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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-20 · 104 added, 155 removed, 327 unchanged (44% of the section changed)

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Key financial results as of and for the year ended December 31, 2024, as compared to the year ended December 31, 2023, were as follows:

• Home sales revenues increased 2.3% to $2.4 billion from $2.3 billion.

• Homes closed increased 1.6% to 6,729 homes from 6,621 homes.

• Home sales revenues decreased 6.6% to $2.2 billion from $2.4 billion.

• Homes closed decreased 10.4% to 6,028 homes from 6,729 homes.

Including the bulk sale of 103 leased, single-family homes, homes closed decreased 8.9% to 6,131 homes from 6,729 homes.

• Average sales price per home closed increased 4.2% to $365,394 from $350,510.

• Gross margin as a percentage of home sales revenues decreased to 23.0% from 28.1%.

• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues decreased to 24.7% from 29.2%.

• Gross margin as a percentage of home sales revenues increased to 24.2% from 23.0%.

• Adjusted gross margin (non-GAAP) as a percentage of home sales revenues increased to 26.3% from 24.7%.

• Net income before income taxes decreased 1.1% to $258.9 million from $261.8 million.

• Net income decreased 1.6% to $196.1 million from $199.2 million.

• EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 12.6% from 19.1%.

• Adjusted EBITDA (non-GAAP) as a percentage of home sales revenues decreased to 11.7% from 18.2%.

• EBITDA (non-GAAP) as a percentage of home sales revenues increased to 13.8% from 12.6%.

• Active communities at the end of 2024 increased 29.1% to 151 from 117.

• Total owned and controlled lots decreased 0.3% to 70,899 lots at December 31, 2024 from 71,081 lots at December 31, 2023.

For reconciliations of the non-GAAP financial measures of adjusted gross margin, EBITDA and adjusted EBITDA to the most directly comparable GAAP financial measures, please see “— Non-GAAP Measures .”

For reconciliations of the non-GAAP financial measures of adjusted gross margin and EBITDA to the most directly comparable GAAP financial measures, please see “— Non-GAAP Measures .”

Results of Operations

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Operating income 212,146 233,255 390,107

Loss on extinguishment of debt — — 13,976

Other income, net (46,767) (28,499) (28,009)

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Income tax provision 62,842 62,527 91,549

Net income $ 199,227 $ 326,567 $ 429,645

$ 196,071 $ 199,227 $ 326,567

Basic earnings per share $ 8.33 $ 8.48 $ 13.90

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Average community count

130.5 103.9 91.9

Community count at end of period

Home closings

6,028 6,729 6,621

Average sales price per home closed $ 365,394 $ 350,510 $ 348,052

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13.8 % 12.6 % 19.1 %

Adjusted EBITDA (4)

$ 275,523 $ 418,828 $ 591,362

Adjusted EBITDA margin % (2)(4)

11.7 % 18.2 % 19.4 %

(1) Gross margin is home sales revenues less cost of sales.

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Please see “ —Non-GAAP Measures ” for a reconciliation of adjusted gross margin to gross margin, which is the GAAP financial measure that our management believes to be most directly comparable.

(4) EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance.

(4) EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance.

We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.

We define adjusted EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization, (iv) capitalized interest charged to the cost of sales, (v) loss on extinguishment of debt, (vi) other income, net and (vii) adjustments resulting from the application of purchase accounting.

Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our

results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.

EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring.

Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.

Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.

Although we use EBITDA and adjusted EBITDA as financial measures to assess the performance of our business, the use of these measures is limited because they do not include certain material costs, such as interest and taxes, necessary to operate our business.

EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.

Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.

Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.

Please see “ —Non-GAAP Measures ” for reconciliations of EBITDA and adjusted EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.

Our management believes that the presentation of EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.

EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization and items considered to be unusual or non-recurring.

Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.

Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.

Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and

taxes, necessary to operate our business.

EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.

Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.

Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.

Please see “ —Non-GAAP Measures ” for reconciliations of EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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Home Sales Revenues .

Home sales revenues for the year ended December 31, 2023 were $2.4 billion, an increase of $54.1 million, or 2.3%, from $2.3 billion for the year ended December 31, 2022.

The increase in home sales revenues was primarily due to a 1.6% increase in homes closed and a slight increase in the average sales price per home closed during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Home sales revenues for the year ended December 31, 2024 were $2.2 billion, a decrease of $156.0 million, or 6.6%, from $2.4 billion for the year ended December 31, 2023.

The decrease in home sales revenues was primarily due to a 10.4% decrease in homes closed, offset by an increase in the average sales price per home closed, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

We closed 6,028 homes during 2024, as compared to 6,729 homes closed during 2023.

The overall increase in home closings was a result of higher average community count, offset by an overall lower absorption pace during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The overall decrease in home closings was a result of a lower absorption rate, partially offset by a higher average community count during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Our average community count at December 31, 2024 increased to 130.5 from 103.9 at December 31, 2023.

The overall increase in average community count is related to timing associated with new community openings, offset by the close out of some communities and transition between certain active communities during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The average sales price per home closed during the year ended December 31, 2024 was $365,394, an increase of $14,885, or 4.2%, from the average sales price per home closed of $350,510 for the year ended December 31, 2023.

The increase in the average sales price per home closed was primarily due to our ability to increase prices in certain markets and the impact of fewer home closings in our wholesale channel.

The overall decrease in absorption rate relates to the continued normalization of demand primarily resulting from higher mortgage rates.

The increase in the average sales price per home closed was primarily due to geographic mix and a favorable pricing environment.

The overall decrease in absorption rate generally relates to the impact of ongoing affordability constraints, new community openings, and the overall increase in community count.

Included within our home sales revenues for the year ended December 31, 2024 was $164.1 million in wholesale revenues resulting from 552 home closings, representing 9.2% of the 6,028 total homes closed during the year ended December 31, 2024.

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• Home sales revenues in our Central reportable segment decreased by $166.1 million, or 22.7%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 21.6% decrease in the number of homes closed and a slight decrease in the average sales price per home closed.

The decrease in home closings was the result of a lower absorption rate, partially offset by an increase in the average community count.

• Home sales revenues in our Southeast reportable segment increased by $101.5 million, or 22.3%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 22.2% increase in the number of homes closed and a slight increase in the average sales price per home closed.

The increase in home closings was the result of an increase in the average community count and a higher absorption rate.

• Home sales revenues in our Northwest reportable segment decreased by $2.2 million, or 0.9%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 2.6% decrease in the average sales price per home closed, partially offset by a 1.8% increase in the number of homes closed.

The increase in home closings was the result of a 20.0% increase in the average community count, offset by a lower absorption rate.

• Home sales revenues in our West reportable segment increased by $80.1 million, or 26.6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 32.1% increase in the number of homes closed, partially offset by a 4.1% decrease in the average sales price per home closed.

The increase in home closings was the result of a 21.7% increase in the average community count and a higher absorption rate.

• Home sales revenues in our Florida reportable segment increased by $155.9 million, or 55.1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a 45.9% increase in the number of homes closed and a 6.3% increase in the average sales price per home closed.

The increase in home closings was the result of a higher absorption rate and an increase in the average community count.

The decrease in home closings was primarily the result of a lower absorption rate, partially offset by an increase in the average community count.

• Home sales revenues in our Southeast reportable segment decreased by $18.6 million, or 3.3%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 4.7% decrease in the number of homes closed, offset by a slight increase in the average sales price per home closed.

The decrease in home closings was the result of a lower absorption rate, partially offset by a 9.7% increase in the average community count.

• Home sales revenues in our Northwest reportable segment increased by $7.2 million, or 2.9%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an 8.8% increase in the average sales price per home closed, partially offset by a 5.5% decrease in the number of homes closed.

The decrease in the number of homes closed was the result of a lower absorption rate, offset by a 40.2% increase in the average community count.

• Home sales revenues in our West reportable segment increased by $91.6 million, or 24.0%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 14.9% increase in the number of homes closed and a 7.9% increase in the average sales price per home closed.

The increase in home closings was the result of a 55.0% increase in the average community count, partially offset by a lower absorption rate.

• Home sales revenues in our Florida reportable segment decreased by $70.1 million, or 16.0%, during the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a 20.2% decrease in the number of homes closed, partially offset by a 5.3% increase in the average sales price per home closed.

The decrease in home closings was the result of a lower absorption rate, partially offset by a 17.2% increase in the average community count.

Cost of Sales and Gross Margin (home sales revenues less cost of sales).

Cost of sales increased for the year ended December 31, 2023 to $1.8 billion, an increase of $158.5 million, or 9.6%, from $1.7 billion for the year ended December 31, 2022.

This overall increase was primarily due to higher construction costs and capitalized interest and a 1.6% increase in homes closed.

Cost of sales decreased for the year ended December 31, 2024 to $1.7 billion, a decrease of $147.1 million, or 8.1%, from $1.8 billion for the year ended December 31, 2023.

This overall decrease was primarily due to a 10.4% decrease in homes closed.

Gross margin for the year ended December 31, 2024 was $533.3 million, a decrease of $8.9 million, or 1.6%, from $542.2 million for the year ended December 31, 2023.

Gross margin as a percentage of home sales revenues was 24.2% for the year ended December 31, 2024 and 23.0% for the year ended December 31, 2023.

The decrease in gross margin as a percentage of home sales revenues was primarily due to a combination of higher construction costs and capitalized interest and the impact of sales incentives offered during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase in gross margin as a percentage of home sales revenues was primarily due to a higher average sales price per home closed, partially offset by a combination of higher lot costs and higher capitalized interest as a percentage of revenue as well as the impact of sales incentives offered during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Selling Expenses.

Selling expenses for the year ended December 31, 2024 were $200.0 million, an increase of $8.4 million, or 4.4%, from $191.6 million for the year ended December 31, 2023.

Sales commissions increased to $102.8 million for the year ended December 31, 2023 from $82.7 million for the year ended December 31, 2022 due to a 2.3% increase in home sales revenues and an increase in outside commissions during 2023 as compared to 2022.

The increase in selling expenses was primarily due to an increase in advertising expense and an increase in personnel costs as a result of an increase in communities, offset by a decrease in sales commissions.

Sales commissions decreased to $95.8 million for the year ended December 31, 2024 from $102.8 million for the year ended December 31, 2023 primarily due to a decrease in home sales revenues during 2024 as compared to 2023.

Selling expenses as a percentage of home sales revenues were 9.1% and 8.1% for the years ended December 31, 2024 and 2023, respectively.

The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising expenses, fewer wholesale home closings and higher other expenses incurred during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase in selling expenses as a percentage of home sales revenues was primarily due to higher advertising expenses, fewer wholesale home closings and higher other personnel expenses incurred during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

General and Administrative.

General and administrative expenses for the year ended December 31, 2024 were $121.2 million, an increase of $3.8 million, or 3.3%, from $117.4 million for the year ended December 31, 2023.

The increase in the amount of general and administrative expenses was primarily due to higher personnel related costs and increased indirect overhead expenses, partially offset by a decrease in payroll related costs and lower terminated land purchase expenses for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase in the amount of general and administrative expenses was primarily a result of increased indirect overhead expenses and professional fees, partially offset by a decrease in payroll related costs for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

General and administrative expenses as a percentage of home sales revenues were 5.5% and 5.0% for the years ended December 31, 2024 and 2023, respectively.

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Other income, net of other expenses was $46.8 million for the year ended December 31, 2024, an increase of $18.3 million from $28.5 million for the year ended December 31, 2023.

The increase in other income, net of other expenses, primarily reflects an increase in income associated with our investment in unconsolidated entities and rental properties for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase in other income, net of other expenses, primarily reflects gains realized from the bulk sale of 103 leased, single-family homes and the sale of residential lots for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Operating Income and Net Income before Income Taxes.

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Net income before income taxes for the year ended December 31, 2024 was $258.9 million, a decrease of $2.8 million, or 1.1%, from $261.8 million for the year ended December 31, 2023.

The overall decreases in operating income and net income before income taxes were primarily due to overall lower home closings at a lower absorption rate, and higher advertising and other costs associated with the increase in average community count during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The following reportable segments contributed to net income before income taxes during the year ended December 31, 2024 as follows:

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and Florida - $30.4 million, or 11.7%.

The overall decreases in operating income and net income before income taxes were primarily due to a lower absorption rate, a lower gross margin, and higher advertising and other selling expenses incurred, partially offset by a higher average community count during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Income Taxes .

Income tax provision for the year ended December 31, 2023 was $62.5 million, a decrease of $29.0 million, or 31.7%, from income tax provision of $91.5 million for the year ended December 31, 2022.

The increase in our effective tax rate to 23.9% from 21.9% was primarily due to an increase in the rate for state income taxes, net of the federal benefit, the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the year ended December 31, 2022, offset by a decrease in the rate for the deductions in excess of compensation cost for share-based payments.

Income tax provision for the year ended December 31, 2024 was $62.8 million, an increase of $0.3 million, or 0.5%, from income tax provision of $62.5 million for the year ended December 31, 2023.

The increase in our effective tax rate to 24.3% from 23.9% was primarily due to an increase in the rate for the deductions in excess of compensation cost for share-based payments, and the rate for state income taxes, net of the federal benefit, offset by a decrease in the rate for the compensation limitation under Section 162(m) of the Internal Revenue Code, as amended, and the retroactive extension of the federal energy efficient homes tax credits for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Net income for the year ended December 31, 2024 was $196.1 million, a decrease of $3.2 million, or 1.6%, from $199.2 million for the year ended December 31, 2023.

The decrease in net income was primarily attributed to a lower gross margin and higher selling expenses as a percentage of revenues during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The decrease in net income was primarily attributed to overall lower homes closed and lower home sales revenues, partially offset by a higher gross margin during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided information in this Annual Report on Form 10-K relating to adjusted gross margin, EBITDA and adjusted EBITDA.

Adjusted Gross Margin

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(2) Calculated as a percentage of home sales revenues.

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance.

EBITDA is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance.

We define EBITDA as net income before (i) interest expense, (ii) income taxes, (iii) depreciation and amortization and (iv) capitalized interest charged to the cost of sales.

Our management believes that the presentation of EBITDA and adjusted EBITDA provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business.

EBITDA and adjusted EBITDA provide indicators of general economic performance that are not affected by fluctuations in interest rates or effective tax rates,

levels of depreciation or amortization and items considered to be unusual or non-recurring.

Accordingly, our management believes that these measures are useful for comparing general operating performance from period to period.

Other companies may define these measures differently and, as a result, our measures of EBITDA and adjusted EBITDA may not be directly comparable to the measures of other companies.

EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.

Our presentation of EBITDA and adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.

Our use of EBITDA and adjusted EBITDA is limited as an analytical tool, and you should not consider these measures in isolation or as substitutes for analysis of our results as reported under GAAP.

Accordingly, our management believes that this measure is useful for comparing general operating performance from period to period.

Other companies may define this measure differently and, as a result, our measure of EBITDA may not be directly comparable to the measures of other companies.

Although we use EBITDA as a financial measure to assess the performance of our business, the use of this measure is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business.

EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance.

Our presentation of EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items.

Our use of EBITDA is limited as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of these limitations are:

(i) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;

(ii) they do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements or improvements;

(iv) they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

(v) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;

(vi) other companies in our industry may calculate them differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, our EBITDA and adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

We compensate for these limitations by using our EBITDA and adjusted EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance.

(i) it does not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments, including for purchase of land;

(ii) it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

(iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and EBITDA does not reflect any cash requirements for such replacements or improvements;

(iv) it does not adjust for all non-cash income or expense items that are reflected in our statements of cash flows;

(v) it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;

(vi) other companies in our industry may calculate it differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, our EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.

We compensate for these limitations by using our EBITDA along with other comparative tools, together with GAAP measures, to assist in the evaluation of operating performance.

These GAAP measures include operating income, net income and cash flow data.

We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA or adjusted EBITDA.

EBITDA and adjusted EBITDA are not intended as alternatives to net income as indicators of our operating performance, as alternatives to any other measure of performance in conformity with GAAP or as alternatives to cash flows as a measure of liquidity.

You should therefore not place undue reliance on our EBITDA or adjusted EBITDA calculated using these measures.

The following table reconciles EBITDA and adjusted EBITDA to net income, which is the GAAP measure that our management believes to be most directly comparable (dollars in thousands):

We have significant uses of cash flows, including capital expenditures, interest payments and other non-recurring charges, which are not reflected in our EBITDA.

EBITDA is not intended as an alternative to net income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flows as a measure of liquidity.

You should therefore not place undue reliance on our EBITDA calculated using these measures.

The following table reconciles EBITDA to net income, which is the GAAP financial measure that our management believes to be most directly comparable (dollars in thousands):

Year Ended December 31,

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EBITDA 304,092 297,530 439,968

Purchase accounting adjustments (1)

6,492 6,869 4,964

Loss on extinguishment of debt — — 13,976

Other income, net (28,499) (28,009) (9,053)

Adjusted EBITDA $ 275,523 $ 418,828 $ 591,362

EBITDA margin % (1)

13.8 % 12.6 % 19.1 %

Adjusted EBITDA margin % (2)

11.7 % 18.2 % 19.4 %

(1) Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.

(1) Calculated as a percentage of home sales revenues.

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Backlog may be impacted by customer cancellations for various reasons that are beyond our control, and in light of our minimal required deposit, there is little negative impact to the potential homebuyer from the cancellation of the purchase contract.

Our net orders increased for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase in average community count.

Our wholesale orders decreased 61.8% to 60 units at December 31, 2023 from 157 units at December 31, 2022.

The number of homes in our backlog at December 31, 2023 decreased 16.0% compared to December 31, 2022.

The decrease in ending backlog is primarily a result of the continued increase in mortgage rates for our homebuyers during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Our net orders decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the increase in new communities which typically open at a slower sales pace and lower overall demand compared to 2023.

Our wholesale orders increased 143.3% to 146 units at December 31, 2024 from 60 units at December 31, 2023.

The number of homes in our backlog at December 31, 2024 increased 1.5% compared to December 31, 2023.

As of the dates set forth below, our net orders, cancellation rate, and ending backlog homes and value were as follows (dollars in thousands):

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Ending backlog - homes (3)

590 702 2,055

Ending backlog - value (3)

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Material Cash Requirements

The following is a summary of our material cash requirements from known contractual and other obligations as of December 31, 2023 and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

Payments due by period (in thousands)

Total < 1 year 1 - 3 years 3 - 5 yrs More than 5 years

Credit Agreement (a)

$ 569,816 — 115,818 $ 453,998 —

Senior Notes (b)

700,000 — — 400,000 300,000

Land banking financing arrangements (c)

104,459 61,337 43,122 — —

Interest and fees (d)

435,226 91,362 181,077 162,787 —

Operating Leases 5,604 1,535 2,452 1,604 13

Total $ 1,815,105 $ 154,234 $ 342,469 $ 1,018,389 $ 300,013

(a) Represents borrowings under the Credit Agreement, which matures on April 28, 2025 with respect to 20.3% of the commitments thereunder and April 28, 2028 with respect to 79.7% of the commitments thereunder.

See Note 6 , “ Notes Payable ” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding our long-term debt.

(b) Represents $300.0 million aggregate principal amount of our 4.000% 2029 Senior Notes and $400.0 million aggregate principal amount of our 8.750% 2028 Senior Notes.

The 2029 Senior Notes mature on July 15, 2029, and the 2028 Senior Notes mature on December 15, 2028.

See Note 6 “ Notes Payable ” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding our long-term debt.

(c) The land banking financing arrangements are subject to certain performance obligations, financial and other penalties if the lots covered by such arrangements are not purchased.

See Note 5 , “Accrued Expenses and Other Liabilities” for additional information regarding our land banking financing arrangements.

(d) All of the outstanding borrowings under the Credit Agreement are at variable rates based on SOFR, or subject to an interest rate floor.

The interest rate for our variable rate indebtedness as of December 31, 2023 was SOFR plus 1.85%.

Interest calculated using the effective rate as of December 31, 2023.

Fees under the Credit Agreement are approximately $0.3 million per year.

Interest on the 2029 Senior Notes accrues at a rate of 4.000% per annum, payable semi-annually in arrears on January 15 and July 15 of each year.

Interest on the 2028 Senior Notes accrues at a rate of 8.750% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2024.

The land banking financing arrangements incur interest at the time of purchase.

Interest of $1.6 million related to the land banking financing arrangements is included in the table.

We are a party to many agreements that include contractual obligations and commitments to make payments to third parties.

These obligations impact our short-term and long-term liquidity and capital resource needs.

Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2024, while others are considered future commitments.

Our contractual obligations primarily consist of principal and interest payments on our senior notes, notes payable and land banking financing arrangements, including our unsecured revolving credit facility, letters of credit and surety bonds and operating leases.

We have no senior note maturities until 2028.

We also enter into certain commitments to fund our existing or future unconsolidated joint ventures, letters of credit and other purchase obligations in the normal course of business.

For more information regarding our primary obligations, refer to Note 5 , “Accrued Expenses and Other Liabilities,” Note 6 , “Notes Payable,” and Note 12 , “Commitments and Contingencies,” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for amounts outstanding as of December 31, 2024, related to accrued expenses and other liabilities, debt and commitments and contingencies, respectively.

In the ordinary course of business, we enter into land purchase contracts in order to procure land and lots for the construction of our homes.

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Revolving Credit Facility

On December 5, 2023, we entered into a Fourth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fourth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fourth Amendment, the “Credit Agreement”).

On October 9, 2024, we entered into a Fifth Amendment to Fifth Amended and Restated Credit Agreement with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (the “Fifth Amendment”), which amended the Fifth Amended and Restated Credit Agreement, dated as of April 28, 2021, with several financial institutions, and Wells Fargo Bank, National Association, as administrative agent (as amended to date, including the Fifth Amendment, the “Credit Agreement”).

The Credit Agreement provides for a $1.205 billion revolving credit facility, which can be increased at the request of the Company by up to $95.0 million, subject to the terms and conditions of the Credit Agreement.

The Credit Agreement matures on April 28, 2028 with respect to $960.0 million, or 79.7%, of the $1.205 billion of commitments thereunder and on April 28, 2025 with respect to 20.3% of the commitments thereunder.

The Credit Agreement matures on April 28, 2028 with respect to $1.085 billion, or 90.0%, of the $1.205 billion of commitments thereunder and on April 28, 2025 with respect to 10.0% of the commitments thereunder.

Before each anniversary of the Credit Agreement, we may request a one-year extension of its maturity date.

The Credit Agreement is guaranteed by, among others, each of our subsidiaries that have gross assets of at least $0.5 million, other than subsidiaries whose sole purpose is to own and operate single-family rental homes.

The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) and our 8.750% Senior Notes due 2028 (the “2028 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.

The borrowings and letters of credit outstanding under the Credit Agreement, together with the outstanding principal balance of our 8.750% Senior Notes due 2028 (the “2028 Senior Notes”), our 4.000% Senior Notes due 2029 (the “2029 Senior Notes”) and our 7.000% Senior Notes due 2032 (the “2032 Senior Notes”), may not exceed the borrowing base under the Credit Agreement.

The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by the Company and its subsidiaries that guarantee the obligations under the Credit Agreement.

As of December 31, 2023, the borrowing base under the Credit Agreement was $1.7 billion, of which the maximum available to borrow was $1.205 billion.

As of December 31, 2023, borrowings under the Credit Agreement and the outstanding principal amount of the 2029 Senior Notes and the 2028 Senior Notes totaled $1.3 billion, $28.1 million of letters of credit were outstanding and $354.8 million was available to borrow under the Credit Agreement.

As of December 31, 2024, the borrowing base under the Credit Agreement was $1.205 billion, of which the

maximum available to borrow was $1.8 billion.

As of December 31, 2024, borrowings under the Credit Agreement and the outstanding principal amount of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes totaled approximately $1.5 billion, $24.5 million of letters of credit were outstanding and $270.5 million was available to borrow under the Credit Agreement.

For a further description of the Credit Agreement, please refer to Note 6 , “Notes Payable” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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persons in transactions outside the United States pursuant to Regulation S (“Regulation S”) under the Securities Act.

Interest on the 2032 Senior Notes accrues at a rate of 7.000% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2025.

The 2032 Senior Notes mature on November 15, 2032.

The terms of the 2032 Senior Notes are governed by an Indenture, dated as of July 6, 2018, and Fifth Supplemental Indenture thereto, dated as of November 15, 2024, as may be supplemented from time to time, among us, our subsidiaries that guarantee our obligations under the Credit Agreement and Regions Bank, as trustee.

On November 21, 2023, we issued $400.0 million aggregate principal amount of the 2028 Senior Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S.

Interest on the 2028 Senior Notes accrues at a rate of 8.750% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2024.

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Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and surety bonds are not generally released until all development and construction activities are completed.

We do not believe that it

is probable that any outstanding letters of credit, surety bonds or financial guarantees as of December 31, 2023 will be drawn upon.

We do not believe that it is probable that any outstanding letters of credit, surety bonds or financial guarantees as of December 31, 2024 will be drawn upon.

Stock Repurchase Program

In February 2022, our Board of Directors (the “Board”) approved a $200.0 million increase to our previously authorized stock repurchase program, pursuant to which we may purchase up to $550.0 million of shares of our common stock through open market transactions, privately negotiated transactions or otherwise in accordance with applicable laws.

During the years ended December 31, 2024 and 2022, we repurchased 307,867 shares of our common stock for $30.8 million to be held as treasury stock, excluding the excise taxes accrued on our share repurchases as a result of the IRA 2022 and 892,916 shares of our common stock for $95.1 million to be held as treasury stock, respectively.

During the year ended December 31, 2023, we did not repurchase any shares of our common stock.

During the years ended December 31, 2022 and 2021, we repurchased 892,916 shares of our common stock for $95.1 million to be held as treasury stock and 1,288,563 shares of our common stock for $193.8 million to be held as treasury stock, respectively.

A total of 3,247,339 shares of our common stock has been repurchased since our stock repurchase program commenced.

As of December 31, 2024, we may purchase up to $180.7 million of shares of our common stock under our stock repurchase program.

The timing, amount and other terms and conditions of any repurchases of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.

The timing, amount and other terms and conditions of any repurchases

of shares of our common stock under our stock repurchase program will be determined by our management at its discretion based on a variety of factors, including the market price of our common stock, corporate considerations, general market and economic conditions and legal requirements.

Our stock repurchase program may be modified, discontinued or suspended at any time.

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The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.

Net cash used in operating activities during the year ended December 31, 2023 was primarily driven by cash outflow from the $255.5 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity, partially offset by net income of $199.2 million, as well as the $16.2 million increase and $18.3 million decrease in the net change in accounts receivable, and accrued expenses and other liabilities, respectively.

Net cash used in operating activities during the year ended December 31, 2024 was primarily driven by cash outflow from the $365.9 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity, partially offset by net income of $196.1 million.

Net cash used in operating activities was $57.0 million during the year ended December 31, 2023.

The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.

Net cash used in operating activities during the year ended December 31, 2022 was primarily driven by cash outflow from the $823.9 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity, partially offset by net income of $326.6 million, as well as the $32.8 million decrease and $58.1 million increase in the net change in accounts receivable, and accrued expenses and other liabilities, respectively.

Net cash provided by operating activities was $21.7 million during the year ended December 31, 2021.

The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development.

Net cash provided by operating activities during the year ended December 31, 2021 was primarily driven by net income of $429.6 million, and included cash outflows from the $463.6 million increase in the net change in real estate inventory, which was primarily related to our homes under construction and land acquisitions and development level of activity and a $58.0 million decrease in the net change in accounts receivable.

Investing Activities

Net cash provided by investing activities was $15.6 million during the year ended December 31, 2024, primarily due to the sale of property and equipment, offset by additional investments in unconsolidated entities.

Net cash used in investing activities was $13.6 million during the year ended December 31, 2023, primarily due to additional investments in unconsolidated entities, net of return of capital from unconsolidated entities.

Net cash used in investing activities was $6.0 million during the year ended December 31, 2022, primarily due to additional investments in unconsolidated entities.

Net cash used in investing activities was $70.4 million during the year ended December 31, 2021, primarily due to the business acquisitions of certain real estate assets owned by KenRoe Inc.

and its affiliated entities, including R Home LLC and Paxmar Land Development, and the real estate assets of Buffington Homebuilding Group, Ltd.

Financing Activities

Net cash provided by financing activities was $132.3 million during the year ended December 31, 2024, primarily driven by $592.3 million of borrowings under our credit agreement then in effect and $400.0 million of proceeds from the offering of our 2032 Senior Notes.

These were partially offset by $760.0 million of repayments on our credit agreement then in effect, net of payments of $67.9 million related to a financing arrangement with a third-party land banker and by the $31.0 million in payments for shares of our common stock under our stock repurchase program.

Net cash provided by financing activities was $87.6 million during the year ended December 31, 2023, primarily driven by $887.3 million of borrowings under our credit agreement then in effect and $50.4 million of proceeds related to financing arrangements with a third-party land banker.

These were partially offset by $746.0 million of repayments on our credit agreement then in effect, net of payments of $95.0 million related to a financing arrangement with a third-party land banker.

Net cash provided by financing activities was $357.9 million during the year ended December 31, 2022, primarily driven by $618.9 million of borrowings under our credit agreement then in effect and $149.5 million of proceeds related to financing arrangements with a third-party land banker.

These were partially offset by $308.0 million of repayments on our credit agreement then in effect and by $95.1 million in payments for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock.

Net cash provided by financing activities during the year ended December 31, 2021 was $63.3 million, primarily driven by borrowings of $1.2 billion under our credit agreement then in effect and the 2029 Senior Notes, offset by $969.0 million of payments associated with the 2026 Senior Notes and our credit agreement then in effect and by the $193.8 million payment for shares of our common stock repurchased under our stock repurchase program to be held as treasury stock.

Our business can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs.

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and potential cost reimbursements from various municipalities.

Changes to estimated total remaining development costs subsequent to initial home closings in a community are allocated to the remaining unsold homes

in the community on a prospective basis.

Changes to estimated total remaining development costs subsequent to initial home closings in a community are allocated to the remaining unsold homes in the community on a prospective basis.

Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method and are capitalized as they are incurred.

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For projects we develop, the period between the acquisition of a raw piece of land and completion of the development of that land generally ranges from two to three years.

During the life of a project, a constructed home is used as the community information center and then sold.

During the life of a project, a constructed home is used as

the community information center and then sold.

Actual individual community lives will vary based on the size of the community, the sales absorption rate, and whether the property was purchased as raw land or finished lots.

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For raw land, land under development and completed lots that our management anticipates will be utilized for future homebuilding activities or to be sold as finished lots to individuals, the recoverability of assets is measured by comparing the carrying amount of the assets to future undiscounted cash flows expected to be generated by the assets based on home or lot sales, consistent with the evaluation of operating communities discussed above.

Pre-acquisition Costs and Controlled Lots Not Owned

We enter into land purchase agreements in the ordinary course of business in order to secure land for the construction of homes in the future.

Pursuant to these agreements, we typically provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices.

We do not have title to the property and our obligations with respect to the contracts are generally limited to the forfeiture of the related nonrefundable cash deposits.

To the extent that any deposits are nonrefundable and the associated land acquisition process is terminated or no longer determined probable, the deposit and any related pre-acquisition costs (e.g.

due diligence costs) are charged to general and administrative expense.

Assessments are made on each agreement based on criteria including, but not limited to, market absorption, historical and current average sales price per home, timing of purchase and size of land parcel.

We terminated $3.6 million, $6.7 million and $2.4 million of nonrefundable pre-acquisition costs or controlled lots deposits for the years ended December 31, 2023, 2022 and 2021, respectively.

We regularly review the likelihood of the acquisition of contracted lots in conjunction with our periodic real estate impairment analysis.

Warranty Reserves

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Estimated future direct warranty costs are assessed monthly on a consistent basis as part of our policy and accrued and charged to cost of sales in connection with our home sales.

and is adjusted as appropriate to reflect qualitative risks associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our expansion.

The primary assumption to record amounts accrued for our warranty liability is based upon a trailing 120 month period of historical warranty cost experience on a per house basis established based on (i) trends in historical warranty payment levels, (ii) the historical range of amounts paid per house, (iii) any warranty expenditures not considered to be normal and recurring, and is adjusted as appropriate to reflect qualitative risks associated with the types of homes built, the geographic areas in which they are built, and potential impacts of our expansion.

Our analysis also considers improvements in quality control and construction techniques expected to impact future warranty expenditures and the expertise of our personnel.

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We increased our warranty reserve by $2.5 million, $2.9 million and $2.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Business Acquisitions

We account for certain homebuilding asset purchases as business combinations using the acquisition method of accounting and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date with excess recorded as goodwill.

The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair value of the acquired assets.

We determine the estimated fair values of the real estate inventory with the assistance of appraisals performed by independent third-party specialists and estimates by management.

Assumptions utilized in our estimates of the fair value of the assets acquired may include market comparisons, gross margin comparisons, future development costs and the timing of the completion of development activities, absorption rates, and mix of products sold in each community.

We utilize the liability method of accounting for income taxes.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis