United Homes Group Inc.
03/13/2026 | Press release | Distributed by Public on 03/13/2026 14:39
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 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 some third-time move-up single-family houses and custom builds. 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 December 31, 2025 consists of approximately 7,200 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 over 16,000 homes and currently builds in 57 active subdivisions at prices that generally range from approximately $200,000 to approximately $600,000. For the years ended December 31, 2025 and 2024, UHG had 1,227 and 1,399 net new orders, and generated approximately $406.7 million and $463.7 million in revenue on 1,192 and 1,431 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. UHG expects that continued operation of Homeowners Mortgage will add to UHG's revenue and EBITDA growth, improve buyer traffic conversion, and reduce backlog cancellation rates.
Fiscal year 2025 proved to be a challenging year for the homebuilding industry as market conditions reflected persistently elevated mortgage interest rates, affordability concerns, and overall macroeconomic and geopolitical uncertainties. These headwinds, coupled with delayed new community openings predominately in the first half of 2025, negatively impacted several financial and operational metrics in 2025, including net new orders and closings which decreased by 12.3% and 16.7%, respectively, compared to 2024. In response to the current environment, the Company continues to provide discounts on base home prices 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.
In 2025, the Company remained focused on the execution of several key initiatives targeted at accelerating sales and improving gross margins. These operational enhancements 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. The Company's ongoing efforts were able to offset heavier discounting during the year, which resulted in a slight increase in gross margin of 40 basis points when compared to the prior year.
UHG's revenues decreased from approximately $463.7 million for the year ended December 31, 2024 to $406.7 million for the year ended December 31, 2025. For the year ended December 31, 2025, UHG generated a net loss of approximately $16.3 million, which included deferred tax expense of $20.4 million related to a valuation allowance against the Company's net deferred tax assets, partially offset by a gain of $9.9 million related to the change in fair value of derivative liabilities, gross margin of 17.6%, adjusted gross margin of 19.7%, and adjusted EBITDA margin of 5.5%, representing a decrease of $63.2 million, and a percentage increase of 0.4%, and decreases of 0.2%, and 1.3%, respectively, from the year ended December 31, 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
Merger Agreement
On February 22, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Stanley Martin Homes, LLC ("Parent") and its wholly owned subsidiary, pursuant to which the subsidiary will merge with and into the Company, with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (the "Merger"). At the effective time of the Merger (the "Effective Time"), each share of the Company's Class A and Class B common stock that is issued and outstanding as of immediately prior to the Effective Time (other than shares to be canceled pursuant to the Merger Agreement and any shares held by stockholders who properly exercise dissenters' rights under applicable law) will be converted into the right to receive $1.18 in cash per share, without interest (the "Per Share Amount"). The Merger is expected to be completed in the second quarter of 2026 and is subject to customary closing conditions. If the Merger is consummated, the Company's common stock and warrants will be delisted from the Nasdaq Global Market and deregistered under the Securities Exchange Act of 1934, as amended, and the Company will become a privately held company. Refer to Note 21 - Subsequent Eventsof the Notes to the Consolidated Financial Statements and "Risk Factors" for additional information.
Factors Affecting the Comparability of UHG's Financial Condition and Results of Operations
UHG's historical financial condition and results of operations for the periods presented are not expected to be indicative of UHG's future performance, either from period to period or going forward as a result of the following reasons:
Change in Fair Value of Derivative Liabilities
Change in fair value of derivative liabilities includes certain stock options issued under the 2023 Plan, public and private warrants, common shares to be issued upon the achievement of certain future earnout conditions ("Earnout Shares"), and embedded derivatives associated with the Company's term loan that are required to be bifurcated. These instruments were recognized as derivative liabilities in accordance with ASC 815, Derivatives and Hedgingand are marked to market at the end of each reporting period. With the exception of the public warrants, the fair values of each derivative liability are determined using Level 3 inputs. The models used to fair value the derivative liabilities rely on significant assumptions and inputs, including the Company's stock price, which may cause volatility in the fair value each reporting period. Fluctuations in the fair value of derivative liabilities as a result of Level 3 inputs may impact the comparability of UHG's results of operations.
Loss on Extinguishment of Convertible Notes
Loss on extinguishment of convertible notes relates to the Company's redemption of its previously issued Convertible Notes on December 11, 2024 and is accounted for as a debt extinguishment in accordance with ASC 405, Liabilities. The loss represents the difference between the total reacquisition price, including the make-whole amount, and the net carrying amount of the Convertible Notes as of the redemption date. In connection with this transaction, the Company paid to the convertible note investors (a) an aggregate of $70.0 million, plus accrued and unpaid interest, and (b)
an aggregate of 10,168,850 shares of Class A Common Stock with a fair value of $4.41 per share. The loss on extinguishment is non-recurring in nature and is directly attributable to the early redemption of the Convertible Notes. As such, its recognition may impact the comparability of the Company's results of operations for the period, as similar charges are not expected to recur absent additional debt modification or extinguishment transactions.
Income Tax Expense
For the year ended December 31, 2025, income tax expense for the period is primarily attributable to the Company's recognition of a full valuation allowance of $20.4 million against its net deferred tax assets. The Company records deferred tax assets to the extent it is more likely than not that such assets will be realized based on an evaluation of available positive and negative evidence, including recent operating results and expectations regarding future taxable income. Based on this assessment, in 2025 management concluded that a full valuation allowance was appropriate.
The establishment of a full valuation allowance reflects management's judgment regarding the realizability of deferred tax assets at a specific point in time and is reevaluated each reporting period based on the Company's operating performance, future taxable income, and updated assessments of realizability. Accordingly, the resulting income tax expense for 2025 may impact the comparability of the Company's results of operations for the periods presented.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The following table presents summary results of operations for the periods indicated (dollar amounts in thousands except average sales price):
| Year Ended December 31, | Period over period | ||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | ||||||||||||||||||||
| Statements of Operations | |||||||||||||||||||||||
| Revenue, net of sales discounts | $ | 406,692 | $ | 463,714 | $ | (57,022) | (12.3) | % | |||||||||||||||
| Cost of sales | 334,955 | 383,884 | (48,929) | (12.7) | % | ||||||||||||||||||
| Selling, general and administrative expense | 71,766 | 74,700 | (2,934) | (3.9) | % | ||||||||||||||||||
| Other expense, net | (9,326) | (12,483) | 3,157 | (25.3) | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 1,057 | 1,529 | (472) | (30.9) | % | ||||||||||||||||||
| Goodwill impairment | (1,147) | - | (1,147) | NM | |||||||||||||||||||
| Loss on extinguishment of Convertible Notes | - | (45,642) | 45,642 | NM | |||||||||||||||||||
| Change in fair value of derivative liabilities | 9,940 | 88,653 | (78,713) | (88.8) | % | ||||||||||||||||||
| Income before taxes | $ | 495 | $ | 37,187 | $ | (36,692) | (98.7) | % | |||||||||||||||
| Income tax expense (benefit) | 16,747 | (9,719) | 26,466 | (272.3) | % | ||||||||||||||||||
| Net (loss) income | $ | (16,252) | $ | 46,906 | $ | (63,158) | (134.6) | % | |||||||||||||||
| Other Financial and Operating Data: | |||||||||||||||||||||||
|
Active communities at end of period(a)
|
57 | 46 | 11 | 23.9 | % | ||||||||||||||||||
| Home closings | 1,192 | 1,431 | (239) | (16.7) | % | ||||||||||||||||||
|
Average sales price of homes closed(b)
|
$ | 341,314 | $ | 329,111 | $ | 12,203 | 3.7 | % | |||||||||||||||
| Net new orders (units) | 1,227 | 1,399 | (172) | (12.3) | % | ||||||||||||||||||
| Cancellation rate | 13.0 | % | 11.4 | % | 1.6 | % | 14.4 | % | |||||||||||||||
| Backlog | 192 | 157 | 35 | 22.3 | % | ||||||||||||||||||
| Gross profit | $ | 71,737 | $ | 79,830 | $ | (8,093) | (10.1) | % | |||||||||||||||
|
Gross margin(c)
|
17.6 | % | 17.2 | % | 0.4 | % | 2.3 | % | |||||||||||||||
|
Adjusted gross profit(d)
|
$ | 80,127 | $ | 92,407 | $ | (12,280) | (13.3) | % | |||||||||||||||
|
Adjusted gross margin(c)
|
19.7 | % | 19.9 | % | (0.2) | % | (1.0) | % | |||||||||||||||
|
EBITDA(d)
|
$ | 18,013 | $ | 60,432 | $ | (42,419) | (70.2) | % | |||||||||||||||
|
EBITDA margin(c)
|
4.4 | % | 13.0 | % | (8.6) | % | (66.2) | % | |||||||||||||||
|
Adjusted EBITDA(d)
|
$ | 22,543 | $ | 31,636 | $ | (9,093) | (28.7) | % | |||||||||||||||
|
Adjusted EBITDA margin(c)
|
5.5 | % | 6.8 | % | (1.3) | % | (19.1) | % | |||||||||||||||
______________________________
NM - Not Meaningful
(a)UHG had 8 communities in closeout as of the year ended December 31, 2025 and 13 communities in closeout as of the year ended December 31, 2024. 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 year ended December 31, 2025 were $406.7 million, a decrease of $57.0 million, from $463.7 million for the year ended December 31, 2024. The decrease in revenues was primarily attributable to the decrease in production-built home closings, partially offset by an increase of 3.7%in average sales price of production-built homes.Additionally, for the year ended December 31, 2024closings included 60 build-to-rent units with significantly lower ASPs, compared to no build-to-rent closings for the year ended December 31, 2025. The decline in the total number
of homes closed as compared to the year ended December 31, 2024is isolated to the GSH South Carolina segment, which decreased 18.6%.
The following table provides a summary of the Company's revenues, home closings, and ASP in each of the reportable segments (revenues in thousands):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Period over period change | |||||||||||||||||||||||||||||||||
| Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
Revenues | Closings |
ASP1
|
|||||||||||||||||||||||||||
| GSH South Carolina | $ | 358,745 | 1,106 | $ | 324,389 | $ | 419,453 | 1,358 | $ | 313,814 | (14.5) | % | (18.6) | % | 3.4 | % | |||||||||||||||||||
| Rosewood | 32,847 | 52 | 639,157 | 25,750 | 39 | 660,395 | 27.6 | % | 33.3 | % | (3.2) | % | |||||||||||||||||||||||
|
Other2
|
15,100 | 34 | 444,118 | 18,511 | 34 | 541,500 | (18.4) | % | - | % | (18.0) | % | |||||||||||||||||||||||
| Total | $ | 406,692 | 1,192 | $ | 341,314 | $ | 463,714 | 1,431 | $ | 329,111 | (12.3) | % | (16.7) | % | 3.7 | % | |||||||||||||||||||
______________________
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 year ended December 31, 2025 was $335.0 million, a decrease of $48.9 million, from $383.9 million for the year ended December 31, 2024. The decrease in Cost of sales was largely attributable to a decrease in home closings of 16.7% compared to the same period in 2024.
Gross profit for the year ended December 31, 2025 was $71.7 million, a decrease of $8.1 million, from $79.8 million for the year ended December 31, 2024. Gross profit as a percentage of revenue for the year ended December 31, 2025 was 17.6%, an increase of 0.4%, as compared to 17.2% for the year ended December 31, 2024. The increase in gross profit as a percentage of revenue is attributableto a decrease in direct costs and interest as a percentage of revenue, partially offset by higher discounting.
Adjusted Gross Profit:Adjusted gross profit for the year ended December 31, 2025 was $80.1 million, a decrease of $12.3 million, as compared to $92.4 million for the year ended December 31, 2024. Adjusted gross profit as a percentage of revenue for the year ended December 31, 2025 was 19.7%, a decrease of 0.2%, as compared to 19.9% for the year ended December 31, 2024. Adjusted gross margin decreased slightly due primarily 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 year ended December 31, 2025 was $71.8 million, a decrease of $2.9 million, from $74.7 million for the year ended December 31, 2024. The decrease in selling, general and administrative expense was primarily attributable to a $5.8 milliondecrease in commission expense due to less broker incentives and fewer closings, a $1.1 millionreduction in severance expense related to the June 2024 RIF, partially offset by increases in transaction costs of $1.5 million, and salaries and wages of $2.6 million.
Other Expense, Net:Total other expense, net for the year ended December 31, 2025 was $9.3 million, a decrease of $3.2 million as compared to $12.5 million for the year ended December 31, 2024. The decrease was primarily driven by a $3.3 million reduction in interest expense due to the refinance of the Company's corporate debt.
Equity in Net Earnings from Investment in Joint Venture:Equity in net earnings from investment in joint venture for the year ended December 31, 2025 was $1.1 million, a decrease of $0.4 million, as compared to $1.5 million for the year ended December 31, 2024.
Goodwill Impairment: Goodwill impairment for the year ended December 31, 2025 was $1.1 million compared to no goodwill impairment for the year ended December 31, 2024. During the fourth quarter of 2025, management identified indicators of potential impairment associated with the Company's business acquisitions, including a decline in market capitalization and a decline in performance compared to the original projected underwriting of the acquisitions. Consequently, the Company performed a quantitative impairment analysis in accordance with ASC 350, Intangibles-Goodwill and Otheras of December 1, 2025. As a result of the quantitative assessment, the Company recorded a total impairment charge of $1.1 million for the year ended December 31, 2025.
Loss on Extinguishment of Convertible Notes: Loss on extinguishment of Convertible Notes for the year ended December 31, 2024 was $45.6 million and is attributable to the redemption of the Convertible Notes that occurred in
December 2024. As a result of the redemption, the Company paid to the Convertible Note Investors (a) an aggregate of $70.0 million, plus accrued and unpaid interest through the redemption date, and (b) an aggregate of 10,168,850 shares of Class A Common Stock with a fair value of $4.41 per share. The majority of the loss on extinguishment of Convertible Notes is attributable to the make-whole payment of $37.1 million.
Change in Fair Value of Derivative Liabilities:Change in fair value of derivative liabilities for the year ended December 31, 2025 was a gain of $9.9 million as compared to a gain of $88.7 million for the year ended December 31, 2024. Under ASC 815, Derivatives and Hedging, derivative liabilities are marked to market each reporting period with changes recognized on the consolidated statements of operations. The overall increase is primarily attributable to changes in the fair value of the Earnout Shares, which fluctuates each period due to changes in the Company's stock price.
Income Before Taxes: The following table provides a summary of the Company's income before taxes by reportable segment (in thousands, except percentage change):
| Year Ended December 31, | Period over period | ||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | ||||||||||||||||||||
| GSH South Carolina | $ | 14,562 | $ | 30,154 | $ | (15,592) | (51.7) | % | |||||||||||||||
| Rosewood | (1,103) | (1,475) | 372 | 25.2 | % | ||||||||||||||||||
|
Other1
|
(1,205) | (2,939) | 1,734 | 59.0 | % | ||||||||||||||||||
| Segment total | 12,254 | 25,740 | (13,486) | (52.4) | % | ||||||||||||||||||
|
Corporate2
|
(22,756) | (33,093) | 10,337 | 31.2 | % | ||||||||||||||||||
| Equity in net earnings from investment in joint venture | 1,057 | 1,529 | (472) | (30.9) | % | ||||||||||||||||||
| Loss on extinguishment of Convertible Notes | - | (45,642) | 45,642 | NM | |||||||||||||||||||
| Change in fair value of derivative liabilities | 9,940 | 88,653 | (78,713) | (88.8) | % | ||||||||||||||||||
| Consolidated income before taxes | $ | 495 | $ | 37,187 | $ | (36,692) | (98.7) | % | |||||||||||||||
___________________
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.
NM - Not Meaningful
Income before taxes for the year ended December 31, 2025decreased $36.7 millionfrom the year ended December 31, 2024. The decrease was primarily due to a decrease in the change in fair value of derivative liabilities of $78.7 millionand a decrease in gross profit of $8.1 million, partially offset by the loss on extinguishment of Convertible Notes in the prior period of $45.6 millionand a $3.3 million reduction in interest expense in Other expense, net.
GSH South Carolina: The $15.6 milliondecrease in income before taxes for the year ended December 31, 2025compared to the same period in the prior year was primarily due to a decrease in closings of 18.6%, 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 $0.4 millionincrease in pre-tax profitability for the year ended December 31, 2025compared to the same period in the prior year was primarily attributable to an increase of 33.3% in home closings coupled with a 5.5% increase in gross margin, partially offset by increased operating expenses and $0.6 million of goodwill impairment incurred in the year ended December 31, 2025.
Other: The $1.7 millionincrease in pre-tax profitability for Raleigh for the year ended December 31, 2025compared to the same period in the prior year was primarily attributable to a $2.2 million decrease in operating expenses caused by reduced severance and salaries costs, partially offset by $0.5 million in goodwill impairment incurred in the year ended December 31, 2025.
Income Tax Expense (Benefit):Income tax expense for the year ended December 31, 2025 was $16.7 million as compared to an income tax benefit of $9.7 million for the year ended December 31, 2024. The Company's estimated annual effective tax rate as of December 31, 2025 is 3,351.3% as compared to (26.1)% as of December 31, 2024. The change in the estimated annual effective tax rate was primarily driven by the establishment of a full valuation allowance of $20.4 million against the Company's net deferred tax assets, and a $36.7 million reduction in income before taxes.
Net New Orders: Net new orders for a period is gross sales of homes less any customer cancellations received during the same period. Net new orders for the year ended December 31, 2025 were 1,227units, a decreaseof 172 units, from 1,399units for the year ended December 31, 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 year ended December 31, 2025 was 13.0%, an increaseof 1.6%, from 11.4%for the year ended December 31, 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 December 31, 2025was 192 units, an increase of 35 units, from 157 units as of December 31, 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 December 31, 2025 | As of December 31, 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 | 176 | $ | 59,042 | $ | 335,466 | 144 | $ | 49,537 | $ | 344,007 | 22.2 | % | 19.2 | % | (2.5) | % | |||||||||||||||||||
| Rosewood | 13 | 7,939 | 610,692 | 10 | 7,134 | 713,400 | 30.0 | % | 11.3 | % | (14.4) | % | |||||||||||||||||||||||
|
Other3
|
3 | 1,154 | 384,667 | 3 | 1,615 | 538,333 | - | % | (28.5) | % | (28.5) | % | |||||||||||||||||||||||
| Total | 192 | $ | 68,135 | $ | 354,870 | 157 | $ | 58,286 | $ | 371,248 | 22.3 | % | 16.9 | % | (4.4) | % | |||||||||||||||||||
________________________
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.
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).
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenue, net of sales discounts | $ | 406,692 | $ | 463,714 | |||||||
| Cost of sales | 334,955 | 383,884 | |||||||||
| Gross profit | $ | 71,737 | $ | 79,830 | |||||||
| Interest expense in cost of sales | 5,648 | 8,563 | |||||||||
|
Amortization in homebuilding cost of sales(a)
|
2,668 | 3,049 | |||||||||
| Abandoned project costs | 74 | 508 | |||||||||
| Severance expense in cost of sales | - | 348 | |||||||||
| Non-recurring remediation costs | - | 109 | |||||||||
| Adjusted gross profit | $ | 80,127 | $ | 92,407 | |||||||
|
Gross margin(b)
|
17.6 | % | 17.2 | % | |||||||
|
Adjusted gross margin(b)
|
19.7 | % | 19.9 | % | |||||||
______________________________
(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, goodwill impairment, change in fair value of derivative liabilities, loss on extinguishment of Convertible Notes, and non-recurring remediation costs. 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).
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net (loss) income | $ | (16,252) | $ | 46,906 | |||||||
| Interest expense in cost of sales | 5,648 | 8,563 | |||||||||
| Interest expense in other expense, net | 9,180 | 12,439 | |||||||||
| Depreciation and amortization | 2,420 | 1,945 | |||||||||
| Taxes | 17,017 | (9,421) | |||||||||
| EBITDA | $ | 18,013 | $ | 60,432 | |||||||
| Stock-based compensation expense | 6,563 | 6,476 | |||||||||
| Transaction cost expense | 3,893 | 2,428 | |||||||||
|
Amortization in homebuilding cost of sales(a)
|
2,668 | 3,049 | |||||||||
| Severance expense | 125 | 1,645 | |||||||||
| Abandoned project costs | 74 | 508 | |||||||||
| Goodwill impairment | 1,147 | - | |||||||||
| Change in fair value of derivative liabilities | (9,940) | (88,653) | |||||||||
| Loss on extinguishment of Convertible Notes | - | 45,642 | |||||||||
| Non-recurring remediation costs | - | 109 | |||||||||
| Adjusted EBITDA | $ | 22,543 | $ | 31,636 | |||||||
|
EBITDA margin(b)
|
4.4 | % | 13.0 | % | |||||||
|
Adjusted EBITDA margin(b)
|
5.5 | % | 6.8 | % | |||||||
______________________________
(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 December 31, 2025, UHG had approximately $24.4 million in cash and cash equivalents, an increase of $1.8 million, from $22.6 million as of December 31, 2024. As of December 31, 2025 and 2024, UHG had approximately$56.4 million and $96.4 million, respectively,in unused committed capacity, calculated in accordance with the Syndicated Line.
In December 2024, the Company redeemed the Convertible Notes by paying the outstanding principal and interest amounts plus a make-whole amount, consisting of (a) an aggregate of $70.0 millionplus accrued and unpaid interest, and (b) an aggregate of 10,168,850 shares of Class A Common Stock with a fair value of $4.41 per share. The Company financed the transaction, in part, by entering into a Credit Agreement with a third party that provides for a term loan of $70.0 million.Refer to Note 9 - Debtand Note 14 - Convertible Notes Payablefor additional information.
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 or future events of default on the Company's existing debt.
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 December 31, 2025, the Company had lot deposits of $40.5 million related to option contracts with an aggregate remaining purchase price of $270.6 million. Refer to Note 2 - Variable Interest Entitiesof the Notes to the 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 $78.2 million as of December 31, 2025. The Syndicated Line also includes a $2.0 million letter of credit sub-facility under the same terms and conditions. The Company had $56.4 million of availability under the Syndicated Line, based on its borrowing base of $136.0 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 December 31, 2025, the Syndicated Line had a weighted average interest rate of 7.48% 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 9 - Debtof the Notes to the Consolidated Financial Statements included in this report. As of December 31, 2025, the Company was in compliance with all covenants set forth in the Syndicated Line.
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 $67.5 million as of December 31, 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 11.52% as of December 31, 2025. Refer to Note 9 - Debtof the Notes to the 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 9 - Debtof the Notes to the Consolidated Financial Statements included in this report. The term loan includes customary representations, warranties, and covenants by the Company that are described in Note 9 - Debtof the Notes to the Consolidated Financial Statements contained in this report. As of December 31, 2025, the Company was in compliance with all covenants set forth in the Credit Agreement.
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 three 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 December 31, 2025, the future minimum lease payments required under these leases totaled $2.2 million, with $0.9 million payable within 12 months. Further information regarding the Company's leases is provided in Note 13 - Commitments and Contingencies of the Notes to the Consolidated Financial Statements contained in this report.
Cash Flows
The following table summarizes the Company's cash flows for the periods indicated (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash flows (used in) provided by operating activities | $ | (19,580) | $ | 15,444 | |||||||
| Net cash flows used in investing activities | (1,890) | (12,586) | |||||||||
| Net cash flows provided by (used in) financing activities | 21,640 | (33,980) | |||||||||
Operating Activities
Net cash used in operating activities was $19.6 million for the year ended December 31, 2025, as compared to cash provided by operating activities of $15.4 million for the year ended December 31, 2024. The difference in cash flows year over year is $35.0 million.During the year ended December 31, 2025, cash used in operating activities was driven by an increase in inventory of $33.2 million due to an increase in the Company's active community count from 46 to 57, partially offset by an increase in net income adjusted for non-cash transactions of $1.4 million, and a decrease in cash used in accounts payable and other accrued expenses and liabilities of $10.0 million. During the year ended December 31, 2024, cash flows provided by operating activities was driven by cash provided by inventory of $45.6 million due to the Company's efforts to move aged inventory and net income adjusted for non-cash transactions of $2.9 million, partially offset by an increase in cash used in accounts payable and lot deposits of $21.2 million and $12.1 million, respectively.
Investing Activities
Net cash used in investing activities was $1.9 million for the year ended December 31, 2025, as compared to $12.6 million for the year ended December 31, 2024. The difference in cash flows year over year is $10.7 million. The decrease in cash used in investing activities is primarily attributable to cash paid to acquire Creekside Custom Homes of $12.7 million in 2024, partially offset by an increase in purchases of property and equipment, specifically model home furnishings.
Financing Activities
Net cash provided by financing activities was $21.6 million for the year ended December 31, 2025, as compared to net cash used in financing activities of $34.0 million for the year ended December 31, 2024. The difference in cash flows year over year is $55.6 million. During the year ended December 31, 2025 cash flows provided by financing activities were primarily attributable to net proceeds from the Syndicated Line of $28.0 million, partially offset by repayments of financing liabilities from real estate inventory not owned of $6.3 million. During the year ended December 31, 2024, net cash flows used in financing activities were primarily due to net cash used of $2.9 million to redeem the Convertibles Notes and issue the term loan, net repayments of $35.0 million to the Syndicated Line and other debt, and debt issuance costs of $2.8 million, partially offset by net proceeds of $6.7 million related to financing liabilities from real estate inventory not owned.
Critical Accounting Policies and Estimates
UHG prepared the consolidated financial statements in accordance with GAAP. Its critical accounting estimates are those that it believes have the most significant impact to the presentation of its financial position and results of operations and that require the most difficult, subjective or complex judgments. In many cases, the accounting treatment of a transaction is specifically dictated by GAAP without the need for the application of judgment.
In certain circumstances, however, the preparation of financial statements in conformity with GAAP requires UHG to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
While UHG's significant accounting policies are more fully described in Note 1 - Nature of Business and Summary of Significant Accounting Policiesof the Notes to the Consolidated Financial Statements contained in this report, UHG believes the following topics reflect the critical accounting policies and the more significant judgment and estimates used in the preparation of the consolidated financial statements.
Revenue Recognition
UHG recognizes revenue upon meeting its performance obligations. Home sale transactions typically have a single performance obligation to deliver a completed home to the homebuyer which is generally satisfied at a point in time when control of the home is transferred to the customer. Control is considered to be transferred to the customer at the time of closing when the title and possession of the home are received by the homebuyer. Little to no estimation is involved in recognizing such revenues. Revenue is reported net of any discounts and incentives.
Revenues from home sales in which the buyer retains title to the homesite while UHG builds the home are recognized over time based on the percentage of completion of the home construction as that is considered to represent the transfer of control. Percentage of completion is based on costs incurred as compared to total estimated project costs.
Real Estate Inventory and Cost of Home Sales
Inventory includes pre-acquisition land costs, land under development, developed lots, homes under construction, and finished homes.
UHG relies on certain estimates to determine its construction and land development costs. Construction and land costs are comprised of direct and allocated costs, including estimated future costs. In determining these costs, UHG compiles project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred. Actual results can differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, slower absorptions, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated issues encountered during construction and development and other factors beyond UHG's control. To address uncertainty in these budgets, UHG assesses, updates and revises project budgets on a regular basis, utilizing the most current information available to estimate home construction and land development costs.
Developed lot and pre-acquisition land costs are typically allocated to individual residential lots on a per lot basis based on specific costs incurred for the acquisition of the lot. At the time construction of the home begins, developed lot and pre-acquisition land costs are transferred to homes under construction within inventory. Sold units are expensed to cost of sales based on a specific identification basis. Cost of sales consists of specific construction costs of each home, estimated warranty costs, allocated developed lot costs, and closing costs applicable to the home.
Inventories are carried at the lower of accumulated cost or net realizable value. UHG periodically reviews the performance and outlook of its inventories for indicators of potential impairment.
UHG records rebates with certain suppliers as a reduction in cost of sales based on a specific identification basis. At the time of closing, costs that were incurred as part of the construction of the home but not paid at the time of closing are accrued. The accrual is recorded within cost of sales.
Stock-Based Compensation
As of December 31, 2025, the Company has four types of stock-based compensation outstanding: stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PSUs") with a market condition and stock warrants. Stock option, RSU, and PSU awards are expensed on a straight-line basis over the requisite service period of the entire award from the date of grant through the period of the last separately vesting portion of the grant. For grants that include graded vesting and either a market or performance condition, the Company utilizes the graded vesting method to recognize compensation expense. The Company accounts for forfeitures when they occur. The Company's stock warrant awards do not contain a service condition and were expensed on the grant date.
The fair value of stock option awards, granted or modified, is determined on the grant date (or modification or acquisition dates, if applicable) at fair value, using the Black-Scholes option pricing model. The fair value and requisite service period of PSU awards with a market condition are determined using a Monte Carlo simulation model. These models require the input of highly subjective assumptions, including the option's expected term and stock price volatility. The grant date fair value of the RSUs is the closing price of UHG's common stock on the date of the grant. Refer to Note 15 - Stock-Based Compensationof the Notes to the Consolidated Financial Statements contained in this report for additional information.
Derivative Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Derivative liabilities are recognized at fair value and are subsequently remeasured at each reporting date with changes in fair value recorded in the Company's consolidated statements of operations. Depending on the nature of the derivative liability, the Company may utilize, with the assistance of a third party valuation expert, Monte Carlo simulation models, Black-Scholes option pricing models, or discounted cash flow models, each adjusted for instrument-specific terms. Due to the nature of the Company's derivative instruments, the Company may use Level 3 inputs for estimating fair value.
Changes in estimates and assumptions used to fair value the Company's derivative instruments from period to period could be material to the Company's results of operations and financial condition.
Refer to Note 5 - Fair Value Measurement, Note 9 - Debt, Note 15 - Stock-Based Compensation, Note 16 - Earnout Shares, Note 17 - Warrant Liability of the Notes to the Consolidated Financial Statements for additional information related to those instruments that the Company accounts for as a derivative liability.
Business Acquisitions and Valuation of Contingent Consideration
The Company accounts for business acquisitions using the acquisition method. Under ASC 805, Business Combinations, a business combination occurs when an entity obtains control of a "business." The Company determines whether or not the gross assets acquired meet the definition of a business. If they meet this criteria, the Company accounts for the transaction as a business acquisition. If they do not meet this criteria the transaction is accounted for as an asset acquisition. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issuance of debt or equity securities. Any contingent consideration is measured at fair value at the date of acquisition and is based on expected cash flow of the acquisition target discounted over time using an observable market discount rate. The Company generally utilizes outside valuation experts to determine the amount of contingent consideration. Contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in Other income (expense) in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and liabilities assumed in business acquisitions. In accordance with ASC 350, Intangibles-Goodwill and Other,the Company analyzes goodwill for impairment on at least an annual basis as of October 1 of each year using a two-step process. The first step is a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, then a quantitative assessment is performed to determine the reporting unit's fair value. The Company may, at its election, skip the qualitative assessment and move directly to the second step. In the quantitative assessment, the evaluation of goodwill for possible impairment includes estimating fair value using one or a combination of valuation techniques, including discounted expected future cash flows. These valuation techniques require significant judgments including estimation of future cash flows, which is dependent on internal projections, estimation of the long-term growth rate for the business, and determination of the respective weighted-average cost of capital. Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce a materially different result.
If the reporting unit's carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit's fair value. During the fourth quarter of 2025, management identified indicators of goodwill impairment, such as, decline in market capitalization and reduced operating performance. Based on these factors, the Company performed a quantitative impairment test in accordance with ASC 350, Intangibles-Goodwill and Other. The fair value of the reporting units were estimated using both and income approach (discounted cash flow model) and market approaches (guideline public company method and guideline transaction method), consistent with valuation methods used historically. The quantitative impairment assessment requires the application of a number of significant assumptions, including estimates of future revenue growth rates, EBITDA margins, net working capital and capital expenditure requirements, long term growth rate, discount rates, and market multiples. As a result of the quantitative assessment, the Company recorded a total impairment charge of $1.1 million for the year ended December 31, 2025. There was no goodwill impairment recorded during the year ended December 31, 2024.
If the Company's market capitalization continues to deteriorate or if factors utilized in the impairment test deteriorate, the Company may have to record additional impairment charges in future periods.
Recently Issued/Adopted Accounting Standards
Refer to the sections titled "Recently Adopted Accounting Pronouncements" and "Recent Accounting Pronouncements Not Yet Adopted" in Note 1 of the Notes to the Consolidated Financial Statements contained in this report, for more information.
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 land 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 December 31, 2025 consists of approximately 7,200 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 $40.5 million in lot deposits and $13.5 million of capitalized pre-acquisition land costs as of December 31, 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 December 31, 2025, the Company had outstanding surety bonds and letters of credit totaling $9.1 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.
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