LGI Homes, Inc.

Previous 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.

Current wording

We delivered positive second 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

For the three months ended March 31, 2026, we closed 916 homes, including 35 currently and previously leased single-family homes. Excluding the 35 currently or previously leased single-family homes, our average sales price per home closed was $362,924. For the three months ended March 31, 2025, we closed 996 homes with an average sales price per home closed of $352,831.

Current wording

For the three months ended June 30, 2026, we closed 1,440 homes, including 75 currently and previously leased single-family homes. Excluding the 75 currently or previously leased single-family homes, our average sales price per home closed was $367,407. For the three months ended June 30, 2025, we closed 1,323 homes with an average sales price per home closed of $365,446.

Previous 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.

Current wording

We sell homes under the LGI Homes and Terrata Homes brands. Our 151 active communities at June 30, 2026 included 16 Terrata Homes communities. At June 30, 2025, we had 146 active communities, including 16 Terrata Homes communities.

Previous wording

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

Current wording

•Adjusted homebuilding gross margin (non-GAAP) as a percentage of homebuilding revenues decreased to 23.2% from 25.5%.

Previous wording

For reconciliations of the non-GAAP financial measures of adjusted gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”

Current wording

For reconciliations of the non-GAAP financial measures of adjusted homebuilding gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “—Non-GAAP Measures.”

Previous wording

•EBITDA (non-GAAP) as a percentage of home sales revenues increased to 4.8% from 4.2%.

Current wording

•EBITDA (non-GAAP) as a percentage of total revenues increased to 8.2% from 8.0%.

Previous wording

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

Current wording

We owned and controlled 57,406 lots at June 30, 2026 as compared to 59,028 lots at March 31, 2026 and 60,842 lots at December 31, 2025.

Previous wording

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

Current wording

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

Current wording

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

Previous 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.

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

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 three months ended March 31, 2026 and 2025, and our community count by reportable segment as of March 31, 2026 and 2025, were as follows (revenues in thousands):

Current wording

Our homebuilding revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the three months ended June 30, 2026 and 2025, and our community count by reportable segment as of June 30, 2026 and 2025, were as follows (revenues in thousands):

Previous 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.

Current wording

Homebuilding Revenues. Homebuilding revenues for the three months ended June 30, 2026 were $501.5 million, an increase of $18.0 million, or 3.7%, from $483.5 million for the three months ended June 30, 2025. The increase in homebuilding revenues was primarily due to a 3.2% increase in the number of homes closed during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The overall increase in home closings was a result of greater wholesale closings during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The increase in wholesale closings was primarily driven by home deliveries related to a previously contracted bulk sales agreement during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The average sales price per home closed during the three months ended June 30, 2026 was $367,407, an increase of $1,961, or 0.5%, from the average sales price per home closed of $365,446 for the three months ended June 30, 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 a higher volume of wholesale closings and discounted older inventory.

Previous 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.

Current wording

Included within our homebuilding revenues for the three months ended June 30, 2026 was $73.5 million in wholesale revenues resulting from 295 home closings, representing 21.6% of the 1,365 total number of homes closed during the three months ended June 30, 2026. Included within our homebuilding revenues for the three months ended June 30, 2025 was $71.4 million in wholesale revenues resulting from 237 home closings, representing 17.9% of the 1,323 total number of homes closed during the three months ended June 30, 2025. The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to a previously contracted bulk sales agreement during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Previous 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.

Current wording

•Homebuilding revenues in our Southeast reportable segment decreased by $42.0 million, or 28.0%, during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to a 29.2% 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 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.

Current wording

•Homebuilding revenues in our Northwest reportable segment increased by $6.1 million, or 11.4%, during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to a 21.0% increase in the number of homes closed, partially offset by a 7.9% decrease in the average sales price per home closed. The increase in home closings was the result of a higher absorption rate and an increase in the average community count.

Previous 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.

Current wording

•Homebuilding revenues in our West reportable segment increased by $34.3 million, or 34.2%, during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to a 30.0% increase in the number of homes closed and a 3.2% 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 $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.

Current wording

•Homebuilding revenues in our Florida reportable segment increased by $4.8 million, or 7.2%, during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily due to a 14.7% increase in the number of homes closed, partially offset by a 6.5% decrease in the average sales price per home closed. The increase in home closings was the result of a slightly higher absorption rate.

Previous 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.

Current wording

Selling Expenses. Selling expenses for the three months ended June 30, 2026 were $44.1 million, an increase of $2.5 million, or 6.0%, from $41.6 million for the three months ended June 30, 2025. The increase in selling expenses was primarily due to an increase in the number of homes closed for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. Sales commissions increased to $19.2 million for the three months ended June 30, 2026 from $18.9 million for the three months ended June 30, 2025, primarily due to an increase in the number of homes closed. Selling expenses as a percentage of total revenues were 8.6% and 8.5% for the three months ended June 30, 2026 and 2025, respectively. The increase in selling expenses as a percentage of total revenues was primarily due to higher advertising expenses during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Previous 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.

Current wording

General and Administrative. General and administrative expenses for the three months ended June 30, 2026 were $28.6 million, a decrease of $0.8 million, or 2.7%, from $29.4 million for the three months ended June 30, 2025. General and administrative expenses as a percentage of total revenues were 5.5% and 6.0% during the three months ended June 30, 2026 and 2025, respectively. The decrease in general and administrative expenses as a percentage of total revenues was due to higher revenues and lower overall other general and administrative expenses during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Previous 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.

Current wording

Other Income, Net. Other income, net of other expenses for the three months ended June 30, 2026 was $7.6 million, an increase of $4.2 million from $3.4 million for the three months ended June 30, 2025. The increase in other income, net of other expenses, primarily reflects the increase in income associated with our investment in unconsolidated entities and the increase in interest income recognized.

Previous 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.

Current wording

Income Taxes. Income tax provision for the three months ended June 30, 2026 was $9.6 million, a decrease of $0.9 million, or 8.6%, from income tax provision of $10.5 million for the three months ended June 30, 2025. 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 26.3% for the three months ended June 30, 2026 from 25.0% for the three months ended June 30, 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

•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.

Current wording

•Homebuilding revenues in our Southeast reportable segment decreased by $71.3 million, or 28.3%, during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a 29.4% 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.

Previous 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)%.

Current wording

Net Income before Income Taxes. Net income before income taxes for the six months ended June 30, 2026 was $40.9 million, a decrease of $6.9 million, or 14.4%, from $47.8 million for the six months ended June 30, 2025. The overall decrease in net income before income taxes was primarily due to overall lower homebuilding revenues, higher homebuilding costs, and an inventory impairment charge during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. Our reportable segments contributed to net income before income taxes during the six months ended June 30, 2026 as follows: Central - $15.9 million, or 38.9%; Southeast - $11.6 million, or 28.4%; Northwest - $(0.5) million, or (1.2)%; West - $18.5 million, or 45.2%; and Florida - $(4.8) million, or (11.7)%.

Previous 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.

Current wording

Net Income. Net income for the six months ended June 30, 2026 was $29.1 million, a decrease of $6.4 million, or 18.0%, from $35.5 million for the six months ended June 30, 2025. The decrease in net income was primarily attributed to lower homebuilding revenues and homebuilding gross margin, as well as an inventory impairment charge during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

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 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.

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 homebuilding gross margin excluding inventory impairment, adjusted homebuilding gross margin, EBITDA, adjusted EBITDA, net debt to capital ratio, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share.

Previous 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.

Current wording

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

Previous 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):

Current wording

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

Previous 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:

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

Previous 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.

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 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

Net orders for the three months ended March 31, 2026 were 1,221 homes, a decrease of 15.0% from 1,437 homes for the three months ended March 31, 2025, reflecting continued affordability pressures and higher mortgage rates. The cancellation rate increased to 45.6% in 2026 from 16.3% in 2025, primarily due to financing challenges and buyer sensitivity to market conditions. Ending backlog grew to 1,699 homes, with an aggregate value of $660.5 million at March 31, 2026, compared to 1,040 homes valued at $406.2 million at March 31, 2025, which represented increases of 63.4% in units and 62.6% in value. The increases were driven by slower conversion of homes under contract to closings and a higher volume of homes under contract at quarter end. A significant portion of backlog relates to homes further along in construction and expected to close in the near term. However, conversion to revenue remains subject to construction timing, buyer financing, and incentive levels. Elevated cancellation rates and changes in market conditions could affect the pace of backlog conversion and future gross margins.

Current wording

Net orders for the six months ended June 30, 2026 were 2,260 homes, a decrease of 10.6% from 2,528 homes for the six months ended June 30, 2025, reflecting continued affordability pressures and higher mortgage rates. The cancellation rate increased to 47.4% in 2026 from 24.2% in 2025, primarily due to financing challenges and buyer sensitivity to market conditions. Ending backlog grew to 1,298 homes, with an aggregate value of $525.5 million at June 30, 2026, compared to 808 homes valued at $322.5 million at June 30, 2025, which represented increases of 60.6% in units and 63.0% in value. The increases were driven by slower conversion of homes under contract to closings and a higher volume of homes under contract at quarter end. A significant portion of backlog relates to homes further along in construction and expected to close in the near term. However, conversion to revenue remains subject to construction timing, buyer financing, and incentive levels. Elevated cancellation rates and changes in market conditions could affect the pace of backlog conversion and future homebuilding gross margins.

Previous wording

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

Current wording

(4)As of June 30, 2026, we had 269 units related to bulk sales agreements associated with our wholesale business.

Previous wording

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

Current wording

(5)As of June 30, 2025, we had 91 units related to bulk sales agreements associated with our wholesale business.

Previous 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.

Current wording

We had 151 and 144 active communities as of June 30, 2026 and December 31, 2025, respectively. Generally, it takes us three to four years to turn raw or undeveloped land into an active community. To mitigate our exposure to real estate inventory risks, we have utilized, on a limited and strategic basis, land banking financing arrangements.

Previous 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.

Current wording

Our lot inventory decreased to 57,406 owned or controlled lots as of June 30, 2026 from 60,842 owned or controlled lots as of December 31, 2025, primarily related to our discipline in the evaluation and selective approval of new land deals and strategic lot sales in select markets.

Previous wording

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources. In consideration for this repurchase option, we paid a non-refundable commitment fee. Based on our right to control the ultimate economic outcome of these finished lots, these assets will continue to be held as real estate not owned within our inventory and a corresponding obligation was established within our accrued liabilities, as discussed in Note 3, “Accrued Expenses and Other Liabilities” to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, to recognize this relationship. While we are not legally obligated to repurchase the balance of the lots, we will be subject to certain performance obligations, financial and other penalties if the lots are not purchased. We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities.

Current wording

We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources. In consideration for this repurchase option, we paid a non-refundable commitment fee. Based on our right to control the ultimate economic outcome of these finished lots, these assets will continue to be held as real estate not owned within our inventory and a corresponding obligation was established within our accrued liabilities, as discussed in Note 3, “Accrued Expenses and Other Liabilities” to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, to recognize this relationship. While we are not legally obligated to repurchase the balance of the lots, we will be subject to certain performance obligations, financial and other penalties if the lots are not purchased. We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities. As of June 30, 2026, we have completed the repurchase of all lots via takedowns associated with these transactions.

Previous 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.

Current wording

The table below shows (i) home closings by reportable segment for the six months ended June 30, 2026 and (ii) our owned or controlled lots by reportable segment as of June 30, 2026.

Previous wording

(1)Of the 51,193 owned lots as of March 31, 2026, 34,168 were raw/under development lots and 17,025 were finished lots.

Current wording

(1)Of the 50,522 owned lots as of June 30, 2026, 33,775 were raw/under development lots and 16,747 were finished lots.

Previous wording

When entering a new community, we intend to build a sufficient number of move-in ready homes to meet our budgets. We base future home starts on home closings. As homes are closed, we start more homes to maintain our inventory. As of March 31, 2026, we had a total of 2,266 completed homes, including information centers, and 1,355 homes in progress.

Current wording

When entering a new community, we intend to build a sufficient number of move-in ready homes to meet our budgets. We base future home starts on home closings. As homes are closed, we start more homes to maintain our inventory. As of June 30, 2026, we had a total of 1,858 completed homes, including information centers, and 1,899 homes in progress.

Previous wording

As of March 31, 2026, we had $60.9 million of cash and cash equivalents. Cash flows for each of our active communities depend on the status of the development cycle and can differ substantially from reported earnings.

Current wording

As of June 30, 2026, we had $61.1 million of cash and cash equivalents. Cash flows for each of our active communities depend on the status of the development cycle and can differ substantially from reported earnings.

Previous wording

Our principal uses of capital are operating expenses, land and lot purchases, lot development, home construction, interest costs on our indebtedness and the payment of various liabilities. In addition, we may purchase land, lots, homes under construction or other assets as part of an acquisition and repurchase shares of our common stock. Early stages of development or expansion require significant cash outlays for land acquisitions, land development, plats, vertical development, construction of information centers, general landscaping, and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of home sales revenues. In the later stages of an active community, cash inflows may exceed home sales revenues reported for financial statement purposes, as the costs associated with home and land construction were previously incurred.

Current wording

Our principal uses of capital are operating expenses, land and lot purchases, lot development, home construction, interest costs on our indebtedness and the payment of various liabilities. In addition, we may purchase land, lots, homes under construction or other assets as part of an acquisition and repurchase shares of our common stock. Early stages of development or expansion require significant cash outlays for land acquisitions, land development, plats, vertical development, construction of information centers, general landscaping, and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of homebuilding revenues. In the later stages of an active community, cash inflows may exceed homebuilding revenues reported for financial statement purposes, as the costs associated with home and land construction were previously incurred.