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What changed in LGI Homes, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LGI Homes, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+288 added−294 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-20)

Top changes in LGI Homes, Inc.'s 2024 10-K

288 paragraphs added · 294 removed · 251 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe following is a summary of our homes in inventory by reportable segment as of December 31, 2023 (dollar values in thousands): Reportable Segment Homes in Inventory (1) Inventory Value (1) Central 953 $ 277,433 Southeast 710 142,921 Northwest 325 122,591 West 528 140,197 Florida 752 172,978 Total 3,268 $ 856,120 (1) Includes homes in progress and completed homes; excludes information centers. 7 Table of Contents Backlog See discussion included in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Backlog .” Raw Materials and Labor When constructing homes, we use various materials and components.
Biggest changeAs of December 31, 2024, we had a total of 2,685 completed homes, including information centers, and 1,358 homes in progress. 7 Table of Contents The following is a summary of our homes in inventory by reportable segment as of December 31, 2024 (dollar values in thousands): Reportable Segment Homes in Inventory (1) Inventory Value (1) Central 1,150 $ 263,005 Southeast 845 178,907 Northwest 321 130,377 West 688 204,018 Florida 866 229,432 Total 3,870 $ 1,005,739 (1) Includes homes in progress and completed homes; excludes information centers.
LGI Insurance Solutions provides homeowners and other insurance products to our customers through an unconsolidated joint venture. Our wholesale business provides opportunities for us to leverage our even-flow construction methodology to build and sell homes primarily to large institutions interested in acquiring homes to be used as rental properties, primarily through bulk sales agreements.
LGI Insurance Solutions provides homeowners and other insurance products to our customers through an unconsolidated joint venture. Our wholesale business provides opportunities for us to leverage our even-flow construction methodology to build and sell homes primarily to large institutions interested in acquiring homes to be used as rental properties through bulk sales agreements.
As part of this commitment, we have implemented a systems-based program of regularly scheduled safety reviews, meetings and continuing education that are held in our communities and include our employees and the employees of our subcontractors and tradespeople. 9 Table of Contents We are committed to improving and giving back to the communities we serve.
As part of this commitment, we have implemented a systems-based program of regularly scheduled safety reviews, meetings 9 Table of Contents and continuing education that are held in our communities and include our employees and the employees of our subcontractors and tradespeople. We are committed to improving and giving back to the communities we serve.
As a result of our transparent approach, customers receive all the information needed to make a buying decision, which we believe sets clear expectations and eliminates confusion during the home buying process. Homebuilding Operations Our homebuilding operations are organized and managed by seven operating segments: West, Northwest, Central, Midwest, Florida, Southeast and Mid-Atlantic.
As a result of our transparent approach, we believe customers receive all the critical information needed to make a buying decision, which we believe sets clear expectations and eliminates confusion during the home buying process. Homebuilding Operations Our homebuilding operations are organized and managed by seven operating segments: West, Northwest, Central, Midwest, Florida, Southeast and Mid-Atlantic.
Additional information on our operating segments and product information is contained in Note 15 , “ Segment Information ” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. We offer a set number of floor plans in each community with standardized finishes.
Additional information on our operating segments and product information is contained in Note 14 , “ Segment Information ” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. We offer a set number of floor plans in each community with standardized finishes.
Additionally, our construction managers monitor our compliance with zoning, safety, and other regulations, production schedules, and quality standards for our projects. We endeavor to obtain favorable pricing from subcontractors through long-term relationships and consistent workflow. A number of our trade partners have subcontracted on our projects since we commenced homebuilding operations in 2003.
Additionally, our construction managers monitor our compliance with zoning, safety, and other regulations, production schedules, and quality standards for our projects. 5 Table of Contents We endeavor to obtain favorable pricing from subcontractors through long-term relationships and consistent workflow. A number of our trade partners have subcontracted on our projects since we commenced homebuilding operations in 2003.
Lipar has been in the residential land development business since the mid-1990s and is one of our founders. He has overseen land acquisitions, development and the sale of over 65,000 homes since our inception. Mr.
Lipar has been in the residential land development business since the mid-1990s and is one of our founders. He has overseen land acquisitions, development and the sale of over 75,000 homes since our inception. Mr.
A mitigation plan may be implemented during the construction of a home if a cleanup does not remove all contaminants of 8 Table of Contents concern or to address a naturally occurring condition, such as methane or radon. Some homebuyers may not want to purchase a home that is, or may have been, subject to a mitigation plan.
A mitigation plan may be implemented during the construction of a home if a cleanup does not remove all contaminants of concern or to address a naturally occurring condition, such as methane or radon. Some homebuyers may not want to purchase a home that is, or may have been, subject to a mitigation plan.
The table below shows (i) home closings by reportable segment for the year ended December 31, 2023 and (ii) our owned or controlled lots by reportable segment as of December 31, 2023.
The table below shows (i) home closings by reportable segment for the year ended December 31, 2024 and (ii) our owned or controlled lots by reportable segment as of December 31, 2024.
Garber is a member of the State Bar of Texas and is also admitted to practice before the U.S. Patent & Trademark Office. Mr. Garber is also a member of the Board of Directors and of the Executive Committee of Archway Insurance, Ltd, a captive insurance company. 10 Table of Contents Board of Directors of LGI Homes, Inc. Mr.
Garber is a member of the State Bar of Texas and is also admitted to practice before the U.S. Patent & Trademark Office. Mr. Garber is also a member of the Board of Directors and of the Executive Committee of Archway Insurance, Ltd, a captive insurance company. Board of Directors of LGI Homes, Inc. Mr.
We also work closely with our construction managers and subcontractors and train them using a comprehensive construction manual that outlines the most efficient way to build an LGI home. 5 Table of Contents Our homebuilding operations utilize a paperless purchase order system to conduct business with our subcontractors and suppliers.
We also work closely with our construction managers and subcontractors and train them using a comprehensive construction manual that outlines the most efficient way to build an LGI home. Our homebuilding operations utilize a paperless purchase order system to conduct business with our subcontractors and suppliers.
Since 2016, we have contributed over $3.0 million in corporate, non-profit sponsorships, donated over 30,000 employee service hours and collaborated with over 100 non-profit organizations in an effort to make a meaningful impact in our local communities.
Since 2016, we have contributed over $3.5 million in corporate, non-profit sponsorships, donated over 40,000 employee service hours and collaborated with over 100 non-profit organizations in an effort to make a meaningful impact in our local communities.
We believe that this product helps to counter rising land and home costs. Our active adult communities offer affordable homes in both open and age-restricted lifestyles in amenity-rich communities. These communities leverage existing floor plans with minor modifications designed to meet the needs of active adult homebuyers at prices that present a compelling value-proposition.
We believe that this product helps to counter rising land and home costs. Our active adult community offers affordable homes in both open and age-restricted lifestyles in amenity-rich communities. This community leverages existing floor plans with minor modifications designed to meet the needs of active adult homebuyers at prices that present a compelling value-proposition.
Environmental laws and conditions may result in delays, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.
Environmental laws and conditions may result in delays, may cause us to incur substantial compliance and other costs, and can 8 Table of Contents prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.
Information about our Executive Officers The following table sets forth information regarding our executive officers as of February 20, 2024: Name Age Position Eric Lipar 53 Chief Executive Officer and Chairman of the Board Michael Snider 52 President and Chief Operating Officer Charles Merdian 54 Chief Financial Officer and Treasurer Scott Garber 52 General Counsel and Corporate Secretary Eric Lipar.
Information about our Executive Officers The following table sets forth information regarding our executive officers as of February 25, 2025: Name Age Position Eric Lipar 54 Chief Executive Officer and Chairman of the Board Michael Snider 53 President and Chief Operating Officer Charles Merdian 55 Chief Financial Officer and Treasurer Scott Garber 53 General Counsel and Corporate Secretary Eric Lipar.
Unless otherwise indicated or the context requires, “LGI,” the “Company,” “we,” “our” and “us” refer collectively to LGI Homes, Inc. and its subsidiaries. Business Opportunities Since December 2013, we have grown substantially, expanding our operations from eight markets in four states to 36 markets in 21 states. We currently offer homes for sale in 117 communities throughout the United States.
Unless otherwise indicated or the context requires, “LGI,” the “Company,” “we,” “our” and “us” refer collectively to LGI Homes, Inc. and its subsidiaries. Business Opportunities Since December 2013, we have grown substantially, expanding our operations from eight markets in four states to 36 markets in 21 states.
Supply and demand are analyzed to ensure land investment is targeted appropriately. On an ongoing basis, the long-term plan is compared to our recent experience in the marketplace and adjusted accordingly. We have also purchased larger tracts of land across our markets which will provide us with more opportunities to build homes with multiple price points in our communities.
On an ongoing basis, the long-term plan is compared to our recent experience in the marketplace and adjusted accordingly. We have also purchased larger tracts of land across our markets which will provide us with more opportunities to build homes with multiple price points in our communities.
Our lot inventory decreased to 71,081 owned or controlled lots as of December 31, 2023 from 71,904 owned or controlled lots as of December 31, 2022 primarily related to our discipline in the evaluation of and selective approval of new land deals. We had 117 and 99 active communities as of December 31, 2023 and December 31, 2022, respectively.
Our lot inventory decreased to 70,899 owned or controlled lots as of December 31, 2024 from 71,081 owned or controlled lots as of December 31, 2023 primarily related to our discipline in the evaluation of and selective approval of new land deals. We had 151 and 117 active communities as of December 31, 2024 and December 31, 2023, respectively.
We believe our commitments to hiring, training, safety and employee retention form the foundation of our people-focused culture. As of December 31, 2023, we employed 1,089 people, of whom 89 were located at our corporate headquarters.
We believe our commitments to hiring, training, safety and employee retention form the foundation of our people-focused culture. As of December 31, 2024, we employed 1,170 people, of whom 98 were located at our corporate headquarters.
Generally, it takes us two to three years to turn raw or undeveloped land into an active community. We utilize land banking financing arrangements on a limited and strategic basis.
Generally, it takes us two to five years to turn raw or undeveloped land into an active community. 6 Table of Contents We utilize land banking financing arrangements on a limited and strategic basis.
Typically, the price changes that most significantly influence our operations are price increases in labor, commodities and lumber. In future quarters, we could see various cost pressures associated with inflation similar to the cost pressures experienced in the last few years.
We continue to monitor the supply markets to achieve the best prices available. Typically, the price changes that most significantly influence our operations are price increases in labor, commodities and lumber. In future quarters, we could see various cost pressures associated with inflation similar to the cost pressures experienced in the last few years.
We expect that home closings in our Terrata Homes branded communities will be less than 5% of our annual home closings during 2024. Our mortgage financing and homeowners insurance joint ventures provide a streamlined, customer-focused experience for our homebuyers. LGI Mortgage Solutions provides mortgage services to our customers through an unconsolidated joint venture.
We expect that home closings in our Terrata Homes branded communities will be less than 5% of our annual home closings during 2025. Our two equity-method real estate joint ventures and four additional joint ventures provide a streamlined, customer-focused experience for our homebuyers. LGI Mortgage Solutions provides mortgage services to our customers through an unconsolidated joint venture.
Shailee Parikh - Managing Partner of ARK Real Estate, LLC, a real estate investment and management company. Mr. Bryan Sansbury - Chief Executive Officer, Chairman of the Board of Directors, and a founding partner of AEGIS Hedging Solutions, LLC, formerly known as AEGIS Energy Risk, LLC. Mr. Sansbury serves as our Lead Independent Director. Ms.
Bryan Sansbury - Chief Executive Officer, Chairman of the Board of Directors, and a founding partner of AEGIS Hedging Solutions, LLC, formerly known as AEGIS Energy Risk, LLC. Mr. Sansbury serves as our Lead Independent Director. Ms. Maria Sharpe - Managing Principal of Sharpe Human Solutions, LLC, a human resource consulting and commercial real estate investment company. Mr.
Of our employees located outside our corporate headquarters, 631 were on-site sales and support personnel, and 369 were involved with acquisition and development, purchasing, and construction. We have built a diverse team of professionals with a wide range of industry experience across our markets. We are dedicated to supporting our employees when times are challenging.
Of our employees located outside our corporate headquarters, 689 were on-site sales and support personnel, and 383 were involved with acquisition and development, purchasing, and construction. We have built a diverse team of professionals with a wide range of industry experience across our markets.
He oversees all aspects of our sales, construction, and product development. Prior to serving as our President, Mr. Snider was Executive Vice President of Homebuilding (2005-2009) and in the role of Homebuilding Manager (2004). Before joining the Company in 2004, Mr. Snider was a Project Manager for Tadian Homes, a homebuilder based in Troy, Michigan. Charles Merdian. Mr.
He oversees all aspects of our sales, construction, and product development. Prior to serving as our President, Mr. Snider was Executive Vice President of Homebuilding (2005-2009) and in the role of Homebuilding Manager (2004). Before joining the Company in 2004, Mr.
Since commencing home building operations in 2003, we have constructed and closed over 65,000 homes. During the year ended December 31, 2023, we had 6,729 home closings, compared to 6,621 home closings in 2022. LGI Homes, Inc. is a Delaware corporation incorporated on July 9, 2013.
Since commencing home building operations in 2003, we have constructed and closed over 75,000 homes. During the year ended December 31, 2024, we had 6,131 home closings, including the bulk sale of 103 leased, single-family homes, compared to 6,729 home closings in 2023. LGI Homes, Inc. is a Delaware corporation incorporated on July 9, 2013.
During 2023 and 2022, we had 679 and 1,233 wholesale home closings, respectively, which represented 10.1% and 18.6% of our total home closings in 2023 and 2022, respectively. We expect our wholesale business to represent approximately 5% of our annual home closings during 2024.
During 2024 and 2023, we had 552 and 679 wholesale home closings, respectively, which represented 9.2% and 10.1% of our total home closings in 2024 and 2023, respectively. We expect our wholesale business to represent approximately 10% of our annual home closings during 2025.
We employ various marketing methods, such as digital marketing strategies, interactive online media, social media, direct mail, directional signage, and billboards.
We use extensive digital and print advertising to attract potential homebuyers. We employ various marketing methods, such as digital marketing strategies, interactive online media, social media, direct mail, directional signage, and billboards.
Garber has served as our General Counsel and Corporate Secretary since April 2018. His responsibilities include all company legal matters, as well as corporate governance and risk management. Prior to joining the Company, Mr.
Merdian also serves on the Montgomery County Habitat for Humanity Board of Directors. Scott Garber. Mr. Garber has served as our General Counsel and Corporate Secretary since April 2018. His responsibilities include all company legal matters, as well as corporate governance and risk management. Prior to joining the Company, Mr.
We pursue a flexible land acquisition strategy of purchasing or optioning finished lots at attractive prices, or purchasing raw land for residential development. Given our successful history as a land developer, we are experienced in converting raw land into residential communities. We endeavor to maintain a pipeline of desirable land positions for replacement and new communities.
Given our successful history as a land developer, we are experienced in converting raw land into residential communities. We endeavor to maintain a pipeline of desirable land positions for replacement and new communities.
Merdian served as Accounting and Finance Manager for The Woodlands Operating Company where he specialized in accounting and financial analysis of real estate ventures, focusing primarily on residential and commercial developments. Prior to The Woodlands Operating Company, Mr. Merdian served as an accounting manager working at the Williamson-Dickie Manufacturing Co. and as a senior auditor for Coopers & Lybrand, LLP.
Prior to joining us in 2004, Mr. Merdian served as Accounting and Finance Manager for The Woodlands Operating Company where he specialized in accounting and financial analysis of real estate ventures, focusing primarily on residential and commercial developments. Prior to The Woodlands Operating Company, Mr.
During 2023, we closed 249 Terrata Homes at an average sales price per home closed of $573,000, compared to 217 Terrata Homes at an average sales price per home closed of $549,551, in 2022. As of December 31, 2023, we offered Terrata Homes in 15 of our active communities.
During 2024, we closed 318 Terrata Homes at an average sales price per home closed of $637,000, compared to 260 Terrata Homes at an average sales price per home closed of $587,000 in 2023. As of December 31, 2024, we offered Terrata Homes in 18 of our active communities.
During 2023, our average home completion time was approximately 108 to 150 days, our home size ranged between 950 to approximately 4,100 square feet and our overall sales prices ranged from approximately $189,000 to more than $1,000,000. For the year ended December 31, 2023, we closed 6,729 homes at an average sales price per home closed of $350,510.
Excluding the bulk sale of 103 leased, single-family homes, our average sales price per home closed was $365,394. During 2023, our average home completion time was approximately 108 to 150 days, our home size ranged between 950 to approximately 4,100 square feet and our overall sales prices ranged from approximately $189,000 to more than $1,000,000.
These methods have proven highly successful in reaching our target market, placing potential homebuyers in front of our trained sales professionals and communicating our core messages of value and dream fulfillment. 4 Table of Contents While a proportion of our business comes from realtors, our marketing efforts are principally designed to connect directly with potential customers currently renting their residences and encourage them to schedule an in-person appointment at one of our information centers.
While a proportion of our business comes from realtors, our marketing efforts are principally designed to connect directly with potential customers currently renting their residences and encourage them to schedule an in-person appointment at one of our information centers.
During 2022, our average home completion time was approximately 90 to 165 days, our home size ranged between 1,000 to approximately 4,100 square feet and our overall sales prices ranged from approximately $190,000 to more than $1,200,000. For the year ended December 31, 2022, we closed 6,621 homes at an average sales price per home closed of $348,052.
During 2024, our average home completion time was approximately 105 to 135 calendar days, our home size ranged between 900 to approximately 4,100 square feet and our overall sales prices ranged from approximately $191,000 to more than $1,000,000. For the year ended December 31, 2024, we closed 6,131 homes, including the bulk sale of 103 leased, single-family homes.
Our allocation of capital for land investment is performed at the corporate level with a disciplined approach to portfolio management. Our Acquisitions Committee consists of our Chief Executive Officer, Chief Financial Officer, and Executive Vice President of Acquisitions. Annually, our divisions prepare a strategic plan for their respective geographic areas.
Our Acquisitions Committee consists of our Chief Executive Officer, Chief Financial Officer, and Executive Vice President of Acquisitions. Annually, our divisions prepare a strategic plan for their respective geographic areas. Supply and demand are analyzed to ensure land investment is targeted appropriately.
During the years ended December 31, 2023 and 2022, we entered into several land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns. In consideration for this repurchase option, we paid a non-refundable commitment fee.
We have land banking financing arrangements with a third-party land banker to repurchase land that we sold to the land banker as a method of acquiring finished lots in staged takedowns, while limiting risk and minimizing the use of funds from our available cash or other financing sources. In consideration for this repurchase option, we paid a non-refundable commitment fee.
Merdian has served as our Chief Financial Officer and Treasurer since 2013 and served as our Secretary from 2013 to 2016. Prior to becoming our Chief Financial Officer in 2010, Mr. Merdian was our Controller from 2004 through 2010. Prior to joining us in 2004, Mr.
Snider was a Project Manager for Tadian Homes, a homebuilder based in Troy, Michigan. 10 Table of Contents Charles Merdian. Mr. Merdian has served as our Chief Financial Officer and Treasurer since 2013 and served as our Secretary from 2013 to 2016. Prior to becoming our Chief Financial Officer in 2010, Mr. Merdian was our Controller from 2004 through 2010.
Most of the raw materials necessary for our subcontractors are standard items carried by major suppliers. Our construction work is substantially completed by third-party subcontractors, most of whom are non-unionized. We continue to monitor the supply markets to achieve the best prices available.
In addition, the majority of our raw materials are supplied to us by our subcontractors and are included in the price of our contract with such subcontractors. Most of the raw materials necessary for our subcontractors are standard items carried by major suppliers. Our construction work is substantially completed by third-party subcontractors, most of whom are non-unionized.
We generally contract for our materials and labor at a fixed price for the anticipated construction period of our homes. This allows us to mitigate the risks associated with increases in building materials and labor costs between the time construction begins on a home and the time it is closed.
This allows us to mitigate the risks associated with increases in building materials and labor costs between the time construction begins on a home and the time it is closed. Typically, the raw materials and most of the components used in our business are readily available in the United States.
Typically, the raw materials and most of the components used in our business are readily available in the United States. We purchase some components and materials centrally to leverage our purchasing power to achieve volume discounts, a practice that often reduces costs and ensures timely deliveries.
We purchase some components and materials centrally to leverage our purchasing power to achieve volume discounts, a practice that often reduces costs and ensures timely deliveries. We typically do not store significant inventories of construction materials, except for work in progress materials for homes under construction.
While we are not legally obligated to repurchase the balance of the lots, we are subject to certain performance obligations, financial and other penalties if the lots are not purchased. 6 Table of Contents We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities.
While we are not legally obligated to repurchase the balance of the lots, we are subject to certain performance obligations, financial and other penalties if the lots are not purchased.
Maria Sharpe - Managing Principal of Sharpe Human Solutions, LLC, a human resource consulting and commercial real estate investment company. Mr. Steven Smith - Owner and solo practitioner of Steven R. Smith Law, LLC. He is a former shareholder of the law firm Baker Donelson. Mr.
Steven Smith - Owner and solo practitioner of Steven R. Smith Law, LLC. He is a former shareholder of the law firm Baker Donelson. Mr. Robert Vahradian - Partner of GTIS Partners, LP, a global real estate investment firm. 11 Table of Contents
Finally, our strategic joint ventures, LGI Mortgage Solutions and LGI Insurance Solutions, provide mortgage financing and homeowners insurance services to our customers. Sales and Marketing Our well-defined sales and marketing approach focuses on converting renters of apartments and single-family homes into homeowners. We use extensive digital and print advertising to attract potential homebuyers.
We have two equity-method real estate joint ventures and four additional joint ventures engaged primarily to provide services, such as mortgage and insurance, to our homebuyers. 4 Table of Contents Sales and Marketing Our well-defined sales and marketing approach focuses on converting renters of apartments and single-family homes into homeowners.
Mr. Merdian has worked in residential real estate and homebuilding finance since 1998. Mr. Merdian is a Certified Public Accountant and is a member of the Texas Society of Certified Public Accountants. Mr. Merdian also serves on the Montgomery County Habitat for Humanity Board of Directors. Scott Garber. Mr.
Merdian served as an accounting manager working at the Williamson-Dickie Manufacturing Co. and as a senior auditor for Coopers & Lybrand, LLP. Mr. Merdian has worked in residential real estate and homebuilding finance since 1998. Mr. Merdian is a Certified Public Accountant and is a member of the Texas Society of Certified Public Accountants. Mr.
We focus on demographic and economic trends forecasted for these markets and expect to continue to grow.
As of December 31, 2024, we were active in 151 communities throughout the United States. We focus on demographic and economic trends forecasted for these markets and expect to continue increasing our community count in the future.
Year Ended December 31, 2023 As of December 31, 2023 Reportable Segment Home Closings Owned (1) Controlled Total Central 2,241 20,606 3,093 23,699 Southeast 1,716 14,563 5,429 19,992 Northwest 511 5,934 1,652 7,586 West 992 9,049 2,747 11,796 Florida 1,269 5,179 2,829 8,008 Total 6,729 55,331 15,750 71,081 (1) Of the 55,331 owned lots as of December 31, 2023, 41,155 were raw/under development lots and 14,176 were finished lots.
Year Ended December 31, 2024 As of December 31, 2024 Reportable Segment Home Closings Owned (1) Controlled Total Central 1,757 20,099 3,542 23,641 Southeast 1,635 13,870 4,434 18,304 Northwest 483 5,161 3,000 8,161 West 1,140 8,829 4,119 12,948 Florida 1,013 5,358 2,487 7,845 Total 6,028 53,317 17,582 70,899 (1) Of the 53,317 owned lots as of December 31, 2024, 37,432 were raw/under development lots and 15,885 were finished lots.
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As of December 31, 2023, we had a total of 2,017 completed homes, including information centers, and 1,410 homes in progress.
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For the year ended December 31, 2023, we closed 6,729 homes at an average sales price per home closed of $350,510. We pursue a flexible land acquisition strategy of purchasing or optioning finished lots at attractive prices, or purchasing raw land for residential development.
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We typically do not store significant inventories of construction materials, except for work in progress materials for homes under construction. In addition, the majority of our raw materials are supplied to us by our subcontractors and are included in the price of our contract with such subcontractors.
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Finally, from time to time, we enter into strategic joint ventures.
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We are committed to equal employment and advancement opportunities for all individuals regardless of race, color, religion, gender, gender identity or expression, sex, sexual orientation, national origin, age, disability, genetic information, marital status or status as a covered veteran in accordance with applicable federal, state and local laws.
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These methods have proven highly successful in reaching our target market, placing potential homebuyers in front of our trained sales professionals and communicating our core messages of value and dream fulfillment.
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As of December 31, 2023, our workforce at our corporate headquarters was comprised of 60% women and 34% identified as racially or ethnically diverse. As of December 31, 2023, our on-site sales, sales support and construction workforce located outside of our corporate headquarters was comprised of 28% women and 37% identified as racially or ethnically diverse.
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We do not have any ownership interest or title to the assets that we have sold to the land banker and we do not guarantee any of the land banker’s liabilities. Our allocation of capital for land investment is performed at the corporate level with a disciplined approach to portfolio management.
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We are committed to maintaining a workplace that is respectful to all individuals and we maintain a zero-tolerance policy on discrimination and harassment of any kind. Any conduct that creates an offensive or intimidating environment runs counter to our culture and core values and is strictly prohibited.
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Backlog See discussion included in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Backlog .” Raw Materials and Labor When constructing homes, we use various materials and components. We generally contract for our materials and labor at a fixed price for the anticipated construction period of our homes.
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This policy is expressly described in our Code of Business Conduct and Ethics and our Employee Handbook and includes, but is not limited to, any protected status or characteristic, including race, color, ethnicity or national origin, age, sex, religion, disability, marital status, status as a veteran, genetic information, or any other status or characteristic protected by any federal, state, or local law.
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Shailee Parikh - Chief Operating Officer of Revantage, a Blackstone portfolio company that provides support to Blackstone’s real estate portfolio, and Managing Partner of ARK Real Estate, LLC, a real estate investment and management company. Mr.
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Robert Vahradian - Partner of GTIS Partners, LP, a global real estate investment firm. 11 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe cannot predict whether and to what extent the housing markets in the geographic areas in which we operate will grow, particularly if interest rates for mortgage loans, land costs, and construction costs continue to rise or stay at similar levels. 17 Table of Contents Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or the 2024 U.S. presidential and other elections, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.
Biggest changeOther factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or impacts from the change in U.S. presidential administration, tight lending standards and practices for mortgage loans 17 Table of Contents that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums, homeowners’ insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.
The following are some of the factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements: • adverse economic changes either nationally or in the markets in which we operate, including, among other things, potential impacts from political uncertainty, civil unrest, increases in unemployment, volatility of mortgage rates, supply chain disruptions (including due to the conflict between Russia and Ukraine and the wide-ranging sanctions the United States and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials and the conflict in the Middle East), inflation, the possibility of recession and decreases in housing prices; • a slowdown in the homebuilding industry or changes in population growth rates in our markets; • volatility and uncertainty in the credit markets and broader financial markets; • disruption in the terms or availability of mortgage financing or increase in the number of foreclosures in our markets; • the cyclical and seasonal nature of our business; • our future operating results and financial condition; • our business operations; • changes in our business and investment strategy; • the success of our operations in recently opened new markets and our ability to expand into additional new markets; • our ability to successfully extend our business model to building homes with higher price points, developing larger communities and producing and selling multi-unit products, townhouses, wholesale products, and acreage home sites; • our ability to develop our projects successfully or within expected timeframes; • our ability to identify potential acquisition targets, close such acquisitions and realize the benefits of such acquisitions; • increases in taxes or government fees; • decline in the market value of our land portfolio; 30 Table of Contents • our ability to successfully integrate any acquisitions with our existing operations; • availability of land to acquire and our ability to acquire such land on favorable terms or at all; • availability, terms and deployment of capital and ability to meet our ongoing liquidity needs; • decisions of the Credit Agreement lender group; • the cost and availability of insurance and surety bonds; • shortages of or increased prices for labor, land, or raw materials used in land development and housing construction, including due to changes in trade policies; • delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control; • uninsured losses in excess of insurance limits; • our leverage and future debt service obligations; • changes in, liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental laws and regulations; • the timing of receipt of regulatory approvals and the opening of projects; • the degree and nature of our competition; • information system failures, cyber incidents or breaches in security; • our continued ability to qualify for additional federal energy efficient homes tax credits and the extension of the availability of such tax credits beyond 2032; • our ability to retain our key personnel; • the impact of an epidemic or pandemic and its effect on us, our business, customers, subcontractors and suppliers (including associated supply chain disruptions); • negative publicity or poor relations with the residents of our projects; • existing and future litigation, arbitration or other claims; • availability of qualified personnel and third-party contractors and subcontractors; • the impact on our business of any future government shutdown; • other risks and uncertainties inherent in our business; and • other factors we discuss under the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .” You should not place undue reliance on forward-looking statements.
The following are some of the factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements: • adverse economic changes either nationally or in the markets in which we operate, including, among other things, potential impacts from political uncertainty, civil unrest, increases in unemployment, volatility of mortgage rates, supply chain disruptions (including due to the conflict between Russia and Ukraine and the wide-ranging sanctions the United States and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials and the conflict in the Middle East), inflation, the possibility of recession and decreases in housing prices; • a slowdown in the homebuilding industry or changes in population growth rates in our markets; • volatility and uncertainty in the credit markets and broader financial markets; • elevated mortgage interest rates for prolonged periods, disruption in the terms or availability of mortgage financing or increase in the number of foreclosures in our markets; • the cyclical and seasonal nature of our business; • our future operating results and financial condition; • our business operations; 30 Table of Contents • changes in our business and investment strategy; • the success of our operations in recently opened new markets and our ability to expand into additional new markets; • our ability to successfully extend our business model to building homes with higher price points, developing larger communities and producing and selling multi-unit products, townhouses, wholesale products, and acreage home sites; • our ability to develop our projects successfully or within expected timeframes; • our ability to identify potential acquisition targets, close such acquisitions and realize the benefits of such acquisitions; • increases in taxes or government fees; • decline in the market value of our land portfolio; • our ability to successfully integrate any acquisitions with our existing operations; • availability of land to acquire and our ability to acquire such land on favorable terms or at all; • availability, terms and deployment of capital and ability to meet our ongoing liquidity needs; • decisions of the Credit Agreement lender group; • the cost and availability of insurance and surety bonds; • shortages of or increased prices for labor, land, or raw materials used in land development and housing construction, including due to changes in trade policies; • delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control; • uninsured losses in excess of insurance limits; • our leverage and future debt service obligations; • changes in, liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental, privacy and security laws and regulations; • the timing of receipt of regulatory approvals and the opening of projects; • the degree and nature of our competition; • information system failures, cyber incidents or breaches in security; • our continued ability to qualify for additional federal energy efficient homes tax credits and the extension of the availability of such tax credits beyond 2032; • our ability to retain our key personnel; • the impact of an epidemic or pandemic and its effect on us, our business, customers, subcontractors and suppliers (including associated supply chain disruptions); • negative publicity or poor relations with the residents of our projects; • existing and future litigation, arbitration or other claims; • availability of qualified personnel and third-party contractors and subcontractors; • the impact on our business of any future government shutdown; • other risks and uncertainties inherent in our business; and • other factors we discuss under the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .” You should not place undue reliance on forward-looking statements.
In September 2023, California passed climate-related disclosure mandates that are broader than the SEC’s proposed rules. Compliance with these disclosure rules may be costly and subject a company to criticism by regulators, investors, the media or other stakeholders for the accuracy, adequacy or completeness of its ESG disclosures and could adversely impact a company’s reputation and financial position.
In September 2023, California passed climate-related disclosure mandates that are broader than the SEC’s rules. Compliance with these disclosure rules may be costly and subject a company to criticism by regulators, investors, the media or other stakeholders for the accuracy, adequacy or completeness of its ESG disclosures and could adversely impact a company’s reputation and financial position.
We are subject to environmental, health and safety laws and regulations, which may increase our costs, result in liabilities, limit the areas in which we can build homes and delay completion of our projects.
We are subject to environmental, health and safety laws and regulations, which may increase our costs, result in liabilities, limit the areas in which we can build homes and/or delay completion of our projects.
Incurring substantial indebtedness could subject us to many risks that, if realized, would adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt, which is likely to result in acceleration of such indebtedness; • our indebtedness may increase our vulnerability to adverse economic and industry conditions with no assurance that our profitability will increase with higher financing cost; • we may be required to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for operations and capital expenditures, future investment opportunities or other purposes; and • the terms of any refinancing may not be as favorable as the terms of the indebtedness being refinanced.
Incurring substantial indebtedness could subject us to many risks that, if realized, would adversely affect us, including the risk that: 25 Table of Contents • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt, which is likely to result in acceleration of such indebtedness; • our indebtedness may increase our vulnerability to adverse economic and industry conditions with no assurance that our profitability will increase with higher financing cost; • we may be required to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for operations and capital expenditures, future investment opportunities or other purposes; and • the terms of any refinancing may not be as favorable as the terms of the indebtedness being refinanced.
Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power, acts of terrorism, political uncertainty or conflicts, such as the conflict between Russia and Ukraine and the conflict in the Middle East, or civil unrest may cause disruption to the U.S. economy, or the local economies of the markets in which we operate, cause shortages of 28 Table of Contents building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, result in uninsured losses, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our business, prospects, liquidity, financial condition and results of operations.
Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power, acts of terrorism, political uncertainty or conflicts, such as the conflict between Russia and Ukraine and the conflict in the Middle East, or civil unrest may cause disruption to the U.S. economy, or the local economies of the markets in which we operate, cause shortages of building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, result in uninsured losses, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our business, prospects, liquidity, financial condition and results of operations.
In particular, the Credit Agreement requires us to maintain (i) a tangible net worth of not less than $1,218.2 million plus 50% of the net proceeds of equity issuances after December 31, 2022 plus 50.0% of our positive consolidated earnings after taxes for each fiscal quarter ended after December 31, 2022, (ii) a leverage 25 Table of Contents ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.
In particular, the Credit Agreement requires us to maintain (i) a tangible net worth of not less than $1,218.2 million plus 50% of the net proceeds of equity issuances after December 31, 2022 plus 50.0% of our positive consolidated earnings after taxes for each fiscal quarter ended after December 31, 2022, (ii) a leverage ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.
For example, the federal government has previously imposed new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them).
For example, the federal government previously imposed, and has recently proposed, new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them).
The recording of a significant inventory impairment could negatively affect our reported earnings per share and negatively impact the market perception of our business. Labor and raw material shortages, price fluctuations and supply chain constraints could delay or increase the cost of home construction, which could materially and adversely affect us.
The recording of a significant inventory impairment could negatively affect our reported earnings per share and negatively impact the market perception of our business. Labor and raw material shortages, price fluctuations and supply chain constraints could delay or increase the cost of home construction or land development, which could materially and adversely affect us.
We may also suffer reputational damage, and may be exposed to potential liability, from the actions of subcontractors or their failure to comply with applicable laws, including matters which are beyond our control. Attempts at mitigation may not be successful, and we could be subject to claims relating to actions of, or matters relating to, our subcontractors.
We may also suffer reputational damage, and may be exposed to potential liability, from the actions of subcontractors or their failure to comply with applicable laws, including matters that are beyond our control. Attempts at mitigation may not be successful, and we could be subject to claims relating to actions of, or matters relating to, our subcontractors.
Furthermore, if we need to lower the sales prices of our homes to meet demand, the value of our land inventory may decrease. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult to maintain sufficient funds to operate our business.
Furthermore, if we need to lower the sales prices of our homes to meet demand, the value of our land inventory may decrease. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult and/or more expensive to maintain sufficient funds to operate our business.
We can make no assurances that potential home closings affected by any such shutdown or slowdown will occur after the shutdown or slowdown has ended. 19 Table of Contents Natural disasters, severe weather and adverse geological conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.
We can make no assurances that potential home closings affected by any such shutdown or slowdown will occur after the shutdown or slowdown has ended. Natural disasters, severe weather and adverse geological conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.
We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction, accessibility, anti-discrimination and other matters, which, among other things, impose restrictive zoning and density requirements, the result of which is to limit the number of homes that can be built within the boundaries of a particular area.
We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction, accessibility, anti-discrimination and other matters, which, among other things, impose restrictive zoning and density requirements, the result of which is to limit the number of homes that can be built within 20 Table of Contents the boundaries of a particular area.
These risks are discussed more fully below and include, but are not limited to, risks related to: • Operational Risks Related to Our Business: ◦ our ability to acquire finished lots and land parcels suitable for residential homebuilding at reasonable prices; ◦ labor and raw material shortages and price fluctuations that could delay or increase the cost of home construction; ◦ the impact of an epidemic or pandemic; • Industry and Economic Risks: ◦ higher mortgage interest rates, and the tightening of mortgage lending standards and mortgage financing requirements; ◦ a significant downturn in our housing markets or in the homebuilding industry; ◦ the homebuilding industry is highly competitive; ◦ new and existing laws and regulations or other governmental actions, including environmental, health and safety laws and regulations; ◦ increasing attention to environmental, social and governance matters; ◦ the seasonal nature of our business; • Strategic Risks Related to Our Business: ◦ our growth or expansion strategies may not be successful; • Risks Related to Our Organization and Structure: ◦ we depend on key management personnel and other experienced employees; ◦ our use of leverage in executing our business strategy; ◦ we are a holding company, and we are accordingly dependent upon distributions from our subsidiaries to service our debt and pay dividends, if any, taxes and other expenses; • General Risks: ◦ we may be subject to litigation, arbitration or other claims; ◦ information system failures, cyber incidents or breaches in security; ◦ complex and evolving U.S. laws and regulations regarding privacy and data protection; ◦ access to financing sources may not be available on favorable terms, or at all; and ◦ the impact of financial industry and capital markets turmoil.
These risks are discussed more fully below and include, but are not limited to, risks related to: • Operational Risks Related to Our Business: ◦ our ability to acquire finished lots and land parcels suitable for residential homebuilding at reasonable prices; ◦ labor and raw material shortages and price fluctuations that could delay or increase the cost of home construction or land development; ◦ the impact of an epidemic or pandemic; • Industry and Economic Risks: ◦ higher mortgage interest rates, and the tightening of mortgage lending standards and mortgage financing requirements; ◦ a significant downturn in our housing markets or in the homebuilding industry; ◦ the homebuilding industry is highly competitive; ◦ new and existing laws and regulations or other governmental actions, including environmental, health and safety laws and regulations; ◦ increasing attention to environmental, social and governance matters; ◦ the seasonal nature of our business; • Strategic Risks Related to Our Business: ◦ our growth or expansion strategies may not be successful; • Risks Related to Our Organization and Structure: ◦ we depend on key management personnel and other experienced employees; ◦ our use of leverage in executing our business strategy; ◦ we are a holding company, and we are accordingly dependent upon distributions from our subsidiaries to service our debt and pay dividends, if any, taxes and other expenses; • General Risks: ◦ we may be subject to litigation, arbitration or other claims; ◦ information system failures, cyber incidents or breaches in security by us or third parties upon which we rely; ◦ complex and evolving U.S. laws and regulations regarding privacy and data protection; and ◦ access to financing sources may not be available on favorable terms, or at all.
Our business can be substantially affected by adverse changes in general economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; housing demand from population growth, household formation and other demographic changes, among other factors; availability and pricing of mortgage financing for homebuyers; housing affordability; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; interest of financial institutions or other businesses in purchasing wholesale homes; and real estate taxes.
Our business can be substantially affected by adverse changes in general economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; housing demand from population growth, household formation and other demographic changes, among other factors (which may be driven by birth rate changes, economic factors or U.S. immigration policies); availability and pricing of mortgage financing for homebuyers; housing affordability; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; interest of financial institutions or other businesses in purchasing wholesale homes; and real estate taxes.
Increased lending volume and losses insured by the FHA have resulted in a reduction of the FHA insurance fund. The USDA rural development program provides for zero down payment and 100% financing for homebuyers in qualifying areas. If the USDA program was discontinued or if funding was decreased, then our business could be adversely affected.
Increased lending volume and losses insured by the FHA have resulted in a reduction of the FHA insurance fund. The USDA rural development program provides for zero down payment and 100% 16 Table of Contents financing for homebuyers in qualifying areas. If the USDA program was discontinued or if funding was decreased, then our business could be adversely affected.
As a homebuilding and land development business with a wide variety of historic ownership, development, homebuilding and construction activities, we could be liable for future claims for damages as a result of the past or present use of hazardous materials, including building materials or fixtures known or suspected to be hazardous or to contain hazardous materials or due 21 Table of Contents to use of building materials or fixtures that are associated with mold.
As a homebuilding and land development business with a wide variety of historic ownership, development, homebuilding and construction activities, we could be liable for future claims for damages as a result of the past or present use of hazardous materials, including building materials or fixtures known or suspected to be hazardous or to contain hazardous materials or due to use of building materials or fixtures that are associated with mold.
Failure to attract and retain such personnel or to ensure that their experience 24 Table of Contents and knowledge is not lost when they leave the business through retirement, redundancy or otherwise may adversely affect the standards of our service and may have an adverse impact on our business, prospects, liquidity, financial condition and results of operations.
Failure to attract and retain such personnel or to ensure that their experience and knowledge is not lost when they leave the business through retirement, redundancy or otherwise may adversely affect the standards of our service and may have an adverse impact on our business, prospects, liquidity, financial condition and results of operations.
If we need to repay existing indebtedness during periods of rising interest rates, we could be required to refinance our then-existing indebtedness on unfavorable terms or liquidate one or more of our assets to repay such indebtedness at times which may not permit realization of the maximum return on such assets and could result in a loss.
If we need to repay existing indebtedness during periods of rising interest rates, we could be required to refinance our then-existing indebtedness on unfavorable terms or liquidate one or more of our assets to repay such indebtedness 26 Table of Contents at times which may not permit realization of the maximum return on such assets and could result in a loss.
Moreover, our valuations are made on the basis of assumptions that may not prove to reflect economic or demographic reality. If housing demand fails to meet our expectations when we acquired our inventory, our profitability may be adversely affected and we may not be able to recover our costs when we build and sell houses.
Moreover, our valuations are made on the basis of assumptions that may not prove to reflect economic or demographic reality. 19 Table of Contents If housing demand fails to meet our expectations when we acquired our inventory, our profitability may be adversely affected and we may not be able to recover our costs when we build and sell houses.
If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or the 2024 U.S. presidential and other elections, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed , cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.
If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S presidential administration, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed , cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.
Labor and raw material shortages, price increases for labor and raw materials and supply chain constraints could 13 Table of Contents cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Labor and raw material shortages, price increases for labor and raw materials and supply chain constraints could cause delays in and increase our costs of home 13 Table of Contents construction or land development, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. Climate change is a focus of both the SEC and investors.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. 22 Table of Contents Climate change is a focus of both the SEC and investors.
Despite our oversight, contractual protections, and other mitigation efforts, our employees or subcontractors could violate some of these laws or regulations, as a result of which we may incur fines, penalties or other liabilities, which could be significant, and our reputation with governmental agencies, customers, vendors or suppliers could be damaged.
Despite our oversight, contractual protections, and other mitigation efforts, our employees or subcontractors could violate some of these laws or regulations, as a result of which 27 Table of Contents we may incur fines, penalties or other liabilities, which could be significant, and our reputation with governmental agencies, customers, vendors or suppliers could be damaged.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our 26 Table of Contents financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect us.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect us.
Department of 16 Table of Contents Agriculture (“USDA”). FHA and USDA backing of mortgage loans has been particularly important to the mortgage finance industry and to our business. If either the FHA or USDA raised their down payment requirements or lowered maximum loan amounts, our business could be materially affected.
Department of Agriculture (“USDA”). FHA and USDA backing of mortgage loans has been particularly important to the mortgage finance industry and to our business. If either the FHA or USDA raised their down payment requirements or lowered maximum loan amounts, our business could be materially affected.
As of December 31, 2023, borrowings under the Credit Agreement bore interest at a rate of the Secured Overnight Financing Rate (“SOFR”) plus 1.85% per annum.
As of December 31, 2024, borrowings under the Credit Agreement bore interest at a rate of the Secured Overnight Financing Rate (“SOFR”) plus 1.85% per annum.
A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, particularly within Texas, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
The availability of suitable land assets could also affect the success of our land acquisition strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our revenues and margins, and achieve or maintain profitability.
The availability of suitable land assets could also affect the 12 Table of Contents success of our land acquisition strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our revenues and margins, and achieve or maintain profitability.
We may be unable to achieve the anticipated benefits of any such growth or expansion, including through add-on acquisitions or through efficiencies that we may be unable to achieve, the anticipated benefits may take longer to realize than expected or we may incur greater costs than expected in attempting to achieve the anticipated benefits.
We may be unable to achieve the anticipated benefits of any such growth or expansion, including through add-on acquisitions or through efficiencies that we may 24 Table of Contents be unable to achieve, the anticipated benefits may take longer to realize than expected or we may incur greater costs than expected in attempting to achieve the anticipated benefits.
Such cybersecurity incidents or IT resource failures could significantly disrupt our ability to close on land transactions or our customers’ ability to close on their homes, as well as our production schedules and delivery forecasts, and could have a material impact on our operations or consolidated financial statements, including by causing home sales contract cancellations.
Such cybersecurity incidents or IT resource failures could significantly disrupt our ability to close 28 Table of Contents on land transactions or our customers’ ability to close on their homes, as well as our production schedules and delivery forecasts, and could have a material impact on our operations or consolidated financial statements, including by causing home sales contract cancellations.
Furthermore, we could be 27 Table of Contents liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles. We may also be liable for any debt or other financial obligations related to affected property. Information system failures, cyber incidents or breaches in security could adversely affect us.
Furthermore, we could be liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles. We may also be liable for any debt or other financial obligations related to affected property. Information system failures, cyber incidents or breaches in security could adversely affect us.
In addition, pricing for labor and raw materials can be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws, trends in labor migration and tariffs.
In addition, pricing for labor and raw materials can be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws or their enforcement, trends in labor migration and tariffs.
Almost all of our customers finance their home purchases through lenders that provide mortgage financing. Mortgage interest rates have increased significantly since January 2022, which has negatively impacted the overall housing market. The current and continued macroeconomic conditions impacting the homebuilding industry are rapid inflation and rising interest rates.
Almost all of our customers finance their home purchases through lenders that provide mortgage financing. Mortgage interest rates have increased significantly since January 2022, which has negatively impacted the overall housing market. The current and continued macroeconomic conditions impacting the homebuilding industry include inflation and mortgage interest rates.
Such laws and regulations governing data privacy and the unauthorized disclosure of personal information, such as the California Consumer Privacy Act (CCPA), may significantly impact our business activities and require substantial compliance costs, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Such laws and regulations governing data privacy and the unauthorized disclosure of personal information, such as the California Privacy Rights Act (CPRA), may significantly impact our business activities and require substantial compliance costs, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 31 Table of Contents
As competition for suitable land increases, the cost of undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at 12 Table of Contents acceptable prices may decline, which could adversely impact us.
As competition for suitable land increases, the cost of undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at acceptable prices may decline, which could adversely impact us.
This could both reduce the availability of hurricane and other types of natural disaster insurance, in general, and increase the cost of such insurance to prospective purchasers of homes. 18 Table of Contents Mortgage financing for a new home is conditioned, among other things, on the availability of adequate homeowners’ insurance.
This could both reduce the availability of hurricane, fire and other types of natural disaster insurance, in general, and increase the cost of such insurance to prospective purchasers of homes. Mortgage financing for a new home is conditioned, among other things, on the availability of adequate homeowners’ insurance.
On June 1, 2022, the Biden Administration launched the National Initiative to Advance Building Codes, an initiative to modernize building codes, improve climate resilience, and reduce energy costs and the Inflation Reduction Act of 2022, through various grants and tax incentives, encourages municipalities to adopt stricter energy codes, both of which could increase the cost to construct homes and cause delays.
On June 1, 2022, the Biden Administration launched the National Initiative to Advance Building Codes, an initiative to modernize building codes, improve climate resilience, and reduce energy costs and the Inflation Reduction Act of 2022 (the “IRA 2022”), through various grants and tax incentives, encourages municipalities to adopt stricter energy codes, both of which could increase the cost to construct homes and cause 21 Table of Contents delays.
Changes in tax law could adversely affect our business. U.S. tax law is always subject to change (possibly with retroactive effect). For example, in August 2022, the United States enacted the Inflation Reduction Act of 2022, which contains significant changes to U.S. tax law including, but not limited to, a corporate minimum tax and 1% excise tax on stock repurchases.
Changes in tax law could adversely affect our business. U.S. tax law is always subject to change (possibly with retroactive effect). For example, in August 2022, the United States enacted the IRA 2022, which contains significant changes to U.S. tax law including, but not limited to, a corporate minimum tax and 1% excise tax on stock repurchases.
Furthermore, any downgrade of our credit ratings or other 23 Table of Contents negative rating actions by credit agencies may make it more difficult and costly for us to access capital.
Furthermore, any downgrade of our credit ratings or other negative rating actions by credit agencies may make it more difficult and costly for us to access capital.
We have also experienced labor shortages, price fluctuations and increased labor costs, including as a result of inflation or wage increases, particularly over the past two years due to historic inflation rates in the United States. It is uncertain whether these conditions will continue as is, improve or worsen.
We have also experienced labor shortages, price fluctuations and increased labor costs, including as a result of inflation or wage increases, particularly over the past few years, before stabilizing recently, due to historic inflation rates in the United States. It is uncertain whether these conditions will continue as is, improve or worsen.
The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors and tradespeople and supplies of insulation, drywall, cement, steel and lumber.
The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors and tradespeople and supplies of materials such as insulation, drywall, cement, steel and lumber.
Any such actions taken with respect to us may 20 Table of Contents increase our costs and result in project delays. Further, we expect that increasingly stringent requirements will be imposed on land developers and homebuilders in the future.
Any such actions taken with respect to us may increase our costs and result in project delays. Further, we expect that increasingly stringent requirements will be imposed on land developers and homebuilders in the future.
In addition, as of December 31, 2023, we had outstanding $300.0 million aggregate principal amount of the 2029 Senior Notes, which bear interest at a fixed rate of 4.000%, and $400.0 million aggregate principal amount of the 2028 Senior Notes, which bear interest at a fixed rate of 8.750%.
In addition, as of December 31, 2024, we had outstanding $400.0 million aggregate principal amount of the 2028 Senior Notes, which bear interest at a fixed rate of 8.750%, $300.0 million aggregate principal amount of the 2029 Senior Notes, which bear interest at a fixed rate of 4.000%, and $400.0 million aggregate principal amount of the 2032 Senior Notes, which bear interest at a fixed rate of 7.000%.
In addition, as of December 31, 2023, we had outstanding $300.0 million aggregate principal amount of the 2029 Senior Notes (as defined herein) and $400.0 million aggregate principal amount of the 2028 Senior Notes (as defined herein).
In addition, as of December 31, 2024, we had outstanding $400.0 million aggregate principal amount of the 2028 Senior Notes (as defined herein), $300.0 million aggregate principal amount of the 2029 Senior Notes (as defined herein) and $400.0 million aggregate principal amount of the 2032 Senior Notes (as defined herein).
As a homebuilder and developer, we are subject to construction defect, product liability and home and other warranty claims, including moisture intrusion and related claims, arising in the ordinary course of business. These claims are common to the homebuilding industry and can be costly.
As a homebuilder and developer, we are subject to construction defect, product liability and home and other warranty claims arising in the ordinary course of business. These claims are common to the homebuilding industry and can be costly.
For example, the third-party lender in our mortgage solutions joint venture recently identified a cybersecurity incident that included unauthorized third-party access to its systems.
For example, in late 2023, the third-party lender in our mortgage solutions joint venture identified a cybersecurity incident that included unauthorized third-party access to its systems.
These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic disruptions, such as the COVID-19 pandemic.
These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic disruptions.
In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets, affect the desirability of our land or projects or result in potential buyers facing higher costs for, or being unable to obtain, fire, flood or other hazard insurance coverage in certain areas, thereby adversely affecting our ability to market homes or sell land in those areas and possibly increasing the costs of homebuilding completion.
In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets, affect the desirability of our land or projects or result in potential buyers facing higher costs for, or being unable to obtain, fire, flood or other hazard insurance coverage in certain areas, thereby reducing the number of potential buyers who can afford, or are willing, to purchase homes in those areas, adversely affecting our ability to market homes or sell land in those areas and possibly increasing the costs of homebuilding completion.
The adverse costs of satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs of warranty-related repairs from subcontractors, suppliers and insurers, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.
The adverse costs of repairing such defects or satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs from subcontractors, suppliers and insurers, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.
We could suffer physical damage to property and liabilities resulting in losses that may not be fully recoverable by insurance.
We could suffer physical damage to property or sustain liabilities resulting in losses that may not be fully recoverable by insurance.
Despite our quality control and jobsite safety efforts, we may discover from time to time that our subcontractors have engaged in improper construction or safety practices or have installed defective materials in our homes. When we discover these issues, we typically utilize our subcontractors to repair the homes in accordance with our new home warranty.
Despite our quality control and jobsite safety efforts, we may discover from time to time that our subcontractors have engaged in improper construction or safety practices or have installed defective materials in our homes or subdivisions. When we discover these issues, we typically utilize our subcontractors to repair the defects.
We have experienced a significant increase in land, labor, materials and construction costs. In an inflationary environment, such as the current economic environment, depending on the homebuilding industry and other economic conditions, we may be unable to raise the sales prices of our homes enough to offset the increasing costs of our operations, which would decrease our profit margins.
In an inflationary environment, such as the economic environment we have experienced recently, depending on the homebuilding industry and other economic conditions, we may be unable to raise the sales prices of our homes enough to offset the increasing costs of our operations, which would decrease our profit margins.
In some cases, however, a homebuyer may cancel the purchase contract and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the homebuyer’s inability to obtain mortgage financing, the homebuyer’s failure to sell their current home, or our inability to complete and deliver the house within the defined time.
In some cases, however, a homebuyer may cancel the purchase contract and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the homebuyer’s inability to obtain mortgage financing or the homebuyer’s failure to sell their current home. Homebuyers may also choose to cancel their purchase contract and forfeit their deposit.
Our competitors may independently develop land and construct homes that are substantially similar to our products. Increased competition could hurt our business, as it could prevent us from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our market share expansion and cause us to increase our selling incentives and reduce our prices.
Increased competition could hurt our business, as it could prevent us from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our market share expansion and cause us to increase our selling incentives and reduce our prices.
Furthermore, any failure or security breach of information systems or data could result in a violation of applicable privacy, data security, or other laws; significant legal and financial exposure; damage to our reputation; or a loss of confidence in our security measures which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Furthermore, any failure or security breach of information systems or data could result in diversion of management or work force attention; increased costs required to prevent, respond to or mitigate an incident; a violation of applicable privacy, data security, or other laws; significant legal and financial exposure; damage to our reputation; or a loss of confidence in our security measures which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
As of December 31, 2023, we had a $1.205 billion revolving credit facility under the Credit Agreement to finance our construction and development activities. As of December 31, 2023, we had outstanding borrowings of $569.6 million under the Credit Agreement and we could borrow an additional $354.8 million under the Credit Agreement.
As of December 31, 2024, we had a $1.205 billion revolving credit facility under the Credit Agreement to finance our construction and development activities. As of December 31, 2024, we had outstanding borrowings of $401.9 million under the Credit Agreement and we could borrow an additional $270.5 million under the Credit Agreement.
As of December 31, 2023, we had total outstanding borrowings of $569.6 million under the Credit Agreement, and we could borrow an additional $354.8 million under the Credit Agreement. As of December 31, 2023, borrowings under the Credit Agreement bore interest at a rate of SOFR plus 1.85% per annum.
As of December 31, 2024, we had total outstanding borrowings of $401.9 million under the Credit Agreement, and we could borrow an additional $270.5 million under the Credit Agreement. As of December 31, 2024, borrowings under the Credit Agreement bore interest at a rate of SOFR plus 1.85% per annum.
Our business and results of operations are dependent on the availability, skill and performance of subcontractors. We engage subcontractors to perform the construction of our homes and, in many cases, to select and obtain the raw materials used in constructing our homes. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors.
Our business and results of operations are dependent on the availability, skill and performance of subcontractors. We engage subcontractors to perform the construction of our homes and the development of our raw land and, in many cases, to select and obtain the raw materials used for such work.
Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the market’s perception of our growth potential; • with respect to acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our current debt levels; • our current and expected future earnings; • our cash flow; and • the market price per share of our common stock.
Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns. 29 Table of Contents Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the market’s perception of our growth potential; • with respect to acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our current debt levels; • our current and expected future earnings; • our cash flow; and • the market price per share of our common stock.
As of December 31, 2023, we had 2,017 completed homes in inventory and 1,410 homes in progress in inventory.
As of December 31, 2024, we had 2,512 completed homes in inventory and 1,358 homes in progress in inventory.
We have established LGI Mortgage Solutions and LGI Insurance Solutions, two separate joint ventures with a long-time, third-party preferred lender and third-party insurance agency. We may co-invest in the future with third parties through other partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development.
We may co-invest in the future with third parties through other partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development.
As of December 31, 2023 and 2022, we have contributed a total of $21.5 million and $11.2 million, respectively, relating to our investment in the real estate investment fund and the mortgage joint venture. Contributions into these unconsolidated entities are used by the entities to invest in certain real estate transactions and residential mortgage services, respectively.
As of December 31, 2024 and 2023, we have contributed a total of $28.3 million and $21.5 million, respectively, within other assets on the balance sheet relating to our investment in joint ventures associated with our operations. Contributions into these unconsolidated entities are used by the entities to invest in certain real estate transactions and residential mortgage services, respectively.
Although we provide subcontractors with detailed specifications and perform quality control procedures, subcontractors may, in some cases, use improper construction processes or defective materials. Defective products used in the construction of our homes can result in the need to perform extensive repairs.
We rely on subcontractors to perform the construction of our homes and the development of our communities and, in some cases, to select and obtain building materials. Although we provide subcontractors with detailed specifications and perform quality control procedures, subcontractors may, in some cases, use improper construction processes or defective materials.
We currently participate through a real estate investment fund as a limited partner and operate through a mortgage service joint venture with independent third parties in which we do not have a controlling interest.
We currently participate through two equity-method real estate joint ventures and four additional joint ventures as a limited partner and with independent third parties in which we do not have a controlling interest.
Moreover, certain insurance companies doing business in states in which we operate could restrict, curtail or suspend the issuance of homeowners’ insurance policies on single-family homes.
Our communities in our West segment are especially susceptible to restrictive government regulations and environmental laws. Moreover, certain insurance companies doing business in states in which we operate could restrict, curtail or suspend the issuance of homeowners’ insurance policies on single-family homes.
There can be no assurance that any developments we undertake will be free from defects once completed and any defects attributable to us may lead to significant contractual or other liabilities. We rely on subcontractors to perform the construction of our homes and, in some cases, to select and obtain building materials.
There can be no assurance that any developments we undertake or homes we build will be free from defects once completed, and any defects attributable to us may lead to significant contractual or other liabilities.
Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
We caution you that assumptions, beliefs, expectations, intentions and projections about future events may, and often do, vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
Cautionary Statement about Forward-Looking Statements From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
We may not have access to such equity or debt capital on favorable terms at the desired times, or at all. Cautionary Statement about Forward-Looking Statements From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts.
Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or other similar words.
You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made.
The cost of performing such repairs, or litigation arising out of such issues, may be significant if we are unable to recover the costs from subcontractors, suppliers and/or insurers. Warranty and construction defect matters can also result in negative publicity, including on social media outlets, which could damage our reputation and negatively affect our ability to sell homes.
Defective products used during construction or defective construction of our homes or communities can result in the need to perform extensive repairs. The cost of performing such repairs, or litigation arising out of such issues, may be significant if we are unable to recover the costs from subcontractors, suppliers and/or insurers.
We anticipate that a variety of new legislation may be enacted or considered for enactment at the federal, state and local levels relating to climate change and energy, including in response to the United States’ reentry into the Paris Agreement and the COP 28 stocktake.
Despite the issuance of an executive order on January 20, 2025 initiating the process to withdraw the United States from the Paris Agreement, we anticipate that a variety of legislation may be enacted or considered for enactment at the state and local levels relating to climate change and energy.
Furthermore, the occurrence of natural disasters, severe weather and other adverse geological conditions has increased in recent years due to climate change and may continue to increase in the future.
These natural events could also prompt governmental authorities to adopt more stringent building codes, which would likely increase development costs in affected areas and negatively impact home affordability and/or demand. Furthermore, the occurrence of natural disasters, severe weather and other adverse geological conditions has increased in recent years due to climate change and may continue to increase in the future.
We expect this seasonal pattern to continue over the long term, but we can make no assurances as to the degree to which our historical seasonal patterns will occur in the future. 22 Table of Contents Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.
Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.
This may give our competitors an advantage in marketing their products, securing materials and labor at lower prices and allowing their homes to be delivered to customers more quickly and at more favorable prices. We compete for, among other things, homebuyers, desirable land parcels, financing, raw materials and skilled management and labor resources.
We compete for, among other things, homebuyers, desirable land parcels, financing, raw materials and skilled management and labor resources. Our competitors may independently develop land and construct homes that are substantially similar to our products.
Homebuyers may also choose to cancel their purchase contract and forfeit their deposit. As of December 31, 2023, we had 590 homes with an ending backlog value of $224.9 million. With the weakening of the housing market, we have experienced an increase in cancellation rates.
As of December 31, 2024, we had 599 homes with an ending backlog value of $236.5 million. With the weakening of the housing market over the past several years, we have experienced an increase in cancellation rates.
Furthermore, our market share in certain of our markets may be lower as compared to some of our competitors. Many of our competitors also have longer operating histories and longstanding relationships with subcontractors and suppliers in the markets in which we operate or to which we may expand.
Many of our competitors also have longer operating histories and longstanding relationships with subcontractors and suppliers in the markets in which we operate or to which we may expand. 18 Table of Contents This may give our competitors an advantage in marketing their products, securing materials and labor at lower prices and allowing their homes to be delivered to customers more quickly and at more favorable prices.
The potential difficulties described above can cause demand and prices for our homes to fall or cause us to take longer and incur more costs to develop the land and build our homes. We may not be able to recover these increased costs by raising prices because of market conditions.
The resulting increased costs of borrowing negatively impacted customer sentiment and accelerated existing affordability constraints for potential homebuyers. As a result, many homebuyers paused their home purchasing decisions. The potential difficulties described above can cause demand and prices for our homes to fall or cause us to take longer and incur more costs to develop land and build our homes.
The potential difficulties described above could also lead some homebuyers to cancel or refuse to honor their home purchase contracts altogether. A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.
We may not be able to recover these increased costs by raising prices because of market conditions. The potential difficulties described above could also lead some homebuyers to cancel or refuse to honor their home purchase contracts altogether.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Vice President, Information Technology and our information technology group endeavor to evaluate and address cyber risks in alignment with our business objectives, operational needs and industry-accepted standards, such as the National Institute of Standards and Technology (NIST) and CIS Critical Security Controls frameworks.
Biggest changeOur Vice President, Information Technology and our information technology group endeavor to evaluate and address cyber risks in alignment with our business objectives, operational needs and industry-accepted standards, such as the National Institute of Standards and Technology (NIST) and Center for Internet Security (CIS) Critical Security Controls frameworks.
These include but are not limited to: • Maintaining a defined and practiced incident response plan; • Employing appropriate incident prevention and detection safeguards; 31 Table of Contents • Maintaining a defined disaster recovery policy and employing disaster recovery software, where appropriate; • Educating, training and testing our user community on information security practices and identification of potential cybersecurity risks and threats; and • Reviewing and evaluating new developments in the cyber threat landscape.
These include but are not limited to: • Maintaining a defined and practiced incident response plan; • Employing appropriate incident prevention and detection safeguards; • Maintaining a defined disaster recovery policy and employing disaster recovery software, where appropriate; • Educating, training and testing our user community on information security practices and identification of potential cybersecurity risks and threats; and • Reviewing and evaluating new developments in the cyber threat landscape.
Furthermore, at the Board meetings at which our Vice President, Information Technology or other members of our information technology group do not provide in-person updates to the Board, our CEO or another executive team member provides current updates to the Board.
Furthermore, at the Board meetings at which our Vice President, Information Technology or other members of our information technology group do not provide in-person updates to the Board, our CEO or another executive team member 32 Table of Contents provides current updates to the Board.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSee “ Business—Land Acquisition Policies and Development ” for a summary of the other property which we owned or controlled as of December 31, 2023. 32 Table of Contents
Biggest changeSee “ Business—Land Acquisition Policies and Development ” for a summary of the other property which we owned or controlled as of December 31, 2024.
ITEM 2. PROPERTIES We lease approximately 25,000 square feet in The Woodlands, Texas for our corporate headquarters; this lease expires in 2028. In addition, to adequately meet the needs of our operations, we lease offices in Arizona, California, Colorado, Florida, Georgia, Maryland, Minnesota, Nevada, North Carolina, Oregon, Tennessee, Texas, Utah and Washington.
ITEM 2. PROPERTIES We lease approximately 25,000 square feet in The Woodlands, Texas for our corporate headquarters; this lease expires in 2028. In addition, to adequately meet the needs of our operations, we lease offices in Arizona, California, Colorado, Florida, Georgia, Maryland, Minnesota, Nevada, North Carolina, Tennessee, Texas, Utah and Washington.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Class Action Lawsuit On May 23, 2023, a class action lawsuit was filed by Rikki McAlister, a former sales representative, on behalf of herself and all others similarly situated, in the District Court of Arapahoe County, State of Colorado, against LGI Homes Corporate, LLC, a subsidiary of the Company, alleging violations of Colorado employment law, including failure to pay overtime compensation, failure to provide rest periods and improper deductions from wages.
Added
On November 21, 2023, the lawsuit was removed to the United States District Court for the District of Colorado, which granted the plaintiff’s motion for class certification on December 6, 2024.
Added
The plaintiff in the lawsuit is requesting as damages, on behalf of the plaintiff and all members of the class, unpaid back wages, unpaid minimum wages, unpaid overtime compensation, reimbursement for unlawfully-deducted wages, compensation for rest periods not provided, certain mandatory and additional penalties, reasonable attorney’s fees and incurred costs.
Added
We have responded to the complaint and intend to defend ourselves vigorously against the allegations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Repurchase Program In February 2022, the Board approved a $200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws.
Biggest changeStock Repurchase Program The following table summarizes the repurchase of shares of our common stock during the three months ended December 31, 2024: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (in thousands) October 1-31, 2024 — $ — — $ 193,528 November 1-30, 2024 — $ — — $ 193,528 December 1-31, 2024 134,877 $ 94.89 134,877 $ 180,729 134,877 $ 94.89 134,877 (1) On February 15, 2022, the Board announced that it had approved a $200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws.
The chart assumes $100.00 was invested at the close of market on December 31, 2018 and assumes the reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Comparison of Cumulative Total Return among LGI Homes, Inc.
The chart assumes $100.00 was invested at the close of market on December 31, 2019 and assumes the reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Comparison of Cumulative Total Return among LGI Homes, Inc.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the NASDAQ Stock Market (NASDAQ) under the symbol “LGIH.” As of February 16, 2024, the closing price of our common stock on the NASDAQ was $126.94, and we had 21 stockholders of record, including Cede & Co. as nominee of The Depository Trust Company.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the NASDAQ Stock Market (NASDAQ) under the symbol “LGIH.” As of February 21, 2025, the closing price of our common stock on the NASDAQ was $77.80, and we had 22 stockholders of record, including Cede & Co. as nominee of The Depository Trust Company.
Our stock repurchase program may be modified, discontinued or suspended at any time. During the three months ended December 31, 2023, we did not repurchase any shares of our common stock. A total of 2,939,472 shares of our common stock has been repurchased since our stock repurchase program commenced.
Our stock repurchase program may be modified, discontinued or suspended at any time. During the three months ended December 31, 2024, we repurchased 134,877 shares of our common stock for $12.8 million to be held as treasury stock. A total of 3,247,339 shares of our common stock has been repurchased since our stock repurchase program commenced.
As of December 31, 2023, we may purchase up to $211.5 million of shares of common stock under our stock repurchase program. Dividends We have not previously declared or paid any cash dividends on our common stock.
Dividends We have not previously declared or paid any cash dividends on our common stock.
Common Stock, the S&P 500 Index, and the S&P Homebuilders Index for the years ended December 31, 2023, 2022, 2021, 2020 and 2019. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 LGIH $100.00 $156.24 $234.08 $341.62 $204.78 $294.47 S&P 500 Index $100.00 $128.88 $149.83 $190.13 $153.16 $190.82 S&P Homebuilders Index $100.00 $140.12 $176.78 $263.06 $185.08 $291.68
Common Stock, the S&P 500 Index, and the S&P Homebuilders Index for the years ended December 31, 2024, 2023, 2022, 2021 and 2020. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 LGIH $100.00 $149.82 $218.66 $131.07 $188.48 $126.54 S&P 500 Index $100.00 $116.26 $147.52 $118.84 $147.64 $182.05 S&P Homebuilders Index $100.00 $126.16 $187.73 $132.08 $209.43 $228.94
Added
As of December 31, 2024, we may purchase up to $180.7 million of shares of common stock under our stock repurchase program. The IRA 2022 imposes a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. All dollar amounts presented exclude such excise taxes, as applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reconciles EBITDA and adjusted EBITDA to net income, which is the GAAP measure that our management believes to be most directly comparable (dollars in thousands): Year Ended December 31, 2023 2022 2021 Net income $ 199,227 $ 326,567 $ 429,645 Income tax provision 62,527 91,549 113,130 Depreciation and amortization 2,408 1,576 1,154 Capitalized interest charged to cost of sales 33,368 20,276 37,546 EBITDA 297,530 439,968 581,475 Purchase accounting adjustments (1) 6,492 6,869 4,964 Loss on extinguishment of debt — — 13,976 Other income, net (28,499) (28,009) (9,053) Adjusted EBITDA $ 275,523 $ 418,828 $ 591,362 EBITDA margin % (2) 12.6 % 19.1 % 19.1 % Adjusted EBITDA margin % (2) 11.7 % 18.2 % 19.4 % (1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
Biggest changeThe following table reconciles EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands): Year Ended December 31, 2024 2023 2022 Net income $ 196,071 $ 199,227 $ 326,567 Income tax provision 62,842 62,527 91,549 Depreciation and amortization 3,108 2,408 1,576 Capitalized interest charged to cost of sales 42,071 33,368 20,276 EBITDA 304,092 297,530 439,968 EBITDA margin % (1) 13.8 % 12.6 % 19.1 % (1) Calculated as a percentage of home sales revenues. 42 Table of Contents Backlog We sell our homes under standard purchase contracts, which generally require a homebuyer to pay a deposit at the time of signing the purchase contract.
However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact our results, the utility of adjusted gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that we do.
However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact our results, the utility of adjusted gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that we do.
Financing Activities Net cash provided by financing activities was $87.6 million during the year ended December 31, 2023, primarily driven by $887.3 million of borrowings under our credit agreement then in effect and $50.4 million of proceeds related to financing arrangements with a third-party land banker.
Net cash provided by financing activities was $87.6 million during the year ended December 31, 2023, primarily driven by $887.3 million of borrowings under our credit agreement then in effect and $50.4 million of proceeds related to financing arrangements with a third-party land banker.
EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.
We compensate for these limitations by using our EBITDA and adjusted EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance. These GAAP measures include operating income, net income and cash flow data.
We compensate for these limitations by using our EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance. These GAAP measures include operating income, net income and cash flow data.
Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
The primary assumption to record amounts accrued for our warranty liability is based upon a trailing 120 month period of historical warranty cost experience on a per house basis established based on (i) trends in historical warranty payment levels, (ii) the historical range of amounts paid per house, (iii) any warranty expenditures not considered to be normal and recurring, 49 Table of Contents and is adjusted as appropriate to reflect qualitative risks associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our expansion.
The primary assumption to record amounts accrued for our warranty liability is based upon a trailing 120 month period of historical warranty cost experience on a per house basis established based on (i) trends in historical warranty payment levels, (ii) the historical range of amounts paid per house, (iii) any warranty expenditures not considered to be normal and recurring, and is adjusted as appropriate to reflect qualitative risks associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our expansion.
Our historical consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K contain additional information that should be referred to when reviewing this material. This section covers fiscal years 2023 and 2022 and discusses the results of operations for fiscal year 2023 compared to fiscal year 2022.
Our historical consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K contain additional information that should be referred to when reviewing this material. This section covers fiscal years 2024 and 2023 and discusses the results of operations for fiscal year 2024 compared to fiscal year 2023.
The increase in general and administrative expenses as a percentage of home sales revenues reflects our increased personnel and associated overhead costs, partially offset by a decrease in payroll related costs during the year ended December 31, 2023 as compared to the year ended December 31, 2022. Other Income.
The increase in general and administrative expenses as a percentage of home sales revenues reflects our increased personnel and associated overhead costs, partially offset by a decrease in payroll related costs during the year ended December 31, 2024 as compared to the year ended December 31, 2023. Other Income.
Long-term Liquidity and Capital Resources We believe that our long-term principal uses of liquidity and capital resources will be inventory related purchases concerning land, lot development, repurchases of shares of our common stock, other capital expenditures, and principal and interest payments on our debt obligations maturing between 2025 and 2029.
Long-term Liquidity and Capital Resources We believe that our long-term principal uses of liquidity and capital resources will be inventory related purchases concerning land, lot development, repurchases of shares of our common stock, other capital expenditures, and principal and interest payments on our debt obligations maturing between 2025 and 2032.
For reconciliations of the non-GAAP financial measures of adjusted gross margin, EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measures, please see “— Non-GAAP Measures .” 36 Table of Contents Results of Operations The following table sets forth our results of operations for the years ended December 31, 2023, 2022 and 2021.
For reconciliations of the non-GAAP financial measures of adjusted gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “— Non-GAAP Measures .” 36 Table of Contents Results of Operations The following table sets forth our results of operations for the years ended December 31, 2024, 2023 and 2022.
(6) As of December 31, 2021, we had 481 units related to bulk sales agreements associated with our wholesale business. 43 Table of Contents Land Acquisition Policies and Development See discussion included in “ Business—Land Acquisition Policies and Development .” Homes in Inventory See discussion included in “ Business—Homes in Inventory .” Raw Materials and Labor See discussion included in “ Business—Raw Materials and Labor .” Seasonality In all of our reportable segments, we have historically experienced similar variability in our results of operations and in capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry.
(6) As of December 31, 2022, we had 157 units related to bulk sales agreements associated with our wholesale business. 43 Table of Contents Land Acquisition Policies and Development See discussion included in “ Business—Land Acquisition Policies and Development .” Homes in Inventory See discussion included in “ Business—Homes in Inventory .” Raw Materials and Labor See discussion included in “ Business—Raw Materials and Labor .” Seasonality In all of our reportable segments, we have historically experienced similar variability in our results of operations and in capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry.
Investing Activities Net cash used in investing activities was $13.6 million during the year ended December 31, 2023, primarily due to additional investments in unconsolidated entities, net of return of capital from unconsolidated entities. Net cash used in investing activities was $6.0 million during the year ended December 31, 2022, primarily due to additional investments in unconsolidated entities.
Net cash used in investing activities was $13.6 million during the year ended December 31, 2023, primarily due to additional investments in unconsolidated entities, net of return of capital from unconsolidated entities.
Due largely to the relatively short development and construction periods for our communities and our growth, we have experienced limited circumstances during 2023, 2022 or 2021 that are indicators of impairment.
Due largely to the relatively short development and construction periods for our communities and our growth, we have experienced limited circumstances during 2024, 2023 or 2022 that are indicators of impairment.
The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.
The timing, amount and other terms and conditions of any repurchases 46 Table of Contents of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.
Changes to estimated total remaining development costs subsequent to initial home closings in a community are allocated to the remaining unsold homes 48 Table of Contents in the community on a prospective basis. Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method and are capitalized as they are incurred.
Changes to estimated total remaining development costs subsequent to initial home closings in a community are allocated to the remaining unsold homes in the community on a prospective basis. Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method and are capitalized as they are incurred.
During the life of a project, a constructed home is used as the community information center and then sold. Actual individual community lives will vary based on the size of the community, the sales absorption rate, and whether the property was purchased as raw land or finished lots.
During the life of a project, a constructed home is used as 48 Table of Contents the community information center and then sold. Actual individual community lives will vary based on the size of the community, the sales absorption rate, and whether the property was purchased as raw land or finished lots.
We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA or adjusted EBITDA.
We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA.
The discussion of fiscal year 2021 and the results of operations for fiscal year 2022 compared to fiscal year 2021 is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 21, 2023, and is incorporated by reference into this Annual Report on Form 10-K.
The discussion of fiscal year 2022 and the results of operations for fiscal year 2023 compared to fiscal year 2022 is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 20, 2024, and is incorporated by reference into this Annual Report on Form 10-K.
Some of these limitations are: (i) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land; (ii) they do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; (iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements or improvements; (iv) they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; (v) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and (vi) other companies in our industry may calculate them differently than we do, limiting their usefulness as a comparative measure.
Some of these limitations are: (i) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land; (ii) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; (iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA does not reflect any cash requirements for such replacements or improvements; (iv) it does not adjust for all non-cash income or expense items that are reflected in our statements of cash flows; (v) it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and (vi) other companies in our industry may calculate it differently than we do, limiting its usefulness as a comparative measure.
The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising expenses, fewer wholesale home closings and higher other expenses incurred during the year ended December 31, 2023 as compared to the year ended December 31, 2022. General and Administrative.
The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising expenses, fewer wholesale home closings and higher other personnel expenses incurred during the year ended December 31, 2024 as compared to the year ended December 31, 2023. General and Administrative.
The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) and our 8.750% Senior Notes due 2028 (the “2028 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.
The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 8.750% Senior Notes due 2028 (the “2028 Senior Notes”), our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) and our 7.000% Senior Notes due 2032 (the “2032 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.
We recognize potential interest and penalties related to uncertain tax positions in income tax expense, as applicable. 50 Table of Contents
We recognize potential interest and penalties related to uncertain tax positions in income tax expense, as applicable. 49 Table of Contents
Please see “ —Non-GAAP Measures ” for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable. 38 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Homes Sales.
Please see “ —Non-GAAP Measures ” for reconciliations of EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable. 38 Table of Contents Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Homes Sales.
Senior Notes Offering On November 21, 2023, we issued $400.0 million aggregate principal amount of the 2028 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.
Senior Notes Offering On November 15, 2024, we issued $400.0 million aggregate principal amount of the 2032 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.
The increase in our effective tax rate to 23.9% from 21.9% was primarily due to an increase in the rate for state income taxes, net of the federal benefit, the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the year ended December 31, 2022, offset by a decrease in the rate for the deductions in excess of compensation cost for share-based payments.
The increase in our effective tax rate to 24.3% from 23.9% was primarily due to an increase in the rate for the deductions in excess of compensation cost for share-based payments, and the rate for state income taxes, net of the federal benefit, offset by a decrease in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Our stock repurchase program may be modified, discontinued or suspended at any time. Cash Flows Operating Activities Net cash used in operating activities was $57.0 million during the year ended December 31, 2023. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
Our stock repurchase program may be modified, discontinued or suspended at any time. Cash Flows Operating Activities Net cash used in operating activities was $143.7 million during the year ended December 31, 2024. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our 37 Table of Contents results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.
Outstanding letters of credit, surety bonds and financial guarantees under these arrangements, totaled $357.0 million as of December 31, 2023. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and surety bonds are not generally released until all development and construction activities are completed.
Outstanding letters of credit, surety bonds and financial guarantees under these arrangements, totaled $377.5 million as of December 31, 2024. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and surety bonds are not generally released until all development and construction activities are completed.
(4) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
(4) EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
General and administrative expenses as a percentage of home sales revenues were 5.0% and 4.8% for the years ended December 31, 2023 and 2022, respectively.
General and administrative expenses as a percentage of home sales revenues were 5.5% and 5.0% for the years ended December 31, 2024 and 2023, respectively.
Approximately $11.4 million of the cash deposits as of December 31, 2023 are secured by third-party guarantees or indemnity mortgages on the related property.
Approximately $10.4 million of the cash deposits as of December 31, 2024 are secured by third-party guarantees or indemnity mortgages on the related property.
Liquidity and Capital Resources Overview As of December 31, 2023, we had $49.0 million of cash and cash equivalents. Cash flows for each of our active communities depend on the status of the development cycle and can differ substantially from reported earnings.
Liquidity and Capital Resources Overview As of December 31, 2024, we had $53.2 million of cash and cash equivalents. Cash flows for each of our active communities depend on the status of the development cycle and can differ substantially from reported earnings.
(4) As of December 31, 2023, we had 60 units related to bulk sales agreements associated with our wholesale business. (5) As of December 31, 2022, we had 157 units related to bulk sales agreements associated with our wholesale business.
(4) As of December 31, 2024, we had 146 units related to bulk sales agreements associated with our wholesale business. (5) As of December 31, 2023, we had 60 units related to bulk sales agreements associated with our wholesale business.
Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
Because of these limitations, our EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.
(2) Calculated as a percentage of home sales revenues. EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
(2) Calculated as a percentage of home sales revenues. 41 Table of Contents EBITDA EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.
We do not believe that it 46 Table of Contents is probable that any outstanding letters of credit, surety bonds or financial guarantees as of December 31, 2023 will be drawn upon.
We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of December 31, 2024 will be drawn upon.
Net cash used in operating activities was $370.5 million during the year ended December 31, 2022. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
Net cash used in operating activities was $57.0 million during the year ended December 31, 2023. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.
Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.
Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.
Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.
Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.
The following table reconciles adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands): Year Ended December 31, 2023 2022 2021 Home sales revenues $ 2,358,580 $ 2,304,455 $ 3,050,149 Cost of sales 1,816,393 1,657,855 2,232,115 Gross margin 542,187 646,600 818,034 Capitalized interest charged to cost of sales 33,368 20,276 37,546 Purchase accounting adjustments (1) 6,492 6,869 4,964 Adjusted gross margin $ 582,047 $ 673,745 $ 860,544 Gross margin % (2) 23.0 % 28.1 % 26.8 % Adjusted gross margin % (2) 24.7 % 29.2 % 28.2 % (1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
The following table reconciles adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands): Year Ended December 31, 2024 2023 2022 Home sales revenues $ 2,202,598 $ 2,358,580 $ 2,304,455 Cost of sales 1,669,310 1,816,393 1,657,855 Gross margin 533,288 542,187 646,600 Capitalized interest charged to cost of sales 42,071 33,368 20,276 Purchase accounting adjustments (1) 4,034 6,492 6,869 Adjusted gross margin $ 579,393 $ 582,047 $ 673,745 Gross margin % (2) 24.2 % 23.0 % 28.1 % Adjusted gross margin % (2) 26.3 % 24.7 % 29.2 % (1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
Revolving Credit Facility On December 5, 2023, we entered into a Fourth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fourth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fourth Amendment, the “Credit Agreement”).
Revolving Credit Facility On October 9, 2024, we entered into a Fifth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fifth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fifth Amendment, the “Credit Agreement”).
Selling expenses as a percentage of home sales revenues were 8.1% and 6.3% for the years ended December 31, 2023 and 2022, respectively.
Selling expenses as a percentage of home sales revenues were 9.1% and 8.1% for the years ended December 31, 2024 and 2023, respectively.
In addition, our deposit may also be refundable if the land seller does not satisfy all conditions precedent in the respective contract. As of December 31, 2023, we had $27.0 million of cash deposits pertaining to land purchase contracts for 15,750 lots with an aggregate purchase price of $513.9 million.
In addition, our deposit may also be refundable if the land seller does not satisfy all conditions precedent in the respective contract. As of December 31, 2024, we had $29.0 million of cash deposits pertaining to land purchase contracts for 17,582 lots with an aggregate purchase price of $653.9 million.
As of the dates set forth below, our net orders, cancellation rate, and ending backlog homes and value were as follows (dollars in thousands): Backlog Data Year Ended December 31, 2023 (4) 2022 (5) 2021 (6) Net orders (1) 6,617 5,268 9,533 Cancellation rate (2) 25.4 % 24.4 % 19.3 % Ending backlog - homes (3) 590 702 2,055 Ending backlog - value (3) $ 224,851 $ 252,002 $ 659,234 (1) Net orders are new (gross) orders for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.
As of the dates set forth below, our net orders, cancellation rate, and ending backlog homes and value were as follows (dollars in thousands): Backlog Data Year Ended December 31, 2024 (4) 2023 (5) 2022 (6) Net orders (1) 6,037 6,617 5,268 Cancellation rate (2) 22.8 % 25.4 % 24.4 % Ending backlog - homes (3) 599 590 702 Ending backlog - value (3) $ 236,511 $ 224,851 $ 252,002 (1) Net orders are new (gross) orders for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.
The increase in home closings was the result of an increase in the average community count and a higher absorption rate. • Home sales revenues in our Northwest reportable segment decreased by $2.2 million, or 0.9%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 2.6% decrease in the average sales price per home closed, partially offset by a 1.8% increase in the number of homes closed.
The decrease in home closings was the result of a lower absorption rate, partially offset by a 9.7% increase in the average community count. • Home sales revenues in our Northwest reportable segment increased by $7.2 million, or 2.9%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an 8.8% increase in the average sales price per home closed, partially offset by a 5.5% decrease in the number of homes closed.
EBITDA and adjusted EBITDA are not intended as alternatives to net income as indicators of our operating performance, as alternatives to any other measure of performance in conformity with GAAP or as alternatives to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA or adjusted EBITDA calculated using these measures.
EBITDA is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flows as a measure of liquidity. You should therefore not place undue reliance on our EBITDA calculated using these measures.
The Credit Agreement matures on April 28, 2028 with respect to $960.0 million, or 79.7%, of the $1.205 billion of commitments thereunder and on April 28, 2025 with respect to 20.3% of the commitments thereunder. Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date.
The Credit Agreement matures on April 28, 2028 with respect to $1.085 billion, or 90.0%, of the $1.205 billion of commitments thereunder and on April 28, 2025 with respect to 10.0% of the commitments thereunder. Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date.
General and administrative expenses for the year ended December 31, 2023 were $117.4 million, an increase of $5.8 million, or 5.2%, from $111.6 million for the year ended December 31, 2022.
General and administrative expenses for the year ended December 31, 2024 were $121.2 million, an increase of $3.8 million, or 3.3%, from $117.4 million for the year ended December 31, 2023.
EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.
EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.
Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.
Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.
Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.
Our utilization of land purchase contracts is dependent on, among other things, the availability of land sellers willing to enter into contracts at acceptable terms, which may include option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing conditions, and local market dynamics. 45 Table of Contents Land purchase contracts may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain markets.
Our utilization of land purchase contracts is dependent on, among other things, the availability of land sellers willing to enter into contracts at acceptable terms, which may include option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing conditions, and local market dynamics.
Risk Factors in Part I of this Annual Report on Form 10-K. Critical Accounting Policies and Estimates In preparing our Consolidated Financial Statements in accordance with GAAP and pursuant to the rules and regulations of the SEC, we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
Critical Accounting Policies and Estimates In preparing our consolidated financial statements in accordance with GAAP and pursuant to the rules and regulations of the SEC, we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
Non-GAAP Measures In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Annual Report on Form 10-K relating to adjusted gross margin, EBITDA and adjusted EBITDA.
Non-GAAP Measures In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Annual Report on Form 10-K relating to adjusted gross margin and EBITDA. Adjusted Gross Margin Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance.
The overall increase in home closings was a result of higher average community count, offset by an overall lower absorption pace during the year ended December 31, 2023 as compared to the year ended December 31, 2022. Our average community count at December 31, 2023 increased to 103.9 from 91.9 at December 31, 2022.
The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count during the year ended December 31, 2024 as compared to the year ended December 31, 2023. Our average community count at December 31, 2024 increased to 130.5 from 103.9 at December 31, 2023.
The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count. 39 Table of Contents • Home sales revenues in our Southeast reportable segment increased by $101.5 million, or 22.3%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 22.2% increase in the number of homes closed and a slight increase in the average sales price per home closed.
The decrease in home closings was primarily the result of a lower absorption rate, partially offset by an increase in the average community count. • Home sales revenues in our Southeast reportable segment decreased by $18.6 million, or 3.3%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 4.7% decrease in the number of homes closed, offset by a slight increase in the average sales price per home closed.
Other income, net of other expenses was $28.5 million for the year ended December 31, 2023, an increase of $0.5 million from $28.0 million for the year ended December 31, 2022.
Other income, net of other expenses was $46.8 million for the year ended December 31, 2024, an increase of $18.3 million from $28.5 million for the year ended December 31, 2023.
As of December 31, 2023, the borrowing base under the Credit Agreement was $1.7 billion, of which the maximum available to borrow was $1.205 billion.
As of December 31, 2024, the borrowing base under the Credit Agreement was $1.205 billion, of which the 45 Table of Contents maximum available to borrow was $1.8 billion.
Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business.
Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business.
The increase in home closings was the result of a 20.0% increase in the average community count, offset by a lower absorption rate. • Home sales revenues in our West reportable segment increased by $80.1 million, or 26.6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 32.1% increase in the number of homes closed, partially offset by a 4.1% decrease in the average sales price per home closed.
The increase in home closings was the result of a 55.0% increase in the average community count, partially offset by a lower absorption rate. • Home sales revenues in our Florida reportable segment decreased by $70.1 million, or 16.0%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 20.2% decrease in the number of homes closed, partially offset by a 5.3% increase in the average sales price per home closed.
The increase in the amount of general and administrative expenses was primarily due to higher personnel related costs and increased indirect overhead expenses, partially offset by a decrease in payroll related costs and lower terminated land purchase expenses for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The increase in the amount of general and administrative expenses was primarily a result of increased indirect overhead expenses and professional fees, partially offset by a decrease in payroll related costs for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Operating income for the year ended December 31, 2023 was $233.3 million, a decrease of $156.9 million, or 40.2%, from $390.1 million for the year ended December 31, 2022.
Operating income for the year ended December 31, 2024 was $212.1 million, a decrease of $21.1 million, or 9.1%, from $233.3 million for the year ended December 31, 2023.
Net Income . Net income for the year ended December 31, 2023 was $199.2 million, a decrease of $127.3 million, or 39.0%, from $326.6 million for the year ended December 31, 2022.
Net Income . Net income for the year ended December 31, 2024 was $196.1 million, a decrease of $3.2 million, or 1.6%, from $199.2 million for the year ended December 31, 2023.
EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, 41 Table of Contents levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.
EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring. Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.
As of December 31, 2023, borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes and the 2028 Senior Notes totaled $1.3 billion, $28.1 million of letters of credit were outstanding and $354.8 million was available to borrow under the Credit Agreement.
As of December 31, 2024, borrowings under the Credit Agreement and the outstanding principal amount of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes totaled approximately $1.5 billion, $24.5 million of letters of credit were outstanding and $270.5 million was available to borrow under the Credit Agreement.
Home Sales Revenue Recognition We recognize home sales revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process: • Identify the contract(s) with a customer • Identify the performance obligations • Determine the transaction price • Allocate the transaction price • Recognize revenue when the performance obligations are met Our contracts with customers include a single performance obligation to transfer a completed home to the customer.
Discussed below are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant judgment in their application. 47 Table of Contents Home Sales Revenue Recognition We recognize home sales revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process: • Identify the contract(s) with a customer • Identify the performance obligations • Determine the transaction price • Allocate the transaction price • Recognize revenue when the performance obligations are met Our contracts with customers include a single performance obligation to transfer a completed home to the customer.
The increase in home closings was the result of a higher absorption rate and an increase in the average community count. Cost of Sales and Gross Margin (home sales revenues less cost of sales).
The decrease in home closings was the result of a lower absorption rate, partially offset by a 17.2% increase in the average community count. Cost of Sales and Gross Margin (home sales revenues less cost of sales).
Gross margin for the year ended December 31, 2023 was $542.2 million, a decrease of $104.4 million, or 16.1%, from $646.6 million for the year ended December 31, 2022. Gross margin as a percentage of home sales revenues was 23.0% for the year ended December 31, 2023 and 28.1% for the year ended December 31, 2022.
Gross margin for the year ended December 31, 2024 was $533.3 million, a decrease of $8.9 million, or 1.6%, from $542.2 million for the year ended December 31, 2023. Gross margin as a percentage of home sales revenues was 24.2% for the year ended December 31, 2024 and 23.0% for the year ended December 31, 2023.
Net income before income taxes for the year ended December 31, 2023 was $261.8 million, a decrease of $156.4 million, or 37.4%, from $418.1 million for the year ended December 31, 2022.
Net income before income taxes for the year ended December 31, 2024 was $258.9 million, a decrease of $2.8 million, or 1.1%, from $261.8 million for the year ended December 31, 2023.
We permit our retail homebuyers to cancel the purchase contract and obtain a refund of their deposit in the event mortgage financing cannot be obtained within a certain period of time, as specified in their purchase contract. Typically, our retail homebuyers provide documentation regarding their ability to obtain mortgage financing within 14 days after the purchase contract is signed.
The amount of the required deposit is minimal (typically $1,000 to $10,000). We permit our retail homebuyers to cancel the purchase contract and obtain a refund of their deposit in the event mortgage financing cannot be obtained within a certain period of time, as specified in their purchase contract.
Included within our home sales revenues for the year ended December 31, 2023 was $202.3 million in wholesale revenues resulting from 679 home closings, representing 10.1% of the 6,729 total homes closed during the year ended December 31, 2023.
Included within our home sales revenues for the year ended December 31, 2024 was $164.1 million in wholesale revenues resulting from 552 home closings, representing 9.2% of the 6,028 total homes closed during the year ended December 31, 2024.
We increased our warranty reserve by $2.9 million, $2.9 million and $2.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We increased our warranty reserve by $2.5 million, $2.9 million and $2.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. Taxes We utilize the liability method of accounting for income taxes.
Net cash used in operating activities during the year ended December 31, 2022 was primarily driven by cash outflow from the $823.9 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity, partially offset by net income of $326.6 million, as well as the $32.8 million decrease and $58.1 million increase in the net change in accounts receivable, and accrued expenses and other liabilities, respectively.
Net cash used in operating activities during the year ended December 31, 2024 was primarily driven by cash outflow from the $365.9 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity, partially offset by net income of $196.1 million.
Included within our home sales revenues for the year ended December 31, 2022 was $340.6 million in wholesale revenues resulting from 1,233 home closings, representing 18.6% of the 6,621 total homes closed during the year ended December 31, 2022. • Home sales revenues in our Central reportable segment decreased by $281.2 million, or 27.8%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 27.6% decrease in the number of homes closed and a slight decrease in the average sales price per home closed.
Included within our home sales revenues for the year ended December 31, 2023 was $202.3 million in wholesale revenues resulting from 679 home closings, representing 10.1% of the 6,729 total homes closed during the year ended December 31, 2023. 39 Table of Contents • Home sales revenues in our Central reportable segment decreased by $166.1 million, or 22.7%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 21.6% decrease in the number of homes closed and a slight decrease in the average sales price per home closed.
The increase in home sales revenues was primarily due to a 1.6% increase in homes closed and a slight increase in the average sales price per home closed during the year ended December 31, 2023 as compared to the year ended December 31, 2022. We closed 6,729 homes during 2023, as compared to 6,621 homes closed during 2022.
The decrease in home sales revenues was primarily due to a 10.4% decrease in homes closed, offset by an increase in the average sales price per home closed, during the year ended December 31, 2024 as compared to the year ended December 31, 2023. We closed 6,028 homes during 2024, as compared to 6,729 homes closed during 2023.
Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business.
Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and 37 Table of Contents taxes, necessary to operate our business.
The increase in home closings was the result of a 21.7% increase in the average community count and a higher absorption rate. • Home sales revenues in our Florida reportable segment increased by $155.9 million, or 55.1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 45.9% increase in the number of homes closed and a 6.3% increase in the average sales price per home closed.
The decrease in the number of homes closed was the result of a lower absorption rate, offset by a 40.2% increase in the average community count. • Home sales revenues in our West reportable segment increased by $91.6 million, or 24.0%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 14.9% increase in the number of homes closed and a 7.9% increase in the average sales price per home closed.
Year Ended December 31, 2023 2022 2021 (dollars in thousands, except per share data and average home sales price) Statement of Income Data: Home sales revenues $ 2,358,580 $ 2,304,455 $ 3,050,149 Expenses: Cost of sales 1,816,393 1,657,855 2,232,115 Selling expenses 191,582 144,928 170,005 General and administrative 117,350 111,565 100,331 Operating income 233,255 390,107 547,698 Loss on extinguishment of debt — — 13,976 Other income, net (28,499) (28,009) (9,053) Net income before income taxes 261,754 418,116 542,775 Income tax provision 62,527 91,549 113,130 Net income $ 199,227 $ 326,567 $ 429,645 Basic earnings per share $ 8.48 $ 13.90 $ 17.46 Diluted earnings per share $ 8.42 $ 13.76 $ 17.25 Other Financial and Operating Data: Average community count 103.9 91.9 104.4 Community count at end of period 117 99 101 Home closings 6,729 6,621 10,442 Average sales price per home closed $ 350,510 $ 348,052 $ 292,104 Gross margin (1) $ 542,187 $ 646,600 $ 818,034 Gross margin % (2) 23.0 % 28.1 % 26.8 % Adjusted gross margin (3) $ 582,047 $ 673,745 $ 860,544 Adjusted gross margin % (2)(3) 24.7 % 29.2 % 28.2 % EBITDA (4) $ 297,530 $ 439,968 $ 581,475 EBITDA margin % (2)(4) 12.6 % 19.1 % 19.1 % Adjusted EBITDA (4) $ 275,523 $ 418,828 $ 591,362 Adjusted EBITDA margin % (2)(4) 11.7 % 18.2 % 19.4 % (1) Gross margin is home sales revenues less cost of sales.
Year Ended December 31, 2024 2023 2022 (dollars in thousands, except per share data and average home sales price) Statement of Income Data: Home sales revenues $ 2,202,598 $ 2,358,580 $ 2,304,455 Expenses: Cost of sales 1,669,310 1,816,393 1,657,855 Selling expenses 199,950 191,582 144,928 General and administrative 121,192 117,350 111,565 Operating income 212,146 233,255 390,107 Other income, net (46,767) (28,499) (28,009) Net income before income taxes 258,913 261,754 418,116 Income tax provision 62,842 62,527 91,549 Net income $ 196,071 $ 199,227 $ 326,567 Basic earnings per share $ 8.33 $ 8.48 $ 13.90 Diluted earnings per share $ 8.30 $ 8.42 $ 13.76 Other Financial and Operating Data: Average community count 130.5 103.9 91.9 Community count at end of period 151 117 99 Home closings 6,028 6,729 6,621 Average sales price per home closed $ 365,394 $ 350,510 $ 348,052 Gross margin (1) $ 533,288 $ 542,187 $ 646,600 Gross margin % (2) 24.2 % 23.0 % 28.1 % Adjusted gross margin (3) $ 579,393 $ 582,047 $ 673,745 Adjusted gross margin % (2)(3) 26.3 % 24.7 % 29.2 % EBITDA (4) $ 304,092 $ 297,530 $ 439,968 EBITDA margin % (2)(4) 13.8 % 12.6 % 19.1 % (1) Gross margin is home sales revenues less cost of sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQuantitative and Qualitative Disclosures About Interest Rate Risk We utilize both fixed-rate debt ($300.0 million aggregate principal amount of the 2029 Senior Notes, $400.0 million aggregate principal amount of the 2028 Senior Notes and certain inventory related obligations) and variable-rate debt (our $1.205 billion Credit Agreement) as part of financing our operations.
Biggest changeQuantitative and Qualitative Disclosures About Interest Rate Risk We utilize both fixed-rate debt and variable-rate debt as part of financing our operations.
Based on the current interest rate management policies we have in place with respect to our outstanding indebtedness, we do not believe that the future interest rate risks related to our existing indebtedness will have a material adverse impact on our financial position, results of operations, or liquidity. 51 Table of Contents
Based on the current interest rate management policies we have in place with respect to our outstanding indebtedness, we do not believe that the future interest rate risks related to our existing indebtedness will have a material adverse impact on our financial position, results of operations, or liquidity. 50 Table of Contents
We do not have the obligation to prepay the 2029 Senior Notes, the 2028 Senior Notes or our fixed-rate inventory related obligations prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt.
We do not have the obligation to prepay our senior notes or our fixed-rate inventory related obligations prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt.
The interest rate for our variable rate indebtedness as of December 31, 2023 was SOFR plus 1.85%. At December 31, 2023, SOFR was 5.36%, subject to the 0.50% SOFR floor as included in the Credit Agreement.
The interest rate for our variable rate indebtedness as of December 31, 2024 was SOFR plus 1.85%. At December 31, 2024, SOFR was 4.36%, subject to the 0.50% SOFR floor as included in the Credit Agreement.
A hypothetical 100 basis point increase in the average interest rate above the SOFR floor on our variable rate indebtedness would increase our annual interest cost by approximately $5.7 million.
A hypothetical 100 basis point increase in the average interest rate above the SOFR floor on our variable rate indebtedness would increase our annual interest cost by approximately $4.0 million.
We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate indebtedness. As of December 31, 2023, we had $569.6 million of variable rate indebtedness outstanding under the Credit Agreement. All of the outstanding borrowings under the Credit Agreement are at variable rates based on SOFR.
We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate indebtedness. As of December 31, 2024, we had $401.9 million of variable rate indebtedness outstanding under the Credit Agreement. All of the outstanding borrowings under the Credit Agreement are at variable rates based on SOFR.

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