Century Communities, Inc.: Form 10-Q for the period ended Mar 31, 2025

As used in this Quarterly Report on Form 10-Q (which we refer to as this “Form 10-Q”), references to “we,” “us,” “our,” “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.

The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company, business, operations and present business environment and is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We use certain non-GAAP financial measures that we believe are important for purposes of comparison to prior periods. This information is also used by our management to measure the profitability of our ongoing operations and analyze our business performance and trends.

Cautionary Note Regarding Forward-Looking Statements

Some of the statements included in this Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” “outlook,” the negative of such terms and other comparable terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors.

The forward-looking statements included in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking and subject to risks and uncertainties including among others:

economic changes, either nationally or in the markets in which we operate, including changes in interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels and consumer confidence, and increased recessionary conditions;

shortages of or increased prices for labor, land or raw materials used in housing construction and resource shortages, including as a result of recent tariffs and immigration reform;

a downturn in the homebuilding industry, including a reduction in demand for our homes or a decline in real estate values or market conditions resulting in an adverse impact on our business, operating results and financial condition, including an impairment of our assets;

changes in assumptions used to make industry forecasts, population growth rates or trends affecting housing demand or prices;

volatility and uncertainty in the credit markets and broader financial markets and the impact on such markets and our ability to access them, including as a result of geopolitical conditions and in the event of a threatened or actual U.S. government shutdown or sovereign default;

our future business operations, operating results and financial condition; future impairment and restructuring charges; and changes in our business and investment strategy;

availability and price of land to acquire, and our ability to acquire such land on favorable terms or at all;

the effect of and risks associated with our acquisitions;

availability, terms and deployment of capital;

availability or cost of mortgage financing or an increase in the number of foreclosures in the market;

delays in land development or home construction resulting from adverse weather conditions or other events outside our control;

delays in completion of projects, land development or home construction, or reduced consumer demand for housing resulting from significant weather conditions and natural disasters in the geographic areas where we operate;

the impact of construction defect, product liability, and/or home warranty claims, including the adequacy of accruals and the applicability and sufficiency of our insurance coverage;

changes in, or the failure or inability to comply with, governmental laws and regulations;

the timing of receipt of municipal, utility and other regulatory approvals and the opening of projects and construction and completion of our homes;

the impact and cost of compliance with evolving environmental, health and safety and other laws and regulations and third-party challenges to required permits and other approvals and potential legal liability in connection therewith;

the degree and nature of our competition;

unstable economic and political conditions as well as geopolitical conflicts, could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes and/or increases to the price of gasoline and other fuels and cause higher interest rates, inflation, reduced consumer confidence and/or general economic uncertainty;

our leverage, debt service obligations and exposure to changes in interest rates and our ability to obtain additional or refinance our existing debt when needed or on favorable terms;

our ability to continue to fund and succeed in our mortgage lending business and the additional risks involved in that business;

availability of qualified personnel and contractors and our ability to obtain additional or retain existing key personnel and contractor relationships;

our ability to continue to pay dividends and make stock repurchases in the future; and

taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance.

Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including “Part II, Item 1A. Risk Factors,” and our other reports and filings with the SEC. If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q.

Business Overview

Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 17 states. In many of our projects, in addition to building homes, we entitle and develop the underlying land. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brand has an emphasis on serving the affordable homebuilding market but offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade selections. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade selections.

Our homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. Our indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, IHL Home Insurance Agency, LLC, and IHL Escrow Inc., which provide mortgage, title, insurance brokerage and escrow services, respectively, primarily to our homebuyers, have been identified as our Financial Services segment. Additionally, our Century Living segment is engaged in the development, construction, management, and disposition of multi-family rental properties, currently all located in Colorado.

While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing our customers greater certainty on their financing and allowing us to more appropriately price the homes and deploy our capital. Of the 2,284 homes delivered during the first three months of 2025, approximately 94% of homes delivered had purchase prices below the Federal Housing Administration-insured mortgage limits and approximately 99% of homes delivered were built as move-in ready homes.

Market conditions in the homebuilding industry have continued to be impacted by elevated mortgage rates, macro-economic and geopolitical uncertainty, and broader concerns about affordability by homebuyers. Amidst these market conditions, we experienced a slowing in demand during the first quarter of 2025, as net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2025 decreased 6.1% compared to the prior year period. Still, there remains an underlying need for affordable new homes, supported by solid demographic trends, and we have continued to provide, when necessary, incentive offerings across our communities, including discounts on base home prices, lot premiums, options and upgrades, and financing incentives, including interest rate buydowns. During the three months ended March 31, 2025, cycle times remained approximately in the four-month timeframe.

We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy, and we expect our operating strategy will continue to adapt to market changes, though we cannot provide any assurance that our strategies will remain consistent or continue to be successful. We believe future demand for our homes remains uncertain as future economic, market and geopolitical conditions remain uncertain, in particular with respect to inflation; the impact of potential future increases or decreases to the federal funds interest rate by the Federal Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial, credit and mortgage markets; the extent to which and how long government monetary directives and actions will impact the U.S. economy; the effect of recent tariffs; consumer confidence; wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental prices; availability and cost of land, labor and construction materials; demographic trends; housing demand; the possibility of an economic recession; and other factors, including those described elsewhere in this Form 10-Q. Specifically, changes in mortgage interest rates impact the costs of owning a home and affect the purchasing power of our customers and could impact homebuyer confidence. Changes in demand for our homes or cancellations due to mortgage interest rates, consumer confidence or otherwise affect our operating results in future periods, including our net sales, home deliveries, gross margin, origination volume of and revenues from our Financial Services segment, and net income. As a result, our past performance may not be indicative of our future results.

We believe we are well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase in our key markets and the favorable demographics that support the need for new affordable housing. We believe our operations are prepared to withstand volatility in future market conditions as a result of our product offerings which both span the home buying segment and focus on affordable price points, and our current and future inventories of attractive land positions. We have continued to focus on maintaining an appropriate balance of home and land inventories in relation to anticipated future demand, as well as prudent leverage; and, as a result, we believe we are well positioned to continue to execute on our strategy to optimize stockholder returns.

Results of Operations

During the three months ended March 31, 2025, we generated $52.5 million in income before income tax expense, as compared to $84.3 million in the prior year period, and we generated net income of $39.4 million, or $1.26 per diluted share, as compared to $64.3 million, or $2.00 per diluted share in the prior year period.

‎During the three months ended March 31, 2025, we generated total revenues of $903.2 million, as compared to $948.5 million in the prior year period, as we delivered 2,284 homes with an average sales price of $386.9 thousand, as compared to 2,358 homes with an average sales price of $391.2 thousand in the prior year period. The number of homes delivered decreased by 3.1% as compared to the prior year period primarily due to slower absorption rates, and average sales price decreased 1.1% as compared to the prior year, primarily due to higher incentives in the current year period. During the three months ended March 31, 2025, net new contracts decreased 6.1% to 2,692 as compared to the prior year period.

We ended the first quarter of 2025 with $100.3 million of cash and cash equivalents and $24.2 million of cash held in escrow. We had $237.0 million outstanding under our revolving line of credit, with a homebuilding debt to capital ratio of 32.4% and a net homebuilding debt to net capital ratio of 30.1%. During the three months ended March 31, 2025, we paid quarterly cash dividends to our stockholders of $0.29 per share, a 12% increase from the $0.26 per share quarterly dividend paid during the three months ended March 31, 2024. We have continued to strategically manage our lot pipeline, resulting in 79,014 lots owned and controlled at March 31, 2025.

Our Financial Services segment generated income before income tax expense of $2.4 million for the three months ended March 31, 2025, a 76.5% decrease from the prior year period. During the three months ended March 31, 2025, the number of mortgages originated decreased 2.6% and the number of loans sold to third parties decreased 2.8%, in each case as compared to the prior year period. The decrease in income before income tax expense of our Financial Services segment was primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in fair value of our mortgage servicing portfolio.

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024:

(in thousands, except per share amounts)

(1) This is a non-GAAP financial measure and should not be used as a substitute for our operating results prepared in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

(2) Homebuilding gross margin percentage is inclusive of impairment charges, if applicable. We recorded impairment charges of $0.4 million during the three months ended March 31, 2025. No impairment charges were recorded during the three months ended March 31, 2024.

NM – Not meaningful

Results of Operations by Segment

(dollars in thousands)

Commencing in the first quarter of 2025, we have separately reported our Century Living segment, previously included in our Corporate segment, in order to reflect the distinct nature of our multi-family rental operations. Accordingly, we have recast the corresponding segment information for the three months ended March 31, 2024.

(1) Includes cost of land sales and other revenues, and other income (expense).

West

During the three months ended March 31, 2025, our West segment generated income before income tax expense of $21.4 million, a 19.9% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin. Revenue increased $9.1 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 6.7% increase in the number of homes delivered, and was partially offset by a 1.2% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in open communities, and the average sales price decrease was driven by the mix of deliveries within individual communities. Homebuilding gross margin was 22.1% for the three months ended March 31, 2025, which decreased 230 basis points from 24.4% in the prior year period, primarily driven by higher incentives in the current year period.

Mountain

During the three months ended March 31, 2025, our Mountain segment generated income before income tax expense of $23.4 million, a 15.7% decrease from the prior year period, which was primarily driven by a decrease in revenue and a decrease in homebuilding gross margin. Revenue decreased $29.2 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 13.3% decrease in the number of homes delivered, and was partially offset by a 2.1% increase in the average sales price per home. The decrease in the number of homes delivered was primarily driven by slower absorption rates, and the average sales price increase was driven by the mix of deliveries within individual communities. Homebuilding gross margin was 19.6% for the three months ended March 31, 2025, which decreased 70 basis points from 20.3% in the prior year period, primarily driven by higher incentives in the current year period.

Texas

During the three months ended March 31, 2025, our Texas segment generated income before income tax expense of $10.4 million, a 25.4% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin. Revenue increased $5.4 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 7.8% increase in the number of homes delivered, and was partially offset by a 3.4% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in open communities and partially offset by slower absorption rates, and the average sales price decrease was driven by the mix of deliveries within individual communities. Homebuilding gross margin was 20.0% for the three months ended March 31, 2025, which decreased 170 basis points from 21.7% in the prior year period, primarily driven by higher incentives in the current year period.

Southeast

During the three months ended March 31, 2025, our Southeast segment generated income before income tax expense of $14.2 million, a 31.8% decrease from the prior year, which was primarily driven by a decrease in revenue and a decrease in homebuilding gross margin. Revenue decreased $27.2 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 20.1% decrease in the number of homes delivered, and was partially offset by a 4.1% increase in the average sales price per home. The decrease in the number of homes delivered was primarily driven by slower absorption rates, and the average sales price increase was driven by the mix of deliveries within individual communities. Homebuilding gross margin was 21.8% for the three months ended March 31, 2025, which decreased 90 basis points from 22.7% in the prior year period, primarily driven by higher incentives in the current year period.

Century Complete

During the three months ended March 31, 2025, our Century Complete segment generated income before income tax expense of $13.8 million, a 34.5% decrease from the prior year period, which was primarily driven by a decrease in homebuilding gross margin. Revenue increased $3.1 million during the three months ended March 31, 2025 as compared to the prior year period, primarily driven by a 2.1% increase in the number of homes delivered, and was partially offset by a 0.6% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in open communities, and the average sales price decrease was driven by the mix of deliveries within individual communities. Homebuilding gross margin was 18.0% for the three months ended March 31, 2025, which decreased 210 basis points from 20.1% in the prior year period, primarily driven by higher incentives in the current year period.

Financial Services

Our Financial Services segment originates mortgages for primarily our homebuyers, and as such, the volume of loans originated typically correlates to our number of homes delivered. Fluctuations in financial services income before income tax may occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. Our Financial Services segment generated income before income tax expense of $2.4 million for the three months ended March 31, 2025, a 76.5% decrease from the prior year period. During the three months ended March 31, 2025, the number of mortgages originated decreased 2.6% and the number of loans sold to third parties decreased 2.8%, in each case as compared to the prior year period. The decrease in income before income tax expense of our Financial Services segment was primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in fair value of our mortgage servicing portfolio.

The following table presents selected operational data for our Financial Services segment in relation to our loan origination activities (dollars in thousands):

Century Living

Our Century Living operations are engaged in the development, construction, management, and disposition of multi-family rental properties. As of March 31, 2025, the Company had three multi-family rental properties under active construction in Colorado, two of which were available for leasing. These three projects represent over 1,000 total multi-family units, including 471 under active construction and 581 completed units, of which 336 units were leased as of March 31, 2025.

Corporate

During the three months ended March 31, 2025, our Corporate segment generated a loss of $31.6 million, as compared to a loss of $35.3 million during the same respective period in 2024. The decrease in loss was primarily due to $7.7 million in impairment charges related to other investments during the three months ended March 31, 2024, as well as a reduction in interest income as compared to the prior year period.

Homebuilding Gross Margin

Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment, if applicable. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, decreased to 19.9% for the three months ended March 31, 2025 as compared to 21.3% in the prior year period. The decrease was primarily driven by higher incentives in the current year period.

In the following table, we calculate our homebuilding gross margin and our adjusted homebuilding gross margin, as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues, and further adjusted to exclude the effect of purchase price accounting for acquired work in process inventory, if applicable.

26

(1) This non-GAAP financial measure should not be used as a substitute for our operating results in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under “—Non-GAAP Financial Measures.” An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

For the three months ended March 31, 2025, our adjusted homebuilding gross margin percentage excluding inventory impairment, interest in cost of home sales revenues, and purchase price accounting for acquired work in process inventory was 21.6% as compared to 22.8% for the prior year period. We believe the above information is meaningful as it isolates the impact that inventory impairment, indebtedness, and acquisitions (in each case as applicable) during any period, have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to prior periods and to homebuilding gross margins of our competitors.

Selling, General and Administrative Expense

(dollars in thousands)

As a percentage of home sales revenue, our selling, general and administrative expense increased 130 basis points during the three months ended March 31, 2025, driven primarily by decreased revenue on a partially fixed cost base. Our selling, general and administrative expense increased $6.7 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This increase was primarily attributable to increased compensation and other costs due to higher active community count and $1.5 million in restructuring costs, and partially offset by decreased stock compensation expense.

Income Tax Expense

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. Our 2025 estimated annual effective tax rate, before discrete items, of 25.3%, is driven by our blended federal and state statutory rate of 24.6%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation, and partially offset by estimated federal energy home credits for current year home deliveries.

For the three months ended March 31, 2025, our estimated annual rate of 25.3% was benefitted by discrete items which had a net impact of decreasing our rate by 0.3%, including the impact of excess tax benefits for vested stock-based compensation.

For the three months ended March 31, 2025 and 2024, we recorded income tax expense of $13.1 million and $20.0 million, respectively.

Segment Assets

(dollars in thousands)

Total assets increased to $4.6 billion as of March 31, 2025 as compared to $4.5 billion as of December 31, 2024, primarily as a result of changes in our inventory balances within our homebuilding segments related to the timing of home and land development construction activities.

Homebuilding lots owned and controlled

During the three months ended March 31, 2025, we continued to strategically manage our lot pipeline, resulting in 79,014 lots owned and controlled at March 31, 2025, compared to 80,632 at December 31, 2024. Of our total lots owned and controlled as of March 31, 2025, 45.4% were owned and 54.6% were controlled, as compared to 44.3% owned and 55.7% controlled as of December 31, 2024.

Other Homebuilding Operating Data

Net new home contracts

Net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2025 decreased by 174 homes, or 6.1%, to 2,692 as compared to 2,866 for the same period in 2024.

Average monthly absorption rate

Our overall average monthly “absorption rate” (calculated as monthly net new home contracts divided by average selling communities) for the three months ended March 31, 2025 and 2024 by segment is included in the table below:

During the three months ended March 31, 2025, our absorption rate decreased by 24.3% to 2.8 per month as compared to the same period in 2024, driven by slowing demand during the first quarter of 2025 amidst homebuilding market conditions impacted by elevated mortgage rates, macro-economic and geopolitical uncertainty, and broader concerns about affordability by homebuyers.

Selling communities

Our selling communities increased by 65 communities to 318 communities at March 31, 2025 as compared to 253 at March 31, 2024. This 25.7% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts, as well as the acquisition of Anglia completed during the third quarter of 2024.

Backlog

(dollars in thousands)

Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. As of March 31, 2025, we had 1,258 homes in backlog, which decreased as compared to 1,590 homes in backlog at March 31, 2024, with a total value of $521.1 million, as compared to $667.2 million at March 31, 2024. Backlog dollar value decreased due to the decrease in the number of backlog units, and a 1.3% decrease in the average sales price of backlog units, largely due to mix.

Supplemental Guarantor Information

Our 6.750% senior notes due 2027 (which we collectively refer to as our “2027 Notes”) and our 3.875% senior notes due 2029 (which we collectively refer to as our “2029 Notes” and together with the 2027 Notes, the “Senior Notes”) are our unsecured senior obligations and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by substantially all of our direct and indirect wholly-owned operating subsidiaries (which we refer to collectively as “Guarantors”). Our subsidiaries associated with our Financial Services operations (referred to as “Non-Guarantors”) do not guarantee the Senior Notes. The guarantees are senior unsecured obligations of the Guarantors that rank equal with all existing and future senior debt of the Guarantors and senior to all subordinated debt of the Guarantors. The guarantees are effectively subordinated to any secured debt of the Guarantors. As of March 31, 2025, Century Communities, Inc. had outstanding $1.0 billion in total principal amount of Senior Notes.

Each of the indentures governing our Senior Notes provides that the guarantees of a Guarantor will be automatically and unconditionally released and discharged: (1) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the equity interests of such Guarantor after which the applicable Guarantor is no longer a “Restricted Subsidiary” (as defined in the respective indentures), which sale, transfer, exchange or other disposition does not constitute an “Asset Sale” (as defined in the respective indentures) or is made in compliance with applicable provisions of the applicable indenture; (2) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the assets of such Guarantor, which sale, transfer, exchange or other disposition does not constitute an Asset Sale or is made in compliance with applicable provisions of the applicable indenture; provided, that after such sale, transfer, exchange or other disposition, such Guarantor is an “Immaterial Subsidiary” (as defined in the respective indentures); (3) unless a default has occurred and is continuing, upon the release or discharge of such Guarantor from its guarantee of any indebtedness for borrowed money of the Company and the Guarantors so long as such Guarantor would not then otherwise be required to provide a guarantee pursuant to the applicable indenture; provided that if such Guarantor has incurred any indebtedness in reliance on its status as a Guarantor in compliance with applicable provisions of the applicable Indenture, such Guarantor’s obligations under such indebtedness, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Guarantor) in compliance with applicable provisions of the applicable Indenture; (4) upon the designation of such Guarantor as an “Unrestricted Subsidiary” (as defined in the respective Indentures), in accordance with the applicable indenture; (5) if the Company exercises its legal defeasance option or covenant defeasance option under the applicable indenture or if the obligations of the Company and the Guarantors are discharged in compliance with applicable provisions of the applicable indenture, upon such exercise or discharge; or (6) in connection with the dissolution of such Guarantor under applicable law in accordance with the applicable indenture.

If a Guarantor were to become a debtor in a case under the US Bankruptcy Code, a court may decline to enforce its guarantee of the Senior Notes. This may occur when, among other factors, it is found that the Guarantor originally received less than fair consideration for the guarantee and the Guarantor would be rendered insolvent by enforcement of the guarantee. 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 its guarantee of the Senior Notes when the guarantee was issued, was not insolvent and did not and has not incurred debts beyond its ability to pay such debts as they mature. The Company cannot predict, however, what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

Only the 2027 Notes and the related guarantees are registered securities under the Securities Act of 1933, as amended (the “Securities Act”). The offer and sale of the 2029 Notes and the related guarantees were not and will not be registered under the Securities Act or the securities laws of any other jurisdiction and instead were issued in reliance upon an exemption from such registration. Unless they are subsequently registered under the Securities Act, neither the 2029 Notes nor the related guarantees may be offered and sold only in transactions that are exempt from the registration requirements under the Securities Act and the applicable securities laws of any other jurisdiction.

The Guarantors’ condensed supplemental financial information is presented in this report as if the Senior Note guarantees existed during the periods presented pursuant to applicable SEC rules and guidance. If any Guarantors are released from the guarantees in future periods, the changes are reflected prospectively. We have determined that separate, full financial statements of the Guarantors would not be material to investors, and accordingly, supplemental financial information is presented below.

The following summarized financial information is presented for Century Communities, Inc. and the Guarantor Subsidiaries on a combined basis after eliminating intercompany transactions and balances among Century Communities, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from Non-Guarantor Subsidiaries.

Century Communities, Inc. and Guarantor Subsidiaries

Critical Accounting Policies

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and the estimates included in our financial statements might be impacted if we used different assumptions or conditions. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on January 30, 2025, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies.”

Liquidity and Capital Resources

Overview

Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $787.5 million as of March 31, 2025 and $918.0 million as of December 31, 2024.

Our principal uses of capital for the three months ended March 31, 2025 were our land purchases, land development, home construction, construction of multi-family rental properties, share repurchases, dividends, and the payment of routine liabilities.

Cash flows for each of our communities depend on the stage in the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and not recognized in our consolidated statements of operations until a home closes, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint, we continue to acquire and develop lots in our markets when they meet our current investment criteria.

Short-term Liquidity and Capital Resources

We use funds generated by operations, available borrowings under our revolving line of credit, and proceeds from issuances of debt or equity to fund our short-term working capital obligations and our purchases of land, as well as land development, home construction activities, and other cash needs. We had $237.0 million outstanding under our revolving line of credit as of March 31, 2025, as compared to $135.5 million outstanding as of December 31, 2024.

Our Financial Services operations use funds generated from operations, and availability under our mortgage repurchase facilities to finance its operations, including originations of mortgage loans to our homebuyers.

Our Century Living operations use excess cash from our operations, as well as project specific secured financing under construction loan agreements to fund development of multi-family projects.

We believe that we will be able to fund our current liquidity needs for at least the next twelve months with our cash on hand, cash generated from operations, and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available or on acceptable terms based on the macro-economy and market conditions at the time. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. We believe we are well positioned from a cash and liquidity standpoint to operate in an uncertain environment and to pursue other ways to properly deploy capital to enhance returns, which may include taking advantage of strategic opportunities as they arise.

Long-term Liquidity and Capital Resources

Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available, or on favorable terms, especially if interest rates remain high. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance debt, or dispose of certain assets to fund our operating activities and capital needs.

Material Cash Requirements

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future in addition to our outstanding debt obligations and debt service requirements described below. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three months ended March 31, 2025, there were no material changes to the contractual obligations we previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 that was filed with the SEC on January 30, 2025.

In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. Purchase and option contracts for the purchase of land enable us to defer acquiring portions of properties owned by third parties until we have determined whether to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. These purchase contracts typically require a cash deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and others as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require payment by us of a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. Our obligations with respect to purchase contracts and option contracts are generally limited to the forfeiture of the related non-refundable cash deposits.

As of March 31, 2025, we had outstanding purchase contracts and option contracts for 43,117 lots totaling approximately $3.0 billion and we had $111.0 million of deposits for land contracts, of which $70.5 million were non-refundable cash deposits pertaining to land contracts. For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next 24 months. Our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change and dependent on future market conditions. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

In addition, in the ordinary course of business, we explore, and from time to time, enter into purchase agreements to opportunistically acquire other homebuilders to add existing and future lots to our land portfolio and augment the organic expansion of our land portfolio. These acquisitions are often legally structured as asset acquisitions for cash and conditioned upon a due diligence investigation by us of the business for a limited period of time, in addition to other standard and customary closing conditions.

Outstanding Debt Obligations and Debt Service Requirements

One of our principal liquidity needs is the payment of principal and interest on our outstanding indebtedness. Our outstanding indebtedness is described in detail in Note 10 – Debt in the Notes to the Condensed Consolidated Financial Statements. We are required to meet certain covenants, and as of March 31, 2025, we were in compliance with all such covenants and requirements under the agreements governing our revolving line of credit, mortgage repurchase facilities, and construction loan agreements. See Note 10 – Debt in the Notes to the Condensed Consolidated Financial Statements for further detail.

Our outstanding debt obligations included the following as of March 31, 2025 and December 31, 2024, respectively (in thousands):

(1) The carrying value of the senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.

(2) As of March 31, 2025, other financing obligations included $3.2 million related to insurance premium notes, as well as $118.1 million outstanding under construction loan agreements related to Century Living, as described below. As of December 31, 2024, other financing obligations included $11.0 million related to insurance premium notes and certain secured borrowings, as well as $102.4 million outstanding under construction loan agreements.

We may from time to time seek to refinance or increase our outstanding debt or retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may or may not be material during any particular reporting period.

6.750% Senior Notes Due 2027

As of March 31, 2025, we had outstanding $500.0 million in aggregate principal amount of our 6.750% Senior Notes due 2027, which principal balance is due in June 2027. Prior to that date, interest only payments are due semi-annually in June and December of each year. These notes were issued under an indenture which contains certain restrictive covenants on issuing future secured debt and other transactions. As of March 31, 2025, the aggregate obligation of these notes, inclusive of unamortized financing costs on these notes was $498.2 million as reported on our condensed consolidated financial statements.

3.875% Senior Notes Due 2029

As of March 31, 2025, we had outstanding $500.0 million in aggregate principal amount of our 3.875% Senior Notes due 2029, which principal balance is due in August 2029. Prior to that date, interest only payments are due semi-annually in February and August of each year. These notes were issued under an indenture which contains certain restrictive covenants on issuing future secured debt and other transactions. As of March 31, 2025, the aggregate obligation, inclusive of unamortized financing costs on these notes, was $496.6 million, as reported on our condensed consolidated financial statements.

Construction Loan Agreements

Certain wholly owned subsidiaries of Century Living, LLC are parties to construction loan agreements with various banks (which we collectively refer to as “the lenders”). These construction loan agreements collectively provide that we may borrow up to an aggregate of $204.7 million from the lenders for purposes of construction of multi-family projects in Colorado, with advances made by the lenders upon the satisfaction of certain conditions. The obligations under construction loan agreements are guaranteed by certain of our subsidiaries. Borrowings under the construction loan agreements bear interest at various rates, including a fixed rate and floating interest rates per annum equal to the Secured Overnight Financing Rate (which we refer to as “SOFR”) plus an applicable margin. The outstanding principal balances and all accrued and unpaid interest is due on varying maturity dates from March 17, 2026 through February 28, 2029, with certain of the construction loan agreements allowing for the option to extend the maturity dates for a period of 12 months if certain conditions are satisfied. The construction loan agreements contain customary affirmative and negative covenants (including covenants related to construction completion, and limitations on the use of loan proceeds, transfers of land, equipment, and improvements), as well as customary events of default. Interest on our construction loan agreements is capitalized to the multi-family properties assets included in prepaid expenses and other assets on the condensed consolidated balance sheets while the related multi-family rental properties are being actively developed.

As of March 31, 2025 and December 31, 2024, $118.1 million and $102.4 million was outstanding under the construction loan agreements respectively, with borrowings that bore a weighted average interest rate of 6.6% and 6.5% as of March 31, 2025 and December 31, 2024, respectively, and we were in compliance with all covenants thereunder.

Revolving Line of Credit

On November 1, 2024, we entered into a credit agreement (the “Credit Agreement”) with U.S. Bank National Association, as Administrative Agent, and the lenders party thereto. The Credit Agreement, which replaced our prior Second Amended and Restated Credit Agreement, provides us with a senior unsecured revolving credit facility (which we refer to as the “revolving line of credit”) of up to $900.0 million. The revolving line of credit includes a $250.0 million sublimit for letters of credit. Subject to the terms and conditions of the Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $400.0 million. The obligations under the Credit Agreement are guaranteed by certain of our subsidiaries. Funds are available under the revolving line of credit for the construction of homes, for the acquisition and development of land, land under development and lots for the eventual construction of homes thereon, and for working capital in the ordinary course of business. Unless terminated earlier, the revolving line of credit will mature on November 1, 2028, and the principal amount thereunder, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on such date. Subject to the terms and conditions of the Credit Agreement, we may request once per year a one-year extension of the maturity date and up to three times during the term of the revolving line of credit, subject to the approval of the lenders and the Administrative Agent. The Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments, issue certain equity securities, engage in transactions with affiliates and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. Borrowings under the Credit Agreement bear interest at a floating rate equal to Term SOFR or Daily Simple SOFR (in each case as defined in the Credit Agreement), plus an applicable margin between 1.45% and 2.30% per annum, or if selected by us, a base rate plus an applicable margin between 0.45% and 1.30% per annum. The “applicable margins” described above are determined by a schedule based on our leverage ratio, as defined in the Credit Agreement. The Credit Agreement also provides for customary fees including commitment fees payable to each lender ranging from 0.20% to 0.35% per annum based on our leverage ratio of the unused portion of the revolving line of credit and other customary fees.

As of March 31, 2025 and December 31, 2024, $237.0 million and $135.5 million, respectively, was outstanding under the revolving line of credit, with borrowings that bore an interest rate of 5.9% and 5.9%, respectively, and we were in compliance with all covenants under the Credit Agreement. On April 22, 2025, in accordance with the terms of the Credit Agreement, we increased our revolving line of credit to $1.0 billion.

Mortgage Repurchase Facilities – Financial Services

Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., U.S. Bank National Association and Truist Bank, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $375.0 million as of March 31, 2025, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through November 14, 2025. Borrowings under the mortgage repurchase facilities bear interest at variable interest rates per annum equal to SOFR plus an applicable margin, and bore a weighted average interest rate of 6.0% as of March 31, 2025.

Amounts outstanding under the repurchase facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of March 31, 2025 and December 31, 2024, we had $204.3 million and $232.8 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.

Letters of Credit and Performance Bonds

In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of March 31, 2025 and December 31, 2024, we had $570.9 million and $563.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance and other bonds are not generally fully released until all development and construction activities are completed.

Stock Repurchases

Our current stock repurchase program, authorized by our Board of Directors, authorizes us to repurchase up to 4.5 million shares of our outstanding common stock, of which 3.9 million shares remained available to be repurchased as of March 31, 2025. During the three months ended March 31, 2025 and 2024, an aggregate of 753.3 thousand and 186.9 thousand shares, respectively, were repurchased under this and our previous stock repurchase program for a total purchase price of approximately $55.6 million and $16.1 million, respectively, and a weighted average price of $73.76 and $86.16 per share, respectively, excluding the excise tax accrued on our net share repurchases as a result of the Inflation Reduction Act of 2022.

Under the terms of these programs, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program is determined by management at its discretion and depends on a number of factors, including, among others, the market price of our common stock, trading volume, our available cash balance, our anticipated working capital needs, other capital management objectives and opportunities, applicable legal requirements, applicable tax effects including the 1% excise tax instituted under the Inflation Reduction Act of 2022, and general market and economic conditions. We finance any stock repurchases through available cash and our revolving line of credit. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. Our stock repurchase programs have no expiration dates and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the programs will be cancelled and returned to the status of authorized but unissued shares of common stock.

Cash Dividends

The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three months ended March 31, 2025 and 2024, respectively (in thousands, except per share information):

We expect to continue paying our quarterly cash dividends to stockholders for the remainder of 2025. However, the declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our Board of Directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions.

Cash Flows— Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

For the three months ended March 31, 2025 and 2024, the comparison of cash flows is as follows:

Our primary sources of cash flows from operations are from the sale of single-family attached and detached homes and mortgages. Our primary uses of cash flows from operations are the acquisition of land and expenditures associated with the construction of our single-family attached and detached homes and the origination of mortgages held for sale. Net cash used in operating activities was $36.6 million during the three months ended March 31, 2025 as compared to net cash provided by operating activities of $21.6 million during the prior year period. This change is primarily a result of (1) a $24.9 million decrease in net income, (2) changes in cash balances held in escrow, and (3) expenditures related to the development, construction, and management of multi-family rental properties by our Century Living segment within prepaid and other assets during the three months ended March 31, 2025. During the three months ended March 31, 2025, our strategy evolved for our Century Living multi-family rental properties to be predominantly focused on the disposition of the assets and we determined that these operations have become part of our ordinary activities, and cash flows from development activities and the disposition of properties are recorded as operating activities on the condensed consolidated statement of cash flows.

Net cash used in investing activities decreased to $4.0 million during the three months ended March 31, 2025, compared to $64.6 million during the prior year period. This decrease was primarily related to (1) $32.7 million in expenditures related to our acquisition of Landmark during the three months ended March 31, 2024 and (2) $26.0 million in expenditures related to the development, construction, and management of multi-family rental properties by our Century Living segment during the three months ended March 31, 2024. During the three months ended March 31, 2025, our strategy evolved for our Century Living multi-family rental properties to be predominantly focused on the disposition of the assets and we determined that these operations have become part of our ordinary activities, and cash flows from development activities and the disposition of properties are recorded as operating activities on the condensed consolidated statement of cash flows.

Net cash used in financing activities was $1.5 million during the three months ended March 31, 2025, compared to $54.7 million during the prior year period. This decrease in net cash used in financing activities was primarily attributable to a $101.5 million increase in net borrowings under our revolving line of credit during the current year period, and was partially offset by a $39.5 million increase in stock repurchases during the current year period, in each case compared to the prior year period.

As of March 31, 2025, our cash and cash equivalents and restricted cash balance was $133.2 million, as compared to $175.3 million as of December 31, 2024.

Non-GAAP Financial Measures

In this Form 10-Q, we use certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, net homebuilding debt to net capital, adjusted net income and adjusted diluted earnings per share. These non-GAAP financial measures are presented to provide investors additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information to investors because they are used to evaluate our performance on a comparable year-over-year or period-over-period basis. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented.

EBITDA and Adjusted EBITDA

The following table presents EBITDA and adjusted EBITDA for the three months ended March 31, 2025 and 2024. EBITDA and adjusted EBITDA are non-GAAP financial measures we use as a supplemental measure in evaluating operating performance. We define EBITDA as net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense (income), and (iv) depreciation and amortization expense. We define adjusted EBITDA as EBITDA before inventory impairment, restructuring costs, impairment on other investment, purchase price accounting for acquired work in process inventory and loss on debt extinguishment, in each case as applicable during a period. We believe EBITDA and adjusted EBITDA provide an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that these measurements are useful for comparing general operating performance from period to period. Neither EBITDA nor adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our presentation of adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Each of our EBITDA and adjusted EBITDA is limited as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results of operations as reported under GAAP

(dollars in thousands)

NM – Not Meaningful

Net Homebuilding Debt to Net Capital

The following table presents our ratio of net homebuilding debt to net capital, which is a non-GAAP financial measure. We calculate this by dividing net homebuilding debt (homebuilding debt less cash and cash equivalents, and cash held in escrow) by net capital (net homebuilding debt plus total stockholders’ equity). Homebuilding debt is our total debt minus our outstanding borrowings under our construction loan agreements and our repurchase facilities. The most directly comparable GAAP measure is the ratio of debt to total capital. We believe the ratio of net homebuilding debt to net capital is a relevant and useful financial measure to investors in understanding the leverage employed in our operations and as an indicator of our ability to obtain external financing.

(dollars in thousands)

Adjusted Net Income and Adjusted Diluted Earnings per Share

Adjusted net income and adjusted diluted earnings per share (which we refer to as “Adjusted EPS”) are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of certain non-recurring items. We believe excluding certain non-recurring items provides more comparable assessment of our financial results from period to period. We define adjusted net income as consolidated net income before (i) income tax expense; (ii) inventory impairment; (iii) restructuring costs; (iv) impairment on other investment; (v) purchase price accounting for acquired work in process inventory; and (vi) loss on debt extinguishment; in each case, as applicable during a period, less adjusted income tax expense, calculated using our estimated annual effective tax rate after discrete items for the applicable period. Adjusted EPS is calculated by dividing adjusted net income by weighted average common shares – diluted.

(in thousands, except share and per share information)

(1) The tax rates used in calculating adjusted net income for the three months ended March 31, 2025 and 2024 were 25.0% and 23.7%, respectively, which are reflective of our GAAP tax rates for the applicable periods.

Interest Rates

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our Credit Agreement and construction loan agreements. For additional information regarding our market risk, refer to the “Quantitative and Qualitative Disclosures About Market Risk” section of our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in our market risk since December 31, 2024.

Inflation

Our homebuilding operations have been and may continue to be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs. The Federal Reserve did not change the federal funds interest rate during the first quarter of 2025, and we cannot provide any assurance as to the impact of any future potential changes to the federal funds interest rate or mortgage rates on our current or future business. Inflation has led and could continue to lead to higher mortgage rates, which has and could continue to significantly affect the affordability of mortgage financing to homebuyers and lead to weakened demand for our homes, as well as increased cancellations compared to prior year periods.

Seasonality

Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity during the spring, although this activity is also highly dependent on the number of active selling communities, timing of new community openings, and other market factors. Since it typically takes approximately four months to construct a new home, we typically deliver more homes in the second half of the year as spring and summer home starts convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of our cash receipts from home deliveries occurs during the second half of the year. This seasonality pattern may be affected by volatility in the homebuilding industry, supply chain challenges, subcontractor and labor shortages, and changes in demand for our homes.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our co-principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”)) as of March 31, 2025, the end of the period covered by this Form 10-Q. Based on this evaluation, our co-principal executive officers and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2025 in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes during the first quarter of 2025 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 that was filed with the SEC on January 30, 2025, other than the revised risk factors below:

We are subject to demand fluctuations in the housing market and homebuilding industry. Declines in demand for our homes or in the homebuilding industry have, and may continue to, materially and adversely affect our business, results of operations, and financial condition.

Demand for our homes is subject to fluctuations, often due to factors outside of our control. These factors may include interest rates and Federal Reserve policy changes; inflation; consumer confidence and spending, which declined significantly in the first quarter of 2025; employment levels; uncertainty and recent declines in financial, credit and consumer lending markets; slow economic growth or recessionary conditions in various regions or industries around the world; availability of financing for homebuyers; tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements; changes to mortgage regulations; availability and prices of new homes compared to existing inventory; demographic trends, including slower rates of population growth or population decline in our markets; the effect of pandemics; and other factors, including those described elsewhere in this report. Recent declines in consumer confidence and spending, market fluctuations and the increased likelihood of recessionary conditions contributed to reduced demand for our homes in the first quarter of 2025 compared to recent prior periods, which adversely affected our first quarter 2025 results of operations. If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices rise, there could likely be additional corresponding adverse effects on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed, cancellations of home purchase contracts, and the amount of revenues or profits we generate, and such effect may be material. In a housing market downturn when demand for our homes decreases, our revenues and results of operations are typically adversely affected; we may have significant inventory impairments and other write-offs; our gross margins may decline significantly from historical levels; and we may incur substantial losses from operations. At any particular time, we cannot accurately predict whether housing market conditions will improve, deteriorate or continue as they exist at that time.

Adverse changes in general economic conditions have reduced and may continue to reduce the demand for our homes and, as a result, have had and may continue to have a material adverse effect on our business, results of operations and financial condition.

The residential homebuilding industry is cyclical and is highly sensitive to changes in local and general economic conditions that are outside our control, including:

consumer confidence, employment levels, job growth, spending levels, wage and personal income growth, personal indebtedness levels, and household debt-to-income levels of potential homebuyers;

the availability and cost of financing for homebuyers or restrictive mortgage standards, including private and federal mortgage financing programs and federal, state, and provincial regulation of lending practices;

real estate taxes and federal and state income tax provisions, including provisions for the deduction of mortgage interest payments;

U.S. and global financial system and credit markets, including short- and long-term interest rates and inflation, and any effects from a potential U.S. government shutdown or sovereign default;

housing demand from population growth, household formations, new home buying catalysts (such as marriage and children), second home buying catalysts (such as retirement), home sale catalysts (such as an aging population), demographic changes (including immigration levels and trends in urban and suburban migration), generational shifts, or otherwise, or perceptions regarding the strength of the housing market, and home price appreciation and depreciation resulting therefrom;

competition from other real estate investors with significant capital, including other real estate operating companies and developers, institutional investment funds, and companies solely focused on single-family rentals; and

the supply of new or existing homes, including foreclosures, and other housing alternatives, such as apartments and other residential rental property, and the aging of existing housing inventory.

These factors have resulted in the past and in the future could result in a decline in the demand for our homes, as well as a decline in the pricing for our homes, an increase in customer cancellations, an increase in selling concessions, and downward pressure on the market value of our inventory, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations and increase the risk for asset impairments. In the first quarter of 2025, uncertainty resulting in part from the imposition and repeal of tariffs on U.S. trade partners caused declines in consumer confidence and spending, market fluctuations and the increased likelihood of recessionary conditions, which resulted in a decline in the demand for our homes during first quarter of 2025 compared to recent prior periods, which had a material adverse effect on our first quarter 2025 results of operations. If these conditions persist, there may be a sustained downturn in the homebuilding market, which would likely have an adverse effect on our business and results of operations for multiple years.

In addition, the portion of our customer base that consists of first- and second-time move-up buyers often purchase homes subject to contingencies related to the sale and/or closing of their existing homes. If these potential buyers face difficulties in selling or closing their homes, whether due to rising interest rates for mortgage loans, periods of weak or uncertain economic conditions, oversupply, restrictive mortgage standards or otherwise, our sales may be adversely affected. Moreover, we may need to reduce our sales prices, possibly in instances where appraised values of our homes are lower than our sales price, and offer greater incentives to buyers to compete for sales that may result in reduced margins. Also, because we have increased our supply of quick move-in (or “spec”) homes relative to our built-to-order homes, adverse changes in economic conditions could cause us to reduce prices more rapidly to avoid carrying large amounts of finished inventory. This, in turn, could adversely affect our results of operations and financial condition.

Global economic and political instability and conflicts could adversely affect our business, financial condition or results of operations.

A global economic slowdown, inflation, rising interest rates and the possibility of a future recession, as well disruptions in access to bank deposits or lending commitments due to bank failure, could materially and adversely affect our liquidity, our business, financial condition and results of operations. The failure of any bank with which we do business could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

Additionally, our business could be adversely affected by unstable economic and political conditions as well as geopolitical conflicts. While we do not have any customer or direct supplier relationships in foreign countries experiencing war, military conflicts, sanctions, or export controls, other actions that may be initiated by nations (e.g., the recent imposition and repeal of tariffs, potential cyber attacks, disruption of energy flows, etc.) and other potential uncertainties could adversely affect our supply chain by causing shortages or increases in costs for materials necessary to construct homes, as described elsewhere in these risk factors, and/or increases to the price of gasoline and other fuels. In addition, such events could cause higher interest rates, inflation or general economic and geopolitical uncertainty, including the recent economic uncertainty and volatility resulting from the imposition and repeal of tariffs, any of which could negatively impact our business partners, employees or customers, or otherwise adversely impact our business. Furthermore, deployments of U.S. military personnel to foreign regions, terrorist attacks, other acts of violence or threats to national security and any corresponding response by the United States or others, related domestic or international instability or civil unrest may cause an economic slowdown in the markets where we operate, which could adversely affect our business.

Any increase in unemployment or underemployment may lead to reduced demand for our homes and an increase in the number of loan delinquencies and property repossessions and have an adverse impact on our business and results of operations.

In the United States, the unemployment rate was 4.2% as of the end of March 2025, according to the U.S. Bureau of Labor Statistics. Recessionary conditions may cause this rate to increase. People who are not employed, are underemployed, or are concerned about the loss of their jobs are less likely to purchase new homes, may be forced to try to sell the homes they own, and may face difficulties in making required mortgage payments. Therefore, an increase in unemployment or underemployment may lead to an increase in the number of loan delinquencies and property repossessions and have an adverse impact on our business by both reducing the demand for the homes we build and increasing the supply of homes for sale, which would also likely adversely affect our Financial Services business, which is dependent upon the sale of our homes. In addition, an increase in unemployment or underemployment may result in increased default rates on mortgage loans we originated, which could expose us to repurchase obligations or other liabilities, reduce our ability to sell or finance the loans we originate or require us to sell or finance the loans we originate on less favorable terms, lead us to impose stricter loan qualification standards, or result in us no longer being able to offer financing terms that are attractive to potential buyers, all of which would adversely affect our Financial Services business.

Inflation has adversely affected and could continue to adversely affect our business and financial results, especially since we may not be able to raise home prices sufficiently to offset increased prices.

Although inflation eased somewhat in 2024, high inflation has adversely affected us in recent years by increasing the costs of land, materials and labor needed to operate our business and could continue to adversely affect us in future periods. The recent implementation of widespread tariffs and the future implementation of inflationary policies may have similar adverse effects. In the event inflation increases again, we may seek to increase the sales prices of homes in order to maintain satisfactory margins. However, an oversupply of homes relative to demand and home prices being set several months before homes are delivered and affordability concerns may make any such increase difficult or impossible in future periods. In addition, inflation is often accompanied by higher interest rates, which historically negatively impact housing demand. While we historically have been able to pass along price increases to our consumers to help offset price increases, we may not be able to continue to do so, thereby adversely impacting our margins. Moreover, the cost of capital typically increases as a result of inflation and the purchasing power of our cash resources typically declines. Future actions by the government to stimulate the economy may further increase the risk of inflation, which may have an adverse impact on our business or financial results.

Tariffs and duties that have been and may be enacted into law could adversely affect our business and financial results, especially since we may not be able to raise home prices sufficiently to offset increased prices caused by any such trade regulations.

The Trump administration has implemented a number of tariffs. Most recently, on April 2, 2025, the President implemented additional tariffs on 180 countries and territories, which currently range from 10% to 125%. Although these tariffs were subsequently paused in part for 90 days, it is uncertain whether and to what extent they may become effective following this period. Additionally, while Canadian lumber was exempt from these tariffs, the U.S. Department of Commerce has indicated that it will more than double duties imposed on Canadian softwood lumber imports by September 2025, which may increase the cost of lumber available in the U.S and, therefore, increase the cost of our homes. As noted above with respect to the impact of inflation, while we historically have been able to pass along price increases to our consumers to help offset price increases we incur, we may not be able to continue to do so depending on the significance of cost increases, thereby adversely impacting our margins as a result of any tariffs and duties imposed on our operations. More broadly, adverse effects such trade regulations may have on U.S. national or regional economies could adversely affect our business and financial results.

Raw materials and building supply shortages and price fluctuations could delay or increase the cost of home construction and adversely affect our operating results.

The homebuilding industry, from time to time, has experienced and will likely continue to experience raw material shortages and has been adversely affected by volatility in global commodity prices and government imposed tariffs and other trade regulations, including those described elsewhere in these risk factors. Shortages and fluctuations in the price of concrete, drywall, steel, lumber or other important raw materials in the past have resulted, and in the future could result, in delays in the start or completion of, or increase the cost of, developing one or more of our residential communities. These shortages can be more severe during periods of strong demand for housing or during periods following natural disasters that have a significant impact on existing residential and commercial structures. The cost of raw materials also in the past has been, and in the future may be, materially and adversely affected during periods of shortages or high inflation or as a result of trade regulations, such as the recent imposition of increased tariffs. These shortages have caused, and in the future may cause, construction delays, and increases in our costs of home construction.

Shortages or increases in the price of raw materials could cause delays in and increase our costs of home construction. We generally are unable to pass on increases in construction costs to customers who have already entered into home purchase contracts and may not be able to sufficiently increase the price of homes remaining to be sold due to affordability concerns or otherwise. Sustained increases in construction costs may continue to adversely affect our gross margins, which in turn could materially and adversely affect our business, liquidity, financial condition and results of operations.

The cost of petroleum products, which are used both to deliver our materials and to transport workers to our job sites, fluctuates and may be subject to increased volatility as a result of geopolitical events or accidents. Increases in such costs could also result in higher prices for any product utilizing petrochemicals. Persistent cost increases may have an even greater adverse effect on our operating margins and results of operations. Furthermore, any such cost increase may adversely affect the regional economies in which we operate and reduce demand for our homes.

Our Financial Services segment can be adversely affected by reduced demand for our homes.

Nearly all of the mortgage loans closed by our Financial Services segment in 2024 were made to buyers of homes we built. Therefore, a decrease in the demand for our homes adversely affects the revenues of this segment of our business. In the first quarter of 2025, economic uncertainty, as described elsewhere in these risk factors, contributed to reduced demand for our homes compared to recent prior periods, which adversely affected our revenues and our Financial Services segment. Future demand for our homes is uncertain and dependent upon interest rates for mortgage loans, consumer confidence, availability of credit, economic conditions and other factors, including those described elsewhere in this report, and it is possible that demand for our homes may decrease further in 2025 if current economic conditions persist or worsen.