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Item 1. Financial Statements

2024-07-26 compared with 2024-04-26 · 161 added, 101 removed, 576 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except share amounts)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 992,921 $ 921,227

11 unchanged sentences

Loans payable and other borrowings 9,711 13,526

Senior notes, net 994,966 994,689

Senior and convertible senior notes, net 1,303,600 994,689

Total liabilities 2,041,446 1,741,234

2 unchanged sentences

Authorized 10,000,000 shares;

none issued and outstanding at March 31, 2024 and December 31, 2023

none issued and outstanding at June 30, 2024 and December 31, 2023

Common stock, par value $ 0.01 .

Authorized 125,000,000 shares;

36,319,014 and 36,425,037 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

36,327,214 and 36,425,037 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 198,503 290,955

6 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Homebuilding:

11 unchanged sentences

Expense ( 3,924 ) ( 2,972 ) ( 6,927 ) ( 6,039 )

(Loss)/earnings from financial services unconsolidated entities and other, net ( 4,040 ) 259

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

Earnings/(loss) from financial services unconsolidated entities and other, net 450 ( 5,795 ) ( 3,590 ) ( 5,536 )

Financial services profit/(loss) 4,837 ( 2,557 ) 4,147 366

Commissions and other sales costs ( 104,665 ) ( 95,798 ) ( 206,215 ) ( 178,644 )

2 unchanged sentences

Other income, net 11,498 12,862 20,520 21,706

Loss on early extinguishment of debt ( 631 ) — ( 631 ) —

Earnings before income taxes 297,361 239,524 531,376 404,827

11 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net earnings $ 417,571 $ 318,137

Adjustments to reconcile net earnings to net cash provided by operating activities:

Adjustments to reconcile net earnings to net cash (used in)/provided by operating activities:

Depreciation and amortization 12,812 11,196

6 unchanged sentences

(Increase)/decrease in deposits on real estate under option or contract ( 45,576 ) 5,491

Decrease/(increase) in other receivables, prepaids and other assets 53,769 ( 11,749 )

Increase/(decrease) in accounts payable and accrued liabilities 27,668 ( 31,687 )

Decrease in other receivables, prepaids and other assets 24,237 8,962

Decrease in accounts payable and accrued liabilities ( 12,965 ) ( 27,754 )

Increase in home sale deposits 2,775 11,818

Net cash provided by operating activities 81,930 124,472

Net cash (used in)/provided by operating activities ( 36,017 ) 355,885

Cash flows from investing activities:

3 unchanged sentences

Proceeds from sales of property and equipment 130 228

Maturities/sales of investments and securities 750 750

Payments to purchase investments and securities ( 750 ) ( 750 )

Net cash used in investing activities ( 19,639 ) ( 22,140 )

1 unchanged sentence

Repayment of loans payable and other borrowings ( 7,445 ) ( 2,209 )

Repayment of senior notes ( 250,695 ) —

Proceeds from issuance of convertible senior notes 575,000 —

Payment of debt issuance costs ( 17,303 ) —

Purchase of capped calls related to issuance of convertible senior notes ( 61,790 ) —

Dividends paid ( 54,484 ) ( 19,854 )

Repurchase of shares ( 55,933 ) ( 10,000 )

Net cash used in financing activities ( 90,094 ) ( 20,095 )

Net (decrease)/increase in cash and cash equivalents ( 15,929 ) 95,649

Net cash provided by/(used in) financing activities 127,350 ( 32,063 )

Net increase in cash and cash equivalents 71,694 301,682

Cash and cash equivalents, beginning of period 921,227 861,561

24 unchanged sentences

Meritage Homes Corporation operates as a holding company and has no independent assets or operations.

Our homebuilding construction, development and sales activities are conducted through our subsidiaries.

Our homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets.

At March 31, 2024, we were actively selling homes in 275 communities, with base prices ranging from approximately $ 203,000 to $ 1,074,000 .

Its homebuilding construction, development and sales activities are conducted through its subsidiaries.

Its homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets.

At June 30, 2024, we were actively selling homes in 287 communities, with base prices ranging from approximately $ 243,000 to $ 1,080,000 .

Basis of Presentation .

8 unchanged sentences

Liquid investments with an initial maturity of three months or less are classified as cash equivalents.

Amounts in transit from title companies or closing agents for home closings of approximately $ 85.3 million and $ 95.7 million are included in Cash and cash equivalents at March 31, 2024 and December 31, 2023, respectively.

Amounts in transit from title companies or closing agents for home closings of approximately $ 75.1 million and $ 95.7 million are included in Cash and cash equivalents at June 30, 2024 and December 31, 2023, respectively.

Real estate inventory is stated at cost unless the community or land is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment (“ASC 360-10”) .

32 unchanged sentences

Since our acquisition contracts typically do not require specific performance, we do not consider such contracts to be contractual obligations to purchase the land and our total exposure under such contracts is limited to the loss of any non-refundable deposits and any related capitalized costs.

Our Deposits on real estate under option or contract were $ 122.8 million and $ 111.4 million as of March 31, 2024 and December 31, 2023, respectively.

Our Deposits on real estate under option or contract were $ 156.7 million and $ 111.4 million as of June 30, 2024 and December 31, 2023, respectively.

See Note 3 for additional information related to Deposits on real estate under option or contract.

2 unchanged sentences

Such qualitative factors include:

(1) macroeconomic conditions, such as a deterioration in general economic conditions;

(2) industry and market considerations such as deterioration in the environment in which the entity operates;

(3) cost factors such as increases in raw materials, labor costs, etc.;

and (4) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings.

(1) macroeconomic conditions, such as a deterioration in general economic conditions, (2) industry and market considerations such as deterioration in the environment in which the entity operates, (3) cost factors such as increases in raw materials, labor costs, etc., and (4) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings.

If the qualitative analysis determines that additional impairment testing is required, a two-step impairment test in accordance with ASC 350 would be initiated.

8 unchanged sentences

The table below outlines our ROU assets and lease liabilities (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

ROU assets $ 52,460 $ 51,275

14 unchanged sentences

The table below outlines our surety bond and letter of credit obligations (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Outstanding Estimated work

7 unchanged sentences

Accrued Liabilities .

Accrued liabilities at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024 December 31, 2023

Accrued liabilities at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024 December 31, 2023

Accruals related to real estate development and construction activities $ 169,482 $ 137,489

12 unchanged sentences

We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available.

Based on such reviews of warranty costs incurred, we did not adjust the warranty reserve balance in the three months ended March 31, 2024 or 2023.

Included in the warranty reserve balances at March 31, 2024 and December 31, 2023 are case-specific reserves for warranty matters, as discussed in Note 15.

Based on such reviews of warranty costs incurred, we did not adjust the warranty reserve balance in the three or six months ended June 30, 2024 or 2023.

Included in the warranty reserve balances at June 30, 2024 and December 31, 2023 are case-specific reserves for warranty matters, as discussed in Note 15.

A summary of changes in our warranty reserves follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Balance, beginning of period $ 36,364 $ 37,063 $ 37,360 $ 35,575

Additions to reserve from new home deliveries 5,809 5,982 10,642 10,388

Warranty claims ( 5,829 ) ( 2,918 )

Warranty claims, net of recoveries ( 7,404 ) ( 6,830 ) ( 13,233 ) ( 9,748 )

Adjustments to pre-existing reserves — — — —

11 unchanged sentences

and (5) recognize revenue when (or as) we satisfy the performance obligations.

Our three sources of revenue are disaggregated by type in the accompanying unaudited consolidated income statements.

The performance obligations and subsequent revenue recognition for our three sources of revenue are outlined below:

5 unchanged sentences

Revenue from financial services includes estimated future insurance policy renewal commissions as our performance obligations are satisfied upon issuance of the initial policy with a third party broker.

The related contract assets for these estimated future renewal commissions are no t material at March 31, 2024 and December 31, 2023.

Our three sources of revenue are disaggregated by type on the accompanying unaudited consolidated income statements.

The related contract assets for these estimated future renewal commissions are no t material at June 30, 2024 and December 31, 2023.

Recent Accounting Pronouncements.

12 unchanged sentences

Real estate consists of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Homes under contract under construction (1)

14 unchanged sentences

A summary of our capitalized interest is as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Capitalized interest, beginning of period $ 54,227 $ 62,452 $ 54,516 $ 60,169

9 unchanged sentences

Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect its assets and liabilities as Real estate not owned and Liabilities related to real estate not owned, respectively.

We determined that as of March 31, 2024 and December 31, 2023 we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at March 31, 2024 (dollars in thousands):

We determined that as of June 30, 2024 and December 31, 2023, we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at June 30, 2024 (dollars in thousands):

Projected Number

18 unchanged sentences

(3) Except for our specific performance contracts recorded on the accompanying unaudited consolidated balance sheets as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots.

(4) Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of March 31, 2024.

(4) Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of June 30, 2024.

Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots on a pre-determined schedule in accordance with each respective agreement.

7 unchanged sentences

Based on the structure of these joint ventures, they may or may not be consolidated into our results.

As of March 31, 2024, we had two active equity-method land joint ventures and one mortgage joint venture, which is engaged in mortgage activities and primarily provides mortgage services to our homebuyers.

As of June 30, 2024, we had one active equity-method land joint venture and one mortgage joint venture, which is engaged in mortgage activities and primarily provides mortgage services to our homebuyers.

Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

$ 3,839 $ 3,546

6 unchanged sentences

Total liabilities and equity $ 49,254 $ 38,455

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenue $ 12,739 $ 11,710 $ 23,329 $ 21,226

Costs and expenses ( 10,451 ) ( 9,099 ) ( 19,588 ) ( 17,450 )

Pre-tax earnings of unconsolidated entities $ 1,453 $ 1,165

Meritage’s share of pre-tax earnings (1) (2)

Net earnings of unconsolidated entities $ 2,288 $ 2,611 $ 3,741 $ 3,776

Meritage’s share of pre-tax earnings/(loss) (1) (2)

$ 1,655 $ 1,536 $ 2,627 $ 2,882

2 unchanged sentences

(i) timing differences for revenue and distributions recognition, (ii) step-up basis and corresponding amortization, (iii) capitalization of interest on qualified assets, (iv) income deferrals as discussed in Note (2) below and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses.

(2) Our share of pre-tax earnings/(loss) from our mortgage joint venture is recorded in (Loss)/earnings from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements.

(2) Our share of pre-tax earnings/(loss) from our mortgage joint venture is recorded in Earnings/(loss) from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements.

Our share of pre-tax earnings/(loss) from all other joint ventures is recorded in Other income, net on the accompanying unaudited consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any.

2 unchanged sentences

Loans payable and other borrowings consist of the following (in thousands):

March 31, 2024 December 31, 2023

Other borrowings, secured real estate notes payable (1)

June 30, 2024 December 31, 2023

Other borrowings, real estate notes payable (1)

$ 9,711 $ 13,526

3 unchanged sentences

The Company entered into an amended and restated unsecured revolving credit facility agreement ("Credit Facility") in 2014 that has been amended from time to time.

In June 2023, the Credit Facility was amended to increase the facility size to

$ 835.0 million, extend the maturity date to June 2, 2028, amend the accordion feature to permit the facility to increase by up to fifty percent of the facility size, increase the letter of credit sublimit up to the maximum size of the facility, eliminate the liquidity and interest coverage covenant and adjust certain covenant basket amounts.

The Credit Facility's aggregate commitment is $ 835.0 million with an accordion feature permitting the size of the facility to increase to a maximum of $ 1.3 billion, subject to certain conditions, including the availability of additional bank commitments.

In June 2024, the Credit Facility was amended to increase the facility size, amend the accordion feature to permit the facility size to be increased, subject to certain conditions, extended the maturity date from June 2, 2028 to June 12, 2029, and revised the applicable pricing grid.

The Credit Facility's aggregate commitment is

$ 910.0 million with an accordion feature permitting the size of the facility to increase to a maximum of $ 1.4 billion, subject to certain conditions, including the availability of additional bank commitments.

Borrowings under the Credit Facility bear interest at the Company's option, at either (1) term SOFR (based on 1, 3, or 6 month interest periods, as selected by the Company) plus a 10 basis point adjustment plus an applicable margin (ranging from 110 basis points to 175 basis points (the "applicable margin")) based on the Company's leverage ratio as determined in accordance with a pricing grid, (2) the higher of (i) the prime lending rate ("Prime"), (ii) an overnight bank rate plus 50 basis points and (iii) term SOFR (based on a 1 month interest period) plus a 10 basis point adjustment plus 1 %, in each case plus a margin ranging from 10 basis points to 75 basis points based on the Company's leverage in accordance with a pricing grid, or (3) daily simple SOFR plus a 10 basis point adjustment plus the applicable margin.

At March 31, 2024, the interest rate on outstanding borrowings under the Credit Facility would have been 6.68 % per annum, calculated in accordance with option (1) noted above and using the 1-month term SOFR.

At June 30, 2024, the interest rate on outstanding borrowings under the Credit Facility would have been 6.537 % per annum, calculated in accordance with option (1) noted above and using the 1-month term SOFR.

We are obligated to pay a fee on the undrawn portion of the Credit Facility at a rate determined by a tiered fee matrix based on our leverage ratio.

The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $ 3.3 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 March 31, 2024.

We had no outstanding borrowings under the Credit Facility as of March 31, 2024 and December 31, 2023.

There were no borrowings or repayments under the Credit Facility during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, we had outstanding letters of credit issued under the Credit Facility totaling $ 69.7 million, leaving $ 765.3 million available under the Credit Facility to be drawn.

NOTE 6 — SENIOR NOTES, NET

Senior notes, net consist of the following (in thousands):

March 31, 2024 December 31, 2023

6.00 % senior notes due 2025.

At March 31, 2024 and December 31, 2023 there was approximately $ 818 and $ 994 in net unamortized premium, respectively.

$ 250,818 $ 250,994

5.125 % senior notes due 2027

We were in compliance with all Credit Facility covenants as of June 30, 2024.

We had no outstanding borrowings under the Credit Facility as of June 30, 2024 and December 31, 2023.

There were no borrowings or repayments under the Credit Facility during the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024, we had outstanding letters of credit issued under the Credit Facility totaling $ 114.7 million, leaving $ 795.3 million available under the Credit Facility to be drawn.

NOTE 6 — SENIOR AND CONVERTIBLE SENIOR NOTES, NET

S enior and convertible senior notes, net consist of the following (in thousands):

June 30, 2024 December 31, 2023

6.00 % senior notes due 2025 ("2025 Notes").

At December 31, 2023 there was approximately $ 994 in net unamortized premium.

5.125 % senior notes due 2027 ("2027 Notes")

300,000 300,000

3.875 % senior notes due 2029

1.750 % convertible senior notes due 2028 ("2028 Convertible Notes")

3.875 % senior notes due 2029 ("2029 Notes")

450,000 450,000

1 unchanged sentence

Total $ 1,303,600 $ 994,689

The indentures for all of our senior notes contain non-financial covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers.

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

Obligations to pay principal and interest on the senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100 % owned by Meritage Homes Corporation.

The indentures for our 2027 Notes and 2029 Notes contain non-financial covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers.

We were in compliance with all such covenants as of June 30, 2024.

Obligations to pay principal and interest on the senior and convertible senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100% owned by Meritage Homes Corporation.

Such guarantees are full and unconditional, and joint and several.

3 unchanged sentences

Subsidiaries of Meritage Homes Corporation that are non-guarantor subsidiaries are, individually and in the aggregate, minor.

Convertible Senior Notes due 2028

In May 2024, we issued $ 575.0 million aggregate principal amount of 1.750 % 2028 Convertible Notes pursuant to an Indenture dated as of May 9, 2024 (the “Indenture”).

The 2028 Convertible Notes were issued at par and will mature on May 15, 2028, unless converted earlier in accordance with their terms prior to such date.

We used a portion of the net proceeds from the offering to pay the cost of entering into the capped calls, as defined and described below, and to redeem all $ 250.0 million

aggregate principal then outstanding of our 6.00 % 2025 Notes for which we incurred $ 0.6 million in early debt extinguishment charges in the three and six months ended June 30, 2024 , reflected as Loss on early extinguishment of debt in the accompanying unaudited consolidated income statements.

The 2028 Convertible Notes are convertible into shares of the Company’s common stock (“common stock”) at an initial conversion rate of 4.3048 shares of common stock per $1,000 principal amount of the 2028 Convertible Notes, which is equivalent to an initial conversion price of approximately $ 232.30 per share.

The conversion rate will be subject to adjustment upon the occurrence of certain events specified in the Indenture but will not be adjusted for accrued and unpaid interest or quarterly cash dividends.

In addition, we must provide additional shares upon conversion if there is a "Make-Whole Fundamental Change" as defined in the Indenture.

The Company is required to satisfy its conversion obligations by paying cash up to the principal amount of notes and settle any additional value in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.

Prior to February 15, 2028, the holders of the 2028 Convertible Notes may convert their notes only under the following conditions:

(1) the sale price of common stock reaches 130 % of the applicable conversion price for a specified period during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2024;

(2) the trading price of the 2028 Convertible Notes falls below 98% of the product of the last reported sale price of common stock and the conversion rate for a specified period;

or (3) upon the occurrence of specified corporate events.

On or after February 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

The 2028 Convertible Notes are accounted for in accordance with ASC 470, Debt , and ASC 815, Derivatives and Hedging .

The conversion options and the 2028 Convertible Notes are reflected as a single instrument in Senior and convertible senior notes, net on the accompanying unaudited consolidated balance sheets and the conversion options are not bifurcated as a derivative.

Capped Call Transactions

Concurrent with the offering of the 2028 Convertible Notes, we used $ 61.8 million of the net proceeds to enter into privately negotiated capped call transactions (the "Capped Calls”) which require the Capped Call counterparties (the counterparties") to provide shares of our common stock to converting debt holders up to a cap price.

The Capped Calls each have an initial strike price of approximately $ 232.30 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2028 Convertible Notes.

The Capped Calls have initial cap prices of $ 350.64 per share, subject to certain adjustments.

The Capped Calls will reduce our obligation to settle, in shares or in cash, conversions when our stock price is between $ 232.30 and $ 350.64 .

The Capped Calls are separate transactions entered into by the Company with each of the counterparties, are not part of the terms of the 2028 Convertible Notes and do not change the holders’ rights under the 2028 Convertible Notes or the Indenture.

Holders of the 2028 Convertible Notes do not have any rights with respect to the Capped Calls.

As the Capped Calls are considered indexed to the Company's own stock, they are recorded in stockholders’ equity as a reduction of Additional paid-in capital in the accompanying unaudited consolidated balance sheets, and are not accounted for as derivatives under ASC 815-10, Derivatives and Hedging .

NOTE 7 — FAIR VALUE DISCLOSURES

9 unchanged sentences

The fair value of our fixed-rate debt is derived from quoted market prices by independent dealers (Level 2 inputs as per the discussion above) and is as follows (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Principal Estimated Fair

5 unchanged sentences

$ 300,000 $ 294,780 $ 300,000 $ 295,500

1.750 % convertible senior notes due 2028

$ 575,000 $ 579,272 $ — $ —

3.875 % senior notes due 2029

$ 450,000 $ 412,875 $ 450,000 $ 411,750

Other financial assets and liabilities, including our Loans payable and other borrowings, are generally shorter term in nature and the longer term balances are not material to our consolidated balance sheet.

Therefore, we consider the carrying amounts of our other financial assets and liabilities to approximate fair value.

4 unchanged sentences

Basic and diluted earnings per common share were calculated as follows (in thousands, except per share amounts):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Basic weighted average number of shares outstanding 36,322 36,765 36,317 36,715

5 unchanged sentences

Diluted earnings per share $ 6.31 $ 5.02 $ 11.37 $ 8.56

We compute basic earnings per share by dividing net earnings by the weighted average number of common shares outstanding during the period.

Diluted earnings per share gives effect to the potential dilution that could occur if securities or contracts to issue common stock that are dilutive were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings.

In accordance with ASC 260-10, Earnings Per Share , we calculate the dilutive effect of the 2028 Convertible Notes using the "if-converted" method.

As discussed in Note 6, the Company will settle any convertible note conversions by paying cash up to the principal amount of notes and settle any additional value in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election.

As the Company will settle the principal amount of convertible notes in cash upon conversion, the convertible notes only have a dilutive impact when the average share price of the Company’s common stock exceeds the conversion price, in any applicable period.

NOTE 9 — ACQUISITIONS AND GOODWILL

9 unchanged sentences

Balance at December 31, 2023

$ — $ — $ 32,962 $ — $ — $ 32,962

Additions — — — — — —

Balance at March 31, 2024 $ — $ — $ 32,962 $ — $ — $ 32,962

Balance at June 30, 2024 $ — $ — $ 32,962 $ — $ — $ 32,962

NOTE 10 — STOCKHOLDERS’ EQUITY

A summary of changes in stockholders’ equity is presented below (in thousands):

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

(In thousands)

Shares Common

7 unchanged sentences

Dividends declared — — — ( 27,239 ) ( 27,239 )

Repurchase of shares ( 362 ) ( 4 ) ( 56,214 ) — ( 56,218 )

Share repurchases ( 362 ) ( 4 ) ( 56,214 ) — ( 56,218 )

Balance at March 31, 2024 36,319 $ 363 $ 240,852 $ 4,479,358 $ 4,720,573

Three Months Ended March 31, 2023

Net earnings — — — 231,555 231,555

Stock-based compensation expense — — 4,718 — 4,718

Issuance of stock 8 — — — —

Dividends declared — — — ( 27,245 ) ( 27,245 )

Capped call transactions, net of tax — — ( 47,067 ) — ( 47,067 )

Balance at June 30, 2024 36,327 $ 363 $ 198,503 $ 4,683,668 $ 4,882,534

Six Months Ended June 30, 2023

(In thousands)

Shares Common

7 unchanged sentences

Dividends declared — — — ( 9,927 ) ( 9,927 )

Repurchase of shares ( 93 ) ( 1 ) ( 9,999 ) — ( 10,000 )

Share repurchases ( 93 ) ( 1 ) ( 9,999 ) — ( 10,000 )

Balance at March 31, 2023 36,765 $ 368 $ 324,101 $ 3,742,741 $ 4,067,210

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.

During the three months ended March 31, 2024 and 2023, we reflected the applicable excise tax on share repurchases in Additional paid-in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability in Accrued liabilities on the accompanying unaudited consolidated balance sheets.

Net earnings — — — 186,836 186,836

Stock-based compensation expense — — 4,176 — 4,176

Dividends declared — — — ( 9,927 ) ( 9,927 )

Balance at June 30, 2023 36,765 368 328,277 3,919,650 4,248,295

During the three months ended June 30, 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.

Quarterly dividends declared and paid during the six months ended June 30, 2024 and 2023, totaled $ 1.50 and $ 0.54 per share, respectively.

During the three and six months ended June 30, 2024 and 2023, we reflected the applicable excise tax on share repurchases in Additional paid-in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability in Accrued liabilities on the accompanying unaudited consolidated balance sheets.

NOTE 11 — STOCK BASED AND DEFERRED COMPENSATION

4 unchanged sentences

The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants.

The 2018 Plan authorizes 7,400,000 shares of stock to be awarded, of which 1,146,248 shares remain available for grant at March 31, 2024.

The 2018 Plan authorizes 7,400,000 shares of stock to be awarded, of which 1,151,115 shares remain available for grant at June 30, 2024.

We believe that such awards provide a means of long-term compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders.

Non-vested stock awards are usually granted with a five-year ratable vesting period for employees, a three-year cliff vesting for both restricted stock and performance-based awards granted to senior executive officers and either a three-year cliff vesting or one-year vesting for non-employee directors, dependent on their start date.

Non-vested stock awards are usually granted with a five-year ratable vesting period for employees, a three-year cliff vesting for both restricted stock units and performance-based awards granted to senior executive officers and either a three-year cliff vesting or one-year vesting for non-employee directors, dependent on their start date.

Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award.

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Below is a summary of stock-based compensation expense and stock award activity (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Stock-based compensation expense $ 4,718 $ 4,176 $ 10,832 $ 10,401

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The following table includes additional information regarding our stock compensation plan (dollars in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Unrecognized stock-based compensation cost $ 38,819 $ 27,791

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We do not currently offer a contribution match on the deferred compensation plan.

All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the three months ended March 31, 2024 or 2023, other than minor administrative costs.

All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the three and six months ended June 30, 2024 or 2023, other than minor administrative costs.

NOTE 12 — INCOME TAXES

Components of the provision for income taxes are as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Federal $ 52,340 $ 41,831 $ 90,462 $ 68,271

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Total $ 65,806 $ 52,688 $ 113,805 $ 86,690

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

The lower tax rate for the three months ended March 31, 2024 reflects the increased §45L energy-efficient homes federal tax credit on qualifying homes under the Internal Revenue Code ("IRC") enacted in the Inflation Reduction Act ("IRA") in August 2022.

At March 31, 2024 and December 31, 2023, we have no unrecognized tax benefits.

The effective tax rate for the three and six months ended June 30, 2024 was 22.1 % and 21.4 %, and for the three and six months ended June 30, 2023 was 22.0 % and 21.4 %, respectively.

The rate for all periods reflects the increased §45L energy-efficient homes federal tax credit on qualifying homes under the Internal Revenue Code ("IRC") enacted in the Inflation Reduction Act ("IRA") in August 2022.

At June 30, 2024 and December 31, 2023, we have no unrecognized tax benefits.

We believe our current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change.

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This evaluation considers, among other matters, the nature, frequency and severity of cumulative losses, forecasts of future profitability, the length of statutory carry forward periods, experiences with operating losses and experiences of utilizing tax credit carry forwards and tax planning alternatives.

We have no NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets is necessary at March 31, 2024.

At March 31, 2024, we have $ 58.9 million in income taxes payable and no income taxes receivable.

The income taxes payable primarily consists of current federal and state tax accruals, net of current energy tax credits and estimated tax payments and is recorded in Accrued liabilities on the accompanying unaudited consolidated balance sheets at March 31, 2024.

We have no NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets is necessary at June 30, 2024.

At June 30, 2024, we have $ 7.7 million in income taxes payable and no income taxes receivable.

We conduct business and are subject to tax in the U.S.

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The following table presents certain supplemental cash flow information (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Cash paid during the year for:

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The homebuilding segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services.

We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic

characteristics and geographical proximity.

We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity.

Our three reportable homebuilding segments are as follows:

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The following segment information is in thousands:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Homebuilding revenue (1) :

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Total homebuilding segment operating income 293,601 239,291 532,245 404,267

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

Financial services segment profit/(loss) 4,837 ( 2,557 ) 4,147 366

Corporate and unallocated costs (2)

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Other income, net 11,498 12,862 20,520 21,706

Loss on early extinguishment of debt ( 631 ) — ( 631 ) —

Earnings before income taxes $ 297,361 $ 239,524 $ 531,376 $ 404,827

(1) Homebuilding revenue includes the following land closing revenue, by segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Land closing revenue:

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Central — 1,908 — 2,478

East — 12,711 2,305 12,711

Total $ — $ 24,379 $ 2,305 $ 41,764

(2) Balance consists primarily of corporate costs and shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments.

At March 31, 2024

At June 30, 2024

West Central East Financial Services Corporate and

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(2) Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets.

(3) Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), prepaids and other assets and property and equipment, net.

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets, net and prepaids and other assets.

(3) Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), and prepaids and other assets.

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets.

At December 31, 2023

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Total assets $ 1,861,803 $ 1,543,666 $ 1,920,099 $ 1,889 $ 1,025,677 $ 6,353,134

(1) Balance consists primarily of cash and cash equivalents, receivables from title companies or closing agents and property and equipment, net.

(1) Balance consists primarily of cash and cash equivalents, receivables from title companies and property and equipment, net.

(2) Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets .

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Historically, most disputes regarding warranty claims are resolved prior to litigation.

We believe there are no pending legal or warranty matters as of March 31, 2024 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.

We believe there are no pending legal or warranty matters as of June 30, 2024 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.

As discussed in Note 1 under the heading “Warranty Reserves”, we have case specific reserves within our $ 34.8 million of total warranty reserves related to alleged stucco defects in certain homes we constructed predominantly between 2006 and 2017 and HVAC condensation issues in limited geographies for homes constructed and delivered in 2021 and the first half of 2022.

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Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate and thus our related reserves.

As of March 31, 2024, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we believe our reserves are sufficient to cover the above mentioned matter.

As of June 30, 2024, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we did not adjust such reserves and we believe our reserves are sufficient to cover the above mentioned matters.

See Note 1 for information related to our warranty obligations.

Special Note of Caution Regarding Forward-Looking Statement

Special Note of Caution Regarding Forward-Looking Statements

In passing the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Congress encouraged public companies to make “forward-looking statements” by creating a safe-harbor to protect companies from securities law liability in connection with forward-looking statements.

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All statements we make other than statements of historical fact are forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").

Forward-looking statements in this Annual Report include statements concerning our belief that we have ample liquidity;

Forward-looking statements in this Quarterly Report include statements concerning our belief that we have ample liquidity;

our goals, strategies and strategic initiatives including our all-spec strategy and the anticipated benefits relating thereto;

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our level of indebtedness;

our exposure to counterparty risk with respect to our Capped Calls;

our ability to obtain financing if our credit ratings are downgraded;

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

What changed 10-Q

Item 1. Financial Statements