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Nashville, TN
−Removed: We delivered strong financial results during the three months ended September 30, 2023.
−Removed: We attribute our success during the third quarter to several factors, including our ability to drive leads to our information centers through targeted marketing, our ability to partially offset affordability pressures through a combination of mortgage buy-down programs and other sales incentives, and our decision to build smaller, lower-priced homes.
−Removed: Although we are encouraged by our recent results, interest rates continue to move higher, creating the potential for a slowing demand for new homes.
−Removed: As a result, we continue to closely monitor demand trends at each active community and remain focused on balancing levels of vertical and completed inventory with current sales activity.
−Removed: During the three months ended September 30, 2023, we had 1,751 home closings, compared to 1,547 home closings during the three months ended September 30, 2022.
−Removed: The increase in home closings for the three months ended September 30, 2023 was primarily due to an increase in the community count and the relative strength of the demand environment experienced during the three months ended September 30, 2023 compared to the three months ended September 30, 2022.
−Removed: During the nine months ended September 30, 2023, we had 4,971 home closings, compared to 5,173 home closings during the nine months ended September 30, 2022.
−Removed: At September 30, 2023, we had 106 active communities, including 11 Terrata Homes communities.
−Removed: At September 30, 2022, we had 93 active communities, including 11 Terrata Homes communities.
+Added: The first quarter of 2024 was impacted by several contributing factors including lower home closings primarily due to pressure on affordability, as a result of continued inflation, elevated mortgage rates and new community openings.
+Added: During the three months ended March 31, 2024, we had 1,083 home closings, compared to 1,366 home closings during the three months ended March 31, 2023.
+Added: At March 31, 2024, we had 120 active communities, including 16 Terrata Homes communities.
+Added: At March 31, 2023, we had 99 active communities, including 10 Terrata Homes communities.
Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, mortgage rates, inflation, financial market stability, consumer confidence, housing demand, availability of financing for homebuyers, availability and prices of new homes compared to existing inventory, and demographic trends.
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We believe the long-term outlook for new homes remains strong, driven by solid fundamentals, including a historically low inventory of new and existing homes for sale, an aging housing stock, rising rents, strong household formations and low unemployment.
−Removed: However, the housing market is currently in a state of transition and we expect affordability constraints to continue to impact demand for the foreseeable future.
+Added: However, the housing market is currently in a state of transition and we expect interest rate driven affordability constraints to continue to impact demand for the foreseeable future.
For additional discussion regarding our business and operations, see Item 7.
1 unchanged sentence
For additional discussion regarding risks associated with our business and operations, see Item 1A.
−Removed: Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Item 1A.
−Removed: Risk Factors in Part II of this Quarterly Report on Form 10-Q.
−Removed: Key financial results as of and for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, were as follows:
−Removed: • Home sales revenues increased 12.9% to $617.5 million from $547.1 million.
−Removed: • Homes closed increased 13.2% to 1,751 homes from 1,547 homes.
−Removed: • Average sales price per home closed decreased 0.3% to $352,678 from $353,635.
−Removed: • Gross margin as a percentage of home sales revenues decreased to 25.7% from 28.5%.
−Removed: • Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 27.2% from 29.5%.
−Removed: • Net income before income taxes decreased 17.7% to $89.4 million from $108.7 million.
−Removed: • Net income decreased 25.8% to $67.0 million from $90.4 million.
−Removed: • EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 16.0% from 20.8%.
−Removed: • Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 15.0% from 18.4%.
−Removed: 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 .”
−Removed: Key financial results as of and for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, were as follows:
−Removed: • Home sales revenues decreased 3.6% to $1.75 billion from $1.82 billion.
+Added: Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
+Added: Key financial results as of and for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, were as follows:
+Added: • Home sales revenues decreased 19.8% to $390.9 million from $487.4 million.
• Homes closed decreased 20.7% to 1,083 homes from 1,366 homes.
• Average sales price per home closed increased 1.2% to $360,897 from $356,777.
−Removed: • Gross margin as a percentage of home sales revenues decreased to 22.8% from 30.0%.
−Removed: • Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 24.5% from 31.2%.
+Added: • Gross margin as a percentage of home sales revenues increased to 23.4% from 20.3%.
+Added: • Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 25.3% from 22.1%.
• Net income before income taxes decreased 28.6% to $23.1 million from $32.3 million.
1 unchanged sentence
• EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 7.8% from 8.1%.
−Removed: • Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 11.7% from 20.4%.
−Removed: 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 .”
−Removed: We owned and controlled 72,109 lots at September 30, 2023 as compared to 69,226 lots at June 30, 2023 and 71,904 lots at December 31, 2022.
+Added: For reconciliations of the non-GAAP financial measures of adjusted gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “ —Non-GAAP Measures .”
+Added: We owned and controlled 70,145 lots at March 31, 2024 as compared to 71,081 lots at December 31, 2023.
Results of Operations
−Removed: The following table sets forth our results of operations for the three and nine months ended September 30, 2023 and 2022:
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2023 2022 2023 2022
+Added: The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023:
+Added: Three Months Ended March 31,
(dollars in thousands, except per share data and average home sales price)
26 unchanged sentences
EBITDA margin % (2)(4)
−Removed: 16.0 % 20.8 % 12.5 % 21.3 %
−Removed: Adjusted EBITDA (4)
−Removed: $ 92,416 $ 100,760 $ 205,179 $ 370,772
−Removed: Adjusted EBITDA margin % (2)(4)
−Removed: 15.0 % 18.4 % 11.7 % 20.4 %
(1) Gross margin is home sales revenues less cost of sales.
5 unchanged sentences
In addition, other companies may not calculate adjusted gross margin information in the same manner that we do.
−Removed: Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance.
+Added: adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance.
Please see “ —Non-GAAP Measures ” for a reconciliation of adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.
−Removed: (4) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance.
+Added: (4) EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance.
We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
−Removed: 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.
−Removed: Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our
−Removed: results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
−Removed: 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.
−Removed: Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.
−Removed: Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.
−Removed: Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business.
−Removed: EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.
−Removed: Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
−Removed: Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.
−Removed: 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.
−Removed: Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022
−Removed: Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the three months ended September 30, 2023 and 2022, and our community count as of September 30, 2023 and 2022, were as follows (revenues in thousands):
−Removed: Three Months Ended September 30, 2023 As of September 30, 2023
+Added: Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
+Added: EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring.
+Added: Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.
+Added: Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.
+Added: Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business.
+Added: EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.
+Added: Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
+Added: Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
+Added: Please see “ —Non-GAAP Measures ” for reconciliations of EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.
+Added: Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
+Added: Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate for the three months ended March 31, 2024 and 2023, and our community count as of March 31, 2024 and 2023, by reportable segment were as follows (revenues in thousands):
+Added: Three Months Ended March 31, 2024 As of March 31, 2024
Revenues Home Closings ASP Average Community Count Average
6 unchanged sentences
Total $ 390,851 1,083 $ 360,897 116.7 3.1 120
−Removed: Three Months Ended September 30, 2022 As of September 30, 2022
−Removed: Revenues Home Closings ASP Average Community Count Average
+Added: Three Months Ended March 31, 2023 As of March 31, 2023
+Added: Revenues Home Closings ASP Average Community Count Average Monthly
Absorption Rate Community Count at End of Period
5 unchanged sentences
Total $ 487,357 1,366 $ 356,777 97.7 4.7 99
−Removed: Home sales revenues for the three months ended September 30, 2023 were $617.5 million, an increase of $70.5 million, or 12.9%, from $547.1 million for the three months ended September 30, 2022.
−Removed: The increase in home sales revenues was primarily due to a 13.2% increase in homes closed, partially offset by a slight decrease in the average sales price per home closed during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: The overall increase in home closings was a result of a higher average community count during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: Our community count at September 30, 2023 increased to 106 from 93 at September 30, 2022.
−Removed: The average sales price per home closed during the three months ended September 30, 2023 was $352,678, a decrease of $957, or 0.3%, from the average sales price per home closed of $353,635 for the three months ended September 30, 2022.
−Removed: The decrease in the average sales price per home closed was primarily due to geographic mix and our focus on starting smaller square foot homes to meet the current demand environment and address interest rate driven affordability constraints.
−Removed: Included within our home sales revenues for the three months ended September 30, 2023 was $43.3 million in wholesale revenues resulting from 139 home closings, representing 7.9% of the 1,751 total homes closed during the three months ended September 30, 2023.
−Removed: Included within our home sales revenues for the three months ended September 30, 2022 was $127.9 million in wholesale revenues resulting from 443 home closings, representing 28.6% of the 1,547 total homes closed during the three months ended September 30, 2022.
−Removed: • Home sales revenues in our Central reportable segment decreased by $44.8 million, or 19.6%, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, due to a 17.6% decrease in the number of homes closed and a 2.4% decrease in the average sales price per home closed.
+Added: Home sales revenues for the three months ended March 31, 2024 were $390.9 million, a decrease of $96.5 million, or 19.8%, from $487.4 million for the three months ended March 31, 2023.
+Added: The decrease in home sales revenues was primarily due to a 20.7% decrease in homes closed, partially offset by an increase in the average sales price per home closed during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
+Added: The overall decrease in home closings was a result of an overall lower absorption rate, partially offset by a higher average community count, during the three
+Added: months ended March 31, 2024 as compared to the three months ended March 31, 2023.
+Added: The decrease in home closings is due to continued pressure on affordability due to inflation and mortgage rates which continue to be elevated.
+Added: The overall increase in average community count relates to timing associated with the close out of some higher performing communities, new openings that are still in the early stages, or transition between certain active communities during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
+Added: The average sales price per home closed during the three months ended March 31, 2024 was $360,897, an increase of $4,120, or 1.2%, from the average sales price per home closed of $356,777 for the three months ended March 31, 2023.
+Added: The increase in the average sales price per home closed was primarily due to geographic mix and our ability to increase prices in those markets.
+Added: Included within our home sales revenues for the three months ended March 31, 2024 was $28.6 million in wholesale revenues resulting from 102 home closings, representing 9.4% of the 1,083 total homes closed during the three months ended March 31, 2024.
+Added: Included within our home sales revenues for the three months ended March 31, 2023 was $31.2 million in wholesale revenues resulting from 103 home closings, representing 7.5% of the 1,366 total homes closed during the three months ended March 31, 2023.
+Added: The increase in home closings as a percentage of revenues through our wholesale channel was primarily related to fewer retail home closings during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
+Added: • Home sales revenues in our Central reportable segment decreased by $46.6 million, or 31.0%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to a 29.6% decrease in the number of homes closed and a slight decrease in the average sales price per home closed.
The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
−Removed: • Home sales revenues in our Southeast reportable segment increased by $11.1 million, or 8.0%, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to a 7.9% increase in the number of homes closed and a slight increase in the average sales price per home closed.
−Removed: The increase in home closings was the result of a higher absorption rate and an increase in the average community count.
−Removed: • Home sales revenues in our Northwest reportable segment increased by $20.9 million, or 44.7%, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to a 37.9% increase in the number of homes closed and a 4.9% increase in the average sales price per home closed.
−Removed: The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.
−Removed: • Home sales revenues in our West reportable segment increased by $29.9 million, or 45.9%, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to a 60.6% increase in the number of homes closed, partially offset by a 9.2% decrease in the average sales price per home closed.
−Removed: The increase in home closings was the result of an increase in the average community count and a higher absorption rate.
−Removed: • Home sales revenues in our Florida reportable segment increased by $53.4 million, or 78.2%, during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to a 81.7% increase in the number of homes closed, partially offset by a 2.0% decrease in the average sales price per home closed.
−Removed: The increase in home closings was the result of a higher absorption rate and a higher average community count.
+Added: • Home sales revenues in our Southeast reportable segment increased by $12.1 million, or 11.6%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to a 12.3% increase in the number of homes closed, partially offset by a 0.7% decrease in the average sales price per home closed.
+Added: The increase in home closings was the result of an increase in the average community count.
+Added: • Home sales revenues in our Northwest reportable segment decreased by $38.7 million, or 51.8%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to a 61.0% decrease in the number of homes closed, offset by a 23.6% increase in the average sales price per home closed.
+Added: The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
+Added: • Home sales revenues in our West reportable segment decreased by $5.8 million, or 7.4%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to a 14.4% decrease in the number of homes closed, partially offset by an 8.2% increase in the average sales price per home closed.
+Added: The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
+Added: • Home sales revenues in our Florida reportable segment decreased by $17.4 million, or 22.0%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a 26.6% decrease in the number of homes closed, partially offset by a 6.3% increase in the average sales price per home closed.
+Added: The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
Cost of Sales and Gross Margin (home sales revenues less cost of sales).
−Removed: Cost of sales increased for the three months ended September 30, 2023 to $458.7 million, an increase of $67.5 million, or 17.2%, from $391.3 million for the three months ended September 30, 2022, primarily due to a 13.2% increase in homes closed.
−Removed: Gross margin for the three months ended September 30, 2023 was $158.8 million, an increase of $3.0 million, or 1.9%, from $155.8 million for the three months ended September 30, 2022.
−Removed: Gross margin as a percentage of home sales revenues was 25.7% for the three months ended September 30, 2023 and 28.5% for the three months ended September 30, 2022.
−Removed: This decrease in gross margin was due to a combination of higher construction costs as a percentage of home sales revenues, higher capitalized interest charged to cost of sales and the impact of sales incentives offered during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
+Added: Cost of sales for the three months ended March 31, 2024 was $299.5 million, a decrease of $89.1 million, or 22.9%, from $388.5 million for the three months ended March 31, 2023.
+Added: This decrease was primarily due to a 20.7% decrease in homes closed.
+Added: Gross margin for the three months ended March 31, 2024 was $91.4 million, a decrease of $7.4 million, or 7.5%, from $98.8 million for the three months ended March 31, 2023.
+Added: Gross margin as a percentage of home sales revenues was 23.4% for the three months ended March 31, 2024 and 20.3% for the three months ended March 31, 2023.
+Added: The increase in gross margin as a percentage of home sales revenues during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to a combination of lower input costs and higher sales prices during the three months ended March 31, 2024.
Selling Expenses.
−Removed: Selling expenses for the three months ended September 30, 2023 were $49.8 million, an increase of $15.8 million, or 46.7%, from $33.9 million for the three months ended September 30, 2022.
−Removed: The increase in selling expenses was primarily due to increased sales commissions, advertising expense and personnel costs for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: Sales commissions increased to $27.9 million for the three months ended September 30, 2023 from $17.9 million for the three months ended September 30, 2022, due to a 12.9% increase in home sales revenues and an increase in outside commissions during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: Selling expenses as a percentage of home sales revenues were 8.1% and 6.2% for the three months ended September 30, 2023 and 2022, respectively.
−Removed: The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising, fewer wholesale home closings and other expenses incurred during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
+Added: Selling expenses for the three months ended March 31, 2024 were $41.1 million, a decrease of $1.7 million, or 3.9%, from $42.8 million for the three months ended March 31, 2023.
+Added: The decrease in selling expenses was primarily due to a decrease in sales commissions for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
+Added: Sales commissions decreased to $17.4 million during the three months ended March 31, 2024 from $20.3 million for the three months ended March 31, 2023, primarily due to fewer homes closed.
+Added: Selling expenses as a percentage of home sales revenues were 10.5% and 8.8% for the three months ended March 31, 2024 and 2023, respectively.
+Added: The increase in selling expenses as a percentage of home sales revenues was driven primarily by increased advertising expense and other expenses incurred in addition to lower homes sales revenues during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
General and Administrative.
−Removed: General and administrative expenses for the three months ended September 30, 2023 were $26.7 million, a decrease of $0.5 million, or 2.0%, from $27.3 million for the three months ended September 30, 2022.
−Removed: The decrease in the amount of general and administrative expenses was primarily due to lower costs related to the termination of land purchase agreements during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, partially offset by increased personnel costs and professional fees during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: General and administrative expenses as a percentage of home sales revenues were 4.3% and 5.0% for the three months ended September 30, 2023 and 2022, respectively.
−Removed: The decrease in general and administrative expenses as a percentage of home sales revenues was primarily due to the 12.9% increase in homes sales revenues during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
+Added: General and administrative expenses for the three months ended March 31, 2024 were $31.5 million, an increase of $1.6 million, or 5.3%, from $30.0 million for the three months ended March 31, 2023.
+Added: General and administrative expenses as a percentage of home sales revenues were 8.1% and 6.1% for the three months ended March 31, 2024 and 2023, respectively.
+Added: The increase in general and administrative expenses as a percentage of home sales revenues is primarily due to lower home sales revenues during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Other Income.
−Removed: Other income, net of other expenses was $7.2 million for the three months ended September 30, 2023, a decrease of $7.0 million from $14.1 million for the three months ended September 30, 2022.
−Removed: The decrease in other income, net of other expenses, primarily reflects the gain resulting from the sale of a three-year interest rate cap of LIBOR prior to its expiration during the three months ended September 30, 2022.
+Added: Other income, net of other expenses was $4.4 million for the three months ended March 31, 2024, a decrease of $1.9 million from $6.3 million for the three months ended March 31, 2023.
+Added: The decrease in other income, net of other expenses, primarily reflects gains realized from the sale of land and lots not directly associated with our core homebuilding operations for the three months ended March 31, 2023.
Operating Income and Net Income before Income Taxes.
−Removed: Operating income for the three months ended September 30, 2023 was $82.3 million, a decrease of $12.3 million, or 13.0%, from $94.6 million for the three months ended September 30, 2022.
−Removed: Net income before income taxes for the three months ended September 30, 2023 was $89.4 million, a decrease of $19.3
−Removed: million, or 17.7%, from $108.7 million for the three months ended September 30, 2022.
−Removed: All reportable segments contributed to net income before income taxes during the three months ended September 30, 2023 as follows:
+Added: Operating income for the three months ended March 31, 2024 was $18.7 million, a decrease of $7.3 million, or 28.1%, from $26.1 million for the three months ended March 31, 2023.
+Added: Net income before income taxes for the three months ended March 31, 2024 was $23.1 million, a decrease of $9.3 million, or 28.6%, from $32.3 million for the three months ended March 31, 2023.
+Added: The following reportable segments contributed to net income before income taxes during the three months ended March 31, 2024 as follows:
Central - $3.5 million, or 15.0%;
3 unchanged sentences
and Florida - $2.1 million, or 9.2%.
−Removed: The overall decreases in operating income and net income before income taxes were primarily due to overall lower gross margin and higher advertising and other selling expenses incurred during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: Income Taxes .
−Removed: Income tax provision for the three months ended September 30, 2023 was $22.4 million, an increase of $4.1 million, or 22.4%, from income tax provision of $18.3 million for the three months ended September 30, 2022.
−Removed: The increase in our effective tax rate to 25.1% for the three months ended September 30, 2023 from 16.8% for the three months ended September 30, 2022 was primarily due to an increase in the rate for the state income taxes, net of the federal benefit, the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the impact of the retroactive extension in the third quarter of the federal energy efficient homes tax credits for the nine months ended September 30, 2022.
−Removed: Net income for the three months ended September 30, 2023 was $67.0 million, a decrease of $23.3 million, or 25.8%, from $90.4 million for the three months ended September 30, 2022.
−Removed: The decrease in net income was primarily attributed to lower gross margin and higher selling expenses as a percentage of revenues during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.
−Removed: Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
−Removed: Our home sales revenues, home closings, average sales price per home closed (ASP), average community count and average monthly absorption rate by reportable segment for the nine months ended September 30, 2023 and 2022 were as follows (revenues in thousands):
−Removed: Nine Months Ended September 30, 2023
−Removed: Revenues Home Closings ASP Average Community Count Average
−Removed: Absorption Rate
−Removed: Central $ 564,580 1,724 $ 327,483 35.3 5.4
−Removed: Southeast 397,618 1,216 326,988 24.1 5.6
−Removed: Northwest 212,885 433 491,651 10.1 4.8
−Removed: West 256,575 672 381,808 13.3 5.6
−Removed: Florida 318,508 926 343,961 18.3 5.6
−Removed: Total $ 1,750,166 4,971 $ 352,075 101.1 5.5
−Removed: Nine Months Ended September 30, 2022
−Removed: Revenues Home Closings ASP Average Community Count Average Monthly
−Removed: Absorption Rate
−Removed: Central $ 807,400 2,460 $ 328,211 31.3 8.7
−Removed: Southeast 328,510 1,018 322,701 21.0 5.4
−Removed: Northwest 220,440 429 513,846 8.6 5.5
−Removed: West 244,603 598 409,035 11.2 5.9
−Removed: Florida 215,240 668 322,216 19.0 3.9
−Removed: Total $ 1,816,193 5,173 $ 351,091 91.1 6.3
−Removed: Home sales revenues for the nine months ended September 30, 2023 were $1.75 billion, a decrease of $0.1 billion, or 3.6%, from $1.82 billion for the nine months ended September 30, 2022.
−Removed: The decrease in home sales revenues was primarily due to a 3.9% decrease in homes closed, partially offset by an increase in the average sales price per home closed during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
−Removed: The overall decrease in home closings was a result of an overall lower absorption rate, partially offset by a higher average community count, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
−Removed: The average sales price per home closed during the nine months ended September 30, 2023 was $352,075, an increase of $984, or 0.3%, from the average sales price per home closed of $351,091 for the nine months ended September 30, 2022.
−Removed: The increase in the average sales price per home closed was primarily due to our ability to increase prices in certain markets and the impact of fewer home closings in our wholesale channel.
−Removed: The overall decrease in absorption rate relates to the normalization of demand primarily resulting from higher mortgage rates.
−Removed: Included within our home sales revenues for the nine months ended September 30, 2023 was $116.3 million in wholesale revenues resulting from 381 home closings, representing 7.7% of the 4,971 total homes closed during the nine months ended September 30, 2023.
−Removed: Included within our home sales revenues for the nine months ended September 30, 2022 was $216.6 million in wholesale revenues resulting from 802 home closings, representing 15.5% of the 5,173 total homes closed during the nine months ended September 30, 2022.
−Removed: The decrease in home closings as a percentage of revenues through our wholesale channel was primarily related to lower demand from our wholesale channel customers during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
−Removed: • Home sales revenues in our Central reportable segment decreased by $242.8 million, or 30.1%, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to a 29.9% decrease in the number of homes closed and a slight decrease in the average sales price per home closed.
−Removed: in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.
−Removed: • Home sales revenues in our Southeast reportable segment increased by $69.1 million, or 21.0%, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to a 19.4% increase in the number of homes closed and a 1.3% increase in the average sales price per home closed.
−Removed: The increase in home closings was the result of an increase in the average community count and a higher absorption rate.
−Removed: • Home sales revenues in our Northwest reportable segment decreased by $7.6 million, or 3.4%, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to a 4.3% decrease in the average sales price per home closed, partially offset by a 0.9% increase in the number of homes closed.
−Removed: The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.
−Removed: • Home sales revenues in our West reportable segment increased by $12.0 million, or 4.9%, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to a 12.4% increase in the number of homes closed, partially offset by a 6.7% decrease in the average sales price per home closed.
−Removed: The increase in home closings was the result of an increase in the average community count, partially offset by a lower absorption rate.
−Removed: • Home sales revenues in our Florida reportable segment increased by $103.3 million, or 48.0%, during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to a 38.6% increase in the number of homes closed and a 6.7% increase in the average sales price per home closed.
−Removed: The increase in home closings was the result of a higher absorption rate, partially offset by a decrease in the average community count.
−Removed: Cost of Sales and Gross Margin (home sales revenues less cost of sales).
−Removed: Cost of sales increased for the nine months ended September 30, 2023 to $1.4 billion, an increase of $0.1 billion, or 6.3%, from $1.3 billion for the nine months ended September 30, 2022.
−Removed: This overall increase was primarily due to higher construction costs and capitalized interest, partially offset by a 3.9% decrease in homes closed.
−Removed: Gross margin for the nine months ended September 30, 2023 was $399.6 million, a decrease of $146.0 million, or 26.8%, from $545.6 million for the nine months ended September 30, 2022.
−Removed: Gross margin as a percentage of home sales revenues was 22.8% for the nine months ended September 30, 2023 and 30.0% for the nine months ended September 30, 2022.
−Removed: The decrease in gross margin as a percentage of home sales revenues during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily due to a combination of higher construction costs, capitalized interest and the impact of sales incentives offered during the nine months ended September 30, 2023.
−Removed: Selling Expenses.
−Removed: Selling expenses for the nine months ended September 30, 2023 were $141.8 million, an increase of $30.2 million, or 27.1%, from $111.6 million for the nine months ended September 30, 2022.
−Removed: The increase in selling expenses was primarily due to increased advertising expense, sales commissions and personnel costs for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
−Removed: Sales commissions increased to $77.1 million primarily due to an increase in outside commissions during the nine months ended September 30, 2023 from $68.5 million for the nine months ended September 30, 2022.
−Removed: Selling expenses as a percentage of home sales revenues were 8.1% and 6.1% for the nine months ended September 30, 2023 and 2022, respectively.
−Removed: The increase in selling expenses as a percentage of home sales revenues was driven primarily by increased advertising expense, sales commissions and other expenses incurred during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
−Removed: General and Administrative.
−Removed: General and administrative expenses for the nine months ended September 30, 2023 were $84.3 million, a decrease of $0.3 million, or 0.4%, from $84.7 million for the nine months ended September 30, 2022.
−Removed: General and administrative expenses as a percentage of home sales revenues were 4.8% and 4.7% for the nine months ended September 30, 2023 and 2022, respectively.
−Removed: Other Income.
−Removed: Other income, net of other expenses was $19.8 million for the nine months ended September 30, 2023, a decrease of $2.2 million from $22.0 million for the nine months ended September 30, 2022.
−Removed: The decrease in other income, net of other expenses, primarily reflects the proceeds resulting from the sale of a three-year interest rate cap of LIBOR prior to its expiration, offset by the increase in income associated with our investment in unconsolidated entities for the nine months ended September 30, 2023 and 2022, respectively.
−Removed: Operating Income and Net Income before Income Taxes.
−Removed: Operating income for the nine months ended September 30, 2023 was $173.4 million, a decrease of $175.9 million, or 50.4%, from $349.3 million for the nine months ended September 30, 2022.
−Removed: Net income before income taxes for the nine months ended September 30, 2023 was $193.2 million, a decrease of $178.1 million, or 48.0%, from $371.3 million for the nine months ended September 30, 2022.
−Removed: The following reportable segments contributed to net income before income taxes during the nine months ended September 30, 2023 as follows:
−Removed: Central - $69.5
−Removed: million, or 36.0%;
−Removed: Southeast - $54.2 million, or 28.0%;
−Removed: Northwest - $23.2 million, or 12.0%;
−Removed: West - $15.2 million, or 7.8%;
−Removed: and Florida - $37.1 million, or 19.2%.
−Removed: The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption pace at a lower gross margin, higher advertising and other selling expenses incurred, partially offset by a higher average community count during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
+Added: The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate, higher advertising and other selling expenses incurred partially offset by a higher gross margin and a higher average community count during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Income Taxes .
−Removed: Income tax provision for the nine months ended September 30, 2023 was $46.1 million, a decrease of $32.7 million, or 41.5%, from income tax provision of $78.8 million for the nine months ended September 30, 2022.
−Removed: The increase in our effective tax rate to 23.8% for the nine months ended September 30, 2023 from 21.2% for the nine months ended September 30, 2022 was primarily due to an increase in the rate for the state income taxes, net of the federal benefit, the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the nine months ended September 30, 2022, offset by a decrease in the rate for the deductions in excess of compensation cost for share-based payments.
−Removed: Net income for the nine months ended September 30, 2023 was $147.1 million, a decrease of $145.3 million, or 49.7%, from $292.5 million for the nine months ended September 30, 2022.
−Removed: The decrease in net income was primarily attributed to a lower gross margin and higher selling expenses as a percentage of revenues during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.
+Added: Income tax provision for the three months ended March 31, 2024 was $6.0 million, an increase of $0.7 million, or 12.2%, from income tax provision of $5.4 million for the three months ended March 31, 2023.
+Added: The increase in our effective tax rate to 26.2% for the three months ended March 31, 2024 from 16.7% for the three months ended March 31, 2023 was primarily due to an increase in the rate for the compensation cost in excess of deductions for share-based payments, state income taxes, net of the federal benefit, and the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, partially offset by the retroactive extension of the federal energy efficient homes tax credits for the three months ended March 31, 2023.
+Added: Net income for the three months ended March 31, 2024 was $17.1 million, a decrease of $9.9 million, or 36.8%, from $27.0 million for the three months ended March 31, 2023.
+Added: The decrease in net income was primarily attributed to overall lower homes closed, lower home sales revenues and lower operating leverage during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
Non-GAAP Measures
−Removed: In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Quarterly Report on Form 10-Q relating to adjusted gross margin, EBITDA and adjusted EBITDA.
+Added: In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Quarterly Report on Form 10-Q relating to adjusted gross margin and EBITDA.
Adjusted Gross Margin
6 unchanged sentences
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):
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2023 2022 2023 2022
+Added: Three Months Ended March 31,
Home sales revenues $ 390,851 $ 487,357
3 unchanged sentences
Purchase accounting adjustments (1)
−Removed: 767 1,162 5,511 5,470
Adjusted gross margin $ 98,805 $ 107,609
5 unchanged sentences
(2) Calculated as a percentage of home sales revenues.
−Removed: EBITDA and Adjusted EBITDA
−Removed: EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance.
+Added: EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance.
We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
−Removed: We define adjusted EBITDA as net
−Removed: 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 included in cost of sales.
−Removed: 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.
−Removed: 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.
−Removed: Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.
−Removed: Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.
−Removed: Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business.
−Removed: EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.
−Removed: Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
−Removed: Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.
+Added: Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
+Added: EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring.
+Added: Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.
+Added: Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.
+Added: Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business.
+Added: EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.
+Added: Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
+Added: Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Some of these limitations are:
−Removed: (i) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;
−Removed: (ii) they do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
−Removed: (iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements or improvements;
−Removed: (iv) they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
−Removed: (v) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
−Removed: (vi) other companies in our industry may calculate them differently than we do, limiting their usefulness as a comparative measure.
−Removed: Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
−Removed: We compensate for these limitations by using our EBITDA and adjusted EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance.
+Added: (i) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;
+Added: (ii) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
+Added: (iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA does not reflect any cash requirements for such replacements or improvements;
+Added: (iv) it does not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;
+Added: (v) it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
+Added: (vi) other companies in our industry may calculate it differently than we do, limiting its usefulness as a comparative measure.
+Added: Because of these limitations, our EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.
+Added: We compensate for these limitations by using our EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance.
These GAAP measures include operating income, net income and cash flow data.
−Removed: We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA or adjusted EBITDA.
−Removed: EBITDA and adjusted EBITDA are not intended as alternatives to net income as indicators of our operating performance, as alternatives to any other measure of performance in conformity with GAAP or as alternatives to cash flows as a measure of liquidity.
−Removed: You should therefore not place undue reliance on our EBITDA or adjusted EBITDA calculated using these measures.
−Removed: 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):
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2023 2022 2023 2022
+Added: We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA.
+Added: EBITDA is not intended as an alternative to net income as an indicator of our operating
+Added: performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flows as a measure of liquidity.
+Added: You should therefore not place undue reliance on our EBITDA calculated using these measures.
+Added: The following table reconciles EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):
+Added: Three Months Ended March 31,
Net income $ 17,053 $ 26,962
3 unchanged sentences
EBITDA 30,368 39,587
−Removed: Purchase accounting adjustments (1)
−Removed: 767 1,162 5,511 5,470
−Removed: Other income, net (7,173) (14,124) (19,793) (21,960)
−Removed: Adjusted EBITDA $ 92,416 $ 100,760 $ 205,179 $ 370,772
EBITDA margin % (1)
−Removed: 16.0 % 20.8 % 12.5 % 21.3 %
−Removed: Adjusted EBITDA margin % (2)
−Removed: 15.0 % 18.4 % 11.7 % 20.4 %
−Removed: (1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
(1) Calculated as a percentage of home sales revenues.
14 unchanged sentences
Backlog may be impacted by customer cancellations for various reasons that are beyond our control, and in light of our minimal required deposit, there is little negative impact to the potential homebuyer from the cancellation of the purchase contract.
−Removed: Our net orders increased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to an increase in average community count.
−Removed: The number of homes in our backlog at September 30, 2023 increased 9.7% compared to September 30, 2022.
−Removed: The increase in ending backlog relates to the normalization in demand for new homes experienced in the third quarter of 2023 as compared to the third quarter of 2022.
+Added: Our net orders decreased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to lower demand resulting from higher mortgage rates.
+Added: The number of homes in our backlog at March 31, 2024 decreased 14.1% compared to March 31, 2023.
+Added: The decrease in ending backlog is primarily a result of lower demand resulting from higher mortgage rates during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
As of the dates set forth below, our net orders, cancellation rate and ending backlog homes and value were as follows (dollars in thousands):
−Removed: Backlog Data Nine Months Ended September 30,
+Added: Backlog Data Three Months Ended March 31,
Net orders (1)
8 unchanged sentences
Ending backlog is valued at the contract amount.
−Removed: (4) As of September 30, 2023, we had 273 units related to bulk sales agreements associated with our wholesale business.
−Removed: (5) As of September 30, 2022, we had 591 units related to bulk sales agreements associated with our wholesale business.
+Added: (4) As of March 31, 2024, we had 178 units related to bulk sales agreements associated with our wholesale business.
+Added: (5) As of March 31, 2023, we had 130 units related to bulk sales agreements associated with our wholesale business.
Land Acquisition Policies and Development
−Removed: We had 106 and 99 active communities as of September 30, 2023 and December 31, 2022, respectively.
+Added: We had 120 and 117 active communities as of March 31, 2024 and December 31, 2023, respectively.
Generally, it takes us two to three years to turn raw or undeveloped land into an active community.
To mitigate our exposure to real estate inventory risks, we utilize, on a limited and strategic basis, land banking financing arrangements.
−Removed: Our lot inventory increased to 72,109 owned or controlled lots as of September 30, 2023 from 71,904 owned or controlled lots as of December 31, 2022, primarily related to our discipline in the evaluation of and selective approval of new land deals.
+Added: Our lot inventory decreased to 70,145 owned or controlled lots as of March 31, 2024 from 71,081 owned or controlled lots as of December 31, 2023, primarily related to our discipline in the evaluation of and selective approval of new land deals.
We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources.
3 unchanged sentences
We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities.
−Removed: The table below shows (i) home closings by reportable segment for the nine months ended September 30, 2023 and (ii) our owned or controlled lots by reportable segment as of September 30, 2023.
−Removed: Nine Months Ended September 30, 2023 As of September 30, 2023
+Added: The table below shows (i) home closings by reportable segment for the three months ended March 31, 2024 and (ii) our owned or controlled lots by reportable segment as of March 31, 2024.
+Added: Three Months Ended March 31, 2024 As of March 31, 2024
Reportable Segment Home Closings Owned (1)
6 unchanged sentences
Total 1,083 54,763 15,382 70,145
−Removed: (1) Of the 56,301 owned lots as of September 30, 2023, 42,618 were raw/under development lots and 13,683 were finished lots.
+Added: (1) Of the 54,763 owned lots as of March 31, 2024, 39,601 were raw/under development lots and 15,162 were finished lots.
Homes in Inventory
2 unchanged sentences
As homes are closed, we start more homes to maintain our inventory.
−Removed: As of September 30, 2023, we had a total of 1,471 completed homes, including information centers, and 3,009 homes in progress.
+Added: As of March 31, 2024, we had a total of 2,154 completed homes, including information centers, and 2,000 homes in progress.
Raw Materials and Labor
3 unchanged sentences
Typically, the raw materials and most of the components used in our business are readily available in the United States.
−Removed: We purchase some components and materials centrally to achieve volume discounts, reducing costs and helping to ensure timely deliveries.
+Added: We purchase some components and materials centrally to achieve volume discounts, a practice that often reduces costs and ensures timely deliveries.
We typically do not store significant inventories of construction materials, except for work in progress materials for homes under construction.
−Removed: In addition, the majority of our raw materials are supplied to us by our subcontractors, and are included in the price of our contract with such subcontractors.
+Added: In addition, the majority of our raw materials are supplied to us by our subcontractors and are
+Added: included in the price of our contract with such subcontractors.
Most of the raw materials necessary for our subcontractors are standard items carried by major suppliers.
−Removed: Our construction work is performed by third-party subcontractors, most of whom are non-unionized.
−Removed: We continue to monitor the supply markets to achieve the best prices possible.
+Added: Our construction work is substantially completed by third-party subcontractors, most of whom are non-unionized.
+Added: We continue to monitor the supply markets to achieve the best prices available.
Typically, the price changes that most significantly influence our operations are price increases in labor, commodities and lumber.
+Added: In future quarters, we could see various cost pressures associated with inflation similar to the cost pressures experienced in the last few years.
+Added: Generally, we have successfully increased the sales prices of our homes to absorb these increased costs or have successfully made cost-effective changes as we endeavor to keep our homes affordable.
In all of our reportable segments, we have historically experienced similar variability in our results of operations and in capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry.
5 unchanged sentences
Liquidity and Capital Resources
−Removed: As of September 30, 2023, we had $47.0 million of cash and cash equivalents.
+Added: As of March 31, 2024, we had $49.0 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.
5 unchanged sentences
Short-term Liquidity and Capital Resources
−Removed: We generally rely on our ability to finance our operations by generating operating cash flows and borrowing under the Credit Agreement to adequately fund our short-term working capital obligations and to purchase land and other assets, develop lots and homes and repurchase shares of our common stock.
+Added: We generally rely on our ability to finance our operations by generating operating cash flows and borrowing under the Credit Agreement (as defined below) to adequately fund our short-term working capital obligations and to purchase land and other assets, develop lots and homes and repurchase shares of our common stock.
As needed, we will consider accessing the debt and equity capital markets as part of our ongoing financing strategy.
7 unchanged sentences
Additionally, we plan to further utilize, on a limited and strategic basis, land banking financing arrangements to maximize long-term liquidity for lot development projects where we have sufficient finished lot availability in certain markets.
−Removed: To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance our indebtedness, or dispose of certain assets to fund our operating activities and capital needs.
+Added: To the extent these sources of capital are
+Added: insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance our indebtedness, or dispose of certain assets to fund our operating activities and capital needs.
Revolving Credit Facility
−Removed: On April 28, 2023, we entered into a Third Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Third Amendment”), which amends the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended by an amendment dated as of April 29,
−Removed: 2022 and as further amended by the Third Amendment, the “Credit Agreement”).
+Added: On December 5, 2023, we entered into a Fourth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fourth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fourth Amendment, the “Credit Agreement”).
The Credit Agreement provides for a $1.205 billion revolving credit facility, which can be increased at the request of the Company by up to $95.0 million, subject to the terms and conditions of the Credit Agreement.
2 unchanged sentences
The Credit Agreement is guaranteed by, among others, each of our subsidiaries that have gross assets of at least $0.5 million, other than subsidiaries whose sole purpose is to own and operate single-family rental homes.
−Removed: The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.
−Removed: As of September 30, 2023, the borrowing base under the Credit Agreement is $1.8 billion of which the maximum available to borrow is $1.4 billion.
−Removed: As of September 30, 2023, borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes totaled $1.2 billion, $28.1 million of letters of credit were outstanding and $196.2 million was available to borrow under the Credit Agreement.
+Added: The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) and our 8.750% Senior Notes due 2028 (the “2028 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.
+Added: The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by the Company and its subsidiaries that guarantee the obligations under the Credit Agreement.
+Added: As of March 31, 2024, the borrowing base under the Credit Agreement was $1.9 billion, and borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes and the 2028 Senior Notes totaled approximately $1.4 billion, $22.5 million of letters of credit were outstanding and $442.5 million was available to borrow under the Credit Agreement.
For a further description of the Credit Agreement, please refer to Note 4 , “Notes Payable” to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Senior Notes Offering
−Removed: 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 under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.
−Removed: persons in transactions outside the United States pursuant to Regulation S under the Securities Act.
+Added: On November 21, 2023, we issued $400.0 million aggregate principal amount of the 2028 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.
+Added: persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.
+Added: Interest on the 2028 Senior Notes accrues at a rate of 8.750% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2024.
+Added: The 2028 Senior Notes mature on December 15, 2028.
+Added: The terms of the 2028 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fourth Supplemental Indenture thereto, dated as of November 21, 2023, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Regions Bank, as trustee.
+Added: 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 and to certain non-U.S.
+Added: persons in transactions outside the United States pursuant to Regulation S.
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.
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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.
−Removed: Outstanding letters of credit, surety bonds and financial guarantees under these arrangements, totaled $382.9 million as of September 30, 2023.
+Added: Outstanding letters of credit, surety bonds and financial guarantees under these arrangements totaled $351.7 million as of March 31, 2024.
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.
−Removed: We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of September 30, 2023 will be drawn upon.
+Added: We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of March 31, 2024 will be drawn upon.
Stock Repurchase Program
In February 2022, our Board of Directors (the “Board”) approved a $200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws.
−Removed: During the nine months ended September 30, 2023, we did not repurchase any shares of our common stock.
−Removed: During the nine months ended September 30, 2022, we repurchased 892,916 shares of our common stock for $95.1 million to be held as treasury stock.
+Added: During the three months ended March 31, 2024, we repurchased 89,227 shares of our common stock for $10.0 million to be held as treasury stock.
+Added: During the three months ended March 31, 2023, we did not repurchase any shares of our common stock.
A total of 3,028,699 shares of our common stock has been repurchased since our stock repurchase program commenced.
−Removed: As of September 30, 2023, we may purchase up to $211.5 million of shares of our common stock under our stock repurchase program.
+Added: As of March 31, 2024, we may purchase up to $201.5 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
−Removed: Net cash used in operating activities was $22.7 million for the nine months ended September 30, 2023.
+Added: Net cash used in operating activities was $99.5 million during the three months ended March 31, 2024.
The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
−Removed: Net cash used in operating activities during the nine months ended September 30, 2023 was primarily driven by cash outflow from the $194.4 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 partially offset by net income of $147.1 million.
−Removed: Net cash used in operating activities was $359.6 million for the nine months ended September 30, 2022.
+Added: Net cash used in operating activities during the three months ended March 31, 2024 was primarily driven by cash outflow from the $139.6 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 the $16.6 million decrease in the net change in accrued expenses and other liabilities, partially offset by net income of $17.1 million as well as the $14.2 million increase in accounts receivable and the $14.5 million increase in the net change in accounts payable.
+Added: Net cash provided by operating activities was $77.6 million during the three months ended March 31, 2023.
The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
−Removed: Net cash used in operating activities during the nine months ended September 30, 2022 was primarily driven by cash outflow from the $791.7 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 partially offset by net income of $292.5 million, as well as the $41.1 million and the $43.8 million increase in the net change in accounts payable and accrued expenses and other liabilities, respectively.
+Added: Net cash provided by operating activities during the three months ended March 31, 2023 was primarily driven by cash inflow from the $15.9 million increase in the net change in real estate inventory, which was primarily related to the number of home closings outpacing the homes under construction and land acquisitions and development level of activity, net income of $27.0 million, as well as the $22.3 million increase in other assets and $14.7 million increase in the net change in accounts payable.
Investing Activities
−Removed: Net cash used in investing activities was $7.6 million for the nine months ended September 30, 2023, primarily due to additional investment in unconsolidated entities.
−Removed: Net cash used in investing activities was $2.1 million for the nine months ended September 30, 2022, primarily due to the purchase of property and equipment and additional investment in unconsolidated entities.
+Added: Net cash provided by investing activities was $2.0 million during the three months ended March 31, 2024, primarily due to proceeds from the sale of assets offset by the purchase of property and equipment.
+Added: Net cash used in investing activities was $4.9 million during the three months ended March 31, 2023, primarily due to additional investment in unconsolidated entities.
Financing Activities
−Removed: Net cash provided by financing activities was $45.3 million for the nine months ended September 30, 2023, primarily driven by net borrowings of $75.9 million on the Credit Agreement, partially offset by net payments of $29.4 million related to a financing arrangement with a third-party land banker.
−Removed: Net cash provided by financing activities was $363.8 million for the nine months ended September 30, 2022, primarily driven by $534.9 million of borrowings under our credit agreement then in effect and the 2022 Credit Agreement and $35.9 million of proceeds related to a financing arrangement with a third-party land banker.
−Removed: These were partially offset by $110.0 million of repayments on our credit agreement then in effect and the 2022 Credit Agreement and by $95.1 million in payments for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock.
+Added: Net cash provided by financing activities was $97.5 million during the three months ended March 31, 2024, primarily driven by $172.4 million of borrowings under our Credit Agreement, offset by $39.0 million of repayments on our Credit Agreement and payments of $27.3 million related to a financing arrangement with a third-party land banker.
+Added: In addition, during the three months ended March 31, 2024, we repurchased $10.0 million of shares of our common stock under our stock repurchase program to be held as treasury stock.
+Added: Net cash used in financing activities was $61.8 million during the three months ended March 31, 2023, primarily driven by $105.0 million of repayments on our credit agreement then in effect and the $17.9 million of payments related to a financing arrangement with a third-party land banker, offset by proceeds of $32.9 million under our credit agreement then in effect and proceeds of $26.9 million related to a financing arrangement with a third-party land banker.
Our business can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs.
In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers.
−Removed: During the nine months ended September 30, 2023, we continued to experience pressure on costs due to high levels of inflation, which we expect will continue throughout 2023.
−Removed: Generally, we have been able to increase the sales prices of our homes to absorb such increased costs.
See “Industry and Economic Risks—Inflation could adversely affect our business and financial results” in Item 1A.
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Material Cash Requirements
−Removed: As of September 30, 2023, there have been no material changes to our known contractual and other obligations appearing in the “Material Cash Requirements” 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, 2022.
+Added: As of March 31, 2024, there have been no material changes to our known contractual and other obligations appearing in the “Material Cash Requirements” 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, 2023.
Critical Accounting Policies and Estimates
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Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
−Removed: On an ongoing basis, management evaluates such estimates and
−Removed: judgments and makes adjustments as deemed necessary.
+Added: On an ongoing basis, management evaluates such estimates and judgments and makes adjustments as deemed necessary.
Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future.
−Removed: We believe that there have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2023 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, 2022.
+Added: We believe that there have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2024 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, 2023.
Cautionary Statement about Forward-Looking Statements
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• our ability to retain our key personnel;
−Removed: • the impact of the COVID-19 pandemic and its effect on us, our business, customers, subcontractors and suppliers (including associated supply chain disruptions);
+Added: • the impact of an epidemic or pandemic and its effect on us, our business, customers, subcontractors and suppliers (including associated supply chain disruptions);
• negative publicity or poor relations with the residents of our projects;
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• other factors we discuss under the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ”;
−Removed: • the risk factor set forth in Item 1A.
−Removed: Risk Factors in Part II of this Quarterly Report on Form 10-Q;
• the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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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.