a 14.5% increase in the number of homes closed and a 7.2% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Previous wording

•Home sales revenues in our West reportable segment increased by $45.4 million, or 54.9%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to a 43.9% increase in the number of homes closed and a 7.6% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Current wording

•Home sales revenues in our West reportable segment increased by $55.7 million, or 58.7%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to a 45.0% increase in the number of homes closed and a 9.4% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Previous wording

•Home sales revenues in our Florida reportable segment decreased by $20.5 million, or 17.4%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to a 20.4% decrease in the number of homes closed, partially offset by a 3.7% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by a higher average community count.

Current wording

•Home sales revenues in our Florida reportable segment decreased by $23.2 million, or 19.1%, during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to a 24.3% decrease in the number of homes closed, partially offset by a 6.9% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by a higher average community count.

Previous wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales decreased for the three months ended June 30, 2024 to $451.6 million, a decrease of $51.7 million, or 10.3%, from $503.3 million for the three months ended June 30, 2023, primarily due to a 10.7% decrease in homes closed. Gross margin for the three months ended June 30, 2024 was $150.9 million, an increase of $8.9 million, or 6.3%, from $141.9 million for the three months ended June 30, 2023. Gross margin as a percentage of home sales revenues was 25.0% for the three months ended June 30, 2024 and 22.0% for the three months ended June 30, 2023. This increase in gross margin as a percentage of home sales revenues was primarily due to a combination of lower input costs and higher sales prices during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales increased for the three months ended September 30, 2024 to $488.4 million, an increase of $29.6 million, or 6.5%, from $458.7 million for the three months ended September 30, 2023, primarily due to an increase in lot costs and higher capitalized interest. Gross margin for the three months ended September 30, 2024 was $163.5 million, an increase of $4.7 million, or 3.0%, from $158.8 million for the three months ended September 30, 2023. Gross margin as a percentage of home sales revenues was 25.1% for the three months ended September 30, 2024 and 25.7% for the three months ended September 30, 2023. This decrease in gross margin as a percentage of home sales revenues was primarily due to the impact of increased sales incentives offered and a combination of an increase in lot costs and higher capitalized interest during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

Selling Expenses. Selling expenses for the three months ended June 30, 2024 were $52.9 million, an increase of $3.6 million, or 7.4%, from $49.2 million for the three months ended June 30, 2023. The increase in selling expenses was primarily due to an increase in advertising expense and personnel costs, partially offset by a decrease in sales commissions for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Sales commissions decreased to $27.2 million for the three months ended June 30, 2024 from $28.9 million for the three months ended June 30, 2023, due to a 6.6% decrease in home sales revenues and a decrease in outside commissions during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Selling expenses as a percentage of home sales revenues were 8.8% and 7.6% for the three months ended June 30, 2024 and 2023, respectively. The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising and other expenses incurred during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Selling Expenses. Selling expenses for the three months ended September 30, 2024 were $55.2 million, an increase of $5.4 million, or 10.9%, from $49.8 million for the three months ended September 30, 2023. The increase in selling expenses was primarily due to an increase in advertising expense and an increase in personnel costs as a result of an increase in communities for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Sales commissions decreased to $27.6 million for the three months ended September 30, 2024 from $27.9 million for the three months ended September 30, 2023, primarily due to a decrease in outside commissions, partially offset by an increase in our in-house commissions due to an overall increase in revenues during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Selling expenses as a percentage of home sales revenues were 8.5% and 8.1% for the three months ended September 30, 2024 and 2023, respectively. The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising and other personnel expenses incurred during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

General and Administrative. General and administrative expenses for the six months ended June 30, 2024 were $62.0 million, an increase of $4.4 million, or 7.7%, from $57.6 million for the six months ended June 30, 2023. The increase in general and administrative expenses was primarily a result of community count growth and lower home sales revenues during the six months ended June 30, 2024. General and administrative expenses as a percentage of home sales revenues were 6.2% and 5.1% for the six months ended June 30, 2024 and 2023, respectively. The increase in general and administrative expenses as a percentage of home sales revenues was primarily a result of community count growth and lower home sales revenues during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

General and Administrative. General and administrative expenses for the three months ended September 30, 2024 were $28.0 million, an increase of $1.2 million, or 4.6%, from $26.7 million for the three months ended September 30, 2023. The increase in general and administrative expenses was primarily a result of increased indirect overhead expenses and professional fees, partially offset by a decrease in payroll related costs during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. General and administrative expenses as a percentage of home sales revenues were 4.3% during each of the three months ended September 30, 2024 and 2023.

Previous wording

Other Income. Other income, net of other expenses was $13.7 million for the six months ended June 30, 2024, an increase of $1.1 million from $12.6 million for the six months ended June 30, 2023. The increase in other income, net of other expenses, primarily reflects interest income and gains realized from the sale of residential lots and commercial acreage not directly associated with our core homebuilding operations.

Current wording

Other Income, Net. Other income, net of other expenses was $11.5 million for the three months ended September 30, 2024, an increase of $4.4 million from $7.2 million for the three months ended September 30, 2023. The increase in other income, net of other expenses, primarily reflects gains realized from the sale of residential lots and the increase in income associated with our investment in unconsolidated entities during the three months ended September 30, 2024.

Previous wording

Operating Income and Net Income before Income Taxes. Operating income for the three months ended June 30, 2024 was $67.5 million, an increase of $2.4 million, or 3.7%, from $65.1 million for the three months ended June 30, 2023. Net income before income taxes for the three months ended June 30, 2024 was $76.9 million, an increase of $5.5 million, or 7.7%, from $71.4 million for the three months ended June 30, 2023. Our reportable segments contributed to net income before income taxes during the three months ended June 30, 2024 as follows: Central - $21.7 million, or 28.2%; Southeast - $24.2 million, or 31.5%; Northwest - $7.7 million, or 10.1%; West - $17.0 million, or 22.1%; and Florida - $7.7 million, or 10.1%. The increases in operating income and net income before income taxes were primarily attributed to higher gross margins and higher average sales price per home closed, offset by higher advertising and other costs associated with the increase in average community count during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Operating Income and Net Income before Income Taxes. Operating income for the three months ended September 30, 2024 was $80.3 million, a decrease of $2.0 million, or 2.4%, from $82.3 million for the three months ended September 30, 2023. The decrease in operating income was primarily attributed to lower gross margin and higher advertising and other costs associated with the increase in average community count. Net income before income taxes for the three months ended September 30, 2024 was $91.9 million, an increase of $2.4 million, or 2.7%, from $89.4 million for the three months ended September 30, 2023. The increase in net income before income taxes was primarily attributed to gains realized from the sale of residential lots during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Our reportable segments contributed to net income before income taxes during the three months ended September 30, 2024 as follows: Central - $21.8 million, or 23.8%; Southeast - $27.6 million, or 30.0%; Northwest - $12.3 million, or 13.4%; West - $21.0 million, or 22.8%; and Florida - $9.7 million, or 10.6%.

Previous wording

Income Taxes. Income tax provision for each of the three months ended June 30, 2024 and 2023 was $18.3 million. The decrease in our effective tax rate to 23.8% for the three months ended June 30, 2024 from 25.6% for the three months ended June 30, 2023 was primarily a result of a decrease in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.

Current wording

Income Taxes. Income tax provision for the three months ended September 30, 2024 was $22.3 million, a decrease of $0.1 million, or 0.6%, from income tax provision of $22.4 million for the three months ended September 30, 2023. The decrease in our effective tax rate to 24.3% for the three months ended September 30, 2024 from 25.1% for the three months ended September 30, 2023 was primarily a result of a decrease in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.

Previous wording

Net Income. Net income for the three months ended June 30, 2024 was $58.6 million, an increase of $5.4 million, or 10.2%, from $53.1 million for the three months ended June 30, 2023. The increase in net income was primarily attributed to a higher gross margin and a higher average sales price per home closed during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Net Income. Net income for the three months ended September 30, 2024 was $69.6 million, an increase of $2.5 million, or 3.8%, from $67.0 million for the three months ended September 30, 2023. The increase in net income was primarily attributed to a higher average sales price per home closed and gains realized from the sale of residential lots during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

Homes Sales. Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the six months ended June 30, 2024 and 2023 were as follows (revenues in thousands):

Current wording

Homes Sales. Our home sales 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, 2024 and 2023 were as follows (revenues in thousands):

Previous wording

Home sales revenues for the six months ended June 30, 2024 were $993.3 million, a decrease of $139.3 million, or 12.3%, from $1.1 billion for the six months ended June 30, 2023. The decrease in home sales revenues was primarily due to a 15.0% decrease in homes closed, offset by an increase in the average sales price per home closed during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease in home closings is due to continued pressure on affordability due to inflation and mortgage rates which continue to be elevated. The overall increase in average community count relates to timing associated with the close out of some higher performing communities, new openings that are still in the early stages, or transition between certain active communities during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The average sales price per home closed during the six months ended June 30, 2024 was $362,801, an increase of $11,053, or 3.1%, from the average sales price per home closed of $351,748 for the six months ended June 30, 2023. The increase in the average sales price per home closed was primarily due to geographic mix and a favorable pricing environment.

Current wording

Home sales revenues for the nine months ended September 30, 2024 were $1.6 billion, a decrease of $105.0 million, or 6.0%, from $1.8 billion for the nine months ended September 30, 2023. The decrease in home sales revenues was primarily due to a 9.6% decrease in homes closed, offset by an increase in the average sales price per home closed during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The overall increase in average community count relates 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, 2024 as compared to the nine months ended September 30, 2023. The average sales price per home closed during the nine months ended September 30, 2024 was $366,007, an increase of $13,932, or 4.0%, from the average sales price per home closed of $352,075 for the nine months ended September 30, 2023. The increase in the average sales price per home closed was primarily due to geographic mix and a favorable pricing environment. The overall decrease in absorption rate generally relates to the impact of ongoing affordability constraints, new community openings, and the overall increase in community count.

Previous wording

Included within our home sales revenues for the six months ended June 30, 2024 was $64.3 million in wholesale revenues resulting from 219 home closings, representing 8.0% of the 2,738 total homes closed during the six months ended June 30, 2024. Included within our home sales revenues for the six months ended June 30, 2023 was $73.0 million in wholesale revenues resulting from 242 home closings, representing 7.5% of the 3,220 total homes closed during the six months ended June 30, 2023. The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to fewer retail home closings during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Included within our home sales revenues for the nine months ended September 30, 2024 was $113.7 million in wholesale revenues resulting from 379 home closings, representing 8.4% of the 4,495 total homes closed during the nine months ended September 30, 2024. Included within our home sales revenues for the nine months ended September 30, 2023 was $116.3 million in wholesale revenues resulting from 381 home closings, representing 7.7% of the 4,971 total homes closed during the nine months ended September 30, 2023. The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to fewer retail home closings during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

•Home sales revenues in our Central reportable segment decreased by $103.8 million, or 27.2%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to a 26.6% decrease in the number of homes closed as well as a slight decrease in the average sales price per home closed. The decrease in home closings was primarily the result of a lower absorption rate, partially offset by an increase in the average community count.

Current wording

•Home sales revenues in our Central reportable segment decreased by $123.0 million, or 21.8%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a 20.9% decrease in the number of homes closed as well as a slight decrease in the average sales price per home closed. The decrease in home closings was primarily the result of a lower absorption rate, partially offset by an increase in the average community count.

Previous wording

•Home sales revenues in our Southeast reportable segment increased by $3.8 million, or 1.5%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to a 1.4% increase in the average sales price per home closed and a slight increase in the number of homes closed. The increase in home closings was the result of an increase in the average community count.

Current wording

•Home sales revenues in our Southeast reportable segment increased by $9.5 million, or 2.4%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a 1.2% increase in the number of homes closed and a 1.1% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Previous wording

•Home sales revenues in our Northwest reportable segment decreased by $41.0 million, or 28.3%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to a 35.8% decrease in the number of homes closed, offset by a 11.7% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Current wording

•Home sales revenues in our Northwest reportable segment decreased by $25.6 million, or 12.0%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a 20.6% decrease in the number of homes closed, offset by a 10.7% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Previous wording

•Home sales revenues in our West reportable segment increased by $39.6 million, or 24.5%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to a 15.1% increase in the number of homes closed and an 8.1% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Current wording

•Home sales revenues in our West reportable segment increased by $95.3 million, or 37.1%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a 26.2% increase in the number of homes closed and an 8.7% increase in the average sales price per home closed. The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.

Previous wording

•Home sales revenues in our Florida reportable segment decreased by $37.9 million, or 19.3%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to a 22.9% decrease in the number of homes closed, partially offset by a 4.7% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Current wording

•Home sales revenues in our Florida reportable segment decreased by $61.1 million, or 19.2%, during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to a 23.4% decrease in the number of homes closed, partially offset by a 5.5% increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

Previous wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the six months ended June 30, 2024 was $751.1 million, a decrease of $140.8 million, or 15.8%, from $891.9 million for the six months ended June 30, 2023. This decrease was primarily due to a 15.0% decrease in homes closed. Gross margin for the six months ended June 30, 2024 was $242.3 million, an increase of $1.5 million, or 0.6%, from $240.8 million for the six months ended June 30, 2023. Gross margin as a percentage of home sales revenues was 24.4% for the six months ended June 30, 2024 and 21.3% for the six months ended June 30, 2023. The increase in gross margin as a percentage of home sales revenues during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily due to a combination of lower input costs and higher sales prices during the six months ended June 30, 2024.

Current wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the nine months ended September 30, 2024 was $1.2 billion, a decrease of $111.2 million, or 8.2%, from $1.4 billion for the nine months ended September 30, 2023. This decrease was primarily due to an increase in lot costs and higher capitalized interest. Gross margin for the nine months ended September 30, 2024 was $405.8 million, an increase of $6.2 million, or 1.6%, from $399.6 million for the nine months ended September 30, 2023. Gross margin as a percentage of home sales revenues was 24.7% for the nine months ended September 30, 2024 and 22.8% for the nine months ended September 30, 2023. The increase in gross margin as a percentage of home sales revenues during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily due to a higher average sales price per home closed, partially offset by a combination of higher lot costs and higher capitalized interest as a percentage of revenue as well as the impact of sales incentives offered during the nine months ended September 30, 2024.

Previous wording

Selling Expenses. Selling expenses for the six months ended June 30, 2024 were $94.0 million, an increase of $2.0 million, or 2.1%, from $92.0 million for the six months ended June 30, 2023. The increase in selling expenses was primarily due to an increase in advertising expense and personnel costs, partially offset by a decrease in sales commissions for the six months ended June 30, 2024 as compared to the three months ended June 30, 2023. Sales commissions decreased to $44.6 million during the six months ended June 30, 2024 from $49.2 million for the six months ended June 30, 2023, primarily due to fewer homes closed. Selling expenses as a percentage of home sales revenues were 9.5% and 8.1% for the six months ended June 30, 2024 and 2023, respectively. The increase in selling expenses as a percentage of home sales revenues was driven primarily by increased advertising expense and other expenses incurred in addition to lower home sales revenues during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Selling Expenses. Selling expenses for the nine months ended September 30, 2024 were $149.2 million, an increase of $7.4 million, or 5.2%, from $141.8 million for the nine months ended September 30, 2023. The increase in selling expenses was primarily due to an increase in advertising expense and an increase in personnel costs as a result of an increase in communities for the nine months ended September 30, 2024 as compared to the three months ended September 30, 2023. Sales commissions decreased to $72.2 million during the nine months ended September 30, 2024 from $77.1 million for the nine months ended September 30, 2023, primarily due to a decrease in outside commissions and our in-house commissions. Selling expenses as a percentage of home sales revenues were 9.1% and 8.1% for the nine months ended September 30, 2024 and 2023, respectively. The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising and other personnel expenses during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

General and Administrative. General and administrative expenses for the three months ended June 30, 2024 were $30.5 million, an increase of $2.9 million, or 10.4%, from $27.6 million for the three months ended June 30, 2023. The increase in general and administrative expenses was primarily a result of community count growth during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. General and administrative expenses as a percentage of home sales revenues were 5.1% and 4.3% for the three months ended June 30, 2024 and 2023, respectively. The increase in general and administrative expenses as a percentage of home sales revenues was primarily due to lower home sales revenues during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

General and Administrative. General and administrative expenses for the nine months ended September 30, 2024 were $90.0 million, an increase of $5.7 million, or 6.7%, from $84.3 million for the nine months ended September 30, 2023. The increase in general and administrative expenses was primarily a result of increased indirect overhead expenses and professional fees, partially offset by a decrease in payroll related costs during the nine months ended September 30, 2024. General and administrative expenses as a percentage of home sales revenues were 5.5% and 4.8% for the nine months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses as a percentage of home sales revenues was primarily due to leverage from community count growth during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

Other Income. Other income, net of other expenses was $9.4 million for the three months ended June 30, 2024, an increase of $3.0 million from $6.3 million for the three months ended June 30, 2023. The increase in other income, net of other expenses, primarily reflects gains realized from the sale of residential lots and commercial acreage not directly associated with our core homebuilding operations.

Current wording

Other Income, Net. Other income, net of other expenses was $25.3 million for the nine months ended September 30, 2024, an increase of $5.5 million from $19.8 million for the nine months ended September 30, 2023. The increase in other income, net of other expenses, primarily reflects gains realized from the sale of residential lots and the increase in income associated with our investment in unconsolidated entities.

Previous wording

Operating Income and Net Income before Income Taxes. Operating income for the six months ended June 30, 2024 was $86.3 million, a decrease of $4.9 million, or 5.4%, from $91.1 million for the six months ended June 30, 2023. Net income before income taxes for the six months ended June 30, 2024 was $100.0 million, a decrease of $3.8 million, or 3.6%, from $103.8 million for the six months ended June 30, 2023. Our reportable segments contributed to net income before income taxes during the six months ended June 30, 2024 as follows: Central - $25.2 million, or 25.2%; Southeast - $40.0 million, or 40.0%; Northwest - $7.3 million, or 7.3%; West - $19.9 million, or 19.9%; and Florida - $9.9 million, or 9.9%. The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate, higher advertising and other selling expenses incurred partially offset by a higher gross margin and a higher average community count during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Operating Income and Net Income before Income Taxes. Operating income for the nine months ended September 30, 2024 was $166.6 million, a decrease of $6.9 million, or 4.0%, from $173.4 million for the nine months ended September 30, 2023. The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate and higher advertising and other costs associated with the increase in average community count during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Net income before income taxes for the nine months ended September 30, 2024 was $191.8 million, a decrease of $1.4 million, or 0.7%, from $193.2 million for the nine months ended September 30, 2023. Our reportable segments contributed to net income before income taxes during the nine months ended September 30, 2024 as follows: Central - $47.0 million, or 24.5%; Southeast - $67.6 million, or 35.2%; Northwest - $19.6 million, or 10.2%; West - $40.9 million, or 21.3%; and Florida - $19.6 million, or 10.2%.

Previous wording

Income Taxes. Income tax provision for the six months ended June 30, 2024 was $24.4 million, an increase of $0.7 million, or 2.9%, from income tax provision of $23.7 million for the six months ended June 30, 2023. The increase in our effective tax rate to 24.4% for the six months ended June 30, 2024 from 22.8% for the six months ended June 30, 2023 was primarily a result of an increase in the compensation cost in excess of deductions for share-based payments, partially offset by the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.

Current wording

Income Taxes. Income tax provision for the nine months ended September 30, 2024 was $46.6 million, an increase of $0.6 million, or 1.2%, from income tax provision of $46.1 million for the nine months ended September 30, 2023. The increase in our effective tax rate to 24.3% for the nine months ended September 30, 2024 from 23.8% for the nine months ended September 30, 2023 was primarily a result of an increase in the compensation cost in excess of deductions for share-based payments, partially offset by the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.

Previous wording

Net Income. Net income for the six months ended June 30, 2024 was $75.6 million, a decrease of $4.5 million, or 5.6%, from $80.1 million for the six months ended June 30, 2023. The decrease in net income was primarily attributed to overall lower homes closed and lower home sales revenues, partially offset by a higher gross margin during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Net Income. Net income for the nine months ended September 30, 2024 was $145.2 million, a decrease of $1.9 million, or 1.3%, from $147.1 million for the nine months ended September 30, 2023. The decrease in net income was primarily attributed to overall lower homes closed and lower home sales revenues, partially offset by a higher gross margin during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

(4)As of June 30, 2024, we had 181 units related to bulk sales agreements associated with our wholesale business.

Current wording

(4)As of September 30, 2024, we had 212 units related to bulk sales agreements associated with our wholesale business.

Previous wording

(5)As of June 30, 2023, we had 131 units related to bulk sales agreements associated with our wholesale business.

Current wording

(5)As of September 30, 2023, we had 273 units related to bulk sales agreements associated with our wholesale business.

Previous wording

We had 128 and 117 active communities as of June 30, 2024 and December 31, 2023, respectively. Generally, it takes us two to three years to turn raw or undeveloped land into an active community. To mitigate our exposure to real estate inventory risks, we utilize, on a limited and strategic basis, land banking financing arrangements.

Current wording

We had 138 and 117 active communities as of September 30, 2024 and December 31, 2023, respectively. Generally, it takes us two to three 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.