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Washington, D.C. 20549

(Exact name of registrant as specified in its charter) 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [X]   No  [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  [X]   No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Number of common shares outstanding as of April 15, 2025: 200,427,178

 

			March 31, 2025						December 31, 2024
			(Unaudited)
ASSETS
Cash and equivalents			$	1,235,666					$	1,613,327
Restricted cash			40,219						40,353
Total cash, cash equivalents, and restricted cash			1,275,885						1,653,680
House and land inventory			12,959,499						12,692,820
Residential mortgage loans available-for-sale			642,793						629,582
Investments in unconsolidated entities			220,787						215,416
Other assets			2,071,683						2,001,991
Goodwill			68,930						68,930
Other intangible assets			43,937						46,303
Deferred tax assets			53,032						55,041
			$	17,336,546					$	17,363,763
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable			$	682,143					$	727,995
Customer deposits			541,455						512,580
Deferred tax liabilities			461,978						443,566
Accrued and other liabilities			1,297,475						1,412,166
Financial Services debt			426,851						526,906
Notes payable			1,625,672						1,618,586
			5,035,574						5,241,799
Shareholders' equity			12,300,972						12,121,964
			$	17,336,546					$	17,363,763

 

PulteGroup, Inc. is one of the largest homebuilders in the United States ("U.S."), and our common shares trade on the New York Stock Exchange under the ticker symbol “PHM”. Unless the context otherwise requires, the terms "PulteGroup," the "Company," "we," "us," and "our" used herein refer to PulteGroup, Inc. and its subsidiaries. While our subsidiaries engage primarily in the homebuilding business, we also engage in mortgage banking operations, conducted through Pulte Mortgage LLC (“Pulte Mortgage”), and title and insurance agency operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

We evaluated subsequent events up until the time the financial statements were filed with the Securities and Exchange Commission (the "SEC").

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

Home sale revenues - Home sale revenues and related profit are generally recognized when title to and possession of the home are transferred to the buyer, and our performance obligation to deliver the agreed-upon home is generally satisfied at the home closing date. Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash. Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $541.5 million and $512.6 million at March 31, 2025 and December 31, 2024, respectively. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. See Note 8 for information on warranties and related obligations.

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 sales are generally outright sales of specified land parcels with cash consideration due on the closing date, which is generally when performance obligations are satisfied. Other revenues related to our construction services operations are generally recognized as materials are delivered and installation services are provided.

Financial Services revenues - Loan origination fees, commitment fees, and discount points are recognized upon loan origination. Expected gains and losses from the sale of residential mortgage loans and their related servicing rights are included in the measurement of interest rate lock commitments ("IRLCs") that are accounted for at fair value through Financial Services revenues at the time of commitment. Subsequent changes in the fair value of IRLCs and residential mortgage loans available-for-sale are reflected in Financial Services revenues as they occur. Interest income is accrued from the date a mortgage loan is originated until the loan is sold. Mortgage servicing fees represent fees earned for servicing loans until the loans are sold. Servicing fees are based on a contractual percentage of the outstanding principal balance and are credited to income when related mortgage payments are received.

Revenues associated with our title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed. Insurance agency commissions relate to commissions on home and other insurance policies placed with third-party carriers through various agency channels. Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy. The related contract assets for estimated future renewal commissions are included in other assets and totaled $93.5 million and $91.1 million at March 31, 2025 and December 31, 2024, respectively.

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days. At March 31, 2025 and December 31, 2024, residential mortgage loans available-for-sale had an aggregate fair value of $642.8 million and $629.6 million, respectively, and an aggregate outstanding principal balance of $648.0 million and $645.7 million, respectively. These changes in fair value were substantially offset by changes in fair value of the corresponding derivative instruments. Net gains from the sale of mortgages were $49.8 million and $50.6 million for the three months ended March 31, 2025 and 2024, respectively, and have been included in Financial Services revenues.

We are party to IRLCs with customers resulting from our mortgage origination operations. At March 31, 2025 and December 31, 2024, we had aggregate IRLCs of $780.2 million and $469.4 million, respectively. Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements.

We hedge our exposure to interest rate market risk relating to residential mortgage loans available-for-sale and IRLCs using forward contracts on mortgage-backed securities, which are commitments to either purchase or sell a specified financial instrument at a specified future date for a specified price, and whole loan investor commitments, which are obligations of an investor to buy loans at a specified price within a specified time period. Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor. At March 31, 2025 and December 31, 2024, we had unexpired forward contracts of $1.3 billion and $977.0 million, respectively, and whole loan investor commitments of $327.1 million and $237.1 million, respectively.

Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal. Gains and losses on IRLCs are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments. We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 90 days.

The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):

 

			March 31, 2025												December 31, 2024
			Other Assets						Accrued and Other Liabilities						Other Assets						Accrued and Other Liabilities
Interest rate lock commitments			$	3,547					$	15,182					$	1,452					$	14,946
Forward contracts			1,072						9,981						13,233						1,943
Whole loan commitments			85						166						50						80
			$	4,704					$	25,329					$	14,735					$	16,969

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding, adjusted for unvested shares (the “Denominator”) for the period. Computing diluted earnings per share is similar to computing basic earnings per share, except that the Denominator is increased to include the dilutive effects of unvested restricted share units and other potentially dilutive instruments.

We are exposed to credit losses primarily through our vendors and insurance carriers. We assess and monitor each counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial condition, macroeconomic factors, and business strategy. Our assets exposed to credit losses consist primarily of insurance receivables, contract assets related to insurance agency commissions, accounts receivable, and vendor rebate receivables. Counterparties associated with these assets are generally highly rated. Allowances on the aforementioned assets were not material as of March 31, 2025.

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires expanded disclosure of our income tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for us for annual periods beginning on or after January 1, 2025. We are currently evaluating the impact ASU 2023-09 will have on our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” ("ASU 2024-03"), which requires disaggregated disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. ASU 2024-03 is effective for us for annual periods beginning after December 31, 2026. We are currently evaluating the impact ASU 2024-03 will have on our financial statement disclosures.

Major components of inventory were as follows ($000’s omitted): 

We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):

We enter into land option agreements in order to procure land for the construction of homes in the future. 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. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other income, net. See Note 1.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either March 31, 2025 or December 31, 2024 because we determined that we were not any VIE's primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements. The following provides a summary of our interests in land option agreements as of March 31, 2025 and December 31, 2024 ($000’s omitted):

 

			March 31, 2025																		December 31, 2024
			Deposits and Pre-acquisition Costs						Remaining Purchase Price												Deposits and Pre-acquisition Costs						Remaining Purchase Price
Land options with VIEs			$	377,297					$	3,294,587											$	358,066					$	3,104,196
Other land options			754,185						6,804,263												700,397						6,127,486
			$	1,131,482					$	10,098,850											$	1,058,463					$	9,231,682

Our evaluations for land-related charges are based on our best estimates of the future cash flows for our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates. See Note 3 for a summary of such charges by reportable segment.

Our Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the U.S. and the construction of housing on such land. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:

We also have a reportable segment for our Financial Services operations, which consist principally of mortgage banking, title, and insurance agency operations. The Financial Services segment operates generally in the same markets as the Homebuilding segments. Evaluation of segment performance is generally based on income before income taxes. Each reportable segment generally follows the same accounting policies described in Note 1.

In 2024, we adopted ASU 2023-07, which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis. The adoption of ASU 2023-07 impacted the presentation of the performance measures presented in the below tables. Information for previous periods in the below tables conforms with the current year presentation.

(a)Other homebuilding includes revenues from land sales and construction services.

(b)Other homebuilding includes cost of revenues related to land sales, construction services, and amortization of capitalized interest.

(c)Other homebuilding includes insurance reserve reversals of $26.8 million for the three months ended March 31, 2024 (see Note 8). Other homebuilding also includes eliminations of corporate overhead allocated to the operating segments.

(d)Other Segment Items reflects other sources of income and expense, including internal capital charge allocations that are eliminated within Other homebuilding.

(e)Other homebuilding includes income from unconsolidated entities, interest, the amortization of intangible assets, and other items not allocated to the operating segments. Other homebuilding also includes a gain of $37.7 million for the three months ended March 31, 2024 related to the sale of our minority interest in a joint venture.

(f)Includes certain land-related charges (see the following table and Note 2).

 

(a)Other homebuilding primarily includes cash and equivalents, capitalized interest, intangibles, deferred tax assets, other corporate items that are not allocated to the operating segments, and eliminations of certain inventory not owned allocated to the operating segments. Other homebuilding also includes goodwill of $68.9 million, net of cumulative impairment charges of $20.2 million at March 31, 2025 and December 31, 2024.

Our notes payable are summarized as follows ($000’s omitted):

(a)Redeemable prior to maturity; guaranteed on a senior basis by certain wholly-owned subsidiaries.

(b)The carrying value of 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.

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $42.6 million and $35.8 million at March 31, 2025 and December 31, 2024, respectively. These notes have maturities ranging up to five years, are secured by the applicable land positions to which they relate, and generally have no recourse to other assets. The stated interest rates on these notes range up to 9%. We recorded $9.5 million and $5.4 million of inventory through seller financing in the three months ended March 31, 2025 and 2024, respectively.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to the vesting of shares, generally related to the payment of minimum tax obligations. In the three months ended March 31, 2025 and 2024, participants surrendered shares valued at $23.4 million and $17.6 million, respectively, under these plans. Such share transactions are excluded from the above noted share repurchase authorization.

Our effective tax rate was 23.2% for the three months ended March 31, 2025, compared with 23.7% for the three months ended March 31, 2024. Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense and federal tax credits.

At March 31, 2025 and December 31, 2024, we had net deferred tax liabilities of $408.9 million and $388.5 million, respectively. The accounting for deferred taxes is based upon estimates of future results. Differences between estimated and actual results could result in changes in the valuation of deferred tax assets that could have a material impact on our consolidated results of operations or financial position. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. We had $38.5 million and $38.7 million of gross unrecognized tax benefits at March 31, 2025 and December 31, 2024, respectively. Additionally, we had accrued interest and penalties of $2.0 million and $1.9 million at March 31, 2025 and December 31, 2024, respectively.

Accounting Standards Codification 820, “Fair Value Measurements and Disclosures”, provides a framework for measuring fair value in generally accepted accounting principles and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows: 

Our assets and liabilities measured or disclosed at fair value are summarized below ($000’s omitted): 

Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments. Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management. Fair values for IRLCs, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments. Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

The carrying amounts of cash and equivalents, Financial Services debt and other notes payable approximate their fair values due to their short-term nature and/or floating interest rate terms. The fair values of senior notes are based on quoted market prices, when available. If quoted market prices are not available, fair values are based on quoted market prices of similar issues. The carrying value of senior notes was $1.6 billion at both March 31, 2025 and December 31, 2024.

In the normal course of business, we post letters of credit and surety bonds pursuant to certain performance-related obligations, as security for certain land option agreements, and under various insurance programs. The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure. We had outstanding letters of credit and surety bonds totaling $307.7 million and $3.0 billion, respectively, at March 31, 2025, and $321.1 million and $2.9 billion, respectively, at December 31, 2024. In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond. Our surety bonds generally do not have stated expiration dates; rather we are released from the surety bonds as the underlying contractual performance is completed. 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. We do not believe that a material amount, if any, of the letters of credit or surety bonds will be drawn.

We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations.

We establish liabilities for litigation, legal claims, and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, an exposure to loss in excess of any amounts currently accrued may exist. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

Home buyers are provided with a limited warranty against certain building defects, including a one-year comprehensive limited warranty and coverage for certain other aspects of the home's construction and operating systems for periods of up to, and, in limited instances, exceeding, 10 years. We estimate the costs to be incurred under these warranties and record liabilities in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liabilities include the number of homes sold, historical and anticipated rates of warranty claims, and the projected cost per claim. We periodically assess the adequacy of the warranty liabilities for each geographic market in which we operate and adjust the amounts as necessary. Actual warranty costs in the future could differ from the current estimates. Changes to warranty liabilities were as follows ($000’s omitted):

We maintain, and require our subcontractors to maintain, general liability insurance coverage. We also maintain builders' risk, property, errors and omissions, workers compensation, and other business insurance coverages. These insurance policies protect us against a portion of the risk of loss from potential claims. However, we retain a significant portion of the overall risk for such claims either through our own self-insured per occurrence and aggregate retentions, deductibles, policies issued by our captive insurance subsidiaries, and any potential claims in excess of available insurance policy limits.

Our general liability insurance includes coverage for certain construction defects. While construction defect claims may relate to a variety of issues, the majority of our claims relate to alleged problems with siding, windows, roofing, and foundations. The availability of general liability insurance for the homebuilding industry and its subcontractors has become increasingly limited, and the insurance policies available require companies to retain significant per occurrence and aggregate retention levels. In certain instances, we may offer our subcontractors the opportunity to purchase general liability insurance through one of our captive insurance subsidiaries or participate in a project-specific insurance program. Policies issued by our captive insurance subsidiaries represent self-insurance of these risks by us, limited by reinsurance policies that we purchase. General liability coverage for the homebuilding industry is complex, and our coverage varies from policy year to policy year. Our insurance coverage requires a per occurrence retention as well as an overall aggregate amount. Amounts paid to resolve insured claims apply to our per occurrence and aggregate retention obligations. Any amounts incurred in excess of the occurrence or aggregate retention levels are covered by insurance up to the purchased coverage levels. Our insurance policies, including the captive insurance subsidiaries' reinsurance policies, are maintained with highly-rated carriers for whom we believe counterparty default risk is not significant.

At any point in time, we are managing numerous individual claims related to general liability, property, errors and omission, workers compensation, and other business insurance coverages. We reserve for costs associated with these claims (including expected claims management expenses) on an undiscounted basis at the time revenue is recognized for each home closing and evaluate the recorded liabilities based on actuarial analyses of our historical claims. The actuarial analyses calculate estimates of the ultimate net cost of all unpaid losses, including estimates for incurred but not reported losses ("IBNR"). IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled $276.3 million and $267.5 million at March 31, 2025 and December 31, 2024, respectively. The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses. Liabilities related to IBNR and related claim expenses represented approximately 71% and 68% of the total general liability reserves at March 31, 2025 and December 31, 2024, respectively. The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data. The actuarial analyses of the reserves also consider historical third party recovery rates and claims management expenses.

Volatility in both national and local housing market conditions may affect the frequency and cost of construction defect claims. Additionally, IBNR estimates comprise the substantial majority of our liability and are subject to a high degree of uncertainty due to a variety of factors, including changes in claims reporting and resolution patterns, third party recoveries, insurance industry practices, the regulatory environment, and legal precedent. State regulations vary, but construction defect claims are typically reported and resolved over an extended time period often exceeding ten years. Changes in the frequency and timing of reported claims and estimates of specific claim values can impact the underlying inputs and trends utilized in the actuarial analyses, which could have a material impact on the recorded reserves. Because of the inherent uncertainty in estimating future losses and the timing of such losses related to these claims, actual costs could differ significantly from estimated costs.

Adjustments to reserves are recorded in the period in which the change in estimate occurs. Our lower ending reserve balance at March 31, 2025 compared with March 31, 2024 results primarily from adjustments made during 2024 as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections. The changes in actuarial estimates were driven by changes in actual claims experience that, in turn, impacted actuarial estimates for potential future claims. These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities. There were no material adjustments to individual claims. Costs associated with our insurance programs are classified within selling, general, and administrative expenses. Changes in these liabilities were as follows ($000's omitted):

We lease certain office space and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets and leasehold improvements are limited to the expected lease term. Certain of our lease agreements include rental payments based on a pro rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

    

ROU assets are classified within other assets on the balance sheet, while lease liabilities are classified within accrued and other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease liabilities were $105.8 million and $121.1 million at March 31, 2025, respectively, and $93.9 million and $109.0 million at December 31, 2024, respectively. In the three months ended March 31, 2025 and 2024 we recorded an additional $19.6 million and $3.7 million of lease liabilities under operating leases, respectively. Payments on lease liabilities in the three months ended March 31, 2025 and 2024 totaled $5.8 million and $5.9 million, respectively.

Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one year. In the three months ended March 31, 2025 and 2024 our total lease expense was $15.7 million and $15.0 million, respectively, inclusive of variable lease costs of $5.3 million and $3.6 million, respectively, as well as short-term lease costs of $3.8 million and $4.8 million, respectively. Sublease income was de minimis.

The future minimum lease payments required under our leases as of March 31, 2025 were as follows ($000's omitted):

(a)Remaining payments are for the nine months ending December 31, 2025.

(b)Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $19.2 million of legally binding minimum lease payments for leases signed but not yet commenced at March 31, 2025.

(c)Our leases do not provide a readily determinable implicit rate. As a result, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

(d)The weighted-average remaining lease term and weighted-average discount rate used in calculating our lease liabilities were 5.8 years and 4.5%, respectively, at March 31, 2025.

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):

In the first quarter of 2025, consumer demand was influenced by ongoing affordability challenges, resulting from elevated mortgage interest rates and higher housing costs, as well as volatility in other macroeconomic and geopolitical conditions, including weakened consumer confidence. We have responded to these conditions by adjusting sales prices where necessary and focusing sales incentives on closing cost incentives, especially mortgage interest rate buydowns. Despite these efforts, net new orders in units for the first quarter of 2025 decreased 7% compared to the first quarter of 2024.

Although higher mortgage interest rates and volatile macroeconomic and geopolitical conditions may persist for some time, the demographics supporting housing demand remain favorable over the long term, and during the first quarter of 2025 there continued to be a limited supply of existing homes for sale in many of our geographic markets. We expect that homebuyers will continue to face affordability challenges, so our sales paces may remain volatile on a monthly basis. In response, we expect our sales incentives to remain elevated and for our pace of house starts to remain dynamic. Additionally, we continue to face pressure in the cost of land acquisition and development. Due to the length of our land development and construction cycle times, there is a lag between when such cost changes occur and when they impact our operating results. This is evidenced in our gross margin from home sales for the first quarter of 2025, which decreased to 27.5% from 29.6% in the comparable prior year period, primarily due to higher land costs and sales incentives. While we expect to continue to generate healthy gross margins, they may decline somewhat in future periods as a result of these factors.

We operate our business to generate a cadence of house starts that aligns with the sales environment, and an appropriate inventory of quick move-in speculative ("spec") homes as we focus on turning our assets and delivering high returns on investment, which has allowed us to achieve an effective balance of price and pace. The supply chain constraints that arose in recent years have largely subsided. As a result, our production cycle times have improved significantly over the past two years and have now returned to near historical norms.

We remain focused on taking a measured approach to our capital allocation strategy to effectively respond to future volatility in demand. Accordingly, we are focused on protecting liquidity and closely managing our cash flows while also continuing to focus on shareholder returns, including the following actions:

–Increasing our lot optionality within our land pipeline for increased flexibility;

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

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

–Maintaining ample liquidity.

–Taking an opportunistic approach to repurchasing debt; and We believe our strategic approach with respect to balancing sales price with sales price, including actions taken related to sales incentives, advertising, and our production cadence, will enable us to meet consumer demand at the selling prices necessary to turn our inventory, maintain market share, and generate healthy returns. And we remain confident in our ability to navigate the future environment and to position the Company to take advantage of opportunities as they arise and support future growth and continued profitability and financial strength.

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

(a)Includes the amortization of capitalized interest.

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

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

(d)Percentage not meaningful.

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

Home sale revenues in the three months ended March 31, 2025 were lower than the prior year period by $70.3 million. In the three months ended March 31, 2025, the 2% decrease resulted primarily from a 7% decrease in closings from the prior year period, partially offset by a 6% increase in average selling price. The decrease in closings was primarily attributable to lower net new orders in both the first quarter of 2025 and in the second half of 2024 as compared with the first half of 2024, contributing to a weaker backlog, partially offset by improved production cycle times. Average selling price during the three months ended March 31, 2025 increased primarily due to geographic mix, including our Northeast and West segments, which carry a higher average selling price.

Home sale gross margins were 27.5% in the three months ended March 31, 2025 compared with 29.6% in the three months ended March 31, 2024. The decrease in homes sale gross margins was primarily attributable to higher land acquisition and development costs, coupled with elevated sales incentives. We expect these factors to continue to impact our gross margins over the near term.

We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. Land sale and other revenues and their related gains or losses vary between periods, depending on the timing of land sales and our strategic operating decisions. Land sales and other revenues contributed income of $1.6 million and $0.2 million and for the three months ended March 31, 2025 and 2024, respectively.

SG&A as a percentage of home sale revenues was 10.5% and in the three months ended March 31, 2025 compared with 9.4% for the three months ended March 31, 2024. The gross dollar amount of our SG&A increased $35.7 million, or 10%, for the three months ended March 31, 2025 compared with the prior year period. The increase in gross dollars for the three months ended March 31, 2025 resulted primarily from increased overhead costs to support ongoing production volumes, combined with insurance reserve reversals of $26.8 million recorded in the three months ended March 31, 2024.

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

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

Net new orders in units decreased 7% while net new orders in dollars decreased 5% in the three months ended March 31, 2025, as compared with the prior year period. The decreased net new order volume and dollars in the three months ended March 31, 2025 over the comparable prior year period was primarily attributable to the lower volumes in our West segment. Cancellation rates (canceled orders for the period divided by gross new orders for the period) were 13% for both the three months ended March 31, 2025 and 2024. Ending backlog dollars, which represent orders for homes that have not yet closed, decreased 12% at March 31, 2025 compared with March 31, 2024.

The following is a summary of our homes in production:

The number of homes in production at March 31, 2025 was 3% lower than at March 31, 2024. This decrease was primarily due to a decreased number of sold homes due to lower backlog and improved production cycle times, which reduces the length of time a home sits in inventory. We continue to carefully monitor our production levels and expect to lower the percentage of our inventory that is unsold by the end of 2025.

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

While competition for well-positioned land is robust, we have continued to pursue land investments that we believe can achieve appropriate risk-adjusted returns on invested capital. We have also continued to seek to maintain a high percentage of our lots that are controlled via land option agreements as such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. The remaining purchase price under our land option agreements totaled $10.1 billion at March 31, 2025.

As of March 31, 2025, we conducted our operations in 47 markets located throughout 25 states. For reporting purposes, our Homebuilding operations are aggregated into six reportable segments:

 

Northeast:						Maryland, Massachusetts, New Jersey, Pennsylvania, Virginia
Southeast:						Georgia, North Carolina, South Carolina, Tennessee
Florida:						Florida
Midwest:						Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio
Texas:						Texas
West:						Arizona, California, Colorado, Nevada, New Mexico, Oregon, Utah, Washington

The following tables present selected financial information for our reportable Homebuilding segments: