Century Communities, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND A NALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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 results 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:  econo mic changes, either nationally or in the markets in which we operate, including increased interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels;  shortages of or increased prices for labor, land or raw materials 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;  volatility and uncertainty in the credit markets and broader financial markets and the impact on such markets and our ability to access them in the event of a threatened or actual U.S. government shutdown or sovereign default;  our future business operations, operating results and financial condition, and 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;  delays in completion of projects, land development or home construction, or reduced consumer demand for housing resulting from significant weather conditions and natural disasters in the geographic areas where we operate;  the 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 r eceipt of municipal, utility and other regulatory approvals and the opening of projects and construction and completion of our homes;  the i mpact 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;  unstable economic and political conditions as well as geopolitical conflicts, could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels and cause higher interest rates, inflation or general economic uncertainty;  our leverage, debt service obligations and exposure to changes in interest rates and our ability to obtain additional or refinance our existing 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 obtain additional or retain existing key personnel and contractor relationships;  our ability to continue to pay dividends and make stock repurchases in the future; and  taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance. 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 18 Table of Contents 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 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, 2023. 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. Business Overview Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states. In many of our projects, in addition to building homes, we entitle and develop the underlying land. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand has an emphasis on serving the entry-level homebuilding market but 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. 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, IHL Home Insurance Agency, LLC, and IHL Escrow Inc., which provide mortgage, title, insurance, and escrow 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, currently all located in Colorado. Century Living, LLC is included in our Corporate 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 our customers greater certainty on their financing and allowing us to more appropriately price the homes and deploy our capital. Of the 2,358 homes delivered during the first three months of 2024, approximately 94% of our deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately 98% of homes delivered were built as move-in ready homes. We generated solid financial results during the three months ended March 31, 2024 and are encouraged by recent housing market conditions demonstrating strong, underlying demand for affordable new homes. While uncertainty remains surrounding interest rates , we experienced strong demand during the first quarter of 2024, as net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2024 increased 41.7% as compared to the prior year period. We have continued to provide, when necessary, incentive offerings across our communities during the first quarter of 2024, including discounts on base home prices, lot premiums, and options and upgrades and financing incentives, including interest rate buydowns. During the three months ended March 31, 2024, cycle times have remained in the four- to five-month timeframe. We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy, and we expect our operating strategy will continue to adapt to market changes, though we cannot provide any assurance that our strategies will remain consistent or continue to be successful. We believe future demand for our homes remains uncertain as future economic and market conditions remain uncertain, in particular with respect to inflation; the impact of potential future increases or decreases to the federal funds interest rate by the Federal Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial markets, credit and mortgage markets; the extent to which and how long government monetary directives, actions, and economic relief efforts will impact the U.S. economy; consumer confidence; wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental 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, 19 Table of Contents changes in mortgage interest rates impact the costs of owning a home and affect the purchasing power of our customers and could impact homebuyer confidence. Changes in demand for our homes or cancellations due to mortgage interest rates or otherwise 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. Despite future macro-economic uncertainty, especially in relation to the interest rate environment, 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 affordable housing. We believe our operations are prepared to withstand volatility in future market conditions as a result of 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. 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 to optimize stockholder returns. Results of Operations During the three months ended March 31, 2024, we generated $84.3 million in income before income tax expense, as compared to $44.0 million in the prior year period, and net income of $64.3 million, or $2.00 per diluted share, as compared to $33.3 million, or $1.04 per diluted share, respectively, in the prior year period. During the three months ended March 31, 2024, we generated total revenues of $948.5 million, a 25.4% increase as compared to the prior year period, driven primarily by home sales revenue . During the three months ended March 31, 2024, we delivered 2,358 homes with an average sales price of $391.2 thousand, as compared to 1,912 homes with an average sales price of $384.7 thousand in the prior year period. Net new contracts increased 41.7% to 2,866, as compared to 2,022 in the prior year period. We ended the first quarter of 2024 with no amounts outstanding under our revolving line of credit, $122.8 million of cash and cash equivalents, $84.8 million of cash held in escrow, a homebuilding debt to capital ratio of 29.4%, and a net homebuilding debt to net capital ratio of 24.9%. During the three months ended March 31, 2024, we paid a quarterly cash dividend to our stockholders of $0.26 per share, which represents a 13% increase from the $0.23 per share quarterly dividend paid during the three months ended March 31, 2023. We have continued to strategically manage our lot pipeline, resulting in 75,089 lots owned and controlled at March 31, 2024. During the three months ended March 31, 2024, we generated financial services revenue of $24.9 million, representing an increase of 57.2% as compared to the prior year period, driven by a 52.3% increase in the number of mortgages originated period over period, primarily due to our increased capture rate of 81% as of March 31, 2024 as compared to 66% for the prior year period, as well as a 41.2% increase in the number of loans sold to third parties period over period. Our Century Living operations are engaged in construction on three multi-family for rent projects in Colorado, which commenced in 2022 and comprise over 900 total units. The first multi-family property consisting of over 200 units became available for leasing during 2023, and we anticipate the remaining projects will be available for leasing during 2024. On January 22, 2024, we closed on the acquisition of substantially all the assets of Landmark Homes of Tennessee, Inc. (“Landmark”), a homebuilder with operations, including six active communities, in Nashville, Tennessee, for approximately $33.4 million in cash, inclusive of customary holdbacks. 20 Table of Contents The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023: (in thousands, except per share amounts) Three Months Ended March 31, Increase (Decrease) 2024 2023 Amount % Consolidated Statements of Operations: Revenues Home sales revenues $ 922,402 $ 735,600 $ 186,802 25.4 % Land sales and other revenues 1,216 1,535 (319) (20.8) % Total homebuilding revenues 923,618 737,135 186,483 25.3 % Financial services revenues 24,925 15,855 9,070 57.2 % Total revenues 948,543 752,990 195,553 26.0 % Homebuilding cost of revenues Cost of home sales revenues (725,570) (601,385) (124,185) 20.6 % Cost of land sales and other revenues (37) — (37) NM Total homebuilding cost of revenues (725,607) (601,385) (124,222) 20.7 % Financial services costs (14,877) (10,781) (4,096) 38.0 % Selling, general, and administrative (114,109) (98,313) (15,796) 16.1 % Other income (expense) (9,630) 1,498 (11,128) (742.9) % Income before income tax expense 84,320 44,009 40,311 91.6 % Income tax expense (19,988) (10,698) (9,290) 86.8 % Net income $ 64,332 $ 33,311 $ 31,021 93.1 % Earnings per share: Basic $ 2.02 $ 1.04 $ 0.98 94.2 % Diluted $ 2.00 $ 1.04 $ 0.96 92.3 % Adjusted diluted earnings per share (1) $ 2.22 $ 1.04 $ 1.18 113.5 % Other Operating Information (dollars in thousands): Number of homes delivered 2,358 1,912 446 23.3 % Average sales price of homes delivered $ 391.2 $ 384.7 $ 6.5 1.7 % Homebuilding gross margin percentage (2) 21.3 % 18.2 % 3.1 % 17.0 % Adjusted homebuilding gross margin excluding interest, inventory impairment, and purchase price accounting for acquired work in process inventory (1) 22.8 % 19.6 % 3.2 % 16.3 % Backlog at end of period, number of homes 1,590 1,920 (330) (17.2) % Backlog at end of period, aggregate sales value $ 667,207 $ 713,612 $ (46,405) (6.5) % Average sales price of homes in backlog $ 419.6 $ 371.7 $ 47.9 12.9 % Net new home contracts 2,866 2,022 844 41.7 % Selling communities at period end 253 234 19 8.1 % Average selling communities 255 223 32 14.3 % Total owned and controlled lot inventory 75,089 51,614 23,475 45.5 % Adjusted EBITDA (1) $ 109,616 $ 54,744 $ 54,872 100.2 % Adjusted income before income tax expense (1) $ 93,623 $ 44,009 $ 49,614 112.7 % Adjusted net income (1) $ 71,430 $ 33,311 $ 38,119 114.4 % Net homebuilding debt to net capital (1) 24.9 % 21.5 % 3.4 % 15.8 % (1) This is a non-GAAP financial measure and should not be used as a substitute for our 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 is inclusive of impairment charges, if applicable. No impairment charges were recorded for the three months ended March 31, 2024 and 2023. NM – Not Meaningful ‎ 21 Table of Contents Results of Operations by Segment (dollars in thousands) New Homes Delivered Average Sales Price of Homes Delivered Home Sales Revenues Income before Income Tax Expense Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31, 2024 2023 2024 2023 2024 2023 2024 2023 West 284 203 $ 606.5 $ 634.9 $ 172,254 $ 128,894 $ 26,707 $ 7,973 Mountain 495 455 513.4 539.8 254,139 245,594 27,808 27,808 Texas 424 327 309.4 273.5 131,175 89,434 13,872 3,673 Southeast 379 198 426.1 439.0 161,501 86,929 20,796 11,966 Century Complete 776 729 262.0 253.4 203,333 184,749 21,101 13,950 Financial Services — — — — — — 10,048 5,074 Corporate — — — — — — (36,012) (26,435) Total 2,358 1,912 $ 391.2 $ 384.7 $ 922,402 $ 735,600 $ 84,320 $ 44,009 West During the three months ended March 31, 2024, our West segment generated income before income tax expense of $26.7 million, a 235.0% increase over the prior year period, which was driven by an increase in home sales revenue of $43.4 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by a 39.9% increase in the number of homes delivered, partially offset by a 4.5% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction. The average sales price decrease was driven by the mix of deliveries within individual communities. Mountain During the three months ended March 31, 2024, our Mountain segment generated income before income tax expense of $27.8 million, remaining consistent with the prior year period. Home sales revenue increased $8.5 million during the three months ended March 31, 2024, primarily driven by an 8.8% increase in the number of homes delivered, and partially offset by a 4.9% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction. The average sales price decrease was driven by the mix of deliveries within individual communities. For the three months ended March 31, 2024, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of the mix of margin profiles within individual communities. Texas During the three months ended March 31, 2024, our Texas segment generated income before income tax expense of $13.9 million, a 277.7% increase over the prior year period, which was driven by an increase in home sales revenue of $41.7 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by both a 29.7% increase in the number of homes delivered and by a 13.1% increase in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction, and the average sales price increase was driven by the mix of deliveries within individual communities. Southeast During the three months ended March 31, 2024, our Southeast segment generated income before income tax expense of $20.8 million, an 73.8% increase over the prior year period, which was driven by an increase in home sales revenue of $74.6 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by a 91.4% increase in the number of homes delivered, partially offset by a 2.9% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction, and the average sales price decrease was driven by the mix of deliveries within individual communities. Century Complete During the three months ended March 31, 2024, our Century Complete segment generated income before income tax expense of $21.1 million, a 51.3% increase over the prior year period, which was driven by an increase in home sales revenue of $18.6 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by both a 6.4% increase in the number of homes delivered and by a 3.4% increase in the average sales price per home. The increase in the number of homes delivered was primarily 22 Table of Contents driven by an increase in the number of homes under construction, and the average sales price increase was driven by the mix of deliveries within individual communities. Financial Services Our Financial Services segment originates mortgages primarily for our homebuyers, and as such, performance typically correlates to our number of homes delivered. Our Financial Services segment generated income before income tax of $10.0 million for the three months ended March 31, 2024, an increase of $5.0 million, or 98.0%, over the prior year period. This increase was driven by a $9.1 million increase in financial services revenue as compared to the prior year period. The increase in financial services revenue was primarily driven by a 52.3% increase in the number of mortgages originated period over period, primarily due to our increased capture rate of 81% as of March 31, 2024 as compared to 66% for the prior year period, as well as a 41.2% increase in the number of loans sold to third parties period over period. 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 March 31, 2024 2023 Total originations: Number of loans 1,506 989 Principal $ 540,164 $ 343,081 Capture rate of Century homebuyers 81 % 66 % Century Communities 86 % 72 % Century Complete 69 % 56 % Average FICO score 729 724 Century Communities 734 729 Century Complete 716 713 Loans sold to third parties: Number of loans sold 1,608 1,139 Principal $ 568,392 $ 389,810 Corporate During the three months ended March 31, 2024, our Corporate segment generated a loss of $36.0 million as compared to a loss of $26.4 million during the same period in 2023. The increase in loss was primarily due to a $7.7 million impairment related to other investments during March 31, 2024. Homebuilding Gross Margin (dollars in thousands) Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment, if applicable. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, increased for the three months ended March 31, 2024 to 21.3% as compared to 18.2% during the same period in 2023. The increase was primarily driven by deliveries during the prior year period that carried both higher incentives and elevated construction costs due to homes commencing construction during high costs periods in 2022. 23 Table of Contents In the following table, we calculate our homebuilding gross margin, as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues. Three Months Ended March 31, 2024 % 2023 % Home sales revenues $ 922,402 100.0 % $ 735,600 100.0 % Cost of home sales revenues (725,570) (78.7) % (601,385) (81.8) % Inventory impairment — — % — — % Homebuilding gross margin 196,832 21.3 % 134,215 18.2 % Add: Inventory impairment — — % — — % Add: Interest in cost of home sales revenues 12,033 1.3 % 9,807 1.3 % Adjusted homebuilding gross margin excluding interest and inventory impairment (1) $ 208,865 22.6 % $ 144,022 19.6 % Add: Purchase price accounting for acquired work in process inventory 1,581 0.2 % — — % Adjusted homebuilding gross margin excluding interest, inventory impairment and purchase price accounting for acquired work in process inventory (1) $ 210,446 22.8 % $ 144,022 19.6 % (1) This non-GAAP financial measure should not be used as a substitute for our 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 ended March 31, 2024, our adjusted homebuilding gross margin percentage excluding interest in cost of home sales revenues, inventory impairment, and purchase price accounting for work in process inventory, was 22.8% as compared to 19.6% for the same period in 2023. We believe the above information is meaningful as it isolates the impact that indebtedness, inventory impairment (if applicable), 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 . Selling, General and Administrative Expense (dollars in thousands) Three Months Ended March 31, Change 2024 2023 Amount % Selling, general and administrative $ 114,109 $ 98,313 $ 15,796 16.1 % As a percentage of home sales revenue 12.4 % 13.4 % Our selling, general and administrative expense increased $15.8 million for the three months ended March 31, 2024 as compared to the prior year period. This increase was primarily attributable to an increase in internal and external commission expense associated with the increase in home sales revenue and increased compensation and other costs due to increased active community count. These increases were partially offset by a decrease in stock compensation expense related to forfeitures during the period . As a percentage of home sales revenue, our selling, general and administrative expense decreased 100 basis points during the three months ended March 31, 2024, driven primarily by increased revenue 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 2024 estimated annual effective tax rate, before discrete items of 25.0%, is driven by our blended federal and state statutory rate of 24.7%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation offset by estimated federal energy home credits for current year home deliveries, which combined resulted in a net increase of 0.3%. For the three months ended March 31, 2024, our estimated annual rate of 25.0% was benefitted by discrete items which had a net impact of decreasing our rate by 1.3%, including the impact of excess tax benefits for vested stock-based compensation. 24 Table of Contents For the three months ended March 31, 2024 and 2023, we recorded income tax expense of $20.0 million and $10.7 million, respectively. Segment Assets (dollars in thousands) March 31, December 31 Increase (Decrease) 2024 2023 Amount Change West $ 787,198 $ 786,489 $ 709 0.1 % Mountain 1,050,830 1,051,052 (222) (0.0) % Texas 617,785 577,129 40,656 7.0 % Southeast 542,895 503,249 39,646 7.9 % Century Complete 417,352 386,444 30,908 8.0 % Financial Services 397,700 450,208 (52,508) (11.7) % Corporate 297,817 384,791 (86,974) (22.6) % Total assets $ 4,111,577 $ 4,139,362 $ (27,785) (0.7) % Total assets remained consistent at $4.1 billion as of March 31, 2024 and December 31, 2023 . Lots owned and controlled March 31, 2024 December 31, 2023 % Change Owned Controlled Total Owned Controlled Total Owned Controlled Total West 4,397 3,230 7,627 4,036 3,259 7,295 8.9 % (0.9) % 4.6 % Mountain 8,475 5,602 14,077 8,615 5,025 13,640 (1.6) % 11.5 % 3.2 % Texas 9,422 11,183 20,605 8,647 11,027 19,674 9.0 % 1.4 % 4.7 % Southeast 5,461 10,370 15,831 5,486 10,941 16,427 (0.5) % (5.2) % (3.6) % Century Complete 3,955 12,994 16,949 3,839 12,845 16,684 3.0 % 1.2 % 1.6 % Total 31,710 43,379 75,089 30,623 43,097 73,720 3.5 % 0.7 % 1.9 % Of our total lots owned and controlled as of March 31, 2024, 42.2% were owned and 57.8% were controlled, as compared to 41.5% owned and 58.5% controlled as of December 31, 2023. Other Homebuilding Operating Data Net new home contracts Three Months Ended March 31, Increase (Decrease) 2024 2023 Amount % Change West 440 343 97 28.3 % Mountain 611 333 278 83.5 % Texas 514 475 39 8.2 % Southeast 450 242 208 86.0 % Century Complete 851 629 222 35.3 % Total 2,866 2,022 844 41.7 % Net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2024 increased by 844 homes, or 41.7%, to 2,866 as compared to 2,022 for the same period in 2023, primarily due to more homes available for sale, as well as favorable market conditions. 25 Table of Contents Monthly absorption rate Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of cancellations) for the three months ended March 31, 2024 and 2023 by segment are included in the tables below: Three Months Ended March 31, Increase (Decrease) 2024 2023 Amount % Change West 5.2 4.4 0.8 18.2 % Mountain 4.4 2.8 1.6 57.1 % Texas 4.2 4.5 (0.3) (6.7) % Southeast 5.0 2.9 2.1 72.4 % Century Complete 2.6 2.0 0.6 30.0 % Total 3.8 2.9 0.9 31.0 % During the three months ended March 31, 2024, our absorption rate increased by 31.0% to 3.8 per month as compared to the same period in 2023, driven by strong demand for new homes during the current period as homebuyers adjust to the higher interest rate environment. Selling communities at period end As of March 31, Increase/(Decrease) 2024 2023 Amount % Change West 28 26 2 7.7 % Mountain 46 40 6 15.0 % Texas 41 35 6 17.1 % Southeast 30 28 2 7.1 % Century Complete 108 105 3 2.9 % Total 253 234 19 8.1 % Our selling communities increased by 19 communities to 253 communities at March 31, 2024 as compared to 234 at March 31, 2023. This 8.1% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts during the first quarter of 2024. Backlog (dollars in thousands) As of March 31, 2024 2023 % Change Homes Dollar Value Average Sales Price Homes Dollar Value Average Sales Price Homes Dollar Value Average Sales Price West 262 $ 176,732 $ 674.5 220 $ 133,249 $ 605.7 19.1 % 32.6 % 11.4 % Mountain 279 161,477 578.8 319 152,521 478.1 (12.5) % 5.9 % 21.1 % Texas 258 78,396 303.9 303 95,464 315.1 (14.9) % (17.9) % (3.6) % Southeast 214 99,448 464.7 249 110,864 445.2 (14.1) % (10.3) % 4.4 % Century Complete 577 151,154 262.0 829 221,514 267.2 (30.4) % (31.8) % (1.9) % Total / Weighted Average 1,590 $ 667,207 $ 419.6 1,920 $ 713,612 $ 371.7 (17.2) % (6.5) % 12.9 % ‎ 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 March 31, 2024, we had 1,590 homes in backlog with a total value of $667.2 million, which represents decreases of 17.2% and 6.5%, respectively, as compared to 1,920 homes in backlog with a total value of $713.6 million at December 31, 2023. The decrease in backlog dollar value is primarily attributable to the decrease in backlog units. 26 Table of Contents 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”). 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 March 31, 2024, 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. 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 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. The Guarantors’ condensed supplemental financial information is presented in this report as if the Senior Note guarantees existed during the periods presented pursuant to applicable SEC rules and guidance. If any Guarantors are released from the guarantees in future periods, 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. 27 Table of Contents Century Communities, Inc. and Guarantor Subsidiaries Summarized Balance Sheet Data (in thousands) March 31, 2024 December 31, 2023 Assets Cash and cash equivalents $ 21,547 $ 104,900 Cash held in escrow 84,776 101,845 Accounts receivable 57,935 67,480 Due from non-guarantors — 17,982 Inventories 3,107,133 3,016,641 Prepaid expenses and other assets 318,441 282,056 Property and equipment, net 74,363 68,839 Deferred tax assets, net 17,601 16,998 Goodwill 32,082 30,395 Total assets $ 3,713,878 $ 3,707,136 Liabilities and stockholders’ equity Liabilities: Accounts payable $ 133,963 $ 145,231 Accrued expenses and other liabilities 237,579 259,912 Due to non-guarantors 10,029 — Notes payable 1,069,762 1,062,471 Revolving line of credit — — Total liabilities 1,451,333 1,467,614 Stockholders’ equity: 2,262,545 2,239,522 Total liabilities and stockholders’ equity $ 3,713,878 $ 3,707,136 Summarized Statements of Operations Data (in thousands) Year Ended Year Ended March 31, 2024 December 31, 2023 Total homebuilding revenues $ 923,618 $ 3,611,962 Total homebuilding cost of revenues (725,607) (2,840,583) Selling, general and administrative (114,109) (447,311) Inventory impairment — (1,877) Other income (expense) (11,594) (6,547) Income before income tax expense 72,308 315,644 Income tax expense (17,141) (82,419) Net income $ 55,167 $ 233,225 ‎ 28 Table of Contents 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, 2023, filed with the SEC on February 5, 2024, 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 revolving line of credit availability, was $1.0 billion as of March 31, 2024 and $1.1 billion as of December 31, 2023. Our principal uses of capital for the three months ended March 31, 2024 were our land purchases, land development, home construction, the acquisition of Landmark Homes, share repurchases, dividends, and the payment of routine liabilities. 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 continue to acquire and develop lots in our markets when they meet our current investment criteria. Short-term Liquidity and Capital Resources We use funds generated by operations, available borrowings under our revolving line of credit facility, and proceeds from issuances of debt or equity, including our 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 under construction loan agreements 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 based on the macro-economy and market conditions at the time. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as our revolving line of credit. We believe we are well positioned from a cash and liquidity standpoint to operate in an uncertain environment, and to 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, 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 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 favorable terms, especially in light of rising interest rates. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. 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. 29 Table of Contents Material Cash Requirements 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 months ended March 31, 2024, there were no material changes to the contractual obligations we previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on February 5, 2024. 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 March 31, 2024, we had outstanding purchase contracts and option contracts for 43,379 lots totaling approximately $2.2 billion and we had $64.1 million of deposits for land contracts, of which $37.4 million were non-refundable cash deposits pertaining to land contracts. For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next 24 months. 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 One of our principal liquidity needs is the payment of principal and interest on our outstanding indebtedness. Our outstanding indebtedness is described in detail in Note 9 – Debt in the Notes to the Condensed Consolidated Financial Statements . We are required to meet certain covenants, and as of March 31, 2024, we were in compliance with all such covenants and requirements under the agreements governing our revolving line of credit, mortgage repurchase facilities, and construction loan agreements. See Note 9 – Debt in the Notes to the Condensed Consolidated Financial Statements for further detail. Our outstanding debt obligations included the following as of March 31, 2024 and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 3.875% senior notes, due August 2029 (1) $ 495,849 $ 495,656 6.750% senior notes, due June 2027 (1) 497,414 497,210 Other financing obligations (2) 76,499 69,605 Notes payable 1,069,762 1,062,471 Revolving line of credit — — Mortgage repurchase facilities 212,447 239,298 Total debt $ 1,282,209 $ 1,301,769 (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 March 31, 2024, other financing obligations included $15.6 million related to insurance premium notes and certain secured borrowings, as well as $60.9 million outstanding under construction loan agreements, as described below. As of December 31, 2023, other financing obligations included $24.7 million related to insurance premium notes and certain secured borrowings, as well as $44.9 million outstanding under construction loan agreements. 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. 30 Table of Contents 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 March 31, 2024 and December 31, 2023, we had $509.0 million and $510.5 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 fully released until all development and construction activities are completed. Construction Loan Agreements Certain wholly owned subsidiaries of Century Living, LLC, are parties to construction loan agreements with various banks, (which we collectively refer to as “the lenders”). These construction loan agreements collectively provide that we may borrow up to an aggregate of $187.6 million from the lenders for purposes of construction of multi-family projects in Colorado, with advances made by the lenders upon the satisfaction of certain conditions. Borrowings under the construction loan agreements bear interest at various rates, including a fixed rate, and floating interest rates per annum equal to the Secured Overnight Financing Rate (which we refer to as “SOFR”) and the Bloomberg Short-term Bank Yield Index, plus an applicable margin. The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates from March 17, 2026 through March 17, 2028, with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied. The construction loan agreements contain 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. Interest on our construction loan agreements is capitalized to the multi-family properties assets included in prepaid expenses and other assets on the condensed consolidated balance sheets while the related multi-family rental properties are being actively developed. As of March 31, 2024, $60.9 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.5% during the three months ended March 31, 2024, and we were in compliance with all covenants thereunder. Revolving Line of Credit In 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 our prior Amended and Restated Credit Agreement , provides us with a senior unsecured revolving line of credit (which we refer to as the “revolving line of credit”) of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The revolving line of credit includes a $250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $200.0 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 are based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10%. As of March 31, 2024 and December 31, 2023, no amounts were outstanding under our revolving line of credit and were in compliance with all covenants under the Second A&R Credit Agreement. Mortgage Repurchase Facilities – Financial Services Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., Texas Capital Bank, and U.S. Bank National Association, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $450.0 million as of March 31, 2024, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through March 21, 2025. Borrowings under the mortgage repurchase facilities bear interest at variable interest rates per annum equal to SOFR plus an applicable margin, and bore a weighted average interest rate of 7.2% during the year ended March 31, 2024. 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 March 31, 2024 and December 31, 2023, we had $212.4 million and $239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder. 31 Table of Contents At-the-Market Offerings We are party to a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Wells Fargo Securities, LLC 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. 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. We did not sell or issue any shares of our common stock during the three months ended March 31, 2024 and 2023, respectively, and as of March 31, 2024, all $100.0 million remained available for sale. Stock Repurchase Program Our Board of Directors authorized a stock repurchase program in 2018, 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, applicable tax effects including the 1% excise tax instituted under the Inflation Reduction Act of 2022, and general market and economic conditions. We intend to finance any stock repurchases through available cash and our revolving line of credit. 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 months ended March 31, 2024, an aggregate of 186.9 thousand shares were repurchased for a total purchase price of approximately $16.1 million and a weighted average price of $86.16 per share. During the three months ended March 31, 2023, we did not repurchase any shares of common stock. The maximum number of shares available to be repurchased under the stock repurchase program as of March 31, 2024 was 1,043,123 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 three months ended March 31, 2024 and 2023, respectively (in thousands, except per share information): Three Months Ended March 31, 2024 Cash Dividends Declared and Paid Declaration Date Record Date Paid Date Per Share Amount February 7, 2024 February 28, 2024 March 13, 2024 $ 0.26 $ 8,264 Three Months Ended March 31, 2023 Cash Dividends Declared and Paid Declaration Date Record Date Paid Date Per Share Amount February 8, 2023 March 1, 2023 March 15, 2023 $ 0.23 $ 7,365 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. 32 Table of Contents Cash Flows— Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023 For the three months ended March 31, 2024 and 2023, 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 provided by operating activities was $21.6 million during the three months ended March 31, 2024 as compared to $191.3 million during the prior year period. This decrease is primarily a result of increased expenditures related to land acquisition and expenditures associated with the construction of homes during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This reduction was primarily offset by a $31.0 million increase in net income.  Net cash used in investing activities increased to $64.6 million during the three months ended March 31, 2024, compared to $20.9 million used during the prior year period. This increase was primarily related to (1) $9.7 million increase in expenditures related to the development, construction, and management of multi-family rental properties by our wholly owned subsidiary, Century Living; and (2) $32.7 million in expenditures related to a business combination during the three months ended March 31, 2024.  Net cash used in financing activities was $54.7 million during the three months ended March 31, 2024, compared $58.3 million during the prior year period. This decrease was primarily attributable to (1) a $21.0 million decrease in net payments on our mortgage repurchase facilities and (2) an $8.8 million increase in borrowings under construction loan agreements, partially offset by (1) $16.1 million in repurchases of our common stock during the three months ended March 31, 2024 as compared to no repurchases of our common stock during the prior year period; and (2) an $8.7 million net increase in payments for insurance premium notes. As of March 31, 2024, our cash and cash equivalents and restricted cash balance was $144.3 million, as compared to $242.0 million as of December 31, 2023. ‎ 33 Table of Contents 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, adjusted net income and adjusted diluted earnings per share. 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 months ended March 31, 2024 and 2023. EBITDA and adjusted EBITDA are non-GAAP financial measures we use as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense (income), and (iv) depreciation and amortization expense. We define adjusted EBITDA as EBITDA before loss on debt extinguishment (if applicable), inventory impairment (if applicable), purchase price accounting for acquired work in process inventory (if applicable), and impairment on other investments (if applicable) . We believe EBITDA and adjusted EBITDA provide 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 these measurements are useful for comparing general operating performance from period to period. Neither EBITDA or 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. Each of our EBITDA and 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 March 31, 2024 2023 % Change Net income $ 64,332 $ 33,311 93.1 % Income tax expense 19,988 10,698 86.8 % Interest in cost of home sales revenues 12,033 9,807 22.7 % Interest income (1,515) (2,364) (35.9) % Depreciation and amortization expense 5,475 3,292 66.3 % EBITDA 100,313 54,744 83.2 % Inventory impairment — — NM Impairment on other investment 7,722 — NM Purchase price accounting for acquired work in process inventory 1,581 — NM Adjusted EBITDA $ 109,616 $ 54,744 100.2 % NM – Not Meaningful ‎ 34 Table of Contents Net Homebuilding Debt to Net Capital 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 agreements 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) March 31, December 31, 2024 2023 Notes payable $ 1,069,762 $ 1,062,471 Revolving line of credit — — Construction loan agreements (60,867) (44,895) Total homebuilding debt 1,008,895 1,017,576 Total stockholders' equity 2,419,276 2,386,936 Total capital $ 3,428,171 $ 3,404,512 Homebuilding debt to capital 29.4% 29.9% Total homebuilding debt $ 1,008,895 $ 1,017,576 Cash and cash equivalents (122,840) (226,150) Cash held in escrow (84,776) (101,845) Net homebuilding debt 801,279 689,581 Total stockholders' equity 2,419,276 2,386,936 Net capital $ 3,220,555 $ 3,076,517 Net homebuilding debt to net capital 24.9% 22.4% ‎ 35 Table of Contents Adjusted Net Income 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, if applicable (iii) restructuring costs, if applicable, (iv) loss on debt extinguishment, if applicable, (v) purchase price accounting for acquired work in process inventory, if applicable, and (vi) impairment on other investments, if applicable, less adjusted income tax expense, calculated using our estimated annual effective tax rate after discrete items for the applicable period. Adjusted EPS is calculated by dividing adjusted net income by weighted average common shares – diluted. (in thousands, except share and per share information) Three Months Ended March 31, 2024 2023 Numerator Net income $ 64,332 $ 33,311 Denominator Weighted average common shares outstanding - basic 31,808,959 31,914,414 Dilutive effect of stock-based compensation awards 429,849 202,668 Weighted average common shares outstanding - diluted 32,238,808 32,117,082 Earnings per share: Basic $ 2.02 $ 1.04 Diluted $ 2.00 $ 1.04 Adjusted earnings per share Numerator Net income $ 64,332 $ 33,311 Income tax expense 19,988 10,698 Income before income tax expense 84,320 44,009 Inventory impairment — — Impairment on other investment 7,722 — Purchase price accounting for acquired work in process inventory 1,581 — Adjusted income before income tax expense 93,623 44,009 Adjusted income tax expense (1) (22,193) (10,698) Adjusted net income $ 71,430 $ 33,311 Denominator - Diluted 32,238,808 32,117,082 Adjusted diluted earnings per share $ 2.22 $ 1.04 (1) The tax rates used in calculating adjusted net income for the three months ended March 31, 2024 and 2023 were 23.7% and 24.3%, respectively, which are reflective of our GAAP tax rates for the applicable periods. ‎ 36 Table of Contents ITEM 3. QUANTIT ATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rates Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our Second A&R Credit Agreemen t and construction loan agreements. There have been no material changes in our market risk since December 31, 2023. For additional information regarding our market risk, refer to the “Quantitative and Qualitative Disclosures About Market Risk” section of our Annual Report on Form 10-K for the year ended December 31, 2023. Inflation Our homebuilding operations have been and may continue to be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs. In addition, inflation has led and could continue to lead to higher mortgage rates, which has and could continue to significantly affect the affordability of mortgage financing to homebuyers and lead to weakened demand for our homes, as well as increased cancellations compared to prior year periods. Inflation remained elevated during the three months ended March 31, 2024. Seasonality Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity during the spring, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes four to five months to construct a new home, we typically deliver more homes in the second half of the year as spring and summer home starts convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of our cash receipts from home deliveries occurs during the second half of the year. This seasonality pattern may be affected by volatility in the homebuilding industry, supply chain challenges, and changes in demand for our homes.