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 Six Months Ended June 30, June 30, 2025 2024 2025 2024 Income before income taxes: Homebuilding $ 764,359 $ 984,934 $ 1,409,639 $ 1,812,598 Financial Services 42,797 63,378 78,655 104,357 Income before income taxes 807,156 1,048,312 1,488,294 1,916,955 Income tax expense (198,673) (239,179) (357,012) (444,846) Net income $ 608,483 $ 809,133 $ 1,131,282 $ 1,472,109 Diluted earnings per share $ 3.03 $ 3.83 $ 5.60 $ 6.93 In the second quarter of 2025, the consumer demand weakness we experienced to begin the year continued. This softening continued to be 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 decreased 7% for each of the three and six months ended June 30, 2025 versus the comparable prior year periods. Although elevated mortgage interest rates and volatile macroeconomic and geopolitical conditions may persist for some time, we believe the demographics supporting housing demand remain favorable over the long term. While inventories of new and existing homes have increased in the majority of our geographies, we believe that a chronic undersupply of housing stock remains in the United States that will take years to resolve. We expect that many 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 second quarter of 2025, which decreased to 27.0% from 29.9% in the comparable prior year period, and from 27.5% in the first quarter of 2025. These decreases are 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 several years ago 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 $1.6 billion as of June 30, 2025, after $600.0 million of share repurchases in the first half of 2025; 24 – Taking an opportunistic approach to repurchasing debt; and – Maintaining ample liquidity. We believe our strategic approach with respect to balancing sales price with sales pace, 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 Six Months Ended June 30, June 30, 2025 2025 vs. 2024 2024 2025 2025 vs. 2024 2024 Home sale revenues $ 4,267,975 (4) % $ 4,448,168 $ 8,017,244 (3) % $ 8,267,754 Land sale and other revenues 34,622 (13) % 39,825 87,176 13 % 77,042 Total Homebuilding revenues 4,302,597 (4) % 4,487,993 8,104,420 (3) % 8,344,796 Home sale cost of revenues (a) (3,115,450) — % (3,117,482) (5,834,564) — % (5,806,569) Land sale and other cost of revenues (30,488) (22) % (38,873) (81,443) 7 % (75,917) Selling, general, and administrative expenses ("SG&A") (b) (390,453) 8 % (361,145) (783,790) 9 % (718,739) Equity income (loss) from unconsolidated entities, net (c) (841) (d) 1,117 (339) (d) 39,019 Other income (expense), net (1,006) (d) 13,324 5,355 (d) 30,008 Income before income taxes $ 764,359 (22) % $ 984,934 $ 1,409,639 (22) % $ 1,812,598 Supplemental data: Gross margin from home sales (a) 27.0 % (290) bps 29.9 % 27.2 % (260) bps 29.8 % SG&A as a percentage of home sale revenues (b) 9.1 % 100 bps 8.1 % 9.8 % 110 bps 8.7 % Closings (units) 7,639 (6) % 8,097 14,222 (6) % 15,192 Average selling price $ 559 2 % $ 549 $ 564 4 % $ 544 Net new orders: Units 7,083 (7) % 7,649 14,848 (7) % 16,028 Dollars (e) $ 3,887,938 (11) % $ 4,358,508 $ 8,365,765 (8) % $ 9,057,167 Cancellation rate 15 % 14 % 14 % 13 % Average active communities 994 6 % 934 978 5 % 932 Backlog at June 30: Units 10,779 (17) % 12,982 Dollars $ 6,843,239 (16) % $ 8,109,128 (a) Includes the amortization of capitalized interest. (b) SG&A includes insurance reserve reversals of $51.9 million and $78.7 million, respectively, for the three and six months ended June 30, 2024 (see Note 8 ). (c) Equity income from unconsolidated entities includes a gain of $37.7 million for the six months ended June 30, 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. 25 Home sale revenues Home sale revenues in the three and six months ended June 30, 2025 were lower than the prior year periods by $180.2 million and $250.5 million, respectively. In the three months ended June 30, 2025, the 4% decrease resulted primarily from a 6% decrease in closings from the prior year period, partially offset by a 2% increase in average selling price. In the six months ended June 30, 2025 the 3% decrease resulted primarily from a 6% decrease in closings, partially offset by a 4% increase in average selling price. The decreases in closings were primarily attributable to lower net new orders in the first half of 2025 and a weaker order backlog entering the year, partially offset by a higher community count and improved production cycle times. Average selling price during the three and six months ended June 30, 2025 increased primarily due to geographic mix, including our Northeast segment, which carries a higher average selling price. Home sale gross margins Home sale gross margins were 27.0% and 27.2% in the three and six months ended June 30, 2025, respectively, compared with 29.9% and 29.8% in the three and six months ended June 30, 2024, respectively. The decreases in homes sale gross margins were primarily attributable to elevated sales incentives coupled with increased land acquisition and development costs. We expect these factors to continue to impact our gross margins over the near term. Gross margins for the first six months of 2025 were also unfavorably impacted by our efforts to reduce the number of final spec inventory to more appropriate levels, which we expect will continue to be an area of focus for the remainder of 2025. While we have made significant progress in the first half of 2025, the level of final spec inventory remains elevated for the current demand environment. 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 $4.1 million and $5.7 million for the three and six months ended June 30, 2025, respectively, compared with $1.0 million and $1.1 million for the three and six months ended June 30, 2024, respectively. SG&A SG&A as a percentage of home sale revenues was 9.1% and 9.8% and in the three and six months ended June 30, 2025, respectively, compared with 8.1% and 8.7% for the three and six months ended June 30, 2024, respectively. The gross dollar amount of our SG&A increased $29.3 million, or 8%, for the three months ended June 30, 2025 compared with the prior year period, and increased $65.1 million, or 9%, for the six months ended June 30, 2025 compared with the prior year period. The increase in gross dollars for the three and six months ended June 30, 2025 resulted primarily from insurance reserve reversals of $51.9 million and $78.7 million recorded in the three and six months ended June 30, 2024, respectively. Additionally, SG&A for the first half of 2025 reflects modestly higher headcount and technology costs to support ongoing production volumes. We expect to continue managing and balancing our overhead costs consistent with expected changes in the demand environment. Other income, net Other income, net includes the following ($000’s omitted): Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Write-offs of deposits and pre-acquisition costs $ (11,344) $ (3,685) $ (15,679) $ (7,675) Amortization of intangible assets (2,301) (2,498) (4,667) (5,038) Interest income 9,581 17,141 19,843 34,520 Interest expense (141) (117) (268) (232) Miscellaneous, net 3,199 2,483 6,126 8,433 Other income, net $ (1,006) $ 13,324 $ 5,355 $ 30,008 26 The increase in write-offs of deposits and pre-acquisition costs for 2025 relative to 2024 resulted from strategic decisions to not move forward with certain projects based on the current environment. 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 11% in the three months ended June 30, 2025, as compared with the prior year period. Net new orders in units decreased 7% while net new orders in dollars decreased 8% in the six months ended June 30, 2025, as compared with the prior year period. The decreased net new order volume and dollars in the three and six months ended June 30, 2025 over the comparable prior year periods was primarily attributable to the lower order volumes in our Texas and West segments. Cancellation rates (canceled orders for the period divided by gross new orders for the period) were 15% and 14% for the three and six months ended June 30, 2025, respectively, and 14% and 13% for the three and six months ended June 30, 2024, respectively. Ending backlog dollars, which represent orders for homes that have not yet closed, decreased 16% at June 30, 2025 compared with June 30, 2024. Homes in production The following is a summary of our homes in production: June 30, 2025 June 30, 2024 Sold 8,499 10,322 Unsold Under construction 5,741 5,692 Completed 1,865 1,236 7,606 6,928 Models 1,673 1,511 Total 17,778 18,761 The number of homes in production at June 30, 2025 was 5% lower than at June 30, 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 June 30, 2025 and December 31, 2024: June 30, 2025 December 31, 2024 Owned Optioned Controlled Owned Optioned Controlled Northeast 3,884 6,964 10,848 3,946 6,693 10,639 Southeast 17,798 43,161 60,959 17,843 32,770 50,613 Florida 25,714 40,926 66,640 27,041 34,499 61,540 Midwest 11,580 20,946 32,526 11,271 20,061 31,332 Texas 16,014 22,340 38,354 15,420 23,663 39,083 West 25,992 14,326 40,318 26,655 14,727 41,382 Total 100,982 148,663 249,645 102,176 132,413 234,589 40 % 60 % 100 % 44 % 56 % 100 % Developed (%) 49 % 23 % 33 % 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 27 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 June 30, 2025. Homebuilding Segment Operations As of June 30, 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 Six Months Ended June 30, June 30, 2025 2025 vs. 2024 2024 2025 2025 vs. 2024 2024 Revenues: Northeast $ 347,437 35 % $ 257,153 $ 597,171 31 % $ 457,557 Southeast 747,017 (3) % 770,587 1,385,746 (7) % 1,487,809 Florida 1,037,352 (20) % 1,294,077 2,017,891 (17) % 2,438,954 Midwest 691,347 6 % 651,580 1,273,789 8 % 1,183,288 Texas 465,919 (20) % 583,303 878,332 (21) % 1,107,715 West 979,758 10 % 890,769 1,868,555 17 % 1,594,934 Other homebuilding (a) 33,767 (17) % 40,524 $ 82,936 11 % $ 74,539 $ 4,302,597 (4) % $ 4,487,993 $ 8,104,420 (3) % $ 8,344,796 Income before income taxes (b) : Northeast $ 88,586 51 % $ 58,793 $ 149,807 54 % $ 97,432 Southeast 147,642 (16) % 175,518 277,434 (19) % 341,432 Florida 190,216 (41) % 324,761 393,143 (36) % 611,664 Midwest 138,170 15 % 120,397 243,752 15 % 212,751 Texas 54,072 (49) % 105,138 104,935 (47) % 196,771 West 121,495 (3) % 125,094 214,072 3 % 207,639 Other homebuilding (c) 24,178 (d) 75,233 26,496 (d) 144,909 $ 764,359 (22) % $ 984,934 $ 1,409,639 (22) % $ 1,812,598 (a) Other homebuilding includes revenues from land sales and construction services. (b) Includes land-related charges as summarized in the table below. (c) 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 $51.9 million and $78.7 million, respectively, for the three and six months ended June 30, 2024, (see Note 8 ), and a gain of $37.7 million for the six months ended June 30, 2024 related to the sale of our minority interest in a joint venture. (d) Percentage not meaningful. 28 Operating Data by Segment ($000's omitted) Three Months Ended Six Months Ended June 30, June 30, 2025 2025 vs. 2024 2024 2025 2025 vs. 2024 2024 Closings (units): Northeast 451 19 % 378 790 19 % 663 Southeast 1,402 (6) % 1,499 2,595 (12) % 2,944 Florida 1,882 (12) % 2,150 3,532 (13) % 4,067 Midwest 1,272 6 % 1,196 2,362 8 % 2,186 Texas 1,218 (17) % 1,472 2,257 (19) % 2,800 West 1,414 1 % 1,402 2,686 6 % 2,532 7,639 (6) % 8,097 14,222 (6) % 15,192 Average selling price: Northeast $ 770 13 % $ 680 $ 756 10 % $ 690 Southeast 533 4 % 514 534 6 % 505 Florida 551 (8) % 602 571 (5) % 600 Midwest 544 0 % 545 539 0 % 541 Texas 383 (3) % 396 389 (2) % 396 West 693 9 % 635 696 10 % 630 $ 559 2 % $ 549 $ 564 4 % $ 544 Net new orders - units: Northeast 384 (4) % 400 788 (6) % 841 Southeast 1,405 1 % 1,396 2,761 (1) % 2,790 Florida 1,773 2 % 1,746 3,642 (2) % 3,718 Midwest 1,272 1 % 1,265 2,660 5 % 2,539 Texas 1,042 (18) % 1,275 2,329 (15) % 2,729 West 1,207 (23) % 1,567 2,668 (22) % 3,411 7,083 (7) % 7,649 14,848 (7) % 16,028 Net new orders - dollars: Northeast $ 264,954 (7) % $ 285,380 $ 581,960 (3) % $ 599,534 Southeast 740,378 2 % 728,250 1,474,753 3 % 1,430,221 Florida 990,804 (3) % 1,020,211 2,079,434 (6) % 2,201,703 Midwest 688,715 (2) % 699,344 1,436,721 4 % 1,381,019 Texas 384,980 (23) % 500,093 888,820 (17) % 1,075,810 West 818,107 (27) % 1,125,230 1,904,077 (20) % 2,368,880 $ 3,887,938 (11) % $ 4,358,508 $ 8,365,765 (8) % $ 9,057,167 29 Operating Data by Segment ($000's omitted) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2025 vs. 2024 2024 Cancellation rates: Northeast 9 % 7 % 9 % 6 % Southeast 13 % 11 % 12 % 11 % Florida 15 % 15 % 15 % 15 % Midwest 11 % 10 % 9 % 9 % Texas 19 % 15 % 16 % 15 % West 21 % 19 % 19 % 17 % 15 % 14 % 14 % 13 % Unit backlog: Northeast 613 (18) % 745 Southeast 2,078 (1) % 2,092 Florida 2,905 (16) % 3,443 Midwest 2,100 3 % 2,045 Texas 1,020 (35) % 1,566 West 2,063 (33) % 3,091 10,779 (17) % 12,982 Backlog dollars: Northeast $ 490,911 (11) % $ 550,349 Southeast 1,216,524 4 % 1,164,148 Florida 1,874,145 (17) % 2,263,079 Midwest 1,227,094 1 % 1,209,234 Texas 441,665 (37) % 698,484 West 1,592,900 (28) % 2,223,834 $ 6,843,239 (16) % $ 8,109,128 30 Operating Data by Segment ($000’s omitted) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Land-related charges (a) : Northeast $ 47 $ 638 $ 241 $ 1,604 Southeast 3,525 1,566 5,674 2,556 Florida 2,850 576 5,289 917 Midwest 757 287 1,603 647 Texas 3,858 262 4,350 507 West 6,782 356 23,424 1,444 Other homebuilding 593 95 1,603 123 $ 18,412 $ 3,780 $ 42,184 $ 7,798 (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 second quarter of 2025, Northeast home sale revenues increased 35% when compared with the prior year period due to a 19% increase in closings combined with a 13% increase in average selling price. The increase in closings and average selling price occurred across all markets. Income before income taxes increased 51%, 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 six months ended June 30, 2025, Northeast home sale revenues increased by a 31% when compared with the prior year period due to a 19% increase in closings combined with a 10% increase in average selling price. The increase in closings was primarily due to the timing of projects in our Northeast Corridor operations, while the increase in average selling price occurred across the majority of markets. Income before income taxes increased 54% 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 all markets. Southeast For the second quarter of 2025, Southeast home sale revenues decreased 3% when compared with the prior year period due to a 6% decrease in closings partially offset by a 4% 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 16%, primarily due to lower gross margins and higher overhead costs across the majority of markets. The increase in net new orders was mixed among markets. For the six months ended June 30, 2025, Southeast home sale revenues decreased 7% when compared with the prior year period due to a 12% decrease in closings partially offset by a 6% increase in average selling price. The decrease in closings occurred across the majority of markets while the increase in average selling price was mixed among markets. Income before income taxes decreased 19% primarily due to lower gross margins across the majority of markets. The decrease in net new orders was mixed among markets. Florida For the second quarter of 2025, Florida home sale revenues decreased 20% when compared with the prior year period primarily due to a 12% decrease in closings combined with an 8% decrease in average selling price. The decrease in closings occurred across the majority of markets, while the decrease in average selling price occurred across all markets. Income before income taxes decreased 41% primarily due to lower revenues and gross margins across the majority of markets. Net new orders increased across the majority of markets. 31 For the six months ended June 30, 2025, Florida home sale revenues decreased 17% when compared with the prior year period due to a 13% decrease in closings combined with a 5% decrease in the average selling price. The decrease in closings and average selling price occurred across the majority of markets. Income before income taxes decreased 36% 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 second quarter of 2025, Midwest home sale revenues increased 6% when compared with the prior year period 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 while the decrease in average selling price was mixed among markets. Income before income taxes increased 15% primarily due to higher revenues and gross margins across the majority of markets. The increase in net new orders was mixed among markets. For the six months ended June 30, 2025, Midwest home sale revenues increased 8% when compared with the prior year period due to an 8% increase in closings combined with a slight decrease in average selling price. The increase in closings and the decrease in average selling price occurred across the majority of markets. Income before income taxes increased 15% primarily due to higher revenues and gross margins across the majority of markets. The increase in net new orders was mixed among markets. Texas For the second quarter of 2025, Texas home sale revenues decreased 20% when compared with the prior year period due to a 17% decrease in closings combined with a 3% decrease in average selling price. The decrease in closings occurred across the majority of markets while the decrease in average selling price was mixed among markets. Income before income taxes decreased 49% primarily due to decreased revenues and gross margins across all markets, partially offset by lower overhead costs across the majority of markets. The decrease in net new orders occurred across all markets. For the six months ended June 30, 2025, Texas home sale revenues decreased 21% when compared with the prior year period due to a 19% decrease in closings combined with a 2% decrease in average selling price. The decrease in closings occurred across the majority of markets while the decrease in average selling price was mixed among markets. Income before income taxes decreased 47% primarily due to decreased revenues and gross margins across all markets, partially offset by lower overhead costs across the majority of markets. Net new orders decreased across the majority of markets. West For the second quarter of 2025, West home sale revenues increased 10% when compared with the prior year period due to a 1% increase in closings combined with a 9% increase in average selling price. The increase in closings and average selling price occurred across the majority of markets. Income before income taxes decreased 3%, primarily due to lower gross margins and increased overhead costs across the majority of markets. Net new orders decreased across the majority of markets. For the six months ended June 30, 2025, West home sale revenues increased 17% when compared with the prior year period due to a 6% increase in closing combine with a 10% increase in average selling price. The increase in closings and average selling price occurred across the majority of markets. Income before income taxes increased 3% primarily due to increased revenues, partially offset by lower gross margins and increased overhead costs across the majority of markets. Net new orders decreased across all 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 32 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 Six Months Ended June 30, June 30, 2025 2025 vs. 2024 2024 2025 2025 vs. 2024 2024 Mortgage revenues $ 74,224 (4) % $ 76,967 $ 137,094 (2) % $ 139,992 Title services revenues 25,047 (1) % 25,405 46,758 (1) % 47,224 Insurance agency commissions 1,887 (80) % 9,290 8,134 (52) % 16,803 Total Financial Services revenues 101,158 (9) % 111,662 191,986 (6) % 204,019 Expenses (59,611) 21 % (49,334) (114,581) 14 % (100,712) Equity income from unconsolidated entities 1,250 19 % 1,050 1,250 19 % 1,050 Income before income taxes $ 42,797 (32) % $ 63,378 $ 78,655 (25) % $ 104,357 Total originations: Loans 4,984 (2) % 5,105 9,255 (2) % 9,437 Principal $ 2,164,755 1 % $ 2,140,103 $ 4,030,773 3 % $ 3,895,150 Six Months Ended June 30, 2025 2024 Supplemental data: Capture rate 85.5 % 85.4 % Average FICO score 751 750 Funded origination breakdown: Government (FHA, VA, USDA) 27 % 25 % Other agency 69 % 72 % Total agency 96 % 97 % Non-agency 4 % 3 % Total funded originations 100 % 100 % Revenues Total Financial Services revenues for the three and six months ended June 30, 2025 decreased 9% and 6%, respectively, compared with the comparable prior year periods, reflective of the lower homebuilding volume. Insurance agency commissions reflect lower policy retention and commission rates as a result of the evolving environment for home insurance as carriers adjust their premiums, geographic markets, and product coverages. Income before income taxes Income before income taxes in the three and six months ended June 30, 2025 decreased 32% and 25%, respectively, compared with the same period in 2024 due to lower insurance agency commissions combined with higher expenses. Income Taxes Our effective tax rate for the three and six months ended June 30, 2025 was 24.6% and 24.0%, respectively, compared with 22.8% and 23.2% for the comparable prior year periods. 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. Our income tax expense for the three and six months ended June 30, 2024 also reflected a reduction in income tax liabilities totaling $13.2 million related to the favorable resolution of uncertain state tax positions. 33 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 June 30, 2025, we had unrestricted cash and equivalents of $1.2 billion, restricted cash balances of $33.2 million, and $908.8 million available under our Revolving Credit Facility. Our ratio of debt-to-total capitalization, excluding our Financial Services debt, was 11.4% at June 30, 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 additional unsecured senior notes beginning in January 2027 and beyond (see Note 4 ). We may from time to time repurchase our unsecured senior notes through open market purchases, privately negotiated transactions, or otherwise. 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 June 30, 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 $39.7 million and $35.8 million at June 30, 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 June 30, 2025. Outstanding balances under the Revolving Credit Facility are guaranteed by certain of our wholly-owned subsidiaries. At June 30, 2025, we had no borrowings outstanding, $341.2 million of letters of credit issued, and $908.8 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. 34 Joint venture debt At June 30, 2025, aggregate outstanding debt of unconsolidated joint ventures was $36.5 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 June 30, 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 June 30, 2025, Pulte Mortgage had $498.4 million outstanding at a weighted-average interest rate of 6.12% and $151.6 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 six months ended June 30, 2025, we declared cash dividends totaling $88.7 million and repurchased 5.8 million shares under our share repurchase authorization for $600.0 million. In the six months ended June 30, 2024, we declared cash dividends totaling $84.7 million and repurchased 5.1 million shares under our share repurchase authorization for $560.0 million. On January 29, 2025, the Board of Directors increased our share repurchase authorization by $1.5 billion, which was publicly announced on January 30, 2025. At June 30, 2025, we had remaining authorization to repurchase $1.6 billion of common shares. 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 June 30, 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 June 30, 2025, we had outstanding letters of credit totaling $341.2 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 $3.1 billion at June 30, 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 June 30, 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 June 30, 2025, outstanding deposits totaled $673.1 million, of which $21.5 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 June 30, 2025 related to debt and commitments and contingencies, respectively. 35 Cash flows Operating activities Net cash provided by operating activities in the six months ended June 30, 2025 was $421.7 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 six months ended June 30, 2025 were primarily due to net income of $1.1 billion, partially offset by a net increase in inventories of $533.0 million, which was primarily attributable to land acquisition, development, and house spend to support expected future growth. Net cash provided by operating activities in the six months ended June 30, 2024 was $657.3 million. The cash inflows from our operations for the six months ended June 30, 2024 were primarily due to net income of $1.5 billion, partially offset by a net increase in inventories of $473.7 million, which was primarily attributable to the increased number of homes in production coupled with land acquisition and development spend to support expected future growth, as well as a seasonal $55.3 million increase in residential mortgage loans available-for-sale. Investing activities Net cash used in investing activities in the six months ended June 30, 2025 was $39.2 million. These cash outflows primarily resulted from capital expenditures of $64.1 million related to our ongoing investments in new communities, facilities, and information technology applications, partially offset by distributions of capital from unconsolidated entities of $39.4 million. Net cash used in investing activities in the six months ended June 30, 2024 was $66.2 million. These cash outflows primarily resulted from capital expenditures of $55.3 million related to our ongoing investments in new communities, facilities, and information technology applications. Financing activities Net cash used in financing activities in the six months ended June 30, 2025 totaled $768.9 million. These cash outflows resulted primarily from the repurchase of 5.8 million common shares for $600.0 million under our share repurchase authorization, payments of $90.1 million in cash dividends, payments of $22.4 million related to consolidated inventory not owned, and net repayments of $28.5 million under the Repurchase Agreement. Net cash used in financing activities in the six months ended June 30, 2024 totaled $994.3 million. These cash outflows resulted primarily from the repurchase of 5.1 million common shares for $560.0 million under our share repurchase authorization, payments of $84.9 million in cash dividends, payments of $70.6 million related to consolidated inventory not owned, and $318.3 million of repayments of notes payable, partially offset by net borrowings of $24.4 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 June 30, 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, $341.2 million of letters of credit issued, and $908.8 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 36 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; • 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): 37 PulteGroup, Inc. and Guarantor Subsidiaries Summarized Balance Sheet Data ASSETS June 30, 2025 December 31, 2024 Cash, cash equivalents, and restricted cash $1,117,535 $1,218,207 House and land inventory 12,911,638 12,354,274 Amount due from Non-Guarantor Subsidiaries 890,680 1,024,762 Total assets 16,136,750 15,589,227 LIABILITIES Accounts payable, customer deposits, accrued and other liabilities $2,570,083 $2,735,190 Notes payable 1,623,065 1,618,586 Total liabilities 4,656,932 4,801,056 Six Months Ended June 30, Summarized Statement of Operations Data 2025 2024 Revenues $7,935,940 $8,223,331 Cost of revenues 5,779,077 5,778,838 Selling, general, and administrative expenses 748,053 704,832 Income before income taxes 1,371,236 1,774,676 Critical Accounting Estimates There have been no significant changes to our critical accounting estimates in the six months ended June 30, 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.