What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-24 · 229 added, 244 removed, 375 unchanged (56% of the section changed)

15 unchanged sentences

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 changes in 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;

 shortages of or increased prices for labor, land or raw materials used in housing construction and resource shortages , including as a result of recent tariffs and immigration reform;

 a downturn in the homebuilding industry, including a reduction in demand for our homes 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.

 volatility and uncertainty in the credit markets and broader financial markets and the impact on such markets and our ability to access them , including as a result of geopolitical conditions and 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;

 our future business operations, operating results and financial condition;

future impairment and restructuring charges;

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;

 the effect of and risks associated with our recent acquisitions;

 the effect of and risks associated with our acquisitions;

 availability, terms and deployment of capital;

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 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;

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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.

Some of these events and factors are described above and in this “Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part I, Item 1A.

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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 Century Communities brand has an emphasis on serving the affordable 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 selections.

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 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.

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 brokerage and escrow services, respectively, primarily to our homebuyers, have been identified as our Financial Services segment.

Additionally, our Century Living segment is engaged in the development, construction, management, and disposition of multi-family rental properties, currently all located in Colorado.

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 7,809 homes delivered during the first nine months of 2024, approximately 93% 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.

During 2024, we have completed two acquisitions.

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 in the greater Houston, Texas area, for approximately $127.0 million in cash, inclusive of customary holdbacks.

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.

Current housing market conditions demonstrate solid, underlying demand for affordable new homes and, coupled with a more recent moderation in mortgage rates, we experienced solid demand during the first nine months of 2024, as net new home contracts (new home contracts net of cancellations) for the three and nine months ended September 30, 2024 increased 19.3% and 26.5%, respectively, as compared to the same prior year periods.

We have continued to provide, when necessary, incentive offerings across our communities during the first nine months of 2024, including discounts on base home prices, lot premiums, and options and upgrades and financing incentives, including interest rate buydowns.

During the nine months ended September 30, 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;

Of the 2,284 homes delivered during the first three months of 2025, approximately 94% of homes delivered had purchase prices below the Federal Housing Administration-insured mortgage limits and approximately 99% of homes delivered were built as move-in ready homes.

Market conditions in the homebuilding industry have continued to be impacted by elevated mortgage rates, macro-economic and geopolitical uncertainty, and broader concerns about affordability by homebuyers.

Amidst these market conditions, we experienced a slowing in demand during the first quarter of 2025, as net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2025 decreased 6.1% compared to the prior year period.

Still, there remains an underlying need for affordable new homes, supported by solid demographic trends, and w e have continued to provide, when necessary, incentive offerings across our communities, including discounts on base home prices, lot premiums, options and upgrades, and financing incentives, including interest rate buydowns.

During the three months ended March 31, 2025, cycle times remained approximately in the four-month timeframe.

We believe future demand for our homes remains uncertain as future economic, market and geopolitical conditions remain uncertain, in particular with respect to inflation;

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.

financial, credit and mortgage markets;

the extent to which and how long government monetary directives and actions will impact the U.S.

the effect of recent tariffs;

consumer confidence;

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housing demand;

the effect of the U.S.

Presidential election on the economy, consumer confidence and homebuilding;

the possibility of an economic recession;

and other factors, including those described elsewhere in this Form 10-Q.

Specifically, 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.

Changes in demand for our homes or cancellations due to mortgage interest rates, consumer confidence 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.

We believe we are well-positioned to benefit from any future declines in mortgage interest rates, 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 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.

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 and nine months ended September 30, 2024, we generated $109.9 million and $304.9 million, respectively, in income before income tax expense, as compared to $112.0 million and $224.8 million, respectively, in the respective prior year periods.

During the three and nine months ended September 30, 2024, we generated net income of $83.0 million, or $2.59 per diluted share, and $231.1 million, or $7.19 per diluted share, respectively, as compared to $83.2 million, or $2.58 per diluted share, and $167.9 million, or $5.21 per diluted share, respectively, in the respective prior year periods.

During the three and nine months ended September 30, 2024, we generated total revenues of $1.1 billion and $3.1 billion, respectively, which represent increases of 27.8% and 25.7%, respectively, as compared to the respective prior year periods, driven primarily by increased home sales revenue from increased number of homes available for sale and increased average sales prices .

During the three and nine months ended September 30, 2024, we delivered 2,834 and 7,809 homes, respectively, with an average sales price of $393.8 thousand and $391.3 thousand, respectively.

The number of homes delivered increased by 25.2% and 21.8%, respectively, during the three and nine months ended September 30, 2024, as compared to the respective prior year periods, representing growth across all of our segments.

Average sales price increased 3.1 % and 3.7%, respectively, during the three and nine months ended September 30, 2024, as compared to the respective prior year periods.

During the three and nine months ended September 30, 2024, net new contracts increased 19.3% and 26.5%, respectively, to 2,563 and 8,209, respectively, as compared to the respective prior year periods.

We ended the third quarter of 2024 with $149.2 million of cash and cash equivalents and $70.8 million of cash held in escrow.

During the three months ended March 31, 2025, we generated $52.5 million in income before income tax expense, as compared to $84.3 million in the prior year period, and we generated net income of $39.4 million, or $1.26 per diluted share, as compared to $64.3 million, or $2.00 per diluted share in the prior year period.

‎During the three months ended March 31, 2025, we generated total revenues of $903.2 million, as compared to $948.5 million in the prior year period, as we delivered 2,284 homes with an average sales price of $386.9 thousand, as compared to 2,358 homes with an average sales price of $391.2 thousand in the prior year period.

The number of homes delivered decreased by 3.1% as compared to the prior year period primarily due to slower absorption rates, and average sales price decreased 1.1% as compared to the prior year, primarily due to higher incentives in the current year period.

During the three months ended March 31, 2025, net new contracts decreased 6.1% to 2,692 as compared to the prior year period.

We ended the first quarter of 2025 with $100.3 million of cash and cash equivalents and $24.2 million of cash held in escrow.

We had $237.0 million outstanding under our revolving line of credit, with a homebuilding debt to capital ratio of 32.4% and a net homebuilding debt to net capital ratio of 30.1%.

During the three and nine months ended September 30, 2024, we paid quarterly cash dividends to our stockholders of $0.26 per share, which represents a 13% increase from the $0.23 per share quarterly dividends paid during the three and nine months ended September 30, 2023.

During the nine months ended September 30, 2024, we have continued to strategically increase our lot pipeline, including both organically and through acquisitions, resulting in 80,121 lots owned and controlled at September 30, 2024.

For the three and nine months ended September 30, 2024, our Financial Services segment generated income before income tax of $3.1 million and $18.8 million, respectively, representing a decrease of 74.8% and 36.9%, respectively, as compared to the respective prior year periods.

During the three and nine months ended September 30, 2024, the number of mortgages originated increased 45.5% and 41.6%, respectively, as compared to the respective prior year periods, which benefited from increased capture rates, and the number of loans sold to third parties increased 35.5% and 37.0%, respectively, as compared to the respective prior year periods.

While total loan origination volumes increased during the three and nine months ended September 30, 2024, the decrease in income before income tax is primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in the fair value of our mortgage servicing rights portfolio.

Our Century Living operations are engaged in the development, construction and management of multi-family rental properties in Colorado, and currently comprise over 1,200 total units.

As of September 30, 2024, one project had been successfully completed and available for leasing, and three projects remain under construction, two of which were available for pre-leasing.

As of September 30, 2024, 407 units had been completed, 193 units of which were occupied, and 872 units were under development.

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023:

During the three months ended March 31, 2025, we paid quarterly cash dividends to our stockholders of $0.29 per share, a 12% increase from the $0.26 per share quarterly dividend paid during the three months ended March 31, 2024.

We have continued to strategically manage our lot pipeline, resulting in 79,014 lots owned and controlled at March 31, 2025.

Our Financial Services segment generated income before income tax expense of $2.4 million for the three months ended March 31, 2025, a 76.5% decrease from the prior year period.

During the three months ended March 31, 2025, the number of mortgages originated decreased 2.6% and the number of loans sold to third parties decreased 2.8%, in each case as compared to the prior year period.

The decrease in income before income tax expense of our Financial Services segment was primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in fair value of our mortgage servicing portfolio.

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:

(in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

Consolidated Statements of Operations:

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Inventory impairment

Other income (expense)

Income before income tax expense

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Adjusted diluted earnings per share (1)

Other Operating Information (dollars in thousands):

Other Operating Information

(dollars in thousands):

Number of homes delivered

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(2) Homebuilding gross margin percentage is inclusive of impairment charges, if applicable.

We recorded impairment charges of $1.4 million and $1.9 million during the three and nine months ended September 30, 2024.

No impairment charges were recorded during the three and nine months ended September 30, 2023.

We recorded impairment charges of $0.4 million during the three months ended March 31, 2025.

No impairment charges were recorded during the three months ended March 31, 2024.

NM – Not meaningful

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 September 30,

Commencing in the first quarter of 202 5 , we have separately reported our Century Living segment, previously included in our Corporate segment, in order to reflect the distinct nature of our multi-family rental operations.

Accordingly, we have re cast the corresponding segment information for the three months ended Ma r ch 31, 202 4 .

Three months ended March 31, 2025

Century Complete

Financial Services

Century Living

New homes delivered

Average Sales Price of Homes Delivered

Home Sales Revenues

Income before Income Tax Expense

Nine Months Ended September 30,

Average sales price of new homes delivered

Cost of home sales

Inventory impairment

Selling, general and administrative

Financial services costs

Other segment items (1)

Income (loss) before tax expense

Three months ended March 31, 2024

Century Complete

Financial Services

During the three and nine months ended September 30, 2024, our West segment generated income before income tax expense of $35.2 million and $94.1 million, respectively, an increase of 12.1% and 73.1%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $73.0 million and $180.8 million, respectively.

The revenue increases for the three- and nine-month comparisons were primarily driven by an increase of 29.2% and 31.7%, respectively, in the number of homes delivered, and increases of 11.1% and 7.4%, respectively, in the average sales price per home.

The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.

During the three and nine months ended September 30, 2024, our Mountain segment generated income before income tax expense of $31.8 million and $93.9 million, respectively, an increase of 24.8% and 20.5%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $64.2 million and $102.4 million, respectively.

The revenue increases for the three and nine-month comparisons were primarily driven by an increase of 23.6% and 12.8%, respectively, in the number of homes delivered, and increases of 6.0% and 2.0%, respectively, in the average sales price per home.

During the three months ended September 30, 2024, our Texas segment generated income before income tax expense of $14.7 million, a decrease of 10.3% over the prior year period, which was primarily driven by a decrease of 5.5% in the percentage of income before income tax expense to home sales revenues due to a decreased gross margin on home sales, which included purchase price accounting of $2.7 million related to our purchase of Anglia.

This decrease was partially offset by an increase in home sales revenue of $47.8

million, primarily driven by an increase of 38.7% in the number of homes delivered and an increase of 2.9% in the average sales price per home.

During the nine months ended September 30, 2024, our Texas segment generated income before income tax expense of $46.4 million, an increase of 47.2% over the prior year period, which was driven by an increase in home sales revenue of $109.0 million.

The revenue increase was primarily driven by an increase of 24.2% in the number of homes delivered, and an increase of 7.3% in the average sales price per home.

For both the three- and nine-month comparisons, the increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.

During the three months ended September 30, 2024, our Southeast segment generated income before income tax expense of $27.2 million, a decrease of 19.3% over the prior year period, which was primarily driven by a decrease of 5.4% in the percentage of income before income tax expense to home sales revenues due to a decreased margin on home sales and impairment recognized during the current year period.

This decrease was partially offset by an increase in home sales revenue of $15.4 million, primarily driven by an increase of 13.0% in the number of homes delivered, and partially offset by a decrease of 3.2% in the average sales price per home.

During the nine months ended September 30, 2024, our Southeast segment generated income before income tax expense of $73.9 million, an increase of 16.0% over the prior year period, which was driven by an increase in home sales revenue of $126.6 million.

The revenue increase was primarily driven by an increase of 35.7% in the number of homes delivered, and partially offset by a decrease of 1.0% in the average sales price per home.

For both the three- and nine-month comparisons, the increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price decreases were driven by the mix of deliveries within individual communities.

Century Living

New homes delivered

Average sales price of new homes delivered

Cost of home sales

Inventory impairment

Selling, general and administrative

Financial services costs

Other segment items (1)

Income (loss) before tax expense

(1) Includes cost of land sales and other revenues, and other income (expense).

During the three months ended March 31, 2025, our West segment generated income before income tax expense of $21.4 million, a 19.9% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin.

Revenue increased $9.1 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 6.7% increase in the number of homes delivered, and was partially offset by a 1.2% decrease in the average sales price per home.

The increase in the number of homes delivered was primarily driven by an increase in open communities, and the average sales price decrease was driven by the mix of deliveries within individual communities.

Homebuilding gross margin was 22.1% for the three months ended March 31, 2025, which decreased 230 basis points from 24.4% in the prior year period, primarily driven by higher incentives in the current year period.

During the three months ended March 31, 2025, our Mountain segment generated income before income tax expense of $23.4 million, a 15.7% decrease from the prior year period, which was primarily driven by a decrease in revenue and a decrease in homebuilding gross

Revenue decreased $29.2 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 13.3% decrease in the number of homes delivered, and was partially offset by a 2.1% increase in the average sales price per home.

The decrease in the number of homes delivered was primarily driven by slower absorption rates, and the average sales price increase was driven by the mix of deliveries within individual communities.

Homebuilding gross margin was 19.6% for the three months ended March 31, 2025, which decreased 70 basis points from 20.3% in the prior year period, primarily driven by higher incentives in the current year period.

During the three months ended March 31, 2025, our Texas segment generated income before income tax expense of $10.4 million, a 25.4% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin.

Revenue increased $5.4 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 7.8% increase in the number of homes delivered, and was partially offset by a 3.4% decrease in the average sales price per home.

The increase in the number of homes delivered was primarily driven by an increase in open communities and partially offset by slower absorption rates, and the average sales price decrease was driven by the mix of deliveries within individual communities .

Homebuilding gross margin was 20.0% for the three months ended March 31, 2025, which decreased 170 basis points from 21.7% in the prior year period, primarily driven by higher incentives in the current year period.

During the three months ended March 31, 2025, our Southeast segment generated income before income tax expense of $14.2 million, a 31.8% decrease from the prior year, which was primarily driven by a decrease in revenue and a decrease in homebuilding gross margin.

Revenue decreased $27.2 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 20.1% decrease in the number of homes delivered, and was partially offset by a 4.1% increase in the average sales price per home.

The decrease in the number of homes delivered was primarily driven by slower absorption rates, and the average sales price increase was driven by the mix of deliveries within individual communities.

Homebuilding gross margin was 21.8% for the three months ended March 31, 2025, which decreased 90 basis points from 22.7% in the prior year period, primarily driven by higher incentives in the current year period.

Century Complete

During the three and nine months ended September 30, 2024, our Century Complete segment generated income before income tax expense of $34.1 million and $84.2 million, respectively, an increase of 10.3% and 37.6%, respectively, over the respective prior year period, which increases were driven by increases in home sales revenue of $50.7 million and $118.0 million, respectively.

The revenue increases for the three and nine- month comparisons were primarily driven by an increase of 23.9% and 17.6%, respectively, in the number of homes delivered, primarily driven by increases in the number of homes under construction.

During the three months ended March 31, 2025, our Century Complete segment generated income before income tax expense of $13.8 million, a 34.5% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin.

Revenue increased $3.1 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 2.1% increase in the number of homes delivered, and was partially offset by a 0.6% decrease in the average sales price per home.

Homebuilding gross margin was 18.0% for the three months ended March 31, 2025, which decreased 210 basis points from 20.1% in the prior year period, primarily driven by higher incentives in the current year period.

Financial Services

Our Financial Services segment originates mortgages primarily for our homebuyers, and as such, the volume of loans originated typically correlates to our number of homes delivered.

Our Financial Services segment originates mortgages for primarily our homebuyers, and as such, the volume of loans originated typically correlates to our number of homes delivered.

Fluctuations in financial services income before income tax may occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned.

Our Financial Services segment generated income before income tax expense of $2.4 million for the three months ended March 31, 2025, a 76.5% decrease from the prior year 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total originations:

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Number of loans sold

During the three and nine months ended September 30, 2024, our Corporate segment generated losses of $36.1 million and $106.4 million, respectively as compared to a losses of $38.0 million and $93.7 million, respectively, during the same respective periods in 2023.

The decrease in loss for the three-month comparison was primarily due to a decrease in compensation costs as compared to the prior year period.

The increase in loss for the nine-month comparison was primarily due to increased insurance and acquisition costs and a reduction in interest income as compared to the prior year period, as well as a $7.7 million impairment related to other investments during the nine months ended September 30, 2024.

Century Living

Our Century Living operations are engaged in the development, construction, management, and disposition of multi-family rental properties.

As of March 31, 2025, the Company had three multi-family rental properties under active construction in Colorado, two of which were available for leasing.

These three projects represent over 1,000 total multi-family units, including 471 under active construction and 581 completed units, of which 336 units were leased as of March 31, 2025.

During the three months ended March 31, 2025, our Corporate segment generated a loss of $31.6 million, as compared to a loss of $35.3 million during the same respective period in 2024.

The decrease in loss was primarily due to $7.7 million in impairment charges related to other investments during the three months ended March 31, 2024, as well as a reduction in interest income as compared to the prior year period.

Homebuilding Gross Margin

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, decreased to 21.7% for the three months ended September 30, 2024 as compared to 24.6% in the prior year period, and increased to 21.9% during the nine months ended September 30, 2024 as compared to 21.0% in the prior year period.

The decrease for the three-month comparison was primarily driven by higher incentives in the current year period.

The increase for the nine-month comparison was primarily driven by deliveries during the prior year period that carried higher incentives.

Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, decreased to 19.9% for the three months ended March 31, 2025 as compared to 21.3% in the prior year period.

The decrease was primarily driven by higher incentives in the current year period.

In the following table, we calculate our homebuilding gross margin and our adjusted homebuilding gross margin, as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues, and further adjusted to exclude the effect of purchase price accounting for acquired work in process inventory, if applicable.

Three Months Ended September 30,

Home sales revenues

Cost of home sales revenues

Inventory impairment

Homebuilding gross margin

Inventory impairment

Interest in cost of home sales revenues

Adjusted homebuilding gross margin excluding interest and inventory impairment (1)

Purchase price accounting for acquired work in process inventory

Adjusted homebuilding gross margin excluding interest, inventory impairment and purchase price accounting for acquired work in process inventory (1)

Nine Months Ended September 30,

Three Months Ended March 31,

Home sales revenues

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Interest in cost of home sales revenues

Adjusted homebuilding gross margin excluding interest and inventory impairment (1)

Purchase price accounting for acquired work in process inventory

2 unchanged sentences

See the reconciliations to the most comparable GAAP measure and other information under “ — Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

For the three and nine months ended September 30, 2024, our adjusted homebuilding gross margin percentage, excluding inventory impairment (if applicable), interest in cost of home sales revenues, and purchase price accounting for work in process inventory (if applicable), was 23.6% and 23.5%, respectively, as compared to 25.8% and 22.3% for the same respective periods in 2023.

We believe the above information is meaningful as it isolates the impact that inventory impairment (if applicable), indebtedness, and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our competitors .

For the three months ended March 31, 2025, our adjusted homebuilding gross margin percentage excluding inventory impairment, interest in cost of home sales revenues, and purchase price accounting for acquired work in process inventory was 21.6% as compared to 22.8% for the prior year period.

We believe the above information is meaningful as it isolates the impact that inventory impairment, indebtedness, and acquisitions (in each case as applicable) during any period, have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to prior periods and to homebuilding gross margins of our competitors.

Selling, General and Administrative Expense

(dollars in thousands)

Three Months Ended September 30,

Selling, general and administrative

As a percentage of home sales revenue

Nine Months Ended September 30,

Three Months Ended March 31,

Selling, general and administrative

As a percentage of home sales revenue

Our selling, general and administrative expense increased $21.1 million and $57.7 million for the three and nine months ended September 30, 2024, respectively, as compared to the respective prior year periods.

For both the three and nine-month comparisons, these increases were 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.

As a percentage of home sales revenue, our selling, general and administrative expense decreased 100 basis points and 80 basis points during the three and nine months ended September 30, 2024, respectively, driven primarily by increased revenue on a partially fixed cost base.

As a percentage of home sales revenue, our selling, general and administrative expense increased 130 basis points during the three months ended March 31, 2025, driven primarily by decreased revenue on a partially fixed cost base.

Our selling, general and administrative expense increased $6.7 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

This increase was primarily attributable to increased compensation and other costs due to higher active community count and $1.5 million in restructuring costs, and partially offset by decreased stock compensation expense.

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 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.

Our 2025 estimated annual effective tax rate, before discrete items, of 25.3%, 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, and partially offset by estimated federal energy home credits for current year home deliveries.

For the three months ended March 31, 2025, our estimated annual rate of 25.3% was benefitted by discrete items which had a net impact of decreasing our rate by 0.3%, including the impact of excess tax benefits for vested stock-based compensation.

For the three months ended March 31, 2025 and 2024, we recorded income tax expense of $13.1 million and $20.0 million, respectively.

Segment Assets

(dollars in thousands)

September 30,

Increase (Decrease)

1 unchanged sentence

Financial Services

Total assets increased to $4.8 billion as of September 30, 2024 as compared to $4.1 billion as of December 31, 2023 , primarily as a result of changes in our inventory balances within our homebuilding segments related to the timing of home and land development construction activities and an increase in the number of homes under construction.

Lots owned and controlled

September 30, 2024

Century Living

Total assets increased to $4.6 billion as of March 31, 2025 as compared to $4.5 billion as of December 31, 202 4, primarily as a result of changes in our inventory balances within our homebuilding segments related to the timing of home and land development construction activities.

Homebuilding lots owned and controlled

March 31, 2025

December 31, 2024

Century Complete

During the nine months ended September 30, 2024, we continued to strategically increase our lot pipeline, including both organically and through acquisitions, resulting in 80,121 lots owned and controlled at September 30, 2024, compared to 73,720 at December 31, 2023.

Of our total lots owned and controlled as of September 30, 2024, 44.5% were owned and 55.5% were controlled, as compared to 41.5% owned and 58.5% controlled as of December 31, 2023.

During the three months ended March 31, 2025, we continued to strategically manage our lot pipeline, resulting in 79,014 lots owned and controlled at March 31, 2025, compared to 80,632 at December 31, 2024.

Of our total lots owned and controlled as of March 31, 2025, 45.4% were owned and 54.6% were controlled, as compared to 44.3% owned and 55.7% controlled as of December 31, 2024.

Other Homebuilding Operating Data

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Three Months Ended

Nine Months Ended

September 30,

Increase (Decrease)

September 30,

Increase (Decrease)

Century Complete

Net new home contracts (new home contracts net of cancellations) for the three months ended September 30, 2024 increased by 414 homes, or 19.3%, to 2,563 as compared to 2,149 for the same period in 2023.

Net new home contracts for the nine months ended September 30, 2024 increased by 1,721 homes, or 26.5%, to 8,209 as compared to 6,488 for the same period in 2023.

These increases were primarily due to more homes available for sale, as well as favorable market conditions including a more recent moderation in mortgage interest rates.

Monthly absorption rate

Our overall monthly “absorption rate” (calculated as monthly net new home contracts divided by selling communities at period end) for the three and nine months ended September 30, 2024 and 2023 by segment are included in the tables below:

Three Months Ended September 30,

Increase (Decrease)

Century Complete

Nine Months Ended September 30,

Net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2025 decreased by 174 homes, or 6.1%, to 2,692 as compared to 2,866 for the same period in 2024.

Average monthly absorption rate

Our overall average monthly “absorption rate” (calculated as monthly net new home contracts divided by average selling communities) for the three months ended March 31, 2025 and 2024 by segment is included in the table below:

Three Months Ended March 31,

Increase (Decrease)

Century Complete

During the three months ended September 30, 2024 and 2023, our absorption rates remained consistent at 2.8 per month, respectively.

Absorptions in our Texas segment during the three months ended September 30, 2024 were impacted by a partial period of operations from our Anglia acquisition, which occurred on July 31, 2024.

During the nine months ended September 30, 2024, our absorption rates increased by 17.2% per month, as compared to the same respective period in 2023, driven by strong demand for new homes during the current period.

Selling communities at period end

As of September 30,

Increase/Decrease

During the three months ended March 31, 2025, our absorption rate decreased by 24.3% to 2.8 per month as compared to the same period in 2024, driven by slowing demand during the first quarter of 2025 amidst homebuilding market conditions impacted by elevated mortgage rates, macro-economic and geopolitical uncertainty, and broader concerns about affordability by homebuyers.

Selling communities

Selling Communities

Average Selling Communities

As of March 31,

For the three months ended March 31,

Century Complete

Our selling communities increased by 53 communities to 305 communities at September 30, 2024 as compared to 252 at September 30, 2023.

This 21.0% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts during the first nine months of 2024, and includes our acquisition of Anglia, which added 26 new communities in our Texas segment as of September 30, 2024.

Our selling communities increased by 65 communities to 318 communities at March 31, 2025 as compared to 253 at March 31, 2024.

This 25.7% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts, as well as the acquisition of Anglia completed during the third quarter of 2024.

(dollars in thousands)

As of September 30,

As of March 31,

Average Sales Price

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Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home.

As of September 30, 2024, we had 1,580 homes in backlog, which represents a decrease of 16.3% as compared to 1,887 homes in backlog at September 30, 2023, with a total value of $671.4 million, as compared to $707.2 million at September 30, 2023.

Backlog dollar value decreased due to the decrease in the number of backlog units, and was partially offset by a 13.4% increase in the average sales price of backlog units, largely due to mix.

As of March 31, 2025, we had 1,258 homes in backlog, which decreased as compared to 1,590 homes in backlog at March 31, 2024, with a total value of $521.1 million, as compared to $667.2 million at March 31, 2024.

Backlog dollar value decreased due to the decrease in the number of backlog units, and a 1.3% decrease in the average sales price of backlog units, largely due to mix.

Supplemental Guarantor Information

3 unchanged sentences

The guarantees are effectively subordinated to any secured debt of the Guarantors.

As of September 30, 2024, Century Communities, Inc.

As of March 31, 2025, Century Communities, Inc.

had outstanding $1.0 billion in total principal amount of Senior Notes.

1 unchanged sentence

(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;

(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);

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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.

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.

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Summarized Balance Sheet Data (in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

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Summarized Statements of Operations Data (in thousands)

Nine Months Ended

September 30, 2024

March 31, 2025

December 31, 2024

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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.”

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on January 30, 2025, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”

Liquidity and Capital Resources

Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $605.9 million as of September 30, 2024 and $1.1 billion as of December 31, 2023.

Our principal uses of capital for the nine months ended September 30, 2024 were our land purchases, land development, home construction, the acquisition of Anglia and Landmark, share repurchases, dividends, and the payment of routine liabilities.

Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $787.5 million as of March 31, 2025 and $918.0 million as of December 31, 2024.

Our principal uses of capital for the three months ended March 31, 2025 were our land purchases, land development, home construction, construction of multi-family rental properties, 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.

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We use funds generated by operations, available borrowings under our revolving line of credit, and proceeds from issuances of debt or equity to fund our short-term working capital obligations and our purchases of land, as well as land development, home construction activities, and other cash needs.

We had $414.0 million outstanding under our revolving line of credit as of September 30, 2024, as compared to no amounts outstanding as of December 31, 2023, which increase was primarily driven by increased community count and an increase in our investment in homes under construction during the period, as well as our acquisitions of Anglia and Landmark.

We had $237.0 million outstanding under our revolving line of credit as of March 31, 2025, as compared to $135.5 million outstanding as of December 31, 2024.

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.

1 unchanged sentence

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.

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.

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.

7 unchanged sentences

These obligations impact our short-term and long-term liquidity and capital resource needs.

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2025, 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, 2024 that was filed with the SEC on January 30, 2025.

In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes.

5 unchanged sentences

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 September 30, 2024, we had outstanding purchase contracts and option contracts for 44,435 lots totaling approximately $2.6 billion and we had $94.4 million of deposits for land contracts, of which $56.0 million were non-refundable cash deposits pertaining to land contracts.

As of March 31, 2025, we had outstanding purchase contracts and option contracts for 43,117 lots totaling approximately $3.0 billion and we had $111.0 million of deposits for land contracts, of which $70.5 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.

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Our outstanding indebtedness is described in detail in Note 10 – Debt in the Notes to the Condensed Consolidated Financial Statements .

We are required to meet certain covenants, and as of September 30, 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.

We are required to meet certain covenants, and as of March 31, 2025, 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 10 – Debt in the Notes to the Condensed Consolidated Financial Statements for further detail.

Our outstanding debt obligations included the following as of September 30, 2024 and December 31, 2023 (in thousands):

September 30,

3.875% senior notes, due August 2029 (1)

Our outstanding debt obligations included the following as of March 31, 2025 and December 31, 2024, respectively (in thousands):

6.750% senior notes, due June 2027 (1)

3.875% senior notes, due August 2029 (1)

Other financing obligations (2)

3 unchanged sentences

(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 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 described below.

(2) As of March 31, 2025, other financing obligations included $3.2 million related to insurance premium notes, as well as $118.1 million outstanding under construction loan agreements related to Century Living, as described below.

As of December 31, 2024, other financing obligations included $11.0 million related to insurance premium notes and certain secured borrowings, as well as $102.4 million outstanding under construction loan agreements.

2 unchanged sentences

The amounts involved may or may not be material during any particular reporting period.

Letters of Credit and Performance Bonds

In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities.

As of 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.

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.

6.750% Senior Notes Due 2027

As of March 31, 2025, we had outstanding $500.0 million in aggregate principal amount of our 6.750% Senior Notes due 2027, which principal balance is due in June 2027.

Prior to that date, interest only payments are due semi-annually in June and December of each year.

These notes were issued under an indenture which contains certain restrictive covenants on issuing future secured debt and other transactions.

As of March 31, 2025, the aggregate obligation of these notes, inclusive of unamortized financing costs on these notes was $498.2 million as reported on our condensed consolidated financial statements.

3.875% Senior Notes Due 2029

As of March 31, 2025, we had outstanding $500.0 million in aggregate principal amount of our 3.875% Senior Notes due 2029, which principal balance is due in August 2029.

Prior to that date, interest only payments are due semi-annually in February and August of each year.

These notes were issued under an indenture which contains certain restrictive covenants on issuing future secured debt and other transactions.

As of March 31, 2025, the aggregate obligation, inclusive of unamortized financing costs on these notes, was $496.6 million, as reported on our condensed consolidated financial statements.

Construction Loan Agreements

1 unchanged sentence

These construction loan agreements collectively provide that we may borrow up to an aggregate of $204.7 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 obligations under construction loan agreements are guaranteed by certain of our subsidiaries.

The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates from March 17, 2026 through February 28, 2029, 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, $110.3 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.2% as of September 30, 2024, and we were in compliance with all covenants thereunder.

As of March 31, 2025 and December 31, 2024, $118.1 million and $102.4 million was outstanding under the construction loan agreements respectively, with borrowings that bore a weighted average interest rate of 6.6% and 6.5% as of March 31, 2025 and December 31, 2024, 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 our revolving line of credit, with borrowings that bore an interest rate of 7.4%, and 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.

On November 1, 2024, we entered into a credit agreement (the “Credit Agreement”) with U.S.

Bank National Association, as Administrative Agent, and the lenders party thereto.

The Credit Agreement, which replaced our prior Second Amended and Restated Credit Agreement, provides us with a senior unsecured revolving credit facility (which we refer to as the “revolving line of credit”) of up to $900.0 million.

The revolving line of credit includes a $250.0 million sublimit for letters of credit.

Subject to the terms and conditions of the Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $400.0 million.

The obligations under the Credit Agreement are guaranteed by certain of our subsidiaries.

Funds are available under the revolving line of credit for the construction of homes, for the acquisition and development of land, land under development and lots for the eventual construction of homes thereon, and for working capital in the ordinary course of business.

Unless terminated earlier, the revolving line of credit will mature on November 1, 2028, and the principal amount thereunder, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on such date.

Subject to the terms and conditions of the Credit Agreement, we may request once per year a one-year extension of the maturity date and up to three times during the term of

the revolving line of credit, subject to the approval of the lenders and the Administrative Agent.

The 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, issue certain equity securities, engage in transactions with affiliates and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default.

Borrowings under the Credit Agreement bear interest at a floating rate equal to Term SOFR or Daily Simple SOFR (in each case as defined in the Credit Agreement), plus an applicable margin between 1.45% and 2.30% per annum, or if selected by us, a base rate plus an applicable margin between 0.45% and 1.30% per annum.

The “applicable margins” described above are determined by a schedule based on our leverage ratio, as defined in the Credit Agreement.

The Credit Agreement also provides for customary fees including commitment fees payable to each lender ranging from 0.20% to 0.35% per annum based on our leverage ratio of the unused portion of the revolving line of credit and other customary fees.

As of March 31, 2025 and December 31, 2024, $237.0 million and $135.5 million, respectively, was outstanding under the revolving line of credit, with borrowings that bore an interest rate of 5.9% and 5.9%, respectively, and we were in compliance with all covenants under the Credit Agreement.

On April 22, 2025, in accordance with the terms of the Credit Agreement, we increased our revolving line of credit to $1.0 billion.

Mortgage Repurchase Facilities – Financial Services

1 unchanged sentence

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.

Bank National Association and Truist Bank, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $375.0 million as of March 31, 2025, secured by the mortgage loans financed thereunder.

The repurchase facilities have varying short term maturity dates through November 14, 2025.

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.

As of March 31, 2025 and December 31, 2024, we had $204.3 million and $232.8 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

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, 2025 and December 31, 2024, we had $570.9 million and $563.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding.

Stock Repurchases

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 not 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.

Our current stock repurchase program, authorized by our Board of Directors, authorizes us to repurchase up to 4.5 million shares of our outstanding common stock, of which 3.9 million shares remained available to be repurchased as of March 31, 2025.

During the three months ended March 31, 2025 and 2024, an aggregate of 753.3 thousand and 186.9 thousand shares, respectively, were repurchased under this and our previous stock repurchase program for a total purchase price of approximately $55.6 million and $16.1 million, respectively, and a weighted average price of $73.76 and $86.16 per share, respectively, excluding the excise tax accrued on our net share repurchases as a result of the Inflation Reduction Act of 2022.

Under the terms of these programs, 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.

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Cash Dividends

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

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, 2025 and 2024, respectively (in thousands, except per share information):

Three months ended March 31, 2025

Cash Dividends Declared and Paid

3 unchanged sentences

March 12, 2025

June 12, 2024

August 14, 2024

August 28, 2024

September 11, 2024

Nine Months Ended September 30, 2023

Three months ended March 31, 2024

Cash Dividends Declared and Paid

1 unchanged sentence

February 7, 2024

March 1, 2023

February 28, 2024

March 13, 2024

June 14, 2023

August 16, 2023

August 30, 2023

September 13, 2023

We expect to continue paying our quarterly cash dividends to stockholders for the remainder of 2025.

However, 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.

Cash Flows— Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

For the nine months ended September 30, 2024 and 2023, the comparison of cash flows is as follows:

Cash Flows— Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

For the three months ended March 31, 2025 and 2024, the comparison of cash flows is as follows:

 Our primary sources of cash flows from operations are from the sale of single-family attached and detached homes and mortgages.

Our primary uses of cash flows from operations are the acquisition of land and expenditures associated with the construction of our single-family attached and detached homes and the origination of mortgages held for sale.

Net cash used in operating activities was $174.0 million during the nine months ended September 30, 2024 as compared to net cash provided by operating activities of $33.0 million during the prior year period.

This change is primarily a result of increased expenditures related to land acquisition and expenditures associated with the construction of homes during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

These increased expenditures were primarily offset by a $63.2 million increase in net income.

 Net cash used in investing activities increased to $277.7 million during the nine months ended September 30, 2024, compared to $74.6 million used during the prior year period.

This increase was primarily related to (1) $157.1 million in expenditures related to our acquisitions of Anglia and Landmark during the nine months ended September 30, 2024 and (2) a $38.2 million increase in expenditures related to the development, construction, and management of multi-family rental properties by our wholly owned subsidiary, Century Living .

 Net cash provided by financing activities was $388.6 million during the nine months ended September 30, 2024, compared to net cash used in financing activities of $56.8 million during the prior year period.

This change was primarily attributable to (1) a $414.0 increase in borrowings under our revolving credit facility;

(2) a $43.4 million increase in net proceeds for our mortgage repurchase facilities;

and (3) a $44.0 million increase in borrowings under construction loan agreements, in each case, during the nine months ended September 30, 2024, and as compared to the prior year period.

These increases were partially offset by $53.1 million in repurchases of our common stock during the nine months ended September 30, 2024 as compared to $19.2 million in repurchases of our common stock during the prior year period.

As of September 30, 2024, our cash and cash equivalents and restricted cash balance was $178.9 million, as compared to $242.0 million as of December 31, 2023.

Net cash used in operating activities was $36.6 million during the three months ended March 31, 2025 as compared to net cash provided by operating activities of $21.6 million during the prior year period.

This change is primarily a result of (1) a $24.9 million decrease in net income, (2) changes in cash balances held in escrow, and (3) expenditures related to the development, construction, and management of multi-family rental properties by our Century Living segment within prepaid and other assets during the three months ended March 31, 2025.

During the three months ended March 31, 2025, our strategy evolved for our Century Living multi-family rental properties to be predominantly focused on the disposition of the assets and we determined that these operations have become part of our ordinary activities, and cash flows from development activities and the disposition of properties are recorded as operating activities on the condensed consolidated statement of cash flows.

 Net cash used in investing activities decreased to $4.0 million during the three months ended March 31, 2025, compared to $64.6 million during the prior year period.

This decrease was primarily related to (1) $32.7 million in expenditures related to our acquisition of Landmark during the three months ended March 31, 2024 and (2) $26.0 million in expenditures related to the development, construction, and management of multi-family rental properties by our Century Living segment during the three months ended March 31, 2024.

 Net cash used in financing activities was $1.5 million during the three months ended March 31, 2025, compared to $54.7 million during the prior year period.

This decrease in net cash used in financing activities was primarily attributable to a $101.5 million increase in net borrowings under our revolving line of credit during the current year period, and was partially offset by a $39.5 million increase in stock repurchases during the current year period, in each case compared to the prior year period.

As of March 31, 2025, our cash and cash equivalents and restricted cash balance was $133.2 million, as compared to $175.3 million as of December 31, 2024.

Non-GAAP Financial Measures

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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.

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 or period-over-period 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.

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EBITDA and Adjusted EBITDA

The following table presents EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

The following table presents EBITDA and adjusted EBITDA for the three months ended March 31, 2025 and 2024.

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 define adjusted EBITDA as EBITDA before inventory impairment, restructuring costs, impairment on other investment, purchase price accounting for acquired work in process inventory and loss on debt extinguishment, in each case as applicable during a period.

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.

Neither EBITDA nor 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.

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 of operations as reported under GAAP

(dollars in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Income tax expense

Interest in cost of home sales revenues

Interest income

Interest expense (income)

Depreciation and amortization expense

Inventory impairment

Restructuring costs

Impairment on other investment

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(dollars in thousands)

September 30,

Notes payable

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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.

We define adjusted net income as consolidated net income before (i) income tax expense;

(ii) inventory impairment;

(iii) restructuring costs;

(iv) impairment on other investment;

(v) purchase price accounting for acquired work in process inventory;

and (vi) loss on debt extinguishment;

in each case, as applicable during a period, 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Weighted average common shares outstanding - basic

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Inventory impairment

Restructuring costs

Impairment on other investment

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Adjusted diluted earnings per share

(1) The tax rates used in calculating adjusted net income for the three and nine months ended September 30, 2024 were 24.2%, respectively, which are reflective of our GAAP tax rates for the nine months ended September 30, 2024.

The tax rates used in calculating adjusted net income for the three and nine months ended September 30, 2023 were 25.8% and 25.3%, respectively, which are reflective of our GAAP tax rates for the applicable periods.

(1) The tax rates used in calculating adjusted net income for the three months ended March 31, 2025 and 2024 were 25.0% and 23.7%, respectively, which are reflective of our GAAP tax rates for the applicable periods.

QUANTIT ATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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.

Our primary exposure to market risk is interest rate risk associated with our Credit Agreemen t and construction loan agreements.

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, 2024.

There have been no material changes in our market risk since December 31, 2024.

Our homebuilding operations have been and may continue to be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs.

The Federal Reserve aggressively raised the federal funds interest rates during 2022 and 2023, in order to mitigate persistent inflation, which significantly impacting the U.S housing market.

While the Federal Reserve reduced the federal funds interest rate during the third quarter of 2024, we cannot provide any assurance as to the impact of changes to the federal funds interest rate or mortgage rates on our current or future business.

The Federal Reserve did not change the federal funds interest rate during the first quarter of 2025, and we cannot provide any assurance as to the impact of any future potential changes to the federal funds interest rate or mortgage rates on our current or future business.

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.

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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.

Since it typically takes approximately four 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis