What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-22 compared with 2024-10-22 · 142 added, 202 removed, 291 unchanged (54% of the section changed)

2 unchanged sentences

The following is a summary of our operating results by line of business ($000's omitted, except per share data):

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Three Months Ended

Income before income taxes:

5 unchanged sentences

Diluted earnings per share $ 2.57 $ 3.10

In 2022, the Federal Reserve began raising its benchmark interest rate in response to persistent inflation that began after the onset of the COVID-19 pandemic.

These actions drove national mortgage and other interest rates higher and negatively impacted home affordability and consumer sentiment.

Despite this rise in interest rates, demand for new homes generally remained strong during 2023 and into 2024.

Despite a recent 50 bps cut in the Federal Reserve benchmark interest rate late in the third quarter of 2024, affordability remains challenged for housing due to the higher interest rates, house price increases, and general inflation in recent years as compared with historical levels.

We have responded by adjusting sales prices where necessary and focusing sales incentives on closing cost incentives and mortgage interest rate buydowns.

Additionally, the rate of customer order cancellations that spiked in 2022 in response to higher inflation and interest rate increases has now normalized to historical levels.

We operate our business to generate a consistent cadence of house starts and an appropriate inventory of quick move-in speculative ("spec") homes as we focus on turning our assets and delivering high returns on investment, which has allowed us to achieve an effective balance of price and pace.

Within an evolving macroeconomic environment, consumers across all buyer segments and price points have continued demonstrating a strong desire for homeownership despite continued interest rate variability.

During 2023 and the first nine months of 2024, through a combination of our ongoing construction cost reduction initiatives, construction pacing, and sales strategies that capitalized on periods of strong consumer demand, we were able to achieve historically strong financial results.

The supply chain constraints that arose in connection with the COVID-19 pandemic improved during 2023 and have continued to ease during the first nine months of 2024, which has contributed to a shortening of our production cycle times.

The time required to construct a home was approximately seven weeks shorter at the end of the third quarter of 2024 compared to the comparable prior year period, and nearly two weeks shorter than at the end of the second quarter of 2024.

This decrease in cycle times, coupled with our strong backlog and focus on spec home production, contributed to an increase in closings of 12% and 10% in the three and nine months ended September 30, 2024, respectively, over the comparable prior year periods.

While production cycle times remain elevated versus our historical norms due to the availability of certain materials and construction labor, along with extended timelines for municipal approvals and inspections in certain geographies, we continue to make progress.

Inflation also continues to impact our business, especially the cost of land and related development expenditures.

Due to the length of our construction cycle times, there is a lag between when such cost changes occur and when they impact our operating results.

We remain focused on taking a measured approach to our capital allocation strategy in order to position ourselves to effectively respond to any potential future volatility in demand.

In the first quarter of 2025, consumer demand was influenced by ongoing affordability challenges, resulting from elevated mortgage interest rates and higher housing costs, as well as volatility in other macroeconomic and geopolitical conditions, including weakened consumer confidence.

We have responded to these conditions by adjusting sales prices where necessary and focusing sales incentives on closing cost incentives, especially mortgage interest rate buydowns.

Despite these efforts, net new orders in units for the first quarter of 2025 decreased 7% compared to the first quarter of 2024.

Although higher mortgage interest rates and volatile macroeconomic and geopolitical conditions may persist for some time, the demographics supporting housing demand remain favorable over the long term, and during the first quarter of 2025 there continued to be a limited supply of existing homes for sale in many of our geographic markets.

We expect that homebuyers will continue to face affordability challenges, so our sales paces may remain volatile on a monthly basis.

In response, we expect our sales incentives to remain elevated and for our pace of house starts to remain dynamic.

Additionally, we continue to face pressure in the cost of land acquisition and development.

Due to the length of our land development and construction cycle times, there is a lag between when such cost changes occur and when they impact our operating results.

This is evidenced in our gross margin from home sales for the first quarter of 2025, which decreased to 27.5% from 29.6% in the comparable prior year period, primarily due to higher land costs and sales incentives.

While we expect to continue to generate healthy gross margins, they may decline somewhat in future periods as a result of these factors.

We operate our business to generate a cadence of house starts that aligns with the sales environment, and an appropriate inventory of quick move-in speculative ("spec") homes as we focus on turning our assets and delivering high returns on investment, which has allowed us to achieve an effective balance of price and pace.

The supply chain constraints that arose in recent years have largely subsided.

As a result, our production cycle times have improved significantly over the past two years and have now returned to near historical norms.

We remain focused on taking a measured approach to our capital allocation strategy to effectively respond to future volatility in demand.

Accordingly, we are focused on protecting liquidity and closely managing our cash flows while also continuing to focus on shareholder returns, including the following actions:

1 unchanged sentence

– Producing sufficient levels of spec inventory (houses without customer orders) to service buyers seeking to close within 30 to 90 days;

– Maintaining a focus on shareholder return through share buybacks and dividends, including a 25% increase in our dividends from $0.16 to $0.20 per share effective with our January 2024 dividend payment;

– Maintaining a focus on shareholder return through share buybacks and dividends, including a 10% increase in our quarterly dividends from $0.20 to $0.22 per share effective with our January 2025 dividend payment and an additional $1.5 billion share repurchase authorization effective January 2025, bringing our total remaining share repurchase authorization to $1.9 billion as of March 31, 2025;

– Taking an opportunistic approach to repurchasing debt;

– Maintaining ample liquidity.

The limited supply of both new and existing homes for sale, continuing low levels of unemployment, and demographics supporting housing demand remain favorable.

We believe our strategic approach with respect to sales incentives, advertising, and our production cadence will enable us to meet consumer demand at the selling prices necessary to turn our inventory, maintain market share, and generate healthy returns.

We remain confident in our ability to navigate this environment and to position the Company to take advantage of opportunities as they arise to support future growth and continued profitability and financial strength.

We believe our strategic approach with respect to balancing sales price with sales price, including actions taken related to sales incentives, advertising, and our production cadence, will enable us to meet consumer demand at the selling prices necessary to turn our inventory, maintain market share, and generate healthy returns.

And we remain confident in our ability to navigate the future environment and to position the Company to take advantage of opportunities as they arise and support future growth and continued profitability and financial strength.

Homebuilding Operations

The following presents selected financial information for our Homebuilding operations ($000’s omitted):

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2024 vs.

Three Months Ended

2025 2025 vs.

2 unchanged sentences

Total Homebuilding revenues 3,801,823 (1) % 3,856,803

Home sale cost of revenues (3,091,267) 13 % (2,739,596) (8,897,835) 10 % (8,068,287)

Home sale cost of revenues (a)

(2,719,115) 1 % (2,689,087)

Land sale and other cost of revenues (50,955) 38 % (37,043)

Selling, general, and administrative

expenses ("SG&A") (a)

expenses ("SG&A") (b)

(393,337) 10 % (357,594)

Equity income from unconsolidated

entities, net (b)

2,508 (c) 891 41,527 (c) 3,293

entities, net (c)

502 (d) 37,902

Other income, net 6,362 (62) % 16,683

1 unchanged sentence

Supplemental data:

Gross margin from home sales 28.8 % (70) bps 29.5 % 29.4 % — bps 29.4 %

Gross margin from home sales (a)

27.5 % (210) bps 29.6 %

SG&A as a percentage of home

sale revenues (a)

9.4 % 30 bps 9.1 % 8.9 % 10 bps 8.8 %

sale revenues (b)

10.5 % 110 bps 9.4 %

Closings (units) 6,583 (7) % 7,095

5 unchanged sentences

Average active communities 961 3 % 931

Backlog at September 30:

Backlog at March 31:

Units 11,335 (16) % 13,430

Dollars $ 7,223,276 (12) % $ 8,198,788

(a) SG&A includes insurance reserve reversals of $78.7 million for the nine months ended September 30, 2024, and $66.2 million for the nine months ended September 30, 2023, (see Note 8 ).

(b) Equity income from unconsolidated entities includes a gain of $37.7 million for the nine months ended September 30, 2024 related to the sale of our minority interest in a joint venture.

(d) Net new order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders.

(a) Includes the amortization of capitalized interest.

(b) SG&A includes insurance reserve reversals of $26.8 million for the three months ended March 31, 2024 (see Note 8 ).

(c) Equity income from unconsolidated entities includes a gain of $37.7 million for the three months ended March 31, 2024 related to the sale of our minority interest in a joint venture.

(d) Percentage not meaningful.

(e) Net new order dollars represent a composite of new order dollars combined with other movements of the dollars in backlog related to cancellations and change orders.

Home sale revenues

Home sale revenues in the three and nine months ended September 30, 2024 were higher than the prior year period by $456.3 million and $1.2 billion, respectively.

In the three months ended September 30, 2024, the 12% increase resulted primarily from a 12% increase in closings.

In the nine months ended September 30, 2024, the 10% increase resulted primarily from a 10% increase in closings.

The increases in closings were primarily attributable to a strong backlog, improved production cycle times, and initiatives to prioritize quick move-in spec homes to satisfy customer desire to quickly close on homes due to the volatile interest rate environment and to ensure an efficient production cadence of homes.

Average selling price during the three and nine months ended September 30, 2024 remained flat compared with the respective prior year periods.

Home sale revenues in the three months ended March 31, 2025 were lower than the prior year period by $70.3 million.

In the three months ended March 31, 2025, the 2% decrease resulted primarily from a 7% decrease in closings from the prior year period, partially offset by a 6% increase in average selling price.

The decrease in closings was primarily attributable to lower net new orders in both the first quarter of 2025 and in the second half of 2024 as compared with the first half of 2024, contributing to a weaker backlog, partially offset by improved production cycle times.

Average selling price during the three months ended March 31, 2025 increased primarily due to geographic mix, including our Northeast and West segments, which carry a higher average selling price.

Home sale gross margins

Home sale gross margins were 28.8% and 29.4% in the three and nine months ended September 30, 2024, respectively, compared with 29.5% and 29.4% in the three and nine months ended September 30, 2023, respectively.

Due to the low supply of new and existing homes for sale, we were generally able to maintain net sales pricing to substantially offset increases in house and land costs and higher sales incentives over these periods.

However, we expect sales incentives, especially mortgage interest rate buydowns, to remain elevated to address buyer affordability challenges, which will continue to impact our gross margins in the near term.

Home sale gross margins were 27.5% in the three months ended March 31, 2025 compared with 29.6% in the three months ended March 31, 2024.

The decrease in homes sale gross margins was primarily attributable to higher land acquisition and development costs, coupled with elevated sales incentives.

We expect these factors to continue to impact our gross margins over the near term.

Land sale and other revenues

1 unchanged sentence

Land sale and other revenues and their related gains or losses vary between periods, depending on the timing of land sales and our strategic operating decisions.

Land sales and other revenues contributed losses of $6.0 million and $4.9 million for the three and nine months ended September 30, 2024, respectively, compared with gains of $4.9 million and $15.1 million for the three and nine months ended September 30, 2023, respectively.

SG&A as a percentage of home sale revenues was 9.4% and 8.9% in the three and nine months ended September 30, 2024, respectively, compared with 9.1% and 8.8% for the three and nine months ended September 30, 2023, respectively.

The gross dollar amount of our SG&A increased $53.7 million, or 15%, for the three months ended September 30, 2024 compared with the prior year period, and increased $121.3 million, or 12%, for the nine months ended September 30, 2024 compared with the prior year period.

The increases in gross dollars for the three and nine months ended September 30, 2024 resulted primarily from overhead costs to support increased production volumes, partially offset by insurance reserve reversals of $78.7 million recorded in the nine months ended September 30, 2024, compared with insurance reserve reversals of $66.2 million recorded in the nine months ended September 30, 2023.

Land sales and other revenues contributed income of $1.6 million and $0.2 million and for the three months ended March 31, 2025 and 2024, respectively.

SG&A as a percentage of home sale revenues was 10.5% and in the three months ended March 31, 2025 compared with 9.4% for the three months ended March 31, 2024.

The gross dollar amount of our SG&A increased $35.7 million, or 10%, for the three months ended March 31, 2025 compared with the prior year period.

The increase in gross dollars for the three months ended March 31, 2025 resulted primarily from increased overhead costs to support ongoing production volumes, combined with insurance reserve reversals of $26.8 million recorded in the three months ended March 31, 2024.

Other income, net

Other income, net includes the following ($000’s omitted):

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Three Months Ended

Write-offs of deposits and pre-acquisition costs $ (4,335) $ (3,990)

Amortization of intangible assets (2,367) (2,540)

Gain (loss) on debt retirement — 362 (222) 362

Interest income 10,262 17,379

1 unchanged sentence

Miscellaneous, net 2,929 5,949

Total other income, net $ 9,702 $ 18,431 $ 39,709 $ 33,836

Interest income began to increase significantly in 2023 and has continued to do so into 2024 as the result of higher returns on invested cash balances due to the elevated interest rate environment.

Other income, net $ 6,362 $ 16,683

Interest income declined in 2025, primarily due to lower returns on invested cash balances.

Net new orders

Net new orders in units decreased less than 1% while net new orders in dollars increased 3% in the three months ended September 30, 2024, as compared with the prior year period.

Net new orders in units increased 3% while net new orders in dollars increased 9% in the nine months ended September 30, 2024, as compared with the prior year period.

The increase in net new order dollars in the three months ended September 30, 2024 was primarily attributable to geographic mix, including our West segment, which carries a higher average selling price.

The increased net new order volume and dollars in the nine months ended September 30, 2024 over the comparable prior year period was primarily attributable to the higher volumes in our West segment.

Cancellation rates (canceled orders for the period divided by gross new orders for the period) were 15% and 14% for the three and nine months ended September 30, 2024, respectively, and 15% in both the three and nine months ended September 30, 2023.

Cancellation rates began to decrease in 2023 and have now returned to historical levels.

Ending backlog dollars, which represents orders for homes that have not yet closed, decreased 5% at September 30, 2024 compared with September 30, 2023.

Net new orders in units decreased 7% while net new orders in dollars decreased 5% in the three months ended March 31, 2025, as compared with the prior year period.

The decreased net new order volume and dollars in the three months ended March 31, 2025 over the comparable prior year period was primarily attributable to the lower volumes in our West segment.

Cancellation rates (canceled orders for the period divided by gross new orders for the period) were 13% for both the three months ended March 31, 2025 and 2024.

Ending backlog dollars, which represent orders for homes that have not yet closed, decreased 12% at March 31, 2025 compared with March 31, 2024.

Homes in production

The following is a summary of our homes in production:

September 30,

2024 September 30,

2025 March 31,

Sold 8,708 10,260

3 unchanged sentences

Total 18,197 18,712

The number of homes in production at September 30, 2024 was 1% lower than at September 30, 2023.

This decrease was primarily due to a decreased number of sold homes due to increased closings and lower backlog.

This decrease was partially offset by a higher number of homes under construction and completed homes, which reflects our strategic decision to increase starts of spec units in response to buyer demand for quick move-in homes.

The number of homes in production at March 31, 2025 was 3% lower than at March 31, 2024.

This decrease was primarily due to a decreased number of sold homes due to lower backlog and improved production cycle times, which reduces the length of time a home sits in inventory.

We continue to carefully monitor our production levels and expect to lower the percentage of our inventory that is unsold by the end of 2025.

Controlled lots

The following is a summary of our lots under control at September 30, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

The following is a summary of our lots under control at March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

Owned Optioned Controlled Owned Optioned Controlled

8 unchanged sentences

Developed (%) 49 % 24 % 35 % 48 % 24 % 34 %

While competition for well-positioned land is robust, we continued to pursue land investments that we believe can achieve appropriate risk-adjusted returns on invested capital.

We have also continued to seek to maintain a high percentage of our lots that are controlled via land option agreements as such contracts enable us to defer acquiring portions of properties owned by

third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings.

The remaining purchase price under our land option agreements totaled $8.1 billion at September 30, 2024.

While competition for well-positioned land is robust, we have continued to pursue land investments that we believe can achieve appropriate risk-adjusted returns on invested capital.

We have also continued to seek to maintain a high percentage of our lots that are controlled via land option agreements as such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings.

The remaining purchase price under our land option agreements totaled $10.1 billion at March 31, 2025.

Homebuilding Segment Operations

As of September 30, 2024, we conducted our operations in 46 markets located throughout 25 states.

As of March 31, 2025, we conducted our operations in 47 markets located throughout 25 states.

For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:

5 unchanged sentences

Operating Data by Segment ($000's omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2024 vs.

Three Months Ended

2025 2025 vs.

Home sale revenues:

Northeast $ 249,733 25 % $ 200,404

4 unchanged sentences

West 888,797 26 % 704,165

Other homebuilding 49,170 45 % 34,016

$ 3,801,823 (1) % $ 3,856,803

Income (loss) before income taxes (a) :

Income before income taxes (a) :

Northeast $ 61,221 58 % $ 38,639

5 unchanged sentences

Other homebuilding (b)

(4,296) (38) % (6,893) 99,896 206 % 32,666

2,319 (c) 69,677

$ 645,280 (22) % $ 827,664

1 unchanged sentence

(b) Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the other segments.

Other homebuilding also includes insurance reserve reversals of $78.7 million for the nine months ended September 30, 2024, and $66.2 million for the nine months ended September 30, 2023, (see Note 8 ), and a gain of $37.7 million for the nine months ended September 30, 2024 related to the sale of our minority interest in a joint venture.

Other homebuilding also includes insurance reserve reversals of $26.8 million for the three months ended March 31, 2024, (see Note 8 ), and a gain of $37.7 million for the three months ended March 31, 2024 related to the sale of our minority interest in a joint venture.

Operating Data by Segment ($000's omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2024 vs.

Three Months Ended

2025 2025 vs.

32 unchanged sentences

Operating Data by Segment ($000's omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

2025 2025 vs.

6 unchanged sentences

West 18 % 16 %

15 % 15 % 14 % 15 %

Unit backlog:

16 unchanged sentences

($000’s omitted)

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Three Months Ended

Land-related charges (a) :

9 unchanged sentences

Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges.

For the third quarter of 2024, Northeast home sale revenues increased 13% when compared with the prior year period due to a 14% increase in closings partially offset by a slight decrease in average selling price.

The increase in closings and decrease in average selling price occurred across the majority of markets.

Income before income taxes increased 9%, primarily due to higher revenues and gross margins across the majority of markets, partially offset by increased overhead costs across the majority of markets.

Net new orders increased across the majority of markets.

For the nine months ended September 30, 2024, Northeast home sale revenues increased 6% when compared with the prior year period primarily due to a 6% increase in closings partially offset by a slight decrease in average selling price.

The increase in closings occurred across the majority of markets.

Income before income taxes increased 5% primarily due to higher revenues and gross margins across the majority of markets, partially offset by increased overhead costs across all markets.

Net new orders increased across the majority of markets.

For the third quarter of 2024, Southeast home sale revenues increased 3% when compared with the prior year period due to a 4% increase in closings partially offset by a 1% decrease in average selling price.

The increase in closings was mixed among markets while the decrease in average selling price occurred across the majority of markets.

Income before income taxes increased 1%, primarily due to higher revenues and gross margins which were mixed among markets, partially offset by increased overhead costs, which were also mixed among markets.

Net new orders decreased across the majority of markets.

For the nine months ended September 30, 2024, Southeast home sale revenues increased 7% when compared with the prior year period due to an 11% increase in closings partially offset by a 3% decrease in average selling price.

The increase in closings and decrease in average selling price occurred across the majority of markets.

Income before income taxes increased 5%, primarily due to higher revenues which were mixed among markets and higher gross margins across the majority of markets.

For the first quarter of 2025, Northeast home sale revenues increased 25% when compared with the prior year period due to a 19% increase in closings combined with a 5% increase in average selling price.

The increase in closings and average selling price occurred across the majority of markets.

Income before income taxes increased 58%, primarily due to higher revenues and gross margins across all markets, partially offset by increased overhead costs across all markets.

Net new orders decreased across the majority of markets.

For the third quarter of 2024, Florida home sale revenues decreased 2% when compared with the prior year period primarily due to a 3% decrease in average selling price, partially offset by a slight increase in closings.

The decrease in average selling price and increase in closings occurred across the majority of markets.

Income before income taxes decreased 14%, primarily due to lower revenues and gross margins across the majority of markets.

Net new orders increased across the majority of markets.

For the nine months ended September 30, 2024, Florida home sale revenues increased 4% when compared with the prior year period primarily due to a 4% increase in closings partially offset by a slight decrease in the average selling price.

The increase in closings and decrease in average selling price occurred across the majority of markets.

Income before income taxes decreased 2%, primarily due to higher revenues and gross margins across the majority of markets.

Net new orders increased across the majority of markets.

For the third quarter of 2024, Midwest home sale revenues increased 22% when compared with the prior year period due to a 17% increase in closings combined with a 4% increase in average selling price.

The increase in closings occurred across all markets while the increase in average selling price occurred across the majority of markets.

Income before income taxes increased 28%, primarily due to higher revenues across the majority of markets and higher gross margins across all markets.

Net new orders increased across the majority of markets.

For the nine months ended September 30, 2024, Midwest home sale revenues increased 31% when compared with the prior year period due to a 26% increase in closings combined with a 4% increase in average selling price.

The increase in closings occurred across all markets while the increase in average selling price occurred across the majority of markets.

Income before income taxes increased 45%, primarily due to higher revenues and gross margins across all markets.

Net new orders increased across the majority of markets.

For the third quarter of 2024, Texas home sale revenues increased 18% when compared with the prior year period due to a 23% increase in closings partially offset by a 4% decrease in average selling price.

The increase in closings occurred across all markets while the decrease in average selling price occurred across the majority of markets.

Income before income taxes decreased 4%, primarily due to increased overhead costs across all markets and decreased gross margins across the majority of markets.

The decrease in net new orders was mixed among markets.

For the nine months ended September 30, 2024, Texas home sale revenues increased 7% when compared with the prior year period due to a 6% increase in closings combined with a 1% increase in average selling price.

The increase in closings occurred across all markets while the increase in average selling price was mixed among markets.

Income before income taxes decreased 2%, primarily due to increased overhead costs across all markets and decreased gross margins across the majority of markets.

For the first quarter of 2025, Southeast home sale revenues decreased 11% when compared with the prior year period due to a 17% decrease in closings partially offset by an 8% increase in average selling price.

The decrease in closings and increase in average selling price occurred across the majority of markets.

Income before income taxes decreased 22%, primarily due to lower gross margins and higher overhead costs across the majority of markets.

The decrease in net new orders was mixed among markets.

For the third quarter of 2024, West home sale revenues increased 29% compared with the prior year period due to an 24% increase in closings combined with a 4% increase in average selling price.

The increase in closings occurred across the majority of markets while the increase in average selling price was mixed among markets.

For the first quarter of 2025, Florida home sale revenues decreased 14% when compared with the prior year period primarily due to a 14% decrease in closings combined with a slight decrease in average selling price.

The decrease in closings and average selling price occurred across the majority of markets.

Income before income taxes decreased 29%, primarily due to lower revenues and gross margins across the majority of markets.

Net new orders decreased across the majority of markets.

For the first quarter of 2025, Midwest home sale revenues increased 10% when compared with the prior year period due to a 10% increase in closings partially offset by a 1% decrease in average selling price.

The increase in closings occurred across the majority of markets while the decrease in average selling price was mixed among markets.

Income before income taxes increased 14%, primarily due to higher revenues and gross margins across the majority of markets.

Net new orders decreased in certain markets.

For the nine months ended September 30, 2024, West home sale revenues increased 13% when compared with the prior year period due to a 13% increase in closings combined with a slight increase in average selling price.

The increase in closings occurred across the majority of markets while the increase in average selling price was mixed among markets.

Income before income taxes increased 22%, primarily due to higher revenues and increased gross margins across the majority of markets.

Net new orders increased across all markets.

Net new orders increased across the majority of markets.

For the first quarter of 2025, Texas home sale revenues decreased 21% when compared with the prior year period due to a 22% decrease in closings partially offset by a 1% increase in average selling price.

The decrease in closings occurred across all markets while the increase in average selling price was mixed among markets.

Income before income taxes decreased 44%,

primarily due to decreased revenues and gross margins across all markets and increased overhead costs across the majority of markets.

The decrease in net new orders occurred across the majority of markets.

For the first quarter of 2025, West home sale revenues increased 26% compared with the prior year period due to a 13% increase in closings combined with a 12% increase in average selling price.

The increase in closings and average selling price occurred across the majority of markets.

Income before income taxes increased 12%, primarily due to higher revenues and gross margins across the majority of markets, partially offset by increased overhead costs across all markets.

Net new orders decreased across the majority of markets.

Financial Services Operations

4 unchanged sentences

This strategy results in owning loans and related servicing rights for only a short period of time.

Operating as a captive business model primarily targeted to support our Homebuilding operations, the business levels of our Financial Services operations are highly correlated to Homebuilding, as Homebuilding customers continue to account for substantially all of its

We believe that our mortgage capture rate, which represents loan originations from our Homebuilding operations as a percentage of total loan opportunities from our Homebuilding operations, excluding cash closings, is an important metric in evaluating the effectiveness of our captive mortgage business model.

The following tables present selected financial information for our Financial Services operations ($000's omitted):

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2024 vs.

Three Months Ended

2025 2025 vs.

4 unchanged sentences

Expenses (54,970) 7 % (51,378)

Equity income from unconsolidated entities — — % — 1,050 — % 1,055

Other income (expense), net — (a) (1,340) — (a) (1,340)

Income before income taxes $ 35,857 (12) % $ 40,979

2 unchanged sentences

Principal $ 1,866,018 6 % $ 1,755,046

(a) Percentage not meaningful.

Nine Months Ended

September 30,

Three Months Ended

Supplemental data:

7 unchanged sentences

Total funded originations 100 % 100 %

Total Financial Services revenues for the three and nine months ended September 30, 2024 increased 48% and 40%, respectively, compared with the same periods in 2023.

The increases during 2024 when compared with the prior year periods were primarily due to an increase in origination volumes resulting from higher closings within Homebuilding and improved capture rates.

Revenues per loan also increased as the result of a more favorable operating environment for Financial Services.

The increased use of closing cost incentives in the form of mortgage interest rate buydowns has also contributed favorably to the Financial Services volumes and revenues per transaction.

Total Financial Services revenues for the three months ended March 31, 2025 decreased 2% compared with the same period in 2024, primarily due to lower insurance agency commissions.

Income before income taxes

Income before income taxes in the three and nine months ended September 30, 2024 increased 90% and 78%, respectively, compared with the same period in 2023.

The increases during the three and nine months ended September 30, 2024 when

compared with the prior year periods were primarily due to the higher loan origination volume, capture rate, and revenue per transaction.

Our effective tax rate was 23.0% and 23.1% for the three and nine months ended September 30, 2024, respectively, compared with 24.6% and 24.4% for the same periods in 2023.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense.

Income tax expense for the three and nine months ended September 30, 2024 also includes a benefit of $14.3 million associated with the purchase of transferable federal renewable energy tax credits.

Income tax expense for the nine months ended September 30, 2024 also reflects a reduction in income tax liabilities totaling $13.2 million related to the favorable resolution of uncertain state tax positions.

Income before income taxes in the three months ended March 31, 2025 decreased 12%, compared with the same period in 2024.

Our effective tax rate was 23.2% for the three months ended March 31, 2025, compared with 23.7% for the same period in 2024.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense and federal tax credits.

Liquidity and Capital Resources

1 unchanged sentence

We routinely monitor current and expected operational requirements and financial market conditions to evaluate accessing available financing sources, including revolving bank credit and securities offerings.

At September 30, 2024, we had unrestricted cash and equivalents of $1.4 billion, restricted cash balances of $57.5 million, and $939.1 million available under our Revolving Credit Facility.

Our ratio of debt-to-total capitalization, excluding our Financial Services debt, was 12.3% at September 30, 2024, compared with 15.9% at December 31, 2023.

At March 31, 2025, we had unrestricted cash and equivalents of $1.2 billion, restricted cash balances of $40.2 million, and $942.3 million available under our Revolving Credit Facility.

Our ratio of debt-to-total capitalization, excluding our Financial Services debt, was 11.7% at March 31, 2025, compared with 11.8% at December 31, 2024.

We follow a diversified investment approach for our cash and equivalents by maintaining such funds with a portfolio of banks within our group of relationship banks in high quality, highly liquid, short-term deposits and investments, which helps mitigate banking concentration risk.

For the next twelve months, we expect our principal demand for funds will be for the acquisition and development of land inventory, construction of house inventory, and operating expenses, including our general and administrative expenses.

The increase in sales and related increased pace in starts, coupled with the elongation of our production cycle compared to historical levels, has required a greater investment of cash in our homes under production.

Additionally, we plan to continue our dividend payments and repurchases of common stock.

For the next 12 months, we expect our principal demand for funds will be for the acquisition and development of land inventory, construction of house inventory, the repayment of certain of our unsecured senior notes due in March 2026, and operating expenses, including our general and administrative expenses.

We plan to continue our dividend payments and repurchases of common stock.

In August 2025, we need to repay or refinance Pulte Mortgage's master repurchase agreement with third-party lenders (as amended, the "Repurchase Agreement").

1 unchanged sentence

However, we believe we have adequate liquidity to meet Pulte Mortgage's anticipated financing needs.

Beyond the next twelve months, we will need to repay or refinance our Revolving Credit Facility, which matures in June 2027, and our unsecured senior notes, the next tranche of which becomes due in 2026.

Beyond the next 12 months, we will need to repay or refinance our Revolving Credit Facility, which matures in June 2027, and our unsecured senior notes, the next tranche of which becomes due in March 2026.

We may from time to time repurchase our unsecured senior notes through open market purchases, privately negotiated transactions, or otherwise.

In the nine months ended September 30, 2024, we completed repurchases of $193.4 million and $106.6 million aggregate principal amount of our unsecured senior notes scheduled to mature in 2026 and 2027, respectively, through a cash tender offer.

Our total repurchases in the nine months ended September 30, 2024, including open market repurchases, were $310.2 million.

We believe that our current cash position and other available financing resources, coupled with our ongoing operating activities, will provide sufficient liquidity to fund our business needs over the next twelve months and beyond.

To the extent the sources of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities, refinance debt, dispose of certain assets to fund our operating activities, or draw on existing or new debt facilities.

Unsecured senior notes

We had $1.6 billion and $1.9 billion of unsecured senior notes outstanding at September 30, 2024 and December 31, 2023, respectively, with no repayments due until March 2026, when $251.9 million of unsecured senior notes are scheduled to mature.

We had $1.6 billion of unsecured senior notes outstanding at both March 31, 2025 and December 31, 2024, with no repayments due until March 2026, when $251.9 million of unsecured senior notes are scheduled to mature.

Other notes payable

Other notes payable include non-recourse and limited recourse secured notes with third parties that totaled $41.1 million and $71.0 million at September 30, 2024 and December 31, 2023, respectively.

These notes have maturities ranging up to six years, are secured by the applicable land positions to which they relate, and generally have no recourse to other assets.

Other notes payable include non-recourse and limited recourse secured notes with third parties that totaled $42.6 million and $35.8 million at March 31, 2025 and December 31, 2024, respectively.

These notes have maturities ranging up to five years, are secured by the applicable land positions to which they relate, and generally have no recourse to other assets.

The stated interest rates on these notes range up to 9%.

4 unchanged sentences

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility).

We were in compliance with all covenants and requirements as of September 30, 2024.

We were in compliance with all covenants and requirements as of March 31, 2025.

Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries.

At September 30, 2024, we had no borrowings outstanding, $310.9 million of letters of credit issued, and $939.1 million of remaining capacity under the Revolving Credit Facility.

At March 31, 2025, we had no borrowings outstanding, $307.7 million of letters of credit issued, and $942.3 million of remaining capacity under the Revolving Credit Facility.

At December 31, 2024, we had no borrowings outstanding, $321.1 million of letters of credit issued, and $928.9 million of remaining capacity under the Revolving Credit Facility.

Joint venture debt

At September 30, 2024, aggregate outstanding debt of unconsolidated joint ventures was $35.2 million.

At March 31, 2025, aggregate outstanding debt of unconsolidated joint ventures was $34.9 million.

Financial Services debt

Pulte Mortgage maintains a master repurchase agreement with third-party lenders (as amended, the "Repurchase Agreement") that matures on August 13, 2025.

The maximum aggregate commitment under the Repurchase Agreement was $675.0 million at September 30, 2024 and will decrease to $650.0 million on January 14, 2025, which continues until maturity.

The maximum aggregate commitment under the Repurchase Agreement was $650.0 million at March 31, 2025, which continues until maturity.

The Repurchase Agreement also contains an accordion feature that could increase the commitment by $50.0 million above its active commitment level.

1 unchanged sentence

The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity.

At September 30, 2024, Pulte Mortgage had $524.1 million outstanding at a weighted-average interest rate of 6.65% and $150.9 million of remaining capacity under the Repurchase Agreement.

At December 31, 2023, Pulte Mortgage had $499.6 million outstanding at a weighted-average interest rate of 7.15% and $350.4 million of remaining capacity under the prior agreement replaced by the Repurchase Agreement.

Pulte Mortgage was in compliance with all covenants and requirements as of September 30, 2024.

At March 31, 2025, Pulte Mortgage had $426.9 million outstanding at a weighted-average interest rate of 6.12% and $223.1 million of remaining capacity under the Repurchase Agreement.

At December 31, 2024, Pulte Mortgage had $526.9 million outstanding at a weighted-average interest rate of 6.13% and $148.1 million of remaining capacity under the Repurchase Agreement.

Pulte Mortgage was in compliance with all covenants and requirements as of such dates.

Dividends and share repurchase program

In the nine months ended September 30, 2024, we declared cash dividends totaling $126.2 million and repurchased 7.6 million shares under our repurchase authorization for $880.0 million.

In the nine months ended September 30, 2023, we declared cash dividends totaling $106.8 million and repurchased 10.2 million shares under our repurchase authorization for $700.0 million.

In the three months ended March 31, 2025, we declared cash dividends totaling $44.7 million and repurchased 2.8 million shares under our share repurchase authorization for $300.0 million.

In the three months ended March 31, 2024, we declared cash dividends totaling $42.6 million and repurchased 2.3 million shares under our share repurchase authorization for $245.8 million.

On January 29, 2025, the Board of Directors increased our share repurchase authorization by $1.5 billion.

At September 30, 2024, we had remaining authorization to repurchase $1.0 billion of common shares.

At March 31, 2025, we had remaining authorization to repurchase $1.9 billion of common shares.

Contractual Obligations

1 unchanged sentence

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

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of September 30, 2024, while others are considered future commitments.

Certain contractual obligations are reflected on the Consolidated Balance Sheet as of March 31, 2025, while others are considered future commitments.

Our contractual obligations primarily consist of long-term debt and related interest payments, purchase obligations related to expected acquisitions and development of land, house construction costs, operating leases, and obligations under our various compensation and benefit plans.

2 unchanged sentences

If the obligations related to a project or program are ongoing, annual extensions of the letters of credit are typically granted on a year-to-year basis.

At September 30, 2024, we had outstanding letters of credit totaling $310.9 million.

At March 31, 2025, we had outstanding letters of credit totaling $307.7 million.

Our surety bonds generally do not have stated expiration dates;

rather, we are released from the bonds as the contractual performance is completed.

These bonds, which approximated $2.8 billion at September 30, 2024, are typically outstanding over a period of approximately three to five years.

These bonds, which approximated $3.0 billion at March 31, 2025, are typically outstanding over a period of approximately three to five years.

Because significant construction and development work has been performed related to projects that have not yet received final acceptance by the respective counterparties, the aggregate amount of surety bonds outstanding is in excess of the projected cost of the remaining work to be performed.

In the ordinary course of business, we enter into land option agreements in order to procure land for the construction of houses in the future.

At September 30, 2024, these agreements had an aggregate remaining purchase price of $8.1 billion.

At March 31, 2025, these agreements had an aggregate remaining purchase price of $10.1 billion.

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

At September 30, 2024, outstanding deposits totaled $556.0 million, of which $16.2 million is refundable.

For further information regarding our primary obligations, refer to Note 4 and Note 8 to the Consolidated Financial Statements included elsewhere in this Quarterly Report on 10-Q for amounts outstanding as of September 30, 2024 related to debt and commitments and contingencies, respectively.

At March 31, 2025, outstanding deposits totaled $667.7 million, of which $27.0 million is refundable.

For further information regarding our primary obligations, refer to Note 4 and Note 8 to the Consolidated Financial Statements included elsewhere in this Quarterly Report on 10-Q for amounts outstanding as of March 31, 2025 related to debt and commitments and contingencies, respectively.

Operating activities

Net cash provided by operating activities in the nine months ended September 30, 2024 was $1.1 billion.

Net cash provided by operating activities in the three months ended March 31, 2025 was $134.2 million.

Generally, the primary drivers of our cash flow from operations are profitability and changes in the levels of inventory and residential mortgage loans available-for-sale, each of which experiences seasonal fluctuations.

The cash inflows from our operations for the nine months ended September 30, 2024 were primarily due to net income of $2.2 billion, partially offset by a net increase in inventories of $805.3 million, which was primarily attributable to land acquisition, development, and house spend to support future growth, and a $45.2 million increase in residential mortgage loans available due to higher loan origination volumes.

Net cash provided by operating activities in the nine months ended September 30, 2023 was $1.9 billion.

The cash inflows from our operations for the nine months ended September 30, 2023 were primarily due to net income of $1.9 billion along with a seasonal $262.6 million decrease in residential mortgage loans available-for-sale, partially offset by a net increase in inventories of $173.4 million.

The cash inflows from our operations for the three months ended March 31, 2025 were primarily due to net income of $522.8 million, partially offset by a net increase in inventories of $270.6 million, which was primarily attributable to land acquisition, development, and house spend to support future growth.

Net cash provided by operating activities in the three months ended March 31, 2024 was $239.8 million.

The cash inflows from our operations for the three months ended March 31, 2024 were primarily due to net income of $663.0 million, partially offset by a net increase in inventories of $289.2 million, which was primarily attributable to the increased number of homes in production coupled with land acquisition, development, and house spend to support future growth, as well as a seasonal $54.8 million increase in residential mortgage loans available-for-sale.

Investing activities

Net cash used in investing activities in the nine months ended September 30, 2024 was $108.4 million.

These cash outflows primarily resulted from capital expenditures of $94.1 million related to our ongoing investments in new communities, facilities, and information technology applications along with $15.1 million of investments in unconsolidated entities.

Net cash used in investing activities in the nine months ended September 30, 2023 was $95.0 million.

These cash outflows primarily related to capital expenditures of $67.6 million related to our ongoing investments in new communities, facilities, and information technology applications along with $18.1 million of investments in unconsolidated entities.

Net cash used in investing activities in the three months ended March 31, 2025 was $39.7 million.

These cash outflows primarily resulted from capital expenditures of $29.6 million related to our ongoing investments in new communities, facilities, and information technology applications.

Net cash used in investing activities in the three months ended March 31, 2024 was $26.9 million.

These cash outflows primarily resulted from capital expenditures of $24.1 million related to our ongoing investments in new communities, facilities, and information technology applications.

Financing activities

Net cash used in financing activities in the nine months ended September 30, 2024 totaled $1.4 billion.

These cash outflows resulted primarily from the repurchase of 7.6 million common shares for $880.0 million under our share repurchase authorization, payments of $126.6 million in cash dividends, payments of $94.1 million related to consolidated inventory not owned, and $350.5 million of repayments of notes payable, partially offset by net Financial Services borrowings of $24.5 million related to an increase in residential mortgage loans available-for-sale.

Net cash used in financing activities in the nine months ended September 30, 2023 totaled $1.0 billion.

These cash outflows resulted primarily from the repurchase of 10.2 million common shares for $700.0 million under our share repurchase authorization, payments of $107.7 million in cash dividends, $86.8 million of repayments of notes payable, and net Financial Services repayments of $161.3 million related to a seasonal reduction in residential mortgage loans available-for-sale.

Net cash used in financing activities in the three months ended March 31, 2025 totaled $472.3 million.

These cash outflows resulted primarily from the repurchase of 2.8 million common shares for $300.0 million under our share repurchase authorization, payments of $45.8 million in cash dividends, payments of $11.4 million related to consolidated inventory not owned, and net repayments of $100.1 million under the Repurchase Agreement.

Net cash used in financing activities in the three months ended March 31, 2024 totaled $296.0 million.

These cash outflows resulted primarily from the repurchase of 2.3 million common shares for $245.8 million under our share repurchase authorization, payments of $42.7 million in cash dividends, payments of $32.5 million related to consolidated inventory not owned, and $11.1 million of repayments of notes payable, partially offset by net borrowings of $34.7 million under the Repurchase Agreement.

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again, we historically experience variability in our quarterly results from operations due to the seasonal nature of the homebuilding industry.

3 unchanged sentences

Supplemental Guarantor Financial Information

As of September 30, 2024, PulteGroup, Inc.

As of March 31, 2025, PulteGroup, Inc.

had outstanding $1.6 billion principal amount of unsecured senior notes due at dates from March 2026 through February 2035 and no borrowings outstanding, $307.7 million of letters of credit issued, and $942.3 million of remaining capacity under its Revolving Credit Facility.

18 unchanged sentences

The guarantees of the senior notes contain a provision to limit each Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer.

However, under recent case law, this provision may not be effective to protect such guarantee from being voided under fraudulent transfer law or otherwise determined to be unenforceable.

However, under certain case law, this provision may not be effective to protect such guarantee from being voided under fraudulent transfer law or otherwise determined to be unenforceable.

If a court were to find that the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under that guarantee, could subordinate that guarantee to presently existing and future indebtedness of the Guarantor or could require the holders of the senior notes to repay any amounts received with respect to that guarantee.

9 unchanged sentences

Summarized Balance Sheet Data

ASSETS September 30, 2024 December 31, 2023

ASSETS March 31, 2025 December 31, 2024

Cash, cash equivalents, and restricted cash $1,111,854 $1,218,207

6 unchanged sentences

Total liabilities 4,732,735 4,801,056

Nine Months Ended

September 30,

Three Months Ended

Summarized Statement of Operations Data 2025 2024

4 unchanged sentences

Critical Accounting Estimates

There have been no significant changes to our critical accounting estimates in the nine months ended September 30, 2024 compared with those contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no significant changes to our critical accounting estimates in the three months ended March 31, 2025 compared with those contained in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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