What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-10-08 compared with 2026-07-09 · 268 added, 287 removed, 404 unchanged (58% 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 May 31, Six Months Ended May 31,

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

2026 2025 Variance

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$ 1.05 $ 1.61 (35) % $ 2.00 $ 4.60 (57) %

In the 2026 second quarter, the housing market continued to be negatively affected by a combination of persistent affordability pressures, elevated mortgage interest rates, and cautious buyer sentiment, which softened further during the period due to rising inflation, heightened macroeconomic uncertainties and geopolitical tensions, including the military conflict in the Middle East.

At the same time, underlying demand drivers, such as favorable demographic trends, an ongoing structural undersupply of homes, and the appeal of new, personalized energy‑efficient homes, drove healthy traffic at our communities and interest in our product offerings.

We generated 3,317 net orders in the 2026 second quarter, a 4% decrease from the year-earlier quarter, with a monthly net order pace per community of 4.0, compared to 4.5 for the prior-year period.

Our average community count increased 9% year over year to 278, and our ending community count rose 11% to 280, reflecting our continued investments in land and land development to support future growth.

The value of net orders for the quarter was $1.55 billion, down 4% from the year-earlier period, reflecting the lower net order volume, as their $466,800 average selling price was nearly even with the year-ago quarter.

Within this operating environment during the 2026 first half, we maintained the simplified sales approach we implemented more than a year ago.

With this approach, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices.

Additionally, while selling through our existing inventory, we continued to emphasize sales of our Built to Order ® homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes.

Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025.

Our Built to Order homes are our core competency and their value proposition to prospective customers has increased with the meaningful reduction in our build times over the past few years.

Reflecting this demand – and supported in part by our achieving year-over-year build time improvements for Built to Order homes of 22% in the 2026 first quarter and 24% in the 2026 second quarter – we generated predominantly Built to Order net orders in both quarters of our 2026 first half.

We believe this momentum will enable us to accomplish our homes delivered mix goal in the 2026 second half and beyond.

While our ending backlog at May 31, 2026 was down 5% on a year-over-year basis, our renewed focus on Built to Order contributed to sequential growth in our ending backlog for both the 2026 first and second quarters, with the number of homes at May 31, 2026 up 45% from November 30, 2025.

Among other benefits, our larger backlog of Built to Order homes generally provides us with greater visibility into future deliveries and enhanced predictability of housing gross profit margins compared to inventory homes, as the selling price and cost to build are usually known prior to starting the home.

Our strategic shift toward a higher mix of Built to Order home sales contributed to an anticipated temporary trough in deliveries during the 2026 first half, partly due to both the inherent time between sale and delivery of Built to Order homes and our intentional moderation of inventory starts.

We expect the higher level of Built to Order sales generated during this period to

benefit our homes delivered and housing gross profit margins in the third and fourth quarters of the year as well as position us to be a stronger company.

Homebuilding revenues for the three months ended May 31, 2026 were generated from housing operations and nominal land sales.

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

Housing revenues for the 2026 second quarter decreased 27% year over year to $1.11 billion, due to a 23% decrease in the number of homes delivered to 2,395 and a 5% decline in their average selling price to $461,900.

Approximately 50% of our homes delivered in the 2026 second quarter were to first-time homebuyers.

Our homes delivered as a percentage of backlog at the beginning of the quarter were 66% for the 2026 second quarter, compared to 70% for the year-earlier quarter.

This decrease reflects growth in our backlog since the beginning of the year, as well as a lower percentage of homes sold and delivered within the same quarter.

Homebuilding operating income for the three months ended May 31, 2026 was $28.2 million, compared to $131.5 million for the year-earlier period.

As a percentage of revenues, homebuilding operating income was 2.5% for the 2026 second quarter, compared to 8.6% for the corresponding 2025 period, reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues.

Operating income in both periods included $5.6 million of inventory-related charges.

Our housing gross profit margin was 15.2%, compared to 19.3% for the year-earlier quarter, primarily due to price reductions we implemented in conjunction with our simplified sales strategy to stimulate demand, higher relative land costs and reduced operating leverage.

During the 2026 third quarter, housing market conditions remained challenging, weakening from the prior quarter as an increase in mortgage loan interest rates further pressured affordability in many of our served markets.

Higher interest rates coupled with persistent inflation, attributable in part to rising commodity and oil prices, heightened macroeconomic uncertainties and geopolitical tensions, including the military conflicts in the Middle East and in Ukraine, caused prospective buyers to become more cautious on purchasing a home.

In addition, resale home inventory, which is our largest competitor, increased to its highest levels in a decade, and we are seeing pricing trending downward in several areas within our operational footprint.

Even with the significant headwinds, demand for our Built to Order ® homes contributed to our first year-over-year increase in ending backlog in four years, as these homes are generally sold prior to the start of construction and remain in backlog until delivered.

Reflecting the operating environment, we produced 2,604 net orders in the 2026 third quarter, down 12% from the year-earlier quarter, which contributed, along with a higher average community count, to a decline in the monthly net order pace per community to 3.1, compared to 3.8 for the prior-year period.

Our average community count increased 8% year over year to 279, and our ending community count rose 5% to 277, primarily reflecting our continued investments in land and land development to support future growth.

The value of net orders for the quarter was $1.21 billion, down 8% from the year-earlier period, primarily due to lower net orders, partly offset by a 4% increase in their average selling price to $463,600.

To support orders, we have remained focused in 2026 on our strategy of offering customers a simple, straightforward and transparent base price with limited, if any, concessions or incentives, intended to provide a compelling value competitive with area resale home prices.

In addition, while selling through our existing inventory, we have continued to prioritize orders of our Built to Order homes, which are our core competency and a key industry differentiator for us that typically generate higher gross profit margins than inventory homes, and we generated predominantly Built to Order net orders in each of the first three quarters of 2026.

We believe this reflects, in part, how the value proposition of our Built to Order homes to prospective customers has increased with the meaningful reduction in build times we have achieved over the past few years.

In 2026, our average build times improved year over year by 22% in the first quarter, 24% in the second quarter and 19% in the third quarter.

With the substantial Built to Order net orders we generated in the first nine months of the year, we reached our goal of a predominantly Built to Order mix of homes delivered in the 2026 third quarter, with these homes comprising 74% of homes delivered and benefiting our housing gross profit margin.

Homebuilding revenues for the three months ended August 31, 2026 were generated solely from housing operations.

For the three months ended August 31, 2025, homebuilding revenues were generated from housing operations and nominal land sales.

Housing revenues for the 2026 third quarter decreased 20% year over year to $1.29 billion, due to a 19% decrease in the number of homes delivered to 2,732 and a slight decline in their average selling price to $473,000.

Approximately 50% of our

homes delivered in the 2026 third quarter were to first-time homebuyers.

Our homes delivered as a percentage of backlog at the beginning of the quarter were 60% for the 2026 third quarter, compared to 71% for the year-earlier quarter.

This decrease reflects growth in our backlog since the beginning of the year, as well as a lower percentage of homes sold and delivered within the same quarter, corresponding to our strategic shift toward increasing our mix of Built to Order net orders.

Homebuilding operating income for the three months ended August 31, 2026 was $67.1 million, compared to $131.2 million for the year-earlier period.

As a percentage of revenues, homebuilding operating income was 5.2% for the 2026 third quarter, compared to 8.1% for the corresponding 2025 period, mainly due to a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues.

Excluding inventory-related charges of $3.0 million for the current quarter and $11.3 million for the year-earlier quarter, the homebuilding operating income margin was 5.4%, compared to 8.8%.

Our housing gross profit margin was 16.5%, compared to 18.2% for the year-earlier quarter.

Excluding the above-mentioned inventory-related charges, the housing gross profit margin was 16.8%, compared to 18.9%, primarily reflecting pricing pressure, higher relative land costs and reduced operating leverage.

Selling, general and administrative expenses as a percentage of housing revenues increased 130 basis points year over year to 11.3%, mainly due to a decrease in operating leverage from lower housing revenues.

Net income and diluted earnings per share for the three months ended May 31, 2026 were $27.3 million and $.43, respectively, compared to $107.9 million and $1.50, respectively, for the three months ended May 31, 2025.

Our diluted earnings per share for the 2026 second quarter reflected lower net income, partly offset by a 12% reduction in our weighted-average diluted share count reflecting the impact of our common stock repurchases over the past several quarters .

Total pretax income for the 2026 third quarter was $81.2 million, including a $3.5 million gain associated with the sale of an investment in equity securities of a privately held technology company, compared to $143.2 million for the year-earlier period.

Net income and diluted earnings per share for the three months ended August 31, 2026 were $65.3 million and $1.05, respectively, compared to $109.8 million and $1.61, respectively, for the three months ended August 31, 2025.

Our diluted earnings per share for the 2026 third quarter reflected lower net income, partly offset by a 9% reduction in our weighted-average diluted share count attributable to common stock repurchases over the past several quarters .

We continue to take a balanced approach to capital allocation, guided by market conditions and our priorities of investing in land and land development to support future growth and returning capital to our stockholders.

Our investments in land and land development for the 2026 second quarter totaled $495.8 million, a 4% decrease compared to the year-earlier quarter.

During the 2026 second quarter, we repurchased 1.4 million shares of our common stock at a total cost of $75.0 million, compared to 3.7 million shares at a total cost of $200.0 million in the year-earlier quarter.

For the 2026 first half, we invested $1.06 billion in land and land development, representing a 26% decrease from the corresponding year-earlier period, and repurchased 2.2 million shares of our common stock at a total cost of $125.0 million.

We ended the 2026 second quarter with total liquidity of $1.12 billion, including cash and cash equivalents and $923.4 million of available capacity under the Credit Facility.

We had $275.0 million of cash borrowings outstanding under the Credit Facility at May 31, 2026.

Although our ending backlog value at May 31, 2026 decreased 7% year over year to approximately $2.14 billion, we believe we are well positioned to achieve our projections for the 2026 third quarter and full year, as described below under “Outlook.”

Our investments in land and land development for the 2026 third quarter totaled $722.3 million, a 40% increase compared to the year-earlier quarter.

During the 2026 third quarter, we repurchased .9 million shares of our common stock at a total cost of $50.0 million, compared to 3.3 million shares at a total cost of $188.5 million in the year-earlier quarter.

For the nine months ended August 31, 2026, we invested $1.79 billion in land and land development, representing an 8% decrease from the corresponding year-earlier period, and repurchased 3.1 million shares of our common stock at a total cost of $175.0 million.

We ended the 2026 third quarter with total liquidity of $942.4 million, including cash and cash equivalents and $783.4 million of available capacity under the Credit Facility.

We had $415.0 million of cash borrowings outstanding under the Credit Facility at August 31, 2026.

With our ending backlog value at August 31, 2026 up 3% year over year to approximately $2.05 billion, we believe we are well positioned to achieve our projections for the 2026 fourth 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 May 31, Six Months Ended May 31,

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

2026 2025 2026 2025

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Operating income 67,134 131,163 128,271 389,965

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

2026 2025 2026 2025

Interest income

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

2026 2025 2026 2025

Interest income and other $ 4,518 $ 1,870 $ 6,963 $ 5,628

Equity in income of unconsolidated joint ventures

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Operating income as a percentage of revenues 5.2 % 8.1 % 3.7 % 8.6 %

Homebuilding revenues for the three months ended May 31, 2026 consisted of housing revenues and nominal land sale revenues.

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

Housing revenues for the 2026 second quarter declined 27% from the year-earlier quarter due to decreases of 23% in the number of homes delivered and 5% in their overall average selling price.

Each of our homebuilding reporting segments posted year-over-year decreases in second quarter housing revenues, ranging from 17% in our Southeast segment to 47% in our Southwest segment.

The decline in the overall number of homes delivered primarily resulted from our having 19% fewer homes in backlog at the beginning of the 2026 second quarter compared to the year-earlier period, as well as our strategic shift toward a higher mix of Built to Order sales in the 2026 first half.

The lower average selling price mainly reflected a combination of product and geographic mix factors and the price reductions we implemented in conjunction with our simplified sales strategy to stimulate demand.

For the six months ended May 31, 2026, homebuilding revenues consisted of housing revenues and land sale revenues.

In the year-earlier period, homebuilding revenues were generated solely from housing operations.

Housing revenues for the six months ended May 31, 2026 decreased 25% from the corresponding 2025 period due to a 19% decline in the number of homes delivered and an 8% decrease in their average selling price.

Land sale revenues for the three-month and six-month periods ended May 31, 2026 totaled $.9 million and $1.4 million, respectively.

There were no land sales during the three-month and six-month periods ended May 31, 2025.

Homebuilding revenues for the three months ended August 31, 2026 consisted solely of housing revenues.

In the three months ended August 31, 2025, homebuilding revenues were generated from housing operations and nominal land sale revenues.

Housing revenues for the 2026 third quarter declined 20% from the year-earlier quarter due to a decrease of 19% in the number of homes delivered and a slight decline in their overall average selling price.

Each of our homebuilding reporting segments posted year-over-year decreases in third-quarter housing revenues, ranging from 7% in our West Coast segment to 34% in our Southwest and Central segments.

The decline in the overall number of homes delivered primarily resulted from our having 5% fewer homes in backlog at the beginning of the 2026 third quarter compared to the year-earlier period, as well as our strategic shift toward a higher mix of Built to Order sales in the 2026 first nine months.

For the nine months ended August 31, 2026 and 2025, homebuilding revenues consisted of housing revenues and land sale revenues.

Housing revenues for the nine months ended August 31, 2026 decreased 23% from the corresponding 2025 period due to a 19% decline in the number of homes delivered and a 5% decrease in their average selling price.

There were no land sale revenues for the three months ended August 31, 2026, compared to land sale revenues of $.5 million for the corresponding 2025 period.

For the nine months ended August 31, 2026, land sale revenues totaled $1.4 million, compared to $.5 million for the nine months ended August 31, 2025.

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 May 31, 2026 decreased 79% from the prior-year period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for both periods included $5.6 million of inventory-related charges.

As a percentage of revenues, our operating income for the three months ended May 31, 2026 was 2.5%, compared to 8.6% for the corresponding 2025 period, 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 3.0% for the three months ended May 31, 2026, compared to 9.0% for the year-earlier period.

For the six months ended May 31, 2026, our homebuilding operating income declined 76% from the year-earlier period mainly due to a decrease in housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for the six months ended May 31, 2026 included inventory-related charges of $7.7 million, compared to $7.0 million of such charges for the corresponding 2025 period.

As a percentage of revenues, our operating income for the six months ended May 31, 2026 decreased 610 basis points year over year to 2.8%, 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 590 basis points to 3.2% for the six months ended May 31, 2026 from 9.1% for the corresponding year-earlier period.

• Housing Gross Profits – Housing gross profits of $168.6 million for the three months ended May 31, 2026 were down 43% year over year, reflecting lower housing revenues and a 410 basis-point decrease in our housing gross profit margin to 15.2%.

The decline in the housing gross profit margin primarily reflected the price reductions we implemented a year ago, higher relative land costs and reduced operating leverage.

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, 2026 and 2025.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 15.7% for the 2026 second quarter decreased 400 basis points year over year.

For the six months ended May 31, 2026, our housing gross profits of $332.6 million decreased from $574.3 million for the year-earlier period due to lower housing revenues and a 440 basis-point decline in our housing gross profit margin.

The housing gross profit margin decrease primarily reflected the same factors described above for the three months ended May 31, 2026.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for both the six months ended May 31, 2026 and 2025.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 15.6% for the six months ended May 31, 2026 decreased 440 basis points year over year.

Our homebuilding operating income for the three months ended August 31, 2026 decreased 49% from the prior-year period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses.

Operating income for the 2026 third quarter included $3.0 million of inventory-related charges, compared to $11.3 million for the year-earlier quarter.

As a percentage of revenues, our operating income for the three months ended August 31, 2026 was 5.2%, compared to 8.1% for the corresponding 2025 period, 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 5.4% for the three months ended August 31, 2026, compared to 8.8% for the year-earlier period.

For the nine months ended August 31, 2026, our homebuilding operating income declined 67% from the year-earlier period mainly due to a decrease in housing gross profits, partially offset by lower selling, general and administrative expenses.

Operating income for the nine months ended August 31, 2026 included inventory-related charges of $10.7 million, compared to $18.4 million of such charges for the corresponding 2025 period.

As a percentage of revenues, our operating income for the nine months ended August 31, 2026 decreased 490 basis points year over year to 3.7%, 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 500 basis points to 4.0% for the nine months ended August 31, 2026.

• Housing Gross Profits – Housing gross profits of $213.8 million for the three months ended August 31, 2026 were down 27% year over year, reflecting lower housing revenues and a 170 basis-point decrease in our housing gross profit margin to

The decline in the housing gross profit margin primarily reflected continued pricing pressure, higher relative land costs and reduced operating leverage.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 16.8% for the 2026 third quarter decreased 210 basis points year over year.

For the nine months ended August 31, 2026, our housing gross profits of $546.3 million decreased from $867.7 million for the year-earlier period due to lower housing revenues and a 350 basis-point decline in our housing gross profit margin.

The housing gross profit margin decrease primarily reflected the same factors described above for the three months ended August 31, 2026.

As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for both the nine months ended August 31, 2026 and 2025.

Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 16.1% for the nine months ended August 31, 2026 decreased 350 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 – Land sales generated nominal results for the three-month and six-month periods ended May 31, 2026.

There were no land sales during the three-month and six-month periods ended May 31, 2025.

• Land Sale Profits – There were no land sales during the three months ended August 31, 2026.

Land sales generated nominal results for the nine months ended August 31, 2026 and the three-month and nine-month periods ended August 31, 2025.

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

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

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

2026 % of Housing Revenues 2025 % of Housing Revenues 2026 % of Housing Revenues 2025 % of Housing Revenues

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Commission expenses (a) 44,358 3.4 56,062 3.5 124,099 3.5 155,742 3.5

General and administrative expenses (b) 61,324 5.6 68,082 4.5 114,073 5.2 133,541 4.6

General and administrative expenses 62,546 4.8 66,196 4.1 176,620 5.1 199,737 4.4

Total $ 146,626 11.3 % $ 162,152 10.0 % $ 418,217 12.0 % $ 477,638 10.6 %

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

(b) General and administrative expenses for both the three months and six months ended May 31, 2026 included $1.5 million of costs associated with the planned relocation of our corporate headquarters office, as discussed in Note 21 – Relocation of Corporate Headquarters in the Notes to Consolidated Financial Statements in this report.

Our selling, general and administrative expenses for the three months ended May 31, 2026 decreased 14% compared to the year-earlier period, primarily reflecting a decrease in commission expenses resulting from fewer homes delivered in the 2026 period and a reduction in general and administrative expenses largely due to lower performance-based compensation costs.

As a percentage of housing revenues, our selling, general and administrative expenses for the three months ended May 31, 2026 increased 200 basis points year over year, mainly due to a decrease in operating leverage from lower housing revenues.

For the six months ended May 31, 2026, selling, general and administrative expenses decreased 14% year over year, primarily due to the same factors described above for the three months ended May 31, 2026 as well as the favorable impact of $8.0 million in insurance recoveries.

As a percentage of housing revenues, selling, general and administrative expenses for the six months ended May 31, 2026 increased 170 basis points, primarily reflecting decreased operating leverage from lower housing revenues, partly offset by the insurance recoveries.

Interest Income/Expense .

Interest income, which is generated from short-term investments, was $1.2 million for the three months ended May 31, 2026, compared to $1.7 million for the year-earlier quarter.

For the six months ended May 31, 2026, interest income was $2.4 million, compared to $3.8 million for the corresponding 2025 period.

The year-over-year decreases for the three-month and six-month periods ended May 31, 2026 reflected our lower average balance of cash equivalents and a lower interest rate in the 2026 periods.

Our selling, general and administrative expenses for the three months ended August 31, 2026 decreased 10% compared to the year-earlier period, primarily reflecting a decrease in commission expenses resulting from fewer homes delivered in the 2026 period and a reduction in general and administrative expenses largely due to lower costs associated with performance-based compensation and personnel reductions.

As a percentage of housing revenues, our selling, general and administrative expenses for the three months ended August 31, 2026 increased 130 basis points year over year, mainly due to a decrease in operating leverage from lower housing revenues, partly offset by lower costs associated with certain performance-based employee compensation plans and personnel reductions.

For the nine months ended August 31, 2026, selling, general and administrative expenses decreased 12% year over year, primarily due to the same factors described above for the three months ended August 31, 2026 as well as the favorable impact of $8.0 million in insurance recoveries.

As a percentage of housing revenues, selling, general and administrative expenses for the nine months ended August 31, 2026 increased 140 basis points, primarily reflecting decreased operating leverage from lower housing revenues, partly offset by lower costs associated with certain performance-based employee compensation plans and personnel reductions, and the insurance recoveries.

Interest Income/Expense and Other .

Interest income and other for the three months and nine months ended August 31, 2026 consisted of interest income and a $3.5 million gain associated with the sale of an investment in equity securities of a privately held technology company.

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

For the three months and nine months ended August 31, 2025, interest income and other was comprised solely of interest income.

Interest income, which is generated from short-term investments, was $1.0 million for the three months ended August 31, 2026, compared to $1.9 million for the year-earlier quarter.

For the nine months ended August 31, 2026, interest income was $3.5 million, compared to $5.6 million for the corresponding 2025 period.

The year-over-year decreases for the three-month and nine-month periods ended August 31, 2026 reflected our lower average balance of cash equivalents and a lower interest rate in the 2026 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 and six-month periods ended May 31, 2026 and 2025 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 nine-month periods ended August 31, 2026 and 2025 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 of Unconsolidated Joint Ventures .

Our equity in income of unconsolidated joint ventures was $1.3 million for the three months ended May 31, 2026, compared to $1.1 million for the year-earlier period.

For the six months ended May 31, 2026, our equity in income of unconsolidated joint ventures was $1.8 million, compared to $3.5 million for the corresponding 2025 period, mainly due to a decrease in the number of homes delivered by an unconsolidated joint venture in California.

Our equity in income of unconsolidated joint ventures was $2.1 million for the three months ended August 31, 2026, compared to $1.5 million for the year-earlier period.

For the nine months ended August 31, 2026, our equity in income of unconsolidated joint ventures was $3.9 million, compared to $5.0 million for the corresponding 2025 period.

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 May 31, Six Months Ended May 31,

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

2026 2025 2026 2025

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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 2026 second quarter decreased 4% compared to the year-earlier quarter, driven by declines of 6% and 22% in our Southwest and Central homebuilding reporting segments, respectively, partly offset by growth of 9% in our West Coast segment and 2% in our Southeast segment.

The pace of monthly net orders per community was 4.0 in the 2026 second quarter, compared to 4.5 for the corresponding 2025 quarter, reflecting the lower net order volume and our higher average community count.

The value of net orders for the 2026 second quarter was $1.55 billion, a decline of 4% from year-earlier quarter, reflecting the lower net order volume, as the average selling price of those net orders was nearly even with the year-earlier quarter at $466,800.

Our cancellation rate as a percentage of gross orders for the three months ended May 31, 2026 was 12%, compared to 16% for the year-earlier period.

In the 2026 first half, we maintained the simplified sales approach we implemented more than a year ago.

Additionally, while selling through our existing inventory, we continued to emphasize sales of our Built to Order homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes.

Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025.

Our Built to Order homes are our core competency and their value proposition to prospective customers has increased with the meaningful reduction in our build times over the past few years.

Reflecting demand for our personalized homes, supported in part by our achieving ongoing year-over-year build time improvements, we generated predominantly Built to Order net orders in both the 2026 first and second quarters, momentum that we believe will enable us to accomplish our homes delivered mix goal in the 2026 second half and beyond.

The number of homes in our backlog at May 31, 2026 decreased 5% compared to May 31, 2025.

Our overall backlog value at May 31, 2026 declined 7% year over year due to the lower number of homes in backlog and a slight decrease in their

average selling price.

Backlog value was down year over year in three of our homebuilding reporting segments, with decreases ranging from 11% in our Southeast segment to 27% in our Southwest segment, partially offset by a 10% increase in our West Coast segment.

Net orders for the 2026 third quarter were down 12% compared to the year-earlier quarter, driven by decreases ranging from 2% in our Southwest homebuilding reporting segment to 26% in our Central segment, partly offset by an increase of 8% in our West Coast segment.

The pace of monthly net orders per community was 3.1 in the 2026 third quarter, compared to 3.8 for the corresponding 2025 quarter, reflecting the lower net order volume and our higher average community count.

The value of net orders for the 2026 third quarter was $1.21 billion, a decline of 8% from year-earlier quarter, reflecting the lower net order volume, partly offset by a 4% increase in average selling price of those net orders to $463,600.

Our cancellation rate as a percentage of gross orders for the three months ended August 31, 2026 was nearly even with the year-earlier period.

To support sales in the nine months ended August 31, 2026, we remained focused on offering customers a simple, straightforward, transparent base price with limited, if any, concessions or incentives, intended to provide a compelling value competitive with area resale home prices.

Further, while selling through our existing inventory, we have continued to prioritize orders of our Built to Order homes, which are our core competency and a key industry differentiator for us that typically generate higher gross margins than inventory homes, and we generated predominantly Built to Order net orders in each of the first three quarters of 2026.

This momentum contributed to a 74% mix of Built to Order homes delivered in the 2026 third quarter and helped drive the first year-over-year increase in our ending backlog in four years, as these homes are generally sold prior to the start of construction and remain in backlog until delivered.

The number of homes in our backlog at August 31, 2026 increased 2% compared to August 31, 2025.

Our overall backlog value at August 31, 2026 grew 3% year over year due to the increased number of homes in backlog and their higher average selling price.

Backlog value reflected a year-over-year increase of 22% in our West Coast homebuilding reporting segment, partially offset by decreases ranging from 9% in our Southwest segment to 12% in our Southeast segment.

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

Our renewed focus on Built to Order contributed to sequential growth in our ending backlog for both the 2026 first and second quarters, with the number of homes in backlog at May 31, 2026 up 45% from November 30, 2025.

1 unchanged sentence

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 2026 second quarter grew 11% and our average community count increased 9%, each as compared to the year-earlier quarter.

Our ending community count for the 2026 third quarter grew 5% and our average community count increased 8%, each as compared to the year-earlier quarter.

HOMEBUILDING REPORTING SEGMENTS

1 unchanged sentence

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 May 31,

Three Months Ended August 31,

Homes Delivered Net Orders Cancellation Rates

12 unchanged sentences

Total $ 1,207,224 $ 1,314,607 (8) % 279 259 8 %

Six Months Ended May 31,

Nine Months Ended August 31,

Homes Delivered Net Orders Cancellation Rates

5 unchanged sentences

Total 7,497 9,283 8,767 9,182 14 % 16 %

Six Months Ended May 31,

Nine Months Ended August 31,

Net Order Value Average Community Count

20 unchanged sentences

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 $36.8 million and $40.4 million in the three months ended May 31, 2026 and 2025, respectively.

For the six months ended May 31, 2026, Corporate and other had an operating loss of $70.5 million, compared to $76.9 million for the corresponding year-earlier period.

The financial results of our homebuilding reporting segments for the three months and six months ended May 31, 2026 and 2025 were impacted to varying degrees by price reductions and other homebuyer concessions we extended to buyers in conjunction with our sales strategies, as well as product and geographic mix shifts of homes delivered.

Corporate and other had operating losses of $31.4 million and $36.4 million in the three months ended August 31, 2026 and 2025, respectively.

For the nine months ended August 31, 2026, Corporate and other had an operating loss of $101.9 million, compared to $113.3 million for the corresponding year-earlier period.

The financial results of our homebuilding reporting segments for the three months and nine months ended August 31, 2026 and 2025 were impacted to varying degrees by price reductions and other homebuyer concessions we extended to buyers in conjunction with our 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 May 31, Six Months Ended May 31,

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

2026 2025 Variance 2026 2025 Variance

3 unchanged sentences

Operating income $ 52,974 $ 69,649 (24) % $ 104,866 $ 211,735 (50) %

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

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

2026 2025 Variance 2026 2025 Variance

2 unchanged sentences

Operating income as a percentage of revenues 8.5 % 10.5 % (200) bps 6.6 % 11.0 % (440) bps

This segment’s revenues for the three-month and six-month periods ended May 31, 2026 consisted of housing revenues and nominal land sale revenues.

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

Housing revenues for the three months and six months ended May 31, 2026 declined from the corresponding year-earlier periods, reflecting 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, 2026 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 2026 second quarter decreased from the year-earlier quarter due to a 430 basis-point decline in the housing gross profit margin to 14.0% and a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.7%.

For the six months ended May 31, 2026, operating income as a percentage of revenues declined from the corresponding 2025 period, mainly reflecting a 420 basis-point decrease in the housing gross profit margin to 14.2% and a 170 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.8%.

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2026 was primarily due to price reductions, higher relative construction and land costs, increased inventory-related charges, product and geographic mix, and reduced operating leverage.

For the three months ended May 31, 2026, inventory-related charges associated with housing operations were $4.3 million, compared to $1.2 million for the year-earlier period.

For the six months ended May 31, 2026, inventory-related charges associated with housing operations were $5.0 million, compared to $1.8 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, 2026 was mainly due to higher marketing and other expenses associated with our expanded community count in this segment as well as a decrease in operating leverage from lower housing revenues.

For the six months ended May 31, 2026, these impacts were partly offset by insurance recoveries.

This segment’s revenues for the three months ended August 31, 2026 and the three-month and nine-month periods ended August 31, 2025 were generated solely from housing operations.

For the nine months ended August 31, 2026, this segment’s revenues consisted of housing revenues and nominal land sale revenues.

Housing revenues for the three months and nine months ended August 31, 2026 decreased from the corresponding year-earlier periods, reflecting declines in both the number of homes delivered and their average selling price.

Operating income for the three months ended August 31, 2026 decreased year over year due to lower housing gross profits and higher selling, general and administrative expenses.

Operating income as a percentage of revenues decreased from the prior-year quarter due to a 70 basis-point decline in the housing gross profit margin to 16.7% and a 130 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.2%.

For the nine months ended August 31, 2026, operating income decreased from the corresponding 2025 period, primarily reflecting lower housing gross profits.

Operating income as a percentage of revenues also declined, mainly due to a 280 basis-point decrease in the housing gross profit margin to 15.2% and a 160 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.5%.

The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2026 was primarily due to continued pricing pressure, higher relative land costs, and product and geographic mix.

For the nine months ended August 31, 2026, the housing gross profit margin was also impacted by higher relative construction costs and reduced operating leverage.

For the three months ended August 31, 2026, inventory-related charges associated with housing operations were $.7 million, compared to $1.1 million for the year-earlier period.

For the nine months ended August 31, 2026, inventory-related charges associated with housing operations were $5.7 million, compared to $3.0 million for the year-earlier period.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2026 was mainly due to higher marketing and other expenses associated with our expanded community count in this segment as well as a decrease in operating leverage from lower housing revenues.

For the nine months ended August 31, 2026, these impacts were partly offset by insurance recoveries.

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

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

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

2026 2025 Variance 2026 2025 Variance

8 unchanged sentences

Operating income as a percentage of revenues 11.7 % 17.1 % (540) bps 11.8 % 17.8 % (600) bps

In the three-month and six-month periods ended May 31, 2026 and 2025, this segment’s revenues were generated solely from housing operations.

This segment’s housing revenues for the three months and six months ended May 31, 2026 declined year over year, driven by decreases in both the number of homes delivered and their average selling price.

Operating income for both periods decreased year over year due to lower housing gross profits, partially offset by lower selling, general and administrative expenses.

As a percentage of revenues, this segment’s operating income for the 2026 second quarter declined from the year-earlier quarter, reflecting a 450 basis-point decrease in the housing gross profit margin to 20.2% and a 210 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.1%.

For the six months ended May 31, 2026, operating income as a percentage of revenues decreased year over year, mainly reflecting a 450 basis-point decrease in the housing gross profit margin to 20.7% and a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.9%.

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2026 primarily reflected higher relative land costs and decreased operating leverage on lower housing revenues, partly offset by lower construction costs.

There were $.4 million of inventory-related charges associated with housing operations for the three months and six months ended May 31, 2026, compared to $.8 million and $1.1 million, respectively, of such charges for the corresponding year-earlier periods.

For the three-month and nine-month periods ended August 31, 2026 and 2025, this segment’s revenues were generated solely from housing operations.

This segment’s housing revenues declined year over year in both periods, reflecting decreases in both the number of homes delivered and their average selling price.

Operating income for the three-month and nine-month periods ended August 31, 2026 decreased from the corresponding year-earlier periods due to lower housing gross profits, partially offset by lower selling, general and administrative expenses.

As a percentage of revenues, operating income for the 2026 third quarter declined from the year-earlier quarter, reflecting a 440 basis-point decrease in the housing gross profit margin to 19.7% and a 100 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.0%.

For the nine months ended August 31, 2026, operating income as a percentage of revenues also decreased year over year due to a

450 basis-point decrease in the housing gross profit margin to 20.3% and a 150 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.6%.

The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2026 primarily reflected continued pricing pressure, higher relative land costs and decreased operating leverage on lower housing revenues.

There were no inventory-related charges associated with housing operations for the three months ended August 31, 2026, and such charges totaled $.4 million for the nine months ended August 31, 2026, compared to $.5 million and $1.6 million, respectively, for the corresponding year-earlier periods.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for both the three months and nine months ended August 31, 2026 was mainly due to a decrease in operating leverage from lower housing revenues.

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

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

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

2026 2025 Variance 2026 2025 Variance

8 unchanged sentences

Operating income as a percentage of revenues 1.7 % 5.9 % (420) bps 3.4 % 7.4 % (400) bps

This segment’s revenues for the three-month and six-month periods ended May 31, 2026 and 2025 were generated solely from housing operations.

Housing revenues for the three months and six months ended May 31, 2026 were down 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-month and six-month periods ended May 31, 2026 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

This segment’s operating income as a percentage of revenues for the 2026 second quarter decreased from the year-earlier period due to a 270 basis-point decline in the housing gross profit margin to 15.6% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.8%.

For the six months ended May 31, 2026, operating income as a percentage of revenues decreased year over year, reflecting a 400 basis-point decrease in the housing gross profit margin to 15.2%, and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.0%.

The housing gross profit margin declined year over year for both the three-month and six-month periods ended May 31, 2026, mainly due to price reductions, higher relative construction and land costs, and product and geographic mix.

Inventory-related charges associated with housing operations for the three months ended May 31, 2026 were $.4 million, compared to $1.8 million for the year-earlier period.

For the six months ended May 31, 2026, inventory-related charges associated with housing operations were $1.0 million, compared to $2.1 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 ended May 31, 2026 primarily reflected decreased operating leverage from lower housing revenues.

For the six months ended May 31, 2026, the year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues was mainly due to decreased operating leverage, largely offset by the favorable impact of insurance recoveries.

This segment’s revenues for the three-month and nine-month periods ended August 31, 2026 and 2025 were generated solely from housing operations.

Housing revenues for the three months and nine months ended August 31, 2026 were down from the corresponding year-earlier periods primarily due to a decrease in the number of homes delivered.

Operating income for the three-month and nine-month periods ended August 31, 2026 declined from the corresponding year-earlier periods due to lower housing gross profits, partly offset by lower selling, general and administrative expenses.

This segment’s operating income as a percentage of revenues for the 2026 third quarter decreased from the year-earlier period due to a 220 basis-point decline in the housing gross profit margin to 13.7% and a 200 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 12.0%.

For the nine months ended August 31, 2026, operating income as a percentage of revenues decreased year over year, reflecting a 330 basis-point decrease in the housing gross profit margin to 14.7%, and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.3%.

The housing gross profit margin declined year over year for both the three-month and nine-month periods ended August 31, 2026, mainly due to continued pricing pressure, higher relative land costs, product and geographic mix, and decreased operating leverage on lower housing revenues, partly offset by decreased inventory-related charges.

Inventory-related charges associated with housing operations for the three months ended August 31, 2026 were $.9 million, compared to $7.2 million for the year-earlier period.

For the nine months ended August 31, 2026, inventory-related charges associated with housing operations were $1.9 million, compared to $9.4 million for the year-earlier period.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and nine months ended August 31, 2026 primarily reflected a decrease in operating leverage from lower housing revenues.

For the nine months ended August 31, 2026, the year-over-year increase was largely offset by the favorable impact of insurance recoveries.

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

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

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

2026 2025 Variance 2026 2025 Variance

5 unchanged sentences

Operating income $ 16,130 $ 22,225 (27) % $ 36,836 $ 55,532 (34) %

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

2026 2025 Variance 2026 2025 Variance

Homes delivered 654 797 (18) % 1,867 1,969 (5) %

1 unchanged sentence

Operating income as a percentage of revenues 6.6 % 7.3 % (70) bps 5.4 % 7.2 % (180) bps

This segment’s revenues for the three months ended May 31, 2026 and the three months and six months ended May 31, 2025 were generated solely from housing operations.

For the six months ended May 31, 2026, this segment’s revenues were comprised of housing revenues and nominal land sale revenues.

Housing revenues for the three months ended May 31, 2026 were down year over year due to decreases in both the number of homes delivered and their average selling price.

For the six months ended May 31, 2026, housing revenues declined from the corresponding year-earlier period to $441.6 million, reflecting a decrease in the average selling price of homes delivered, partly offset by an increase in the number of homes delivered.

Operating income for the three months and six months ended May 31, 2026 declined from the corresponding year-earlier periods as a result of lower housing gross profits, partially offset by lower selling, general and administrative expenses.

As a percentage of revenues, operating income for the 2026 second quarter declined from the year-earlier quarter primarily due to a 230 basis-point decrease in the housing gross profit margin to 15.0%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.6%.

Operating income as a percentage of revenues for the six months ended May 31, 2026 declined from the year-earlier period due to a 320 basis-point decrease in the housing gross profit margin to 14.3%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.7%.

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2026 mainly reflected price reductions, higher construction and land costs, and product and geographic mix.

Inventory-related charges associated with housing operations for the three months ended May 31, 2026 were $.5 million, compared to $1.7 million for the year-earlier quarter.

For the six months ended May 31, 2026, inventory-related charges associated with housing operations were $1.3 million, compared to $1.9 million for the corresponding 2025 period.

The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for both the three months and six months ended May 31, 2026 was mainly due to a decrease in sales commissions.

For the three months ended August 31, 2026, this segment’s revenues were generated solely from housing operations.

For the nine months ended August 31, 2026 and the three-month and nine-month periods ended August 31, 2025, this segment’s revenues were comprised of housing revenues and nominal land sale revenues.

Housing revenues for the three months ended August 31, 2026 decreased 19% year over year and, for the nine months ended August 31, 2026, declined 11% from the corresponding year-earlier period.

In both periods, the decline reflected decreases in both the number of homes delivered and their average selling price.

Operating income for the three months and nine months ended August 31, 2026 was down from the corresponding year-earlier periods mainly due to lower housing gross profits, partially offset by lower selling, general and administrative expenses.

As a percentage of revenues, operating income for the 2026 third quarter declined from the year-earlier quarter primarily due to a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.9%, partially offset by a 20 basis-point increase in the housing gross profit margin to 16.5%.

Operating income as a percentage of revenues for the nine months ended August 31, 2026 declined from the year-earlier period due to a 190 basis-point decrease in the housing gross profit margin to 15.1%, partly offset by a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.8%.

The year-over-year increase in the housing gross profit margin for three months ended August 31, 2026 primarily reflected lower construction costs, which more than offset the effects of continued pricing pressure and higher relative land costs.

For the nine months ended August 31, 2026, the housing gross profit margin decreased from the year-earlier period, mainly due to continued pricing pressure, higher land costs, and product and geographic mix, partially offset by lower construction costs.

Inventory-related charges associated with housing operations for the three months ended August 31, 2026 were $1.4 million, compared to $2.5 million for the year-earlier quarter.

For the nine months ended August 31, 2026, inventory-related charges associated with housing operations were $2.7 million, compared to $4.4 million for the corresponding 2025 period.

The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended August 31, 2026 was mainly due to a decrease in operating leverage from lower housing revenues.

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 May 31, Six Months Ended May 31,

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

2026 2025 2026 2025

4 unchanged sentences

Pretax income $ 7,381 $ 8,686 $ 19,581 $ 24,373

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

2026 2025 2026 2025

Total originations (a):

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(a) Loan originations and sales occurred within KBHS.

Financial services revenues for the three-month and six-month periods ended May 31, 2026 grew 9% and 7%, respectively, from the corresponding year-earlier periods, reflecting higher insurance commission revenues, partly offset by lower title services revenues.

The year-over-year increase in insurance commission revenues in the 2026 periods was primarily due to higher estimated future renewal commissions.

Title services revenues decreased mainly due to fewer homes delivered in the 2026 periods.

Financial services revenues for the three months ended August 31, 2026 declined 21% year over year, reflecting lower title services revenues and insurance commission revenues.

For the nine months ended August 31, 2026, financial services revenues decreased 4% from the corresponding year-earlier period, as lower title services revenues were partly offset by higher insurance commission revenues.

Lower title services revenues in both periods primarily reflected fewer homes delivered in the 2026 periods.

Insurance commission revenues decreased in the three-month period and increased in the nine-month period, primarily due to changes in estimated future renewal commissions.

Pretax income.

Financial services pretax income for the three-month and six-month periods ended May 31, 2026 decreased 18% and 22%, respectively, from the corresponding year-earlier periods, primarily due to lower equity in income of our unconsolidated joint venture, KBHS.

For the 2026 second quarter, our equity in income of KBHS declined 42% year over year, reflecting a decrease in KBHS’ income mainly due to fewer loans originated as a result of both the lower number of homes we delivered and a lower percentage of our homebuyers using KBHS.

The impact of the lower loan volume on KBHS’ income was partially offset by a $.9 million gain in the fair value of IRLCs in the three months ended May 31, 2026, compared to a $2.1 million loss for the year‑earlier period.

For the six months ended May 31, 2026, our equity in income of KBHS decreased 46% from the corresponding year-earlier period, due to a decline in KBHS’ income that primarily reflected the same factors described above for the three months ended May 31, 2026.

The impact of the lower loan volume for the six months ended May 31, 2026 was partly offset by a $1.0 million gain in the fair value of IRLCs, compared to a $3.6 million loss in the corresponding period of 2025.

Financial services pretax income for the three months ended August 31, 2026 decreased 15% from the year-earlier period, mainly reflecting lower results from title and insurance operations.

Our equity in income of KBHS declined 4% year over year due to a decline in KBHS’ income that primarily reflected fewer loans originated resulting from the lower number of homes we delivered, partially offset by a higher percentage of our homebuyers using KBHS.

The impact of the lower loan volume on KBHS’ income was partly offset by a $1.2 million gain in the fair value of IRLCs in the three months ended August 31, 2026, compared to a $3.0 million loss for the year‑earlier period.

For the nine months ended August 31, 2026, financial services pretax income declined 20% from the corresponding year-earlier period, primarily due to a 33% decrease in the equity in income of our unconsolidated joint venture, KBHS.

Our equity in income of KBHS declined from the corresponding year-earlier period due to a decrease in KBHS’ income that mainly reflected fewer loans originated as a result of both the lower number of homes we delivered and a lower percentage of our homebuyers using KBHS.

The impact of the lower loan volume for the nine months ended August 31, 2026 was partially offset by a $2.2 million gain in the fair value of IRLCs, compared to a $6.6 million loss in the corresponding period of 2025.

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.

1 unchanged sentence

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

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

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

2026 2025 2026 2025

1 unchanged sentence

Effective tax rate 19.6 % 23.3 % 20.6 % 23.0 %

Our effective tax rate for the three months ended May 31, 2026 increased from the year-earlier period, primarily due to the lower pretax income we generated for the 2026 period, which heightened the relative impact of non-deductible executive compensation expense.

For the six months ended May 31, 2026, our effective tax rate decreased from the year-earlier period, mainly due to the lower pretax income, which resulted in a higher relative impact of excess tax benefits from stock-based compensation in the 2026 period, partly offset by a higher relative impact of non-deductible executive compensation expense.

Our effective tax rate for the three months ended August 31, 2026 decreased from the year-earlier period, primarily due to an increase in excess benefits from stock based compensation as well as the lower pretax income we generated for the 2026 period, which heightened their relative impact.

For the nine months ended August 31, 2026, our effective tax rate decreased from the year-earlier period, mainly due to the lower pretax income, which resulted in a higher relative impact of excess tax benefits from stock-based compensation in the 2026 period, partly offset by a higher relative impact of non-deductible executive compensation expense.

On July 4, 2025, the OBBBA was signed into law.

Among its provisions is the repeal of 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 take into account the anticipated lower Section 45L benefit for the homes delivered after the effective date.

As a result, our income tax expense and effective tax rate for the three months and nine months ended August 31, 2026 reflected the lower Section 45L benefit for the homes delivered after the effective date.

The other tax-related provisions of the OBBBA did not have a material impact on our consolidated financial statements.

7 unchanged sentences

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 May 31, Six Months Ended May 31,

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

2026 2025 2026 2025

32 unchanged sentences

• repurchases of our common stock.

We ended the 2026 second quarter with total liquidity of $1.12 billion, including cash and cash equivalents and $923.4 million of available capacity under the Credit Facility, with $275.0 million of cash borrowings outstanding.

Cash and cash equivalents totaled $199.8 million at May 31, 2026, compared to $228.6 million at November 30, 2025.

Cash equivalents included in the total were $63.3 million at May 31, 2026 and $152.6 million at November 30, 2025, and were mainly invested in interest-bearing bank deposit accounts and money market funds.

Based on our financial position as of May 31, 2026, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity.

We believe that our

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

We ended the 2026 third quarter with total liquidity of $942.4 million, including cash and cash equivalents and $783.4 million of available capacity under the Credit Facility, with $415.0 million of cash borrowings outstanding.

Cash and cash equivalents totaled $159.0 million at August 31, 2026, compared to $228.6 million at November 30, 2025.

Cash equivalents included in the total were $35.7 million at August 31, 2026 and $152.6 million at November 30, 2025, and were mainly invested in interest-bearing bank deposit accounts and money market funds.

Based on our financial position as of August 31, 2026, 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 six months ended May 31, 2026, 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, 2025.

In the nine months ended August 31, 2026, 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, 2025.

Investments in Land and Land Development.

Our investments in land and land development for the six months ended May 31, 2026 totaled $1.06 billion, a 26% decrease compared to the year-earlier period;

Our investments in land and land development for the nine months ended August 31, 2026 totaled $1.79 billion, an 8% decrease compared to the year-earlier period;

the prior period included our purchase of two sizable land parcels in our Southwest homebuilding reporting segment.

In the six months ended May 31, 2026, land acquisition expenditures, which are included in our investments in land and land development, decreased to $353.1 million, or 33% of our total investments, compared to $661.9 million, or 46% of our total investments, in the corresponding period of 2025.

While land and land development investments were made in all of our homebuilding reporting segments during the six months ended May 31, 2026 and 2025, our West Coast segment comprised 44% and 49%, respectively, of our total investments.

For the remainder of 2026, 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 nine months ended August 31, 2026, land acquisition expenditures, which are included in our investments in land and land development, decreased to $650.3 million, or 36% of our total investments, compared to $771.3 million, or 40% of our total investments, in the corresponding period of 2025.

While land and land development investments were made in all of our homebuilding reporting segments during the nine months ended August 31, 2026 and 2025, our West Coast segment comprised 47% and 51%, respectively, of our total investments.

In the 2026 fourth quarter, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, 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):

May 31, 2026 November 30, 2025 Variance

August 31, 2026 November 30, 2025 Variance

Segment Lots Carrying Value Lots Carrying Value Lots Carrying Value

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Total 61,581 $ 5,981,182 64,612 $ 5,670,802 (3,031) $ 310,380

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at May 31, 2026 increased slightly from November 30, 2025, mainly due to land and land development investments during the six months ended May 31, 2026.

The number of lots we owned or controlled as of May 31, 2026 decreased 9% from November 30, 2025, largely reflecting homes delivered and our strategic abandonment of 7,301 previously controlled lots, partly offset by newly optioned lots during the period.

The number of lots in inventory as of May 31, 2026 included 6,319 lots under contract where the associated deposits were refundable at our discretion, compared to 7,715 of such lots at November 30, 2025.

Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 38% at May 31, 2026, compared to 43% at November 30, 2025.

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2026 increased 5% from November 30, 2025, mainly due to land and land development investments during the nine months ended August 31, 2026.

The number of lots we owned or controlled as of August 31, 2026 decreased 5% from November 30, 2025, largely reflecting homes delivered and our strategic abandonment of 8,777 previously controlled lots, partly offset by newly optioned lots during the period.

The number of lots in inventory as of August 31, 2026 included 9,549 lots under contract where the associated deposits were refundable at our discretion, compared to 7,715 of such lots at November 30, 2025.

Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 40% at August 31, 2026, compared to 43% at November 30, 2025.

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

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

If we were to acquire all the land we had under land option contracts and other similar contracts at May 31, 2026, we estimate the remaining purchase price to be paid would be as follows:

If we were to acquire all the land we had under land option contracts and other similar contracts at August 31, 2026, we estimate the remaining purchase price to be paid would be as follows:

2026 – $358.3 million;

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2029 – $98.5 million;

2030 – $4.0 million;

and thereafter – $0.

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$ 2,109,145 $ 1,692,977 $ 416,168

Our financial leverage, as measured by the ratio of debt to capital, increased 380 basis points to 34.1% at May 31, 2026, compared to 30.3% at November 30, 2025 due to cash borrowings outstanding under the Credit Facility.

Our financial leverage, as measured by the ratio of debt to capital, increased 540 basis points to 35.7% at August 31, 2026, compared to 30.3% at November 30, 2025 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 May 31, 2026 and November 30, 2025, we had letters of credit outstanding under the LOC Facility of $55.4 million and $68.2 million, respectively.

As of August 31, 2026 and November 30, 2025, we had letters of credit outstanding under the LOC Facility of $53.5 million and $68.2 million, respectively.

Performance Bonds .

As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.38 billion and $1.37 billion of performance bonds outstanding at May 31, 2026 and November 30, 2025, respectively.

As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.35 billion and $1.37 billion of performance bonds outstanding at August 31, 2026 and November 30, 2025, 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 May 31, 2026, we had $275.0 million of cash borrowings and $1.6 million of letters of credit outstanding under the Credit Facility.

As of August 31, 2026, we had $415.0 million of cash borrowings and $1.6 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 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 May 31, 2026:

Financial Covenants and Other Requirements Covenant Requirement Actual

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Interest Coverage Ratio (a) > 1.500 3.863

Minimum liquidity (a) > $109.9 million $1.12 billion

Minimum liquidity (a) > $112.7 million $942.4 million

Investments in joint ventures and non-guarantor subsidiaries < $856.9 million $472.0 million

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

As of May 31, 2026, 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 August 31, 2026, we were in compliance with the applicable terms of all of our covenants and other requirements under the Credit Facility, the Term Loan, the senior notes, the indenture, the LOC Facility and the mortgages and land contracts due to land sellers and other loans.

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

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

At May 31, 2026, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $2.6 million, secured primarily by the underlying property, which had an aggregate carrying value of $20.8 million.

At August 31, 2026, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $2.4 million, secured primarily by the underlying property, which had an aggregate carrying value of $22.7 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 May 31, 2026, 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, 2026.

As of August 31, 2026, two of our unconsolidated joint ventures had borrowings outstanding with third-party lenders, secured by the underlying property and related project assets.

Credit Rating.

Our credit ratings are periodically reviewed by rating agencies.

In July 2026, S&P Global Ratings downgraded our corporate credit rating to BB from BB+ and changed its rating outlook to negative from stable based primarily on the impact of persistent macroeconomic headwinds and softer homebuilding business conditions on our financial performance.

Consolidated Cash Flows .

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

Six Months Ended May 31,

Nine Months Ended August 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 six months ended May 31, 2026 mainly reflected a net decrease in accounts payable, accrued expenses and other liabilities of $93.3 million, a net increase in inventories of $73.6 million and a net increase in receivables of $25.1 million, partly offset by net income of $60.8 million.

In the six months ended May 31, 2025, our net cash used by operating activities primarily 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.

Our net cash used by operating activities for the nine months ended August 31, 2026 mainly reflected a net increase in inventories of $326.5 million, a net decrease in accounts payable, accrued expenses and other liabilities of $49.2 million, and a net increase in receivables of $32.7 million, partly offset by net income of $126.1 million.

In the nine months ended August 31, 2025, our net cash provided by operating activities primarily reflected net income of $327.3 million and a net decrease in receivables of $7.2 million, partly offset by a net increase in inventories of $330.0 million and a net decrease in accounts payable, accrued expenses and other liabilities of $63.8 million.

Investing Activities .

In the six months ended May 31, 2026, net cash used in investing activities consisted of $22.9 million for net purchases of property and equipment and $8.9 million of contributions to unconsolidated joint ventures, partially offset by a return of investments in unconsolidated joint ventures of $1.6 million.

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

In the nine months ended August 31, 2026, net cash used in investing activities consisted of $32.5 million for net purchases of property and equipment and $19.4 million of contributions to unconsolidated joint ventures, partially offset by $20.0 million of proceeds from the sale of our investment in the equity securities of a privately held technology company and a $16.6 million return of investments in unconsolidated joint ventures.

In the nine months ended August 31, 2025, our net cash used in investing activities included $34.6 million for net purchases of property and equipment and $10.6 million for contributions to unconsolidated joint ventures, partly offset by a $3.0 million return of investments in unconsolidated joint ventures.

Financing Activities .

In the six months ended May 31, 2026, cash was provided by $275.0 million of net borrowings under the Credit Facility and $.6 million of issuances of common stock under employee stock plans.

In the nine months ended August 31, 2026, cash was provided by $415.0 million of net borrowings under the Credit Facility and $5.7 million of issuances of common stock under employee stock plans.

The cash provided was partly offset by stock repurchases and excise taxes paid of $180.1 million, dividend payments on our common stock of $47.7 million, and tax payments associated with stock-based compensation awards of $18.3 million.

In the six months ended May 31, 2025, our uses of cash included 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 nine months ended August 31, 2025, our uses of cash included stock repurchases of $438.5 million, dividend payments on our common stock of $52.8 million and tax payments associated with stock-based compensation awards of $15.9 million.

The cash used was partially offset by $250.0 million of net borrowings under the Credit Facility and $.7 million of issuances of common stock under employee stock plans.

In the 2026 and 2025 second quarters, our board of directors declared, and we paid, a quarterly cash dividend of $.25 per share.

Quarterly dividends declared and paid during each of the six-month periods ended May 31, 2026 and 2025 totaled $.50 per share.

In the 2026 and 2025 third quarters, our board of directors declared, and we paid, a quarterly cash dividend of $.25 per share.

Quarterly dividends declared and paid during each of the nine-month periods ended August 31, 2026 and 2025 totaled $.75 per share.

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

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As of November 30, 2025, there was $900.0 million of remaining availability under this share repurchase authorization.

In the six months ended May 31, 2026, we repurchased 2,216,336 shares of our common stock at a total cost of $125.0 million.

In the nine months ended August 31, 2026, we repurchased 3,104,677 shares of our common stock at a total cost of $175.0 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 May 31, 2026, there was $775.0 million of remaining availability under this share repurchase authorization.

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

As of August 31, 2026, there was $725.0 million of remaining availability under this share repurchase authorization.

Shelf Registration .

On July 14, 2026, we filed the 2026 Shelf Registration with the SEC.

The 2026 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined.

Our ability to issue securities is subject to market conditions and, with respect to debt securities, other factors impacting our borrowing capacity.

The 2026 Shelf Registration replaced our previous such registration statement filed with the SEC on July 10, 2023.

We have not made any offerings of securities under the 2026 Shelf Registration.

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 May 31, 2026, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $275.0 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 August 31, 2026, we had $1.34 billion in aggregate principal amount of outstanding senior notes, $415.0 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 3,404,321 3,528,938

Summarized Statement of Operations Data (in thousands) Six Months Ended

Summarized Statement of Operations Data (in thousands) Nine Months Ended

August 31, 2026

Revenues $ 3,164,958

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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 May 31, 2026 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, 2025.

There have been no significant changes to our critical accounting policies and estimates during the three months ended August 31, 2026 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, 2025.

Recent Accounting Pronouncements

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

We continue to view the long‑term outlook for the housing market favorably, supported by positive demographic trends and an ongoing structural undersupply of homes.

However, we expect the challenging market conditions we experienced in the 2026 second quarter – marked by persistent affordability pressures, elevated mortgage interest rates, and cautious buyer sentiment, which softened further during the period due to rising inflation, heightened macroeconomic uncertainties and geopolitical tensions, including the military conflict in the Middle East – to continue in the near term.

To the extent these trends continue or worsen, net order activity could remain subdued, including net orders for our Built to Order homes.

As we move into the 2026 second half, we plan to maintain our simplified sales approach we implemented more than a year ago.

Additionally, while selling through our existing inventory, we will continue to emphasize sales of our Built to Order homes, with the goal of bringing the mix closer to our historical average of 60% to 70% of homes delivered.

Our mix of net orders in both the 2026 first and second quarters was predominantly Built to Order, momentum that we believe will enable us to accomplish our homes delivered mix goal in the 2026 second half and beyond.

Although the number of homes in our backlog at May 31, 2026 was down 5% year over year, our renewed focus on Built to Order contributed to sequential growth in our ending backlog for both the 2026 first and second quarters, with the number of homes in backlog at May 31, 2026 up 45% from November 30, 2025.

We expect our year-over-year ending backlog comparison to turn positive in the 2026 third quarter.

Among other benefits, a larger backlog of Built to Order homes generally provides us greater visibility into future deliveries and higher gross margins than we typically generate on inventory sales.

We expect housing market conditions to remain challenging through the 2026 fourth quarter and into 2027 as higher mortgage loan interest rates, which increased further during the 2026 third quarter, continue to challenge affordability and, along with rising resale inventory levels, contribute to pricing pressure across many of our served markets.

In addition, consumer confidence and homebuyer demand are expected to be negatively affected by persistent inflation, attributable in part to rising commodity and oil prices, heightened macroeconomic uncertainties and geopolitical tensions, including the military conflicts in the Middle East and in Ukraine.

To the extent these conditions continue or worsen, net order activity, including net orders for our Built to Order homes, could remain subdued.

As we navigate these near-term headwinds, we remain focused on executing our Built to Order strategy, balancing sales pace, pricing, and profitability, and selectively investing in land and land development to support future growth.

We continue to believe that favorable demographic trends, an ongoing structural undersupply of homes and the appeal of new, personalized energy-efficient homes support the long-term outlook for our business.

Entering the 2026 fourth quarter, we plan to maintain the simplified sales approach we implemented more than a year ago.

Additionally, while selling through our existing inventory, we will continue to emphasize sales of our Built to Order homes.

Our mix of net orders in the 2026 first, second and third quarters was predominantly Built to Order.

As a result, we believe we are positioned to achieve our goal of a 2026 full-year mix of Built to Order homes delivered within our historical average of 60% to 70%, compared to 56% for 2025.

The number of homes in our backlog at August 31, 2026 was up 2% from August 31, 2025, marking the first year-over-year increase in our ending backlog in four years.

Among other benefits, a larger backlog of Built to Order homes generally provides us with greater visibility into future deliveries.

We also intend to continue focusing on improving our build times and tightly managing our direct construction costs.

While our strategic shift toward a higher mix of Built to Order homes and our intentional moderation of inventory starts contributed to an anticipated temporary trough in the number of homes delivered during the 2026 first half, we expect the higher level of Built to Order sales generated during this period to produce sequential improvement in our homes delivered and

housing gross profit margins during the 2026 second half, although each is projected to be lower on a year-over-year basis in the third and fourth quarters.

Specifically as to our housing gross profit margin, we anticipate more pronounced sequential improvement as the year progresses, supported by increased operating leverage and a favorable mix of homes delivered, including a growing proportion of Built to Order homes and a greater share from our Northern California operations, which have historically generated relatively high average selling prices and margins.

In addition, we believe that our selling, general and administrative expenses as a percentage of housing revenues will benefit in the 2026 second half from an expected increase in operating leverage.

However, as our average build time for the 2026 third quarter was the lowest in more than a decade, we expect the pace of future improvement to be more gradual relative to recent periods.

Based on the present and expected housing market environment and our results through the first nine months of 2026, we currently expect our housing gross profit margin for the 2026 fourth quarter to decline sequentially from the third quarter.

Accordingly, we have modestly lowered and narrowed our full-year housing gross profit margin outlook compared to our prior outlook.

We have maintained a strong financial position and financial flexibility, supported by our Credit Facility, which we expanded at the end of our 2025 fiscal year.

For the remainder of 2026, in order to strengthen our long-term growth platform, we intend, subject to the operating environment and available opportunities, to acquire and control additional land positions within attractive submarkets in our served markets that meet our investment standards.

We also plan to continue to develop land we own in a manner that prioritizes capital efficiency, including developing lots where possible in smaller phases and aligning development with our starts pace to optimally manage our inventory of finished lots.

Reflecting our ongoing investments in land and land development, our ending community count for the 2026 second quarter increased 11% year over year to 280.

For the 2026 fourth quarter, in order to strengthen our long-term growth platform, we intend, subject to the operating environment and available opportunities, to acquire and control additional land positions within attractive submarkets in our served markets that meet our investment standards.

We also plan to continue to develop land we own in a manner that prioritizes capital efficiency, including developing lots in smaller phases, where possible, and aligning development with our starts pace to optimally manage our inventory of finished lots.

Reflecting our ongoing investments in land and land development, our ending community count for the 2026 third quarter increased 5% year over year to 277.

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, 2026, we had $775.0 million remaining under our current board of directors share repurchase authorization.

This provides us with the opportunity to repurchase our common stock in the remainder of 2026, 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.

Based on the factors discussed above, we have updated our 2026 projections.

We are providing our current projections for the 2026 third quarter, reaffirming, with narrower ranges, the 2026 full‑year projections for deliveries and housing revenues previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2026, and providing additional details on our present 2026 full‑year outlook for certain metrics, as follows:

2026 Third Quarter

• We expect deliveries to be in the range of 2,600 to 2,800, compared to 3,393 for the 2025 third quarter.

As of August 31, 2026, we had $725.0 million remaining under our current board of directors share repurchase authorization.

This provides us with the opportunity to repurchase our common stock in the 2026 fourth quarter, 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.

Based on the foregoing, we have updated the 2026 full-year projections that were previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2026.

Our present outlook for the 2026 fourth quarter and full‑year for certain metrics is as follows:

2026 Fourth Quarter

• We expect deliveries to be in the range of 3,000 to 3,500, compared to 3,619 for the 2025 fourth quarter.

• We expect to generate housing revenues in the range of $1.45 billion to $1.65 billion, compared to $1.68 billion for the corresponding 2025 period.

• We expect our housing gross profit margin will be in the range of 16.0% to 16.6%, assuming no inventory-related charges, compared to 17.8% for the corresponding 2025 quarter.

• We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 11.3% to 11.9%, compared to 10.0% for the 2025 third quarter.

• We expect our effective tax rate will be in the range of 19.0% to 21.0%, compared to 23.3% for the year-earlier quarter.

• We expect our ending community count will be in the range of 270 to 280, compared to 264 for the 2025 third quarter.

• We expect our common stock repurchases to be in the range of $50.0 million to $100.0 million.

• We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 10.3% to 10.9%, compared to 10.0% for the 2025 fourth quarter.

• We expect our effective tax rate will be approximately 26.0%, compared to 21.4% for the year-earlier quarter.

• We expect our ending community count will be in the range of 270 to 275, compared to 271 for the 2025 fourth quarter.

• We expect to repurchase up to $50.0 million of our common stock.

2026 Full Year

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• We expect our selling, general and administrative expenses as a percentage of housing revenues to be in the range of 11.5% to 11.7%, compared to 10.4% for 2025.

• We expect our effective tax rate will be in the range of 22.0% to 24.0%, compared to 22.6% for 2025.

credit and financial market conditions, as well as a fairly stable and constructive political and regulatory environment, particularly in regard to housing and mortgage loan financing policies.

• We expect our effective tax rate will be approximately 23.0%, compared to 22.6% for 2025.

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 economic, employment, homebuilding industry and capital, credit and financial market conditions, as well as a fairly stable and constructive political and regulatory environment, particularly in regard to housing and mortgage loan financing policies.

This includes U.S.

trade policy and any tariffs, and other countries’ countervailing measures, that remain in effect 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 affected pricing in adjacent sectors, we have not experienced significant cost increases or raw material/finished product availability constraints to date.

trade policy and any tariffs, and other countries’ countervailing measures, including those recently established between the U.S.

and Canada, that remain in effect 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 affected pricing in adjacent sectors, we have not experienced significant cost increases or raw material/finished product availability constraints to date.

However, if U.S.

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

We also believe the ongoing significant volatility in global energy, credit and capital markets, international shipping instability, and negative consumer confidence impacts from the conflict in the Middle East, particularly if it intensifies or is prolonged, could cause supply chain disruptions, increase our land development and input costs – such as for lumber and oil‑ and petroleum‑based building products – or reduce our revenues or housing gross profit margins beyond our ability to offset through pricing or cost‑management initiatives.

Additionally, while the Federal Reserve reduced interest rates in 2025 and may lower rates further in 2026 or later periods, there is no assurance it will do so, or that any reduction(s), or other monetary policy changes, will meaningfully lower mortgage interest rates or 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 three months ended May 31, 2026, 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.

We also believe the ongoing significant volatility in global energy, credit and capital markets, international shipping instability, and negative consumer confidence impacts from the conflicts in the Middle East and in Ukraine, particularly if it intensifies or is prolonged, could cause supply chain disruptions, increase our land development and input costs – such as for lumber and oil‑ and petroleum‑based building products – or reduce our revenues or housing gross profit margins beyond our ability to offset through pricing or cost‑management initiatives.

Additionally, as the Federal Reserve increased interest rates in September 2026 and its projections pointed to another possible increase before year-end, there can be no assurance it will implement rate reductions or other monetary policy changes in the near term that would meaningfully lower mortgage loan interest rates, increase demand or positively affect 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 three months ended August 31, 2026, 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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The most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following:

• general economic, employment and business conditions;

• population growth or decline, household formations and demographic trends;

• conditions in the capital, credit and financial markets;

• our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms;

• the execution of any securities repurchases pursuant to our board of directors’ authorization;

• material and trade costs and availability, including the costs associated with achieving the current standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages;

• rising consumer and producer price inflation;

• 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;

• general economic, employment and business conditions (including, without limitation, consumer and producer price inflation;

interest rates and terms available from outside financing sources for our business and for consumer mortgage loans;

and consumer confidence, either generally or specifically with respect to purchasing homes);

• material and trade costs and availability;

• disruptions in world and regional trade flows and supply chains due to the military conflicts in the Middle East and in Ukraine and/or U.S.

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

• population, household formations and demographic trends;

• government actions, policies, programs and regulations, including tax-related, directed at or affecting, directly or indirectly, the housing market, the homebuilding industry, or our business;

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

• changes in our credit rating;

• homebuyer interest in and ability to afford to purchase our homes (including their ability to obtain typical or lender-required insurance or other policies to cover hazards to their homes);

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

• our compliance with the terms of the Credit Facility and the Term Loan;

• the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility;

• 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 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;

• weak or declining consumer confidence, either generally or specifically with respect to purchasing homes;

• competition from other sellers of new and resale homes, particularly homebuilders with significant unsold inventory;

• weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas;

• potential instability associated with the regulatory and executive policies, proposals and orders of the U.S.

presidential administration, including any directed at or affecting our operations, business practices or capital allocation strategies;

• 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 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 and the pending expiration of such tax credits in 2026;

• changes in U.S.

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

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

and other countries have imposed or may further impose respectively on Iranian or Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings;

• the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto;

• the availability and cost of land in desirable areas and our ability to timely and efficiently develop acquired land parcels and open new home communities;

• our compliance with the terms of our Credit Facility and our Term Loan;

• the execution of any securities repurchases pursuant to our board of directors’ authorization;

• impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets;

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

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

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

• our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, and in entering into new markets;

• our operational and investment concentration in markets in California;

• consumer interest in and responsiveness to our new home communities, products and simplified selling process with transparent pricing and limited initiatives, particularly from first-time homebuyers and higher-income consumers;

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

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

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

• the costs we incur in connection with relocating our corporate headquarters office from Los Angeles, California to Tempe, Arizona in 2027, including costs for employee-related severance, retention and relocation, as well as recruitment and onboarding;

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

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

• the performance of mortgage lenders to our homebuyers;

• volatility in the market price of our common stock;

• the costs we incur in connection with relocating our corporate headquarters office from Los Angeles, California to Tempe, Arizona in 2027;

• the performance of mortgage lenders for our homebuyers;

• the performance of KBHS;

• the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans;

• information technology failures and data security breaches;

• an epidemic, pandemic or significant seasonal or other disease outbreak, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period;

• widespread protests and/or civil unrest, whether due to political events, social movements or other reasons;

• other events outside of our control.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis