What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-23 compared with 2024-07-23 · 267 added, 371 removed, 509 unchanged (56% of the section changed)

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Our business operations consist of homebuilding, rental, a majority-owned residential lot development company, financial services and other activities.

Our homebuilding operations are our core business and primarily include the construction and sale of single-family homes with sales prices generally ranging from $200,000 to more than $1,000,000, with an average closing price of $378,200 during the nine months ended June 30, 2024.

Approximately 88% of our home sales revenue in the nine months ended June 30, 2024 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, duplexes and triplexes.

We have closed more than one million homes during our 45-year history, and we have been the largest volume homebuilder in the United States every year since 2002.

Approximately 84% of our home sales revenue in the three months ended December 31, 2024 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, duplexes and triplexes.

We have closed more than 1.1 million homes during our 46-year history, and we have been the largest volume homebuilder in the United States every year since 2002.

Our product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers.

Our rental segment consists of single-family and multi-family rental operations.

The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.

The single-family rental operations construct and lease single-family homes within a community and then generally market each community for a bulk sale of rental homes.

The multi-family rental operations develop, construct, lease and sell residential rental properties, the majority of which are apartment communities.

At June 30, 2024, we owned 62% of the outstanding shares of Forestar Group Inc.

At December 31, 2024, we owned 62% of the outstanding shares of Forestar Group Inc.

(Forestar), a publicly traded residential lot development company listed on the New York Stock Exchange under the ticker symbol “FOR.” Forestar operates across many of our homebuilding operating markets and is a key part of our homebuilding strategy to maintain relationships with land developers and to control a large portion of our land and lot position through land purchase contracts.

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The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other.

During the nine months ended June 30, 2024, our number of homes closed increased 10%, and our home sales revenues increased 9% compared to the prior year period.

Our consolidated revenues increased 7% to $26.8 billion in the nine months ended June 30, 2024 compared to $25.0 billion in the prior year period.

Our pre-tax income was $4.6 billion in the nine months ended June 30, 2024 compared to $4.3 billion in the prior year period, and our pre-tax operating margin was 17.1% compared to 17.2%.

Net income was $3.5 billion in the nine months ended June 30, 2024 compared to $3.3 billion in the prior year period, and our diluted earnings per share were $10.43 compared to $9.39.

In the trailing twelve months ended June 30, 2024, our return on equity (ROE) was 21.5% compared to 24.3% in the prior year period, and our homebuilding return on inventory (ROI) was 29.5% compared to 31.8%.

During the three months ended December 31, 2024, our number of homes closed and our home sales revenues decreased 1% and 2%, respectively, compared to the prior year period, and our consolidated revenues decreased 1% to $7.6 billion compared to $7.7 billion.

Our pre-tax income was $1.1 billion in the three months ended December 31, 2024 compared to $1.2 billion in the prior year period, and our pre-tax operating margin was 14.6% compared to 16.1%.

Net income was $851.9 million in the three months ended December 31, 2024 compared to $955.7 million in the prior year period, and our diluted earnings per share were $2.61 compared to $2.82.

In the trailing twelve months ended December 31, 2024, our return on equity (ROE) was 19.1% compared to 21.8% in the prior year period, and our return on assets (ROA) was 13.4% compared to 14.8%.

ROE is calculated as net income attributable to D.R.

Horton for the trailing twelve months divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances of the trailing five quarters divided by five.

Homebuilding ROI is calculated as homebuilding pre-tax income for the trailing twelve months divided by average inventory, where average inventory is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.

Although inflation and mortgage interest rates remain elevated, demand for new homes has remained solid.

Our net sales orders increased 1% and 14% in the three and nine months ended June 30, 2024, respectively, from the prior year periods.

We are continuing to use incentives and pricing adjustments to adapt to current market conditions.

The disruptions in the supply chain for certain building materials and tightness in the labor market we experienced in recent years have largely subsided, and our average construction cycle time has returned to historical norms.

Although higher interest rates and economic fluctuations may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable.

Horton for the trailing twelve months divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances for the trailing five quarters divided by five.

ROA is calculated as net income attributable to D.R.

Horton for the trailing twelve months divided by average consolidated assets, where average consolidated assets is the sum of total asset balances for the trailing five quarters divided by five.

Despite elevated mortgage interest rates and inflationary pressures, demand for new homes remained solid.

Our net sales orders totaled 17,837 in the three months ended December 31, 2024 compared to 18,069 in the prior year period.

Although the level of new and existing home inventories has increased from historically low levels, the supply of homes at affordable price points is still limited, and demographics supporting housing demand remain favorable.

We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.

We remain focused on our relationships with land developers across the country in order to maximize our returns and capital efficiency .

Within our homebuilding land and lot portfolio, our lots controlled through purchase contracts represent 76% of the lots owned and controlled at June 30, 2024 compared to 75% at both September 30, 2023 and June 30, 2023.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

We remain focused on our relationships with land developers across the country in order to maximize returns and capital efficiency .

Within our homebuilding land and lot portfolio, lots controlled through purchase contracts represent 76% of the lots owned and controlled at each of December 31, 2024, September 30, 2024 and December 31, 2023.

We are prioritizing the purchase of finished lots from Forestar and other land developers when possible.

During the nine months ended June 30, 2024, 63% of the homes we closed were on lots developed by either Forestar or a third party.

During the three months ended December 31, 2024, 65% of the homes we closed were on lots developed by either Forestar or a third party.

We believe our strong balance sheet and liquidity provide us with the flexibility to operate effectively through changing economic conditions.

We plan to generate strong cash flows from our operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.

Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive position to maximize the returns on our inventory investments and generate strong profitability and cash flows, while managing risk and maintaining financial flexibility to navigate changing economic conditions.

Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive position to maximize the returns on our inventory investments and generate consistent, sustainable profitability and cash flows, while managing risk and maintaining financial flexibility to navigate changing economic conditions.

Our strategy includes the following initiatives:

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However, we cannot provide any assurances that the initiatives listed above will continue to be successful, and we may need to adjust parts of our strategy to meet future market conditions.

Key financial results as of and for the three months ended June 30, 2024, as compared to the same period of 2023 unless otherwise indicated, were as follows:

Key financial results as of and for the three months ended December 31, 2024, as compared to the same period of 2023 unless otherwise indicated, were as follows:

Consolidated Results:

• Consolidated revenues decreased 1% to $7.6 billion compared to $7.7 billion.

• Consolidated pre-tax income decreased 11% to $1.1 billion compared to $1.2 billion.

• Consolidated pre-tax income was 14.6% of consolidated revenues compared to 16.1%.

• Income tax expense was $258.0 million compared to $291.8 million, and our effective tax rate was 23.2% compared to 23.4%.

• Net income attributable to D.R.

Horton decreased 11% to $844.9 million compared to $947.4 million.

• Diluted net income per common share attributable to D.R.

Horton decreased 7% to $2.61 compared to $2.82.

• Stockholders’ equity was $24.9 billion compared to $25.3 billion and $23.2 billion at September 30, 2024 and December 31, 2023, respectively.

• Book value per common share increased to $78.53 compared to $78.12 and $69.70 at September 30, 2024 and December 31, 2023, respectively.

• Debt to total capital was 17.0% compared to 18.9% and 18.6% at September 30, 2024 and December 31, 2023, respectively.

Net debt to total capital was 7.6% compared to 5.2% and 7.8% at September 30, 2024 and December 31, 2023, respectively.

Homebuilding:

• Homebuilding revenues increased 6% to $9.2 billion compared to $8.7 billion.

• Homes closed increased 5% to 24,155 homes, and the average closing price of those homes increased 1% to $382,200.

• Net sales orders increased 1% to 23,001 homes, and the value of net sales orders was essentially flat at $8.7 billion.

• Homebuilding revenues decreased 2% to $7.2 billion compared to $7.3 billion.

• Homes closed decreased 1% to 19,059 homes, and the average closing price of those homes decreased slightly to $374,900.

• Net sales orders decreased 1% to 17,837 homes, and the value of net sales orders decreased 2% to $6.7 billion.

• Sales order backlog decreased 21% to 11,003 homes, and the value of sales order backlog also decreased 21% to $4.3 billion.

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• Homebuilding SG&A expense was 8.9% of homebuilding revenues compared to 8.3%.

• Homebuilding pre-tax income increased 7% to $1.6 billion compared to $1.5 billion.

• Homebuilding pre-tax income decreased 8% to $1.0 billion compared to $1.1 billion.

• Homebuilding pre-tax income was 14.1% of homebuilding revenues compared to 15.0%.

• Homebuilding cash and cash equivalents totaled $2.2 billion compared to $2.9 billion and $2.6 billion at September 30, 2023 and June 30, 2023, respectively.

• Homebuilding inventories totaled $20.5 billion compared to $18.2 billion and $18.0 billion at September 30, 2023 and June 30, 2023, respectively.

• Homes in inventory totaled 42,600 compared to 42,000 and 43,800 at September 30, 2023 and June 30, 2023, respectively.

• Owned lots totaled 150,900 compared to 141,100 and 137,500 at September 30, 2023 and June 30, 2023, respectively.

Lots controlled through purchase contracts totaled 479,300 compared to 427,300 and 417,600 at September 30, 2023 and June 30, 2023, respectively.

• Homebuilding debt was $2.26 billion compared to $2.33 billion and $2.71 billion at September 30, 2023 and June 30, 2023, respectively.

• Homebuilding pre-tax return on inventory was 26.7% compared to 29.0%.

• Homebuilding cash and cash equivalents totaled $2.5 billion compared to $3.6 billion and $2.5 billion at September 30, 2024 and December 31, 2023, respectively.

• Homebuilding inventories totaled $20.7 billion compared to $20.0 billion and $19.4 billion at September 30, 2024 and December 31, 2023, respectively.

• Homes in inventory totaled 36,200 compared to 37,400 and 42,600 at September 30, 2024 and December 31, 2023, respectively.

• Owned lots totaled 154,400 compared to 152,500 and 145,000 at September 30, 2024 and December 31, 2023, respectively.

Lots controlled through purchase contracts totaled 485,400 compared to 480,400 and 462,200 at September 30, 2024 and December 31, 2023, respectively.

• Homebuilding debt was $2.4 billion compared to $2.9 billion and $2.4 billion at September 30, 2024 and December 31, 2023, respectively.

• Rental revenues were $217.8 million compared to $195.3 million.

• Rental pre-tax income was $11.9 million compared to $31.3 million.

• Rental inventory totaled $3.1 billion compared to $2.7 billion and $3.3 billion at September 30, 2023 and June 30, 2023, respectively.

• Rental inventory totaled $3.0 billion compared to $2.9 billion and $3.0 billion at September 30, 2024 and December 31, 2023, respectively.

• Single-family rental homes closed totaled 311 compared to 379.

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• Forestar’s pre-tax income was 8.7% of revenues compared to 16.7%.

• Forestar’s cash and cash equivalents totaled $359.2 million compared to $616.0 million and $401.0 million at September 30, 2023 and June 30, 2023, respectively.

• Forestar’s inventories totaled $2.2 billion compared to $1.8 billion and $1.9 billion at September 30, 2023 and June 30, 2023, respectively.

• Forestar’s owned and controlled lots totaled 102,100 compared to 79,200 and 73,000 at September 30, 2023 and June 30, 2023, respectively.

• Forestar’s cash and cash equivalents totaled $132.0 million compared to $481.2 million and $458.9 million at September 30, 2024 and December 31, 2023, respectively.

• Forestar’s inventories totaled $2.7 billion compared to $2.3 billion and $2.0 billion at September 30, 2024 and December 31, 2023, respectively.

• Forestar’s owned and controlled lots totaled 106,000 compared to 95,100 and 82,400 at September 30, 2024 and December 31, 2023, respectively.

Of these lots, 43,800 were under contract to sell to or subject to a right of first offer with D.R.

Horton compared to 31,400 and 30,500 at September 30, 2023 and June 30, 2023, respectively.

• Forestar’s debt was $706.1 million compared to $695.0 million and $707.2 million at September 30, 2023 and June 30, 2023, respectively.

Horton compared to 37,700 and 33,700 at September 30, 2024 and December 31, 2023, respectively.

• Forestar’s debt was $806.8 million compared to $706.4 million and $705.3 million at September 30, 2024 and December 31, 2023, respectively.

Financial Services:

• Financial services revenues increased 6% to $242.3 million compared to $228.5 million.

• Financial services revenues decreased 5% to $182.3 million compared to $192.6 million.

• Financial services pre-tax income was $48.6 million compared to $66.0 million.

• Financial services pre-tax income was 26.7% of financial services revenues compared to 34.3%.

Consolidated Results:

• Consolidated revenues increased 2% to $10.0 billion compared to $9.7 billion.

• Consolidated pre-tax income increased 1% to $1.80 billion compared to $1.78 billion.

• Consolidated pre-tax income was 18.1% of consolidated revenues compared to 18.3%.

• Income tax expense was $432.2 million in both quarters, and our effective tax rate was 24.0% compared to 24.2%.

• Net income attributable to D.R.

Horton increased 1% to $1.35 billion compared to $1.34 billion.

• Diluted net income per common share attributable to D.R.

Horton increased 5% to $4.10 compared to $3.90.

• Stockholders’ equity was $24.7 billion compared to $22.7 billion and $21.7 billion at September 30, 2023 and June 30, 2023, respectively.

• Book value per common share increased to $75.32 compared to $67.78 and $64.03 at September 30, 2023 and June 30, 2023, respectively.

• Debt to total capital was 18.8% compared to 18.3% and 22.0% at September 30, 2023 and June 30, 2023, respectively.

Net debt to total capital was 9.9% compared to 5.1% and 11.2% at September 30, 2023 and June 30, 2023, respectively.

Key financial results for the nine months ended June 30, 2024, as compared to the same period of 2023, were as follows:

Homebuilding:

• Homebuilding revenues increased 9% to $25.0 billion compared to $22.9 billion.

• Homes closed increased 10% to 66,043 homes, while the average closing price of those homes decreased 1% to $378,200.

• Net sales orders increased 14% to 67,526 homes, and the value of net sales orders increased 15% to $25.6 billion.

• Home sales gross margin was 23.4% compared to 22.9%.

• Homebuilding SG&A expense was 7.5% of homebuilding revenues compared to 7.2%.

• Homebuilding pre-tax income increased 11% to $4.0 billion compared to $3.6 billion.

• Homebuilding pre-tax income was 16.1% of homebuilding revenues compared to 15.8%.

• Net cash provided by homebuilding operations was $971.9 million compared to $2.1 billion.

• Rental revenues were $980.2 million compared to $1.2 billion.

• Rental pre-tax income was $128.8 million compared to $307.0 million.

• Single-family rental homes closed totaled 2,278 compared to 3,169.

• Multi-family rental units closed totaled 1,334 compared to 530.

• Forestar’s revenues increased 8% to $958.0 million compared to $887.1 million.

Revenues in the current and prior year periods included $851.3 million and $736.7 million, respectively, of revenue from land and lot sales to our homebuilding segment.

• Forestar’s lots sold increased 7% to 9,694 compared to 9,054.

Lots sold to D.R.

Horton totaled 8,842 compared to 7,947.

• Forestar’s pre-tax income increased 28% to $161.6 million compared to $126.2 million.

• Forestar’s pre-tax income was 16.9% of revenues compared to 14.2%.

Financial Services:

• Financial services revenues increased 13% to $660.5 million compared to $582.0 million.

• Financial services pre-tax income increased 19% to $235.3 million compared to $197.9 million.

• Financial services pre-tax income was 35.6% of financial services revenues compared to 34.0%.

Consolidated Results:

• Consolidated revenues increased 7% to $26.8 billion compared to $25.0 billion.

• Consolidated pre-tax income increased 6% to $4.6 billion compared to $4.3 billion.

• Consolidated pre-tax income was 17.1% of consolidated revenues compared to 17.2%.

• Income tax expense was $1.1 billion compared to $1.0 billion, and our effective tax rate was 23.4% compared to 23.9%.

• Net income attributable to D.R.

Horton increased 7% to $3.5 billion compared to $3.2 billion.

• Diluted net income per common share attributable to D.R.

Horton increased 11% to $10.43 compared to $9.39.

• Net cash provided by operations was $228.2 million compared to $2.3 billion.

RESULTS OF OPERATIONS - HOMEBUILDING

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Utah Salt Lake City Gainesville Iowa City/Cedar Rapids

George Jacksonville Kentucky Louisville

Washington Central Washington Lakeland Maryland Baltimore

Kennewick/Pasco/Richland Melbourne/Vero Beach Eastern Maryland

Seattle/Tacoma/Everett/Olympia Miami/Fort Lauderdale Suburban Washington, D.C.

Spokane Ocala Western Maryland

Vancouver Orlando Minnesota Minneapolis/St.

Panama City Nebraska Omaha

Southwest Region Pensacola New Jersey Northern New Jersey

Arizona Phoenix Port St.

Lucie Southern New Jersey

Tucson Tallahassee Ohio Cincinnati/Dayton

California Bakersfield Tampa/Sarasota Columbus

Bay Area Volusia County Pennsylvania Central Pennsylvania

George Jacksonville Kansas/Missouri Kansas City

Washington Bremerton Lakeland Kentucky Louisville

Central Washington Melbourne/Vero Beach Maryland Baltimore

Kennewick/Pasco/Richland Miami/Fort Lauderdale Eastern Maryland

Seattle/Tacoma/Everett/Olympia Ocala Suburban Washington, D.C.

Spokane Orlando Western Maryland

Vancouver Panama City Minnesota Minneapolis/St.

Pensacola Nebraska Omaha

Southwest Region Port St.

Lucie New Jersey Northern New Jersey

Arizona Phoenix Tallahassee Southern New Jersey

Tucson Tampa/Sarasota Ohio Cincinnati/Dayton

California Bakersfield Volusia County Columbus

Bay Area West Palm Beach Pennsylvania Central Pennsylvania

Fresno/Tulare Louisiana Baton Rouge Philadelphia

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San Bernardino County East Region West Virginia Eastern West Virginia

Hawaii Oahu Georgia Atlanta

Nevada Las Vegas Augusta

Hawaii Oahu Georgia Atlanta Northern West Virginia

Nevada Las Vegas Augusta Wisconsin Southeast Wisconsin

Reno Central Georgia

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New Braunfels/San Marcos

The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the three and nine months ended June 30, 2024 and 2023.

The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the three months ended December 31, 2024 and 2023.

Net Sales Orders (1)

Three Months Ended June 30,

Net Homes Sold Value (In millions) Average Selling Price

Change 2024 2023 %

Northwest 1,458 1,208 21 % $ 729.5 $ 647.2 13 % $ 500,300 $ 535,800 (7) %

Southwest 2,488 2,815 (12) % 1,215.3 1,345.6 (10) % 488,500 478,000 2 %

South Central 5,880 6,078 (3) % 1,917.8 2,029.6 (6) % 326,200 333,900 (2) %

Southeast 6,089 6,021 1 % 2,165.1 2,182.9 (1) % 355,600 362,500 (2) %

East 4,546 4,547 — % 1,614.6 1,615.0 — % 355,200 355,200 — %

North 2,540 2,210 15 % 1,073.4 899.7 19 % 422,600 407,100 4 %

23,001 22,879 1 % $ 8,715.7 $ 8,720.0 — % $ 378,900 $ 381,100 (1) %

Nine Months Ended June 30,

Three Months Ended December 31,

Net Homes Sold Value (In millions) Average Selling Price

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Sales Order Cancellations

Three Months Ended June 30,

Cancelled Sales Orders Value (In millions) Cancellation Rate (2)

2024 2023 2024 2023 2024 2023

Northwest 223 211 $ 122.0 $ 115.8 13 % 15 %

Southwest 449 487 214.6 241.7 15 % 15 %

South Central 1,188 1,427 399.7 491.9 17 % 19 %

Southeast 1,530 1,404 554.9 500.6 20 % 19 %

East 1,010 910 358.0 321.8 18 % 17 %

North 623 476 256.5 191.1 20 % 18 %

5,023 4,915 $ 1,905.7 $ 1,862.9 18 % 18 %

Nine Months Ended June 30,

Three Months Ended December 31,

Cancelled Sales Orders Value (In millions) Cancellation Rate (2)

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Net Sales Orders

The number of net sales orders increased 1% and 14% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

The value of net sales orders was essentially flat at $8.7 billion (23,001 homes and 22,879 homes, respectively) for the three months ended June 30, 2024 and 2023.

The value of net sales orders increased 15% to $25.6 billion (67,526 homes) for the nine months ended June 30, 2024 compared to $22.3 billion (59,403 homes) in the prior year period.

The average selling price of net sales orders during the three and nine months ended June 30, 2024 was $378,900 and $378,600, respectively, down 1% and up 1% from the prior year periods.

During the three months ended June 30, 2024, the markets contributing most to the increases in sales order volume were the Portland and Salt Lake City markets in the Northwest and the suburban Washington, D.C.

market in the North.

The markets contributing most to the decrease in sales order volume in the Southwest region were the Phoenix and Northern California markets.

During the nine months ended June 30, 2024, the markets contributing most to the increases in sales order volume were the Portland and Salt Lake City markets in the Northwest, the California and Phoenix markets in the Southwest, the Dallas and San Antonio markets in the South Central, the North Carolina markets in the East and the suburban Washington, D.C.

market in the North.

Despite continued inflationary pressures and elevated mortgage interest rates, demand for new homes remained solid during the third quarter.

Our net sales orders increased 1% and 14% in the three and nine months ended June 30, 2024, respectively, from the prior year periods.

We are continuing to use incentives and pricing adjustments to adapt to current market conditions.

We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply.

The number of net sales orders decreased 1% in the three months ended December 31, 2024 compared to the prior year period, and the value of net sales orders decreased 2% to $6.7 billion (17,837 homes) compared to $6.8 billion (18,069 homes).

The average selling price of net sales orders during the three months ended December 31, 2024 was $373,000 down 1% from the prior year period.

The markets contributing most to the decrease in sales order volume were the Salt Lake City market in the Northwest, the Dallas and Fort Worth markets in the South Central and the Florida markets in the Southeast.

The markets with the largest increases in sales order volume were the North Carolina markets in the East and the suburban Washington, D.C., New Jersey and Chicago markets in the North.

Despite elevated mortgage interest rates and inflationary pressures, demand for new homes remained solid during the first quarter with only a slight decrease in sales order volume compared to the prior year quarter.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

Sales Order Backlog

As of June 30,

As of December 31,

Homes in Backlog Value (In millions) Average Selling Price

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Homes Closed and Home Sales Revenue

Three Months Ended June 30,

Homes Closed Value (In millions) Average Selling Price

Change 2024 2023 %

Northwest 1,427 1,209 18 % $ 720.7 $ 653.6 10 % $ 505,000 $ 540,600 (7) %

Southwest 2,673 2,316 15 % 1,313.7 1,120.1 17 % 491,500 483,600 2 %

South Central 6,104 6,477 (6) % 2,009.0 2,169.7 (7) % 329,100 335,000 (2) %

Southeast 6,669 6,616 1 % 2,415.9 2,384.0 1 % 362,300 360,300 1 %

East 4,748 4,102 16 % 1,709.0 1,464.2 17 % 359,900 356,900 1 %

North 2,534 2,265 12 % 1,062.9 911.5 17 % 419,500 402,400 4 %

24,155 22,985 5 % $ 9,231.2 $ 8,703.1 6 % $ 382,200 $ 378,600 1 %

Nine Months Ended June 30,

Three Months Ended December 31,

Homes Closed Value (In millions) Average Selling Price

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Home Sales Revenue

Revenues from home sales were $9.2 billion (24,155 homes closed) for the three months ended June 30, 2024 compared to $8.7 billion (22,985 homes closed) in the prior year period.

Revenues from home sales were $25.0 billion (66,043 homes closed) for the nine months ended June 30, 2024 compared to $22.9 billion (59,989 homes closed) in the prior year period.

The number of homes closed increased 5% and 10% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

The average selling price of homes closed during the three and nine months ended June 30, 2024 was $382,200 and $378,200, respectively, up 1% and down 1%, respectively, from the prior year periods.

The markets contributing most to the increases in closings volume in both periods were the Portland market in the Northwest, the California and Nevada markets in the Southwest, the North Carolina markets in the East and the suburban Washington, D.C.

market in the North.

Revenues from home sales were $7.1 billion (19,059 homes closed) for the three months ended December 31, 2024 compared to $7.3 billion (19,340 homes closed) in the prior year period.

The decrease in revenues was attributable to a slight decrease in both the number of homes closed and in the average selling price of those homes.

The markets contributing most to the 22% increase in closings volume in the North were the Chicago, suburban Washington, D.C.

and Iowa markets.

Homebuilding Operating Margin Analysis

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Three Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

Gross profit – home sales 22.7 % 22.9 %

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Home Sales Gross Profit

Gross profit from home sales increased to $2.2 billion in the three months ended June 30, 2024 from $2.0 billion in the prior year period and increased 70 basis points to 24.0% as a percentage of home sales revenues.

The percentage increase resulted from an increase of 70 basis points due to the average cost of our homes closed decreasing while the average selling price of those homes increased slightly, 10 basis points due to a decrease in the amortization of capitalized interest and 10 basis points due to a decrease in warranty and construction defect costs, partially offset by a decrease of 20 basis points due to an increase in the amount of purchase accounting adjustments related to prior year acquisitions.

Gross profit from home sales increased to $5.8 billion in the nine months ended June 30, 2024 from $5.2 billion in the prior year period and increased 50 basis points to 23.4% as a percentage of home sales revenues.

The percentage increase resulted from an increase of 60 basis points due to the average cost of our homes closed decreasing by more than the decrease in the average selling price of those homes, partially offset by a decrease of 10 basis points due to an increase in the amount of purchase accounting adjustments related to prior year acquisitions.

Gross profit from home sales decreased to $1.6 billion in the three months ended December 31, 2024 from $1.7 billion in the prior year period and decreased 20 basis points to 22.7% as a percentage of home sales revenues.

The percentage decrease resulted from a decrease of 30 basis points due to the average cost of our homes closed increasing along with a slight decrease in the average selling price of those homes, partially offset by an increase of 10 basis points due to a decrease in warranty and construction defect costs.

We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand.

To adjust to changes in market conditions during fiscal 2023 and the first nine months of fiscal 2024, we have used a higher level of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers.

To adjust to changes in market conditions during recent years, we have used a higher level of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

Land/Lot Sales and Other Revenues

Land/lot sales and other revenues from our homebuilding operations were $10.3 million and $37.6 million in the three and nine months ended June 30, 2024, respectively, and $30.5 million and $85.2 million in the prior year periods.

Land/lot sales and other revenues from our homebuilding operations were $21.2 million and $20.3 million in the three months ended December 31, 2024 and 2023, respectively.

We continually evaluate our land and lot supply, and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets.

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We may also sell residential lots or land parcels to manage our supply or for other strategic reasons.

As of June 30, 2024, our homebuilding operations had $15.8 million of land held for sale that we expect to sell in the next twelve months.

As of December 31, 2024, our homebuilding operations had $8.7 million of land held for sale that we expect to sell in the next twelve months.

Inventory and Land Option Charges

At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary.

As a result of these reviews, there were no impairment charges recorded in our homebuilding segment during the current and prior year quarters and $5.6 million and $5.7 million recorded in the nine month periods ended June 30, 2024 and 2023, respectively.

As a result of this review, there were $2.0 million of impairment charges recorded in our homebuilding segment during the three months ended December 31, 2024 compared to none in the prior year quarter.

As we manage our inventory investments across our operating markets to optimize returns and cash flows, we may modify our pricing and incentives, construction and development plans or land sale strategies in individual active communities and land held for development, which could result in the affected communities being evaluated for potential impairment.

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These evaluations could result in impairment charges, which could be significant.

During the three and nine months ended June 30, 2024, earnest money and pre-acquisition cost write-offs related to our homebuilding segment’s land purchase contracts that we have terminated or expect to terminate were $12.6 million and $25.6 million, respectively, compared to $9.0 million and $41.7 million in the prior year periods.

During the three months ended December 31, 2024, earnest money and pre-acquisition cost write-offs related to our homebuilding segment’s land purchase contracts that we have terminated or expect to terminate were $9.8 million compared to $5.5 million in the same period of fiscal 2024.

Selling, General and Administrative (SG&A) Expense

SG&A expense from homebuilding activities increased 12% to $656.5 million and 13% to $1.9 billion in the three and nine months ended June 30, 2024, respectively, from $584.9 million and $1.7 billion in the prior year periods.

SG&A expense as a percentage of homebuilding revenues was 7.1% and 7.5% in the three and nine months ended June 30, 2024, respectively, compared to 6.7% and 7.2% in the prior year periods.

Employee compensation and related costs were $538.6 million and $1.5 billion in the three and nine months ended June 30, 2024, respectively, compared to $502.3 million and $1.4 billion in the prior year periods.

These costs increased 7% and 11% in the three and nine months ended June 30, 2024, respectively, from the prior year periods.

Employee compensation and related costs represented 82% of SG&A costs in both the three and nine months ended June 30, 2024 compared to 86% and 83%, respectively, in the prior year periods.

Our homebuilding operations employed 10,099 and 9,040 people at June 30, 2024 and 2023, respectively.

SG&A expense from homebuilding activities increased 6% to $636.6 million in the three months ended December 31, 2024 from $603.4 million in the prior year period.

SG&A expense as a percentage of homebuilding revenues was 8.9% in the three months ended December 31, 2024 compared to 8.3% in the prior year period.

Employee compensation and related costs were $493.1 million and $487.3 million in the three months ended December 31, 2024 and 2023, respectively, representing 77% and 81% of SG&A costs in those periods.

Our homebuilding operations employed 10,168 and 9,429 people at December 31, 2024 and 2023, respectively.

We attempt to control our homebuilding SG&A costs while ensuring that our infrastructure adequately supports our operations;

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Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer.

Interest incurred by our homebuilding operations decreased 33% to $11.5 million and 40% to $34.2 million in the three and nine months ended June 30, 2024, respectively, compared to $17.2 million and $57.1 million in the prior year periods, primarily due to decreases of 14% and 19% in our average homebuilding debt.

Interest charged to cost of sales was 0.3% and 0.4% of homebuilding cost of sales (excluding inventory and land option charges) in the three and nine months ended June 30, 2024, respectively, compared to 0.4% in both prior year periods.

Other income, net of other expenses, included in our homebuilding operations decreased to $22.7 million and increased to $73.2 million in the three and nine months ended June 30, 2024, respectively, from $26.4 million and $54.1 million in the prior year periods.

Interest incurred by our homebuilding operations increased 57% to $17.9 million in the three months ended December 31, 2024 compared to $11.4 million in the prior year period.

The increase was primarily due to an increase in the weighted average interest rate of the homebuilding debt outstanding during the period, as well as an increase in the average amount of that debt.

Interest charged to cost of sales was 0.4% of homebuilding cost of sales (excluding inventory and land option charges) in both periods.

Other income, net of other expenses, included in our homebuilding operations was $29.9 million in the three months ended December 31, 2024 compared to $29.5 million in the prior year period.

Other income consists of interest income and various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots.

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Homebuilding Results by Reporting Region

Three Months Ended June 30,

Revenues Homebuilding

Income (1) % of

Revenues Homebuilding

Income (1) % of

(In millions)

Northwest $ 725.0 $ 121.2 16.7 % $ 661.1 $ 105.6 16.0 %

Southwest 1,313.7 209.4 15.9 % 1,134.3 131.2 11.6 %

South Central 2,013.0 368.7 18.3 % 2,175.0 407.2 18.7 %

Southeast 2,417.2 404.1 16.7 % 2,384.5 459.8 19.3 %

East 1,709.6 314.9 18.4 % 1,464.4 262.0 17.9 %

North 1,063.0 153.9 14.5 % 914.3 98.6 10.8 %

$ 9,241.5 $ 1,572.2 17.0 % $ 8,733.6 $ 1,464.4 16.8 %

Nine Months Ended June 30,

Three Months Ended December 31,

Revenues Homebuilding

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The amortization of capitalized interest and property taxes is allocated to each segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment’s inventory balances.

Northwest Region — Homebuilding revenues increased 10% and 9% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods due to increases in the number of homes closed, particularly in our Portland market.

The region generated pre-tax income of $121.2 million and $300.0 million in the three and nine months ended June 30, 2024, respectively, compared to $105.6 million and $260.6 million in the prior year periods.

Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) increased by 70 and 60 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the average cost of homes closed decreasing by more than the average selling price of those homes.

As a percentage of homebuilding revenues, SG&A expenses decreased by 10 basis points and increased by 10 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

Southwest Region — Homebuilding revenues increased 16% and 28% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to increases in the number of homes closed, particularly in our California and Nevada markets.

The region generated pre-tax income of $209.4 million and $515.3 million in the three and nine months ended June 30, 2024, respectively, compared to $131.2 million and $296.9 million in the prior year periods.

Home sales gross profit percentage increased by 380 and 250 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to decreases in the average costs of homes closed.

As a percentage of homebuilding revenues, SG&A expenses decreased by 40 and 110 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

South Central Region — Homebuilding revenues decreased 7% and were essentially flat in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

The region generated pre-tax income of $368.7 million and $986.9 million in the three and nine months ended June 30, 2024, respectively, compared to $407.2 million and $956.8 million in the prior year periods.

Home sales gross profit percentage increased by 20 and 90 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the average cost of homes closed decreasing by more than the average selling price of those homes.

As a percentage of homebuilding revenues, SG&A expenses increased by 60 basis points in both the three and nine months ended June 30, 2024 compared to the prior year periods.

Southeast Region — Homebuilding revenues increased 1% and 2% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

The region generated pre-tax income of $404.1 million and $1.1 billion in the three and nine months ended June 30, 2024, respectively, compared to $459.8 million and $1.3 billion in the prior year periods.

Home sales gross profit percentage decreased by 170 and 230 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the average cost of homes closed increasing with only minor fluctuations in the average sales price, as well as an increase in purchase accounting adjustments related to a prior year acquisition.

As a percentage of homebuilding revenues, SG&A expenses increased by 80 and 50 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

East Region — Homebuilding revenues increased 17% and 16% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, due to increases in the number of homes closed, particularly in our North Carolina markets.

The region generated pre-tax income of $314.9 million and $774.0 million in the three and nine months ended June 30, 2024, respectively, compared to $262.0 million and $634.9 million in the prior year periods.

Home sales gross profit percentage increased by 110 and 130 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the average cost of homes closed decreasing with only minor fluctuations in the average sales price.

As a percentage of homebuilding revenues, SG&A expenses increased by 40 and 50 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

North Region — Homebuilding revenues increased 16% in both the three and nine months ended June 30, 2024 compared to the prior year periods, primarily due to increases in the number of homes closed, particularly in our suburban Washington, D.C.

The region generated pre-tax income of $153.9 million and $354.7 million in the three and nine months ended June 30, 2024, respectively, compared to $98.6 million and $224.7 million in the prior year periods.

Home sales gross profit percentage increased by 380 and 390 basis points in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods, primarily due to the average cost of homes closed decreasing while the average selling price of those homes increased.

As a percentage of homebuilding revenues, SG&A expenses were essentially flat in the three months ended June 30, 2024 and decreased by 10 basis points in the nine months ended June 30, 2024 compared to the prior year periods.

Northwest Region — Homebuilding revenues decreased 8% in the three months ended December 31, 2024 compared to the prior year period due to a decrease in the number of homes closed, particularly in our Salt Lake City market.

The region generated pre-tax income of $76.2 million in the three months ended December 31, 2024 compared to $69.5 million in the prior year period.

Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) increased by 370 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the average cost of homes closed decreasing by more than the average selling price of those homes.

As a percentage of homebuilding revenues, SG&A expenses increased by 150 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the decrease in homebuilding revenues.

Southwest Region — Homebuilding revenues increased 8% in the three months ended December 31, 2024 compared to the prior year period, primarily due to an increase in the number of homes closed, particularly in our Las Vegas market.

The region generated pre-tax income of $168.4 million in the three months ended December 31, 2024 compared to $134.9 million in the prior year period.

Home sales gross profit percentage increased by 210 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to an increase in the average selling price of homes closed and a decrease in the average cost of those homes.

As a percentage of homebuilding revenues, SG&A expenses were essentially flat in the three months ended December 31, 2024 compared to the prior year period.

South Central Region — Homebuilding revenues decreased 11% in the three months ended December 31, 2024 compared to the prior year period, primarily due to a decrease in the number of homes closed, particularly in our Fort Worth and Austin markets.

The region generated pre-tax income of $221.3 million in the three months ended December 31, 2024 compared to $271.6 million in the prior year period.

Home sales gross profit percentage decreased by 50 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes.

As a percentage of homebuilding revenues, SG&A expenses increased by 90 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the decrease in homebuilding revenues.

Southeast Region — Homebuilding revenues decreased 12% in the three months ended December 31, 2024 compared to the prior year period, primarily due to a decrease in the number of homes closed, particularly in our Florida markets.

The region generated pre-tax income of $222.8 million in the three months ended December 31, 2024 compared to $329.4 million in the prior year period.

Home sales gross profit percentage decreased by 260 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes.

East Region — Homebuilding revenues increased 4% in the three months ended December 31, 2024 compared to the prior year period, due to an increase in the number of homes closed, particularly in our North Carolina markets.

The region generated pre-tax income of $194.4 million in the three months ended December 31, 2024 compared to $204.6 million in the prior year period.

Home sales gross profit percentage decreased by 80 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased slightly.

As a percentage of homebuilding revenues, SG&A expenses increased by 50 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to an increase in employee compensation costs.

North Region — Homebuilding revenues increased 29% in the three months ended December 31, 2024 compared to the prior year period, primarily due to an increase in the number of homes closed, particularly in our Chicago, suburban Washington, D.C.

and Iowa markets.

The region generated pre-tax income of $129.8 million in the three months ended December 31, 2024 compared to $86.1 million in the prior year period.

Home sales gross profit percentage increased by 140 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes.

As a percentage of homebuilding revenues, SG&A expenses decreased by 70 basis points in the three months ended December 31, 2024 compared to the prior year period, primarily due to the increase in homebuilding revenues.

HOMEBUILDING INVENTORIES, LAND AND LOT POSITION AND HOMES IN INVENTORY

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We manage our inventory of owned land and lots and homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.

Our homebuilding segment’s inventories at June 30, 2024 and September 30, 2023 are summarized as follows:

June 30, 2024

Our homebuilding segment’s inventories at December 31, 2024 and September 30, 2024 are summarized as follows:

December 31, 2024

Construction in Progress and

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(1) Corporate and unallocated inventory consists primarily of capitalized interest and property taxes.

Our land and lot position and homes in inventory at June 30, 2024 and September 30, 2023 are summarized as follows:

June 30, 2024

Our land and lot position and homes in inventory at December 31, 2024 and September 30, 2024 are summarized as follows:

December 31, 2024

Owned (1) Lots Controlled

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___________________

(1) Land/lots owned included approximately 58,500 and 50,300 owned lots that are fully developed and ready for home construction at June 30, 2024 and September 30, 2023, respectively.

(2) The total remaining purchase price of lots controlled through land and lot purchase contracts at June 30, 2024 and September 30, 2023 was $24.5 billion and $21.1 billion, respectively, secured by earnest money deposits of $2.1 billion and $1.8 billion, respectively.

The total remaining purchase price of lots controlled through land and lot purchase contracts at June 30, 2024 and September 30, 2023 included $1.8 billion and $1.3 billion, respectively, related to land and lot purchase contracts with Forestar, secured by $181.1 million and $139.1 million, respectively, of earnest money.

(3) Lots controlled at June 30, 2024 included approximately 36,200 lots owned or controlled by Forestar, 19,500 of which our homebuilding divisions had under contract to purchase and 16,700 of which our homebuilding divisions had a right of first offer to purchase.

Of these, approximately 11,400 lots were in our Southeast region, 8,100 lots were in our East region, 6,000 lots were in our North region, 5,100 lots were in our South Central region, 3,900 lots were in our Southwest region and 1,700 lots were in our Northwest region.

Lots controlled at September 30, 2023 included approximately 31,400 lots owned or controlled by Forestar, 14,400 of which our homebuilding divisions had under contract to purchase and 17,000 of which our homebuilding divisions had a right of first offer to purchase.

(4) Approximately 26,200 and 27,000 of our homes in inventory were unsold at June 30, 2024 and September 30, 2023, respectively.

At June 30, 2024, approximately 8,800 of our unsold homes were completed, of which approximately 990 homes had been completed for more than six months.

(1) Land/lots owned included approximately 70,200 and 64,400 owned lots that are fully developed and ready for home construction at December 31, 2024 and September 30, 2024, respectively.

(2) The total remaining purchase price of lots controlled through land and lot purchase contracts at December 31, 2024 and September 30, 2024 was $25.8 billion and $25.2 billion, respectively, secured by earnest money deposits of $2.24 billion and $2.15 billion, respectively.

The total remaining purchase price of lots controlled through land and lot purchase contracts at December 31, 2024 and September 30, 2024 included $2.2 billion and $1.9 billion, respectively, related to lot purchase contracts with Forestar, secured by $225.1 million and $193.3 million, respectively, of earnest money.

(3) Lots controlled at December 31, 2024 included approximately 43,800 lots owned by Forestar, 24,500 of which our homebuilding divisions had under contract to purchase and 19,300 of which our homebuilding divisions had a right of first offer to purchase.

Of these, approximately 10,700 lots were in our Southeast region, 10,100 lots were in our East region, 9,000 lots were in our South Central region, 6,500 lots were in our North region, 5,200 lots were in our Southwest region and 2,300 lots were in our Northwest region.

Lots controlled at September 30, 2024 included approximately 37,700 lots owned by Forestar, 20,500 of which our homebuilding divisions had under contract to purchase and 17,200 of which our homebuilding divisions had a right of first offer to purchase.

(4) Approximately 25,700 of our homes in inventory were unsold at both December 31, 2024 and September 30, 2024.

At December 31, 2024, approximately 10,400 of our unsold homes were completed, of which approximately 1,300 homes had been completed for more than six months.

At September 30, 2024, approximately 10,300 of our unsold homes were completed, of which approximately 1,100 homes had been completed for more than six months.

Homes in inventory exclude approximately 2,400 and 2,100 model homes at June 30, 2024 and September 30, 2023, respectively.

Homes in inventory exclude approximately 2,500 and 2,400 model homes at December 31, 2024 and September 30, 2024, respectively.

RESULTS OF OPERATIONS - RENTAL

Our rental segment consists of single-family and multi-family rental operations.

The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.

The single-family rental operations construct and lease single-family homes within a community and then generally market each community for a bulk sale of rental homes.

The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style apartment communities in high growth suburban markets.

Single-family and multi-family rental property sales are recognized as revenues, and rental income is recognized as other income.

The following tables provide further information regarding our rental operations as of and for the three and nine months ended June 30, 2024 and 2023.

Rental Homes/Units Closed

Three Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

Single-family rental homes 790 1,754 2,278 3,169

Multi-family rental units 610 230 1,334 530

The following tables provide further information regarding our rental operations as of and for the three months ended December 31, 2024 and 2023.

Rental Homes/Units Closed and Revenue

Three Months Ended December 31,

Homes/Units Closed Rental Revenue (In millions) Average Selling Price

Change 2024 2023 %

Single-family 311 379 (18) % $ 88.1 $ 116.1 (24) % 283,300 306,300 (8) %

Multi-family 504 300 68 % 129.7 79.2 64 % 257,300 264,000 (3) %

815 679 20 % $ 217.8 $ 195.3 12 % 267,200 287,600 (7) %

Results of Operations

Three Months Ended

(In millions)

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Income before income taxes $ 11.9 $ 31.3

Revenues from our rental operations decreased to $413.7 million and $980.2 million during the three and nine months ended June 30, 2024, respectively, from $667.1 million and $1.2 billion in the prior year periods.

Pre-tax income was $64.2 million and $128.8 million during the three and nine months ended June 30, 2024, respectively, compared to $162.1 million and $307.0 million in the prior year periods.

The decrease in pre-tax income was due to a decrease in home closings and lower gross margins on home and unit closings during the current year periods compared to the prior year periods.

At June 30, 2024, our rental property inventory of $3.1 billion included $1.1 billion of inventory related to our single-family rental operations and $2.0 billion of inventory related to our multi-family rental operations.

At September 30, 2023, our rental property inventory of $2.7 billion included $1.3 billion of inventory related to our single-family rental operations and $1.4 billion of inventory related to our multi-family rental operations.

Single-family rental homes and lots and multi-family rental units at June 30, 2024 and September 30, 2023 consisted of the following:

Rental Operating Margin Analysis

Percentages of Related Revenues

Three Months Ended

Gross profit — rental 16.0 % 27.4 %

Selling, general and administrative expense 21.3 % 24.3 %

Other (income) expense (10.8) % (12.9) %

Rental pre-tax income 5.5 % 16.0 %

Revenues from our rental operations increased to $217.8 million during the three months ended December 31, 2024 from $195.3 million in the prior year period, and pre-tax income decreased to $11.9 million from $31.3 million.

The decline in pre-tax income was primarily due to lower gross margins on home and unit closings during the current year period compared to the prior year period.

At December 31, 2024, our rental property inventory of $3.0 billion included $728.3 million of inventory related to our single-family rental operations and $2.3 billion of inventory related to our multi-family rental operations.

At September 30, 2024, our rental property inventory of $2.9 billion included $800.3 million of inventory related to our single-family rental operations and $2.1 billion of inventory related to our multi-family rental operations.

Single-family rental homes and lots and multi-family rental units at December 31, 2024 and September 30, 2024 consisted of the following:

Rental Inventory

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Multi-family rental units (3) 12,220 11,960

________________________

(1) Single-family rental homes at June 30, 2024 consist of 520 homes under construction and 4,020 completed homes.

Single-family rental homes at September 30, 2023 consist of 1,260 homes under construction and 4,370 completed homes.

(2) Single-family rental lots at June 30, 2024 consist of 1,125 undeveloped lots and 775 finished lots.

Single-family rental lots at September 30, 2023 consist of 2,210 undeveloped lots and 1,170 finished lots.

(3) Multi-family rental units at June 30, 2024 consist of 7,810 units under construction and 3,570 units that were substantially complete and in the lease-up phase.

Multi-family rental units at September 30, 2023 consist of 7,200 units under construction and 1,950 units that were substantially complete and in the lease-up phase.

(1) Single-family rental homes at December 31, 2024 consist of 390 homes under construction and 2,750 completed homes compared to 340 homes under construction and 2,800 completed homes at September 30, 2024.

(2) Single-family rental lots at December 31, 2024 consist of 860 undeveloped lots and 640 finished lots compared to 910 undeveloped lots and 1,000 finished lots at September 30, 2024.

(3) Multi-family rental units at December 31, 2024 consist of 7,010 units under construction and 5,210 units that were substantially complete and in the lease-up phase compared to 7,900 units under construction and 4,060 units that were substantially complete at September 30, 2024.

RESULTS OF OPERATIONS – FORESTAR

At June 30, 2024, we owned 62% of the outstanding shares of Forestar.

Forestar is a publicly traded residential lot development company with operations in 60 markets across 24 states as of June 30, 2024.

At December 31, 2024, we owned 62% of the outstanding shares of Forestar.

Forestar is a publicly traded residential lot development company with operations in 62 markets across 24 states as of December 31, 2024.

(See Note B to the accompanying financial statements for additional Forestar segment information.)

Results of operations for the Forestar segment for the three and nine months ended June 30, 2024 and 2023 were as follows:

Results of operations for the Forestar segment for the three months ended December 31, 2024 and 2023 were as follows:

Three Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

(In millions)

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Forestar’s revenues are primarily derived from sales of single-family residential lots to local, regional and national homebuilders and land bankers for homebuilders.

The following tables provide further information regarding Forestar’s revenues and lot position as of and for the three and nine months ended June 30, 2024 and 2023:

Three Months Ended June 30,

The following tables provide further information regarding Forestar’s revenues and lot position as of and for the three months ended December 31, 2024 and 2023:

Three Months Ended December 31,

Lots Sold Value (In millions)

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Total lots sold 2,333 3,150 $ 247.4 $ 304.2

Tract acres sold to D.R.

Horton 32 45 $ 2.1 $ 22.8

Nine Months Ended June 30,

Lots Closed Value (In millions)

2024 2023 2024 2023

Residential single-family lots sold

Lots sold to D.R.

Horton 8,842 7,947 $ 849.2 $ 681.4

Total lots sold 9,694 9,054 $ 935.9 $ 794.3

Tract acres sold to D.R.

Horton 32 424 $ 2.1 $ 55.3

2024 September 30,

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Owned lots fully developed 8,100 6,300

At June 30, 2024 and September 30, 2023, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.2 billion and $1.8 billion, respectively.

There were no impairment charges recorded in either current year period or during the prior year quarter.

Impairment charges included in inventory and land option charges during the nine months ended June 30, 2023 were $19.4 million.

SG&A expense for the three and nine months ended June 30, 2024 included charges of $1.4 million and $4.1 million, respectively, related to the shared services agreement between Forestar and D.R.

At December 31, 2024 and September 30, 2024, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.7 billion and $2.3 billion, respectively.

Forestar’s inventory and land option charges consisted of $1.2 million and $0.2 million of earnest money and pre-acquisition cost write-offs in the three months ended December 31, 2024 and 2023, respectively.

There were no impairment charges recorded in either period.

SG&A expense for the three months ended December 31, 2024 and 2023 included charges of $1.8 million and $1.3 million, respectively, related to the shared services agreement between Forestar and D.R.

Horton whereby D.R.

Horton provides Forestar with certain administrative, compliance, operational and procurement services.

Shared services charges were $0.9 million and $2.8 million, respectively, in the prior year periods.

The decline in Forestar’s pre-tax income was primarily due to a 26% decrease in the number of lots sold.

RESULTS OF OPERATIONS – FINANCIAL SERVICES

The following tables and related discussion set forth key operating and financial data for our financial services operations, comprising DHI Mortgage and our subsidiary title companies, for the three and nine months ended June 30, 2024 and 2023.

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 % Change 2024 2023 % Change

Three Months Ended December 31,

2024 2023 % Change

Number of first-lien loans originated or brokered by DHI Mortgage for D.R.

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Loans sold by DHI Mortgage to third parties 16,896 16,927 — %

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 % Change 2024 2023 % Change

Three Months Ended December 31,

2024 2023 % Change

(In millions)

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Three Months Ended

June 30, Nine Months Ended

2024 2023 2024 2023

General and administrative expense 84.6 % 78.7 %

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DHI Mortgage’s primary focus is to originate loans for our homebuilding operations, and those loan originations account for virtually all of its total loan volume.

In the three and nine months ended June 30, 2024, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased 11% and 15%, respectively, primarily due to increases of 5% and 10%, respectively, in the number of homes closed by our homebuilding operations, as well as an increase in the percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing.

The percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing was 78% and 79% in the three and nine months ended June 30, 2024, respectively, up from 74% and 75% in the prior year periods.

The number of loans sold increased 19% and 15% in the three and nine months ended June 30, 2024, respectively, compared to the prior year periods.

Virtually all of the mortgage loans held for sale on June 30, 2024 were eligible for sale to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae).

During the nine months ended June 30, 2024, approximately 73% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 26% were sold to one other major financial entity.

In the three months ended December 31, 2024, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers decreased 1%, corresponding to the 1% decrease in the number of homes closed by our homebuilding operations.

The percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing was 79% in the three months ended December 31, 2024, up from 78% in the prior year period.

This increase reflects DHI Mortgage’s ongoing efforts to align their business with our homebuilding operations by offering competitive products and pricing.

The number of loans sold decreased slightly in the three months ended December 31, 2024 compared to the prior year period.

Virtually all of the mortgage loans held for sale on December 31, 2024 were eligible for sale to Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or Government National Mortgage Association (Ginnie Mae).

During the three months ended December 31, 2024, approximately 69% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 30% were sold to one other major financial entity.

Changes in market conditions could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae, Freddie Mac or Ginnie Mae, and we may need to make other adjustments to our mortgage operations.

Financial Services Revenues and Expenses

Total loan origination volume increased 10% and 15% in the three and nine months ended June 30, 2024, respectively, and revenues from our mortgage operations increased 6% to $189.3 million and 15% to $512.4 million in the three and nine months ended June 30, 2024, respectively, from $178.8 million and $447.1 million in the prior year periods.

In the three month period, the revenue increase was less than the volume increase due to a more competitive market.

Revenues from our title operations increased 7% to $53.0 million and 10% to $148.1 million in the three and nine months ended June 30, 2024, respectively, from $49.7 million and $134.9 million in the prior year periods.

General and administrative (G&A) expense related to our financial services operations increased 15% to $178.0 million and $500.6 million in the three and nine months ended June 30, 2024, respectively, from $154.7 million and $435.7 million in the prior year periods.

The increases were primarily due to the increases in loan origination volume and related title closing services.

As a percentage of financial services revenues, G&A expense was 73.5% and 75.8% in the three and nine months ended June 30, 2024, respectively, compared to 67.7% and 74.9% in the prior year periods.

Total loan origination volume decreased 1% in the three months ended December 31, 2024, and revenues from our mortgage operations decreased 6% to $139.7 million from $148.1 million in the prior year period.

Revenues from our title operations decreased 4% to $42.6 million in the three months ended December 31, 2024 from $44.5 million in the prior year period.

General and administrative (G&A) expense related to our financial services operations increased 2% to $154.2 million in the three months ended December 31, 2024 from $151.5 million in the prior year period.

As a percentage of financial services revenues, G&A expense was 84.6% in the three months ended December 31, 2024 compared to 78.7% in the prior year period.

Fluctuations in financial services G&A expense as a percentage of revenues can 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 operations employed 3,112 and 2,845 people at June 30, 2024 and 2023, respectively.

Our financial services operations employed 3,114 and 2,978 people at December 31, 2024 and 2023, respectively.

Other income, net of other expense, included in our financial services operations consists primarily of the interest income of our mortgage subsidiary.

Other income increased 33% to $27.0 million and 46% to $75.4 million in the three and nine months ended June 30, 2024, respectively, from $20.3 million and $51.6 million in the prior year periods, primarily due to an increase in interest income on our loan origination volume.

Other income decreased 18% to $20.5 million in the three months ended December 31, 2024 from $24.9 million in the prior year period, primarily due to a decrease in interest income on our loan origination volume.

RESULTS OF OPERATIONS - OTHER BUSINESSES

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We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and improvements.

The pre-tax income of all of our subsidiaries engaged in other business activities was $13.7 million and $32.8 million in the three and nine months ended June 30, 2024, respectively, compared to $0.2 million and $22.1 million in the prior year periods.

The pre-tax income of all of our subsidiaries engaged in other business activities was $11.5 million in the three months ended December 31, 2024 compared to $9.9 million in the prior year period.

RESULTS OF OPERATIONS - CONSOLIDATED

Income before Income Taxes

Pre-tax income for the three and nine months ended June 30, 2024 was $1.8 billion and $4.6 billion, respectively, compared to $1.8 billion and $4.3 billion in the prior year periods.

The increase in both periods was primarily due to an increase in the pre-tax income of our homebuilding operations as a result of higher revenues from an increase in home closings, largely offset by a decrease in the pre-tax income of our rental operations due to lower home and unit closings.

Our income tax expense was $432.2 million for each of the three month periods ended June 30, 2024 and 2023 and $1.1 billion and $1.0 billion in the nine months ended June 30, 2024 and 2023, respectively.

Our effective tax rate was 24.0% and 23.4% for the three and nine months ended June 30, 2024, respectively, compared to 24.2% and 23.9% in the prior year periods.

The effective tax rates for all periods include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient homes tax credits.

Our deferred tax assets, net of deferred tax liabilities, were $171.3 million at June 30, 2024 compared to $202.0 million at September 30, 2023.

We had a valuation allowance of $14.7 million and $14.8 million at June 30, 2024 and September 30, 2023, respectively, related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized.

Pre-tax income for the three months ended December 31, 2024 was $1.1 billion compared to $1.2 billion in the prior year period.

The decrease was primarily due to a decrease in the pre-tax income of our homebuilding operations.

Our income tax expense for the three months ended December 31, 2024 and 2023 was $258.0 million and $291.8 million, respectively.

Our effective tax rate was 23.2% for the three months ended December 31, 2024 compared to 23.4% in the prior year period.

The effective tax rates for both periods include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient homes tax credits.

Our deferred tax assets, net of deferred tax liabilities, were $142.3 million at December 31, 2024 compared to $182.4 million at September 30, 2024.

We have a valuation allowance of $14.9 million at December 31, 2024 and September 30, 2024 related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized.

We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to our remaining state NOL and tax credit carryforwards.

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We are maintaining significant homebuilding cash balances and liquidity to support the increased scale and level of activity in our business and to provide flexibility to adjust to changing conditions and opportunities.

At June 30, 2024, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.7 billion.

$2.3 billion is payable within 12 months, including $1.7 billion which is outstanding under our mortgage repurchase facilities and $500 million principal amount of 2.5% homebuilding senior notes maturing in October 2024.

At June 30, 2024, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 18.8% compared to 18.3% at September 30, 2023 and 22.0% at June 30, 2023.

Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 9.9% at June 30, 2024 compared to 5.1% at September 30, 2023 and 11.2% at June 30, 2023.

At December 31, 2024, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.1 billion.

$1.5 billion was payable within 12 months, including $786.9 million which is outstanding under our mortgage repurchase facilities and $500 million principal amount of 2.6% homebuilding senior notes maturing in October 2025.

At December 31, 2024, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 17.0% compared to 18.9% at September 30, 2024 and 18.6% at December 31, 2023.

Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 7.6% at December 31, 2024 compared to 5.2% at September 30, 2024 and 7.8% at December 31, 2023.

Over the long term, we intend to maintain our ratio of debt to total capital around or slightly below 20%.

At June 30, 2024, we had outstanding letters of credit of $242.1 million and surety bonds of $3.4 billion issued by third parties to secure performance under various contracts.

At December 31, 2024, we had outstanding letters of credit of $248.6 million and surety bonds of $3.4 billion issued by third parties to secure performance under various contracts.

We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms.

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Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 2024, registering debt and equity securities that may be issued from time to time in amounts to be determined.

Forestar also has an effective shelf registration statement filed with the SEC in October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering (ATM) program that became effective in November 2021.

At June 30, 2024, $728.1 million remained available for issuance under Forestar’s shelf registration statement, of which $278.1 million was reserved for sales under its ATM program.

Forestar also has an effective shelf registration statement filed with the SEC in September 2024, registering $750 million of equity securities, of which $300 million is reserved for sales under its at-the-market equity offering (ATM) program that was entered into in November 2024.

As market conditions permit, we may issue new debt or equity securities through the capital markets or obtain additional bank financing to fund our projected capital requirements or provide additional liquidity.

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Capital Resources - Homebuilding

Cash and Cash Equivalents — At June 30, 2024, cash and cash equivalents of our homebuilding segment totaled $2.2 billion.

Bank Credit Facility — We have a $2.19 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments.

Cash and Cash Equivalents — At December 31, 2024, cash and cash equivalents of our homebuilding segment totaled $2.5 billion.

Bank Credit Facility — We have a senior unsecured homebuilding revolving credit facility that was amended in December 2024 to increase its capacity from $2.19 billion to $2.23 billion.

The amendment also extended the maturity date of the facility.

The facility includes bank commitments of $1.965 billion maturing on December 18, 2029 and $265 million maturing on October 28, 2027.

The facility has an uncommitted accordion feature that could increase its size to $3.0 billion, subject to certain conditions and availability of additional bank commitments.

The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit commitments.

Letters of credit issued under the facility reduce the available borrowing capacity.

The maturity date of the facility is October 28, 2027.

At June 30, 2024, there were no borrowings outstanding and $217.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $1.97 billion.

At December 31, 2024, there were no borrowings outstanding and $221.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.01 billion.

Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level.

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The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens.

At June 30, 2024, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — At June 30, 2024, we had $2.1 billion principal amount of homebuilding senior notes outstanding that mature from October 2024 through October 2027.

The indentures governing our senior notes impose restrictions on the creation of secured debt and liens.

At June 30, 2024, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

At December 31, 2024, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — At December 31, 2024, we had $2.3 billion principal amount of homebuilding senior notes outstanding that were scheduled to mature from October 2025 through October 2034.

In October 2024, we repaid $500 million principal amount of our 2.5% senior notes at maturity.

The indenture governing our senior notes imposes restrictions on the creation of secured debt and liens.

At December 31, 2024, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

Our homebuilding revolving credit facility and homebuilding senior notes are guaranteed by D.R.

Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

Debt and Stock Repurchase Authorizations — In July 2024, our Board of Directors authorized the repurchase of up to $500 million of our debt securities, replacing the previous authorization, under which no debt securities were repurchased.

In October 2023, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock, which replaced the previous authorization.

During the nine months ended June 30, 2024, we repurchased 9.0 million shares at a total cost, including commissions and excise taxes, of $1.2 billion.

At June 30, 2024, the full amount of the debt repurchase authorization was remaining, and $459.7 million of the stock repurchase authorization was remaining.

In July 2024, our Board of Directors authorized the repurchase of up to $4.0 billion of our common stock, replacing the previous authorization, which at that time had $261.9 million remaining due to repurchases made subsequent to quarter end.

Debt and Stock Repurchase Authorizations — In July 2024, our Board of Directors authorized the repurchase of up to $500 million of our debt securities and up to $4.0 billion of our common stock, replacing the previous authorizations.

During the three months ended December 31, 2024, we repurchased 6.8 million shares at a total cost, including commissions and excise taxes, of $1.1 billion.

At December 31, 2024, the full amount of the debt repurchase authorization was remaining, and $2.5 billion of the stock repurchase authorization was remaining.

The debt and stock repurchase authorizations have no expiration date.

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During the past few years, we have made significant investments in our rental operations.

The inventory in our rental segment totaled $3.1 billion at June 30, 2024 compared to $2.7 billion at September 30, 2023 and $3.3 billion at June 30, 2023.

Cash and Cash Equivalents — At June 30, 2024, cash and cash equivalents of our rental segment totaled $119.1 million.

The inventory in our rental segment totaled $3.0 billion at December 31, 2024 compared to $2.9 billion at September 30, 2024 and $3.0 billion at December 31, 2023.

Cash and Cash Equivalents — At December 31, 2024, cash and cash equivalents of our rental segment totaled $113.0 million.

Bank Credit Facility — Our rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments.

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The maturity date of the facility is October 10, 2027.

Borrowings and repayments under the facility totaled $1.27 billion and $640 million, respectively, during the nine months ended June 30, 2024.

At June 30, 2024, there were $1.03 billion of borrowings outstanding at a 7.4% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $20 million.

Borrowings and repayments under the facility totaled $560 million and $255 million, respectively, during the three months ended December 31, 2024.

At December 31, 2024, there were $1.05 billion of borrowings outstanding at a 6.2% annual interest rate and no letters of credit issued under the facility, resulting in no available capacity.

The rental revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants.

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A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.

At June 30, 2024, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

At December 31, 2024, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

The rental revolving credit facility is not guaranteed by D.R.

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As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity.

At June 30, 2024, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 31.8% compared to 33.7% at September 30, 2023 and 35.3% at June 30, 2023.

Forestar’s ratio of net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 18.7% compared to 5.5% at September 30, 2023 and 19.1% at June 30, 2023.

Cash and Cash Equivalents — At June 30, 2024, Forestar had cash and cash equivalents of $359.2 million.

Bank Credit Facility — Forestar has a $410 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments.

At December 31, 2024, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 33.3% compared to 30.7% at September 30, 2024 and 33.4% at December 31, 2023.

Forestar’s ratio of net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 29.5% compared to 12.4% at September 30, 2024 and 14.9% at December 31, 2023.

Cash and Cash Equivalents — At December 31, 2024, Forestar had cash and cash equivalents of $132.0 million.

Bank Credit Facility — Forestar has a senior unsecured revolving credit facility that was amended in December 2024 to increase its capacity from $410 million to $640 million and to raise the uncommitted accordion feature that could increase the size of the facility to $1.0 billion, subject to certain conditions and availability of additional bank commitments.

The amendment also extended the maturity date of the facility.

The facility includes bank commitments of $575 million maturing on December 18, 2029 and $65 million maturing on October 28, 2026.

The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments.

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Letters of credit issued under the facility reduce the available borrowing capacity.

The maturity date of the facility is October 28, 2026.

At June 30, 2024, there were no borrowings outstanding and $24.8 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $385.2 million.

At December 31, 2024, there were $100 million of borrowings outstanding at a 5.9% annual interest rate and $27.5 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $512.5 million.

The Forestar revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants.

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Unsecured Debt — As of June 30, 2024, Forestar had $700 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar.

Unsecured Debt — As of December 31, 2024, Forestar had $700 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar.

These notes include $400 million principal amount of 3.85% senior notes that mature in May 2026 and $300 million principal amount of 5.0% senior notes that mature in March 2028.

At June 30, 2024, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

At December 31, 2024, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

They are not guaranteed by D.R.

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Debt Repurchase Authorization — In April 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities.

All of the $30 million authorization was remaining at June 30, 2024, and the authorization has no expiration date.

Issuance of Common Stock — During the nine months ended June 30, 2024, Forestar issued 546,174 shares of common stock under its ATM program for proceeds of $19.7 million, net of commissions and other issuance costs totaling $0.4 million.

At June 30, 2024, $728.1 million remained available for issuance under Forestar’s shelf registration statement, of which $278.1 million was reserved for sales under its ATM program.

All of the $30 million authorization was remaining at December 31, 2024, and the authorization has no expiration date.

Issuance of Common Stock — During the three months ended December 31, 2024, there were no shares issued under Forestar’s ATM program.

At December 31, 2024, $750 million remained available for issuance under Forestar’s shelf registration statement, with $300 million reserved for sales under the ATM program.

Capital Resources - Financial Services

Cash and Cash Equivalents — At June 30, 2024, cash and cash equivalents of our financial services segment totaled $305.7 million.

Cash and Cash Equivalents — At December 31, 2024, cash and cash equivalents of our financial services segment totaled $238.6 million.

Mortgage Repurchase Facilities — Our mortgage subsidiary, DHI Mortgage, has two mortgage repurchase facilities, one of which is committed and the other of which is uncommitted, that provide financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to counterparties upon receipt of funds from the counterparties.

DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames in accordance with the terms of the mortgage repurchase facilities.

In February 2024, the committed mortgage repurchase facility was amended to reduce its capacity to $1.6 billion and extend its maturity date to February 13, 2025.

The committed mortgage repurchase facility has a total capacity of $1.6 billion and a maturity date of May 9, 2025.

The capacity of the facility can be increased to $2.0 billion subject to the availability of additional commitments.

At June 30, 2024, DHI Mortgage had an obligation of $1.2 billion under the committed mortgage repurchase facility at a 7.0% annual interest rate.

At June 30, 2024, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $496.9 million at a 6.5% annual interest rate.

At June 30, 2024, $1.95 billion of mortgage loans held for sale with a collateral value of $1.91 billion were pledged under the committed mortgage repurchase facility, and $532.6 million of mortgage loans held for sale with a collateral value of $511.0 million were pledged under the uncommitted mortgage repurchase facility.

At December 31, 2024, DHI Mortgage had an obligation of $669.8 million under the committed mortgage repurchase facility at a 6.0% annual interest rate.

At December 31, 2024, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $117.1 million at a 5.7% annual interest rate.

At December 31, 2024, $1.67 billion of mortgage loans held for sale with a collateral value of $1.64 billion were pledged under the committed mortgage repurchase facility, and $129.2 million of mortgage loans held for sale with a collateral value of $120.4 million were pledged under the uncommitted mortgage repurchase facility.

The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity.

At June 30, 2024, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

At December 31, 2024, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

These mortgage repurchase facilities are not guaranteed by D.R.

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Operating Cash Flow Activities

In the nine months ended June 30, 2024, net cash provided by operating activities was $228.2 million compared to $2.3 billion in the prior year period.

Cash provided by operating activities in the current year period primarily consisted of $971.9 million and $156.9 million of cash provided by our homebuilding and financial services segments, respectively, partially offset by $656.8 million and $277.6 million of cash used in our rental and Forestar segments.

Cash used to increase construction in progress and finished home inventory was $863.0 million in the current year period, reflecting an increase in our completed homes in inventory in the current period.

In the three months ended December 31, 2024, net cash provided by operating activities was $646.7 million compared to $153.4 million of cash used in operating activities in the prior year period.

Cash provided by operating activities in the current year period primarily consisted of $813.3 million and $552.0 million of cash provided by our financial services and homebuilding segments, respectively, partially offset by $449.9 million and $283.3 million of cash used in our Forestar and rental segments.

Cash provided by a decrease in construction in progress and finished home inventory was $181.7 million in the current year period, reflecting a decrease in our homes in inventory in the current period.

Cash used to increase residential land and lots was $1.2 billion in the current year period compared to $937.8 million in the prior year period.

Investing Cash Flow Activities

In the nine months ended June 30, 2024, net cash used in investing activities was $161.1 million compared to $308.5 million in the prior year period.

In the current year period, uses of cash included purchases of property and equipment totaling $133.3 million.

In the prior year period, uses of cash included payments totaling $202.0 million related to the acquisitions of Riggins Custom Homes and Truland Homes and purchases of property and equipment totaling $108.3 million.

In the three months ended December 31, 2024, net cash used in investing activities was $57.1 million compared to $39.3 million in the prior year period.

In the current year period, uses of cash included the payment of $51.0 million related to a business acquisition in our South Central region and purchases of property and equipment totaling $13.3 million.

In the prior year period, uses of cash included purchases of property and equipment totaling $47.6 million.

Financing Cash Flow Activities

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Long-term financing needs for our operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.

During the nine months ended June 30, 2024, net cash used in financing activities was $947.2 million, primarily consisting of cash used to repurchase shares of our common stock of $1.2 billion and payment of cash dividends totaling $297.5 million.

During the three months ended December 31, 2024, net cash used in financing activities was $2.1 billion, consisting primarily of cash used to repurchase shares of our common stock of $1.1 billion, net payments on our mortgage repurchase facilities of $746.9 million, repayment of $500 million principal amount of our 2.5% homebuilding senior notes at maturity and payment of cash dividends totaling $128.5 million.

These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $305 million.

During the nine months ended June 30, 2023, net cash used in financing activities was $1.1 billion, primarily consisting of cash used to repurchase shares of our common stock of $759.6 million, repayment of $300 million principal amount of our 4.75% homebuilding senior notes and payment of cash dividends totaling $256.9 million.

These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $200 million and net advances on our mortgage repurchase facilities of $67.3 million.

During each of the first three quarters of fiscal 2024, our Board of Directors approved a quarterly cash dividend of $0.30 per common share, the most recent of which was paid on May 9, 2024 to stockholders of record on May 2, 2024.

In July 2024, our Board of Directors approved a quarterly cash dividend of $0.30 per common share, payable on August 8, 2024 to stockholders of record on August 1, 2024.

During the three months ended December 31, 2023, net cash used in financing activities was $362.8 million, consisting primarily of net payments on our mortgage repurchase facilities of $389.9 million, cash used to repurchase shares of our common stock of $376.9 million and payment of cash dividends totaling $99.9 million.

These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $550 million.

During the three months ended December 31, 2024, our Board of Directors approved a quarterly cash dividend of $0.40 per common share, which was paid on November 19, 2024 to stockholders of record on November 12, 2024.

In January 2025, our Board of Directors approved a quarterly cash dividend of $0.40 per common share, payable on February 14, 2025 to stockholders of record on February 7, 2025.

Cash dividends of $0.30 per common share were approved and paid in each quarter of fiscal 2024.

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SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

As of June 30, 2024, D.R.

As of December 31, 2024, D.R.

had $2.3 billion principal amount of homebuilding senior notes outstanding due through October 2034 and no amounts outstanding on its homebuilding revolving credit facility.

13 unchanged sentences

In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of our guaranteed obligations.

The indentures governing our homebuilding senior notes contain a “savings clause,” which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer.

The indenture governing our homebuilding senior notes contains a “savings clause,” which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer.

This provision may not be effective to protect such guarantees from fraudulent transfer challenges or, if it does, it may reduce such Guarantor’s obligation such that the remaining amount due and collectible under the guarantees would not suffice, if necessary, to pay the notes in full when due.

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and Guarantor Subsidiaries

Summarized Balance Sheet Data June 30,

Summarized Balance Sheet Data December 31,

2024 September 30,

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21,983.0 22,410.7

Summarized Statement of Operations Data Nine Months Ended

June 30, 2024 Year Ended

Summarized Statement of Operations Data Three Months Ended

December 31, 2024 Year Ended

September 30, 2024

9 unchanged sentences

As disclosed in our critical accounting policies in our Form 10-K for the fiscal year ended September 30, 2024, our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims.

At June 30, 2024 and September 30, 2023, we had reserves for approximately 570 and 600 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the nine months ended June 30, 2024, we were notified of approximately 240 new construction defect claims and resolved 270 construction defect claims for a total cost of $49.6 million.

At June 30, 2023 and September 30, 2022, we had reserves for approximately 625 and 560 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the nine months ended June 30, 2023, we were notified of approximately 240 new construction defect claims and resolved 175 construction defect claims for a total cost of $25.5 million.

At December 31, 2024 and September 30, 2024, we had reserves for approximately 880 and 825 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the three months ended December 31, 2024, we were notified of approximately 120 new construction defect claims and resolved 65 construction defect claims for a total cost of $5.8 million.

At December 31, 2023 and September 30, 2023, we had reserves for approximately 565 and 600 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the three months ended December 31, 2023, we were notified of approximately 85 new construction defect claims and resolved 120 construction defect claims for a total cost of $34.9 million.

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and pre-tax income in the third and fourth quarters of our fiscal year.

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• the effects of information technology failures, data security breaches, and the failure to satisfy privacy and data protection laws and regulations;

• the effects of governmental regulations and environmental matters on our homebuilding and land development operations;

• the effects of governmental regulations and environmental matters on our land development and housing operations;

• the effects of governmental regulations on our financial services operations;

• competitive conditions within the industries in which we operate;

• the effects of competitive conditions within the industries in which we operate;

• our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations;

1 unchanged sentence

• the effects of the loss of key personnel;

• actions by activist stockholders.

• the effects of actions by activist stockholders.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2 unchanged sentences

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