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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-11-01 · 132 added, 211 removed, 162 unchanged (68% of the section changed)

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Overview and Outlook

Demand for new homes in the third quarter of 2023 held steady with that experienced in first half of the year, despite the persistence of elevated interest rates and high inflation.

This environment has homebuyers looking for assistance with monthly mortgage affordability, requiring greater use of financing incentives, including interest rate locks and buy-downs.

Millennial and baby boomer generations are seeking affordable, move-in ready homes that meet their changing lifestyle needs, which has created elevated demand for new inventory, as existing homeowners with lower mortgage rates are not listing their homes, resulting in a short supply of total inventory.

We believe our all-spec strategy with a commitment to affordability will meet the persisting demographic demand, providing us with ample opportunity to capture and grow our market share.

While we have experienced some limited relief in material costs, primarily due to the retraction in lumber commodities, most other home costs have held relatively steady at their elevated levels.

Our cost savings year over year were primarily generated by improvements in our construction cycle time.

During the third quarter of 2023, we further reduced our construction cycle time by over two weeks as supply chain and labor constraints have continuously lessened throughout the year.

We continue to rebid all of our construction inputs and expect costs to begin to trend down to historical levels as the economy resets into stabilizing inflation rates.

Higher land development costs have also begun to impact margins for newer communities and will continue to do so in the near-to-mid term.

Demand for new homes was strong in the first quarter of 2024, as the Millennial, Gen Z and move-down Baby Boomer generations are experiencing life events that necessitate a dwelling change while there continues to be a shortage of existing housing supply.

Our spec building strategy and streamlined operations provide us with appropriate levels of available inventory to capitalize on this strong housing demand by providing a quick move-in opportunity, the most desirable characteristic for our potential customers.

Combined with financing and other incentives offered in our commitment to affordability, we believe our homes provide an attractive opportunity for homeownership.

We believe that the execution of our strategy has, and will continue to, drive strong performance of the key financial measures of home closing volume, home closing gross margin, selling, general and administrative cost control, balance sheet management and long-term community count growth.

Supply chain disruptions that impacted production costs and cycle times in the homebuilding industry as a whole over the last several years began to ease in 2023, and while both are still elevated, we have experienced significant year-over-year improvements in the first quarter of 2024 as compared to 2023.

Summary Company Results

We achieved record third quarter home closing revenue and units volume of 3,638 homes valued at $1.6 billion in the third quarter of 2023, improving 4.3% and 2.6%, respectively, year over year.

The increase in home closing revenue was driven by the higher volume as the average sales price ("ASP") on closings decreased 1.6% due to higher incentives.

Third quarter home closing gross margin of 26.7% for home closing gross profit of $429.6 million compared to 28.7% and $450.6 million, respectively, in the third quarter of 2022.

The 200 basis point margin deterioration is due primarily to increased incentives and higher land development costs, while direct costs held relatively steady.

Commissions and other sales costs of $99.1 million in the three months ended September 30, 2023 increased $21.2 million due to the combined effect of higher home closing volume and increased commissions offered in response to the current sales environment.

General and administrative expenses of $63.1 million were 3.9% of home closing revenue for the three months ended September 30, 2023, compared to $48.4 million, or 3.1% of home closing revenue, for the same period in 2022.

The increase in General and administrative expenses is due to higher compensation, inclusive of newer market operations and competitive market adjustments.

Other income, net of $13.3 million increased from a net other expense of $0.1 million in the prior year primarily due to higher interest rates earned on a larger cash balance.

In September 2023 we partially redeemed $150.0 million of our 2025 Notes, resulting in charges of $0.9 million reflected in Loss on early extinguishment of debt, with no similar charges in 2022.

Earnings before income taxes for the third quarter of 2023 of $285.7 million decreased $43.8 million year over year from $329.5 million in 2022.

The effective income tax rate for the third quarter of 2023 was 22.4%, compared to 20.3% in 2022.

The 2022 effective tax rate reflects the catch-up of tax credits for energy efficient homes closed in the first nine months of 2022 for the extension of the §45L energy-efficient homes federal tax credit enacted by the IRA in third quarter of 2022.

The decrease in year-over-year profitability and a higher tax rate, resulted in net earnings of $221.8 million in the third quarter of 2023 versus $262.5 million in the third quarter of 2022.

For the nine months ended September 30, 2023, home closing volume of 10,025 units increased 4.8% from 2022, leading to a 4.5% increase in home closing revenue to $4.4 billion.

Home closing gross margin of 24.7% decreased 540 basis points, resulting in a $184.0 million decrease in home closing gross profit.

Lower gross margin and profitability, partially offset by a lower effective tax rate of 21.8%, led to net income of $539.9 million for the nine months ended September 30, 2023, compared to $729.8 million for the 2022 period.

Home orders of 3,474 for the quarter ended September 30, 2023 were 50.4% higher than the third quarter of 2022, as market conditions stabilized over the last twelve months, increasing consumer confidence and buyer demand, and our cancellation rate in the third quarter of 2023 of 11% improved significantly from the elevated 30% in the third quarter of 2022.

Our average active community count decrease of 2.6% for the third quarter of 2023 was overshadowed by a 51.9% increase in orders pace to 4.1 per month compared to 2.7 in the 2022 third quarter.

Home order value increased 53.5% year-over-year, to $1.5 billion during the three months ended September 30, 2023, versus $1.0 billion in the same period of 2022, due to the

higher volume and a 2.1% increase in ASP on orders.

The higher ASP on orders year over year is due to geographic mix, with a greater proportion of orders in higher ASP markets in the third quarter of 2023 as compared to 2022.

For the nine months ended September 30, 2023, home orders increased 3.5% and home order value decreased 1.6% over the prior year, with a cancellation rate of 13% compared to 16% for the prior year period.

We ended the third quarter of 2023 with 3,608 homes in backlog valued at $1.6 billion, decreases of 40.5% and 44.9%, respectively, from September 30, 2022.

The decrease in backlog units is due to a 96.4% backlog conversion rate during the third quarter of 2023.

We ended the third quarter of 2023 with 272 active communities, down from 275 at September 30, 2022 as our accelerated orders pace resulted in early community close outs.

We purchased approximately 9,100 lots for $486.0 million, spent $769.7 million on land development and started construction on 10,547 homes during the nine months ended September 30, 2023.

Home closing revenue of $1.5 billion on 3,507 home closings in the three months ended March 31, 2024 was up from $1.3 billion on 2,897 homes in the three months ended March 31, 2023.

The 16.2% increase in home closing revenue year-over-year was driven by the 21.1% higher volume, offset by average sales price ("ASP") on closings which was down 4.0% due to product mix shift.

Home closing gross margin in the three months ended March 31, 2024 improved 340 basis points to 25.8%, for home closing gross profit of $378.0 million compared to home closing gross margin and profit of 22.4% and $282.5 million, respectively, in the three months ended March 31, 2023.

The margin improvement is due to lower direct costs and shorter construction cycle times, reduced utilization of interest rate lock incentives and leverage of higher home closing revenue on overhead costs, which were partially offset by higher lot costs.

Financial services loss of $0.7 million in the three months ended March 31, 2024, as compared to profit of $2.9 million in 2023, reflects $5.8 million of charges taken for unused prepaid interest rate forward commitments that expired during the period, compared to $1.9 million of similar charges in the three months ended March 31, 2023.

Commissions and other sales costs of $101.6 million increased $18.7 million due to higher commissions resulting from higher home closing revenue combined with higher commission rates paid to external brokers.

General and administrative expenses of $50.7 million in the three months ended March 31, 2024 increased $3.2 million due to higher headcount and operating lease costs for new office spaces, as well as increased investment in technology.

Earnings before income taxes for the three months ended March 31, 2024 of $234.0 million increased $68.7 million year over year from $165.3 million in 2023.

The effective income tax rate was 20.5% in the three months ended March 31, 2024, consistent with 20.6% in 2023.

Both periods reflect the benefit from earned eligible energy tax credits on qualifying homes under the Inflation Reduction Act ("IRA").

The increase in year-over-year profitability resulted in net earnings of $186.0 million in the three months ended March 31, 2024 versus $131.3 million in the three months ended March 31, 2023.

We had our highest quarterly home orders in Company history of 3,991 in the three months ended March 31, 2024, 14.5% higher than the same period in 2023 despite a relatively flat average active community count, as strong demand led to a 16.7% increase in orders pace to 4.9 per month compared to 4.2 per month in 2023.

Our cancellation rate of 8% improved significantly from 15% in the three months ended March 31, 2023 and is well below our historical average, indicating strong buyer sentiment and a faster order-to-close timeline.

Home order value increased 8.2% year-over-year, to $1.6 billion in the three months ended March 31, 2024, versus $1.5 billion in the same period of 2023, due to the higher order volume which was offset by a 5.4% decrease in ASP on orders.

We ended the first quarter of 2024 with 3,033 homes in backlog valued at $1.2 billion, down 22.7% and 29.5%, respectively, from March 31, 2023.

The decrease in backlog units is due to a higher a backlog conversion rate in the first quarter of 2024 of 138%, compared to 87% in the first quarter of 2023.

A higher percentage of spec homes sold later in the construction cycle contributed to the higher backlog conversion rate and resulted in an increased percentage of home orders that converted to closings within the same quarter.

We ended the first quarter of 2024 with 275 active communities, down slightly from 278 at March 31, 2023 and up sequentially from 270 at December 31, 2023.

We purchased approximately 2,900 lots for $162.2 million, spent $268.2 million on land development and started construction on 4,142 homes during the three months ended March 31, 2024.

Company Positioning

We believe that the investments in our new communities designed for the first-time and first move-up homebuyer, our commitment to being primarily an all-spec builder, and industry-leading innovation in energy-efficient product offerings and automation, create a differentiated strategy that has aided us in our growth in the highly competitive new home market.

We believe that the investments in our new communities designed for the first-time and first move-up homebuyer, our commitment to being an all-spec builder, and our offerings of energy-efficient products and automation in our entry-level homes create a differentiated strategy that has aided us in our growth in the highly competitive new home market.

Our focus on growing our community count and market share includes the following strategic initiatives:

• Achieving or maintaining a position of at least 5% market share in all of our markets;

• Delivering affordable homes on a shorter timeline through simplification of production processes and maintaining market-appropriate levels of spec inventory;

• Delivering affordable homes on a shorter timeline through simplification of production processes and maintaining levels of spec inventory that are aligned with our strategy;

• Continuously improving the overall home buying experience through simplification and innovation;

• Maintaining our home closing gross profit by growing closing volume, allowing us to better leverage our overhead;

• Leveraging and expanding on technological solutions through digital offerings to our customers, such as our virtual home tours, interactive maps, digital financial services offerings and online warranty portal;

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In addition to these strategic initiatives, we also remain committed to the following:

• Carefully managing our liquidity and a strong balance sheet, including a $150.0 million early redemption of debt this quarter;

we ended the third quarter with an 18.5% debt-to-capital ratio and a (1.0)% net debt-to-capital ratio;

• Maximizing returns to our shareholders through improved financial performance, dividend payments and share repurchases;

• Achieving or maintaining a top 5 market position in all of our markets;

• Maintaining and where possible, expanding, our home closing gross profit by growing closing volume, allowing us to better leverage our direct overhead;

• Carefully managing our liquidity and a strong balance sheet.

We ended the first quarter of 2024 with a 17.5% debt-to-capital ratio and a 2.0% net debt-to-capital ratio;

• Balancing return of capital to our shareholders with internal growth goals, utilizing both share repurchases and dividend payments;

• Managing construction efficiencies and costs through national and regional vendor relationships with a focus on timely, quality construction and warranty management;

• Promoting a positive environment for our employees through our commitment to foster diversity, equity, and inclusion ("DE&I") and providing market-competitive benefits in order to develop and motivate our employees and to minimize turnover and to maximize recruitment efforts;

• Promoting a positive environment for our employees through our commitment to foster diversity, equity and inclusion and providing market-competitive benefits in order to develop and motivate our employees, minimize turnover and maximize recruitment efforts;

• Targeting a strong yet sustainable orders pace through the use of our consumer and market research to ensure that we build homes that offer our buyers their desired features and amenities.

• Continuing to innovate and promote our energy efficiency program and our M.Connected ® Automation Suite to create differentiation from existing available inventory.

Critical Accounting Estimates

The critical accounting estimates that we deem to involve the most difficult, subjective or complex judgments include valuation of real estate and cost of home closings, warranty reserves and valuation of deferred tax assets.

There have been no significant changes to our critical accounting estimates during the nine months ended September 30, 2023 compared to those disclosed in Item 7.

The critical accounting estimates that we deem to involve the most difficult, subjective or complex judgments include real estate valuation and cost of home closings, warranty reserves and valuation of deferred tax assets.

There have been no significant changes to our critical accounting estimates during the three months ended March 31, 2024 compared to those disclosed in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2023 Annual Report on Form 10-K.

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The tables on the following pages present operating and financial data that we consider most critical to managing our operations (dollars in thousands):

Home Closing Revenue Three Months Ended September 30, Quarter over Quarter

2023 2022 Change $ Change %

Dollars $ 1,610,317 $ 1,569,032 $ 41,285 2.6 %

Homes closed 3,638 3,487 151 4.3 %

Average sales price $ 442.6 $ 450.0 $ (7.4) (1.6) %

Dollars $ 606,833 $ 590,027 $ 16,806 2.8 %

Homes closed 1,172 1,086 86 7.9 %

Average sales price $ 517.8 $ 543.3 $ (25.5) (4.7) %

Central Region

Dollars $ 452,687 $ 499,713 $ (47,026) (9.4) %

Homes closed 1,102 1,218 (116) (9.5) %

Average sales price $ 410.8 $ 410.3 $ 0.5 0.1 %

Dollars $ 550,797 $ 479,292 $ 71,505 14.9 %

Homes closed 1,364 1,183 181 15.3 %

Average sales price $ 403.8 $ 405.1 $ (1.3) (0.3) %

Nine Months Ended September 30, Quarter over Quarter

Home Closing Revenue Three Months Ended March 31, Quarter over Quarter

2024 2023 Change $ Change %

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Average sales price $ 508.5 $ 531.6 $ (23.1) (4.3) %

Central Region

Central Region - Texas

Dollars $ 427,565 $ 424,880 $ 2,685 0.6 %

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Average sales price $ 394.3 $ 394.5 $ (0.2) (0.1) %

Home Orders (1) Three Months Ended September 30, Quarter over Quarter

2023 2022 Change $ Change %

Dollars $ 1,495,542 $ 974,314 $ 521,228 53.5 %

Homes ordered 3,474 2,310 1,164 50.4 %

Average sales price $ 430.5 $ 421.8 $ 8.7 2.1 %

Dollars $ 521,049 $ 241,098 $ 279,951 116.1 %

Homes ordered 985 456 529 116.0 %

Average sales price $ 529.0 $ 528.7 $ 0.3 0.1 %

Central Region

Dollars $ 425,165 $ 253,321 $ 171,844 67.8 %

Homes ordered 1,099 635 464 73.1 %

Average sales price $ 386.9 $ 398.9 $ (12.0) (3.0) %

Dollars $ 549,328 $ 479,895 $ 69,433 14.5 %

Homes ordered 1,390 1,219 171 14.0 %

Average sales price $ 395.2 $ 393.7 $ 1.5 0.4 %

Nine Months Ended September 30, Quarter over Quarter

Home Orders (1)

Three Months Ended March 31, Quarter over Quarter

2024 2023 Change $ Change %

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Average sales price $ 496.4 $ 494.5 $ 1.9 0.4 %

Central Region

Central Region - Texas

Dollars $ 482,183 $ 420,521 $ 61,662 14.7 %

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Order Backlog (1)

At September 30, Quarter over Quarter

At March 31, Quarter over Quarter

2024 2023 Change $ Change %

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Average sales price $ 410.2 $ 449.7 $ (39.5) (8.8) %

West Region Totals

Dollars $ 439,957 $ 676,135 $ (236,178) (34.9) %

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Average sales price $ 487.8 $ 492.5 $ (4.7) (1.0) %

Central Region

Central Region Totals

Dollars $ 341,691 $ 419,822 $ (78,131) (18.6) %

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Average sales price $ 375.1 $ 424.9 $ (49.8) (11.7) %

East Region Totals

Dollars $ 462,609 $ 667,875 $ (205,266) (30.7) %

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(1) Our backlog represents net home orders that have not closed.

Active Communities and Cancellation Rates

Active Communities Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Ending Average Ending Average Ending Average Ending Average

Active Communities Three Months Ended March 31,

Ending Average Ending Average

Total 275 272.5 278 274.5

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Cancellation Rates (1)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Total 8 % 15 %

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Companywide .

We had our highest third quarter home closing revenue and volume in Company history, improving 2.6% and 4.3%, respectively, over prior year, with 3,638 closings valued at $1.6 billion for the three months ended September 30, 2023, compared to 3,487 closings valued at $1.6 billion in 2022.

Despite entering the 2023 third quarter with lower backlog than prior year, home closing volume increased over the third quarter of 2022 due to a backlog conversion rate of 96.4% versus 48.2% in the prior year.

The improvement in backlog conversion was bolstered by reduced cycle times combined with 31.6% of our third quarter 2023 home closings also being sold within the same quarter.

Order cancellations of 11% for the third quarter of 2023 improved greatly from 30% in the third quarter of 2022, resulting in a 50.4% increase in home order volume of 3,474 homes, compared to 2,310 homes in the third quarter of 2022, and our orders pace improved 51.9% to 4.1 per month from 2.7 per month.

ASP on orders increased 2.1% due to geographic mix, which combined with the higher order volume for a 53.5% increase in home order value of $1.5 billion.

For the nine months ended September 30, 2023, home closing revenue of $4.4 billion increased 4.5% from $4.2 billion, due to a 4.8% increase in home closing volume to 10,025, up from 9,566 homes in the prior year period, as ASP on closings was relatively flat.

Home order volume of 10,301 increased 3.5% from prior year due primarily to a 2.5% increase in orders pace of 4.1 homes per month, up from 4.0 in 2022, on a relatively consistent average active community count.

Despite the increase in order volume, home order value decreased 1.6% from prior year due to increased incentives that caused ASP on orders to decline 5.0%.

We ended the third quarter of 2023 with 272 actively selling communities, down from 275 at September 30, 2022.

At September 30, 2023, we had 3,608 homes in backlog valued at $1.6 billion, down from 6,064 units valued at $2.8 billion at September 30, 2022, due to a higher backlog conversion rate and improved cycle times.

The West Region generated $606.8 million in home closing revenue on 1,172 homes in the third quarter of 2023, up from $590.0 million on 1,086 homes in the prior year period.

The 7.9% increase in volume resulted in a 2.8% increase in home closing revenue, as ASP on closings decreased 4.7% due to higher incentives.

Home orders in the third quarter of 2023 of 985 were up 116.0% from 456 in the prior year, as the buyer hesitancy and elevated cancellations in the third quarter of 2022 have dramatically lessened as the economy stabilizes coupled with increased incentives to alleviate affordability concerns.

The West Region cancellation rate of 14% in the third quarter of 2023 improved from 43% in the prior year, resulting in a 140.0% higher orders pace of 3.6 homes per month in the third quarter of 2023 compared 1.5 per month in 2022.

This accelerated orders pace contributed to a 12.9% decrease in average active communities due to early close outs.

Home order value of $521.0 million for the third quarter of 2023 increased proportionately with order volume, as ASP on orders remained consistent.

For the nine months ended September 30, 2023, home closing revenue of $1.5 billion was consistent with prior year, as a 2.7% increase in home closing volume was offset by a 2.4% decrease in ASP on closings.

Order volume in the West Region increased 23.7% year-to-date driven by a return to more normalized demand.

With just a 1.1% increase in average active communities, year-to-date orders pace of 3.9 homes per month improved 21.9% compared to 2022, although last year's orders pace was negatively impacted by elevated cancellations.

Home order value of $1.7 billion was up 12.5% from 2022 due to higher volume, offset by a 9.1% decrease in ASP on orders caused by increased buyer financing incentives.

The year-to-date cancellation rate of 14% was down from 21% in the prior year period.

The West Region ended the third quarter of 2023 with 1,179 homes in backlog valued at $579.8 million, compared to 1,627 units valued at $905.1 million at September 30, 2022, decreases of 27.5% and 35.9%, respectively.

The Central Region closed 1,102 homes in the three months ended September 30, 2023, down 9.5% from 1,218 home closings in 2022, which was the Region's highest quarterly home closings in its history.

Home closing revenue of $452.7 million decreased 9.4% due to lower home closing volume as ASP on closings was flat.

The Central Region cancellation rate of 13% in the third quarter of 2023 was down from 37% in the third quarter of 2022, resulting in significant improvement in home order volume and orders pace.

Home order volume increased 73.1% to 1,099 homes in the third quarter of 2023 due to a 6.5% increase in average active communities coupled with a 66.7% increase in orders pace to 4.5 homes per month from 2.7 in 2022.

Order value of $425.2 million in the three months ended September 30, 2023 increased 67.8% from $253.3 million in the third quarter of 2022 due to entirely to the higher order volume, as the Region experienced a 3.0% decrease in ASP on orders resulting from higher incentives year over year.

Year-to-date, Central Region home closing revenue of $1.3 billion on 3,244 home closings increased 5.1% and 3.3%, respectively, from the nine months ended September 30, 2022, and ASP on home closings increased 1.7%, buoyed by favorable results in the first half of 2023 which more than offset the difficult third quarter comparisons.

Home order volume of 3,237 for the nine months ended September 30, 2023 increased 6.9% because of a higher average active community count, as orders pace of 4.4 homes per month was consistent with the same period in 2022.

ASP on orders declined 7.0% year-over-year, resulting in a 0.6% decrease in order value of $1.3 billion.

The year-to-date cancellation rate of 14% was down from 20% in the prior year.

The Central Region ended the quarter with 956 units in backlog valued at $370.3 million, down 45.9% and 53.1%, respectively, compared to September 30, 2022.

During the three months ended September 30, 2023, the East Region closed 1,364 homes for $550.8 million in home closing revenue, compared to 1,183 closings and $479.3 million in the comparable prior year period.

The 15.3% increase in home closing volume resulted in a 14.9% improvement in home closing revenue while ASP on closings held steady.

Home orders of 1,390 valued at $549.3 million for the third quarter of 2023 increased 14.0% and 14.5%, respectively, due to a 13.2% increase in orders pace of 4.3 homes per month coupled with a relatively flat average active community count.

ASP on orders was up just slightly from 2022 due to geographic mix.

The cancellation rate of 8% in the third quarter of 2023 improved from 18% in 2022.

For the nine months ended September 30, 2023, the East Region delivered 3,827 home closings for $1.5 billion in home closing revenue, up 7.7% and 8.7%, respectively, compared to the 2022 period, with a 0.9% improvement in ASP on closings.

Order volume decreased 11.3% due to the combined impact of a 5.0% decrease in average active communities and a 6.8% decrease in orders pace for the nine months ended September 30, 2023.

Order value of $1.5 billion decreased 14.3% year over year due to decreased volume and a 3.3% decrease in ASP on orders.

Year-to-date, the East Region's cancellation rate of 11% is up slightly from 10% in the prior year, although still in line with historically normal rates.

The East Region ended the third quarter of 2023 with 1,473 homes in backlog valued at $608.6 million, down 44.9% and 46.2%, respectively, from 2,671 homes valued at $1.1 billion at September 30, 2022.

In the three months ended March 31, 2024, we closed 3,507 closings valued at $1.5 billion, compared to 2,897 closings valued at $1.3 billion in the prior year.

The 21.1% increase in home closing volume, driven by a record backlog conversion rate of 138%, led to a 16.2% improvement in home closing revenue.

We had a partial offset to the volume growth from a 4.0% decrease in ASP on closings resulting primarily from product mix shift to more entry-level homes, which represented 88% of home closings in the three months ended March 31, 2024 versus 84% in the prior year period.

Home orders of 3,991, our highest quarterly orders in Company history, were up 14.5% over 3,487 homes ordered in the three months ended March 31, 2023.

Strong housing demand coupled with having the right amount of available inventory drove the orders growth even as our average active communities decreased slightly.

The first quarter 2024 orders pace of 4.9 per month increased from 4.2 per month in the same period of 2023, benefiting from a historically low cancellation rate of 8% in the first quarter of 2024, a significant improvement over 15% in the same period of 2023.

ASP on orders declined 5.4% due to geographic mix and a higher mix of entry-level homes, which constituted 91% of total orders in the three months ended March 31, 2024 compared to 87% in 2023.

The lower ASP on orders was fully offset by higher order volume, resulting in an 8.2% increase in home order value of $1.6 billion for the quarter ended March 31, 2024.

We ended the quarter with 3,033 homes in backlog valued at $1.2 billion, compared to 3,922 units valued at $1.8 billion at March 31, 2023, due to the improved backlog conversion rate in the first quarter of 2024 resulting from a higher percentage of spec homes being sold later in the construction cycle which resulted in an increased percentage of home orders that converted to closings within the same quarter.

The West Region generated $515.6 million in home closing revenue on 1,014 homes in the three months ended March 31, 2024, increasing from $417.3 million and 785 homes in the prior year period.

The 29.2% increase in volume and 4.3% decrease in ASP on closings due to a higher percentage of entry-level homes led to a 23.6% increase in home closing revenue year over year.

Home orders of 1,170 during the quarter ended March 31, 2024 decreased 9.0% from the prior year due entirely to a 15.3% decrease in average actively selling communities that was partially offset by a 6.7% increase in orders pace to 4.8 homes per month.

The West Region entered the year with a lower community count but made progress replenishing it in the first quarter of 2024 by opening 15 new communities.

Home order value of $580.8 million in the first quarter of 2024 decreased 8.7% from $635.9 million in 2023 due to the lower volume as ASP on orders held relatively steady.

The West Region's cancellation rate of 9% in the three months ended March 31, 2024 improved from 13% in the prior year.

The West Region ended the first quarter of 2024 with 902 homes in backlog valued at $440.0 million, down from 1,373 homes in backlog valued at $676.1 million at March 31, 2023, due to lower order volume and a 136% backlog conversion rate, up from 90% in the prior year.

The Central Region, made up of our Texas markets, closed 1,167 homes during the three months ended March 31, 2024, up 11.4% from 1,048 homes in 2023.

Home closing revenue of $427.6 million in the three months ended March 31, 2024 held relatively steady as the increase in volume was offset by a corresponding decrease in ASP on closings caused by a shift to a higher mix of entry-level product.

A 3.1% increase in average actively selling communities coupled with an 18.2% increase in orders pace of 5.2 per month led to a 22.1% increase in home orders of 1,310 in the three months ended March 31, 2024, up from 1,073 in 2023.

Home order value of $482.2 million in the three months ended March 31, 2024 was up 14.7% from the prior year, as the increase in volume more than offset a 6.1% decrease in ASP on orders due to product mix shift.

The Central Region's cancellation rate of 9% was the Company's greatest improvement, down from 17% in 2023.

The Central Region ended the quarter with 911 homes in backlog valued at $341.7 million, down 7.8% and 18.6%, respectively, largely due to a backlog conversion rate of 152% in the first quarter of 2024, compared to 109% in 2023.

During the quarter ended March 31, 2024, the East Region closed 1,326 homes for $522.9 million, compared to 1,064 closings and $419.7 million in home closing revenue in the comparable prior year period.

The 24.6% improvement in home closing revenue was attributable entirely to the 24.6% increase in volume, as ASP on closings was consistent year over year.

With 10.2% more average active communities combined with a 23.7% increase in orders pace to 4.7 per month, home orders increased 34.0% to 1,511 in the three months ended March 31, 2024 from 1,128 in the prior year period.

A 5.8% lower ASP on orders due to a higher mix of entry-level homes, combined with the higher order volume, translated to a 26.1% increase in home order value of $568.2 million in the three months ended March 31, 2024, up from $450.4 million in the comparable prior year period.

The East Region had a cancellation rate of 8% in the three months ended March 31, 2024, down from 15% in the first quarter of 2023.

The East Region ended the first quarter of 2024 with 1,220 homes in backlog valued at $462.6 million, down 21.8% and 30.7%, respectively, from 1,561 homes valued at $667.9 million at March 31, 2023.

The decrease in backlog units is due to a 128% backlog conversion rate in 2024, compared to 71% during the first quarter of 2023.

Land Closing Revenue and Gross Profit

From time to time, we may sell certain lots or land parcels to other homebuilders, developers or investors if we feel the sale will provide a greater economic benefit to us than continuing home construction or where we are looking to diversify our land positions in a specific geography or divest of assets that no longer align with our strategy.

As a result of such sales, we recognized land closing revenue of $2.8 million and $9.0 million and gross profit of $0.2 million and $0.4 million for the three months ending September 30, 2023 and 2022, respectively.

Year-to-date land sales resulted in profits of $1.9 million and $11.9 million for 2023 and 2022, respectively.

As a result of such sales, we recognized land closing revenue of $2.3 million and $17.4 million for the three months ended March 31, 2024 and 2023, respectively, and profit of $7,000 and $1.4 million for the three months ended March 31, 2024 and 2023, respectively.

Other Operating Information (dollars in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Dollars Percent of Home Closing Revenue Dollars Percent of Home Closing Revenue Dollars Percent of Home Closing Revenue Dollars Percent of Home Closing Revenue

Three Months Ended March 31,

Dollars Percent of Home Closing Revenue Dollars Percent of Home Closing Revenue

Home Closing Gross Profit (1)

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Companywide .

Home closing gross profit for the third quarter of 2023 was $429.6 million with a home closing gross margin of 26.7%, down 200 basis points from 28.7% in the third quarter of 2022, due to increased buyer financing incentives and higher land development costs, partially offset by costs savings from shorter construction cycle times as direct costs were relatively flat year over year.

Home closing gross margin in the third quarter of 2022 included $8.8 million in charges associated with the termination of land purchase agreements, while only $0.2 million of such charges were recorded in third quarter of 2023.

For the nine months ended September 30, 2023, gross profit of $1.1 billion and gross margin of 24.7% decreased from $1.3 billion and 30.1% in 2022 due to the combined impact of higher direct costs and increased sales incentives.

The West Region home closing gross margin of 23.3% for the third quarter of 2023 declined 330 basis points from 26.6% in the third quarter of 2022.

The West Region contains some of our most expensive markets that were most impacted by

the volatile economic conditions that began in the latter half of 2022, both in terms of ASP as well as land costs, and has led us to offering significant incentives to assist homebuyers with monthly affordability.

The home closing gross margin for the third quarter of 2023 was impacted by these higher incentives and land development costs.

For the nine months ended September 30, 2023, the West Region home closing gross margin of 20.2% declined from 29.2% in the 2022 period due to higher incentives and elevated cost of production and land development.

The Central Region's third quarter 2023 home closing gross margin of 28.4% decreased from 30.1% in the prior year quarter, due to elevated incentives and increased land development costs.

Year-to-date, the Central Region gross margin of 27.0% in 2023 is down from 30.7%, mostly as a result of elevated sales incentives.

The East Region had the highest home closing gross margin in the Company, at 29.0% in the third quarter of 2023, a 90 basis point decline from 29.9% for the comparable 2022 period.

With relatively consistent direct costs, the East Region margin decline is due almost entirely to increased financing incentives.

The East Region's year-to-date home closing gross margin of 27.1% is down from 30.6% in 2022 as a result of higher sales incentives.

Financial Services Profit (in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Financial services profit $ 5,700 $ 4,842 $ 6,066 $ 12,255

Financial services profit represents the net profit of our financial services operations, including the operating profit generated by our wholly-owned title and insurance companies, Carefree Title Agency, Inc.

Gross profit for the three months ended March 31, 2024 was $378.0 million with a home closing gross margin of 25.8%, a 340 basis point improvement from 22.4% in the three months ended March 31, 2023.

The margin improvement was due to lower direct costs, reduced utilization of interest rate lock incentives, leverage of higher home closing revenue on overhead costs and shorter construction cycle times, all of which were partially offset by higher lot cost.

The West Region delivered a 450 basis point improvement in home closing gross margin of 22.3% for the three months ended March 31, 2024, up from 17.8% in the three months ended March 31, 2023.

The West Region's home closing gross margin benefited from lower direct costs, reduced utilization of interest rate lock incentives, which were heavily utilized in early 2023 to address the challenging market conditions, and improved leverage of higher home closing revenue on overhead costs.

The West Region's home closing gross margin for the three months ended March 31, 2024 was negatively impacted by higher lot costs.

In the quarter ended March 31, 2024, the Central Region's home closing gross margin of 27.3% improved 240 basis points from 24.9% in the prior year quarter, due largely to improvements in direct costs while higher lot costs year-over-year negatively impacted home closing gross margin.

The East Region had the Company's highest home closing gross margin of 28.0% in the three months ended March 31, 2024, up 350 basis points from 24.5% for the comparable 2023 period.

The East Region had the greatest reduction of interest rate lock incentive utilization in the three months ended March 31, 2024, which combined with lower direct costs and greater leverage of home closing revenue on overhead costs to offset the higher lot costs.

Financial Services (Loss)/Profit (in thousands)

Three Months Ended March 31,

Financial services (loss)/profit $ (690) $ 2,923

Financial services (loss)/profit represents the net (loss)/profit of our financial services operations, including the operating profit generated by our wholly-owned title and insurance companies, Carefree Title Agency, Inc.

and Meritage Homes Insurance Agency, respectively, as well as our portion of earnings from a mortgage joint venture.

Financial services profit of $5.7 million in the three months ended September 30, 2023 increased from $4.8 million in the comparable prior year period due to higher home closing volume.

Financial services profit for the nine months ended September 30, 2023 decreased $6.2 million year over year, due primarily to $7.9 million in charges in the second quarter of 2023 related to unused prepaid interest rate locks that expired.

Financial services loss of $0.7 million for the three months ended March 31, 2024 included $5.8 million in charges related to unused prepaid interest rate forward commitments that expired.

Financial services profit of $2.9 million for the three months ended March 31, 2023 included $1.9 million in charges related to unused prepaid interest rate forward commitments that expired.

The increase in charges related to unused prepaid interest rate forward commitments was partially offset by increases in both title and insurance company profits resulting from higher home closing revenue.

Selling, General and Administrative Expenses and Other Expenses (dollars in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Commissions and other sales costs $ (101,550) $ (82,846)

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Interest expense $ — $ —

Other income/(expense), net $ 13,331 $ (74) $ 35,037 $ (849)

Loss on early extinguishment of debt $ (907) $ — $ (907) $ —

Other income, net $ 9,022 $ 8,844

Provision for income taxes $ (47,999) $ (34,002)

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Commissions and other sales costs are comprised of internal and external commissions and related sales and marketing expenses such as advertising and sales office costs.

These costs increased $21.2 million to $99.1 million in the three months ended September 30, 2023, due to higher home closing revenue and increased broker commissions.

As a percentage of home closing revenue, Commissions and other sales costs were up 120 basis points to 6.2% of home closing revenue in the third quarter of 2023 from 5.0% in 2022, due to increased commission rates reflective of the current sales environment as well as a higher external broker participation rate.

For the nine months ended September 30, 2023, Commissions and other sales costs of $277.8 million were 6.3% of home closing revenue, increasing $65.0 million and 130 basis points, respectively, due to increased commissions and advertising spend.

These costs increased $18.7 million to $101.6 million in the three months ended March 31, 2024, and as a percentage of home closing revenue increased 30 basis points.

The year-over-year increase in both dollars and as a percentage of home closing revenue was due primarily to higher commissions resulting from higher home closing revenue combined with higher commission rates paid to external brokers.

General and Administrative Expenses.

General and administrative expenses represent corporate and divisional overhead expenses such as salaries and bonuses, occupancy, insurance and travel expenses.

For the three months ended September 30, 2023, General and administrative expenses of $63.1 million increased $14.6 million from $48.4 million in 2022, and as a percentage of home closing revenue increased 80 basis points to 3.9% from 3.1%.

The increase in both dollars and as a percentage of home closing revenue is largely due to higher compensation costs, including increases as part of new and growing market operations, some of which are not yet producing offsetting earnings, as well as competitive pay adjustments to reflect current market conditions in many of our geographies.

For the nine months ended September 30, 2023, General and

administrative expenses were $162.8 million, up $26.4 million and 50 basis points from $136.4 million in the 2022 period, due primarily to higher compensation costs and increased spending on technology and insurance.

For the three months ended March 31, 2024, general and administrative expenses were $50.7 million, $3.2 million higher than the 2023 period, due to higher employee headcount, increased operating lease costs for new corporate and division office spaces, and increased investments in technology.

As a percentage of home closing revenue, general and administrative expenses improved 30 basis points to 3.5% in the first quarter of 2024, down from 3.8% in the three months ended March 31, 2023, due to improved leverage from higher home closing revenue.

Interest Expense.

Interest expense is comprised of interest incurred, but not capitalized, on our senior notes, other borrowings, and our Credit Facility.

We recognized no interest expense for the three and nine months ended September 30, 2023 as all interest was capitalized to qualifying assets.

We recognized no interest expense in the three months ended September 30, 2022, and interest expense of $41,000 for the nine months ended September 30, 2022.

Other Income/(Expense), Net.

Other income, net, primarily consists of (i) interest earned on our cash and cash equivalents, (ii) sublease income, (iii) payments and awards related to legal settlements and (iv) our portion of pre-tax income or loss from non-financial services joint ventures.

For the three and nine months ended September 30, 2023, Other income was $13.3 million and $35.0 million, respectively, compared to net other expense of $0.1 million and $0.8 million in the 2022 comparable periods.

The increase in both quarter and year-to-date is due to higher interest earned on larger cash and cash equivalents balances.

Loss on Early Extinguishment of Debt.

Loss on early extinguishment of debt of $0.9 million for the three and nine months ended September 30, 2023 is related to the $150.0 million partial redemption of our 2025 Notes.

There were no similar charges for the three and nine months ended September 30, 2022.

See Note 6 to the unaudited consolidated financial statements included in this report for more information related to the partial redemption of our 2025 Notes.

We recognized no interest expense in the three months ended March 31, 2024 and 2023, respectively, as all interest was capitalized.

Other Income, Net.

Other income, net, primarily consists of (i) sublease income, (ii) interest earned on our cash and cash equivalents, (iii) payments and awards related to legal settlements and (iv) our portion of pre-tax income or loss from non-financial services joint ventures.

Other income, net was $9.0 million and $8.8 million for the three months ended March 31, 2024 and 2023, respectively, and consists primarily of interest income in both periods.

Income Taxes.

Our effective tax rate was 22.4% and 20.3% for the three months ended September 30, 2023 and 2022, respectively, and 21.8% and 22.9% for the nine months ended September 30, 2023 and 2022, respectively.

The higher effective tax rate for the three months ended September 30, 2023 is due to the catch-up of energy-efficient homes tax credits on qualifying homes under the IRC §45L energy-efficient homes federal tax credit from the IRA that was enacted in the third quarter of 2022.

The lower effective tax rate for the nine months ended September 30, 2023 reflects the increased per-home energy-efficiency credit amount starting in 2023.

Our effective tax rate was 20.5% and 20.6% for the three months ended March 31, 2024 and 2023, respectively.

Both periods reflect energy-efficient homes tax credits on qualifying homes under the Internal Revenue Code ("IRC") §45L energy-efficient homes federal tax credit.

Liquidity and Capital Resources

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Our principal uses of cash include acquisition and development of land and lots, home construction, operating expenses, share repurchases and the payment of interest, routine liabilities and dividends.

We also opportunistically repurchase our senior notes, as we did this quarter with a $150.0 million partial redemption of our 2025 Notes.

We also opportunistically repurchase our senior notes, as we did in 2023 with a partial redemption of $150.0 million of aggregate principal amount of our 2025 Notes.

Cash flows for each of our communities depend on their stage of the development cycle, and can differ substantially from reported earnings.

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Similarly, in times of community count growth, we incur significant outlays of cash through the land purchase, development and community opening stages whereas in in times of community count stability, these cash outlays are incurred in a more even-flow cadence with cash inflows from actively selling communities that are contributing closing volume and home closing revenue.

Conversely, in a down turn environment, cash outlays for land and community count growth may be scaled back and we may curtail community count.

Conversely, in a down turn environment, cash outlays for land and community count growth may be scaled back to preserve liquidity and we may curtail community count.

Short-term Liquidity and Capital Resources

Over the course of the next twelve months, we expect that our primary demand for funds will be for the construction of homes, as well as acquisition and development of both new and existing lots, operating expenses, including general and administrative expenses, interest and dividend payments and common stock repurchases.

In addition, we may opportunistically retire or redeem a portion of our senior notes.

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Long-term Liquidity and Capital Resources

Beyond the next twelve months, our principal demands for funds will be for the construction of homes, land acquisition and development activities needed to maintain our lot supply and active community count, payments of principal and interest on our senior notes as they become due or mature, common stock repurchases and payments of dividends.

We expect our existing and future generated cash will be adequate to fund our ongoing operating activities as well as provide capital for investment in future land purchases and related development activities.

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

Certain contractual obligations are reflected on our unaudited consolidated balance sheets as of September 30, 2023, while others are considered future commitments for materials or services not yet provided.

Certain contractual obligations are reflected on our unaudited consolidated balance sheets as of March 31, 2024, while others are considered future commitments for materials or services not yet provided.

Our contractual obligations primarily consist of principal and interest payments on our senior notes, loans payable and other borrowings, including our Credit Facility, letters of credit and surety bonds and operating leases.

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Other material cash requirements include land acquisition and development costs, home construction costs and operating expenses, including our selling, general and administrative expenses, as previously discussed.

We plan to fund these commitments primarily with cash flows generated by operations, but may also utilize additional debt or equity financing and borrowing capacity under our Credit Facility.

We plan to fund these commitments primarily with cash flows generated by operations, but may also utilize additional debt or equity financing and

borrowing capacity under our Credit Facility.

Our maximum exposure to loss on our purchase and option agreements is generally limited to non-refundable deposits and capitalized or committed pre-acquisition costs.

For information about our loans payable and other borrowings, including our Credit Facility, and senior notes, reference is made to Notes 5 and 6 in the notes to our unaudited consolidated financial statements included in this report and are incorporated by reference herein.

For information about our lease obligations, reference is made to Note 4 in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

For information about our lease obligations, reference is made to Note 4 in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Reference is made to Notes 1, 3, 4, and 15 in the notes to our unaudited consolidated financial statements included in this report and are incorporated by reference herein.

These Notes discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items.

In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in connection with the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be obligated.

We do not engage in commodity trading or other similar activities.

We had no derivative financial instruments at September 30, 2023 or December 31, 2022.

We had no derivative financial instruments at March 31, 2024 or December 31, 2023.

Operating Cash Flow Activities

During the nine months ended September 30, 2023, net cash provided by operating activities totaled $460.1 million, compared to net cash used in operations of $169.8 million during the nine months ended September 30, 2022.

Operating cash flows in the first nine months of 2023 benefited from cash generated from net earnings of $539.9 million and were partially offset by a $137.5 million increase in real estate.

Operating cash flows in the first nine months of 2022 benefited from cash generated from net earnings of $729.8 million and an increase in accounts payable and accrued liabilities of $118.6 million due to timing of payments for routine transactions, offset by a $990.1 million increase in real estate and an $89.2 million increase in other receivables, prepaids and other assets.

The increase in real estate in both periods was due to construction activities on a greater number of homes under construction, land acquisition and development activities.

The increase in other receivables, prepaids and other assets for the first nine months of 2022 was largely due to receivables from municipalities for land development reimbursements and the purchase of fixed rate interest locks for eligible buyers in our backlog.

During the three months ended March 31, 2024 and 2023, net cash provided by operating activities totaled $81.9 million and $124.5 million, respectively.

Operating cash flows in the first quarter of 2024 benefited from cash generated by net earnings of $186.0 million and timing of other receivables, prepaids and other assets, offset by a $193.4 million increase in real estate.

Operating cash flows in the first quarter of 2023 was primarily comprised of cash generated by net earnings of $131.3 million.

Investing Cash Flow Activities

During the nine months ended September 30, 2023 and 2022, net cash used in investing activities totaled $34.7 million and $24.9 million, respectively.

Cash used in investing activities in both periods was mainly attributable to the purchases of property and equipment and investments in unconsolidated entities.

During the three months ended March 31, 2024, net cash used in investing activities totaled $7.8 million and consisted primarily of purchases of property and equipment and investments in unconsolidated entities.

Cash used in investing activities totaled $8.7 million for the quarter ended March 31, 2023 and was mainly attributable to purchases of property and equipment.

Financing Cash Flow Activities

During the nine months ended September 30, 2023 and 2022, net cash used in financing activities totaled $238.2 million and $124.3 million, respectively.

The net cash used in financing activities in 2023 includes $150.0 million for the partial redemption of our 2025 Notes and associated early tender fees of $0.9 million, $55.0 million in share repurchases and $29.7 million of dividends paid.

The net cash used in financing activities in 2022 primarily reflects $109.3 million in share repurchases.

See 'Part II, Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities' for more information about our authorized share repurchase program.

During the three months ended March 31, 2024 and 2023, net cash used in financing activities totaled $90.1 million and $20.1 million, respectively.

The net cash used in financing activities in 2024 includes $27.2 million of dividends paid and $55.9 million in share repurchases.

The net cash used in financing activities in 2023 includes $9.9 million of dividends paid and $10.0 million in share repurchases.

See "Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds" for more information about our authorized share repurchase program.

We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management.

Debt-to-capital and net debt-to-capital are calculated as follows (dollars in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Senior notes, net, loans payable and other borrowings $ 1,001,570 $ 1,008,215

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Net debt-to-capital (2)

(1.0) % 6.8 %

(1) Debt-to-capital is computed as senior notes, net and loans payable and other borrowings divided by the aggregate of total senior notes, net, loans payable and other borrowings and stockholders' equity.

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We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing.

During the three months ended September 30, 2023, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $0.27 per share.

Quarterly dividends declared and paid during the nine months ended September 30, 2023 totaled $0.81 per share.

There were no such transactions in the three and nine months ended September 30, 2022.

During the three months ended March 31, 2024 and 2023, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $0.75 and $0.27 per share, respectively.

Credit Facility Covenants

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The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $2.8 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%.

We were in compliance with all Credit Facility covenants as of September 30, 2023.

Our actual financial covenant calculations as of September 30, 2023 are reflected in the table below.

We were in compliance with all Credit Facility covenants as of March 31, 2024.

Our actual financial covenant calculations as of March 31, 2024 are reflected in the table below.

Financial Covenant (dollars in thousands):

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Historically, we have experienced seasonal variations in our quarterly operating results and capital requirements.

We typically sell more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year.

We typically benefit from the cash generated from home closings more in the third and fourth quarters than in the first and second quarters.

Historical cycles were impacted in 2020 by unprecedented demand that continued through the middle of 2022, and were further impacted by supply chain and labor constraints and rising interest rates.

Historical seasonality returned in the back half of 2022 and we expect it to continue over the long term, although it may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.

Recent Issued Accounting Pronouncements

We typically take orders for more homes in the first half of the fiscal year than in the second half, which has created additional working capital requirements in the second and third quarters to build our inventories to satisfy seasonally higher closings in the second half of the year.

While we expect the seasonal orders pattern to continue over the long term, our higher backlog conversion rate and all-spec strategy may shift the timing of home closings and capital requirements to build our inventories to earlier in the year.

Additionally, seasonality may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.

Recent Accounting Pronouncements

See Note 1 to our unaudited consolidated financial statements included in this report for discussion of recently issued accounting pronouncements.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis