LGI Homes, Inc.

Previous wording

Our management team has been in the residential land development business since the mid-1990s. Since commencing home building operations in 2003, we have constructed and closed over 75,000 homes.

Current wording

Our management team has been in the residential land development business since the mid-1990s. Since commencing home building operations in 2003, we have constructed and closed over 80,000 homes.

Previous wording

Our third quarter 2025 results were achieved against a challenging macroeconomic backdrop that included elevated mortgage rates, persistent inflation, and a government shutdown. Throughout the quarter, we continued executing on our strategy of delivering affordable homes to entry-level buyers across our markets. Although mortgage rates have trended downward since June, they continue to be a key pressure point for entry-level buyers. Additionally, subdued consumer sentiment continues to impact buyers’ willingness to purchase new homes. In response, we continued offering affordable, move-in ready homes supported by financial incentives and discounts on older inventory. These strategies are designed to bridge the ongoing affordability gap and make homeownership accessible to as many customers as possible.

Current wording

We delivered positive first quarter 2026 results that were in line with our expectations, despite a macroeconomic backdrop that remains challenging. Throughout the quarter, we continued executing on our strategy of delivering affordable homes to entry-level buyers across our markets. Persistently high mortgage rates continue to be a key pressure point for entry-level buyers. During the quarter, mortgage rates trended upward, driven by ongoing inflation, economic uncertainty, and geopolitical developments, including the conflict in the Middle East. Additionally, subdued consumer sentiment continues to impact buyers’ willingness to purchase new homes. In response to these dynamics, we continued offering affordable, move-in ready homes supported by compelling financial incentives and targeted discounts on older completed inventory. These strategies are designed to bridge the ongoing affordability gap and make homeownership accessible to as many customers as possible.

Previous wording

We sell homes under the LGI Homes and Terrata Homes brands. Our 141 active communities at September 30, 2025 included 14 Terrata Homes communities. At September 30, 2024, we had 138 active communities, including 18 Terrata Homes communities.

Current wording

We sell homes under the LGI Homes and Terrata Homes brands. Our 142 active communities at March 31, 2026 included 18 Terrata Homes communities. At March 31, 2025, we had 146 active communities, including 17 Terrata Homes communities.

Previous wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 24.5% from 27.2%.

Current wording

•Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 23.4% from 23.6%.

Previous wording

We owned and controlled 62,564 lots at September 30, 2025 as compared to 64,756 lots at June 30, 2025 and 70,899 lots at December 31, 2024.

Current wording

We owned and controlled 59,028 lots at March 31, 2026 as compared to 60,842 lots at December 31, 2025.

Previous wording

The following table sets forth our results of operations for the three and nine months ended September 30, 2025 and 2024:

Current wording

The following table sets forth our results of operations for the three months ended March 31, 2026 and 2025:

Previous wording

(3)Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes this information is useful because it isolates the impact that capitalized interest and purchase accounting adjustments have on gross margin. However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact our results, the utility of adjusted gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that we do. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance. Please see “—Non-GAAP Measures” for a reconciliation of adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.

Current wording

(3)Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define gross margin excluding inventory impairment as gross margin less inventory impairment charges. We define adjusted gross margin as gross margin excluding inventory impairment, less capitalized interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes adjusted gross margin is useful because it isolates the impact that capitalized interest, purchase accounting adjustments and inventory impairment have on gross margin. However, because adjusted gross margin excludes capitalized interest, purchase accounting adjustments and inventory impairment, which have real economic effects and could impact our results, the utility of adjusted gross margin as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin in the same manner that we do. Accordingly, adjusted gross margin should be considered only as a supplement to gross margin as a measure of our performance. Please see “—Non-GAAP Measures” for a reconciliation of adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.

Previous wording

(4)EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period. Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Please see “—Non-GAAP Measures” for reconciliations of EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.

Current wording

(4)EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, stock-based compensation, purchase accounting adjustments, and dead deal costs, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, management believes that these measures are useful for comparing general operating performance from period to period. Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as substitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP. Please see “—Non-GAAP Measures” for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.

Previous wording

Home sales revenues for the three months ended September 30, 2025 were $396.6 million, a decrease of $255.2 million, or 39.2%, from $651.9 million for the three months ended September 30, 2024. The decrease in home sales revenues was primarily due to a 39.4% decrease in the number of homes closed during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. 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, 2025 as compared to the three months ended September 30, 2024. The average sales price per home closed during the three months ended September 30, 2025 was $372,424, an increase of $1,420, or 0.4%, from the average sales price per home closed of $371,004 for the three months ended September 30, 2024. The increase in the average sales price per home closed was primarily due to geographic mix and a decrease in sales incentives. 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.

Current wording

Home sales revenues for the three months ended March 31, 2026 were $319.7 million, a decrease of $31.7 million, or 9.0%, from $351.4 million for the three months ended March 31, 2025. The decrease in home sales revenues was primarily due to an 11.5% decrease in the number of homes closed during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The overall decrease in home closings was a result of fewer wholesale closings and a lower absorption rate during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in wholesale closings was primarily related to lower institutional demand during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in absorption rate was generally related to the impact of ongoing affordability constraints. The average sales price per home closed during the three months ended March 31, 2026 was $362,924, an increase of $10,093, or 2.9%, from the average sales price per home closed of $352,831 for the three months ended March 31, 2025. The increase in the average sales price per home closed was primarily due to geographic mix and a decrease in sales incentives, partially offset by discounted older inventory.

Previous wording

Included within our home sales revenues for the three months ended September 30, 2025 was $54.5 million in wholesale revenues resulting from 163 home closings, representing 15.3% of the 1,065 total number of homes closed during the three months ended September 30, 2025. 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 number of homes closed during the three months ended September 30, 2024. The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to lower retail demand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

Included within our home sales revenues for the three months ended March 31, 2026 was $29.8 million in wholesale revenues resulting from 111 home closings, representing 12.6% of the 881 total number of homes closed during the three months ended March 31, 2026. Included within our home sales revenues for the three months ended March 31, 2025 was $54.5 million in wholesale revenues resulting from 179 home closings, representing 18.0% of the 996 total number of homes closed during the three months ended March 31, 2025. The decrease in home closings as a percentage of revenues through our wholesale channel was primarily related to lower institutional demand during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

•Home sales revenues in our Central reportable segment decreased by $65.1 million, or 39.6%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to a 39.7% decrease in the number of homes closed, partially offset by an increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate and a decrease in the average community count.

Current wording

•Home sales revenues in our Central reportable segment decreased by $12.0 million, or 11.9%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to a 10.3% decrease in the number of homes closed and a decrease in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate and a decrease in the average community count.

Previous wording

•Home sales revenues in our Southeast reportable segment decreased by $53.8 million, or 34.7%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to a 35.8% decrease in the number of homes closed, partially offset by an 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 Southeast reportable segment decreased by $29.4 million, or 28.9%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to a 29.8% decrease in the number of homes closed, partially offset by an increase in the average sales price per home closed. The decrease in home closings was the result of a lower absorption rate.

Previous wording

•Home sales revenues in our Northwest reportable segment decreased by $33.7 million, or 40.5%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to a 27.3% decrease in the number of homes closed and an 18.1% 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 Northwest reportable segment increased by $2.8 million, or 8.1%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to a 1.5% increase in the number of homes closed and a 6.5% increase in the average sales price per home closed. The increase in home closings was the result of a slightly higher absorption rate, partially offset by a decrease in the average community count.

Previous wording

•Home sales revenues in our West reportable segment decreased by $58.9 million, or 39.1%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to a 43.8% decrease in the number of homes closed, partially offset by an 8.2% 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 West reportable segment increased by $8.9 million, or 13.3%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to an 8.2% increase in the number of homes closed and a 4.7% increase in the average sales price per home closed. The increase in home closings was the result of a higher absorption rate.

Previous wording

•Home sales revenues in our Florida reportable segment decreased by $43.8 million, or 44.4%, during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily due to a 45.8% decrease in the number of homes closed, partially offset by an 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 $2.0 million, or 4.2%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to a 1.5% decrease in the number of homes closed and a 2.7% decrease in the average sales price per home closed. The decrease in home closings was the result of a decrease in the average community count, partially offset by a slightly higher absorption rate.

Previous wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the three months ended September 30, 2025 was $311.5 million, a decrease of $176.8 million, or 36.2%, from $488.4 million for the three months ended September 30, 2024. This overall decrease was primarily due to a 39.4% decrease in the number of homes closed. Gross margin for the three months ended September 30, 2025 was $85.1 million, a decrease of $78.4 million, or 47.9%, from $163.5 million for the three months ended September 30, 2024. Gross margin as a percentage of home sales revenues was 21.5% for the three months ended September 30, 2025 and 25.1% for the three months ended September 30, 2024. The decrease in gross margin as a percentage of home sales revenues was primarily due to higher lot costs, higher capitalized interest and higher indirect overhead, partially offset by the impact of lower sales incentives offered during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

Cost of Sales and Gross Margin (home sales revenues less cost of sales). Cost of sales for the three months ended March 31, 2026 was $259.8 million, a decrease of $17.9 million, or 6.4%, from $277.7 million for the three months ended March 31, 2025. This overall decrease was primarily due to an 11.5% decrease in the number of homes closed. Gross margin for the three months ended March 31, 2026 was $59.9 million, a decrease of $13.8 million, or 18.7%, from $73.7 million for the three months ended March 31, 2025. Gross margin as a percentage of home sales revenues was 18.7% for the three months ended March 31, 2026 and 21.0% for the three months ended March 31, 2025. The decrease in gross margin as a percentage of home sales revenues was primarily due to inventory-related impairment charges, price discounts on older inventory, higher capitalized interest, and higher indirect overhead costs, partially offset by a lower volume of wholesale home closings and lower house costs as a percentage of revenue during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

Selling Expenses. Selling expenses for the three months ended September 30, 2025 were $35.7 million, a decrease of $19.5 million, or 35.4%, from $55.2 million for the three months ended September 30, 2024. The decrease in selling expenses was primarily due to a decrease in the number of homes closed for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. Sales commissions decreased to $15.2 million for the three months ended September 30, 2025 from $27.6 million for the three months ended September 30, 2024, primarily due to a decrease in the number of homes closed. Selling expenses as a percentage of home sales revenues were 9.0% and 8.5% for the three months ended September 30, 2025 and 2024, respectively. The increase in selling expenses as a percentage of home sales revenues was primarily due to a decrease in home sales revenues during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

Selling Expenses. Selling expenses for the three months ended March 31, 2026 were $32.7 million, a decrease of $9.7 million, or 22.9%, from $42.3 million for the three months ended March 31, 2025. The decrease in selling expenses was primarily due to a decrease in the number of homes closed for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Sales commissions decreased to $12.5 million for the three months ended March 31, 2026 from $14.0 million for the three months ended March 31, 2025, primarily due to a decrease in the number of homes closed. Selling expenses as a percentage of home sales revenues were 10.2% and 12.0% for the three months ended March 31, 2026 and 2025, respectively. The decrease in selling expenses as a percentage of home sales revenues was primarily due to a decrease in home sales revenues and overall cost efficiencies in advertising expense during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

General and Administrative. General and administrative expenses for the three months ended September 30, 2025 were $28.0 million, which was consistent with $28.0 million for the three months ended September 30, 2024. General and administrative expenses as a percentage of home sales revenues were 7.1% and 4.3% during the three months ended September 30, 2025 and 2024, 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 September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

General and Administrative. General and administrative expenses for the three months ended March 31, 2026 were $27.9 million, a decrease of $3.3 million, or 10.7%, from $31.2 million for the three months ended March 31, 2025. General and administrative expenses as a percentage of home sales revenues were 8.7% and 8.9% during the three months ended March 31, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of home sales revenues was due to a one-time sales incentive fee in the prior period and reduced spending related to meetings, entertainment and travel during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

Other Income, Net. Other income, net of other expenses was $5.2 million for the three months ended September 30, 2025, a decrease of $6.3 million from $11.5 million for the three months ended September 30, 2024. The decrease in other income, net of other expenses, primarily reflects the decrease in income associated with our investment in unconsolidated entities and the decrease in interest income recognized.

Current wording

Other Income, Net. Other income, net of other expenses for the three months ended March 31, 2026 was $4.9 million, a decrease of $0.7 million from $5.6 million for the three months ended March 31, 2025. The decrease in other income, net of other expenses, primarily reflects the decrease in income associated with our investment in unconsolidated entities and the decrease in interest income recognized.

Previous wording

Operating Income and Net Income before Income Taxes. Operating income for the three months ended September 30, 2025 was $21.5 million, a decrease of $58.8 million, or 73.2%, from $80.3 million for the three months ended September 30, 2024. Net income before income taxes for the three months ended September 30, 2025 was $26.7 million, a decrease of $65.2 million, or 71.0%, from $91.9 million for the three months ended September 30, 2024. 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, lower gross margin and other costs associated with the increase in average community count during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. Our reportable segments contributed to net income before income taxes during the three months ended September 30, 2025 as follows: Central - $9.1 million, or 34.2%; Southeast - $10.7 million, or 40.1%; Northwest - $(0.8) million, or (2.9)%; West - $9.7 million, or 36.4%; and Florida - $(1.1) million, or (4.1)%.

Current wording

Operating Income (Loss) and Net Income before Income Taxes. Operating loss for the three months ended March 31, 2026 was $(0.6) million, a decrease of $0.8 million, or 473.4%, from operating income of $0.2 million for the three months ended March 31, 2025. Net income before income taxes for the three months ended March 31, 2026 was $4.3 million, a decrease of $1.4 million, or 24.5%, from $5.7 million for the three months ended March 31, 2025. 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, lower gross margin, other costs associated with the decrease in average community count, and $4.7 million of impairment changes related to inventory during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Our reportable segments contributed to net income before income taxes during the three months ended March 31, 2026 as follows: Central - $3.1 million, or 72.4%; Southeast - $3.7 million, or 85.9%; Northwest - $(1.6) million, or (37.5)%; West - $3.3 million, or 77.2%; and Florida - $(3.8) million, or (87.6)%.

Previous wording

Income Taxes. Income tax provision for the nine months ended September 30, 2025 was $19.2 million, a decrease of $27.4 million, or 58.8%, from income tax provision of $46.6 million for the nine months ended September 30, 2024. The decrease in our income tax provision was primarily due to the overall decrease in net income before income taxes. The increase in our effective tax rate to 25.8% for the nine months ended September 30, 2025 from 24.3% for the nine months ended September 30, 2024 was primarily a result of an increase in the rate for state income taxes, net of the federal benefit, the compensation cost in excess of deductions for share-based payments, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended.

Current wording

Income Taxes. Income tax provision for the three months ended March 31, 2026 was $2.2 million, an increase of $0.4 million, or 23.1%, from income tax provision of $1.7 million for the three months ended March 31, 2025. The increase in our income tax provision was primarily due to the increase in our effective tax rate. The increase in our effective tax rate to 50.0% for the three months ended March 31, 2026 from 30.2% for the three months ended March 31, 2025 was primarily a result of an increase in the rate for the compensation cost in excess of deductions for share-based payments, state income taxes, net of the federal benefit, and 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 September 30, 2025 was $19.7 million, a decrease of $49.9 million, or 71.7%, from $69.6 million for the three months ended September 30, 2024. The decrease in net income was primarily attributed to an overall decrease in the number of homes closed, home sales revenues and gross margin during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

Net Income. Net income for the three months ended March 31, 2026 was $2.2 million, a decrease of $1.8 million, or 45.1%, from $4.0 million for the three months ended March 31, 2025. The decrease in net income during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily attributed to an overall decrease in the number of homes closed, home sales revenues and gross margin, as well as an inventory impairment charge of $4.7 million, of which $2.4 million was related to our Florida reportable segment and $2.3 million was related to our Central reportable segment.

Previous wording

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Quarterly Report on Form 10-Q relating to adjusted gross margin and EBITDA.

Current wording

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Quarterly Report on Form 10-Q relating to gross margin excluding inventory impairment, adjusted gross margin, EBITDA, adjusted EBITDA, net debt to capital ratio, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share.

Previous wording

Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes this information is useful because it isolates the impact that capitalized interest and purchase accounting adjustments have on gross margin. However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact our results, the utility of adjusted gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that we do. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance.

Current wording

Gross margin excluding inventory impairment and adjusted gross margin are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define gross margin excluding inventory impairment as gross margin less inventory impairment charges. We define adjusted gross margin as gross margin excluding inventory impairments, less capitalized interest, and adjustments resulting from the application of purchase accounting included in the cost of sales. Our management believes gross margin excluding inventory impairment and adjusted gross margin are useful because they isolate the impact that capitalized interest, purchase accounting adjustments, and inventory impairment have on gross margin. However, because gross margin excluding inventory impairment and adjusted gross margin exclude capitalized interest, purchase accounting adjustments, and inventory impairment, which have real economic effects and could impact our results, the utility of gross margin excluding inventory impairment and adjusted gross margin as measures of our operating performance may be limited. In addition, other companies may not calculate gross margin excluding inventory impairment and adjusted gross margin in the same manner that we do. Accordingly, gross margin excluding inventory impairment and adjusted gross margin should be considered only as supplements to gross margin as a measure of our performance.

Previous wording

The following table reconciles adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):

Current wording

The following table reconciles gross margin excluding inventory impairment and adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):

Previous wording

EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period. Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

Current wording

EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales. We define adjusted EBITDA as EBITDA before inventory impairment, stock-based compensation, purchase accounting adjustments, and dead deal costs, as applicable during a period. Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period. Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies. Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business. EBITDA and adjusted EBITDA should be considered in addition to, and not as substitutes for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:

Previous wording

(i) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;

Current wording

(i) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;

Previous wording

(ii) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

Current wording

(ii) they do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

Previous wording

(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA does not reflect any cash requirements for such replacements or improvements;

Current wording

(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements or improvements;

Previous wording

(iv) it does not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;

Current wording

(iv) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;

Previous wording

(v) it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

Current wording

(v) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

Previous wording

(vi) other companies in our industry may calculate it differently than we do, limiting its usefulness as a comparative measure.

Current wording

(vi) other companies in our industry may calculate them differently than we do, limiting their usefulness as a comparative measure.

Previous wording

Because of these limitations, our EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. We compensate for these limitations by using our EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance. These GAAP measures include operating income, net income and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA. EBITDA is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA calculated using these measures.

Current wording

Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using our EBITDA and adjusted EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance. These GAAP measures include operating income, net income and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA and adjusted EBITDA. EBITDA and adjusted EBITDA are not intended as alternatives to net income as indicators of our operating performance, as alternatives to any other measure of performance in conformity with GAAP or as alternatives to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA and adjusted EBITDA calculated using these measures.

Previous wording

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

Current wording

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

Previous wording

Net debt to capital ratio is a non-GAAP financial measure used by management as a supplemental measure in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing. We define net debt to capital ratio as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our management believes that the presentation of net debt to capital ratio provides useful information to investors regarding the Company’s financial leverage and its ability to meet long-term obligations. By excluding cash and cash equivalents from total debt, the ratio offers a clearer view of our capital structure and financial flexibility. Our management uses this metric to monitor our capital efficiency and to evaluate the effectiveness of our capital management strategies over time. Other companies may define this measure differently and, as a result, our measure of net debt to capital ratio may not be directly comparable to the measures of other companies.

Current wording

Net debt to capital ratio is a non-GAAP financial measure used by management as a supplemental measure in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing. We define net debt to capital ratio as net debt (which is total debt minus cash and cash equivalents) divided by net debt plus total equity. Our management believes that the presentation of net debt to capital ratio provides useful information to investors regarding our financial leverage and our ability to meet long-term obligations. By excluding cash and cash equivalents from total debt, the ratio offers a clearer view of our capital structure and financial flexibility. Our management uses this metric to monitor our capital efficiency and to evaluate the effectiveness of our capital management strategies over time. Other companies may define this measure differently and, as a result, our measure of net debt to capital ratio may not be directly comparable to the measures of other companies.

Previous wording

(4)As of September 30, 2025, we had 60 units related to bulk sales agreements associated with our wholesale business.

Current wording

(4)As of March 31, 2026, we had 442 units related to bulk sales agreements associated with our wholesale business.

Previous wording

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

Current wording

(5)As of March 31, 2025, we had 253 units related to bulk sales agreements associated with our wholesale business.

Previous wording

We had 141 and 151 active communities as of September 30, 2025 and December 31, 2024, respectively. Generally, it takes us three to four years to turn raw or undeveloped land into an active community. To mitigate our exposure to real estate inventory risks, we have utilized, on a limited and strategic basis, land banking financing arrangements.

Current wording

We had 142 and 144 active communities as of March 31, 2026 and December 31, 2025, respectively. Generally, it takes us three to four years to turn raw or undeveloped land into an active community. To mitigate our exposure to real estate inventory risks, we have utilized, on a limited and strategic basis, land banking financing arrangements.

Previous wording

Our lot inventory decreased to 62,564 owned or controlled lots as of September 30, 2025 from 70,899 owned or controlled lots as of December 31, 2024, primarily related to our discipline in the evaluation and selective approval of new land deals and strategic lot sales in select markets.

Current wording

Our lot inventory decreased to 59,028 owned or controlled lots as of March 31, 2026 from 60,842 owned or controlled lots as of December 31, 2025, primarily related to our discipline in the evaluation and selective approval of new land deals and strategic lot sales in select markets.

Previous wording

The table below shows (i) home closings by reportable segment for the nine months ended September 30, 2025 and (ii) our owned or controlled lots by reportable segment as of September 30, 2025.

Current wording

The table below shows (i) home closings by reportable segment for the three months ended March 31, 2026 and (ii) our owned or controlled lots by reportable segment as of March 31, 2026.