What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-23 compared with 2025-01-23 · 322 added, 207 removed, 569 unchanged (48% 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 $374,900 during the three months ended December 31, 2024.

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.

Our homebuilding operations are our core business and primarily include the construction and sale of single-family homes with sales prices generally ranging from $250,000 to more than $1,000,000, with an average closing price of $373,700 during the six months ended March 31, 2025.

Approximately 84% of our home sales revenue in the six months ended March 31, 2025 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.

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

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

At March 31, 2025, 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 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%.

During the six months ended March 31, 2025, our number of homes closed and our home sales revenues decreased 8% and 9%, respectively, compared to the prior year period, and our consolidated revenues decreased 9% to $15.3 billion compared to $16.8 billion.

Our pre-tax income was $2.2 billion in the six months ended March 31, 2025 compared to $2.8 billion in the prior year period, and our pre-tax operating margin was 14.2% compared to 16.5%.

Net income was $1.7 billion in the six months ended March 31, 2025 compared to $2.1 billion in the prior year period, and our diluted earnings per share were $5.19 compared to $6.34.

In the trailing twelve months ended March 31, 2025, our return on equity (ROE) was 17.4% compared to 22.2% in the prior year period, and our return on assets (ROA) was 12.2% compared to 15.1%.

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

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

The 2025 spring selling season has begun, and new home demand has been slower than expected due to uncertainty among potential homebuyers caused by continued affordability constraints and declining consumer confidence.

As a result, our net sales orders and homebuilding revenues in the second quarter decreased 15% from the prior year period, and our home sales gross margin decreased to 21.8% as we increased sales incentives such as buydowns of mortgage rates for our homebuyers.

We strive to remain well-positioned with affordable product offerings and a flexible lot supply, and we will continue to manage our home pricing, sales incentives and number of homes in inventory based on the level of new home demand in each of our local markets.

We expect our incentive levels to stay elevated and increase further, depending on market conditions and 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.

Within our homebuilding land and lot portfolio, lots controlled through purchase contracts represent 75% of the lots owned and controlled at March 31, 2025 compared to 76% at September 30, 2024 and 77% at March 31, 2024.

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

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.

During the six months ended March 31, 2025, 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 consistent, sustainable 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 positions to maximize the returns on our inventory investments and generate strong profits and cash flows from operations, 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 December 31, 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 March 31, 2025, as compared to the same period of 2024 unless otherwise indicated, were as follows:

Consolidated Results:

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• Net income attributable to D.R.

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

Horton decreased 31% to $810.4 million compared to $1.2 billion.

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

Horton decreased 27% to $2.58 compared to $3.52.

• 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.

• Stockholders’ equity was $24.3 billion compared to $25.3 billion and $23.8 billion at September 30, 2024 and March 31, 2024, respectively.

• Book value per common share increased to $78.82 compared to $78.12 and $72.13 at September 30, 2024 and March 31, 2024, respectively.

• Debt to total capital was 21.1% compared to 18.9% and 20.0% at September 30, 2024 and March 31, 2024, respectively.

Net debt to total capital was 14.3% compared to 5.2% and 10.8% at September 30, 2024 and March 31, 2024, respectively.

Homebuilding:

• Homebuilding revenues decreased 15% to $7.2 billion compared to $8.5 billion.

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

• Homes closed decreased 15% to 19,276 homes, and the average closing price of those homes decreased 1% to $372,500.

• Net sales orders decreased 15% to 22,437 homes, and the value of net sales orders decreased 17% to $8.4 billion.

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

• Sales order backlog decreased 21% to 14,164 homes, and the value of sales order backlog decreased 22% to $5.5 billion.

• Home sales gross margin was 21.8% compared to 23.2%.

• Homebuilding SG&A expense was 8.9% of homebuilding revenues compared to 7.2%.

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

• Homebuilding pre-tax income decreased 31% to $935.0 million compared to $1.4 billion.

• Homebuilding pre-tax income was 13.0% of homebuilding revenues compared to 16.0%.

• Homebuilding pre-tax return on inventory was 24.3% compared to 29.9%.

• 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.

• Homebuilding cash and cash equivalents totaled $1.9 billion compared to $3.6 billion and $2.2 billion at September 30, 2024 and March 31, 2024, respectively.

• Homebuilding inventories totaled $20.9 billion compared to $20.0 billion and $19.9 billion at September 30, 2024 and March 31, 2024, respectively.

• Homes in inventory totaled 36,900 compared to 37,400 and 45,000 at September 30, 2024 and March 31, 2024, respectively.

• Owned lots totaled 150,600 compared to 152,500 and 143,900 at September 30, 2024 and March 31, 2024, respectively.

Lots controlled through purchase contracts totaled 462,500 compared to 480,400 and 473,300 at September 30, 2024 and March 31, 2024, respectively.

• Homebuilding debt was $3.1 billion compared to $2.9 billion and $2.4 billion at September 30, 2024 and March 31, 2024, respectively.

• Rental revenues were $236.6 million compared to $371.3 million.

• Rental pre-tax income was $22.8 million compared to $33.3 million.

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

• Rental inventory totaled $3.1 billion compared to $2.9 billion and $3.1 billion at September 30, 2024 and March 31, 2024, respectively.

• Single-family rental homes closed totaled 519 compared to 1,109.

• Multi-family rental units closed totaled 300 compared to 424.

• Forestar’s revenues decreased 18% to $250.4 million compared to $305.9 million.

• Forestar’s revenues increased 5% to $351.0 million compared to $333.8 million.

Revenues in the current and prior year quarters included $267.8 million and $310.3 million, respectively, of revenue from land and lot sales to our homebuilding segment.

• Forestar’s lots sold decreased 26% to 2,333 compared to 3,150.

• Forestar’s lots sold increased 4% to 3,411 compared to 3,289.

Lots sold to D.R.

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• Forestar’s pre-tax income was 11.6% of revenues compared to 17.6%.

• 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.

• Forestar’s cash and cash equivalents totaled $174.3 million compared to $481.2 million and $416.2 million at September 30, 2024 and March 31, 2024, respectively.

• Forestar’s inventories totaled $2.8 billion compared to $2.3 billion and $2.1 billion at September 30, 2024 and March 31, 2024, respectively.

• Forestar’s owned and controlled lots totaled 105,900 compared to 95,100 and 96,100 at September 30, 2024 and March 31, 2024, respectively.

Of these lots, 43,900 were under contract to sell to or subject to a right of first offer with D.R.

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.

Horton compared to 37,700 and 34,300 at September 30, 2024 and March 31, 2024, respectively.

• Forestar’s debt was $872.5 million compared to $706.4 million and $705.7 million at September 30, 2024 and March 31, 2024, respectively.

Financial Services:

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• Financial services pre-tax income was 34.3% of financial services revenues compared to 34.6%.

Key financial results for the six months ended March 31, 2025, as compared to the same period of 2024, were as follows:

Consolidated Results:

• Consolidated revenues decreased 9% to $15.3 billion compared to $16.8 billion.

• Consolidated pre-tax income decreased 22% to $2.2 billion compared to $2.8 billion.

• Consolidated pre-tax income was 14.2% of consolidated revenues compared to 16.5%.

• Income tax expense was $506.0 million compared to $636.6 million, and our effective tax rate was 23.2% compared to 22.9%.

• Net income attributable to D.R.

Horton decreased 22% to $1.7 billion compared to $2.1 billion.

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

Horton decreased 18% to $5.19 compared to $6.34.

• Net cash provided by operations was $210.5 million compared to net cash used in operations of $470.1 million.

Homebuilding:

• Homebuilding revenues decreased 9% to $14.4 billion compared to $15.8 billion.

• Homes closed decreased 8% to 38,335 homes, and the average closing price of those homes decreased 1% to $373,700.

• Net sales orders decreased 10% to 40,274 homes, and the value of net sales orders decreased 11% to $15.0 billion.

• Home sales gross margin was 22.3% compared to 23.1%.

• Homebuilding SG&A expense was 8.9% of homebuilding revenues compared to 7.7%.

• Homebuilding pre-tax income decreased 21% to $1.9 billion compared to $2.5 billion.

• Homebuilding pre-tax income was 13.6% of homebuilding revenues compared to 15.6%.

• Net cash provided by homebuilding operations was $876.0 million compared to $408.3 million.

• Rental revenues were $454.3 million compared to $566.5 million.

• Rental pre-tax income was $34.7 million compared to $64.6 million.

• Single-family rental homes closed totaled 830 compared to 1,488.

• Multi-family rental units closed totaled 804 compared to 724.

• Forestar’s revenues decreased 6% to $601.3 million compared to $639.7 million.

Revenues in the current and prior year periods included $486.4 million and $583.9 million, respectively, of revenue from land and lot sales to our homebuilding segment.

• Forestar’s lots sold decreased 11% to 5,744 compared to 6,439.

Lots sold to D.R.

Horton totaled 4,613 compared to 5,939.

• Forestar’s pre-tax income decreased 43% to $62.6 million compared to $110.1 million.

• Forestar’s pre-tax income was 10.4% of revenues compared to 17.2%.

Financial Services:

• Financial services revenues decreased 5% to $395.2 million compared to $418.2 million.

• Financial services pre-tax income decreased 16% to $121.6 million compared to $144.0 million.

• Financial services pre-tax income was 30.8% of financial services revenues compared to 34.4%.

RESULTS OF OPERATIONS - HOMEBUILDING

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Reno Central Georgia

New Mexico Albuquerque Savannah

New Mexico Albuquerque Savannah/Brunswick

Santa Fe Valdosta

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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 months ended December 31, 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 and six months ended March 31, 2025 and 2024.

Net Sales Orders (1)

Three Months Ended December 31,

Three Months Ended March 31,

Net Homes Sold Value (In millions) Average Selling Price

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22,437 26,456 (15) % $ 8,358.6 $ 10,063.2 (17) % $ 372,500 $ 380,400 (2) %

Six Months Ended March 31,

Net Homes Sold Value (In millions) Average Selling Price

Change 2025 2024 %

Northwest 2,409 2,796 (14) % $ 1,296.4 $ 1,428.9 (9) % $ 538,100 $ 511,100 5 %

Southwest 4,545 5,231 (13) % 2,193.1 2,547.3 (14) % 482,500 487,000 (1) %

South Central 10,517 11,853 (11) % 3,284.2 3,841.8 (15) % 312,300 324,100 (4) %

Southeast 9,602 11,786 (19) % 3,264.1 4,194.9 (22) % 339,900 355,900 (4) %

East 8,341 8,279 1 % 2,883.3 2,960.3 (3) % 345,700 357,600 (3) %

North 4,860 4,580 6 % 2,091.0 1,879.5 11 % 430,200 410,400 5 %

40,274 44,525 (10) % $ 15,012.1 $ 16,852.7 (11) % $ 372,700 $ 378,500 (2) %

Sales Order Cancellations

Three Months Ended December 31,

Three Months Ended March 31,

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

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4,255 4,646 $ 1,622.1 $ 1,746.2 16 % 15 %

Six Months Ended March 31,

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

2025 2024 2025 2024 2025 2024

Northwest 362 433 $ 209.3 $ 222.3 13 % 13 %

Southwest 777 877 395.4 423.1 15 % 14 %

South Central 2,021 2,268 658.4 758.6 16 % 16 %

Southeast 2,175 2,581 751.1 937.0 18 % 18 %

East 1,708 1,749 607.0 621.3 17 % 17 %

North 1,141 951 480.6 387.3 19 % 17 %

8,184 8,859 $ 3,101.8 $ 3,349.6 17 % 17 %

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(1) Net sales orders represent the number and dollar value of new sales contracts executed with customers (gross sales orders), net of cancelled sales orders.

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Net Sales Orders

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.

The value of net sales orders was $8.4 billion (22,437 homes) and $15.0 billion (40,274 homes) for the three and six months ended March 31, 2025, respectively, compared to $10.1 billion (26,456 homes) and $16.9 billion (44,525 homes) in the prior year periods.

The decrease in value in both periods was primarily attributable to a decrease in the number of sales orders, along with a 2% decrease in the average selling price.

The number of net sales orders decreased 15% and 10% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods.

The markets contributing most to the decrease in sales order volume in both periods were the Salt Lake City market in the Northwest, the Phoenix and California markets in the Southwest, most of the Texas markets in the South Central and the Florida markets (particularly Tampa) in the Southeast.

New home demand has been slower than expected this spring due to uncertainty among potential homebuyers caused by continued affordability constraints and declining consumer confidence.

Sales Order Backlog

As of December 31,

As of March 31,

Homes in Backlog Value (In millions) Average Selling Price

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Homes Closed and Home Sales Revenue

Three Months Ended December 31,

Three Months Ended March 31,

Homes Closed Value (In millions) Average Selling Price

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19,276 22,548 (15) % $ 7,180.9 $ 8,466.7 (15) % $ 372,500 $ 375,500 (1) %

Six Months Ended March 31,

Homes Closed Value (In millions) Average Selling Price

Change 2025 2024 %

Northwest 2,279 2,610 (13) % $ 1,193.5 $ 1,313.6 (9) % $ 523,700 $ 503,300 4 %

Southwest 4,541 4,883 (7) % 2,203.6 2,334.2 (6) % 485,300 478,000 2 %

South Central 9,704 11,219 (14) % 3,016.5 3,622.4 (17) % 310,900 322,900 (4) %

Southeast 9,657 11,612 (17) % 3,332.2 4,175.4 (20) % 345,100 359,600 (4) %

East 7,672 7,641 — % 2,668.3 2,709.1 (2) % 347,800 354,500 (2) %

North 4,482 3,923 14 % 1,912.9 1,588.4 20 % 426,800 404,900 5 %

38,335 41,888 (8) % $ 14,327.0 $ 15,743.1 (9) % $ 373,700 $ 375,800 (1) %

Home Sales Revenue

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.

Revenues from home sales were $7.2 billion (19,276 homes closed) and $14.3 billion (38,335 homes closed) for the three and six months ended March 31, 2025, respectively, compared to $8.5 billion (22,548 homes closed) and $15.7 billion (41,888 homes closed) in the prior year periods.

The decrease in revenues in both periods was primarily attributable to a decrease in the number of homes closed, along with a 1% decrease in the average selling price.

The number of homes closed decreased 15% and 8% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods.

The markets contributing most to the decrease in home closings volume in both periods were the Salt Lake City market in the Northwest, the Phoenix and California markets in the Southwest, most of the Texas markets in the South Central and the Florida markets in the Southeast.

The markets contributing most to the increase in closings volume in the North were the suburban Washington, D.C., New Jersey and Chicago markets.

Homebuilding Operating Margin Analysis

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Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

Gross profit – home sales 21.8 % 23.2 % 22.3 % 23.1 %

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Home Sales Gross Profit

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.

Gross profit from home sales decreased to $1.6 billion in the three months ended March 31, 2025 from $2.0 billion in the prior year period and decreased 140 basis points to 21.8% as a percentage of home sales revenues.

The 140 basis point decrease was due to the average cost of our homes closed increasing while the average selling price of those homes decreased slightly.

Gross profit from home sales decreased to $3.2 billion in the six months ended March 31, 2025 from $3.6 billion in the prior year period and decreased 80 basis points to 22.3% as a percentage of home sales revenues.

The percentage decrease resulted from a decrease of 80 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.

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 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.

We expect our incentive levels to stay elevated and increase further, depending on market conditions and changes in mortgage interest rates.

Land/Lot Sales and Other Revenues

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.

Land/lot sales and other revenues from our homebuilding operations were $22.0 million and $43.2 million in the three and six months ended March 31, 2025, respectively, and $6.9 million and $27.2 million in the prior year periods.

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 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.

As of March 31, 2025, our homebuilding operations had $11.9 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 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 a result of this review, there were $5.4 million and $7.4 million of impairment charges recorded in our homebuilding segment during the three and six months ended March 31, 2025, respectively, compared to $5.6 million in the three and six months ended March 31, 2024.

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 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.

During the three and six months ended March 31, 2025, 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 $24.0 million and $33.9 million, respectively, compared to $7.5 million and $13.0 million in the prior year periods.

Selling, General and Administrative (SG&A) Expense

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.

SG&A expense from homebuilding activities increased 4% to $637.8 million and 5% to $1.3 billion in the three and six months ended March 31, 2025, respectively, from $614.1 million and $1.2 billion in the prior year periods.

SG&A expense as a percentage of homebuilding revenues was 8.9% in both the three and six months ended March 31, 2025 compared to 7.2% and 7.7%, respectively, in the prior year periods.

Employee compensation and related costs were $500.9 million and $994.0 million in the three and six months ended March 31, 2025, respectively, compared to $512.2 million and $999.4 million in the prior year periods.

Employee compensation and related costs represented 79% and 78% of SG&A costs in the three and six months ended March 31, 2025, respectively, compared to 83% and 82% in the prior year periods.

Our homebuilding operations employed 10,199 and 9,717 people at March 31, 2025 and 2024, 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 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.

Interest incurred by our homebuilding operations increased 84% to $20.8 million and 71% to $38.8 million in the three and six months ended March 31, 2025, respectively, compared to $11.3 million and $22.7 million in the prior year periods.

The increase was primarily due to an increase in the weighted average interest rate of the homebuilding debt outstanding during the periods, 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 all four periods.

Other income, net of other expenses, included in our homebuilding operations was $17.0 million and $46.9 million in the three and six months ended March 31, 2025, respectively, compared to $21.0 million and $50.4 million in the prior year periods.

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 December 31,

Three Months Ended March 31,

Revenues Homebuilding

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$ 7,202.9 $ 935.0 13.0 % $ 8,473.6 $ 1,357.6 16.0 %

Six Months Ended March 31,

Revenues Homebuilding

Income (1) % of

Revenues Homebuilding

Income (1) % of

(In millions)

Northwest $ 1,193.6 $ 169.9 14.2 % $ 1,320.0 $ 178.8 13.5 %

Southwest 2,203.8 291.7 13.2 % 2,334.8 305.9 13.1 %

South Central 3,017.6 429.7 14.2 % 3,630.3 618.2 17.0 %

Southeast 3,363.6 434.1 12.9 % 4,185.4 690.9 16.5 %

East 2,674.6 366.2 13.7 % 2,710.1 459.1 16.9 %

North 1,917.0 256.3 13.4 % 1,589.7 200.8 12.6 %

$ 14,370.2 $ 1,947.9 13.6 % $ 15,770.3 $ 2,453.7 15.6 %

____________________

(1) Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating our corporate office.

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 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.

Northwest Region — Homebuilding revenues decreased 11% and 10% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods due to decreases in the number of homes closed, particularly in our Salt Lake City market.

The region generated pre-tax income of $93.7 million and $169.9 million in the three and six months ended March 31, 2025, respectively, compared to $109.3 million and $178.8 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 140 and 240 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, 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 increased by 150 and 160 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to the decrease in homebuilding revenues.

Southwest Region — Homebuilding revenues decreased 17% and 6% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to decreases in the number of homes closed, particularly in our Phoenix market.

The region generated pre-tax income of $123.3 million and $291.7 million in the three and six months ended March 31, 2025, respectively, compared to $171.0 million and $305.9 million in the prior year periods.

Home sales gross profit percentage was flat in the three month period, while it increased by 110 basis points in the six months ended March 31, 2025 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 increased by 170 and 90 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to the decrease in homebuilding revenues.

South Central Region — Homebuilding revenues decreased 22% and 17% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to decreases in the number of homes closed in most of the region’s markets.

The region generated pre-tax income of $208.4 million and $429.7 million in the three and six months ended March 31, 2025, respectively, compared to $346.6 million and $618.2 million in the prior year periods.

Home sales gross profit percentage decreased by 230 and 150 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, 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 150 and 120 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to the decrease in homebuilding revenues.

Southeast Region — Homebuilding revenues decreased 26% and 20% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to decreases in the number of homes closed, particularly in our Florida markets.

The region generated pre-tax income of $211.3 million and $434.1 million in the three and six months ended March 31, 2025, respectively, compared to $361.5 million and $690.9 million in the prior year periods.

Home sales gross profit percentage decreased by 220 and 240 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, 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 180 and 130 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to the decrease in homebuilding revenues.

East Region — Homebuilding revenues decreased 6% and 1% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods.

The region generated pre-tax income of $171.8 million and $366.2 million in the three and six months ended March 31, 2025, respectively, compared to $254.5 million and $459.1 million in the prior year periods.

Home sales gross profit percentage decreased by 320 and 200 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, 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 130 and 100 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to an increase in employee compensation costs.

North Region — Homebuilding revenues increased 13% and 21% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to increases in the number of homes closed, particularly in our suburban Washington, D.C., Chicago and New Jersey markets.

The region generated pre-tax income of $126.5 million and $256.3 million in the three and six months ended March 31, 2025, respectively, compared to $114.7 million and $200.8 million in the prior year periods.

Home sales gross profit percentage increased by 100 and 120 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, 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 increased by 150 and 50 basis points in the three and six months ended March 31, 2025, respectively, compared to the prior year periods, primarily due to an increase in employee compensation costs.

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 December 31, 2024 and September 30, 2024 are summarized as follows:

December 31, 2024

Our homebuilding segment’s inventories at March 31, 2025 and September 30, 2024 are summarized as follows:

March 31, 2025

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 December 31, 2024 and September 30, 2024 are summarized as follows:

December 31, 2024

Our land and lot position and homes in inventory at March 31, 2025 and September 30, 2024 are summarized as follows:

March 31, 2025

Owned (1) Lots Controlled

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___________________

(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.

(1) Land/lots owned included approximately 72,500 and 64,400 owned lots that are fully developed and ready for home construction at March 31, 2025 and September 30, 2024, respectively.

(2) The total remaining purchase price of lots controlled through land and lot purchase contracts at March 31, 2025 and September 30, 2024 was $25.6 billion and $25.2 billion, respectively, secured by earnest money deposits of $2.26 billion and $2.15 billion, respectively.

The total remaining purchase price of lots controlled through land and lot purchase contracts at March 31, 2025 and September 30, 2024 included $2.2 billion and $1.9 billion, respectively, related to lot purchase contracts with Forestar, secured by $223.8 million and $193.3 million, respectively, of earnest money.

(3) Lots controlled at March 31, 2025 included approximately 43,900 lots owned by Forestar, 24,700 of which our homebuilding divisions had under contract to purchase and 19,200 of which our homebuilding divisions had a right of first offer to purchase.

Of these, approximately 10,800 lots were in our Southeast region, 10,300 lots were in our East region, 8,500 lots were in our South Central region, 7,000 lots were in our North region, 4,600 lots were in our Southwest region and 2,700 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.

(4) Approximately 23,500 and 25,700 of our homes in inventory were unsold at March 31, 2025 and September 30, 2024, respectively.

At March 31, 2025, approximately 8,400 of our unsold homes were completed, of which approximately 1,200 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 2,500 and 2,400 model homes at December 31, 2024 and September 30, 2024, respectively.

Homes in inventory exclude approximately 2,600 and 2,400 model homes at March 31, 2025 and September 30, 2024, respectively.

RESULTS OF OPERATIONS - RENTAL

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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 months ended December 31, 2024 and 2023.

The following tables provide further information regarding our rental operations as of and for the three and six months ended March 31, 2025 and 2024.

Rental Homes/Units Closed and Revenue

Three Months Ended December 31,

Three Months Ended March 31,

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

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819 1,533 (47) % $ 228.6 $ 371.3 (38) % 279,100 242,200 15 %

Six Months Ended March 31,

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

Change 2025 2024 %

Single-family 830 1,488 (44) % $ 232.3 $ 417.3 (44) % 279,900 280,400 — %

Multi-family 804 724 11 % 214.0 149.2 43 % 266,200 206,100 29 %

1,634 2,212 (26) % $ 446.3 $ 566.5 (21) % 273,100 256,100 7 %

Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

(In millions)

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Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

Gross profit — rental 22.6 % 18.4 % 19.4 % 21.5 %

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Rental pre-tax income 9.6 % 9.0 % 7.6 % 11.4 %

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.

Revenues from our rental operations decreased to $236.6 million and $454.3 million during the three and six months ended March 31, 2025, respectively, from $371.3 million and $566.5 million in the prior year periods.

Pre-tax income was $22.8 million and $34.7 million during the three and six months ended March 31, 2025, respectively, compared to $33.3 million and $64.6 million in the prior year periods.

The decline in pre-tax income was due to a decrease in revenues due to fewer overall home and unit closings compared to the prior year periods.

At March 31, 2025, our rental property inventory of $3.1 billion included $813.2 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:

Single-family rental homes and lots and multi-family rental units at March 31, 2025 and September 30, 2024 consisted of the following:

Rental Inventory

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Multi-family rental units (3) 12,330 11,960

(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.

(1) Single-family rental homes at March 31, 2025 consist of 580 homes under construction and 2,820 completed homes compared to 340 homes under construction and 2,800 completed homes at September 30, 2024.

(2) Single-family rental lots at March 31, 2025 consist of 610 undeveloped lots and 590 finished lots compared to 910 undeveloped lots and 1,000 finished lots at September 30, 2024.

(3) Multi-family rental units at March 31, 2025 consist of 5,800 units under construction and 6,530 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 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.

At March 31, 2025, we owned 62% of the outstanding shares of Forestar.

Forestar is a publicly traded residential lot development company with operations in 65 markets across 24 states as of March 31, 2025.

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

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

Results of operations for the Forestar segment for the three and six months ended March 31, 2025 and 2024 were as follows:

Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

(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 months ended December 31, 2024 and 2023:

Three Months Ended December 31,

The following tables provide further information regarding Forestar’s revenues and lot position as of and for the three and six months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Lots Sold Value (In millions)

4 unchanged sentences

Total lots sold 3,411 3,289 $ 346.9 $ 325.9

Six Months Ended March 31,

Lots Sold Value (In millions)

2025 2024 2025 2024

Residential single-family lots sold

Lots sold to D.R.

Horton 4,613 5,939 $ 486.4 $ 583.9

Total lots sold 5,744 6,439 $ 594.2 $ 630.1

2025 September 30,

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Owned lots fully developed 9,500 6,300

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.

At March 31, 2025 and September 30, 2024, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.8 billion and $2.3 billion, respectively.

Forestar’s inventory and land option charges consisted of $0.9 million and $2.0 million of earnest money and pre-acquisition cost write-offs in the three and six months ended March 31, 2025, respectively, compared to $0.2 million and $0.4 million in the prior year periods.

There were no impairment charges recorded in the current or prior year periods.

SG&A expense for the three and six months ended March 31, 2025 included charges of $1.8 million and $3.6 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.

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

Shared services charges were $1.4 million and $2.7 million, respectively, in the prior year periods.

Other expense in the three and six months ended March 31, 2025 includes a loss on extinguishment of debt of $1.1 million due to Forestar’s repurchase of $329.4 million of its $400 million principal amount of 3.85% senior notes due 2026 in March 2025.

The decline in Forestar’s pre-tax income was primarily due to lower gross margins on lot sales and higher SG&A costs.

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 months ended December 31, 2024 and 2023.

Three Months Ended December 31,

2024 2023 % Change

Three Months Ended March 31, Six Months Ended March 31,

2025 2024 % Change 2025 2024 % 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 13,839 16,029 (14) % 30,735 32,956 (7) %

Three Months Ended December 31,

2024 2023 % Change

Three Months Ended March 31, Six Months Ended March 31,

2025 2024 % Change 2025 2024 % Change

(In millions)

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Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

General and administrative expense 75.3 % 75.9 % 79.6 % 77.2 %

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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 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.

In the three and six months ended March 31, 2025, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers decreased 14% and 8%, respectively, corresponding to the decreases of 15% and 8%, respectively, in the number of homes closed by our homebuilding operations.

The percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing was 81% and 80% in the three and six months ended March 31, 2025, respectively, up from 80% and 79% in the prior year periods.

These percentages reflect 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 14% and 7% in the three and six months ended March 31, 2025, respectively, compared to the prior year periods.

Virtually all of the mortgage loans held for sale on March 31, 2025 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 six months ended March 31, 2025, approximately 69% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 29% 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 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.

Total loan origination volume decreased 14% and 8% in the three and six months ended March 31, 2025, respectively, and revenues from our mortgage operations decreased 2% to $171.2 million and 4% to $310.9 million in the three and six months ended March 31, 2025, respectively, from $175.1 million and $323.1 million in the prior year periods.

Revenues from our title operations decreased 17% to $41.7 million and 11% to $84.3 million in the three and six months ended March 31, 2025, respectively, from $50.5 million and $95.1 million in the prior year periods, due to a decrease in transactions closed through our title operations.

General and administrative (G&A) expense related to our financial services operations decreased 6% to $160.3 million and 3% to $314.5 million in the three and six months ended March 31, 2025, respectively, from $171.2 million and $322.7 million in the prior year periods.

As a percentage of financial services revenues, G&A expense was 75.3% and 79.6% in the three and six months ended March 31, 2025, respectively, compared to 75.9% and 77.2% in the prior year periods.

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 3,114 and 2,978 people at December 31, 2024 and 2023, respectively.

Our financial services operations employed 3,121 and 3,016 people at March 31, 2025 and 2024, 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 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.

Other income decreased 14% to $20.4 million and 16% to $40.9 million in the three and six months ended March 31, 2025, respectively, from $23.6 million and $48.5 million in the prior year periods, 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 $11.5 million in the three months ended December 31, 2024 compared to $9.9 million in the prior year period.

The pre-tax income of all of our subsidiaries engaged in other business activities was $11.2 million and $22.7 million in the three and six months ended March 31, 2025, respectively, compared to $9.2 million and $19.1 million in the prior year periods.

RESULTS OF OPERATIONS - CONSOLIDATED

Income before Income Taxes

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.

Pre-tax income for the three and six months ended March 31, 2025 was $1.1 billion and $2.2 billion, respectively, compared to $1.5 billion and $2.8 billion in the prior year periods.

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

Our income tax expense for the three and six months ended March 31, 2025 was $248.0 million and $506.0 million, respectively, compared to $344.8 million and $636.6 million in the prior year periods.

Our effective tax rate was 23.2% for both the three and six months ended March 31, 2025 compared to 22.6% and 22.9% 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 $89.5 million at March 31, 2025 compared to $182.4 million at September 30, 2024.

We have a valuation allowance of $14.9 million at March 31, 2025 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 also returning capital to our shareholders through repurchases of our common stock and dividend payments.

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 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 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.

At March 31, 2025, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $6.6 billion.

$2.1 billion was payable within 12 months, including $1.4 billion which is outstanding under our mortgage repurchase facilities and $500 million principal amount of 2.6% homebuilding senior notes maturing in October 2025.

At March 31, 2025, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 21.1% compared to 18.9% at September 30, 2024 and 20.0% at March 31, 2024.

Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 14.3% at March 31, 2025 compared to 5.2% at September 30, 2024 and 10.8% at March 31, 2024.

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

At March 31, 2025, we had outstanding letters of credit of $234.2 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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Capital Resources - Homebuilding

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

Cash and Cash Equivalents — At March 31, 2025, cash and cash equivalents of our homebuilding segment totaled $1.9 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.

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

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.

At March 31, 2025, there were no borrowings outstanding and $211.9 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.02 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 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.

Public Unsecured Debt — At March 31, 2025, we had $3.0 billion principal amount of homebuilding senior notes outstanding that mature from October 2025 through October 2035.

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

In February 2025, we issued $700 million principal amount of 5.5% senior notes due October 15, 2035, with interest payable semi-annually.

The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 5.6%.

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.

At March 31, 2025, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility and public debt obligations.

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

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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.

During the six months ended March 31, 2025, we repurchased 16.5 million shares at a total cost, including commissions and excise taxes, of $2.4 billion.

At March 31, 2025, the full amount of the debt repurchase authorization was remaining, and $1.2 billion of the stock repurchase authorization was remaining.

In April 2025, our Board of Directors authorized the repurchase of up to $5.0 billion of our common stock, replacing the previous authorization, which at that time had $1.1 billion remaining due to repurchases made subsequent to quarter end.

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 $3.0 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.

The inventory in our rental segment totaled $3.1 billion at March 31, 2025 compared to $2.9 billion at September 30, 2024 and $3.1 billion at March 31, 2024.

Cash and Cash Equivalents — At March 31, 2025, cash and cash equivalents of our rental segment totaled $98.6 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 $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.

Borrowings and repayments under the facility totaled $790 million and $485 million, respectively, during the six months ended March 31, 2025.

At March 31, 2025, there were $1.05 billion of borrowings outstanding at a 6.4% 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 December 31, 2024, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

At March 31, 2025, 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.

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Capital Resources - Forestar

The achievement of Forestar’s long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations.

Forestar’s achievement of its long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations.

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 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.

At March 31, 2025, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 34.7% compared to 30.7% at September 30, 2024 and 32.4% at March 31, 2024.

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 29.8% compared to 12.4% at September 30, 2024 and 16.4% at March 31, 2024.

Cash and Cash Equivalents — At March 31, 2025, Forestar had cash and cash equivalents of $174.3 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.

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

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.

At March 31, 2025, there were no borrowings outstanding and $22.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $617.7 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 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 December 31, 2024, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Unsecured Debt — As of March 31, 2025, Forestar had $870.6 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which mature from May 2026 through March 2033 and represent unsecured obligations of Forestar.

In March 2025, Forestar issued $500 million principal amount of 6.5% senior notes due March 15, 2033, with interest payable semi-annually.

The annual effective interest rate of these notes after giving effect to the amortization of financing costs is 6.7%.

The net proceeds from this issuance were primarily used to fund Forestar’s tender offer to purchase any and all of its outstanding $400 million principal amount of 3.85% senior notes due 2026 (of which $329.4 million aggregate principal amount was tendered).

The repurchase price of $333.4 million included accrued and unpaid interest of $4.2 million.

Forestar recognized a $1.1 million loss on extinguishment of debt upon repurchase of the notes.

At March 31, 2025, 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.

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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 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.

All of the $30 million authorization was remaining at March 31, 2025, and the authorization has no expiration date.

Issuance of Common Stock — During the six months ended March 31, 2025, there were no shares issued under Forestar’s ATM program.

At March 31, 2025, $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 December 31, 2024, cash and cash equivalents of our financial services segment totaled $238.6 million.

Cash and Cash Equivalents — At March 31, 2025, cash and cash equivalents of our financial services segment totaled $269.1 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.

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

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.

At March 31, 2025, DHI Mortgage had an obligation of $1.4 billion under the committed mortgage repurchase facility at a 6.0% annual interest rate.

At March 31, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $82.5 million at a 5.6% annual interest rate.

At March 31, 2025, $2.35 billion of mortgage loans held for sale with a collateral value of $2.31 billion were pledged under the committed mortgage repurchase facility, and $90.5 million of mortgage loans held for sale with a collateral value of $85.8 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 December 31, 2024, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

At March 31, 2025, 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 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.

In the six months ended March 31, 2025, net cash provided by operating activities was $210.5 million compared to $470.1 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 $876.0 million and $197.2 million of cash provided by our homebuilding and financial services segments, respectively, partially offset by $469.8 million and $381.6 million of cash used in our Forestar and rental segments, respectively.

Cash provided by a decrease in construction in progress and finished home inventory was $229.8 million in the current year period, reflecting a decrease in our completed unsold homes in the current period.

Cash used to increase residential land and lots was $1.6 billion in the current year period compared to $1.4 billion in the prior year period.

Investing Cash Flow Activities

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 six months ended March 31, 2025, net cash used in investing activities was $94.5 million compared to $66.0 million in the prior year period.

In the current year period, uses of cash included the payment of $53.1 million related to a business acquisition in our South Central region and purchases of property and equipment totaling $47.6 million.

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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 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 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.

During the six months ended March 31, 2025, net cash used in financing activities was $2.1 billion, consisting primarily of cash used to repurchase shares of our common stock of $2.4 billion, repayment of $500 million principal amount of our 2.5% homebuilding senior notes at maturity, early repurchase of $329.4 million of Forestar’s $400 million principal amount 3.85% senior notes, payment of cash dividends totaling $254.0 million and net payments on our mortgage repurchase facilities of $86.4 million,.

These uses of cash were partially offset by note proceeds from our issuance of $700 million principal amount of 5.5% homebuilding senior notes, note proceeds from Forestar’s issuance of $500 million principal amount of 6.5% senior notes and net borrowings on our rental revolving credit facility of $305 million.

During the six months ended March 31, 2024, net cash used in financing activities was $270.6 million, consisting primarily of cash used to repurchase shares of our common stock of $794.5 million and payment of cash dividends totaling $199.1 million.

These uses of cash were partially offset by net borrowings on our rental revolving credit facility and mortgage repurchase facilities of $585 million and $214.4 million, respectively.

During each of the first two quarters of fiscal 2025, our Board of Directors approved a quarterly cash dividend of $0.40 per common share, the most recent of which was paid on February 14, 2025 to stockholders of record on February 7, 2025.

Cash dividends declared and paid in the three and six months ended March 31, 2025 totaled $125.5 million and $254.0 million, respectively.

In April 2025, our Board of Directors approved a quarterly cash dividend of $0.40 per common share, payable on May 9, 2025 to stockholders of record on May 2, 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 December 31, 2024, D.R.

As of March 31, 2025, D.R.

had $3.0 billion principal amount of homebuilding senior notes outstanding due through October 2035 and no amounts outstanding on its homebuilding revolving credit facility.

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and Guarantor Subsidiaries

Summarized Balance Sheet Data December 31,

Summarized Balance Sheet Data March 31,

2025 September 30,

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21,273.2 22,410.7

Summarized Statement of Operations Data Three Months Ended

December 31, 2024 Year Ended

Summarized Statement of Operations Data Six Months Ended

March 31, 2025 Year Ended

September 30, 2024

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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 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.

At March 31, 2025 and September 30, 2024, we had reserves for approximately 970 and 825 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the six months ended March 31, 2025, we were notified of approximately 330 new construction defect claims and resolved 185 construction defect claims for a total cost of $17.4 million.

At March 31, 2024 and September 30, 2023, we had reserves for approximately 595 and 600 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements.

During the six months ended March 31, 2024, we were notified of approximately 185 new construction defect claims and resolved 190 construction defect claims for a total cost of $44.8 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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Forward-Looking Statements

Some of the statements contained in this report, as well as in other materials we have filed or will file with the Securities and Exchange Commission, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

Some of the statements contained in this report, as well as in other materials we have filed or will file with the SEC, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management’s beliefs as well as assumptions made by, and information currently available to, management.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis