UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x	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


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

Commission File Number: 001-36491

Century Communities, Inc.

(Exact name of registrant as specified in its charter)


Delaware		68-0521411
(State or other jurisdiction of ‎incorporation or organization)		(I.R.S. Employer ‎Identification No.)

8390 East Crescent Parkway, Suite 650 ‎Greenwood Village, CO		80111
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code): (303) 770-8300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	CCS	New York Stock Exchange

Indicate by check mark whether the 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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data 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 x No o

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.

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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

On October ~~21, 2022, 31,772,335~~20, 2023, 31,774,615 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

Table of Contents

CENTURY COMMUNITIES, INC.

FORM 10-Q

For the Three and Nine Months Ended September 30, ~~2022~~2023

Index


	Page No.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 (audited)	3
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	4
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	5
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022	6
Notes to the Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4139
Item 4. Controls and Procedures	4139
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	4240
Item 1A. Risk Factors	4240
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4241
Item 3. Defaults Upon Senior Securities	4241
Item 4. Mine Safety Disclosures	4241
Item 5. Other Information	4241
Item 6. Exhibits	4342
Signatures	4443

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Century Communities, Inc.

Condensed Consolidated Balance Sheets

As of September 30, ~~2022~~2023 and December 31, ~~2021~~2022

(in thousands, except share and per share amounts)



	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
Assets	(unaudited)		(audited)		(unaudited)		(audited)
Cash and cash equivalents	$	98,203	$	316,310	$	193,111	$	296,724
Cash held in escrow		83,952		52,297		52,488		56,569
Accounts receivable		41,955		41,932		53,878		52,797
Inventories		3,107,734		2,456,614		3,058,317		2,830,645
Mortgage loans held for sale		194,123		353,063		162,742		203,558
Prepaid expenses and other assets		259,379		200,087		345,637		250,535
Property and equipment, net		30,450		24,939		34,044		31,688
Deferred tax assets, net		33,873		21,239		18,778		20,856
Goodwill		30,395		30,395		30,395		30,395
Total assets	$	3,880,064	$	3,496,876	$	3,949,390	$	3,773,767
Liabilities and stockholders' equity
Liabilities:
Accounts payable	$	94,054	$	84,679	$	161,054	$	106,926
Accrued expenses and other liabilities		337,415		316,877		282,283		299,588
Notes payable		1,016,548		998,936		1,051,294		1,019,412
Revolving line of credit		165,000		—		—		—
Mortgage repurchase facilities		195,047		331,876		162,094		197,626
Total liabilities		1,808,064		1,732,368		1,656,725		1,623,552
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none outstanding		—		—		—		—
Common stock, $0.01 par value, 100,000,000 shares authorized, 31,772,335 and 33,760,940 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		318		338
Common stock, $0.01 par value, 100,000,000 shares authorized, 31,773,033 and 31,772,791 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively						318		318
Additional paid-in capital		579,697		697,845		582,334		584,803
Retained earnings		1,491,985		1,066,325		1,710,013		1,565,094
Total stockholders' equity		2,072,000		1,764,508		2,292,665		2,150,215
Total liabilities and stockholders' equity	$	3,880,064	$	3,496,876	$	3,949,390	$	3,773,767

See Notes to Unaudited Condensed Consolidated Financial Statements

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Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

(in thousands, except share and 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
Revenues
Homebuilding revenues
Home sales revenues	$	1,118,588	$	917,337	$	3,241,537	$	2,881,404	$	865,065	$	1,118,588	$	2,419,025	$	3,241,537
Land sales and other revenues		2,432		11,594		12,872		35,522		722		2,432		3,811		12,872
Total homebuilding revenues		1,121,020		928,931		3,254,409		2,916,926		865,787		1,121,020		2,422,836		3,254,409
Financial services revenues		23,271		29,101		72,373		92,586		23,636		23,271		63,768		72,373
Total revenues		1,144,291		958,032		3,326,782		3,009,512		889,423		1,144,291		2,486,604		3,326,782
Homebuilding cost of revenues
Cost of home sales revenues		(841,665)		(682,012)		(2,365,633)		(2,203,187)		(652,411)		(841,665)		(1,910,630)		(2,365,633)
Cost of land sales and other revenues		(292)		(6,977)		(9,151)		(23,996)		—		(292)		(375)		(9,151)
Total homebuilding cost of revenues		(841,957)		(688,989)		(2,374,784)		(2,227,183)		(652,411)		(841,957)		(1,911,005)		(2,374,784)
Financial services costs		(13,922)		(17,666)		(43,262)		(54,135)		(11,432)		(13,922)		(33,983)		(43,262)
Selling, general and administrative		(110,687)		(90,154)		(321,484)		(281,961)		(111,918)		(110,687)		(315,351)		(321,484)
Loss on debt extinguishment		—		(14,458)		—		(14,458)
Inventory impairment and other		—		—		—		(41)
Other income (expense)		(5,651)		(1,004)		(12,754)		(2,790)		(1,663)		(5,651)		(1,509)		(12,754)
Income before income tax expense		172,074		145,761		574,498		428,944		111,999		172,074		224,756		574,498
Income tax expense		(27,601)		(31,784)		(128,861)		(95,406)		(28,849)		(27,601)		(56,850)		(128,861)
Net income	$	144,473	$	113,977	$	445,637	$	333,538	$	83,150	$	144,473	$	167,906	$	445,637

Earnings per share:
Basic	$	4.49	$	3.38	$	13.57	$	9.90	$	2.60	$	4.49	$	5.25	$	13.57
Diluted	$	4.44	$	3.31	$	13.41	$	9.69	$	2.58	$	4.44	$	5.21	$	13.41
Weighted average common shares outstanding:
Basic		32,196,589		33,760,940		32,850,647		33,688,531		31,962,884		32,196,589		31,967,672		32,850,647
Diluted		32,570,335		34,471,044		33,241,764		34,420,163		32,237,022		32,570,335		32,200,677		33,241,764

See Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

(in thousands)


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2023		2022
Operating activities
Net income	$	445,637	$	333,538	$	167,906	$	445,637
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		8,207		8,324		11,019		8,207
Stock-based compensation expense		14,950		10,760		26,517		14,950
Fair value of mortgage loans held for sale and other		12,174		3,529		(2,269)		12,174
Loss on debt extinguishment		—		14,458
Inventory impairment and other		—		41
Abandonment of lot option contracts						3,021		7,389
Deferred income taxes		(12,634)		(10,336)		2,078		(12,634)
Loss on disposition of assets		1,504		1,267		1,062		1,504
Changes in assets and liabilities:
Cash held in escrow		(31,655)		(6,034)		4,081		(31,655)
Accounts receivable		(14,499)		(12,353)		(1,081)		(24)
Inventories		(597,539)		(267,282)		(225,587)		(649,038)
Mortgage loans held for sale		142,283		53,132		36,343		142,283
Prepaid expenses and other assets		(25,740)		(68,622)		(21,179)		(33,129)
Accounts payable		10,605		(5,385)		54,126		9,374
Accrued expenses and other liabilities		(20,400)		27,743		(23,029)		17,855
Net cash (used in) provided by operating activities		(67,107)		82,780
Net cash provided by (used in) operating activities						33,008		(67,107)
Investing activities
Purchases of property and equipment		(15,395)		(6,763)		(14,438)		(15,395)
Expenditures related to development of rental properties		(18,082)		—		(59,812)		(18,082)
Other investing activities		(3,853)		2,434		(346)		(3,853)
Net cash used in investing activities		(37,330)		(4,329)		(74,596)		(37,330)
Financing activities
Borrowings under revolving credit facilities		968,000		—		25,000		968,000
Payments on revolving credit facilities		(803,000)		—		(25,000)		(803,000)
Proceeds from issuance of senior notes due 2029		—		500,000
Extinguishment of senior notes due 2025		—		(411,752)
Borrowing under construction loan agreements						21,453		—
Proceeds from issuance of insurance premium notes and other		25,070		19,580		26,511		25,070
Principal payments on insurance premium notes and other		(11,627)		(9,683)		(17,273)		(11,627)
Debt issuance costs		—		(6,155)
Net payments for mortgage repurchase facilities		(136,829)		(47,451)		(35,532)		(136,829)
Withholding of common stock upon vesting of stock-based compensation awards		(12,735)		(13,726)		(10,672)		(12,735)
Repurchases of common stock under stock repurchase program		(120,646)		—		(19,227)		(120,646)
Dividend payments		(19,680)		(10,127)		(22,074)		(19,680)
Other financing activities		2,941		(133)		—		2,941
Net cash (used in) provided by financing activities		(108,506)		20,553
Net (decrease) increase	$	(212,943)	$	99,004
Net cash used in financing activities						(56,814)		(108,506)
Net decrease					$	(98,402)	$	(212,943)
Cash and cash equivalents and Restricted cash
Beginning of period		322,241		398,081		308,492		322,241
End of period	$	109,298	$	497,085	$	210,090	$	109,298
Supplemental cash flow disclosure
Cash paid for income taxes	$	151,079	$	116,182	$	41,358	$	151,079
Cash and cash equivalents and Restricted cash
Cash and cash equivalents	$	98,203	$	491,879	$	193,111	$	98,203
Restricted cash (Note 5)		11,095		5,206		16,979		11,095
Cash and cash equivalents and Restricted cash	$	109,298	$	497,085	$	210,090	$	109,298

See Notes to Unaudited Condensed Consolidated Financial Statements

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Century Communities, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

(in thousands)

For the Three Months Ended September 30, ~~2022~~2023 and ~~2021~~2022


										Common Stock
										Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at June 30, 2023										32,020	$	320	$	586,856	$	1,634,741	$	2,221,917
Vesting of stock-based compensation awards										1		—		—		—		—
Withholding of common stock upon vesting of stock-based compensation awards										—		—		(29)		—		(29)
Repurchases of common stock										(248)		(2)		(17,256)		—		(17,258)
Stock-based compensation expense												—		12,226		—		12,226
Cash dividends declared and dividend equivalents										—		—		537		(7,878)		(7,341)
Net income										—		—		—		83,150		83,150
Balance at September 30, 2023										31,773	$	318	$	582,334	$	1,710,013	$	2,292,665
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at June 30, 2022	32,273	$	323	$	596,727	$	1,354,114	$	1,951,164	32,273	$	323	$	596,727	$	1,354,114	$	1,951,164
Vesting of stock-based compensation awards	—		—		—		—		—	—		—		—		—		—
Withholding of common stock upon vesting of stock-based compensation awards	—		—		—		—		—	—		—		—		—		—
Repurchases of common stock	(501)		(5)		(22,336)		—		(22,341)	(501)		(5)		(22,336)				(22,341)
Stock-based compensation expense	—		—		5,159		—		5,159	—		—		5,159		—		5,159
Cash dividends declared and dividend equivalents	—		—		147		(6,602)		(6,455)	—		—		147		(6,602)		(6,455)
Net income	—		—		—		144,473		144,473	—		—		—		144,473		144,473
Balance at September 30, 2022	31,772	$	318	$	579,697	$	1,491,985	$	2,072,000	31,772	$	318	$	579,697	$	1,491,985	$	2,072,000


Balance at June 30, 2021	33,761	$	338	$	690,707	$	797,613	$	1,488,658
Stock-based compensation expense	��		—		3,548		—		3,548
Cash dividends declared and dividend equivalents	—		—		54		(5,117)		(5,063)
Other	—		—		(103)		—		(103)
Net income	—		—		—		113,977		113,977
Balance at September 30, 2021	33,761	$	338	$	694,206	$	906,473	$	1,601,017

For the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022


										Common Stock
										Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at December 31, 2022										31,773	$	318	$	584,803	$	1,565,094	$	2,150,215
Vesting of stock-based compensation awards										448		4		(4)		—		—
Withholding of common stock upon vesting of stock-based compensation awards										(170)		(2)		(10,670)		—		(10,672)
Repurchases of common stock										(278)		(2)		(19,225)		—		(19,227)
Stock-based compensation expense										—		—		26,517		—		26,517
Cash dividends declared and dividend equivalents										—		—		913		(22,987)		(22,074)
Net income										—		—		—		167,906		167,906
Balance at September 30, 2023										31,773	$	318	$	582,334	$	1,710,013	$	2,292,665
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders' Equity
Balance at December 31, 2021	33,761	$	338	$	697,845	$	1,066,325	$	1,764,508	33,761	$	338	$	697,845	$	1,066,325	$	1,764,508
Vesting of stock-based compensation awards	516		5		(5)		—		—	516		5		(5)		—		—
Withholding of common stock upon vesting of stock-based compensation awards	(200)		(2)		(12,733)		—		(12,735)	(200)		(2)		(12,733)		—		(12,735)
Repurchases of common stock	(2,305)		(23)		(120,623)		—		(120,646)	(2,305)		(23)		(120,623)		—		(120,646)
Stock-based compensation expense	—		—		14,950		—		14,950	—		—		14,950		—		14,950
Cash dividends declared and dividend equivalents	—		—		297		(19,977)		(19,680)	—		—		297		(19,977)		(19,680)
Other	—		—		(34)		—		(34)	—		—		(34)		—		(34)
Net income	—		—		—		445,637		445,637	—		—		—		445,637		445,637
Balance at September 30, 2022	31,772	$	318	$	579,697	$	1,491,985	$	2,072,000	31,772	$	318	$	579,697	$	1,491,985	$	2,072,000


Balance at December 31, 2020	33,351	$	334	$	697,200	$	583,171	$	1,280,705
Vesting of stock-based compensation awards	675		7		(7)		—		—
Withholding of common stock upon vesting of stock-based compensation awards	(265)		(3)		(13,723)		—		(13,726)
Stock-based compensation expense	—		—		10,760		—		10,760
Cash dividends declared and dividend equivalents	—		—		109		(10,236)		(10,127)
Other	—		—		(133)		—		(133)
Net income	—		—		—		333,538		333,538
Balance at September 30, 2021	33,761	$	338	$	694,206	$	906,473	$	1,601,017

See Notes to Unaudited Condensed Consolidated Financial Statements

‎

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Century Communities, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, ~~2022~~2023

1. Basis of Presentation

Century Communities, Inc. (which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 1718 states. In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand targets a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.

Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title, and insurance services, respectively, primarily to our homebuyers, have been identified as our Financial Services segment. Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, ~~primarily~~currently all located in ~~Colorado, with the intent to dispose of properties shortly after achieving stabilized rental operations.~~Colorado. Century Living, LLC is included in our Corporate segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (which we refer to as “GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations for the periods presented. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by GAAP and should be read in conjunction with the consolidated financial statements for the year ended December 31, ~~2021,~~2022, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 that was filed with the SEC on February ~~3, 2022.~~2, 2023.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, as well as all subsidiaries in which we have a controlling interest, and variable interest entities for which the Company is deemed to be the primary beneficiary. We do not have any variable interest entities in which we are deemed the primary beneficiary. ~~All intercompany accounts and transactions have been eliminated.~~

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

‎Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation.

Recently Issued Accounting Standards

There are no recent accounting standards that are expected to have a material impact on our consolidated financial statements.

2. Reporting Segments

Our homebuilding operations are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 1718 states. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand is managed by geographic location, and each of our four geographic regions offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Each of our four geographic regions is considered a separate operating segment. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade selections. Our Century Complete brand currently has operations in 11 states and is managed separately from our four geographic regions. Accordingly, it is considered a separate operating segment.

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internet, and generally provides no option or upgrade selections. Our Century Complete brand currently has operations in 11 states and it is considered a separate operating segment.

The management of our four Century Communities geographic regions and Century Complete reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company. The CODMs review the results of our operations, including total revenue and income before income tax expense to determine profitability and to allocate resources. Accordingly, we have presented our homebuilding operations as the following five reportable segments:

West (California and Washington)

Mountain (Arizona, Colorado, Nevada, and Utah)

Texas

Southeast ~~(Florida,~~(Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee)

Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Louisiana, Michigan, North Carolina, Ohio, South ~~Carolina,~~Carolina)

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and ~~Texas)~~are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis as of and for the three and nine months ended September 30, 2023, and we have restated the corresponding segment information for those segments as of December 31, 2022 and for the three and nine months ended September 30, 2022.

We have identified our Financial Services operations, which provide mortgage, title, and insurance services to our homebuyers, as a sixth reportable segment. Our Corporate operations are a non-operating segment, as ~~they~~our Corporate operations serve to support our homebuilding, and to a lesser extent our Financial Services operations, through functions, such as our executive, finance, treasury, human resources, accounting and legal departments.

Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, ~~primarily~~currently all located in ~~Colorado, with the intent to dispose of properties shortly after achieving stabilized rental operations.~~Colorado. Century Living, LLC is included in our Corporate segment.

The following table summarizes total revenue and income (loss) before income tax expense by segment (in thousands):

Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Revenue:
West
$
255,413
$
268,279
$
811,961
$
691,472
Mountain
288,620
263,587
852,981
863,901
Texas
115,857
87,250
363,297
307,774
Southeast
196,787
131,297
526,944
520,221
Century Complete
264,343
178,518
699,226
533,558
Financial Services
23,271
29,101
72,373
92,586
Corporate
—
—
—
—
Total revenue
$
1,144,291
$
958,032
$
3,326,782
$
3,009,512
Income (loss) before income tax expense:
West
$
51,036
$
60,915
$
200,213
$
129,279
Mountain
51,058
50,561
159,559
158,355
Texas
17,084
11,884
62,978
39,554
Southeast
38,400
20,004
108,053
69,540
Century Complete
36,939
24,838
101,769
69,657
Financial Services
9,349
11,435
29,111
38,451
Corporate
(31,792)
(33,876)
(87,185)
(75,892)
Total income before income tax expense
$
172,074
$
145,761
$
574,498
$
428,944

~~The following table summarizes total assets by segment (in thousands):~~



	September 30,		December 31,
	2022		2021		Three Months Ended September 30,				Nine Months Ended September 30,
					2023		2022		2023		2022
Revenue:
West	$	785,994	$	668,830	$	167,708	$	255,413	$	436,081	$	811,961
Mountain		1,135,788		1,008,481		207,054		288,620		683,432		852,981
Texas		499,751		322,302		111,694		132,940		327,844		424,893
Southeast		451,104		360,644		164,968		196,787		369,414		526,944
Century Complete		510,290		371,096		214,363		247,260		606,065		637,630
Financial Services		357,431		533,159		23,636		23,271		63,768		72,373
Corporate		139,706		232,364		—		—		—		—
Total assets	$	3,880,064	$	3,496,876
Total revenue					$	889,423	$	1,144,291	$	2,486,604	$	3,326,782

Income (loss) before income tax expense:
West					$	31,419	$	51,036	$	54,358	$	200,213
Mountain						25,449		51,058		77,946		159,559
Texas						16,377		20,084		31,502		73,579
Southeast						33,717		38,400		63,675		108,053
Century Complete						30,873		33,939		61,171		91,168
Financial Services						12,204		9,349		29,785		29,111
Corporate						(38,040)		(31,792)		(93,681)		(87,185)
Total income before income tax expense					$	111,999	$	172,074	$	224,756	$	574,498

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The following table summarizes total assets by segment (in thousands):



	September 30,		December 31,
	2023		2022
West	$	732,859	$	665,827
Mountain		1,076,810		1,122,892
Texas		573,187		508,862
Southeast		506,659		415,887
Century Complete		401,238		376,131
Financial Services		347,896		372,284
Corporate		310,741		311,884
Total assets	$	3,949,390	$	3,773,767

Corporate assets primarily include certain cash and cash equivalents, ~~certain property and equipment,~~capitalized interest, costs associated with development of multi-family rental properties, certain property and equipment, prepaid insurance, and deferred financing costs on our revolving line of credit.

3. Inventories

Inventories included the following (in thousands):



	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
Homes under construction	$	1,597,083	$	1,188,270	$	1,507,186	$	1,213,919
Land and land development		1,449,972		1,214,965		1,477,804		1,554,951
Capitalized interest		60,679		53,379		73,327		61,775
Total inventories	$	3,107,734	$	2,456,614	$	3,058,317	$	2,830,645

4. Financial Services

Our Financial Services are principally comprised of our mortgage lending operations, Inspire Home Loans Inc. (which we refer to as “Inspire”). Inspire is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers. Inspire sells substantially all of the loans it originates either as loans with servicing rights released, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days. Inspire primarily finances these loans using its mortgage repurchase facilities. Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $139.8 million and $164.3 million at September 30, 2022 and December 31, 2021, respectively, and carried a weighted average interest rate of approximately 5.3% and 3.3%, respectively. As of September 30, 2022 and December 31, 2021, Inspire had mortgage loans held for sale with an aggregate fair value of $194.1 million and $353.1 million, respectively, and an aggregate outstanding principal balance of $199.7 million and $342.0 million, respectively. Net losses on the sale of mortgage loans were $3.6 million and $1.4 million for the three and nine months ended September 30, 2022, respectively, and net gains on the sale of mortgage loans were $21.7 million and $64.2 million for the three and nine months ended September 30, 2021, respectively, and are included in financial services revenue on the condensed consolidated statements of operations. Interest rate risks related to these obligations are typically mitigated by the preselling of loans to investors or through our interest rate hedging program.

Mortgage loans held for sale ~~including the~~and mortgage servicing rights to service the mortgage loans, mortgage loans in process for which interest rates were committed to the borrowers (referred to as “interest rate lock commitments”), as well as the derivative instruments used to economically hedge our interest rate risk, which are typically forward commitments on mortgage-backed securities and interest rate lock commitments, are carried at fair ~~value.~~value, with gains and losses from the changes in fair value reflected in financial services revenue on the consolidated statements of operations. Management believes carrying mortgage loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them. ~~Gains~~Net gains and losses from the ~~changes in fair~~sale of mortgage loans held for sale, which are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale, are ~~reflected~~also included in financial services revenue on the ~~condensed~~ consolidated statements of operations. Financial services revenue also includes fees earned from originating mortgage loans which are recognized at the time the mortgage loans are funded, including origination fees, discount points to reduce interest rates and fees earned from forward commitment agreements entered into between our homebuilding segments and Financial Services.

As of September 30, 2023 and December 31, 2022, Inspire had mortgage loans held for sale with an aggregate fair value of $162.7 million and $203.6 million, respectively, and an aggregate outstanding principal balance of $165.7 million and $202.0 million, respectively. Net losses on the sale of mortgage loans were $6.9 million and $3.4 million for the three and nine months ended September 30, 2023, respectively, and net gains on the sale of mortgage loans were $4.5 million and $15.3 million for the three and nine months ended September 30, 2022, respectively. Losses from the change in fair value for mortgage loans held for sale were ~~$8.1~~$2.9 million and ~~$1.8~~$4.9 million for the three and nine months ended September 30, ~~2022 and 2021,~~2023, respectively, and were ~~$16.7~~$8.1 million and ~~$6.1~~$16.7 million for the three and nine months ended September 30, 2022, respectively.

Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $138.9 million and ~~2021,~~$68.1 million at September 30, 2023 and December 31, 2022, respectively, and carried a weighted average interest rate of approximately 6.0% and 6.1%, respectively.Interest rate risks related to these obligations are typically mitigated by the preselling of loans to investors or through our interest rate hedging program. Derivative instruments used to economically hedge our market and interest rate risk are carried at fair value. Derivative instruments typically include interest rate lock commitments and forward commitments on mortgage-backed securities. Changes in fair value of these derivatives as well as any gains or losses upon settlement

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are reflected in financial services revenue on our condensed consolidated statements of operations. Refer to Note 12 – Fair Value Disclosures for further information regarding our derivative instruments.

5. Prepaid Expenses and Other Assets

Prepaid expenses and other assets included the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
Prepaid insurance	$	37,384	$	37,814	$	44,234	$	31,716
Lot option and escrow deposits		61,070		61,649		46,752		48,354
Performance deposits		12,974		11,196		12,077		12,626
Deferred financing costs on revolving line of credit, net		4,246		5,135
Restricted cash ⁽¹⁾		11,095		5,931		16,979		11,768
Right of use assets		15,541		16,939
Multi-family rental properties under construction						119,206		56,615
Mortgage loans held for investment at fair value		16,285		10,631		21,367		18,875
Mortgage loans held for investment at amortized cost		6,726		2,825		6,927		6,574
Derivative assets and mortgage servicing rights		29,731		19,645
Mortgage servicing rights						30,493		24,164
Derivative assets						5,458		1,958
Other assets and prepaid expenses		64,327		28,322		42,144		37,885
Total prepaid expenses and other assets	$	259,379	$	200,087	$	345,637	$	250,535

(1)Restricted cash consists of restricted cash related to land development, earnest money deposits for home sale contracts held by third parties as required by various jurisdictions, and certain ~~pledge~~compensating balances associated with our mortgage repurchase ~~facilities.~~

9facilities and other financing obligations.

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6. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities included the following (in thousands):



	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
Earnest money deposits	$	43,865	$	56,811	$	15,805	$	17,903
Warranty reserve		15,336		13,343		12,789		13,136
Self-insurance reserve		13,864		5,103		20,495		16,998
Accrued compensation costs		72,057		81,604		61,026		80,415
Land development and home construction accruals		143,486		88,155		118,352		128,483
Accrued interest		15,114		9,653		13,841		10,670
Lease liabilities - operating leases		16,181		17,359
Income taxes payable		—		1,684
Derivative liabilities		—		359		—		1,526
Other accrued liabilities		17,512		42,806		39,975		30,457
Total accrued expenses and other liabilities	$	337,415	$	316,877	$	282,283	$	299,588

7. Warranties

Estimated future direct warranty costs are accrued and charged to cost of home sales revenues in the period when the related home sales revenues are recognized. Amounts accrued, which are included in accrued expenses and other liabilities on the condensed consolidated balance sheets, are based upon historical experience rates. We subsequently assess the adequacy of our warranty accrual on a quarterly basis through a model that incorporates historical payment trends and adjust the amounts recorded, if necessary. Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by ~~$0.1~~$0.5 million and ~~$2.5~~$0.1 million during the three months ended September 30, 2023 and 2022, ~~and 2021~~respectively, and we reduced our warranty reserve by ~~$0.6~~$1.2 million and ~~$4.7~~$0.6 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. These adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations. Changes in our warranty accrual for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are detailed in the table below (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
Beginning balance	$	14,127	$	13,862	$	13,343	$	13,824	$	12,984	$	14,127	$	13,136	$	13,343
Warranty expense provisions		3,498		2,459		7,645		7,139		2,199		3,498		6,500		7,645
Payments		(2,179)		(1,494)		(5,046)		(3,938)		(1,874)		(2,179)		(5,643)		(5,046)
Warranty adjustment		(110)		(2,512)		(606)		(4,710)		(520)		(110)		(1,204)		(606)
Ending balance	$	15,336	$	12,315	$	15,336	$	12,315	$	12,789	$	15,336	$	12,789	$	15,336

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8. Self-Insurance Reserve

We maintain general liability insurance coverage, including coverage for certain construction ~~defects.~~defects after homes have closed and premise operations during construction. These insurance policies protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy ~~limits. Prior to the year ended December 31, 2021, we generally maintained construction defect policies with lower self-insurance~~ limits. In circumstances where we have elected to retain a higher portion of the overall risk for construction defect claims in return for a lower initial premium, we reserve for the estimated self-insured retention costs that we will incur that are above our coverage limits or that are not covered by our insurance policies. The reserve is recorded on an undiscounted basis at the time revenue is recognized for each home closing. Amounts accrued, which are included in accrued expenses and other liabilities on the condensed consolidated balance sheets, are based on third party actuarial analyses that are primarily based on industry data and partially on our historical claims, which include estimates of claims incurred but not yet reported. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. Our self-insurance liability is presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. Based on our third-party actuarial analysis, we reduced our self-insurance reserve by $3.4 million during the three and nine months ended September 30, 2023, and we increased our self-insurance reserve by $0.9 million during the three and nine months ended September

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30, ~~2022 and recorded no change to our reserve during the three and nine months ended September 30, 2021, respectively. These~~2022. Any adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations.

Changes in our self-insurance reserve for incurred but not reported construction defect claims for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are detailed in the table below (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
Beginning balance	$	10,153	$	—	$	5,103	$	—	$	21,477	$	10,153	$	16,998	$	5,103
Self-insurance expense provisions		2,861		2,289		7,911		2,289		2,470		2,861		7,029		7,911
Payments		—		—		—		—		(16)		—		(96)		—
Self-insurance adjustment		850		—		850		—		(3,436)		850		(3,436)		850
Ending balance	$	13,864	$	2,289	$	13,864	$	2,289	$	20,495	$	13,864	$	20,495	$	13,864

9. Debt

Our outstanding debt obligations included the following as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
3.875% senior notes, due August 2029⁽¹⁾	$	494,691	$	494,117	$	495,463	$	494,884
6.750% senior notes, due May 2027⁽¹⁾		496,190		495,581
6.750% senior notes, due June 2027⁽¹⁾						497,006		496,394
Other financing obligations⁽²⁾		25,667		9,238		58,825		28,134
Notes payable		1,016,548		998,936		1,051,294		1,019,412
Revolving line of credit		165,000		—		—		—
Mortgage repurchase facilities		195,047		331,876		162,094		197,626
Total debt	$	1,376,595	$	1,330,812	$	1,213,388	$	1,217,038

⁽¹⁾The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest expense over the respective terms of the senior notes.

⁽²⁾As of September 30, ~~2022,~~2023, other financing obligations included ~~$22.7~~$30.0 million related to insurance premium notes and certain secured borrowings, as well as ~~$3.0~~$28.8 million outstanding under ~~the Construction Loan Agreements.~~construction loan agreements. As of December 31, ~~2021,~~2022, other financing obligations included ~~$9.2~~$20.7 million related to insurance premium notes and certain secured ~~borrowings.~~borrowings, as well as $7.4 million outstanding under construction loan agreements.

Construction Loan Agreements

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margin. The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates through ~~August 9, 2026,~~March 17, 2028, with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied. The ~~Construction Loan Agreements~~construction loan agreements contain customary affirmative and negative covenants (including covenants related to construction completion, and limitations on the use of loan proceeds, transfers of land, equipment, and improvements), as well as customary events of default. Interest on our construction loan agreements is capitalized to the multi-family properties assets included in prepaid expenses and other assets on the condensed consolidated balance sheets while the related multi-family rental properties are being actively developed.

As of September 30, ~~2022, $3.0~~2023, $28.8 million was outstanding under the ~~Construction Loan Agreements,~~construction loan agreements, with borrowings ~~bearing~~that bore a weighted average interest rate of ~~4.423%,~~7.2% during the nine months ended September 30, 2023, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

~~On May 21,~~In 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement, provides us with a senior unsecured revolving line of credit (which we refer to as the ~~“Credit Facility”~~“revolving line of credit”) of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The ~~Credit Facility~~revolving line of credit includes a $250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, the Company is entitled to request an increase in the size of the ~~Credit Facility~~revolving line of credit by an

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amount not exceeding ~~$200~~$200.0 million. Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. ~~Borrowings under~~On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank (formerly known as Texas Capital Bank, National Association), as Administrative Agent, amending the Second A&R Credit Agreement ~~bear~~pursuant to which, effective January 3, 2023, all existing borrowings using an interest atrate based on a ~~floating~~LIBOR reference rate ~~equal to~~had the interest rate replaced with one based on an adjusted ~~Eurodollar Rate~~term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus ~~an applicable margin between 2.05% and 2.65% per annum, and if made available in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.05% and 1.65% per annum.~~0.10%.

As of September 30, ~~2022~~2023 and December 31, ~~2021, $165.0 million and~~2022, no amounts were outstanding under the ~~Credit Facility,~~revolving line of credit, respectively, and we were in compliance with all covenants under the Second A&R Credit Agreement.

Mortgage Repurchase Facilities – Financial Services

Inspire is a party to a mortgage warehouse ~~facilities~~facility with ~~Comerica Bank,~~ J.P. Morgan, ~~and Wells Fargo (which we refer to as the “Repurchase Facilities”),~~ which ~~provide~~provides Inspire with uncommitted repurchase facilities of up to ~~$275.0~~an aggregate of $200.0 million as of September 30, ~~2022,~~2023, secured by the mortgage loans financed ~~thereunder.~~ thereunder, and a maturity date through January 19, 2024. During the three months ended September 30, 2023, we terminated our mortgage warehouse facility agreement with Comerica, which provided uncommitted repurchase facilities of up to an aggregate of $75.0 million, with outstanding principal and interest due on December 29, 2023. The ~~Repurchase Facilities have varying short term maturity dates through August 15, 2023 and bear~~repurchase facilities bore a weighted average interest rate of ~~4.208%.~~6.80% during the nine months ended September 30, 2023.

Amounts outstanding under the ~~Repurchase Facilities~~repurchase facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of September 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, we had ~~$195.0~~$162.1 million and ~~$331.9~~$197.6 million outstanding under the ~~Repurchase Facilities,~~repurchase facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended September 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $0.6 million and $0.4 million, respectively, which are included in financial services costs on our condensed consolidated statements of operations. During the nine months ended September 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $1.4 million and $1.8 million, respectively.

10. Interest on Senior Notes and Revolving Line of Credit

Interest on our senior notes and ~~Revolving Line~~revolving line of ~~Credit~~credit, if applicable, is capitalized to inventories while the related communities are being actively developed and until homes are completed. As our qualifying assets exceeded our outstanding debt during the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we capitalized all interest costs incurred on these facilities during these periods.

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Our interest costs were 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
Interest capitalized beginning of period	$	57,124	$	54,161	$	53,379	$	60,838	$	69,745	$	57,124	$	61,775	$	53,379
Interest capitalized during period		17,281		15,204		46,645		45,310		14,234		17,281		42,281		46,645
Less: capitalized interest in cost of sales		(13,726)		(14,636)		(39,345)		(51,419)		(10,652)		(13,726)		(30,729)		(39,345)
Interest capitalized end of period	$	60,679	$	54,729	$	60,679	$	54,729	$	73,327	$	60,679	$	73,327	$	60,679

11. Income Taxes

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. Our ~~2022~~2023 estimated annual effective tax rate, before discrete items of ~~23.6%~~26.4%, is driven by our blended federal and state statutory rate of 24.8%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation ~~and~~offset by estimated federal energy home credits for ~~the~~ current year home deliveries, which combined resulted in a net ~~decrease~~increase of ~~1.2%~~1.6%.

~~On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA extended the energy efficient home credit~~ ~~which provides a tax credit for each home delivered that met the energy saving and certification requirements for homes delivered~~ from January 1, 2022 (retroactively) through December 31, 2022, as well as modifies and increases the tax credit starting in 2023 through 2032. Previously, the federal tax credit expired for homes delivered after December 31, 2021. During the three months ended September 30, 2022~~, our effective tax rate was benefited by a $13.6 million benefit as a result of the retroactive extension of the energy efficient home credit.~~

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For the nine months ended September 30, ~~2022,~~2023, our estimated annual rate of ~~23.6%~~26.4% was ~~impacted~~benefitted by discrete items which had a net impact of decreasing our rate by ~~1.2%~~1.1%, including federal energy home tax credits claimed for prior year home deliveries in excess of previous estimates and the impact of excess tax benefits for vested stock-based compensation.

For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax expense of ~~$27.6~~$28.8 million and ~~$31.8~~$27.6 million, respectively. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax expense of $56.9 million and $128.9 million, ~~and $95.4 million,~~ respectively.

12. Fair Value Disclosures

Fair value measurements are used for the Company’s mortgage loans held for sale, mortgage loans held for investment, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis. We also utilize fair value measurements on a non-recurring basis for inventories and intangible assets when events and circumstances indicate that the carrying value is not recoverable. The fair value hierarchy and its application to the Company’s assets and liabilities is as follows:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at the measurement date.

Mortgage loans held for sale – Fair value is based on quoted market prices for committed and uncommitted mortgage loans.

Derivative assets and liabilities – Derivative assets are associated with interest rate lock commitments and ~~derivative~~investor commitments on loans and may also be associated with forward mortgage-backed securities contracts. Derivative liabilities are associated with forward ~~commitments and investor commitments on loans.~~mortgage-backed securities contracts. Fair value is based on market prices for similar instruments.

Level 3 – Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at the measurement date.

Mortgage servicing rights - The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service.

Mortgage loans held for investment at fair value – The fair value of mortgage loans held for investment at fair value is calculated based on Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity.

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The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively (in thousands):


			September 30,		December 31,				September 30,		December 31,
	Balance Sheet Classification	Hierarchy	2022		2021		Balance Sheet Classification	Hierarchy	2023		2022

Mortgage loans held for sale	Mortgage loans held for sale	Level 2	$	194,123	$	353,063	Mortgage loans held for sale	Level 2	$	162,742	$	203,558
Mortgage loans held for investment at fair value ⁽¹⁾	Prepaid expenses and other assets	Level 3	$	16,285	$	10,631	Prepaid expenses and other assets	Level 3	$	21,367	$	18,875
Derivative assets	Prepaid expenses and other assets	Level 2	$	7,937	$	5,944	Prepaid expenses and other assets	Level 2	$	5,458	$	1,958
Mortgage servicing rights ⁽²⁾	Prepaid expenses and other assets	Level 3	$	21,794	$	13,701	Prepaid expenses and other assets	Level 3	$	30,493	$	24,164
Derivative liabilities	Accrued expenses and other liabilities	Level 2	$	—	$	359	Accrued expenses and other liabilities	Level 2	$	—	$	1,526

⁽¹⁾The unobservable inputs used in the valuation of the mortgage loans held for investment at fair value include, among other items, the value of underlying collateral, from markets where there is little observable trading activity.

⁽²⁾The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were ~~7.6%~~9.0%, ~~10.0~~10.2%, and ~~$0.086~~$0.071 per year per loan, respectively, as of September 30, ~~2022,~~2023, and ~~8.5%~~7.6%, ~~9.9%~~9.0%, and ~~$0.085~~$0.072 per year per loan, respectively, as of December 31, ~~2021.~~2022. The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement.

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The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements, with gains and losses from the changes in fair value reflected in financial services revenue on ~~the~~our condensed consolidated statements of operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Mortgage servicing rights		2022		2021		2022		2021		2023		2022		2023		2022
Beginning of period	$	20,196	$	10,298	$	13,701	$	4,115	$	26,631	$	20,196	$	24,164	$	13,701
Originations		1,232		1,604		6,605		7,986		3,017		1,232		5,121		6,605
Settlements		(166)		(258)		(701)		(527)		(428)		(166)		(989)		(701)
Changes in fair value		532		27		2,189		97		1,273		532		2,197		2,189
End of period	$	21,794	$	11,671	$	21,794	$	11,671	$	30,493	$	21,794	$	30,493	$	21,794

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Mortgage loans held-for-investment at fair value		2022		2021		2022		2021		2023		2022		2023		2022
Beginning of period	$	14,509	$	10,823	$	10,631	$	8,727	$	20,559	$	14,509	$	18,875	$	10,631
Transfers from loans held for sale		1,904		973		7,046		4,354		1,268		1,904		4,432		7,046
Settlements		—		(129)		(1,121)		(1,309)		(316)		—		(997)		(1,121)
Reduction in unpaid principal balance		(89)		(54)		(213)		(159)		(120)		(89)		(753)		(213)
Changes in fair value		(39)		—		(58)		—		(24)		(39)		(190)		(58)
End of period	$	16,285	$	11,613	$	16,285	$	11,613	$	21,367	$	16,285	$	21,367	$	16,285

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For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively (in thousands).



		September 30, 2022				December 31, 2021					September 30, 2023				December 31, 2022

	Hierarchy	Carrying		Fair Value		Carrying		Fair Value		Hierarchy	Carrying		Fair Value		Carrying		Fair Value
Cash and cash equivalents	Level 1	$	98,203	$	98,203	$	316,310	$	316,310	Level 1	$	193,111	$	193,111	$	296,724	$	296,724
3.875% senior notes ⁽¹⁾⁽²⁾	Level 2	$	494,691	$	380,000	$	494,117	$	504,375	Level 2	$	495,463	$	412,500	$	494,884	$	395,000
6.750% senior notes ⁽¹⁾⁽²⁾	Level 2	$	496,190	$	466,250	$	495,581	$	526,875	Level 2	$	497,006	$	490,000	$	496,394	$	477,500
Revolving line of credit⁽³⁾	Level 2	$	165,000	$	165,000	$	—	$	—	Level 2	$	—	$	—	$	—	$	—
Other financing obligations⁽³⁾⁽⁴⁾	Level 3	$	25,667	$	25,667	$	9,238	$	9,238	Level 3	$	58,825	$	58,825	$	28,134	$	28,134
Mortgage repurchase facilities⁽³⁾	Level 2	$	195,047	$	195,047	$	331,876	$	331,876	Level 2	$	162,094	$	162,094	$	197,626	$	197,626

⁽¹⁾Estimated fair value of the senior notes is based on recent trading activity in inactive markets.

⁽²⁾Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts. As of September 30, ~~2022,~~2023, these amounts totaled ~~$5.3~~$4.5 million and ~~$3.8~~$3.0 million for the 3.875% senior notes and 6.750% senior notes, respectively. As of December 31, ~~2021,~~2022, these amounts totaled ~~$5.9~~$5.1 million and ~~$4.4~~$3.6 million for the 3.875% senior notes and 6.750% senior notes, respectively.

⁽³⁾Carrying amount approximates fair value due to short-term nature ~~and~~and/or interest rate terms.

⁽⁴⁾~~Other~~During the period ended September 30, 2023, other financing obligations included ~~$22.7~~$30.0 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 2.40% to ~~3.99%~~7.70%, and ~~$3.0~~$28.8 million related to outstanding borrowings on the ~~Construction Loan Agreements~~construction loan agreements that bore a weighted average interest rate of ~~4.423% during~~7.2%. During the period ended ~~September 30, 2022. Other~~December 31, 2022, other financing obligations included ~~$9.2~~$20.7 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from ~~2.99%~~2.40% to ~~3.24% during~~5.84%, and $7.4 million related to outstanding borrowings on the ~~period ended December 31, 2021.~~construction loan agreements that bore a weighted average interest rate of 5.6%.

Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and as a result of impairments, if deemed necessary. No impairment charges were recorded in the three and nine months ended September 30, ~~2022. No impairment charges were recorded in the three months ended September 30, 2021,~~2023 and ~~nominal impairment charges were recorded in the nine months ended September 30, 2021.~~2022. When impairment charges are recognized, the estimated fair value of communities are determined through a discounted cash flow approach utilizing Level 3 inputs. Changes in our cash flow projections in future periods related to these communities may change our conclusions on the recoverability of inventory in the future.

13. Stock-Based Compensation

During the nine months ended September 30, ~~2022~~2023 and 2021, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.2 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $55.43 and $58.28 per share, respectively, that are subject to both service and performance vesting conditions. The quantity of shares that will ultimately vest for the PSUs ranges from 0% to up to 250% of a targeted number of shares for each participant and will be determined based on an achievement of a three year adjusted pre-tax income performance goal. During the nine months ended September 30, 2022, and 2021, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods. Approximately 0.9 million shares will vest from 2022 to 2024 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

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~~During the nine months ended September 30, 2022 and 2021,~~ we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of common stock, respectively, with a grant date fair value of ~~$63.26~~$62.68 and ~~$53.40~~$63.26 per share, respectively, that primarily vest over a three year period. During the nine months ended September 30, 2023 and 2022, we granted 11.0 thousand and 11.0 thousand shares of common stock, respectively, on an unrestricted basis (which we refer to as “stock awards”) with a grant date fair value of $65.77 and $54.46 per share, respectively, to our non-employee directors.

During the nine months ended September 30, 2023 and 2022, we granted performance share units (which we refer to as “PSUs”) covering up to 0.5 million and 0.5 million shares of common stock, respectively, assuming maximum level of performance, with a grant date fair value of $60.05 and $55.93 per share, respectively, that are subject to both service and performance vesting conditions. The quantity of shares that will ultimately vest and be issued for the PSUs ranges from 0% to up to 250% of a targeted number of shares dependent upon the participant and will be determined based on an achievement of a three year adjusted pre-tax income performance goal. During the nine months ended September 30, 2023 and 2022, we issued 0.3 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods. Approximately 1.1 million shares will vest from 2024 to 2026 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met.

A summary of our outstanding PSUs, assuming the current estimated level of performance achievement, and RSUs are as follows (in thousands, except years):


	As of September 30, ~~2022~~2023
Unvested units		~~988~~1,357
Unrecognized compensation cost	$	~~25,116~~41,092
Weighted-average ~~period~~years to recognize compensation cost		~~1.59~~1.91

During the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recognized stock-based compensation expense of ~~$5.2~~$12.2 million and ~~$3.5~~$5.2 million, respectively. During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recognized stock-based compensation expense of $26.5 million and $15.0 million, ~~and $10.8 million,~~ respectively.Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations.

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During the three and nine months ended September 30, 2023, in accordance with ASC 718, Compensation—Stock Compensation we updated our recognition of stock-based compensation expense associated with previously granted PSU awards to reflect probable financial results as they relate to the performance goals of the awards. Accordingly, our estimate of the number of shares which will ultimately vest under our PSU awards increased by 0.4 million shares during the three months ended September 30, 2023 and 0.4 million shares during the nine months ended September 30, 2023. We recorded a cumulative catch-up adjustment to increase stock-based compensation expense of $7.4 million ($5.5 million net of tax), or $0.17 per share (basic and diluted), for the three months ended September 30, 2023, and $10.8 million ($8.0 million net of tax), or $0.25 per share (basic and diluted), for the nine months ended September 30, 2023.

14. Stockholders’ Equity

~~Our~~The Company’s authorized capital stock consists of 100.0 million shares of common stock, par value $0.01 per share, and 50.0 million shares of preferred stock, par value $0.01 per share. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were 31.8 million and ~~33.8~~31.8 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding.

On May 4, 2022, the stockholders approved the adoption of the Century Communities, Inc. 2022 Omnibus Incentive Plan (which we refer to as the “2022 Incentive Plan”), which replaced the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”). Under the 2022 Incentive Plan, 3.1 million shares of common stock are available for issuance to eligible participants, plus 51.2 thousand shares of our common stock that remained available for issuance under the 2017 Incentive Plan and any shares subject to awards outstanding under the 2017 Incentive Plan that are subsequently forfeited, cancelled, expire or otherwise terminate without the issuance of such shares. During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we issued ~~0.5~~0.4 million and ~~0.7~~0.5 million shares of common stock, respectively, related to the vesting and settlement of RSUs ~~PSUs,~~ and ~~stock awards.~~PSUs. As of September 30, ~~2022,~~2023, approximately ~~3.1~~2.5 million shares of common stock remained available for issuance under the 2022 Incentive Plan.

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively (in thousands, except per share information):



									Nine Months Ended September 30, 2023
									Cash Dividends Declared and Paid
Declaration Date							Record Date	Paid Date	Per Share		Amount
February 8, 2023							March 1, 2023	March 15, 2023	$	0.23	$	7,365
May 17, 2023							May 31, 2023	June 14, 2023	$	0.23	$	7,368
August 16, 2023							August 30, 2023	September 13, 2023	$	0.23	$	7,341


			Nine months ended September 30, 2022						Nine Months Ended September 30, 2022
			Cash Dividends Declared and Paid						Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount		Record Date	Paid Date	Per Share		Amount
February 16, 2022	March 2, 2022	March 16, 2022	$	0.20	$	6,657	March 2, 2022	March 16, 2022	$	0.20	$	6,657
May 18, 2022	June 1, 2022	June 15, 2022	$	0.20	$	6,568	June 1, 2022	June 15, 2022	$	0.20	$	6,568
August 17, 2022	August 31, 2022	September 14, 2022	$	0.20	$	6,455	August 31, 2022	September 14, 2022	$	0.20	$	6,455

			Nine months ended September 30, 2021
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
May 19, 2021	June 2, 2021	June 16, 2021	$	$0.15	$	5,064
August 18, 2021	September 1, 2021	September 15, 2021	$	$0.15	$	5,063

Under the 2022 Incentive Plan and the previous 2017 Incentive Plan, at the discretion of the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as holders of common stock. Dividend equivalents are subject to the same vesting and other terms and conditions as the underlying RSUs and PSUs.

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which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement. This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, and was amended in July 2021 to acknowledge our filing of a new registration statement on Form S-3 registering the issuance and sale of shares of our common stock under the Distribution Agreement and replace Citigroup Global Markets Inc. with Wells Fargo Securities, LLC as a sales agent, had all $100.0 million available for sale as of September 30, 2022. ~~We did not sell or issue any shares of our common stock during the three and nine months ended September 30, 2022 and 2021, respectively.~~ The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the ~~agreement~~.agreement. We did not sell or issue any shares of our common stock during the three and nine months ended September 30, 2023 and 2022, and as of September 30, 2023, all $100.0 million remained available for sale.

~~On November 6, 2018, we~~We authorized a stock repurchase program in 2018, under which we may repurchase up to 4.5 million shares of our outstanding common stock. During the three and nine months ended September 30, 2023, an aggregate of 247.8 thousand and 278.2 thousand shares,

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respectively, were repurchased for a total purchase price of approximately $17.3 million and $19.2 million, respectively, and a weighted average price of $69.61 and $69.09 per share, respectively. During the three and nine months ended September 30, 2022, an aggregate of 0.5 million and 2.3 million shares, respectively, were repurchased for a total purchase price of approximately $22.3 million and $120.6 million, respectively, and a weighted average price of $44.58 and $52.32 per share, respectively. ~~During the three and nine months ended September 30, 2021, we did not repurchase any shares of common stock.~~ The maximum number of shares available to be repurchased under the stock repurchase program as of September 30, ~~2022~~2023 was ~~1,508,169~~1,230,010 shares.

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, shares of common stock at a total cost of ~~$12.7~~$10.7 million and ~~$13.7~~$12.7 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock-based compensation awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased and retired by us but are not part of our publicly announced share repurchase programs.

15. Earnings Per Share

We use the treasury stock method to calculate earnings per share as our currently issued non-vested RSUs and PSUs do not have participating rights.

The following table sets forth the computation of basic and diluted EPS for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 (in thousands, except share and per share information):


	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
Numerator
Net income	$	144,473	$	113,977	$	445,637	$	333,538	$	83,150	$	144,473	$	167,906	$	445,637
Denominator
Weighted average common shares outstanding - basic		32,196,589		33,760,940		32,850,647		33,688,531		31,962,884		32,196,589		31,967,672		32,850,647
Dilutive effect of restricted stock units		373,746		710,104		391,117		731,632
Dilutive effect of stock-based compensation awards										274,138		373,746		233,005		391,117
Weighted average common shares outstanding - diluted		32,570,335		34,471,044		33,241,764		34,420,163		32,237,022		32,570,335		32,200,677		33,241,764
Earnings per share:
Basic	$	4.49	$	3.38	$	13.57	$	9.90	$	2.60	$	4.49	$	5.25	$	13.57
Diluted	$	4.44	$	3.31	$	13.41	$	9.69	$	2.58	$	4.44	$	5.21	$	13.41

Stock-based awards are excluded from the calculation of diluted EPS in the event they are subject to unsatisfied performance conditions or are antidilutive. We excluded ~~0.5~~0.9 million and ~~0.2~~0.5 million common stock unit equivalents from diluted earnings per share during the three months ended September 30, 2023 and 2022, ~~and 2021,~~ respectively, and we excluded ~~0.5~~0.8 million and ~~0.2~~0.5 million common stock unit equivalents from diluted earnings per share during the nine months ended September 30, 2023 and 2022, ~~and 2021,~~ respectively, related to the PSUs for which performance conditions remained unsatisfied.

16. Commitments and Contingencies

Letters of Credit and Performance Bonds

Legal Proceedings

We are subject to claims and lawsuits that arise primarily in the ordinary course of business, which consist primarily of construction claims. It is the opinion of our management that if the claims have merit, parties other than the Company would be, at least in part, liable

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for the claims, and the eventual outcome of these claims will not have a material adverse effect upon our consolidated financial condition, results of operations, or cash flows. When we believe that a loss is probable and estimable, we record a charge on our condensed consolidated statements of operations for our estimated loss.

Under various insurance policies, we have the ability to recoup costs in excess of applicable self-insured retentions. Estimates of such amounts are recorded in other assets on our condensed consolidated balance sheet when recovery is probable.

We do not believe that the ultimate resolution of any claims and lawsuits will have a material adverse effect upon our consolidated financial position, results of operations, or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Some of the statements included in this Quarterly Report on Form 10-Q (which we refer to as this “Form 10-Q”) constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual ~~events and~~ results ~~of operations~~ could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” “outlook,” the negative of such terms and other comparable terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors.

The forward-looking statements included in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking and subject to risks and uncertainties including among others:

economic changes, either nationally or in the markets in which we operate, including increased interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels;

shortages of or increased prices for labor, land or raw materials ~~including lumber,~~ used in housing construction and resource shortages;

a downturn in the homebuilding industry, including a reduction in demand or a decline in real estate values or market conditions resulting in an adverse impact on our business, operating results and financial condition, including an impairment of our assets;

changes in assumptions used to make industry forecasts, population growth rates or trends affecting housing demand or prices;

~~continued~~ volatility and uncertainty in the credit markets and broader financial ~~markets;~~markets and the impact on such markets and our ability to access them in the event of a threatened or actual U.S. government shutdown or sovereign default;

~~the impact of the COVID-19 pandemic and measures taken in response to the COVID-19 pandemic on~~ our future business operations, operating results and financial condition, ~~as well as the general economy~~ and ~~housing market in particular;~~

~~our future operating results and financial condition;~~

~~our business operations;~~

changes in our business and investment strategy;

availability and price of land to acquire, and our ability to acquire such land on favorable terms or at all;

availability, terms and deployment of capital;

availability or cost of mortgage financing or an increase in the number of foreclosures in the market;

delays in land development or home construction resulting from adverse weather conditions or other events outside our control;

delays in completion of projects, land development or home construction, or reduced consumer demand for housing resulting from significant weather conditions and natural disasters in the geographic areas where we ~~operate~~operate;

the impact of construction defect, product liability, and/or home warranty claims, including the adequacy of accruals and the applicability and sufficiency of our insurance coverage;

changes in, or the failure or inability to comply with, governmental laws and regulations;

the timing of receipt of municipal, utility and other regulatory approvals and the opening of projects and construction and completion of our homes;

the impact and cost of compliance with evolving environmental, health and safety and other laws and regulations and third-party challenges to required permits and other approvals and potential legal liability in connection therewith;

the degree and nature of our competition;

unstable economic and political conditions as well as geopolitical conflicts, could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels and cause higher interest rates, inflation or general economic uncertainty;

our leverage, debt service obligations and exposure to changes in interest rates and our ability to refinance our debt when needed or on favorable terms;

our ability to continue to fund and succeed in our mortgage lending business and the additional risks involved in that business;

availability of qualified personnel and contractors and our ability to retain key personnel and contractor relationships;

our ability to pay dividends in the future;

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and

taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or ~~guidance; and~~

~~changes~~ ~~in United States generally accepted accounting principles (which we refer to as “GAAP”).~~guidance.

Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including “Part II, Item 1A. Risk ~~Factors”,~~Factors,” and our other reports and filings with the SEC. If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or

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revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q.

As used in this Form 10-Q, references to “we,” “us,” “our,” “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.

The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company, business, operations and present business environment and is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. We use certain non-GAAP financial measures that we believe are important for purposes of comparison to prior periods. This information is also used by our management to measure the profitability of our ongoing operations and analyze our business performance and trends. ~~Some of the numbers included herein have been rounded for the convenience of presentation.~~

Business Overview

Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 1718 states. In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land. We build and sell homes under our Century Communities and Century Complete brands.

Our Century Communities brand offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.

Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and IHL Home Insurance Agency, LLC, which provide mortgage, title, and insurance services, respectively, primarily to our homebuyers, have been identified as our Financial Services reportable segment. Additionally, our wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, ~~primarily~~currently all located in Colorado. During the three and nine months ended September 30, 2023, our Century Living operations were engaged in construction on three multi-family projects in Colorado, ~~with the intent to dispose of properties shortly after achieving stabilized rental operations.~~ which commenced construction in 2022. Century Living, LLC is included in our Corporate segment.

While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing our customers greater certainty on their financing and allowing us to more appropriately price the homes and deploy our capital. Of the ~~7,691~~6,411 homes delivered during the first nine months of ~~2022,~~2023, approximately ~~76%~~91% of our deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately ~~96%~~98% of homes delivered were built as move-in ready homes.

~~In recent~~Financial Overview

We generated solid financial results during the first nine months of 2023 and we are encouraged by the ~~Federal Reserve’s ongoing raising~~housing market conditions as compared to the second half of ~~the federal funds~~2022, when increased mortgage interest ~~rate to mitigate~~rates, inflation, ~~has now~~and macro-economic uncertainty considerably impacted the U.S. housing market. While~~Beginning in~~ inflation continued to impact the ~~second quarter~~broader economy during the first nine months of ~~2022~~2023, homebuyers are adjusting to a more normalized higher interest rate environment, and ~~continuing through the third quarter of 2022,~~ we experienced ~~a moderation of sales pace across our markets, resulting in a third quarter decrease of 51.9% in our net~~more typical seasonality surrounding demand. Net new home contracts (new home contracts net of cancellations) for the three months ended September 30, 2023 increased 63.1% as compared to the prior year period. ~~In addition,~~Further, during the three and nine months ended September 30, 2023, our cancellation rates were 16.2% and 15.8%, respectively, representing significant improvements from the cancellation rates we experienced ~~an increase~~ in ~~cancellation rates to a combined 35%, with a 31% cancellation rate for Century Communities and a 41% cancellation rate for Century Complete, primarily driven by~~ the ~~increases in mortgage rates. This decrease in our sales pace was consistent with~~latter half of 2022.

During the third quarter ~~2022 trends seen in~~of 2023, we continued to experience improved cycle times and benefitted from reduced direct construction costs on our starts as compared to the overall housing market, as increases in interest rates on mortgages, rising inflation, and macro-economic uncertainty caused demand for home sales to decrease from the historically strong market conditions experienced sincehigh point of our direct construction costs during the second quarter of ~~2020.~~2022. Further, ~~this uncertainty has led a majority~~

~~Table~~during the second and third quarters of ~~Contents~~

of our recent homebuyers to seek homes with near-term completion schedules, allowing them to lock interest rates closer to a home closing. In response to the interest rate volatility and to maintain sales momentum,2023, we ~~have increased~~reduced incentive offerings across our communities ~~including discounts on option~~as compared to previous quarters, which along with improved construction costs and ~~upgrades and financing incentives, which we expect will result in downward pressure~~cycle times, contributed to an improvement to our homebuilding ~~margins~~gross margin during the third quarter of 2023 as compared to the first ~~half~~and second quarters of 2023. ~~We have also taken steps to reduce our fixed costs in light of decreased demand for our homes compared to prior periods.~~

We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy. While we experienced strengthened market demand during the third quarter of 2023 compared to the latter half of 2022, Wewe believe future demand for our homes is uncertain as future economic and market conditions are uncertain, in particular with respect to inflation; the impact of recent and ~~anticipated~~potential for future increases to the federal funds interest rate by the Federal

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Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial markets, credit and mortgage markets; the extent to which and how long government monetary directives, actions, and economic relief efforts will impact the U.S. economy, ~~financial markets, credit and mortgage markets;~~ consumer confidence; ~~interest rates; availability and cost of mortgage loans to homebuyers;~~ wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental prices; availability and cost of land, labor and construction materials; demographic trends; housing demand; and other factors, including those described elsewhere in this Form 10-Q. Specifically, ~~the recent~~a rise in interest rates increases the costs of owning a home and adversely affects the purchasing power of our ~~customers. Increased interest rates also~~customers and could decrease homebuyer confidence ~~and hinder~~hindering not only demand for our homes, but also our ability to realize our backlog. A decrease in demand for our homes or an increase in cancellations due to increased interest rates or otherwise would adversely affect our operating results in future periods, including our net sales, home deliveries, gross margin, origination volume of and revenues from our Financial Services segment, and net income. As a result, our past performance may not be indicative of our future results.

Despite ~~the~~ future macro-economic uncertainty, especially in relation to the ~~recent higher~~ interest rate environment, we believe we are well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase in our key markets and the favorable demographics that support the need for new affordable housing. We believe our operations are ~~well-positioned~~prepared to withstand volatility in future market conditions as a result of our product offerings which both span the home buying segment and focus on affordable price points, and our current and future inventories of attractive land positions. We have continued to focus on maintaining an appropriate balance of home and land inventories in relation to anticipated future demand, as well as prudent leverage, and, as a result, we believe we are well positioned to continue to execute on our strategy in order to optimize stockholder returns.

Results of Operations

During the three and nine months ended September 30, ~~2022,~~2023, we generated ~~$172.1~~$112.0 million and ~~$574.5~~$224.8 million, respectively, in income before income tax expense, as compared to $172.1 million and $574.5 million, respectively, in the respective prior year periods. During the three and nine months ended September 30, 2023, we generated net income of $83.2 million, or $2.58 per diluted share, and $167.9 million, or $5.21 per diluted share, respectively, as compared to $144.5 million, or $4.44 per diluted share, and $445.6 million, or $13.41 per diluted share, respectively, ~~representing substantial increases as compared to~~in the respective prior year periods, and resulting in a 33.2% return on equity on an annualized basis for the trailing twelve months. During the first nine months of 2022, we paid cash dividends to our stockholders of $0.20 per share, and we also returned capital to our stockholders via share repurchases of 2.3 million shares for $120.6 million or a weighted average price of $52.32 per share.

Our results for the third quarter of 2022 are reflective of the strength of our markets during previous quarters when the homes were contracted for which allowed us to pass on higher costs through higher selling prices and thereby positively affecting our margins during the third quarter of 2022. While we continued to experience labor and raw material shortages and municipal and utility delays in many of our markets, the severity of the shortages and delays began to moderate in the second quarter of 2022 and continued through the third quarter of 2022, resulting in improvements to our construction cycle times.periods.

During the three and nine months ended September 30, ~~2022,~~2023, we generated ~~homebuilding~~total revenues of $889.4 million and $2.5 billion, respectively, driven primarily by home sales revenue, as compared to $1.1 billion and $3.3 billion, respectively, ~~representing increases of 20.7% and 11.6% over~~in the respective prior year ~~period.~~ periods. During the three and nine months ended September 30, ~~2022,~~2023, we delivered ~~2,630~~2,264 and ~~7,691~~6,411 homes, respectively, with an average sales price of ~~$425.3~~$382.1 thousand and ~~$421.5~~$377.3 thousand, respectively. The number of homes delivered decreased by 13.9% and 16.6%, respectively, as compared to the respective prior year periods, which were primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022. Average sales price decreased 10.2% and 10.5% during the three and nine months ended September 30, 2023 as compared to the respective prior year periods.

We ended the third quarter of 2023 with no amounts outstanding under our revolving line of credit, $193.1 million of cash and cash equivalents, $52.5 million of cash held in escrow, a homebuilding debt to capital ratio of 30.8%, and a net homebuilding debt to net capital ratio of 25.3%. During the three and nine months ended September 30, 2023, we paid quarterly cash dividends to our stockholders of $0.23 per share, a 15% increase from the quarterly dividends paid during the three and nine months ended September 30, 2022 ~~represent an increase~~ of ~~13.3% and a decrease of 2.5%, respectively,~~$0.20 per share.

~~as compared to the respective prior year period, and were primarily driven by the timing of new community openings. Average sales price increased 7.6% and 15.4% during~~During the three ~~and nine~~ months ended September 30, 2022 as compared to the respective prior year period. As of September 30, 2022, we had a backlog of 3,455 homes, a 29.0% decrease as compared to September 30, 2021, representing approximately $1.4 billion in sales value, a 28.3% decrease as compared to September 30, 2021.

During third quarter of 2022, Hurricane Ian had a modest impact on our total deliveries, primarily affecting our Century Complete segment, and we expect additional impacts in the fourth quarter of 2022 in those affected regions due to disruptions to the supply chain, municipalities and labor availability.

~~During the three and nine months ended September 30, 2022,~~2023, we generated financial services revenue of ~~$23.3~~$23.6 million, ~~and $72.4 million, respectively,~~ representing ~~decreases~~an increase of ~~20.0% and 21.8% over the respective prior year period, driven by a reduced number of mortgages originated, as well as~~ ~~reduced gain on sale margins on loans sold to third parties.~~

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We ended the third quarter of 2022 with $165.0 million outstanding under our revolving line of credit, $98.2 million of cash and cash equivalents, $84.0 million of cash held in escrow, and a net homebuilding debt to net capital ratio of 32.5%. Additionally, we have continued to strategically manage our lot pipeline, while selectively reducing our land acquisition and development activities by terminating ~~certain contracts in our markets that did not meet our investment criteria,~~ ~~resulting in 62,788 lots owned and controlled at September 30, 2022, a 16.9% decrease~~1.6% as compared to ~~September 30, 2021 and a 21.4% decrease as compared to December 31, 2021.~~

the prior year period. During the nine months ended September 30, ~~2022,~~2023, we generated financial services revenue of $63.8 million, a decrease of 11.9% as compared to the prior year period, primarily driven by reduced margins on loans sold to third parties period over period and a decrease in the number of mortgages originated during the current year period, partially offset by a smaller fair value markdown on our loan pipeline as compared to the prior year period, and increased revenue related to discount points compared to the prior year period.

Our Century Living operations ~~commenced~~are engaged in construction on ~~two~~three multi-family projects in ~~Colorado. First, a 425-unit multi-family project was~~Colorado, which commenced in ~~Lone Tree, Colorado, which~~2022 and comprise over 900 total units. The first multi-family property consisting of over 200 units became available for leasing during the third quarter of 2023, and we anticipate the remaining projects will be available for leasing ~~in 2024, and second, a 227-unit multi-family project was commenced in Highlands Ranch, Colorado, which we anticipate will be available for leasing in the second half of 2023.~~during 2024.

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The following table summarizes our results of operations for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.


(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
Consolidated Statements of Operations:
Revenue
Revenues
Home sales revenues	$	1,118,588		$	917,337		$	3,241,537		$	2,881,404		$	865,065		$	1,118,588		$	2,419,025		$	3,241,537
Land sales and other revenues		2,432			11,594			12,872			35,522			722			2,432			3,811			12,872
Total homebuilding revenues		1,121,020			928,931			3,254,409			2,916,926			865,787			1,121,020			2,422,836			3,254,409
Financial services revenues		23,271			29,101			72,373			92,586			23,636			23,271			63,768			72,373
Total revenues		1,144,291			958,032			3,326,782			3,009,512			889,423			1,144,291			2,486,604			3,326,782
Homebuilding cost of revenues
Cost of home sales revenues		(841,665)			(682,012)			(2,365,633)			(2,203,187)			(652,411)			(841,665)			(1,910,630)			(2,365,633)
Cost of land sales and other revenues		(292)			(6,977)			(9,151)			(23,996)			—			(292)			(375)			(9,151)
		(841,957)			(688,989)			(2,374,784)			(2,227,183)			(652,411)			(841,957)			(1,911,005)			(2,374,784)
Financial services costs		(13,922)			(17,666)			(43,262)			(54,135)			(11,432)			(13,922)			(33,983)			(43,262)
Selling, general, and administrative		(110,687)			(90,154)			(321,484)			(281,961)			(111,918)			(110,687)			(315,351)			(321,484)
Loss on debt extinguishment		—			(14,458)			—			(14,458)
Inventory impairment and other		—			—			—			(41)
Other income (expense)		(5,651)			(1,004)			(12,754)			(2,790)			(1,663)			(5,651)			(1,509)			(12,754)
Income before income tax expense		172,074			145,761			574,498			428,944			111,999			172,074			224,756			574,498
Income tax expense		(27,601)			(31,784)			(128,861)			(95,406)			(28,849)			(27,601)			(56,850)			(128,861)
Net income	$	144,473		$	113,977		$	445,637		$	333,538		$	83,150		$	144,473		$	167,906		$	445,637
Earnings per share:
Basic	$	4.49		$	3.38		$	13.57		$	9.90		$	2.60		$	4.49		$	5.25		$	13.57
Diluted	$	4.44		$	3.31		$	13.41		$	9.69		$	2.58		$	4.44		$	5.21		$	13.41
Adjusted diluted earnings per share⁽¹⁾	$	4.44		$	3.63		$	13.41		$	10.02		$	2.58		$	4.44		$	5.21		$	13.41
Other Operating Information (dollars in thousands):
Number of homes delivered		2,630			2,322			7,691			7,890			2,264			2,630			6,411			7,691
Average sales price of homes delivered	$	425.3		$	395.1		$	421.5		$	365.2		$	382.1		$	425.3		$	377.3		$	421.5
Homebuilding gross margin percentage⁽²⁾		24.8	%		25.7	%		27.0	%		23.5	%		24.6	%		24.8	%		21.0	%		27.0	%
Adjusted homebuilding gross margin excluding interest and inventory impairment and other ⁽¹⁾		26.0	%		27.2	%		28.2	%		25.3	%
Adjusted homebuilding gross margin excluding interest and inventory impairment ⁽¹⁾														25.8	%		26.0	%		22.3	%		28.2	%
Backlog at end of period, number of homes		3,455			4,866			3,455			4,866			1,887			3,455			1,887			3,455
Backlog at end of period, aggregate sales value	$	1,379,380		$	1,922,784		$	1,379,380		$	1,922,784		$	707,169		$	1,379,380		$	707,169		$	1,379,380
Average sales price of homes in backlog	$	399.2		$	395.1		$	399.2		$	395.1		$	374.8		$	399.2		$	374.8		$	399.2
Net new home contracts		1,318			2,742			6,495			9,317			2,149			1,318			6,488			6,495
Selling communities at period end		217			186			217			186			252			217			252			217
Average selling communities		213			185			204			186			246			213			233			204
Total owned and controlled lot inventory		62,778			75,537			62,778			75,537			68,570			62,778			68,570			62,778
Adjusted EBITDA⁽¹⁾	$	188,653		$	177,376		$	622,036		$	502,755		$	125,268		$	188,653		$	260,073		$	622,036
Adjusted income before income tax expense⁽¹⁾	$	172,074		$	160,219		$	574,498		$	443,443		$	111,999		$	172,074		$	224,756		$	574,498
Adjusted net income⁽¹⁾	$	144,473		$	125,282		$	445,637		$	344,812		$	83,150		$	144,473		$	167,906		$	445,637
Net homebuilding debt to net capital ⁽¹⁾		32.5	%		23.1	%		32.5	%		23.1	%		25.3	%		32.5	%		25.3	%		32.5	%

⁽¹⁾This is a non-GAAP financial measure and should not be used as a substitute for ~~the Company’s~~our operating results prepared in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

⁽²⁾Homebuilding gross margin percentage ~~for the nine months ended September 30, 2021 includes~~ ~~inventory~~is inclusive of impairment ~~which is included within inventory~~charges, if applicable. No impairment ~~and other on our condensed consolidated financial statements. No inventory impairments~~charges were ~~recognized~~recorded for the three and nine months ended September 30, ~~2022~~2023 and ~~for the~~ ~~three months ended September 30, 2021.~~2022.

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Results of Operations by Segment

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis for the three and nine months ended September 30, 2023, and we have restated the corresponding segment information for those segments for the three and nine months ended September 30, 2022.

(dollars in thousands)


	New Homes Delivered				Average Sales Price of Homes Delivered				Home Sales Revenues				Income before Income Tax Expense				New Homes Delivered				Average Sales Price of Homes Delivered				Home Sales Revenues				Income before Income Tax Expense
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021		2023		2022		2023		2022		2023		2022		2023		2022
West		378		409	$	674.3	$	655.8	$	254,885	$	268,219	$	51,036	$	60,915		281		378	$	596.6	$	674.3	$	167,636	$	254,885	$	31,419	$	51,036
Mountain		494		509		582.4		500.6		287,723		254,794		51,058		50,561		415		494		498.5		582.4		206,857		287,723		25,449		51,058
Texas		314		274		368.5		313.1		115,699		85,778		17,084		11,884		382		379		292.3		350.3		111,656		132,777		16,377		20,084
Southeast		423		325		464.0		403.8		196,286		131,228		38,400		20,004		378		423		435.9		464.0		164,784		196,286		33,717		38,400
Century Complete		1,021		805		258.6		220.3		263,995		177,318		36,939		24,838		808		956		265.0		258.3		214,132		246,917		30,873		33,939
Financial Services		—		—		—		—		—		—		9,349		11,435		—		—		—		—		—		—		12,204		9,349
Corporate		—		—		—		—		—		—		(31,792)		(33,876)		—		—		—		—		—		—		(38,040)		(31,792)
Total		2,630		2,322	$	425.3	$	395.1	$	1,118,588	$	917,337	$	172,074	$	145,761		2,264		2,630	$	382.1	$	425.3	$	865,065	$	1,118,588	$	111,999	$	172,074


	New Homes Delivered				Average Sales Price of Homes Delivered				Home Sales Revenues				Income before Income Tax Expense				New Homes Delivered				Average Sales Price of Homes Delivered				Home Sales Revenues				Income before Income Tax Expense
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021		2023		2022		2023		2022		2023		2022		2023		2022
West		1,200		1,113	$	676.1	$	621.2	$	811,284	$	691,369	$	200,213	$	129,279		738		1,200	$	590.5	$	676.1	$	435,774	$	811,284	$	54,358	$	200,213
Mountain		1,466		1,805		575.4		462.0		843,592		833,916		159,559		158,355		1,325		1,466		514.4		575.4		681,621		843,592		77,946		159,559
Texas		1,043		1,079		347.5		281.9		362,485		304,158		62,978		39,554		1,159		1,291		282.7		328.5		327,639		424,060		31,502		73,579
Southeast		1,193		1,322		441.0		393.2		526,135		519,762		108,053		69,540		851		1,193		433.6		441.0		368,993		526,135		63,675		108,053
Century Complete		2,789		2,571		250.3		207.0		698,041		532,199		101,769		69,657		2,338		2,541		258.8		250.5		604,998		636,466		61,171		91,168
Financial Services		—		—		—		—		—		—		29,111		38,451		—		—		—		—		—		—		29,785		29,111
Corporate		—		—		—		—		—		—		(87,185)		(75,892)		—		—		—		—		—		—		(93,681)		(87,185)
Total		7,691		7,890	$	421.5	$	365.2	$	3,241,537	$	2,881,404	$	574,498	$	428,944		6,411		7,691	$	377.3	$	421.5	$	2,419,025	$	3,241,537	$	224,756	$	574,498

West

During the three and nine months ended September 30, ~~2022,~~2023, our West segment generated income before income tax expense of ~~$51.0~~$31.4 million and $54.4 million, respectively, a ~~16.2%~~38.4% and 72.8% decrease, ~~over~~respectively, as compared to the respective prior year ~~period. This decrease was~~periods. These decreases were primarily driven by ~~a decrease~~decreases in home sales revenue of ~~$13.3~~$87.2 million and $375.5 million, respectively. The revenue decreases during the three and nine months ended September 30, 2023 were primarily ~~due to~~driven by a 25.7% and 38.5% decrease, ~~of 7.6%~~respectively, in the number of homes delivered, ~~partially offset by an increase of 2.8%~~and a 11.5% and 12.7% decrease, respectively, in the average sales price per home. ~~During~~For both the ~~nine months ended September 30, 2022, our West segment generated income before income tax expense~~three- and nine-month comparisons, the decreases in the number of ~~$200.2 million, a 54.9% increase over the respective prior year period. This increase was~~homes delivered were primarily driven by ~~an increase~~fewer homes available for delivery given a decrease in home starts during the latter half of 2022. For both the three- and nine-month comparisons, the average sales ~~revenue~~price decreases were driven by the mix of ~~$119.9 million~~deliveries and ~~an increase of 598 basis points~~pricing to market within individual communities. For the three-month comparison, the decrease in the percentage of income before income tax expense to home sales ~~revenues, as~~revenue was primarily a result of decreased revenue on a partially fixed cost base, and for the nine-month comparison, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) ~~increased~~decreased revenue on a partially fixed cost base and (2) ~~increased~~decreased gross margins on home sales. The revenue increase during the nine months ended September 30, 2022 was primarily driven by an increase of 7.8% in the number of homes delivered and an increase of 8.8% in the average sales price per home. For both the three- and nine- month comparisons, the changes in the number of homes delivered were driven by the timing of new community openings, and the average sales price increases were driven by the mix of deliveries within individual communities and home price appreciation over each respective period.

Mountain

During the three and nine months ended September 30, ~~2022,~~2023, our Mountain segment generated income before income tax expense of ~~$51.1~~$25.4 million and ~~$159.6~~$77.9 million, respectively, ~~remaining relatively flat over~~a 50.2% and 51.1% decrease, respectively, as compared to the respective prior year ~~period. Home~~periods. These decreases were primarily driven by decreases in home sales revenue ~~increased during the three and nine months ended September 30, 2022 by $32.9~~of $80.9 million and ~~$9.7~~$162.0 million, respectively, primarily generated by increases of 16.3% and 24.5% in the average sales price per home, respectively, partially offset by decreases of 2.9% and 18.8%, respectively, in the number of homes delivered. For both the three- and nine-month comparisons, the decreases in the number of homes delivered were driven by timing of new community openings, and the average sales price increases were driven by the mix of deliveries within individual communities and home price appreciation over each respective period.

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The revenue decreases during the three and nine months ended September 30, 2023 were primarily driven by a 16.0% and 9.6% decrease, respectively, in the number of homes delivered, and a 14.4% and 10.6% decrease, respectively, in the average sales price per home. For both the three- and nine-month comparisons, the decrease in the number of homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022, and the average sales price decreases were driven by the mix of deliveries and pricing to market within individual communities. For the three-month comparison, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of decreased revenue on a partially fixed cost base, and for the nine-month comparison, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home sales.

Texas

During the three and nine months ended September 30, ~~2022,~~2023, our Texas segment generated income before income tax expense of ~~$17.1~~$16.4 million and ~~$63.0~~$31.5 million, respectively, ~~a 43.8%~~an 18.5% and ~~59.2% increase,~~57.2% decrease, respectively, ~~over~~as compared to the respective prior year ~~period. During~~periods. For both the three- and nine-month comparisons, the decreases were primarily driven by a decrease in home sales revenue of $21.1 million and $96.4 million, respectively. The revenue decrease during the three months ended September 30, ~~2022,~~2023 was primarily driven a 16.6% decrease in the ~~increase~~average sales price per home, and the revenue decrease during the nine months ended September 20, 2023 was primarily driven by ~~an increase in home sales revenue of $30.0 million, primarily generated by an increase of 14.6%~~a 10.2% decrease in the number of homes delivered and ~~an increase of 17.7%~~a 13.9% decrease in the average sales price per home. ~~During~~For both the ~~nine months ended September 30, 2022,~~three- and nine-month comparisons, the ~~increase in income before income tax expense was~~average sales price decreases were driven by ~~an increase~~the mix of deliveries and pricing to market within individual communities, and for the nine-month comparison, the decrease in the number of homes delivered was primarily driven by fewer homes available for delivery given a decrease in home ~~sales revenue~~starts during the latter half of ~~$58.3 million and an increase of 437 basis points~~2022. For the nine-month comparison, the decrease in the percentage of income before income tax expense to home sales ~~revenues, as~~revenue was primarily a result of (1) ~~increased~~decreased revenue on a partially fixed cost base and (2) ~~increased~~decreased gross margins on home sales. The revenue increase during the nine months ended September 30, 2022 was primarily generated by an increase of 23.3% in the average sales price per home, partially offset by a 3.3% decrease in the number of homes delivered. For both the three- and nine- month comparisons, the change in the number of homes delivered were driven by the timing of new community openings, and the average sales price increases were driven by the mix of deliveries within individual communities and home price appreciation over each respective period.

Southeast

During the three and nine months ended September 30, ~~2022,~~2023, our Southeast segment generated income before income tax expense of ~~$38.4~~$33.7 million and ~~$108.1~~$63.7 million, respectively, a ~~92.0%~~12.2% and ~~55.4% increase,~~41.1% decrease, respectively, ~~over~~as compared to the respective prior year ~~period. During~~periods. For the ~~three months ended September 30, 2022,~~three- and nine-month comparisons, the ~~increase was~~decreases were primarily driven by ~~an increase~~a decrease in home sales revenue of ~~$65.1~~$31.5 million and ~~an increase~~$157.1 million, respectively. The revenue decreases during the three- and nine months ended September 30, 2023 were primarily driven by a 10.6% and 28.7% decrease, respectively, in the number of ~~432 basis points~~homes delivered, and a 6.1% and 1.7% decrease, respectively, in the average sales price per home. For the three- and nine-month comparisons, the decrease in the number of homes delivered was primarily driven by fewer homes available for delivery given a decrease in home starts during the latter half of 2022. For both the three- and nine-month comparisons, the average sales price decreases were driven by the mix of deliveries and pricing to market within individual communities. For the nine-month comparison, the decrease in the percentage of income before income tax expense to home sales ~~revenues, as~~revenue was primarily a result of (1) ~~increased~~decreased revenue on a partially fixed cost base and (2) ~~increased~~decreased gross margins on home sales. The revenue increase during the three months ended September 30, 2022 was primarily generated by an increase of 30.2% in the number of homes delivered and an increase of 14.9% in the average sales price per home. During the nine months ended September 30, 2022, the increase in income before income tax expense was driven by an increase in home sales revenue of $6.4 million and an increase of 716 basis points in the percentage of income before income tax expense to home sales revenues, as a result of (1) increased revenue on a partially fixed cost base and (2) increased gross margins on home sales. The revenue increase during the nine months ended September 30, 2022 was primarily generated by an increase of 12.2% in the average sales price per home, partially offset by a 9.8% decrease in the number of homes delivered. For both the three- and nine- month comparisons, the change in the number of homes delivered were driven by the timing of new community openings, and the average sales price increases were driven by the mix of deliveries within individual communities and home price appreciation over each respective period.

Century Complete

During the three and nine months ended September 30, ~~2022,~~2023, our Century Complete segment generated income before income tax expense of ~~$36.9~~$30.9 million and ~~$101.8~~$61.2 million, respectively, a ~~48.7%~~9.0% and ~~46.1% increase,~~32.9% decrease, respectively, ~~over~~as compared to the respective prior year ~~period. These increases~~periods. For the three- and nine-month comparisons, the decreases were primarily driven by ~~increases~~a decrease in home sales revenue of ~~$86.7~~$32.8 million and ~~$165.8~~$31.5 million, respectively. The revenue ~~increases~~decreases during the ~~three~~three- and nine months ended September 30, ~~2022~~2023 were primarily ~~generated~~driven by ~~increases of 26.8%~~a 15.5% and ~~8.5%,~~8.0% decrease, respectively, in the number of homes delivered, ~~as well as increases of 17.4%~~ and ~~20.9%,~~partially offset by a 2.6% and 3.3% increase, respectively, in the average sales price per home. For ~~both~~ the three- and ~~nine- month~~nine-month comparisons, the ~~increases~~decreases in the number of homes delivered were primarily driven by fewer homes available for delivery given a decrease in home starts during the ~~timing~~latter half of ~~new community openings,~~2022. For both the three- and nine-month comparisons, the average sales price increases were driven by the mix of deliveries and pricing to market within individual ~~communities~~communities. For the nine-month comparison, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of (1) decreased revenue on a partially fixed cost base and (2) decreased gross margins on home ~~price appreciation over each respective period.~~sales.

Financial Services

Our Financial Services segment originates mortgages for primarily our homebuyers, and as such, performance typically correlates to the number of homes delivered. Our Financial Services segment generated income before income tax of ~~$9.3~~$12.2 million for the three months ended September 30, ~~2022,~~2023, a ~~18.2% decrease~~30.5% increase over the prior year period. This ~~decrease~~increase was primarily the result of a ~~$5.8~~$2.5 million decrease in financial services ~~revenue during the three months ended September 30, 2022 compared to the prior year period,~~costs due to ~~(1) a 23.6% decrease to 1,375 in the number of mortgages originated during the three months ended September 30, 2022, and (2) reduced gain on sale margins on loans sold to third parties~~decreased headcount period over period. Our Financial Services segment generated income before income tax of ~~$29.1~~$29.8 million for the nine months ended September 30, ~~2022,~~2023, a ~~24.3% decrease~~nominal increase over the prior year ~~period. This decrease was~~period, primarily the result of a ~~$20.2~~$9.3 million decrease in financial services costs due to decreased headcount as compared to the prior year period, partially offset by an $8.6 million decrease in financial services revenue ~~during the nine months ended September 30, 2022~~as compared to the prior year ~~period, due to (1) a 30.1% decrease to 4,360 in the number of mortgages originated during the nine months ended September 30, 2022, due in part to a~~period. The decrease in ~~originations related to refinancing, and (2)~~financial services revenue was primarily driven by reduced ~~gain on sale~~ margins on loans sold to third parties period over ~~period.~~ ~~During~~period and a 17.1% decrease in the three and nine months ended September 30, 2022, the capture rate of Century homebuyers has decreased to 66% and 71%, respectively, primarily driven by the impact of market uncertainty on the financial services competitive environment.

number

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of mortgages originated during the nine months ended September 30, 2023, and partially offset by a smaller fair value markdown on our loan pipeline as compared to the prior year period, and increased revenue related to discount points compared to the prior year period.

The following table presents selected operational data for our Financial Services segment in relation to our loan origination activities (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
Total originations:
Number of loans		1,375			1,799			4,360			6,238			1,280			1,375			3,615			4,360
Principal	$	496,071		$	600,238		$	1,576,773		$	1,971,472		$	443,829		$	496,071		$	1,248,998		$	1,576,773
Capture rate of Century homebuyers		66	%		71	%		71	%		74	%		71	%		66	%		70	%		71	%
Century Communities		70	%		78	%		76	%		80	%		77	%		70	%		76	%		76	%
Century Complete		57	%		58	%		59	%		61	%		59	%		57	%		59	%		59	%
Average FICO score		728			736			731			737			727			728			725			731
Century Communities		736			748			739			741			731			736			730			739
Century Complete		709			713			711			711			719			709			715			711

Loans sold to third parties:
Number of loans sold		1,383			1,867			4,759			6,476			1,382			1,383			3,725			4,759
Principal	$	507,784		$	608,504		$	1,707,851		$	2,016,120		$	473,400		$	507,784		$	1,281,823		$	1,707,851

Corporate

During the three and nine months ended September 30, ~~2022,~~2023, our Corporate segment generated losses of $38.0 million and $93.7 million, respectively, as compared to losses of $31.8 million and $87.2 million, respectively, ~~as compared to losses of $33.9 million and $75.9 million, respectively, for~~during the same respective period in ~~2021.~~ ~~The decrease~~2022. These increases in ~~net loss for the three-month comparison is~~losses were primarily ~~attributed~~driven by adjustments to ~~a $14.5 million loss on debt extinguishment~~increase stock-based compensation expense during the three months ended September 30, 2021 related to the redemption of our 5.75% senior notes due 2025, partially offset by higher corporate costs to support our homebuilding operations during the three months ended September 30, 2022~~. The increase in loss for the nine-month comparison is primarily attributed to~~ ~~higher compensation costs~~ and ~~other corporate costs to support our homebuilding operations, partially offset by the loss on debt extinguishment during the~~ nine months ended September 30, ~~2021.~~2023 of $7.4 million and $10.8 million, respectively, to reflect an increased estimate in the number of shares which will ultimately vest and be issued under certain performance share awards.

Homebuilding Gross Margin

(dollars in thousands)

Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment, ~~and other.~~if applicable. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, decreased ~~during~~for the three months ended September 30, 2022 to 24.8% as compared to 25.7% for the same period in 2021, primarily driven by higher incentives during the quarter. Our homebuilding gross margin percentage increased during theand nine months ended September 30, ~~2022~~2023 to ~~27.0%~~24.6% and 21.0%, respectively, as compared to ~~23.5%~~24.8% and 27.0% during the same respective periods in 2022. The decreases for the ~~same period in 2021.~~ ~~This increase was~~three and nine-month comparisons were primarily driven by ~~(1) our ability~~deliveries during the period that carried both higher incentives and elevated construction costs due to ~~increase sales price~~homes commencing construction during high costs periods in excess of an increase in our labor and direct costs period over period, (2) benefits from our increased scale driving building efficiencies and streamlined production processes, and (3) the realization of less interest in cost of home sales revenue over the prior period.

2022.

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In the following table, we calculate our homebuilding gross margin, as adjusted to exclude inventory impairment, ~~and other~~if applicable, and interest in cost of home sales revenues.

Three Months Ended September 30,
2022
%
2021
%
Home sales revenues
$
1,118,588
100.0
%
$
917,337
100.0
%
Cost of home sales revenues
(841,665)
(75.2)
%
(682,012)
(74.3)
%
Inventory impairment and other
—
—
%
—
—
%
Gross margin from home sales
276,923
24.8
%
235,325
25.7
%
Add: Inventory impairment and other
—
—
%
—
—
%
Add: Interest in cost of home sales revenues
13,726
1.2
%
14,636
1.6
%
Adjusted homebuilding gross margin excluding interest and inventory impairment and other ⁽¹⁾
$
290,649
26.0
%
$
249,961
27.2
%
Nine Months Ended September 30,
2022
%
2021
%
Home sales revenues
$
3,241,537
100.0
%
$
2,881,404
100.0
%
Cost of home sales revenues
(2,365,633)
(73.0)
%
(2,203,187)
(76.5)
%
Inventory impairment and other
—
—
%
(41)
(0.0)
%
Gross margin from home sales
875,904
27.0
%
678,176
23.5
%
Add: Inventory impairment and other
—
—
%
41
0.0
%
Add: Interest in cost of home sales revenues
39,345
1.2
%
51,419
1.8
%
Adjusted homebuilding gross margin excluding interest and inventory impairment and other ⁽¹⁾
$
915,249
28.2
%
$
729,636
25.3
%



	Three Months Ended September 30,
	2023		%		2022		%

Home sales revenues	$	865,065	100.0	%	$	1,118,588	100.0	%
Cost of home sales revenues		(652,411)	(75.4)	%		(841,665)	(75.2)	%
Inventory impairment		—	—	%		—	—	%
Homebuilding gross margin		212,654	24.6	%		276,923	24.8	%
Add: Inventory impairment		—	—	%		—	—	%
Add: Interest in cost of home sales revenues		10,652	1.2	%		13,726	1.2	%
Adjusted homebuilding gross margin excluding interest and inventory impairment ⁽¹⁾	$	223,306	25.8	%	$	290,649	26.0	%



	Nine Months Ended September 30,
	2023		%		2022		%

Home sales revenues	$	2,419,025	100.0	%	$	3,241,537	100.0	%
Cost of home sales revenues		(1,910,630)	(79.0)	%		(2,365,633)	(73.0)	%
Inventory impairment		—	—	%		—	—	%
Homebuilding gross margin		508,395	21.0	%		875,904	27.0	%
Add: Inventory impairment		—	—	%		—	—	%
Add: Interest in cost of home sales revenues		30,729	1.3	%		39,345	1.2	%
Adjusted homebuilding gross margin excluding interest and inventory impairment ⁽¹⁾	$	539,124	22.3	%	$	915,249	28.2	%

⁽¹⁾This non-GAAP financial measure should not be used as a substitute for ~~the Company’s~~our operating results in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under ~~“—Non-GAAP~~“Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

For the three and nine months ended September 30, ~~2022,~~2023, our adjusted homebuilding gross margin percentage excluding inventory impairment ~~and other,~~ and interest in cost of home sales revenues, ~~our adjusted homebuilding gross margin percentage~~ was 25.8% and 22.3%, respectively, as compared to 26.0% and 28.2%~~, as compared to 27.2% and 25.3%, respectively,~~ for the same respective periods in ~~2021.~~2022. We believe the above information is meaningful as it isolates the impact that indebtedness, inventory impairment ~~indebtedness~~(if applicable), and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our ~~competitors.~~competitors.

‎

Selling, General and Administrative Expense



(dollars in thousands)
	Three Months Ended September 30,						Change
	2023			2022			Amount		%
Selling, general and administrative	$	111,918		$	110,687		$	1,231	1.1	%
As a percentage of home sales revenue		12.9	%		9.9	%

	Nine Months Ended September 30,						Change
	2023			2022			Amount		%
Selling, general and administrative	$	315,351		$	321,484		$	(6,133)	(1.9)	%
As a percentage of home sales revenue		13.0	%		9.9	%

Our selling, general and administrative expense remained relatively consistent for the three months ended September 30, 2023, and decreased $6.1 million for nine months ended September 30, 2023 as compared to the same respective periods in 2022. The increase for the three month comparison was primarily attributable to an adjustment of $7.4 million in stock-based compensation expense to reflect an increased estimate in the number of shares which will ultimately vest and be issued under certain performance share awards, partially offset by various decreases in other expenses, including advertising. The decrease for the nine month comparison was primarily

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~~Selling, General~~attributable to a decrease of $9.2 million in salaries and ~~Administrative Expense~~

(dollars in thousands)
Three Months Ended September 30,
Increase
2022
2021
Amount
%
Selling, general and administrative
$
110,687
$
90,154
$
20,533
22.8
%
As a percentage of home sales revenue
9.9
%
9.8
%
Nine Months Ended September 30,
Increase
2022
2021
Amount
%
Selling, general and administrative
$
321,484
$
281,961
$
39,523
14.0
%
As a percentage of home sales revenue
9.9
%
9.8
%

~~Our~~wages due to decreased headcount and a decrease of $4.7 million in internal and external commission expense, partially offset by $10.8 million in stock-based compensation expense to reflect an increased estimate in the number of shares which will ultimately vest and be issued under certain performance share awards.. As a percentage of home sales revenue, our selling, general and administrative expense increased ~~$20.5 million~~300 basis points and ~~$39.5 million,~~310 basis points, respectively, ~~for~~during each of the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022, ~~as compared to the same respective periods in 2021. These increases were~~respectively, driven primarily attributable to increases of $6.4 million and $23.8 million, respectively, in salaries and wages expense as compared to the same respective period in 2021 due to increased headcount, increased base pay due to market conditions, and increased incentive based compensation accruals, as well as increases in expenses in numerous areas to support our homebuilding operations. The increase for the nine months ended September 30, 2022 wasby decreased revenue on a partially offset by a decrease in internal and external commission expense of $3.8 million. During the three and nine months ended September 30, 2022, our selling, general, and administrative expense increased each by 10 basis points, respectively, as a percentage of home sales revenue as compared to the same respective period in 2021.fixed cost base.

Income Tax Expense

~~On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA extended the energy efficient home credit~~ ~~which provides a tax credit for each home delivered that met the energy saving and certification requirements for homes delivered~~ from January 1, 2022 (retroactively) through December 31, 2022, as well as modifies and increases the tax credit starting in 2023 through 2032. Previously, the federal tax credit expired for homes delivered after December 31, 2021. During the three months ended September 30, 2022, our effective tax rate was benefited by a $13.6 million benefit as a result of the retroactive extension energy efficient home credit.

Our effective tax rate for the nine months ended September 30, 2023 of 25.3% increased by 290 basis points as compared to our effective tax rate for the year ended December 31, 2022 of 22.4%. The increase in our effective tax rate is primarily a result of the enactment of the Inflation Reduction Act of 2022 during the third quarter of 2022, which modified the energy efficient home credit beginning with homes closed on or after January 1, 2023 and provided for more stringent energy standards than previous periods, resulting in fewer closed homes qualifying for energy efficient home credits, as well as the impact of disallowed deductions for executive compensation during 2023.

For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax expense of ~~$27.6~~$28.8 million and ~~$31.8~~$27.6 million, respectively. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we recorded income tax expense of ~~$128.9~~$56.9 million and ~~$95.4~~$128.9 million, respectively.

Segment Assets

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis as of September 30, 2023, and we have restated the corresponding segment information for those segments as of December 31, 2022.

(dollars in thousands)


	September 30,		December 31			Increase (Decrease)
	2023		2022			Amount	Change
West	$	732,859	$	665,827	$	67,032	10.1	%
Mountain		1,076,810		1,122,892		(46,082)	(4.1)	%
Texas		573,187		508,862		64,325	12.6	%
Southeast		506,659		415,887		90,772	21.8	%
Century Complete		401,238		376,131		25,107	6.7	%
Financial Services		347,896		372,284		(24,388)	(6.6)	%
Corporate		310,741		311,884		(1,143)	(0.4)	%
Total assets	$	3,949,390	$	3,773,767	$	175,623	4.7	%

Total assets increased to $3.9 billion as of September 30, 2023 as compared to $3.8 billion as of December 31, 2022, primarily as a result of changes in our inventory balances within our homebuilding segments related to timing of home and land development construction activities and an increase in the number of homes under construction.

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~~Segment Assets~~

~~(dollars in thousands)~~

September 30,
December 31
Increase (Decrease)
2022
2021
Amount
Change
West
$
785,994
$
668,830
$
117,164
17.5
%
Mountain
1,135,788
1,008,481
127,307
12.6
%
Texas
499,751
322,302
177,449
55.1
%
Southeast
451,104
360,644
90,460
25.1
%
Century Complete
510,290
371,096
139,194
37.5
%
Financial Services
357,431
533,159
(175,728)
(33.0)
%
Corporate
139,706
232,364
(92,658)
(39.9)
%
Total assets
$
3,880,064
$
3,496,876
$
383,188
11.0
%

Total assets increased to $3.9 billion as of September 30, 2022 as compared to December 31, 2021, primarily as a result of an increase in investment in homebuilding inventory, partially offset by a decrease in Financial Services assets primarily related to a decrease in mortgage loans held for sale period over period. The decrease in our Corporate assets was driven by a decrease in our cash and cash equivalents, partially offset by increases related to Century Living.

Lots owned and controlled


	September 30, 2022			December 31, 2021			% Change						September 30, 2023			December 31, 2022			% Change
	Owned	Controlled	Total	Owned	Controlled	Total	Owned		Controlled		Total		Owned	Controlled	Total	Owned	Controlled	Total	Owned		Controlled		Total

West	4,824	1,325	6,149	4,440	4,877	9,317	8.6	%	(72.8)	%	(34.0)	%	4,160	3,991	8,151	4,433	509	4,942	(6.2)	%	684.1	%	64.9	%
Mountain	11,312	2,374	13,686	11,860	8,039	19,899	(4.6)	%	(70.5)	%	(31.2)	%	8,751	4,745	13,496	10,845	1,566	12,411	(19.3)	%	203.0	%	8.7	%
Texas	7,382	4,158	11,540	5,340	8,159	13,499	38.2	%	(49.0)	%	(14.5)	%	8,105	9,691	17,796	7,432	3,876	11,308	9.1	%	150.0	%	57.4	%
Southeast	5,981	7,683	13,664	5,928	14,195	20,123	0.9	%	(45.9)	%	(32.1)	%	5,583	8,602	14,185	5,576	5,733	11,309	0.1	%	50.0	%	25.4	%
Century Complete	4,978	12,761	17,739	5,287	11,734	17,021	(5.8)	%	8.8	%	4.2	%	3,638	11,304	14,942	3,826	9,323	13,149	(4.9)	%	21.2	%	13.6	%
Total	34,477	28,301	62,778	32,855	47,004	79,859	4.9	%	(39.8)	%	(21.4)	%	30,237	38,333	68,570	32,112	21,007	53,119	(5.8)	%	82.5	%	29.1	%

Of our total lots owned and controlled as of September 30, ~~2022, 54.9%~~2023, 44.1% were owned and ~~45.1%~~55.9% were controlled, as compared to ~~41.1%~~60.5% owned and ~~58.9%~~39.5% controlled as of December 31, ~~2021. The decrease in the number of controlled lots was driven by~~ 2022.

~~the termination of certain contracts in our markets that did not meet our investment criteria.~~

Other Homebuilding Operating Data

Commencing in the first quarter of 2023, our Century Complete operations in Texas were realigned and are now managed under our Texas segment. Accordingly, we have presented segment information under this new basis as of and for the three and nine months ended September 30, 2023, and we have restated the corresponding segment information for those segments as of and for the three and nine months ended September 30, 2022.

Net new home contracts


	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
	September 30,		Increase (Decrease)			September 30,		Increase (Decrease)			September 30,		Increase (Decrease)			September 30,		Increase (Decrease)
	2022	2021	Amount	% Change		2022	2021	Amount	% Change		2023	2022	Amount	% Change		2023	2022	Amount	% Change
West	219	395	(176)	(44.6)	%	884	1,286	(402)	(31.3)	%	269	219	50	22.8	%	849	884	(35)	(4.0)	%
Mountain	183	489	(306)	(62.6)	%	1,247	2,053	(806)	(39.3)	%	395	183	212	115.8	%	1,174	1,247	(73)	(5.9)	%
Texas	181	392	(211)	(53.8)	%	867	1,309	(442)	(33.8)	%	377	215	162	75.3	%	1,252	1,044	208	19.9	%
Southeast	240	387	(147)	(38.0)	%	1,064	1,151	(87)	(7.6)	%	352	240	112	46.7	%	945	1,064	(119)	(11.2)	%
Century Complete	495	1,079	(584)	(54.1)	%	2,433	3,518	(1,085)	(30.8)	%	756	461	295	64.0	%	2,268	2,256	12	0.5	%
Total	1,318	2,742	(1,424)	(51.9)	%	6,495	9,317	(2,822)	(30.3)	%	2,149	1,318	831	63.1	%	6,488	6,495	(7)	(0.1)	%

Net new home contracts (new home contracts net of cancellations) for the three months ended September 30, ~~2022 decreased~~2023 increased by ~~1,424~~831 homes, or ~~51.9%~~63.1%, to ~~1,318,~~2,149 as compared to ~~2,742~~1,318 for the same period in ~~2021.~~2022, when increased mortgage interest rates, inflation, and macro-economic uncertainty considerably impacted the U.S. housing market. Net new home contracts for the nine months ended September 30, ~~2022 decreased by 2,822 homes, or~~ ~~30.3%, to 6,495,~~2023 remained relative flat at 6,488 as compared to ~~9,317~~6,495 for the same period in ~~2021. Beginning in the~~ ~~second quarter of 2022 and continuing through the third quarter of 2022, we experienced a moderation of home sales pace across our markets as compared to prior periods.~~ These decreases were primarily driven by the impact on demand for new homes from increasing interest rates, rising inflation, and macro-economic uncertainty, and to some extent, an increase in cancellations primarily due to interest rate increases.2022.

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Monthly absorption rate

Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of ~~cancelations)~~cancellations) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 by segment are included in the tables below:


	Three Months Ended September 30,		Increase (Decrease)			Three Months Ended September 30,		Increase (Decrease)
	2022	2021	Amount	% Change		2023	2022	Amount	% Change
West	3.3	7.3	(4.0)	(54.8)	%	3.2	3.3	(0.1)	(3.0)	%
Mountain	1.9	6.0	(4.1)	(68.3)	%	2.7	1.9	0.8	42.1	%
Texas	2.5	8.7	(6.2)	(71.3)	%	3.0	2.3	0.7	30.4	%
Southeast	3.2	6.8	(3.6)	(52.9)	%	4.0	3.2	0.8	25.0	%
Century Complete	1.4	3.4	(2.0)	(58.8)	%	2.4	1.4	1.0	71.4	%
Total	2.0	4.9	(2.9)	(59.2)	%	2.8	2.0	0.8	40.0	%

	Nine Months Ended September 30,		Increase (Decrease)			Nine Months Ended September 30,		Increase (Decrease)
	2022	2021	Amount	% Change		2023	2022	Amount	% Change
West	4.5	7.9	(3.4)	(43.0)	%	3.4	4.5	(1.1)	(24.4)	%
Mountain	4.3	8.4	(4.1)	(48.8)	%	2.7	4.3	(1.6)	(37.2)	%
Texas	4.0	9.7	(5.7)	(58.8)	%	3.3	3.7	(0.4)	(10.8)	%
Southeast	4.7	6.7	(2.0)	(29.9)	%	3.6	4.7	(1.1)	(23.4)	%
Century Complete	2.4	3.7	(1.3)	(35.1)	%	2.4	2.3	0.1	4.3	%
Total	3.3	5.6	(2.3)	(41.1)	%	2.9	3.3	(0.4)	(12.1)	%

During the three months ended September 30, 2023, our absorption rate increased by 40.0% to 2.8 per month as compared to the same period in 2022. During the nine months ended September 30, 2023, our absorption rate decreased by 12.1% to 2.9 per month as compared to the same period in 2022. During the three and nine months ended September 30, 2023, we experienced cancellation rates of 16.2% and 15.8% respectively, which represent a significant reduction from cancellation rates we experienced in the latter half of 2022 ~~our absorption rates decreased by 59.2% and 41.1%, respectively, to 2.0 and 3.3 per month, respectively,~~ as ~~compared~~we believe homebuyers are adjusting to the ~~same respective periods in 2021.~~ ~~Beginning~~higher interest rate environment and our strategy of selling homes later in the ~~second quarter of 2022 and continuing through the third quarter of 2022, we experienced a moderation of sales pace across~~construction cycle has benefitted our ~~markets compared to prior periods, as well as an increase in~~ cancellation rates to a combined 35%, with a 31% cancellation rate for Century Communities and a 41% cancellation rate for Century Complete, primarily driven by the increases in mortgage rates. The third quarter 2022 decrease in sales pace was consistent with trends seen in the overall housing market, as interest rate increases on mortgages, rising inflation, and macro-economic uncertainty caused demand to decrease from the historically strong market conditions experienced since the second quarter of 2020.rate.

Selling communities at period end



Selling communities at period end	As of September 30,		Increase/(Decrease)
	2022	2021	Amount	% Change		As of September 30,		Increase/(Decrease)
						2023	2022	Amount	% Change
West	22	18	4	22.2	%	28	22	6	27.3	%
Mountain	32	27	5	18.5	%	49	32	17	53.1	%
Texas	24	15	9	60.0	%	42	31	11	35.5	%
Southeast	25	19	6	31.6	%	29	25	4	16.0	%
Century Complete	114	107	7	6.5	%	104	107	(3)	(2.8)	%
Total	217	186	31	16.7	%	252	217	35	16.1	%

Our selling communities increased by 35 communities to ~~217~~252 communities at September 30, ~~2022~~2023 as compared to ~~186~~217 at September 30, ~~2021.~~2022. This increase was a result of net new community openings ~~during~~since the ~~past year.~~end of the prior year period.

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Backlog

(dollars in thousands)



	As of September 30,																As of September 30,
	2022					2021					% Change						2023					2022					% Change

	Homes	Dollar Value		Average Sales Price		Homes	Dollar Value		Average Sales Price		Homes		Dollar Value		Average Sales Price		Homes	Dollar Value		Average Sales Price		Homes	Dollar Value		Average Sales Price		Homes		Dollar Value		Average Sales Price

West	208	$	172,071	$	827.3	659	$	436,812	$	662.8	(68.4)	%	(60.6)	%	24.8	%	191	$	116,721	$	611.1	208	$	172,071	$	827.3	(8.2)	%	(32.2)	%	(26.1)	%
Mountain	826		447,827		542.2	1,037		556,192		536.3	(20.3)	%	(19.5)	%	1.1	%	290		146,137		503.9	826		447,827		542.2	(64.9)	%	(67.4)	%	(7.1)	%
Texas	210		73,482		349.9	615		217,362		353.4	(65.9)	%	(66.2)	%	(1.0)	%	248		76,224		307.4	244		82,305		337.3	1.6	%	(7.4)	%	(8.9)	%
Southeast	584		246,764		422.5	630		257,902		409.4	(7.3)	%	(4.3)	%	3.2	%	299		136,921		457.9	584		246,764		422.5	(48.8)	%	(44.5)	%	8.4	%
Century Complete	1,627		439,236		270.0	1,925		454,516		236.1	(15.5)	%	(3.4)	%	14.4	%	859		231,166		269.1	1,593		430,413		270.2	(46.1)	%	(46.3)	%	(0.4)	%
Total / Weighted Average	3,455	$	1,379,380	$	399.2	4,866	$	1,922,784	$	395.1	(29.0)	%	(28.3)	%	1.0	%	1,887	$	707,169	$	374.8	3,455	$	1,379,380	$	399.2	(45.4)	%	(48.7)	%	(6.1)	%

‎

Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. At September 30, ~~2022,~~2023, we had 1,887 homes in backlog with a total value of $707.2 million, which represents decreases of 45.4% and 48.7%, respectively, as compared to 3,455 homes in backlog with a total value of $1.4 billion ~~which represents decreases of 29.0% and 28.3%, respectively, as compared to 4,866 homes in backlog with a total value of $1.9 billion~~ at September 30, ~~2021.~~2022. The decrease in backlog dollar value is primarily attributable to the decrease in backlog units, partially ~~offset by~~due to our strategy of selling homes later in the construction cycle and in part due to a ~~1.0% increase~~6.1% decrease in the average sales price of homes in backlog.

Supplemental Guarantor Information

Our 6.750% senior notes due 2027 (which we collectively refer to as our “2027 Notes”) and our 3.875% senior notes due 2029 (which we collectively refer to as our “2029 Notes” and together with the 2027 Notes, the “Senior Notes”) are our unsecured senior obligations and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by substantially all of our direct and indirect wholly-owned operating subsidiaries (which we refer to collectively as “Guarantors”). ~~In addition, our former 5.875% senior notes due~~ ~~2025 (which we collectively refer to as our “2025 Notes”), which~~ ~~were extinguished during the third quarter of 2021, were our unsecured senior obligations and were fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the Guarantors.~~ Our subsidiaries associated with our Financial Services operations (referred to as “Non-Guarantors”) do not guarantee the Senior Notes. The guarantees are senior unsecured obligations of the Guarantors that rank equal with all existing and future senior debt of the Guarantors and senior to all subordinated debt of the Guarantors. The guarantees are effectively subordinated to any secured debt of the Guarantors. As of September 30, ~~2022,~~2023, Century Communities, Inc. had outstanding $1.0 billion in total principal amount of Senior Notes.

Each of the indentures governing our Senior Notes provides that the guarantees of a Guarantor will be automatically and unconditionally released and discharged: (1) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the equity interests of such Guarantor after which the applicable Guarantor is no longer a “Restricted Subsidiary” (as defined in the respective indentures), which sale, transfer, exchange or other disposition does not constitute an “Asset Sale” (as defined in the respective indentures) or is made in compliance with applicable provisions of the applicable indenture; (2) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the assets of such Guarantor, which sale, transfer, exchange or other disposition does not constitute an Asset Sale or is made in compliance with applicable provisions of the applicable indenture; provided, that after such sale, transfer, exchange or other disposition, such Guarantor is an “Immaterial Subsidiary” (as defined in the respective indentures); (3) unless a default has occurred and is continuing, upon the release or discharge of such Guarantor from its guarantee of any indebtedness for borrowed money of the Company and the Guarantors so long as such Guarantor would not then otherwise be required to provide a guarantee pursuant to the applicable indenture; provided that if such Guarantor has incurred any indebtedness in reliance on its status as a Guarantor in compliance with applicable provisions of the applicable Indenture, such Guarantor’s obligations under such indebtedness, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Guarantor) in compliance with applicable provisions of the applicable Indenture; (4) upon the designation of such Guarantor as an “Unrestricted Subsidiary” (as defined in the respective Indentures), in accordance with the applicable indenture; (5) if the Company exercises its legal defeasance option or covenant defeasance option under the applicable indenture or if the obligations of the Company and the Guarantors are discharged in compliance with applicable provisions of the applicable indenture, upon such exercise or discharge; or (6) in connection with the dissolution of such Guarantor under applicable law in accordance with the applicable indenture.~~The indenture governing our former 2025 Notes contained a similar provision.~~

If a guarantor were to become a debtor in a case under the US Bankruptcy Code, a court may decline to enforce its guarantee of the Senior Notes. This may occur when, among other factors, it is found that the guarantor originally received less than fair consideration for the guarantee and the guarantor would be rendered insolvent by enforcement of the guarantee. On the basis of historical financial information, operating history and other factors, we believe that each of the guarantors, after giving effect to the issuance of its guarantee

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~~information, operating history and other factors, we believe that each of the guarantors, after giving effect to the issuance of its guarantee~~ of the Senior Notes when the guarantee was issued, was not insolvent and did not and has not incurred debts beyond its ability to pay such debts as they mature. The Company cannot predict, however, what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

Only the 2027 Notes and the related guarantees are ~~and the former 2025 Notes and the related guarantees were,~~ registered securities under the Securities Act of 1933, as amended (the “Securities Act”). The offer and sale of the 2029 Notes and the related guarantees were not and will not be registered under the Securities Act or the securities laws of any other jurisdiction and instead were issued in reliance upon an exemption from such registration. Unless they are subsequently registered under the Securities Act, neither the 2029 Notes nor the related guarantees may be offered and sold only in transactions that are exempt from the registration requirements under the Securities Act and the applicable securities laws of any other jurisdiction.

As the guarantees for the 2027 Notes and the guarantees for the former 2025 Notes were made in connection with the issuance of the 2027 Notes and former 2025 Notes and exchange offers effected under the Securities Act in February 2015, October 2015 and April 2017, theThe Guarantors’ condensed supplemental financial information is presented in this report as if the Senior Note guarantees existed during the periods presented pursuant to applicable SEC rules and guidance. If any Guarantors are released from the guarantees in future periods, the changes are reflected prospectively. We have determined that separate, full financial statements of the Guarantors would not be material to investors, and accordingly, supplemental financial information is presented below.

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The following summarized financial information is presented for Century Communities, Inc. and the Guarantor Subsidiaries on a combined basis after eliminating intercompany transactions and balances among Century Communities, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from Non-Guarantor Subsidiaries.

Century Communities, Inc. and Guarantor Subsidiaries


Summarized Balance Sheet Data (in thousands)	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022

Assets
Cash and cash equivalents	$	3,484	$	180,843	$	78,516	$	191,541
Cash held in escrow		83,952		52,297		52,488		56,569
Accounts receivable		32,471		39,492		47,744		46,326
Inventories		3,107,734		2,456,614		3,058,317		2,830,645
Prepaid expenses and other assets		200,768		160,999		281,463		193,824
Property and equipment, net		29,957		24,220		33,792		31,326
Deferred tax assets, net		33,873		21,239		18,778		20,856
Goodwill		30,395		30,395		30,395		30,395
Total assets	$	3,522,634	$	2,966,099	$	3,601,493	$	3,401,482
Liabilities and stockholders’ equity
Liabilities:
Accounts payable	$	92,318	$	82,734	$	159,875	$	105,727
Accrued expenses and other liabilities		357,679		288,229		303,310		310,330
Notes payable		1,016,548		998,936		1,051,294		1,019,412
Revolving line of credit		165,000		—		—		—
Total liabilities		1,631,545		1,369,899		1,514,479		1,435,469
Stockholders’ equity:		1,891,089		1,596,200		2,087,014		1,966,013
Total liabilities and stockholders’ equity	$	3,522,634	$	2,966,099	$	3,601,493	$	3,401,482


Summarized Statements of Operations Data (in thousands)	Nine Months Ended		Year Ended		Nine Months Ended		Year Ended
	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022

Total homebuilding revenues	$	3,254,409	$	4,092,576	$	2,422,836	$	4,410,483
Total homebuilding cost of revenues		(2,374,784)		(3,095,363)		(1,911,005)		(3,315,994)
Selling, general and administrative		(321,484)		(389,610)		(315,351)		(430,742)
Loss on debt extinguishment		—		(14,458)
Inventory impairment and other		—		(41)
Inventory impairment						—		(10,149)
Other income (expense)		(11,205)		(3,307)		(3,235)		(15,894)
Income before income tax expense		546,936		589,797		193,245		637,704
Income tax expense		(122,679)		(131,201)		(48,880)		(142,986)
Net income	$	424,257	$	458,596	$	144,365	$	494,718

‎

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Critical Accounting Policies

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and the estimates included in our financial statements might be impacted if we used different assumptions or conditions. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed with the SEC on February ~~3, 2022,~~2, 2023, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.” ~~During the three and nine months ended September 30, 2022, we have updated our critical accounting policies to include the following disclosure about our self-insurance accounting policy:~~

~~Self-Insurance~~

We maintain general liability insurance coverage, including coverage for certain construction defects. These insurance policies protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits. Prior to the year ended December 31, 2021, we generally maintained construction defect policies with lower self-insurance limits. In circumstances where we have elected to retain a higher portion of the overall risk for construction defect claims in return for a lower initial premium, we reserve for the estimated costs that we will incur that are above our coverage limits or that are not covered by our insurance policies. The reserve is recorded on an undiscounted basis at the time revenue is recognized for each home closing. Our self-insurance liability is presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable.

As of September 30, 2022, our self-insurance reserve for incurred but not reported construction defect claims was $13.9 million, compared to $5.1 million as of December 31, 2021. The self-insurance reserve estimate requires significant management judgment and assumptions, and is based on a third-party actuarial analysis that relies primarily upon industry data and partially on our historical claims to estimate overall costs. These estimates are subject to uncertainty due to a variety of factors, the most significant being the long period of time between the delivery of a home to a homebuyer and when a construction defect claim may be made, and the ultimate resolution of any such construction defect claim. Though state regulations vary, construction defect claims are reported and resolved over a long period of time, which can extend for 10 years or more. As a result, the majority of the estimated self-insurance liability based on the actuarial analysis relates to claims incurred but not yet reported. Assumptions used in developing estimates can fluctuate as a result of unforeseen developments in claims relative to markets in which we operate, inflation rates, regulatory or legal changes, and other factors. While we believe our estimates are reasonable and provide for a certain degree of coverage to account for these variables, actual claims and costs could differ significantly from recorded reserves. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. Historically, adjustments to our estimates have not been material, as we increased our self-insurance reserve by $0.9 million during the three and nine months ended September 30, 2022 and recorded no change to our reserve during the three and nine months ended September 30, 2021, respectively.

Liquidity and Capital Resources

Overview

Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and ~~Credit Facility~~revolving line of credit availability, was ~~$817.2 million~~$1.0 billion as of September 30, ~~2022, compared to~~2023 and $1.2 billion as of December 31, ~~2021.~~2022.

Our principal uses of capital for the three and nine months ended September 30, ~~2022~~2023 were our land purchases, land development, home construction, ~~share repurchases,~~ and the payment of routine liabilities. We increased our investment in homebuilding inventory during 2022, including an increase of $408.8 million in homes under construction and $235.0 million in land and land development, which resulted in 34,477 lots owned at September 30, 2022, a 4.9% increase as compared to December 31, 2021.

Cash flows for each of our communities depend on the stage in the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and not recognized in our consolidated statements of operations until a home closes, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint, we continue to acquire and develop lots in our markets when they meet our current investment ~~criteria, During the three months ended September 30, 2022, we reduced our land acquisition and development activities by terminating~~ ~~certain contracts in our markets that did not meet our investment criteria,~~ ~~resulting in a charge of $4.4 million recorded as other expense included in our condensed consolidated statements of operations.~~

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Under our shelf registration statement, which we filed with the SEC on July 1, 2021 and was automatically effective upon filing, we have the ability to access the debt and equity capital markets in registered transactions from time to time and as needed as part of our ongoing financing strategy and subject to market conditions.criteria.

Short-term Liquidity and Capital Resources

We use funds generated by operations, available borrowings under our ~~Credit Facility,~~revolving line of credit facility, and proceeds from issuances of debt or equity, including our ~~current~~ at-the-market facility, to fund our short term working capital obligations and fund our purchases of land, as well as land development, home construction activities, ~~general corporate purposes,~~ and other cash needs.

Our Financial Services operations use funds generated from operations and availability under our mortgage repurchase facilities to finance its operations, including originations of mortgage loans to our homebuyers.

Our Century Living operations use excess cash from our operations, as well as project specific secured financing under construction loan agreements to fund development of multi-family projects.

We believe that we will be able to fund our current liquidity needs for at least the next twelve months with our cash on hand, cash generated from operations, and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available or on acceptable terms based on the macro-economy and market conditions at the time. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as our revolving line of credit. We believe we are well positioned from a cash and liquidity standpoint to operate in an uncertain environment, and to pursue other ways to properly deploy capital to enhance returns, which may include taking advantage of strategic opportunities as they ~~arise.~~arise.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available, or on favorable terms, especially in light of rising interest rates. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of ~~credit.~~credit, repurchase facilities, and construction loan agreements. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance debt, or dispose of certain assets to fund our operating activities and capital needs.

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Material Cash Requirements

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three and nine months ended September 30, ~~2022,~~2023, there were no material changes to the contractual obligations we previously ~~disclosed~~described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 that was filed with the SEC on February ~~3, 2022.~~2, 2023.

In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. Purchase and option contracts for the purchase of land enable us to defer acquiring portions of properties owned by third parties until we have determined whether to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. These purchase contracts typically require a cash deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and others as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require payment by us of a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. Our obligations with respect to purchase contracts and option contracts are generally limited to the forfeiture of the related non-refundable cash deposits.

As of September 30, ~~2022,~~2023, we had outstanding purchase contracts and option contracts for ~~28,301~~38,333 lots totaling approximately ~~$1.2~~$1.8 billion and we had ~~$61.1~~$46.8 million of deposits for land contracts, of which ~~$33.1~~$19.5 million were non-refundable cash deposits pertaining to land contracts. For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next ~~twenty-four~~24 months. Our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change and dependent on future market conditions. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability

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of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

Outstanding Debt Obligations and Debt Service Requirements

One of our principal liquidity needs is the payment of principal and interest on our outstanding indebtedness. Our outstanding indebtedness is described in detail in Note 9 – Debt in the Notes to the Condensed Consolidated Financial Statements. We are required to meet certain covenants, and as of September 30, 2023, we were in compliance with all such covenants and requirements under the agreements governing our revolving line of credit, mortgage repurchase facilities, and construction loan agreements. See Note 9 – Debt in the Notes to the Condensed Consolidated Financial Statements for further detail.

Our outstanding debt obligations included the following as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):



	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
3.875% senior notes, due August 2029⁽¹⁾	$	494,691	$	494,117	$	495,463	$	494,884
6.750% senior notes, due May 2027⁽¹⁾		496,190		495,581
6.750% senior notes, due June 2027⁽¹⁾						497,006		496,394
Other financing obligations⁽²⁾		25,667		9,238		58,825		28,134
Notes payable		1,016,548		998,936		1,051,294		1,019,412
Revolving line of credit		165,000		—		—		—
Mortgage repurchase facilities		195,047		331,876		162,094		197,626
Total debt	$	1,376,595	$	1,330,812	$	1,213,388	$	1,217,038

⁽¹⁾The carrying value of the senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.

⁽²⁾As of September 30, ~~2022,~~2023, other financing obligations included ~~$22.7~~$30.0 million related to insurance premium notes and certain secured borrowings, as well as ~~$3.0~~$28.8 million outstanding under ~~the~~ construction loan agreements, as described below. As of December 31, ~~2021,~~2022, other financing obligations included ~~$9.2~~$20.7 million related to insurance premium notes and certain secured ~~borrowings.~~

A summary of our debt obligations is included in Note 9 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 3, 2022 and in Note 9 to our condensed consolidated financial statements in this Form 10-Q.borrowings, as well as $7.4 million outstanding under construction loan agreements.

We may from time to time seek to refinance or increase our outstanding debt or retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such

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repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may or may not be material during any particular reporting period.

Letters of Credit and Performance Bonds

In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had ~~$565.8~~$513.9 million and ~~$492.5~~$574.8 million, respectively, in letters of credit and performance and other bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance and other bonds are not generally fully released until all development and construction activities are completed.

Construction Loan Agreements

~~On August 9, 2022 and March 17, 2022, certain~~Certain wholly owned subsidiaries of Century Living, LLC, ~~entered into~~are parties to construction loan agreements entered into during 2022 and the first quarter of 2023 with ~~PNC Bank, National Association and U.S. Bank National Association, a national banking association, d/b/a Housing Capital Company~~various banks, (which we collectively refer to as “the ~~Lenders”~~lenders”)~~, respectively.~~ . The three construction loan agreements ~~(which we refer to as the “Construction Loan Agreements”),~~ collectively provide that we may borrow up to ~~$128.0~~an aggregate of $187.6 million from the ~~Lenders~~lenders for purposes of construction of multi-family projects in Colorado, with advances made by the ~~Lenders~~lenders upon the satisfaction of certain conditions. Borrowings under the ~~Construction Loan Agreements~~construction loan agreements bear interest at various rates, including a fixed rate, and floating interest rates per annum equal to the Secured Overnight Financing Rate (which we refer to as “SOFR”) and the Bloomberg Short-term Bank Yield Index, plus an applicable margin. The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates through ~~August 9, 2026,~~March 17, 2028, with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied. The ~~Construction Loan Agreements~~construction loan agreements contain customary affirmative and negative covenants (including covenants related to construction completion, and limitations on the use of loan proceeds, transfers of land, equipment, and improvements), as well as customary events of default. Interest on our construction loan agreements is capitalized to the multi-family properties assets included in prepaid expenses and other assets on the condensed consolidated balance sheets while the related multi-family rental properties are being actively developed.

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Revolving Line of Credit

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement ~~which amended and restated the Amended and Restated Credit Agreement~~,provides us with a senior unsecured revolving line of credit (which we refer to as the ~~“Credit Facility”~~“revolving line of credit”) of up to ~~$800~~$800.0 million, and unless terminated earlier, will mature on April 30, 2026. The ~~Credit Facility~~revolving line of credit includes a $250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, ~~the Company is~~we are entitled to request an increase in the size of the ~~Credit Facility~~revolving line of credit by an amount not exceeding ~~$200~~$200.0 million. Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. ~~Borrowings under~~On December 21, 2022, we entered into a First Modification Agreement with Texas Capital Bank, as Administrative Agent, amending the Second A&R Credit Agreement ~~bear~~pursuant to which, effective January 3, 2023, all existing borrowings using an interest atrate based on a ~~floating~~LIBOR reference rate ~~equal to~~had the interest rate replaced with one based on an adjusted ~~Eurodollar Rate~~term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus ~~an applicable margin between 2.05% and 2.65% per annum, and if made available in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.05% and 1.65% per annum.~~0.10%.

As of September 30, ~~2022, we had $165.0 million~~2023, no amounts were outstanding under ~~the Credit Facility~~our revolving line of credit and were in compliance with all covenants under the Second A&R Credit Agreement.

Mortgage Repurchase Facilities – Financial Services

Inspire is a party to a mortgage warehouse ~~facilities~~facility with ~~Comerica Bank,~~ J.P. Morgan, ~~and Wells Fargo (which we refer to as the “Repurchase Facilities”),~~ which ~~provide~~provides Inspire with uncommitted repurchase facilities of up to an aggregate of ~~$275.0~~$200.0 million as of September 30, ~~2022,~~2023, secured by the mortgage loans financed ~~thereunder.~~ thereunder, and a maturity date through January 19, 2024. During the three months ended September 30, 2023, we terminated our mortgage warehouse facility agreement with Comerica, which provided uncommitted repurchase facilities of up to an aggregate of $75.0 million, with outstanding principal and interest due on December 29, 2023. The ~~Repurchase Facilities have varying short term maturity dates through August 15, 2023 and bear~~repurchase facilities bore a weighted average interest rate of ~~4.208%.~~6.80% during the nine months ended September 30, 2023.

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Amounts outstanding under the ~~Repurchase Facilities~~repurchase facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of September 30, 2023 and December 31, 2022, we had ~~$195.0~~$162.1 million and $197.6 million outstanding under ~~these Repurchase Facilities~~the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

During the three months ended September 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $0.6 million and $0.4 million, respectively. During the nine months ended September 30, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of $1.4 million and $1.8 million, respectively. Interest expense on the Repurchase Facilities is included in financial services costs on our condensed consolidated statements of operations.

At-the-Market Offerings

~~On November 27, 2019, we entered into~~We are party to a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., ~~Citigroup Global Markets Inc.,~~Wells Fargo Securities, LLC and Fifth Third Securities, Inc. (which we refer to as the “Distribution Agreement”), as sales agents pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement. This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, and was amended in July 2021 to acknowledge our filing of a new registration statement on Form S-3 registering the issuance and sale of shares of our common stock under the Distribution Agreement and replace Citigroup Global Markets Inc. with Wells Fargo Securities, LLC as a sales agent, had ~~all $100.0 million available for sale~~ ~~as of September 30, 2022. We did not sell or issue any shares of our common stock during the three and nine months ended September 30, 2022 and 2021, respectively.~~ The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the agreement. We did not sell or issue any shares of our common stock during the three and nine months ended September 30, 2023 and 2022, respectively, and as of September 30, 2023, all $100.0 million remained available for sale.

Stock Repurchase Program

~~On November 6, 2018, our~~Our Board of Directors authorized a stock repurchase program in 2018, under which we may repurchase up to 4.5 million shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of our common stock, trading volume, other capital management objectives and opportunities, applicable legal requirements, ~~general market and economic conditions, as well as~~applicable tax effects including the ~~future~~ 1% excise tax ~~on stock repurchases after December 31, 2022 included in~~instituted under the Inflation Reduction Act of 2022, ~~which was enacted into law on August 16, 2022.~~ and general market and economic conditions.

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We intend to finance any stock repurchases through available cash and our ~~Credit Facility.~~revolving line of credit. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The stock repurchase program has no expiration date and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the program will be cancelled and returned to the status of authorized but unissued shares of common stock.

During the three and nine months ended September 30, 2023, an aggregate of 247.8 thousand and 278.2 thousand shares, respectively, were repurchased for a total purchase price of approximately $17.3 million and $19.2 million, respectively, and a weighted average price of $69.61 and $69.09 per share, respectively. During the three and nine months ended September 30, 2022, an aggregate of 0.5 million and 2.3 million shares, respectively, ~~of our common stock~~ were repurchased for a total purchase price of approximately $22.3 million and $120.6 million, respectively, and a weighted average price of $44.58 and $52.32 per share, respectively. ~~During the three and nine months ended September 30, 2021, we did not repurchase any shares of our common stock.~~ The maximum number of shares available to be ~~purchased~~repurchased under the stock repurchase program as of September 30, ~~2022~~2023 was ~~1,508,169~~1,230,010 shares.

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Dividends

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively (in thousands, except per share information):



									Nine Months Ended September 30, 2023
									Cash Dividends Declared and Paid
Declaration Date							Record Date	Paid Date	Per Share		Amount
February 8, 2023							March 1, 2023	March 15, 2023	$	0.23	$	7,365
May 17, 2023							May 31, 2023	June 14, 2023	$	0.23	$	7,368
August 16, 2023							August 30, 2023	September 13, 2023	$	0.23	$	7,341


			Nine months ended September 30, 2022						Nine Months Ended September 30, 2022
			Cash Dividends Declared and Paid						Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount		Record Date	Paid Date	Per Share		Amount
February 16, 2022	March 2, 2022	March 16, 2022	$	0.20	$	6,657	March 2, 2022	March 16, 2022	$	0.20	$	6,657
May 18, 2022	June 1, 2022	June 15, 2022	$	0.20	$	6,568	June 1, 2022	June 15, 2022	$	0.20	$	6,568
August 17, 2022	August 31, 2022	September 14, 2022	$	0.20	$	6,455	August 31, 2022	September 14, 2022	$	0.20	$	6,455

			Nine months ended September 30, 2021
			Cash Dividends Declared and Paid
Declaration Date	Record Date	Paid Date	Per Share		Amount
May 19, 2021	June 2, 2021	June 16, 2021	$	$0.15	$	5,064
August 18, 2021	September 1, 2021	September 15, 2021	$	$0.15	$	5,063

The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our Board of Directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

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Cash Flows— Nine Months Ended September 30, ~~2022~~2023 Compared to the Nine Months Ended September 30, ~~2021~~2022

For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the comparison of cash flows is as follows:

Our primary sources of cash flows from operations are from the sale of single-family attached and detached homes and mortgages. Our primary uses of cash flows from operations are the acquisition of land and expenditures associated with the construction of our single-family attached and detached homes and the origination of mortgages held for sale. Net cash provided by operating activities was $33.0 million during the nine months ended September 30, 2023 as compared to net cash used in operating activities ~~was~~of $67.1 million during the nine months ended September 30, ~~2022 as compared to~~2022. The increase in net cash provided by ~~operating activities of $82.8 million during the same period in 2021. The increase in cash used in~~ operations is primarily a result of ~~increased investment in our homebuilding inventories for~~reduced expenditures related to land acquisition and expenditures associated with the construction of homes during the nine months ended September 30, ~~2022~~2023 as compared to the nine months ended September 30, ~~2021, partially~~2022. This reduction was offset by (1) a decrease in ~~originations~~net income of $277.7 million and (2) a reduction in our mortgage loans held for sale ~~and a $112.1~~of $36.3 million ~~increase in net income for nine months ended September 30, 2022 as compared to~~during the nine months ended September 30, ~~2021.~~2023, as compared to a reduction in mortgage loans held for sale of $142.3 million during the nine months ended September 30, 2022.

Net cash used in investing activities increased to $37.3 million during the nine months ended September 30, ~~2022,~~2023 as compared to ~~$4.3 million used during~~ the ~~same period in 2021.~~prior year period. The increase in net cash used in investing activities was primarily ~~related~~attributable to a $41.7 million increase in expenditures related to the development, construction, and management of multi-family rental properties by our wholly owned subsidiary, Century Living, ~~and a $8.6 million increase in purchases of property and equipment for~~LLC, during the nine months ended September 30, ~~2022~~2023 as compared to the ~~nine months ended September 30,2021.~~prior year period.

Net cash used in financing activities ~~was $108.5~~decreased $51.7 million during the nine months ended September 30, ~~2022,~~2023 as compared to ~~net cash provided by financing activities of $20.6 million during~~ the ~~same period~~prior year period. The decrease in ~~2021. The increase in~~net cash used in financing activities was primarily attributable to (1) a ~~$120.6~~$101.3 million ~~increase in repurchases of our common stock during the current year period, (2) a $89.4 million increase~~decrease in net payments on the ~~Repurchase Facilities during~~repurchase facilities in the ~~current year period, (3) $88.2 million in net proceeds from the issuance~~first nine months of ~~senior notes due 2029 in~~2023 as compared to the prior year period and (2) $120.6 million of repurchases of common stock during the first nine months of 2022, as compared to $19.2 million of repurchases of common stock during the first nine months of 2023, partially offset by $165.0 million in net borrowings on the ~~simultaneous extinguishment~~line of ~~our former senior notes due 2025~~ ~~and (4) a $9.6 million increase in dividend payments~~credit during the nine months ended September 30, 2022, as compared to no net borrowings during the nine months ended September 30, 2021. These increases were offset by $165.0 million net cash inflow from borrowings under our revolving line of credit for the nine months ended September 30, 2022 compared to no revolving line of credit borrowings outstanding for the nine months ended September 30, 2021.2023.

As of September 30, ~~2022,~~2023, our cash and cash equivalents and restricted cash balance was ~~$109.3~~$210.1 million, as compared to ~~$322.2~~$308.5 million as of December 31, ~~2021.~~2022.

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Non-GAAP Financial Measures

In this Form 10-Q, we use certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, net homebuilding debt to net capital, adjusted net income and adjusted ~~net~~diluted earnings per ~~diluted common shares.~~share. These non-GAAP financial measures are presented to provide investors additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information to investors because they are used to evaluate our performance on a comparable year-over-year basis. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented.

EBITDA and Adjusted EBITDA

The following table presents EBITDA and Adjusted EBITDA for the three and nine months ended September 30, ~~2022~~2023 and ~~2021. Adjusted~~2022. EBITDA ~~is a~~and adjusted EBITDA are non-GAAP financial ~~measure~~measures we use as a supplemental measure in evaluating operating performance. We define ~~Adjusted~~ EBITDA as ~~consolidated~~ net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense (income), and (iv) depreciation and amortization ~~expense, (v)~~expense. We define adjusted EBITDA as EBITDA before loss on debt extinguishment (if applicable), and ~~(vi)~~ inventory impairment ~~and other~~(if applicable). We believe ~~Adjusted~~ EBITDA ~~provides~~and adjusted EBITDA provide an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that ~~this measurement is~~these measurements are useful for comparing general operating performance from period to period. ~~Adjusted~~Neither EBITDA or adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our presentation of Adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. ~~Our Adjusted~~Each of our EBITDA and adjusted EBITDA is limited as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

(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		% Change			2022		2021		% Change			2023		2022		% Change			2023		2022		% Change
Net income	$	144,473	$	113,977		26.8	%	$	445,637	$	333,538		33.6	%	$	83,150	$	144,473		(42.4)	%	$	167,906	$	445,637		(62.3)	%
Income tax expense		27,601		31,784		(13.2)	%		128,861		95,406		35.1	%		28,849		27,601		4.5	%		56,850		128,861		(55.9)	%
Interest in cost of home sales revenues		13,726		14,636		(6.2)	%		39,345		51,419		(23.5)	%		10,652		13,726		(22.4)	%		30,729		39,345		(21.9)	%
Interest expense (income)		(2)		(148)		(98.6)	%		(14)		(431)		(96.8)	%		(1,489)		(2)		NM	%		(6,431)		(14)		NM	%
Depreciation and amortization expense		2,855		2,669		7.0	%		8,207		8,324		(1.4)	%		4,106		2,855		43.8	%		11,019		8,207		34.3	%
EBITDA		188,653		162,918		15.8	%		622,036		488,256		27.4	%		125,268		188,653		(33.6)	%		260,073		622,036		(58.2)	%
Loss on debt extinguishment		—		14,458		(100.0)	%		—		14,458		(100.0)	%
Inventory impairment and other		—		—		NM			—		41		(100.0)	%
Inventory impairment																—		—		NM	%		—		—		NM	%
Adjusted EBITDA	$	188,653	$	177,376		6.4	%	$	622,036	$	502,755		23.7	%	$	125,268	$	188,653		(33.6)	%	$	260,073	$	622,036		(58.2)	%

NM – Not Meaningful

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Net Homebuilding Debt to Net Capital

The following table presents our ratio of net homebuilding debt to net capital, which is a non-GAAP financial measure. We calculate this by dividing net homebuilding debt (homebuilding debt less cash and cash equivalents, and cash held in escrow) by net capital (net homebuilding debt plus total stockholders’ equity). Homebuilding debt is our total debt minus our outstanding borrowings under our ~~Construction Loan Agreements~~construction loan agreements and our ~~Repurchase Facilities.~~repurchase facilities. The most directly comparable GAAP measure is the ratio of debt to total capital. We believe the ratio of net homebuilding debt to net capital is a relevant and useful financial measure to investors in understanding the leverage employed in our operations and as an indicator of our ability to obtain external financing.

(dollars in thousands)


	September 30,		December 31,		September 30,		December 31,
	2022		2021		2023		2022
Notes payable	$	1,016,548	$	998,936	$	1,051,294	$	1,019,412
Revolving line of credit		165,000		—		—		—
Construction loan agreements		(2,985)		—		(28,842)		(7,389)
Total homebuilding debt		1,178,563		998,936		1,022,452		1,012,023
Total stockholders' equity		2,072,000		1,764,508		2,292,665		2,150,215
Total capital	$	3,250,563	$	2,763,444	$	3,315,117	$	3,162,238
Homebuilding debt to capital		36.3%		36.1%		30.8%		32.0%

Total homebuilding debt	$	1,178,563	$	998,936	$	1,022,452	$	1,012,023
Cash and cash equivalents		(98,203)		(316,310)		(193,111)		(296,724)
Cash held in escrow		(83,952)		(52,297)		(52,488)		(56,569)
Net homebuilding debt		996,408		630,329		776,853		658,730
Total stockholders' equity		2,072,000		1,764,508		2,292,665		2,150,215
Net capital	$	3,068,408	$	2,394,837	$	3,069,518	$	2,808,945

Net homebuilding debt to net capital		32.5%		26.3%		25.3%		23.5%

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Adjusted Net Income and Adjusted Diluted Earnings per Share

Adjusted ~~Net Income~~net income and ~~Adjusted~~adjusted ~~Diluted Earnings~~diluted earnings per ~~Share~~share (which we refer to as “Adjusted EPS”) are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of certain non-recurring items. We believe excluding certain non-recurring items provides more comparable assessment of our financial results from period to period. We define ~~Adjusted Net Income~~adjusted net income as consolidated net income before (i) income tax expense, (ii) inventory impairment, ~~and other~~if applicable (iii) restructuring costs, if applicable and (iv) loss on debt extinguishment, if applicable, less adjusted income tax expense, calculated using ~~the Company’s~~our estimated annual effective tax rate after discrete items for the applicable period. Adjusted ~~Diluted~~ EPS is calculated by dividing ~~Adjusted Net Income~~adjusted net income by weighted average common shares – diluted.

(in thousands, except share and per share ~~amounts)~~information)


	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
Numerator
Net income	$	144,473	$	113,977	$	445,637	$	333,538	$	83,150	$	144,473	$	167,906	$	445,637
Denominator
Weighted average common shares outstanding - basic		32,196,589		33,760,940		32,850,647		33,688,531		31,962,884		32,196,589		31,967,672		32,850,647
Dilutive effect of restricted stock units		373,746		710,104		391,117		731,632
Dilutive effect of stock-based compensation awards										274,138		373,746		233,005		391,117
Weighted average common shares outstanding - diluted		32,570,335		34,471,044		33,241,764		34,420,163		32,237,022		32,570,335		32,200,677		33,241,764
Earnings per share:
Basic	$	4.49	$	3.38	$	13.57	$	9.90	$	2.60	$	4.49	$	5.25	$	13.57
Diluted	$	4.44	$	3.31	$	13.41	$	9.69	$	2.58	$	4.44	$	5.21	$	13.41

Adjusted earnings per share
Numerator
Net income	$	144,473	$	113,977	$	445,637	$	333,538	$	83,150	$	144,473	$	167,906	$	445,637
Income tax expense		27,601		31,784		128,861		95,406		28,849		27,601		56,850		128,861
Income before income tax expense		172,074		145,761		574,498		428,944		111,999		172,074		224,756		574,498
Inventory impairment and other		—		—		—		41
Loss on debt extinguishment		—		14,458		—		14,458
Inventory impairment										—		—		—		—
Adjusted income before income tax expense		172,074		160,219		574,498		443,443		111,999		172,074		224,756		574,498
Adjusted income tax expense⁽¹⁾		(27,601)		(34,937)		(128,861)		(98,631)		(28,849)		(27,601)		(56,850)		(128,861)
Adjusted net income	$	144,473	$	125,282	$	445,637	$	344,812	$	83,150	$	144,473	$	167,906	$	445,637

Denominator - Diluted		32,570,335		34,471,044		33,241,764		34,420,163		32,237,022		32,570,335		32,200,677		33,241,764

Adjusted diluted earnings per share	$	4.44	$	3.63	$	13.41	$	10.02	$	2.58	$	4.44	$	5.21	$	13.41

⁽¹⁾The tax rates used in calculating adjusted net income for the three and nine months ended September 30, ~~2022~~2023 were ~~16.0%~~25.8% and ~~22.4%~~25.3%, respectively, and the tax rates used in calculating adjusted net income for the three and nine months ended September 30, ~~2021~~2022 were ~~21.8%~~16.0% and ~~22.2%~~22.4%, respectively, which are reflective of ~~the Company’s~~our GAAP tax rates for the applicable periods.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rates

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate ~~risks~~risk associated with our Second A&R Credit Agreement and construction loan agreements.

On December 21, 2022, we entered into a First Modification Agreement ~~and Construction Loan Agreements.~~with Texas Capital Bank (formerly known as Texas Capital Bank, National Association), as Administrative Agent, amending the Second A&R Credit Agreement. Per the First Modification Agreement, effective January 3, 2023, all existing borrowings using an interest rate based on a LIBOR reference rate had the interest rate replaced with one based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10%.

Borrowings under the ~~Second A&R Credit Agreement~~construction loan agreements bear interest at various rates, including a ~~floating~~fixed rate, ~~equal to the adjusted Eurodollar Rate plus an applicable margin between 2.05%~~ and 2.65% per annum, and if made available in the Administrative Agent’s discretion, a base rate plus an applicable margin between 1.05% and 1.65% per annum. The “applicable margins” described above are determined by a schedule based on the leverage ratio of the Company, as defined in the Second A&R Credit Agreement. The Second A&R Credit Agreement also provides for fronting fees and letter of credit fees payable to the L/C Issuer and commitment fees payable to the Administrative Agent equal to 0.20% of the unused portion of the senior unsecured revolving line of credit.

~~Borrowings under the Construction Loan Agreements bear interest at~~ floating interest ~~rate~~rates per annum equal to the ~~Secured Overnight Financing Rate~~SOFR and the Bloomberg Short-term Bank Yield Index, plus an applicable margin.

For fixed rate debt, such as our senior notes, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. As interest rates increase, the fair value of the debt instrument will decrease.

Our Financial Services business utilizes mortgage backed securities forward commitments, option contracts and investor commitments to protect the value of rate-locked commitments and loans held for sale from fluctuations in mortgage-related interest rates. To mitigate interest risk associated with loans held for sale, we typically use derivative financial instruments to hedge our exposure to risk from the time a borrower locks a loan until the time the loan is securitized. We also typically hedge our interest rate exposure through entering into interest rate swap futures.

Inflation

Our homebuilding operations have been and may continue to be adversely impacted by inflation, primarily from higher land, financing, labor, material ~~particularly lumber,~~, and construction costs. In addition, inflation has led and could continue to lead to higher mortgage rates, which has and could continue to significantly affect the affordability of mortgage financing to homebuyers and lead to weakened demand for our homes, as well as increased ~~cancellations. As inflation~~cancellations compared to prior year periods. Inflation remained elevated during the three and nine months ended September 30, ~~2022, interest rates on 30-year fixed mortgages have risen, coupled with~~2023 compared to the prior year periods, and the Federal Reserve ~~raising~~continued to raise the federal funds interest rate during the first ~~second, and third quarters~~nine months of ~~2022. While~~2023, which continued to impact interest rates on 30-year fixed mortgages. Due to higher mortgage rates, we were ~~generally~~no longer able ~~to pass on cost increases from inflationary impacts to customers through increased home prices during the three and nine months ended September 30, 2022, we may not be able to continue~~ to offset cost increases with higher home selling prices in the ~~future if weak housing market conditions exist.~~first nine months of 2023.

Seasonality

Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity during the spring, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it historically has taken four to eight months to construct a new home, we typically deliver more homes in the second half of the year as spring and summer home orders convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of our cash receipts from home deliveries occurs during the second half of the year. We expect this seasonal pattern, especially with respect to sales, to return this year after being obscured by the COVID-driven sales boom that began in 2020 and continued until the interest rate led softening in the second half of 2022, and to continue over the long term, although it may be affected by volatility in the homebuilding industry, supply chain challenges, and changes in demand for our homes.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our co-principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”)) as of September 30, ~~2022,~~2023, the end of the period covered by this Form 10-Q. Based on this evaluation, our co-principal executive officers and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2022~~2023 in providing reasonable assurance that information required to be disclosed by us in the reports that 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.

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Changes in Internal Control over Financial Reporting

There were no changes during the third quarter of ~~2022~~2023 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Because of the nature of the homebuilding business, we and certain of our subsidiaries and affiliates have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business. In the opinion of our management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 that was filed with the SEC on February ~~3, 2022,~~2, 2023, other than the ~~impact~~revised risk factor below:

Global economic and political instability and conflicts could adversely affect our business, financial condition or results of operations.

The global economic slowdown, inflation, ~~and increased~~rising interest rates ~~on housing demand,~~and the prospects for recession, as well as recent and potential future disruptions in access to bank deposits or lending commitments due to bank failure, could materially and adversely affect our liquidity, our business, financial condition and results of operations. The closures of certain regional banks during the first half of 2023 and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at these banks would have access to their funds, even those in excess of the standard FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. The failure of any bank with which we do business could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has ~~moderated considerably over~~failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions enter receivership or become insolvent in the ~~past few months,~~future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and could have a material adverse effect on our ~~cancellation rates, which~~business and financial condition.

Additionally, our business could be adversely affected by unstable economic and political conditions as well as geopolitical conflicts. While we do not have ~~increased over the past few months,~~any customer or direct supplier relationships in foreign countries experiencing war, current military conflicts, and related sanctions, as well as export controls or actions that may be initiated by nations (e.g., potential cyber attacks, disruption of energy flows, etc.) and other ~~trends that have materialized this year, as discussed~~potential uncertainties could adversely affect our supply chain by causing shortages or increases in ~~“Part I. Item 2. Management’s Discussion~~costs for materials necessary to construct homes and/or increases to the price of gasoline and ~~Analysis~~other fuels. In addition, such events could cause higher interest rates, inflation or general economic uncertainty, which could negatively impact our business partners, employees or customers, or otherwise adversely impact our business.

Table of ~~Financial Condition and Results of Operations” above.~~Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table summarizes the number of shares of our common stock that were purchased by ~~the Company~~us during each of the three fiscal months in our third quarter ended September 30, ~~2022.~~2023.


	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs		Total number of shares purchased ⁽¹⁾	Average price paid per share ⁽²⁾		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July
Purchased 7/1 through 7/31	—	$	—	—		2,008,994
July 1, 2023 through July 31, 2023							—	$	—	—		1,477,817
August
Purchased 8/1 through 8/31	—		—	—		2,008,994
August 1, 2023 through August 31, 2023							104,479		69.51	104,479		1,373,338
September
Purchased 9/1 through 9/30	500,825		44.58	500,825		1,508,169
September 1, 2023 through September 30, 2023							143,328		69.69	143,328		1,230,010
Total	500,825	$	44.58				247,807	$	69.61

(1)On November 6, 2018, ~~the Company's~~our Board of Directors authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock. Under the terms of the program, the shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. This program has no expiration date but may be terminated by the Board of Directors at any time. ~~The Company~~We repurchased ~~500,825~~247,807 shares during the period indicated above under this program and ~~1,508,169~~1,230,010 shares remained available to repurchase under this program as of September 30, 2023.

(2)The Inflation Reduction Act of 2022, 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. All dollar amounts presented exclude such excise taxes, as applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

~~Not applicable.~~

During the three months ended September 30, 2023, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of SEC Regulation S-K.

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ITEM 6. EXHIBITS.

The following exhibits are either filed or furnished herewith or incorporated herein by reference:

Item No.		Description
3.1		Restated Certificate of Incorporation of Century Communities, Inc., as amended (incorporated by reference to Exhibit 3.1 to the initial filing of Century Communities, Inc.’s Registration Statement on Form S-1, filed with the SEC on May 5, 2014 (File No. 333-195678)) (filed herewith)
3.2		Amended and Restated Bylaws of Century Communities, Inc., effective November 9, 2022 (incorporated by reference to Exhibit ~~3.2~~3.1 to Century Communities, Inc.’s ~~Quarterly~~Current Report on Form ~~10-Q for~~8-K filed with the ~~quarterly period ended June 30, 2021~~SEC on November 10, 2022 (File No. 001-36491)).
22.1		List of Guarantor Subsidiaries (filed herewith)
31.1		Certification of the Co-Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
31.2		Certification of the Co-Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
31.3		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith)
32.1		Certification of the Co-Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2		Certification of the Co-Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.3		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS		Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document (filed herewith)
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
101.DEF		Inline XBRL Taxonomy Definition Linkbase Document (filed herewith)
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document (filed herewith)
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
104		Cover Page Interactive Data File (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.

	Century Communities, Inc.



Date: October ~~26, 2022~~25, 2023	By:	/s/ Dale Francescon
		Dale Francescon
		Chairman of the Board and Co-Chief Executive Officer
		(Co-Principal Executive Officer)

Date: October ~~26, 2022~~25, 2023	By:	/s/ Robert J. Francescon
		Robert J. Francescon
		Co-Chief Executive Officer and President
		(Co-Principal Executive Officer)


Date: October ~~26, 2022~~25, 2023	By:	/s/ David Messenger
		David Messenger
		Chief Financial Officer
		(Principal Financial Officer)


Date: October ~~26, 2022~~25, 2023	By:	/s/ J. Scott Dixon
		J. Scott Dixon
		Assistant Chief Financial Officer
		(Principal Accounting Officer)

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(dollars in thousands)
	Three Months Ended September 30,						Increase
	2022			2021			Amount		%
Selling, general and administrative	$	110,687		$	90,154		$	20,533	22.8	%
As a percentage of home sales revenue		9.9	%		9.8	%

	Nine Months Ended September 30,						Increase
	2022			2021			Amount		%
Selling, general and administrative	$	321,484		$	281,961		$	39,523	14.0	%
As a percentage of home sales revenue		9.9	%		9.8	%

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company