What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-09 compared with 2024-10-10 · 237 added, 318 removed, 376 unchanged (60% of the section changed)

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The following table presents a summary of our consolidated results of operations (dollars in thousands, except per share amounts):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Homebuilding $ 1,387,041 $ 1,461,698 (5) %

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$ 1.49 $ 1.76 (15) %

In the 2024 third quarter, our operational execution contributed to year-over-year growth in total revenues, net income and diluted earnings per share.

While longer-term housing market drivers remain largely positive, including favorable demographic trends, rising household formations, solid employment, wage growth and the undersupply of new and resale homes, net orders for the 2024 third quarter were essentially flat with the year-earlier quarter, reflecting variability in demand across the quarter.

Homebuying demand softened from late June through July, primarily due to consumers evaluating elevated mortgage interest rates, as well as rising general economic concerns.

Amid the uneven market conditions, and considering the price increases we had implemented in most of our communities in the 2024 first half, we selectively adjusted pricing at certain communities in the third quarter to help stimulate demand and optimize the sales price and pace balance for each such asset.

We also employed targeted sales strategies during the 2024 third quarter, as we have to varying degrees since the 2022 second half, including homebuyer concessions (particularly, mortgage-related concessions such as interest rate buydowns), to support homebuyers, helping to drive order activity and minimize cancellations.

With these actions and a general moderation in mortgage interest rates, our weekly net orders improved sequentially in each of the last three weeks of August.

For the 2024 third quarter, we achieved a monthly net order pace per community of 4.1, compared to 4.3 a year ago.

The net order value for the current quarter increased 2% year over year to $1.54 billion, driven by an increase in the average selling price of our net orders, mainly due to shifts in product and geographic mix.

Our average community count for the quarter increased 5% year over year, and we ended the quarter with 254 communities, up 10%.

Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations.

In the 2025 first quarter, market conditions were shaped by ongoing elevated mortgage interest rates, housing affordability concerns and heightened macroeconomic and geopolitical uncertainties that have negatively affected consumer confidence and caused homebuyers to take longer to make their purchase decisions.

Within this environment, our first-quarter performance fell short of our expectations, with a 9% year-over-year decrease in the number of homes delivered to 2,770, primarily due to fewer inventory homes sold and delivered, and utility services-related delays stemming from the unprecedented wildfires in Southern California as certain municipal resources were diverted to fire-related priorities.

Reflecting the market conditions, demand at the start of the Spring selling season was more muted relative to the past few years, and despite a healthy level of traffic in our communities, our 2,772 net orders for the 2025 first quarter were down 17% year over year, and our monthly net order pace per community was 3.6, compared to 4.6.

Also contributing to the year-over-year decline in our net orders were delays in several of our planned community openings until late in the first quarter or, in some cases, into the second quarter.

Even with the delayed openings, our average community count for the first quarter increased 7% year over year to 257, and our ending community count was 255, also up 7%.

We employed targeted sales strategies during the 2025 first quarter to improve affordability for our homebuyers and help drive order activity.

These sales strategies, which we have used to varying degrees since the 2022 second half, included homebuyer concessions, particularly mortgage-related concessions such as interest rate buydowns.

Additionally, in mid-February 2025, we selectively reduced selling prices on a community-by-community basis at roughly one-half of our communities to stimulate demand, and in many cases, we lowered or eliminated homebuyer concessions, helping to offset the margin impact of those price changes.

Consumers responded favorably to these steps, which were focused around offering the most compelling value, and we saw improved weekly net orders and a normalizing absorption pace at the end of the quarter.

Homebuilding revenues for the three months ended February 28, 2025 were generated solely from housing operations.

In the year-earlier period, homebuilding revenues were generated from housing operations and land sales.

Our 2024 third-quarter housing revenues grew 11% year over year to $1.75 billion due to an 8% increase in the number of homes delivered to 3,631 and a 3% increase in their average selling price to $480,900.

Approximately 50% of our homes delivered in the 2024 third quarter were to first-time homebuyers.

Homebuilding operating income for the three months ended August 31, 2024 rose 5% from the year-earlier period to $189.0 million.

As a percentage of revenues, homebuilding operating income was 10.8% for the 2024 third quarter compared to 11.3% for the year-earlier quarter, primarily reflecting a lower housing gross profit margin, partly offset by a modest improvement in selling, general and administrative expenses as a percentage of housing revenues.

Our housing gross profit margin for the 2024 third quarter was 20.6%, compared to 21.5% for the year-earlier quarter.

Net income and diluted earnings per share for the three months ended August 31, 2024 increased 5% and 13%, respectively, year over year.

The increase in diluted earnings per share for the 2024 third quarter was driven by higher net income and the favorable impact of our common stock repurchases over the past several quarters .

During the nine months ended August 31, 2024, we remained focused on balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context.

The significant supply chain disruptions we experienced in recent years have largely subsided, and together with our ongoing initiative to simplify our product offerings,

we have continued to improve our construction cycle times compared to last year.

Among other benefits, faster construction times make our Built to Order® personalized homes more appealing to customers, increase our inventory turns and expand the population of homes available for delivery.

Reflecting our improved build times and lower cancellation rate in the current period, our homes delivered as a percentage of backlog at the beginning of the quarter increased to 58% for the 2024 third quarter, from 46% for the year-earlier quarter.

We believe our strong balance sheet and liquidity position will provide us with the flexibility to operate effectively through evolving market conditions during the 2024 fourth quarter and pursue our priorities of investing in land and land development to support future growth and returning capital to our stockholders.

We continue to take a balanced approach in allocating our capital aligned with these priorities.

For the nine months ended August 31, 2024, we increased our investments in land and land development to $2.10 billion, representing a 59% increase from the prior-year period, and repurchased 3,460,697 shares of our common stock at a total cost of $250.0 million.

Over the nine months ended August 31, 2024, we have repurchased about 5% of our shares that were outstanding at the start of the fiscal year.

Additionally, in the 2024 second quarter, we raised the quarterly cash dividend on our common stock by $.05 per share, or 25%, to $.25 per share, and we paid a cash dividend at this rate in the 2024 second and third quarters.

We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility.

We had no cash borrowings outstanding under the Credit Facility at August 31, 2024.

Although our ending backlog value at August 31, 2024 decreased 14% year over year to approximately $2.92 billion, we believe we are well-positioned to achieve solid results for the 2024 fourth quarter and full year, as described below under “Outlook.”

Our 2025 first-quarter housing revenues were down 5% year over year to $1.39 billion due to a 9% decrease in the number of homes delivered to 2,770, partly offset by a 4% increase in their average selling price to $500,700.

Approximately 49% of our homes delivered in the 2025 first quarter were to first-time homebuyers.

Our homes delivered as a percentage of backlog at the beginning of the quarter increased to 62% for the 2025 first quarter, from 55% for the year-earlier quarter, mainly due to our improved build times.

Homebuilding operating income for the three months ended February 28, 2025 declined 19% from the year-earlier period to $127.3 million.

As a percentage of revenues, homebuilding operating income was 9.2% for the 2025 first quarter compared to 10.8% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin.

Our housing gross profit margin for the 2025 first quarter was 20.2%, compared to 21.5% for the year-earlier quarter, mainly due to higher

relative land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues.

Net income and diluted earnings per share for the three months ended February 28, 2025 decreased 21% and 15%, respectively, year over year.

Our diluted earnings per share for the 2025 first quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters .

We continue to take a balanced approach in allocating our capital aligned with our priorities of investing in land and land development to support future growth and returning capital to our stockholders.

For the three months ended February 28, 2025, we increased our investments in land and land development to $920.3 million, representing a 57% increase from the prior-year period, and repurchased 753,939 shares of our common stock at a total cost of $50.0 million.

We ended the 2025 first quarter with total liquidity of $1.25 billion, including cash and cash equivalents and $981.7 million of available capacity under the Credit Facility.

We had $100.0 million of cash borrowings outstanding under the Credit Facility at February 28, 2025.

We have revised our projections for 2025 due to our first quarter results, the relatively soft start to the Spring selling season and the selling price adjustments we implemented in mid-February 2025.

Although our ending backlog value at February 28, 2025 decreased 21% year over year to approximately $2.20 billion, we believe we are well positioned to achieve our updated projections for the 2025 second quarter and full year, as described below under “Outlook.”

Financial Results .

The following table presents a summary of certain financial and operational data for our homebuilding operations (dollars in thousands, except average selling price):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 2024 2023

Three Months Ended

February 28, 2025 February 29, 2024

Housing $ 1,387,041 $ 1,458,126

Land — 6,035 3,572 6,035

Total 1,387,041 1,461,698

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Operating income 127,339 157,676

Interest income and other

4,073 5,492 29,379 7,688

Interest income

Equity in income (loss) of unconsolidated joint ventures

3,453 (112) 3,232 (1,182)

Homebuilding pretax income $ 131,831 $ 163,088

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Operating income as a percentage of revenues 9.2 % 10.8 %

Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations.

For the three months ended August 31, 2023, homebuilding revenues were generated from housing operations and land sales.

Housing revenues for the 2024 third quarter grew 11% from the year-earlier quarter due to increases of 8% in the overall number of homes delivered and 3% in their overall average selling price.

The year-over-year growth in our 2024 third quarter housing revenues reflected increases of 50%, 15% and 4% in our West Coast, Southeast and Southwest homebuilding reporting segments, respectively, partially offset by a 26% decrease in our Central segment.

The growth in the number of homes delivered as compared to the year-earlier quarter reflected increases of 57% and 9% in our West Coast and Southeast homebuilding reporting segments, respectively, partly offset by decreases of 5% and 15% in our Southwest and Central segments, respectively.

The higher overall average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-priced West Coast homebuilding reporting segment, and a year-over-year decrease in homebuyer concessions.

For the nine months ended August 31, 2024 and 2023, homebuilding revenues were generated from both housing operations and land sales.

Housing revenues for the nine months ended August 31, 2024 rose 4% from the corresponding 2023 period, due to 4% growth in the number of homes delivered, while the average selling price remained essentially the same.

There were no land sales for the three months ended August 31, 2024, compared to $6.0 million of land sale revenues for the three months ended August 31, 2023.

For the nine months ended August 31, 2024 and 2023, land sale revenues totaled $3.6 million and $6.0 million, respectively.

Homebuilding revenues for the three months ended February 28, 2025 were generated solely from housing operations.

For the three months ended February 29, 2024, homebuilding revenues were generated from housing operations and land sales.

Housing revenues for the 2025 first quarter declined 5% from the year-earlier quarter due to a 9% decrease in the number of homes delivered, partly offset by a 4% increase in their overall average selling price.

Our 2025 first-quarter housing revenues reflected year-over-year decreases of 3%, 13% and 24% in our Southwest, Central and Southeast homebuilding reporting segments, respectively, partially offset by an 8% increase in our West Coast segment.

The number of homes delivered decreased as compared to the year-earlier quarter, primarily due to fewer inventory homes sold and delivered, and utility services-related delays stemming from the unprecedented wildfires in Southern California as certain municipal resources were diverted to fire-related priorities.

The higher overall average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-priced West Coast homebuilding reporting segment, partly offset by a year-over-year increase in homebuyer concessions.

There were no land sales for the three months ended February 28, 2025, compared to $3.6 million of land sale revenues for the three months ended February 29, 2024.

Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

Operating Income .

Our homebuilding operating income for the three months ended August 31, 2024 increased 5% year over year, reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses.

Operating income for the 2024 third quarter included inventory-related charges of $1.2 million, compared to $.6 million in the year-earlier quarter.

As a percentage of revenues, our operating income for the three months ended August 31, 2024 was 10.8%, compared to 11.3% for the corresponding 2023 period due to a lower housing gross profit margin, partially offset by lower selling, general and administrative expenses as a percentage of housing revenues.

Excluding inventory-related charges, our operating income as a percentage of revenues was 10.9% for the 2024 third quarter, compared to 11.4% for the year-earlier quarter.

For the nine months ended August 31, 2024, our operating income decreased slightly from the year-earlier period, as higher selling, general and administrative expenses were mostly offset by higher housing gross profits.

Operating income for the nine months ended August 31, 2024 included inventory-related charges of $3.7 million, compared to $10.2 million of such charges in the corresponding 2023 period.

As a percentage of revenues, our operating income for the nine months ended August 31, 2024 decreased 50 basis points year over year to 10.9%, reflecting higher selling, general and administrative expenses as a percentage of housing revenues and a lower housing gross profit margin.

Excluding inventory-related charges, our operating income as a percentage of revenues declined 60 basis points to 11.0% for the nine months ended August 31, 2024 from 11.6% for the corresponding year-earlier period.

• Housing Gross Profits – Housing gross profits of $360.4 million for the three months ended August 31, 2024 grew 7% year over year, reflecting an increase in housing revenues, partly offset by a 90 basis-point decrease in our housing gross profit margin to 20.6%.

The decline in the housing gross profit margin was primarily due to product and geographic mix shifts of homes delivered along with higher relative construction and land costs, which included the impact of pricing adjustments to support demand, partially offset by reduced homebuyer concessions.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.6% and 1.8% for the three months ended August 31, 2024 and 2023, respectively.

Excluding the inventory-related charges associated with housing operations of $1.2 million in the current quarter and $.6 million in the year-earlier quarter, our adjusted housing gross profit margin of 20.7% for the 2024 third quarter decreased 80 basis points year over year.

For the nine months ended August 31, 2024, our housing gross profits of $1.03 billion increased 3% from the year-earlier period due to higher housing revenues, partially offset by a 20 basis-point decline in our housing gross profit margin to 21.1%.

The housing gross profit margin mainly reflected product and geographic mix shifts of homes delivered and higher relative construction and land costs, largely offset by decreases in both inventory-related charges and homebuyer concessions.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for the nine months ended August 31, 2024, compared to 1.9% for the corresponding 2023 period.

Excluding the inventory-related charges associated with housing operations of $3.7 million in the current period and $10.2 million in the year-earlier period, our adjusted housing gross profit margin of 21.1% for the nine months ended August 31, 2024 decreased 50 basis points year over year.

Our homebuilding operating income for the three months ended February 28, 2025 decreased 19% year over year, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for the 2025 first quarter included inventory-related charges of $1.5 million, compared to $1.3 million in the year-earlier quarter.

As a percentage of revenues, our operating income for the three months ended February 28, 2025 was 9.2%, compared to 10.8% for the corresponding 2024 period, mainly due to a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of housing revenues.

Excluding inventory-related charges, our operating income as a percentage of revenues was 9.3% for the 2025 first quarter, compared to 10.9% for the year-earlier quarter.

• Housing Gross Profits – Housing gross profits of $279.6 million for the three months ended February 28, 2025 were down 11% year over year, reflecting a decrease in housing revenues and a 130 basis-point decrease in our housing gross profit margin to 20.2%.

The decline in the housing gross profit margin was primarily due to higher relative land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.7% and 1.8% for the three months ended February 28, 2025 and February 29, 2024, respectively.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 20.3% for the 2025 first quarter decreased 130 basis points year over year.

The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under “Non-GAAP Financial Measures.”

• Land Sale Profits – There was no land sale activity in the three months ended August 31, 2024, compared to land sale profits of $1.1 million in the three months ended August 31, 2023.

For the nine months ended August 31, 2024 and 2023, land sale profits totaled $1.5 million and $1.1 million, respectively.

• Land Sale Profits – There was no land sale activity in the three months ended February 28, 2025, compared to land sale profits of $1.5 million in the three months ended February 29, 2024.

• Selling, General and Administrative Expenses – The following table presents the components of our selling, general and administrative expenses (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2024 % of Housing Revenues 2023 % of Housing Revenues 2024 % of Housing Revenues 2023 % of Housing Revenues

Three Months Ended

February 28, 2025 % of Housing Revenues February 29, 2024 % of Housing Revenues

Marketing expenses $ 39,663 2.9 % $ 36,360 2.5 %

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(a) Commission expenses include sales commissions on homes delivered paid to internal sales counselors and external real estate brokers.

Selling, general and administrative expenses for the three months ended August 31, 2024 increased 7% from the year-earlier quarter.

As a percentage of housing revenues, our selling, general and administrative expenses for the 2024 third quarter decreased 40 basis points, primarily reflecting increased operating leverage from higher housing revenues.

For the nine months ended August 31, 2024, selling, general and administrative expenses increased 7% year over year.

As a percentage of housing revenues, selling, general and administrative expenses for the nine months ended August 31, 2024 increased 30 basis points mainly due to higher costs, including marketing and other expenses associated with the increase in our community count during the year to position our operations for growth, partially offset by increased operating leverage from higher housing revenues.

Interest Income/Expense and Other .

Interest income and other for the three months ended August 31, 2024 and the three months and nine months ended August 31, 2023, was comprised solely of interest income.

For the nine months ended August 31, 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we held an ownership interest.

Further information regarding this gain is provided in Note 10 – Other Assets in the Notes to Consolidated Financial Statements in this report.

Interest income, which is generated from short-term investments, was $4.1 million for the three months ended August 31, 2024, compared to $5.5 million for the year-earlier quarter, reflecting a decrease in the average balance of cash equivalents and a lower interest rate.

For the nine months ended August 31, 2024, interest income increased to $16.9 million, compared to $7.7 million for the corresponding period of 2023, due to a higher average balance of cash equivalents and a higher interest rate in the 2024 period.

Selling, general and administrative expenses for the three months ended February 28, 2025 decreased 3% from the year-earlier quarter.

As a percentage of housing revenues, our selling, general and administrative expenses for the 2025 first quarter increased 20 basis points, primarily reflecting reduced operating leverage from lower housing revenues.

Interest Income/Expense .

Interest income, which is generated from short-term investments, was $2.1 million for the three months ended February 28, 2025, compared to $5.9 million for the year-earlier quarter, reflecting a decrease in the average balance of cash equivalents and a lower interest rate.

Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs.

All interest incurred during the three-month and nine-month periods ended August 31, 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period.

All interest incurred during the three-month periods ended February 28, 2025 and February 29, 2024 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period.

Accordingly, we had no interest expense for these periods.

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Equity in Income (Loss) of Unconsolidated Joint Ventures .

Our equity in income of unconsolidated joint ventures was $3.5 million and $3.2 million for the three-month and nine-month periods ended August 31, 2024, respectively.

For the three-month and nine-month periods ended August 31, 2023, our equity in loss of unconsolidated joint ventures was nominal and $1.2 million, respectively.

The year-over-year improvement for the 2024 periods mainly reflected homes delivered by an unconsolidated joint venture in California.

In the corresponding periods of 2023, our unconsolidated joint ventures did not

deliver any homes.

Our equity in income of unconsolidated joint ventures was $2.4 million for the three months ended February 28, 2025, compared to our equity in loss of unconsolidated joint ventures of $.4 million for three months ended February 29, 2024.

The year-over-year improvement for the 2025 period mainly reflected homes delivered by an unconsolidated joint venture in California.

In the corresponding period of 2024, our unconsolidated joint ventures did not deliver any homes.

Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

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The following table presents information about our net orders, cancellation rate, ending backlog and community count (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 2024 2023

Three Months Ended

February 28, 2025 February 29, 2024

Net orders 2,772 3,323

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Average community count 257 240

(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design studio options and upgrades for homes in backlog during the same period.

(b) Cancellation rates represent the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.

Net orders for the 2024 third quarter were essentially flat with the year-earlier quarter, reflecting variability in demand across the quarter.

Homebuying demand softened from late June through July, primarily due to consumers evaluating elevated mortgage interest rates, as well as rising general economic concerns.

With these actions and a general moderation in mortgage interest rates, our weekly net orders improved sequentially in each of the last three weeks of August.

The pace of monthly net orders per community was 4.1 in the 2024 third quarter, compared to 4.3 in the corresponding 2023 quarter, reflecting our higher average community count for the quarter.

The value of our net orders expanded 2% year over year as a result of a 2% increase in the average selling price for our net orders to $500,200, primarily due to a shift in product and geographic mix.

In the 2024 third quarter, the year-over-year growth in our overall net order value reflected increases of 6% in both our West Coast and Central homebuilding reporting segments, partly offset by decreases of 2% and 7% in our Southwest and Southeast segments, respectively.

Our cancellation rate as a percentage of gross orders for the three months ended August 31, 2024 improved from the year-earlier period, reflecting positive housing market dynamics, as well as buyers’ ability and willingness to close on their homes when available for delivery.

The number of homes in our backlog and our backlog value at August 31, 2024 decreased 18% and 14%, respectively, from August 31, 2023.

The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 9% in our Southwest segment to 24% in our Southeast segment.

(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period.

(b) Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.

Net orders for the 2025 first quarter decreased 17%, compared to the year-earlier quarter, and the pace of monthly net orders per community was 3.6 in the 2025 first quarter, compared to 4.6 in the corresponding 2024 quarter, reflecting our lower net orders as well as a higher average community count.

The decreases in our net orders and monthly pace per community reflected market conditions in the 2025 first quarter, with demand at the start of the Spring selling season more muted relative to the past few years, shaped by ongoing elevated mortgage interest rates, housing affordability concerns and heightened macroeconomic and geopolitical uncertainties that have negatively affected consumer confidence and caused homebuyers to take longer to make their purchase decisions.

In addition, several of our planned community openings were delayed until late in the first quarter or, in some cases, into the second quarter, which also contributed to the year-over-year decline in our net orders.

We employed targeted sales strategies during the 2025 first quarter to improve affordability for our homebuyers and help drive order activity.

These sales strategies, which we have used to varying degrees since the 2022 second half, included homebuyer concessions, particularly mortgage-related concessions such as interest rate buydowns.

Additionally, in mid-February 2025, we selectively reduced selling prices on a community-by-community basis at roughly half of our communities to stimulate demand, with a focus around offering consumers the most compelling value, and from these steps we saw improved weekly net orders and a normalizing absorption pace at the end of the quarter.

The value of our net orders for the 2025 first quarter decreased

15% year over year as a result of the 17% decrease in net orders, partly offset by a 2% increase in their average selling price to $485,600.

Our cancellation rate as a percentage of gross orders for the three months ended February 28, 2025 increased slightly from the year-earlier period.

The number of homes in our backlog and our backlog value at February 28, 2025 decreased 23% and 21%, respectively, from February 29, 2024.

The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 20% in our West Coast and Southwest segments to 25% in our Southeast segment.

Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.

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We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period.

Our average community count for the three months ended August 31, 2024 increased 5% from the year-earlier period.

Our ending community count for the 2024 third quarter grew 10% from the year-earlier quarter.

On a sequential basis, our 2024 third quarter ending community count expanded 3%.

To help drive future community count growth, we increased our investments in land and land development on a year-over-year basis for the nine months ended August 31, 2024, as discussed below under “Liquidity and Capital Resources.”

Our ending community count for the 2025 first quarter grew 7% from the year-earlier quarter.

Our average community count for the three months ended February 28, 2025 also increased 7% from the year-earlier period.

To help drive future growth, we increased our investments in land and land development on a year-over-year basis for the three months ended February 28, 2025, as discussed below under “Liquidity and Capital Resources.”

HOMEBUILDING REPORTING SEGMENTS

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The following tables present information about our homes delivered, net orders, cancellation rates as a percentage of gross orders, net order value, average community count and ending backlog (number of homes and value) by homebuilding reporting segment (dollars in thousands):

Three Months Ended August 31,

Homes Delivered Net Orders Cancellation Rates

Segment 2024 2023 2024 2023 2024 2023

West Coast 1,150 732 958 906 15 % 15 %

Southwest 681 717 616 656 11 13

Central 1,073 1,258 871 865 15 33

Southeast 727 668 640 670 18 19

Total 3,631 3,375 3,085 3,097 15 % 21 %

Net Order Value Average Community Count

Segment 2024 2023 Variance 2024 2023 Variance

West Coast $ 678,783 $ 638,643 6 % 83 71 17 %

Southwest 290,229 296,811 (2) 44 44 —

Central 313,108 296,255 6 77 79 (3)

Southeast 261,028 280,671 (7) 47 46 2

Total $ 1,543,148 $ 1,512,380 2 % 251 240 5 %

Nine Months Ended August 31,

Three Months Ended

Homes Delivered Net Orders Cancellation Rates

Segment 2024 2023 2024 2023 2024 2023

Segment February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024

West Coast 849 828 898 950 15 % 13 %

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Net Order Value Average Community Count

Segment 2024 2023 Variance 2024 2023 Variance

Segment February 28, 2025 February 29, 2024 Variance February 28, 2025 February 29, 2024 Variance

West Coast $ 607,179 $ 633,400 (4) % 88 73 21 %

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Backlog – Homes Backlog – Value

Segment 2024 2023 Variance 2024 2023 Variance

Segment February 28, 2025 February 29, 2024 Variance February 28, 2025 February 29, 2024 Variance

West Coast 1,260 1,667 (24) % $ 879,894 $ 1,100,889 (20) %

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The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course.

In addition, with our Built to Order business model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design studio options and upgrades buyers select in the community.

These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods.

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In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment.

Corporate and other had operating losses of $37.9 million and $36.0 million in the three months ended August 31, 2024 and 2023, respectively.

For the nine months ended August 31, 2024, Corporate and other had an operating loss of $111.6 million, compared to an operating loss of $104.5 million for the corresponding year-earlier period.

The financial results of our homebuilding reporting segments for the three-month and nine-month periods ended August 31, 2024 and 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

Corporate and other had operating losses of $36.5 million and $35.1 million in the three months ended February 28, 2025 and February 29, 2024, respectively.

The financial results of our homebuilding reporting segments for the three months ended February 28, 2025 and February 29, 2024 were impacted to varying degrees by homebuyer concessions we extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

The following table presents financial information related to our West Coast segment (dollars in thousands, except average selling price):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance 2024 2023 Variance

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Revenues $ 601,649 $ 558,302 8 %

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Average selling price $ 708,700 $ 673,800 5 %

Operating income as a percentage of revenues 12.6 % 10.9 % 170 bps 12.3 % 10.6 % 170 bps

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, revenues were generated solely from housing operations.

In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues.

The year-over-year growth in housing revenues for the three-month and nine-month periods ended August 31, 2024 was driven by an increase in the number of homes delivered, partially offset by a decrease in their average selling price.

Operating income for the three months and nine months ended August 31, 2024 was up

year over year, reflecting higher housing gross profits, partly offset by increased selling, general and administrative expenses.

Operating income as a percentage of revenues for the 2024 third quarter rose from the year-earlier quarter, primarily due to a 30 basis-point increase in the housing gross profit margin to 18.8% and a 140 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.2%.

For the nine months ended August 31, 2024, operating income as a percentage of revenues increased from the corresponding 2023 period, reflecting a 110 basis-point expansion in the housing gross profit margin to 19.2% and a 60 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.9%.

The year-over-year expansion in the housing gross profit margins for the three-month and nine-month periods ended August 31, 2024 mainly reflected lower relative construction and land costs, which occurred despite the effects of selective pricing adjustments aimed at stimulating demand.

Additionally, the year-over-year expansion reflected increased operating leverage from higher housing revenues.

The higher housing gross profit margin for the nine-month period ended August 31, 2024 also benefited from a decrease in homebuyer concessions.

For the three months ended August 31, 2024, inventory-related charges associated with housing operations were $.5 million, compared to $.4 million for the year-earlier period.

For the nine months ended August 31, 2024, inventory-related charges associated with housing operations were $2.4 million, compared to $4.3 million for the year-earlier period.

The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for the three-month and nine-month periods ended August 31, 2024 reflected lower relative sales commissions and improved operating leverage from higher housing revenues, partly offset by higher costs including marketing and other expenses associated with our increased community count in this segment.

Operating income as a percentage of revenues 11.1 % 11.8 % (70) bps

In the three months ended February 28, 2025, this segment’s revenues were generated solely from housing operations.

In the three months ended February 29, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues.

The year-over-year growth in housing revenues for the three months ended February 28, 2025 was driven by increases in both the number of homes delivered and their average selling price.

Operating income for the three months ended February 28, 2025 was nearly even year over year, as housing gross profits were essentially flat, and a slight decrease in selling, general and administrative expenses was partly offset by the absence of land sale profits in the current period.

Land sale profits were $.4 million in the year-earlier period.

Operating income as a percentage of revenues for the 2025 first quarter was down from the year-earlier quarter, primarily due to a 140 basis-point decrease in the housing gross profit margin to 18.4%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.3%.

The year-over-year decrease in the housing gross profit margin for the three months ended February 28, 2025 mainly reflected higher relative land costs as well as increased homebuyer concessions.

For the three months ended February 28, 2025, inventory-related charges associated with housing operations were $.6 million, compared to $1.3 million for the year-earlier period.

The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 primarily reflected improved operating leverage from higher housing revenues, partly offset by higher costs including marketing and other expenses associated with our increased community count in this segment.

The following table presents financial information related to our Southwest segment (dollars in thousands, except average selling price):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance 2024 2023 Variance

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Revenues $ 312,879 $ 323,125 (3) %

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Average selling price $ 461,500 $ 450,700 2 %

Operating income as a percentage of revenues 17.6 % 15.1 % 250 bps 17.3 % 16.7 % 60 bps

In the three-month and nine-month periods ended August 31, 2024, revenues were generated solely from housing operations.

Revenues for the three-month and nine-month periods ended August 31, 2023 were comprised of housing revenues and land sale revenues.

This segment’s housing revenues for the three months ended August 31, 2024 improved from $300.2 million in the year-earlier quarter, reflecting an increase in the average selling price of homes delivered, partly offset by a decrease in the number of homes delivered.

For the nine months ended August 31, 2024, housing revenues grew as a result of increases in both the number of homes delivered and their average selling price.

Operating income for the three months and nine months ended August 31, 2024 increased from the corresponding year-earlier period, due to higher housing gross profits, partially offset by higher selling, general and administrative expenses and the absence of land sale profits in the current periods, compared to $1.1 million of land sale profits in the year-earlier periods.

As a percentage of revenues, this segment’s operating income for the 2024 third quarter improved from the year-earlier quarter, reflecting a 290 basis-point increase in the housing gross profit margin to 25.3%, partly offset by a 40 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.8%.

Operating income as a percentage of revenues for the nine months ended August 31, 2024 improved from the corresponding 2023 period, primarily reflecting an 80 basis-point increase in the housing gross profit margin to 24.7%, partly offset by a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.3%.

The year-over-year expansion in the housing gross profit margins for the three-month and nine-month periods ended August 31, 2024 primarily reflected lower relative construction and land costs, increased operating leverage from higher housing revenues, a decrease in homebuyer concessions and product and geographic mix shifts of homes delivered.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2024 was mainly due to higher costs including marketing and other expenses, partly offset by improved operating leverage from higher housing revenues.

Operating income as a percentage of revenues 18.8 % 17.3 % 150 bps

In the three-month periods ended February 28, 2025 and February 29, 2024, this segment’s revenues were generated solely from housing operations.

The year-over-year decline in this segment’s housing revenues for the three months ended February 28, 2025 reflected a decrease in the number of homes delivered, partly offset by an increase in their average selling price.

Operating income for the three months ended February 28, 2025 increased from the corresponding year-earlier period due to higher housing gross profits and lower selling, general and administrative expenses.

As a percentage of revenues, this segment’s operating income for the 2025 first quarter grew from the year-earlier quarter, reflecting a 130 basis-point increase in the housing gross profit margin to 25.6% and a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.8%.

The year-over-year expansion in the housing gross profit margin for the three months ended February 28, 2025 primarily reflected lower relative construction and land costs, partly offset by increased homebuyer concessions and reduced operating leverage from lower housing revenues.

For the three months ended February 28, 2025, inventory-related charges associated with housing operations were $.3 million, compared to none for the year-earlier period.

The following table presents financial information related to our Central segment (dollars in thousands, except average selling price):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance 2024 2023 Variance

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Revenues $ 275,613 $ 320,484 (14) %

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Average selling price $ 367,000 $ 364,700 1 %

Operating income as a percentage of revenues 11.6 % 14.9 % (330) bps 12.0 % 14.8 % (280) bps

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, this segment’s revenues were generated solely from housing operations.

In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues.

Housing revenues for the three months ended August 31, 2024 decreased 26% from the year-earlier period.

For the nine months ended August 31, 2024, housing revenues of $1.07 billion were also down 26% year over year.

The lower housing revenues for the three-month and nine-month periods ended August 31, 2024 reflected decreases in both the number of homes delivered and their average selling price.

Operating income for the three months and nine months ended August 31, 2024 declined from the year-earlier period due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for the nine months ended August 31, 2024 also reflected land sale profits of $1.1 million.

This segment’s operating income as a percentage of revenues for the 2024 third quarter decreased from the year-earlier period, primarily due to a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.1%, and a 140 basis-point decline in the housing gross profit margin to 21.8%.

Operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the corresponding 2023 period, mainly reflecting a 100 basis-point decrease in the housing gross profit margin to 21.9% and a 180 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.0%.

The housing gross profit margin for the three months ended August 31, 2024 declined due to higher relative construction and land costs, which included the impact of selective pricing adjustments aimed at stimulating demand, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest and lower homebuyer concessions.

For the nine months ended August 31, 2024, the year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest.

Inventory-related charges associated with housing operations for the nine months ended August 31, 2024 were $.7 million, compared to $2.3 million for the year-earlier period.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2024 was primarily due to reduced operating leverage from lower housing revenues as well as higher costs, including marketing and other expenses.

Operating income as a percentage of revenues 9.2 % 12.0 % (280) bps

In the three months ended February 28, 2025, this segment’s revenues were generated solely from housing operations.

In the three months ended February 29, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues.

Housing revenues for the three months ended February 28, 2025 were down 13% from $317.3 million in the year-earlier period due to a decrease in the number of homes delivered, partly offset by a slight increase in their average selling price.

Land sale revenues totaled $3.2 million in the three months ended February 29, 2024.

Operating income for the 2025 first quarter declined from the year-earlier period mainly due to lower housing gross profits and the absence of land sale profits in the current quarter, partly offset by lower selling, general and administrative expenses.

Land sale profits totaled $1.1 million for the 2024 first quarter.

This segment’s operating income as a percentage of revenues for the 2025 first quarter decreased from the year-earlier period, primarily due to a 170 basis-point decline in the housing gross profit margin to 20.2% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.0%.

The housing gross profit margin for the three months ended February 28, 2025 declined mainly due to higher relative land costs, and reduced operating leverage from lower housing revenues.

Inventory-related charges associated with housing operations for the three months ended February 28, 2025 were $.3 million, compared to none for the year-earlier period.

The year-over-year increase in

selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 was mainly due to reduced operating leverage from lower housing revenues.

The following table presents financial information related to our Southeast segment (dollars in thousands, except average selling price):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance 2024 2023 Variance

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Revenues $ 196,900 $ 259,787 (24) %

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Operating income $ 13,077 $ 32,265 (59) %

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 Variance 2024 2023 Variance

Homes delivered 492 622 (21) %

Average selling price $ 400,200 $ 417,700 (4) %

Operating income as a percentage of revenues 11.0 % 14.8 % (380) bps 12.0 % 14.2 % (220) bps

This segment’s revenues for the three-month and nine-month periods ended August 31, 2024 and 2023 were generated solely from housing operations.

Housing revenues for the three-month and nine-month periods ended August 31, 2024 grew year over year due to increases in both the number of homes delivered and their average selling price.

Operating income for the three-month and nine-month periods ended August 31, 2024 decreased from the corresponding year-earlier periods, primarily reflecting higher selling, general and administrative expenses, as housing gross profits were essentially flat year over year.

As a percentage of revenues, operating income for the 2024 third quarter decreased from the year-earlier quarter due to a 390 basis-point decrease in the housing gross profit margin to 20.0%, slightly offset by a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.0%.

For the nine months ended August 31, 2024, operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the year-earlier period, reflecting a 220 basis-point decline in the housing gross profit margin to 20.9%.

The year-over-year decrease in the housing gross profit margin for the three months ended August 31, 2024 primarily reflected higher relative construction and land costs and product and geographic mix shifts of homes delivered.

For the nine months ended August 31, 2024, the housing gross profit margin decreased year over year mainly due to higher relative construction and land costs, partly offset by decreases in both homebuyer concessions and inventory-related charges.

For the nine months ended August 31, 2024, inventory-related charges associated with housing operations were $.4 million, compared to $3.5 million for the year-earlier period.

Operating income as a percentage of revenues 6.6 % 12.4 % (580) bps

This segment’s revenues for the three months ended February 28, 2025 and February 29, 2024 were generated solely from housing operations.

Housing revenues for the three-month period ended February 28, 2025 declined from the corresponding year-earlier period due to decreases in both the number of homes delivered and their average selling price.

Operating income for the three months ended February 28, 2025 was down year over year, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses.

As a percentage of revenues, operating income for the 2025 first quarter decreased from the year-earlier quarter due to a 390 basis-point decline in the housing gross profit margin to 17.7% and a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.1%.

The year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction and land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 was mainly due to reduced operating leverage from lower housing revenues as well as higher costs, including marketing and other expenses associated with our expanded community count in this segment.

FINANCIAL SERVICES REPORTING SEGMENT

The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 2024 2023

Three Months Ended

February 28, 2025 February 29, 2024

Revenues $ 4,736 $ 6,068

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Equity in income of unconsolidated joint venture

5,932 4,149 19,422 11,157

Pretax income $ 7,526 $ 11,577

$ 10,953 $ 9,911 $ 35,793 $ 27,336

Total originations (a):

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Average FICO score 746 743

Three Months Ended

February 28, 2025 February 29, 2024

Loans sold (a):

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(a) Loan originations and sales occurred within KBHS.

Financial services revenues for the three months ended August 31, 2024 declined 9% year over year, due to decreases in both insurance commissions and title services revenues.

For the nine months ended August 31, 2024, financial services revenues rose slightly from the year-earlier period, as an increase in insurance commissions was largely offset by a decrease in title services revenues.

Financial services revenues for the three months ended February 28, 2025 declined 22% year over year, due to decreases in both insurance commissions and title services revenues.

Pretax income.

Financial services pretax income for the three months ended August 31, 2024 grew 11% from the year-earlier period, largely due to an increase in the equity in income of our unconsolidated joint venture, KBHS.

In the 2024 third quarter, the equity in income of our unconsolidated joint venture increased to $5.9 million, from $4.1 million in the year-earlier quarter, due to an increase in KBHS’ income.

The year-over-year increase in KBHS’ income reflected the loss in the fair value of IRLCs decreasing to $.4 million in the current quarter, compared to $5.2 million in the year-earlier quarter.

Also contributing to the year-over-year increase in KBHS’ income was the higher principal amount of loans originated, which reflected increases in both the number of homes we delivered and the percentage of homebuyers using KBHS.

In the 2024 third quarter, 88% of the buyers financing their home purchases used KBHS, up from 84% in the year-earlier quarter.

For the nine months ended August 31, 2024, our financial services pretax income increased 31% from the corresponding 2023 period, mostly due to an increase in the equity in income of our unconsolidated joint venture.

In the nine months ended August 31, 2024, the equity in income of unconsolidated joint venture rose to $19.4 million, compared to $11.2 million in the year-earlier period, mainly as a result of an increase in KBHS’ income.

The year-over-year increase in KBHS’ income was primarily due to gains of $3.8 million in the fair value of IRLCs in the current period, compared to losses of $9.4 million in the year-earlier period, as well as the factors described above for the three months ended August 31, 2024.

Financial services pretax income for the three months ended February 28, 2025 was down 35% from the year-earlier period, largely due to a decrease in the equity in income of our unconsolidated joint venture, KBHS.

In the 2025 first quarter, the equity in income of our unconsolidated joint venture was $4.3 million, compared to $7.1 million in the year-earlier quarter, reflecting a decrease in KBHS’ income.

The year-over-year decrease in KBHS’ income primarily reflected a loss in the fair value of IRLCs of $1.5 million in the current quarter, compared to a gain in the fair value of IRLCs of $2.9 million in the year-earlier quarter.

Also contributing to the year-over-year decrease in KBHS’ income was a decline in the number of loans originated, which reflected a decrease in the number of homes we delivered, partly offset by an increase in the percentage of homebuyers using KBHS.

Further information regarding our investments in unconsolidated joint ventures, including KBHS, is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

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Our income tax expense and effective tax rates were as follows (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 2024 2023

Three Months Ended

February 28, 2025 February 29, 2024

Income tax expense $ 29,800 $ 36,000

Effective tax rate 21.4 % 20.6 %

Our effective tax rate for the three months ended August 31, 2024 increased from the year-earlier period, mainly due to a $3.0 million decline in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $1.9 million decrease in excess tax benefits related to stock-based compensation, partly offset by a $2.4 million decrease in state taxes.

For the nine months ended August 31, 2024, our effective tax rate was essentially flat with the year-earlier period, primarily reflecting a $5.3 million decrease in state income taxes, a $1.3 million decline in nondeductible executive compensation expense and a $.8 million increase in excess tax benefits related to stock-based compensation, largely offset by a $6.6 million decrease in the Section 45L tax credits.

Our effective tax rate for the three months ended February 28, 2025 increased from the year-earlier period, mainly due to a $2.4 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $.7 million decrease in excess tax benefits related to stock-based compensation.

The year-over-year decrease in Section 45L tax credits reflects the impact of guidance the IRS issued in 2023 that heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states and our decision to build homes in many of our markets beginning in 2025 that are highly energy efficient and qualify for ENERGY STAR certification but do not qualify for Section 45L tax credits.

We believe the additional costs necessary to satisfy the higher standards for some of our homes outweigh the possible benefits of meeting those standards for both our business and our buyers.

Further information regarding our income taxes is provided in Note 13 – Income Taxes in the Notes to Consolidated Financial Statements in this report.

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This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with GAAP.

We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations and the leverage employed in our operations, and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information.

We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations, and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information.

However, because it is not calculated in accordance with GAAP, this non-GAAP financial measure may not be completely comparable to other companies in the homebuilding industry and, thus, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP.

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The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands):

Three Months Ended August 31, Nine Months Ended August 31,

2024 2023 2024 2023

Three Months Ended

February 28, 2025 February 29, 2024

Housing revenues $ 1,387,041 $ 1,458,126

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Inventory-related charges (a)

1,177 631 3,685 10,207

Adjusted housing gross profits $ 281,082 $ 314,997

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• repurchases of our common stock.

We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility.

Based on our financial position as of August 31, 2024, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity.

We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

We ended the 2025 first quarter with total liquidity of $1.25 billion, including cash and cash equivalents and $981.7 million of available capacity under the Credit Facility, with $100.0 million of cash borrowings outstanding.

Cash and cash equivalents totaled $267.8 million at February 28, 2025, compared to $598.0 million at November 30, 2024.

Cash equivalents included in the total were $48.7 million at February 28, 2025 and $385.1 million at November 30, 2024, and were mainly invested in interest-bearing bank deposit accounts and money market funds.

Based on our financial position as of February 28, 2025, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity.

that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

Cash Requirements .

In the nine months ended August 31, 2024, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

In the three months ended February 28, 2025, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2024.

Investments in Land and Land Development.

Our investments in land and land development for the nine months ended August 31, 2024 increased 59% to $2.10 billion, compared to $1.32 billion for the year-earlier period.

Land acquisition expenditures, which are included in our investments in land and land development, increased to $916.9 million in the nine months ended August 31, 2024, from $329.5 million in the corresponding period of 2023.

Approximately 44% of our total investments for the nine months ended August 31, 2024 related to land acquisitions, compared to approximately 25% in the prior-year period.

While we made investments in land and land development in each of our homebuilding reporting segments during the nine months ended August 31, 2024 and 2023, approximately 55% of these investments for each period were made in our West Coast homebuilding reporting segment.

For the 2024 fourth quarter, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards.

While we expect our land acquisition activity to increase on a year-over-year basis in the 2024 fourth quarter, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.

Our investments in land and land development for the three months ended February 28, 2025 grew 57% to $920.3 million, compared to $587.1 million for the corresponding year-earlier period.

This increase reflected the execution of our strategic priority to expand our land-related investments to support future growth, and our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out.

Land acquisition expenditures, which are included in our investments in land and land development, increased to $538.0 million, or 58% of our total investments, for the three months ended February 28, 2025, from $214.4 million, or approximately 37% of our total investments, for the corresponding period of 2024.

While we made investments in land and land development in each of our homebuilding reporting segments during the three months ended February 28, 2025 and February 29, 2024, approximately 47% and 50%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

For the remainder of 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities that meet our investment return standards.

The following table presents the number of lots we owned or controlled under land option contracts and other similar contracts and the carrying value of inventory by homebuilding reporting segment (dollars in thousands):

August 31, 2024 November 30, 2023 Variance

February 28, 2025 November 30, 2024 Variance

Segment Lots Carrying Value Lots Carrying Value Lots Carrying Value

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Total 78,233 $ 5,942,547 76,703 $ 5,528,020 1,530 $ 414,527

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2024 increased 10% from November 30, 2023, reflecting land investments during the nine months ended August 31, 2024, partly offset by homes delivered and our abandonment of 5,590 previously controlled lots.

The number of lots we owned or controlled as of August 31, 2024 increased 24% from November 30, 2023.

The number of lots in inventory as of August 31, 2024 included 16,069 lots under contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023.

Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 42% at August 31, 2024, compared to 27% at November 30, 2023.

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at February 28, 2025 increased 7% from November 30, 2024, reflecting land investments during the three months ended February 28, 2025, partly offset by homes delivered and our abandonment of 4,621 previously controlled lots.

The number of lots we owned or controlled as of February 28, 2025 increased 2% from November 30, 2024.

The number of lots in inventory as of February 28, 2025 included 13,993 lots under contract where the associated deposits were refundable at our discretion, compared to 18,923 of such lots at November 30, 2024.

Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 46% at February 28, 2025, compared to 49% at November 30, 2024.

Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

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We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers.

If we were to acquire all the land we had under land option contracts and other similar contracts at August 31, 2024, we estimate the remaining purchase price to be paid would be as follows:

If we were to acquire all the land we had under land option contracts and other similar contracts at February 28, 2025, we estimate the remaining purchase price to be paid would be as follows:

2025 – $902.6 million;

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2029 – $62.5 million;

and thereafter – $.6 million.

and thereafter – $0.

The table below summarizes our cash and cash equivalents, and total liquidity (in thousands):

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Credit Facility commitment 1,090,000 1,090,000

Borrowings outstanding under the Credit Facility (100,000) —

Letters of credit outstanding under the Credit Facility (8,260) (8,260)

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Total liquidity $ 1,249,573 $ 1,679,713

Our cash equivalents at August 31, 2024 and November 30, 2023 were mainly invested in interest-bearing bank deposit accounts and money market funds.

Capital Resources.

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2024 Variance

Credit Facility $ 100,000 $ — $ 100,000

Term Loan 358,994 358,826 168

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$ 1,792,307 $ 1,691,679 $ 100,628

Our financial leverage, as measured by the ratio of debt to capital, improved 90 basis points to 29.8% at August 31, 2024, compared to 30.7% at November 30, 2023.

On a year-over-year basis, our debt to capital ratio improved 80 basis points from 30.6%.

Our first quarter is typically when we have the lowest cash inflows and highest cash outflows of our fiscal year.

As such, to support executing on our strategic priority of expanding our investments in land and land development for future growth, during the 2025 first quarter we utilized cash borrowings from the Credit Facility.

As a result, our financial leverage, as measured by the ratio of debt to capital, increased 110 basis points to 30.5% at February 28, 2025, compared to 29.4% at November 30, 2024.

On a year-over-year basis, our debt to capital ratio was nearly even with 30.4% at February 29, 2024.

The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).

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Under the LOC Facility, which expires on February 13, 2028, we may issue up to $100.0 million of letters of credit.

As of August 31, 2024 and November 30, 2023, we had letters of credit outstanding under the LOC Facility of $70.6 million and $12.5 million, respectively.

As of February 28, 2025 and November 30, 2024, we had letters of credit outstanding under the LOC Facility of $72.6 million and $73.3 million, respectively.

Performance Bonds .

As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.31 billion and $1.32 billion of performance bonds outstanding at August 31, 2024 and November 30, 2023, respectively.

As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.31 billion and $1.33 billion of performance bonds outstanding at February 28, 2025 and November 30, 2024, respectively.

Unsecured Revolving Credit Facility .

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The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility.

As of August 31, 2024, we had no cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility.

As of February 28, 2025, we had $100.0 million of cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility.

The Credit Facility is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

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The financial covenant requirements under the Credit Facility and the Term Loan are set forth below:

• Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021.

fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021.

• Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.

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The covenants and other requirements under the Credit Facility and the Term Loan represent the most restrictive covenants that we are subject to with respect to our notes payable.

The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of August 31, 2024:

Financial Covenants and Other Requirements Covenant Requirement Actual

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In addition, the indenture contains certain limitations related to mergers, consolidations, and sales of assets.

As of August 31, 2024, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility and the mortgages and land contracts due to land sellers and other loans.

As of February 28, 2025, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility and the mortgages and land contracts due to land sellers and other loans.

Our ability to access the Credit Facility for cash borrowings and letters of credit and our ability to secure future debt financing depend, in part, on our ability to remain in such compliance.

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Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties.

At August 31, 2024, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $11.7 million.

At February 28, 2025, we had outstanding mortgages and land contracts due to land

sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $16.5 million.

Senior Unsecured Term Loan .

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As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located.

As of August 31, 2024, one of our unconsolidated joint ventures had borrowings outstanding under a revolving line of credit with a third-party lender and secured by the underlying property and related project assets.

None of our other unconsolidated joint ventures had outstanding debt at August 31, 2024.

Credit Ratings.

Our credit ratings are periodically reviewed by rating agencies.

In March 2024, S&P Global Ratings upgraded our corporate credit rating to BB+ from BB and maintained its rating outlook at stable.

In May 2024, Moody’s Ratings upgraded our corporate credit rating to Ba1 from Ba2 and changed its rating outlook to stable from positive.

As of February 28, 2025, one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets.

None of our other homebuilding unconsolidated joint ventures had outstanding debt at February 28, 2025.

Consolidated Cash Flows .

The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands):

Nine Months Ended August 31,

Three Months Ended

February 28, 2025 February 29, 2024

Net cash provided by (used in):

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Financing activities 15,250 (74,973)

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (329,735) $ (59,047)

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Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability.

Our net cash provided by operating activities for the nine months ended August 31, 2024 mainly reflected net income of $464.4 million and a net decrease in receivables of $6.2 million, partly offset by a net increase in inventories of $504.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $14.4 million.

In the nine months ended August 31, 2023, our net cash provided by operating activities primarily reflected net income of $439.9 million and a net decrease in inventories of $355.3 million, partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $100.5 million and a net increase in receivables of $1.6 million.

Our net cash used by operating activities for the three months ended February 28, 2025 mainly reflected a net increase in inventories of $416.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $99.0 million, partly offset by net income of $109.6 million and a net decrease in receivables of $39.3 million.

In the three months ended February 29, 2024, our net cash provided by operating activities primarily reflected net income of $138.7 million and a net decrease in receivables of $10.1 million, partly offset by a net increase in inventories of $107.5 million and a net decrease in accounts payable, accrued expenses and other liabilities of $38.5 million.

Investing Activities .

In the nine months ended August 31, 2024, our uses of cash included $29.2 million for net purchases of property and equipment and $12.6 million for contributions to unconsolidated joint ventures.

These uses of cash were partially offset by a $2.0 million return of investments in unconsolidated joint ventures and $1.7 million of proceeds from the sale of an investment.

In the nine months ended August 31, 2023, the net cash used for investing activities reflected $26.4 million for net purchases of property and equipment and $23.5 million for contributions to unconsolidated joint ventures.

These uses of cash were partially offset by a $5.1 million return of investments in unconsolidated joint ventures.

In the three months ended February 28, 2025, our net cash used for investing activities reflected $11.2 million used for net purchases of property and equipment, partially offset by a $.6 million return of investments in unconsolidated joint ventures.

In the three months ended February 29, 2024, the net cash used for investing activities included $9.5 million for net purchases of property and equipment and $3.1 million for contributions to unconsolidated joint ventures.

Financing Activities .

In the nine months ended August 31, 2024, our uses of cash included stock repurchases of $250.0 million, dividend payments on our common stock of $53.5 million, tax payments associated with stock-based compensation awards of $16.5 million, and payments on mortgages and land contracts due to land sellers and other loans of $2.8 million.

The cash used was partly offset by $9.3 million of issuances of common stock under employee stock plans.

In the nine months ended August 31, 2023, our uses of cash included stock repurchases of $249.6 million, net repayments under the Credit Facility of $150.0 million, dividend payments on our common stock of $41.6 million, tax payments associated with stock-based compensation awards of $9.7 million and payments on mortgages and land contracts due to land sellers and other loans of $3.2 million.

In the three months ended February 28, 2025, cash was provided by $100.0 million of net borrowings under the Credit Facility and $.4 million of issuances of common stock under employee stock plans.

The cash provided was partly offset by stock repurchases of $50.0 million, dividend payments on our common stock of $19.3 million, and tax payments associated with stock-based compensation awards of $15.9 million.

In the three months ended February 29, 2024, our uses of cash included stock repurchases of $50.0 million, tax payments associated with stock-based compensation awards of $16.5 million, dividend payments on our common stock of $16.4 million, and payments on mortgages and land contracts due to land sellers and other loans of $.9 million.

The cash used was partially offset by $8.8 million of issuances of common stock under employee stock plans.

In the 2024 second quarter, our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.25 per share.

In the 2024 third quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $.25 per share.

In the 2023 third quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $.20 per share.

Quarterly dividends declared and paid during the nine-month periods ended August 31, 2024 and 2023 totaled $.70 per share and $.50 per share, respectively.

The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external

financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

In the 2025 first quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $.25 per share.

In the 2024 first quarter, our board of directors declared, and we paid, a quarterly cash dividend on our common stock of $.20 per share.

The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our board of directors, and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

Share Repurchase Program.

On March 21, 2023, our board of directors authorized us to repurchase up to $500.0 million of our outstanding common stock.

On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock.

As of November 30, 2024, there was $700.0 million of remaining availability under this share repurchase authorization.

In the 2025 first quarter, we repurchased 753,939 shares of our common stock at a total cost of $50.0 million.

On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock.

This authorization replaced the prior board of directors authorization, which had $113.6 million remaining.

In the 2024 second quarter, we repurchased 764,742 shares of our common stock at a total cost of $50.0 million.

In the 2024 third quarter, we repurchased 1,869,292 shares of our common stock at a total cost of $150.0 million, bringing our total repurchases for the nine months ended August 31, 2024 to 3,460,697 shares of common stock at a total cost of $250.0 million.

Repurchases under the authorization may occur periodically through open market purchases, privately negotiated transactions or otherwise, with the timing and amount at management’s discretion and dependent on market, business and other conditions.

This share repurchase authorization will continue in effect until fully used or earlier terminated or suspended by our board of directors, and does not obligate us to purchase any shares.

As of August 31, 2024, there was $800.0 million of remaining availability under this share repurchase authorization.

As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

For the 2024 fourth quarter, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility primarily to position our operations for growth within the context of prevailing market conditions.

As of February 28, 2025, there was $650.0 million of remaining availability under this share repurchase authorization.

As of the date of this report, and as stated above, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

For the remainder of 2025, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.

During this time, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or equity securities or potential new issuances of debt or equity securities to support our business needs.

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In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Credit Facility or the LOC Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities or loans to mature or expire.

Our intended uses of our cash resources or cash borrowings, and ability to engage in any of the transactions described in the foregoing two sentences, may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or other factors, including those described below under “Outlook,” and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions.

Our ability to engage in such transactions may be constrained by volatile or tight economic, capital, credit and/or financial market conditions or other factors, including those described below under “Outlook,” and/or our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from any one or series of such transactions.

Supplemental Guarantor Financial Information

As of August 31, 2024, we had $1.34 billion in aggregate principal amount of outstanding senior notes, no borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan.

As of February 28, 2025, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $100.0 million of borrowings outstanding under the Credit Facility and $360.0 million in aggregate principal amount of borrowings outstanding under the Term Loan.

Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by our Guarantor Subsidiaries.

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Stockholders’ equity 3,759,181 3,729,310

Nine Months Ended

August 31, 2024

Three Months Ended

February 28, 2025

Summarized Statement of Operations Data (in thousands)

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The preparation of our consolidated financial statements requires the use of judgment in the application of accounting policies and estimates of uncertain matters.

There have been no significant changes to our critical accounting policies and estimates during the nine months ended August 31, 2024 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

There have been no significant changes to our critical accounting policies and estimates during the three months ended February 28, 2025 from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2024.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have a material impact on our consolidated financial statements.

We have achieved solid results through our 2024 first three quarters.

Our performance reflects, among other things, longer-term housing market drivers remaining largely positive, including favorable demographic trends, rising household formations, solid employment, wage growth and the undersupply of new and resale homes.

However, net orders for the 2024 third quarter were essentially flat with the year-earlier quarter, reflecting variability in demand across the quarter.

Homebuying demand softened from late June through July, primarily due to consumers evaluating elevated mortgage interest rates, as well as rising general economic concerns.

With these actions and a general moderation in mortgage interest rates, our weekly net orders improved sequentially in each of the last three weeks of August.

We are encouraged by the strengthening in demand as August progressed, and the continuing positive trend in our 2024 fourth quarter to date.

Further, given the soft

comparison in the year-ago fourth quarter, we expect a strong year-over year comparison in our 2024 fourth quarter net orders, positioning us to enter 2025 with momentum.

In the 2024 fourth quarter, we plan to continue to focus operationally on maintaining high customer satisfaction levels, achieving additional improvement in our build times, and further simplifying and value engineering our products to lower direct costs.

More broadly, our key objectives remain to increase our scale, profitability and returns, as well as generate cash flows, by expanding our lot count through land acquisitions that meet our underwriting standards, opening new communities on time, driving net orders and balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context.

At the same time, we anticipate the homebuyer concessions we have selectively extended to buyers since the 2022 second half will continue to temper the average selling price of homes delivered.

Our use of such concessions in the 2024 fourth quarter will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots remaining available for sale.

While we expect our land acquisition activity to increase during the 2024 fourth quarter as compared to the corresponding 2023 quarter, our investments in land and land development will depend significantly on market conditions and available opportunities that meet our investment return standards.

In addition, our focus is on capital efficiency, developing lots where possible in smaller phases and balancing development with our starts pace to manage our inventory of finished lots.

With our strong balance sheet and liquidity position, we believe we can operate effectively through evolving market conditions in 2024 and continue to prioritize investing in land acquisition and development to support future growth, as well as returning capital to our stockholders.

We ended the 2024 third quarter with $800.0 million remaining under our current board of directors share repurchase authorization.

This provides us the opportunity to continue to repurchase our common stock in the 2024 fourth quarter, with the volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions.

Overall, we believe we are well positioned to achieve our goals over the remainder of 2024 given our commitment to offering homebuyers the ability to meaningfully personalize their home;

our well-designed products and attractive price points;

backlog value of $2.92 billion at August 31, 2024;

and measurable improvement in our build times, subject to the factors and risks described in this report, including uncertainty regarding the near-term direction of mortgage interest rates, inflation, consumer confidence and the economy.

Our present outlook for the 2024 fourth quarter, the 2024 full year and the 2025 full year as to certain metrics is as follows:

2024 Fourth Quarter

Although certain longer-term housing market drivers remain largely positive, including favorable demographic trends, rising household formations and the undersupply of new and resale homes, we expect the softer market conditions, including ongoing elevated mortgage interest rates, housing affordability concerns and heightened macroeconomic and geopolitical uncertainties, that we experienced in the 2025 first quarter to persist for the remainder of the year.

The negative impact of these conditions on consumer confidence has caused homebuyers to take longer in making their purchase decisions and demand at the start of the Spring selling season to be muted relative to the past few years.

Reflecting this environment, despite a healthy level of traffic in our communities, we experienced year-over-year decreases in our 2025 first quarter net orders of 17%, ending backlog of 23% and ending backlog value of 21%.

In mid-February 2025, we selectively reduced selling prices on a community-by-community basis at roughly one-half of our communities to stimulate demand, and in many cases, we lowered or eliminated homebuyer concessions, helping to offset the margin impact of those price changes.

Although our net orders for the 2025 first quarter were below our expectations, we were encouraged by the net order and absorption rates we saw at the end of the 2025 first quarter, which have continued into the early weeks of our 2025 second quarter.

While our net order trend has improved, we have revised our projections for 2025 due to our first quarter results, the relatively soft start to the Spring selling season and the selling price adjustments we implemented in mid-February 2025.

We believe we

are well positioned to meet our present net order expectations for what is typically the seasonally strongest selling period of the year.

At the same time, we intend to remain nimble in our approach to the Spring selling season, as we balance pace and price at the community level.

We also expect to continue to employ targeted sales strategies during the remainder of 2025, as we have to varying degrees since the 2022 second half, including homebuyer concessions, particularly, mortgage-related concessions such as interest rate buydowns.

Our use of such concessions will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots remaining available for sale.

We anticipate our use of pricing adjustments and homebuyer concessions will continue to temper the average selling prices of homes delivered and housing gross profit margins for the remainder of the year, as reflected in our 2025 second quarter and full-year projections below.

For the remainder of 2025, we intend to continue to invest in and develop land positions within attractive submarkets and acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities, though we anticipate a sequential decrease in our land-related investments in the 2025 second quarter.

Additionally, we intend to prioritize capital efficiency, developing lots where possible in smaller phases and balancing development with our starts pace to manage our inventory of finished lots.

At the same time, we plan to continue returning capital to our stockholders.

As of February 28, 2025, we had $650.0 million of remaining availability under our current board of directors share repurchase authorization.

This provides us the opportunity to repurchase our common stock in the remainder of 2025, with the pace, volume and timing based on considerations of our operating cash flow, liquidity outlook, land investment opportunities and needs, the market price of our common stock, and the housing market and general economic conditions.

Considering the foregoing, our present outlook for the 2025 second quarter and the 2025 full year as to certain metrics is as follows:

2025 Second Quarter

• We expect to generate housing revenues in the range of $1.45 billion to $1.55 billion, compared to $1.70 billion for the corresponding 2024 period, and anticipate our average selling price to be approximately $488,000, compared to $483,000 in the year-earlier period.

• We expect our homebuilding operating income margin will be in the range of 11.4% to 11.8%, assuming no inventory-related charges, compared to 10.9% for the year-earlier quarter.

• We expect our homebuilding operating income margin to be approximately 8.5%, assuming no inventory-related charges, compared to 11.1% for the year-earlier quarter.

• We expect our housing gross profit margin will be in the range of 19.1% to 19.5%, assuming no inventory-related charges, compared to 21.2% for the corresponding 2024 quarter.

• We expect our selling, general and administrative expenses as a percentage of housing revenues to be approximately 9.6%, compared to 9.9% for the 2023 fourth quarter.

• We expect our selling, general and administrative expenses as a percentage of housing revenues will be in the range of 10.6% to 11.0%, compared to 10.1% for the 2024 second quarter.

• We expect our effective tax rate will be approximately 24.0%, compared to 23.8% for the year-earlier quarter.

• We expect our average community count will be up 7% to 8%, as compared to the prior-year quarter.

• We expect our ending community count to be in the range of 250 to 260, compared to 247 for the corresponding 2024 quarter.

2025 Full Year

• We expect our housing revenues to be in the range of $6.85 billion to $6.95 billion, an increase from $6.37 billion for 2023.

• We expect our average selling price to be approximately $490,000, compared to $481,300 for 2023.

• We expect our homebuilding operating income margin as a percentage of revenues to be in the range of 11.1% to 11.2%, assuming no inventory-related charges, compared to 11.4% for 2023.

• We expect our housing revenues to be in the range of $6.60 billion to $7.00 billion, compared to $6.90 billion for 2024.

• We expect our average selling price to be in the range of $480,000 to $495,000, compared to $486,900 for 2024.

• We expect our homebuilding operating income margin as a percentage of revenues to be approximately 9.4%, assuming no inventory-related charges, compared to 11.1% for 2024.

• We expect our housing gross profit margin to be in the range of 19.2% to 20.0%, assuming no inventory-related charges, compared to 21.1% for 2024.

• We expect our selling, general and administrative expenses as a percentage of housing revenues to be approximately 10.0%, compared to 9.9% for 2023.

• We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 10.0% to 10.4%, compared to 10.0% for 2024.

• We expect our effective tax rate to be approximately 24.0%, compared to 23.0% for 2024.

• We expect our return on equity to be approximately 16.5%, compared to 15.7% for 2023.

• We expect our ending community count to be in the range of 250 to 255, compared to 242 for 2023.

2025 Full Year

• We expect our housing revenues to be approximately $7.50 billion .

• We expect our ending community count to be approximately 250, compared to 258 for 2024.

In addition to factors discussed elsewhere in this report, our future performance and the strategies we implement (and adjust or refine as necessary or appropriate) will depend significantly on prevailing economic, employment, homebuilding industry and capital, credit and financial market conditions and on a fairly stable and constructive political and regulatory environment (particularly in regard to housing and mortgage loan financing policies).

For instance, the Federal Reserve’s aggressive raising of the federal funds interest rate and other measures during 2022 and 2023 to moderate persistent U.S.

inflation created significant and ongoing headwinds for the housing market, tempering consumer demand for homes and disrupting credit and lending markets.

While the Federal Reserve reduced interest rates in September 2024 and may lower interest rates further in 2024 or later periods, we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes, will positively affect demand or our business, results of operations or consolidated financial statements.

In addition, while we experienced improvement with respect to supply chain-related disruptions as described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we believe they could persist to a certain degree during the remainder of 2024.

The potential extent and effect of these and other factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in the 2024 first three quarters, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns.

While the Federal Reserve reduced interest rates three times in 2024, and may lower rates further in 2025 or later periods, it has since December 2024 kept rates unchanged and we cannot provide any assurance it will or that any interest rate reduction(s), or other monetary policy changes, will positively affect demand or our business, results of operations or consolidated financial statements.

The potential extent and effect of these and other factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in the 2025 first quarter, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns.

Forward-Looking Statements

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• consumer and producer price inflation;

• changes in interest rates, including those set by the Federal Reserve , which the Federal Reserve has increased sharply over the past two years and may further increase to moderate inflation, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans;

• changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve may increase to moderate inflation, as it did in 2022 and 2023, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans;

• our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule;

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• volatility in the market price of our common stock;

• our obtaining adequate levels of affordable insurance for our business and our ability to cover any incurred costs, liabilities or losses that are not covered by the insurance we have procured;

• home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes;

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• any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure;

• regulatory instability associated with the current U.S.

presidential administration, including from its government efficiency initiatives, and the impact on the economy or financial markets therefrom;

• government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities;

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• changes in U.S.

trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries;

trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries, and financial markets’ and businesses’ reactions to any such policies;

• disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict and other attacks in the Middle East region and military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S.

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• our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred;

• costs and/or charges arising from regulatory compliance requirements, including the costs to implement recent federal and state climate-related disclosure rules, or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals;

• costs and/or charges arising from regulatory compliance requirements, including implementing state climate-related disclosure rules, or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals;

• our ability to use/realize the net deferred tax assets we have generated;

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• consumer interest in our new home communities and products, particularly from first-time homebuyers and higher-income consumers;

• our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California;

• our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California, and the costs and margin impact we incur from the incentives or concessions we may provide to buyers to do so;

• our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures;

• income tax expense volatility associated with stock-based compensation;

• the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all;

• the ability of our homebuyers to obtain or afford homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all;

• the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers;

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Please see our Annual Report on Form 10-K for the year ended November 30, 2024 and other filings with the SEC for a further discussion of these and other risks and uncertainties applicable to our business.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risk since November 30, 2023.

For additional information regarding our market risk, refer to the “Quantitative and Qualitative Disclosures About Market Risk” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

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