Meritage Homes CORP 10-K

Item 8. Financial Statements and Supplementary Data Our consolidated financial statements as of December 31, 2025 and 2024 and for each of the years in the three-year period ended December 31, 2025, together with related notes and the report of Deloitte & Touche LLP, independent registered public accounting firm (PCAOB ID: 34 ), are on the following pages. 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Meritage Homes Corporation: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Meritage Homes Corporation and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated income statements, statements of stockholders' equity and statements of cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 13, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Real Estate — Refer to Notes 1 and 2 to the financial statements Critical Audit Matter Description The Company’s land inventory and real estate assets are periodically reviewed for recoverability when certain criteria are met, but at least annually. The Company’s impairment analysis is conducted if indicators of a change in conditions that could result in a decline in value of the Company’s land and real estate assets exist. Impairment charges are recorded to write down an asset to its estimated fair value if the undiscounted cash flows expected to be generated by the asset are lower than its carrying amount. The Company’s determination of fair value is based on projections and estimates. Changes in these expectations may lead to a change in the outcome of the Company’s impairment analysis, and actual results may also differ from management’s assumptions. If an asset is deemed to be impaired, the impairment recognized is measured as the amount by which the asset’s carrying amount exceeds its fair value. The Company’s evaluation included whether indicators of a decline in value of the Company’s land and real estate assets exist and the determination of value to evaluate the recoverability of real estate assets used in the undiscounted cash flows. This 45 evaluation requires management to make significant projections and estimates, which required a high degree of auditor judgment and an increased extent of audit effort. How the Critical Audit Matter Was Addressed in the Audit We tested the effectiveness of the Company’s internal controls related to the Company’s evaluation of the recoverability of real estate assets. We also evaluated the significant assumptions used in the Company’s evaluation of the recoverability of real estate assets, by comparing the assumptions to actual recent home sales and closings in that community and the Company’s other nearby communities, as well as external analyst and industry reports for the respective geography. For certain communities that did not have actual recent home closings, we compared to historical home sales and closings in nearby communities taking into consideration factors such as location, size, and type of community. We also compared assumptions to current advertised listings of the Company and comparable competitor communities. In addition, we met with management to understand how recent trends in home sales, closings and market conditions have been considered in the Company’s evaluation of the recoverability of real estate assets. /s/ DELOITTE & TOUCHE LLP Tempe, Arizona February 13, 2026 We have served as the Company's auditor since 2004. 46 MERITAGE HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS At December 31, 2025 2024 (In thousands, except share data) Assets Cash and cash equivalents $ 775,157 $ 651,555 Other receivables 306,956 256,282 Real estate 5,987,120 5,728,775 Deposits on real estate under option or contract 174,170 192,405 Investments in unconsolidated entities 57,268 28,735 Property and equipment, net 46,647 47,285 Deferred tax assets, net 53,293 54,524 Prepaids, other assets and goodwill 221,676 203,093 Total assets $ 7,622,287 $ 7,162,654 Liabilities Accounts payable $ 200,679 $ 212,477 Accrued liabilities 387,698 452,213 Home sale deposits 9,213 20,513 Loans payable and other borrowings 24,328 29,343 Senior and convertible senior notes, net 1,804,726 1,306,535 Total liabilities 2,426,644 2,021,081 Stockholders’ Equity Preferred stock, par value $ 0.01 . Authorized 10,000,000 shares; none issued and outstanding at December 31, 2025 and 2024 — — Common stock, par value $ 0.01 . Authorized 125,000,000 shares; 68,168,923 and 71,921,972 shares issued and outstanding at December 31, 2025 and 2024, respectively 682 360 Additional paid-in capital — 143,036 Retained earnings 5,194,961 4,998,177 Total stockholders’ equity 5,195,643 5,141,573 Total liabilities and stockholders’ equity $ 7,622,287 $ 7,162,654 See accompanying notes to consolidated financial statements 47 MERITAGE HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS Years Ended December 31, 2025 2024 2023 (In thousands, except per share data) Homebuilding: Home closing revenue $ 5,763,597 $ 6,341,546 $ 6,056,784 Land closing revenue 60,838 22,326 56,229 Total closing revenue 5,824,435 6,363,872 6,113,013 Cost of home closings ( 4,627,405 ) ( 4,761,703 ) ( 4,554,671 ) Cost of land closings ( 59,026 ) ( 18,309 ) ( 51,786 ) Total cost of closings ( 4,686,431 ) ( 4,780,012 ) ( 4,606,457 ) Home closing gross profit 1,136,192 1,579,843 1,502,113 Land closing gross profit 1,812 4,017 4,443 Total closing gross profit 1,138,004 1,583,860 1,506,556 Financial Services: Revenue 33,202 31,163 25,250 Expense ( 17,562 ) ( 14,657 ) ( 12,128 ) Earnings/(loss) from financial services unconsolidated entities and other, net 2,978 ( 2,096 ) ( 656 ) Financial services profit 18,618 14,410 12,466 Commissions and other sales costs ( 404,405 ) ( 409,069 ) ( 384,911 ) General and administrative expenses ( 211,762 ) ( 230,856 ) ( 231,722 ) Interest expense — — — Other income, net 44,145 45,156 47,948 Loss on early extinguishment of debt — ( 631 ) ( 907 ) Earnings before income taxes 584,600 1,002,870 949,430 Provision for income taxes ( 131,587 ) ( 216,684 ) ( 210,682 ) Net earnings $ 453,013 $ 786,186 $ 738,748 Earnings per common share: Basic $ 6.40 $ 10.85 $ 10.09 Diluted $ 6.35 $ 10.72 $ 9.96 Weighted average number of shares: Basic 70,819 72,476 73,238 Diluted 71,348 73,332 74,138 See accompanying notes to consolidated financial statements 48 MERITAGE HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended December 31, 2025, 2024 and 2023 (In thousands) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Total Balance at January 1, 2023 73,142 $ 366 $ 327,878 $ 3,621,367 $ 3,949,611 Net earnings — — — 738,748 738,748 Issuance of stock 582 3 ( 3 ) — — Equity award compensation expense — — 22,511 — 22,511 Dividends declared ( 0.54 per share) — — — ( 39,534 ) ( 39,534 ) Share repurchases ( 874 ) ( 5 ) ( 59,431 ) — ( 59,436 ) Balance at December 31, 2023 72,850 364 290,955 4,320,581 4,611,900 Net earnings — — — 786,186 786,186 Issuance of stock 536 3 ( 3 ) — — Equity award compensation expense — — 25,809 — 25,809 Dividends declared ($ 1.50 per share) — — — ( 108,590 ) ( 108,590 ) Share repurchases ( 1,464 ) ( 7 ) ( 126,658 ) — ( 126,665 ) Capped call transactions, net of tax — — ( 47,067 ) — ( 47,067 ) Balance at December 31, 2024 71,922 360 143,036 4,998,177 5,141,573 Stock Split effective January 2, 2025 (See Note 9) — 360 ( 360 ) — — Net earnings — — — 453,013 453,013 Issuance of stock 537 5 ( 5 ) — — Equity award compensation expense — — 19,683 — 19,683 Dividends declared ($ 1.72 per share) — — — ( 121,072 ) ( 121,072 ) Share repurchases ( 4,290 ) ( 43 ) ( 162,354 ) ( 135,157 ) ( 297,554 ) Balance at December 31, 2025 68,169 $ 682 $ — $ 5,194,961 $ 5,195,643 See accompanying notes to consolidated financial statements 49 MERITAGE HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2025 2024 2023 (In thousands) Cash flows from operating activities: Net earnings $ 453,013 $ 786,186 $ 738,748 Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities: Depreciation and amortization 25,285 25,959 25,334 Real estate and land impairments 18,118 — 964 Write-off of terminated land deals 39,382 6,702 5,309 Stock-based compensation 19,683 25,809 22,511 Loss on early extinguishment of debt — 631 907 Equity in earnings from unconsolidated entities ( 3,973 ) ( 9,225 ) ( 6,371 ) Distributions of earnings from unconsolidated entities 4,143 7,461 6,792 Other 1,332 7,758 ( 2,158 ) Changes in assets and liabilities: Increase in real estate ( 274,052 ) ( 979,254 ) ( 357,408 ) Increase in deposits on real estate under option or contract ( 5,708 ) ( 81,354 ) ( 36,140 ) (Increase)/decrease in receivables, prepaids and other assets ( 55,265 ) 39,776 ( 64,169 ) (Decrease)/increase in accounts payable and accrued liabilities ( 92,370 ) ( 41,933 ) 22,609 Decrease in home sale deposits ( 11,300 ) ( 16,092 ) ( 1,356 ) Net cash provided by/(used in) operating activities 118,288 ( 227,576 ) 355,572 Cash flows from investing activities: Investments in unconsolidated entities ( 32,728 ) ( 18,545 ) ( 5,991 ) Distributions of capital from unconsolidated entities 500 2,867 137 Purchases of property and equipment ( 25,722 ) ( 28,658 ) ( 38,192 ) Proceeds from sales of property and equipment 251 262 423 Maturities/sales of investments and securities 1,750 750 750 Payments to purchase investments and securities ( 1,750 ) ( 750 ) ( 750 ) Net cash used in investing activities ( 57,699 ) ( 44,074 ) ( 43,623 ) Cash flows from financing activities: Repayment of loans payable and other borrowings ( 13,005 ) ( 8,933 ) ( 2,798 ) Repayment of senior notes — ( 250,695 ) ( 150,884 ) Proceeds from issuance of senior and convertible senior notes 497,195 575,000 — Payment of debt issuance costs ( 5,106 ) ( 17,082 ) — Purchase of capped calls related to issuance of convertible senior notes — ( 61,790 ) — Dividends paid ( 121,072 ) ( 108,590 ) ( 39,534 ) Repurchase of shares ( 294,999 ) ( 125,932 ) ( 59,067 ) Net cash provided by/(used in) financing activities 63,013 1,978 ( 252,283 ) Net increase/(decrease) in cash and cash equivalents 123,602 ( 269,672 ) 59,666 Cash and cash equivalents, beginning of year 651,555 921,227 861,561 Cash and cash equivalents, end of year $ 775,157 $ 651,555 $ 921,227 See Supplemental Disclosure of Cash Flow Information in Note 13. See accompanying notes to consolidated financial statements. 50 MERITAGE HOMES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025, 2024 and 2023 NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization. Meritage Homes Corporation ("Meritage Homes") is a leading designer and builder of single-family attached and detached homes. We primarily build in long-term high-growth markets of the United States and offer a variety of entry-level and first move-up homes. We have homebuilding operations in three regions: West, Central and East, which are comprised of twelve states: Arizona, California, Colorado, Utah, Tennessee, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, and South Carolina. These three regions are our principal homebuilding reporting segments. We also operate a financial services segment, which offers title and escrow, mortgage, and insurance services to our homebuyers. Carefree Title Agency, Inc. ("Carefree Title"), our wholly-owned title company, provides title insurance and closing/settlement services to our homebuyers in certain states. Managing our own title operations allows us greater control over the entire escrow and closing cycles in addition to generating additional revenue. Meritage Homes Insurance Agency, Inc. (“Meritage Insurance”), our wholly-owned insurance broker, works in collaboration with insurance companies nationwide to offer homeowners insurance and other insurance products to our homebuyers. Our financial services operation also provides mortgage services to our homebuyers through an unconsolidated joint venture. We commenced our homebuilding operations in 1985 through our predecessor company, Monterey Homes. Meritage Homes Corporation was incorporated in the state of Maryland in 1988 under the name of Homeplex Mortgage Investments Corporation and merged with Monterey Homes in 1996, at which time our name was changed to Monterey Homes Corporation and later ultimately to Meritage Homes Corporation. Since that time, we have engaged in homebuilding and related activities. Meritage Homes Corporation operates as a holding company and has no independent assets or operations. Its homebuilding construction, development and sales activities are conducted through its subsidiaries. Its homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets. At December 31, 2025, we were actively selling homes in 336 communities, with base prices ranging from approximately $ 161,000 to $ 1,000,000 . Basis of Presentation . The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of Meritage Homes Corporation and those of our consolidated subsidiaries, partnerships and other entities in which we have a controlling financial interest, and of variable interest entities (see Note 3) in which we are deemed the primary beneficiary (collectively, “us”, “we”, “our” and the “Company”). Certain reclassifications have been made to prior year footnotes and in the accompanying consolidated financial statements to conform to classifications used in the current year. Intercompany balances and transactions have been eliminated in consolidation. Stock Split Effective January 2, 2025, our common stock was split two -for-one (the "Stock Split"), with no adjustment to the number of authorized shares or the par value. See Note 9 for additional information related to the Stock Split. Cash and Cash Equivalents. Liquid investments with an initial maturity of three months or less are classified as cash equivalents. Amounts in transit from title companies or closing agents for home closings of approximately $ 20.1 million and $ 29.0 million are included in Cash and cash equivalents at December 31, 2025 and 2024, respectively. Real Estate. Real estate inventory is stated at cost unless the community or land is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment ("ASC 360-10") . Real estate inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, and direct overhead costs incurred during development and home construction that benefit the entire community, less impairments, if any. Land and development costs are typically allocated and transferred to homes when home construction begins. Home construction costs are accumulated on a per-home basis, while commissions and other sales costs are expensed as incurred. Cost of home closings includes the specific construction costs of the home and all related allocated land acquisition, land development and other common costs (both incurred and estimated to be incurred) that are allocated based upon the total number of homes expected to be closed in each community or phase. Any changes to the estimated total development costs of a community or phase are allocated to the remaining homes in that community or phase. When a home closes, we may have incurred costs for materials and services that have not yet been paid. 51 We accrue a liability to capture such obligations in connection with the home closing which is charged directly to Cost of home closings. We capitalize qualifying interest to inventory during the development and construction periods. Capitalized interest is included in cost of closings when the related inventory is closed. Included within our Real estate inventory is land held for development, land held for sale, and mothball communities. Land held for development primarily represents land and development costs related to land where development activity is not currently underway but is expected to begin in the future. For these parcels, we have chosen not to currently develop certain land holdings as they typically represent a portion or phases of a larger land parcel that we plan to build out over several years. Mothball communities represent communities where we have elected to stop development of an existing actively selling community because we believe the economic performance of the community would be maximized by deferring development for a period of time to allow market conditions to improve. We do not capitalize interest for these inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. See Note 2 for additional information related to capitalized interest. We rely on certain estimates to determine our construction and land development costs. Construction and land costs are comprised of direct and allocated costs, including estimated future costs. In determining these costs, we compile project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred. Actual results can differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, sales orders absorption rates that differ from our expectations, increases in costs that have not yet been contracted, changes in governmental requirements, or other unanticipated issues, encountered during construction and development and other factors beyond our control, including weather. To address uncertainty in these budgets, we assess, update and revise project budgets on a regular basis, utilizing the most current information available to estimate home construction and land development costs. Typically, a community's life cycle ranges from three to five years , commencing with the acquisition of the land, continuing through the land development phase, if applicable, and concluding with the construction, sale and closing of the homes. Actual community lives will vary based on the size of the community, the sales orders absorption rates and whether the land purchased was raw, partially-developed or in finished status. Master-planned communities encompassing several phases and super-block land parcels may have significantly longer lives and projects involving smaller finished lot purchases may be significantly shorter. All of our land inventory and related real estate assets are periodically reviewed for recoverability when certain criteria are met, but at least annually, as our inventory is considered “long-lived” in accordance with GAAP. Existing communities. Community-level reviews on active communities are performed quarterly, with the community review bifurcated between started and unstarted lots, to determine if indicators of potential impairment exist. If indicators of potential impairment exist and the undiscounted cash flows expected to be generated by an asset are lower than its carrying amount, impairment charges are recorded to write down the asset to its estimated fair value. The impairment of a community is allocated across the remaining lots in the community and is recognized in Cost of home closings in the period in which the impairment is determined. The fair value of the community’s assets is determined using either a market-based approach for projects to be sold or a discounted cash flow model for projects we intend to build out. If a market-based approach is used, we determine fair value based on recent comparable purchase and sale activity in the local market, adjusted for variances as determined by our knowledge of the region and general real estate expertise. If a discounted cash flow approach is used, we compute fair value using projections, estimates and observable and unobservable inputs such as (i) home selling prices in the community adjusted for current and expected sales discounts and incentives, (ii) costs related to the community — both land development and home construction — including costs spent to date and budgeted remaining costs to spend, (iii) projected sales absorption rates, reflecting any product mix change strategies implemented to stimulate the orders pace, (iv) expected cancellation rates, (v) alternative land uses including disposition of all or a portion of the land owned, if applicable, and (vi) discount rate, which is currently 10-14% and varies based on the perceived risk inherent in the community’s other cash flow assumptions. These assumptions vary widely across different communities and geographies and are largely dependent on local market conditions. Community-level factors that may impact our key estimates include: • Our current experience in the market; • The presence and significance of local competitors, including their offered product type, comparable lot size, remaining lots and competitive actions such as incentive offerings; • Economic and related demographic conditions for the surrounding community, such as major employers; • Desirability of the particular community, including unique amenities or other favorable or unfavorable attributes; and • Existing home inventory supplies for the surrounding community. 52 These local circumstances may significantly impact our assumptions and the resulting computation of fair value and are, therefore, closely evaluated by our division personnel in their preparation of the discounted cash flow models. The models are also evaluated by regional and corporate personnel for consistency and integration, as decisions that affect pricing or absorption at one community may have resulting consequences for neighboring communities. Mothball communities. In certain cases, we may elect to stop development of an existing actively selling community (mothball) if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow market conditions to improve. The decision may be based on financial and/or operational metrics. If we decide to mothball a community, we will impair it to its fair value, if applicable, as discussed above and then cease future development activity until such a time when management believes that market conditions have improved and economic performance will be maximized. Impairment charges, if any, are recognized in Cost of home closings in the period in which the impairment is determined. No costs are capitalized to communities that are designated as mothballed. When a community is initially placed into mothball status, it is management’s belief that the community is affected by local market conditions that are expected to improve within the next 1-5 years. Mothball communities are reviewed at least annually to determine if they are at risk of future impairment. The financial and operational status and expectations of these communities are analyzed as well as any unique attributes that could be viewed as indicators for future impairments. Adjustments are made accordingly and incremental impairments, if any, are recorded at each re-evaluation. Land held for sale or future development. Land held for sale or future development is reviewed at least annually to determine if it is at risk of future impairment. Our assessments on land held for sale or land held for future development typically involve third-party valuations, such as broker opinions, and recent comparable land sales in the area. Our assessments typically include highly subjective estimates for future performance, including the timing of development, the product to be offered, orders pace and selling prices of the product when the community is anticipated to open for sales, and the projected costs to develop and construct the community. We evaluate various factors to develop our forecasts, including the availability of and demand for homes and finished lots within the surrounding community, historical, current and future sales trends, and third-party data, if available. Based on these factors, we reach conclusions for future performance based on our judgment. If land held for sale or future development is deemed to be impaired, impairment changes are recognized in the period in which the impairment is determined. Impairments on land held for sale are recognized in Cost of land closings and impairments on land held for future development are recognized in Cost of home closings. See Note 2 for additional information related to Real estate. Deposits. Deposits paid related to land option and purchase contracts are recorded and classified as Deposits on real estate under option or contract until the related land is purchased. Deposits are reclassified as a component of Real estate at the time the deposit is used to offset the acquisition price of the land based on the terms of the underlying agreements. To the extent they are non-refundable, deposits are expensed to Cost of home closings if the land acquisition is terminated or no longer considered probable. Since our acquisition contracts typically do not require specific performance, we do not consider such contracts to be contractual obligations to purchase the land and our total exposure under such contracts is limited to the loss of any non-refundable deposits and any related capitalized costs. Our Deposits on real estate under option or contract were $ 174.2 million and $ 192.4 million as of December 31, 2025 and 2024, respectively. See Note 3 for additional information related to Deposits on real estate under option or contract. Goodwill. In accordance with ASC 350, Intangibles, Goodwill and Other ("ASC 350"), we analyze goodwill on an annual basis (or whenever indication of impairment exists) through a qualitative assessment to determine whether it is necessary to perform a goodwill impairment test. ASC 350 states that an entity may first assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Such qualitative factors include: (1) macroeconomic conditions, such as a deterioration in general economic conditions; (2) industry and market considerations such as deterioration in the environment in which the entity operates; (3) cost factors such as increases in raw materials, labor costs, etc.; and (4) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings. If the qualitative analysis determines that additional impairment testing is required, a two-step impairment test in accordance with ASC 350 would be initiated. We continually evaluate our qualitative inputs to assess whether events and circumstances have occurred that indicate the goodwill balance may not be recoverable. See Note 10 for additional information on our goodwill assets. 53 Property and Equipment, net. Property and equipment, net consists primarily of computer and office equipment, model home furnishings and capitalized sales office costs. Depreciation is generally calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years . Depreciation expense was $ 21.7 million, $ 23.6 million, and $ 23.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. Maintenance and repair costs are expensed as incurred. At December 31, 2025 and 2024, property and equipment, net consisted of the following (in thousands): At December 31, 2025 2024 Computer and office equipment $ 64,271 $ 59,433 Model home furnishings and capitalized sales office costs 58,526 57,149 Gross property and equipment 122,797 116,582 Accumulated depreciation ( 76,150 ) ( 69,297 ) Total $ 46,647 $ 47,285 Deferred Costs. At December 31, 2025 and 2024, deferred costs representing debt issuance costs related to our amended and restated unsecured revolving credit facility (the "Credit Facility") of approximately $ 5.4 million and $ 5.5 million, respectively, net of accumulated amortization, are recorded on our consolidated balance sheets within Prepaids, other assets and goodwill. The costs are amortized to Interest expense using the straight line method which approximates the effective interest method. See Note 7 for additional information related to net debt issuance costs associated with our senior and convertible senior notes. Investments in Unconsolidated Entities . We use the equity method of accounting for investments in unconsolidated entities over which we exercise significant influence but do not have a controlling interest. Under the equity method, our share of the unconsolidated entities’ pre-tax earnings or loss is included in Other income, net, or Earnings/(loss) from financial services unconsolidated entities and other, net, in our consolidated income statements. We use the cost method of accounting for investments in unconsolidated entities over which we do not have significant influence, if any. We track cumulative earnings and distributions from each of our ventures. For cash flow classification, to the extent distributions do not exceed cumulative earnings, we designate such distributions as return on capital. Distributions in excess of cumulative earnings are treated as return of capital. We evaluate our investments in unconsolidated entities for impairment when events that trigger an evaluation of recoverability present themselves. See Note 5 for additional information related to investments in unconsolidated entities. Accrued Liabilities . Accrued liabilities at December 31, 2025 and 2024 consisted of the following (in thousands): At December 31, 2025 2024 Accruals related to real estate development and construction activities $ 144,122 $ 167,075 Payroll and other benefits 98,591 131,733 Accrued interest 14,619 6,290 Accrued taxes 14,205 24,478 Warranty reserves 26,677 32,693 Lease liabilities (1) 60,470 55,825 Other accruals 29,014 34,119 Total $ 387,698 $ 452,213 (1) Refer to Note 4 for additional information related to our leases. Revenue Recognition. In accordance with ASC 606 , Revenue from Contracts with Customers , we apply the following steps in determining the timing and amount of revenue to recognize: (1) identify the contract with our customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if applicable; and (5) recognize revenue when (or as) we satisfy the performance obligations. The performance obligations and subsequent revenue recognition for our three sources of revenue are outlined below: 54 • Revenue from home closings is recognized when closings have occurred, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives. • Revenue from land closings is recognized when a significant down payment is received, title passes and collectability of the receivable, if any, is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow. • Revenue from financial services is recognized when closings have occurred and all financial services have been rendered, which is generally upon the close of escrow. Home sale contract assets consist of cash from home closings that are in transit from title companies, which are considered cash in transit and are classified as cash on our accompanying consolidated balance sheets. See "Cash and Cash Equivalents" in this Note 1 for further information. Contract liabilities include home sale deposit liabilities related to sold but unclosed homes, and are classified as Home sale deposits in our accompanying consolidated balance sheets. Substantially all of our home orders are scheduled to close and be recorded as Home closing revenue within one year from the date of receiving a customer deposit. Home closing and land closing revenue expected to be recognized in any future year related to remaining performance obligations (if any) and the associated contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, are not material. Revenue from financial services includes estimated future insurance policy renewal commissions as our performance obligations are satisfied upon issuance of the initial policy with a third-party broker. The related contract assets for these estimated future renewal commissions are not material at December 31, 2025 and 2024. Our three sources of revenue are disaggregated by type in the accompanying consolidated income statements. Cost of Home Closings . Cost of home closings includes direct home construction costs, closing costs, land acquisition and development costs, development period interest and common costs, and impairments, if any. Direct construction costs are accumulated during the period of construction and charged to Cost of home closings under specific identification methods, as are closing costs. Land development, acquisition and common costs are allocated to each lot based on the number of lots remaining to close. Estimates of costs incurred or to be incurred but not paid are accrued and expensed at the time of closing. Income Taxes. We account for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. We record deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available objectively verifiable positive and negative evidence, including scheduled reversals of deferred tax liabilities, whether we are in a cumulative loss position, projected future taxable income, tax planning strategies and recent financial operations. If we determine that we will not be able to realize our deferred tax assets in the future, we will record a valuation allowance, which increases the provision for income taxes. We recognize interest and penalties related to unrecognized tax benefits within Provision for income taxes in the accompanying consolidated income statements. Accrued interest and penalties are included within Accrued liabilities in the accompanying consolidated balance sheets. See Note 12 for additional information related to income taxes. Advertising Costs. We expense advertising costs to Commissions and other sales costs as they are incurred. Advertising expense was approximately $ 17.5 million, $ 17.1 million and $ 15.1 million for the years ending December 31, 2025, 2024 and 2023, respectively. Earnings Per Share. We compute basic earnings per share by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share gives effect to the potential dilution that could occur if securities or contracts to issue common stock that are dilutive were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. In accordance with ASC 260-10, Earnings Per Share , we calculate the dilutive effect of the 2028 Convertible Notes (as defined in Note 7) using the "if-converted" method. As discussed in Note 7, the Company will settle any convertible note conversions by paying cash up to the principal amount of notes and settle any additional value in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. As the Company will settle the principal amount of convertible notes in cash upon conversion, the convertible notes only have a dilutive impact when the average share price of the Company’s common stock exceeds the 55 conversion price, in any applicable period. In periods of net losses, no dilution is computed. See Note 9 for additional information related to earnings per share. Stock-Based Compensation . We account for stock-based compensation in accordance with ASC 718-10, Compensation—Stock Compensation ("ASC 718"). As allowed by ASC 718, we have elected to estimate forfeitures in calculating the expense related to stock-based compensation. Awards with either a graded or cliff vesting are expensed on a straight-line basis over the life of the award. Stock-based compensation expense is included in General and administrative expenses. See Note 11 for additional information on stock-based compensation. 401(k) Retirement Plan. We have a 401(k) plan for all full-time Meritage employees. We match portions of employees’ voluntary contributions , and contributed to the plan approximately $ 7.3 million, $ 7.2 million and $ 6.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. Off-Balance Sheet Arrangements - Joint Ventures . We participate in land development joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital. See Note 5 for additional discussion of our investments in unconsolidated entities. Off-Balance Sheet Arrangements - Other. In the normal course of business, we may acquire lots from various development entities pursuant to purchase and option agreements. The purchase price generally approximates the market price at the date the contract is executed (with possible future escalators) and the acquisition of the land is typically staggered. See Note 3 for additional information on these off-balance sheet arrangements. Surety Bonds and Letters of Credit. We provide surety bonds and letters of credit in support of our obligations relating to the development of our projects and other corporate purposes, in lieu of cash deposits. The amount of these obligations outstanding at any time varies depending on the stage and level of our development activities. Surety bonds are generally not wholly released until all development activities under the bond are complete. In the event a bond or letter of credit is drawn upon, we would be obligated to reimburse the issuer for any amounts advanced under the bond or letter of credit. We believe it is unlikely that any significant amounts of these bonds or letters of credit will be drawn upon. The table below outlines our surety bond and letter of credit obligations (in thousands): At December 31, 2025 2024 Outstanding Estimated work remaining to complete (unaudited) Outstanding Estimated work remaining to complete (unaudited) Sureties: Sureties related to owned projects and lots under contract 965,349 585,768 1,056,529 712,415 Total Sureties $ 965,349 $ 585,768 $ 1,056,529 $ 712,415 Letters of Credit (“LOCs”): LOCs for land development 70,547 N/A 105,371 N/A LOCs for general corporate operations 5,000 N/A 5,000 N/A Total LOCs $ 75,547 N/A $ 110,371 N/A Warranty Reserves. We provide home purchasers with limited warranties against certain building defects and we have certain obligations related to those post-construction warranties for closed homes. The specific terms and conditions of these limited warranties vary by state, but overall the nature of the warranties include a complete workmanship and materials warranty for the first year after the close of the home, a major mechanical warranty for two years after the close of the home and a structural warranty that typically extends up to 10 years after the close of the home. With the assistance of an actuary, we have estimated these reserves for the structural warranty based on the number of homes still under warranty and historical data and trends for our geographies. We may use industry data with respect to similar product types and geographic areas in markets where our experience is incomplete to draw a meaningful conclusion. We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available. Based on such reviews of warranty costs incurred, we did not record any adjustments in the year ended December 31, 2025. 56 A summary of changes in our warranty reserves follows (in thousands): Years Ended December 31, 2025 2024 Balance, beginning of year $ 32,693 $ 37,360 Additions to reserve from new home deliveries 18,582 21,820 Warranty claims ( 24,598 ) ( 25,444 ) Adjustments to pre-existing reserves — ( 1,043 ) Balance, end of year $ 26,677 $ 32,693 Warranty reserves are included in Accrued liabilities on the accompanying consolidated balance sheets, and additions and adjustments to the reserves are included in Cost of home closings within the accompanying consolidated income statements. These reserves are intended to cover costs associated with our contractual and statutory warranty obligations, which include, among other items, claims involving defective workmanship and materials. We believe that our total reserves, coupled with our contractual relationships and rights with our trades and the insurance we and our trades maintain, are sufficient to cover our general warranty obligations. However, unanticipated changes in regulatory, legislative, weather, environmental or other conditions could have an impact on our actual warranty costs, and future costs could differ significantly from our estimates. Recent Accounting Pronouncements. In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which aligns interim segment disclosure requirements with existing annual requirements and includes updates to segment reporting, most notably through enhanced disclosures about significant segment expenses and the Chief Operating Decision Maker ("CODM"). We adopted ASU 2023-07 for the annual period beginning January 1, 2024, and for interim periods beginning January 1, 2025. ASU 2023-07 is applied retrospectively to all prior periods presented in these financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which modifies the disclosure requirements primarily related to the effective tax rate reconciliation and income taxes paid by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. We adopted ASU 2023-09 for the annual period beginning January 1, 2025, and for interim periods beginning January 1, 2026. ASU 2023-09 is applied retrospectively to all prior periods presented in these financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. ASU 2024-03 is effective for our annual report covering the fiscal year beginning January 1, 2027, and for our interim reports beginning January 1, 2028. We are currently evaluating the impact adopting this guidance will have on our financial statement disclosures. In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments ("ASU 2024-04"), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. We adopted ASU 2024-04 on January 1, 2025 on a prospective basis and will apply the amendments to any future settlements of convertible debt instruments, if applicable. The adoption of ASU 2024-04 did not have any impact on the accompanying consolidated financial statements. In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"), which modernizes the accounting for the costs of internal-use software by removing all references to software development project stages so that the guidance is neutral to different software development methods. ASU 2025-06 is effective for our annual and interim reports within the fiscal year beginning January 1, 2028, and may be applied on a retrospective, modified transition or prospective basis. We are currently evaluating the impact adopting this guidance will have on our consolidated financial statements. In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"), to clarify interim disclosure requirements and the applicability of Topic 270, Interim Reporting . ASU 2025-11 is effective for our interim reports covering the fiscal year beginning January 1, 2028, and may be applied on a retrospective or prospective basis. We are currently evaluating the impact adopting this guidance will have on our consolidated financial statements. 57 NOTE 2 — REAL ESTATE AND CAPITALIZED INTEREST Real estate consists of the following (in thousands): At December 31, 2025 2024 Homes completed and under construction (1) $ 2,069,548 $ 2,375,639 Finished home sites and home sites under development (2) 3,917,572 3,353,136 Total $ 5,987,120 $ 5,728,775 (1) Includes the allocated land and land development costs associated with each lot for sold and unsold homes. (2) Includes raw land, land held for development, land held for sale and communities in mothball status, less impairments, if any. Land held for development, land held for sale and communities in mothball status totaled $ 164.4 million and $ 62.7 million as of December 31, 2025 and 2024, respectively. We do not capitalize interest for these inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred to applicable qualifying assets in connection with our real estate development and construction activities. Capitalized interest is allocated to active Real estate when incurred and charged to Cost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands): Years Ended December 31, 2025 2024 2023 Capitalized interest, beginning of year $ 53,678 $ 54,516 $ 60,169 Interest incurred 74,750 52,717 57,759 Interest expensed — — — Interest amortized to cost of home and land closings ( 51,364 ) ( 53,555 ) ( 63,412 ) Capitalized interest, end of year (1) $ 77,064 $ 53,678 $ 54,516 (1) Approximately $ 40,000 , $ 192,000 and $ 346,000 of the capitalized interest is related to our joint venture investments and is a component of Investments in unconsolidated entities in our consolidated balance sheets as of December 31, 2025, 2024 and 2023, respectively. As discussed in Note 1, and in accordance with ASC 360-10, all of our land inventory and related real estate assets are periodically reviewed for recoverability when certain criteria are met, but at least annually, as our inventory is considered “long-lived” in accordance with GAAP. Based on these reviews, we recorded the following impairment charges during the years ended December 31, 2025, 2024 and 2023 (in thousands): 58 Years Ended December 31, 2025 2024 2023 Real estate inventory impairments: West $ 742 $ — $ 964 Central 5,697 — — East $ 10,093 $ — $ — Total $ 16,532 $ — $ 964 Impairments of land held for sale: West — $ — $ — Central 1,442 — — East 144 $ — $ — Total $ 1,586 $ — $ — Total impairments: West 742 — 964 Central 7,139 — — East 10,237 — — Total $ 18,118 $ — $ 964 As discussed in Note 1, non-refundable deposits are expensed to Cost of home closings when a land acquisition is terminated or no longer considered probable. The following tables summarizes the write-offs of non-refundable deposits and associated pre-acquisition costs for terminated land contracts during the periods presented (in thousands): Years Ended December 31, 2025 2024 2023 Terminated option/purchase contracts and related pre-acquisition costs: West $ 8,599 $ 2,478 $ 3,336 Central 5,204 1,562 451 East $ 25,579 2,662 1,522 Total $ 39,382 $ 6,702 $ 5,309 NOTE 3 — VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED We enter into purchase and option agreements for land or lots as part of the normal course of business. These purchase and option agreements enable us to acquire properties at one or multiple future dates at pre-determined prices. We believe these acquisition structures allow us to better leverage our balance sheet and reduce our financial risk associated with land acquisitions. Based on the provisions of the relevant accounting guidance, we have concluded that when we enter into an option or purchase agreement to acquire land or lots from an entity, a variable interest entity (“VIE”), may be created. In accordance with ASC 810, Consolidation , we evaluate all purchase and option agreements for land to determine whether they are a VIE, and if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect its assets and liabilities as Real estate not owned and Liabilities related to real estate not owned, respectively. The liabilities related to consolidated VIEs are generally excluded from our debt covenant calculations. In order to determine if we are the primary beneficiary, we must first assess whether we have the ability to control the activities of the VIE that most significantly impact its economic performance. Such activities include, but are not limited to, the ability to determine the budget and scope of land development work, if any; the ability to control financing decisions for the VIE; the ability to acquire additional land into the VIE or dispose of land in the VIE not under contract with Meritage; and the ability to change or amend the existing option contract with the VIE. If we are not determined to control such activities, we are not considered the primary beneficiary of the VIE. If we do have the ability to control such activities, we will continue our 59 analysis by determining if we are also expected to absorb a potentially significant amount of the VIE’s losses or, if no party absorbs the majority of such losses, if we will benefit from a potentially significant amount of the VIE’s expected gains. In substantially all cases, creditors of the entities with which we have option agreements have no recourse against us and the maximum exposure to loss in our option agreements is limited to non-refundable option deposits and any capitalized pre-acquisition costs. Often, we are at risk for items over budget related to land development on property we have under option if we are the land developer. In these cases, we have typically contracted to complete development at a fixed cost on behalf of the land owner and any budget savings or shortfalls are borne by us. Some of our option deposits may be refundable to us if certain contractual conditions are not performed by the party selling the lots. The table below presents a summary of our lots under option that are not recorded on the balance sheet at December 31, 2025 (dollars in thousands): Projected Number of Lots (unaudited) Purchase Price (unaudited) Option/ Earnest Money Deposits–Cash Purchase and option contracts recorded on balance sheet as Real estate not owned — $ — $ — Option contracts — non-refundable deposits, committed (1) 9,559 947,636 98,996 Purchase contracts — non-refundable deposits, committed (1) 11,868 373,136 61,706 Purchase and option contracts —refundable deposits, committed 337 6,032 775 Total committed 21,764 1,326,804 161,477 Purchase and option contracts — refundable deposits, uncommitted (2) 14,565 797,182 12,693 Total lots under contract or option 36,329 $ 2,123,986 $ 174,170 Total purchase and option contracts not recorded on balance sheet (3) 36,329 $ 2,123,986 $ 174,170 (4) (1) Deposits are non-refundable except if certain contractual conditions are not performed by the selling party. (2) Deposits are refundable at our sole discretion. We have not completed our acquisition evaluation process and we have not internally committed to purchase these lots. (3) Except for our specific performance contracts recorded on our balance sheet as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots. (4) Amount is reflected in our consolidated balance sheets in Deposits on real estate under option or contract as of December 31, 2025. Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots on a pre-determined schedule in accordance with each respective agreement. Although the pre-established number is typically structured to approximate our expected rate of home construction starts, during a weakened homebuilding market, we may purchase lots at an absorption level that exceeds our expected orders and home starts pace to meet the pre-established minimum number of lots or restructure our original contract to terms that more accurately reflect our revised orders pace expectations. During a strong homebuilding market, we may accelerate our pre-established minimum purchases if allowed by the contract. NOTE 4 - LEASES We lease certain office space and equipment for use in our operations. We assess each of these contracts to determine whether the arrangement contains a lease as defined by ASC 842, Leases ("ASC 842"). In order to meet the definition of a lease under ASC 842, the contractual arrangement must convey to us the right to control the use of an identifiable asset for a period of time in exchange for consideration. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Some of our leases contain renewal options and in accordance with ASC 842, our lease terms include those renewals only to the extent that they are reasonably certain to be exercised. The exercise of these lease renewal options is generally at our discretion. In accordance with ASC 842, the lease liability is equal to the present value of the remaining lease payments while the right-of-use ("ROU") asset is based on the lease liability, subject to adjustment, such as for lease incentives. Our leases do not provide a readily determinable implicit interest rate and therefore, we must estimate our incremental borrowing rate. In determining our incremental borrowing rate, we consider the lease period, market interest rates, current interest rates on our senior notes and the effects of collateralization. 60 Our lease population at December 31, 2025 is comprised of operating leases where we are the lessee and these leases are primarily for office space for our corporate and division offices, in addition to leases of certain equipment. As allowed by ASC 842, we do not record leases with lease terms of twelve months or less on the consolidated balance sheets. Lease cost included in our consolidated income statements in General and administrative expenses is in the table below (in thousands). Our short-term lease costs and sublease income are de minimis. Years Ended December 31, 2025 2024 Operating lease expense $ 10,567 $ 9,834 Non-cash lease expense $ 6,413 $ 6,080 Cash payments on lease liabilities $ 9,818 $ 9,568 ROU assets obtained in exchange for new operating lease obligations $ 12,547 $ 9,476 ROU assets are classified within Prepaids, other assets and goodwill on our consolidated balance sheets, while lease liabilities are classified within Accrued liabilities on our consolidated balance sheets. The following table contains additional information about our leases (dollars in thousands): At December 31, 2025 2024 ROU assets $ 56,985 $ 52,941 Lease liabilities $ 60,470 $ 55,825 Weighted-average remaining lease term 7.3 years 8.2 years Weighted-average discount rate (incremental borrowing rate) 3.53 % 3.57 % Maturities of our operating lease liabilities as of December 31, 2025 are as follows (in thousands): Year ended December 31, 2026 $ 10,518 2027 10,478 2028 9,905 2029 9,009 2030 7,230 Thereafter 21,466 Total payments 68,606 Less: imputed interest ( 8,136 ) Present value of lease liabilities $ 60,470 NOTE 5 - INVESTMENTS IN UNCONSOLIDATED ENTITIES We may enter into joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital. Our joint venture partners generally are other homebuilders, land sellers or other real estate investors. We generally do not have a controlling interest in these ventures, which means our joint venture partners could cause the venture to take actions we disagree with, or fail to take actions we believe should be undertaken, including the sale of the underlying property to repay debt or recoup all or part of the partners' investments. Based on the structure of these joint ventures, they may or may not be consolidated into our results. The primary activity of our land joint ventures is the development and sale of lots to joint venture partners and/or unrelated builders. Our mortgage joint venture is engaged in mortgage activities and primarily provides mortgage services to our homebuyers. As of December 31, 2025, we had three active equity-method land joint ventures and one mortgage joint venture. 61 Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands): At December 31, 2025 2024 Assets: Cash $ 3,516 $ 4,434 Real estate 181,166 66,443 Other assets 6,748 7,286 Total assets $ 191,430 $ 78,163 Liabilities and equity: Accounts payable and other liabilities $ 8,448 $ 7,148 Equity of: Meritage (1) 57,268 27,735 Other 125,714 43,280 Total liabilities and equity $ 191,430 $ 78,163 Years Ended December 31, 2025 2024 2023 Revenue $ 58,333 $ 60,460 $ 46,842 Costs and expenses ( 41,000 ) ( 41,559 ) ( 37,666 ) Net earnings of unconsolidated entities $ 17,333 $ 18,901 $ 9,176 Meritage’s share of pre-tax earnings (1) (2) $ 3,973 $ 9,225 $ 6,371 (1) Balance represents Meritage’s interest, as reflected in the financial records of the respective joint ventures. This balance may differ from the balance reported in our consolidated financial statements due to the following reconciling items: (i) timing differences for revenue and distributions recognition, (ii) step-up basis and corresponding amortization, (iii) capitalization of interest on qualified assets, (iv) income deferrals as discussed in Note (2) below and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses. (2) Our share of pre-tax earnings/(loss) from our mortgage joint venture is recorded in Earnings/(loss) from financial services unconsolidated entities and other, net on the accompanying consolidated income statements. Our share of pre-tax earnings/(loss) from all other joint ventures is recorded in Other income, net on the accompanying consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any. Such profit is deferred until homes are delivered by us and title passes to a homebuyer. Our total investment in all of these joint ventures is $ 57.3 million as of December 31, 2025. We believe these ventures are in compliance with their respective debt agreements, if applicable, and such debt is non-recourse to us. NOTE 6 — LOANS PAYABLE AND OTHER BORROWINGS Loans payable and other borrowings consist of the following (in thousands): At December 31, 2025 2024 Other borrowings, secured real estate notes payable (1) $ 24,328 $ 29,343 $ 910.0 million unsecured revolving credit facility — — Total $ 24,328 $ 29,343 (1) Reflects balance of non-recourse notes payable in connection with land purchases. The Company entered into an amended and restated unsecured revolving credit facility agreement ("Credit Facility") in 2014 that has been amended from time to time. On July 9, 2025, we entered into the Eleventh Amendment to Amended and Restated Credit Agreement, which extends the maturity date from June 12, 2029 to July 9, 2030. The Credit Facility's aggregate commitment is $ 910.0 million with an accordion feature permitting the size of the facility to increase to a maximum of $ 1.4 62 billion, subject to certain conditions, including the availability of additional bank commitments. Borrowings under the Credit Facility bear interest at the Company's option, at either (1) term Secured Overnight Financing Rate ("SOFR") (based on 1, 3, or 6 month interest periods, as selected by the Company) plus a 10 basis point adjustment plus an applicable margin (ranging from 110 basis points to 175 basis points (the "applicable margin")) based on the Company's leverage ratio as determined in accordance with a pricing grid, (2) the higher of (i) the prime lending rate ("Prime"), (ii) an overnight bank rate plus 50 basis points and (iii) term SOFR (based on a 1 month interest period) plus a 10 basis point adjustment plus 1 %, in each case plus a margin ranging from 10 basis points to 75 basis points based on the Company's leverage in accordance with a pricing grid, or (3) daily simple SOFR plus a 10 basis point adjustment plus the applicable margin. At December 31, 2025, the interest rate on outstanding borrowings under the Credit Facility would have been 4.89 % per annum, calculated in accordance with option (1) noted above and using the 1 month term SOFR. We are obligated to pay a fee on the undrawn portion of the Credit Facility at a rate determined by a tiered fee matrix based on our leverage ratio. The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $ 3.3 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60 %. We were in compliance with all Credit Facility covenants as of December 31, 2025. We had no outstanding borrowings under the Credit Facility as of December 31, 2025 and 2024. During the year ended December 31, 2025, we had $5.0 million of borrowings and repayments under the Credit Facility. During the years ended December 31, 2024 and 2023, we had no borrowings or repayments under the Credit Facility. As of December 31, 2025 we had outstanding letters of credit issued under the Credit Facility totaling $ 75.5 million, leaving $ 834.5 million available under the Credit Facility to be drawn. NOTE 7 — SENIOR AND CONVERTIBLE SENIOR NOTES, NET Senior and convertible senior notes, net consist of the following (in thousands): At December 31, 2025 2024 5.125 % senior notes due 2027 ("2027 Notes") 300,000 300,000 1.750 % convertible senior notes due 2028 ("2028 Convertible Notes") 575,000 575,000 3.875 % senior notes due 2029 ("2029 Notes") 450,000 450,000 5.650 % senior notes due 2035 ("2035 Notes"). At December 31, 2025, there was $ 2,571 in net unamortized discount. 497,429 — Net debt issuance costs ( 17,703 ) ( 18,465 ) Total $ 1,804,726 $ 1,306,535 The indentures for our 2027 Notes, 2029 Notes and 2035 Notes contain covenants that place limits on secured debt and sale and leaseback transactions. We were in compliance with all such covenants as of December 31, 2025. Obligations to pay principal and interest on the senior and convertible senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100 % owned by Meritage Homes. Such guarantees are full and unconditional, and joint and several. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the equity interests of any Guarantor then held by Meritage and its subsidiaries, then that Guarantor may be released and relieved of any obligations under its note guarantee. There are no significant restrictions on our ability or the ability of Meritage Homes or any Guarantor to obtain funds from their respective subsidiaries, as applicable, by dividend or loan. We do not provide separate financial statements of the Guarantor Subsidiaries because Meritage Homes (the parent company) has no independent assets or operations and the guarantees are full and unconditional and joint and several. Subsidiaries of Meritage Homes Corporation that are non-guarantor subsidiaries are, individually and in the aggregate, minor, and accordingly, the assets, liabilities and results of operations of Meritage Homes Corporation and the Guarantor Subsidiaries are not materially different than the corresponding amounts presented in the audited consolidated financial statements of Meritage Homes. In June 2015, we completed an offering of $ 200.0 million aggregate principal amount of 6.00 % Senior Notes due 2025 (the "Original 2025 Notes"). The Original 2025 Notes were issued at par. In March 2018, the Company completed an offering of $ 200.0 million aggregate principal amount of additional 2025 Notes (the "Additional Notes"). The Additional Notes were issued as an add-on to the Original 2025 Notes at a premium of 103 % of the principal amount, resulting in a combined $ 400.0 63 million aggregate principal amount of 6.00 % Senior Notes due 2025 (collectively, the "2025 Notes"). In September 2023, we partially redeemed $ 150.0 million of the 2025 Notes, incurring $ 0.9 million in early debt extinguishment charges during the year ended December 31, 2023, reflected as Loss on early extinguishment of debt in the accompanying consolidated income statements. In May 2024, we redeemed the remaining $ 250.0 million aggregate principal then outstanding of the 2025 Notes for which we incurred $ 0.6 million in early debt extinguishment charges during the year ended December 31, 2024 , reflected as Loss on early extinguishment of debt in the accompanying consolidated income statements. In June 2017, we completed an offering of $ 300.0 million aggregate principal amount of the 2027 Notes. The 2027 Notes were issued at par. Using the proceeds from the 2027 Notes offering, we retired all $ 126.5 million of our then outstanding convertible senior notes through a repurchase of $ 51.9 million in privately negotiated transactions and a redemption of the remaining $ 74.6 million through a combination of holder redemptions and an exercise of our call option at a redemption price equal to 100 % of the principal amount of the notes redeemed, plus accrued and unpaid interest. In April 2021, we completed an offering of $ 450.0 million aggregate principal amount of the 2029 Notes. We used a portion of the net proceeds from this offering to redeem all $ 300.0 million aggregate principal then outstanding of other senior notes. In March 2025, we completed an offering of $ 500.0 million aggregate principal amount of the 2035 Notes. The 2035 Notes were issued at a discount of 99.439 % of the principal amount and the net proceeds were used for general corporate purposes. Convertible Notes In May 2024, we issued $ 575.0 million aggregate principal amount of the 2028 Convertible Notes. The 2028 Convertible Notes were issued at par and will mature on May 15, 2028, unless converted earlier in accordance with their terms prior to such date. We used a portion of the net proceeds from the offering to pay the cost of entering into the Capped Calls, as defined and described below, and to redeem all $ 250.0 million aggregate principal then outstanding of our 2025 Notes, as previously discussed. The 2028 Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 8.6096 shares of common stock per $1,000 principal amount of the 2028 Convertible Notes, which is equivalent to an initial conversion price of approximately $ 116.15 per share and is subject to adjustment in certain circumstances. In addition, we must provide additional shares upon conversion if there is a "Make-Whole Fundamental Change". The Company is required to satisfy its conversion obligations by paying cash up to the principal amount of notes and settle any additional value in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. During the year ended December 31, 2025, the conversion price was adjusted to $ 115.78 per share, as a result of the increased dividends we declared and paid during 2025. Prior to February 15, 2028, the holders of the 2028 Convertible Notes may convert their notes only under the following conditions: (1) the sale price of common stock reaches 130 % of the applicable conversion price for a specified period during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2024; (2) the trading price of the 2028 Convertible Notes falls below 98% of the product of the last reported sale price of common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate events. During the year ended December 31, 2025, the circumstances allowing holders of the 2028 Convertible Notes were not met. On or after February 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances. The 2028 Convertible Notes are accounted for in accordance with ASC 470, Debt , and ASC 815, Derivatives and Hedging ("ASC 815") . The conversion options and the 2028 Convertible Notes are reflected as a single instrument in Senior and convertible senior notes, net on the accompanying consolidated balance sheets and the conversion options are not bifurcated as a derivative. Capped Call Transactions Concurrent with the offering of the 2028 Convertible Notes, we used a portion of the net proceeds to enter into privately negotiated capped call transactions (the "Capped Calls”) which require the Capped Calls counterparties (the "Counterparties") to provide shares of our common stock to converting debt holders up to a cap price. The Capped Calls each have an initial strike price of approximately $ 116.15 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2028 Convertible Notes. The Capped Calls have initial cap prices of $ 175.32 per share, subject to certain adjustments. 64 The Capped Calls will reduce our obligation to settle, in shares or in cash, conversions when our stock price is between the strike price and the cap price. During the year ended December 31, 2025, the strike price and cap price were adjusted to $ 115.78 per share and $ 174.77 per share, respectively, as a result of the increased dividends we declared and paid during 2025. The Capped Calls are separate transactions entered into by the Company with each of the Counterparties, are not part of the terms of the 2028 Convertible Notes and do not change the note holders’ rights under the 2028 Convertible Notes or the indenture governing the 2028 Convertible Notes . Holders of the 2028 Convertible Notes do not have any rights with respect to the Capped Calls. As the Capped Calls are considered indexed to the Company's own stock, they are recorded in stockholders’ equity as a reduction of Additional paid-in capital in the accompanying consolidated balance sheets, and are not accounted for as derivatives under ASC 815-10. Scheduled principal maturities of our senior and convertible senior notes as of December 31, 2025 follow (in thousands): Year Ended December 31, 2026 — 2027 300,000 2028 575,000 2029 450,000 2030 — Thereafter 500,000 Total $ 1,825,000 NOTE 8 — FAIR VALUE DISCLOSURES ASC 820-10, Fair Value Measurement ("ASC 820") , defines fair value, establishes a framework for measuring fair value and addresses required disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to the Company while unobservable inputs are generally developed internally, utilizing management’s estimates, assumptions and specific knowledge of the assets/liabilities and related markets. The three levels are defined as follows: • Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities. • Level 2 —Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market. • Level 3 — Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability. If the only observable inputs are from inactive markets or for transactions which the Company evaluates as “distressed”, the use of Level 1 inputs should be modified by the Company to properly address these factors, or the reliance of such inputs may be limited, with a greater weight attributed to Level 3 inputs. 65 Financial Instruments : The fair value of our fixed-rate debt is derived from quoted market prices by independent dealers (Level 2 inputs as per the discussion above) and is as follows (in thousands): At December 31, 2025 2024 Aggregate Principal Estimated Fair Value Aggregate Principal Estimated Fair Value 5.125 % senior notes due 2027 $ 300,000 $ 301,890 $ 300,000 $ 300,330 1.750 % convertible senior notes due 2028 $ 575,000 $ 566,548 $ 575,000 $ 563,259 3.875 % senior notes due 2029 $ 450,000 $ 442,125 $ 450,000 $ 420,795 5.650 % senior notes due 2035 $ 500,000 $ 510,050 $ — $ — Other financial assets and liabilities, including our Loans payable and other borrowings, are generally shorter term in nature and the longer term balances are not material to our consolidated balance sheets. Therefore, we consider the carrying amounts of our other financial assets and liabilities to approximate fair value. Non-Financial Instruments : Our Real estate assets are Level 3 instruments that are required to be recorded at fair value only if events and circumstances indicate that the carrying value may not be recoverable. The fair value of inventories that were measured as of December 31, 2025 was $ 314.1 million. See Note 1 for information on the significant observable and unobservable inputs we utilized in our fair value measurements with respect to the real estate assets measured at fair value. NOTE 9 — EARNINGS PER SHARE; STOCKHOLDERS' EQUITY Basic and diluted earnings per common share were calculated as follows (in thousands, except per share amounts): Years Ended December 31, 2025 2024 2023 Basic weighted average number of shares outstanding 70,819 72,476 73,238 Effect of dilutive securities: Unvested restricted stock 529 856 900 Diluted average shares outstanding 71,348 73,332 74,138 Net earnings $ 453,013 $ 786,186 $ 738,748 Basic earnings per share $ 6.40 $ 10.85 $ 10.09 Diluted earnings per share $ 6.35 $ 10.72 $ 9.96 Stock Split On November 21, 2024, our Board of Directors declared a two-for-one stock split of Meritage’s common stock in the form of a stock dividend. Each stockholder of record at the close of business on December 31, 2024 received one additional share of common stock for each share of common stock held, payable after the close of market on January 2, 2025. Trading began on a split-adjusted basis on January 3, 2025. There was no adjustment to the number of authorized shares or the par value. Dividends During the years ended December 31, 2025, 2024, and 2023 our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $ 0.43 , $ 0.375 , and $ 0.135 per share, respectively. Quarterly dividends declared and paid during the years ended December 31, 2025, 2024, and 2023 totaled $ 1.72 , $ 1.50 , and $ 0.54 per share, respectively. Excise Tax on Stock Repurchases The Inflation Reduction Act of 2022 (the "IRA"), which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. The applicable excise tax is reflected in Additional paid-in capital as part of the cost basis of the stock repurchased and a corresponding liability for the excise taxes payable is recorded in Accrued liabilities on the accompanying consolidated balance sheets. 66 NOTE 10 — ACQUISITIONS AND GOODWILL Goodwill. In prior years, we have entered new markets through the acquisition of the homebuilding assets and operations of local/regional homebuilders in Georgia, South Carolina and Tennessee. As a result of these transactions, we recorded approximately $ 33.0 million of goodwill. Goodwill represents the excess purchase price of our acquisitions over the fair value of the net assets acquired. Our acquisitions were recorded in accordance with ASC 805, Business Combination s and ASC 820, using the acquisition method of accounting. The purchase price for acquisitions was allocated based on estimated fair value of the assets and liabilities at the date of the acquisition. The combined excess purchase price of our acquisitions over the fair value of the net assets is classified as goodwill and is included in our consolidated balance sheets in Prepaids, other assets and goodwill. In accordance with ASC 350, we assess the recoverability of goodwill annually, or more frequently, if impairment indicators are present. A summary of the carrying amount of goodwill follows (in thousands): West Central East Financial Services Corporate Total Balance at January 1, 2024 (1) $ — $ 10,247 $ 22,715 $ — $ — $ 32,962 Additions — — — — — — Balance at December 31, 2024 — 10,247 22,715 — — 32,962 Additions — — — — — — Balance at December 31, 2025 $ — $ 10,247 $ 22,715 $ — $ — $ 32,962 (1) Effective January 1, 2025, the Tennessee homebuilding operating segment has been reclassified from the East reporting segment to the Central reporting segment. See Note 15 for additional information about the reclassification of the Tennessee homebuilding operating segment. Prior period balances have been retroactively adjusted to reflect this reclassification. NOTE 11 — STOCK BASED AND DEFERRED COMPENSATION We have a stock compensation plan, the Meritage Homes Corporation 2018 Stock Incentive Plan (the “2018 Plan"), that was approved by our Board of Directors and our stockholders and adopted in May 2018. In May 2023, the Board of Directors and stockholders approved an amendment to the 2018 Plan to increase the number of shares available for issuance by 1,600,000 . The 2018 Plan is administered by our Board of Directors and allows for the grant of stock appreciation rights, restricted stock awards, restricted stock units, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. All available shares from expired, terminated, or forfeited awards that remained under prior plans were merged into and became available for grant under the 2018 Plan. The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants. The 2018 Plan authorizes 14,800,000 shares of stock to be awarded, of which 2,009,685 shares remain available for grant at December 31, 2025. We believe that such awards provide a means of long-term compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards are usually granted with a five-year ratable vesting period for employees, a three-year cliff vesting for both restricted stock units and performance-based awards granted to senior executive officers and either a three-year cliff vesting or one-year vesting for non-employee directors, dependent on their start date. 67 Summary of Nonvested (Restricted) Shares and Units Activity: We grant time-based and performance-based restricted shares or units. Except in limited cases, performance-based restricted shares and units are only granted to executive officers. All performance share awards only vest upon the attainment of certain financial and operational criteria as established and approved by our Board of Directors. The number of shares that may be issued to the award recipients may be greater or lesser than the target award amount depending on actual performance achieved as compared to the performance targets set forth in the awards. Nonvested Restricted Share Activity (time-based) Weighted Average Grant Date Fair Value Nonvested Restricted Share Activity (performance- based) Weighted Average Grant Date Fair Value Outstanding at January 1, 2023 1,318,204 $ 40.26 289,334 $ 35.67 Granted (1) 369,126 56.18 138,262 50.65 Vested (Earned/Released) (1) ( 421,222 ) 34.73 ( 161,830 ) 36.59 Forfeited (2) ( 125,044 ) 46.08 — — Outstanding as of December 31, 2023 1,141,064 46.82 265,766 50.33 Granted (3) 285,054 76.74 111,902 66.08 Vested (Earned/Released) (3) ( 411,266 ) 42.27 ( 125,142 ) 41.90 Forfeited (2) ( 10,446 ) 63.51 — — Outstanding at December 31, 2024 1,004,406 57.00 252,526 60.35 Granted (4) 321,213 73.59 105,442 73.35 Vested (Earned/Released) (4) ( 427,748 ) 50.88 ( 109,187 ) 50.18 Forfeited (2) ( 97,491 ) 66.18 ( 44,893 ) 48.23 Outstanding at December 31, 2025 800,380 $ 65.80 203,888 $ 70.60 (1) Performance-based shares granted and earned/released for the year ended December 31, 2023 includes 52,334 shares that were issued as a result of the performance achievement exceeding the performance targets related to grants to our executive officers for the year ended December 31, 2020. These shares vested in February 2023. (2) Forfeitures on time-based nonvested shares are a result of terminations of employment, while forfeitures on performance-based nonvested shares are the result of failing to attain certain goals as outlined in our executive officers' compensation agreements or as a result of terminations of employment. (3) Performance-based shares granted and earned/released for the year ended December 31, 2024 includes 31,956 shares that were issued as a result of the performance achievement exceeding the performance targets related to grants to our executive officers for the year ended December 31, 2021. These shares vested in March 2024. (4) Performance-based shares granted and earned/released for the year ended December 31, 2025 includes 22,535 shares that were issued as a result of the performance achievement exceeding the performance targets related to grants to our executive officers for the year ended December 31, 2022. These shares vested in February 2025. Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award. Compensation cost related to performance-based restricted stock unit awards is also measured as of the closing price on the date of grant but is expensed in accordance with ASC 718, which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that a performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense recorded on a straight-line basis through the end of the award vesting period. A portion of the performance-based restricted stock unit awards granted to our executive officers contain market conditions as defined by ASC 718. ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a derived grant date fair value and expensed over the service period. We engage a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is expensed straight-line over the service period of 68 the awards. Below is a summary of stock-based compensation expense and stock award activity (dollars in thousands): Years Ended December 31, 2025 2024 2023 Stock-based compensation expense $ 19,683 $ 25,809 $ 22,511 The following table includes additional information regarding our stock compensation plan (dollars in thousands): At December 31, 2025 2024 Unrecognized stock-based compensation cost (1) $ 30,419 $ 30,666 Weighted average years expense recognition period 1.97 1.95 Total equity awards outstanding (1) 1,004,268 1,256,932 (1) Includes unvested restricted stock units and performance-based awards (assuming 100 %/target payout). We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k) plans, impose on highly compensated employees. We do not currently offer a contribution match on the deferred compensation plan. All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the years ended December 31, 2025, 2024 or 2023, other than minor administrative costs. NOTE 12 — INCOME TAXES Components of the income tax provision are as follows (in thousands): Years Ended December 31, 2025 2024 2023 Current taxes: Federal $ 105,522 $ 166,028 $ 170,306 State 25,096 41,101 41,837 130,618 207,129 212,143 Deferred taxes: Federal 1,481 6,013 ( 1,888 ) State ( 512 ) 3,542 427 969 9,555 ( 1,461 ) Total $ 131,587 $ 216,684 $ 210,682 Income taxes for the years ended December 31, 2025, 2024 and 2023, differ from the expected amounts computed using the federal statutory income tax rate of 21 % as a result of the following (in thousands): Years Ended December 31, 2025 2024 2023 Amount Percent Amount Percent Amount Percent Expected taxes at current federal statutory income tax rate $ 122,766 21.0 % $ 210,603 21.0 % $ 199,380 21.0 % State and local income taxes, net of federal income tax benefit (1) 19,421 3.3 % 35,268 3.5 % 33,389 3.5 % Tax credits ( 10,161 ) ( 1.7 ) % ( 30,071 ) ( 3.0 ) % ( 25,219 ) ( 2.7 ) % Nontaxable or nondeductible items 87 — % 1,891 0.2 % 3,509 0.4 % Other adjustment ( 526 ) ( 0.1 ) % ( 1,007 ) ( 0.1 ) % ( 377 ) — % Income tax expense $ 131,587 22.5 % $ 216,684 21.6 % $ 210,682 22.2 % 69 (1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Arizona and Florida for 2025; California, Arizona, and Georgia for 2024; and California, Arizona, and Florida for 2023. The amounts of cash taxes paid are as follows (in thousands): Years Ended December 31, 2025 2024 2023 Federal $ 127,650 163,000 167,700 State California 6,520 15,400 12,000 All other states 20,060 30,116 32,393 Total income taxes, net of amounts refunded 154,230 208,516 212,093 In 2025, there were no state jurisdictions with cash taxes paid that equaled or exceeded 5% of total income taxes paid. In 2024 and 2023, California was the only jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid. Deferred tax assets and liabilities are netted on our balance sheet by tax jurisdiction. Net overall deferred tax assets for all jurisdictions are grouped and included as a separate asset. Net overall deferred tax liabilities for all jurisdictions are grouped and included in Accrued liabilities. At December 31, 2025, we have a net deferred tax asset of $ 53.3 million. We also have other net deferred tax liabilities of $ 9.5 million. Deferred tax assets and liabilities are comprised of timing differences (in thousands) as follows: At December 31, 2025 2024 Deferred tax assets: Real estate $ 27,441 $ 24,633 Warranty reserve 6,348 7,768 Wages payable 13,430 6,490 Equity-based compensation 5,858 7,575 Accrued expenses 202 94 Lease liabilities 14,392 13,264 Capped Calls cost 9,048 12,545 State operating loss carry forwards 81 — Other 6,805 8,479 Total deferred tax assets 83,605 80,848 Deferred tax liabilities: Goodwill 5,049 4,181 Prepaids 1,845 1,367 ROU assets 13,891 13,071 Fixed assets 9,527 7,705 Total deferred tax liabilities 30,312 26,324 Deferred tax assets, net 53,293 54,524 Other deferred tax liabilities - state franchise taxes 9,534 9,795 Net deferred tax assets and liabilities $ 43,759 $ 44,729 70 At December 31, 2025 and December 31, 2024, we have no unrecognized tax benefits. We believe our current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in the provision for income taxes. We determine our deferred tax assets and liabilities in accordance with ASC 740, Income Taxes ("ASC 740" ) . We evaluate our deferred tax assets, including the benefit from net operating losses ("NOLs"), by jurisdiction to determine if a valuation allowance is required. Companies must assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, experiences with NOLs and experiences of utilizing tax credit carryforwards and tax planning alternatives. We have no federal NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets is necessary at December 31, 2025. On August 16, 2022, the IRA retroactively extended the energy tax credit to homes delivered from January 1, 2022 through December 31, 2032, modified the energy standards required to qualify for the tax credit and increased the per-home credit amount starting in 2023. In accordance with these regulations, we recorded a tax benefit of $ 5.6 million, $ 29.1 million, and $ 22.7 million during the years ended December 31, 2025, 2024 and 2023, respectively, based on our estimate for qualifying new energy efficient homes that we closed in those years. The decrease in the tax benefit recognized in 2025 compared to prior years was primarily due to more stringent ENERGY STAR® program requirements. The IRA also created a 15% corporate alternative minimum tax on certain profits and creates a 1% excise tax on stock repurchases. These provisions do not have a material impact on our financial statements. During the fourth quarter of 2025, we entered into a tax credit transfer agreement to purchase 2025 §45Z alternative clean fuel production credits and we recognized a tax benefit representing the purchase discount between the credit value and the total purchase price. We expect to claim the full §45Z credit on our 2025 federal income tax return. Our future deferred tax asset realization depends on sufficient taxable income in the carryforward periods under existing tax laws. Federal NOL carryforwards may be used to offset future taxable income indefinitely. State NOL carryforwards may be used to offset future taxable income for a period ranging from 5 to 20 years, depending on the state jurisdiction. At December 31, 2025, we had no remaining unutilized federal NOL carryforward or federal tax credits, and had tax benefits of $ 0.1 million state NOL carryforwards that begin to expire in 2041. At December 31, 2025, we have $ 12.8 million current income taxes receivable and no current income taxes payable. Income taxes receivable consists of current federal and state tax accruals, net of current energy tax credits, §45Z transferrable credit and estimated tax payments in excess of income tax liability accrued at December 31, 2025. We have accrued income taxes of $ 12.1 million recorded in Accrued liabilities on the accompanying consolidated balance sheets at December 31, 2025, which consist primarily of state franchise tax and federal excise tax on stock repurchases. We conduct business and are subject to tax in the U.S. both federally and in several states. With few exceptions, we are no longer subject to U.S. federal, state, or local income tax examinations by taxing authorities for years prior to 2021. We do not have any Federal or state income tax examinations pending resolution at this time. 71 NOTE 13 — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The following table presents certain supplemental cash flow information (in thousands): Years Ended December 31, 2025 2024 2023 Cash paid during the year for: Interest, net of interest capitalized $ ( 15,702 ) $ ( 5,506 ) $ ( 1,454 ) Income taxes paid, net $ 154,230 $ 208,516 $ 212,093 Non-cash operating activities: Real estate acquired through notes payable $ 7,990 $ 24,750 $ 9,267 Non-cash investing and financing activities: Distributions of real estate from unconsolidated joint ventures, net $ 3,090 $ 9,594 $ — NOTE 14 — RELATED PARTY TRANSACTIONS From time to time, in the normal course of business, we have transacted with related or affiliated companies and with certain of our officers and directors. We believe that the terms and fees negotiated for all transactions listed below are no less favorable than those that could be negotiated in arm’s length transactions. We charter aircraft services from companies that use the private plane of Steven J. Hilton, our Executive Chairman, although Mr. Hilton does not have an ownership interest in the charter companies. Payments made to these charter companies were approximately $ 448,000 , $ 350,000 and $ 532,000 for the years ended December 31, 2025, 2024 and 2023, respectively. NOTE 15 — OPERATING AND REPORTING SEGMENTS We operate with two principal business segments: homebuilding and financial services. As defined in ASC 280-10, Segment Reporting , we have twelve homebuilding operating segments. The homebuilding segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity. Our three reportable homebuilding segments are as follows: West: Arizona, California, Colorado and Utah Central: Texas and Tennessee East: Alabama, Florida, Georgia, Mississippi, North Carolina, and South Carolina We define our segments based on the way in which internally reported financial information is regularly provided and reviewed by the CODM to analyze financial performance, make decisions, and allocate resources. Our CODM is the chief executive officer. The CODM’s evaluation of the homebuilding segment performance is based on segment home closing revenue, home closing gross profit and gross margin, total gross profit, commissions and other sales costs, general and administrative expenses incurred by or allocated to each segment, including impairments, and operating income. The CODM uses these performance metrics predominantly in the annual budget and forecasting process and considers budget-to-actual variances on a quarterly basis for these measures when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses these data points to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. The CODM also reviews financial services profits and losses to evaluate the performance of the financial services segment and make decisions about allocation of resources and financial services related product offerings. Effective January 1, 2025, we realigned our internal organizational structure and resources following continued growth and recent entry into new markets. As a result of the change in our organizational structure, the Tennessee homebuilding operating segment was reclassified from the East reporting segment to the Central reporting segment for the purpose of making operational and resource decisions and assessing financial performance. Prior period balances have been retroactively adjusted to reflect this reclassification. 72 Each reportable segment follows the same accounting policies described in Note 1, “Business and Summary of Significant Accounting Policies.” Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented. The following tables provide financial information about our reportable segments and Corporate and other categories (in thousands): Year Ended December 31, 2025 West Central East Total Home closing revenue $ 1,829,432 $ 1,835,691 $ 2,098,474 $ 5,763,597 Land closing revenue 7,962 22,656 30,220 60,838 Total closing revenue 1,837,394 1,858,347 2,128,694 5,824,435 Cost of home closings 1,461,313 1,451,785 1,714,307 4,627,405 Cost of land closings 7,534 23,945 27,547 59,026 Total cost of closings 1,468,847 1,475,730 1,741,854 4,686,431 Home closing gross profit 368,119 383,906 384,167 1,136,192 Land closing gross profit/(loss) 428 ( 1,289 ) 2,673 1,812 Total closing gross profit 368,547 382,617 386,840 1,138,004 Home closing gross margin 20.1 % 20.9 % 18.3 % 19.7 % Commissions and other sales costs 110,408 140,114 153,883 404,405 General and administrative expenses 50,944 49,924 70,713 171,581 Homebuilding segment operating income 207,195 192,579 162,244 562,018 Financial services segment profit 18,618 Corporate and unallocated costs (1) ( 40,181 ) Interest expense — Other income, net 44,145 Net earnings before income taxes $ 584,600 (1) Balance consists primarily of corporate costs and shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments. 73 Year Ended December 31, 2024 West Central East Total Home closing revenue $ 2,223,876 $ 2,015,621 $ 2,102,049 $ 6,341,546 Land closing revenue — 6,017 16,309 $ 22,326 Total closing revenue 2,223,876 2,021,638 2,118,358 6,363,872 Cost of home closings 1,715,856 1,492,243 1,553,604 4,761,703 Cost of land closings — 4,149 14,160 18,309 Total cost of closings 1,715,856 1,496,392 1,567,764 4,780,012 Home closing gross profit 508,020 523,378 548,445 1,579,843 Land closing gross profit/(loss) — 1,868 2,149 4,017 Total closing gross profit 508,020 525,246 550,594 1,583,860 Home closing gross margin 22.8 % 26.0 % 26.1 % 24.9 % Commissions and other sales costs 123,393 142,485 143,191 409,069 General and administrative expenses 52,837 50,309 61,047 164,193 Homebuilding segment operating income 331,790 332,452 346,356 1,010,598 Financial services segment profit 14,410 Corporate and unallocated costs (1) ( 66,663 ) Interest expense — Other income, net 45,156 Loss on early extinguishment of debt ( 631 ) Net earnings before income taxes $ 1,002,870 (1) Balance consists primarily of corporate costs and shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments. 74 Year Ended December 31, 2023 West Central East Total Home closing revenue $ 2,107,095 $ 2,006,333 $ 1,943,356 $ 6,056,784 Land closing revenue 35,324 6,694 14,211 $ 56,229 Total closing revenue 2,142,419 2,013,027 1,957,567 $ 6,113,013 Cost of home closings 1,671,330 1,463,694 1,419,647 $ 4,554,671 Cost of land closings 31,963 5,363 14,460 $ 51,786 Total cost of closings 1,703,293 1,469,057 1,434,107 $ 4,606,457 Home closing gross profit 435,765 542,639 523,709 1,502,113 Land closing gross profit/(loss) 3,361 1,331 ( 249 ) 4,443 Total closing gross profit 439,126 543,970 523,460 1,506,556 Home closing gross margin 20.7 % 27.0 % 26.9 % 24.8 % Commissions and other sales costs 115,020 143,985 125,906 384,911 General and administrative expenses 58,627 50,021 57,842 166,490 Homebuilding segment operating income 265,479 349,964 339,712 955,155 Financial services segment profit 12,466 Corporate and unallocated costs (1) ( 65,232 ) Interest expense — Other income, net 47,948 Loss on early extinguishment of debt ( 907 ) Net earnings before income taxes $ 949,430 (1) Balance consists primarily of corporate costs and shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments. At December 31, 2025 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 26,155 $ 61,686 $ 86,329 $ — $ — $ 174,170 Real estate 1,782,502 1,685,355 2,519,263 — — 5,987,120 Investments in unconsolidated entities 28,631 27,734 — — 903 57,268 Other assets 37,118 (1) 309,583 (2) 78,724 (3) 2,342 975,962 (4) 1,403,729 Total assets $ 1,874,406 $ 2,084,358 $ 2,684,316 $ 2,342 $ 976,865 $ 7,622,287 (1) Balance consists primarily of property and equipment, net, prepaid expenses and other assets, and development receivables. (2) Balance consists primarily of development reimbursements from local municipalities, property and equipment, net, goodwill (See Note 10), and prepaid expenses and other assets. (3) Balance consists primarily of prepaid expenses and other assets, goodwill (see Note 10), and property and equipment, net. (4) Balance consists primarily of cash and cash equivalents, prepaid expenses and other assets, and deferred tax assets. 75 At December 31, 2024 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 30,179 $ 32,200 $ 130,026 $ — $ — $ 192,405 Real estate 1,862,792 1,613,735 2,252,248 — — 5,728,775 Investments in unconsolidated entities 9,062 18,816 — — 857 28,735 Other assets 28,251 (1) 270,203 (2) 91,082 (3) 3,049 820,154 (4) 1,212,739 Total assets $ 1,930,284 $ 1,934,954 $ 2,473,356 $ 3,049 $ 821,011 $ 7,162,654 (1) Balance consists primarily of property and equipment, net, prepaid expenses and other assets, and development receivables. (2) Balance consists primarily of development reimbursements from local municipalities, property and equipment, net, goodwill (see Note 10), and prepaid expenses and other assets. (3) Balance consists primarily of cash and cash equivalents, goodwill (see Note 10), and prepaid expenses and other assets. (4) Balance consists primarily of cash and cash equivalents, deferred tax assets, net, and prepaid expenses and other assets. NOTE 16 — COMMITMENTS AND CONTINGENCIES We are involved in various routine legal and regulatory proceedings, including, without limitation, claims and litigation alleging construction defects. In general, the proceedings are incidental to our business, and most exposure is subject to and should be covered by warranty and indemnity obligations of our consultants and subcontractors. Additionally, some such claims are also covered by insurance. With respect to the majority of pending litigation matters, our ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential material losses related to these matters are not considered probable. Historically, most disputes regarding warranty claims are resolved prior to litigation. We believe there are no pending legal or warranty matters as of December 31, 2025 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved. We have case specific reserves within our $ 26.7 million of total warranty reserves related to alleged stucco defects in certain homes we constructed predominantly between 2015 and 2019. Our review and management of these matters is ongoing and our estimate of and reserves for resolving them is based on internal data, historical experience, our judgment and various assumptions and estimates. Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate and thus our related reserves. As of December 31, 2025, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we believe our reserves are sufficient to cover the above mentioned matters. See Note 1 for information related to our warranty obligations. See Note 4 for information related to our leases. 76 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None