UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-9977

MTH_Logo_Standard_Horizontal_Tagline_RGB narrow white space.jpg

Meritage Homes Corporation

(Exact Name of Registrant as Specified in its Charter)

Maryland

86-0611231

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

~~8800 E. Raintree~~18655 North Claret Drive, Suite ~~300,~~400, Scottsdale, Arizona ~~85260~~85255

(Address of Principal Executive Offices) (Zip Code)

(480) 515-8100

(Registrant’s telephone number, including area code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $.01 par value	MTH	New York Stock Exchange

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by a checkmark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	ý	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by a checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Common shares outstanding as of October ~~24, 2022: 36,571,393~~27, 2023: 36,449,906

MERITAGE HOMES CORPORATION

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, ~~2022~~2023

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Unaudited Consolidated Balance Sheets as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022			3

Unaudited Consolidated Income Statements for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			4

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			5

Notes to Unaudited Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22

Item 3. Quantitative and Qualitative Disclosures About Market Risk			3834

Item 4. Controls and Procedures			3934

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			4036

Item 1A. Risk Factors			4036

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds , and Issuer Purchases of Equity Securities			4036

Items ~~3-5.~~3-4. Not Applicable

Item 5. Other Information			36

Item 6. Exhibits			4237

SIGNATURES			4338

INDEX OF EXHIBITS			4338

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MERITAGE HOMES CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)



		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	299,387	$	618,335	Cash and cash equivalents	$	1,048,755	$	861,561

Other receivables	Other receivables	193,307		147,548		Other receivables	228,852		215,019
Real estate	Real estate	4,726,262		3,734,408		Real estate	4,501,358		4,358,263
Real estate not owned		—		8,011

Deposits on real estate under option or contract	Deposits on real estate under option or contract	88,428		90,679		Deposits on real estate under option or contract	93,501		76,729
Investments in unconsolidated entities	Investments in unconsolidated entities	11,356		5,764		Investments in unconsolidated entities	15,062		11,753
Property and equipment, net	Property and equipment, net	39,437		37,340		Property and equipment, net	50,822		38,635
Deferred tax assets, net	Deferred tax assets, net	41,060		40,672		Deferred tax assets, net	45,932		45,452
Prepaids, other assets and goodwill	Prepaids, other assets and goodwill	171,853		124,776		Prepaids, other assets and goodwill	197,588		164,689
Total assets	Total assets	$	5,571,090	$	4,807,533	Total assets	$	6,181,870	$	5,772,101
Liabilities	Liabilities					Liabilities
Accounts payable	Accounts payable	$	322,227	$	216,009	Accounts payable	$	294,183	$	273,267
Accrued liabilities	Accrued liabilities	353,512		337,277		Accrued liabilities	413,092		360,615
Home sale deposits	Home sale deposits	57,767		42,610		Home sale deposits	48,133		37,961
Liabilities related to real estate not owned		—		7,210

Loans payable and other borrowings	Loans payable and other borrowings	12,460		17,552		Loans payable and other borrowings	11,008		7,057
Senior notes, net	Senior notes, net	1,143,314		1,142,486		Senior notes, net	994,412		1,143,590
Total liabilities	Total liabilities	1,889,280		1,763,144		Total liabilities	1,760,828		1,822,490
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, par value $0.01. Authorized 125,000,000 shares; 36,571,393 and 37,340,855 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		366		373
Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at September 30, 2023 and December 31, 2022						Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock, par value $0.01. Authorized 125,000,000 shares; 36,449,906 and 36,571,393 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively						Common stock, par value $0.01. Authorized 125,000,000 shares; 36,449,906 and 36,571,393 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	364		366
Additional paid-in capital	Additional paid-in capital	322,442		414,841		Additional paid-in capital	289,109		327,878
Retained earnings	Retained earnings	3,359,002		2,629,175		Retained earnings	4,131,569		3,621,367

Total stockholders’ equity	Total stockholders’ equity	3,681,810		3,044,389		Total stockholders’ equity	4,421,042		3,949,611
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,571,090	$	4,807,533	Total liabilities and stockholders’ equity	$	6,181,870	$	5,772,101

See accompanying notes to unaudited consolidated financial statements

MERITAGE HOMES CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Homebuilding:	Homebuilding:									Homebuilding:
Home closing revenue	Home closing revenue	$	1,569,032	$	1,251,435	$	4,223,435	$	3,596,060	Home closing revenue	$	1,610,317	$	1,569,032	$	4,415,261	$	4,223,435
Land closing revenue	Land closing revenue	8,989		8,470		53,901		25,225		Land closing revenue	2,783		8,989		44,547		53,901
Total closing revenue	Total closing revenue	1,578,021		1,259,905		4,277,336		3,621,285		Total closing revenue	1,613,100		1,578,021		4,459,808		4,277,336
Cost of home closings	Cost of home closings	(1,118,394)		(879,759)		(2,950,409)		(2,612,428)		Cost of home closings	(1,180,742)		(1,118,394)		(3,326,245)		(2,950,409)
Cost of land closings	Cost of land closings	(8,577)		(7,706)		(42,046)		(24,246)		Cost of land closings	(2,535)		(8,577)		(42,682)		(42,046)
Total cost of closings	Total cost of closings	(1,126,971)		(887,465)		(2,992,455)		(2,636,674)		Total cost of closings	(1,183,277)		(1,126,971)		(3,368,927)		(2,992,455)
Home closing gross profit	Home closing gross profit	450,638		371,676		1,273,026		983,632		Home closing gross profit	429,575		450,638		1,089,016		1,273,026
Land closing gross profit	Land closing gross profit	412		764		11,855		979		Land closing gross profit	248		412		1,865		11,855
Total closing gross profit	Total closing gross profit	451,050		372,440		1,284,881		984,611		Total closing gross profit	429,823		451,050		1,090,881		1,284,881
Financial Services:	Financial Services:									Financial Services:
Revenue	Revenue	6,308		5,208		16,119		15,624		Revenue	6,109		6,308		18,050		16,119
Expense	Expense	(2,804)		(2,308)		(7,897)		(6,846)		Expense	(2,871)		(2,804)		(8,910)		(7,897)
Earnings from financial services unconsolidated entities and other, net		1,338		1,324		4,033		3,821
Earnings/(loss) from financial services unconsolidated entities and other, net										Earnings/(loss) from financial services unconsolidated entities and other, net	2,462		1,338		(3,074)		4,033
Financial services profit	Financial services profit	4,842		4,224		12,255		12,599		Financial services profit	5,700		4,842		6,066		12,255
Commissions and other sales costs	Commissions and other sales costs	(77,884)		(68,952)		(212,807)		(210,585)		Commissions and other sales costs	(99,122)		(77,884)		(277,766)		(212,807)
General and administrative expenses	General and administrative expenses	(48,443)		(47,192)		(136,370)		(128,297)		General and administrative expenses	(63,091)		(48,443)		(162,750)		(136,370)

Interest expense	Interest expense	—		(79)		(41)		(246)		Interest expense	—		—		—		(41)
Other (expense)/income, net		(74)		1,268		(849)		3,443
Other income/(expense), net										Other income/(expense), net	13,331		(74)		35,037		(849)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		—		—		(18,188)		Loss on early extinguishment of debt	(907)		—		(907)		—
Earnings before income taxes	Earnings before income taxes	329,491		261,709		947,069		643,337		Earnings before income taxes	285,734		329,491		690,561		947,069
Provision for income taxes	Provision for income taxes	(67,002)		(60,957)		(217,242)		(143,353)		Provision for income taxes	(63,974)		(67,002)		(150,664)		(217,242)
Net earnings	Net earnings	$	262,489	$	200,752	$	729,827	$	499,984	Net earnings	$	221,760	$	262,489	$	539,897	$	729,827
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	7.18	$	5.33	$	19.87	$	13.26	Basic	$	6.06	$	7.18	$	14.72	$	19.87
Diluted	Diluted	$	7.10	$	5.25	$	19.65	$	13.06	Diluted	$	5.98	$	7.10	$	14.55	$	19.65
Weighted average number of shares:	Weighted average number of shares:									Weighted average number of shares:
Basic	Basic	36,569		37,647		36,736		37,703		Basic	36,603		36,569		36,677		36,736
Diluted	Diluted	36,946		38,229		37,136		38,285		Diluted	37,078		36,946		37,109		37,136

See accompanying notes to unaudited consolidated financial statements

MERITAGE HOMES CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	729,827	$	499,984	Net earnings	$	539,897	$	729,827
Adjustments to reconcile net earnings to net cash used in operating activities:
Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities:						Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities:
Depreciation and amortization	Depreciation and amortization	17,545		19,892		Depreciation and amortization	17,576		17,545
Stock-based compensation	Stock-based compensation	16,897		14,435		Stock-based compensation	16,557		16,897
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		18,188		Loss on early extinguishment of debt	907		—
Equity in earnings from unconsolidated entities	Equity in earnings from unconsolidated entities	(3,703)		(2,878)		Equity in earnings from unconsolidated entities	(4,651)		(3,703)

Distributions of earnings from unconsolidated entities	Distributions of earnings from unconsolidated entities	3,785		3,324		Distributions of earnings from unconsolidated entities	5,158		3,785
Other	Other	11,154		(3,085)		Other	1,408		11,154
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Increase in real estate	Increase in real estate	(990,106)		(810,731)		Increase in real estate	(137,543)		(990,106)
Decrease/(increase) in deposits on real estate under option or contract		176		(18,453)
(Increase)/decrease in deposits on real estate under option or contract						(Increase)/decrease in deposits on real estate under option or contract	(17,027)		176
Increase in other receivables, prepaids and other assets	Increase in other receivables, prepaids and other assets	(89,177)		(51,611)		Increase in other receivables, prepaids and other assets	(9,447)		(89,177)
Increase in accounts payable and accrued liabilities	Increase in accounts payable and accrued liabilities	118,636		67,301		Increase in accounts payable and accrued liabilities	37,085		118,636
Increase in home sale deposits	Increase in home sale deposits	15,157		14,928		Increase in home sale deposits	10,172		15,157
Net cash used in operating activities		(169,809)		(248,706)
Net cash provided by/(used in) operating activities						Net cash provided by/(used in) operating activities	460,092		(169,809)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Investments in unconsolidated entities	Investments in unconsolidated entities	(5,674)		(1)		Investments in unconsolidated entities	(3,859)		(5,674)

Distributions of capital from unconsolidated entities						Distributions of capital from unconsolidated entities	43		—
Purchases of property and equipment	Purchases of property and equipment	(19,537)		(17,910)		Purchases of property and equipment	(31,221)		(19,537)
Proceeds from sales of property and equipment	Proceeds from sales of property and equipment	328		404		Proceeds from sales of property and equipment	334		328
Maturities/sales of investments and securities	Maturities/sales of investments and securities	1,032		2,795		Maturities/sales of investments and securities	750		1,032
Payments to purchase investments and securities	Payments to purchase investments and securities	(1,032)		(2,795)		Payments to purchase investments and securities	(750)		(1,032)
Net cash used in investing activities	Net cash used in investing activities	(24,883)		(17,507)		Net cash used in investing activities	(34,703)		(24,883)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayment of loans payable and other borrowings	Repayment of loans payable and other borrowings	(14,953)		(6,308)		Repayment of loans payable and other borrowings	(2,616)		(14,953)
Repayment of senior notes	Repayment of senior notes	—		(317,690)		Repayment of senior notes	(150,884)		—
Proceeds from issuance of senior notes		—		450,000
Payment of debt issuance costs		—		(6,102)

Dividends paid						Dividends paid	(29,695)		—
Repurchase of shares	Repurchase of shares	(109,303)		(37,017)		Repurchase of shares	(55,000)		(109,303)

Net cash (used in)/provided by financing activities		(124,256)		82,883
Net decrease in cash and cash equivalents		(318,948)		(183,330)
Net cash used in financing activities						Net cash used in financing activities	(238,195)		(124,256)
Net increase/(decrease) in cash and cash equivalents						Net increase/(decrease) in cash and cash equivalents	187,194		(318,948)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	618,335		745,621		Cash and cash equivalents, beginning of period	861,561		618,335
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	299,387	$	562,291	Cash and cash equivalents, end of period	$	1,048,755	$	299,387

See Supplemental Disclosure of Cash Flow Information in Note 13.

See accompanying notes to unaudited consolidated financial statements

MERITAGE HOMES CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Organization. Meritage Homes Corporation ("Meritage Homes") is a leading designer and builder of single-family attached and detached homes. We primarily build in historically high-growth regions of the United States and offer a variety of entry-level and first move-up homes. We have ~~homebuilding~~ operations in three regions: West, Central and East, which are comprised of ten states: Arizona, California, Colorado, Utah, Texas, Florida, Georgia, North Carolina, South Carolina, ~~Tennessee~~ and ~~Utah.~~Tennessee. We also operate a financial services reporting segment. In this segment, we offer title and escrow, mortgage, and insurance services. Carefree Title Agency, Inc. ("Carefree Title"), our wholly-owned title company, provides title insurance and closing/settlement services to our ~~homebuyers.~~homebuyers in certain states. Managing our own title operations allows us greater control over the entire escrow and closing cycles in addition to generating additional revenue. Meritage Homes Insurance Agency, Inc. (“Meritage ~~Insurance"~~Insurance”), our wholly-owned insurance broker, works in collaboration with insurance companies nationwide to offer homeowners insurance and other insurance products to our homebuyers. Our financial services ~~operations~~operation also provides mortgage services to our homebuyers through an unconsolidated joint venture.

We commenced our homebuilding operations in 1985 through our predecessor company, Monterey Homes. Meritage Homes Corporation was incorporated in the state of Maryland in 1988 under the name of Homeplex Mortgage Investments Corporation and merged with Monterey Homes in 1996, at which time our name was changed to Monterey Homes Corporation and later ultimately to Meritage Homes Corporation. Since that time, we have engaged in homebuilding and related activities. Meritage Homes Corporation operates as a holding company and has no independent assets or operations. Its homebuilding construction, development and sales activities are conducted through its subsidiaries. Our homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets. At September 30, ~~2022,~~2023, we were actively selling homes in ~~275~~272 communities, with base prices ranging from approximately ~~$250,000~~$231,000 to ~~$1,400,000.~~$1,054,000.

Basis of Presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. The unaudited consolidated financial statements include the accounts of Meritage Homes ~~Corporation~~ and those of our consolidated subsidiaries, partnerships and other entities in which we have a controlling financial interest, and of variable interest entities (see Note 3) in which we are deemed the primary beneficiary (collectively, “us”, “we”, “our” and “the Company”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full fiscal year.

Cash and Cash Equivalents. Liquid investments with an initial maturity of three months or less are classified as cash equivalents. Amounts in transit from title companies or closing agents for home closings of approximately ~~$94.6~~$81.1 million and ~~$95.4~~$161.5 million are included in Cash and cash equivalents at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Real Estate. Real estate inventory is stated at cost unless the community or land is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment (“ASC 360-10”). ~~Inventory~~Real estate inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, and direct overhead costs incurred during development and home construction that benefit the entire community, less impairments, if any. Land and development costs are typically allocated and transferred to homes when home construction begins. Home construction costs are accumulated on a per-home basis, while selling and marketing costs are expensed as incurred. Cost of home closings includes the specific construction costs of the home and all related allocated land acquisition, land development and other common costs (both incurred and estimated to be incurred) that are allocated based upon the total number of homes expected to be closed in each community or phase. Any changes to the estimated total development costs of a community or phase are allocated to the remaining homes in that community or phase. When a home closes, we may have incurred costs for ~~goods~~materials and services that have not yet been paid. We accrue a liability to capture such obligations in connection with the home closing which is charged directly to Cost of home closings.

We capitalize qualifying interest to inventory during the development and construction periods. Capitalized interest is included in ~~cost~~Cost of closings when the related inventory is closed. Included within our ~~real~~Real estate inventory is land held for development and land held for sale. Land held for development primarily represents land and land development costs related to land where development activity is not currently underway but is expected to begin in the future. For these parcels, we have chosen not to currently develop certain land holdings as they typically represent a portion or phases of a larger land parcel that we plan to build out over several years. We do not capitalize interest for these inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred.

We rely on certain estimates to determine our construction and land development costs. Construction and land costs are comprised of direct and allocated costs, including estimated future costs. In determining these costs, we compile project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred. Actual results can differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, sales orders absorptions that differ from our expectations, increases in costs that have not yet been ~~committed,~~contracted, changes in governmental requirements, or other unanticipated issues ~~including weather,~~ encountered during construction and development and other factors beyond our ~~control.~~control, including weather. To address uncertainty in these budgets, we assess, update and revise project budgets on a regular basis, utilizing the most current information available to estimate home construction and land development costs.

Typically, a community's life cycle ranges from three to five years, commencing with the acquisition of the land, continuing through the land development phase, if applicable, and concluding with the construction, sale ~~construction~~ and closing of the homes. Actual community lives will vary based on the size of the community, the sales orders absorption rates and whether the land purchased was raw, partially-developed or in finished status. Master-planned communities encompassing several phases and super-block land parcels may have significantly longer lives and projects involving smaller finished lot purchases may be significantly shorter.

All of our land inventory and related real estate assets are periodically reviewed for recoverability when certain criteria are met, but at least annually, as our inventory is considered “long-lived” in accordance with GAAP. Community-level reviews are performed quarterly to determine if indicators of potential impairment exist. If indicators of potential impairment exist and the undiscounted cash flows expected to be generated by an asset are lower than its carrying amount, impairment charges are recorded to write down the asset to its estimated fair value. The impairment of a community is allocated to each remaining unstarted lot in the community on a straight-line ~~basis.~~basis and is recognized in Cost of home closings in the period in which the impairment is determined. Our determination of fair value is based on projections and estimates. Changes in these expectations may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our ~~assumptions.~~assumptions, although if financial metrics improve, we do not reverse impairments once recorded. See Note 2 for additional information related to real estate.

Deposits. Deposits paid related to land option and purchase contracts are recorded and classified as Deposits on real estate under option or contract until the related land is purchased. Deposits are reclassified as a component of Real estate at the time the deposit is used to offset the acquisition price of the land based on the terms of the underlying agreements. To the extent they are non-refundable, deposits are expensed to Cost of home closings if the land acquisition is terminated or no longer considered probable. Since our acquisition contracts typically do not require specific performance, we do not consider such contracts to be contractual obligations to purchase the land and our total exposure under such contracts is limited to the loss of any non-refundable deposits and any ~~ancillary~~related capitalized costs. Our Deposits on real estate under option or contract were ~~$88.4~~$93.5 million and ~~$90.7~~$76.7 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. See Note 3 for additional information related to Deposits on real estate under option or contract.

Goodwill. In accordance with ASC 350, Intangibles, Goodwill and Other ("ASC 350"), we analyze goodwill on an annual basis (or whenever indication of impairment exists) through a qualitative assessment to determine whether it is necessary to perform a goodwill impairment test. ASC 350 states that an entity may first assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Such qualitative factors include: (1) macroeconomic conditions, such as a deterioration in general economic ~~conditions,~~conditions; (2) industry and market considerations such as deterioration in the environment in which the entity ~~operates,~~operates; (3) cost factors such as increases in raw materials, labor costs, etc.,; and (4) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings. If the qualitative analysis determines that additional impairment testing is required, a two-step impairment test in accordance with ASC 350 would be initiated. We continually evaluate our qualitative inputs to assess whether events and circumstances have occurred that indicate the goodwill balance may not be recoverable. See Note 9 for additional information on our goodwill assets.

Leases. We lease certain office space and equipment for use in our operations. We assess each of these contracts to determine whether the arrangement contains a lease as defined by ASC 842, Leases ("ASC 842"). In order to meet the definition of a lease under ASC 842, the contractual arrangement must convey to us the right to control the use of an identifiable asset for a period of time in exchange for consideration. Leases that meet the criteria of ASC 842 are recorded on

our balance sheets as right-of-use ("ROU") assets and lease liabilities. ROU assets are classified within Prepaids, other assets and goodwill on the accompanying unaudited consolidated balance sheets, while lease liabilities are classified within Accrued liabilities on the accompanying unaudited consolidated balance sheets.

The table below outlines our ROU assets and lease liabilities (in thousands):
As of
September 30, 2022 December 31, 2021
ROU assets $ 19,961 $ 21,038
Lease liabilities 23,998 26,171


	As of
	September 30, 2023		December 31, 2022
ROU assets	$	49,619	$	19,129
Lease liabilities	52,340		22,782

Off-Balance Sheet Arrangements - Joint Ventures. We may participate in land development joint ventures as a means of accessing larger parcels of land, ~~and lot positions,~~ expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital, ~~base,~~ although our participation in such ventures is currently limited. See Note 4 for additional discussion of our investments in unconsolidated entities.

Off-Balance Sheet Arrangements - Other. In the normal course of business, we may acquire lots from various development entities pursuant to purchase and option agreements. The purchase price generally approximates the market price at the date the contract is executed (with possible future escalators) and ~~may have staggered purchase schedules.~~the acquisition of the land is typically staggered. See Note 3 for additional information on these off-balance sheet arrangements.

Surety Bonds and Letters of Credit. We provide surety bonds and letters of credit in support of our obligations relating to the development of our projects and other corporate purposes in lieu of cash deposits. The amount of these obligations outstanding at any time varies depending on the stage and level of our development activities. ~~Bonds~~Surety bonds are generally not wholly released until all development activities under the bond are complete. In the event a bond or letter of credit is drawn upon, we would be obligated to reimburse the issuer for any amounts advanced under the bond or letter of credit. We believe it is unlikely that any significant amounts of these bonds or letters of credit will be drawn upon.

The table below outlines our surety bond and letter of credit obligations (in thousands):


		As of									As of
		September 30, 2022				December 31, 2021					September 30, 2023				December 31, 2022
		Outstanding		Estimated work remaining to complete		Outstanding		Estimated work remaining to complete			Outstanding		Estimated work remaining to complete		Outstanding		Estimated work remaining to complete
Sureties:	Sureties:									Sureties:

Sureties related to owned projects and lots under contract	Sureties related to owned projects and lots under contract	$	852,017	$	528,510	$	620,297	$	352,152	Sureties related to owned projects and lots under contract	$	1,005,561	$	738,545	$	926,928	$	616,028
Total Sureties	Total Sureties	$	852,017	$	528,510	$	620,297	$	352,152	Total Sureties	$	1,005,561	$	738,545	$	926,928	$	616,028
Letters of Credit (“LOCs”):	Letters of Credit (“LOCs”):									Letters of Credit (“LOCs”):

LOCs for land development	LOCs for land development	54,799		N/A		57,396		N/A		LOCs for land development	35,554		N/A		49,442		N/A
LOCs for general corporate operations	LOCs for general corporate operations	5,000		N/A		5,000		N/A		LOCs for general corporate operations	5,000		N/A		5,000		N/A
Total LOCs	Total LOCs	$	59,799	N/A		$	62,396	N/A		Total LOCs	$	40,554	N/A		$	54,442	N/A

Accrued Liabilities. Accrued liabilities at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following (in thousands):
As of
September 30, 2022 December 31, 2021
Accruals related to real estate development and construction activities $ 158,552 $ 115,214
Payroll and other benefits 84,062 102,773
Accrued interest 21,383 5,556
Accrued taxes 12,634 37,297
Warranty reserves 31,715 26,264
Lease liabilities 23,998 26,171
Other accruals 21,168 24,002
Total $ 353,512 $ 337,277


	As of
	September 30, 2023		December 31, 2022
Accruals related to real estate development and construction activities	$	145,467	$	139,447
Payroll and other benefits	107,413		110,338
Accrued interest	18,257		7,026
Accrued taxes	28,674		25,182
Warranty reserves	39,145		35,575
Lease liabilities	52,340		22,782
Other accruals	21,796		20,265
Total	$	413,092	$	360,615

Warranty Reserves. We provide home purchasers with limited warranties against certain building defects and we have certain obligations related to those post-construction warranties for closed homes. The specific terms and conditions of these limited warranties vary by state, but overall the nature of the warranties include a complete workmanship and materials warranty for the first year after the close of the home, a major mechanical warranty for two years after the close of the home and a structural warranty that typically extends up to 10 years after the close of the home. With the assistance of an actuary, we have estimated these reserves for the structural warranty based on the number of homes still under warranty and historical data and trends for our ~~communities.~~geographies. We may use industry data with respect to similar product types and geographic areas in markets where our experience is incomplete to draw a meaningful conclusion. We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available. Based on such reviews of warranty costs incurred, we did not adjust the warranty reserve balance in the three or nine months ended September 30, ~~2022~~2023 or ~~2021.~~2022. Included in the warranty reserve balances at September 30, ~~2022~~2023 and December 31, ~~2021 reflected in the table below~~2022 are case-specific reserves for warranty matters, as discussed in Note 15.

A summary of changes in our warranty reserves follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022			2021			2023		2022		2023		2022
Balance, beginning of period	Balance, beginning of period	$	31,437	$	25,065	$	26,264		$	23,743	Balance, beginning of period	$	36,215	$	31,437	$	35,575	$	26,264
Additions to reserve from new home deliveries	Additions to reserve from new home deliveries	5,583		4,442		15,419			12,766		Additions to reserve from new home deliveries	6,444		5,583		16,832		15,419
Warranty claims		(5,305)		(2,956)		(9,968)		(1)	(9,958)
Warranty claims and recoveries											Warranty claims and recoveries	(3,514)		(5,305)		(13,262)		(9,968)		(1)
Adjustments to pre-existing reserves	Adjustments to pre-existing reserves	—		—		—			—		Adjustments to pre-existing reserves	—		—		—		—
Balance, end of period	Balance, end of period	$	31,715	$	26,551	$	31,715		$	26,551	Balance, end of period	$	39,145	$	31,715	$	39,145	$	31,715

(1) ~~Net of~~Includes recoveries for costs incurred over several years on a foundation design and performance matter that affected a single community in Texas.

Warranty reserves are included in Accrued liabilities on the accompanying unaudited consolidated balance sheets, and additions and adjustments to the reserves are included in Cost of home closings within the accompanying unaudited consolidated income statements. These reserves are intended to cover costs associated with our contractual and statutory warranty obligations, which include, among other items, claims involving defective workmanship and materials. We believe that our total reserves, coupled with our contractual relationships and rights with our trades and the insurance we and our trades maintain, are sufficient to cover our general warranty obligations. However, unanticipated changes in ~~legal,~~regulatory, legislative, weather, environmental or other conditions could have an impact on our actual warranty costs, and future costs could differ significantly from our estimates.

Revenue Recognition. In accordance with ASC 606, Revenue from Contracts with Customers, we apply the following steps in determining the timing and amount of revenue to recognize: (1) identify the contract with our customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if applicable; and (5) recognize revenue when (or as) we satisfy the performance obligations. The performance obligations and subsequent revenue recognition for our three sources of revenue are outlined below:

•Revenue from home closings is recognized when closings have occurred, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives.

•Revenue from land closings is recognized when a significant down payment is received, title passes, and collectability of the receivable, if any, is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow.

•Revenue from financial services is recognized when closings have occurred and all financial services have been rendered, which is generally upon the close of escrow.

Home closing and land closing revenue expected to be recognized in any future year related to remaining performance obligations (if any) and the associated contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material. Revenue from financial services includes estimated future insurance policy renewal commissions as our performance obligations are satisfied upon issuance of the initial policy with a third party broker. The related contract assets for these estimated future renewal commissions are not material at

September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Our three sources of revenue are disaggregated by type in the accompanying unaudited consolidated income statements.

Recent Accounting Pronouncements.

There are no recent accounting pronouncements that are expected to have a material impact on our financial statements or financial statement disclosures.

NOTE 2 — REAL ESTATE AND CAPITALIZED INTEREST

Real estate consists of the following (in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Homes under contract under construction (1)	Homes under contract under construction (1)	$	1,452,691	$	1,039,822	Homes under contract under construction (1)	$	931,820	$	822,428
Unsold homes, completed and under construction (1)	Unsold homes, completed and under construction (1)	986,862		484,999		Unsold homes, completed and under construction (1)	1,027,352		1,155,543
Model homes (1)	Model homes (1)	87,550		81,049		Model homes (1)	112,306		97,198
Finished home sites and home sites under development (2) (3)	Finished home sites and home sites under development (2) (3)	2,199,159		2,128,538		Finished home sites and home sites under development (2) (3)	2,429,880		2,283,094
Total	Total	$	4,726,262	$	3,734,408	Total	$	4,501,358	$	4,358,263

(1)Includes the allocated land and land development costs associated with each lot for these homes.

(2)Includes raw land, land held for development and land held for sale, less impairments, if any. We do not capitalize interest for inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred.

(3)Includes land held for sale of ~~$62.2~~$7.1 million and ~~$62.1~~$66.8 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred to applicable qualifying assets in connection with our real estate development and construction activities. Capitalized interest is allocated to active real estate when incurred and charged to Cost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Capitalized interest, beginning of period	Capitalized interest, beginning of period	$	61,459	$	56,710	$	56,253	$	58,940	Capitalized interest, beginning of period	$	61,078	$	61,459	$	60,169	$	56,253
Interest incurred	Interest incurred	15,179		15,212		45,563		47,625		Interest incurred	14,740		15,179		44,914		45,563
Interest expensed	Interest expensed	—		(79)		(41)		(246)		Interest expensed	—		—		—		(41)
Interest amortized to cost of home and land closings	Interest amortized to cost of home and land closings	(14,548)		(14,550)		(39,685)		(49,026)		Interest amortized to cost of home and land closings	(17,342)		(14,548)		(46,607)		(39,685)
Capitalized interest, end of period	Capitalized interest, end of period	$	62,090	$	57,293	$	62,090	$	57,293	Capitalized interest, end of period	$	58,476	$	62,090	$	58,476	$	62,090

NOTE 3 — VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED

We enter into purchase and option agreements for land or lots as part of the normal course of business. These purchase and option agreements enable us to acquire properties at one or multiple future dates at pre-determined prices. We believe these acquisition structures allow us to better leverage our balance sheet and reduce our financial risk associated with land acquisitions. In accordance with ASC 810, Consolidation, we evaluate all purchase and option agreements for land to determine whether they are a variable interest entity ("VIE"), and if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect ~~such~~its assets and liabilities as Real estate not owned and Liabilities related to real estate not owned, respectively. As a result of our analyses, we determined that as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at September 30, ~~2022~~2023 (dollars in thousands):


		Projected Number of Lots	Purchase Price		Option/ Earnest Money Deposits–Cash				Projected Number of Lots	Purchase Price		Option/ Earnest Money Deposits–Cash
Purchase and option contracts recorded on balance sheet as Real estate not owned	Purchase and option contracts recorded on balance sheet as Real estate not owned	—	$	—	$	—		Purchase and option contracts recorded on balance sheet as Real estate not owned	—	$	—	$	—
Option contracts — non-refundable deposits, committed (1)	Option contracts — non-refundable deposits, committed (1)	9,989	558,694		58,154			Option contracts — non-refundable deposits, committed (1)	7,498	399,674		41,794
Purchase contracts — non-refundable deposits, committed (1)	Purchase contracts — non-refundable deposits, committed (1)	8,427	243,038		19,508			Purchase contracts — non-refundable deposits, committed (1)	7,554	248,934		31,360
Purchase and option contracts —refundable deposits, committed	Purchase and option contracts —refundable deposits, committed	2,102	52,787		1,105			Purchase and option contracts —refundable deposits, committed	996	72,759		4,891
Total committed	Total committed	20,518	854,519		78,767			Total committed	16,048	721,367		78,045
Purchase and option contracts — refundable deposits, uncommitted (2)	Purchase and option contracts — refundable deposits, uncommitted (2)	22,524	743,757		9,661			Purchase and option contracts — refundable deposits, uncommitted (2)	28,416	901,198		15,456
Total lots under contract or option	Total lots under contract or option	43,042	$	1,598,276	$	88,428		Total lots under contract or option	44,464	$	1,622,565	$	93,501
Total purchase and option contracts not recorded on balance sheet (3)	Total purchase and option contracts not recorded on balance sheet (3)	43,042	$	1,598,276	$	88,428	(4)	Total purchase and option contracts not recorded on balance sheet (3)	44,464	$	1,622,565	$	93,501	(4)

(1)Deposits are non-refundable except if certain contractual conditions are not performed by the selling party.

(2)Deposits are refundable at our sole discretion. We have not completed our acquisition evaluation process and we have not internally committed to purchase these lots.

(3)Except for our specific performance contracts recorded on the accompanying unaudited consolidated balance sheets as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots.

(4)Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of September 30, ~~2022.~~2023.

Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots on a pre-determined schedule in accordance with each ~~month or quarter, as determined by the~~ respective agreement. Although the pre-established number is typically structured to approximate our expected rate of home construction starts, during a weakened homebuilding market, we may purchase lots at an absorption level that exceeds our expected orders and home starts pace to meet the pre-established minimum number of lots or restructure our original contract to terms that more accurately reflect our revised orders pace expectations. During a strong homebuilding market, we may accelerate our pre-established minimum purchases if allowed by the contract.

NOTE 4 - INVESTMENTS IN UNCONSOLIDATED ENTITIES

We may enter into joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital. While purchasing land through a joint venture can be beneficial, currently we do not view joint ventures as critical to the success of our homebuilding operations. Our joint venture partners generally are other homebuilders, land sellers or other real estate investors. We generally do not have a controlling interest in these ventures, which means our joint venture partners could cause the venture to take actions we disagree with or fail to take actions we believe should be undertaken, including the sale of the underlying property to repay debt or recoup all or part of the partners' investments. Based on the structure of these joint ventures, they may or may not be consolidated into our results. As of September 30, ~~2022,~~2023, we had two active equity-method land joint ventures and one mortgage joint venture, which is engaged in mortgage activities and primarily provides services to our homebuyers.

Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash	Cash	$	2,768	$	7,983	Cash	$	3,855	$	3,389
Real estate	Real estate	17,628		7,989		Real estate	24,743		17,965
Other assets	Other assets	7,844		3,903		Other assets	5,971		11,653
Total assets	Total assets	$	28,240	$	19,875	Total assets	$	34,569	$	33,007
Liabilities and equity:	Liabilities and equity:					Liabilities and equity:
Accounts payable and other liabilities	Accounts payable and other liabilities	$	6,870	$	7,899	Accounts payable and other liabilities	$	6,352	$	11,397

Equity of:	Equity of:					Equity of:
Meritage (1)	Meritage (1)	10,195		4,752		Meritage (1)	14,157		10,356
Other	Other	11,175		7,224		Other	14,060		11,254
Total liabilities and equity	Total liabilities and equity	$	28,240	$	19,875	Total liabilities and equity	$	34,569	$	33,007


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue	$	12,083	$	10,070	$	31,161	$	29,173	Revenue	$	12,715	$	12,083	$	33,941	$	31,161
Costs and expenses	Costs and expenses	(9,535)		(8,171)		(25,743)		(24,700)		Costs and expenses	(9,937)		(9,535)		(27,387)		(25,743)
Net earnings of unconsolidated entities	Net earnings of unconsolidated entities	$	2,548	$	1,899	$	5,418	$	4,473	Net earnings of unconsolidated entities	$	2,778	$	2,548	$	6,554	$	5,418
Meritage’s share of pre-tax earnings (1) (2)	Meritage’s share of pre-tax earnings (1) (2)	$	1,558	$	1,071	$	3,750	$	2,878	Meritage’s share of pre-tax earnings (1) (2)	$	1,770	$	1,558	$	4,652	$	3,750

(1)Balance represents Meritage’s interest, as reflected in the financial records of the respective joint ventures. This balance may differ from the balance reported in the accompanying unaudited consolidated financial statements due to the following reconciling items: (i) timing differences for revenue and distributions ~~recognition,~~recognition; (ii) step-up basis and corresponding ~~amortization,~~amortization; (iii) capitalization of interest on qualified ~~assets,~~assets; (iv) income deferrals as discussed in Note (2) ~~below~~below; and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses.

(2)Our share of pre-tax ~~earnings~~earnings/(loss) from our mortgage joint venture is recorded in ~~Earnings~~Earnings/(loss) from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements. Our share of pre-tax ~~earnings~~earnings/(loss) from all other joint ventures is recorded in Other income/(expense)~~/income,~~, net on the accompanying unaudited consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any. Such profit is deferred until homes are delivered by us and title passes to a homebuyer.

NOTE 5 — LOANS PAYABLE AND OTHER BORROWINGS

Loans payable and other borrowings consist of the following (in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Other borrowings, real estate notes payable (1)	Other borrowings, real estate notes payable (1)	$	12,460	$	17,552	Other borrowings, real estate notes payable (1)	$	11,008	$	7,057
$780.0 million unsecured revolving credit facility		—		—
$835.0 million unsecured revolving credit facility						$835.0 million unsecured revolving credit facility	—		—
Total	Total	$	12,460	$	17,552	Total	$	11,008	$	7,057

(1)Reflects balance of non-recourse notes payable in connection with land purchases.

The Company entered into an amended and restated unsecured revolving credit facility agreement ("Credit Facility") in 2014 that has been amended from time to time. In ~~December 2021,~~June 2023, the Credit Facility was amended to increase the facility size to $835.0 million, extend the maturity date to ~~December 22, 2026 and replace LIBOR as~~June 2, 2028, amend the ~~benchmark interest rate with the Secured Overnight Financing Rate ("SOFR") as described below. The Credit Facility's aggregate commitment is $780.0 million with an~~ accordion feature ~~permitting~~to permit the facility to increase by up to fifty percent of the facility size, increase the letter of credit sublimit up to the maximum size of the facility, eliminate the

liquidity and interest coverage covenant and adjust certain covenant basket amounts. The Credit Facility's aggregate commitment is $835.0 million with an accordion feature permitting the size of the facility to increase to a maximum of ~~$880.0 million,~~$1.3 billion, subject to certain conditions, including the availability of additional bank commitments. Borrowings under the Credit Facility bear interest at the Company's option, at either (1) term SOFR (based on 1, 3, or 6 month interest periods, as selected by the Company) plus a 10 basis point adjustment plus an applicable margin (ranging from 125 basis points to 175 basis points (the "applicable margin")) based on the Company's leverage ratio as determined in accordance with a pricing grid, (2) the higher of (i) the prime lending rate ("Prime"), (ii) an overnight bank rate plus 50 basis points and (iii) term SOFR (based on a 1 month interest period) plus a 10 basis point adjustment plus 1%, in each case plus a margin ranging from 25 basis points to 75 basis points based on the Company's leverage in accordance with a pricing grid, or (3) daily simple SOFR plus a 10 basis point adjustment plus the applicable margin. At September 30, ~~2022,~~2023, the interest rate on outstanding borrowings under the Credit Facility would have been ~~4.390%~~6.670% per annum, calculated in accordance with option (1) ~~discussed previously~~noted above and using the ~~1 month~~1-month term SOFR. We are obligated to pay a fee on the undrawn portion of the Credit Facility at a rate ~~equal to the applicable margin then in effect.~~determined by a tiered fee matrix based on our leverage ratio.

The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of ~~$1.9~~$2.8 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%. In addition, we are required to maintain either (i) an interest coverage ratio (EBITDA to interest expense, as defined therein) of at least 1.50 to 1.00 or (ii) liquidity (as defined therein) of an amount not less than our consolidated interest incurred during the trailing 12 months. We were in compliance with all Credit Facility covenants as of September 30, ~~2022.~~2023.

We had no outstanding borrowings under the Credit Facility as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. We had no borrowings or repayments under the Credit Facility during the three and nine months ended September 30, 2023, and $40.0 million in borrowings and repayments during the three and nine months ended September 30, ~~2022, and no borrowings or repayments during the three and nine months ended September 30, 2021.~~2022. As of September 30, ~~2022,~~2023, we had outstanding letters of credit issued under the Credit Facility totaling ~~$59.8~~$40.6 million, leaving ~~$720.2~~$794.4 million available under the Credit Facility to be drawn.

NOTE 6 — SENIOR NOTES, NET

Senior notes, net consist of the following (in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
6.00% senior notes due 2025. At September 30, 2022 and December 31, 2021 there was approximately $2,182 and $2,795 in net unamortized premium, respectively.		402,182		402,795
6.00% senior notes due 2025. At September 30, 2023 and December 31, 2022 there was approximately $1,169 and $1,977 in net unamortized premium, respectively.						6.00% senior notes due 2025. At September 30, 2023 and December 31, 2022 there was approximately $1,169 and $1,977 in net unamortized premium, respectively.	251,169		401,977
5.125% senior notes due 2027	5.125% senior notes due 2027	300,000		300,000		5.125% senior notes due 2027	300,000		300,000
3.875% senior notes due 2029	3.875% senior notes due 2029	450,000		450,000		3.875% senior notes due 2029	450,000		450,000
Net debt issuance costs	Net debt issuance costs	(8,868)		(10,309)		Net debt issuance costs	(6,757)		(8,387)
Total	Total	$	1,143,314	$	1,142,486	Total	$	994,412	$	1,143,590

The indentures for all of our senior notes contain non-financial covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers. We were in compliance with all such covenants as of September 30, ~~2022.~~2023.

Obligations to pay principal and interest on the senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100% owned by Meritage Homes Corporation. Such guarantees are full and unconditional, and joint and several. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the equity interests of any Guarantor then held by Meritage and its subsidiaries, then that Guarantor may be released and relieved of any obligations under its note guarantee. There are no significant restrictions on our ability or the ability of any Guarantor to obtain funds from their respective subsidiaries, as applicable, by dividend or loan. We do not provide separate financial statements of the Guarantor Subsidiaries because Meritage (the parent company) has no independent assets or operations and the guarantees are full and unconditional and joint and several. Subsidiaries of Meritage Homes Corporation that are non-guarantor subsidiaries are, individually and in the aggregate, minor.

In ~~April 2021,~~September 2023, we ~~completed an offering~~partially redeemed $150.0 million of ~~$450.0 million aggregate principal amount of 3.875%~~our 6.00% Senior Notes due ~~2029. We used a portion of the net proceeds from this offering to redeem all $300.0 million aggregate principal outstanding of our 7.00% Senior Notes due 2022,~~2025 (the "2025 Notes"), incurring ~~$18.2~~$0.9 million in early debt extinguishment charges in the three and nine months ended September 30, ~~2021,~~2023, reflected as Loss on early extinguishment of debt in the accompanying unaudited consolidated income statements. After the partial redemption, the 2025 Notes have $250.0 million in remaining principal outstanding.

NOTE 7 — FAIR VALUE DISCLOSURES

ASC 820-10, Fair Value Measurement ("ASC 820"), defines fair value, establishes a framework for measuring fair value and addresses required disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to the Company while unobservable inputs are generally developed internally, utilizing management’s estimates, assumptions and specific knowledge of the assets/liabilities and related markets. The three levels are defined as follows:

•Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.

•Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market.

•Level 3 — Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the company’s own estimates about the assumptions that market participants would use to value the asset or liability.

If the only observable inputs are from inactive markets or for transactions which the Company evaluates as “distressed”, the use of Level 1 inputs should be modified by the Company to properly address these factors, or the reliance of such inputs may be limited, with a greater weight attributed to Level 3 inputs.

Financial Instruments: The fair value of our fixed-rate debt is derived from quoted market prices by independent dealers (Level 2 inputs as per the discussion above) and is as follows (in thousands):


		As of									As of
		September 30, 2022				December 31, 2021					September 30, 2023				December 31, 2022
		Aggregate Principal		Estimated Fair Value		Aggregate Principal		Estimated Fair Value			Aggregate Principal		Estimated Fair Value		Aggregate Principal		Estimated Fair Value
6.00% senior notes due 2025	6.00% senior notes due 2025	$	400,000	$	388,000	$	400,000	$	446,520	6.00% senior notes due 2025	$	250,000	$	245,625	$	400,000	$	397,520
5.125% senior notes due 2027	5.125% senior notes due 2027	$	300,000	$	267,000	$	300,000	$	329,640	5.125% senior notes due 2027	$	300,000	$	283,140	$	300,000	$	283,500
3.875% senior notes due 2029	3.875% senior notes due 2029	$	450,000	$	357,750	$	450,000	$	472,500	3.875% senior notes due 2029	$	450,000	$	387,090	$	450,000	$	380,610

Due to the short-term nature of other financial assets and liabilities, including our Loans payable and other borrowings, we consider the carrying amounts of our other short-term financial instruments to approximate fair value.

Non-Financial Instruments: Our Real estate assets are Level 3 instruments that are required to be recorded at fair value on non-recurring basis when events and circumstances indicate that the carrying value may not be recoverable. Refer to Note 1 for information regarding the valuation of these assets.

NOTE 8 — EARNINGS PER SHARE

Basic and diluted earnings per common share were calculated as follows (in thousands, except per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	36,569		37,647		36,736		37,703		Basic weighted average number of shares outstanding	36,603		36,569		36,677		36,736
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:

Unvested restricted stock	Unvested restricted stock	377		582		400		582		Unvested restricted stock	475		377		432		400
Diluted average shares outstanding	Diluted average shares outstanding	36,946		38,229		37,136		38,285		Diluted average shares outstanding	37,078		36,946		37,109		37,136
Net earnings	Net earnings	$	262,489	$	200,752	$	729,827	$	499,984	Net earnings	$	221,760	$	262,489	$	539,897	$	729,827

Basic earnings per share	Basic earnings per share	$	7.18	$	5.33	$	19.87	$	13.26	Basic earnings per share	$	6.06	$	7.18	$	14.72	$	19.87
Diluted earnings per share	Diluted earnings per share	$	7.10	$	5.25	$	19.65	$	13.06	Diluted earnings per share	$	5.98	$	7.10	$	14.55	$	19.65

NOTE 9 — ACQUISITIONS AND GOODWILL

Goodwill. In prior years, we have entered new markets through the acquisition of the homebuilding assets and operations of local/regional homebuilders in Georgia, South Carolina and Tennessee. As a result of these transactions, we recorded approximately $33.0 million of goodwill. Goodwill represents the excess purchase price of our acquisitions over the fair value of the net assets acquired. Our acquisitions were recorded in accordance with ASC 805, Business Combinations, and ASC 820, using the acquisition method of accounting. The purchase price for acquisitions was allocated based on estimated fair value of the assets and liabilities at the date of the acquisition. The combined excess purchase price of our acquisitions over the fair value of the net assets is classified as goodwill and is included in our unaudited consolidated balance sheets in Prepaids, other assets and goodwill. In accordance with ASC 350, we assess the recoverability of goodwill annually, or more frequently, if impairment indicators are present.

A summary of the carrying amount of goodwill follows (in thousands):
West Central East Financial Services Corporate Total
Balance at December 31, 2021 $ — $ — $ 32,962 $ — $ — $ 32,962
Additions — — — — — —
Balance at September 30, 2022 $ — $ — $ 32,962 $ — $ — $ 32,962


	West		Central		East		Financial Services		Corporate		Total
Balance at December 31, 2022	$	—	$	—	$	32,962	$	—	$	—	$	32,962
Additions	—		—		—		—		—		—

Balance at September 30, 2023	$	—	$	—	$	32,962	$	—	$	—	$	32,962

NOTE 10 — STOCKHOLDERS’ EQUITY

A summary of changes in stockholders’ equity is presented below (in thousands):

Nine Months Ended September 30, 2022
(In thousands)
Number of
Shares Common
Stock Additional
Paid-In
Capital Retained
Earnings Total
Balance at December 31, 2021 37,341 $ 373 $ 414,841 $ 2,629,175 $ 3,044,389
Net earnings — — — 217,254 217,254
Stock-based compensation expense — — 5,975 — 5,975
Issuance of stock 392 4 (4) — —
Share repurchases (1,038) (10) (99,293) — (99,303)
Balance at March 31, 2022 36,695 $ 367 $ 321,519 $ 2,846,429 $ 3,168,315
Net earnings — — — 250,084 250,084
Stock-based compensation expense — — 4,070 — 4,070
Share repurchases (128) (1) (9,999) — (10,000)
Balance at June 30, 2022 36,567 $ 366 $ 315,590 $ 3,096,513 $ 3,412,469
Net earnings — — — 262,489 262,489
Stock-based compensation expense — — 6,852 — 6,852
Issuance of stock 4 — — — —
Share repurchases — — — — —
Balance at September 30, 2022 36,571 $ 366 $ 322,442 $ 3,359,002 $ 3,681,810


	Nine Months Ended September 30, 2023
	(In thousands)
	Number of Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Total
Balance at December 31, 2022	36,571	$	366	$	327,878	$	3,621,367	$	3,949,611
Net earnings	—	—		—		131,301		131,301
Stock-based compensation expense	—	—		6,225		—		6,225
Issuance of stock	287	3		(3)		—		—
Dividends declared	—	—		—		(9,927)		(9,927)
Share repurchases	(93)	(1)		(9,999)		—		(10,000)
Balance at March 31, 2023	36,765	$	368	$	324,101	$	3,742,741	$	4,067,210
Net earnings	—	—		—		186,836		186,836
Stock-based compensation expense	—	—		4,176		—		4,176

Dividends declared	—	—		—		(9,927)		(9,927)

Balance at June 30, 2023	36,765	$	368	$	328,277	$	3,919,650	$	4,248,295
Net earnings	—	—		—		221,760		221,760
Stock-based compensation expense	—	—		6,156		—		6,156
Dividends declared	—	—		—		(9,841)		(9,841)
Issuance of stock	4	—		—		—		—
Share repurchases	(319)	(4)		(45,324)		—		(45,328)
Balance at September 30, 2023	36,450	$	364	$	289,109	$	4,131,569	$	4,421,042


		Nine Months Ended September 30, 2021														Nine Months Ended September 30, 2022
		(In thousands)														(In thousands)
		Number of Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Total			Number of Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Total
Balance at December 31, 2020		37,512		$	375		$	455,762		$	1,891,731		$	2,347,868
Balance at December 31, 2021															Balance at December 31, 2021	37,341	$	373	$	414,841	$	2,629,175	$	3,044,389
Net earnings	Net earnings	—		—			—			131,843			131,843		Net earnings	—	—		—		217,254		217,254
Stock-based compensation expense	Stock-based compensation expense	—		—			5,367			—			5,367		Stock-based compensation expense	—	—		5,975		—		5,975
Issuance of stock	Issuance of stock	435		4			(4)			—			—		Issuance of stock	392	4		(4)		—		—

Share repurchases	Share repurchases	(100)		(1)			(8,384)			—			(8,385)		Share repurchases	(1,038)	(10)		(99,293)		—		(99,303)
Balance at March 31, 2021		37,847		$	378		$	452,741		$	2,023,574		$	2,476,693
Balance at March 31, 2022															Balance at March 31, 2022	36,695	$	367	$	321,519	$	2,846,429	$	3,168,315
Net earnings	Net earnings	—		—			—			167,389			167,389		Net earnings	—	—		—		250,084		250,084
Stock-based compensation expense	Stock-based compensation expense	—		—			3,223			—			3,223		Stock-based compensation expense	—	—		4,070		—		4,070

Share repurchases	Share repurchases	(200)		(2)			(19,159)			—			(19,161)		Share repurchases	(128)	(1)		(9,999)		—		(10,000)
Balance at June 30, 2021		37,647	—	376		—	436,805		—	2,190,963		—	2,628,144
Balance at June 30, 2022															Balance at June 30, 2022	36,567	$	366	$	315,590	$	3,096,513	$	3,412,469
Net earnings	Net earnings	—		—			—			200,752			200,752		Net earnings	—	—		—		262,489		262,489
Stock-based compensation expense	Stock-based compensation expense	—		—			5,845			—			5,845		Stock-based compensation expense	—	—		6,852		—		6,852
Issuance of stock	Issuance of stock	3		—			—			—			—		Issuance of stock	4	—		—		—		—
Share repurchases		(95)		—			(9,471)			—			(9,471)
Balance at September 30, 2021		37,555		$	376		$	433,179		$	2,391,715		$	2,825,270

Balance at September 30, 2022															Balance at September 30, 2022	36,571	$	366	$	322,442	$	3,359,002	$	3,681,810

During the three months ended September 30, 2023, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $0.27 per share. Quarterly dividends declared and paid during the nine months ended September 30, 2023 totaled $0.81 per share. There were no such transactions in the three and nine months ended September 30, 2022. The Inflation Reduction Act of 2022 ("IRA"), which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three and nine months ended September 30, 2023, we reflected the applicable excise tax in Additional paid-in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in Accrued liabilities on the accompanying unaudited consolidated balance sheets.

NOTE 11 — STOCK BASED AND DEFERRED COMPENSATION

We have a stock compensation plan, the Meritage Homes Corporation 2018 Stock Incentive Plan (the “2018 Plan"), that was approved by our Board of Directors and our stockholders and adopted in May 2018. In May 2023, the Board of Directors and stockholders approved an amendment to the Plan to increase the number of shares available for issuance by 800,000. The 2018 Plan is administered by our Board of Directors and allows for the grant of stock appreciation rights, restricted stock awards, restricted stock units, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. All available shares from expired, terminated, or forfeited awards that remained under prior plans were merged into and became available for grant under the 2018 Plan. The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants. The 2018 Plan authorizes ~~6,600,000~~7,400,000 shares of stock to be awarded, of which ~~731,405~~1,340,233 shares remain available for grant at September 30, ~~2022.~~2023. We believe that such awards provide a means of ~~performance-based~~long-term compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards are usually granted with a five-year ratable vesting period for employees, a three-year cliff vesting for both restricted stock and performance-based awards granted to senior executive officers and either a three-year cliff vesting or one-year vesting for non-employee directors, dependent on their start date.

Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award. Compensation cost related to performance-based restricted stock awards is also measured as of the closing price on the date of grant but is expensed in accordance with ASC 718-10-25-20, Compensation – Stock Compensation ("ASC 718"), which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that the performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense recorded on a straight-line basis through the end of the award vesting period. A portion of the performance-based restricted stock awards granted to our executive officers contain market conditions as defined by ASC 718. ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a

derived grant date fair value and expensed over the service period. We engage a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is expensed straight-line over the service period of the awards. Below is a summary of stock-based

compensation expense and stock award activity (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Stock-based compensation expense $ 6,852 $ 5,845 $ 16,897 $ 14,435
Non-vested shares granted 13,478 4,114 278,340 225,666
Performance-based non-vested shares granted 3,322 — 43,326 46,593
Performance-based shares issued in excess of target shares granted (1)
— — 37,146 37,425
Restricted stock awards vested (includes performance-based awards) 4,418 3,615 396,578 438,344


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Stock-based compensation expense	$	6,156	$	6,852	$	16,557	$	16,897
Non-vested shares granted	4,151		13,478		184,563		278,340
Performance-based non-vested shares granted	—		3,322		42,964		43,326

Performance-based shares issued in excess of target shares granted (1)	—		—		26,167		37,146
Restricted stock awards vested (includes performance-based awards)	4,355		4,418		291,526		396,578

(1)Performance-based shares that vested and were issued as a result of performance achievement exceeding the originally established targeted number of shares related to respective performance metrics.

The following table includes additional information regarding our stock compensation plan (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Unrecognized stock-based compensation cost	Unrecognized stock-based compensation cost	$	33,823	$	25,007	Unrecognized stock-based compensation cost	$	32,844	$	29,187
Weighted average years expense recognition period	Weighted average years expense recognition period	2.02		1.97		Weighted average years expense recognition period	1.97		1.98
Total equity awards outstanding (1)	Total equity awards outstanding (1)	803,769		883,280		Total equity awards outstanding (1)	703,415		803,769

(1)Includes unvested restricted stock awards, restricted stock units and performance-based awards (assuming 100%/target payout).

We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k) plans, impose on highly compensated employees. We do not currently offer a contribution match on the deferred compensation plan. All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the three orand nine months ended September 30, ~~2022~~2023 or ~~2021,~~2022, other than minor administrative costs.

NOTE 12 — INCOME TAXES

Components of the income tax provision are as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Federal	Federal	$	54,114	$	47,955	$	177,577	$	115,781	Federal	$	52,845	$	54,114	$	121,116	$	177,577
State	State	12,888		13,002		39,665		27,572		State	11,129		12,888		29,548		39,665
Total	Total	$	67,002	$	60,957	$	217,242	$	143,353	Total	$	63,974	$	67,002	$	150,664	$	217,242

The effective tax rate for the three and nine months ended September 30, ~~2022~~2023 was ~~20.3%~~22.4% and ~~22.9%~~21.8%, and for the three and nine months ended September 30, ~~2021~~2022 was ~~23.3%~~20.3% and ~~22.3%~~22.9%, respectively. The ~~lower~~higher tax rate for the three months ended September 30, ~~2022~~2023 compared to the ~~same~~2022 period ~~in 2021~~ is due to the retroactive extension of the ~~new~~§45L energy-efficient homes ~~credits for~~federal tax credit on qualifying homes ~~closed in the first half of 2022, described below. The 2021 rates benefited from the Taxpayer Certainty and Disaster Tax Relief Act that was passed in December 2019 and expired on December 31, 2021.~~

~~On August 16, 2022, the Inflation Reduction Act of 2022 ("the IRA") was signed into law. The IRA retroactively extended~~under the Internal Revenue Code ("IRC") ~~§45L new energy-efficient homes federal~~enacted in the IRA in third quarter of 2022, which includes a nine-month catch up in the third quarter of 2022. The lower effective tax ~~credit to homes delivered from January 1, 2022 through December 31, 2032, and also modifies the energy standards required to qualify~~rate for the ~~tax credit and increases~~nine months ended September 30, 2023 compared to the 2022 period reflects the increased per-home energy-efficiency credit amount starting in 2023. As a result of the adoption of the IRA, the effective tax rates for the three and nine months ended September 30, 2022 reflect the benefit of the new energy-efficient homes credits on qualifying homes we delivered during 2022. The IRA, among other provisions, also creates a 15% corporate alternative minimum tax on certain profits and a 1% excise tax on stock repurchases, which will be effective for us on January 1, 2023, and we do not expect to have a material impact on our consolidated financial statements.

At September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we have no unrecognized tax benefits. We believe our current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in the provision for income taxes.

We determine our deferred tax assets and liabilities in accordance with ASC 740, Income Taxes. We evaluate our deferred tax assets, including the benefit from net operating losses ("NOLs"), by jurisdiction to determine if a valuation allowance is required. Companies must assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This ~~assessment~~evaluation considers, among other matters, the nature, frequency and severity of cumulative losses, forecasts of future profitability, the length of statutory carry forward periods, experiences with operating losses and experiences of utilizing tax credit carry forwards and tax planning alternatives. We have no NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets ~~and no NOL carryovers~~is necessary at September 30, ~~2022.~~2023.

At September 30, ~~2022,~~2023, we have $16.1 million in income taxes ~~receivable of $3.7 million~~payable and no ~~incomes tax payable.~~income taxes receivable. The income taxes ~~receivable~~payable primarily consists ~~of estimated tax payments, net~~ of current federal and state tax accruals, ~~and~~net of current energy tax ~~credits. This amount~~credits and estimated tax payments and is recorded in ~~Other receivables~~Accrued liabilities on the accompanying unaudited consolidated balance sheets at September 30, ~~2022.~~

2023. We conduct business and are subject to tax in the U.S. both federally and in several states. With few exceptions, we are no longer subject to U.S. federal, state, or local income tax examinations by taxing authorities for years prior to ~~2017.~~2018. We have ~~no federal or~~one state income tax ~~examinations being conducted~~examination covering various years pending resolution at this time.

NOTE 13 — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following table presents certain supplemental cash flow information (in thousands):


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash paid during the year for:	Cash paid during the year for:					Cash paid during the year for:
Interest, net of interest capitalized	Interest, net of interest capitalized	$	(16,119)	$	(14,451)	Interest, net of interest capitalized	$	(12,900)	$	(16,119)
Income taxes paid	Income taxes paid	$	242,994	$	152,843	Income taxes paid	$	145,020	$	242,994
Non-cash operating activities:	Non-cash operating activities:					Non-cash operating activities:

Real estate acquired through notes payable	Real estate acquired through notes payable	$	9,861	$	2,199	Real estate acquired through notes payable	$	6,567	$	9,861
ROU assets obtained in exchange for new operating lease obligations						ROU assets obtained in exchange for new operating lease obligations	$	36,266	$	4,011

NOTE 14 — OPERATING AND REPORTING SEGMENTS

We operate with two principal business segments: homebuilding and financial services. As defined in ASC 280-10, Segment Reporting, we have ten homebuilding operating segments. The homebuilding segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity. Our ~~current~~three reportable homebuilding segments are as follows:


			West:			Arizona, California, Colorado and Utah
			Central:			Texas
			East:			Florida, Georgia, North Carolina, South Carolina and Tennessee

Management’s evaluation of segment performance is based on homebuilding segment operating income, which we define as home and land closing revenue less cost of home and land closings, including land development and other land sales costs, commissions and other sales costs, and other general and administrative costs incurred by or allocated to each segment, including impairments. Each reportable segment follows the same accounting policies described in Note 1, “Organization and Basis of Presentation.” Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented.

The following segment information is in thousands:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Homebuilding revenue (1):	Homebuilding revenue (1):									Homebuilding revenue (1):
West	West	$	598,147	$	460,089	$	1,580,456	$	1,305,684	West	$	606,833	$	598,147	$	1,569,947	$	1,580,456
Central	Central	500,582		383,206		1,280,242		1,109,228		Central	454,228		500,582		1,338,387		1,280,242
East	East	479,292		416,610		1,416,638		1,206,373		East	552,039		479,292		1,551,474		1,416,638
Consolidated total	Consolidated total	$	1,578,021	$	1,259,905	$	4,277,336	$	3,621,285	Consolidated total	$	1,613,100	$	1,578,021	$	4,459,808	$	4,277,336
Homebuilding segment operating income:	Homebuilding segment operating income:									Homebuilding segment operating income:
West	West	$	121,060	$	95,167	$	357,319	$	238,356	West	$	94,885	$	121,060	$	185,977	$	357,319
Central	Central	112,141		90,579		287,604		232,537		Central	84,575		112,141		233,357		287,604
East	East	104,872		83,853		317,815		207,509		East	109,318		104,872		273,711		317,815
Total homebuilding segment operating income	Total homebuilding segment operating income	338,073		269,599		962,738		678,402		Total homebuilding segment operating income	288,778		338,073		693,045		962,738
Financial services segment profit	Financial services segment profit	4,842		4,224		12,255		12,599		Financial services segment profit	5,700		4,842		6,066		12,255
Corporate and unallocated costs (2)	Corporate and unallocated costs (2)	(13,350)		(13,303)		(27,034)		(32,673)		Corporate and unallocated costs (2)	(21,168)		(13,350)		(42,680)		(27,034)
Interest expense	Interest expense	—		(79)		(41)		(246)		Interest expense	—		—		—		(41)
Other (expense)/ income, net		(74)		1,268		(849)		3,443
Other income/(expense), net										Other income/(expense), net	13,331		(74)		35,037		(849)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		—		—		(18,188)		Loss on early extinguishment of debt	(907)		—		(907)		—
Earnings before income taxes	Earnings before income taxes	$	329,491	$	261,709	$	947,069	$	643,337	Earnings before income taxes	$	285,734	$	329,491	$	690,561	$	947,069

(1)Homebuilding revenue includes the following land closing revenue, by segment:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Land closing revenue:	Land closing revenue:									Land closing revenue:
West	West	$	8,120	$	8,470	$	40,927	$	21,426	West	$	—	$	8,120	$	26,575	$	40,927
Central	Central	869		—		10,374		3,799		Central	1,541		869		4,019		10,374
East	East	—		—		2,600		—		East	1,242		—		13,953		2,600
Total	Total	$	8,989	$	8,470	$	53,901	$	25,225	Total	$	2,783	$	8,989	$	44,547	$	53,901

(2)Balance consists primarily of corporate costs and ~~numerous~~ shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments.


		At September 30, 2022																	At September 30, 2023
		West			Central			East			Financial Services		Corporate and Unallocated			Total			West			Central			East			Financial Services		Corporate and Unallocated			Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	25,211		$	9,223		$	53,994		$	—	$	—		$	88,428	Deposits on real estate under option or contract	$	17,655		$	12,853		$	62,993		$	—	$	—		$	93,501
Real estate	Real estate	1,910,289			1,409,875			1,406,098			—		—			4,726,262		Real estate	1,664,257			1,231,251			1,605,850			—		—			4,501,358
Investments in unconsolidated entities	Investments in unconsolidated entities	110			2,897			7,381			—		968			11,356		Investments in unconsolidated entities	73			2,833			11,278			—		878			15,062
Other assets	Other assets	72,913		(1)	217,266		(2)	96,315		(3)	610		357,940		(4)	745,044		Other assets	62,498		(1)	259,753		(2)	104,404		(3)	1,320		1,143,974		(4)	1,571,949
Total assets	Total assets	$	2,008,523		$	1,639,261		$	1,563,788		$	610	$	358,908		$	5,571,090	Total assets	$	1,744,483		$	1,506,690		$	1,784,525		$	1,320	$	1,144,852		$	6,181,870

(1)Balance consists primarily of cash and cash equivalents, ~~prepaids and~~ other ~~assets~~receivables and property and equipment, net.

(2)Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets.

(3)Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), prepaids and other assets and property and equipment, net.

(4)Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets.


		At December 31, 2021																	At December 31, 2022
		West			Central			East			Financial Services		Corporate and Unallocated			Total			West			Central			East			Financial Services		Corporate and Unallocated			Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	26,687		$	11,132		$	52,860		$	—	$	—		$	90,679	Deposits on real estate under option or contract	$	21,599		$	8,992		$	46,138		$	—	$	—		$	76,729
Real estate	Real estate	1,571,477			1,076,300			1,086,631			—		—			3,734,408		Real estate	1,775,879			1,298,455			1,283,929			—		—			4,358,263
Investments in unconsolidated entities	Investments in unconsolidated entities	87			2,974			1,707			—		996			5,764		Investments in unconsolidated entities	110			2,866			7,503			—		1,274			11,753
Other assets	Other assets	66,897		(1)	199,791		(2)	102,073		(3)	610		607,311		(4)	976,682		Other assets	99,267		(1)	241,470		(2)	132,181		(3)	1,536		850,902		(4)	1,325,356
Total assets	Total assets	$	1,665,148		$	1,290,197		$	1,243,271		$	610	$	608,307		$	4,807,533	Total assets	$	1,896,855		$	1,551,783		$	1,469,751		$	1,536	$	852,176		$	5,772,101

(1)Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and property and equipment, net.

(2)Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets.

(3)Balance consists primarily of cash and cash equivalents, ~~real estate not owned,~~ goodwill, prepaids and other assets and property and equipment, net.

(4)Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets.

NOTE 15 — COMMITMENTS AND CONTINGENCIES

We are involved in various routine legal and regulatory proceedings, including, without limitation, claims and litigation alleging construction defects. In general, the proceedings are incidental to our business, and most exposure is subject to and should be covered by warranty and indemnity obligations of our consultants and subcontractors. Additionally, some such claims are also covered by insurance. With respect to the majority of pending litigation matters, our ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential material losses related to these matters are not considered probable. Historically, most disputes regarding warranty claims are resolved prior to litigation. We believe there are no pending legal or warranty matters as of September 30, ~~2022~~2023 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.

As discussed in Note 1 under the heading “Warranty Reserves”, we have case specific reserves within our ~~$31.7~~$39.1 million of total warranty reserves related to alleged stucco defects in certain homes we constructed predominantly between 2006 and ~~2017.~~2017 and HVAC condensation issues in limited geographies for homes constructed and delivered in 2021 and the first half of 2022. Our review and ~~handling~~management of ~~this matter~~these matters is ongoing and our estimate of and reserves for resolving ~~this matter~~them is based on internal data, historical experience, our judgment and various assumptions and estimates. Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate and thus our related reserves. As of September 30, ~~2022,~~2023, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we believe our reserves are sufficient to cover the above mentioned matter. See Note 1 for information related to our warranty obligations.

Special Note of Caution Regarding Forward-Looking Statements

In passing the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Congress encouraged public companies to make “forward-looking statements” by creating a safe-harbor to protect companies from securities law liability in connection with forward-looking statements. We intend to qualify both our written and oral forward-looking statements for protection under the PSLRA.

The words “believe,” “expect,” “anticipate,” “forecast,” “plan,” “intend,” “may,” “will,” “should,” “could,” “estimate,” "target," and “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. All statements we make other than statements of historical fact are forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements in this Annual Report include statements concerning our belief that we have ample liquidity; our goals, strategies and strategic initiatives including our all-spec strategy ~~for entry-level homes~~ and the anticipated benefits relating thereto; our intentions and the expected benefits and advantages of our product and land positioning strategies, including with respect to our focus on the first-time and first move-up home buyer and housing demand for affordable homes; the benefits of and our intentions to use options to acquire land; our ~~delivery of substantially all of our backlog existing as of period end; our~~ positions and our expected outcome relating to litigation and regulatory proceedings in general; our intentions to ~~not~~ pay quarterly dividends; the sustainability of our tax positions; that we may repurchase our debt and equity securities; our non-use of derivative financial instruments; expectations regarding our industry and our business for the remainder of ~~2022~~2023 and ~~beyond, including our all-spec strategy for entry-level homes;~~beyond; the demand for and the pricing of our homes; our land and lot acquisition strategy (including that we will redeploy cash to acquire well-positioned finished lots and that we may participate in joint ventures or opportunities outside of our existing markets if opportunities arise and the benefits relating thereto); that we may expand into new markets; the availability of labor and materials for our operations; that we may seek additional debt or equity capital; our expectation that existing guarantees, letters of credit and performance and surety bonds will not be drawn on; the sufficiency of our insurance coverage and legal and warranty reserves; the outcome of pending litigation; the sources and sufficiency of our capital resources to support our business strategy; the sufficiency of our land pipeline; the impact of new accounting standards and changes in accounting estimates; trends and expectations concerning future demand for homes, home construction cycle times, sales prices, sales orders, cancellations, construction and materials costs and availability, gross margins, land costs, inflation, community counts and profitability and future home supply and inventories; our future cash needs and ~~sources;~~sources, and the impact of ~~seasonality; and our future compliance with debt covenants.~~seasonality.

Important factors that could cause actual results to differ materially from those in forward-looking statements, and that could negatively affect our business include, but are not limited to, the following: increases in mortgage interest rates and the availability and pricing of residential ~~mortgages and the potential benefits of rate locks;~~mortgages; inflation in the cost of materials used to develop communities and construct homes; cancellation rates; supply chain and labor constraints; the ability of our potential buyers to sell their existing homes; our ability to acquire and develop lots may be negatively impacted if we are unable to obtain performance and surety bonds; the ~~ability of our potential buyers to sell their existing homes; legislation related to tariffs; the~~ adverse effect of slow absorption rates; legislation related to tariffs; impairments of our real estate inventory; ~~cancellation rates;~~ competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing if our credit ratings are downgraded; our potential exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; a change to the feasibility of projects under option or contract that could result in the write-down or write-off of earnest money or option deposits; our limited geographic diversification; the replication of our energy-efficient technologies by our competitors; shortages in the availability and cost of subcontract labor; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure of our employees and representatives to comply with laws and regulations; our compliance with government regulations related to our financial services operations; negative publicity that affects our reputation; potential disruptions to our business by an epidemic or pandemic (such as COVID-19), and measures that federal, state and local governments and/or health authorities implement to address it; and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in ~~this Form 10-Q and~~ our Form 10-K for the year ended December 31, ~~2021~~2022 under the caption "Risk Factors."

Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain, as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, the investment community is urged not to place undue reliance on forward-looking statements. In addition, we disclaim and undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Outlook

~~The~~Demand for new homes in the third quarter of ~~2022 saw a continuation~~2023 held steady with that experienced in first half of the ~~housing market deterioration that began in~~year, despite the ~~second quarter, as homebuyers remain concerned about the effects~~persistence of ~~higher~~elevated interest rates and ~~future potential~~high inflation. This environment has homebuyers looking for assistance with monthly mortgage affordability, requiring greater use of financing incentives, including interest rate ~~increases, inflation~~locks and ~~deterioration~~buy-downs. Millennial and baby boomer generations are seeking affordable, move-in ready homes that meet their changing lifestyle needs, which has created elevated demand for new inventory, as existing homeowners with lower mortgage rates are not listing their homes, resulting in ~~the general economy on their personal financial condition and overall affordability following two years~~a short supply of strong home price appreciation. Although these economic conditions are applying current downward pressure on the housing market, we believe favorable homebuyer demographics support long-term stable demand, although at a more normalized pace than what was experienced in 2020 and 2021.total inventory. We believe our all-spec strategy ~~targeting affordable homes offers~~with a commitment to affordability will meet the persisting demographic demand, providing us with ample opportunity to capture and grow our ~~customers readily available inventory which, combined with our financing and other incentives, still provides an attractive opportunity for homeownership.~~market share.

~~Disruptions~~While we have experienced some limited relief in ~~the supply chain have continued to impact production~~material costs, ~~and cycle times in the homebuilding industry as a whole. We have been successful over the past several quarters in offsetting the higher costs with sales price increases~~primarily due to the retraction in lumber commodities, most other home costs have held relatively steady at their elevated ~~buyer demand, although~~levels. Our cost savings year over year were primarily generated by improvements in our construction cycle time. During the third quarter of 2023, we further reduced our construction cycle time by over two weeks as supply chain and labor constraints have ~~experienced elongated cycle times and more recently, have not been able to offset these cost increases as we previously had.~~continuously lessened throughout the year. We continue to ~~carefully navigate this constrained operating environment by expanding~~rebid all of our ~~trade base and strengthening critical relationships~~construction inputs and expect ~~that over time, with lower, normalized volume~~costs to begin to trend down to historical levels as the economy resets into stabilizing inflation rates. Higher land development costs have also begun to impact margins for newer communities and will continue to do so in the ~~homebuilding market, costs will begin to decline and cycle times will shorten.~~

near-to-mid term.

Summary Company Results

We achieved ~~our highest quarterly~~record third quarter home closing revenue ~~in Company history~~and units volume of 3,638 homes valued at $1.6 billion in the third quarter of 2023, improving 4.3% and 2.6%, respectively, year over year. The increase in home closing revenue was driven by the higher volume as the average sales price ("ASP") on ~~3,487 homes closed~~closings decreased 1.6% due to higher incentives. Third quarter home closing gross margin of 26.7% for home closing gross profit of $429.6 million compared to 28.7% and $450.6 million, respectively, in the third quarter of 2022. The 200 basis point margin deterioration is due primarily to increased incentives and higher land development costs, while direct costs held relatively steady. Commissions and other sales costs of $99.1 million in the three months ended September 30, 2023 increased $21.2 million due to the combined effect of higher home closing volume and increased commissions offered in response to the current sales environment. General and administrative expenses of $63.1 million were 3.9% of home closing revenue for the three months ended September 30, ~~2022,~~2023, compared to ~~$1.3 billion~~$48.4 million, or 3.1% of home closing revenue, for the same period in 2022. The increase in General and administrative expenses is due to higher compensation, inclusive of newer market operations and competitive market adjustments. Other income, net of $13.3 million increased from a net other expense of $0.1 million in the prior year primarily due to higher interest rates earned on ~~3,112 homes closed~~a larger cash balance. In September 2023 we partially redeemed $150.0 million of our 2025 Notes, resulting in charges of $0.9 million reflected in Loss on early extinguishment of debt, with no similar charges in 2022. Earnings before income taxes for the third quarter of 2021. This 25.4% increase in home closing revenue year-over-year was driven by the 12.1% higher volume and an 11.9% increase in average sales price ("ASP") on closings. Third quarter home closing gross margin declined 100 basis points to 28.7%, for home closing gross profit2023 of ~~$450.6~~$285.7 million ~~compared to $371.7~~decreased $43.8 million in the third quarter of 2021. The margin deterioration is the combined effect of higher direct costs and increased incentives, as well as $8.8 million of charges related to the write-off of option deposits and due diligence costs on cancelled land contracts as we reassessed our land positions in response to weakening demand. There were only $0.9 million of such charges in the third quarter of 2021. Commissions and other sales costs increased $8.9 million due to higher home closing revenue, although as a percentage of home closing revenue improved 50 basis points in the three months ended September 30, 2022 as compared to prior year, due to lower commission rates. General and administrative expenses increased 2.7%, to $48.4 million during the three months ended September 30, 2022, compared to $47.2 million in the prior year quarter, primarily due to higher headcount. Higher home closing revenue provided leverage on these fixed expenses, and as a result, they improved 70 basis points year over year. Earnings before income taxes are up $67.8 million, or 25.9%, year over year tofrom $329.5 million in 2022. The effective income tax rate for the third quarter of 2023 was 22.4%, compared to 20.3% in 2022. The ~~lower~~2022 effective ~~income~~ tax rate ~~of 20.3% compared to 23.3% in 2021~~ reflects the catch-up of tax credits for energy efficient homes closed in the first ~~half~~nine months of 2022 asfor the ~~Inflation Reduction Act retroactively extended these credits.~~extension of the §45L energy-efficient homes federal tax credit enacted by the IRA in third quarter of 2022. The decrease in year-over-year ~~improved~~ profitability ~~combined with the lower~~and a higher tax rate, resulted in net earnings of $221.8 million in the third quarter of 2023 versus $262.5 million in the third quarter of ~~2022 versus $200.8 million in the third quarter of 2021.~~2022.

~~Year-to-date results reflect a $289.4 million increase in home closing gross profit compared to~~For the nine months ended September 30, ~~2021, and~~2023, home closing volume of 10,025 units increased 4.8% from 2022, leading to a ~~270~~4.5% increase in home closing revenue to $4.4 billion. Home closing gross margin of 24.7% decreased 540 basis ~~point improvement~~points, resulting in a $184.0 million decrease in home closing gross margin due to higher ASPs on closings and leverage of fixed expenses on higher home closing revenue. In the first nine months of 2021, we recognized a loss on early extinguishment of debt of $18.2 million in connection with the early redemption of our 2022 Senior Notes in April 2021. There were no such transactions in the first nine months of 2022. Higher revenue andprofit. Lower gross margin ~~technology-enabled marketing~~ and ~~commission savings and leverage~~profitability, partially offset by a lower effective tax rate of ~~higher home closing revenue on fixed expenses combined~~21.8%, led to net income of ~~$729.8~~$539.9 million for the nine months ended September 30, ~~2022~~2023, compared to ~~$500.0~~$729.8 million for the ~~2021~~2022 period.

Home orders of ~~2,310~~3,474 for the quarter ended September 30, ~~2022~~2023 were ~~32.9% lower~~50.4% higher than the ~~same~~third quarter of 2022, as market conditions stabilized over the ~~prior year, primarily due to an escalated~~last twelve months, increasing consumer confidence and buyer demand, and our cancellation rate ~~of 30%, compared to 10%~~ in the ~~prior year period, as buyers terminated their existing home purchase contracts due to a variety~~third quarter of ~~reasons, including uncertainty about current economic conditions, changes~~2023 of 11% improved significantly from the elevated 30% in ~~personal finances and a shift to resale home inventory due to elongation~~the third quarter of ~~cycle times for new homes. Higher cancellation rates and slowing demand contributed to a 46.0% decline in orders pace to 2.7 per month compared to 5.0 per month in 2021. Gross orders~~2022. Our average active community count decrease of ~~3,291~~2.6% for the third quarter of 2023 was overshadowed by a 51.9% increase in orders pace to 4.1 per month compared to 2.7 in the 2022 ~~were 14% lower than 2021, indicating stable demand still exists for new~~third quarter. Home order value increased 53.5% year-over-year, to $1.5 billion during the three months ended September 30, 2023, versus $1.0 billion in the same period of 2022, due to the

~~homes. Home order value decreased 34.6% year-over-year, to $1.0 billion during the three months ended September 30, 2022, versus $1.5 billion in the same period of 2021, largely due to the lower~~higher volume ~~as well as~~and a ~~2.5% decrease~~2.1% increase in ASP on orders. The higher ASP on orders year over year is due to ~~increased incentives reducing home sale prices and our continuing shift~~geographic mix, with a greater proportion of orders in higher ASP markets in the third quarter of 2023 as compared to ~~offer more affordable product.~~ 2022.

For the nine months ended September 30, ~~2022,~~2023, home orders increased 3.5% and home order value ~~increased 4.9% due to a 10.1% increase in ASP on home orders, partially offset by a 4.7% decrease in home order volume~~decreased 1.6% over the prior ~~year. For the nine months ended September 30, 2022, the~~year, with a cancellation rate of 13% compared to 16% ~~was up from 10%~~ for the prior year ~~period, stemming primarily from the cancellations in the third quarter, as previously discussed.~~period. We ended the third quarter of ~~2022~~2023 with ~~6,064~~3,608 homes in backlog valued at ~~$2.8~~$1.6 billion, ~~a 3.9% increase in units~~decreases of 40.5% and ~~a 10.6% increase in value over~~44.9%, respectively, from September 30, ~~2021.~~2022. The decrease in backlog units is due to a 96.4% backlog conversion rate during the third quarter of 2023.

We ended the third quarter of ~~2022~~2023 with ~~275~~272 active communities, down from ~~303~~275 at ~~June 30, 2022. Due to the natural timing of community openings and closings, we expect this to be a temporary drop in our community count. During the nine months ended~~ September 30, 2022 weas our accelerated orders pace resulted in early community close outs. We purchased approximately ~~10,000~~9,100 lots for ~~$378.8~~$486.0 million, spent ~~$794.5~~$769.7 million on land development and started construction on ~~11,761 homes. In response to weaker demand, we reassessed our land positions~~10,547 homes during the third quarter and reduced our lot supply and terminated option contracts for approximately 5,200 lots. With the current absorption pace and higher incentives environment, we determined these terminated lots did not offer an optimal return.nine months ended September 30, 2023.

Company Positioning

We believe that the investments in our new communities designed for the first-time and first move-up homebuyer, our commitment to being primarily an all-spec ~~strategy for our entry-level homes, our simplified first move-up design studio process,~~builder, and industry-leading innovation in energy-efficient product offerings and automation, create a differentiated strategy that has aided us in our growth in the highly competitive new home market.

Our ~~mid-term~~ focus ~~includes the following strategies:~~

•~~Maintain~~on growing our community count and ~~grow~~ market ~~share;~~share includes the following strategic initiatives:

•Achieving or maintaining a position of at least 5% market share in all of our markets;

•Delivering affordable homes on a shorter timeline through simplification of production processes and maintaining market-appropriate levels of spec inventory;

•Continuously improving the overall home buying experience through simplification and innovation;

•Simplifying our production process to allow us to more efficiently build our homes, delivering them on a shorter timeline, and reducing our construction costs, which in turn allows us to competitively price our homes;

•~~Improving~~Maintaining our home closing gross profit by growing closing volume, allowing us to better leverage our overhead;

•Leveraging and expanding on technological solutions through digital offerings to our customers, such as our virtual home tours, interactive maps, digital financial services offerings and online warranty portal; and

•Increasing homeowner satisfaction by offering healthier, ~~safer~~energy-efficient homes that come equipped with a suite of ~~energy-efficiency and~~ home automation standard features.

In ~~order~~addition to ~~maintain focus on growing our business,~~these strategic initiatives, we also remain committed to the ~~following long-term objectives:~~following:

•Carefully managing our liquidity and a strong balance ~~sheet;~~sheet, including a $150.0 million early redemption of debt this quarter; we ended the third quarter with ~~a 23.9%~~an 18.5% debt-to-capital ratio and ~~an 18.9%~~a (1.0)% net debt-to-capital ratio;

•Maximizing returns to our shareholders through ~~both our~~ improved financial performance, dividend payments and a share ~~repurchase program;~~

•~~Achieving or maintaining a position of at least 5% market share in all of our markets;~~repurchases;

•Managing construction efficiencies and costs through national and regional vendor relationships with a focus on timely, quality construction and warranty management;

•Promoting a positive environment for our employees through our commitment to foster diversity, equity, and inclusion ("DE&I") and providing market-competitive benefits in order to develop and motivate our employees and to minimize turnover and to maximize recruitment efforts;

•~~Maintaining~~Targeting a ~~healthy~~strong yet sustainable orders pace through the use of our consumer and market research to ensure that we build homes that offer our buyers their desired features and amenities; and

•Continuing to innovate and promote our energy efficiency program and our M.Connected® Automation Suite to create differentiation ~~for the Meritage brand.~~from existing available inventory.

Critical Accounting Estimates

The critical accounting estimates that we deem to involve the most difficult, subjective or complex judgments include valuation of real estate and cost of home closings, warranty reserves and valuation of deferred tax assets. There have been no significant changes to our critical accounting estimates during the nine months ended September 30, ~~2022~~2023 compared to those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our ~~2021~~2022 Annual Report on Form 10-K.

Home Closing Revenue, Home Orders and Order Backlog

The composition of our closings, home orders and backlog is constantly changing and is based on a changing mix of communities with various price points between periods as new projects open and existing projects wind down and close-out. Further, individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots (e.g. cul-de-sac, view lots, greenbelt lots). These variations result in a lack of meaningful comparability between our home orders, closings and backlog due to the changing mix between periods. The tables on the following pages present operating and financial data that we consider most critical to managing our operations (dollars in thousands):


Home Closing Revenue	Three Months Ended September 30,				Quarter over Quarter
	2023		2022		Change $		Change %
Total
Dollars	$	1,610,317	$	1,569,032	$	41,285	2.6	%
Homes closed	3,638		3,487		151		4.3	%
Average sales price	$	442.6	$	450.0	$	(7.4)	(1.6)	%
West Region













Dollars	$	606,833	$	590,027	$	16,806	2.8	%
Homes closed	1,172		1,086		86		7.9	%
Average sales price	$	517.8	$	543.3	$	(25.5)	(4.7)	%
Central Region

Dollars	$	452,687	$	499,713	$	(47,026)	(9.4)	%
Homes closed	1,102		1,218		(116)		(9.5)	%
Average sales price	$	410.8	$	410.3	$	0.5	0.1	%
East Region





















Dollars	$	550,797	$	479,292	$	71,505	14.9	%
Homes closed	1,364		1,183		181		15.3	%
Average sales price	$	403.8	$	405.1	$	(1.3)	(0.3)	%


	Nine Months Ended September 30,				Quarter over Quarter
	2023		2022		Change $		Change %
Total
Dollars	$	4,415,261	$	4,223,435	$	191,826	4.5	%
Homes closed	10,025		9,566		459		4.8	%
Average sales price	$	440.4	$	441.5	$	(1.1)	(0.2)	%
West Region













Dollars	$	1,543,372	$	1,539,529	$	3,843	0.2	%
Homes closed	2,954		2,875		79		2.7	%
Average sales price	$	522.5	$	535.5	$	(13.0)	(2.4)	%
Central Region

Dollars	$	1,334,368	$	1,269,868	$	64,500	5.1	%
Homes closed	3,244		3,139		105		3.3	%
Average sales price	$	411.3	$	404.5	$	6.8	1.7	%
East Region





















Dollars	$	1,537,521	$	1,414,038	$	123,483	8.7	%
Homes closed	3,827		3,552		275		7.7	%
Average sales price	$	401.8	$	398.1	$	3.7	0.9	%

Three Months Ended September 30, Quarter over Quarter
2022 2021 Change $ Change %
Home Closing Revenue
Total
Dollars $ 1,569,032 $ 1,251,435 $ 317,597 25.4 %
Homes closed 3,487 3,112 375 12.1 %
Average sales price $ 450.0 $ 402.1 $ 47.9 11.9 %
West Region
Arizona
Dollars $ 254,530 $ 193,847 $ 60,683 31.3 %
Homes closed 599 532 67 12.6 %
Average sales price $ 424.9 $ 364.4 $ 60.5 16.6 %
California
Dollars $ 236,872 $ 177,623 $ 59,249 33.4 %
Homes closed 321 295 26 8.8 %
Average sales price $ 737.9 $ 602.1 $ 135.8 22.6 %
Colorado
Dollars $ 98,625 $ 80,149 $ 18,476 23.1 %
Homes closed 166 144 22 15.3 %
Average sales price $ 594.1 $ 556.6 $ 37.5 6.7 %
West Region Totals
Dollars $ 590,027 $ 451,619 $ 138,408 30.6 %
Homes closed 1,086 971 115 11.8 %
Average sales price $ 543.3 $ 465.1 $ 78.2 16.8 %
Central Region - Texas
Central Region Totals
Dollars $ 499,713 $ 383,206 $ 116,507 30.4 %
Homes closed 1,218 1,012 206 20.4 %
Average sales price $ 410.3 $ 378.7 $ 31.6 8.3 %
East Region
Florida
Dollars $ 166,138 $ 139,642 $ 26,496 19.0 %
Homes closed 426 386 40 10.4 %
Average sales price $ 390.0 $ 361.8 $ 28.2 7.8 %
Georgia
Dollars $ 53,108 $ 52,004 $ 1,104 2.1 %
Homes closed 117 139 (22) (15.8) %
Average sales price $ 453.9 $ 374.1 $ 79.8 21.3 %
North Carolina
Dollars $ 148,111 $ 145,268 $ 2,843 2.0 %
Homes closed 340 371 (31) (8.4) %
Average sales price $ 435.6 $ 391.6 $ 44.0 11.2 %
South Carolina
Dollars $ 48,777 $ 31,686 $ 17,091 53.9 %
Homes closed 147 92 55 59.8 %
Average sales price $ 331.8 $ 344.4 $ (12.6) (3.7) %
Tennessee
Dollars $ 63,158 $ 48,010 $ 15,148 31.6 %
Homes closed 153 141 12 8.5 %
Average sales price $ 412.8 $ 340.5 $ 72.3 21.2 %
East Region Totals
Dollars $ 479,292 $ 416,610 $ 62,682 15.0 %
Homes closed 1,183 1,129 54 4.8 %
Average sales price $ 405.1 $ 369.0 $ 36.1 9.8 %


Home Orders (1)										Home Orders (1)	Three Months Ended September 30,				Quarter over Quarter
											2023		2022		Change $		Change %
Total										Total
Dollars										Dollars	$	1,495,542	$	974,314	$	521,228	53.5	%
Homes ordered										Homes ordered	3,474		2,310		1,164		50.4	%
Average sales price										Average sales price	$	430.5	$	421.8	$	8.7	2.1	%
West Region										West Region

		Nine Months Ended September 30,				Quarter over Quarter
		2022		2021		Change $		Change %
Home Closing Revenue
Total

Dollars	Dollars	$	4,223,435	$	3,596,060	$	627,375	17.4	%	Dollars	$	521,049	$	241,098	$	279,951	116.1	%
Homes closed		9,566		9,275		291		3.1	%
Homes ordered										Homes ordered	985		456		529		116.0	%
Average sales price	Average sales price	$	441.5	$	387.7	$	53.8	13.9	%	Average sales price	$	529.0	$	528.7	$	0.3	0.1	%
West Region
Arizona
Central Region										Central Region

Dollars	Dollars	$	687,527	$	497,105	$	190,422	38.3	%	Dollars	$	425,165	$	253,321	$	171,844	67.8	%
Homes closed		1,599		1,423		176		12.4	%
Average sales price		$	430.0	$	349.3	$	80.7	23.1	%
California
Dollars		$	597,913	$	547,754	$	50,159	9.2	%
Homes closed		852		890		(38)		(4.3)	%
Average sales price		$	701.8	$	615.5	$	86.3	14.0	%
Colorado
Dollars		$	254,089	$	239,399	$	14,690	6.1	%
Homes closed		424		464		(40)		(8.6)	%
Average sales price		$	599.3	$	515.9	$	83.4	16.2	%
West Region Totals
Dollars		$	1,539,529	$	1,284,258	$	255,271	19.9	%
Homes closed		2,875		2,777		98		3.5	%
Average sales price		$	535.5	$	462.5	$	73.0	15.8	%
Central Region - Texas
Central Region Totals
Dollars		$	1,269,868	$	1,105,429	$	164,439	14.9	%
Homes closed		3,139		3,129		10		0.3	%
Homes ordered										Homes ordered	1,099		635		464		73.1	%
Average sales price	Average sales price	$	404.5	$	353.3	$	51.2	14.5	%	Average sales price	$	386.9	$	398.9	$	(12.0)	(3.0)	%
East Region	East Region									East Region
Florida

Dollars	Dollars	$	503,820	$	440,847	$	62,973	14.3	%	Dollars	$	549,328	$	479,895	$	69,433	14.5	%
Homes closed		1,301		1,246		55		4.4	%
Homes ordered										Homes ordered	1,390		1,219		171		14.0	%
Average sales price	Average sales price	$	387.3	$	353.8	$	33.5	9.5	%	Average sales price	$	395.2	$	393.7	$	1.5	0.4	%
Georgia
Dollars		$	190,769	$	169,620	$	21,149	12.5	%
Homes closed		423		456		(33)		(7.2)	%
Average sales price		$	451.0	$	372.0	$	79.0	21.2	%
North Carolina
Dollars		$	415,975	$	372,119	$	43,856	11.8	%
Homes closed		996		1,000		(4)		(0.4)	%
Average sales price		$	417.6	$	372.1	$	45.5	12.2	%
South Carolina
Dollars		$	132,855	$	87,741	$	45,114	51.4	%
Homes closed		400		258		142		55.0	%
Average sales price		$	332.1	$	340.1	$	(8.0)	(2.4)	%
Tennessee
Dollars		$	170,619	$	136,046	$	34,573	25.4	%
Homes closed		432		409		23		5.6	%
Average sales price		$	395.0	$	332.6	$	62.4	18.8	%
East Region Totals
Dollars		$	1,414,038	$	1,206,373	$	207,665	17.2	%
Homes closed		3,552		3,369		183		5.4	%
Average sales price		$	398.1	$	358.1	$	40.0	11.2	%


	Nine Months Ended September 30,				Quarter over Quarter
	2023		2022		Change $		Change %
Total
Dollars	$	4,477,148	$	4,551,894	$	(74,746)	(1.6)	%
Homes ordered	10,301		9,951		350		3.5	%
Average sales price	$	434.6	$	457.4	$	(22.8)	(5.0)	%
West Region













Dollars	$	1,672,310	$	1,486,674	$	185,636	12.5	%
Homes ordered	3,261		2,636		625		23.7	%
Average sales price	$	512.8	$	564.0	$	(51.2)	(9.1)	%
Central Region

Dollars	$	1,286,063	$	1,293,282	$	(7,219)	(0.6)	%
Homes ordered	3,237		3,027		210		6.9	%
Average sales price	$	397.3	$	427.2	$	(29.9)	(7.0)	%
East Region





















Dollars	$	1,518,775	$	1,771,938	$	(253,163)	(14.3)	%
Homes ordered	3,803		4,288		(485)		(11.3)	%
Average sales price	$	399.4	$	413.2	$	(13.8)	(3.3)	%

Three Months Ended September 30, Quarter over Quarter
2022 2021 Change $ Change %
Home Orders (1)
Total
Dollars $ 974,314 $ 1,488,951 $ (514,637) (34.6) %
Homes ordered 2,310 3,441 (1,131) (32.9) %
Average sales price $ 421.8 $ 432.7 $ (10.9) (2.5) %
West Region
Arizona
Dollars $ 97,462 $ 233,828 $ (136,366) (58.3) %
Homes ordered 232 550 (318) (57.8) %
Average sales price $ 420.1 $ 425.1 $ (5.0) (1.2) %
California
Dollars $ 122,994 $ 213,859 $ (90,865) (42.5) %
Homes ordered 187 319 (132) (41.4) %
Average sales price $ 657.7 $ 670.4 $ (12.7) (1.9) %
Colorado
Dollars $ 20,642 $ 123,242 $ (102,600) (83.3) %
Homes ordered 37 207 (170) (82.1) %
Average sales price $ 557.9 $ 595.4 $ (37.5) (6.3) %
West Region Totals
Dollars $ 241,098 $ 570,929 $ (329,831) (57.8) %
Homes ordered 456 1,076 (620) (57.6) %
Average sales price $ 528.7 $ 530.6 $ (1.9) (0.4) %
Central Region - Texas
Central Region Totals
Dollars $ 253,321 $ 427,689 $ (174,368) (40.8) %
Homes ordered 635 1,070 (435) (40.7) %
Average sales price $ 398.9 $ 399.7 $ (0.8) (0.2) %
East Region
Florida
Dollars $ 214,004 $ 192,479 $ 21,525 11.2 %
Homes ordered 531 534 (3) (0.6) %
Average sales price $ 403.0 $ 360.4 $ 42.6 11.8 %
Georgia
Dollars $ 71,731 $ 74,766 $ (3,035) (4.1) %
Homes ordered 175 176 (1) (0.6) %
Average sales price $ 409.9 $ 424.8 $ (14.9) (3.5) %
North Carolina
Dollars $ 98,147 $ 140,135 $ (41,988) (30.0) %
Homes ordered 251 347 (96) (27.7) %
Average sales price $ 391.0 $ 403.8 $ (12.8) (3.2) %
South Carolina
Dollars $ 42,728 $ 31,535 $ 11,193 35.5 %
Homes ordered 137 100 37 37.0 %
Average sales price $ 311.9 $ 315.4 $ (3.5) (1.1) %
Tennessee
Dollars $ 53,285 $ 51,418 $ 1,867 3.6 %
Homes ordered 125 138 (13) (9.4) %
Average sales price $ 426.3 $ 372.6 $ 53.7 14.4 %
East Region Totals
Dollars $ 479,895 $ 490,333 $ (10,438) (2.1) %
Homes ordered 1,219 1,295 (76) (5.9) %
Average sales price $ 393.7 $ 378.6 $ 15.1 4.0 %

(1)Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer’s existing home or a mortgage pre-approval as a sales contract until the contingency is removed.

Nine Months Ended September 30, Quarter over Quarter
2022 2021 Change $ Change %
Home Orders (1)
Total
Dollars $ 4,551,894 $ 4,337,753 $ 214,141 4.9 %
Homes ordered 9,951 10,441 (490) (4.7) %
Average sales price $ 457.4 $ 415.5 $ 41.9 10.1 %
West Region
Arizona
Dollars $ 594,631 $ 713,067 $ (118,436) (16.6) %
Homes ordered 1,342 1,776 (434) (24.4) %
Average sales price $ 443.1 $ 401.5 $ 41.6 10.4 %
California
Dollars $ 642,938 $ 604,478 $ 38,460 6.4 %
Homes ordered 888 949 (61) (6.4) %
Average sales price $ 724.0 $ 637.0 $ 87.0 13.7 %
Colorado
Dollars $ 249,105 $ 317,155 $ (68,050) (21.5) %
Homes ordered 406 557 (151) (27.1) %
Average sales price $ 613.6 $ 569.4 $ 44.2 7.8 %
West Region Totals
Dollars $ 1,486,674 $ 1,634,700 $ (148,026) (9.1) %
Homes ordered 2,636 3,282 (646) (19.7) %
Average sales price $ 564.0 $ 498.1 $ 65.9 13.2 %
Central Region - Texas
Central Region Totals
Dollars $ 1,293,282 $ 1,248,032 $ 45,250 3.6 %
Homes ordered 3,027 3,286 (259) (7.9) %
Average sales price $ 427.2 $ 379.8 $ 47.4 12.5 %
East Region
Florida
Dollars $ 724,209 $ 547,706 $ 176,503 32.2 %
Homes ordered 1,788 1,481 307 20.7 %
Average sales price $ 405.0 $ 369.8 $ 35.2 9.5 %
Georgia
Dollars $ 280,010 $ 213,632 $ 66,378 31.1 %
Homes ordered 620 533 87 16.3 %
Average sales price $ 451.6 $ 400.8 $ 50.8 12.7 %
North Carolina
Dollars $ 439,618 $ 450,854 $ (11,236) (2.5) %
Homes ordered 1,015 1,156 (141) (12.2) %
Average sales price $ 433.1 $ 390.0 $ 43.1 11.1 %
South Carolina
Dollars $ 146,100 $ 90,532 $ 55,568 61.4 %
Homes ordered 435 264 171 64.8 %
Average sales price $ 335.9 $ 342.9 $ (7.0) (2.0) %
Tennessee
Dollars $ 182,001 $ 152,297 $ 29,704 19.5 %
Homes ordered 430 439 (9) (2.1) %
Average sales price $ 423.3 $ 346.9 $ 76.4 22.0 %
East Region Totals
Dollars $ 1,771,938 $ 1,455,021 $ 316,917 21.8 %
Homes ordered 4,288 3,873 415 10.7 %
Average sales price $ 413.2 $ 375.7 $ 37.5 10.0 %

~~(1)~~Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer’s existing home or a mortgage pre-approval as a sales contract until the contingency is removed.

Three Months Ended September 30,
2022 2021
Ending Average Ending Average
Active Communities
Total 275 289.0 236 231.0
West Region
Arizona 52 54.0 38 38.0
California 32 32.0 18 19.0
Colorado 18 18.5 16 16.5
West Region Totals 102 104.5 72 73.5
Central Region - Texas
Central Region Totals 74 77.0 68 66.0
East Region
Florida 30 35.5 38 36.0
Georgia 18 16.0 12 11.0
North Carolina 27 29.5 26 26.0
South Carolina 12 14.5 11 9.0
Tennessee 12 12.0 9 9.5
East Region Totals 99 107.5 96 91.5

Nine Months Ended September 30,
2022 2021
Ending Average Ending Average
Active Communities
Total 275 276.7 236 215.3
West Region
Arizona 52 46.8 38 35.5
California 32 27.3 18 18.3
Colorado 18 18.0 16 14.0
West Region Totals 102 92.1 72 67.8
Central Region - Texas
Central Region Totals 74 75.6 68 63.6
East Region
Florida 30 38.4 38 33.3
Georgia 18 15.5 12 10.3
North Carolina 27 28.6 26 24.3
South Carolina 12 14.0 11 7.5
Tennessee 12 12.5 9 8.5
East Region Totals 99 109.0 96 83.9


Order Backlog (1)	At September 30,				Quarter over Quarter
	2023		2022		Change $		Change %
Total
Dollars	$	1,558,637	$	2,826,759	$	(1,268,122)	(44.9)	%
Homes in backlog	3,608		6,064		(2,456)		(40.5)	%
Average sales price	$	432.0	$	466.2	$	(34.2)	(7.3)	%
West Region













Dollars	$	579,787	$	905,080	$	(325,293)	(35.9)	%
Homes in backlog	1,179		1,627		(448)		(27.5)	%
Average sales price	$	491.8	$	556.3	$	(64.5)	(11.6)	%
Central Region

Dollars	$	370,279	$	790,227	$	(419,948)	(53.1)	%
Homes in backlog	956		1,766		(810)		(45.9)	%
Average sales price	$	387.3	$	447.5	$	(60.2)	(13.5)	%
East Region





















Dollars	$	608,571	$	1,131,452	$	(522,881)	(46.2)	%
Homes in backlog	1,473		2,671		(1,198)		(44.9)	%
Average sales price	$	413.2	$	423.6	$	(10.4)	(2.5)	%

(1)Our backlog represents net home orders that have not closed.

Active Communities and Cancellation Rates


Active Communities	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	Ending	Average	Ending	Average	Ending	Average	Ending	Average
Total	272	281.5	275	289.0	272	278.4	275	276.7




West Region	84	91.0	102	104.5	84	93.1	102	92.1

Central Region	82	82.0	74	77.0	82	81.8	74	75.6






East Region	106	108.5	99	107.5	106	103.5	99	109.0


Cancellation Rates (2)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total	11	%	30	%	13	%	16	%




West Region	14	%	43	%	14	%	21	%

Central Region	13	%	37	%	14	%	20	%






East Region	8	%	18	%	11	%	10	%

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Cancellation Rates (1)
Total 30 % 10 % 16 % 10 %
West Region
Arizona 42 % 12 % 22 % 10 %
California 35 % 10 % 19 % 10 %
Colorado 66 % 10 % 24 % 8 %
West Region Totals 43 % 10 % 21 % 9 %
Central Region - Texas
Central Region Totals 37 % 13 % 20 % 11 %
East Region
Florida 12 % 5 % 7 % 8 %
Georgia 29 % 9 % 16 % 10 %
North Carolina 22 % 7 % 11 % 7 %
South Carolina 22 % 18 % 17 % 15 %
Tennessee 16 % 7 % 9 % 10 %
East Region Totals 18 % 8 % 10 % 9 %

~~(1)~~(2)Cancellation rates are computed as the number of canceled units for the period divided by the gross sales units for the same period.

At September 30, Quarter over Quarter
2022 2021 Change $ Change %
Order Backlog (1)
Total
Dollars $ 2,826,759 $ 2,555,405 $ 271,354 10.6 %
Homes in backlog 6,064 5,838 226 3.9 %
Average sales price $ 466.2 $ 437.7 $ 28.5 6.5 %
West Region
Arizona
Dollars $ 397,695 $ 560,090 $ (162,395) (29.0) %
Homes in backlog 888 1,346 (458) (34.0) %
Average sales price $ 447.9 $ 416.1 $ 31.8 7.6 %
California
Dollars $ 314,622 $ 331,454 $ (16,832) (5.1) %
Homes in backlog 429 503 (74) (14.7) %
Average sales price $ 733.4 $ 659.0 $ 74.4 11.3 %
Colorado
Dollars $ 192,763 $ 182,536 $ 10,227 5.6 %
Homes in backlog 310 301 9 3.0 %
Average sales price $ 621.8 $ 606.4 $ 15.4 2.5 %
West Region Totals
Dollars $ 905,080 $ 1,074,080 $ (169,000) (15.7) %
Homes in backlog 1,627 2,150 (523) (24.3) %
Average sales price $ 556.3 $ 499.6 $ 56.7 11.3 %
Central Region - Texas
Central Region Totals
Dollars $ 790,227 $ 715,226 $ 75,001 10.5 %
Homes in backlog 1,766 1,787 (21) (1.2) %
Average sales price $ 447.5 $ 400.2 $ 47.3 11.8 %
East Region
Florida
Dollars $ 571,001 $ 321,831 $ 249,170 77.4 %
Homes in backlog 1,355 785 570 72.6 %
Average sales price $ 421.4 $ 410.0 $ 11.4 2.8 %
Georgia
Dollars $ 180,059 $ 101,996 $ 78,063 76.5 %
Homes in backlog 400 233 167 71.7 %
Average sales price $ 450.1 $ 437.8 $ 12.3 2.8 %
North Carolina
Dollars $ 247,405 $ 242,192 $ 5,213 2.2 %
Homes in backlog 584 610 (26) (4.3) %
Average sales price $ 423.6 $ 397.0 $ 26.6 6.7 %
South Carolina
Dollars $ 57,664 $ 44,028 $ 13,636 31.0 %
Homes in backlog 168 126 42 33.3 %
Average sales price $ 343.2 $ 349.4 $ (6.2) (1.8) %
Tennessee
Dollars $ 75,323 $ 56,052 $ 19,271 34.4 %
Homes in backlog 164 147 17 11.6 %
Average sales price $ 459.3 $ 381.3 $ 78.0 20.5 %
East Region Totals
Dollars $ 1,131,452 $ 766,099 $ 365,353 47.7 %
Homes in backlog 2,671 1,901 770 40.5 %
Average sales price $ 423.6 $ 403.0 $ 20.6 5.1 %

~~(1)Our backlog represents net sales that have not closed.~~

3127

Operating Results

Companywide. ~~In the~~We had our highest third quarter ~~of 2022, we achieved our highest quarterly~~ home closing revenue and volume in Company history, improving 2.6% and 4.3%, respectively, over prior year, with 3,638 closings valued at $1.6 billion for the three months ended September 30, 2023, compared to 3,487 closings valued at $1.6 billion ~~compared to 3,112 closings valued at $1.3 billion~~ in 2022. Despite entering the 2023 third quarter with lower backlog than prior ~~year. Home~~year, home closing volume increased ~~12.1%~~ over the third quarter of ~~2021 as we entered the quarter with~~2022 due to a ~~higher backlog as compared to prior year, a lower~~ backlog conversion rate ~~due primarily to construction delays as well as some~~of 96.4% versus 48.2% in the prior year. The improvement in backlog conversion was bolstered by reduced cycle times combined with 31.6% of our third quarter 2023 home ~~closing delays from Hurricane Ian in our Florida markets. Home closing revenue improved by 25.4% over~~closings also being sold within the same quarter. Order cancellations of 11% for the third quarter of ~~2021 due to~~2023 improved greatly from 30% in the ~~higher closing volume and an 11.9%~~third quarter of 2022, resulting in a 50.4% increase in ~~ASP on closings. Home~~home order volume ~~declined by 32.9%~~of 3,474 homes, compared to 2,310 ~~homes as compared to 3,441~~ homes in the third quarter of ~~2021, despite~~2022, and our orders pace improved 51.9% to 4.1 per month from 2.7 per month. ASP on orders increased 2.1% due to geographic mix, which combined with the higher order volume for a ~~25.1%~~53.5% increase in average active communities. This is a direct result of the 46.0% lower orders pace, dropping to 2.7 per month compared to 5.0 per month in 2021, primarily resulting from a 30% cancellation rate during the quarter ended September 30, 2022. The spike in cancellations stems largely from homebuyer hesitancy over affordability, cycle times and economic uncertainties. Gross orders for the third quarter of 2022 were down by 14% from prior year, indicating stable demand is still present for new homes. Homehome order value of $1.0 billion declined 34.6% from the third quarter of 2021, due to the decrease in order volume and a 2.5% lower ASP on orders. The lower ASP on orders reflects higher buyer incentives provided to address the softening demand from affordability concerns and our continuing shift into more affordable product. Community count increased 16.5% year-over-year, ending the third quarter with 275 actively selling communities at September 30, 2022, up from 236 at September 30, 2021, although down sequentially from 303 at June 30, 2022. The temporary drop in community count this quarter is due to the natural timing of community openings and closings.$1.5 billion.

For the nine months ended September 30, ~~2022,~~2023, home closing revenue of $4.4 billion increased 4.5% from $4.2 billion, due to a 4.8% increase in home closing volume ~~grew by 291 units, or 3.1%, and~~to 10,025, up from 9,566 homes in the prior year period, as ASP on closings was relatively flat. Home order volume of 10,301 increased 3.5% from prior year due primarily to a 2.5% increase in orders pace of 4.1 homes per month, up from 4.0 in 2022, on a relatively consistent average active community count. Despite the increase in order volume, home ~~closing revenue improved by $627.4 million~~order value decreased 1.6% from prior year due to increased incentives that caused ASP on ~~9,566 closings valued~~orders to decline 5.0%. We ended the third quarter of 2023 with 272 actively selling communities, down from 275 at ~~$4.2 billion. Order volume for the nine months ended September 30, 2022 decreased 4.7% year-over-year, to 9,951 orders, while value increased 4.9%, to $4.6 billion for the nine months ended~~ September 30, 2022. The higher year-to-date order cancellation rate of 16% is due almost entirely to the third quarter cancellations. Demand in the first half of the year provided us with pricing power, resulting in a 10.1% increase in ASP on orders for the nine months endedAt September 30, ~~2022. We ended the quarter with 6,064~~2023, we had 3,608 homes in backlog valued at ~~$2.8~~$1.6 billion, ~~compared to 5,838~~down from 6,064 units valued at ~~$2.6~~$2.8 billion at September 30, ~~2021. Despite the decrease in order volume, backlog units increased from the combination of~~2022, due to a higher backlog ~~entering the quarter~~conversion rate and ~~construction~~improved cycle ~~delays, and backlog value increased year-over-year from the combined impact of higher units as well as higher ASP on orders.~~times.

West. The West Region generated ~~$590.0~~$606.8 million in home closing revenue on ~~1,086~~1,172 homes in the third quarter of ~~2022,~~2023, up from ~~$451.6~~$590.0 million ~~and 971~~on 1,086 homes in the ~~comparable 2021~~prior year period. ~~ASP increases averaging $78,200 accounted for more than half of the year-over-year~~The 7.9% increase in volume resulted in a 2.8% increase in home closing revenue, ~~with home closing revenue and units improving 30.6% and 11.8%, respectively. The West Region experienced a 43% cancellation rate, the highest rate~~as ASP on closings decreased 4.7% due to higher incentives. Home orders in the ~~Company,~~third quarter of 2023 of 985 were up 116.0% from 456 in the prior year, as the buyer hesitancy and ~~ASP's on orders were flat, which directly contributed to order volume and order value decreases of 57.6% and 57.8%, respectively, to 456 homes at $241.1 million~~elevated cancellations in the third quarter of 2022 compared to 1,076 homes and $570.9 million in 2021. Although the average community count increased 42.2%, orders declined due to a slower orders pace of 1.5 homes per month compared to 4.9 homes in the same period of 2021 primarily from the elevated cancellations. Buyer hesitancy and construction cycle challenges have ~~been most impactful to date in the West Region, predominantly in Colorado.~~

Year-to-date results in the West Region were slightly more favorable than those of the third quarter, supported by the strong demand in the first half of 2022. Home closing revenue and volume versus prior year increased by 19.9% and 3.5%, respectively, and ASP on closings improved 15.8%. Order volume for the Region declined 19.7% year-to-date, evendramatically lessened as the ~~average number of actively selling communities~~economy stabilizes coupled with increased ~~35.8%. The lower orders are due primarily~~incentives to a 21% cancellation rate that contributed to a 40.7% reduction in orders pace. The higher cancellation rate is due largely to the third quarter spike discussed previously. Order value was 9.1% lower for the nine months ended September 30, 2022 due to the decreased volume, partially offset by a 13.2% increase in ASP.alleviate affordability concerns. The West Region ~~ended the third quarter~~cancellation rate of ~~2022 with 1,627 homes in backlog valued at $0.9 billion, down from 2,150 units valued at $1.1 billion at September 30, 2021.~~

~~Central~~. In the third quarter of 2022, the Central Region, made up of our Texas markets, closed 1,218 homes and generated $499.7 million in home closing revenue, up from the prior year comparable period results of 1,012 homes and $383.2 million of home closing revenue. The 30.4% increase in revenue was due to 20.4% higher volume with an 8.3% increase in ASP on closings. Although average active communities increased 16.7%, order volume declined 40.7% due to a 50.0% decrease in orders pace, predominantly driven by a 37% cancellation rate. The lower order volume drove a proportionate decrease in order value of 40.8%, to $253.3 million14% in the third quarter of ~~2022,~~2023 improved from ~~$427.7 million~~43% in the prior year, resulting in a 140.0% higher orders pace of 3.6 homes per month in the third quarter of 2023 compared 1.5 per month in 2022. This accelerated orders pace contributed to a 12.9% decrease in average active communities due to early close outs. Home order value of $521.0 million for the third quarter of 2023 increased proportionately with order volume, as ~~ASPs were flat.~~ASP on orders remained consistent.

For the nine months ended September 30, ~~2022, the Central Region grew~~2023, home closing revenue ~~14.9%~~of $1.5 billion was consistent with prior year, as ~~pricing power provided~~a 2.7% increase in home closing volume was offset by a 2.4% decrease in ASP on closings. Order volume in the West Region increased 23.7% year-to-date driven by a return to more normalized demand. With just a 1.1% increase in average active communities, year-to-date orders pace of 3.9 homes per month improved 21.9% compared to 2022, although last year's orders pace was negatively impacted by elevated cancellations. Home order value of $1.7 billion was up 12.5% from 2022 due to higher volume, offset by a 9.1% decrease in ASP on orders caused by increased buyer financing incentives. The year-to-date cancellation rate of 14% was down from 21% in the prior year period. The West Region ended the third quarter of 2023 with 1,179 homes in backlog valued at $579.8 million, compared to 1,627 units valued at $905.1 million at September 30, 2022, decreases of 27.5% and 35.9%, respectively.

Central. The Central Region closed 1,102 homes in the three months ended September 30, 2023, down 9.5% from 1,218 home closings in 2022, which was the Region's highest quarterly home closings in its history. Home closing revenue of $452.7 million decreased 9.4% due to lower home closing volume as ASP on closings was flat. The Central Region cancellation rate of ~~14.5% while closing volume~~13% in the third quarter of 2023 was ~~relatively flat year-over-year. Average active communities increased 18.9%, but~~down from 37% in the third quarter of 2022, resulting in significant improvement in home order volume ~~decreased 7.9%~~and orders pace. Home order volume increased 73.1% to 1,099 homes in the third quarter of 2023 due to a ~~20% cancellation rate that drove down the~~6.5% increase in average active communities coupled with a 66.7% increase in orders pace to ~~4.4~~4.5 homes per month from ~~5.7 per month~~2.7 in ~~2021.~~2022. Order value of $425.2 million in the three months ended September 30, 2023 increased 67.8% from $253.3 million in the third quarter of 2022 due to entirely to the higher order volume, as the Region experienced a 3.0% decrease in ASP on orders resulting from higher incentives year over year.

Year-to-date, Central Region home closing revenue of $1.3 billion on 3,244 home closings increased 5.1% and 3.3%, respectively, from the nine months ended September 30, 2022, and ASP on home closings increased 1.7%, buoyed by favorable results in the first half of 2023 which more than offset the difficult third quarter comparisons. Home order volume of 3,237 for the nine months ended September 30, 2023 increased 6.9% because of a higher average active community count, as orders ~~improved 3.6%~~pace of 4.4 homes per month was consistent with the same period in 2022. ASP on orders declined 7.0% year-over-year, resulting in a 0.6% decrease in order value of $1.3 billion. The year-to-date cancellation rate of 14% was down from 20% in the prior year. The Central Region ended the quarter with 956 units in backlog valued at $370.3 million, down 45.9% and ~~12.5%~~53.1%, respectively, ~~year-~~compared to September 30, 2022.

3228

~~over-year. The Region ended the quarter with 1,766 units in backlog, down 1.2%, while backlog value of $790.2 million was up 10.5% due to an 11.8% increase in ASP, compared to the prior year.~~

East. During the three months ended September 30, ~~2022,~~2023, the East Region closed ~~1,183~~1,364 homes for ~~$479.3 million, compared to 1,129 closings and $416.6~~$550.8 million in home closing revenue, compared to 1,183 closings and $479.3 million in the comparable prior year ~~period, improvements~~period. The 15.3% increase in home closing volume resulted in a 14.9% improvement in home closing revenue while ASP on closings held steady. Home orders of ~~4.8%~~1,390 valued at $549.3 million for the third quarter of 2023 increased 14.0% and ~~15.0%~~14.5%, ~~respectively. These higher volumes were achieved despite the delayed closing of approximately 150 homes in Florida until the fourth quarter~~respectively, due to ~~the effects of Hurricane Ian. Home closing revenue benefited from the higher volume and~~ a ~~9.8%~~13.2% increase in orders pace of 4.3 homes per month coupled with a relatively flat average active community count. ASP on ~~closings. In spite~~orders was up just slightly from 2022 due to geographic mix. The cancellation rate of ~~a 17.5% increase in average actively selling communities~~8% in the third quarter of ~~2022, home orders decreased 5.9% to 1,219 units compared to 1,295 units~~2023 improved from 18% in the prior year period. Orders in the third quarter of 2022 declined due to an elevated cancellation rate, causing a 19.1% decline in orders pace to 3.8 per month versus 4.7 per month in the prior year. Home order value of $479.9 million decreased 2.1% from $490.3 million in the third quarter of 2021, as 4.0% higher ASP's partially offset the reduction in volume.2022.

~~The East Region saw improvements of 5.4% and 17.2% in home closing volume and revenue, respectively, for~~For the nine months ended September 30, ~~2022 compared to 2021, providing 3,552~~2023, the East Region delivered 3,827 home closings ~~and $1.4~~for $1.5 billion in home closing revenue, ~~in 2022. The East Region was the only Region in the Company with improvements in both year-to-date orders~~up 7.7% and ~~order value, increasing 10.7% and 21.8%~~8.7%, respectively, ascompared to the 2022 period, with a ~~29.9% increase~~0.9% improvement in ASP on closings. Order volume decreased 11.3% due to the combined impact of a 5.0% decrease in average active communities ~~offset the 13.7%~~and a 6.8% decrease in orders pace for the nine months ended September 30, ~~2022 compared~~2023. Order value of $1.5 billion decreased 14.3% year over year due to decreased volume and a 3.3% decrease in ASP on orders. Year-to-date, the East Region's cancellation rate of 11% is up slightly from 10% in the prior ~~year. Due to the increase~~year, although still in ~~orders and the impacts of extended cycle times and delayed closings from the effects of Hurricane Ian, the~~line with historically normal rates. The East Region ended the third quarter of 2023 with ~~40.5% higher backlog of 2,671~~1,473 homes in backlog valued at ~~$1.1 billion compared to 1,901~~$608.6 million, down 44.9% and 46.2%, respectively, from 2,671 homes valued at ~~$766.1 million~~$1.1 billion at September 30, ~~2021.~~2022.

Land Closing Revenue and Gross ~~Profit/(Loss)~~Profit

From time to time, we may sell certain lots or land parcels to other homebuilders, developers or investors if we feel the sale will provide a greater economic benefit to us than continuing home construction or where we are looking to diversify our land positions in a specific geography ~~particularly with~~or divest of assets that no longer align with our strategy. As a result of such sales, we recognized land closing revenue of $2.8 million and $9.0 million and ~~$8.5~~gross profit of $0.2 million and $0.4 million for the three months ending September 30, ~~2022~~2023 and ~~2021, respectively, and profit of $0.4 million and $0.8 million for the three months ending September 30,~~ 2022, ~~and 2021,~~ respectively. Year-to-date land sales resulted in profits of $1.9 million and $11.9 million for 2023 and ~~$1.0 million, respectively, for the nine months ended September 30,~~ 2022, ~~and 2021.~~respectively.

Other Operating Information (dollars in thousands)


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021					2023				2022				2023				2022
		Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue			Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue		Dollars		Percent of Home Closing Revenue
Home Closing Gross Profit (1)	Home Closing Gross Profit (1)																	Home Closing Gross Profit (1)
Total	Total	$	450,638	28.7	%	$	371,676	29.7	%	$	1,273,026	30.1	%	$	983,632	27.4	%	Total	$	429,575	26.7	%	$	450,638	28.7	%	$	1,089,016	24.7	%	$	1,273,026	30.1	%

West	West	$	156,999	26.6	%	$	127,783	28.3	%	$	449,632	29.2	%	$	339,024	26.4	%	West	$	141,632	23.3	%	$	156,999	26.6	%	$	311,267	20.2	%	$	449,632	29.2	%

Central	Central	$	150,337	30.1	%	$	122,940	32.1	%	$	390,281	30.7	%	$	327,728	29.6	%	Central	$	128,387	28.4	%	$	150,337	30.1	%	$	360,529	27.0	%	$	390,281	30.7	%

East	East	$	143,302	29.9	%	$	120,953	29.0	%	$	433,113	30.6	%	$	316,880	26.3	%	East	$	159,556	29.0	%	$	143,302	29.9	%	$	417,220	27.1	%	$	433,113	30.6	%

(1)Home closing gross profit represents home closing revenue less cost of home closings, including impairments, if any. Cost of home closings includes land and associated development costs, direct home construction costs, an allocation of common community costs (such as architectural, legal and zoning costs), interest, sales tax, impact fees, warranty, construction overhead and closing costs.

Companywide. ~~Gross~~Home closing gross profit for the third quarter of ~~2022 improved $79.0~~2023 was $429.6 million ~~or 21.2%, due to higher~~with a home ~~closing volume. Home~~ closing gross margin ~~declined 100~~of 26.7%, down 200 basis points tofrom 28.7%~~, compared to 29.7%~~ in the third quarter of ~~2021~~2022, due to ~~the combined impact of rising~~increased buyer financing incentives and higher land development costs, partially offset by costs savings from shorter construction cycle times as direct costs ~~and increased sales incentives. Additionally, we incurred $8.8 million~~were relatively flat year over year. Home closing gross margin in ~~charges during~~ the third quarter of 2022 included $8.8 million in charges associated with the termination of land purchase agreements, ~~for lots that we determined no~~

~~longer offer optimal return potential, compared to~~while only ~~$0.9~~$0.2 million of such charges were recorded in ~~the~~ third quarter of 2021. Without these charges, gross margin for the three months ended September 30, 2022 and 2021 would have been 29.3% and 29.8%, respectively. Year-to-date, gross margin improved 270 basis points to 30.1% versus 27.4% for2023. For the nine months ended September 30, 2023, gross profit of $1.1 billion and gross margin of 24.7% decreased from $1.3 billion and 30.1% in 2022 due to the combined impact of higher direct costs and ~~2021, as pricing power and leverage of fixed costs on higher home closing revenue more than offset the~~ increased ~~commodity costs earlier in the year.~~sales incentives.

West. The West Region home closing gross margin ~~decreased 170 basis points to 26.6%~~of 23.3% for the third quarter of ~~2022 versus 28.3%~~2023 declined 330 basis points from 26.6% in the third quarter of ~~2021, primarily due to charges on terminated land purchase agreements~~2022. The West Region contains some of our most expensive markets that were most impacted by

the volatile economic conditions that began in the latter half of 2022, both in terms of ASP as well as ~~increased incentives.~~land costs, and has led us to offering significant incentives to assist homebuyers with monthly affordability. The home closing gross margin for the third quarter of 2023 was impacted by these higher incentives and land development costs. For the nine months ended September 30, ~~2022,~~2023, the West Region home closing gross margin ~~improved by 280 basis points to~~of 20.2% declined from 29.2% ~~versus 26.4% for the same period~~ in the ~~prior year. The improvements in the West Region's year-to-date gross margins are~~2022 period due to ~~pricing power from strong market demand~~higher incentives and ~~leverage~~elevated cost of ~~fixed costs on higher home closing revenue in the earlier part of the year.~~production and land development.

Central. The Central Region's third quarter 2023 home closing gross margin of 28.4% decreased from 30.1% in the prior year quarter, due to elevated incentives and increased land development costs. Year-to-date, the Central Region ~~provided~~gross margin of 27.0% in 2023 is down from 30.7%, mostly as a result of elevated sales incentives.

East. The East Region had the highest home closing gross margin in the Company, of 30.1%. The 200 basis point decrease from 32.1% in the prior year quarter resulted from increased sales incentives, higher direct costs and mix shift across the state. For the nine months ended September 30, 2022, gross margin in the Central Region improved 110 basis points due largely to pricing power earlier this year.

~~East.~~ ~~The East Region had the Company's only quarterly gross margin improvement, increasing 90 basis points to 29.9%~~at 29.0% in the third quarter of ~~2022 versus 29.0%~~2023, a 90 basis point decline from 29.9% for the comparable ~~2021~~2022 period. With relatively consistent direct costs, the East Region margin decline is due almost entirely to increased financing incentives. The improvement in margin for the third quarter of 2022 was attributable to pricing power and mix of homes that have more favorable margins due to lower land costs, partially offset by charges associated with cancelled land contracts and an increase in sales incentives. For the nine months ended September 30, 2022,East Region's year-to-date home closing gross margin ~~was up 430 basis points to~~of 27.1% is down from 30.6% ~~versus 26.3% for the same period~~ in ~~the prior year due to leverage~~2022 as a result of higher ~~home closing revenue on fixed costs and product mix.~~sales incentives.

Financial Services Profit (in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Financial services profit $ 4,842 $ 4,224 $ 12,255 $ 12,599


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Financial services profit	$	5,700	$	4,842	$	6,066	$	12,255

Financial services profit represents the net profit of our financial services operations, including the operating profit generated by our wholly-owned title and insurance companies, Carefree Title Agency, Inc. and Meritage Homes Insurance Agency, respectively, as well as our portion of earnings from a mortgage joint venture. Financial services profit ~~was $4.8~~of $5.7 million ~~and $4.2 million for~~in the three months ended September 30, ~~2022 and 2021, respectively, and $12.3~~2023 increased from $4.8 million ~~and $12.6 million~~in the comparable prior year period due to higher home closing volume. Financial services profit for the nine months ended September 30, ~~2022 and 2021, respectively. The increase~~2023 decreased $6.2 million year over year, due primarily to $7.9 million in ~~third quarter 2022 financial services profit compared to 2021 is due to a higher number of closings~~charges in the ~~markets where Carefree Title provides title and escrow services. The decrease in year-to-date financial services profit is primarily due~~second quarter of 2023 related to ~~a change in the mix of financial services closing volume as well as increased overhead expenses due to a higher employee headcount.~~unused prepaid interest rate locks that expired.

Selling, General and Administrative Expenses and Other Expenses (dollars in thousands)


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021				2023			2022			2023			2022
Commissions and other sales costs	Commissions and other sales costs	$	(77,884)		$	(68,952)		$	(212,807)		$	(210,585)		Commissions and other sales costs	$	(99,122)		$	(77,884)		$	(277,766)		$	(212,807)
Percent of home closing revenue	Percent of home closing revenue	5.0		%	5.5		%	5.0		%	5.9		%	Percent of home closing revenue	6.2		%	5.0		%	6.3		%	5.0		%
General and administrative expenses	General and administrative expenses	$	(48,443)		$	(47,192)		$	(136,370)		$	(128,297)		General and administrative expenses	$	(63,091)		$	(48,443)		$	(162,750)		$	(136,370)
Percent of home closing revenue	Percent of home closing revenue	3.1		%	3.8		%	3.2		%	3.6		%	Percent of home closing revenue	3.9		%	3.1		%	3.7		%	3.2		%

Interest expense	Interest expense	$	—		$	(79)		$	(41)		$	(246)		Interest expense	$	—		$	—		$	—		$	(41)
Other (expense)/income, net		$	(74)		$	1,268		$	(849)		$	3,443
Other income/(expense), net														Other income/(expense), net	$	13,331		$	(74)		$	35,037		$	(849)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	$	—		$	—		$	—		$	(18,188)		Loss on early extinguishment of debt	$	(907)		$	—		$	(907)		$	—
Provision for income taxes	Provision for income taxes	$	(67,002)		$	(60,957)		$	(217,242)		$	(143,353)		Provision for income taxes	$	(63,974)		$	(67,002)		$	(150,664)		$	(217,242)

Commissions and Other Sales Costs. Commissions and other sales costs are comprised of internal and external commissions and related sales and marketing expenses such as advertising and sales office costs. ~~At $77.9~~These costs increased $21.2 million ~~for~~to $99.1 million in the three months ended September 30, ~~2022, these costs increased $8.9 million~~2023, due to higher home closing revenue ~~compared to the prior year.~~and increased broker commissions. As a percentage of home closing revenue, ~~these~~Commissions and other sales costs ~~improved 50~~were up 120 basis points ~~from the benefit~~to 6.2% of ~~lower commission rates on~~ home ~~closings~~closing revenue in the third quarter of ~~2022.~~2023 from 5.0% in 2022, due to increased commission rates reflective of the current sales environment as well as a higher external broker participation rate. For the nine months ended September 30, ~~2022, commissions~~2023, Commissions and other sales

costs of $277.8 million were ~~$2.2 million higher than the corresponding prior year period. The year-over-year improvement as a percentage~~6.3% of home closing revenue, ~~of 90~~increasing $65.0 million and 130 basis points, isrespectively, due to ~~lower commissions.~~increased commissions and advertising spend.

General and Administrative Expenses. General and administrative expenses represent corporate and divisional overhead expenses such as salaries and bonuses, occupancy, insurance and travel expenses. For the three months ended September 30, ~~2022, general~~2023, General and administrative expenses ~~were~~of $63.1 million increased $14.6 million from $48.4 million ~~$1.3 million higher than the 2021 period, due primarily to increased payroll expenses on higher employee headcount~~in 2022, and ~~some increased travel costs due to lifting COVID-19 restrictions. General and administrative expenses~~ as a percentage of home closing revenue ~~improved 70~~increased 80 basis points to 3.9% from 3.1%. The increase in ~~the third quarter~~both dollars and as a percentage of ~~2022 due to leverage of higher~~ home closing revenue ~~on fixed overhead expenses.~~is largely due to higher compensation costs, including increases as part of new and growing market operations, some of which are not yet producing offsetting earnings, as well as competitive pay adjustments to reflect current market conditions in many of our geographies. For the nine months ended September 30, ~~2022, general~~2023, General and

administrative expenses were ~~$136.4~~$162.8 million, ~~a 6.3% increase~~up $26.4 million and 50 basis points from ~~$128.3~~$136.4 million in the ~~prior year comparative period. As a percentage of home closing revenue, expenses improved 40 basis points~~2022 period, due primarily to ~~3.2% for similar reasons as our quarterly results.~~higher compensation costs and increased spending on technology and insurance.

Interest Expense. Interest expense is comprised of interest incurred, but not capitalized, on our senior notes, other borrowings, and our Credit Facility. We recognized no interest expense for the three and nine months ended September 30, 2023 as all interest was capitalized to qualifying assets. We recognized no interest expense in the three months ended September 30, 2022, ~~as all~~and interest ~~was capitalized. Interest~~ expense ~~was $79,000~~of $41,000 for ~~same period in 2021. For~~ the nine months ended September 30, ~~2022 and 2021, interest expense totaled $41,000 and $246,000, respectively.~~2022.

Other Income/(Expense)~~/Income,~~, Net. Other income, net, primarily consists of (i) ~~sublease income, (ii)~~ interest earned on our cash and cash equivalents, (ii) sublease income, (iii) payments and awards related to legal settlements and (iv) our portion of pre-tax income or loss from non-financial services joint ventures. For the three and nine months ended September 30, ~~2022,~~2023, Other income was $13.3 million and $35.0 million, respectively, compared to net other expense ~~was~~of $0.1 million and $0.8 million ~~respectively, compared to Other income of $1.3 million and $3.4 million~~ in the ~~2021~~2022 comparable periods. The increase in both quarter and year-to-date is due to higher interest earned on larger cash and cash equivalents balances.

Loss on Early Extinguishment of Debt. Loss on early extinguishment of debt of ~~$18.2~~$0.9 million for the three and nine months ended September 30, ~~2021~~2023 is related to the ~~early~~$150.0 million partial redemption of our ~~$300.0 million 7.00% Senior Notes due 2022 during the second quarter of 2021.~~2025 Notes. There were no similar charges for the three and nine months ended September 30, 2022. See Note 6 to the unaudited consolidated financial statements included in this report for more information related to the ~~early~~partial redemption of our ~~Senior Notes due 2022.~~2025 Notes.

Income Taxes. Our effective tax rate was ~~20.3%~~22.4% and ~~23.3%~~20.3% for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~22.9%~~21.8% and ~~22.3%~~22.9% for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~lower~~higher effective tax rate for the three months ended September 30, ~~2022 compared~~2023 is due to the ~~three months ended September 30, 2021, reflects~~catch-up of energy-efficient homes tax credits on qualifying homes under the ~~benefit of the retroactive extension of the~~IRC §45L energy-efficient homes federal ~~energy efficient home credits under Internal Revenue Code §45L enacted by~~tax credit from the IRA ~~of 2022 in August 2022, under which we recorded a benefit~~that was enacted in the third quarter of ~~2022 for all qualifying 2022 home closings.~~2022. The lower effective tax ~~rates~~rate for the nine months ended September 30, ~~2022 and~~2023 reflects the ~~three and nine months ended September 30, 2021 also reflect credits earned under Internal Revenue Code §45L new energy efficient homes.~~increased per-home energy-efficiency credit amount starting in 2023.

Liquidity and Capital Resources

Overview

We have historically generated cash and funded our operations primarily from cash flows from operating activities. Additional sources of funds may include additional debt or equity financing and borrowing capacity under our Credit Facility. We exercise strict controls and believe we have a prudent strategy for Company-wide cash management, including those related to cash outlays for land acquisition and development and spec home construction. Our principal uses of cash include acquisition and development of land and lots, home construction, operating expenses, share repurchases and the payment of interest, routine liabilities and ~~routine liabilities. From time to time, we~~dividends. We also opportunistically repurchase our ~~common stock and~~ senior ~~notes.~~notes, as we did this quarter with a $150.0 million partial redemption of our 2025 Notes.

Cash flows for each of our communities depend on their stage of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, zoning plat and other approvals, community and lot development, and construction of model homes, roads, utilities, landscape and other amenities. Because these costs are a component of our inventory and are not recognized in our income statement until a home closes, we incur significant cash outlays prior to recognition of earnings. In the later stages of a community, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. Similarly, in times of community count growth, we incur significant outlays of cash through the land purchase, development and community opening stages whereas in in times of community count stability, these cash outlays are incurred in a more even-flow cadence with cash inflows from actively selling communities that are contributing closing volume and home closing revenue. Conversely, in a down turn environment, cash outlays for land and community count growth may be scaled ~~back.~~

back and we may curtail community count.

Short-term Liquidity and Capital Resources

Over the course of the next twelve months, we expect that our primary demand for funds will be for the construction of homes, as well as acquisition and development of both new and existing lots, operating expenses, including general and administrative expenses, interest and dividend payments and ~~opportunistic~~ common stock repurchases. In addition, we may opportunistically retire or redeem a portion of our senior notes. We expect to meet these short-term liquidity requirements primarily through our cash and cash equivalents on hand and the net cash flows provided by our operations.

Between our cash and cash equivalents on hand combined with the availability of liquidity from our Credit Facility, we believe that we currently have sufficient liquidity. Nevertheless, we may seek additional capital to strengthen our liquidity position, enable us to acquire additional land inventory in anticipation of improving market conditions, and/or strengthen our long-term capital structure.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, our principal demands for funds will be for the construction of homes, land acquisition and development activities needed to maintain our lot supply and active community count, payments of principal and interest on our senior notes as they become due or mature, ~~and~~ common stock ~~repurchases.~~repurchases and payments of dividends. We expect our existing and future generated cash will be adequate to fund our ongoing operating activities as well as ~~providing~~provide capital for investment in future land purchases and related development activities. To the extent the sources of capital described above are insufficient to meet our long-term cash needs, we may also conduct additional public offerings of our securities, refinance or secure new debt or dispose of certain assets to fund our operating activities. There can be no assurances that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing stockholders or increase our interest costs.

Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact both short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on our unaudited consolidated balance sheets as of September 30, ~~2022,~~2023, while others are considered future commitments for materials or services not yet provided. Our contractual obligations primarily consist of principal and interest payments on our senior notes, loans payable and other borrowings, including our Credit ~~Agreement,~~Facility, letters of credit and surety bonds and operating leases. We have no debt maturities until 2025. We also have requirements for certain short-term lease commitments, ~~commitments to fund~~funding working capital needs of our existing unconsolidated joint ventures and other purchase obligations in the normal course of business. Other material cash requirements include land acquisition and development costs, home construction costs and operating expenses, including our selling, general and administrative expenses, as previously discussed. We plan to fund these commitments primarily with cash flows generated by operations, but may also utilize additional debt or equity financing and borrowing capacity under our Credit Facility. Our maximum exposure to loss on our purchase and option agreements is generally limited to non-refundable deposits and capitalized or committed pre-acquisition costs.

For information about our loans payable and other borrowings, including our Credit Facility, and senior notes, reference is made to Notes 5 and 6 in the notes to our unaudited consolidated financial statements included in this report and are incorporated by reference herein. For information about our lease obligations, reference is made to Note 4 in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Reference is made to Notes 1, 3, 4, and 15 in the notes to our unaudited consolidated financial statements included in this report and are incorporated by reference herein. These Notes discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items. In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in connection with the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be ~~obligated, if any.~~obligated.

We do not engage in commodity trading or other similar activities. We had no derivative financial instruments at September 30, ~~2022~~2023 or December 31, ~~2021.~~

2022.

Operating Cash Flow Activities

During the nine months ended September 30, ~~2022 and 2021,~~2023, net cash ~~used~~provided by operating activities totaled $460.1 million, compared to net cash used in operations of $169.8 million during the nine months ended September 30, 2022. Operating cash flows in the first nine months of 2023 benefited from cash generated from net earnings of $539.9 million and ~~$248.7~~were partially offset by a $137.5 million ~~respectively.~~increase in real estate. Operating cash flows in the first nine months of 2022 benefited from cash generated byfrom net earnings of $729.8 million and an increase in accounts payable and accrued liabilities of $118.6 million due to timing of payments for routine transactions, offset by a $990.1 million increase in real estate and an $89.2 million increase in other receivables, prepaids and other assets. The increase in real estate in both periods was due to construction activities on a greater number of homes under construction, land acquisition and development activities. The increase in other receivables, prepaids and other assets for the first nine months of 2022 was largely due to receivables from municipalities for land development reimbursements and the purchase of fixed rate interest locks for eligible buyers in our backlog. During the nine months ended September 30, 2021, operating cash flows benefited from cash generated by net earnings of $500.0 million and were offset by an increase in real estate assets of $810.7 million.

Investing Cash Flow Activities

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, net cash used in investing activities totaled ~~$24.9~~$34.7 million and ~~$17.5~~$24.9 million, respectively. Cash used in investing activities in ~~2022~~both periods was mainly attributable to the purchases of property and equipment ~~of $19.5 million~~ and investments in unconsolidated ~~entities of $5.7 million. Cash used in investing activities in 2021 was primarily due to $17.9 million in purchases of property and equipment.~~entities.

Financing Cash Flow Activities

During the nine months ended September 30, 2023 and 2022, net cash used in financing activities totaled $238.2 million and $124.3 million, ~~versus~~respectively. The net cash ~~provided by~~used in financing activities ~~of $82.9~~in 2023 includes $150.0 million for the ~~2021 period.~~partial redemption of our 2025 Notes and associated early tender fees of $0.9 million, $55.0 million in share repurchases and $29.7 million of dividends paid. The net cash used in financing activities in 2022 primarily reflects $109.3 million in share repurchases. See 'Part II, Item 2 - Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds'~~Proceeds and Issuer Purchases of Equity Securities' for more information about our authorized share repurchase program. The net cash provided by financing activities in 2021 primarily reflects the net proceeds of $450.0 million from the issuance of our 3.875% Senior Notes due 2029, offset by the early redemption of our 7.00% Senior Notes due 2022 of $300.0 million principal and associated early tender fees of $17.7 million, along with share repurchases of $37.0 million.

We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. Debt-to-capital and net debt-to-capital are calculated as follows (dollars in thousands):


		As of							As of
		September 30, 2022			December 31, 2021				September 30, 2023			December 31, 2022
Senior notes, net, loans payable and other borrowings	Senior notes, net, loans payable and other borrowings	$	1,155,774		$	1,160,038		Senior notes, net, loans payable and other borrowings	$	1,005,420		$	1,150,647
Stockholders’ equity	Stockholders’ equity	3,681,810			3,044,389			Stockholders’ equity	4,421,042			3,949,611
Total capital	Total capital	$	4,837,584		$	4,204,427		Total capital	$	5,426,462		$	5,100,258
Debt-to-capital (1)	Debt-to-capital (1)	23.9		%	27.6		%	Debt-to-capital (1)	18.5		%	22.6		%
Senior notes, net, loans payable and other borrowings	Senior notes, net, loans payable and other borrowings	$	1,155,774		$	1,160,038		Senior notes, net, loans payable and other borrowings	$	1,005,420		$	1,150,647
Less: cash and cash equivalents	Less: cash and cash equivalents	(299,387)			(618,335)			Less: cash and cash equivalents	(1,048,755)			(861,561)
Net debt	Net debt	856,387			541,703			Net debt	(43,335)			289,086
Stockholders’ equity	Stockholders’ equity	3,681,810			3,044,389			Stockholders’ equity	4,421,042			3,949,611
Total net capital	Total net capital	$	4,538,197		$	3,586,092		Total net capital	$	4,377,707		$	4,238,697
Net debt-to-capital (2)	Net debt-to-capital (2)	18.9		%	15.1		%	Net debt-to-capital (2)	(1.0)		%	6.8		%

(1)Debt-to-capital is computed as senior notes, net and loans payable and other borrowings divided by the aggregate of total senior notes, net, loans payable and other borrowings and stockholders' equity.

(2)Net debt-to-capital is considered a non-GAAP financial measure, and is computed as net debt divided by the aggregate of net debt and stockholders' equity. Net debt is comprised of total senior notes, net and loans payable and other borrowings, less cash and cash equivalents. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing.

Dividends

We have never declared cash dividends. Currently, we plan to utilize our cash to manage our liquidity and to grow community count. Future cash dividends, if any, will depend upon economic and financial conditions, results of operations, capital requirements, statutory requirements, restrictions imposed by our Credit Facility, as well as other factors considered relevant by our Board of Directors.

Credit Facility Covenants

Borrowings under the Credit Facility are unsecured, but availability is subject to, among other things, a borrowing base. The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of ~~$1.9~~$2.8 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%. In addition, we are required to maintain either (i) an interest coverage ratio (EBITDA to interest expense, as defined therein) of at least 1.50 to 1.00 or (ii) liquidity (as defined therein) of an amount not less than our consolidated interest incurred during the trailing 12 months. We were in compliance with all Credit Facility covenants as of September 30, ~~2022.~~2023. Our actual financial covenant calculations as of September 30, ~~2022~~2023 are reflected in the table below.


Financial Covenant (dollars in thousands):	Covenant Requirement	Actual
Minimum Tangible Net Worth	> ~~$2,433,206~~$3,021,938	$~~3,641,053~~4,376,362
Leverage Ratio	< 60%	~~18.0%~~
~~Interest Coverage Ratio~~ ~~(1)~~	~~> 1.50~~	~~22.62~~
~~Minimum Liquidity~~ ~~(1)~~	~~> $60,774~~	~~$1,019,588~~(0.8)%
Investments other than defined permitted investments	< ~~$1,092,316~~$1,337,909	$~~11,356~~15,062

~~(1)We are required to meet either the Interest Coverage Ratio or Minimum Liquidity, but not both.~~

Seasonality

Historically, we have experienced seasonal variations in our quarterly operating results and capital requirements. We typically sell more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year. We typically benefit from the cash generated from home closings more in the third and fourth quarters than in the first and second quarters. ~~During 2020, historical~~Historical cycles were impacted in 2020 by ~~COVID-19~~unprecedented demand that continued through the middle of 2022, and ~~since then have been~~were further impacted by ~~increased demand and~~ supply chain and labor ~~constraints.~~constraints and rising interest rates. Historical seasonality returned in the back half of 2022 and we expect it to continue over the long term, although it may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.

Recent Issued Accounting Pronouncements

See Note 1 to our unaudited consolidated financial statements included in this report for discussion of recently issued accounting pronouncements.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Our fixed rate debt is made up primarily of ~~$1.2~~$1.0 billion in principal of our senior notes. Except in limited circumstances, we do not have an obligation to prepay our fixed-rate debt prior to maturity and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed rate borrowings until we would be required to repay such debt and access the capital markets to issue new debt. Our Credit Facility is subject to interest rate changes as the borrowing rates are based on SOFR or Prime (see Note 5 to our unaudited consolidated financial statements included in this report).

Our operations are interest rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in mortgage interest rates may negatively affect the ability of homebuyers to secure adequate ~~financing.~~financing or cause potential homebuyers with existing mortgages to choose to stay in their lower interest rate homes. Higher interest rates and/or rapidly increasing interest rates could adversely affect our ~~revenues,~~revenue, gross margins, ~~net income~~earnings and cancellation rates and would also increase our variable rate borrowing costs on our Credit Facility, if any. We do not enter into, or intend to enter into, derivative interest rate swap financial instruments for trading or speculative purposes.


Item 4.			Controls and Procedures

In order to ensure that the information we must disclose in our filings with the ~~SEC~~Securities and Exchange Commission ("SEC") is recorded, processed, summarized and reported on a timely basis, we have developed and implemented disclosure controls and procedures. Our management, with the participation of our CEO and CFO, has reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of September 30, ~~2022~~2023 (the “Evaluation Date”). Based on such evaluation, our management has concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring that information that is required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that information required to be

disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

During the fiscal quarter covered by this Form 10-Q, there has not been any change in our internal control over financial reporting that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

See Note 15 to our unaudited consolidated financial statements in this report for a discussion of our legal proceedings.


Item 1A.			Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item IA "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, financial condition and/or operating results. ~~Except as described below, there has~~There have been no material ~~change~~changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

~~Increases in interest rates or decreases in mortgage availability may make purchasing a home more difficult or less desirable and may negatively impact the ability to sell new and existing homes.~~

In general, housing demand is adversely affected by increases in interest rates and a lack of availability of mortgage financing. Most of our buyers finance their home purchases through our mortgage joint venture or third party lenders providing mortgage financing. If mortgage interest rates increase and, consequently, the ability of prospective buyers to finance home purchases is adversely affected, our home sales and cash flow may be adversely affected and the impact may be material. Additionally, rapid increases in interest rates may negatively impact affordability of a home purchase for existing buyers in backlog who have not yet locked in a mortgage interest rate for their loan. This could lead to an increase in the number of contract cancellations in our reported sales order numbers. For example, although long-term interest rates remain low compared to historical averages, in 2022 they have increased significantly from their previously historically low averages and are anticipated to continue to increase in the near term. We may have the ability to offset the impact of rising interest rates on affordability by purchasing interest rate locks; however, there is no guarantee that interest rate locks will be available for us to purchase at desirable terms, or if they are available, there is no guarantee that they will be utilized by potential customers.

A homebuyers' ability to obtain a mortgage loan is largely subject to prevailing interest rates, lenders’ credit standards and appraisals, and the availability of government-supported programs, such as those from the Federal Housing Administration ("FHA"), the Veterans Administration ("VA"), Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). If credit standards or appraisal guidelines are tightened, or mortgage loan programs are curtailed, potential buyers of our homes may not be able to obtain necessary mortgage financing. There can be no assurance that these programs will continue to be available or that they will be as accommodating as they currently are. Continued legislative and regulatory actions and more stringent underwriting standards could have a material adverse effect on our business if certain buyers are unable to obtain mortgage financing. A prolonged tightening of the financial markets could also negatively impact our business.

The above risks can also indirectly impact us to the extent our customers need to sell their existing homes to purchase a new home from us if the potential buyer of their home is unable to obtain mortgage financing. It may also impact the desire for existing homeowners to sell their homes as they may potentially be forfeiting a substantially lower interest rate on their existing home for a higher-rate mortgage on a new home.2022.


Item 2.			Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

We have never declared cash dividends. Currently, we plan to retain our cash to finance the continuing development of the business. Future cash dividends, if any, will depend upon financial condition, results of operations, capital requirements, statutory requirements, restrictions imposed by our Credit Facility, as well as other factors considered relevant by our Board of Directors.

Issuer Purchases of Equity Securities

On February 13, 2019, our Board of Directors authorized a new stock repurchase program, authorizing the expenditure of up to $100.0 million to repurchase shares of our common stock. On November 13, 2020, the Board of Directors authorized the expenditure of an additional $100.0 million to repurchase shares of our common stock under this program. On August 12, 2021, the Board of Directors authorized the expenditure of an additional $100.0 million to repurchase shares of our common stock under this program, which was announced on August 17, 2021. On May 19, 2022, the Board of Directors authorized the expenditure of an additional $200.0 million to repurchase shares of our common stock under this program, which was announced on May 25, 2022. There is no stated expiration for this program. The repurchases of the Company's shares may be made in the open market, in privately negotiated transactions, or otherwise. The timing and amount of repurchases, if any, will be determined by the Company's management at its discretion and be based on a variety of factors such as the market price of the Company's common stock, corporate and contractual requirements, prevailing market and economic conditions and legal requirements. The share repurchase program may be modified, suspended or discontinued at any time. As of September 30, ~~2022~~2023 there was ~~$244.1~~$189.1 million available under this program to repurchase shares. We ~~did not purchase any~~purchased 319,716 shares under the program during the three months ended September 30, ~~2022.~~2023.


Period	Total Number of Shares Purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
July 1, 2023 - July 31, 2023	—	$	—	—	$	234,077,454
August 1, 2023 - August 31, 2023	319,716	$	140.75	319,716	$	189,077,636
September 1, 2023 - September 30, 2023	—	$	—	—	$	189,077,636
Total	319,716			319,716


Item 5.			Other Information

Insider Trading Arrangements

During the fiscal quarter ended September 30, 2023, no director or officer adopted a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6.			Exhibits


Exhibit Number	Description	Page or Method of Filing
3.1	Restated Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Exhibit 3 of Form 8-K dated June 20, 2002

3.1.1	Amendment to Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Exhibit 3.1 of Form 10-Q for the quarter ended September 30, 1998

3.1.2	Amendment to Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Exhibit 3.1 of Form 8-K dated September 15, 2004

3.1.3	Amendment to Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Appendix A of the Definitive Proxy Statement for the ~~Registrant's~~ 2006 Annual Meeting of Stockholders filed on April 10, 2006

3.1.4	Amendment to Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Appendix B of the Definitive Proxy Statement for the ~~Registrant's~~ 2008 Annual Meeting of Stockholders filed on April 1, 2008

3.1.5	Amendment to Articles of Incorporation of Meritage Homes Corporation	Incorporated by reference to Appendix A of the Definitive Proxy Statement filed ~~by the Registrant with the Securities and Exchange Commission~~ on January 9, 2009

3.2	Meritage Homes Corporation Amended and Restated Bylaws ~~of Meritage Homes Corporation~~	Incorporated by reference to Exhibit 3.1 of Form 8-K dated ~~August 12, 2022~~June 14, 2023

22	List of Guarantor Subsidiaries	Incorporated by reference to Exhibit 22 of Form 10-K for the year ended December 31, ~~2021~~2022

31.1	Rule 13a-14(a)/15d-14(a) Certification of Phillippe Lord, Chief Executive Officer	Filed herewith

31.2	Rule 13a-14(a)/15d-14(a) Certification of Hilla Sferruzza, Chief Financial Officer	Filed herewith

32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer	Furnished herewith

101.0	The following ~~financial statements~~information from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three months and nine months ended September 30, ~~2022~~2023 were formatted in Inline XBRL (Extensible Business Reporting Language);: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Income Statements, (iii) Unaudited Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Consolidated Financial Statements.

104.0	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2022,~~2023, formatted in Inline XBRL and contained in exhibit 101.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			MERITAGE HOMES CORPORATION, a Maryland corporation

By:			/s/ HILLA SFERRUZZA
			Hilla Sferruzza Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

Date:			~~October 28, 2022~~November 1, 2023

INDEX OF EXHIBITS


3.1						Restated Articles of Incorporation of Meritage Homes Corporation

3.1.1						Amendment to Articles of Incorporation of Meritage Homes Corporation

3.1.2						Amendment to Articles of Incorporation of Meritage Homes Corporation

3.1.3						Amendment to Articles of Incorporation of Meritage Homes Corporation

3.1.4						Amendment to Articles of Incorporation of Meritage Homes Corporation

3.1.5						Amendment to Articles of Incorporation of Meritage Homes Corporation

3.2						Meritage Homes Corporation Amended and Restated Bylaws ~~of Meritage Homes Corporation~~

22						List of Guarantor Subsidiaries

31.1						Rule 13a-14(a)/15d-14(a) Certification of Phillippe Lord, Chief Executive Officer

31.2						Rule 13a-14(a)/15d-14(a) Certification of Hilla Sferruzza, Chief Financial Officer

32.1						Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

101.0						The following ~~financial statements~~information from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three months and nine months ended September 30, ~~2022~~2023 were formatted in Inline XBRL (Extensible Business Reporting Language);: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Income Statements, (iii) Unaudited Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Consolidated Financial Statements.

104.0						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2022,~~2023, formatted in Inline XBRL and contained in exhibit 101.

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