Results
United Homes Group Inc.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 15:13
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
References to the "Company," "UHG," "our," "us" or "we" refer to United Homes Group, Inc. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements."
Overview
UHG designs, builds and sells homes in South Carolina, North Carolina and Georgia. The geographical markets in which UHG presently operates its homebuilding business are high-growth markets, with substantial in-migrations and employment growth. The Company employs a land-light lot operating strategy, with a focus on the design, construction and sale of entry-level, first, second and third move-up single-family houses. UHG principally builds detached single-family houses, and, to a lesser extent, attached single-family houses, including duplex houses and town houses.
UHG's pipeline as of September 30, 2025 consists of approximately 7,700 lots, which includes lots that UHG may acquire from third party lot option contracts or land bank option contracts, in addition to lots that are owned or controlled by related parties and which UHG expects to obtain the contractual right to acquire.
Since its founding in 2004, UHG has delivered approximately 16,000 homes and currently builds in 56 active subdivisions at prices that generally range from approximately $200,000 to approximately $600,000. For the three months ended September 30, 2025 and 2024, UHG had 324 and 341 net new orders, and generated approximately $90.8 million and $118.6 million in revenue on 262 and 369 closings, respectively. For the nine months ended September 30, 2025 and 2024, UHG had 924 and 1,048 net new orders, and generated approximately $283.3 million and $328.9 million in revenue on 817 and 1,017 closings, respectively.
UHG intends to grow organically, both arising out of its historical operations which may include entry into new markets and growth in community count, and through expansion of its mortgage joint venture Homeowners Mortgage, LLC (the "Joint Venture"). UHG expects that continued operation of the Joint Venture will add to UHG's revenue and EBITDA growth, improve buyer traffic conversion, and reduce backlog cancellation rates.
The Company's third quarter results reflect the market conditions and affordability concerns that continue to create challenges for the homebuilding industry. These challenges, coupled with delayed new community openings earlier in the year, negatively impacted net new orders for the three and nine months ended September 30, 2025 which decreased by 5.0% and 11.8%, respectively, versus the comparable prior year periods.
In response to the current environment, the Company continues to provide discounts on base home prices, when necessary, and utilize various sales incentives, primarily in the form of buyer financing incentives such as mortgage rate buy downs, mortgage forward commitments, or cash incentives applied against closing costs. Increased discounting during the third quarter 2025 had a negative impact on the Company's reported gross margin. For the three and nine months ended September 30, 2025, gross margin decreased by 1.2% and remained flat, respectively, compared to the respective prior year periods.
Operationally, the Company remains focused on the execution of several key improvements targeted at accelerating sales and improving gross margins. These operational improvements included refreshing the Company's portfolio of house plans, expanding customization options for buyers, and a strategic rebidding of supplier contracts to reduce direct construction costs. Despite underperforming in the third quarter, Management believes that the Company's proactive approach, position within high growth markets, and adaptable land-light business model will enable the Company to effectively navigate these multifaceted macroeconomic conditions. However, the Company cannot provide any assurance that its strategies will continue to be successful in future quarters.
UHG revenues decreasedfrom approximately $118.6 million for the three months ended September 30, 2024 to $90.8 million for the three months ended September 30, 2025. For the three months ended September 30, 2025, UHG generated a net loss of approximately $31.3 million, which included a $27.2 million loss related to the change in fair value of derivative liabilities, gross margin of 17.7%, adjusted gross margin of 19.6%, and adjusted EBITDA margin of 4.2%, representing an increase in net loss of $24.0 million, and percentage decreases of 1.2%, 1.0%, and 3.4%, respectively, from the three months ended September 30, 2024.
UHG revenues decreased from approximately $328.9 million for the nine months ended September 30, 2024 to $283.3 million for the nine months ended September 30, 2025. For the nine months ended September 30, 2025, UHG generated net loss of approximately $19.5 million, which included a loss from the change in fair value of derivative liabilities of $12.2 million, gross margin of 17.7%, adjusted gross margin of 20.0%, and adjusted EBITDA margin of 4.9%,
representing a decrease of $65.7 million, and percentage changes of zero, a decrease of 0.7%, and a decrease of 2.4%, respectively, from the nine months ended September 30, 2024.
Adjusted gross profit, EBITDA, and adjusted EBITDA are not financial measures under generally accepted accounting principles in the United States of America ("GAAP"). See "Non-GAAP Financial Measures" for an explanation of how UHG computes these non-GAAP financial measures and for reconciliations to the most directly comparable GAAP financial measure.
Recent Developments
On October 20, 2025, the Company announced the conclusion of the previously-announced review of strategic alternatives. After evaluating a full range of strategic alternatives, including a potential sale, merger or other transaction, the special committee of independent directors that was constituted for this purpose unanimously determined that, in light of current macroeconomic conditions, continuing to execute on the Company's strategic plan as an independent, public company is in the best interests of the Company and its stockholders at this time. At the same time, one of the Company's directors submitted his resignation effective immediately, and five of the Company's other directors notified the Company of their intent to resign from the Board no later than November 14, 2025. The reasons for such resignations are set forth in greater detail in the Company's Form 8-K filed on October 20, 2025. Subsequent to the filing of such Form 8-K, the Company has identified and is reviewing the independence of three director candidates identified by Michael Nieri, the Company's Executive Chairman and a continuing director. In light of the Company's status with respect to appointment of replacement directors, directors Robert Dozier Jr., Jason Enoch, and Alan Levine informed the Company of their willingness to remain on the Board and applicable committees beyond November 14, 2025, to ensure an orderly transition as director candidates are identified and recruited in order to maintain compliance with the requirements under Nasdaq Listing Rule 5605. Director Nikki Haley and director James M. Pirrello resigned from the Board effective as of November 7, 2025. Following the October 20 announcement, management of the Company has been engaged in discussions with various key counterparties, including its lenders, land banking partners, and insurers, regarding, among other things, the pressing need to identify replacement directors, maintaining compliance with loan covenants, and planning for the ongoing operations of the Company. If the Company is unable to successfully navigate these challenges, including identifying and seating additional directors, management expects continued pressure from these and other key relationships, which could have an adverse effect on the Company's operations.
In addition, on November 6, 2025, the Company entered into Retention Agreements (each, a "Retention Agreement") with John G. (Jack) Micenko, the Company's Chief Executive Officer and President, Keith Feldman, the Company's Chief Financial Officer, and Erin Reeves McGinnis, the Company's General Counsel and Corporate Secretary (each, a "Participant"). Pursuant to the terms of the Retention Agreements, each Participant shall be paid a cash retention amount equal to 100% of their respective 2025 base salaries (the "Retention Payment"). In the event a Participant's employment with the Company is terminated prior to March 31, 2026, such Participant will be required to repay to the Company a pro rata portion of the after-tax value of the Retention Payment, provided that such termination is by the Company for Cause or by the Participant other than for Good Reason (each term as defined in the respective employment agreements of the Participants).
Results of Operations
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table presents summary results of operations for the periods indicated (dollar amounts in thousands except average sales price):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | ||||||||||||||||||||
| Statements of Operations | |||||||||||||||||||||||
| Revenue, net of sales discounts | $ | 90,794 | $ | 118,644 | $ | (27,850) | (23.5) | % | |||||||||||||||
| Cost of sales | 74,746 | 96,261 | (21,515) | (22.4) | % | ||||||||||||||||||
| Selling, general and administrative expense | 17,573 | 18,690 | (1,117) | (6.0) | % | ||||||||||||||||||
| Other expense, net | (2,182) | (3,710) | 1,528 | (41.2) | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 218 | 419 | (201) | (48.0) | % | ||||||||||||||||||
| Change in fair value of derivative liabilities | (27,208) | (7,785) | (19,423) | 249.5 | % | ||||||||||||||||||
| Loss before taxes | (30,697) | (7,383) | (23,314) | 315.8 | % | ||||||||||||||||||
| Income tax expense (benefit) | 598 | (44) | 642 | (1459.1) | % | ||||||||||||||||||
| Net loss | $ | (31,295) | $ | (7,339) | $ | (23,956) | 326.4 | % | |||||||||||||||
| Other Financial and Operating Data: | |||||||||||||||||||||||
|
Active communities at end of period(a)
|
56 | 55 | 1 | 1.8 | % | ||||||||||||||||||
| Home closings | 262 | 369 | (107) | (29.0) | % | ||||||||||||||||||
|
Average sales price of homes closed(b)
|
$ | 345,920 | $ | 320,199 | $ | 25,721 | 8.0 | % | |||||||||||||||
| Net new orders | 324 | 341 | (17) | (5.0) | % | ||||||||||||||||||
| Cancellation rate | 14.3 | % | 12.8 | % | 1.5 | % | 11.6 | % | |||||||||||||||
| Backlog | 264 | 220 | 44 | 20.0 | % | ||||||||||||||||||
| Gross profit | $ | 16,048 | $ | 22,383 | $ | (6,335) | (28.3) | % | |||||||||||||||
|
Gross margin(c)
|
17.7 | % | 18.9 | % | (1.2) | % | (6.3) | % | |||||||||||||||
|
Adjusted gross profit(d)
|
$ | 17,814 | $ | 24,481 | $ | (6,667) | (27.2) | % | |||||||||||||||
|
Adjusted gross margin(c)(d)
|
19.6 | % | 20.6 | % | (1.0) | % | (4.9) | % | |||||||||||||||
|
EBITDA(d)
|
$ | (26,605) | $ | (1,634) | $ | (24,971) | 1,528.2 | % | |||||||||||||||
|
EBITDA margin(c)(d)
|
(29.3) | % | (1.4) | % | (27.9) | % | 1,992.9 | % | |||||||||||||||
|
Adjusted EBITDA(d)
|
$ | 3,815 | $ | 8,978 | $ | (5,163) | (57.5) | % | |||||||||||||||
|
Adjusted EBITDA margin(c)(d)
|
4.2 | % | 7.6 | % | (3.4) | % | (44.7) | % | |||||||||||||||
______________________________
(a)UHG had five and ten communities in closeout for the three months ended September 30, 2025 and 2024, respectively. These communities are not included in the count of "Active communities at end of period."
(b)Average sales price of homes closed, excluding the impact of percentage of completion revenues and build-to-rent revenues.
(c)Calculated as a percentage of revenue.
(d)Adjusted gross profit, EBITDA and adjusted EBITDA are non-GAAP financial measures. For definitions of adjusted gross profit, EBITDA and adjusted EBITDA and a reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP, see "Non-GAAP Financial Measures."
Revenues: Revenues for the three months ended September 30, 2025were $90.8 million,a decreaseof $27.8 million, from $118.6 million for the three months ended September 30, 2024. The decrease in revenues was primarily attributable to a decrease in home closings of 29.0%, partially offset by an increase in average sales price ("ASP") of production-built homes of 8.0%. The decline in the number of homes closed as compared to the three months ended September 30, 2024 was primarily due to decreases of 31.5% in the GSH South Carolina segment, partially offset by an increase in closings of 75.0% in the Rosewood reporting segment.
The following table provides a summary of the Company's revenues, home closings, and ASP in each of the reportable segments (revenues in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Period over period change | |||||||||||||||||||||||||||||||||
| Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
|||||||||||||||||||||||||||
| GSH South Carolina | $ | 79,472 | 241 | $ | 329,083 | $ | 108,950 | 352 | $ | 308,125 | (27.1) | % | (31.5) | % | 6.8 | % | |||||||||||||||||||
| Rosewood | 8,448 | 14 | 603,429 | 5,701 | 8 | 712,625 | 48.2 | % | 75.0 | % | (15.3) | % | |||||||||||||||||||||||
|
Other2
|
2,874 | 7 | 410,571 | 3,993 | 9 | 443,667 | (28.0) | % | (22.2) | % | (7.5) | % | |||||||||||||||||||||||
| Total | $ | 90,794 | 262 | $ | 345,920 | $ | 118,644 | 369 | $ | 320,199 | (23.5) | % | (29.0) | % | 8.0 | % | |||||||||||||||||||
___________________
1 Average sales price of homes closed, excluding the impact of percentage of completion revenues and build-to-rent revenues.
2 Other consists of UHG's homebuilding operations in Raleigh, NC.
Cost of sales and Gross profit:Cost of sales for the three months ended September 30, 2025was $74.7 million, a decrease of $21.6 million, from $96.3 million for the three months ended September 30, 2024.The decrease in Cost of sales was largely attributable to a decrease in home closings of 29.0% compared to the same period in 2024.
Gross profit for the three months ended September 30, 2025 was $16.0 million, a decrease of $6.4 million, from $22.4 million for the three months ended September 30, 2024. Gross margin for the three months ended September 30, 2025 was 17.7%, a decrease of 1.2%, as compared 18.9% for the three months ended September 30, 2024. Gross margins decreased in the third quarter of 2025, primarily due to more discounting to drive sales, partially offset by direct construction cost savings as a result of the rebid initiative.
Adjusted gross profit: Adjusted gross profit for the three months ended September 30, 2025 was $17.8 million, a decrease of $6.7 million, as compared to $24.5 million for the three months ended September 30, 2024. Adjusted gross margin for the three months ended September 30, 2025 was 19.6%, a decrease of 1.0%, as compared to 20.6% for the three months ended September 30, 2024. The decrease in adjusted gross margin was primarily attributable to more discounting, partially offset by direct construction cost savings. Adjusted gross profit is a non-GAAP financial measure. For the definition of adjusted gross profit and a reconciliation to UHG's most directly comparable financial measure calculated and presented in accordance with GAAP, see "Non-GAAP Financial Measures."
Selling, general and administrative expense: Selling, general and administrative expense for the three months ended September 30, 2025 was $17.6 million, a decrease of $1.1 million, from $18.7 million for the three months ended September 30, 2024. The decrease is primarily due to a $2.2 million decrease in commission expense due to less broker incentives and fewer closings, partially offset by increases of $0.4 million in salaries and wages due to increased headcount, and $0.4 million in stock compensation expense.
Other expense, net:Total other expense, net for the three months ended September 30, 2025 was $2.2 million, a decrease of $1.5 million, from $3.7 million for the three months ended September 30, 2024. The decrease was primarily driven by a $1.4 millionreduction in interest expense due to the Company's refinance of corporate debt in December 2024.
Equity in net earnings from investment in joint venture:Equity in net earnings from investment in joint venture for the three months ended September 30, 2025was $0.2 million, a decrease of $0.2 million, from $0.4 million for the three months ended September 30, 2024.
Change in fair value of derivative liabilities: Change in fair value of derivative liabilities for the three months ended September 30, 2025 was a loss of $27.2 million as compared to a loss of $7.8 million for the three months ended September 30, 2024. Under ASC 815, derivative liabilities are marked to market each reporting period with changes recognized as gains or losses on the Condensed Consolidated Statements of Operations. The overall decrease is primarily attributable to changes in the fair value of the earnout shares, which fluctuates each period due primarily to changes in the Company's stock price.
Loss before taxes: The following table provides a summary of the Company's income (loss) before taxes by reportable segment (in thousands, except percentage change):
| Three Months Ended September 30, | Period over period | ||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | ||||||||||||||||||||
| GSH South Carolina | $ | 1,723 | $ | 9,004 | $ | (7,281) | (80.9) | % | |||||||||||||||
| Rosewood | 223 | (475) | 698 | (146.9) | % | ||||||||||||||||||
|
Other1
|
(191) | (531) | 340 | (64.0) | % | ||||||||||||||||||
| Segment total | $ | 1,755 | $ | 7,998 | $ | (6,243) | (78.1) | % | |||||||||||||||
|
Corporate2
|
(5,462) | (8,015) | 2,553 | (31.9) | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 218 | 419 | (201) | (48.0) | % | ||||||||||||||||||
| Change in fair value of derivative liabilities | (27,208) | (7,785) | (19,423) | 249.5 | % | ||||||||||||||||||
| Consolidated loss before taxes | $ | (30,697) | $ | (7,383) | $ | (23,314) | 315.8 | % | |||||||||||||||
___________________
1 Other consists of UHG's homebuilding operations in Raleigh, NC.
2 Corporate items included within consolidated income before taxes includes unallocated corporate overhead, stock-based compensation, corporate interest income and expense, and other corporate level items not allocated to the segments.
Loss before taxes for the three months ended September 30, 2025 increased $23.3 million, from the three months ended September 30, 2024. The decrease was primarily due to a decrease in the change in fair value of derivative liabilities of $19.4 million and a decrease in gross profit of $6.3 million.
GSH South Carolina: The $7.3 million decrease in income before taxes for the three months ended September 30, 2025 compared to the same period in the prior year was primarily due to a decrease in closings of 31.5%, which resulted in lower gross profit, higher operating costs as a percentage of revenue and higher interest costs as a percentage of revenue.
Rosewood: The $0.7 million increase in income before taxes for the three months ended September 30, 2025 compared to the same period in the prior year was primarily attributable to an increase of 75.0% in home closings coupled with a 5.7% increase in gross margin. The increase in gross margin is primarily due to lower direct construction costs and less non-recurring costs as a percentage of revenue.
Other: The $0.3 million decrease in loss before taxes for Raleigh for the three months ended September 30, 2025 compared to the same period in the prior year was primarily attributable to an increase in gross margin coupled with a decrease in operating expenses as a percentage of revenue.
Income tax expense (benefit):Income tax expense for the three months ended September 30, 2025 was $0.6 million compared to a benefit of less than $0.1 million for the three months ended September 30, 2024. The Company estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year-to-date period, adjusted for any discrete period items. The Company's estimated annual effective tax rate as of September 30, 2025 is 11.7% as compared to 17.0% as of September 30, 2024.
Net new orders: Net new orders for a period is gross sales of homes less any customer cancellations received during the same period. Sales are recognized when a customer signs a contract and UHG approves such contract. Net new orders for the three months ended September 30, 2025were 324units, a decreaseof 17 units, from 341units for the three months ended September 30, 2024.
Cancellation rate: The cancellation rate is the total cancellations during the period divided by the total number of new sales for homes during the period.The cancellation rate for the three months ended September 30, 2025was 14.3%, an increase of 1.5%, from 12.8%for the three months ended September 30, 2024.
Backlog:Backlog consists of homes sold but not yet closed with customers. Backlog represents the number of homes in backlog from the previous period plus sales of homes during the current period less cancellations of existing sales contracts and home closings during the current period. A portion of the homes in backlog will not result in homes delivered due to cancellations.
Backlog as of September 30, 2025 was 264 units, an increase of 44 units, or 20.0%, from 220 units as of September 30, 2024. The following table provides a summary of the Company's backlog inventory, backlog value, and average sales price of backlog inventory in each of the reportable segments (backlog value in thousands):
|
As of September 30, 2025
|
As of September 30, 2024 | Period over period change | |||||||||||||||||||||||||||||||||
| Backlog inventory |
Backlog value1
|
Backlog ASP2
|
Backlog inventory |
Backlog value1
|
Backlog ASP2
|
Backlog inventory |
Backlog value1
|
Backlog ASP2
|
|||||||||||||||||||||||||||
| GSH South Carolina | 248 | $ | 84,621 | $ | 341,214 | 205 | $ | 70,520 | $ | 344,000 | 21.0 | % | 20.0 | % | (0.8) | % | |||||||||||||||||||
| Rosewood | 15 | 9,369 | 624,600 | 11 | 7,311 | 664,636 | 36.4 | % | 28.1 | % | (6.0) | % | |||||||||||||||||||||||
|
Other3
|
1 | 355 | 355,000 | 4 | 2,080 | 520,000 | (75.0) | % | (82.9) | % | (31.7) | % | |||||||||||||||||||||||
| Total | 264 | $ | 94,345 | $ | 357,367 | 220 | $ | 79,911 | $ | 363,232 | 20.0 | % | 18.1 | % | (1.6) | % | |||||||||||||||||||
1 Backlog value is calculated as the total contract value of homes in backlog.
2 ASP of backlog is calculated as backlog value divided by backlog inventory.
3 Other consists of UHG's homebuilding operations in Raleigh, NC.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table presents summary results of operations for the periods indicated:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Amount Change | % Change | ||||||||||||||||||||
| Statements of Operations | |||||||||||||||||||||||
| Revenue, net of sales discounts | $ | 283,301 | $ | 328,902 | $ | (45,601) | (13.9) | % | |||||||||||||||
| Cost of sales | 233,206 | 270,847 | (37,641) | (13.9) | % | ||||||||||||||||||
| Selling, general and administrative expense | 51,749 | 55,358 | (3,609) | (6.5) | % | ||||||||||||||||||
| Other expense, net | (7,309) | (9,255) | 1,946 | (21.0) | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 715 | 1,076 | (361) | (33.6) | % | ||||||||||||||||||
| Change in fair value of derivative liabilities | (12,170) | 50,650 | (62,820) | (124.0) | % | ||||||||||||||||||
| (Loss) income before taxes | $ | (20,418) | $ | 45,168 | $ | (65,586) | (145.2) | % | |||||||||||||||
| Income tax benefit | (962) | (1,071) | 109 | (10.2) | % | ||||||||||||||||||
| Net (loss) income | $ | (19,456) | $ | 46,239 | $ | (65,695) | (142.1) | % | |||||||||||||||
| Other Financial and Operating Data: | |||||||||||||||||||||||
|
Active communities at end of period(a)
|
56 | 55 | 1 | 1.8 | % | ||||||||||||||||||
| Home closings | 817 | 1,017 | (200) | (19.7) | % | ||||||||||||||||||
|
Average sales price of homes closed(b)
|
$ | 346,810 | $ | 331,111 | $ | 15,699 | 4.7 | % | |||||||||||||||
| Net new orders | 924 | 1,048 | (124) | (11.8) | % | ||||||||||||||||||
| Cancellation rate | 12.8 | % | 11.6 | % | 1.2 | % | 10.6 | % | |||||||||||||||
| Backlog | 264 | 220 | 44 | 20.0 | % | ||||||||||||||||||
| Gross profit | $ | 50,095 | $ | 58,055 | $ | (7,960) | (13.7) | % | |||||||||||||||
|
Gross margin(c)
|
17.7 | % | 17.7 | % | - | % | - | % | |||||||||||||||
|
Adjusted gross profit(d)
|
$ | 56,615 | $ | 67,940 | $ | (11,325) | (16.7) | % | |||||||||||||||
|
Adjusted gross margin(c)(d)
|
20.0 | % | 20.7 | % | (0.7) | % | (3.4) | % | |||||||||||||||
|
EBITDA(d)
|
$ | (7,278) | $ | 62,859 | $ | (70,137) | (111.6) | % | |||||||||||||||
|
EBITDA margin(c)(d)
|
(2.6) | % | 19.1 | % | (21.7) | % | (113.6) | % | |||||||||||||||
|
Adjusted EBITDA(d)
|
$ | 13,925 | $ | 23,922 | $ | (9,997) | (41.8) | % | |||||||||||||||
|
Adjusted EBITDA margin(c)(d)
|
4.9 | % | 7.3 | % | (2.4) | % | (32.9) | % | |||||||||||||||
______________________________
(a)UHG had five and ten communities in closeout for the nine months ended September 30, 2025 and 2024, respectively. These communities are not included in the count of "Active communities at end of period."
(b)Average sales price of homes closed, excluding the impact of percentage of completion revenues and build-to-rent revenues.
(c)Calculated as a percentage of revenue.
(d)Adjusted gross profit, EBITDA and adjusted EBITDA are non-GAAP financial measures. For definitions of adjusted gross profit, EBITDA and adjusted EBITDA and a reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP, see "Non-GAAP Financial Measures."
Revenues: Revenues for the nine months ended September 30, 2025 were $283.3 million, a decrease of $45.6 million, from $328.9 million for the nine months ended September 30, 2024. The decrease in revenues was primarily attributable to the decrease in production-built home closings, partially offset by an increase in average sales price of production-built homes. Additionally, for the nine months ended September 30, 2024 closings included 60 build-to-rent units with significantly lower ASPs, compared to no build-to-rent closings for the nine months ended September 30, 2025.When factoring in these build-to-rent unit closings, total ASP increased 7.2% compared to the prior year period. The decline in the number of homes closed as compared to the nine months ended September 30, 2024 is isolated to the GSH South Carolina segment, which decreased 23.1%.
The following table provides a summary of the Company's revenues, home closings, and ASP in each of the reportable segments (revenues in thousands):
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Period over period change | |||||||||||||||||||||||||||||||||
| Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
|||||||||||||||||||||||||||
| GSH South Carolina | $ | 242,429 | 743 | $ | 326,183 | $ | 296,915 | 966 | $ | 314,876 | (18.4) | % | (23.1) | % | 3.6 | % | |||||||||||||||||||
| Rosewood | 26,907 | 43 | 634,690 | 19,890 | 30 | 663,310 | 35.3 | % | 43.3 | % | (4.3) | % | |||||||||||||||||||||||
|
Other2
|
13,965 | 31 | 450,484 | 12,097 | 21 | 571,286 | 15.4 | % | 47.6 | % | (21.1) | % | |||||||||||||||||||||||
| Total | $ | 283,301 | 817 | $ | 346,810 | $ | 328,902 | 1,017 | $ | 331,111 | (13.9) | % | (19.7) | % | 4.7 | % | |||||||||||||||||||
___________________
1 Average sales price of homes closed, excluding the impact of percentage of completion revenues and build-to-rent revenues.
2 Other consists of UHG's homebuilding operations in Raleigh, NC.
Cost of Sales and Gross Profit:Cost of sales for the nine months ended September 30, 2025 was $233.2 million, a decrease of $37.6 million, from $270.8 million for the nine months ended September 30, 2024. The decrease in Cost of sales was largely attributable to a decrease in home closings of 19.7% compared to the same period in 2024.
Gross profit for the nine months ended September 30, 2025 was $50.1 million, a decrease of $8.0 million, from $58.1 million for the nine months ended September 30, 2024. Gross margin for the nine months ended September 30, 2025 was consistent with the relative prior period at 17.7%, which was impacted by higher discounting, offset by a reduction in direct costs.
Adjusted Gross Profit:Adjusted gross profit for the nine months ended September 30, 2025 was $56.6 million, a decrease of $11.3 million, as compared to $67.9 million for the nine months ended September 30, 2024. Adjusted gross margin for the nine months ended September 30, 2025 was 20.0%, a decrease of 0.7%, as compared to 20.7% for the nine months ended September 30, 2024. Adjusted gross margin declined, primarily due to increased discounting, partially offset by reduced direct construction costs.Adjusted gross profit is a non-GAAP financial measure. For the definition of adjusted gross profit and a reconciliation to UHG's most directly comparable financial measure calculated and presented in accordance with GAAP, see "Non-GAAP Financial Measures."
Selling, General and Administrative Expense: Selling, general and administrative expense for the nine months ended September 30, 2025 was $51.7 million, a decrease of $3.6 million, from $55.4 million for the nine months ended September 30, 2024. The decrease in selling, general and administrative expense was primarily attributable to a $4.5 million decrease in commission expense due to less broker incentives and fewer closings, a $1.1 million reduction in severance expense related to the June 2024 RIF, and a decrease in transaction costs of $1.1 million, partially offset by an increase in salaries and wages of $3.2 million.
Other Expense, Net:Total other expense, net for the nine months ended September 30, 2025 was $7.3 million, a decrease of $1.9 million, from $9.3 million for the nine months ended September 30, 2024. The decrease was primarily driven by a $2.3 million reduction in interest expense due to the refinance of the Company's corporate debt, partially offset by a loss on litigation of $0.2 million related to Rosewood's proceedings and a decrease in investment income of $0.1 million.
Equity in Net Earnings from Investment in Joint Venture:Equity in net earnings from investment in joint venture for the nine months ended September 30, 2025was $0.7 million, a decreaseof $0.4 million, from $1.1 millionfor the nine months ended September 30, 2024.
Change in Fair Value of Derivative Liabilities: Change in fair value of derivative liabilities for the nine months ended September 30, 2025 was a loss of $12.2 million as compared to a gain of $50.7 million for the nine months ended September 30, 2024. Under ASC 815, derivative liabilities are marked to market each reporting period with changes recognized on the Condensed Consolidated Statements of Operations. The overall increase is primarily attributable to changes in the fair value of the earnout shares, which fluctuates each period due primarily to changes in the Company's stock price.
Income Tax Benefit:Income tax benefit for the nine months ended September 30, 2025 was $1.0 million as compared to $1.1 million for the nine months ended September 30, 2024. The Company estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year-to-date period, adjusted for any discrete period items. The Company's estimated annual effective tax rate as of September 30, 2025 is 11.7% as compared to 17.0% as of September 30, 2024.
(Loss) income before taxes: The following table provides a summary of the Company's (loss) income before taxes by reportable segment (in thousands, except percentage change):
| Nine Months Ended September 30, | Period over period | ||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | ||||||||||||||||||||
| GSH South Carolina | $ | 8,563 | $ | 22,370 | $ | (13,807) | (61.7) | % | |||||||||||||||
| Rosewood | (324) | (456) | 132 | (28.9) | % | ||||||||||||||||||
|
Other1
|
(337) | (2,402) | 2,065 | (86.0) | % | ||||||||||||||||||
| Segment total | $ | 7,902 | $ | 19,512 | $ | (11,610) | (59.5) | % | |||||||||||||||
|
Corporate2
|
(16,865) | (26,070) | 9,205 | (35.3) | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 715 | 1,076 | (361) | (33.6) | % | ||||||||||||||||||
| Change in fair value of derivative liabilities | (12,170) | 50,650 | (62,820) | (124.0) | % | ||||||||||||||||||
| Consolidated (loss) income before taxes | $ | (20,418) | $ | 45,168 | $ | (65,586) | (145.2) | % | |||||||||||||||
___________________
1 Other consists of UHG's homebuilding operations in Raleigh, NC.
2 Corporate items included within consolidated income before taxes includes unallocated corporate overhead, stock-based compensation, corporate interest income and expense, and other corporate level items not allocated to the segments.
Income before taxes for the nine months ended September 30, 2025 decreased $65.6 million, from the nine months ended September 30, 2024. The decrease was primarily due to a decrease in change in fair value of derivative liabilities of $62.8 million and a decrease in gross profit of $8.0 million, partially offset by a decrease in selling, general, and administrative expense of $3.6 million.
GSH South Carolina: The $13.8 million decrease in income before taxes for the nine months ended September 30, 2025 compared to the same period in the prior year was primarily due to a decrease in the number of homes closed of 23.1%, which resulted in lower gross profit and higher operating costs as a percentage of revenue coupled with increased interest expense.
Rosewood: The $0.1 million increase in pre-tax profitability for the nine months ended September 30, 2025 compared to the same period in the prior year was primarily due to higher gross profit as a result of more closings and better margins, partially offset by an increase in operating costs attributable to contingent consideration related to the 2023 acquisition of Rosewood Communities, Inc. and an increase in commission expense as a percentage of revenue.
Other: The $2.1 million increase in pre-tax profitability for the Raleigh market for the nine months ended September 30, 2025 compared to the same period in the prior year was primarily due to an increase in gross profit of $0.4 million and decreases in severance expense of $1.1 million and salaries and wages of $0.5 million.
Net New Orders: Net new orders for the nine months ended September 30, 2025was 924units, a decreaseof 124 units, from 1,048 units for the nine months ended September 30, 2024.
Cancellation Rate: The cancellation rate for the nine months ended September 30, 2025was 12.8%, an increaseof 1.2%, from 11.6%for the nine months ended September 30, 2024.
Non-GAAP Financial Measures
Adjusted Gross Profit
Adjusted gross profit is a non-GAAP financial measure used by management of the Company as a supplemental measure in evaluating operating performance. The Company defines adjusted gross profit as gross profit excluding the effects of capitalized interest expensed in cost of sales, amortization included in homebuilding cost of sales, abandoned project costs, severance expense in cost of sales, and non-recurring remediation costs. The Company's management believes this information is meaningful because it separates the impact that capitalized interest and non-recurring costs directly expensed in cost of sales have on gross profit to provide a more specific measurement of the Company's gross profits. However, because adjusted gross profit information excludes certain balances expensed in cost of sales, which have real economic effects and could impact the Company's results of operations, the utility of adjusted gross profit information as a measure of the Company's operating performance may be limited. Other companies may not calculate adjusted gross profit information in the same manner that the Company does. Accordingly, adjusted gross profit information should be considered only as a supplement to gross profit information as a measure of the Company's performance.
The following table presents a reconciliation of adjusted gross profit to the GAAP financial measure of gross profit for each of the periods indicated (in thousands, except percentages).
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue, net of sales discounts | $ | 90,794 | $ | 118,644 | $ | 283,301 | $ | 328,902 | |||||||||||||||
| Cost of sales | 74,746 | 96,261 | 233,206 | 270,847 | |||||||||||||||||||
| Gross profit | $ | 16,048 | $ | 22,383 | $ | 50,095 | $ | 58,055 | |||||||||||||||
| Interest expense in cost of sales | 1,159 | 1,525 | 4,292 | 6,697 | |||||||||||||||||||
|
Amortization in homebuilding cost of sales(a)
|
598 | 573 | 2,161 | 2,434 | |||||||||||||||||||
| Abandoned project costs | 9 | - | 67 | 320 | |||||||||||||||||||
| Severance expense in cost of sales | - | - | - | 325 | |||||||||||||||||||
| Non-recurring remediation costs | - | - | - | 109 | |||||||||||||||||||
| Adjusted gross profit | $ | 17,814 | $ | 24,481 | $ | 56,615 | $ | 67,940 | |||||||||||||||
|
Gross margin(b)
|
17.7 | % | 18.9 | % | 17.7 | % | 17.7 | % | |||||||||||||||
|
Adjusted gross margin(b)
|
19.6 | % | 20.6 | % | 20.0 | % | 20.7 | % | |||||||||||||||
______________________________
(a) Represents expense recognized resulting from purchase accounting adjustments.
(b) Calculated as a percentage of revenue.
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization, or EBITDA, and adjusted EBITDA are supplemental non-GAAP financial measures used by management of the Company. The Company defines EBITDA as net income before (i) capitalized interest expensed in cost of sales, (ii) interest expensed in other (expense) income, net, (iii) depreciation and amortization, and (iv) taxes. The Company defines adjusted EBITDA as EBITDA before stock-based compensation expense, transaction cost expense, amortization included in homebuilding cost of sales, severance expense, abandoned project costs, change in fair value of derivative liabilities, non-recurring remediation costs, and loss on extinguishment of Convertible Notes. Management of the Company believes EBITDA and adjusted EBITDA are useful because they provide a more effective evaluation of UHG's operating performance and allow comparison of UHG's results of operations from period to period without regard to UHG's financing methods or capital structure or other items that impact comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation or amortization, or unusual items. EBITDA and adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. UHG's computations of EBITDA and adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA of other companies.
The following table presents a reconciliation of EBITDA and adjusted EBITDA to the GAAP financial measure of net income for each of the periods indicated (in thousands, except percentages).
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net (loss) income | $ | (31,295) | $ | (7,339) | $ | (19,456) | $ | 46,239 | |||||||||||||||
| Interest expense in cost of sales | 1,159 | 1,525 | 4,292 | 6,697 | |||||||||||||||||||
| Interest expense in other expense, net | 2,206 | 3,650 | 7,050 | 9,370 | |||||||||||||||||||
| Depreciation and amortization | 643 | 523 | 1,650 | 1,449 | |||||||||||||||||||
| Taxes | 682 | 7 | (814) | (896) | |||||||||||||||||||
| EBITDA | $ | (26,605) | $ | (1,634) | $ | (7,278) | $ | 62,859 | |||||||||||||||
| Stock-based compensation expense | 1,936 | 1,568 | 5,304 | 4,918 | |||||||||||||||||||
| Transaction cost expense | 669 | 686 | 1,376 | 2,428 | |||||||||||||||||||
|
Amortization in homebuilding cost of sales(a)
|
598 | 573 | 2,161 | 2,434 | |||||||||||||||||||
| Severance expense | - | - | 125 | 1,504 | |||||||||||||||||||
| Abandoned project costs | 9 | - | 67 | 320 | |||||||||||||||||||
| Change in fair value of derivative liabilities | 27,208 | 7,785 | 12,170 | (50,650) | |||||||||||||||||||
| Non-recurring remediation costs | - | - | - | 109 | |||||||||||||||||||
| Adjusted EBITDA | $ | 3,815 | $ | 8,978 | $ | 13,925 | $ | 23,922 | |||||||||||||||
|
EBITDA margin(b)
|
(29.3) | % | (1.4) | % | (2.6) | % | 19.1 | % | |||||||||||||||
|
Adjusted EBITDA margin(b)
|
4.2 | % | 7.6 | % | 4.9 | % | 7.3 | % | |||||||||||||||
______________________________
(a) Represents expense recognized resulting from purchase accounting adjustments.
(b) Calculated as a percentage of revenue.
Liquidity and Capital Resources
Overview
UHG funds its operations from its current cash holdings and cash flows generated by operating activities, as well as borrowings under the revolving credit facility ("Syndicated Line"), as further described below. As of September 30, 2025, UHG had approximately $25.6 million in cash and cash equivalents, an increase of $3.0 million, from $22.6 million as of December 31, 2024. As of September 30, 2025 and December 31, 2024, UHG had approximately$57.5 million and $96.4 million, respectively, in unused committed capacity, calculated in accordance with the Syndicated Line.
UHG believes that its current cash holdings including cash generated from continuing operations and cash available under the Syndicated Line will be sufficient to satisfy its short term and long term cash requirements for working capital to support its daily operations and meet current commitments under its contractual obligations. The Company's liquidity and profitability could be adversely impacted by continued operational headwinds.
Cash flows used in and generated by UHG's projects can differ materially in timing from its results of operations, as these depend upon the stage in the life cycle of each project. UHG generally relies upon its syndicated line of credit to fund building costs, and timing of draws is such that UHG may from time to time be in receipt of funds from the Syndicated Line in advance of such funds being utilized. UHG is generally required to make significant cash outlays at the beginning of a project related to lot purchases, permitting, and construction of homes, as well as ongoing property taxes. These costs are capitalized within UHG's real estate inventory and are not recognized in its operating income until a home sale closes. As a result, UHG incurs significant cash outflows prior to the recognition of associated earnings. In later stages of projects, cash inflows could exceed UHG's results of operations, as the cash outflows associated with land purchase and home construction and other expenses were previously incurred.
The Company's strategy is to acquire developed lots through third party and related party land developers and land bank partners pursuant to lot purchase agreements and land banking arrangements. When entering into these contracts, the Company agrees to purchase finished lots at predetermined prices, time frames, and quantities that match expected selling pace in the community. Most lot purchase agreements require the Company to pay a nonrefundable cash deposit of approximately 15% - 20% of the agreed-upon fixed purchase price of the developed lots. As of September 30, 2025, the Company had lot deposits of $41.9 million related to option contracts with an aggregate remaining purchase price of $320.5 million. Refer to Note 2 - Variable interest entitiesof the Notes to the Condensed Consolidated Financial Statements and "Off-Balance Sheet Arrangements"for additional information.
Capital Resources
Syndicated line of credit
The Syndicated Line provides for an aggregate commitment of up to $220.0 million, subject to borrowing base limitations, of which the Company had outstanding borrowings of $79.7 million as of September 30, 2025. The Syndicated Line also includes a $2.0 million letter of credit sub-facility under the same terms and conditions. The Company had $57.5 million of availability under the Syndicated Line, based on its borrowing base of $139.1 million.The borrowing base up to the aggregate commitment generates availability in accordance with the value of the collateral at a given point. The availability under the Syndicated Line, which impacts total liquidity, is reduced by outstanding letters of credit that are not fully cash collateralized. As of September 30, 2025, the Syndicated Line had a weighted average interest rate of 7.58% and will mature on August 2, 2027 except with respect to two non-extending lenders which represent $73.3 million of the committed amount and will mature August 10, 2026.
During the third quarter of 2025, the Company executed an amendment to the Syndicated Line, which, among other things, modified certain financial covenants. Additional details regarding the amendment and the Syndicated Line are provided in Note 6 - Debtof the Notes to the Condensed Consolidated Financial Statements included in this report. The Syndicated Line includes customary representations, warranties, and covenants, and as of September 30, 2025, the Company was in compliance with all covenants under the facility.
Term loan
In 2024, the Company entered into a Credit Agreement (the "Credit Agreement") by and among the Company, GSH, Kennedy Lewis Agency Partners, LLC, as administrative agent, and the lenders party thereto (the "Lenders") pursuant to which the Lenders thereunder funded a $70.0 million subordinated term loan, the proceeds of which were used to redeem the outstanding convertible promissory notes from the Selling Stockholders.
The term loan has an outstanding balance of $67.4 million as of September 30, 2025, and matureson the earlier of December 11, 2030, the maturity date under the Company's Second Amended and Restated Credit Agreement, or the acceleration of indebtedness under the Syndicated Line. The weighted average interest rate of the loan was 11.59% as of September 30, 2025. Refer to Note 6 - Debtof the Notes to the Condensed Consolidated Financial Statements contained in this report for additional information.
During the third quarter of 2025, the Company executed an amendment to the term loan, which, among other things, modified certain financial covenants. Additional details regarding the amendment and the term loan are provided in Note 6 - Debtof the Notes to the Condensed Consolidated Financial Statements included in this report. The term loan includes customary representations, warranties, and covenants, and as of September 30, 2025, the Company was in compliance with all covenants under the facility.
Leases
The Company leases several office spaces in South Carolina under operating lease agreements with related parties, and one office space in North Carolina with a third party. In addition, the Company leases certain model homes from related parties and third parties. The leases have a remaining lease term of up to four years, some of which include options to extend on a month-to-month basis, and some of which include options to terminate the lease. These options are excluded from the calculation of the ROU asset and lease liability until it is reasonably certain that the option will be exercised.As of September 30, 2025, the future minimum lease payments required under these leases totaled $2.5 million, with $1.1 million payable within the next twelve months. Further information regarding Company's leases is provided in Note 9 - Commitments and contingencies of the Notes to the Condensed Consolidated Financial Statements.
Cash Flows
The following table summarizes UHG's cash flows for the periods indicated (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash flows used in operating activities | $ | (20,980) | $ | (11,960) | |||||||
| Net cash flows used in investing activities | (1,154) | (12,716) | |||||||||
| Net cash flows provided by (used in) financing activities | 23,690 | (6,178) | |||||||||
Operating activities
Net cash flows used in operating activities during the nine months ended September 30, 2025 was $21.0 million, as compared to $12.0 million for the nine months ended September 30, 2024. The difference in cash flows used period over period is an increase of $9.0 million. This change is primarily attributable to an increase in cash used in inventory of $46.0 million,partially offset by decreases in cash used in lot deposits of $15.9 million, and cash used in accounts payables and accrued liabilities of $20.4 million.
Investing activities
Net cash used in investing activities for the nine months ended September 30, 2025 was primarily attributable to purchases of property and equipment of $1.3 million. Net cash used in investing activities for the nine months ended September 30, 2024 was attributable to cash paid to acquire the homebuilding assets of Creekside Custom Homes of $12.7 million.
Financing activities
Net cash provided by financing activities for the nine months ended September 30, 2025was $23.7 millioncompared to cash used in financing activities of $6.2 million for the nine months ended September 30, 2024. The difference in cash flows period over period is $29.9 million. During the nine months ended September 30, 2025cash flows provided by financing activities was primarily attributable to net proceeds from the Syndicated Line of $70.8 million, partially offset by repayments of the Syndicated Line and land banking arrangements of $47.2 million. During the nine months ended September 30, 2024cash flows used in financing activities was primarily attributable to the repayment of homebuilding debt of $79.2 million, partially offset by proceeds from the Syndicated Line and land banking arrangements, net of debt issuance costs, of $73.0 million.
Critical Accounting Policies and Estimates
There have been no significant changes to the Company's critical accounting policies and estimates during the nine months ended September 30, 2025 as compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operationsincluded in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Off-Balance Sheet Arrangements
Land-light acquisition strategy
The Company's land-light strategy is accomplished in two ways - lot option contracts with third party and related party land developers and land bank option contracts. These option contracts grant the right, but not the obligation, to purchase land or lots at a future point in time at predetermined prices from various land developers and land bank partners. The Company has the right to cancel or terminate the option contracts at any time for any reason. The legal obligation and economic loss resulting from a cancellation or termination is limited to the amount of the deposits paid pursuant to such option contracts as well as capitalized pre-acquisition costs such as lot option fees paid to the land bank partner. In certain circumstances, the Company may have a completion obligation under development agreements with land bankers where the Company may be at-risk for certain cost overruns.
UHG's pipeline as of September 30, 2025 consists of approximately 7,700 lots, which includes lots that UHG may acquire from third party lot option contracts or land bank option contracts, in addition to lots that are owned or controlled by related parties, and which UHG expects to obtain the contractual right to acquire. The risk of loss pertaining to the aggregate purchase price of contractual commitments resulting from non-performance under finished lot purchase agreements is limited to approximately $41.9 millionin lot deposits and $9.4 million of capitalized pre-acquisition costs as of September 30, 2025.
Surety bonds and letters of credit
During the ordinary course of business, the Company enters into surety bonds and letters of credit arrangements with local municipalities, government agencies, and land developers. These arrangements relate to certain performance-related obligations and serve as security for certain land option agreements.
As of September 30, 2025, the Company had outstanding surety bonds and letters of credit totaling $9.2 million and $1.3 million, respectively. The Company believes it will fulfill its obligations under the related contracts and does not anticipate any material losses under these surety bonds or letters of credit.
United Homes Group Inc. published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 21:14 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]