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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 206 added, 126 removed, 168 unchanged (66% of the section changed)

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Overview and Outlook

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.

Demand for new homes was healthy during the second quarter of 2024 despite ongoing volatility in mortgage interest rates impacting mortgage affordability.

The demand for our product, primarily entry-level homes, has been spurred by life events within our target demographics of Millennials, Baby Boomers, and now Gen Z, that necessitate a housing change, amid a backdrop of a persistent shortage of existing housing supply.

Our spec building strategy and streamlined operations provide us with appropriate levels of available inventory to capitalize on this demand by providing a quick move-in opportunity, one of the most desirable characteristics for our potential customers and creates an offering similar to the missing resale product.

We believe that our interest rate buy-downs and other financing incentives provide us with a competitive advantage over resale homes and new home builders that do not offer such incentives, further contributing to our strong results.

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 leveraging, 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 have continued to improve, leading to significant improvements in 2024.

We believe that cycle times will approximate normal conditions for the remainder of 2024.

Summary Company Results

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.

We achieved record second quarter home closing revenue and units volume of $1.7 billion on 4,118 homes in the three months ended June 30, 2024, up from $1.5 billion on 3,490 homes in the same prior year period.

The 9.8% increase in home closing revenue year-over-year was driven by an 18.0% increase in volume while average sales price ("ASP") on closings decreased 7.0% due primarily to a combination of product mix and geography shift.

Second quarter 2024 home closing gross margin improved 150 basis points to 25.9% for home closing gross profit of $439.5 million compared to 24.4% and $377.0 million, respectively, in the second quarter of 2023.

The margin improvement is primarily due to lower direct costs and leverage of higher home closing revenue on overhead costs combined with shorter construction cycle times, partially offset by higher lot costs.

Financial services profit of $4.8 million in the second quarter of 2024 reflects $2.0 million of charges taken for unused prepaid interest rate locks that expired during the period, as compared to a Financial Services loss of $2.6 million in 2023 that included $7.9 million of similar charges.

Commissions and other sales costs of $104.7 million in the three months ended June 30, 2024 increased $8.9 million largely a result of higher home closing revenue.

General and administrative expenses of $53.2 million in the three months ended June 30, 2024 were relatively consistent with the same period in 2023 of $52.1 million.

Other income, net of $11.5 million decreased $1.4 million due to less interest earned on a lower average cash balance.

Earnings before income taxes for the three months ended June 30, 2024 of $297.4 million increased $57.8 million year over year from $239.5 million in 2023.

The effective income tax rate of 22.1% and 22.0% for the three months ended June 30, 2024 and 2023, respectively, 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 $231.6 million in the three months ended June 30, 2024 versus $186.8 million in the three months ended June 30, 2023.

Similar to the second quarter, 19.4% higher home closing volume led to a 12.7% improvement in home closing revenue for the six months ended June 30, 2024 versus 2023.

Home closing gross margin of 25.9% improved 240 basis points year over year, for a $158.0 million increase in home closing gross profit.

Higher gross margin and profitability and an effective tax rate of 21.4% led to net income of $417.6 million for the six months ended June 30, 2024, compared to $318.1 million for the 2023 period.

Home orders of 3,799 for the quarter ended June 30, 2024 were 13.7% higher than the second quarter of 2023 on a relatively flat average active community count.

The volume growth in orders reflects a 15.4% increase in orders pace to 4.5 per month compared to 3.9 in 2023.

Home order value increased 6.7% year-over-year, to $1.6 billion during the three months ended June 30, 2024, versus $1.5 billion in the same period of 2023, from the higher volume which was partially offset by a 6.2% decrease in ASP on orders primarily due to product and geographic mix.

Entry-level homes represented 92% of orders in the second quarter of 2024 compared to 85% in the second quarter of 2023.

Our cancellation rate of 10% in the second quarter of 2024 was down slightly from 12% in the second quarter of 2023.

Similar to the second quarter, for the six months ended June 30, 2024, home orders and home order value increased 14.1% and 7.5%, respectively, over the prior year.

The cancellation rate of 9% improved from 13% in the prior year period.

the second quarter of 2024 with 2,714 homes in backlog valued at $1.1 billion, decreases of 28.0% and 34.2%, respectively, from June 30, 2023.

The decrease in backlog units is due to a higher backlog conversion rate of 135.8% during the second quarter of 2024, compared to 89.0% in the second 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.

We ended the second quarter of 2024 with 287 active communities, down from 291 at June 30, 2023 although up sequentially from 275 at March 31, 2024.

We purchased approximately 8,900 lots for $477.1 million, spent $584.3 million on land development and started construction on 8,461 homes during the six months ended June 30, 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 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.

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 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:

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

• Offering our customers affordable, turnkey, move-in ready homes with a 60-day closing guarantee;

• Embracing external realtor relationships, as we view realtors as a trusted resource for potential customers, particularly for first-time buyers;

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

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• 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;

We ended the second quarter of 2024 with a 21.2% debt-to-capital ratio and a 6.2% net debt-to-capital ratio, after issuing $575.0 million of convertible senior notes during the second quarter;

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

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• 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.

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

Critical Accounting Estimates

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.

There have been no significant changes to our critical accounting estimates during the six months ended June 30, 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 for the year ended December 31, 2023 (the "Annual Report").

Home Closing Revenue, Home Orders and Order Backlog

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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 March 31, Quarter over Quarter

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

2024 2023 Change $ Change %

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Average sales price $ 492.4 $ 520.8 $ (28.4) (5.5) %

Central Region - Texas

Central Region

Dollars $ 459,180 $ 456,801 $ 2,379 0.5 %

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Average sales price $ 385.2 $ 405.3 $ (20.1) (5.0) %

Home Orders (1)

Three Months Ended March 31, Quarter over Quarter

Six Months Ended June 30, Quarter over Quarter

2024 2023 Change $ Change %

Dollars $ 3,159,834 $ 2,804,944 $ 354,890 12.7 %

Homes closed 7,625 6,387 1,238 19.4 %

Average sales price $ 414.4 $ 439.2 $ (24.8) (5.6) %

Dollars $ 1,138,469 $ 936,539 $ 201,930 21.6 %

Homes closed 2,279 1,782 497 27.9 %

Average sales price $ 499.5 $ 525.6 $ (26.1) (5.0) %

Central Region

Dollars $ 886,745 $ 881,681 $ 5,064 0.6 %

Homes closed 2,432 2,142 290 13.5 %

Average sales price $ 364.6 $ 411.6 $ (47.0) (11.4) %

Dollars $ 1,134,620 $ 986,724 $ 147,896 15.0 %

Homes closed 2,914 2,463 451 18.3 %

Average sales price $ 389.4 $ 400.6 $ (11.2) (2.8) %

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

2024 2023 Change $ Change %

Dollars $ 1,573,456 $ 1,474,713 $ 98,743 6.7 %

Homes ordered 3,799 3,340 459 13.7 %

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Average sales price $ 500.3 $ 520.5 $ (20.2) (3.9) %

Central Region - Texas

Central Region

Dollars $ 399,854 $ 440,377 $ (40,523) (9.2) %

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Average sales price $ 388.8 $ 403.9 $ (15.1) (3.7) %

Six Months Ended June 30, Quarter over Quarter

2024 2023 Change $ Change %

Dollars $ 3,204,651 $ 2,981,606 $ 223,045 7.5 %

Homes ordered 7,790 6,827 963 14.1 %

Average sales price $ 411.4 $ 436.7 $ (25.3) (5.8) %

Dollars $ 1,138,101 $ 1,151,261 $ (13,160) (1.1) %

Homes ordered 2,284 2,276 8 0.4 %

Average sales price $ 498.3 $ 505.8 $ (7.5) (1.5) %

Central Region

Dollars $ 882,037 $ 860,898 $ 21,139 2.5 %

Homes ordered 2,410 2,138 272 12.7 %

Average sales price $ 366.0 $ 402.7 $ (36.7) (9.1) %

Dollars $ 1,184,513 $ 969,447 $ 215,066 22.2 %

Homes ordered 3,096 2,413 683 28.3 %

Average sales price $ 382.6 $ 401.8 $ (19.2) (4.8) %

(1) Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations.

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Order Backlog (1)

At March 31, Quarter over Quarter

At June 30, Quarter over Quarter

2024 2023 Change $ Change %

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Average sales price $ 408.9 $ 447.4 $ (38.5) (8.6) %

West Region Totals

Dollars $ 367,436 $ 669,636 $ (302,200) (45.1) %

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Average sales price $ 489.3 $ 490.2 $ (0.9) (0.2) %

Central Region Totals

Central Region

Dollars $ 278,485 $ 401,601 $ (123,116) (30.7) %

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Average sales price $ 373.3 $ 418.8 $ (45.5) (10.9) %

East Region Totals

Dollars $ 463,766 $ 616,299 $ (152,533) (24.7) %

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

Active Communities Three Months Ended March 31,

Ending Average Ending Average

Active Communities and Cancellation Rates

Active Communities Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Ending Average Ending Average Ending Average Ending Average

Total 287 281.0 291 284.5 287 277.2 291 280.1

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Cancellation Rates (2)

Three Months Ended March 31,

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

2024 2023 2024 2023

Total 10 % 12 % 9 % 13 %

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Companywide .

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.

We reported our highest second quarter home closing revenue and volume in Company history, improving 9.8% and 18.0%, respectively, over prior year, with 4,118 closings valued at $1.7 billion for the three months ended June 30, 2024, compared to 3,490 closings valued at $1.5 billion in 2023.

The 7.0% decrease in ASP on closings is primarily the result of product mix shift, with entry-level homes representing 91% of second quarter 2024 closings compared to 83% in the second quarter of 2023, as well as geographic mix.

Home closing volume in the three months ended June 30, 2024 increased over the same period in 2023 despite entering the quarter with lower backlog than prior year, due to a higher backlog conversion rate of 135.8%, as compared to 89.0% in the prior second quarter period.

Improvements in home order volume in the three months ended June 30, 2024 of 13.7% to 3,799 homes as compared to 3,340 homes in the three months ended June 30, 2023 is primarily tied to a 15.4% higher orders pace of 4.5 per month up from 3.9 per month in the 2023 period.

Home order value of $1.6 billion in the three months ended June 30, 2024 increased 6.7% from 2023 resulting from the higher order volume partially offset by 6.2% lower ASP on orders;

similar to that of closing ASP, a higher percentage of our home orders being entry-level homes and geographic mix shift drove overall ASP down.

Order cancellations of 10% for the three months ended June 30, 2024 were down from 12% in the three months ended June 30, 2023;

the current run rate for cancellations across the company is below our historical company average and demonstrates the tightening of overall inventory availability and attractiveness of our financing incentives.

For the six months ended June 30, 2024, home closing volume increased 19.4% to 7,625 closings, which led to home closing revenue of $3.2 billion, up 12.7% from $2.8 billion in the prior year.

The increased volume was partially offset by a 5.6% year-over-year decrease in ASP on closings.

Similar to the second quarter, home order volume of 7,790 was up 14.1% and home order value of $3.2 billion was up 7.5% from prior year due to higher volume and a 5.8% decrease in ASP on orders.

The increase in home order volume was driven entirely from the 14.6% increase in orders pace of 4.7 homes per month, compared to 4.1 in 2023, on a relatively flat average active community count.

We ended the second quarter of 2024 with 287 actively selling communities, down from 291 June 30, 2023 but up sequentially from 275 at March 31, 2024.

The quarter ended with 2,714 homes in backlog valued at $1.1 billion, compared to 3,772 units valued at $1.7 billion at June 30, 2023.

The lower backlog year over year is a result of the significant improvement in our backlog conversion rate, discussed above, as we are selling spec homes later in the construction cycle.

The West Region generated $622.8 million in home closing revenue in the three months ended June 30, 2024, a 20.0% increase compared to the $519.2 million in prior year period.

The higher revenue was due to the 26.9% higher volume of 1,265 homes in the three months ended June 30, 2024, up from 997 homes in the prior year period.

The higher volume of closing revenue was partially offset by lower ASP on closings, down 5.5% year over year due to a product mix shift to more entry-level homes.

Home orders in the three months ended June 30, 2024 of 1,114 were up 12.5% from 990 in the prior year, resulting from a 29.4% increase in orders pace to 4.4 homes per month from 3.4 per month in 2023, more than offsetting the 13.4% lower number of average active communities.

Although the West Region average active community count is down from 2023, it did increase sequentially from the first quarter of 2024.

Home order value of $557.3 million for the second quarter of 2024 increased 8.1% from prior year due to the impact of the higher order volume offset in part by a 3.9% lower ASP.

The West Region cancellation rate of 10% in the three months ended June 30, 2024 improved from 15% in the prior year.

For the six months ended June 30, 2024, home closing revenue of $1.1 billion increased 21.6% due to 497 more units closed, while ASP on closings decreased 5.0% compared to prior year due to product mix shift previously mentioned.

Home order volume in the West Region of 2,284 was relatively flat with prior year as a 17.5% increase in orders pace of 4.7 homes per month was mostly offset by the 14.7% decrease in the average number of actively selling communities.

Home order value of $1.1 billion was down 1.1% due to a 1.5% lower ASP.

The year-to-date cancellation rate of 9% declined significantly from 14% in the prior year period.

The West Region ended the second quarter of 2024 with 751 homes in backlog valued at $367.4 million, compared to 1,366 units valued at $669.6 million at June 30, 2023, lower backlog is due entirely to a higher backlog conversion rate of 140.2% for the three months ended June 30, 2024 compared to 72.6% in the same period of 2023.

The Central Region closed 1,265 homes in the three months ended June 30, 2024, up 15.6% from 1,094 in the prior year period due to an increase in the backlog conversion rate of 138.9% compared to 110.7% for the same prior year period.

Home closing revenue of $459.2 million in the three months ended June 30, 2024 was relatively flat with the prior year period, as the higher volume was offset by a 13.1% decrease in ASP on closings due to product mix shift and higher utilization of incentives.

Home order volume increased 3.3% to 1,100 homes in the three months ended June 30, 2024 as orders pace improved 9.3% to 4.7 homes per month in three months ended June 30, 2024, compared to 4.3 homes per month in the same prior year period.

Despite the higher order volume, home order value of $399.9 million declined 9.2% from $440.4 million in the prior year quarter as ASP on orders in the three months ended June 30, 2024 decreased $50,000, or 12.1%, from 2023, from more entry-level homes sold in 2024.

The Central Region cancellation rate of 12% in the three months ended June 30, 2024 was relatively in line with 11% in the three months ended June 30, 2023.

Year-to-date home closing results in the Central Region were similar to those of the second quarter.

For the six months ended June 30, 2024, home closing revenue of $886.7 million on 2,432 home closings increased and 0.6% and 13.5%, respectively.

For the six months ended June 30, 2024, home orders increased 12.7%, partially offset by a 9.1% drop in ASP on orders, which led to a 2.5% overall improvement in home order value of $882.0 million.

Order volume was higher due to an 11.4% increase in orders pace to 4.9 homes per month on a relatively flat average active community count.

The year-to-date cancellation rate of 10% for the six months ended June 30, 2024 improved from 14% in the prior year period.

The Central Region ended the quarter with 746 units in backlog valued at $278.5 million, down 22.2% and 30.7%, respectively, compared to June 30, 2023.

The decrease in backlog units is due to the higher backlog conversion rate discussed previously.

During the three months ended June 30, 2024, the East Region closed 1,588 homes for $611.7 million, compared to 1,399 closings and $567.0 million in home closing revenue in the comparable prior year period.

The 13.5% increase in volume, largely benefiting from the 130.2% backlog conversion rate, was partially offset by 5.0% lower ASP on home closings.

Home orders of 1,585 in the three months ended June 30, 2024 increased 23.3% due to the combination of a 12.8% higher average active communities and a 7.3% increase in orders pace to 4.4 homes per month in the three months ended June 30, 2024 compared to 4.1 homes per month in 2023.

Order value rose to $616.3 million in the three months ended June 30, 2024, from $519.0 million in the prior year period, from the 23.3% higher volume, partially offset by the 3.7% lower ASP on orders.

The cancellation rate of 8% in the three months ended June 30, 2024 remained consistent with 9% in the same prior year period.

The year-to-date results of the East Region were similar to those of the three months ended June 30, 2024, with 18.3% and 15.0% improvements in home closing volume and revenue, respectively, compared to the 2023 period, closing 2,914 homes for $1.1 billion in home closing revenue for the six months ended June 30, 2024.

Orders volume increased 28.3% due to an 11.3% increase in average active communities coupled with a 15.4% higher orders pace for the six months ended June 30, 2024.

The higher order volume led to a 22.2% increase in home order value of $1.2 billion, as ASP on orders declined 4.8% due to a higher mix of entry-level homes.

Year-to-date, the East Region's cancellation rate of 8% saw a significant drop from 12% in the prior year.

This Region has experienced our lowest cancellation rates in the Company in 2024 and is well below our historical company average due to overall tightening of inventory in these markets.

The East Region ended the second quarter of 2024 with 1,217 homes in backlog valued at $463.8 million, down 15.9% and 24.7%, respectively, from 1,447 homes valued at $616.3 million at June 30, 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 $2.3 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.

We had no land sales for the three months ending June 30, 2024, and recognized land closing revenue and profit of $24.4 million and $0.2 million, respectively, for the three months ending June 30, 2023.

Year-to-date land sales resulted in profit of $7,000 and $1.6 million for 2024 and 2023, respectively.

Other Operating Information (dollars in thousands)

Three Months Ended March 31,

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

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

2024 2023 2024 2023

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

Home Closing Gross Profit (1)

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Companywide .

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.

Gross profit for the three months ended June 30, 2024 was $439.5 million, with a margin of 25.9%, a 150 basis point improvement from 24.4% in the three months ended June 30, 2023.

The margin improvement was due to lower direct costs offset partially by higher lot costs, leverage of higher home closing revenue on overhead costs coupled with shorter construction cycle times.

For the six months ended June 30, 2024, gross profit of $817.5 million and margin of 25.9% increased from $659.4 million and 23.5% in six months ended June 30, 2023, for a margin improvement of 240 basis points, also due to lower direct costs, leverage of higher home closing revenue on overhead costs and shorter construction cycle times.

For both the three and six month periods, the average per home cost of interest lock incentives was lower, reducing the negative drag on margin year over year.

The West Region had a 540 basis point improvement in home closing gross margin of 23.8% for the three months ended June 30, 2024 versus 18.4% in the three months ended June 30, 2023.

Similarly, year-to-date gross margin improved 500 basis point to 23.1% in 2024 compared to 18.1% in 2023.

The margin improvement in both periods was due to direct cost savings, leverage of higher home closing revenue on overhead costs and shorter construction cycle times, all of which were partially offset by higher lot costs.

Additionally, home closing gross margin for both the three and six month periods ended June 30, 2023 were negatively impacted by significant incentives to address affordability concerns caused by years of steep price appreciation as well as elevated direct costs that had just begun to improve.

The Central Region home closing gross margin of 27.1% for the three months ended June 30, 2024, a 60 basis point decrease from 27.7% in the prior year quarter, was due to geographic mix of closings.

All divisions benefited from lower direct costs and savings resulting from shorter construction cycle times, which were offset by higher lot costs and increased utilization of interest rate lock incentives in certain markets.

Year-to-date, the Central Region gross margin of 27.2% in 2024 improved 90 basis points from 26.3% in 2023 as a result of lower direct costs, leverage of higher home closing revenue on overhead costs, and shorter construction cycle times, which were offset by higher utilization of interest rate lock incentives and higher lot costs.

The East Region home closing gross margin of 27.2% for the three months ended June 30, 2024 was consistent with 27.3% for the comparable 2023 period, as savings in direct costs and higher vendor rebates were offset by increased lot costs.

For the six months ended June 30, 2024, the East Region home closing gross margin improved 150 basis points to 27.6% due to lower direct costs and leverage of higher home closing revenue on overhead costs, all of which were partially offset by higher lot costs.

Financial Services Profit/(Loss) (in thousands)

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

2024 2023 2024 2023

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

Financial services profit/(loss) represents the net profit/(loss) 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 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.

Financial services profit of $4.8 million in the three months ended June 30, 2024 increased $7.4 million from a loss of $2.6 million in the same prior year period, as the prior year period included $7.9 million in charges related to unused interest rate forward commitments that expired as compared to $2.0 million of similar charges in the second quarter of 2024.

Financial services profit for the three months ended June 30, 2024 also increased due to higher profits for both the title and insurance companies as a result of higher home closings volume.

Similar to the second quarter results, year-to-date financial services profit increased $3.8 million due to fewer charges related to unused interest rate forward commitments and greater title and insurance company profits resulting from higher home closings volume.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

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

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

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

Provision for income taxes $ (65,806) $ (52,688) $ (113,805) $ (86,690)

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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 $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.

These costs increased $8.9 million to $104.7 million in the three months ended June 30, 2024, due to higher home closing revenue and increased costs associated with maintaining higher levels of spec inventory.

Commissions and other sales costs were 6.2% of home closing revenue in both second quarter periods.

For the six months ended June 30, 2024, commissions and other sales costs of $206.2 million were 6.5% of home closing revenue, increases of $27.6 million and 10 basis points, respectively.

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 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.

For the three months ended June 30, 2024, general and administrative expenses of $53.2 million were relatively consistent with $52.1 million in the prior year period, and improved 30 basis points to 3.1% of home closing revenue.

For the six months ended June 30, 2024, general and administrative expenses of $103.9 million increased $4.3 million, but as a percentage of home closing revenue improved 30 basis points.

For both the three and six months ended June 30, 2024 general and administrative expenses declined as a percentage of home closing revenue due to leverage of higher home closing revenue on fixed overhead expenses.

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 in the three months ended March 31, 2024 and 2023, respectively, as all interest was capitalized.

Interest expense is comprised of interest incurred, but not capitalized, on our senior and convertible senior notes, loans payable and other borrowings, and our revolving credit facility agreement ("Credit Facility").

We recognized no interest expense for the three and six months ended June 30, 2024 and 2023 because all interest was capitalized to qualifying assets.

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.

Other income, net was $11.5 million and $12.9 million for the three months ended June 30, 2024 and 2023, respectively, and $20.5 million and $21.7 million for the six months ended June 30, 2024 and 2023, respectively.

Loss on Early Extinguishment of Debt.

Loss on early extinguishment of debt of $0.6 million for the three and six months ended June 30, 2024 is related to the $250.0 million redemption of our 2025 Notes.

There were no similar charges for the three

and six months ended June 30, 2023.

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

Income Taxes.

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.

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

The rate for all 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 in 2023 with a partial redemption of $150.0 million of aggregate principal amount of our 2025 Notes.

We may also opportunistically repurchase our senior and convertible senior 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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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 share repurchases.

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

Although we don't anticipate any early redemptions in the near term, we may opportunistically retire or redeem a portion of our senior and convertible senior notes.

We expect to meet these short-term liquidity requirements primarily through our cash and cash equivalents on hand and the net cash flows provided by our operations.

Between our cash and cash equivalents on hand combined with the availability of liquidity from our Credit Facility, we believe that we currently have sufficient liquidity.

Nevertheless, we may seek additional capital to strengthen our liquidity position, enable us to acquire additional land inventory in anticipation of improving market conditions, and/or strengthen our long-term capital structure.

Nevertheless, in the future, we may seek additional capital to strengthen our liquidity position, enable us to acquire additional land inventory in anticipation of improving market conditions, and/or strengthen our long-term capital structure.

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, share repurchases and dividend payments.

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 and convertible senior notes as they become due or mature, share repurchases and dividend payments.

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 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.

We have no debt maturities until 2025.

Certain contractual obligations are reflected on our unaudited consolidated balance sheets as of June 30, 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 and convertible senior notes, loans payable and other borrowings, including our Credit Facility, letters of credit and surety bonds and operating leases.

We have no material debt maturities until 2027.

We also have requirements for certain short-term lease commitments, funding working capital needs of our existing unconsolidated joint ventures and other purchase obligations in the normal course of business.

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 our Annual Report on Form 10-K for the year ended December 31, 2023.

For information about our loans payable and other borrowings, including our Credit Facility, senior and convertible 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 our Annual Report.

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.

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

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

We had no derivative financial instruments that required derivative accounting under ASC 815-10, Derivatives and Hedging , at June 30, 2024 or December 31, 2023.

Operating Cash Flow Activities

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.

During the six months ended June 30, 2024, net cash used in operating activities totaled $36.0 million, versus net cash provided by operating activities of $355.9 million for the six months ended June 30, 2023.

Operating cash flows in the six months ended June 30, 2024 benefited from cash generated by net earnings of $417.6 million, which were offset by a $450.6 million increase in real estate.

Operating cash flows in the six months ended June 30, 2023 benefited from cash generated by net earnings of $318.1 million.

Investing Cash Flow Activities

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.

During the six months ended June 30, 2024 and 2023, net cash used in investing activities totaled $19.6 million and $22.1 million.

Cash used in investing activities in the first half of 2024 was mainly attributable to purchases of property and equipment of $13.2 million and investments in unconsolidated entities of $6.6 million.

Cash used in investing activities in the first half of 2023 was mainly attributable to the purchases of property and equipment.

Financing Cash Flow Activities

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.

During the six months ended June 30, 2024, net cash provided by financing activities totaled $127.4 million as compared to net cash used in financing activities of $32.1 million for the six months ended June 30, 2023.

The net cash provided by financing activities in 2024 primarily reflects the net proceeds of $557.7 million from the issuance of our 1.75% Convertible Senior Notes due 2028, offset by the early redemption of our 6.00% Senior Notes due 2025 of $250.0 million principal and $61.8 million for the purchase of capped calls, along with $55.9 million of share repurchases and $54.5 million of dividends paid.

The net cash used in financing activities in 2023 includes $19.9 million of dividends paid and $10.0 million in share repurchases.

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

March 31, 2024 December 31, 2023

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

June 30, 2024 December 31, 2023

Senior and convertible senior notes, net, loans payable and other borrowings $ 1,313,311 $ 1,008,215

Stockholders’ equity 4,882,534 4,611,900

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21.2 % 17.9 %

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

Senior and convertible senior notes, net, loans payable and other borrowings $ 1,313,311 $ 1,008,215

cash and cash equivalents (992,921) (921,227)

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Net debt-to-capital (2)

(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.

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

(2) Net debt-to-capital is considered a non-GAAP financial measure, and is computed as net debt divided by the aggregate of net debt and stockholders' equity.

Net debt is comprised of total senior notes, net and loans payable and other borrowings, less cash and cash equivalents.

Net debt is comprised of total senior and convertible senior notes, net and loans payable and other borrowings, less cash and cash equivalents.

The most directly comparable GAAP financial measure is the ratio of debt-to-capital.

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 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 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.

Credit Facility Covenants

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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.

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

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

Our actual financial covenant calculations as of June 30, 2024 are reflected in the table below.

Financial Covenant (dollars in thousands):

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Recent Accounting Pronouncements

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

See Note 1 to our unaudited consolidated financial statements included in this report for discussion of recent 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