PULTEGROUP INC/MI/ 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations are provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024. The following is a summary of our operating results by line of business ($000's omitted, except per share data): Three Months Ended March 31, 2025 2024 Income before income taxes: Homebuilding $ 645,280 $ 827,664 Financial Services 35,857 40,979 Income before income taxes 681,137 868,643 Income tax expense (158,338) (205,667) Net income $ 522,799 $ 662,976 Diluted earnings per share $ 2.57 $ 3.10 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: – Increasing our lot optionality within our land pipeline for increased flexibility; – 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 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; and – Maintaining ample liquidity. 23 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 March 31, 2025 2025 vs. 2024 2024 Home sale revenues $ 3,749,269 (2) % $ 3,819,586 Land sale and other revenues 52,554 41 % 37,217 Total Homebuilding revenues 3,801,823 (1) % 3,856,803 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") (b) (393,337) 10 % (357,594) Equity income from unconsolidated entities, net (c) 502 (d) 37,902 Other income, net 6,362 (62) % 16,683 Income before income taxes $ 645,280 (22) % $ 827,664 Supplemental data: Gross margin from home sales (a) 27.5 % (210) bps 29.6 % SG&A as a percentage of home sale revenues (b) 10.5 % 110 bps 9.4 % Closings (units) 6,583 (7) % 7,095 Average selling price $ 570 6 % $ 538 Net new orders: Units 7,765 (7) % 8,379 Dollars (e) $ 4,477,827 (5) % $ 4,698,659 Cancellation rate 13 % 13 % Average active communities 961 3 % 931 Backlog at March 31: Units 11,335 (16) % 13,430 Dollars $ 7,223,276 (12) % $ 8,198,788 (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. 24 Home sale revenues 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 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 We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. 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 income of $1.6 million and $0.2 million and for the three months ended March 31, 2025 and 2024, respectively. SG&A 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 March 31, 2025 2024 Write-offs of deposits and pre-acquisition costs $ (4,335) $ (3,990) Amortization of intangible assets (2,367) (2,540) Interest income 10,262 17,379 Interest expense (127) (115) Miscellaneous, net 2,929 5,949 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 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. 25 Homes in production The following is a summary of our homes in production: March 31, 2025 March 31, 2024 Sold 8,708 10,260 Unsold Under construction 6,036 5,653 Completed 1,804 1,337 7,840 6,990 Models 1,649 1,462 Total 18,197 18,712 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 March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 Owned Optioned Controlled Owned Optioned Controlled Northeast 3,763 6,728 10,491 3,946 6,693 10,639 Southeast 17,832 33,216 51,048 17,843 32,770 50,613 Florida 26,497 40,892 67,389 27,041 34,499 61,540 Midwest 11,149 19,287 30,436 11,271 20,061 31,332 Texas 14,863 28,225 43,088 15,420 23,663 39,083 West 26,314 15,299 41,613 26,655 14,727 41,382 Total 100,418 143,647 244,065 102,176 132,413 234,589 41 % 59 % 100 % 44 % 56 % 100 % Developed (%) 49 % 24 % 35 % 48 % 24 % 34 % 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. 26 Homebuilding Segment Operations 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: Northeast: Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia Southeast: Georgia, North Carolina, South Carolina, Tennessee Florida: Florida Midwest: Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio Texas: Texas West: Arizona, California, Colorado, Nevada, New Mexico, Oregon, Utah, Washington The following tables present selected financial information for our reportable Homebuilding segments: Operating Data by Segment ($000's omitted) Three Months Ended March 31, 2025 2025 vs. 2024 2024 Revenues: Northeast $ 249,733 25 % $ 200,404 Southeast 638,729 (11) % 717,222 Florida 980,539 (14) % 1,144,876 Midwest 582,442 10 % 531,708 Texas 412,413 (21) % 524,412 West 888,797 26 % 704,165 Other homebuilding 49,170 45 % 34,016 $ 3,801,823 (1) % $ 3,856,803 Income before income taxes (a) : Northeast $ 61,221 58 % $ 38,639 Southeast 129,792 (22) % 165,914 Florida 202,928 (29) % 286,903 Midwest 105,581 14 % 92,354 Texas 50,862 (44) % 91,633 West 92,577 12 % 82,544 Other homebuilding (b) 2,319 (c) 69,677 $ 645,280 (22) % $ 827,664 (a) Includes land-related charges as summarized in the table below. (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 $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. (c) Percentage not meaningful. 27 Operating Data by Segment ($000's omitted) Three Months Ended March 31, 2025 2025 vs. 2024 2024 Closings (units): Northeast 339 19 % 285 Southeast 1,193 (17) % 1,445 Florida 1,650 (14) % 1,917 Midwest 1,090 10 % 990 Texas 1,039 (22) % 1,328 West 1,272 13 % 1,130 6,583 (7) % 7,095 Average selling price: Northeast $ 737 5 % $ 703 Southeast 535 8 % 496 Florida 594 — % 597 Midwest 534 (1) % 537 Texas 397 1 % 395 West 699 12 % 623 $ 570 6 % $ 538 Net new orders - units: Northeast 404 (8) % 441 Southeast 1,356 (3) % 1,394 Florida 1,869 (5) % 1,972 Midwest 1,388 9 % 1,274 Texas 1,287 (11) % 1,454 West 1,461 (21) % 1,844 7,765 (7) % 8,379 Net new orders - dollars: Northeast $ 317,006 1 % $ 314,154 Southeast 734,374 5 % 701,971 Florida 1,088,631 (8) % 1,181,491 Midwest 748,006 10 % 681,676 Texas 503,840 (12) % 575,717 West 1,085,970 (13) % 1,243,650 $ 4,477,827 (5) % $ 4,698,659 28 Operating Data by Segment ($000's omitted) Three Months Ended March 31, 2025 2025 vs. 2024 2024 Cancellation rates: Northeast 10 % 6 % Southeast 11 % 11 % Florida 15 % 14 % Midwest 7 % 9 % Texas 13 % 14 % West 18 % 16 % 13 % 13 % Unit backlog: Northeast 680 (6) % 723 Southeast 2,075 (5) % 2,195 Florida 3,014 (22) % 3,847 Midwest 2,100 6 % 1,976 Texas 1,196 (32) % 1,763 West 2,270 (22) % 2,926 11,335 (16) % 13,430 Backlog dollars: Northeast $ 573,394 10 % $ 522,122 Southeast 1,223,163 1 % 1,206,484 Florida 1,919,838 (24) % 2,537,644 Midwest 1,229,726 6 % 1,161,470 Texas 522,604 (33) % 781,694 West 1,754,551 (12) % 1,989,374 $ 7,223,276 (12) % $ 8,198,788 29 Operating Data by Segment ($000’s omitted) Three Months Ended March 31, 2025 2024 Land-related charges (a) : Northeast $ 194 $ 966 Southeast 2,149 990 Florida 2,439 341 Midwest 846 360 Texas 492 245 West 16,642 1,088 Other homebuilding 1,010 28 $ 23,772 $ 4,018 (a) Land-related charges include land inventory impairments, net realizable value adjustments on land held for sale, and write-offs of deposits and pre-acquisition costs for land option contracts we elected not to pursue. Other homebuilding consists primarily of write-offs of capitalized interest related to such land-related charges. Northeast 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. Southeast 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. Florida 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. Midwest 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 increased across the majority of markets. Texas 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%, 30 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. West 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 We conduct our Financial Services operations, which include mortgage banking, title, and insurance agency operations, through Pulte Mortgage LLC ("Pulte Mortgage") and other subsidiaries. In originating mortgage loans, we initially use our own funds supplemented by funds available pursuant to a credit agreement with third parties. Substantially all of the loans we originate are sold in the secondary market within a short period of time after origination, generally within 30 days. We also sell the servicing rights for the loans we originate through fixed price servicing sales contracts to reduce the risks and costs inherent in servicing loans. 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 business. 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 March 31, 2025 2025 vs. 2024 2024 Mortgage revenues $ 62,869 — % $ 63,025 Title services revenues 21,711 — % 21,819 Insurance agency commissions 6,247 (17) % 7,513 Total Financial Services revenues 90,827 (2) % 92,357 Expenses (54,970) 7 % (51,378) Income before income taxes $ 35,857 (12) % $ 40,979 Total originations: Loans 4,271 (1) % 4,332 Principal $ 1,866,018 6 % $ 1,755,046 31 Three Months Ended March 31, 2025 2024 Supplemental data: Capture rate 86.4 % 84.2 % Average FICO score 752 750 Funded origination breakdown: Government (FHA, VA, USDA) 25 % 24 % Other agency 72 % 73 % Total agency 97 % 97 % Non-agency 3 % 3 % Total funded originations 100 % 100 % Revenues 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 months ended March 31, 2025 decreased 12%, compared with the same period in 2024. Income Taxes 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 We finance our land acquisition, development, and construction activities and financial services operations using internally-generated funds, supplemented by credit arrangements with third parties and capital market financing. 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 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 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"). While we intend to refinance the Repurchase Agreement, there can be no assurances that the Repurchase Agreement can be renewed or replaced on commercially reasonable terms upon its expiration. However, we believe we have adequate liquidity to meet Pulte Mortgage's anticipated financing needs. 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. 32 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 12 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 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 $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%. Revolving credit facility We maintain a revolving credit facility (the "Revolving Credit Facility") maturing in June 2027 that has a maximum borrowing capacity of $1.3 billion and contains an uncommitted accordion feature that could increase the capacity to $1.8 billion, subject to certain conditions and availability of additional bank commitments. The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, up to the maximum borrowing capacity. The interest rate on borrowings under the Revolving Credit Facility may be based on either the Secured Overnight Financing Rate or a base rate plus an applicable margin, as defined therein. 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 March 31, 2025. Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries. 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 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 $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. Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale. 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 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 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 March 31, 2025, we had remaining authorization to repurchase $1.9 billion of common shares. 33 Contractual Obligations We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of 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. We use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the development of our homebuilding projects and insurance programs. The expiration dates of the letter of credit contracts coincide with the expected completion date of the related homebuilding projects and insurance programs. 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 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 $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 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 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. Cash flows Operating activities 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 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 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. 34 Financing activities 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. Seasonality 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. We generally experience increases in revenues and cash flow from operations in the fourth quarter based on the timing of home closings. This seasonal activity increases our working capital requirements in our third and fourth quarters to support our home production and loan origination volumes. As a result of the seasonality of our operations, our quarterly results of operations are not necessarily indicative of the results that may be expected for the full year. Supplemental Guarantor Financial Information 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. All of our unsecured senior notes and the Revolving Credit Facility are fully and unconditionally guaranteed, on a joint and several basis, by certain subsidiaries of PulteGroup, Inc. ("Guarantors" or "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by PulteGroup, Inc. Our subsidiaries associated with our Financial Services operations and certain other subsidiaries do not guarantee the unsecured senior notes or the Revolving Credit Facility (collectively, "Non-Guarantor Subsidiaries"). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. A court could void or subordinate any Guarantor’s guarantee under the fraudulent conveyance laws if existing or future creditors of any such Guarantor were successful in establishing that such Guarantor: (a) incurred the guarantee with the intent of hindering, delaying or defrauding creditors; or (b) received less than reasonably equivalent value or fair consideration in return for incurring the guarantee and, in the case of any one of the following being true at the time thereof: • such Guarantor was insolvent or rendered insolvent by reason of the issuance of the incurrence of the guarantee; • the incurrence of the guarantee left such Guarantor with an unreasonably small amount of capital or assets to carry on its business; • such Guarantor intended to, or believed that it would, incur debts beyond its ability to pay as they mature; or • such Guarantor was a defendant in an action for money damages, or had a judgment for money damages docketed against it, if the judgment is unsatisfied after final judgment. The measures of insolvency for purposes of determining whether a fraudulent conveyance occurred would vary depending upon the laws of the relevant jurisdiction and upon the valuation assumptions and methodology applied by the court. However, in general, a court would deem a company insolvent if: • the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets; 35 • the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or • it could not pay its debts as they became due. 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 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. In the event of a finding that a fraudulent transfer or conveyance occurred, holders may not receive any repayment on the senior notes. Finally, as a court of equity, a bankruptcy court may subordinate the claims in respect of the guarantees to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of senior notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of senior notes and (3) equitable subordination is not inconsistent with the provisions of the bankruptcy code. On the basis of historical financial information, operating history and other factors, we believe that each of the Guarantors, after giving effect to the issuance of the guarantees when such guarantees were issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. We cannot, however, provide assurances as to what standard a court would apply in making these determinations or whether a court would agree with our conclusions in this regard. The following tables present summarized financial information for PulteGroup, Inc. and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among PulteGroup, Inc. and the Guarantor Subsidiaries, as well as their investment in and equity in earnings from the Non-Guarantor Subsidiaries ($000’s omitted): PulteGroup, Inc. and Guarantor Subsidiaries Summarized Balance Sheet Data ASSETS March 31, 2025 December 31, 2024 Cash, cash equivalents, and restricted cash $1,111,854 $1,218,207 House and land inventory 12,640,392 12,354,274 Amount due from Non-Guarantor Subsidiaries 872,105 1,024,762 Total assets 15,825,589 15,589,227 LIABILITIES Accounts payable, customer deposits, accrued and other liabilities $2,641,372 $2,735,190 Notes payable 1,625,672 1,618,586 Total liabilities 4,732,735 4,801,056 Three Months Ended March 31, Summarized Statement of Operations Data 2025 2024 Revenues $3,721,729 $3,797,943 Cost of revenues 2,704,104 2,672,700 Selling, general, and administrative expenses 374,703 353,472 Income before income taxes 632,233 814,115 36 Critical Accounting Estimates 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.