Meritage Homes builds houses mainly for first-time buyers and buyers moving to their next home. In the third quarter of 2026, fewer deliveries and more costly help with buyers’ financing reduced net profit by 32%. Slower land spending helped operating cash flow recover to $259.5 million in the first nine months. That gives Meritage more flexibility, although dividends and share repurchases still exceeded the cash left after investment.
Research cutoff: November 2, 2026, New York time. The analysis covers the quarter and nine months ended September 30, 2026; company disclosures verified for this report extend through October 30.
Source: Meritage Homes third-quarter 2026 Form 10-Q, consolidated statements, pp. 3–5, and management discussion, pp. 28–40.
1. More communities could not make up for fewer buyers at each location
Meritage’s larger selling footprint is producing fewer orders. The company had more communities open for business, but buyers signed contracts more slowly at each one. Management says it deliberately accepted a slower sales pace to protect the profit earned on each home, rather than offering enough additional discounts to pursue more sales.
That choice responds to a real affordability problem. Meritage helps buyers by paying to reduce their mortgage interest rate or by providing other incentives. Those payments can make a home affordable, but they also reduce the money Meritage keeps from the transaction.
| Sales measure | Third quarter 2025 | Third quarter 2026 |
|---|---|---|
| Average actively selling communities | 323.0 | 344.0 |
| Net orders per community per month, company-rounded | 3.8 | 3.0 |
| New orders, after cancellations | 3,636 homes | 3,083 homes |
| Cancellations as a share of gross orders | 11% | 13% |
The 6.5% increase in average communities could not offset the slower pace. Orders fell 15.2%. A larger share of signed orders was also canceled. The decline was broad: quarterly orders fell in the West, Central and East regions.
Source: 2026 Form 10-Q, “Home Orders,” “Active Communities and Cancellation Rates,” and “Operating Results,” pp. 32–35. Orders exclude cancellations; the cancellation percentage uses gross orders as its denominator.
The mortgage backdrop supports management’s explanation. Freddie Mac reported a national average 30-year fixed mortgage rate of 7.24% on October 29, compared with 6.17% a year earlier. The latest weekly rate had eased from 7.32%, but borrowing remained substantially more expensive than a year before. These are national conventional-loan averages, not the subsidized rates Meritage may offer individual customers.
Source: Freddie Mac Primary Mortgage Market Survey, October 29, 2026 release and survey methodology.
A large competitor is responding differently. Lennar said it was maintaining production to reduce construction costs. For its quarter ended August 31, 2026, incentives averaged about 12% of the sales price, while deliveries fell 3% and home-sales gross margin declined to 15.8% from 17.5%. Its construction cost per square foot fell 6% from a year earlier. This shows the tradeoff facing Meritage: competitors can use discounts to keep crews busy and lower costs, which makes it harder to protect selling prices. Lennar’s different quarter, product mix and land arrangements prevent a direct ranking of the two companies’ margins.
Source: Lennar third-quarter 2026 results, September 16, 2026, management comments and “Homebuilding.”
2. The profit decline extends beyond land write-downs
Meritage kept less profit from each dollar of home sales, even after removing specified land charges. Buyers received more financing assistance, lots cost more, and fewer deliveries left less revenue to cover costs that do not fall immediately with sales. Savings on construction and performance-based compensation softened those pressures but did not overcome them.
Home deliveries fell 13.5% to 3,187 in the quarter. Average revenue per delivered home fell about 4.0%, to approximately $365,000. Together, those changes reduced home-closing revenue by 16.9%. The average-price decline includes both incentives and changes in the locations and types of homes delivered; it does not measure a uniform price cut on identical houses.
| Consolidated result; US$ millions except margins and EPS | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Home-closing revenue | 1,399.335 | 1,162.352 | 4,357.148 | 3,658.085 |
| Home-closing gross profit | 266.957 | 202.606 | 903.935 | 650.017 |
| Home-closing gross margin, reported | 19.1% | 17.4% | 20.7% | 17.8% |
| Profit before income taxes | 128.248 | 84.815 | 481.467 | 277.903 |
| Net profit | 99.297 | 67.784 | 368.982 | 213.723 |
| Net profit as a share of total revenue, calculated | 7.0% | 5.8% | 8.3% | 5.8% |
| Diluted earnings per share, US$ | 1.39 | 1.04 | 5.13 | 3.22 |
Source: 2026 Form 10-Q, consolidated income statements, p. 4; home-closing analysis, pp. 31 and 36–38. Home-closing gross profit is the money remaining after land and home-delivery costs, before selling and general overhead. The calculated net margin includes home, land and financial-services revenue; the calculation notes give the inputs.
The deterioration has lasted longer than one quarter. In the third quarter of 2024, Meritage earned a 24.8% home-closing gross margin and $196.0 million of net profit. Both were substantially above the corresponding 2025 and 2026 results. Comparing the same quarter across years reduces seasonal distortions and shows that the recent decline follows an earlier weakening.
Source: Meritage Homes third-quarter 2025 Form 10-Q, consolidated income statements, p. 4, and home-closing gross-profit discussion, p. 39; 2024 comparative amounts.
The Central region, which includes Texas and Tennessee, illustrates the pressure most clearly. It accepted discounted sales to institutional buyers acquiring homes for rent in selected markets. Management’s stated purpose was to release capital quickly where it saw little prospect of near-term improvement. That helped turn houses into cash but contributed to a 6.7% decline in the region’s average closing price.
| Homebuilding region; US$ millions except margins | Gross margin, third quarter 2025 | Gross margin, third quarter 2026 | Segment operating profit, third quarter 2025 | Segment operating profit, third quarter 2026 |
|---|---|---|---|---|
| West | 19.6% | 18.0% | 42.746 | 29.990 |
| Central | 21.4% | 17.7% | 48.203 | 26.840 |
| East | 16.7% | 16.8% | 34.774 | 25.701 |
Source: 2026 Form 10-Q, Note 14, pp. 22–23, and Central region discussion, pp. 34–37. Segment operating profit includes regional selling and administrative costs; corporate costs are reconciled separately in the calculation notes.
The East’s slightly higher reported margin needs careful interpretation. It incurred much smaller land-related charges than a year earlier. After removing the specified impairments and terminated-contract amounts from both periods, its margin fell from 18.6% to 16.9%. Across the company, that same adjustment produces a decline from 20.1% to 17.9%. Lower charges therefore made the reported decline look smaller; the pressure on ordinary home sales remained. The complete pretax adjustment is in the calculation notes.
Meritage also reduced quarterly selling and general expenses by $23.9 million, to $127.6 million. Lower commissions, discretionary spending and performance-based compensation helped, while technology spending increased. Because revenue fell faster, these expenses still consumed 11.0% of home-closing revenue, versus 10.8% a year earlier. Financial-services profit rose modestly to $4.8 million from $4.5 million, helped by fewer charges on expired mortgage-rate commitments, but this business was too small to replace the lost homebuilding profit.
Source: 2026 Form 10-Q, adjusted gross-profit tables and expense explanations, pp. 36–38.
Taxes and share repurchases partly softened the decline in earnings per share. Purchased clean-fuel production tax credits reduced the quarterly effective tax rate to 20.1%, from 22.6%. Diluted average shares fell 8.5%, so the remaining profit was divided among fewer shares: net profit fell 31.7%, while reported diluted EPS fell 25.2%. Neither effect represents stronger home-selling profitability. The filing identifies the tax-credit benefit but does not disclose its separate dollar amount.
Source: 2026 Form 10-Q, Notes 8, 10 and 12, pp. 17–20.
3. Fast delivery helps sales, but unsold homes increased during the quarter
Meritage’s ready-to-move-in strategy shortens the wait for buyers while leaving it responsible for unsold houses. It starts every home before offering it for sale, uses preselected designs and features, and works with outside real estate agents. Management intends this approach to attract buyers who would otherwise choose an existing home and to make construction simpler and more repeatable.
The operating benefits are visible. Construction takes fewer than 110 calendar days, compared with management’s historical normal of about 120 days. Its 60-day closing-ready commitment concerns the period after a sale, not the entire construction process. Faster building and closing reduce the time money remains tied up in a house and reduce the cost of carrying it.
Source: 2026 Form 10-Q, “Overview and Outlook” and “Company Positioning,” pp. 28–29; 2025 Form 10-K, Item 1, “Business,” description of the speculative-building and later-sale strategy.
More than 55% of third-quarter deliveries came from orders signed during the same quarter. That explains why Meritage can deliver more houses than it had under contract at the quarter’s start. Its reported 186% backlog-conversion measure divides all deliveries by the homes under contract at the quarter’s start. New orders that also close during the quarter allow that ratio to exceed 100%.
There is also a warning in the inventory counts. Unsold homes, including those still being built, increased from 5,075 in June to 5,454 in September. That remained below 6,355 a year earlier. Management put the supply at five months, within its four-to-six-month target, and cut starts from 3,929 in the second quarter to 3,442 in the third.
Source: Meritage Homes third-quarter 2026 analyst presentation, October 29, 2026, slides 4 and 6.
These figures support a balanced assessment. Meritage has reduced unsold inventory from last year, but slower selling is allowing it to accumulate again. If buyers continue to hesitate, the company must slow new construction further, accept more discounts, or hold homes longer. Each choice affects a different part of the business: future delivery capacity, profit per home, or the cash tied up in inventory.
4. Cash recovered because less money was tied up in land and homes
The cash-flow recovery came mainly from inventory spending, while profit moved in the opposite direction. In the first nine months of 2025, Meritage committed substantial cash to real estate that had not yet turned into delivered homes. In 2026, that drain reversed. Land acquisition and development spending in the first nine months fell to about $1.01 billion from $1.50 billion, net of development reimbursements. Management says it is scaling investment to current selling conditions.
Source: 2026 Form 10-Q, cash-flow statement, p. 5, and management discussion, pp. 29 and 40; 2025 third-quarter Form 10-Q, p. 32. Nine-month land spending adds acquisitions of $410.9 million and development of $601.4 million in 2026, versus $719.6 million and $782.6 million in 2025.
| From profit to operating cash; US$ millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Net profit | 368.982 | 213.723 |
| Noncash charges and other reconciliation items, net | 62.126 | 56.771 |
| Cash released from / used in real estate | -413.224 | 58.676 |
| Other changes in operating assets and liabilities, net | -143.269 | -69.647 |
| Operating cash flow | -125.385 | 259.523 |
Source: 2026 Form 10-Q, consolidated cash-flow statement, p. 5. The grouped rows sum to reported operating cash flow; their components appear in the calculation notes.
The change in real-estate cash use contributed $471.9 million to the improvement, more than offsetting the $155.3 million decline in profit. Other operating assets and liabilities also used less cash. This was a useful release of funding, but it came partly from moderating investment rather than earning more on sales.
Some cash remained tied up elsewhere. Receivables, prepayments and other assets absorbed $42.8 million during the first nine months. Payments and changes in unpaid supplier bills and other operating obligations used another $23.9 million. The receivables category includes development-related amounts as well as other items; the filing does not separate the causes of its cash movement.
For a homebuilder, buying land and constructing houses are operating cash outflows because the resulting assets are inventory for sale. They are not included in the investing statement’s $13.9 million purchase of property and equipment. Operating cash flow less that equipment spending was $245.6 million, a calculated free-cash-flow measure. After all investing activities, including joint-venture funding, the remaining cash was lower, at $224.9 million.
Source: 2026 Form 10-Q, pp. 5–6, Note 14 asset descriptions, p. 25, and liquidity discussion, pp. 38–40. Free cash flow here means operating cash flow minus gross purchases of property and equipment; it is not a company-reported GAAP measure or a maintenance-spending estimate.
5. Shareholder payments used more cash than operations and investment left available
Meritage rebuilt operating cash flow but still drew down its cash balance. Management describes its capital policy as balancing investment in the business with dividends and repurchases. The immediate effect of repurchases is fewer outstanding shares; the cost is cash that can no longer fund construction or repay debt.
Cash dividends and repurchases totaled $379.2 million in the first nine months, compared with $224.9 million remaining after operating and investing activities. That $154.3 million gap was partly covered by financing associated with land arrangements. Cash on hand supplied the rest, together with the amount needed to repay other borrowings. Repurchase payments nearly doubled from a year earlier, even as earnings fell. In the prior-year period, a new bond issue had supplied $492.1 million after issue costs, covering the operating cash deficit and other uses.
| Cash movement; US$ millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Opening cash and cash equivalents | 651.555 | 775.157 |
| Operating cash flow | -125.385 | 259.523 |
| Investing cash outflow | -41.041 | -34.603 |
| New senior-note proceeds after debt issuance costs | 492.089 | 0.000 |
| Financing received through liabilities for consolidated land not owned | 0.000 | 59.947 |
| Repayment of loans and other borrowings | -11.522 | -3.302 |
| Cash dividends paid | -91.759 | -94.224 |
| Cash share repurchases | -145.000 | -285.000 |
| Closing cash and cash equivalents | 728.937 | 677.498 |
Source: 2026 Form 10-Q, consolidated cash-flow statement, p. 5. The statement presents cash and cash equivalents without a separate restricted-cash reconciliation. Closing cash includes approximately $35.0 million in transit from title companies or closing agents, versus $20.1 million at year-end 2025, under Note 1.
Outstanding shares fell from 68.169 million at year-end to 64.423 million. The equity statement records approximately 4.101 million shares repurchased and 0.355 million issued during the period. Repurchases reduced issued and outstanding shares; the balance sheet reports no treasury-share balance. Stock-based compensation of $16.8 million remains a cost of employing and retaining staff, even though it is added back when reconciling profit to operating cash.
Total shareholder equity fell by $151.3 million despite positive earnings. Profit and stock compensation added equity, but dividends and the accounting cost of repurchases removed more. Most of the repurchase cost was deducted from retained earnings—the company’s accumulated profits. The calculation notes reconcile the equity accounts and explain why the recorded repurchase cost differs from the cash payment.
The company still has substantial available credit. Continued shareholder payments at this level would use more of that flexibility unless cash generation improves, investment falls further, or new financing replaces the cash spent.
Source: 2026 Form 10-Q, balance sheet, p. 3; Notes 10–11, pp. 18–20; repurchase authorization and activity, p. 43.
6. The balance sheet has room to respond, with large debt payments approaching
Available cash and credit provide flexibility, but land commitments and the 2027–2029 debt maturities still require planning. Meritage had no revolving-credit borrowings at September 30. After outstanding letters of credit, $896.7 million remained available under the facility, alongside $677.5 million of cash. The resulting $1.57 billion of combined capacity includes money that would become debt if drawn.
The revolving facility—a bank credit line Meritage can borrow from and repay—was enlarged to $980 million and extended to June 2031. Access depends on bank rules tied to eligible assets and financial condition. Meritage reported compliance with its bank and bond borrowing rules, called covenants.
The bank requires a minimum amount of net assets after specified deductions, including goodwill. Meritage had $4.995 billion under that calculation, comfortably above the $3.610 billion minimum. Its bank-defined leverage ratio was 17.1%, against a 60% ceiling. This contractual measure differs from the reported 26.9% debt-to-capital ratio, which measures financing debt as a share of debt plus shareholder equity.
Source: 2026 Form 10-Q, Notes 5–6, pp. 14–15, and covenant calculations, p. 41.
The assets supporting this financial position are overwhelmingly land and houses. Their accounting composition matters because the headline inventory balance barely changed.
| Selected consolidated balances; US$ millions | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Homes completed or under construction, including allocated land | 2,069.548 | 2,045.060 |
| Finished sites and sites under development | 3,917.572 | 3,842.767 |
| Consolidated real estate not legally owned | 0.000 | 126.684 |
| Total real-estate inventory | 5,987.120 | 6,014.511 |
| Other receivables | 306.956 | 345.535 |
| Accounts payable plus accrued and other liabilities | 588.377 | 685.907 |
| Financing debt, net carrying amount | 1,829.054 | 1,851.752 |
| Total assets | 7,622.287 | 7,589.644 |
| Total liabilities | 2,426.644 | 2,545.286 |
| Shareholder equity | 5,195.643 | 5,044.358 |
Source: 2026 Form 10-Q, balance sheet, p. 3, and Notes 1–3, pp. 9–13. Financing debt includes notes and loans; it excludes operating payables, lease obligations and the separate liabilities for consolidated land not owned.
Excluding the newly recorded land not legally owned, real-estate inventory fell $99.3 million. The new $126.7 million asset reflects contracts that require Meritage to complete purchases even though legal title has not transferred. The related liability was $115.2 million. This explains why accrued liabilities rose sharply without an equivalent rise in ordinary unpaid construction bills. Excluding that land liability, accounts payable and accrued liabilities together fell $17.7 million.
The cash-flow inventory movement differs from the balance-sheet movement because some additions did not use cash. The filing separately identifies land obtained through notes payable, real-estate distributions from joint ventures and noncash recognition of land not owned. Those transactions should not be counted as cash purchases merely because inventory increased.
Other receivables rose $38.6 million. Regional disclosures identify development reimbursements from local municipalities among the relevant assets, but do not fully explain the increase. The cash consequence is that more recorded assets await collection.
Buildings, equipment and goodwill are much smaller exposures than inventory. Net property and equipment declined to $45.1 million from $46.6 million. Goodwill—the acquisition price paid above the acquired net assets’ recorded fair value—stayed at $33.0 million. Assets representing future tax benefits declined to $44.4 million from $53.3 million; management still expected to use them and recorded no allowance to reduce their recoverable value.
Source: 2026 Form 10-Q, Notes 1–3, 9 and 12–14, including noncash transactions on p. 21 and regional asset descriptions on p. 25.
The note maturities are spread over several years, but $875 million falls due in 2027 and 2028, followed by $450 million in 2029.
| Notes outstanding at September 30, 2026 | Principal, US$ millions | Annual contractual interest rate | Annual cash interest at current principal, US$ millions |
|---|---|---|---|
| Senior notes due 2027 | 300.000 | 5.125% | 15.3750 |
| Convertible senior notes due 2028 | 575.000 | 1.750% | 10.0625 |
| Senior notes due 2029 | 450.000 | 3.875% | 17.4375 |
| Senior notes due 2035 | 500.000 | 5.650% | 28.2500 |
| Total | 1,825.000 | — | 71.1250 |
Source: 2026 Form 10-Q, Notes 6–7, pp. 15–16; 2025 Form 10-K, Note 7, scheduled principal maturities. Annual cash interest is calculated as principal multiplied by the contractual rate. It excludes fees and interest on other loans and assumes no early repayment or conversion.
The convertible notes require cash settlement of principal even if converted; only value above principal may be settled in shares at the company’s election. Conversion conditions were not met in the first nine months. This means the conversion feature does not remove the need to plan for the $575 million principal payment.
Interest also costs more than the income statement’s separate interest-expense line suggests. Meritage incurred $60.3 million in the first nine months. It added most of that cost to active land and homes, where it will become an expense as properties close. The balance of interest still included in inventory rose from $77.1 million to $92.2 million. This accounting matches interest to future deliveries; it does not eliminate the financing cost.
Office and equipment leases add a further $57.7 million liability. The latest full maturity schedule, dated December 31, 2025, showed $68.6 million of undiscounted future lease payments, including $10.5 million in 2026 and $10.5 million in 2027. Those are the earlier schedule’s full-year amounts, not remaining payments as of September 2026. Compared with inventory funding and note maturities, leases are a smaller call on cash.
Sources: 2026 Form 10-Q, Notes 1–2, 6 and 8, pp. 8–11 and 15–17; 2025 Form 10-K, Note 4, pp. 60–61, and Note 7.
7. Land flexibility has limits, and earlier homes still carry repair obligations
The main balance-sheet risk is how much cash land and houses can recover if demand stays weak. Land held for future development, sale or in paused communities increased to $267.3 million from $164.4 million. The filing does not split that increase among the three categories, so it cannot all be described as abandoned or mothballed projects. Nevertheless, more capital is sitting outside active development, and Meritage expenses the ongoing ownership costs of these inactive assets.
The company recorded $12.6 million of real-estate inventory impairments in the first nine months, compared with $8.7 million a year earlier. An impairment reduces an asset’s recorded value when expected recovery no longer supports its cost. These charges rely on estimates of future selling prices, construction costs and the pace of sales. Continued discounting or slower sales can change those estimates.
Meritage’s options provide some protection. It had $170.8 million of deposits against $2.829 billion of potential purchases covering 36,644 lots. Except for specific-performance contracts, the agreements generally permit it to walk away, losing nonrefundable deposits and related costs. The full potential purchase price therefore is not the same as unavoidable debt. However, keeping an option can require purchases on a preset timetable, which may force a choice between buying faster than current sales justify and giving up the deposit.
Source: 2026 Form 10-Q, real-estate valuation policy, pp. 6–8, and Notes 2–3, pp. 11–13. The impairment comparison is for homebuilding inventory; 2025 also included $0.6 million of separate land-held-for-sale impairments.
There are additional obligations to finish development work. Outstanding surety bonds totaled $993.3 million, with $611.4 million of estimated work remaining. These bonds assure completion and would require reimbursement if drawn; their face value is not an immediate cash payment or an additional estimate of construction spending. The $83.3 million of letters of credit already reduces available revolving credit.
Repair claims on homes sold in earlier years also deserve attention. Warranty reserves fell from $26.7 million to $23.3 million because repair claims charged against the reserve, after recoveries from others, exceeded the amounts added for newly delivered homes. There was no adjustment releasing pre-existing reserves.
Some reserves cover alleged stucco defects in homes delivered mainly between 2019 and 2022. Management considers the reserve adequate after expected insurance and contractor recoveries, but it does not disclose a separate reserve or reasonably possible loss range for those cases. Adequacy therefore remains an estimate, with insurance recovery and actual repair costs affecting the eventual cash burden.
Source: 2026 Form 10-Q, Note 1, sureties and warranty reserve roll-forward, pp. 9–10; Note 15, “Commitments and Contingencies,” p. 26. The reserve reconciles as $26.677 million opening balance + $10.892 million provisions − $14.286 million claims net of recoveries = $23.283 million closing balance.
8. Cash discipline buys time; a recovery still requires healthier home sales
Meritage has financial room to adjust, but its operating recovery is not yet established. It remains profitable, has reduced land spending, and has an undrawn credit facility. Its simpler construction process and shorter delivery times give management practical ways to control costs and keep buyers moving toward a closing.
The harder problem is that each community is attracting fewer orders while financing assistance and land costs take more of the selling price. The recent increase in unsold homes shows why cutting land purchases alone cannot solve that problem. Meritage must also match construction starts to sales and decide where a faster sale justifies accepting less profit.
The business assessment would improve if orders per community stabilized without larger incentives and unsold homes stopped accumulating. Until then, retaining enough cash for the approaching debt payments matters more to operating flexibility than the recovery in cash flow alone suggests. Repurchases remain a discretionary use of that flexibility, and their size will help determine how much room the company preserves for a prolonged housing slowdown.
Source: 2026 Form 10-Q, management discussion and liquidity analysis, pp. 28–41; October 29, 2026 analyst presentation, slides 4, 6 and 9. Conditions for improvement are analytical judgments, not company forecasts.
Reporting basis:
This report uses Meritage Homes Corporation and subsidiaries’ unaudited consolidated US GAAP Form 10-Q for the quarter ended September 30, 2026, filed October 30, 2026: CIK 0000833079, accession 0000833079-26-000135, SEC file number 001-09977. Quarterly comparisons cover July–September; nine-month comparisons cover January–September. Balance-sheet comparisons use September 30, 2026 and December 31, 2025. These are consolidated accounts, including controlled entities, with intercompany transactions eliminated.
The supplied filing text is the foundation. Filing identity and dates were checked against SEC submission records. Applicable assets, liabilities, equity, cash, net-income, EPS and cash-flow facts were cross-checked in SEC company XBRL facts, selecting the accession above and the actual start and end dates. Dollar facts were converted from US dollars to millions; share and per-share facts retained their own units. Operating measures and regional results were checked against the filing tables, rather than inferred from unmatched XBRL contexts.
The historical comparison uses the 2025 third-quarter filing’s 2024 comparative data. Share data reflect the January 2, 2025 two-for-one split. Financial-services results include Meritage’s share of unconsolidated mortgage-joint-venture earnings, not all of those ventures’ revenue or profit. External evidence is dated locally in the source notes; the research cutoff does not imply that every development through that date was independently verified.
Calculation notes:
Removing specified land charges does not reverse the margin decline. The following is the company’s non-GAAP home-closing gross-profit reconciliation. All amounts are pretax and in US$ millions; this is not an adjusted-net-income calculation. The adjustment leaves the cost of buyer incentives and normal land and construction costs in place.
| Home-closing reconciliation | Third quarter 2025 | Third quarter 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Reported gross profit | 266.957 | 202.606 | 903.935 | 650.017 |
| Add inventory impairments | 8.693 | 6.639 | 8.693 | 12.648 |
| Add terminated-contract charges / remove net recoveries | 5.799 | -0.643 | 11.437 | 1.006 |
| Adjusted gross profit | 281.449 | 208.602 | 924.065 | 663.671 |
| Reported gross margin | 19.1% | 17.4% | 20.7% | 17.8% |
| Adjusted gross margin | 20.1% | 17.9% | 21.2% | 18.1% |
Source: 2026 Form 10-Q, p. 36. The negative quarterly adjustment removes a net recovery of deposits previously written off; it is not a new expense. Each margin divides its profit measure by home-closing revenue in Section 2. Company-reported margin changes use the displayed, rounded percentages.
The following checks use US$ millions throughout. They explain how the totals connect without treating accounting entries as cash payments.
Total revenue includes home closings, land closings and financial-services revenue. It was $1,175.930 million and $1,423.863 million in the third quarters of 2026 and 2025, and $3,707.813 million and $4,421.881 million in the corresponding nine-month periods. Dividing reported net profit by these amounts gives the net margins in Section 2. Growth calculations divide the current amount by the comparable prior-period amount, subtract one and multiply by 100.
Regional profits are not the final company profit because headquarters costs, interest and other income remain to be included:
| From regional profit to company profit; US$ millions | Third quarter 2025 | Third quarter 2026 |
|---|---|---|
| Homebuilding segment operating profit | 125.723 | 82.531 |
| Financial-services profit | 4.480 | 4.759 |
| Corporate costs not charged to the regions | -10.083 | -7.412 |
| Separately expensed interest | 0.000 | -1.352 |
| Other income | 8.128 | 6.289 |
| Consolidated profit before income tax | 128.248 | 84.815 |
Source: 2026 Form 10-Q, income statements, p. 4, and Note 14, pp. 22–23.
The cash statement adds back expenses that reduced profit without using operating cash in the period. It also adjusts for money awaiting collection, advance payments and unpaid bills. This table provides the components of the two grouped rows in Section 4; the inventory movement is shown separately there.
| Components of the operating-cash reconciliation; US$ millions | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Depreciation and amortization: earlier asset costs charged to profit | 18.603 | 16.973 |
| Real-estate impairments and terminated-deal write-offs | 20.729 | 13.654 |
| Stock-award compensation expense | 14.780 | 16.788 |
| Joint-venture cash earnings distributions minus earnings already recorded | 0.599 | 0.384 |
| Other adjustments | 7.415 | 8.972 |
| Noncash and other reconciliation subtotal | 62.126 | 56.771 |
| Increase in land-option deposits | -9.010 | -1.431 |
| Increase in receivables, prepayments and other assets | -77.840 | -42.770 |
| Decrease in supplier payables and other accrued liabilities | -45.326 | -23.860 |
| Decrease in home-sale deposits | -11.093 | -1.586 |
| Other operating-asset and liability subtotal | -143.269 | -69.647 |
Source: 2026 Form 10-Q, cash-flow statement, p. 5. The joint-venture row is $3.732 million cash distributions minus $3.133 million earnings in 2025, and $3.325 million minus $2.941 million in 2026.
To check cash available after investment, subtract $13.917 million of gross equipment purchases from $259.523 million operating cash. The result is $245.606 million of calculated free cash flow. Subtracting all $34.603 million of net investing outflow instead leaves $224.920 million. Shareholder cash payments of $379.224 million exceed that amount by $154.304 million.
Shareholder equity represents the recorded assets left after liabilities. Its decline follows from the transactions below:
| Equity reconciliation; US$ millions | First nine months 2026 |
|---|---|
| Opening shareholder equity | 5,195.643 |
| Net profit | 213.723 |
| Stock-compensation accounting credit | 16.788 |
| Dividends declared | -94.224 |
| Recorded cost of shares repurchased | -287.572 |
| Closing shareholder equity | 5,044.358 |
The repurchase accounting entry exceeds cash repurchases by $2.572 million. The filing identifies applicable repurchase excise taxes as part of the shares’ accounting cost. Repurchases reduced accumulated profits, or retained earnings, by $270.746 million. Thus retained earnings reconcile as $5,194.961 million opening balance + $213.723 million profit − $94.224 million dividends − $270.746 million repurchases = $5,043.714 million.
The remaining repurchase cost reduced additional paid-in capital by $16.785 million and common-stock par value by $0.041 million. Stock compensation added $16.788 million to paid-in capital, while stock issuance transferred $0.003 million from that account to common-stock par value. Paid-in capital therefore remained zero, and common-stock par value fell from $0.682 million to $0.644 million. These are the accounting entries for capital supplied through shares. No separate treasury-share or accumulated-other-comprehensive-income balance is reported.
Source: 2026 Form 10-Q, balance sheet and cash-flow statement, pp. 3 and 5, and Note 10, pp. 18–19.
The balance sheet balances in both periods: September assets of $7,589.644 million equal $2,545.286 million liabilities plus $5,044.358 million equity. December assets of $7,622.287 million equal $2,426.644 million liabilities plus $5,195.643 million equity.
Interest included in unsold property also reconciles. Start with $77.064 million already in inventory, add $60.337 million incurred during the first nine months, subtract $4.126 million expensed immediately and $41.106 million charged to delivered properties. The remaining $92.169 million will enter costs as the related inventory is sold.
Source: 2026 Form 10-Q, pp. 3 and 11. Calculations use unrounded filing amounts; displayed totals may be rounded for readability.
This analysis is for information and education. It is not investment advice or a recommendation to buy, sell or hold any security.
