Smith Douglas Homes Corp.

Previous wording

Despite continued uncertainty in the mortgage interest rate environment during 2024, our net new orders increased by 12% in the year ended December 31, 2024 compared to 2023. We believe our focus on affordable luxury will continue to serve us well as we remain optimistic about long-term demand due to favorable homebuyer demographics. Additionally, we construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 12% and 11% for the years ended December 31, 2024 and 2023, respectively.

Current wording

During 2025, we experienced softer‑than‑expected demand driven by sustained elevated mortgage interest rates, which continued to restrict affordability for potential homebuyers and negatively affected consumer sentiment. We responded to these challenges by implementing various financing incentives, such as closing cost credits and mortgage rate buydowns. As a result, our net new orders increased by 3% in the year ended December 31, 2025 compared to 2024. We believe our focus on affordable luxury will continue to serve us well as we remain optimistic about long-term demand due to favorable homebuyer demographics. Additionally, we aim to construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 11% and 12% for the years ended December 31, 2025 and 2024, respectively.

Previous wording

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of December 31, 2024, we had 803 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.1% of our total controlled lot supply.

Current wording

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of December 31, 2025, we had 804 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.6% of our total controlled lot supply.

Previous wording

We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions. Each of our markets is experiencing strong momentum in housing demand drivers relative to historic averages, and we believe there is significant opportunity to expand our presence in each of our respective markets.

Current wording

We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into ten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions. Each of our markets is experiencing strong momentum in housing demand drivers relative to historic averages, and we believe there is significant opportunity to expand our presence in each of our respective markets.

Previous wording

Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions.

Current wording

Our operations are currently organized into ten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions.

Previous wording

We continue to experience certain macroeconomic trends that affect our markets and industry such as higher inflation, elevated interest rates and associated decreases in consumer discretionary income, the effects of supply chain challenges, declining government stimulus following the COVID-19 pandemic, and uncertainty regarding an economic recession. Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results.

Current wording

We continue to experience certain macroeconomic trends that affect our markets and industry such as higher inflation, elevated interest rates and associated decreases in consumer discretionary income, the effects of supply chain challenges, and uncertainty regarding an economic recession. Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results.

Previous wording

Home closing proceeds are generally received from the title company within a few business days after closing. The pace of net new home orders, the ASP, discounts and incentives, and the level of upgrades and options selected by our homebuyer all impact our recognized revenues in a given period. See Critical Accounting Policies and Estimatesfor a description of how we record home closing revenue.

Current wording

Home closing proceeds are generally received from the title company within a few business days after closing. The pace of net new home orders, the ASP, discounts and incentives, and the level of upgrades and options selected by our homebuyer all impact our recognized revenues in a given period. See Note 1—Description of the business and summary of significant accounting policiesfor a description of how we record home closing revenue.

Previous wording

Home closing revenue for the year ended December 31, 2024, was $975.5 million, an increase of $210.8 million, or 27.6%, from $764.6 million for the year ended December 31, 2023. The increase in revenue was primarily attributable to a 24.8% improvement in homes closed and a 2.1% increase in ASP of homes closed across both reportable segments.

Current wording

Home closing revenue for the year ended December 31, 2025, was $971.1 million, a decrease of $4.3 million, or 0.4%, from $975.5 million for the year ended December 31, 2024. The decrease in revenue was primarily attributable to a 1.8% decrease in ASP of homes closed, offset by a 1.4% increase in homes closed across both reportable segments.

Previous wording

Cost of home closings for the year ended December 31, 2024, was $719.9 million, an increase of $171.6 million, or 31.3%, from $548.3 million for the year ended December 31, 2023, which was primarily driven by a 24.8% increase in homes closed and a 5.2% increase in the average cost of homes closed.

Current wording

Cost of home closings for the year ended December 31, 2025, was $758.9 million, an increase of $39.0 million, or 5.4%, from $719.9 million for the year ended December 31, 2024, which was primarily driven by a 1.4% increase in homes closed and a 3.9% increase in the average cost of homes closed.

Previous wording

Home closing gross profit for the year ended December 31, 2024 was $255.5 million, an increase of $39.2 million, or 18.1%, from $216.3 million for the year ended December 31, 2023. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.2% in 2024 compared to 28.3% in 2023. The decrease in home closing gross margin was primarily driven by a 5.2% increase in the average cost of homes closed partially offset by a 2.1% increase in ASP of homes closed.

Current wording

Home closing gross profit for the year ended December 31, 2025 was $212.2 million, a decrease of $43.4 million, or 17.0%, from $255.5 million for the year ended December 31, 2024. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 21.8% in 2025 compared to 26.2% in 2024. The decrease in home closing gross margin was primarily driven by a 3.9% increase in the average cost of homes closed and a 1.8% decrease in ASP of homes closed.

Previous wording

Equity in income from unconsolidated entities consists of our portion of income from our interest in our title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers. For the year ended December 31, 2024, equity in income from unconsolidated entities increased by $0.2 million from the year ended December 31, 2023, due to a 19.8% increase in title insurance revenue generated by the title company.

Current wording

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in thecompany engaged in providing mortgage broker services to our homebuyers. For the year ended December 31, 2025, equity in income from unconsolidated entities increased by $0.9 million from the year ended December 31, 2024, due to a 17.1% increase in title insurance revenue generated by the title company and $0.7 million of income from the mortgage brokerage company, which ramped up operations in 2025.

Previous wording

Interest expense is comprised of interest incurred, but not capitalized on our Amended Credit Facility and Prior Credit Facility and other borrowings and amortization of debt issuance costs. Our interest expense increased$0.8 million to$2.5 million for the year ended December 31, 2024 from$1.7 million for the year ended December 31, 2023, which was primarily driven by an increase in unused fees incurred on our Prior Credit Facility and Amended Credit Facility, amortization of deferred financing costs on our Amended Credit Facility, and interest on the note payable related to the Devon Street Homes Acquisition.

Current wording

Interest expense is comprised of interest incurred, but not capitalized, on our Amended Credit Facility and Prior Credit Facility and other borrowings and amortization of debt issuance costs. Our interest expense increased$0.7 million to$3.2 million for the year ended December 31, 2025 from$2.5 million for the year ended December 31, 2024, which was primarily driven by an increase in interest incurred on our Amended Credit Facility due to a higher average outstanding balance.

Previous wording

Other expense (income), net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the year ended December 31, 2024, other expense (income), net increased by $1.0 million from the year ended December 31, 2023, which was primarily due to the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition.

Current wording

Other expense, net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the year ended December 31, 2025, other expense, net decreased by $0.6 million from the year ended December 31, 2024, which was primarily due to a $2.3 million charge related to abandonment of certain lot option contracts in the Central region in 2025, which did not occur in 2024, and the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition in 2024, which did not recur in 2025.

Previous wording

Net income for the year ended December 31, 2024 decreased by $11.4 million, or 9.2%. The decrease was primarily due to an increase of $43.9 million in selling, general and administrative costs due to higher commissions and advertising costs and $5.1 million of income tax expense as a result of our IPO and Reorganization Transactions, partially offset by an increase in home closing gross profit of $39.2 million.

Current wording

Net income for the year ended December 31, 2025 decreased by $43.4 million, or 38.8%. The decrease was primarily due to a decrease in home closing gross profit of $43.4 million, and an increase of $3.4 million in selling, general and administrative costs due to higher commissions and advertising costs, partially offset by a $2.6 million decrease in income tax expense.

Previous wording

Southeast: The $7.3 million increase in net income compared to the prior year was primarily due to a $16.5 million increase in gross profit due to a 14.1% increase in homes closed and 4.7% increase in ASP of homes closed, offset by a $9.2 million increase in selling, general, and administrative costs.

Current wording

Southeast: The $38.6 million decrease in net income compared to the prior year was primarily due to a $28.4 million decrease in gross profit due to a 2.8% increase in homes closed, 2.5% decrease in ASP of homes closed, and 3.9% increase in the average cost of homes closed. Also contributing to lower net income was a $10.3 million increase in selling, general, and administrative costs primarily due to an increase in division overhead associated with our increased active community count and newly formed divisions, including Central Georgia and Greenville.

Previous wording

Central: The $10.0 million increase in net income compared to the prior year was primarily due a $22.7 million increase in gross profit due to a 45.4% increase in homes closed partially offset by a 1.2% decrease in ASP of homes closed, offset by a $10.6 million increase in selling, general, and administrative costs. The increase in gross profit and selling, general, and administrative costs are largely attributable to the prior year only reflecting results of operations for the Houston division for a partial year after the Devon Street Homes Acquisition was completed on July 31, 2023.

Current wording

Central: The $19.0 million decrease in net income compared to the prior year was primarily due a $15.0 million decrease in gross profit due to a 0.7% decrease in homes closed and a 0.9% decrease in ASP of homes closed and a $3.8 million increase in selling, general, and administrative costs. The increase in selling, general, and administrative costs are largely attributable to an increase in division overhead associated with our increased active community count and newly formed divisions, including Dallas-Fort Worth and the Alabama Gulf Coast.

Previous wording

Our adjusted home closing gross profit increased while adjusted home closing gross margin decreased from the year ended December 31, 2023 to 2024. The increase in adjusted home closing gross profit primarily results from an increase in home closings of 24.8%. The decrease in adjusted home closing gross margin was driven by an increase in the average cost of home closings of 5.2% partially offset by an increase in the ASP of homes closed of 2.1%.

Current wording

Our adjusted home closing gross profit and adjusted home closing gross margin decreased from the year ended December 31, 2024 to 2025. The decrease primarily results from a 1.4% increase in homes closed and a 3.9% increase in the average cost of homes closed.

Previous wording

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income), net, and (ix) severance expenses.

Current wording

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income), net, (ix) severance expenses, and (x) real estate inventory impairment and lot option contract abandonment charges.

Previous wording

For the year ended December 31, 2024 compared to 2023, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of a decrease in net income of 9.2% partially offset by an increase in interest expense of $0.8 million and an increase in provision for income taxes of $5.1 million. A decrease in home closing margin of 2.1% also contributed to the decreases in EBITDA margin and adjusted EBITDA margin.

Current wording

For the year ended December 31, 2025 compared to 2024, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of a decrease in net income of 38.8%. A decrease in home closing margin of 4.3% also contributed to the decreases in EBITDA margin and adjusted EBITDA margin.

Previous wording

As of December 31, 2024, we had $22.4 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit Facility and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. We exercise strict controls and have a prudent strategy for our cash management, including those related to cash outlays for lot acquisitions and deposits on lot-option contracts. We require multiple party account control and authorization for payments. We competitively bid each phase of the development and construction process and closely manage production schedules and payments. Land acquisitions are reviewed and analyzed by our senior management team and ultimately approved by our Chief Executive Officer and Chief Financial Officer. Additionally, our land-light business model reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, which better aligns our pace of home orders and home starts. Our principal uses of cash include deposits on lot-option contracts, acquisition of finished lots, home construction, operating expenses, and the payment of interest and routine liabilities.

Current wording

As of December 31, 2025, we had $12.7 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit Facility and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. We exercise strict controls and have a prudent strategy for our cash management, including those related to cash outlays for lot acquisitions and deposits on lot-option contracts. We require multiple party account control and authorization for payments. We competitively bid each phase of the development and construction process and closely manage production schedules and payments. Land acquisitions are reviewed and analyzed by our senior management team and ultimately approved by our Chief Executive Officer and Chief Financial Officer. Additionally, our land-light business model reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, which better aligns our pace of home orders and home starts. Our principal uses of cash include deposits on lot-option contracts, acquisition of finished lots, home construction, operating expenses, and the payment of interest and routine liabilities.

Previous wording

Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and interest payments on our Amended Credit Facility. We expect our existing cash reserves, along with generated cash flows and availability under our Amended Credit Facility, will be sufficient to fund our ongoing operational activities and provide the necessary capital for future lot purchases and related growth strategies.

Current wording

Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and principal and interest payments on our Amended Credit Facility. We expect our existing cash reserves, along with generated cash flows and availability under our Amended Credit Facility, will be sufficient to fund our ongoing operational activities and provide the necessary capital for future lot purchases and related growth strategies.

Previous wording

Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Amended Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to repay the $84.0 million outstanding under our Prior Credit Facility. Smith Douglas Homes Corp. is not a party to the Amended Credit Facility.

Current wording

Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to repay the $84.0 million outstanding under our Prior Credit Facility. Smith Douglas Homes Corp. is not a party to the Credit Facility.

Previous wording

The Amended Credit Facility, among other things, increases the aggregate principal amount of our revolving credit commitments to $250.0 million and extends the maturity date to January 16, 2027, provided that the borrowers may request a one-year extension of its maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments, and provides that up to $20.0 million may be used for letters of credit.

Current wording

The Credit Facility, among other things, increased the aggregate principal amount of our revolving credit commitments to $250.0 million and extended the maturity date to January 16, 2027, provided that the borrowers may request a one-year extension of its maturity date.

Previous wording

The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $130.0 million, (b) 32.5% of positive pre-tax income earned in any fiscal quarter after June 30, 2023, (c) 75% of the equity proceeds of Smith Douglas Homes Corp. and its subsidiaries from the IPO and (d) 50% of new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries after the IPO, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Homes LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required immediately to repay all amounts outstanding under the Amended Credit Facility. As of December 31, 2024, we were in compliance with all covenants related to the Amended Credit Facility.

Current wording

The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a)$286.1 million, (b)32.5% of pre‑tax income earned in any fiscal quarter after March 31, 2025, and (c)50% of any new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries at any time after March 31, 2025, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of$15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Homes LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required to immediately repay all amounts outstanding under the Amended Credit Facility. As of December 31, 2025, we were in compliance with all covenants related to the Amended Credit Facility.

Previous wording

As of December 31, 2024, there were no outstanding borrowings or letters of credit under the Amended Credit Facility. As of March 14, 2025, outstanding borrowings under our Amended Credit Facility totaled $44.0 million.

Current wording

As of December 31, 2025, there were $40.0 million of outstanding borrowings under the Amended Credit Facility. As of March 6, 2026, outstanding borrowings under our Amended Credit Facility totaled $80.0 million. As of both December 31, 2025 and March 6, 2026, outstanding letters of credit approximated$0.5 million.

Previous wording

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Current wording

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by such Continuing Equity Owners, the amount and timing of taxable income allocated to us or otherwise generated by us in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Previous wording

We generated $19.1 million and $76.3 million in net cash from operating activities for the years ended December 31, 2024 and 2023, respectively. Operating cash flows for 2024 benefited from cash generated by net income of $111.8 million primarily offset by a $53.7 million increase in real estate inventory and a $45.9 million increase in deposits on real estate under option or contract. Operating cash flows for 2023 benefited from cash generated by net income of $123.2 million primarily offset by a $33.7 million increase in real estate inventory and a $16.6 million increase in deposits on real estate under option or contract.

Current wording

We used $31.3 million and generated $19.1 million in net cash from operating activities for the years ended December 31, 2025 and 2024, respectively. Operating cash flows for 2025 benefited from cash generated by net income of $68.4 million primarily offset by a $46.2 million increase in real estate inventory, a $37.4 million increase in deposits on real estate under option or contract, and a $15.3 million decrease in accounts payable. Operating cash flows for 2024 benefited from cash generated by net income of $111.8 million primarily offset by a $53.7 million increase in real estate inventory and a $45.9 million increase in deposits on real estate under option or contract.

Previous wording

We used $4.7 million and $76.8 million in net cash in investing activities for the years ended December 31, 2024 and 2023, respectively. The net cash used in investing activities during 2024 was primarily due to purchases of property and equipment and investments in unconsolidated entities. The net cash used in investing activities during 2023 was primarily due to the $75.9 million used to fund the Devon Street Homes Acquisition.

Current wording

We used $6.6 million and $4.7 million in net cash in investing activities for the years ended December 31, 2025 and 2024, respectively. The net cash used in investing activities during both years was primarily due to purchases of property and equipment and investments in unconsolidated entities.

Previous wording

We expect our future cash requirements will relate to working capital, capital expenditures, benefits expenses, interest expense and debt service obligations. In addition, we may use cash and cash equivalents to enter into strategic transactions, such as potential joint ventures or other unconsolidated entities, or acquisitions. Our material cash commitments as of December 31, 2024 were our $3.2 million operating lease obligation, which primarily consists of our$1.2 million office lease obligation for our headquarters in Woodstock, Georgia where we lease approximately 26,800 square feet of office space under a lease agreement that expires on August 31, 2028 and the interest on our Amended Credit Facility on the amounts outstanding from time to time.

Current wording

We expect our future cash requirements will relate to working capital, capital expenditures, benefits expenses, interest expense and debt service obligations. In addition, we may use cash and cash equivalents to enter into strategic transactions, such as potential joint ventures or other unconsolidated entities, or acquisitions. Our material cash commitments as of December 31, 2025 were our $2.0 million operating lease obligation, which primarily consists of our division offices and the interest on our Amended Credit Facility on the amounts outstanding from time to time.

Previous wording

While using land bankers and third-party developers as part of our land-light operating strategy comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own and develop a higher percentage of their land supply. As of December 31, 2024, we had 803 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.1% of our total controlled lot supply.

Current wording

While using land bankers and third-party developers as part of our land-light operating strategy comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own and develop a higher percentage of their land supply. As of December 31, 2025, we had 804 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.6% of our total controlled lot supply.

Previous wording

As of December 31, 2024, we had $85.4 million of non-refundable cash deposits under land and lot-option contracts pertaining to 10,132 lots with a remaining aggregate purchase price of approximately $707.8 million.

Current wording

As of December 31, 2025, we had $136.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 14,888 lots with a remaining aggregate purchase price of approximately $1.07 billion.

Previous wording

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2024, there were no outstanding letters of credit. Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $32.1 million and $26.1 million as of December 31, 2024 and 2023, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.

Current wording

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2025, outstanding letters of credit approximated $0.5 million. Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $47.4 million and $32.1 million as of December 31, 2025 and 2024, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.

Previous wording

Real estate inventory is stated at cost unless the community is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (ASC) Topic 360-10, Property, Plant, and Equipment. We review our real estate inventory for indicators of potential impairment on a quarterly basis at the community level considering market and economic conditions, current sales absorption rates, and recent profitability of new home orders. When an indicator of impairment is identified, we prepare and analyze cash flows at the community level on an undiscounted basis. If the undiscounted cash flows are less than the community’s carrying value, we generally estimate the fair value using the estimated future discounted cash flows of respective inventories. A community with a fair value less than its carrying value is written down to such fair value and resulting losses are reported within home closing gross profit. No impairments were recognized during the years ended December 31, 2024 and 2023.

Current wording

Real estate inventory is stated at cost unless the community is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (ASC) Topic 360-10, Property, Plant, and Equipment. We review our real estate inventory for indicators of potential impairment on a quarterly basis at the community level considering market and economic conditions, current sales absorption rates, and recent profitability of new home orders. When an indicator of impairment is identified, we prepare and analyze cash flows at the community level on an undiscounted basis. If the undiscounted cash flows are less than the community’s carrying value, we generally estimate the fair value using the estimated future discounted cash flows of respective inventories. A community with a fair value less than its carrying value is written down to such fair value and resulting losses are reported within home closing gross profit. During the year ended December 31, 2025, we recognized an inventory impairment charge of $2.6 million in the Central reporting segment, which is included within cost of home closings in the accompanying consolidated statements of income. No impairments were recognized during the year ended December 31, 2024.

Previous wording

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires expanded disclosure of the Company’s income rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning after January 1, 2025. The Company is currently evaluating the impact ASU 2023-09 will have on its financial statement disclosures.

Current wording

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires expanded disclosure of the Company’s income rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning after January 1, 2025. The Company adopted ASU 2023-09 for the annual period beginning January 1, 2025, and will adopt for interim periods beginning January 1, 2026. ASU 2023-09 is applied retrospectively to all prior periods presented.