lhi-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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

Commission File Number 001-38545

Landsea Homes Corporation

(Exact Name of Registrant as Specified in Its Charter)


Delaware						82-2196021
(State or Other Jurisdiction of						(I.R.S. Employer
Incorporation or Organization)						Identification Number)

1717 McKinney Avenue, Suite 1000
Dallas, Texas						75202
(Address of Principal Executive Offices)						(Zip Code)

(949) 345-8080

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

LSEA

The Nasdaq Capital Market

Warrants exercisable for Common Stock

LSEAW

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 26, 2024, 36,275,392 Class A common stock, par value $0.0001 per share, were outstanding.


Landsea Homes Corporation
Form 10-Q Index
For the Three and Six Months Ended June 30, 2024


PART I - FINANCIAL INFORMATION			Page
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			1
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023			2
Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2024 and 2023			3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023			5
Notes to the Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Result of Operations			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			39
PART II - OTHER INFORMATION
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 3. Defaults Upon Senior Securities			40
Item 4. Mine Safety Disclosures			40
Item 5. Other Information			40
Item 6. Exhibits			41
Signatures			42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


Landsea Homes Corporation
Consolidated Balance Sheets - (Unaudited)
(in thousands, except share and per share amounts)


	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	82,150	$	119,555
Cash held in escrow	24,071		49,091


Real estate inventories	1,350,165		1,121,726

Due from affiliates	4,569		4,348


Goodwill	152,322		68,639
Other assets	129,633		107,873
Total assets	$	1,742,910	$	1,471,232

Liabilities
Accounts payable	$	95,471	$	77,969
Accrued expenses and other liabilities	219,569		160,256
Due to affiliates	881		881


Line of credit facility, net	225,655		307,631
Senior notes, net	528,452		236,143

Total liabilities	1,070,028		782,880

Commitments and contingencies (Note 8)

Equity
Stockholders’ equity:
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, none issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 41,671,387 issued and 36,275,392 outstanding as of June 30, 2024, 41,382,453 issued and 36,520,894 outstanding as of December 31, 2023	4		4
Additional paid-in capital	460,001		465,290
Retained earnings	190,659		187,584
Total stockholders’ equity	650,664		652,878
Noncontrolling interests	22,218		35,474
Total equity	672,882		688,352
Total liabilities and equity	$	1,742,910	$	1,471,232

See accompanying notes to the consolidated financial statements.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 1


Landsea Homes Corporation
Consolidated Statements of Operations - (Unaudited)
(in thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Home sales	$	418,182	$	291,512	$	710,774	$	532,137
Lot sales and other	12,961		1,732		14,410		2,847
Total revenues	431,143		293,244		725,184		534,984

Cost of sales
Home sales	355,736		240,835		604,633		437,889

Lot sales and other	11,231		1,748		12,914		2,461
Total cost of sales	366,967		242,583		617,547		440,350

Gross margin
Home sales	62,446		50,677		106,141		94,248
Lot sales and other	1,730		(16)		1,496		386
Total gross margin	64,176		50,661		107,637		94,634

Sales and marketing expenses	24,663		18,334		43,151		34,742
General and administrative expenses	29,555		25,980		55,637		48,760
Total operating expenses	54,218		44,314		98,788		83,502

Income from operations	9,958		6,347		8,849		11,132

Other (expense) income, net	(5,353)		1,159		(3,540)		2,114



Pretax income	4,605		7,506		5,309		13,246

Provision for income taxes	1,370		1,640		1,340		3,257

Net income	3,235		5,866		3,969		9,989
Net income attributable to noncontrolling interests	350		919		894		1,824
Net income attributable to Landsea Homes Corporation	$	2,885	$	4,947	$	3,075	$	8,165

Income per share:
Basic	$	0.08	$	0.12	$	0.08	$	0.20
Diluted	$	0.08	$	0.12	$	0.08	$	0.20

Weighted average common shares outstanding:
Basic	36,199,850		39,891,982		36,239,765		39,944,549
Diluted	36,369,827		39,971,731		36,558,862		40,059,731

See accompanying notes to the consolidated financial statements.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 2


Landsea Homes Corporation
Consolidated Statements of Equity - (Unaudited)
(in thousands, except shares)


	Common Stock
	Shares	Amount		Additional paid-in capital		Retained earnings		Total stockholders' equity		Noncontrolling interests		Total equity
Balance at March 31, 2024	36,129,736	$	4	$	459,521	$	187,774	$	647,299	$	29,225	$	676,524
Shares issued under share-based awards	117,197	—		—		—		—		—		—
Stock options exercised	28,459	—		240		—		240		—		240
Cash paid for shares withheld for taxes	—	—		(625)		—		(625)		—		(625)
Stock-based compensation	—	—		865		—		865		—		865

Distributions to noncontrolling interests	—	—		—		—		—		(7,357)		(7,357)
Net income	—	—		—		2,885		2,885		350		3,235
Balance at June 30, 2024	36,275,392	$	4	$	460,001	$	190,659	$	650,664	$	22,218	$	672,882

	Common Stock
	Shares	Amount		Additional paid-in capital		Retained earnings		Total stockholders' equity		Noncontrolling interests		Total equity
Balance at December 31, 2023	36,520,894	$	4	$	465,290	$	187,584	$	652,878	$	35,474	$	688,352

Shares issued under share-based awards	188,449	—		—		—		—		—		—
Stock options exercised	100,485	—		976		—		976		—		976
Cash paid for shares withheld for taxes	—	—		(1,299)		—		(1,299)		—		(1,299)
Stock-based compensation	—	—		1,543		—		1,543		—		1,543
Repurchase of common stock and associated tax	(534,436)	—		(6,509)		—		(6,509)		—		(6,509)

Distributions to noncontrolling interests	—	—		—		—		—		(14,150)		(14,150)
Net income	—	—		—		3,075		3,075		894		3,969
Balance at June 30, 2024	36,275,392	$	4	$	460,001	$	190,659	$	650,664	$	22,218	$	672,882

See accompanying notes to the consolidated financial statements.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 3


Landsea Homes Corporation
Consolidated Statements of Equity - (Unaudited)
(in thousands, except shares)


	Common Stock
	Shares	Amount		Additional paid-in capital		Retained earnings		Total stockholders' equity		Noncontrolling interests		Total equity
Balance at March 31, 2023	40,019,283	$	4	$	496,687	$	161,566	$	658,257	$	54,361	$	712,618
Shares issued under share-based awards	132,767	—		—		—		—		—		—
Cash paid for shares withheld for taxes	—	—		(145)		—		(145)		—		(145)
Stock-based compensation expense	—	—		1,731		—		1,731		—		1,731
Repurchase of common stock and associated tax	(968,869)	—		(7,532)		—		(7,532)		—		(7,532)
Distributions to noncontrolling interests	—	—		—		—		—		(932)		(932)
Net income	—	—		—		4,947		4,947		919		5,866
Balance at June 30, 2023	39,183,181	$	4	$	490,741	$	166,513	$	657,258	$	54,348	$	711,606

	Common Stock
	Shares	Amount		Additional paid-in capital		Retained earnings		Total stockholders' equity		Noncontrolling interests		Total equity
Balance at December 31, 2022	40,884,268	$	4	$	497,598	$	158,348	$	655,950	$	54,369	$	710,319
Shares issued under share-based awards	267,782	—		—		—		—		—		—
Cash paid for shares withheld for taxes	—	—		(695)		—		(695)		—		(695)
Stock-based compensation expense	—	—		1,370		—		1,370		—		1,370
Repurchase of common stock and associated tax	(968,869)	—		(7,532)		—		(7,532)		—		(7,532)
Forfeiture and cancellation of Earnout Shares	(1,000,000)	—		—		—		—		—		—
Distributions to noncontrolling interests	—	—		—		—		—		(1,845)		(1,845)
Net income	—	—		—		8,165		8,165		1,824		9,989
Balance at June 30, 2023	39,183,181	$	4	$	490,741	$	166,513	$	657,258	$	54,348	$	711,606

See accompanying notes to the consolidated financial statements.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 4


Landsea Homes Corporation
Consolidated Statements of Cash Flows - (Unaudited)
(in thousands)


	Six Months Ended June 30,
		2024		2023
	(dollars in thousands)
Cash flows from operating activities:
Net income		$	3,969	$	9,989
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		3,170		2,557

Real estate inventories impairment		—		4,700
Stock-based compensation		1,543		1,370
Loss on modification of debt		5,180		—
Abandoned project costs		1,954		312
Write-off of offering costs		—		436


Deferred taxes		264		346
Changes in operating assets and liabilities:
Cash held in escrow		25,020		15,197
Real estate inventories		(47,760)		(35,138)
Due from affiliates		(221)		(366)

Other assets		(3,606)		2,104
Accounts payable		15,030		(1,547)
Accrued expenses and other liabilities		(4,142)		(11,374)

Net cash provided by (used in) operating activities		401		(11,414)

Cash flows from investing activities:
Purchases of property and equipment		(3,619)		(3,571)


Payments for business acquisition, net of cash acquired		(235,043)		—
Net cash used in investing activities		(238,662)		(3,571)

Cash flows from financing activities:
Borrowings from notes, other debts payable, and other liabilities		473,047		190,000
Repayments of notes, other debts payable, and other liabilities		(240,545)		(214,300)

Cash paid for shares withheld for taxes		(1,299)		(695)





Proceeds from exercise of stock options		976		—
Repurchases of common stock		(6,452)		(7,476)


Distributions to noncontrolling interests		(14,150)		(1,845)
Deferred offering costs paid		(2,324)		(147)
Debt issuance and modification costs paid		(8,397)		—

Net cash provided by (used in) financing activities		200,856		(34,463)

Net decrease in cash and cash equivalents		(37,405)		(49,448)
Cash and cash equivalents at beginning of period		119,555		123,634
Cash and cash equivalents at end of period		$	82,150	$	74,186

See accompanying notes to the consolidated financial statements.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 5


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

1. Company and Summary of Significant Account Policies

Landsea Homes Corporation (together with its subsidiaries, “Landsea Homes” or the “Company”) is engaged in the acquisition, development, and sale of homes and lots in Arizona, California, Colorado, Florida, New York, and Texas. The Company’s operations are organized into the following six reportable segments: Arizona, California, Colorado, Florida, Metro New York, and Texas.

Basis of Presentation and Consolidation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and all subsidiaries, partnerships, and other entities in which the Company has a controlling interest as well as variable interest entities (“VIEs”) in which the Company is deemed the primary beneficiary. The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs in which the Company is not deemed to be the primary beneficiary are accounted for under the equity method. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024. The accompanying unaudited consolidated financial statements include all adjustments, consisting of normal recurring entries, necessary for a fair presentation of the Company’s results for the interim periods presented. Results for the interim periods are not necessarily indicative of the results to be expected for the full year due to seasonal variations and other factors.

Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates.

Recent Accounting Pronouncements

In March 2023, the FASB issued ASU 2023-01, which amends the application of ASU 2016-02, Leases (Topic 842), related to leases with entities under common control, also referred to as common control leases. The amendments to this update require an entity to consider the useful life of leasehold improvements associated with common control leases from the perspective of the common control group and amortize the leasehold improvements over the useful life of the assets to the common control group, instead of the term of the lease. Any remaining value for the leasehold improvement at the end of the lease would be adjusted through equity. The standard was effective for fiscal years beginning after December 15, 2023, early adoption was permitted. The adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of additional segment information. The guidance requires entities to provide significant segment expenses that are regularly provided to the entity’s chief operating decision maker (“CODM”), other segment items to reconcile segment revenue and significant expenses to the reported measure of segment profit or loss, a description of the composition of the other segment items, and the title and position of the CODM. The amendments in this update also expand the segment disclosure requirements to interim periods. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The new guidance must be applied retrospectively to all prior periods presented in the financial statements, with the significant segment expense and other segment item amounts disclosed based on categories identified in the period of adoption. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires annual disclosure of specific categories in the income tax rate reconciliation and of additional information for reconciling items that meet a quantitative threshold among other changes. Specifically, the guidance requires a tabular reconciliation disclosure, using both percentages and amounts. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 6


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

2. Business Combination and Asset Acquisition

On April 1, 2024, the Company completed the acquisition of Antares Acquisition, LLC (“Antares”), a Dallas Fort Worth based homebuilder, for approximately $239.8 million (subject to certain customary post-closing adjustments) using a combination of cash on hand and borrowings under the Company’s existing credit facility, which included repayment of approximately $40.2 million of Antares debt. The total assets of Antares included approximately 2,100 lots owned or controlled in the Dallas Fort Worth market. This acquisition was accounted for as a business combination.

In accordance with ASC 805, the assets acquired and liabilities assumed from the acquisition of Antares were measured and recognized at fair value as of the date of the acquisition to reflect the purchase price paid. The determination of the final purchase accounting allocation related to the working capital calculations and resulting goodwill are in process as of the date of these consolidated financial statements. Changes in the determination of the fair value of the assets acquired and liabilities assumed will be recorded as a measurement period adjustment in the period in which they are identified up to one year from the acquisition date.

Acquired inventories consist of land, land deposits, and work in process inventories. For acquired land and land options, the Company typically utilizes, with the assistance of a third-party appraiser, a sales comparison approach. For work in process inventories, the Company estimates the fair value based upon the stage of production of each unit and a gross margin that management believes a market participant would require to complete the remaining development and requisite selling efforts. On the acquisition date, the stage of production for each lot ranged from recently started lots to fully completed homes. The intangible assets acquired relate to the Antares trade name and material contracts, which are estimated to have a fair value of $2.0 million and are being amortized over 12 to 18 months. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed and relates primarily to the assembled workforce and business synergies. Goodwill of $83.7 million was preliminarily recorded on the consolidated balance sheets as a result of this transaction and is expected to be deductible for tax purposes over 15 years. The acquired goodwill is included in the Texas reporting segment in Note 11 – Segment Reporting. The Company incurred transaction related costs of $2.6 million and $3.6 million related to the Antares acquisition during the three and six months ended June 30, 2024, respectively. These transaction costs are included in general and administrative expenses on the consolidated statements of operations.

The Company's results of operations include homebuilding revenues from the Antares acquisition of $35.7 million for both the three and six months ended June 30, 2024. The accompanying results of operations also include pretax loss of $0.8 million from the Antares acquisition during both the three and six months ended June 30, 2024. The pretax loss is inclusive of purchase price accounting and an allocation of corporate general and administrative expenses.

The following is a summary of the preliminary allocation of the purchase price based on the fair value of assets acquired and liabilities assumed (dollars in thousands).


Assets Acquired
Cash	$	4,760
Real estate inventories	157,279
Goodwill	83,683
Other intangible assets	1,950
Other assets	4,539
Total assets	$	252,211

Liabilities Assumed
Accounts payable	$	2,472
Accrued expenses	9,936
Total liabilities	12,408
Net assets acquired	$	239,803

On October 10, 2023, the Company expanded into the Colorado market by acquiring certain assets of Richfield Homes, LLC (“Richfield”). The Company paid an aggregate cash purchase price of $22.5 million to acquire approximately 290 owned or controlled lots in the greater Denver, Colorado area, including any construction in progress on those lots. This acquisition was accounted for as an asset acquisition.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 7


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

Unaudited Pro Forma Financial Information

Unaudited pro forma revenue and net income for the following periods presented give effect to the results of the acquisition of Antares as though the respective acquisition dates were as of January 1, 2023, the beginning of the year preceding the acquisition. Unaudited pro forma net income adjusts the operating results of Antares to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of the year preceding the year of acquisition, including the tax-effected amortization of the acquired intangible assets and transaction related costs.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in thousands)
Revenue	$	431,143	$	346,637	$	767,840	$	627,604

Pretax income	11,246		8,752		17,617		9,841
Provision for income taxes	4,718		2,113		4,447		2,420
Net income	$	6,528	$	6,639	$	13,170	$	7,421

3. Variable Interest Entities

The Company consolidates two joint venture (“JV”) VIEs. The consolidated VIEs include one active project in the Metro New York area (“14th Ave JV”) and one JV with the purpose of acquiring undeveloped land (the “LCF JV”). The Company has determined that it is the primary beneficiary of these VIEs as it has the power to direct activities of the operations that most significantly affect their economic performance.

Both consolidated VIEs are financed by equity contributions from the Company and the JV partner. The 14th Ave JV was also funded by third-party debt which was paid off in 2022.

The following table summarizes the carrying amount and classification of the VIEs’ assets and liabilities in the consolidated balance sheets as of June 30, 2024 and December 31, 2023.


	June 30, 2024		December 31, 2023
	(dollars in thousands)
Cash	$	6,402	$	2,950


Real estate inventories	60,605		79,441
Due from affiliates	115		203
Other assets	2,248		2,107
Total assets	$	69,370	$	84,701

Accounts payable	$	525	$	384
Accrued expenses and other liabilities	5,353		5,257


Total liabilities	$	5,878	$	5,641

4. Real Estate Inventories

Real estate inventories are summarized as follows:


	June 30, 2024		December 31, 2023
	(dollars in thousands)
Deposits and pre-acquisition costs	$	124,883	$	99,702
Land held and land under development	505,631		272,825
Homes completed or under construction	701,819		692,126
Model homes	17,832		57,073
Total real estate inventories	$	1,350,165	$	1,121,726

Landsea Homes Corp. | Q2 2024 Form 10-Q | 8


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

Deposits and pre-acquisition costs include land deposits and other due diligence costs related to potential land acquisitions. Land held and land under development includes costs incurred during site development such as development, indirect costs, and permits. Homes completed or under construction and model homes include all costs associated with home construction, including land, development, indirect costs, permits, materials, and labor.

In accordance with ASC 360, Property, Plant, and Equipment, real estate inventories are stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. The Company reviews each real estate asset at the community-level, on a quarterly basis or whenever indicators of impairment exist. The Company generally determines the estimated fair value of each community by using a discounted cash flow approach based on the estimated future cash flows at discount rates that reflect the risk of the community being evaluated. The discounted cash flow approach can be impacted significantly by the Company’s estimates of future home sales revenue, home construction costs, pace of homes sales, and the applicable discount rate.

For the three and six months ended June 30, 2024, the Company did not recognize any impairments on real estate inventories. For the three and six months ended June 30, 2023, the Company recorded $4.7 million of real estate inventories impairment charges related to one community in its California segment. In this instance, the Company determined that additional incentives and persistent discounts were required to sell the remaining homes, which was the primary reason the estimated future cash flows for the community were driven below their previous carrying values. Real estate inventories impairment charges are recorded to cost of home sales in the consolidated statements of operations.


	Impairment Data					Quantitative Data
Three Months Ended	Number of Projects Impaired	Real Estate Inventories Impairment		Fair Value of Inventory After Impairment		Discount Rate
	(dollars in thousands)
June 30, 2023	1	$	4,700	$	19,363	11	%

5. Capitalized Interest

Interest is capitalized to real estate inventories during development and as a result of other qualifying activities. Interest capitalized as a cost of real estate inventories is included in cost of sales as related inventories are delivered.

For the three and six months ended June 30, 2024, the Company incurred and capitalized interest of $21.6 million and $36.9 million, respectively. For the three and six months ended June 30, 2023, the Company incurred and capitalized interest of $11.3 million and $23.2 million, respectively. Previously capitalized interest included in cost of sales during the three and six months ended June 30, 2024 was $18.0 million and $28.6 million, respectively. Previously capitalized interest included in cost of sales during the three and six months ended June 30, 2023 was $7.3 million and $11.9 million, respectively. These amounts included interest from certain related party transactions, refer to Note 9 – Related Party Transactions for additional information.

6. Other Assets

As of June 30, 2024 and December 31, 2023, the Company had contract assets of $2.6 million and $6.0 million, respectively, related to lot sales and other revenue. The contract asset balance is included in other assets on the Company’s consolidated balance sheets and represents cash to be received for work already performed on lot sales and other contracts. The amount of the transaction price for lot sales and other contracts remaining to be recognized as revenue for performance obligations that were not fully satisfied as of June 30, 2024 and December 31, 2023 was $0.2 million and $1.1 million, respectively. As of June 30, 2024, the Company had no deferred revenue related to lot sales and other revenue included in accrued expenses and other liabilities in the Company’s consolidated balance sheets. As of December 31, 2023, the Company had $0.2 million deferred revenue related to lot sales and other revenue. The Company reduces these liabilities and recognizes revenue as development progresses and the related performance obligations are completed.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 9


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

7. Notes and Other Debts Payable, net

Amounts outstanding under notes and other debts payable, net consist of the following:


	June 30, 2024		December 31, 2023
	(dollars in thousands)
11.0% Senior Notes due July 2028	$	250,000	$	250,000
8.875% Senior Notes due April 2029	300,000		—
Discount and deferred loan costs	(21,548)		(13,857)
Senior Notes, net	$	528,452	$	236,143


	June 30, 2024		December 31, 2023
	(dollars in thousands)
Line of credit facility	$	231,000	$	315,000
Deferred loan costs	(5,345)		(7,369)
Line of credit facility, net	$	225,655	$	307,631

In April 2024, the Company completed the sale to certain purchasers of $300.0 million of 8.875% senior notes (the “8.875% Senior Notes”, together with the 11.0% Senior Notes, the “Senior Notes”). The Company received the proceeds, net of fees, in April 2024. The 8.875% Senior Notes mature in April 2029.

In July 2023, the Company entered into a senior unsecured note (the “Note Purchase Agreement”). The Note Purchase Agreement provided for the private placement of $250.0 million aggregate principal amount of 11.0% senior notes (the “11.0% Senior Notes”). The Company received the proceeds, net of discount and fees, in July 2023. The 11.0% Senior Notes mature in July 2028.

In October 2021, the Company entered into a line of credit agreement which was amended in April 2024 (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a senior unsecured borrowing of up to $455.0 million of which there was $231.0 million outstanding as of June 30, 2024. As part of the amendment, the Company wrote off $5.2 million of previously deferred financing costs associated with the line of credit facility prior to the amendment. This write-off is included in other (expense) income, net on the consolidated statements of operations. The Company may increase the borrowing capacity up to $850.0 million, under certain conditions. Funds available under the Amended Credit Agreement are subject to a borrowing base requirement which is calculated on specified percentages of our real estate inventories. The borrowings under the Amended Credit Agreement bear interest at a daily simple Secured Overnight Financing Rate (“SOFR”) rate, a term SOFR rate, or a base rate (in each case calculated in accordance with the Amended Credit Agreement), plus, in each case, an applicable margin. The applicable margin is adjusted by reference to a grid based on a leverage ratio calculated in accordance with the Amended Credit Agreement. As of June 30, 2024, the applicable margin was 2.85%. The Amended Credit Agreement matures in April 2027. As of June 30, 2024, the interest rate on the loan was 8.16%.

The Amended Credit Agreement and the Note Purchase Agreement contain certain restrictive financial covenants, such as requirements for the Company to maintain a minimum liquidity balance, minimum tangible net worth, and leverage and interest coverage ratios. The 8.875% Senior Notes do not contain financial covenants. As of June 30, 2024, the Company was in compliance with all financial covenants.

Our Senior Notes are not secured, however, the agreements governing the Senior Notes contain some restrictions on secured debt and other transactions. Our Senior Notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. The Senior Notes are redeemable in whole or in part at any time at our option, at prices that vary based upon the remaining original term of the Senior Notes to be redeemed.

8. Commitments and Contingencies

Legal—The Company is currently involved in various legal actions and proceedings that arise from time to time and may be subject to similar or other legal and/or regulatory actions in the future. The Company is currently unable to estimate the likelihood of an unfavorable result in any such proceeding that could have a material adverse effect on the Company’s results of operations, financial position, or liquidity.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 10


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

In the fourth quarter of 2021, three insurers paid $14.9 million on behalf of the Company and others to settle a wrongful death suit. The insurers contend they are entitled to seek reimbursement from the Company for some or all of such amounts, which the Company disputes. During October 2023, one of the insurers filed a lawsuit seeking reimbursement and the two other insurers subsequently asserted reimbursement claims in the lawsuit. However, at this time the Company is unable to predict the outcome of the insurers’ claims against the Company or estimate the amount of any potential damages associated therewith.

Performance Obligations—In the ordinary course of business, and as part of the entitlement and development process, the Company’s subsidiaries are required to provide performance bonds to assure completion of certain public facilities. The Company had $124.4 million and $109.3 million of performance bonds outstanding as of June 30, 2024 and December 31, 2023, respectively.

Warranty—Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Changes in the Company’s warranty accrual are detailed in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in thousands)
Beginning warranty accrual	$	49,101	$	46,230	$	48,949	$	46,657
Warranty provision	2,535		1,263		4,271		2,174
Warranty payments	(2,374)		(1,266)		(3,958)		(2,604)
Ending warranty accrual	$	49,262	$	46,227	$	49,262	$	46,227

Operating Leases—The Company primarily enters into operating leases for the right to use office space, model homes, and computer and office equipment, which have remaining lease terms that range from less than 1 year up to 8 years and often include one or more options to renew. The weighted average remaining lease term as of June 30, 2024 and December 31, 2023 was 4.2 and 5.7 years, respectively. Renewal terms are included in the lease term when it is reasonably certain the option will be exercised.

During June 2024, the Company sold model homes which generated home sales revenue of $60.8 million and cost of sales of $57.9 million. The model homes were immediately leased back for terms ranging from 3 to 36 months. The Company determined that control of the model homes transferred to the buyer and, as a result, the transaction qualified as a sale. All of the leases from the transaction are accounted for as operating leases and the Company recorded right-of-use assets and lease liabilities of $12.5 million in the accompanying consolidated balance sheets.

The Company established a right-of-use asset and a lease liability based on the present value of future minimum lease payments at the commencement date of the lease, or, if subsequently modified, the date of modification for active leases. As the rate implicit in each lease is not readily determinable, the Company’s incremental borrowing rate is used in determining the present value of future minimum payments as of the commencement date. The weighted average rate as of June 30, 2024 and December 31, 2023 was 8.0% and 5.5%, respectively. Lease components and non-lease components are accounted for as a single lease component. As of June 30, 2024, the Company had $24.9 million and $26.0 million recognized as a right-of-use asset and lease liability, respectively, which are presented on the consolidated balance sheets within other assets and accrued expenses and other liabilities, respectively. As of December 31, 2023, the Company had $11.9 million and $13.1 million recognized as a right-of-use asset and lease liability, respectively.

Operating lease expense for the three and six months ended June 30, 2024 was $0.9 million and $1.6 million, respectively, and is included in general and administrative expenses on the consolidated statements of operations. Operating lease expense for the three and six months ended June 30, 2023 was $0.8 million and $1.9 million, respectively.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 11


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

Future minimum payments under the noncancelable operating leases in effect at June 30, 2024 were as follows (dollars in thousands):


2024	$	5,293
2025	8,862
2026	5,608
2027	3,456
2028	2,384
Thereafter	4,958
Total lease payments	30,561
Less: Discount	(4,546)
Present value of lease liabilities	$	26,015

9. Related Party Transactions

The Company continues to pay for certain costs on behalf of Landsea Holdings Corporation (“Landsea Holdings”) which was previously the majority stockholder of the Company. The Company records a due from affiliate balance for all such payments. As of June 30, 2024 and December 31, 2023, the Company had a net receivable due from affiliates balance of $3.7 million and $3.5 million, respectively.

In March 2024, Landsea Holdings, the Company’s then-majority stockholder, completed a registered secondary offering of the Company’s common stock. The Company did not purchase any shares of common stock that were sold by Landsea Holdings in the offering. The Company paid costs, fees, and expenses for the offering of $0.6 million, and Landsea Holdings received all net proceeds from the sale. Landsea Holdings no longer owns greater than 50% of the Company’s common stock upon completion of the offering. As a result, the Company no longer qualifies as a “controlled company” under The Nasdaq Stock Market LLC listing standards.

In August 2023, the Company repurchased from the underwriters, at the public offering price of $9.75 per share, 800,000 shares of common stock that were sold by Green Investment Alpha Limited (“Green Investment”), a beneficial owner of the Company, in a registered secondary offering, for a total purchase price of $7.8 million. The Company paid costs, fees, and expenses for the offering of $0.3 million, and Green Investment received all net proceeds from the sale. Green Investment is required to reimburse the Company for the costs, fees and expenses incurred in offering. Green Investment no longer qualified as a related party upon the completion of the offering.

In June 2023, the Company repurchased from the underwriters, at the public offering price of $7.50 per share, 443,478 shares of common stock that were sold by Landsea Holdings, the Company’s then-majority stockholder, in a registered secondary offering, for a total purchase price of $3.3 million. The Company paid costs, fees, and expenses for the offering of $0.8 million, and Landsea Holdings received all net proceeds from the offering.

In June 2022, Landsea Capital Fund, who is under common control with the Company, contributed $55.0 million to the LCF JV. The LCF JV, which is consolidated by the Company, used these proceeds to purchase undeveloped land from the Company. The Company distributed $7.4 million and $14.1 million to Landsea Capital Fund during the three and six months ended June 30, 2024, respectively. The Company distributed $0.9 million and $1.8 million to Landsea Capital Fund during the three and six months ended June 30, 2023, respectively. All intercompany transactions between the Company and the LCF JV have been eliminated upon consolidation.

In December 2021, the Company sold model homes to a related party for total consideration of $15.2 million. As part of this transaction, the Company leased back these models. The leases completed in April 2024. The total amount of rent payments made during the three and six months ended June 30, 2024 were less than $0.1 million and $0.2 million, respectively. The total amount of rent payments made during the three and six months ended June 30, 2023 were $0.2 million and $0.4 million, respectively. As the leases ended prior to June 30, 2024, we have no remaining right-of-use asset or lease liability balances associated with this transaction. As of December 31, 2023, we had right-of-use asset and lease liability balances of $0.5 million and $0.5 million, respectively.

In July 2021, the Company entered into a landbank agreement for a project in its California segment with a related party. The Company will make regular payments to the related party based on an annualized rate of 7% of the undeveloped land costs while the

Landsea Homes Corp. | Q2 2024 Form 10-Q | 12


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

land is developed and may purchase, at the Company’s discretion, the lots at a predetermined price of $28.9 million. The total amount of interest payments made during both the three and six months ended June 30, 2024 was less than $0.1 million. The total amount of interest payments made during the three and six months ended June 30, 2023 was $0.2 million and $0.4 million, respectively. During the three and six months ended June 30, 2024, payments of $4.0 million have been made to purchase the remaining land at the conclusion of the agreement as of June 30, 2024. During the three and six months ended June 30, 2023, payments of $3.0 million and $4.0 million, including fees, were made to purchase developed lots from the related party, respectively. Capitalized interest included in real estate inventories on the consolidated balance sheets associated with this transaction was $0.6 million and $1.0 million as of June 30, 2024 and December 31, 2023, respectively. Previously capitalized related party interest included in cost of sales during the three and six months ended June 30, 2024 was $0.3 million and $0.4 million, respectively. Previously capitalized related party interest included in cost of sales during the three and six months ended June 30, 2023 was $0.2 million and $0.4 million, respectively.

Landsea Holdings holds a series of notes payable to affiliated entities of its parent. The cash Landsea Holdings received from this debt was previously utilized to partially fund operations of the Company. Related party interest incurred by Landsea Holdings was historically pushed down to the Company and reflected on the consolidated balance sheets of the Company, primarily in real estate inventories, and on the consolidated statements of operations in cost of sales. Refer to Note 5 – Capitalized Interest for further detail. As the Company did not guarantee the notes payable nor have any obligations to repay the notes payable, and as the notes payable were not assigned to the Company, the notes payable do not represent a liability of the Company and accordingly have not been reflected in the consolidated balance sheets. Additionally, in connection with the Merger (as defined below), the Company is precluded from repaying Landsea Holdings’ notes payable to the affiliated entities of its parent. Therefore, beginning January 7, 2021, additional interest from these notes payable is no longer pushed down to the Company. Capitalized interest included in real estate inventories on the consolidated balance sheets associated with this transaction was $0.3 million and $0.4 million as of June 30, 2024 and December 31, 2023, respectively. Previously capitalized related party interest included in cost of sales during both the three and six months ended June 30, 2024 was $0.1 million. Previously capitalized related party interest included in cost of sales during the three and six months ended June 30, 2023 was $0.5 million and $1.3 million, respectively.

10. Income Taxes

Income taxes for the three and six months ended June 30, 2024 was $1.4 million and $1.3 million, respectively. Income taxes for the three and six months ended June 30, 2023 was $1.6 million and $3.3 million, respectively. The effective tax rate for the three and six months ended June 30, 2024 was 29.8% and 25.2% compared to a provision of 21.8% and 24.6% for the three and six months ended June 30, 2023. The difference between the statutory tax rate and the effective tax rate for the three and six months ended June 30, 2024 is primarily related to state income taxes net of federal income tax benefits and estimated deduction limitations for executive compensation under Section 162(m), partially offset by tax credits for energy-efficient homes and excess tax benefits on share-based compensation. The difference between the statutory tax rate and the effective tax rate for the three and six months ended June 30, 2023 is primarily related to state income taxes net of federal income tax benefits and estimated deduction limitations for executive compensation under Section 162(m), partially offset by tax credits for energy-efficient homes.

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets.

11. Segment Reporting

The Company is engaged in the acquisition, development, and sale of homes and lots in multiple states across the country. The Company is managed by geographic location and each of the six geographic regions targets a wide range of buyer profiles including: first time, move-up, and luxury homebuyers.

Management of the six geographic regions report to the Company’s chief operating decision makers (“CODMs”), the Chief Executive Officer and Chief Operating Officer of the Company. The CODMs review the results of operations, including total revenue

Landsea Homes Corp. | Q2 2024 Form 10-Q | 13


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

and pretax income to assess profitability and to allocate resources. Accordingly, the Company has presented its operations as the following six reportable segments:

•Arizona

•California

•Colorado

•Florida

•Metro New York

•Texas

The Company has also identified its Corporate operations as a non-operating segment, as it serves to support the homebuilding operations through functional departments such as executive, finance, treasury, human resources, accounting, and legal. The majority of Corporate personnel and resources are primarily dedicated to activities relating to operations and are allocated based on each segment’s respective percentage of assets, revenue, and dedicated personnel.

The following table summarizes total revenue and pretax income by segment:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in thousands)
Revenue
Arizona	$	108,170	$	72,103	$	187,655	$	145,692
California	134,211		99,516		266,105		166,774
Colorado	10,201		—		19,055		—
Florida	131,052		121,625		204,112		216,682
Metro New York	4,475		—		4,475		1,649
Texas	43,034		—		43,782		4,187
Total revenues	$	431,143	$	293,244	$	725,184	$	534,984

Pretax income (loss)
Arizona	$	4,354	$	(610)	$	4,833	$	(427)
California	10,997		4,452		19,208		7,389
Colorado	(928)		—		(2,080)		—
Florida	6,059		11,388		5,824		19,615
Metro New York	(1,758)		(298)		(2,249)		(901)
Texas	(2,802)		(1,441)		(4,738)		(2,761)
Corporate	(11,317)		(5,985)		(15,489)		(9,669)
Total pretax income	$	4,605	$	7,506	$	5,309	$	13,246

Landsea Homes Corp. | Q2 2024 Form 10-Q | 14


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

The following table summarizes total assets by segment:


	June 30, 2024		December 31, 2023
	(dollars in thousands)
Assets
Arizona	$	329,895	$	336,424
California	449,541		479,218
Colorado	35,464		27,240
Florida	430,071		425,154
Metro New York	39,692		42,047
Texas	357,264		60,255
Corporate	100,983		100,894
Total assets	$	1,742,910	$	1,471,232

Included in the Corporate segment assets is cash and cash equivalents of $65.2 million and $65.2 million as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 goodwill of $83.7 million, $47.9 million and $20.7 million was allocated to the Texas, Florida, and Arizona segments, respectively. As of December 31, 2023, goodwill of $47.9 million and $20.7 million was allocated to the Florida and Arizona segments, respectively.

12. Fair Value

ASC 820, Fair Value Measurement, defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

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

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

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

The following table presents carrying values and estimated fair values of financial instruments:


		June 30, 2024				December 31, 2023
	Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
		(dollars in thousands)
Liabilities:

Line of credit facility (1)	Level 2	$	231,000	$	231,000	$	315,000	$	315,000
11.0% Senior Notes	Level 2	$	250,000	$	261,250	$	250,000	$	257,500
8.875% Senior Notes	Level 2	$	300,000	$	295,875	$	—	$	—

(1) Carrying amount approximates fair value due to the variable interest rate terms of this loan. Carrying value excludes any associated deferred loan costs.

The carrying values of receivables, deposits, and other assets as well as accounts payable and accrued liabilities approximate the fair value for these financial instruments based upon an evaluation of the underlying characteristics, market data, and because of

Landsea Homes Corp. | Q2 2024 Form 10-Q | 15


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

the short period of time between origination of the instruments and their expected realization. The fair value of cash and cash equivalents is classified in Level 1 of the fair value hierarchy.

Non-financial assets such as real estate inventories and goodwill are measured at fair value on a non-recurring basis using a discounted cash flow approach with Level 3 inputs within the fair value hierarchy. This measurement is performed when events and circumstances indicate the asset’s carrying value is not fully recoverable. During the three and six months ended June 30, 2024, the Company did not recognize any impairments on real estate inventories or goodwill. During the three and six months ended June 30, 2023, it was determined that real estate inventories with a carrying value of $24.1 million within one community in the California segment was not expected to be fully recoverable. Accordingly, a real estate inventories impairment charge was recognized in the amount of $4.7 million to reflect the estimated fair value of the community of $19.4 million. Refer to Note 4 – Real Estate Inventories for additional information.

13. Stock-Based Compensation

The following table presents a summary of the Company’s nonvested performance share units (“PSUs”) and restricted stock units (“RSUs”) for the six months ended June 30, 2024:


	Awards	Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested, at December 31, 2023	1,488	$	8.74
Granted	485	8.34
Vested	(274)	9.33
Forfeited	(39)	9.44
Nonvested, at June 30, 2024	1,660	$	8.51

The following table presents a summary of the Company’s stock options activity for the six months ended June 30, 2024:


	Number of Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)			(in years)	(in thousands)
Options outstanding at December 31, 2023	684	$	8.08
Granted	303	12.44
Exercised	(101)	8.36
Forfeited	(83)	10.00
Options outstanding at June 30, 2024	803	$	9.49	8.35	$	605
Options exercisable at June 30, 2024	286	$	8.39	7.24	$	228

Stock-based compensation expense totaled $0.9 million and $1.5 million during the three and six months ended June 30, 2024, respectively, and is included in general and administrative expenses on the consolidated statements of operations. For the three and six months ended June 30, 2023, stock-based compensation expense totaled $1.7 million and $1.4 million, respectively. Net stock-based compensation activity during the three months ended March 31, 2023 resulted in a reduction to expense due to the forfeiture of certain options as well as the revised estimates on the expected PSU achievement.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 16


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

The following table presents a summary of the Company’s outstanding RSUs and PSUs, assuming the current estimated level of performance achievement:


	June 30, 2024
	(in thousands, except period)
Unvested units	1,660
Remaining cost on unvested units	$	3,130
Remaining vesting period	2.91 years

Stock-based compensation expense associated with the outstanding RSUs and PSUs is measured using the grant date fair value which is based on the closing price as of the grant date. The expense associated with the PSUs also incorporates the estimated achievement of the established performance criteria at the end of each reporting period until the performance period ends.

14. Stockholders’ Equity

The Company’s authorized capital stock consists of 500.0 million shares of common stock with a par value of $0.0001 per share, and 50.0 million shares of preferred stock with a par value of $0.0001 per share. As of June 30, 2024, there were 41.7 million shares of common stock issued and 36.3 million outstanding, and no shares of preferred stock issued or outstanding. All outstanding shares of common stock are validly issued, fully paid and nonassessable.

Stock Repurchases

In March 2023, the Board of Directors authorized a stock repurchase program allowing for the repurchase of up to $10.0 million worth of common stock, with an expiration of December 31, 2023. In July 2023, the Board of Directors authorized additional capacity of approximately $3.3 million, with an expiration date of December 31, 2023, and an additional $10.0 million with no stated expiration date. In October 2023, the Board of Directors authorized additional capacity of $20.0 million with no stated expiration date. No additional stock repurchase authorizations occurred during the six months ended June 30, 2024.

During the six months ended June 30, 2024, the Company repurchased 534,436 shares of common stock for a total of $6.4 million, excluding commissions, which was recorded as a reduction to additional paid-in capital. During the three months ended June 30, 2024, the Company did not repurchase any shares of common stock. As of June 30, 2024, the Company had approximately $2.5 million in remaining capacity from previous authorizations. During the three and six months ended June 30, 2023, the Company repurchased 968,869 shares of common stock for a total of $7.5 million, excluding commissions, which was recorded as a reduction to additional paid-in capital. A portion of these shares were repurchased directly from the Company’s majority shareholder at the time. Refer to Note 9 – Related Party Transactions for additional information.

The timing and amount of repurchases are based on a variety of factors such as the market price of the Company's common stock, corporate and contractual requirements, market and economic conditions, and legal requirements.

Merger Transaction

On August 31, 2020, Landsea Homes and Landsea Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LF Capital Acquisition Corp. (“LF Capital”) and LFCA Merger Sub, Inc. (the “Merger Sub”), a direct, wholly-owned subsidiary of LF Capital. The Merger Agreement provided for, among other things, the merger of Merger Sub with and into Landsea Homes Incorporated (“LHI”), previously a wholly-owned subsidiary of Landsea Holdings, with LHI continuing as the surviving corporation (the “Merger”). On January 7, 2021 (the “Closing Date”), the Merger was consummated pursuant to the Merger Agreement (the “Closing”). The name of LF Capital was changed at that time to Landsea Homes Corporation.

Upon closing of the Merger, Level Field Capital, LLC (the “Sponsor”) held 1.0 million shares that were subject to surrender and forfeiture for no consideration in the event the common stock did not reach certain thresholds during the 24-month period following the closing of the Merger (the “Earnout Shares”). The Sponsor transferred 0.5 million Earnout Shares to Landsea Holdings. In January 2023, the Company concluded that the threshold for the Earnout Shares was not met and therefore those shares were forfeited and cancelled.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 17


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

Warrants

As of June 30, 2024, there were 15,525,000 outstanding warrants consisting entirely of public warrants (the “Warrants”). At the time of the Merger, the Warrant Agreement was amended so that each public warrant is exercisable at $1.15 for one tenth of a share of common stock. As part of the amendment, each holder of the public warrants received $1.85 per warrant for a total of $28.7 million paid by the Company upon closing of the Merger. The Warrants will expire five years after the completion of the Merger or earlier upon redemption or liquidation.

The Company may call the public warrants for redemption:

•in whole and not in part;

•at a price of $0.01 per warrant;

•upon a minimum of 30 days’ prior written notice of redemption; and

•if, and only if, the last reported closing price of the shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the Warrant Agreement.

The exercise price and number of common shares issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuance of common shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants shares. Accordingly, the Warrants may expire worthless.

15. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in thousands, except share and per share amounts)
Numerator
Net income attributable to common stockholders	$	2,885	$	4,947	$	3,075	$	8,165

Denominator
Weighted average common shares outstanding - basic	36,199,850		39,891,982		36,239,765		39,944,549

Dilutive effect of warrants	—		—		12,575		—
Dilutive effect of options	77,029		—		114,851		—
Dilutive effect of share-based awards	92,948		79,749		191,671		115,182
Weighted average common shares outstanding - diluted	36,369,827		39,971,731		36,558,862		40,059,731

Earnings per share
Basic	$	0.08	$	0.12	$	0.08	$	0.20
Diluted	$	0.08	$	0.12	$	0.08	$	0.20

The Company excluded 1.8 million and 0.2 million common stock equivalents from diluted EPS related to antidilutive equity instruments during the three and six months ended June 30, 2024, respectively. For the three months ended June 30, 2024, the antidilutive effect is primarily attributable to the warrants. During the three-month period, the average stock price of the Company was below the strike price of the warrants, whereas during the six months ended June 30, 2024, the average stock price exceeded the warrants’ strike price. The Company excluded 2.5 million and 2.2 million common stock equivalents from diluted EPS related to antidilutive equity instruments during the three and six months ended June 30, 2023, respectively.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 18


Landsea Homes Corporation
Notes to the Consolidated Financial Statements - (unaudited)

16. Supplemental Disclosures of Cash Flow Information

The following table presents certain supplemental cash flow information:


	Six Months Ended June 30,
	2024		2023
	(dollars in thousands)
Supplemental disclosures of cash flow information
Interest paid, net of amounts capitalized	$	—	$	—
Income taxes paid	$	7,600	$	6,691

Supplemental disclosures of non-cash investing and financing activities


Change in right-of-use assets for new, modified, or terminated operating leases	$	14,296	$	338
Conversion of deferred offering costs to debt issuance costs	$	5,140	$	—

Landsea Homes Corp. | Q2 2024 Form 10-Q | 19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with and is qualified in its entirety by the consolidated financial statements and notes thereto included elsewhere in this document. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024. This section discusses certain items in the three and six months ended June 30, 2024 and 2023 and year-to-year comparisons between those periods. References to “we”, “Landsea Homes”, the “Company”, “us”, or “our” refer to Landsea Homes Corporation.

Landsea Homes Corp. | Q2 2024 Form 10-Q | 20

Consolidated Financial Data

The following table summarizes our unaudited results of operations for the six months ended June 30, 2024 and 2023.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in thousands, except per share amounts)				(dollars in thousands, except per share amounts)
Revenue
Home sales	$	418,182	$	291,512	$	710,774	$	532,137
Lot sales and other	12,961		1,732		14,410		2,847
Total revenues	431,143		293,244		725,184		534,984

Cost of sales
Home sales	355,736		240,835		604,633		437,889

Lot sales and other	11,231		1,748		12,914		2,461
Total cost of sales	366,967		242,583		617,547		440,350

Gross margin
Home sales	62,446		50,677		106,141		94,248
Lot sales and other	1,730		(16)		1,496		386
Total gross margin	64,176		50,661		107,637		94,634

Sales and marketing expenses	24,663		18,334		43,151		34,742
General and administrative expenses	29,555		25,980		55,637		48,760
Total operating expenses	54,218		44,314		98,788		83,502

Income from operations	9,958		6,347		8,849		11,132

Other (expense) income, net	(5,353)		1,159		(3,540)		2,114


Pretax income	4,605		7,506		5,309		13,246

Provision for income taxes	1,370		1,640		1,340		3,257

Net income	3,235		5,866		3,969		9,989
Net income attributable to noncontrolling interests	350		919		894		1,824
Net income attributable to Landsea Homes Corporation	$	2,885	$	4,947	$	3,075	$	8,165

Income per share:
Basic	$	0.08	$	0.12	$	0.08	$	0.20
Diluted	$	0.08	$	0.12	$	0.08	$	0.20

Weighted average common shares outstanding:
Basic	36,199,850		39,891,982		36,239,765		39,944,549
Diluted	36,369,827		39,971,731		36,558,862		40,059,731

Landsea Homes Corp. | Q2 2024 Form 10-Q | 21

Business Overview

Driven by a commitment to sustainability, we design and build homes and communities in Arizona, California, Colorado, Florida, Metro New York, and Texas. We create inspired spaces for modern living and feature homes and communities in vibrant, prime locations which connect seamlessly with their surroundings and enhance the local lifestyle for living, working, and playing. The defining principle, “Live in Your Element®,” creates the foundation for our customers to live where they want to live, how they want to live – in a home created especially for them.

We are engaged in the acquisition, development, and sale of homes and lots in six states: Arizona, California, Colorado, Florida, New York, and Texas, which also comprise the Company’s six reportable segments. We build and sell an extensive range of home types across a variety of price points, but we focus our efforts on the first-time homebuyer. Our Corporate operations are a non-operating segment that supports our homebuilding operations by providing executive, finance, treasury, human resources, accounting, and legal services.

In April 2024, the Company completed the acquisition of Antares Acquisition, LLC (“Antares”), a Dallas Fort Worth based homebuilder, for approximately $239.8 million (subject to certain customary post-closing adjustments) using a combination of cash on hand and borrowing under the Company’s existing credit facility, which included repayment of approximately $40.2 million of Antares’ debt. The Antares acquisition increased our presence in Texas with approximately 2,100 lots owned or controlled at the time of acquisition. We believe this acquisition fits with and continues to advance our overall business strategy by expanding into new and diverse markets.

In October 2023, the Company expanded into the Colorado market by acquiring certain assets of Richfield Homes, LLC (“Richfield”). The Company paid an aggregate cash purchase price of $22.5 million to acquire approximately 290 owned or controlled lots in the greater Denver, Colorado area, including any construction in progress on those lots. This acquisition was accounted for as an asset acquisition. We believe this acquisition fits with and continues to advance our overall business strategy by allowing us to expand into new geographic markets and to continue to shift inventory and product to more affordable offerings.

We manage inventory challenges by partnering with suppliers that can dedicate their attention and products to us, leveraging operational forecasts to assist in making purchase orders with sufficient lead time, using standard size products that are interchangeable, and holding select products on hand to ensure availability. In recent periods we have focused on being strategic in the contracts we enter into and the vendors we use. Over the last few quarters, we have seen improvements in our cycle time from beginning construction on a home to final delivery to the homebuyer. We believe these steps will allow us to continue to shorten our construction cycle time. Costs of construction have generally increased over recent quarters at a moderate pace. Higher construction costs to build our homes are primarily being driven by increased land costs in the markets we operate in and financing costs driving by higher interest rates.

Sustained higher mortgage interest rates have amplified challenges to affordability for many potential homebuyers and put pressure on demand across the nation. While our absorption and cancellation rates have stabilized to a large extent as many homebuyers acclimated to a higher interest rate environment, continued inflation, and the potential for interest rates to remain high, continues to cause affordability concerns and market uncertainty. These concerns continue to cause challenges across the homebuilding industry during the first half of 2024. Although we expect mortgage interest rates to begin decreasing later in 2024, there can be no assurance as to the timing and magnitude of future federal funds rate changes by the Federal Reserve. These rate changes ultimately drive mortgage interest rates and can significantly influence our absorption and cancellation rates. Even as rates show signs of easing, some homebuyers, anticipating further decreases in rates, may continue to delay purchasing a home. In light of these expectations, we are focusing our sales and marketing efforts on addressing affordability through a commitment to lower fixed interest rate incentive programs as well as providing purchase incentives, subject to managing our inventory levels in the market. We manage certain nationwide marketing programs, however incentives are specifically tailored to the circumstances of each community. We regularly perform stress tests on our backlog to identify homebuyers that are most likely to cancel their sales contracts, without intervention, due to higher costs from rising interest rates.

During 2024, we launched our exclusive financial services, Landsea Elements, which provides end-to-end support for our homebuyers through our existing services, Landsea Mortgage and Landsea Title, along with our newest offering, Landsea Insurance Agency. Through a licensing agreement, we partner with NFM Lending as a preferred lender to provide mortgage services under the name Landsea Mortgage. In connection with this arrangement, we have focused many of our incentives on mortgage interest rates and assisting homebuyers with buydowns on their home loans. This focus has helped achieve certain goals related to sales pace and

Landsea Homes Corp. | Q2 2024 Form 10-Q | 22

absorption, but these additional discounts and incentives have lowered revenue and gross margins. We continue to monitor the credit worthiness of our homebuyers with NFM Lending with the objective of converting as many of our sales as possible into successful home deliveries. In addition to Landsea Mortgage, we offer title and insurance services through Landsea Title and Landsea Insurance Agency, respectively. Together we believe these offerings, bundled under the umbrella of Landsea Elements, provide significant value to potential homebuyers in facilitating the home buying process and additional opportunities for us to generate positive returns while managing and converting sales to deliveries with additional insights throughout the home buying process.

In March 2024, Landsea Holdings Corporation (“Landsea Holdings”), the Company’s then-majority stockholder, completed an underwritten secondary offering of approximately 2.8 million shares of the Company’s common stock. The Company did not receive any proceeds from the sale of shares by Landsea Holdings. The Company paid costs, fees, and expenses for the offering of $0.6 million. Immediately following completion of such sale by Landsea Holdings, the aggregate beneficial ownership of Landsea Holdings fell below 50% of our outstanding shares of common stock. As a result, we no longer qualify as a “controlled company” under The Nasdaq Stock Market LLC listing standards.

Strategy

Our strategy is focused on maximizing stockholder returns through profitability and efficiency, while balancing appropriate amounts of leverage. In general, we are focused on the following long-term strategic objectives:

•Expand community count in current markets and enhance operating returns

•Maintain an appropriate supply of lots

•Continue to focus on entry-level product offerings

•Strengthen unique brand position through product differentiation

•Continue geographic expansion and diversification into new markets

•Leverage existing sales, marketing, and general and administrative base to enhance stockholder returns and profitability

•Become a top-ten homebuilder in the United States

Non-GAAP Financial Measures

Non-GAAP financial measures are defined as numerical measures of a company’s performance that exclude or include amounts so as to be different than the most comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for the Company’s related financial results prepared in accordance with GAAP.

We present non-GAAP financial measures of adjusted home sales gross margin, net debt to total capital, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and adjusted EBITDA, and adjusted net income in their respective sections below to enhance an investor’s evaluation of the ongoing operating results and to facilitate meaningful comparison of the results between periods. Management uses these non-GAAP measures to evaluate the ongoing operations and for internal planning and forecasting.

Summary Results of Operations

For the six months ended June 30, 2024, home sales revenue increased 34% to $710.8 million from $532.1 million and home deliveries increased 25% to 1,265 units from 1,011 units, in each case as compared to the same period in the prior year. The increase in home sales revenue and home deliveries year-over-year is primarily the result of improvements in our California and Arizona segments as well as the addition of Antares in our Texas segment and Richfield to begin our Colorado segment. The results were also impacted by the sale of model homes which we immediately leased back. The model home sales generated $60.8 million and $57.9 million in home sales revenue and cost of sales, respectively. These improvements were partially offset by challenges to affordability across all of our operating segments as mortgage interest rates remain high and more incentives are required to sustain demand. In total, net income for the six months ended June 30, 2024 was $4.0 million compared to $10.0 million in the corresponding prior year period.

We remain focused on growth and view our ability to maintain optimal leverage ratios as a key factor in obtaining the financing required in order to expand. While we have grown organically and through acquisitions in recent years, we have been able to act on our strategy and be opportunistic about acquisitions and other growth opportunities. Our debt to capital ratio increased to 52.8%

Landsea Homes Corp. | Q2 2024 Form 10-Q | 23

as of June 30, 2024 following the acquisition of Antares compared to 44.1% as of December 31, 2023. Our net debt to total capital ratio (a non-GAAP financial measure; see below for the definition and reconciliation to the most directly comparable GAAP measure) increased to 45.4% as of June 30, 2024 compared to 30.4% as of December 31, 2023. We believe the continued strength of our balance sheet and operating platform position us well to continue to execute our growth strategy and are focused on reducing our leverage ratios over time.

We anticipate the homebuilding markets in each of our operating segments to be tied to both the local economy and the macro-economic environment. Accordingly, net orders, home deliveries, and average selling price (“ASP”) can be negatively affected by economic conditions, such as rising interest rates, decreases in employment and median household incomes, as well as decreases in household formations and increasing supply of inventories. Shortages in labor or materials can also significantly increase costs, reduce gross margins, and lower our overall profitability. During the six months ended June 30, 2024 we observed improved absorption rates in all markets, except California, compared to the same period in the prior year, primarily due to successful sales promotions that have helped generate sales, partially offset by continued high mortgage interest rates and concerns about home affordability. In California, with limited exceptions, our current product offerings are at a slightly higher price point than the comparable period in the prior year and therefore a lower absorption is to be expected. Mortgage interest rates continue to be a primary concern for homebuyers and while we continue to see stabilization in most markets, homebuyers continue to be sensitive to mortgage interest rate increases. Our results have been impacted, and could be further impacted, by continued challenges in home affordability as a result of price appreciation, increases in mortgage interest rates, or tightening of mortgage lending standards.

Net New Home Orders, Dollar Value of Orders, and Monthly Absorption Rates

Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the ASP of those homes. Monthly Absorption Rate is calculated as total net new orders per period, divided by the average active communities during the period, divided by the number of months per period. Commentary on significant changes for each of the segments in these metrics is provided below.


	Three Months Ended June 30,
	2024						2023						% Change
	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes		Dollar Value		ASP		Monthly Absorption Rate
	(dollars in thousands)
Arizona	219	$	100,448	$	459	3.5	186	$	79,263	$	426	3.6	18	%	27	%	8	%	(3	%)
California	128	102,158		798		4.4	216	181,466		840		5.9	(41	%)	(44	%)	(5)	%	(25	%)
Colorado	34	14,920		439		3.8	—	—		N/A		—	N/A		N/A		N/A		N/A
Florida	286	133,078		465		3.2	163	63,686		391		1.9	75	%	109	%	19	%	68	%
Metro New York	—	—		N/A		N/A	—	—		N/A		—	N/A		N/A		N/A		N/A
Texas	93	39,146		421		1.5	—	—		N/A		—	N/A		N/A		N/A		N/A
Total	760	$	389,750	$	513	3.0	565	$	324,415	$	574	3.3	35	%	20	%	(11)	%	(9	%)


	Six Months Ended June 30,
	2024						2023						% Change
	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes		Dollar Value		ASP		Monthly Absorption Rate
	(dollars in thousands)
Arizona	452	$	203,963	$	451	3.6	338	$	142,008	$	420	3.4	34	%	44	%	7	%	6	%
California	235	210,483		896		4.0	380	317,693		836		5.3	(38	%)	(34	%)	7	%	(25	%)
Colorado	57	25,791		452		3.8	—	—		N/A		N/A	N/A		N/A		N/A		N/A
Florida	522	242,611		465		3.0	341	143,024		419		2.0	53	%	70	%	11	%	50	%
Metro New York	1	4,475		4,475		N/A	—	—		N/A		N/A	N/A		N/A		N/A		N/A
Texas	105	43,841		418		1.6	4	4,194		1,049		1.3	2525	%	945	%	(60)	%	23	%