United Homes Group, Inc.UHG
United Homes Group, Inc. Fair Value Disclosure
Note 5 - Fair Value Measurement
Certain assets and liabilities measured and reported at fair value under GAAP are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. Categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.
Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.
Due to the short-term nature of the Company’s cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts of these instruments approximate their fair value. Lot deposits are recorded at the agreed-upon contract value, which approximates fair value. The interest rates on the syndicated line of credit and the term loan vary and are the greater of either a reference rate plus an applicable margin, or the base rate plus the aforementioned applicable margin. Refer to Note 9 - Debt for additional detail on the determination of these instruments’ interest rates. As the reference rate of the syndicated line of credit and the term loan at any point in time are reflective of the current interest rate environment the Company operates in, the carrying amount of these instruments approximates their fair value.
The derivative public warrant liability is classified within Level 1 of the fair value hierarchy because the Company values these instruments based on recent trades of securities in active markets. The estimated fair value of the contingent earnout liability, derivative private placement warrants liability, derivative stock option liability, term loan embedded derivative, and contingent consideration are determined using Level 3 inputs. The models and significant assumptions used in preparing the valuations are disclosed in Note 9 - Debt, Note 15 - Stock-Based Compensation, Note 16 - Earnout Shares, and Note 17 - Warrant Liability.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):
| Fair Value Measurements as of December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Contingent earnout liability | $ | — | $ | — | $ | 20,582 | $ | 20,582 | |||||||||||||||
| Derivative private placement warrant liability | — | — | 1,068 | 1,068 | |||||||||||||||||||
| Derivative public warrant liability | 2,845 | — | — | 2,845 | |||||||||||||||||||
| Derivative stock option liability | — | — | 34 | 34 | |||||||||||||||||||
| Term loan embedded derivative | — | — | 4,578 | 4,578 | |||||||||||||||||||
| Total derivative liability | 2,845 | — | 26,262 | 29,107 | |||||||||||||||||||
Contingent consideration(1) | — | — | 638 | 638 | |||||||||||||||||||
| Total fair value | $ | 2,845 | $ | — | $ | 26,900 | $ | 29,745 | |||||||||||||||
| Fair Value Measurements as of December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Contingent earnout liability | $ | — | $ | — | $ | 28,213 | $ | 28,213 | |||||||||||||||
| Derivative private placement warrant liability | — | — | 2,907 | 2,907 | |||||||||||||||||||
| Derivative public warrant liability | 7,763 | — | — | 7,763 | |||||||||||||||||||
| Derivative stock option liability | — | — | 275 | 275 | |||||||||||||||||||
| Total derivative liability | 7,763 | — | 31,395 | 39,158 | |||||||||||||||||||
Contingent consideration(1) | — | — | 1,225 | 1,225 | |||||||||||||||||||
| Total fair value | $ | 7,763 | $ | — | $ | 32,620 | $ | 40,383 | |||||||||||||||
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(1) Contingent consideration is recorded within Other accrued expenses and liabilities on the consolidated balance sheets.
Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period. There were no transfers to/from levels during the years ended December 31, 2025 and 2024, respectively.
The following table presents a roll forward of the Level 3 liabilities measured at fair value on a recurring basis (in thousands):
| Contingent earnout liability | Derivative private placement warrant liability | Derivative stock option liability | Term loan embedded derivative | Contingent consideration | |||||||||||||||||||||||||
| Liability at December 31, 2023 | $ | 115,567 | $ | 3,293 | $ | 414 | $ | — | $ | 1,888 | |||||||||||||||||||
| Recognition of derivative liability | — | — | 211 | — | — | ||||||||||||||||||||||||
| Derecognition of derivative liability | — | — | (8) | — | — | ||||||||||||||||||||||||
| Exercise of liability awards | — | — | (3) | — | — | ||||||||||||||||||||||||
| (87,354) | (386) | (339) | — | (663) | |||||||||||||||||||||||||
| Liability at December 31, 2024 | $ | 28,213 | $ | 2,907 | $ | 275 | $ | — | $ | 1,225 | |||||||||||||||||||
| Recognition of derivative liability | — | — | 4 | — | — | ||||||||||||||||||||||||
| Derecognition of derivative liability | — | — | (113) | — | — | ||||||||||||||||||||||||
| Settlements | — | — | — | — | (390) | ||||||||||||||||||||||||
| Exercise of liability awards | — | — | (2) | — | — | ||||||||||||||||||||||||
| (7,631) | (1,839) | (130) | 4,578 | (197) | |||||||||||||||||||||||||
| Liability at December 31, 2025 | $ | 20,582 | $ | 1,068 | $ | 34 | $ | 4,578 | $ | 638 | |||||||||||||||||||
In addition to assets and liabilities that are recorded at fair value on a recurring basis, annual and interim impairment tests may subject the Company’s goodwill and long-lived assets to nonrecurring fair value measurement. The Company performs the annual impairment test for goodwill in the fourth quarter of each year and, for long-lived assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The various inputs to the fair value models are considered Level 3 inputs. See Note 1 - Nature of Business and Summary of Significant Accounting Policies and Note 8 - Goodwill for additional details on the valuation methodologies and inputs used to measure fair value. During the fourth quarter of 2025, the Company recorded a total goodwill impairment charge of $1.1 million in the consolidated statements of operations. See Note 8 - Goodwill for additional details on impairment charges recorded.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.