What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-10 compared with 2025-04-09 · 284 added, 219 removed, 394 unchanged (56% of the section changed)

3 unchanged sentences

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

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance

Homebuilding $ 1,524,716 $ 1,701,512 (10) % $ 2,911,757 $ 3,163,210 (8) %

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$ 1.50 $ 2.15 (30) % $ 3.00 $ 3.91 (23) %

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 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.”

In the 2025 second quarter, market conditions softened, primarily due to housing affordability concerns, compounded by the variability in persistently elevated mortgage interest rates, as well as macroeconomic and geopolitical uncertainties that have precipitated a marked weakening in consumer confidence and caused homebuyers to hesitate on making purchase decisions.

Reflecting these market conditions, demand during the Spring selling season was more subdued relative to the past few years, and despite a healthy level of traffic in our communities, our 3,460 net orders for the 2025 second quarter were down 13% year over year, and our monthly net order pace per community was 4.5, compared to 5.5 for the year-earlier period.

Also contributing to the year-over-year decline in our net orders were municipal delays in a number of our planned community openings, with some shifting to later in the second quarter or into the third quarter.

Even with the delayed openings, our average community count for the 2025 second quarter increased 5% year over year to 254, and our ending community count was 253, up 2%.

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach.

With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand and continued during the 2025 second quarter, we reduced selling prices relative to applicable market conditions and lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered.

As most of the net orders in the period since we implemented this approach have not yet closed, the associated pricing adjustments did not significantly affect our average selling price or housing gross profit margin on homes delivered for the three months and six months ended May 31, 2025.

While this calibrated repositioning of our communities helped us generate solid net orders in March, with an absorption pace that was approaching a seasonally more normalized level, demand slowed in April and May as weakening consumer confidence and rising and variable mortgage interest rates in those months resulted in heightened hesitancy from homebuyers.

Reflecting the price reductions we implemented, and expanded on in certain underperforming communities to align with local demand dynamics, the value of our net orders for the 2025 second quarter was down 21% year over year driven by the 13% decline in net orders and an 8% decrease in their average selling price to $465,600.

Homebuilding revenues for the three months ended May 31, 2025 and 2024 were generated solely from housing operations.

Our 2025 second-quarter housing revenues declined 10% year over year to $1.52 billion due to an 11% decrease in the number of homes delivered to 3,120, partly offset by a slight increase in their average selling price to $488,700.

Approximately 50% of our homes delivered in the 2025 second quarter were to first-time homebuyers.

Our homes delivered as a percentage of backlog at the beginning of the quarter grew to 70% for the 2025 second quarter, from 61% for the year-earlier quarter, mainly due to our improved build times and an increase in the percentage of homes sold and delivered within the same quarter.

Homebuilding operating income for the three months ended May 31, 2025 was $131.5 million, compared to $188.2 million for the year-earlier period.

As a percentage of revenues, homebuilding operating income was 8.6% for the 2025 second quarter compared to 11.1% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin and an increase in selling, general and administrative expenses as a percentage of housing revenues.

Our housing gross profit margin for the 2025 second quarter decreased to 19.3%, compared to 21.1% for the year-earlier quarter, due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs.

Our selling, general and administrative expenses as a percentage of housing revenues of 10.7% for the 2025 second quarter increased 60 basis points year over year, primarily reflecting higher marketing expenses and decreased operating leverage from lower housing revenues.

Total pretax income for the 2025 second quarter was $142.4 million, down from $221.1 million for the year-earlier quarter, which included a $12.5 million gain associated with the sale of a privately held technology company in which we had an ownership interest.

Net income and diluted earnings per share for the three months ended May 31, 2025 decreased 36% and 30%, respectively, year over year.

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

We take a balanced approach in allocating capital, relative to prevailing market conditions, toward our priorities of investing in land and land development to support future growth and returning capital to our stockholders.

In the current environment and given our existing land pipeline, we are scaling back our investments in land and land development while increasing our share repurchases.

Reflecting this shift, we reduced our investments for the 2025 second quarter by 23% year over year to $513.9 million, and repurchased $200.0 million of our outstanding common stock.

For the 2025 first half, we invested $1.43 billion in land and land development, representing a 14% increase from the corresponding year-earlier period, and repurchased approximately 4.5 million shares of our common stock at a total cost of $250.0 million.

We ended the 2025 second quarter with total liquidity of $1.19 billion, including cash and cash equivalents and $881.7 million of available capacity under the Credit Facility.

We had $200.0 million of cash borrowings outstanding under the Credit Facility at May 31, 2025.

Considering the softer market conditions, we have revised our projections for 2025.

Although our ending backlog value at May 31, 2025 decreased 27% year over year to approximately $2.29 billion, we believe we are well positioned to achieve our updated projections for the 2025 third 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

February 28, 2025 February 29, 2024

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Housing $ 1,524,716 $ 1,701,512 $ 2,911,757 $ 3,159,638

Land — — — 3,572

Total 1,524,716 1,701,512 2,911,757 3,163,210

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Interest income

1,679 19,449 3,758 25,306

Equity in income (loss) of unconsolidated joint ventures

1,080 224 3,493 (221)

Homebuilding pretax income $ 134,222 $ 207,856 $ 266,053 $ 370,944

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Homes delivered 3,120 3,523 5,890 6,560

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Operating income as a percentage of revenues 8.6 % 11.1 % 8.9 % 10.9 %

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.

Homebuilding revenues for the three months ended May 31, 2025 and 2024 were generated solely from housing operations.

Housing revenues for the 2025 second quarter declined 10% from the year-earlier quarter due to an 11% decrease in the number of homes delivered, partly offset by a slight increase in their overall average selling price.

Our 2025 second-quarter housing revenues were down year over year in each of our homebuilding reporting segments, with decreases ranging from 1% in our Southwest segment to 25% in our Central segment.

The decline in the number of homes delivered mainly reflected our having 23% fewer homes in backlog at the beginning of the 2025 second quarter, as compared to the year-earlier quarter.

For the six months ended May 31, 2025, homebuilding revenues were generated solely from housing operations.

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

Housing revenues for the six months ended May 31, 2025 decreased 8% from the corresponding 2024 period due to a 10% decline in the number of homes delivered, partially offset by a 3% increase in their average selling price.

There were no land sales for the three months and six months ended May 31, 2025 and the three months ended May 31, 2024.

Land sale revenues for the six months ended May 31, 2024 totaled $3.6 million.

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 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.

Our homebuilding operating income for the three months ended May 31, 2025 decreased 30% year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for the 2025 second quarter included inventory-related charges of $5.6 million, compared to $1.2 million in the year-earlier quarter.

As a percentage of revenues, our operating income for the three months ended May 31, 2025 was 8.6%, compared to 11.1% 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 9.0% for the 2025 second quarter, compared to 11.1% for the year-earlier quarter.

For the six months ended May 31, 2025, our operating income declined 25% from the year-earlier period, reflecting a decrease in housing gross profits and the absence of land sale profits, partly offset by lower selling, general and administrative expenses.

Operating income for the six months ended May 31, 2025 included inventory-related charges of $7.0 million, compared to $2.5 million of such charges for the corresponding 2024 period.

As a percentage of revenues, our operating income for the six months ended May 31, 2025 decreased 200 basis points year over year to 8.9%, mainly reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues.

Excluding inventory-related charges, our operating income as a percentage of revenues declined 190 basis points to 9.1% for the six months ended May 31, 2025 from 11.0% for the corresponding year-earlier period.

• Housing Gross Profits – Housing gross profits of $294.7 million for the three months ended May 31, 2025 were down 18% year over year, reflecting lower housing revenues and a 180 basis-point decrease in our housing gross profit margin to 19.3%.

The decline in the housing gross profit margin was due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs.

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% for both the three months ended May 31, 2025 and 2024.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 19.7% for the 2025 second quarter decreased 150 basis points year over year.

For the six months ended May 31, 2025, our housing gross profits of $574.3 million decreased from $673.1 million for the year-earlier period due to lower housing revenues and a 160 basis-point decline in our housing gross profit margin.

The housing gross profit margin primarily reflected the same factors described above for the three months ended May 31, 2025.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for the six months ended May 31, 2025, compared to 1.8% for the corresponding 2024 period.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 20.0% for the six months ended May 31, 2025 decreased 140 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 February 28, 2025, compared to land sale profits of $1.5 million in the three months ended February 29, 2024.

• Land Sale Profits – There was no land sale activity in the three months and six months ended May 31, 2025 and the three months ended May 31, 2024.

Land sale profits for the six months ended May 31, 2024 totaled $1.5 million.

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

Three Months Ended

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

Three Months Ended May 31, Six Months Ended May 31,

2025 % of Housing Revenues 2024 % of Housing Revenues 2025 % of Housing Revenues 2024 % of Housing Revenues

Marketing expenses $ 42,602 2.8 % $ 39,884 2.3 % $ 82,265 2.8 % $ 76,244 2.4 %

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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 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.

Selling, general and administrative expenses for the three months ended May 31, 2025 decreased 5% from the year-earlier quarter.

As a percentage of housing revenues, our selling, general and administrative expenses for the 2025 second quarter increased 60 basis points.

For the six months ended May 31, 2025, selling, general and administrative expenses decreased 4% year over year.

As a percentage of housing revenues, selling, general and administrative expenses for the six months ended May 31, 2025 increased 40 basis points.

The year-over-year increases in selling, general and administrative expenses as a percentage of revenues for the three-month and six-month periods ended May 31, 2025 primarily reflected higher marketing expenses and decreased operating leverage from lower housing revenues.

Interest Income/Expense and Other .

Interest income and other for the three months and six months ended May 31, 2025 was comprised solely of interest income.

For the three months and six months ended May 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 had an ownership interest.

Interest income, which is generated from short-term investments, was $1.7 million for the three months ended May 31, 2025, compared to $6.9 million for the year-earlier quarter.

For the six months ended May 31, 2025, interest income was $3.8 million, compared to $12.8 million for the corresponding 2024 period.

The year-over-year decreases for the three-month and six-month periods ended May 31, 2025 reflected our lower average balance of cash equivalents and a lower interest rate in the 2025 periods.

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 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.

All interest incurred during the three-month and six-month periods ended May 31, 2025 and 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 $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.

Our equity in income of unconsolidated joint ventures was $1.1 million for the three months ended May 31, 2025 and nominal for the three months ended May 31, 2024.

For the six months ended May 31, 2025, our equity in income of unconsolidated joint ventures was $3.5 million, compared to a nominal equity in loss of unconsolidated joint ventures for the corresponding 2024 period.

The year-over-year improvement for the 2025 periods

mainly reflected an increase in the number of homes delivered by an unconsolidated joint venture in California, which delivered its first homes in the 2024 second quarter.

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

February 28, 2025 February 29, 2024

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Net orders 3,460 3,997 6,232 7,320

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(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.

Net orders for the 2025 second quarter decreased 13%, compared to the year-earlier quarter, and the pace of monthly net orders per community was 4.5 in the 2025 second quarter, compared to 5.5 in the corresponding 2024 quarter, reflecting both lower net orders and a higher average community count.

The decreases in our net orders and monthly pace per community reflected market conditions in the 2025 second quarter, with demand in the Spring selling season more subdued relative to the past few years due to housing affordability concerns, compounded by the variability in persistently elevated mortgage interest rates, as well as macroeconomic and geopolitical uncertainties that have precipitated a marked weakening in consumer confidence and caused homebuyers to hesitate on making purchase decisions.

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach.

Our cancellation rate as a percentage of gross orders for the three months ended May 31, 2025 increased slightly from the year-earlier period.

The number of homes in our backlog and our backlog value at May 31, 2025 decreased 24% and 27%, respectively, from May 31, 2024.

The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 18% in our Southeast segment to 32% in our Southwest 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 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.”

Our ending community count for the 2025 second quarter grew 2% from the year-earlier quarter.

Our average community count for the three months ended May 31, 2025 increased 5% from the year-earlier period.

While we increased our investments in land and land development on a year-over-year basis for the six months ended May 31, 2025 to help drive future growth, as discussed below under “Liquidity and Capital Resources,” with the softer market conditions we are scaling back our investments in land and land development, which in the 2025 second quarter decreased 23% compared to the year-earlier quarter.

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

Three Months Ended May 31,

Homes Delivered Net Orders Cancellation Rates

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

Segment 2025 2024 2025 2024 2025 2024

West Coast 968 1,043 1,104 1,226 14 % 11 %

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Net Order Value Average Community Count

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

Segment 2025 2024 Variance 2025 2024 Variance

West Coast $ 728,141 $ 902,483 (19) % 89 77 16 %

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Total $ 1,611,014 $ 2,031,903 (21) % 254 243 5 %

Six Months Ended May 31,

Homes Delivered Net Orders Cancellation Rates

Segment 2025 2024 2025 2024 2025 2024

West Coast 1,817 1,871 2,002 2,176 14 % 12 %

Southwest 1,339 1,429 1,102 1,483 14 10

Central 1,562 1,898 1,750 2,317 16 13

Southeast 1,172 1,362 1,378 1,344 20 20

Total 5,890 6,560 6,232 7,320 16 % 13 %

Net Order Value Average Community Count

Segment 2025 2024 Variance 2025 2024 Variance

West Coast $ 1,335,320 $ 1,535,883 (13) % 88 75 17 %

Southwest 538,143 677,651 (21) 38 44 (14)

Central 568,339 849,747 (33) 66 78 (15)

Southeast 515,279 550,813 (6) 63 45 40

Total $ 2,957,081 $ 3,614,094 (18) % 255 242 5 %

Backlog – Homes Backlog – Value

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

Segment 2025 2024 Variance 2025 2024 Variance

West Coast 1,396 1,850 (25) % $ 947,842 $ 1,304,955 (27) %

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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 $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.

Corporate and other had operating losses of $40.4 million and $38.6 million in the three months ended May 31, 2025 and 2024, respectively.

For the six months ended May 31, 2025, Corporate and other had an operating loss of $76.9 million, compared to an operating loss of $73.7 million for the corresponding year-earlier period.

The financial results of our homebuilding reporting segments for the three months ended May 31, 2025 and 2024 were impacted to varying degrees by price reductions and other 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

February 28, 2025 February 29, 2024 Variance

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance 2025 2024 Variance

Revenues $ 660,193 $ 698,417 (5) % $ 1,261,842 $ 1,256,719 — %

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Average selling price $ 682,000 $ 669,600 2 % $ 694,500 $ 671,500 3 %

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.

Operating income as a percentage of revenues 11.5 % 12.4 % (90) bps 11.3 % 12.2 % (90) bps

In the three months and six months ended May 31, 2025 and the three months ended May 31, 2024, this segment’s revenues were generated solely from housing operations.

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

The year-over-year decline in housing revenues for the three months ended May 31, 2025 reflected a decrease in the number of homes delivered, partly offset by an increase in their average selling price.

For the six months ended May 31, 2025, housing revenues of $1.26 billion were essentially even with the

corresponding year-earlier period as a decrease in the number of homes delivered was offset by an increase in their average selling price.

Operating income for the three months and six months ended May 31, 2025 declined year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income as a percentage of revenues for the 2025 second quarter was down from the year-earlier quarter due to an 80 basis-point decrease in the housing gross profit margin to 18.3% and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 6.9%.

For the six months ended May 31, 2025, operating income as a percentage of revenues declined from the corresponding 2024 period, mainly reflecting a 110 basis-point decrease in the housing gross profit margin to 18.4%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.1%.

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2025 was primarily due to price reductions and other homebuyer concessions and higher relative land costs, partly offset by lower construction costs.

For the three months ended May 31, 2025, inventory-related charges associated with housing operations were $1.2 million, compared to $.6 million for the year-earlier period.

For the six months ended May 31, 2025, inventory-related charges associated with housing operations were $1.8 million, compared to $1.9 million for the year-earlier period.

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

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance 2025 2024 Variance

Revenues $ 314,102 $ 318,665 (1) % $ 626,981 $ 641,790 (2) %

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Average selling price $ 475,200 $ 447,600 6 % $ 468,200 $ 449,100 4 %

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.

Operating income as a percentage of revenues 17.6 % 17.2 % 40 bps 18.2 % 17.2 % 100 bps

In the three-month and six-month periods ended May 31, 2025 and 2024, this segment’s revenues were generated solely from housing operations.

This segment’s housing revenues for the three-month and six-month periods ended May 31, 2025 declined slightly year over year, reflecting a decrease in the number of homes delivered, largely offset by an increase in their average selling price.

Operating income for the three months ended May 31, 2025 increased slightly year over year due to lower selling, general and administrative expenses as housing gross profits were essentially even with the year-earlier period.

As a percentage of revenues, this segment’s operating income for the 2025 second quarter grew from the year-earlier quarter, reflecting a 30 basis-point increase in the housing gross profit margin to 24.7% and a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.1%.

For the six months ended May 31, 2025, operating income increased from the corresponding year-earlier period due to higher housing gross profits and lower selling, general and administrative expenses.

Operating income as a percentage of revenues for the six months ended May 31, 2025 grew from the corresponding 2024 period, reflecting an 80 basis-point increase in the housing gross profit margin to 25.2% and a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.0%.

The year-over-year expansion in the housing gross profit margin for the three-month and six-month periods ended May 31, 2025 primarily reflected lower relative construction and land costs, partly offset by price reductions and other homebuyer concessions.

For the three-month and six-month periods ended May 31, 2025, inventory-related charges associated with housing operations were $.8 million and $1.1 million, respectively.

For the three-month and six-month periods ended May 31, 2024, inventory-related charges associated with housing operations were nominal.

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

Three Months Ended

February 28, 2025 February 29, 2024 Variance

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance 2025 2024 Variance

Revenues $ 282,966 $ 375,790 (25) % $ 558,579 $ 696,274 (20) %

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Average selling price $ 348,900 $ 365,600 (5) % $ 357,600 $ 365,200 (2) %

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.

Operating income as a percentage of revenues 7.3 % 12.4 % (510) bps 8.3 % 12.2 % (390) bps

In the three months and six months ended May 31, 2025 and the three months ended May 31, 2024, this segment’s revenues were generated solely from housing operations.

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

Housing revenues for the three months ended May 31, 2025 were down from the year-earlier period due to decreases in both the number of homes delivered and their average selling price.

For the six months ended May 31, 2025, housing revenues decreased 19% year over year, from $693.1 million, for the same reasons.

Land sale revenues totaled $3.2 million for the six months ended May 31, 2024.

Operating income for the three months and six months ended May 31, 2025 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Also contributing to the year-over-year decrease in operating income for the six months ended May 31, 2025 was the absence of land sale profits in the current period, compared to $1.1 million of land sale profits in the corresponding year-earlier period.

This segment’s operating income as a percentage of revenues for the 2025 second quarter decreased from the year-earlier period, primarily due to a 380 basis-point decline in the housing gross profit margin to 18.3% and a 130 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.9%.

For the six months ended May 31, 2025, this segment’s operating income as a percentage of revenues decreased from the year-earlier period, mainly due to a 280 basis-point decline in the housing gross profit margin to 19.2% and a 110 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 and six months ended May 31, 2025 declined year over year due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs.

Inventory-related charges associated with housing operations for the three months ended May 31, 2025 were $1.8 million, compared to $.3 million for the year-earlier period.

For the six months ended May 31, 2025, inventory-related charges associated with housing operations were $2.1 million, compared to $.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 six months ended May 31, 2025 was mainly due to higher marketing expenses and decreased 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

February 28, 2025 February 29, 2024 Variance

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance 2025 2024 Variance

Revenues $ 267,455 $ 308,640 (13) % $ 464,355 $ 568,427 (18) %

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Operating income $ 20,230 $ 38,537 (48) % $ 33,307 $ 70,802 (53) %

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 Variance 2025 2024 Variance

Homes delivered 680 740 (8) % 1,172 1,362 (14) %

Average selling price $ 393,300 $ 417,100 (6) % $ 396,200 $ 417,300 (5) %

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.

Operating income as a percentage of revenues 7.6 % 12.5 % (490) bps 7.2 % 12.5 % (530) bps

This segment’s revenues for the three months and six months ended May 31, 2025 and 2024 were generated solely from housing operations.

Housing revenues for the three months and six months ended May 31, 2025 declined from the corresponding year-earlier periods due to decreases in both the number of homes delivered and their average selling price.

Operating income for the three months and six months ended May 31, 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 second quarter declined from the year-earlier quarter due to a 400 basis-point decline in the housing gross profit margin to 17.3% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.8%.

Operating income as a percentage of revenues for the six months ended May 31, 2025 decreased from the corresponding year-earlier period due to a 390 basis-point decline in the housing gross profit margin to 17.5% and a 140 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.3%.

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2025 reflected price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues.

Inventory-related charges associated with housing operations for the three-month and six-month periods ended May 31, 2025 were $1.7 million and $1.9 million, respectively, compared to a nominal amount for each of the year-earlier periods.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and six months ended May 31, 2025 was mainly due to decreased operating leverage from lower housing revenues as well as higher costs, including higher 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

February 28, 2025 February 29, 2024

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Revenues $ 4,869 $ 8,301 $ 9,605 $ 14,369

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Equity in income of unconsolidated joint venture

4,862 6,435 9,191 13,490

Pretax income $ 8,161 $ 13,263 $ 15,687 $ 24,840

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Average FICO score 743 744 744 744

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 February 28, 2025 declined 22% year over year, due to decreases in both insurance commissions and title services revenues.

Financial services revenues for the three months and six months ended May 31, 2025 declined 41% and 33%, respectively, from the corresponding year-earlier periods due to decreases in both insurance commissions and title services revenues.

Insurance commissions were lower in the 2025 periods due to the contract assets for estimated future renewal commissions remaining relatively steady, as an increase in the number of policies in force was offset by a slight decrease in the average commission per policy.

In contrast, the corresponding 2024 periods benefited from growth in these contract assets driven by an increase in the number of policies in force and fairly stable average commission rates.

Title services revenues decreased year over year mainly due to fewer homes delivered in the 2025 periods.

Pretax income.

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.

Financial services pretax income for the three months and six months ended May 31, 2025 was down 38% and 37%, respectively, from the corresponding year-earlier periods, largely due to the above-mentioned decrease in insurance commissions revenues and a decline in the equity in income of our unconsolidated joint venture, KBHS.

In the 2025 second quarter, the equity in income of our unconsolidated joint venture was $4.9 million, compared to $6.4 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 $2.1 million in the current quarter, compared to a gain in the fair value of IRLCs of $1.3 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.

For the six months ended May 31, 2025, the equity in income of our unconsolidated joint venture was $9.2 million, compared to $13.5 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 $3.6 million in the current quarter, compared to a gain in the fair value of IRLCs of $4.2 million in the year-earlier quarter.

Also contributing to the year-over-year decrease in KBHS’ income for the three months and six months ended May 31, 2025 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

February 28, 2025 February 29, 2024

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Income tax expense $ 34,500 $ 52,700 $ 64,300 $ 88,700

Effective tax rate 24.2 % 23.8 % 22.8 % 22.4 %

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.

Our effective tax rate for the three months ended May 31, 2025 increased from the year-earlier period, mainly due to a $1.7 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $.4 million decrease in excess tax benefits related to stock-based compensation.

For the six months ended May 31, 2025, our effective tax rate increased from the year-earlier period primarily due to a $4.1 million decrease in Section 45L tax credits and a $1.1 million decrease in excess tax benefits related to stock-based compensation.

The year-over-year decreases in Section 45L tax credits for the three months and six months ended May 31, 2025 reflect 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.

H.R.1, the One Big Beautiful Bill Act, was signed into law on July 4, 2025, disallowing Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026.

As a result, our income tax expense and effective tax rate would not reflect a benefit from such tax credits as to homes delivered after that date.

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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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.

an alternative to operating performance and/or financial measures prescribed by GAAP.

Rather, this non-GAAP financial measure should be used to supplement the most directly comparable GAAP financial measure in order to provide a greater understanding of the factors and trends affecting our operations.

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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

February 28, 2025 February 29, 2024

Three Months Ended May 31, Six Months Ended May 31,

2025 2024 2025 2024

Housing revenues $ 1,524,716 $ 1,701,512 $ 2,911,757 $ 3,159,638

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Inventory-related charges (a)

5,558 1,210 7,013 2,508

Adjusted housing gross profits $ 300,219 $ 360,620 $ 581,301 $ 675,617

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• repurchases of our common stock.

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.

We ended the 2025 second quarter with total liquidity of $1.19 billion, including cash and cash equivalents and $881.7 million of available capacity under the Credit Facility, with $200.0 million of cash borrowings outstanding.

Cash and cash equivalents

totaled $308.9 million at May 31, 2025, compared to $598.0 million at November 30, 2024.

Cash equivalents included in the total were $161.2 million at May 31, 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 May 31, 2025, 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.

Cash Requirements .

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.

In the six months ended May 31, 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 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.

In the 2025 first quarter, our investments in land and land development increased 57% year over year to $920.3 million, which included our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out.

As a result of the heightened first-quarter investment level, our existing land pipeline and softer market conditions, however, we are scaling back our investments in land and land development.

Reflecting this shift, our investments for the 2025 second quarter decreased 23% year over year to $513.9 million.

For the six months ended May 31, 2025, our investments in land and land development grew 14% year over year to $1.43 billion.

Land acquisition expenditures, which are included in our investments in land and land development, increased to $661.9 million, or 46% of our total investments, for the six months ended May 31, 2025, from $491.9 million, or approximately 39% 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 six months ended May 31, 2025 and 2024, approximately 49% and 53%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

For the 2025 second half, although we expect a year-over-year decrease in our land-related investments, 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):

February 28, 2025 November 30, 2024 Variance

May 31, 2025 November 30, 2024 Variance

Segment Lots Carrying Value Lots Carrying Value Lots Carrying Value

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Total 74,837 $ 5,913,348 76,703 $ 5,528,020 (1,866) $ 385,328

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.

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at May 31, 2025 increased 7% from November 30, 2024, reflecting land investments during the six months ended May 31, 2025, partly offset by homes delivered and our abandonment of 14,271 previously controlled lots.

The number of lots we owned or controlled as of May 31, 2025 decreased 2% from November 30, 2024.

The number of lots in inventory as of May 31, 2025 included 13,808 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 47% at May 31, 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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In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date.

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 February 28, 2025, we estimate the remaining purchase price to be paid would be as follows:

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 May 31, 2025, we estimate the remaining purchase price to be paid would be as follows:

2025 – $750.1 million;

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2029 – $63.0 million;

and thereafter – $0.

and thereafter – $9.2 million.

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

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$ 1,892,941 $ 1,691,679 $ 201,262

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.

Our financial leverage, as measured by the ratio of debt to capital, increased 280 basis points to 32.2% at May 31, 2025, compared to 29.4% at November 30, 2024 due to cash borrowings outstanding under the Credit Facility.

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 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.

As of May 31, 2025 and November 30, 2024, we had letters of credit outstanding under the LOC Facility of $74.4 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 $1.33 billion of performance bonds outstanding at February 28, 2025 and November 30, 2024, respectively.

As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.44 billion and $1.33 billion of performance bonds outstanding at May 31, 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 February 28, 2025, we had $100.0 million of cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility.

As of May 31, 2025, we had $200.0 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:

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.

• 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.

• 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 February 28, 2025:

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 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.

As of May 31, 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.

Our ability to access the Credit Facility’s full borrowing capacity, as well as the LOC Facility’s full issuance capacity, also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, to meet their commitments to fund loans, extend credit or provide payment guarantees to or for us under those instruments.

There are no agreements that restrict our payment of dividends other than the Credit Facility and the Term Loan, which would restrict our payment of certain dividends, such as cash dividends on our common stock, if a default under the Credit Facility or the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).

the Term Loan exists at the time of any such payment, or if any such payment would result in such a default (other than dividends paid within 60 days after declaration, if there was no default at the time of declaration).

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 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.

At May 31, 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 $15.0 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 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.

As of May 31, 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 May 31, 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):

Three Months Ended

February 28, 2025 February 29, 2024

Six Months Ended May 31,

Net cash provided by (used in):

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

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.

Our net cash used in operating activities for the six months ended May 31, 2025 mainly reflected a net increase in inventories of $390.6 million and a net decrease in accounts payable, accrued expenses and other liabilities of $68.3 million, partly offset by net income of $217.4 million and a net decrease in receivables of $20.7 million.

In the six months ended May 31, 2024, our net cash provided by operating activities primarily reflected net income of $307.1 million, partly offset by a net increase in inventories of $195.3 million and a net decrease in accounts payable, accrued expenses and other liabilities of $40.6 million.

Investing Activities .

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.

In the six months ended May 31, 2025, our net cash used in investing activities reflected $22.7 million used for net purchases of property and equipment, partially offset by a $2.3 million return of investments in unconsolidated joint ventures.

In the six months ended May 31, 2024, the net cash used for investing activities included $19.8 million for net purchases of property and equipment and $10.9 million for contributions to unconsolidated joint ventures, partly offset by $1.7 million of proceeds from the sale of a privately held technology company in which we had an ownership interest.

Financing Activities .

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.

In the six months ended May 31, 2025, cash was provided by $200.0 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 $250.0 million, dividend payments on our common stock of $36.5 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.

In the six months ended May 31, 2024, our uses of cash included stock repurchases of $100.0 million, dividend payments on our common stock of $35.1 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 $1.7 million.

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

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.

In the 2025 and 2024 second quarters, our board of directors declared, and we paid, a quarterly cash dividend of $.25 per share.

Quarterly dividends declared and paid during the six months ended May 31, 2025 and 2024 totaled $.50 and $.45 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.

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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.

In the 2025 first half, we repurchased 4.5 million shares of our 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 February 28, 2025, there was $650.0 million of remaining availability under this share repurchase authorization.

As of May 31, 2025, there was $450.0 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.

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Supplemental Guarantor Financial Information

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.

As of May 31, 2025, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $200.0 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 3,640,907 3,729,310

Three Months Ended

February 28, 2025

Six Months Ended

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 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.

There have been no significant changes to our critical accounting policies and estimates during the six months ended May 31, 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.

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.

Although we continue to view the long-term outlook for the housing market favorably, we expect the softer market conditions that we experienced in the 2025 first half, driven primarily by housing affordability concerns, compounded by ongoing elevated mortgage interest rates and macroeconomic and geopolitical uncertainties, to persist for the remainder of the year.

These conditions have precipitated a marked weakening in consumer confidence and caused homebuyers to hesitate on making purchase decisions, resulting in subdued demand during the Spring selling season 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 second quarter net orders of 13%, ending backlog of 24% and ending backlog value of 27%.

The value of our net orders for the 2025 second quarter was down 21% year over year driven by the 13% decline in net orders and an 8% decrease in their average selling price to $465,600, largely due to price reductions we implemented beginning in mid-February 2025 in conjunction with our strategic focus on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach.

However, we expect it to moderate our average selling prices and housing gross profit margins for the remainder of the year.

In navigating the current environment, we intend to remain nimble, balancing pace and price at the community level to optimize our assets for the highest possible returns.

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.

However, given our existing land pipeline, we are scaling back our investments in land and land development to align with current conditions.

As a result, we anticipate a year-over-year decrease in our land-related investments in the 2025 second half.

Additionally, we intend to continue 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, and consistent with our balanced approach to capital allocation, we plan to continue returning capital to our stockholders, primarily through additional share repurchases.

As of May 31, 2025, we had $450.0 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 to be approximately 8.5%, assuming no inventory-related charges, compared to 11.1% for the year-earlier quarter.

Subject to these factors, we expect to repurchase between $100.0 million and $200.0 million of our common stock in the 2025 third quarter.

Considering the foregoing, we have revised our projections for 2025 that were made in our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2025, and our present outlook for the 2025 third quarter and the 2025 full year as to certain metrics is as follows:

2025 Third Quarter

• We expect to generate housing revenues in the range of $1.50 billion to $1.70 billion, compared to $1.75 billion for the corresponding 2024 period, and anticipate our average selling price to be between $470,000 and $480,000, compared to $480,900 in the year-earlier period.

• We expect our homebuilding operating income margin as a percentage of revenues to be in the range of 7.6% to 8.2%, assuming no inventory-related charges, compared to 10.9% for the year-earlier quarter.

• We expect our housing gross profit margin will be in the range of 18.1% to 18.7%, assuming no inventory-related charges, compared to 20.7% for the corresponding 2024 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 selling, general and administrative expenses as a percentage of housing revenues will be in the range of 10.3% to 10.7%, compared to 9.8% for the 2024 third quarter.

• We expect our effective tax rate will be approximately 24.0%, compared to 24.2% for the year-earlier quarter.

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

• We expect our ending community count to be roughly 250, compared to 254 for the corresponding 2024 quarter.

2025 Full Year

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• We expect our average selling price to be in the range of $480,000 to $490,000, 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 homebuilding operating income margin as a percentage of revenues to be in the range of 8.6% to 9.0%, assuming no inventory-related charges, compared to 11.1% for 2024.

• We expect our housing gross profit margin to be in the range of 19.0% to 19.4%, assuming no inventory-related charges, compared to 21.1% for 2024.

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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).

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.

This includes U.S.

trade policy and recently implemented and proposed tariffs, and other countries’ countervailing measures, on raw building materials, such as steel, lumber, drywall and concrete, and/or finished products.

Though certain tariffs and countervailing measures instituted in 2025

have influenced pricing in adjacent sectors, we have not experienced significant cost increases or raw material/finished product availability constraints as of the date of this filing.

However, if the U.S.

or foreign governments take actions that cause tariff-related cost or availability pressures to escalate or expand, we could experience significant construction cost increases and/or supply chain disruptions that, in turn, would impact our business and our consolidated financial statements in future reporting periods.

Additionally, 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 second 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, margins 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 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;

• changes in interest rates, including those set by the Federal Reserve, 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;

• 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 or that are due to our deciding not to procure certain types or amounts of insurance coverage;

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

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• 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;

• changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes;

presidential administration, 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, and the potential significant scaling back or ending of the federal conservatorship of the government-sponsored enterprises), the homebuilding industry, or construction activities;

• changes in U.S.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis