Century Communities, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Century Communities, Inc. Condensed Consolidated Balance Sheets As of September 30, 2024 and December 31, 2023 (in thousands, except share and per share amounts) September 30, December 31, 2024 2023 Assets (unaudited) (audited) Cash and cash equivalents $ 149,155 $ 226,150 Cash held in escrow 70,755 101,845 Accounts receivable 73,016 76,213 Inventories 3,581,099 3,016,641 Mortgage loans held for sale 257,187 251,852 Prepaid expenses and other assets 427,961 350,193 Property and equipment, net 165,117 69,075 Deferred tax assets, net 17,241 16,998 Goodwill 39,434 30,395 Total assets $ 4,780,965 $ 4,139,362 Liabilities and stockholders' equity Liabilities: Accounts payable $ 165,369 $ 147,265 Accrued expenses and other liabilities 287,937 303,392 Notes payable 1,118,943 1,062,471 Revolving line of credit 414,000 — Mortgage repurchase facilities 247,214 239,298 Total liabilities 2,233,463 1,752,426 Stockholders' equity: Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none outstanding — — Common stock, $ 0.01 par value, 100,000,000 shares authorized, 31,337,062 and 31,774,615 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 313 318 Additional paid-in capital 547,724 592,989 Retained earnings 1,999,465 1,793,629 Total stockholders' equity 2,547,502 2,386,936 Total liabilities and stockholders' equity $ 4,780,965 $ 4,139,362 See Notes to Unaudited Condensed Consolidated Financial Statements 3 Table of Contents Century Communities, Inc. Unaudited Condensed Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2024 and 2023 (in thousands, except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues Homebuilding revenues Home sales revenues $ 1,116,125 $ 865,065 $ 3,055,941 $ 2,419,025 Land sales and other revenues 650 722 2,242 3,811 Total homebuilding revenues 1,116,775 865,787 3,058,183 2,422,836 Financial services revenues 20,091 23,636 66,676 63,768 Total revenues 1,136,866 889,423 3,124,859 2,486,604 Homebuilding cost of revenues Cost of home sales revenues ( 873,081 ) ( 652,411 ) ( 2,386,208 ) ( 1,910,630 ) Cost of land sales and other revenues ( 170 ) — ( 207 ) ( 375 ) Total homebuilding cost of revenues ( 873,251 ) ( 652,411 ) ( 2,386,415 ) ( 1,911,005 ) Financial services costs ( 17,021 ) ( 11,432 ) ( 47,894 ) ( 33,983 ) Selling, general and administrative ( 132,972 ) ( 111,918 ) ( 373,054 ) ( 315,351 ) Inventory impairment ( 1,373 ) — ( 1,942 ) — Other expense ( 2,337 ) ( 1,663 ) ( 10,690 ) ( 1,509 ) Income before income tax expense 109,912 111,999 304,864 224,756 Income tax expense ( 26,892 ) ( 28,849 ) ( 73,789 ) ( 56,850 ) Net income $ 83,020 $ 83,150 $ 231,075 $ 167,906 Earnings per share: Basic $ 2.65 $ 2.60 $ 7.31 $ 5.25 Diluted $ 2.59 $ 2.58 $ 7.19 $ 5.21 Weighted average common shares outstanding: Basic 31,336,756 31,962,884 31,596,995 31,967,672 Diluted 32,025,015 32,237,022 32,117,917 32,200,677 See Notes to Unaudited Condensed Consolidated Financial Statements 4 Table of Contents Century Communities, Inc. Unaudited Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2024 and 2023 (in thousands) Nine Months Ended September 30, 2024 2023 Operating activities Net income $ 231,075 $ 167,906 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 17,437 11,019 Stock-based compensation expense 18,095 26,517 Fair value of mortgage loans held for sale and other ( 647 ) ( 2,269 ) Inventory impairment 1,942 — Impairment on other investment 7,722 — Abandonment of lot option contracts 3,941 3,021 Deferred income taxes ( 243 ) 2,078 (Gain) loss on disposition of assets ( 1,851 ) 1,062 Changes in assets and liabilities: Cash held in escrow 31,090 4,081 Accounts receivable 3,802 ( 1,081 ) Inventories ( 421,938 ) ( 225,587 ) Mortgage loans held for sale ( 9,387 ) 36,343 Prepaid expenses and other assets ( 50,041 ) ( 21,179 ) Accounts payable 14,659 54,126 Accrued expenses and other liabilities ( 19,639 ) ( 23,029 ) Net cash (used in) provided by operating activities ( 173,983 ) 33,008 Investing activities Purchases of property and equipment ( 29,856 ) ( 14,565 ) Proceeds from sale of property and equipment 11,169 127 Expenditures related to development of rental properties ( 98,029 ) ( 59,812 ) Payments for business combinations ( 157,130 ) — Other investing activities ( 3,860 ) ( 346 ) Net cash used in investing activities ( 277,706 ) ( 74,596 ) Financing activities Borrowings under revolving credit facilities 1,459,000 25,000 Payments on revolving credit facilities ( 1,045,000 ) ( 25,000 ) Borrowing under construction loan agreements 65,442 21,453 Proceeds from issuance of insurance premium notes and other 19,619 26,511 Principal payments on insurance premium notes and other ( 29,779 ) ( 17,273 ) Net proceeds (payments) for mortgage repurchase facilities 7,916 ( 35,532 ) Withholding of common stock upon vesting of stock-based compensation awards ( 10,473 ) ( 10,672 ) Repurchases of common stock under stock repurchase program ( 53,139 ) ( 19,227 ) Dividend payments ( 24,629 ) ( 22,074 ) Other financing activities ( 363 ) — Net cash provided by (used in) financing activities 388,594 ( 56,814 ) Net decrease $ ( 63,095 ) $ ( 98,402 ) Cash and cash equivalents and Restricted cash Beginning of period 242,003 308,492 End of period $ 178,908 $ 210,090 Supplemental cash flow disclosure Cash paid for income taxes $ 80,361 $ 41,358 Cash and cash equivalents and Restricted cash Cash and cash equivalents $ 149,155 $ 193,111 Restricted cash (Note 6) 29,753 16,979 Cash and cash equivalents and Restricted cash $ 178,908 $ 210,090 See Notes to Unaudited Condensed Consolidated Financial Statements 5 Table of Contents Century Communities, Inc. Unaudited Condensed Consolidated Statements of Stockholders’ Equity For the Three and Nine Months Ended September 30, 2024 and 2023 (in thousands) For the Three Months Ended September 30, 2024 and 2023 Common Stock Shares Amount Additional Paid-In Capital Retained Earnings Total Stockholders' Equity Balance at June 30, 2024 31,336 $ 313 $ 540,573 $ 1,924,771 $ 2,465,657 Vesting of stock-based compensation awards 1 — — — — Withholding of common stock upon vesting of stock-based compensation awards — — ( 49 ) — ( 49 ) Repurchases of common stock — — — — — Stock-based compensation expense — 7,385 — 7,385 Cash dividends declared and dividend equivalents — — 178 ( 8,326 ) ( 8,148 ) Other — — ( 363 ) — ( 363 ) Net income — — — 83,020 83,020 Balance at September 30, 2024 31,337 $ 313 $ 547,724 $ 1,999,465 $ 2,547,502 Balance at June 30, 2023 32,020 $ 320 $ 586,856 $ 1,634,741 $ 2,221,917 Vesting of stock-based compensation awards 1 — — — — Withholding of common stock upon vesting of stock-based compensation awards — — ( 29 ) — ( 29 ) Repurchases of common stock ( 248 ) ( 2 ) ( 17,256 ) ( 17,258 ) Stock-based compensation expense — — 12,226 — 12,226 Cash dividends declared and dividend equivalents — — 537 ( 7,878 ) ( 7,341 ) Net income — — — 83,150 83,150 Balance at September 30, 2023 31,773 $ 318 $ 582,334 $ 1,710,013 $ 2,292,665 For the Nine Months Ended September 30, 2024 and 2023 Common Stock Shares Amount Additional Paid-In Capital Retained Earnings Total Stockholders' Equity Balance at December 31, 2023 31,775 $ 318 $ 592,989 $ 1,793,629 $ 2,386,936 Vesting of stock-based compensation awards 335 3 ( 3 ) — — Withholding of common stock upon vesting of stock-based compensation awards ( 121 ) ( 1 ) ( 10,472 ) — ( 10,473 ) Repurchases of common stock ( 652 ) ( 7 ) ( 53,132 ) — ( 53,139 ) Stock-based compensation expense — — 18,095 — 18,095 Cash dividends declared and dividend equivalents — — 610 ( 25,239 ) ( 24,629 ) Other — — ( 363 ) — ( 363 ) Net income — — — 231,075 231,075 Balance at September 30, 2024 31,337 $ 313 $ 547,724 $ 1,999,465 $ 2,547,502 Balance at December 31, 2022 31,773 $ 318 $ 584,803 $ 1,565,094 $ 2,150,215 Vesting of stock-based compensation awards 448 4 ( 4 ) — — Withholding of common stock upon vesting of stock-based compensation awards ( 170 ) ( 2 ) ( 10,670 ) — ( 10,672 ) Repurchases of common stock ( 278 ) ( 2 ) ( 19,225 ) — ( 19,227 ) Stock-based compensation expense — — 26,517 — 26,517 Cash dividends declared and dividend equivalents — — 913 ( 22,987 ) ( 22,074 ) Net income — — — 167,906 167,906 Balance at September 30, 2023 31,773 $ 318 $ 582,334 $ 1,710,013 $ 2,292,665 See Notes to Unaudited Condensed Consolidated Financial Statements 6 Table of Contents Century Communities, Inc. Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2024 1. Basis of Presentation Century Communities, Inc. (which we refer to as “we,” “CCS,” or the “Company”), together with its subsidiaries, 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. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (which we refer to as “GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations for the periods presented. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by GAAP and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, which are included 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. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company, as well as all subsidiaries in which we have a controlling interest, and variable interest entities for which the Company is deemed to be the primary beneficiary. We do not have any variable interest entities in which we are deemed the primary beneficiary. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Recently Issued Accounting Standards In December 2023, the Financial Accounting Standards Board (which we refer to as “FASB”) issued Accounting Standards Update (which we refer to as “ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires more disaggregated income tax disclosures, including additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 will become effective for us for the fiscal year ending December 31, 2025. Early adoption is permitted, and guidance should be applied prospectively, with an option to apply guidance retrospectively. We are currently evaluating the impact of the adoption of ASU 2023-09 on our consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (which we refer to as “CODM”) and included within each reported measure of segment profit or loss. The guidance also expands disclosure requirements for interim periods, as well as requires disclosure of other segment items, including the title and position of the entity’s CODM . ASU 2023-07 will become effective for us for the fiscal year ending December 31, 2024, and for interim periods starting in our first quarter of 2025 . Early adoption is permitted, and guidance is required to be applied 7 Table of Contents retrospectively. We are currently evaluating the impact of the adoption of ASU 2023-07 on our consolidated financial statements and related disclosures. 2. Reporting Segments Our homebuilding operations are engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand is managed by geographic location, and each of our four geographic regions 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 selections. Each of our four geographic regions is considered a separate operating segment. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade selections. Our Century Complete brand currently has operations in 11 states and it is considered a separate operating segment. The management of our four Century Communities geographic regions and Century Complete reports to our chief operating decision makers (which we refer to as “CODMs”), the Co-Chief Executive Officers of our Company. The CODMs review the results of our operations, including total revenue and income before income tax expense to determine profitability and to allocate resources. Accordingly, we have presented our homebuilding operations as the following five reportable segments:  West (California and Washington)  Mountain (Arizona, Colorado, Nevada, and Utah)  Texas  Southeast (Florida, Georgia, North Carolina, South Carolina, and Tennessee)  Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Louisiana, Michigan, North Carolina, Ohio, South Carolina) We have identified our Financial Services operations, which provide mortgage, title, insurance and escrow services to our homebuyers, as a sixth reportable segment. Our Corporate operations are a non-operating segment, as our Corporate operations serve to support our homebuilding, and to a lesser extent our Financial Services operations, through functions, such as our executive, finance, treasury, human resources, accounting and legal departments. 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. The following table summarizes total revenue and income (loss) before income tax expense by segment (in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue: West $ 240,722 $ 167,708 $ 617,047 $ 436,081 Mountain 271,305 207,054 784,506 683,432 Texas 159,502 111,694 436,782 327,844 Southeast 180,226 164,968 496,032 369,414 Century Complete 265,020 214,363 723,816 606,065 Financial Services 20,091 23,636 66,676 63,768 Corporate — — — — Total revenue $ 1,136,866 $ 889,423 $ 3,124,859 $ 2,486,604 Income (loss) before income tax expense: West $ 35,222 $ 31,419 $ 94,098 $ 54,358 Mountain 31,770 25,449 93,943 77,946 Texas 14,682 16,377 46,385 31,502 Southeast 27,218 33,717 73,857 63,675 Century Complete 34,056 30,873 84,192 61,171 Financial Services 3,070 12,204 18,782 29,785 Corporate ( 36,106 ) ( 38,040 ) ( 106,393 ) ( 93,681 ) Total income before income tax expense $ 109,912 $ 111,999 $ 304,864 $ 224,756 8 Table of Contents The following table summarizes total assets by segment (in thousands): September 30, December 31, 2024 2023 West $ 873,401 $ 786,489 Mountain 1,054,141 1,051,052 Texas 858,559 577,129 Southeast 631,256 503,249 Century Complete 506,429 386,444 Financial Services 473,767 450,208 Corporate 383,412 384,791 Total assets $ 4,780,965 $ 4,139,362 Corporate assets primarily include costs associated with development of multi-family rental properties, certain cash and cash equivalents, certain property and equipment, deferred tax assets, certain receivables, and prepaid insurance. 3. Business Combinations On January 22, 2024, we closed on the acquisition of substantially all the assets and assumed certain liabilities 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. We concluded that the acquisition represents a business combination, and in connection with this acquisition, we allocated $ 1.7 million in goodwill to the Southeast operating segment. We incurred $ 0.1 million in acquisition costs, which are reflected in other expense in our condensed consolidated statements of operations. On July 31, 2024, we closed on the acquisition of substantially all the assets and operations and assumed certain liabilities of Anglia Homes LP (“Anglia”), a homebuilder with operations, including 26 active communities, in the greater Houston, Texas area, for approximately $ 127.0 million in cash, inclusive of customary holdbacks. We concluded that the acquisition represents a business combination, as we determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets, and the acquired assets and processes have the ability to create outputs in the form of revenue from the sale of single-family residences. We incurred $ 0.5 million in acquisition costs, which are reflected in other expense in our condensed consolidated statements of operations. The following is a summary of the allocation of the purchase price for Anglia based on the fair value of assets acquired and liabilities assumed (in thousands): Prepaid expenses and other assets $ 7,885 Inventories 111,425 Property and equipment, net 127 Amortizable intangible assets 1,900 Goodwill 7,351 Total assets $ 128,688 Accounts payable $ 1,281 Accrued expenses and other liabilities 417 Total liabilities 1,698 Net assets acquired $ 126,990 Acquired inventories consist of work in process inventories and finished lots. We estimated the fair value of the acquired inventories based upon the stage of production of each unit and a gross margin that we believe a market participant would require to complete the remaining development and requisite selling efforts. We estimated a market participant would require a gross margin ranging from approximately 8 % to 20 % based upon the stage of production of the individual lot. Amortizable intangible assets acquired include right of first refusal and non-compete agreements, which we, with the assistance of a third-party valuation firm , estimated to have fair values of $ 0.9 million and $ 1.0 million, respectively. These intangible assets are amortized each over 2 years. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and in connection with this acquisition, we have allocated $ 7.4 million in goodwill to the Texas operating segment. Goodwill allocated for tax purposes is expected to be deductible. We determined that Anglia’s carrying costs approximated fair value for all other acquired assets and assumed liabilities. 9 Table of Contents From the acquisition date, Anglia’s results of operations, which include home sales revenue of $ 20.3 million and loss before income tax, inclu sive of purchase price accounting, of $ 1.5 million, are included in our accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2024. 4. Inventories Inventories included the following (in thousands): September 30, December 31, 2024 2023 Homes under construction $ 1,771,516 $ 1,334,584 Land and land development 1,727,324 1,609,459 Capitalized interest 82,259 72,598 Total inventories $ 3,581,099 $ 3,016,641 5. Financial Services Our Financial Services are principally comprised of our mortgage lending operations, Inspire Home Loans Inc. (which we refer to as “Inspire”). Inspire is a full-service mortgage lender and primarily originates mortgage loans for our homebuyers. Inspire sells substantially all of the loans it originates either as loans with servicing rights released, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days. Inspire primarily finances these loans using its mortgage repurchase facilities. Mortgage loans held for sale and mortgage servicing rights are carried at fair value, with gains and losses from the changes in fair value reflected in financial services revenue on the consolidated statements of operations. Management believes carrying mortgage loans held for sale at fair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them. Net gains and losses from the sale of mortgage loans held for sale, which are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale, are also included in financial services revenue on the consolidated statements of operations. Financial services revenue also includes fees earned from originating mortgage loans, which are recognized at the time the mortgage loans are funded, which include origination fees and discount points provided directly to our customers to reduce interest rates based on commitment agreements entered into between our homebuilding and Financial Services segments . Intercompany fees charged directly to the homebuilder are eliminated from financial services revenue on the condensed consolidated statements of operations upon consolidation. As of September 30, 2024 and December 31, 2023, Inspire had mortgage loans held for sale with an aggregate fair value of $ 257.2 million and $ 251.9 million, respectively, and an aggregate outstanding principal balance of $ 257.1 million and $ 247.7 million, respectively. Net losses on the sale of mortgage loans were $ 1.1 million and $ 4.9 million for the three and nine months ended September 30, 2024 , respectively, and were $ 6.9 million and $ 3.4 million for the three and nine months ended September 30, 2023, respectively. The gain from the change in fair value for mortgage loans held for sale was $ 0.1 million for the three months ended September 30, 2024, and the loss from the change in fair value for mortgage loans held for sale was $ 4.1 million for the nine months ended September 30, 2024. Losses from the change in fair value for mortgage loans held for sale were $ 2.9 million and $ 4.9 million for the three and nine months ended September 30, 2023, respectively. Mortgage loans in process for which interest rates were locked by borrowers, or interest rate lock commitments, totaled approximately $ 146.0 million and $ 49.6 million at September 30, 2024 and December 31, 2023, respectively, and carried a weighted average interest rate of approximately 4.9 % and 5.8 %, respectively . Interest rate risks related to these obligations are typically mitigated through our interest rate hedging program or by the preselling of loans to investors. Derivative instruments used to economically hedge our market and interest rate risk are carried at fair value. Derivative instruments typically include interest rate lock commitments and forward commitments on mortgage-backed securities. Changes in fair value of these derivatives as well as any gains or losses upon settlement are reflected in financial services revenue on our condensed consolidated statements of operations. Refer to Note 13 – Fair Value Disclosures for further information regarding our derivative instruments. 10 Table of Contents 6. Prepaid Expenses and Other Assets Prepaid expenses and other assets included the following (in thousands): September 30, December 31, 2024 2023 Prepaid insurance $ 37,241 $ 37,624 Lot option and escrow deposits 94,384 51,369 Performance deposits 10,282 10,170 Restricted cash (1) 29,753 15,853 Multi-family rental properties under construction (2) 146,993 136,300 Mortgage loans held for investment at fair value 24,032 21,041 Mortgage loans held for investment at amortized cost 6,679 6,826 Mortgage servicing rights 34,523 30,932 Derivative assets 3,757 1,618 Other assets and prepaid expenses 40,317 38,460 Total prepaid expenses and other assets $ 427,961 $ 350,193 (1) Restricted cash consists of restricted cash related to land development, earnest money deposits for home sale contracts held by third parties as required by various jurisdictions, and certain compensating balances associated with our mortgage repurchase facilities and other financing obligations. (2) During the nine months ended September 30, 2024, certain multi-family rental properties were completed and became available for leasing; and as such, we reclassified $ 92.4 million from multi-family rental properties under construction, included in prepaid expenses and other assets on the condensed consolidated balance sheets, to property and equipment, net on the condensed consolidated balance sheets. 7. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities included the following (in thousands): September 30, December 31, 2024 2023 Earnest money deposits $ 17,286 $ 7,933 Warranty reserve 12,203 11,524 Self-insurance reserve 29,751 23,659 Accrued compensation costs 64,360 80,133 Land development and home construction accruals 98,746 120,224 Accrued interest 17,117 10,404 Income taxes payable — — Derivative liabilities 1,088 5,291 Other accrued liabilities 47,386 44,224 Total accrued expenses and other liabilities $ 287,937 $ 303,392 11 Table of Contents 8. Warranties Estimated future direct warranty costs are accrued and charged to cost of home sales revenues in the period when the related home sales revenues are recognized. Amounts accrued, which are included in accrued expenses and other liabilities on the condensed consolidated balance sheets, are based upon historical experience rates. We subsequently assess the adequacy of our warranty accrual on a quarterly basis through a model that incorporates historical payment trends and adjust the amounts recorded, if necessary. Based on warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $ 0.3 million and $ 0.5 million during the three months ended September 30, 2024 and 2023, respectively, and we reduced our warranty reserve by $ 1.9 million and $ 1.2 million during the nine months ended September 30, 2024 and 2023, respectively. These adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations. Changes in our warranty accrual for the three and nine months ended September 30, 2024 and 2023 are detailed in the table below (in thousands) : Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Beginning balance $ 11,598 $ 12,984 $ 11,524 $ 13,136 Warranty expense provisions 2,721 2,199 7,861 6,500 Payments ( 1,770 ) ( 1,874 ) ( 5,303 ) ( 5,643 ) Warranty adjustment ( 346 ) ( 520 ) ( 1,879 ) ( 1,204 ) Ending balance $ 12,203 $ 12,789 $ 12,203 $ 12,789 9. Self-Insurance Reserve We maintain general liability insurance coverage, including coverage for certain construction defects after homes have closed and premise operations during construction. These insurance policies are designed to protect us against a portion of the risk of loss from claims, subject to certain self-insured per occurrence and aggregate retentions, deductibles, and available policy limits. In circumstances where we have elected to retain a higher portion of the overall risk for construction defect claims in return for a lower initial premium, we reserve for the estimated self-insured retention costs that we will incur that are above our coverage limits or that are not covered by our insurance policies. The reserve is recorded on an undiscounted basis at the time revenue is recognized for each home closing. Amounts accrued, which are included in accrued expenses and other liabilities on the condensed consolidated balance sheets, are based on third party actuarial analyses that are primarily based on industry data and partially on our historical claims, which include estimates of claims incurred but not yet reported. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs. Our self-insurance liability is presented on a gross basis without consideration of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any. Estimates of insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as receivables when such recoveries are considered probable. Based on a third-party actuarial analysis, we reduced our self-insurance reserve by $ 0.8 million during the three and nine months ended September 30, 2024, and we reduced our self-insurance reserve by $ 3.4 million during the three and nine months ended September 30, 2023. Any adjustments are included in cost of home sales revenues on our condensed consolidated statements of operations. Changes in our self-insurance reserve for incurred but not reported construction defect claims for the three and nine months ended September 30, 2024 and 2023 are detailed in the table below (in thousands) : Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Beginning balance $ 27,684 $ 21,477 $ 23,659 $ 16,998 Self-insurance expense provisions 3,106 2,470 8,334 7,029 Payments ( 251 ) ( 16 ) ( 1,454 ) ( 96 ) Self-insurance adjustment ( 788 ) ( 3,436 ) ( 788 ) ( 3,436 ) Ending balance $ 29,751 $ 20,495 $ 29,751 $ 20,495 12 Table of Contents 10. Debt Our outstanding debt obligations included the following as of September 30, 2024 and December 31, 2023 (in thousands): September 30, December 31, 2024 2023 3.875 % senior notes, due August 2029 (1) $ 496,235 $ 495,656 6.750 % senior notes, due June 2027 (1) 497,823 497,210 Other financing obligations (2) 124,885 69,605 Notes payable 1,118,943 1,062,471 Revolving line of credit 414,000 — Mortgage repurchase facilities 247,214 239,298 Total debt $ 1,780,157 $ 1,301,769 (1) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest expense over the respective terms of the senior notes. (2) As of September 30, 2024, other financing obligations included $ 14.5 million related to insurance premium notes and certain secured borrowings, as well as $ 110.3 million outstanding under construction loan agreements. 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. 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 September 30, 2024 and December 31, 2023, $ 110.3 million and $ 44.9 million was outstanding under the construction loan agreements respectively, with borrowings that bore a weighted average interest rate of 7.2 % and 7.4 % as of September 30, 2024 and December 31, 2023, respectively, and we were in compliance with all covenants thereunder. Revolving Line of Credit We are party to a Second Amended and Restated Credit Agreement, as amended, (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 and a $ 50.0 million sublimit for swingline loans. 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 SOFR administered by the Federal Reserve Bank of New York, plus 0.10 %. As of September 30, 2024, $ 414.0 million was outstanding under the revolving line of credit, with borrowings that bore an interest rate of 7.4 %, and we were in compliance with all covenants under the Second A&R Credit Agreement. As of December 31, 2023, no amount was outstanding under the revolving line of credit. 13 Table of Contents Mortgage Repurchase Facilities – Financial Services Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., U.S. Bank National Association and Truist Bank, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $ 475.0 million as of September 30, 2024, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through September 26, 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 6.8 % as of September 30, 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 September 30, 2024 and December 31, 2023, we had $ 247.2 million and $ 239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder. 11. Interest on Senior Notes and Revolving Line of Credit Interest on our senior notes and revolving line of credit, if applicable, is capitalized to inventories while the related communities are being actively developed and until homes are completed. As our qualifying assets exceeded our outstanding debt during the three and nine months ended September 30, 2024 and 2023, we capitalized all interest costs incurred on these facilities during these periods. Our interest costs were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Interest capitalized beginning of period $ 77,930 $ 69,745 $ 72,598 $ 61,775 Interest capitalized during period 20,821 14,234 51,778 42,281 Less: capitalized interest in cost of sales ( 16,492 ) ( 10,652 ) ( 42,117 ) ( 30,729 ) Interest capitalized end of period $ 82,259 $ 73,327 $ 82,259 $ 73,327 12 . Income Taxes 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 24.6 %, is driven by our blended federal and state statutory rate of 24.6 %, 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. For the nine months ended September 30, 2024, our estimated annual rate of 24.6 % was benefitted by discrete items which had a net impact of decreasing our rate by 0.4 %, including the impact of excess tax benefits for vested stock-based compensation. For the three months ended September 30, 2024 and 2023, we recorded income tax expense of $ 26.9 million and $ 28.8 million, respectively . For the nine months ended September 30, 2024 and 2023, we recorded income tax expense of $ 73.8 million and $ 56.9 million, respectively . 13. Fair Value Disclosures Fair value measurements are used for the Company’s mortgage loans held for sale, mortgage loans held for investment, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis. We also utilize fair value measurements on a non-recurring basis for inventories and intangible assets when events and circumstances indicate that the carrying value is not recoverable. The fair value hierarchy and its application to the Company’s assets and liabilities is as follows: 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 the measurement date.  Mortgage loans held for sale – Fair value is based on quoted market prices for committed and uncommitted mortgage loans. 14 Table of Contents  Derivative assets and liabilities – Derivative assets are associated with interest rate lock commitments and investor commitments on loans and may also be associated with forward mortgage-backed securities contracts. Derivative liabilities are associated with forward mortgage-backed securities contracts. Fair value is based on market prices for similar instruments. Level 3 – Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at the measurement date.  Mortgage servicing rights - The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service.  Mortgage loans held for investment at fair value – The fair value of mortgage loans held for investment at fair value is calculated based on Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity. The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023, respectively (in thousands): September 30, December 31, Balance Sheet Classification Hierarchy 2024 2023 Mortgage loans held for sale Mortgage loans held for sale Level 2 $ 257,187 $ 251,852 Mortgage loans held for investment at fair value (1) Prepaid expenses and other assets Level 3 $ 24,032 $ 21,041 Derivative assets Prepaid expenses and other assets Level 2 $ 3,757 $ 1,618 Mortgage servicing rights (2) Prepaid expenses and other assets Level 3 $ 34,523 $ 30,932 Derivative liabilities Accrued expenses and other liabilities Level 2 $ 1,088 $ 5,291 (1) The unobservable inputs used in the valuation of the mortgage loans held for investment at fair value include, among other items, the value of underlying collateral, from markets where there is little observable trading activity. (2) The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were 7.8 %, 10.4 %, and $ 0.073 per year per loan, respectively, as of September 30, 2024, and 8.6 %, 10.3 %, and $ 0.072 per year per loan, respectively, as of December 31, 2023. The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement. The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements, with gains and losses from the changes in fair value reflected in financial services revenue on our condensed consolidated statements of operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Mortgage servicing rights 2024 2023 2024 2023 Beginning of period $ 34,070 $ 26,631 $ 30,932 $ 24,164 Originations 3,907 3,017 6,686 5,121 Settlements ( 642 ) ( 428 ) ( 1,754 ) ( 989 ) Changes in fair value ( 2,812 ) 1,273 ( 1,341 ) 2,197 End of period $ 34,523 $ 30,493 $ 34,523 $ 30,493 Three Months Ended September 30, Nine Months Ended September 30, Mortgage loans held-for-investment at fair value 2024 2023 2024 2023 Beginning of period $ 21,763 $ 20,559 $ 21,041 $ 18,875 Transfers from loans held for sale 2,707 1,268 4,663 4,432 Settlements ( 244 ) ( 316 ) ( 905 ) ( 997 ) Reduction in unpaid principal balance ( 102 ) ( 120 ) ( 464 ) ( 753 ) Changes in fair value ( 92 ) ( 24 ) ( 303 ) ( 190 ) End of period $ 24,032 $ 21,367 $ 24,032 $ 21,367 15 Table of Contents For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at September 30, 2024 and December 31, 2023, respectively (in thousands). September 30, 2024 December 31, 2023 Hierarchy Carrying Fair Value Carrying Fair Value Cash and cash equivalents Level 1 $ 149,155 $ 149,155 $ 226,150 $ 226,150 3.875 % senior notes (1)(2) Level 2 $ 496,235 $ 464,375 $ 495,656 $ 436,875 6.750 % senior notes (1)(2) Level 2 $ 497,823 $ 501,875 $ 497,210 $ 500,000 Revolving line of credit (3) Level 2 $ 414,000 $ 414,000 $ — $ — Other financing obligations (3)(4) Level 3 $ 124,885 $ 124,885 $ 69,605 $ 69,605 Mortgage repurchase facilities (3) Level 2 $ 247,214 $ 247,214 $ 239,298 $ 239,298 (1) Estimated fair value of the senior notes is based on recent trading activity in inactive markets. (2) Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts. As of September 30, 2024, these amounts totaled $ 3.8 million and $ 2.2 million for the 3.875 % senior notes and 6.750 % senior notes, respectively. As of December 31, 2023, these amounts totaled $ 4.3 million and $ 2.8 million for the 3.875 % senior notes and 6.750 % senior notes, respectively. (3) Carrying amount approximates fair value due to short-term nature and/or interest rate terms. (4) During the period ended September 30, 2024, other financing obligations included $ 14.5 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 5.0 % to 8.0 %, and $ 110.3 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 7.2 % as of September 30, 2024. During the period ended December 31, 2023, other financing obligations included $ 24.7 million related to insurance premium notes and certain secured borrowings that generally bore interest rates ranging from 4.8 % to 7.7 %, and $ 44.9 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 7.4 %. Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and as a result of impairments, if deemed necessary. D uring the three months ended September 30, 2024, we determined that inventory with a carrying value before impairment of $ 10.6 million for two communities in our Century Complete and Southeast segments were not recoverable. During the nine months ended September 30, 2024, we determined that inventory with a carrying value before impairment of $ 15.2 million for four communities in our Century Complete and Southeast segments were not recoverable . Accordingly, during the three and nine months ended September 30, 2024, we recognized impairment charges of an aggregate $ 1.4 million and $ 1.9 million, respectively, in order to record the communities at fair value. No impairment charges were recorded in the three and nine months ended September 30, 2023. When impairment charges are recognized, the estimated fair value of communities are determined through a discounted cash flow approach utilizing Level 3 inputs. Changes in our cash flow projections in future periods related to these communities may change our conclusions on the recoverability of inventory in the future. 14. Stock-Based Compensation During the nine months ended September 30, 2024 and 2023, we granted restricted stock units (which we refer to as “RSUs”) covering 0.2 million and 0.2 million shares of common stock, respectively, with a grant date fair value of $ 86.01 and $ 62.68 per share, respectively, that vest over a three year period. During the nine months ended September 30, 2024 and 2023, we granted 11.0 thousand and 11.0 thousand shares of common stock, respectively, on an unrestricted basis (which we refer to as “stock awards”) with a grant date fair value of $ 82.84 and $ 65.77 per share, respectively, to our non-employee directors. During the nine months ended September 30, 2024 and 2023, we granted performance share units (which we refer to as “PSUs”) covering up to 0.3 million and 0.5 million shares of common stock assuming maximum level of performance with a grant date fair value of $ 82.23 and $ 60.05 per share, respectively, that are subject to both service and performance vesting conditions. The quantity of shares that will ultimately vest and be issued upon settlement of the PSUs ranges from 0 % to 250 % of a targeted number of shares and will be determined based on an achievement of a three year adjusted pre-tax income performance goal. During the nine months ended September 30, 2024 and 2023, we issued 0.2 million and 0.3 million shares of common stock, respectively, upon the vesting and settlement of PSUs that were granted in previous periods. Approximately 1.1 million shares will vest from 2025 to 2027 if the defined maximum performance targets are met, and no shares will vest if the defined minimum performance targets are not met. A summary of our outstanding PSUs, assuming the current estimated level of performance achievement, and RSUs are as follows (in thousands, except years): September 30, 2024 Unvested units 1,246 Unrecognized compensation cost $ 32,079 Weighted-average years to recognize compensation cost 1.46 16 Table of Contents During the three months ended September 30, 2024 and 2023, we recognized stock-based compensation expense of $ 7.4 million and $ 12.2 million, respectively. During the nine months ended September 30, 2024 and 2023, we recognized stock-based compensation expense of $ 18.1 million and $ 26.5 million, respectively. Stock-based compensation expense is included in selling, general, and administrative expense on our condensed consolidated statements of operations. Stock-based compensation expense for PSUs is initially estimated based on target performance achievement and adjusted as appropriate throughout the performance period. Accordingly, future compensation cost associated with outstanding PSUs may increase or decrease based on the probability and extent of achievement with respect to the applicable performance measures. 15. Stockholders’ Equity The Company’s authorized capital stock consists of 100.0 million shares of common stock, par value $ 0.01 per share, and 50.0 million shares of preferred stock, par value $ 0.01 per share. As of September 30, 2024 and December 31, 2023, there were 31.3 million and 31.8 million shares of common stock issued and outstanding, respectively, and no shares of preferred stock outstanding. On May 4, 2022, the stockholders approved the adoption of the Century Communities, Inc. 2022 Omnibus Incentive Plan (which we refer to as the “2022 Incentive Plan”), which replaced the Century Communities, Inc. Amended and Restated 2017 Omnibus Incentive Plan (which we refer to as our “2017 Incentive Plan”). Under the 2022 Incentive Plan, 3.1 million shares of common stock are available for issuance to eligible participants, plus 51.2 thousand shares of our common stock that remained available for issuance under the 2017 Incentive Plan and any shares subject to awards outstanding under the 2017 Incentive Plan that are subsequently forfeited, cancelled, expire or otherwise terminate without the issuance of such shares. During the nine months ended September 30, 2024 and 2023, we issued 0.3 million and 0.4 million shares of common stock, respectively, related to the vesting and settlement of RSUs and PSUs. As of September 30, 2024, approximately 2.2 million shares of common stock remained available for issuance under the 2022 Incentive Plan. The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the nine months ended September 30, 2024 and 2023, respectively (in thousands, except per share information): Nine Months Ended September 30, 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 May 15, 2024 May 29, 2024 June 12, 2024 $ 0.26 $ 8,217 August 14, 2024 August 28, 2024 September 11, 2024 $ 0.26 $ 8,148 Nine Months Ended September 30, 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 May 17, 2023 May 31, 2023 June 14, 2023 $ 0.23 $ 7,368 August 16, 2023 August 30, 2023 September 13, 2023 $ 0.23 $ 7,341 Under the 2022 Incentive Plan and the previous 2017 Incentive Plan, at the discretion of the Compensation Committee of the Board of Directors, RSUs and PSUs granted under the plan have the right to earn dividend equivalents, which entitles the holders of such RSUs and PSUs to additional RSUs and PSUs equal to the same dividend value per share as holders of common stock. Dividend equivalents are subject to the same vesting and other terms and conditions as the underlying RSUs and PSUs. Our stock repurchase programs, authorized by our Board of Directors, authorize us to repurchase up to 9.0 million shares of our outstanding common stock, of which 5.1 million shares remained available to be repurchased as of September 30, 2024. We did no t repurchase any shares of our common stock during the three months ended September 30, 2024. During the nine months ended September 30, 2024, an aggregate of 651.9 thousand shares were repurchased for a total purchase price of approximately $ 53.1 million and a weighted average price of $ 81.49 per share. During the three and nine months ended September 30, 2023, an aggregate of 247.8 thousand and 278.2 thousand shares, respectively, were repurchased for a total purchase price of approximately $ 17.3 million and $ 19.2 million, respectively, and a weighted average price of $ 69.61 and $ 69.09 per share, respectively. During the nine months ended September 30, 2024 and 2023, shares of common stock at a total cost of $ 10.5 million and $ 10.7 million, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock-based compensation awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased and retired by us but are not part of our publicly announced share repurchase programs. 17 Table of Contents 16. Earnings Per Share We use the treasury stock method to calculate earnings per share as our currently issued non-vested RSUs and PSUs do not have participating rights. The following table sets forth the computation of basic and diluted EPS for the three and nine months ended September 30, 2024 and 2023 (in thousands, except share and per share information): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Numerator Net income $ 83,020 $ 83,150 $ 231,075 $ 167,906 Denominator Weighted average common shares outstanding - basic 31,336,756 31,962,884 31,596,995 31,967,672 Dilutive effect of stock-based compensation awards 688,259 274,138 520,922 233,005 Weighted average common shares outstanding - diluted 32,025,015 32,237,022 32,117,917 32,200,677 Earnings per share: Basic $ 2.65 $ 2.60 $ 7.31 $ 5.25 Diluted $ 2.59 $ 2.58 $ 7.19 $ 5.21 Stock-based awards are excluded from the calculation of diluted EPS in the event they are subject to unsatisfied performance conditions or are antidilutive. We excluded 0.4 million and 0.9 million common stock unit equivalents from diluted earnings per share during the three months ended September 30, 2024 and 2023, respectively, and we excluded 0.4 million and 0.8 million common stock unit equivalents from diluted earnings per share during the nine months ended September 30, 2024 and 2023, respectively, related to the PSUs for which performance conditions remained unsatisfied. 17. Commitments and Contingencies 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 September 30, 2024 and December 31, 2023, we had $ 527.9 million and $ 510.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding. Legal Proceedings We are subject to claims and lawsuits that arise primarily in the ordinary course of business, which consist primarily of construction claims. It is the opinion of our management that if the claims have merit, parties other than the Company would be, at least in part, liable for the claims, and the eventual outcome of these claims will not have a material adverse effect upon our consolidated financial condition, results of operations, or cash flows. When we believe that a loss is probable and estimable, we record a charge on our condensed consolidated statements of operations for our estimated loss. Under various insurance policies, we have the ability to recoup costs in excess of applicable self-insured retentions. Estimates of such amounts are recorded in other assets on our condensed consolidated balance sheet when recovery is probable. We do not believe that the ultimate resolution of any claims and lawsuits will have a material adverse effect upon our consolidated financial position, results of operations, or cash flows. 18 Table of Contents