What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-04 · 216 added, 112 removed, 347 unchanged (49% of the section changed)

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Since commencing home building operations in 2003, we have constructed and closed over 50,000 homes.

During the three months ended March 31, 2021, we had 2,561 home closings, compared to 1,835 home closings during the three months ended March 31, 2020.

During the six months ended June 30, 2021, we had 5,417 home closings, compared to 3,840 home closings during the six months ended June 30, 2020.

We sell homes under the LGI Homes and Terrata Homes brands.

Our 110 active communities at March 31, 2021 included two Terrata Homes communities.

During the three months ended March 31, 2021, we recorded $62.4 million in wholesale revenues as a result of 283 home closings, representing 11.1% of the total homes closed during the three months ended March 31, 2021.

During the three months ended March 31, 2020, we recorded $44.3 million in wholesale revenues as a result of 199 home closings, representing 10.8% of the total homes closed during the three months ended March 31, 2020.

Our 106 active communities at June 30, 2021 included two Terrata Homes communities.

During the three months ended June 30, 2021, we recorded $94.7 million in wholesale revenues as a result of 430 home closings, representing 15.1% of the total homes closed during the three months ended June 30, 2021.

During the three months ended June 30, 2020, we recorded $38.1 million in wholesale revenues as a result of 199 home closings, representing 9.9% of the total homes closed during the three months ended June 30, 2020.

During the six months ended June 30, 2021, we recorded $157.1 million in wholesale revenues as a result of 713 home closings, representing 13.2% of the total homes closed during the six months ended June 30, 2021.

During the six months ended June 30, 2020, we recorded $82.4 million in wholesale revenues as a result of 398 home closings, representing 10.4% of the total homes closed during the six months ended June 30, 2020.

We believe our wholesale home closings provide opportunities for us to leverage our systems and processes to meet the needs of companies looking to acquire multiple homes for rental purposes, primarily through bulk sales agreements.

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During the COVID-19 outbreak, our main focus beyond the health and safety mentioned above is to continue our efforts to sell homes and complete our homes under construction.

We cannot predict the full impact that the significant disruption and volatility currently being experienced in the markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time, due to numerous uncertainties.

uncertainties.

For additional discussion regarding our operations and COVID-19, see Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II our Annual Report on Form 10-K for the fiscal year ended

December 31, 2020.

Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The ultimate impacts of COVID-19 and related mitigation efforts will depend on future developments, including, but not limited to, the duration and geographic spread of COVID-19, the emergence of more infectious strains of the virus, the impact of government actions designed to prevent the spread of COVID-19 or the decrease in such actions, the availability and timely distribution of, and willingness to accept, effective treatments and vaccines, actions taken by customers, subcontractors, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.

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Recent Developments

During the three months ended March 31, 2021, we purchased 216,221 shares of our common stock for $25.8 million under our previously announced stock repurchase program.

In March 2021, we entered into a joint venture with loanDepot.com, LLC to offer mortgage services within markets we operate.

On April 28, 2021, we entered into the Credit Agreement (as defined herein), which amends and restates the 2020 Credit Agreement.

The Credit Agreement (a) increases the commitments to $850.0 million, (b) allows the Company to increase the commitments by up to $100.0 million, subject to terms and conditions, (c) extends the maturity to April 28, 2025 for all lenders, (d) increases the sublimit for letters of credit to $50.0 million, (e) adds unrestricted cash in excess of $10.0 million as a component of the borrowing base and removes certain exclusions from the borrowing base, (f) reduces the applicable margin for LIBOR loans to a range of 2.10% to 1.45%, based on our leverage ratio, (g) reduces the LIBOR floor to 0.50%, (h) increases the minimum tangible net worth requirement to $850.0 million plus 75% of the net proceeds of equity issuances after December 31, 2020 and 50% of consolidated earnings for each quarter ending after March 31, 2021 and (i) provides for a “hardwired” transition from LIBOR loan pricing that is intended to be economically neutral to the Company;

otherwise, the Credit Agreement is on substantially the same terms as the 2020 Credit Agreement.

Key financial results as of and for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, were as follows:

During the three months ended June 30, 2021, we purchased 335,000 shares of our common stock for $55.8 million under our previously announced stock repurchase program.

On May 6, 2021, we acquired the real estate assets of Minneapolis, Minnesota-based KenRoe, Inc., a privately held homebuilder and land development company, for approximately $27.3 million at closing, subject to certain potential post-closing adjustments.

KenRoe is recognized for building quality homes targeted at entry-level buyers.

The acquired assets include approximately 85 homes under construction, 130 finished lots, and 390 lots either raw or under development.

Additionally, we acquired approximately 2,500 controlled lots in the Minneapolis, Minnesota market.

On June 28, 2021, we completed an offering of $300.0 million aggregate principal amount of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”).

We received net proceeds from the offering of the 2029 Senior Notes of approximately $296.6 million, after deducting the initial purchasers’ discounts and commissions and offering expenses.

The net proceeds from the offering were used to temporarily repay borrowings under the Credit Agreement and subsequently in July 2021, to optionally redeem all $300.0 million aggregate principal amount of our outstanding 6.875% Senior Notes due 2026 (the “2026 Senior Notes”).

On June 14, 2021, the Company delivered a notice of conditional full redemption for all of the outstanding 2026 Senior Notes.

On July 15, 2021, we redeemed all of the outstanding 2026 Senior Notes, which resulted in the principal payment of $300.0 million and a redemption premium of $10.3 million.

Additionally, we expensed $3.0 million of deferred financing costs and discounts that were being previously amortized in association with the 2026 Senior Notes.

On July 14, 2021, we acquired the real estate assets of Buffington Homebuilding Group, Ltd., one of the largest privately held homebuilders in Austin, Texas, for approximately $40.0 million in cash at closing, subject to certain potential post-closing adjustments.

This acquisition further expands our land position in the Austin, Texas market.

The acquired assets include over 100 homes under construction, over 350 finished lots and control of approximately 150 additional finished lots that will be available for future sales.

The acquired communities introduce the Terrata Homes brand to the Austin, Texas market.

Key financial results as of and for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, were as follows:

• Home sales revenues increased 64.3% to $791.5 million from $481.6 million.

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• Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues increased to 20.0% from 16.2%.

• Total owned and controlled lots increased 9.4% to 67,286 lots at March 31, 2021 from 61,504 lots at December 31, 2020.

• Total owned and controlled lots increased 12.8% to 75,910 lots at June 30, 2021 from 67,286 lots at March 31, 2021.

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

Key financial results as of and for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, were as follows:

• Home sales revenues increased 59.9% to $1.5 billion from $936.3 million.

• Homes closed increased 41.1% to 5,417 homes from 3,840 homes.

• Average sales price per home closed increased 13.4% to $276,438 from $243,836.

• Gross margin as a percentage of home sales revenues increased to 27.0% from 24.0%.

• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 28.5% from 26.1%.

• Net income before income taxes increased 120.6% to $272.4 million from $123.5 million.

• Net income increased 121.2% to $217.8 million from $98.5 million.

• EBITDA (non-GAAP) as a percentage of home sales revenues increased to 19.6% from 15.1%.

• Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues increased to 19.5% from 15.1%.

• Total owned and controlled lots increased 23.4% to 75,910 lots at June 30, 2021 from 61,504 lots at December 31, 2020.

Results of Operations

The following table sets forth our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following table sets forth our results of operations for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(dollars in thousands, except per share data and average home sales price)

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Operating income 146,007 67,834 268,450 121,712

Loss on extinguishment of debt 662 — 662 —

Other income, net (3,776) (763) (4,609) (1,774)

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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 net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization, (iv) capitalized interest charged to the cost of sales, (v) loss on extinguishment of debt, (vi) other income, net and (vii) adjustments resulting from the application of purchase accounting.

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.

We define adjusted EBITDA as net income before (i) interest

expense, (ii) income taxes, (iii) depreciation and amortization, (iv) capitalized interest charged to the cost of sales, (v) loss on extinguishment of debt, (vi) other income, net and (vii) adjustments resulting from the application of purchase accounting.

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.

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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.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Our home sales revenues, home closings, average sales price per home closed (ASP), average community count, average monthly absorption rate and closing community count by reportable segment for the three months ended March 31, 2021 and 2020 were as follows (revenues in thousands):

Three Months Ended March 31, 2021 As of March 31, 2021

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Our home sales revenues, home closings, average sales price per home closed (ASP), average community count, average monthly absorption rate and closing community count by reportable segment for the three months ended June 30, 2021 and 2020 were as follows (revenues in thousands):

Three Months Ended June 30, 2021 As of June 30, 2021

Revenues Home Closings ASP Average Community Count Average

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Total $ 791,512 2,856 $ 277,140 105.0 9.1 106

Three Months Ended March 31, 2020 As of March 31, 2020

Three Months Ended June 30, 2020 As of June 30, 2020

Revenues Home Closings ASP Average Community Count Average

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Total $ 481,602 2,005 $ 240,200 116.0 5.8 117

Our results of operations for the three months ended March 31, 2021 reflect a significant rebound following the slowdown related to the COVID-19 pandemic that occurred during March and April 2020.

Increase in the demand for our homes driven by benefits of homeownership, low interest rates and an undersupply of new and existing homes available for sale have resulted in an 110.8% increase to our backlog net orders at March 31, 2021 as compared to March 31, 2020.

Home sales revenues for the three months ended March 31, 2021 were $706.0 million, an increase of $251.2 million, or 55.2%, from $454.7 million for the three months ended March 31, 2020.

The increase in home sales revenues is primarily due to a 39.6% increase in homes closed and an increase in the average sales price per home closed during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

The average sales price per home closed during the three months ended March 31, 2021 was $275,655, an increase of $27,847, or 11.2%, from the average sales price per home closed of $247,808 for the three months ended March 31, 2020.

Our results of operations for the three months ended June 30, 2021 reflect a significant rebound following the slowdown related to the COVID-19 pandemic that occurred during March and April 2020.

Increase in the demand for our homes driven by benefits of homeownership, low interest rates and an undersupply of new and existing homes available for sale have resulted in a 53.2% increase to our backlog net orders at June 30, 2021 as compared to June 30, 2020.

Home sales revenues for the three months ended June 30, 2021 were $791.5 million, an increase of $309.9 million, or 64.3%, from $481.6 million for the three months ended June 30, 2020.

The increase in home sales revenues is primarily due to a 42.4% increase in homes closed and an increase in the average sales price per home closed during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

The average sales price per home closed during the three months ended June 30, 2021 was $277,140, an increase of $36,940, or 15.4%, from the average sales price per home closed of $240,200 for the three months ended June 30, 2020.

This increase in the average sales price per home closed is primarily due to a favorable pricing environment, increased closings at higher price points in certain markets and changes in product mix.

The overall increase in home closings was largely due to a strong demand environment leading to higher average monthly absorption rates within certain markets in the Central and Florida reportable segments during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Our community count at March 31, 2021 decreased to 110 from 113 at March 31, 2020.

Home sales revenues in our Central reportable segment increased by $123.0 million, or 74.2%, during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, primarily due to a 52.1% increase in the number of homes closed, increased community count at a higher absorption rate and an increase in the average sales price per home closed.

Home sales revenues in our Florida reportable segment increased by $41.2 million, or 102.9%, largely due to an increase in the number of homes closed resulting from an increase in community count and at a higher absorption rate for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

The overall increase in home closings was largely due to a strong demand environment leading to higher average monthly absorption rates within certain markets in all reportable segments during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Our community count at June 30, 2021 decreased to 106 from 117 at June 30, 2020.

The decrease in community count is due to close out of or transition between certain active communities for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Home sales revenues in our Central reportable segment increased by $180.0 million, or 107.2%, during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, primarily due to an 80.5% increase in the number of homes closed, increased community count at a higher absorption rate and an increase in the average sales price per home closed.

Home sales revenues in our Southeast reportable segment increased by $31.1 million, or 24.2%, primarily due to increased home closings at higher average sales price, as well as continued expansion into certain Mid-Atlantic geographic markets.

Home sales revenues in our

Northwest reportable segment increased by $16.2 million, or 15.9%, primarily due to increased demand and an increase in the number of homes closed, partially offset by the close out of or transition between, and to a lesser extent available inventory in, certain active communities for the three months ended March 31, 2021.

Home sales revenues in our West reportable segment increased by $22.7 million, or 38.8%, during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, primarily due to a 31.5% increase in average sales price per home closed, and the close out of or transition between, and to a lesser extent available inventory in, certain active communities for the three months ended March 31, 2021.

Home sales revenues in our Northwest reportable segment increased by $49.8 million, or 88.4%, primarily due to increased demand and an increase in the number of homes closed, partially offset by the close out of or transition between, and to a lesser extent available inventory in, certain active communities for the three months ended June 30, 2021.

revenues in our West reportable segment increased by $20.2 million, or 33.4%, during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, primarily due to a 35.7% increase in average sales price per home closed, and the close out of or transition between, and to a lesser extent available inventory in, certain active communities for the three months ended June 30, 2021.

Home sales revenues in our Florida reportable segment increased by $28.7 million, or 42.1%, largely due to an increase in the number of homes closed resulting from an increase in community count and a higher absorption rate for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Cost of Sales and Gross Margin (home sales revenues less cost of sales).

Cost of sales increased for the three months ended March 31, 2021 to $516.0 million, an increase of $167.8 million, or 48.2%, from $348.2 million for the three months ended March 31, 2020, primarily due to the increase in homes closed.

Gross margin for the three months ended March 31, 2021 was $189.9 million, an increase of $83.4 million, or 78.2%, from $106.6 million for the three months ended March 31, 2020.

Gross margin as a percentage of home sales revenues was 26.9% for the three months ended March 31, 2021 and 23.4% for the three months ended March 31, 2020.

This increase in gross margin as a percentage of home sales revenues is primarily due to an increase in homes closed with a higher average sales price per home closed, lower capitalized interest and lower overhead expense, offset by higher lot costs for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Cost of sales increased for the three months ended June 30, 2021 to $577.4 million, an increase of $213.8 million, or 58.8%, from $363.6 million for the three months ended June 30, 2020, primarily due to the increase in homes closed.

Gross margin for the three months ended June 30, 2021 was $214.1 million, an increase of $96.1 million, or 81.5%, from $118.0 million for the three months ended June 30, 2020.

Gross margin as a percentage of home sales revenues was 27.0% for the three months ended June 30, 2021 and 24.5% for the three months ended June 30, 2020.

This increase in gross margin as a percentage of home sales revenues was primarily due to raising prices higher than increases in input costs for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Selling Expenses.

Selling expenses for the three months ended March 31, 2021 were $42.8 million, an increase of $10.0 million, or 30.6%, from $32.8 million for the three months ended March 31, 2020.

Sales commissions increased to $26.3 million for the three months ended March 31, 2021 from $16.5 million for the three months ended March 31, 2020, primarily due to a 55.2% increase in home sales revenues during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Selling expenses as a percentage of home sales revenues were 6.1% and 7.2% for the three months ended March 31, 2021 and 2020, respectively.

The decrease in selling expenses as a percentage of home sales revenues reflects operating leverage realized from the increase in home sales revenues during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Selling expenses for the three months ended June 30, 2021 were $44.8 million, an increase of $14.8 million, or 49.5%, from $30.0 million for the three months ended June 30, 2020.

Sales commissions increased to $30.4 million for the three months ended June 30, 2021 from $18.0 million for the three months ended June 30, 2020, primarily due to a 64.3% increase in home sales revenues during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Selling expenses as a percentage of home sales revenues were 5.7% and 6.2% for the three months ended June 30, 2021 and 2020, respectively.

The decrease in selling expenses as a percentage of home sales revenues reflects operating leverage realized from the increase in home sales revenues during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

General and Administrative.

General and administrative expenses for the three months ended March 31, 2021 were $24.7 million, an increase of $4.8 million, or 24.1%, from $19.9 million for the three months ended March 31, 2020.

The increase in the amount of general and administrative expenses is primarily due to increased personnel and related costs during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

General and administrative expenses as a percentage of home sales revenues were 3.5% and 4.4% for the three months ended March 31, 2021 and 2020, respectively.

The decrease in general and administrative expenses as a percentage of home sales revenues reflects operating leverage realized from the increase in home sales revenues during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

General and administrative expenses for the three months ended June 30, 2021 were $23.3 million, an increase of $3.1 million, or 15.3%, from $20.2 million for the three months ended June 30, 2020.

The increase in the amount of general and administrative expenses is primarily due to increased personnel and related costs during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

General and administrative expenses as a percentage of home sales revenues were 2.9% and 4.2% for the three months ended June 30, 2021 and 2020, respectively.

The decrease in general and administrative expenses as a percentage of home sales revenues reflects operating leverage realized from the increase in home sales revenues during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Other Income.

Other income, net of other expenses was $3.8 million for the three months ended June 30, 2021, an increase of $3.0 million from $0.8 million for the three months ended June 30, 2020.

The increase in other income primarily reflects the gain realized from the sale of lots and land not directly associated with our core homebuilding operations.

Operating Income and Net Income before Income Taxes.

Operating income for the three months ended March 31, 2021 was $122.4 million, an increase of $68.6 million, or 127.3%, from $53.9 million for the three months ended March 31, 2020.

Net income before income taxes for the three months ended March 31, 2021 was $123.3 million, an increase of $68.4 million, or 124.6%, from $54.9 million for the three months ended March 31, 2020.

All reportable segments contributed to net income before income taxes during the three months ended March 31, 2021 as follows:

Operating income for the three months ended June 30, 2021 was $146.0 million, an increase of $78.2 million, or 115.2%, from $67.8 million for the three months ended June 30, 2020.

Net income before income taxes for the three months ended June 30, 2021 was $149.1 million, an increase of $80.5 million, or 117.4%, from $68.6 million for the three months ended June 30, 2020.

All reportable segments contributed to net income before income taxes during the three months ended June 30, 2021 as follows:

Central - $69.0 million or 46.3%;

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Northwest - $23.7 million or 15.9%;

West - $12.6 or 10.2%;

and Florida - $10.8 or 8.8%.

The increases in operating income and net income before income taxes are primarily attributed to higher gross margins, operating leverage realized from the increase in home sales revenues and higher average sales price per home closed during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

West - $12.7 million or 8.5%;

and Florida - $14.8 million or 9.9%.

The increases in operating income and net income before income taxes are primarily attributed to higher gross margins, operating leverage realized from the increase in home sales revenues and higher average sales price per home closed during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Income Taxes .

Income tax provision for the three months ended March 31, 2021 was $23.6 million, an increase of $11.6 million, or 96.0%, from income tax provision of $12.1 million for the three months ended March 31, 2020.

The increase in the amount of income tax provision is primarily due to the 124.6% increase in net income before taxes, partially offset by the decrease in our effective tax rate to a 19.2% effective tax rate from a 22.0% effective tax rate as a result of the tax benefits relating to the federal energy efficient homes tax credits, as well as excess compensation cost for share-based payments, we recognized for the three months ended March 31, 2021.

Net income for the three months ended March 31, 2021 was $99.7 million, an increase of $56.8 million, or 132.6%, from $42.8 million for the three months ended March 31, 2020.

The increase in net income is primarily attributed to higher gross margins, operating leverage realized from the increase in home sales revenues, higher average sales price per home closed and the federal energy efficient homes tax credits recognized during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Income tax provision for the three months ended June 30, 2021 was $31.0 million, an increase of $18.0 million, or 138.9%, from income tax provision of $13.0 million for the three months ended June 30, 2020.

The increase in the amount of income tax provision is primarily due to the 117.4% increase in net income before taxes, partially offset by tax benefits relating to the federal energy efficient homes tax credits we recognized during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Net income for the three months ended June 30, 2021 was $118.1 million, an increase of $62.5 million, or 112.4%, from $55.6 million for the three months ended June 30, 2020.

The increase in net income is primarily attributed to higher gross margins, operating leverage realized from the increase in home sales revenues and higher average sales price per home closed recognized during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the six months ended June 30, 2021 and 2020 were as follows (revenues in thousands):

Six Months Ended June 30, 2021

Revenues Home Closings ASP Average Community Count Average

Absorption Rate

Central $ 636,713 2,475 $ 257,258 37.6 11.0

Southeast 296,265 1,180 251,072 26.7 7.4

Northwest 224,388 551 407,238 10.5 8.7

West 161,961 481 336,717 10.7 7.5

Florida 178,138 730 244,025 20.2 6.0

Total $ 1,497,465 5,417 $ 276,438 105.7 8.5

Six Months Ended June 30, 2020

Revenues Home Closings ASP Average Community Count Average Monthly

Absorption Rate

Central $ 333,699 1,488 $ 224,260 34.0 7.3

Southeast 217,024 962 225,597 34.2 4.7

Northwest 158,317 426 371,636 11.8 6.0

West 119,077 472 252,282 15.0 5.2

Florida 108,212 492 219,943 17.3 4.7

Total $ 936,329 3,840 $ 243,836 112.3 5.7

Home sales revenues for the six months ended June 30, 2021 were $1.5 billion, an increase of $561.1 million, or 59.9%, from $0.9 billion for the six months ended June 30, 2020.

The increase in home sales revenues is primarily due to a 41.1% increase in homes closed and an increase in the average sales price per home closed during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

The average sales price per home closed during the six months ended June 30, 2021 was $276,438, an increase of $32,602, or 13.4%, from the average sales price per home closed of $243,836 for the six months ended June 30, 2020.

This increase in the average sales price per home closed was primarily due to changes in product mix and higher price points in certain markets, partially offset by additional wholesale home closings.

The overall increase in home closings was primarily driven by strong demand in all reportable segments during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

The overall decrease in average community count relates to timing associated with the opening, close out or transition between certain active communities during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Home sales revenues in our Central reportable segment increased by $303.0 million, or 90.8%, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, primarily due to a 66.3% increase in the number of homes closed at a higher average sales price per home closed and increased average community count at a higher absorption rate in this reportable segment.

Home sales revenues in our Southeast reportable segment increased by $79.2 million, or 36.5%, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, primarily due to higher average sales price per home closed and improved absorption rate associated with increased demand in certain markets in North Carolina and South Carolina during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Home sales revenues in our Northwest reportable segment increased by $66.1 million, or 41.7%, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, primarily due to a 29.3% increase in the number of homes closed in this reportable segment, as a result of increased demand during the six months ended June 30, 2021.

Home sales revenues in our West reportable segment increased by $42.9 million, or 36.0%, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, primarily due to higher average sales price per home closed and improved absorption rate associated with increased demand in certain markets in this reportable segment.

Home sales revenues in our Florida reportable segment increased by $69.9 million, or 64.6%, largely due to an increase of 10.9% in the average sales price

per home closed as a result of strong demand and complemented by increased average community count at an improved absorption rate during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Cost of Sales and Gross Margin (home sales revenues less cost of sales).

Cost of sales increased for the six months ended June 30, 2021 to $1.1 billion, an increase of $381.6 million, or 53.6%, from $711.8 million for the six months ended June 30, 2020.

This overall increase is primarily due to a 41.1% increase in homes closed and product mix.

As a percentage of home sales revenues, cost of sales decreased as a result of the increase in home sales revenues, lower capitalized interest and lower overhead, partially offset by higher lot costs during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Gross margin for the six months ended June 30, 2021 was $404.0 million, an increase of $179.5 million, or 79.9%, from $224.5 million for the six months ended June 30, 2020.

Gross margin as a percentage of home sales revenues was 27.0% for the six months ended June 30, 2021 and 24.0% for the six months ended June 30, 2020.

This increase in gross margin as a percentage of home sales revenues was primarily due to raising prices higher than increases in input costs for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Selling Expenses.

Selling expenses for the six months ended June 30, 2021 were $87.6 million, an increase of $24.9 million, or 39.6%, from $62.7 million for the six months ended June 30, 2020.

Sales commissions increased to $56.7 million for the six months ended June 30, 2021 from $34.5 million for the six months ended June 30, 2020, partially due to a 59.9% increase in home sales revenues during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Selling expenses as a percentage of home sales revenues were 5.8% and 6.7% for the six months ended June 30, 2021 and 2020, respectively.

The decrease in selling expenses as a percentage of home sales revenues was driven primarily by operating leverage obtained from the increase in home sales revenues and to a lesser extent lower advertising expenses during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

General and Administrative.

General and administrative expenses for the six months ended June 30, 2021 were $48.0 million, an increase of $7.9 million, or 19.7%, from $40.1 million for the six months ended June 30, 2020.

The increase in the amount of general and administrative expenses is primarily due to increased compensation during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

General and administrative expenses as a percentage of home sales revenues were 3.2% and 4.3% for the six months ended June 30, 2021 and 2020, respectively.

The decrease in general and administrative expenses as a percentage of home sales revenues reflects operating leverage realized from the increase in home sales revenues during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Other Income.

Other income, net of other expenses was $4.6 million for the six months ended June 30, 2021, an increase of $2.8 million from $1.8 million for the six months ended June 30, 2020.

The increase in other income primarily reflects the gain realized from the sale of land not directly associated with our core homebuilding operations.

Operating Income and Net Income before Income Taxes.

Operating income for the six months ended June 30, 2021 was $268.5 million, an increase of $146.7 million, or 120.6%, from $121.7 million for the six months ended June 30, 2020.

Net income before income taxes for the six months ended June 30, 2021 was $272.4 million, an increase of $148.9 million, or 120.6%, from $123.5 million for the six months ended June 30, 2020.

All reportable segments contributed to net income before income taxes during the six months ended June 30, 2021 as follows:

Central - $124.7 million or 45.8%;

Southeast - $50.5 million or 18.5%;

Northwest - $49.6 million or 18.2%;

West - $25.3 million or 9.3%;

and Florida - $25.6 million or 9.4%.

The increases in operating income and net income before income taxes are primarily attributed to operating leverage realized from the increase in home sales revenues and higher average sales price per home closed during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Income Taxes .

Income tax provision for the six months ended June 30, 2021 was $54.6 million, an increase of $29.6 million, or 118.2%, from income tax provision of $25.0 million for the six months ended June 30, 2020.

The increase in the amount of income tax provision is primarily due to the 120.6% increase in net income before taxes, partially offset by tax benefits relating to the federal energy efficient homes tax credits we recognized during the six months ended June 30, 2021, that resulted in a decrease in our effective tax rate to 20.0% from 20.3%.

Net income for the six months ended June 30, 2021 was $217.8 million, an increase of $119.3 million, or 121.2%, from $98.5 million for the six months ended June 30, 2020.

The increase in net income is primarily attributed to operating leverage realized from the increase in home sales revenues, higher average sales price per home closed and benefits relating to the federal energy efficient homes tax credits recognized during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Non-GAAP Measures

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Home sales revenues $ 791,512 $ 481,602 $ 1,497,465 $ 936,329

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Purchase accounting adjustments (1)

1,446 1,252 2,258 1,875

Adjusted gross margin $ 225,967 $ 127,909 $ 427,401 $ 244,026

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income $ 118,134 $ 55,624 $ 217,792 $ 98,463

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Purchase accounting adjustments (1)

1,446 1,252 2,258 1,875

Loss on extinguishment of debt 662 — 662 —

Other income, net (3,776) (763) (4,609) (1,774)

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Our “backlog” consists of homes that are under a purchase contract that has been signed by homebuyers who have met the preliminary criteria to obtain mortgage financing but have not yet closed and wholesale contracts for which vertical construction is generally set to occur within the next six to twelve months .

Since our business model is generally based on building move-in ready homes before a purchase contract is signed, the majority of our homes in backlog are currently under construction or complete.

Since our business model is generally based on

building move-in ready homes before a purchase contract is signed, the majority of our homes in backlog are currently under construction or complete.

Ending backlog represents the number of homes in backlog from the previous period plus the number of net orders (new orders for homes less cancellations) generated during the current period minus the number of homes closed during the current period.

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As of the dates set forth below, our net orders, cancellation rate and ending backlog homes and value were as follows (dollars in thousands):

Backlog Data Three Months Ended March 31,

Backlog Data Six Months Ended June 30,

Net orders (1)

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Ending backlog is valued at the contract amount.

(4) As of March 31, 2021, we have 1,344 units related to bulk sales agreements associated with our wholesale business.

(5) As of March 31, 2020, we have 338 units related to bulk sales agreements associated with our wholesale business.

(4) As of June 30, 2021, we have 940 units related to bulk sales agreements associated with our wholesale business.

(5) As of June 30, 2020, we have 208 units related to bulk sales agreements associated with our wholesale business.

Land Acquisition Policies and Development

We had 110 and 116 active communities as of March 31, 2021 and December 31, 2020, respectively.

Our lot inventory increased to 67,286 owned or controlled lots as of March 31, 2021 from 61,504 owned or controlled lots as of December 31, 2020 primarily due to overall increased lot counts within the Southeast, Northwest, West and Florida reportable segments.

The table below shows (i) home closings by reportable segment for the three months ended March 31, 2021 and (ii) our owned or controlled lots by reportable segment as of March 31, 2021.

Three Months Ended March 31, 2021 As of March 31, 2021

We had 106 and 116 active communities as of June 30, 2021 and December 31, 2020, respectively.

Our lot inventory increased to 75,910 owned or controlled lots as of June 30, 2021 from 61,504 owned or controlled lots as of December 31, 2020 due to an overall increased lot count within all reportable segments.

The table below shows (i) home closings by reportable segment for the six months ended June 30, 2021 and (ii) our owned or controlled lots by reportable segment as of June 30, 2021.

Six Months Ended June 30, 2021 As of June 30, 2021

Reportable Segment Home Closings Owned (1)

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Total 5,417 42,492 33,418 75,910

(1) Of the 38,502 owned lots as of March 31, 2021, 26,213 were raw/under development lots and 12,289 were finished lots.

(1) Of the 42,492 owned lots as of June 30, 2021, 29,885 were raw/under development lots and 12,607 were finished lots.

Homes in Inventory

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As homes are closed, we start more homes to maintain our inventory.

As of March 31, 2021, we had a total of 797 completed homes, including information centers, and 3,554 homes in progress.

As of June 30, 2021, we had a total of 481 completed homes, including information centers, and 4,267 homes in progress.

Raw Materials and Labor

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Liquidity and Capital Resources

As of March 31, 2021, we had $48.2 million of cash and cash equivalents.

As of June 30, 2021, we had $111.7 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.

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Revolving Credit Facility

On April 30, 2020, we entered into the Second Amendment to Fourth Amended and Restated Credit Agreement (the “Second Amendment”), which amends the Fourth Amended and Restated Credit Agreement, dated as of May 6, 2019 (as amended by the Lender Addition and Acknowledgement Agreement and First Amendment to Fourth Amended and Restated Credit Agreement, dated as of December 6, 2019, the “2019 Credit Agreement” and, together with the Second Amendment, the “2020 Credit Agreement”), with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent.

In the Second Amendment, certain lenders agreed to extend the maturity of their commitments, while another lender agreed to extend the maturity of its commitment subsequent to the execution of the Second Amendment.

Lenders with $566.0 million, or 87%, of the $650.0 million of commitments under the 2019 Credit Agreement agreed to extend the maturity of their commitments to May 31, 2023, with the remaining lenders retaining their existing maturity of May 31, 2022.

The Second Amendment also reduced the minimum EBITDA to interest expense ratio from 2.50 to 1.75, increased the sublimit for letters of credit to $40.0 million and established a London Interbank Offered Rate (“LIBOR”) floor of 0.70%.

The 2020 Credit Agreement otherwise has substantially similar terms and provisions to the 2019 Credit Agreement and continues to provide for a $650.0 million revolving credit facility, which can be increased at the request of the Company by up to $100.0 million, subject to the terms and conditions of the 2020 Credit Agreement.

The 2020 Credit Agreement matures on May 31, 2023 with respect to 87% of the commitments thereunder and on May 31, 2022 with respect to 13% of the commitments thereunder.

On April 28, 2021, we entered into that certain Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Credit Agreement”), which amends and restates that certain Fourth Amended and Restated Credit Agreement, dated as of May 6, 2019 (as amended, the “2020 Credit Agreement”).

The Credit Agreement (a) increases the commitments to $850.0 million, (b) allows the Company to increase the commitments by up to $100.0 million, subject to terms and conditions, (c) extends the maturity to April 28, 2025 for all lenders, (d) increases the sublimit for letters of credit to $50.0 million, (e) adds unrestricted cash in excess of $10.0 million as a component of the borrowing base and removes certain exclusions from the borrowing base, (f) reduces the applicable margin for LIBOR loans to a range of 1.45% to 2.10%, based on our leverage ratio, (g) reduces the LIBOR floor to 0.50%, (h) increases the minimum tangible net worth requirement to $850.0 million plus 75% of the net proceeds of equity issuances after December 31, 2020 and 50% of consolidated earnings for each quarter ending after March 31, 2021 and (i) provides for a “hardwired” transition from LIBOR loan pricing that is intended to be economically neutral to the Company;

otherwise, the Credit Agreement is on substantially the same terms as the 2020 Credit Agreement.

The Credit Agreement matures on April 28, 2025.

Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date.

The 2020 Credit Agreement is guaranteed by each of our subsidiaries that have gross assets equal to or greater than $0.5 million.

The borrowings and letters of credit outstanding under the 2020 Credit Agreement, together with the outstanding principal balance of our 6.875% Senior Notes due 2026 (the “Senior Notes”), may not exceed the borrowing base under the 2020 Credit Agreement.

As of March 31, 2021, the borrowing base under the 2020 Credit Agreement was $949.3 million, of which borrowings, including the Senior Notes, of $421.5 million were outstanding, $10.3 million of letters of credit were outstanding and $517.5 million was available to borrow under the 2020 Credit Agreement.

Interest is paid monthly on borrowings under the 2020 Credit Agreement at LIBOR plus 2.35%.

The Credit Agreement is guaranteed by each of our subsidiaries that have gross assets of at least $0.5 million.

The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of the 2026 Senior Notes and the 2029 Senior Notes, may not exceed the borrowing base under the Credit Agreement.

As of June 30, 2021, the borrowing base under the Credit Agreement was $1.3 billion, of which borrowings, including the 2026 Senior Notes and the 2029 Senior Notes, of $600.3 million were outstanding, $10.3 million of letters of credit were outstanding and $714.5 million was available to borrow under the Credit Agreement.

Interest is paid monthly on borrowings at LIBOR plus 1.45%.

The Credit Agreement applicable margin for LIBOR loans ranges from 1.45% to 2.10% based on our leverage ratio.

At March 31, 2021, LIBOR was 0.11%;

At June 30, 2021, LIBOR was 0.09%;

however, the Credit Agreement has a 0.50% LIBOR floor.

The 2020 Credit Agreement requires us to maintain (i) a tangible net worth of not less than $625.0 million plus 75% of the net proceeds of all equity issuances plus 50.0% of the amount of our positive net income in any fiscal quarter after December 31, 2019, (ii) a leverage ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.

The Credit Agreement requires us to maintain (i) a tangible net worth of not less than $850.0 million plus 75% of the net proceeds of all equity issuances after December 31, 2020 plus 50.0% of the amount of our positive net income in each fiscal quarter ending after March 31, 2021, (ii) a leverage ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.

The Credit Agreement contains various covenants that, among other restrictions, limit the amount of our additional debt and our ability to make certain investments.

At March 31, 2021, we were in compliance with all of the covenants contained in the 2020 Credit Agreement.

In July 2017, the Financial Conduct Authority in the United Kingdom, which regulates LIBOR, announced that it intends to phase out LIBOR as a benchmark by the end of 2021.

At the present time, the Credit Agreement has a term that extends beyond 2021, and borrowings under the Credit Agreement bear interest at LIBOR plus an applicable margin.

The Credit Agreement provides for a mechanism to amend the Credit Agreement to reflect the establishment of an alternate rate of interest upon the occurrence of certain events related to the phase-out of any applicable interest rate.

However, we have not yet pursued any technical amendment or other contractual alternative to address this matter.

We are currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate on the Credit Agreement.

otherwise, the Credit Agreement is on substantially the same terms as the 2020 Credit Agreement.

Senior Notes Offering

On July 6, 2018, we issued $300.0 million aggregate principal amount of the Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

persons in transactions outside the United States pursuant to

Regulation S under the Securities Act.

At June 30, 2021, we were in compliance with all of the covenants contained in the Credit Agreement.

Senior Notes Offerings

On June 28, 2021, we issued $300.0 million aggregate principal amount of the 2029 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.

Interest on the 2029 Senior Notes accrues at a rate of 4.000% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2022, and the 2029 Senior Notes mature on July 15, 2029.

Terms of the 2029 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Third Supplemental Indenture thereto, dated as of June 28, 2021, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Wilmington Trust, National Association, as trustee.

On July 6, 2018, we issued $300.0 million aggregate principal amount of the 2026 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S.

Interest on the 2026 Senior Notes accrues at a rate of 6.875% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019, and the 2026 Senior Notes mature on July 15, 2026.

Terms of the 2026 Senior Notes are governed by an Indenture and First Supplemental Indenture thereto, each dated as of July 6, 2018, and a Second Supplemental Indenture thereto, dated as of April 30, 2020, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the 2020 Credit Agreement and Wilmington Trust, National Association, as trustee.

On June 14, 2021, the Company delivered a notice of conditional full redemption for all of the outstanding 2026 Senior Notes.

The redemption price for the 2026 Senior Notes was equal to 103.438% (expressed as a percentage of the principal amount of the 2026 Senior Notes redeemed), plus accrued and unpaid interest, if any, on the 2026 Senior Notes to be redeemed.

The Company financed the redemption of the 2026 Senior Notes with a portion of the net proceeds from the offering of the 2029 Senior Notes, together with cash on hand.

The Company’s obligation to redeem the 2026 Senior Notes was conditioned upon the prior consummation of the issuance of the 2029 Senior Notes.

On July 15, 2021, we redeemed all of the outstanding 2026 Senior Notes, which resulted in the principal payment of $300.0 million and a redemption premium of $10.3 million.

Additionally, we expensed $3.0 million of deferred financing costs and discounts that were being previously amortized in association with the 2026 Senior Notes.

Letters of Credit, Surety Bonds and Financial Guarantees

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Under these letters of credit, surety bonds and financial guarantees, we are committed to perform certain development and construction activities and provide certain guarantees in the normal course of business.

Outstanding letters of credit, surety bonds and financial guarantees under these arrangements, totaled $167.6 million as of March 31, 2021.

Outstanding letters of credit, surety bonds and financial guarantees under these arrangements, totaled $182.3 million as of June 30, 2021.

Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and surety bonds are not generally released until all development and construction activities are completed.

We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of March 31, 2021 will be drawn upon.

We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of June 30, 2021 will be drawn upon.

Stock Repurchase Program

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In October 2020, the Board approved an increase in our stock repurchase program by an additional $300.0 million.

During the three months ended March 31, 2021 and 2020, we repurchased 216,221 and 567,028 shares of our common stock for $25.8 million and $31.3 million, respectively, to be held as treasury stock.

During the three months ended June 30, 2021, we repurchased 335,000 shares of our common stock for $55.8 million to be held as treasury stock.

During the six months ended June 30, 2021, we repurchased 551,221 shares of our common stock for $81.6 million to be held as treasury stock.

A total of 1,309,214 shares of our common stock has been repurchased since our stock repurchase program commenced.

As of March 31, 2021, we may purchase up to $274.6 million of shares of our common stock under our stock repurchase program.

As of June 30, 2021, we may purchase up to $218.8 million of shares of our common stock under our stock repurchase program.

The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.

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Operating Activities

Net cash provided by operating activities was $160.7 million for the three months ended March 31, 2021.

Net cash provided by operating activities was $139.9 million for the six months ended June 30, 2021.

The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.

Net cash provided by operating activities during the three months ended March 31, 2021 was primarily driven by net income of $99.7 million, and included cash outflow from the $41.7 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity and a $56.7 million increase in the net change in accounts receivable.

Net cash provided by operating activities was $58.8 million for the three months ended March 31, 2020.

Net cash provided by operating activities during the six months ended June 30, 2021 was primarily driven by net income of $217.8 million, and included cash outflow from the $158.7 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity and increases of $46.4 million and $43.9 million in the net change in accounts receivable and accounts payable, respectively.

Net cash provided by operating activities was $146.1 million for the six months ended June 30, 2020.

The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.

Net cash provided by operating activities during the three months ended March 31, 2020 was primarily driven by net income of $42.8 million, and included cash inflow from the $17.9 million decrease in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity offset by changes in non-inventory balances of $1.9 million.

Net cash provided by operating activities during the six months ended June 30, 2020 was primarily driven by net income of $98.5 million, and included cash inflow from the $41.7 million decrease in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity in addition to changes in non-inventory balances of $5.9 million.

Investing Activities

Net cash provided by investing activities was $0.4 million for the three months ended March 31, 2021, primarily due to the return of capital with our investment in an unconsolidated entity offset by the purchase of property and equipment.

Net cash used in investing activities was $1.5 million for the three months ended March 31, 2020, primarily due to the additional investment in an unconsolidated entity and purchase of property and equipment.

Net cash used in investing activities was $29.8 million for the six months ended June 30, 2021, primarily due to the payment for business acquisition, additional investment in unconsolidated entities and purchase of property and equipment.

Net cash used in investing activities was $1.7 million for the six months ended June 30, 2020, primarily due to the additional investment in an unconsolidated entity and purchase of property and equipment.

Financing Activities

Net cash used in financing activities was $148.9 million for the three months ended March 31, 2021, primarily driven by $230.0 million of payments on the 2020 Credit Agreement and by the $25.8 million payment for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock, offset by borrowings of $104.8 million under the 2020 Credit Agreement.

Net cash provided by financing activities was $22.6 million for the three months ended March 31, 2020, primarily driven by borrowings of $128.1 million under the 2019 Credit Agreement, offset by $75.0 million of payments on the 2019 Credit Agreement and by the $31.3 million payment for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock.

Net cash used in financing activities was $34.3 million for the six months ended June 30, 2021, primarily driven by $564.0 million of payments on the 2020 Credit Agreement and the Credit Agreement and by the $81.6 million payment for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock, offset by $617.7

million related to the proceeds received for the 2029 Senior Notes, and borrowings under the 2020 Credit Agreement and the Credit Agreement.

Net cash used in financing activities was $133.6 million for the six months ended June 30, 2020, primarily driven by $235.0 million of payments on the 2020 Credit Agreement and by the $31.3 million payment for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock, offset by borrowings of $133.0 million under the 2020 Credit Agreement.

Off-Balance Sheet Arrangements

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In addition, our deposit may also be refundable if the land seller does not satisfy all conditions precedent in the respective contract.

As of March 31, 2021, we had $35.5 million of cash deposits pertaining to land purchase contracts for 28,784 lots with an aggregate purchase price of $728.1 million.

Approximately $25.1 million of the cash deposits as of March 31, 2021 are secured by third-party guarantees or indemnity mortgages on the related property.

As of June 30, 2021, we had $36.1 million of cash deposits pertaining to land purchase contracts for 33,418 lots with an aggregate purchase price of $781.3 million.

Approximately $21.0 million of the cash deposits as of June 30, 2021 are secured by third-party guarantees or indemnity mortgages on the related property.

Our utilization of land purchase contracts is dependent on, among other things, the availability of land sellers willing to enter into contracts at acceptable terms, which may include option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing conditions and local market dynamics.

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Contractual Obligations

As of March 31, 2021, there have been no material changes to our contractual obligations appearing in the “Contractual Obligations” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

As of June 30, 2021, there have been no material changes to our contractual obligations appearing in the “Contractual Obligations” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Critical Accounting Policies

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Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future.

We believe that there have been no significant changes to our critical accounting policies during the three months ended March 31, 2021 as compared to those disclosed in Management ’ s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

We believe that there have been no significant changes to our critical accounting policies during the six months ended June 30, 2021 as compared to those disclosed in Management ’ s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Cautionary Statement about Forward-Looking Statements

From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts.

These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are

“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those expressed or implied by these statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis