CENTURY COMMUNITIES, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)

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

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

?economic changes, either nationally or in the markets in which we operate,
including increased interest rates, inflation, and employment levels;
?shortages of or increased prices for labor, land or raw materials, including
lumber, used in housing construction and resource shortages;
?a downturn in the homebuilding industry, including a reduction in demand or a
decline in real estate values or market conditions resulting in an adverse
impact on our business, operating results and financial condition, including an
impairment of our assets;
?changes in assumptions used to make industry forecasts, population growth rates
or trends affecting housing demand or prices;
?continued volatility and uncertainty in the credit markets and broader
financial markets;
?the impact of the COVID-19 pandemic and measures taken in response to the
COVID-19 pandemic on our business operations, operating results and financial
condition, as well as the general economy and housing market in particular;
?our future operating results and financial condition;
?our business operations;
?changes in our business and investment strategy;
?availability and price of land to acquire, and our ability to acquire such land
on favorable terms or at all;
?availability, terms and deployment of capital;
?availability or cost of mortgage financing or an increase in the number of
foreclosures in the market;
?delays in land development or home construction resulting from adverse weather
conditions or other events outside our control;
?impact of construction defect, product liability, and/or home warranty claims,
including the adequacy of accruals and the applicability and sufficiency of our
insurance coverage;
?changes in, or the failure or inability to comply with, governmental laws and
regulations;
?the timing of receipt of municipal, utility and other regulatory approvals and
the opening of projects;
?the impact and cost of compliance with evolving environmental, health and
safety and other laws and regulations and third-party challenges to required
permits and other approvals and potential legal liability in connection
therewith;
?the degree and nature of our competition;
?our leverage, debt service obligations and exposure to changes in interest
rates and our ability to refinance our debt when needed or on favorable terms;
?our ability to continue to fund and succeed in our mortgage lending business
and the additional risks involved in that business;
?availability of qualified personnel and contractors and our ability to retain
key personnel and contractor relationships;
?our ability to pay dividends in the future;
?taxation and tax policy changes, tax rate changes, new tax laws, new or revised
tax law interpretations or guidance; and
?changes in United States generally accepted accounting principles (which we
refer to as "GAAP").

Forward-looking statements are based on our beliefs, assumptions and
expectations of future events, taking into account all information currently
available to us. Forward-looking statements are not guarantees of future events
or of our performance. These beliefs, assumptions and expectations can change as
a result of many possible events or factors, not all of which are known to us.
Some of these events and factors are described above and in "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in "Part I, Item 1A. Risk Factors" in our Annual Report on Form
10-K, and other risks and uncertainties detailed in this report, including "Part
II, Item 1A. Risk Factors", and our other reports and filings with the SEC. If a
change occurs, our business, financial condition, liquidity, cash flows and
results of operations may vary materially from those expressed in or implied by
our forward-looking statements. New risks and uncertainties arise over time, and
it is not possible for us to predict the occurrence of those matters or the
manner in which they may affect us. Except as required by law, we are not
obligated to, and do not intend to, update or
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revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Therefore, you should not rely on these
forward-looking statements as of any date subsequent to the date of this Form
10-Q.
As used in this Form 10-Q, references to "we," "us," "our," "Century" or the
"Company" refer to Century Communities, Inc., a Delaware corporation, and,
unless the context otherwise requires, its subsidiaries and affiliates.
The following discussion and analysis of our financial condition and results of
operations is intended to help the reader understand our Company, business,
operations and present business environment and is provided as a supplement to,
and should be read in conjunction with, our condensed consolidated financial
statements and the related notes to those statements included elsewhere in this
Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December
31, 2021. We use certain non-GAAP financial measures that we believe are
important for purposes of comparison to prior periods. This information is also
used by our management to measure the profitability of our ongoing operations
and analyze our business performance and trends. Some of the numbers included
herein have been rounded for the convenience of presentation.

Insight

Century is engaged in the development, design, construction, marketing and sale
of single-family attached and detached homes in 17 states. In many of our
projects, in addition to building homes, we are responsible for the entitlement
and development of the underlying land. We build and sell homes under our
Century Communities and Century Complete brands.
Our Century Communities brand offers a wide range of buyer profiles including:
entry-level, first and second time move-up, and lifestyle homebuyers, and
provides our homebuyers with the ability to personalize their homes through
certain option and upgrade opportunities. Our Century Complete brand targets
entry-level homebuyers, primarily sells homes through retail studios and the
internet and generally provides no option or upgrade opportunities. We now have
six states where both Century brands have a presence and we believe there are
more opportunities for increased penetration within our over 45 high-growth
markets to enable both brands to benefit from increased scale and enhanced
operational efficiencies.
Our homebuilding operations are organized into the following five reportable
segments: West, Mountain, Texas, Southeast, and Century Complete. Our indirect
wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, and IHL
Home Insurance Agency, LLC, which provide mortgage, title, and insurance
services, respectively, primarily to our homebuyers have been identified as our
Financial Services segment. Additionally, our wholly owned subsidiary, Century
Living, LLC, is engaged in the development, construction and management of
multi-family rental properties, primarily in Colorado, with the intent to
dispose of properties shortly after achieving stabilized rental operations.

Century Living, LLC is included in our Business segment.

While we offer homes that appeal to a broad range of entry-level, move-up, and
lifestyle homebuyers, our offerings are heavily weighted towards providing
affordable housing options in each of our homebuyer segments. Additionally, we
prefer building move-in-ready homes over built-to-order homes, which we believe
allows for a faster construction process, advantageous pricing with
subcontractors, and shortened time period from home sale to home delivery, thus
allowing us to more appropriately price the homes and deploy our capital. Of the
5,061 homes delivered during the first six months of 2022, approximately 77% of
our deliveries were made to entry-level homebuyers and approximately 96% of
homes delivered were built as move-in ready homes.
During the second quarter of 2022 we experienced a moderation of sales pace
across our markets resulting in a decrease of 28.4% in our net new home
contracts as compared to the prior year period. This decrease in our sales pace
was consistent with second quarter 2022 trends seen in the overall housing
market, as increases in interest rates on mortgages, rising inflation, and
macro-economic uncertainty caused demand for home sales to decrease from the
historically strong market conditions experienced since the second quarter of
2020.
We anticipate the homebuilding markets in each of our operating segments will
continue to be tied to both the local economy and the macro-economic
environment. We believe future demand for our homes is uncertain as future
economic and market conditions are uncertain, in particular with respect to
inflation; the impact of raising the federal funds interest rate by the Federal
Reserve; the extent to which and how long COVID-19 and related government
directives, actions, and economic relief efforts will impact the U.S. economy,
financial markets, credit and mortgage markets; consumer confidence; interest
rates; availability and cost of mortgage loans to homebuyers; wage growth;
household formations; levels of new and existing homes for sale; prevailing home
prices, availability and cost of land, labor and construction materials;
demographic trends; housing demand; and other factors, including those described
elsewhere in this Form 10-Q. Specifically, the recent rise in interest rates
increases the costs of owning a home and adversely affects the purchasing power
of our customers. Increased interest rates also could decrease homebuyer
confidence and hinder not only demand for our homes, but also our ability to
realize our backlog. A decrease in demand for our homes or an increase in
cancellations due to increased interest rates or otherwise would adversely
affect our operating results in future periods, including our net sales, home
deliveries, gross margin, origination volume of and revenues from our Financial
Services segment, and net income. As a result, our past performance may not be
indicative of our future results.
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Despite the future macro-economic uncertainty, we believe we are well-positioned
to benefit from the ongoing shortage of both new and resale homes available for
purchase in our key markets and the favorable demographics that support the need
for new housing. Subject to further deteriorating market conditions, we believe
our operations are well-positioned for future growth as a result of the markets
in which we operate, our product offerings which both span the home buying
segment, and focus on affordable price points, and our current and future
inventories of attractive land positions. As we have grown, we have continued to
focus on maintaining an appropriate balance of home and land inventories in
relation to anticipated future demand, as well as prudent leverage, and, as a
result, we believe we are well positioned to continue to execute on our strategy
in order to grow and optimize stockholder returns.

Operating results

During the three and six months ended June 30, 2022, we generated $213.6 million
and $402.4 million in income before income tax expense, respectively, and net
income of $158.7 million, or $4.78 per diluted share, and $301.2 million, or
$8.97 per diluted share, respectively, representing substantial increases as
compared to the respective prior year periods, and resulting in a 33.7% return
on equity on an annualized basis for the three months ended June 30, 2022.
During the first six months of 2022, we paid cash dividends to our stockholders
of $0.20 per share, and we also returned capital to our stockholders via share
repurchases of 1.8 million shares for $98.3 million or a weighted average price
of $54.46 per share.

Our second quarter 2022 financial results for the second quarter are reflective
of the strength of our markets during previous quarters when the homes were
contracted for which allowed us to pass on higher costs through higher selling
prices and thereby positively affecting our margins during the first six months
of 2022. While we continued to experience labor and raw material shortages and
municipal and utility delays in many of our markets, the severity of the
shortages and delays moderated during the second quarter of 2022.

During the three and six months ended June 30, 2022, we delivered 2,713 and
5,061 homes, respectively, with an average sales price of $418.2 thousand and
$419.5 thousand, respectively. Average sales price increased 15.3% and 18.9%
during the three and six months ended June 30, 2022 as compared to the
respective prior year period, driving homebuilding revenues of $1.1 billion and
$2.1 billion, respectively, representing increases of 12.9% and 7.3% over the
respective prior year period. The number of homes delivered represent decreases
of 2.1% and 9.1%, respectively, as compared to the respective prior year period,
which were primarily driven by the timing of new community openings. As of June
30, 2022, we had a backlog of 4,767 homes, a 7.2% increase as compared to June
30, 2021, representing approximately $2.0 billion in sales value, and a 12.2%
increase as compared to June 30, 2021.

During the three and six months ended June 30, 2022, we generated financial
services revenue of $22.8 million and $49.1 million, respectively, representing
decreases of 23.7% and 22.7% over the respective prior year period, driven by a
reduced number of mortgages originated, as well as reduced gain on sale margins
on loans sold to third parties.

We ended the second quarter of 2022 with $141.0 million outstanding under our
revolving line of credit, $78.0 million of cash and cash equivalents, $82.5
million of cash held in escrow, and a net homebuilding debt to net capital ratio
of 33.6%. Additionally, we increased our land acquisition and development
activities during the first six months of 2022 to bolster our lot pipeline and
support future community growth, which resulted in 75,551 lots owned and
controlled at June 30, 2022, a 15.2% increase as compared to June 30, 2021 and a
5.4% decrease as compared to December 31, 2021.

In the six months ended June 30, 2022our Century Living operations have begun construction on a 425-unit multi-family project in Lone Tree, Coloradowhich we expect to be available for charter in 2024.


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The following table summarizes our results of operations for the three and six
months ended June 30, 2022 and 2021.
(in thousands, except per
share amounts)                      Three Months Ended June 30,             Six Months Ended June 30,
                                        2022              2021               2022              2021
Consolidated Statements of
Operations:
Revenue
Home sales revenues              $     1,134,535      $ 1,004,789       $   2,122,950     $   1,964,068
Land sales and other revenues              8,810            8,258              10,440            23,928
Total homebuilding revenues            1,143,345        1,013,047           2,133,390         1,987,996
Financial services revenues               22,797           29,865              49,102            63,485
Total revenues                         1,166,142        1,042,912           2,182,492         2,051,481
Homebuilding cost of revenues
Cost of home sales revenues            (814,895)        (764,668)         (1,523,968)       (1,521,175)
Cost of land sales and other
revenues                                 (8,012)          (7,000)           

(8,858) (17,020)

                                       (822,907)        (771,668)         (1,532,826)       (1,538,195)
Financial services costs                (14,186)         (18,168)            (29,340)          (36,469)
Selling, general, and
administrative                         (109,158)         (99,656)           (210,797)         (191,807)
Inventory impairment and other                 -             (41)                   -              (41)
Other income (expense)                   (6,243)          (1,245)             (7,105)           (1,786)
Income before income tax
expense                                  213,648          152,134             402,424           283,183
Income tax expense                      (54,980)         (34,224)           (101,260)          (63,621)
Net income                       $       158,668      $   117,910       $     301,164     $     219,562
Earnings per share:
Basic                            $          4.83      $      3.49       $        9.08     $        6.52
Diluted                          $          4.78      $      3.47       $        8.97     $        6.47
Adjusted diluted earnings per
share(1)                         $          4.78      $      3.47       $        8.97     $        6.47
Other Operating Information
(dollars in thousands):
Number of homes delivered                  2,713            2,771               5,061             5,568
Average sales price of homes
delivered                        $         418.2      $     362.6       $       419.5     $       352.7
Homebuilding gross margin
percentage(2)                               28.2 %           23.9 %              28.2 %            22.5 %
Adjusted homebuilding gross
margin excluding interest and
inventory impairment and other
(1)                                         29.4 %           25.7 %              29.4 %            24.4 %
Backlog at end of period,
number of homes                            4,767            4,446               4,767             4,446
Backlog at end of period,
aggregate sales value            $     1,977,560      $ 1,762,465       $   1,977,560     $   1,762,465
Average sales price of homes
in backlog                       $         414.8      $     396.4       $       414.8     $       396.4
Net new home contracts                     2,233            3,120               5,177             6,575
Selling communities at period
end                                          213              184                 213               184
Average selling communities                  202              179                 200               187
Total owned and controlled lot
inventory                                 75,551           65,610              75,551            65,610
Adjusted EBITDA(1)               $       229,720      $   173,258       $     433,383     $     325,379
Adjusted income before income
tax expense(1)                   $       213,648      $   152,175       $     402,424     $     283,224
Adjusted net income(1)           $       158,668      $   117,987       $     301,164     $     219,594
Net homebuilding debt to net
capital (1)                                 33.6 %           23.0 %              33.6 %            23.0 %


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

(2) Homebuilding gross margin percentage includes inventory impairment, which is
included within inventory impairment and other on our condensed consolidated
financial statements. No inventory impairments were recognized for the three and
six months ended June 30, 2022 and we recognized nominal inventory impairment
for the three and six months ended June 30, 2021.


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Results of Operations by Segment
(dollars in thousands)
                                       Average Sales Price of                                    Income before Income Tax
               New Homes Delivered        Homes Delivered            Home Sales Revenues                 Expense
                Three Months Ended       Three Months Ended                                      Three Months Ended June
                     June 30,                 June 30,           Three Months Ended June 30,               30,
                 2022        2021         2022         2021           2022            2021          2022          2021
West                 426         385   $     689.4   $  616.5   $        293,668   $   237,359   $    77,945   $   40,903
Mountain             458         611         600.9      473.1            275,214       289,058        51,500       55,814
Texas                363         477         337.5      273.9            122,530       130,641        25,327       19,139
Southeast            404         429         446.5      392.7            180,372       168,453        38,782       26,096
Century
Complete           1,062         869         247.4      206.3            262,751       179,278        40,134       23,089
Financial
Services               -           -             -          -                  -             -         8,611       11,697
Corporate              -           -             -          -                  -             -      (28,651)     (24,604)
Total              2,713       2,771   $     418.2   $  362.6   $      

1,134,535 $1,004,789 $213,648 $152,134

                                       Average Sales Price of                                    Income before Income Tax
               New Homes Delivered        Homes Delivered            Home Sales Revenues                 Expense
              Six Months Ended June    Six Months Ended June                                      Six Months Ended June
                       30,                      30,               Six Months Ended June 30,                30,
                 2022        2021         2022         2021           2022            2021          2022          2021
West                 822         704   $     676.9   $  601.1   $        556,400   $   423,149   $   149,187   $   68,364
Mountain             972       1,296         571.9      446.9            555,869       579,123       108,503      107,794
Texas                729         805         338.5      271.3            246,786       218,380        45,898       27,670
Southeast            770         997         428.4      389.7            329,849       388,534        69,647       49,536
Century
Complete           1,768       1,766         245.5      201.0            434,046       354,882        64,821       44,819
Financial
Services               -           -             -          -                  -             -        19,762       27,016
Corporate              -           -             -          -                  -             -      (55,394)     (42,016)
Total              5,061       5,568   $     419.5   $  352.7   $      2,122,950   $ 1,964,068   $   402,424   $  283,183


West
During the three and six months ended June 30, 2022, our West segment generated
income before income tax expense of $77.9 million and $149.2 million,
respectively, a 90.6% and 118.2% increase, respectively, over the respective
prior year period. These increases were driven by increases in home sales
revenue of $56.3 million and $133.3 million, respectively, and increases of 931
basis points and 1,066 basis points, respectively, in the percentage of income
before income tax expense to home sales revenues, as a result of (1) increased
revenue on a partially fixed cost base and (2) increased gross margins on home
sales. The revenue increases during the three and six months ended June 30, 2022
were primarily generated by increases of 10.6% and 16.8% in the number of homes
delivered, as well as increases of 11.8% and 12.6% in the average sales price
per home.  For both the three and six month comparisons, the increases in the
number of homes delivered were driven by an increase in the number of open
communities as compared to the prior year period and the average sales price
increase were driven by the mix of deliveries within individual communities.
Mountain
During the three months ended June 30, 2022, our Mountain segment generated
income before income tax expense of $51.5 million, a 7.7% decrease over the
respective prior year period. This decrease was primarily driven by a decrease
in home sales revenue of $13.8 million. During the six months ended June 30,
2022, our Mountain segment generated income before income tax expense of $108.5
million, remaining relatively flat over the respective prior year period.
Revenue decreased during the three and six months ended June 30, 2022, primarily
driven by decreases of 25.0% and 25.0%, respectively, in the number of homes
delivered, partially offset by increases of 27.0% and 28.0%, respectively, in
the average sales price per home. For both the three and six month comparisons,
the decreases in the number of homes delivered were driven by the timing of new
community openings between the periods and the average sales price increases
were driven by the mix of deliveries within individual communities.
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Texas

During the three and six months ended June 30, 2022, our Texas segment generated
income before income tax expense of $25.3 million and $45.9 million,
respectively, a 32.3% and 65.9% increase, respectively, over the respective
prior year period. During the three months ended June 30, 2022, the increase was
driven by an increase of 602 basis points in the percentage of income before
income tax expense to home sales revenues, as a result of increased gross
margins on home sales, partially offset by a decrease in home sales revenue of
$8.1 million. The revenue decrease during the three months ended June 30, 2022
was primarily generated by a decrease of 23.9% in the number of homes delivered,
partially offset by an increase of 23.2% in the average sales price per
home. During the six months ended June 30, 2022, the increase in income before
income tax expense was driven by an increase in home sales revenue of $28.4
million and an increase of 593 basis points in the percentage of income before
income tax expense to home sales revenues, as a result of (1) increased revenue
on a partially fixed cost base and (2) increased gross margins on home sales.
The revenue increase during the six months ended June 30, 2022 was primarily
generated by an increase of 24.8% in the average sales price per home, partially
offset by a 9.4% decrease in the number of homes delivered. For both the three
and six month comparisons, the decreases in the number of homes delivered were
driven by the timing of new community openings, and the average sales price
increases were driven by the mix of deliveries within individual communities.
Southeast
During the three and six months ended June 30, 2022, our Southeast segment
generated income before income tax expense of $38.8 million and $69.6 million,
respectively, a 48.6% and 40.6% increase, respectively, over the respective
prior year period. During the three months ended June 30, 2022, the increase was
driven by an increase in home sales revenue of $11.9 million and an increase of
601 basis points in the percentage of income before income tax expense to home
sales revenues, as a result of (1) increased revenue on a partially fixed cost
base and (2) increased gross margins on home sales. The revenue increase during
the three months ended June 30, 2022 was primarily generated by an increase of
13.7% in the average sales price per home. During the six months ended June 30,
2022, the increase in income before income tax expense was driven by an increase
of 837 basis points in the percentage of income before income tax expense to
home sales revenues, as a result of increased gross margins on home sales,
partially offset by a decrease in home sales revenue of $58.7 million. The
revenue decrease during the six months ended June 30, 2022 was primarily
generated by a decrease of 22.8% in the number of homes delivered, partially
offset by an increase of 9.9% in the average sales price per home. For both the
three and six month comparisons, the decreases in the number of homes delivered
were driven by timing of new community openings.
Century Complete
During the three and six months ended June 30, 2022, our Century Complete
segment generated income before income tax expense of $40.1 million and $64.8
million, respectively, a 73.8% and 44.6% increase, respectively, over the
respective prior year period. These increases were driven by increases in home
sales revenue of $83.5 million and $79.2 million, respectively. The revenue
increase during the three months ended June 30, 2022 was primarily generated by
an increase of 22.2% in the number of homes delivered, driven by an increase in
the number of open communities as compared to the prior year period, as well as
an increase of 19.9% in the average sales price per home. The revenue increase
during the six months ended June 30, 2022 was primarily generated by an increase
of 22.1% in the average sales price per home.  For both the three and six month
comparisons, the average sales price increases were driven by the mix of
deliveries within individual communities.
Financial Services
Our Financial Services segment originates mortgages for primarily our
homebuyers, and as such, performance typically correlates to the number of homes
delivered. Our Financial Services segment generated income before income tax of
$8.6 million for the three months ended June 30, 2022, a 26.4% decrease over the
prior year period. This decrease was primarily the result of a $7.1 million
decrease in financial services revenue during the three months ended June 30,
2022 compared to the prior year period, due to (1) a 31.5% decrease to 1,465 in
the number of mortgages originated during the three months ended June 30, 2022,
due in part to a decrease in originations related to refinancing, and (2)
reduced gain on sale margins on loans sold to third parties period over period.
Our Financial Services segment generated income before income tax of $19.8
million for the six months ended June 30, 2022, a 26.9% decrease over the prior
year period. This decrease was primarily the result of a $14.4 million decrease
in financial services revenue during the six months ended June 30, 2022 compared
to the prior year period, due to (1) a 32.8% decrease to 2,985 in the number of
mortgages originated during the six months ended June 30, 2022, due in part to a
decrease in originations related to refinancing, and (2) reduced gain on sale
margins on loans sold to third parties period over period.
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The following table presents selected operational data for our Financial
Services segment in relation to our loan origination activities (dollars in
thousands):
                        Three Months Ended June 30,            Six Months Ended June 30,
                          2022                2021               2022               2021
Total originations:
Number of loans              1,465               2,138              2,985             4,439
Principal           $      528,646      $      661,853     $    1,080,701      $  1,374,144
Capture rate of
Century homebuyers              70 %                74 %               74 %              75 %
Century Communities             77 %                78 %               79 %              81 %
Century Complete                57 %                66 %               60 %              62 %
Average FICO score             733                 737                733               737
Century Communities            740                 748                740               746
Century Complete               715                 711                712               711

Loans sold to third
parties:
Number of loans
sold                         1,417               2,326              3,376             4,605
Principal           $      508,003      $      725,393     $    1,200,067      $  1,406,550


Corporate
During the three and six months ended June 30, 2022, our Corporate segment
generated losses of $28.7 million and $55.4 million, respectively, as compared
to losses of $24.6 million and $42.0 million, respectively, for the same
respective period in 2021. This increase in losses is primarily attributed to
higher compensation costs and other corporate costs to support our growth.

Residential Construction Gross Margin

(dollars in thousands)
Homebuilding gross margin represents home sales revenues less cost of home sales
revenues and inventory impairment and other. Our homebuilding gross margin
percentage, which represents homebuilding gross margin divided by home sales
revenues, increased during the three and six months ended June 30, 2022 to
28.2%, as compared to 23.9% and 22.5%, respectively, for the same periods in
2021. This increase was driven by (1) our ability to increase sales price in
excess of an increase in our labor and direct costs period over period, (2)
benefits from our increased scale driving building efficiencies and streamlined
production processes, and (3) the realization of less interest in cost of home
sales revenue over the prior period.

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

                                                       Three Months Ended June 30,
                                               2022            %           2021           %

Home sales revenues                        $   1,134,535     100.0 %   $   1,004,789    100.0 %
Cost of home sales revenues                    (814,895)    (71.8) %       (764,668)   (76.1) %
Inventory impairment and other                         -         - %            (41)    (0.0) %
Gross margin from home sales                     319,640      28.2 %         240,080     23.9 %
Add: Inventory impairment and other                    -         - %              41      0.0 %
Add: Interest in cost of home sales
revenues                                          13,473       1.2 %          18,406      1.8 %
Adjusted homebuilding gross margin
excluding interest and inventory
impairment and other (1)                   $     333,113      29.4 %   $     258,527     25.7 %

                                                        Six Months Ended June 30,
                                               2022            %           2021           %

Home sales revenues                        $   2,122,950     100.0 %   $   1,964,068    100.0 %
Cost of home sales revenues                  (1,523,968)    (71.8) %     (1,521,175)   (77.5) %
Inventory impairment and other                         -         - %            (41)    (0.0) %
Gross margin from home sales                     598,982      28.2 %         442,852     22.5 %
Add: Inventory impairment and other                    -         - %              41      0.0 %
Add: Interest in cost of home sales
revenues                                          25,619       1.2 %          36,783      1.9 %
Adjusted homebuilding gross margin
excluding interest and inventory
impairment and other (1)                   $     624,601      29.4 %   $    

479,676 24.4%


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


For the three and six months ended June 30, 2022, excluding inventory impairment
and other, and interest in cost of home sales revenues, our adjusted
homebuilding gross margin percentage was 29.4%, as compared to 25.7% and 24.4%,
respectively, for the same periods in 2021. We believe the above information is
meaningful as it isolates the impact that inventory impairment, indebtedness and
acquisitions (if applicable) have on our homebuilding gross margin and allows
for comparability of our homebuilding gross margins to previous periods and our
competitors.

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Selling, General and Administrative Expense
(dollars in thousands)
                                          Three Months Ended June 30,              Increase
                                              2022              2021         Amount          %
Selling, general and administrative     $      109,158      $   99,656     $   9,502          9.5 %
As a percentage of home sales revenue              9.6  %          9.9 %

                                           Six Months Ended June 30,        

Increase

                                              2022              2021         Amount          %
Selling, general and administrative     $      210,797      $  191,807     $  18,990          9.9 %
As a percentage of home sales revenue              9.9  %          9.8 %


Our selling, general and administrative expense increased $9.5 million and $19.0
million, respectively, for the three and six months ended June 30, 2022 as
compared to the same periods in 2021. These increases were primarily
attributable to increases of $8.5 million and $17.4 million, respectively, in
salaries and wages expense as compared to the same respective period in 2021 due
to increased headcount, increased base pay due to market conditions, and
increased incentive based compensation accruals, as well as increases in
expenses in numerous areas to support our growth. The increases for the three
and six months ended June 30, 2022 were partially offset by decreases in
internal and external commission expense of $2.7 million and $8.4 million,
respectively. During the three months ended June 30, 2022, our selling, general,
and administrative expense decreased 30 basis points as a percentage of home
sales revenue as compared to the same period in 2021, and during the six months
ended June 30, 2022, our selling, general, and administrative expense increased
slightly by 10 basis points as a percentage of home sales revenue as compared to
the same period in 2021, which increase was partially offset by increased
revenues on a partially fixed cost base.

income tax expense

At the end of each interim period we are required to estimate our annual
effective tax rate for the fiscal year, and to use that rate to provide for
income taxes for the current year-to-date reporting period. Our 2022 estimated
annual effective tax rate, before discrete items, of 25.6% is driven by our
blended federal and state statutory rate of 24.8%, and certain permanent
differences between GAAP and tax, including disallowed deductions for executive
compensation which increased our rate by 0.8%.
For the six months ended June 30, 2022, our estimated annual rate of 25.6% was
impacted by discrete items which had a net impact of decreasing our rate by
0.4%, including excess tax benefits for vested stock-based compensation and
federal energy tax credits claimed on prior year home deliveries in excess of
previous estimates.
Our estimated annual rate for the six months ended June 30, 2022 of 25.6%
increased by 340 basis points as compared to our effective tax rate for the year
ended December 31, 2021 of 22.2%.  The increase in our estimated rate is driven
by the expiration of the Energy Efficient Home Credit on December 31, 2021. 

The

The Energy Efficient Home Credit provided a $2,000 tax credit for each dwelling delivered that meets the energy saving and certification requirements provided for by law.

For the three months ended June 30, 2022 and 2021, we recorded income tax
expense of $55.0 million and $34.2 million, respectively. For the six months
ended June 30, 2022 and 2021, we recorded income tax expense of $101.3 million
and $63.6 million, respectively.
Segment Assets
(dollars in thousands)
                     June 30,    December 31       Increase (Decrease)
                       2022          2021          Amount         Change
West                $   816,300  $    668,830  $     147,470       22.0 %
Mountain              1,083,966     1,008,481         75,485        7.5 %
Texas                   449,936       322,302        127,634       39.6 %
Southeast               439,321       360,644         78,677       21.8 %
Century Complete        491,925       371,096        120,829       32.6 %
Financial Services      351,300       533,159      (181,859)     (34.1) %
Corporate               139,987       232,364       (92,377)     (39.8) %
Total assets        $ 3,772,735  $  3,496,876  $     275,859        7.9 %


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Total assets increased to $3.8 billion as of June 30, 2022 as compared to
December 31, 2021, primarily as a result of overall growth of the Company and
increased in investment in homebuilding inventory, partially offset by a
decrease in Financial Services assets primarily related to a decrease in
mortgage loans held for sale period over period. The decrease in our Corporate
assets was driven by a decrease in our cash and cash equivalents, partially
offset by increases related to Century Living.
Lots owned and controlled

                             June 30, 2022                December 31, 2021                    % Change
                      Owned    Controlled   Total    Owned    Controlled   Total     Owned    Controlled     Total

West                   5,129        2,453    7,582    4,440        4,877    9,317    15.5 %      (49.7) %   (18.6) %
Mountain              11,706        3,653   15,359   11,860        8,039   19,899   (1.3) %      (54.6) %   (22.8) %
Texas                  6,708        6,741   13,449    5,340        8,159   13,499    25.6 %      (17.4) %    (0.4) %
Southeast              6,123       14,209   20,332    5,928       14,195   20,123     3.3 %         0.1 %      1.0 %
Century Complete       5,467       13,362   18,829    5,287       11,734   17,021     3.4 %        13.9 %     10.6 %
Total                 35,133       40,418   75,551   32,855       47,004   79,859     6.9 %      (14.0) %    (5.4) %


Of our total lots owned and controlled as of June 30, 2022, 46.5% were owned and
53.5% were controlled, as compared to 41.1% owned and 58.9% controlled as of
December 31, 2021. The decrease in the number of controlled lots was driven by
the termination of certain contracts in our markets that did not meet our
investment criteria.

Other residential construction operating data

Net new housing contracts

                   Three Months Ended                                   Six Months Ended
                        June 30,           Increase (Decrease)              June 30,             Increase (Decrease)
                     2022       2021     Amount          % Change      2022           2021      Amount         % Change
West                     248      497       (249)         (50.1) %        665           891        (226)        (25.4) %
Mountain                 478      617       (139)         (22.5) %      1,064         1,564        (500)        (32.0) %
Texas                    274      399       (125)         (31.3) %        686           917        (231)        (25.2) %
Southeast                415      288         127           44.1 %        824           764           60           7.9 %
Century Complete         818    1,319       (501)         (38.0) %      1,938         2,439        (501)        (20.5) %
Total                  2,233    3,120       (887)         (28.4) %      5,177         6,575      (1,398)        (21.3) %


Net new home contracts (new home contracts net of cancellations) for the three
months ended June 30, 2022 decreased by 887 homes, or 28.4%, to 2,233, as
compared to 3,120 for the same period in 2021. Net new home contracts for the
six months ended June 30, 2022 decreased by 1,398 homes, or 21.3%, to 5,177, as
compared to 6,575 for the same period in 2021. During the second quarter of 2022
we experienced a moderation of home sales pace across our markets as compared to
prior periods. These decreases were primarily driven by the impact on demand for
new homes of increasing interest rates, rising inflation, and macro-economic
uncertainty, and to some extent, an increase in cancellations primarily due to
interest rate increases.
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Monthly absorption rate

Our overall monthly “burn rate” (the rate at which stay-at-home orders are contracted, net of cancellations) for the three and six months ended June 30, 2022 and 2021 by segment are shown in the tables below:

                        Three Months Ended June 30,           Increase (Decrease)
                       2022                          2021   Amount          % Change
West                         3.8                      9.7      (5.9)         (60.8) %
Mountain                     4.8                      7.6      (2.8)         (36.8) %
Texas                        4.2                      9.5      (5.3)         (55.8) %
Southeast                    6.0                      4.4        1.6           36.4 %
Century Complete             2.4                      4.2      (1.8)         (42.9) %
Total                        3.5                      5.7      (2.2)         (38.6) %

                         Six Months Ended June 30,            Increase (Decrease)
                       2022                          2021   Amount          % Change
West                         5.0                      8.7      (3.7)         (42.5) %
Mountain                     5.4                      9.7      (4.3)         (44.3) %
Texas                        5.2                     10.9      (5.7)         (52.3) %
Southeast                    6.0                      5.8        0.2            3.4 %
Century Complete             2.9                      3.9      (1.0)         (25.6) %
Total                        4.1                      6.0      (1.9)         (31.7) %


During the three and six months ended June 30, 2022, our absorption rates
decreased by 38.6% and 31.7%, respectively, to 3.5 and 4.1 per month,
respectively, as compared to the same periods in 2021.  During the second
quarter of 2022, we experienced a moderation of sales pace across our markets
compared to prior periods. The second quarter 2022 decrease in sales pace was
consistent with trends seen in the overall housing market, as increases in
interest rates on mortgages, rising inflation, and macro-economic uncertainty
caused demand to decrease from the historically strong market conditions
experienced since the second quarter of 2020.

Selling communities at period end    As of June 30,           Increase/(Decrease)
                                    2022          2021     Amount             % Change

West                                    22          17             5             29.4 %
Mountain                                33          27             6             22.2 %
Texas                                   22          14             8             57.1 %
Southeast                               23          22             1              4.5 %
Century Complete                       113         104             9              8.7 %
Total                                  213         184            29             15.8 %


Our selling communities increased to 213 communities at June 30, 2022 as
compared to 184 at June 30, 2021. This increase was a result of new community
openings.

Backlog
(dollars in thousands)

                                           As of June 30,
                             2022                                  2021                               % Change

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

West            367   $      294,274   $    801.8     673   $      440,008   $    653.8   (45.5) %        (33.1) %     22.6    %
Mountain      1,137          632,865        556.6   1,057          544,365        515.0      7.6 %          16.3 %      8.1    %
Texas           343          128,574        374.9     497          182,080        366.4   (31.0) %        (29.4) %      2.3    %
Southeast       767          349,120        455.2     568          230,558        405.9     35.0 %          51.4 %     12.1    %
Century
Complete      2,153          572,727        266.0   1,651          365,454        221.4     30.4 %          56.7 %     20.1    %
Total /
Weighted
Average       4,767   $    1,977,560   $    414.8   4,446   $    1,762,465   $    396.4      7.2 %          12.2 %      4.6    %


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Backlog reflects the number of homes, net of cancellations, for which we have
entered into a sales contract with a customer but for which we have not yet
delivered the home. At June 30, 2022, we had 4,767 homes in backlog with a total
value of $2.0 billion, which represents increases of 7.2% and 12.2%,
respectively, as compared to 4,446 homes in backlog with a total value of $1.8
billion at June 30, 2021.  The increase in backlog dollar value is primarily
attributable to the increase in backlog units and a 4.6% increase in the average
sales price of homes in backlog.

Supplemental Guarantor Information
Our 6.750% senior notes due 2027 (which we collectively refer to as our "2027
Notes") and our 3.875% senior notes due 2029 (which we collectively refer to as
our "2029 Notes" and together with the 2027 Notes, the "Senior Notes") are our
unsecured senior obligations and are fully and unconditionally guaranteed on an
unsecured basis, jointly and severally, by substantially all of our direct and
indirect wholly-owned operating subsidiaries (which we refer to collectively as
"Guarantors"). In addition, our former 5.875% senior notes due 2025 (which we
collectively refer to as our "2025 Notes"), which were extinguished during the
year ended December 31, 2021, were our unsecured senior obligations and were
fully and unconditionally guaranteed on an unsecured basis, jointly and
severally, by the Guarantors. Our subsidiaries associated with our Financial
Services operations (referred to as "Non-Guarantors") do not guarantee the
Senior Notes. The guarantees are senior unsecured obligations of the Guarantors
that rank equal with all existing and future senior debt of the Guarantors and
senior to all subordinated debt of the Guarantors. The guarantees are
effectively subordinated to any secured debt of the Guarantors. As of June 30,
2022, Century Communities, Inc. had outstanding $1.0 billion in total principal
amount of Senior Notes.
Each of the indentures governing our Senior Notes provides that the guarantees
of a Guarantor will be automatically and unconditionally released and
discharged: (1) upon any sale, transfer, exchange or other disposition (by
merger, consolidation or otherwise) of all of the equity interests of such
Guarantor after which the applicable Guarantor is no longer a "Restricted
Subsidiary" (as defined in the respective indentures), which sale, transfer,
exchange or other disposition does not constitute an "Asset Sale" (as defined in
the respective indentures) or is made in compliance with applicable provisions
of the applicable indenture; (2) upon any sale, transfer, exchange or other
disposition (by merger, consolidation or otherwise) of all of the assets of such
Guarantor, which sale, transfer, exchange or other disposition does not
constitute an Asset Sale or is made in compliance with applicable provisions of
the applicable indenture; provided, that after such sale, transfer, exchange or
other disposition, such Guarantor is an "Immaterial Subsidiary" (as defined in
the respective indentures); (3) unless a default has occurred and is continuing,
upon the release or discharge of such Guarantor from its guarantee of any
indebtedness for borrowed money of the Company and the Guarantors so long as
such Guarantor would not then otherwise be required to provide a guarantee
pursuant to the applicable indenture; provided that if such Guarantor has
incurred any indebtedness in reliance on its status as a Guarantor in compliance
with applicable provisions of the applicable Indenture, such Guarantor's
obligations under such indebtedness, as the case may be, so incurred are
satisfied in full and discharged or are otherwise permitted to be incurred by a
Restricted Subsidiary (other than a Guarantor) in compliance with applicable
provisions of the applicable Indenture; (4) upon the designation of such
Guarantor as an "Unrestricted Subsidiary" (as defined in the respective
Indentures), in accordance with the applicable indenture; (5) if the Company
exercises its legal defeasance option or covenant defeasance option under the
applicable indenture or if the obligations of the Company and the Guarantors are
discharged in compliance with applicable provisions of the applicable indenture,
upon such exercise or discharge; or (6) in connection with the dissolution of
such Guarantor under applicable law in accordance with the applicable indenture.
The indenture governing our former 2025 Notes contained a similar provision.
If a guarantor were to become a debtor in a case under the US Bankruptcy Code, a
court may decline to enforce its guarantee of the Senior Notes. This may occur
when, among other factors, it is found that the guarantor originally received
less than fair consideration for the guarantee and the guarantor would be
rendered insolvent by enforcement of the guarantee. On the basis of historical
financial information, operating history and other factors, we believe that each
of the guarantors, after giving effect to the issuance of its guarantee of the
Senior Notes when the guarantee was issued, was not insolvent and did not and
has not incurred debts beyond its ability to pay such debts as they mature. The
Company cannot predict, however, what standard a court would apply in making
these determinations or that a court would agree with our conclusions in this
regard.
Only the 2027 Notes and the related guarantees are, and the former 2025 Notes
and the related guarantees were, registered securities under the Securities Act
of 1933, as amended (the "Securities Act"). The offer and sale of the 2029 Notes
and the related guarantees were not and will not be registered under the
Securities Act or the securities laws of any other jurisdiction and instead were
issued in reliance upon an exemption from such registration. Unless they are
subsequently registered under the Securities Act, neither the 2029 Notes nor the
related guarantees may be offered and sold only in transactions that are exempt
from the registration requirements under the Securities Act and the applicable
securities laws of any other jurisdiction.
As the guarantees for the 2027 Notes and the guarantees for the former 2025
Notes were made in connection with the issuance of the 2027 Notes and former
2025 Notes and exchange offers effected under the Securities Act in February
2015, October 2015 and April 2017, the Guarantors' condensed supplemental
financial information is presented in this report as if the guarantees existed
during the periods presented pursuant to applicable SEC rules and guidance. If
any Guarantors are released from the guarantees in future periods,
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the changes are reflected prospectively. We have determined that separate, full
financial statements of the Guarantors would not be material to investors, and
accordingly, supplemental financial information is presented below.
The following summarized financial information is presented for Century
Communities, Inc. and the Guarantor Subsidiaries on a combined basis after
eliminating intercompany transactions and balances among Century Communities,
Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity
in earnings from Non-Guarantor Subsidiaries.

              Century Communities, Inc. and Guarantor Subsidiaries

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

Assets
Cash and cash equivalents                      $            3,626    $           180,843
Cash held in escrow                                        82,494                 52,297
Accounts receivable                                        55,638                 39,492
Inventories                                             3,002,338              2,456,614
Prepaid expenses and other assets                         203,169                160,999
Property and equipment, net                                26,709                 24,220
Deferred tax assets, net                                   19,356                 21,239
Goodwill                                                   30,395                 30,395
Total assets                                   $        3,423,725    $         2,966,099
Liabilities and stockholders' equity
Liabilities:
Accounts payable                               $          115,617    $      

82,734

Accrued expenses and other liabilities                    391,932                288,229
Notes payable                                           1,009,631                998,936
Revolving line of credit                                  141,000                      -
Total liabilities                                       1,658,180              1,369,899
Stockholders' equity:                                   1,765,545              1,596,200

Total Liabilities and Equity $3,423,725 $

2,966,099

Summarized Statements of Operations Data (in
thousands)                                      Six Months Ended         Year Ended
                                                 June 30, 2022        December 31, 2021

Total homebuilding revenues                    $        2,133,390    $         4,092,576
Total homebuilding cost of revenues                   (1,532,826)           

(3,095,363)

Selling, general and administrative                     (210,797)           

(389,610)

Loss on debt extinguishment                                     -           

(14,458)

Inventory impairment and other                                  -           

(41)

Other income (expense)                                    (6,209)           

(3,307)

Income before income tax expense                          383,558                589,797
Income tax expense                                       (96,513)              (131,201)
Net income                                     $          287,045    $           458,596



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Critical accounting policies

Critical accounting estimates are those that we believe are both significant and
require us to make difficult, subjective or complex judgments, often because we
need to estimate the effect of inherently uncertain matters. We base our
estimates and judgments on historical experiences and various other factors that
we believe to be appropriate under the circumstances. Actual results may differ
from these estimates, and the estimates included in our financial statements
might be impacted if we used different assumptions or conditions. A summary of
our critical accounting policies is included in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2021, filed with the SEC on February 3,
2022, in the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Critical Accounting Policies."
Liquidity and Capital Resources
Overview
Our liquidity, consisting of our cash and cash equivalents and cash held in
escrow and Credit Facility availability, was $819.5 million as of June 30, 2022,
compared to $1.2 billion as of December 31, 2021.

Our principal uses of capital for the three and six months ended June 30, 2022
were our land purchases, land development, home construction, share repurchases,
and the payment of routine liabilities. We increased our investment in
homebuilding inventory during 2022, which resulted in 35,133 lots owned at June
30, 2022, a 6.9% increase as compared to December 31, 2021.

Cash flows for each of our communities depend on the stage in the development
cycle and can differ substantially from reported earnings. Early stages of
development or expansion require significant cash outlays for land acquisitions,
entitlements and other approvals, and construction of model homes, roads,
utilities, general landscaping and other amenities. Because these costs are a
component of our inventory and not recognized in our consolidated statements of
operations until a home closes, we incur significant cash outlays prior to our
recognition of earnings. In the later stages of community development, cash
inflows may significantly exceed earnings reported for financial statement
purposes, as the cash outflow associated with home and land construction was
previously incurred. From a liquidity standpoint, we are actively acquiring and
developing lots in our markets to maintain and grow our lot supply and active
selling communities. As we continue to expand our business, our cash outlays for
land purchases and land development to grow our lot inventory may exceed our
cash generated by operations.

Under our shelf registration statement, which we filed with the SEC on July 1,
2021 and was automatically effective upon filing, we have the ability to access
the debt and equity capital markets in registered transactions from time to time
and as needed as part of our ongoing financing strategy and subject to market
conditions. In August 2021, we filed a prospectus supplement to offer up to
$100.0 million under the shelf registration statement under our at-the-market
facility described below.

Short-term liquidity and capital resources

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

Our Financial Services operations use funds generated from operations, and
availability under our mortgage repurchase facilities to finance its operations
including originations of mortgage loans to our homebuyers.
Our Century Living operations use excess cash from our operations as well as
project specific secured financing to fund development of multi-family projects.
We believe that we will be able to fund our current liquidity needs for at least
the next twelve months with our cash on hand, cash generated from operations,
and cash expected to be available from our revolving line of credit or through
accessing debt or equity capital, as needed or appropriate, although no
assurance can be provided that such additional debt or equity capital will be
available or on acceptable terms, especially in light of the current COVID-19
pandemic, the macro-economy, and market conditions at the time. While the impact
of the COVID-19 pandemic will continue to evolve, we believe we are well
positioned from a cash and liquidity standpoint to not only operate in an
uncertain environment, but also continue to grow with the market and pursue
other ways to properly deploy capital to enhance returns, which may include
taking advantage of strategic opportunities as they arise.
Long-term Liquidity and Capital Resources
Beyond the next twelve months, we believe that our principal uses of capital
will be land and inventory purchases and other expenditures to invest in our
future growth, as well as principal and interest payments on our long-term debt
obligations. We believe that we will be able to fund our long-term liquidity
needs with cash generated from operations and cash expected to be available from
our revolving
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line of credit or through accessing debt or equity capital, as needed or
appropriate, although no assurance can be provided that such additional debt or
equity capital will be available. To the extent these sources of capital are
insufficient to meet our needs, we may also conduct additional public or private
offerings of our securities, refinance debt, or dispose of certain assets to
fund our operating activities and capital needs.

Material cash needs

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

In the ordinary course of business, we enter into land purchase contracts in
order to procure lots for the construction of our homes. We are subject to
customary obligations associated with entering into contracts for the purchase
of land and improved lots. Purchase and option contracts for the purchase of
land enable us to defer acquiring portions of properties owned by third parties
until we have determined whether to exercise our option, which may serve to
reduce our financial risks associated with long-term land holdings. These
purchase contracts typically require a cash deposit, and the purchase of
properties under these contracts is generally contingent upon satisfaction of
certain requirements, including obtaining applicable property and development
entitlements. We also utilize option contracts with land sellers and others as a
method of acquiring land in staged takedowns, to help us manage the financial
and market risk associated with land holdings, and to reduce the use of funds
from our corporate financing sources. Option contracts generally require payment
by us of a non-refundable deposit for the right to acquire lots over a specified
period of time at pre-determined prices. Our obligations with respect to
purchase contracts and option contracts are generally limited to the forfeiture
of the related non-refundable cash deposits.
As of June 30, 2022, we had outstanding purchase contracts and option contracts
for 40,418 lots, totaling approximately $1.7 billion, and we had $66.8 million
of deposits for land contracts, of which $36.5 million were non-refundable cash
deposits pertaining to land contracts. Subject to the terms of the outstanding
contracts continuing to meet our investment criteria, we currently anticipate
performing on the majority of the purchase and option contracts during the next
twelve to eighteen months, with performance on the remaining purchase and option
contacts occurring in future periods. Our performance, including the timing and
amount of purchase, if any, under these outstanding purchase and option
contracts is subject to change and dependent on future market conditions.
Our utilization of land option contracts is dependent on, among other things,
the availability of land sellers willing to enter into option takedown
arrangements, the availability of capital to financial intermediaries to finance
the development of optioned lots, general housing market conditions, and local
market dynamics. Options may be more difficult to procure from land sellers in
strong housing markets and are more prevalent in certain geographic regions.
Outstanding Debt Obligations and Debt Service Requirements
Our outstanding debt obligations included the following as of June 30, 2022 and
December 31, 2021 (in thousands):
                                          June 30,     December 31,
                                            2022           2021

3.875% Senior Notes, due August 2029(1) $494,503 $494,117
6.750% Senior Notes, due May 2027(1) 495,985 495,581 Other financing obligations(2)

                19,143           9,238
Notes payable                              1,009,631         998,936
Revolving line of credit                     141,000               -
Mortgage repurchase facilities               209,001         331,876
Total debt                               $ 1,359,632  $    1,330,812




(1)The carrying value of the senior notes reflects the impact of premiums,
discounts, and issuance costs that are amortized to interest cost over the
respective terms of the senior notes.
(2)As of June 30, 2022, other financing obligations included $18.2 million
related to insurance premium notes and certain secured borrowings, as well as
$0.9 million outstanding under the Construction Loan Agreement. As of June 30,
2021, other financing obligations included $9.2 million related to insurance
premium notes and certain secured borrowings.
A summary of our debt obligations is included in Note 9 to our consolidated
financial statements in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, filed with the SEC on February 3, 2022 and in Note 8 to our
condensed consolidated financial statements in this Form 10-Q.
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We may from time to time seek to refinance or increase our outstanding debt or
retire or purchase our outstanding debt through cash purchases and/or exchanges
for equity securities, in open market purchases, privately negotiated
transactions or otherwise. Such repurchases or exchanges, if any, will depend on
prevailing market conditions, our liquidity requirements, contractual
restrictions and other factors. The amounts involved may or may not be material
during any particular reporting period.
Letters of Credit and Performance Bonds
In the normal course of business, we post letters of credit and performance and
other bonds primarily related to our land development performance obligations
with local municipalities. As of June 30, 2022 and December 31, 2021, we had
$564.0 million and $492.5 million, respectively, in letters of credit and
performance and other bonds issued and outstanding. Although significant
development and construction activities have been completed related to the
improvements at these sites, the letters of credit and performance and other
bonds are not generally released until all development and construction
activities are completed.
Construction Loan Agreement
On March 17, 2022, a wholly owned subsidiary of Century Living entered into a
Construction Loan Agreement with U.S. Bank National Association, a national
banking association, d/b/a Housing Capital Company (which we refer to as "the
Lender"). The Construction Loan Agreement provides that we may borrow up to
$80.0 million from the Lender for purposes of construction of a multi-family
project in Colorado, with advances made by the Lender upon the satisfaction of
certain conditions. Borrowings under the Construction Loan Agreement bear
interest at a rate per annum equal to a forward-looking term rate based on the
secured overnight financing rate (which we refer to as "SOFR") plus 210 basis
points. The outstanding principal balance and all accrued and unpaid interest is
due on the maturity date of March 17, 2026, and prepayments of the unpaid
principal balance and accrued interest may be prepaid in full or in part,
without premium or penalty. We have the option to extend the maturity date for a
period of 12 months if certain conditions are satisfied. The Construction Loan
Agreement contains customary affirmative and negative covenants (including
covenants related to construction completion, and limitations on the use of loan
proceeds, transfers of land, equipment, and improvements), as well as customary
events of default.

From June 30, 2022, $0.9 million was outstanding under the Construction Loan Agreement and we were in compliance with all of its terms. Revolving line of credit

On May 21, 2021, we entered into a Second Amended and Restated Credit Agreement
(which we refer to as the "Second A&R Credit Agreement") with, Texas Capital
Bank, National Association, as Administrative Agent and L/C Issuer, and the
lenders party thereto. The Second A&R Credit Agreement, which amended and
restated the Amended and Restated Credit Agreement, provides us with a senior
unsecured revolving line of credit (which we refer to as the "Credit Facility")
of up to $800 million, and unless terminated earlier, will mature on April 30,
2026. The Credit Facility includes a $250.0 million sublimit for standby letters
of credit. Under the terms of the Second A&R Credit Agreement, the Company is
entitled to request an increase in the size of the Credit Facility by an amount
not exceeding $200 million. Our obligations under the Second A&R Credit
Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit
Agreement contains customary affirmative and negative covenants (including
limitations on our ability to grant liens, incur additional debt, pay dividends,
redeem our common stock, make certain investments and engage in certain merger,
consolidation or asset sale transactions), as well as customary events of
default. Borrowings under the Second A&R Credit Agreement bear interest at a
floating rate equal to the adjusted Eurodollar Rate plus an applicable margin
between 2.05% and 2.65% per annum, and if made available in the Administrative
Agent's discretion, a base rate plus an applicable margin between 1.05% and
1.65% per annum.
As of June 30, 2022, we had $141.0 million outstanding under the Credit Facility
and were in compliance with all covenants under the Second A&R Credit Agreement.
Mortgage Repurchase Facilities - Financial Services
On May 4, 2018, September 14, 2018, and August 1, 2019, Inspire entered into
mortgage warehouse facilities, with Comerica Bank, J.P. Morgan, and Wells Fargo,
respectively. The mortgage warehouse lines of credit (which we refer to as the
"Repurchase Facilities"), which were increased during 2020, provide Inspire with
uncommitted repurchase facilities of up to an aggregate of $325.0 million as of
June 30, 2022, secured by the mortgage loans financed thereunder. The Repurchase
Facilities have varying short term maturity dates through August 23, 2022 and
bear a weighted average interest rate of 2.938%.
Amounts outstanding under the Repurchase Facilities are not guaranteed by us or
any of our subsidiaries and the agreements contain various affirmative and
negative covenants applicable to Inspire that are customary for arrangements of
this type. As of June 30, 2022, we had $209.0 million outstanding under these
Repurchase Facilities and were in compliance with all covenants thereunder.
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During the three and six months ended June 30, 2022, we incurred interest
expense on the Repurchase Facilities of $0.4 million and $0.6 million,
respectively. During the same periods in 2021, we incurred interest expense on
the Repurchase Facilities of $0.8 million and $1.4 million, respectively.
Interest expense on the Repurchase Facilities is included in financial services
costs on our condensed consolidated statements of operations.

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

Stock Repurchase Program
On November 6, 2018, our Board of Directors authorized a stock repurchase
program, under which we may repurchase up to 4.5 million shares of our
outstanding common stock. The shares may be repurchased from time to time in
open market transactions at prevailing market prices, in privately negotiated
transactions or by other means in accordance with federal securities laws. The
actual manner, timing, amount and value of repurchases under the stock
repurchase program will be determined by management at its discretion and will
depend on a number of factors, including the market price of our common stock,
trading volume, other capital management objectives and opportunities,
applicable legal requirements, and general market and economic conditions.
We intend to finance any stock repurchases through available cash and our Credit
Facility. Repurchases also may be made under a trading plan under Rule 10b5-1
under the Securities Exchange Act of 1934, which would permit shares to be
repurchased when we otherwise may be precluded from doing so because of
self-imposed trading blackout periods or other regulatory restrictions. The
stock repurchase program has no expiration date and may be extended, suspended
or discontinued by our Board of Directors at any time without notice at our
discretion. All shares of common stock repurchased under the program will be
cancelled and returned to the status of authorized but unissued shares of common
stock.
During the three and six months ended June 30, 2022, an aggregate of 0.8 million
and 1.8 million shares, respectively, of our common stock were repurchased for a
total purchase price of approximately $35.9 million and $98.3 million,
respectively, and a weighted average price of $45.42 and $54.46 per share,
respectively. During the three and six months ended June 30, 2021, we did not
repurchase any shares of our common stock. The maximum number of shares
available to be purchased under the stock repurchase program as of June 30, 2022
was 2,008,994 shares.
Dividends
The following table sets forth cash dividends declared by our Board of Directors
to holders of record of our common stock during the six months ended June 30,
2022, (in thousands, except per share information):
                                                       Cash Dividends Declared
Declaration Date    Record Date    Payable Date     Per Share                Amount
February 16, 2022  March 2, 2022  March 16, 2022  $        0.20              $ 6,657
  May 18, 2022     June 1, 2022   June 15, 2022   $        0.20              $ 6,568


The declaration and payment of future cash dividends on our common stock,
whether at current levels or at all, are at the discretion of our Board of
Directors and depend upon, among other things, our expected future earnings,
cash flows, capital requirements, access to external financing, debt structure
and any adjustments thereto, operational and financial investment strategy and
general financial condition, as well as general business conditions.
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Cash Flows- Six Months Ended June 30, 2022 Compared to the Six Months Ended June
30, 2021
For the six months ended June 30, 2022 and 2021, the comparison of cash flows is
as follows:
?Our primary sources of cash flows from operations are from the sale of
single-family attached and detached homes and mortgages. Our primary uses of
cash flows from operations are the acquisition of land and expenditures
associated with the construction of our single-family attached and detached
homes and the origination of mortgages held for sale. Net cash used in operating
activities was $102.9 million during the six months ended June 30, 2022 as
compared to net cash provided by operating activities of $143.4 million during
2021. The increase in cash used in operations is primarily a result of increased
investment in our homebuilding inventories for the six months ended June 30,
2022 as compared to the six months ended June 30, 2021, partially offset by a
decrease in originations of mortgage loans held for sale and a $81.6 million
increase in net income during six months ended June 30, 2022 as compared to the
six months ended June 30, 2021.
?Net cash used in investing activities increased to $25.3 million during the six
months ended June 30, 2022, compared to $4.4 million used during the same period
in 2021. The increase was primarily related to expenditures related to the
development, construction, and management of multi-family rental properties by
our wholly owned subsidiary Century Living.

?Net cash used in financing activities decreased to $96.3 million during the six
months ended June 30, 2022, compared to net cash used by financing activities of
$112.5 million during the same period in 2021. The decrease in cash used in
financing activities was primarily attributable to a $141.0 million cash inflow
from borrowings under our revolving line of credit for the six months ended June
30, 2022 compared to no revolving line of credit borrowings outstanding for the
six months ended June 30, 2021 partially offset by (1) a $23.6 million increase
in net payments on the Repurchase Facilities (2) a $98.3 million increase in
repurchases of our common stock and (3) an $8.2 million increase in dividend
payments during the six months ended June 30, 2022 compared to the six months
ended June 30, 2021.
As of June 30, 2022, our cash and cash equivalents and restricted cash balance
was $97.8 million.

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Non-GAAP Financial Measures

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

EBITDA and Adjusted EBITDA
The following table presents EBITDA and Adjusted EBITDA for the three and six
months ended June 31, 2022 and 2021. Adjusted EBITDA is a non-GAAP financial
measure we use as a supplemental measure in evaluating operating performance. We
define Adjusted EBITDA as consolidated net income before (i) income tax expense,
(ii) interest in cost of home sales revenues, (iii) other interest expense, (iv)
depreciation and amortization expense, (v) loss on debt extinguishment, and (vi)
inventory impairment and other. We believe Adjusted EBITDA provides an indicator
of general economic performance that is not affected by fluctuations in interest
rates or effective tax rates, levels of depreciation or amortization, and items
considered to be non-recurring. Accordingly, our management believes that this
measurement is useful for comparing general operating performance from period to
period. Adjusted EBITDA should be considered in addition to, and not as a
substitute for, consolidated net income in accordance with GAAP as a measure of
performance. Our presentation of Adjusted EBITDA should not be construed as an
indication that our future results will be unaffected by unusual or
non-recurring items. Our Adjusted EBITDA is limited as an analytical tool, and
should not be considered in isolation or as a substitute for analysis of our
results as reported under GAAP.
(dollars in thousands)
                                     Three Months Ended June 30,            

Semester completed June 30th,

                                   2022            2021       % Change       2022         2021       % Change
Net income                     $    158,668      $ 117,910       34.6 %   $   301,164   $ 219,562       37.2 %
Income tax expense                   54,980         34,224       60.6 %       101,260      63,621       59.2 %
Interest in cost of home
sales revenues                       13,473         18,406     (26.8) %        25,619      36,783     (30.4) %
Interest expense (income)             (147)          (172)     (14.5) %          (12)       (283)     (95.8) %
Depreciation and
amortization expense                  2,746          2,849      (3.6) %         5,352       5,655      (5.4) %
EBITDA                             229,720         173,217       32.6 %       433,383     325,338       33.2 %
Inventory impairment and
other                                     -             41         NM               -          41         NM
Adjusted EBITDA                $    229,720      $ 173,258       32.6 %   $   433,383   $ 325,379       33.2 %


NM - Not Meaningful


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Net residential construction debt at net equity

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

(dollars in thousands)

                                       June 30,     December 31,
                                         2022           2021
Notes payable                         $ 1,009,631  $      998,936
Revolving line of credit                  141,000               -
Construction loan agreement                 (917)               -
Total homebuilding debt                 1,149,714         998,936
Total stockholders' equity         1,951,164       1,764,508
Total capital                         $ 3,100,878  $    2,763,444
Homebuilding debt to capital                37.1%           36.1%

Total homebuilding debt               $ 1,149,714  $      998,936
Cash and cash equivalents                (78,011)       (316,310)
Cash held in escrow                      (82,494)        (52,297)
Net homebuilding debt                     989,209         630,329
Total stockholders' equity         1,951,164       1,764,508
Net capital                           $ 2,940,373  $    2,394,837

Net homebuilding debt to net capital        33.6%           26.3%



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Adjusted net earnings and adjusted diluted earnings per share

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

(in thousands, except per share amounts)

                                          Three Months Ended June 30,         Six Months Ended June 30,
                                            2022                2021             2022            2021
Numerator
Net income                             $       158,668      $    117,910    $      301,164   $    219,562
Denominator
Weighted average common shares
outstanding - basic                         32,839,402        33,738,586        33,183,097     33,651,727
Dilutive effect of restricted stock
units                                          387,981           218,052           399,803        269,212
Weighted average common shares
outstanding - diluted                       33,227,383        33,956,638        33,582,900     33,920,939
Earnings per share:
Basic                                  $          4.83      $       3.49    $         9.08   $       6.52
Diluted                                $          4.78      $       3.47    $         8.97   $       6.47

Adjusted earnings per share
Numerator
Net income                             $       158,668      $    117,910    $      301,164   $    219,562
Income tax expense                              54,980            34,224           101,260         63,621
Income before income tax expense               213,648           152,134           402,424        283,183
Inventory impairment and other                       -                41                 -             41
Adjusted income before income tax
expense                                        213,648           152,175           402,424        283,224
Adjusted income tax expense(1)                (54,980)           (34,188)        (101,260)        (63,630)
Adjusted net income                    $       158,668           117,987    

$301,164 219,594

Denominator - Diluted                       33,227,383        33,956,638    

33,582,900 33,920,939

Adjusted diluted earnings per share $4.78 $3.47 $8.97 $6.47


(1)The tax rates used in calculating adjusted net income for the three and six
months ended June 30, 2022 was 25.7% and 25.2%, respectively, and for the three
and six months ended June 30, 2021 was 22.5%, which are reflective of the
Company's GAAP tax rates for the applicable periods.


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