[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's discussion and analysis of M.D.C. Holdings, Inc. for the quarter ended June 30, 2025 [Item 1. Unaudited Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section provides the unaudited consolidated financial statements for M.D.C. Holdings, Inc., including balance sheets, income statements, equity changes, and cash flows, along with detailed explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | ASSETS (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Cash and cash equivalents (Homebuilding) | $272,039 | $605,653 | | Total inventories | $4,194,651 | $3,752,253 | | Total homebuilding assets | $4,762,023 | $4,679,791 | | Total financial services assets | $336,746 | $490,851 | | **Total Assets** | **$5,098,769**| **$5,170,642** | | LIABILITIES AND EQUITY (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Senior notes, net | $1,484,712 | $1,484,267 | | Total Liabilities | $2,170,127 | $2,220,901 | | Total Stockholders' Equity | $2,928,642 | $2,949,741 | | **Total Liabilities and Stockholders' Equity** | **$5,098,769**| **$5,170,642** | [Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section presents the consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2025 and 2024 | (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Home sale revenues | $1,106,405 | $1,411,446 | $2,079,302 | $2,736,648 | | Gross profit | $138,640 | $255,321 | $289,895 | $487,307 | | Homebuilding pretax income | $15,219 | $20,758 | $53,559 | $129,334 | | Financial Services revenues | $32,800 | $37,580 | $57,572 | $68,932 | | Financial services pretax income | $17,838 | $22,643 | $28,811 | $40,307 | | Income before income taxes | $33,057 | $43,401 | $82,370 | $169,641 | | Net income | $25,655 | $25,134 | $65,737 | $120,953 | [Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details the changes in stockholders' equity for the six months ended June 30, 2025 | (Dollars in thousands) | Balance at Dec 31, 2024 | Net Income (Q1 2025) | Balance at Mar 31, 2025 | Net Income (Q2 2025) | Cash Dividends Declared | Balance at Jun 30, 2025 | | :--------------------- | :---------------------- | :------------------- | :---------------------- | :------------------- | :---------------------- | :---------------------- | | Total Stockholders' Equity | $2,949,741 | $40,082 | $2,989,823 | $25,655 | $(86,836) | $2,928,642 | - The company declared cash dividends of **$86.8 million** during the six months ended June 30, 2025[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 | (Dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(281,345) | $50,375 | | Net cash used in investing activities | $(11,871) | $(104,353) | | Net cash used in financing activities | $(138,492) | $(668,142) | | Net decrease in cash, cash equivalents and restricted cash | $(431,708) | $(722,120) | | Cash, cash equivalents and restricted cash, End of period | $407,384 | $920,777 | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the basis of presentation, accounting standards, segment reporting, and other financial disclosures for the unaudited consolidated financial statements [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) This note outlines the basis for preparing the unaudited consolidated financial statements in accordance with SEC rules and GAAP - The unaudited consolidated financial statements are prepared in accordance with SEC rules and GAAP, reflecting all normal and recurring adjustments. They should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2024[22](index=22&type=chunk) - The Company is filing this 10-Q voluntarily and no longer has an obligation to file reports with the SEC, reserving the right to stop future filings at any time[9](index=9&type=chunk) [2. Recently Issued Accounting Standards](index=8&type=section&id=2.%20Recently%20Issued%20Accounting%20Standards) This note discusses the adoption and evaluation of recently issued accounting standards and their impact on the financial statements - The Company adopted ASU 2023-07, "Segment Reporting," in Q4 2024, which had no material impact on consolidated financial statements but updated Footnote 3 disclosures[25](index=25&type=chunk) - The Company is evaluating ASU 2023-09, "Income Taxes," effective for annual periods beginning after December 15, 2024, and ASU 2024-03, "Expense Disaggregation Disclosures," effective for annual periods beginning after December 15, 2026, for potential impacts[26](index=26&type=chunk)[27](index=27&type=chunk) [3. Segment Reporting](index=10&type=section&id=3.%20Segment%20Reporting) This note provides financial information by operating segment, including pretax income and total assets for Homebuilding and Financial Services - The Company operates in two main segments: Homebuilding (aggregated from divisions in West, Mountain, and East regions) and Financial Services (including mortgage operations and other services)[29](index=29&type=chunk)[32](index=32&type=chunk) Pretax Income by Segment (Three Months Ended June 30, 2025 vs 2024) | Segment (Dollars in thousands) | 2025 | 2024 | Change Amount | Change % | | :----------------------------- | :---------- | :---------- | :------------ | :------- | | West | $7,447 | $84,607 | $(77,160) | (91)% | | Mountain | $17,065 | $39,610 | $(22,545) | (57)% | | East | $(1,678) | $12,898 | $(14,576) | (113)% | | Corporate | $(7,615) | $(116,357) | $108,742 | 93% | | **Total Homebuilding** | **$15,219** | **$20,758** | **$(5,539)** | **(27)%**| | Mortgage operations | $7,822 | $11,672 | $(3,850) | (33)% | | Other Financial Services | $10,016 | $10,971 | $(955) | (9)% | | **Total Financial Services** | **$17,838** | **$22,643** | **$(4,805)** | **(21)%**| | **Total Pretax Income** | **$33,057** | **$43,401** | **$(10,344)** | **(24)%**| Total Assets by Segment (June 30, 2025 vs December 31, 2024) | Segment (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | West | $2,469,619 | $2,261,391 | | Mountain | $1,069,118 | $1,055,134 | | East | $800,438 | $593,167 | | Corporate | $422,848 | $770,099 | | **Total Homebuilding assets** | **$4,762,023**| **$4,679,791** | | Mortgage operations | $203,821 | $260,899 | | Other Financial Services | $132,925 | $229,952 | | **Total financial services assets** | **$336,746** | **$490,851** | | **Total assets** | **$5,098,769**| **$5,170,642** | [4. Earnings Per Share](index=12&type=section&id=4.%20Earnings%20Per%20Share) This note clarifies the Company's disclosure requirements regarding earnings per share following the Merger - Earnings Per Share disclosure is not required as the Company no longer has publicly-traded equity securities following the Merger[38](index=38&type=chunk) [5. Fair Value Measurements](index=13&type=section&id=5.%20Fair%20Value%20Measurements) This note details the fair value measurements of financial instruments, including mortgage loans held-for-sale and senior notes Fair Value of Financial Instruments (Dollars in thousands) | Financial Instrument | Hierarchy | June 30, 2025 | December 31, 2024 | | :------------------- | :-------- | :------------ | :---------------- | | Mortgage loans held-for-sale, net | Level 2 | $176,121 | $236,806 | | Interest rate lock commitments | Level 2 | $(3,691) | $(277) | | Forward sales of mortgage-backed securities | Level 2 | $(2,369) | $4,047 | | Mandatory delivery forward loan sale commitments | Level 2 | $(1,127) | $515 | | Best-effort delivery forward loan sale commitments | Level 2 | $(616) | $3 | - Gains/losses on mortgage loans held-for-sale, net, were **$(46.5) million** for Q2 2025 and **$(63.0) million** for H1 2025, compared to **$2.7 million** and **$3.3 million** for the same periods in 2024, respectively[43](index=43&type=chunk) Fair Value of Senior Notes (Dollars in thousands) | Senior Notes | Carrying Amount (Jun 30, 2025) | Fair Value (Jun 30, 2025) | Carrying Amount (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :----------- | :----------------------------- | :------------------------ | :----------------------------- | :------------------------ | | Total | $1,484,712 | $1,270,087 | $1,484,267 | $1,340,119 | [6. Inventories](index=15&type=section&id=6.%20Inventories) This note provides a breakdown of homebuilding inventories by category and segment, along with impairment details Homebuilding Inventories by Segment (Dollars in thousands) | Inventory Category | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Housing completed or under construction: | | | | West | $1,225,177 | $1,112,172 | | Mountain | $666,705 | $616,200 | | East | $426,048 | $387,857 | | Subtotal | $2,317,930 | $2,116,229 | | Land and land under development: | | | | West | $1,165,120 | $1,069,594 | | Mountain | $370,205 | $408,189 | | East | $341,396 | $158,241 | | Subtotal | $1,876,721 | $1,636,024 | | **Total inventories** | **$4,194,651**| **$3,752,253** | Total Inventory Impairments (Dollars in thousands) | Period | 2025 | 2024 | | :--------------------- | :---------- | :---------- | | Three Months Ended June 30, | $9,750 | $4,550 | | Six Months Ended June 30, | $9,750 | $10,450 | - For the three months ended June 30, 2025, 6 subdivisions were impaired, totaling **$9.75 million**, with fair value after impairments of **$44.3 million** and discount rates between **12%-15%**[57](index=57&type=chunk) [7. Capitalization of Interest](index=17&type=section&id=7.%20Capitalization%20of%20Interest) This note explains the Company's policy and amounts related to the capitalization of homebuilding interest - All homebuilding interest incurred was capitalized for the three and six months ended June 30, 2025 and 2024, as qualified assets exceeded homebuilding debt[58](index=58&type=chunk) Homebuilding Interest Activity (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Homebuilding interest incurred | $16,967 | $17,253 | $33,956 | $34,674 | | Interest capitalized, end of period | $59,575 | $60,242 | $59,575 | $60,242 | [8. Leases](index=18&type=section&id=8.%20Leases) This note details the Company's lease arrangements, including lease costs, terms, and right-of-use assets - The Company leases property, land, and equipment, primarily office space, with most property leases classified as operating leases with terms of **3-5 years**[60](index=60&type=chunk)[61](index=61&type=chunk) - The headquarters lease was extended to **October 31, 2028**[62](index=62&type=chunk) Net Lease Cost (Dollars in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net lease cost | $1,994 | $2,017 | $4,010 | $3,993 | - As of June 30, 2025, the weighted-average remaining lease term for operating leases was **3.1 years** with a weighted-average discount rate of **5.5%**[64](index=64&type=chunk) [9. Homebuilding Prepaids and Other Assets](index=19&type=section&id=9.%20Homebuilding%20Prepaids%20and%20Other%20Assets) This note provides a breakdown of homebuilding prepaids and other assets, including land option deposits and goodwill Homebuilding Prepaids and Other Assets (Dollars in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Land option deposits | $35,249 | $52,038 | | Operating lease right-of-use asset | $19,324 | $16,146 | | Goodwill | $6,008 | $6,008 | | **Total prepaids and other assets** | **$107,473** | **$121,505** | [10. Homebuilding Accrued and Other Liabilities and Financial Services Accounts Payable and Accrued Liabilities](index=20&type=section&id=10.%20Homebuilding%20Accrued%20and%20Other%20Liabilities%20and%20Financial%20Services%20Accounts%20Payable%20and%20Accrued%20Liabilities) This note details the Company's accrued and other liabilities for both homebuilding and financial services segments Homebuilding Accrued and Other Liabilities (Dollars in thousands) | Liability Category | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Accrued compensation and related expenses | $49,638 | $86,925 | | Warranty accrual | $54,117 | $50,753 | | Lease liability | $19,725 | $16,867 | | Construction defect claim reserves | $10,342 | $11,209 | | **Total accrued and other liabilities** | **$296,423** | **$316,197** | Financial Services Accounts Payable and Accrued Liabilities (Dollars in thousands) | Liability Category | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Insurance reserves | $97,875 | $96,851 | | **Total accounts payable and accrued liabilities** | **$126,672** | **$121,667** | [11. Warranty Accrual](index=21&type=section&id=11.%20Warranty%20Accrual) This note explains the changes and activity in the Company's warranty accrual - The warranty accrual increased during Q2 and H1 2025 due to a shift in closing mix to divisions with higher warranty accrual rates[72](index=72&type=chunk) Warranty Accrual Activity (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $51,766 | $47,328 | $50,753 | $46,427 | | Expense provisions | $7,144 | $7,102 | $13,170 | $13,170 | | Cash payments | $(4,793) | $(8,003) | $(9,806) | $(9,806) | | Balance at end of period | $54,117 | $46,427 | $54,117 | $46,427 | [12. Insurance and Construction Defect Claim Reserves](index=22&type=section&id=12.%20Insurance%20and%20Construction%20Defect%20Claim%20Reserves) This note details the Company's reserves for insurance and construction defect claims, including activity and basis of estimation - Reserves for insurance and construction defect claims are based on actuarial studies and historical trends, with potential for material impact from changes in payment experience[74](index=74&type=chunk)[75](index=75&type=chunk) Insurance and Construction Defect Claim Reserves Activity (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $108,252 | $104,338 | $108,060 | $100,759 | | Expense provisions | $4,390 | $5,396 | $8,166 | $10,522 | | Cash payments, net of recoveries | $(4,425) | $(1,656) | $(8,009) | $(3,203) | | Balance at end of period | $108,217 | $108,078 | $108,217 | $108,078 | [13. Income Taxes](index=22&type=section&id=13.%20Income%20Taxes) This note outlines the Company's income tax provision, effective tax rates, and the impact of the Merger - The Company's income tax provision is calculated as if it were a separate taxpayer, despite being included in the Sekisui House US Holdings consolidated tax group post-Merger[78](index=78&type=chunk) Effective Income Tax Rates and Expense (Dollars in thousands) | Period | Effective Tax Rate (2025) | Effective Tax Rate (2024) | Income Tax Expense (2025) | Income Tax Expense (2024) | | :----- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Three Months Ended June 30, | 22.4% | 42.1% | $7,402 | $18,267 | | Six Months Ended June 30, | 20.2% | 28.7% | $16,633 | $48,688 | - The decrease in effective tax rates for 2025 is primarily due to reduced non-deductible executive compensation (no longer subject to IRC Section 162(m)) and the absence of prior year one-time non-deductible Merger transaction costs[79](index=79&type=chunk) [14. Senior Notes](index=23&type=section&id=14.%20Senior%20Notes) This note provides details on the Company's outstanding senior notes, including carrying values and guarantees Carrying Values of Senior Notes (Dollars in thousands) | Senior Notes | June 30, 2025 | December 31, 2024 | | :----------- | :------------ | :---------------- | | 3.850% Senior Notes due January 2030, net | $298,616 | $298,478 | | 2.500% Senior Notes due January 2031, net | $348,165 | $348,010 | | 6.000% Senior Notes due January 2043, net | $491,725 | $491,596 | | 3.966% Senior Notes due August 2061, net | $346,206 | $346,183 | | **Total** | **$1,484,712**| **$1,484,267** | - The senior notes are unsecured, do not contain financial covenants, and are fully and unconditionally guaranteed by most homebuilding segment subsidiaries[80](index=80&type=chunk) [15. Stock-Based Compensation](index=23&type=section&id=15.%20Stock-Based%20Compensation) This note explains the Company's stock-based compensation expense and the impact of the Merger on equity awards Stock-Based Compensation Expense (Dollars in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock awards expense | $0 | $281 | $0 | $1,319 | | **Total stock-based compensation** | **$0** | **$281** | **$0** | **$1,319** | - No stock-based compensation expense was recognized for the three and six months ended June 30, 2025, and no awards were outstanding as of June 30, 2025, due to the Merger's effect on equity awards in 2024[81](index=81&type=chunk)[82](index=82&type=chunk) [16. Commitments and Contingencies](index=24&type=section&id=16.%20Commitments%20and%20Contingencies) This note details the Company's various commitments and contingencies, including letters of credit, surety bonds, and land options - As of June 30, 2025, the Company had **$7.2 million** in letters of credit outstanding under its **$25.0 million** LOC Facility[83](index=83&type=chunk) - Outstanding surety bonds and letters of credit totaled **$349.8 million** and **$179.0 million**, respectively, at June 30, 2025, securing obligations with estimated completion costs of **$175.8 million** and **$147.6 million**[84](index=84&type=chunk) - The Company had **$30.8 million** in cash deposits, **$8.0 million** in capitalized costs, and **$12.6 million** in letters of credit at risk for options to purchase **5,676 lots**, with an estimated total purchase price of **$808.2 million**[88](index=88&type=chunk) [17. Derivative and Financial Instruments](index=25&type=section&id=17.%20Derivative%20and%20Financial%20Instruments) This note describes the Company's use of derivative and financial instruments to mitigate interest rate risk - The Company uses forward sales of mortgage-backed securities, mandatory delivery forward loan sale commitments, and best-effort delivery forward loan sale commitments to mitigate interest rate market risk on mortgage loans held-for-sale and interest rate lock commitments (IRLCs)[91](index=91&type=chunk)[92](index=92&type=chunk) Notional Amounts and Fair Value of Derivative and Financial Instruments (Dollars in thousands) | Instrument | Notional Value (Jun 30, 2025) | Derivatives, Net (Jun 30, 2025) | Notional Value (Dec 31, 2024) | Derivatives, Net (Dec 31, 2024) | | :--------- | :---------------------------- | :------------------------------ | :---------------------------- | :------------------------------ | | Interest rate lock commitments | $141,443 | $(3,691) | $57,807 | $(277) | | Forward sales of mortgage-backed securities | $254,500 | $(2,369) | $189,000 | $4,047 | | Mandatory delivery forward loan sale commitments | $46,789 | $(1,127) | $101,557 | $515 | | Best-effort delivery forward loan sale commitments | $11,444 | $(616) | $1,306 | $3 | - Net gains (losses) on these instruments were **$4.7 million** for Q2 2025 and **$(7.6) million** for H1 2025, compared to **$4.4 million** and **$4.3 million** for the same periods in 2024[92](index=92&type=chunk) [18. Lines of Credit](index=26&type=section&id=18.%20Lines%20of%20Credit) This note provides information on the Company's Revolving Credit Facility and Mortgage Repurchase Facility, including availability and covenants - The Company has an unsecured Revolving Credit Facility of up to **$900.0 million** (expandable to **$1.40 billion**), maturing **November 17, 2028**, with **$874.6 million** available as of June 30, 2025[93](index=93&type=chunk)[97](index=97&type=chunk) - HomeAmerican's Mortgage Repurchase Facility provides up to **$150 million** in liquidity, with **$126.0 million** in repurchase obligations at June 30, 2025. The facility's termination date is **August 8, 2025**, and negotiations for extension are ongoing[98](index=98&type=chunk)[99](index=99&type=chunk)[186](index=186&type=chunk) - HomeAmerican received a waiver for an event of default under the Mortgage Repurchase Facility for not meeting the minimum Adjusted Tangible Net Worth requirement as of **February 28, 2025**[100](index=100&type=chunk) [19. Related Party Transactions](index=27&type=section&id=19.%20Related%20Party%20Transactions) This note details transactions between the Company and its related parties, including land purchases and sales - As of June 30, 2025, there was no outstanding accounts receivable due from Parent (SH Residential Holdings, LLC), compared to **$22.2 million** at December 31, 2024[102](index=102&type=chunk) - The Company purchased **$78.0 million** of land from SH Residential Holdings, LLC affiliates as of June 30, 2025, and sold lots acquired from affiliates, generating **$22.3 million** in home sales revenues and **$3.0 million** in gross margin for Q2 2025[103](index=103&type=chunk) [20. Supplemental Guarantor Information](index=28&type=section&id=20.%20Supplemental%20Guarantor%20Information) This note clarifies the guarantees on senior notes and the presentation of financial information for the Obligor Group - Most homebuilding segment subsidiaries fully and unconditionally guarantee the Company's senior notes[105](index=105&type=chunk) - Separate summarized financial information for the Obligor Group (Company and Guarantor Subsidiaries) is not included as their combined assets, liabilities, and operations are not materially different from the homebuilding section of the consolidated statements[106](index=106&type=chunk) [21. Merger](index=29&type=section&id=21.%20Merger) This note provides details on the Company's merger with SH Residential Holdings, LLC, including transaction terms and post-merger status - On **April 19, 2024**, the Company completed its merger with Merger Sub, a subsidiary of SH Residential Holdings, LLC, resulting in the Company becoming a wholly-owned subsidiary[108](index=108&type=chunk) - Each outstanding share of common stock was converted into the right to receive **$63.00 per share** in cash, and all equity awards (options, RSAs, PSUs) were fully vested, cancelled, and converted into cash[108](index=108&type=chunk)[109](index=109&type=chunk) - The aggregate consideration for the Merger was approximately **$4.9 billion**, with the Company funding **$664.6 million**. The Company incurred **$27.6 million** and **$38.3 million** in transaction costs for Q2 and H1 2024, respectively[111](index=111&type=chunk)[116](index=116&type=chunk) - Following the Merger, the Company's common stock was delisted from the NYSE, and the Company filed to terminate registration and suspend reporting obligations under the Exchange Act[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial condition and operational results for the three and six months ended June 30, 2025, covering industry outlook, segment performance, and liquidity [Overview](index=32&type=section&id=Overview) This section provides a high-level summary of the Company's financial performance, market conditions, and strategic position - The homebuilding industry experienced softening market conditions in Q2 2025 due to affordability concerns, macroeconomic uncertainty, and elevated mortgage rates, leading to decreased sales absorption rates[119](index=119&type=chunk) - Net income for Q2 2025 increased **2%** YoY to **$25.7 million**, driven by a lower effective tax rate (**22.4%** vs **42.1%** in Q2 2024), despite decreases in pretax income for both homebuilding (down **27%**) and financial services (down **21%**)[121](index=121&type=chunk) - Net income for H1 2025 decreased **46%** YoY to **$65.7 million**, primarily due to significant decreases in homebuilding pretax income (down **59%**) and financial services pretax income (down **29%**), partially offset by a lower effective tax rate (**20.2%** vs **28.7%** in H1 2024)[122](index=122&type=chunk) - The Company maintains a strong financial position with **$407.4 million** in cash and cash equivalents, **$1.30 billion** in total liquidity, and a debt-to-capital ratio of **33.6%**, with no senior note maturities until **2030**[120](index=120&type=chunk) [Homebuilding](index=33&type=section&id=Homebuilding) This section details the financial performance and operational data of the Company's homebuilding segment [Pretax Income (Loss)](index=33&type=section&id=Pretax%20Income%20(Loss)) This section analyzes the pretax income and loss for each homebuilding division and the corporate segment Homebuilding Pretax Income (Dollars in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change Amount | Change % | | :------ | :------------------------------- | :------------------------------- | :------------ | :------- | | West | $7,447 | $84,607 | $(77,160) | (91)% | | Mountain| $17,065 | $39,610 | $(22,545) | (57)% | | East | $(1,678) | $12,898 | $(14,576) | (113)% | | Corporate| $(7,615) | $(116,357) | $108,742 | 93% | | **Total**| **$15,219** | **$20,758** | **$(5,539)** | **(27)%**| | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change % | | :------ | :----------------------------- | :----------------------------- | :------------ | :------- | | West | $35,468 | $166,734 | $(131,266) | (79)% |\ | Mountain| $31,676 | $65,152 | $(33,476) | (51)% | | East | $(1,773) | $25,572 | $(27,345) | (107)% | | Corporate| $(11,812) | $(128,124) | $116,312 | 91% | | **Total**| **$53,559** | **$129,334** | **$(75,775)** | **(59)%**| - The decrease in homebuilding pretax income for Q2 2025 was due to a **22%** decrease in home sale revenues, a **560 basis point** decrease in gross margin, and lower interest income, partially offset by a **$27.6 million** reduction in Merger-related transaction costs and a **420 basis point** decrease in SG&A as a percentage of revenue[125](index=125&type=chunk) - Corporate segment pretax income increased significantly due to the absence of accelerated equity awards vesting, executive transaction bonuses, and transaction costs related to the Merger in the prior year[125](index=125&type=chunk) [Assets](index=33&type=section&id=Assets) This section details the total homebuilding assets by segment and the factors influencing their changes Total Homebuilding Assets by Segment (Dollars in thousands) | Segment | June 30, 2025 | December 31, 2024 | Change Amount | Change % | | :------ | :------------ | :---------------- | :------------ | :------- | | West | $2,469,619 | $2,261,391 | $208,228 | 9% | | Mountain| $1,069,118 | $1,055,134 | $13,984 | 1% | | East | $800,438 | $593,167 | $207,271 | 35% | | Corporate| $422,848 | $770,099 | $(347,251) | (45)% | | **Total**| **$4,762,023**| **$4,679,791** | **$82,232** | **2%** | - Total homebuilding assets increased **2%** from December 31, 2024, to June 30, 2025, primarily due to increased land acquisition and development in the East and West segments, and an increase in finished homes in inventory across all segments[127](index=127&type=chunk)[128](index=128&type=chunk) - The Corporate segment's assets decreased due to a reduction in cash and cash equivalents, driven by increased land acquisition and development spending[127](index=127&type=chunk) [New Home Deliveries & Home Sale Revenues](index=35&type=section&id=New%20Home%20Deliveries%20%26%20Home%20Sale%20Revenues) This section presents data on new home deliveries, home sale revenues, and average selling prices by segment New Home Deliveries and Home Sale Revenues (Three Months Ended June 30) | Segment | 2025 Homes | 2025 Revenues ($k) | 2025 Avg Price ($k) | 2024 Homes | 2024 Revenues ($k) | 2024 Avg Price ($k) | Homes % Change | Revenues % Change | Avg Price % Change | | :------ | :--------- | :----------------- | :------------------ | :--------- | :----------------- | :------------------ | :------------- | :---------------- | :----------------- | | West | 1,016 | $560,263 | $551.4 | 1,476 | $842,561 | $570.8 | (31)% | (34)% | (3)% | | Mountain| 600 | $352,881 | $588.1 | 586 | $366,071 | $624.7 | 2% | (4)% | (6)% | | East | 456 | $193,261 | $423.8 | 471 | $202,814 | $430.6 | (3)% | (5)% | (2)% | | **Total**| **2,072** | **$1,106,405** | **$534.0** | **2,533** | **$1,411,446** | **$557.2** | **(18)%** | **(22)%** | **(4)%** | New Home Deliveries and Home Sale Revenues (Six Months Ended June 30) | Segment | 2025 Homes | 2025 Revenues ($k) | 2025 Avg Price ($k) | 2024 Homes | 2024 Revenues ($k) | 2024 Avg Price ($k) | Homes % Change | Revenues % Change | Avg Price % Change | | :------ | :--------- | :----------------- | :------------------ | :--------- | :----------------- | :------------------ | :------------- | :---------------- | :----------------- | | West | 1,929 | $1,074,782 | $557.2 | 2,929 | $1,672,647 | $571.1 | (34)% | (36)% | (2)% | | Mountain| 1,107 | $652,845 | $589.7 | 1,086 | $676,250 | $622.7 | 2% | (3)% | (5)% | | East | 821 | $351,675 | $428.3 | 913 | $387,751 | $424.7 | (10)% | (9)% | 1% | | **Total**| **3,857** | **$2,079,302** | **$539.1** | **4,928** | **$2,736,648** | **$555.3** | **(22)%** | **(24)%** | **(3)%** | - Decreases in new home deliveries for the West and East segments were due to lower beginning backlog and decreased net home sales. The Mountain segment saw a slight increase in deliveries due to higher net home sales, offset by lower beginning backlog[132](index=132&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) - The decrease in average selling price across all segments was primarily a result of increased incentive levels, though the East segment's decrease was partially offset by a shift to higher-priced communities[132](index=132&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) [Gross Margin from Home Sales](index=35&type=section&id=Gross%20Margin%20from%20Home%20Sales) This section analyzes the gross margin from home sales and the factors contributing to its changes - Gross margin from home sales decreased by **560 basis points** YoY to **12.5%** for Q2 2025 and by **390 basis points** YoY to **13.9%** for H1 2025[137](index=137&type=chunk) - The decline in gross margin was primarily driven by increased incentive levels, and to a lesser extent, higher land costs and decreased base home prices[137](index=137&type=chunk) [Inventory Impairments](index=36&type=section&id=Inventory%20Impairments) This section details the inventory impairments by category and segment for the reporting periods Inventory Impairments by Segment (Dollars in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Housing Completed or Under Construction: | | | | | | West | $5,789 | $1,423 | $5,789 | $2,331 | | East | $750 | $880 | $750 | $880 | | Subtotal | $6,539 | $2,303 | $6,539 | $3,611 | | Land and Land Under Development: | | | | | | West | $3,211 | $77 | $3,211 | $4,669 | | East | $0 | $2,170 | $0 | $2,170 | | Subtotal | $3,211 | $2,247 | $3,211 | $6,839 | | **Total Inventory Impairments** | **$9,750** | **$4,550** | **$9,750** | **$10,450** | - Total inventory impairments for Q2 2025 were **$9.75 million** across **6 subdivisions**, compared to **$4.55 million** across **4 subdivisions** in Q2 2024[141](index=141&type=chunk) [Selling, General and Administrative Expenses](index=37&type=section&id=Selling%20General%20and%20Administrative%20Expenses) This section analyzes the selling, general and administrative expenses and their impact on home sale revenues Selling, General and Administrative Expenses (Dollars in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($k) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($k) | | :--------------- | :------------------------------- | :------------------------------- | :---------- | :----------------------------- | :----------------------------- | :---------- | | General and administrative expenses | $57,258 | $145,272 | $(88,014) | $111,045 | $211,585 | $(100,540) | | Marketing expenses | $28,871 | $29,109 | $(238) | $55,920 | $58,412 | $(2,492) | | Commissions expenses | $38,261 | $42,165 | $(3,904) | $71,717 | $80,699 | $(8,982) | | **Total SG&A** | **$124,390** | **$216,546** | **$(92,156)**| **$238,682** | **$350,696** | **$(112,014)**| - General and administrative expenses decreased significantly due to the absence of accelerated equity awards vesting, executive transaction bonuses, and Merger-related transaction costs present in the prior year[143](index=143&type=chunk) - Total SG&A as a percentage of home sale revenues decreased by **420 basis points** to **11.2%** for Q2 2025 and by **120 basis points** to **11.5%** for H1 2025[143](index=143&type=chunk) [Other Homebuilding Operating Data](index=38&type=section&id=Other%20Homebuilding%20Operating%20Data) This section provides additional operational data for the homebuilding segment, including new orders, backlog, and inventory [Net New Orders and Active Subdivisions](index=38&type=section&id=Net%20New%20Orders%20and%20Active%20Subdivisions) This section presents data on net new home orders, average selling prices, monthly absorption rates, and active subdivisions Net New Orders (Three Months Ended June 30) | Segment | 2025 Homes | 2025 Dollar Value ($k) | 2025 Avg Price ($k) | 2025 Monthly Absorption Rate | 2024 Homes | 2024 Dollar Value ($k) | 2024 Avg Price ($k) | 2024 Monthly Absorption Rate | Homes % Change | Dollar Value % Change | Avg Price % Change | Absorption Rate % Change | | :------ | :--------- | :--------------------- | :------------------ | :--------------------------- | :--------- | :--------------------- | :------------------ | :--------------------------- | :------------- | :-------------------- | :----------------- | :----------------------- | | West | 842 | $498,167 | $591.6 | 2.89 | 1,284 | $725,770 | $565.2 | 3.54 | (34)% | (31)% | 5% | (18)% | | Mountain| 537 | $338,230 | $629.9 | 3.03 | 488 | $299,809 | $614.4 | 2.80 | 10% | 13% | 3% | 8% | | East | 394 | $183,685 | $466.2 | 3.37 | 496 | $211,837 | $427.1 | 3.94 | (21)% | (13)% | 9% | (14)% | | **Total**| **1,773** | **$1,020,082** | **$575.3** | **3.03** | **2,268** | **$1,237,416** | **$545.6** | **3.44** | **(22)%** | **(18)%** | **5%** | **(12)%** | Average Active Subdivisions | Segment | June 30, 2025 Active Subdivisions | June 30, 2024 Active Subdivisions | % Change | Three Months Ended June 30, 2025 Avg Active Subdivisions | Three Months Ended June 30, 2024 Avg Active Subdivisions | % Change | Six Months Ended June 30, 2025 Avg Active Subdivisions | Six Months Ended June 30, 2024 Avg Active Subdivisions | % Change | | :------ | :-------------------------------- | :-------------------------------- | :------- | :--------------------------------------- | :--------------------------------------- | :------- | :------------------------------------- | :------------------------------------- | :------- | | West | 99 | 115 | (14)% | 97 | 121 | (20)% | 99 | 129 | (23)% | | Mountain| 60 | 58 | 3% | 59 | 58 | 2% | 58 | 59 | (2)% | | East | 40 | 41 | (2)% | 39 | 42 | (7)% | 39 | 40 | (3)% | | **Total**| **199** | **214** | **(7)%** | **195** | **220** | **(11)%**| **196** | **229** | **(14)%**| - The Company updated its methodology for determining active subdivisions from five net sales to the first sale, with prior periods updated for consistency[149](index=149&type=chunk) [Cancellation Rate](index=39&type=section&id=Cancellation%20Rate) This section analyzes the cancellation rate as a percentage of gross sales and its contributing factors Cancellations as a Percentage of Gross Sales | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | West | 18% | 17% | 15% | 16% | | Mountain| 18% | 17% | 16% | 15% | | East | 17% | 17% | 15% | 17% | | **Total**| **18%** | **17%** | **15%** | **16%** | - The cancellation rate as a percentage of gross sales increased YoY for Q2 2025 due to decreased gross sales, partially offset by lower beginning backlog. It decreased YoY for H1 2025 due to lower beginning backlog, partially offset by decreased gross sales[156](index=156&type=chunk) [Backlog](index=39&type=section&id=Backlog) This section details the number and dollar value of homes in backlog by segment Homes in Backlog (June 30) | Segment | 2025 Homes | 2025 Dollar Value ($k) | 2025 Avg Price ($k) | 2024 Homes | 2024 Dollar Value ($k) | 2024 Avg Price ($k) | Homes % Change | Dollar Value % Change | Avg Price % Change | | :------ | :--------- | :--------------------- | :------------------ | :--------- | :--------------------- | :------------------ | :------------- | :-------------------- | :----------------- | | West | 289 | $186,118 | $644.0 | 1,047 | $637,602 | $609.0 | (72)% | (71)% | 6% | | Mountain| 160 | $115,834 | $724.0 | 318 | $216,325 | $680.3 | (50)% | (46)% | 6% | | East | 136 | $72,690 | $534.5 | 335 | $151,461 | $452.1 | (59)% | (52)% | 18% | | **Total**| **585** | **$374,642** | **$640.4** | **1,700** | **$1,005,388** | **$591.4** | **(66)%** | **(63)%** | **8%** | - The number of homes in backlog decreased by **66%** and the dollar value by **63%** YoY at June 30, 2025, primarily due to a shift in consumer preference to quick move-in homes and the Company's pivot to build more spec homes[157](index=157&type=chunk) [Homes Completed or Under Construction (WIP lots)](index=40&type=section&id=Homes%20Completed%20or%20Under%20Construction%20(WIP%20lots)) This section provides a breakdown of homes completed or under construction, including unsold, sold, and model homes Homes Completed or Under Construction (June 30) | Category | 2025 | 2024 | % Change | | :------- | :--- | :--- | :------- | | Unsold: | | | | | Completed| 1,775| 370 | 380% | | Under construction | 2,833| 3,612| (22)% | | Total unsold started homes | 4,608| 3,982| 16% | | Sold homes under construction or completed | 576 | 1,697| (66)% | | Model homes under construction or completed | 405 | 483 | (16)% | | **Total homes completed or under construction** | **5,589**| **6,162**| **(9)%** | - The increase in unsold started homes and decrease in sold homes under construction reflects the Company's pivot to build more spec homes and a slower sales pace in Q2 2025[158](index=158&type=chunk) [Lots Owned and Optioned](index=40&type=section&id=Lots%20Owned%20and%20Optioned) This section presents the total number of lots owned and optioned by segment Lots Owned and Optioned (June 30) | Segment | 2025 Owned | 2025 Optioned | 2025 Total | 2024 Owned | 2024 Optioned | 2024 Total | Total % Change | | :------ | :--------- | :------------ | :--------- | :--------- | :------------ | :--------- | :------------- | | West | 10,064 | 2,132 | 12,196 | 9,236 | 1,546 | 10,782 | 13% | | Mountain| 4,591 | 873 | 5,464 | 5,079 | 1,148 | 6,227 | (12)% | | East | 4,978 | 2,671 | 7,649 | 3,016 | 2,904 | 5,920 | 29% | | **Total**| **19,633** | **5,676** | **25,309** | **17,331** | **5,598** | **22,929** | **10%** | - Total owned and optioned lots increased by **10%** YoY to **25,309** at June 30, 2025, which the Company believes is sufficient for its operating needs[159](index=159&type=chunk)[161](index=161&type=chunk) [Financial Services](index=40&type=section&id=Financial%20Services) This section details the financial performance of the Company's financial services segment, including mortgage operations Financial Services Pretax Income (Dollars in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change Amount | Change % | | :------ | :------------------------------- | :------------------------------- | :------------ | :------- | | Mortgage operations | $7,822 | $11,672 | $(3,850) | (33)% | | Other | $10,016 | $10,971 | $(955) | (9)% | | **Total**| **$17,838** | **$22,643** | **$(4,805)** | **(21)%**| | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change % | | :------ | :----------------------------- | :----------------------------- | :------------ | :------- | | Mortgage operations | $6,603 | $20,873 | $(14,271) | (68)% | | Other | $22,208 | $19,434 | $2,774 | 14% | | **Total**| **$28,811** | **$40,307** | **$(11,496)** | **(29)%**| - The decrease in financial services pretax income for Q2 2025 was primarily due to mortgage operations, impacted by special financing programs and decreased interest income, partially offset by an increase in capture rate[121](index=121&type=chunk)[160](index=160&type=chunk) - For H1 2025, other financial services benefited from increased premium revenue due to higher renewal rates and profit sharing from third-party insurance providers[162](index=162&type=chunk) Mortgage Operations Key Data | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total Originations (Loans) | 1,735 | 1,928 | (10)% | 3,165 | 3,639 | (13)% | | Total Originations (Principal, $k) | $854,174 | $902,249 | (5)% | $1,551,789 | $1,684,070 | (8)% | | Capture rate as % of all homes delivered | 84% | 76% | 8% | 82% | 74% | 8% | | Total government loans (% of mix) | 56% | 47% | 9% | 54% | 47% | 7% | | Conventional loans (% of mix) | 44% | 53% | (9)% | 46% | 53% | (7)% | [Income Taxes](index=41&type=section&id=Income%20Taxes) This section discusses the Company's effective income tax rates and the factors influencing them - The Company's effective income tax rates were **22.4%** for Q2 2025 (down from **42.1%** in Q2 2024) and **20.2%** for H1 2025 (down from **28.7%** in H1 2024)[165](index=165&type=chunk) - The decrease in effective tax rates is primarily attributed to reduced non-deductible executive compensation and the absence of prior year one-time non-deductible transaction costs related to the Merger[165](index=165&type=chunk) [CRITICAL ACCOUNTING ESTIMATES AND POLICIES](index=42&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES%20AND%20POLICIES) This section confirms the Company's critical accounting estimates and policies remain consistent with prior reports - Management's critical accounting estimates and policies remain unchanged from those reported in the Annual Report on Form 10-K for the year ended December 31, 2024[168](index=168&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=42&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section analyzes the Company's liquidity position and capital resources, including cash requirements and credit facilities [Material Cash Requirements](index=42&type=section&id=Material%20Cash%20Requirements) This section details the Company's significant cash obligations, including senior notes, land options, and surety bonds - As of June 30, 2025, the Company had **$1.50 billion** in outstanding senior notes (none due within **12 months**) with future interest payments totaling **$1.16 billion** (**$64.2 million** payable within **12 months**)[172](index=172&type=chunk) - The Company had **$35.2 million** in cash deposits and **$13.6 million** in letters of credit securing options to purchase **5,676 lots** for an estimated **$808.2 million**[173](index=173&type=chunk) - Outstanding surety bonds and letters of credit totaled **$349.8 million** and **$179.0 million**, respectively, with estimated completion costs of **$175.8 million** and **$147.6 million**[174](index=174&type=chunk) [Capital Resources](index=42&type=section&id=Capital%20Resources) This section describes the Company's capital structure and its adequacy to meet financial requirements - The Company's capital structure includes stockholders' equity, long-term senior notes, a Revolving Credit Facility, and a Mortgage Repurchase Facility[175](index=175&type=chunk) - Management believes current capital resources are adequate to meet short and long-term capital requirements, including senior note payments, due to cash balances, capital market access, and available capacity under credit facilities[175](index=175&type=chunk)[176](index=176&type=chunk) [Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facility](index=43&type=section&id=Senior%20Notes%2C%20Revolving%20Credit%20Facility%20and%20Mortgage%20Repurchase%20Facility) This section provides details on the Company's senior notes and various credit facilities, including terms and availability - The Revolving Credit Facility has an aggregate commitment of **$900.0 million** (expandable to **$1.40 billion**) and matures on **November 17, 2028**. As of June 30, 2025, **$874.6 million** was available[179](index=179&type=chunk)[183](index=183&type=chunk) - HomeAmerican's Mortgage Repurchase Facility provides up to **$150 million** in liquidity, with **$126.0 million** in repurchase obligations at June 30, 2025. The facility expires on **August 8, 2025**, and an extension is being negotiated[186](index=186&type=chunk)[187](index=187&type=chunk) - HomeAmerican received a waiver for a covenant default related to its Adjusted Tangible Net Worth under the Mortgage Repurchase Facility as of **February 28, 2025**[188](index=188&type=chunk) [Consolidated Cash Flow](index=45&type=section&id=Consolidated%20Cash%20Flow) This section analyzes the Company's consolidated cash flows from operating, investing, and financing activities - Net cash used in operating activities was **$281.3 million** for H1 2025, a significant change from **$50.4 million** provided in H1 2024, primarily due to increased land acquisition and development spending[191](index=191&type=chunk) - Net cash used in investing activities decreased to **$11.9 million** for H1 2025 from **$104.4 million** in H1 2024, mainly due to lower marketable securities purchases in 2025[192](index=192&type=chunk) - Net cash used in financing activities decreased to **$138.5 million** for H1 2025 from **$668.1 million** in H1 2024, primarily due to the **$611.4 million** distribution to Parent in H1 2024 related to the Merger[193](index=193&type=chunk) - Dividend payments increased to **$86.8 million** in H1 2025 from **$41.3 million** in H1 2024, due to the absence of a dividend payment in Q2 2024[193](index=193&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to market risks, particularly those related to interest rate fluctuations affecting mortgage loans, interest rate lock commitments, and debt instruments. It details the hedging strategies employed by HomeAmerican Mortgage Corporation to mitigate these risks - The Company is exposed to market risks from interest rate fluctuations on mortgage loans held-for-sale, mortgage interest rate lock commitments (IRLCs), and debt[197](index=197&type=chunk) - HomeAmerican uses forward sales of mortgage-backed securities and mandatory/best-effort delivery forward loan sale commitments to economically hedge price risk on rate-locked mortgage loans and held-for-sale mortgages[199](index=199&type=chunk)[200](index=200&type=chunk) - As of June 30, 2025, HomeAmerican had **$141.4 million** in IRLCs and **$181.2 million** in mortgage loans held-for-sale, with **$141.4 million** and **$122.9 million**, respectively, not yet committed to a mortgage purchaser[199](index=199&type=chunk) - For fixed-rate debt (senior notes), interest rate changes affect fair value but not earnings or cash flows, while for variable-rate debt (Revolving Credit Facility, Mortgage Repurchase Facility), changes affect earnings and cash flows but not fair value[201](index=201&type=chunk)[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[204](index=204&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[204](index=204&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=Part%20II.%20Other%20Information) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses legal actions and claims against the Company, primarily arising from its homebuilding operations - The Company is involved in various ordinary course legal actions, including product liability and claims related to home sales and financing[206](index=206&type=chunk) - Management believes the outcome of these matters will not have a material adverse effect on the Company's financial condition, results of operations, or cash flows[206](index=206&type=chunk) - All claims against SHRH in the Building Trades Pension Fund of Western Pennsylvania matter were dismissed without prejudice on or about **March 3, 2025**[87](index=87&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the Company's annual report - There are no material changes to the risk factors from those included in the Company's 2024 Annual Report on Form 10-K[207](index=207&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - No other information is reported in this section[208](index=208&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including certifications and financial statements in iXBRL format - Exhibits include Subsidiary Guarantors, certifications from principal executive and financial officers (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and financial statements in iXBRL format[211](index=211&type=chunk) [Signatures](index=49&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q - The report is signed by Robert N. Martin, Director, Senior Vice President and Chief Financial Officer, and Derek R. Kimmerle, Vice President, Controller and Chief Accounting Officer, on **August 5, 2025**[212](index=212&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-8951 M.D.C. HOLDINGS, INC. (Exact name of Registrant as specified in its charter) Delaware 84-0622967 ( ...

Core Viewpoint - Captiva Verde Wellness Corp's subsidiary, Matnaggewinu Development Corp (MDC), has signed a binding water supply agreement with Rodd Hotel and Resorts to provide pure bottled water for its outlets in Atlantic Canada, marking a significant step in indigenous economic opportunities and sustainable practices [1][2]. Group 1: Agreement Details - The agreement involves the purchase of pure bottled water by Rodd Hotel and Resorts for use in various locations, including premier golf resorts [2]. - The water will be sourced from the coastal atmosphere, ensuring high purity and sustainability, surpassing the quality of other commercial water products [2][5]. Group 2: Company Background - Rodd Hotels and Resorts is the largest independently owned hotel chain in Atlantic Canada, known for exceptional guest experiences and promoting regional tourism [3][4]. - The CEO, Mark Rodd, emphasizes the importance of indigenous procurement and aims to expand MDC's market presence in government and private sectors [5]. Group 3: Matnaggewinu Development Corp (MDC) - MDC is a Mi'kmaq-led corporation focused on economic opportunities and self-sufficiency for Mi'kmaq communities, with initiatives in various sectors including pure drinking water [6]. - MDC is 49% owned by Captiva Verde, which aims to foster long-term sustainable growth for indigenous communities [6][9]. Group 4: Captiva Verde Wellness Corp - Captiva Verde is publicly traded and focuses on sustainable housing, health, and wellness initiatives in Indigenous communities, expanding into aerospace and defense [9]. - The partnership with MDC aligns with Captiva Verde's mission to promote economic reconciliation and self-sufficiency [9].

Core Viewpoint - Matnaggewinu Development Corp (MDC) has been certified as an Indigenous Business by the Canadian Council for Indigenous Business (CCIB), which opens up federal procurement opportunities for the company and supports economic growth for Mi'kmaq communities [1][2][5]. Company Overview - MDC is a Mi'kmaq-owned development corporation focused on advancing economic opportunities and self-sufficiency for Mi'kmaq communities through initiatives in housing, health and wellness, aerospace, defense, and sustainable infrastructure [7]. - MDC is federally incorporated in Canada under the Canada Business Corporations Act [2]. Certification Impact - The CCIB certification positions MDC as a recognized partner for federal government procurement, facilitating economic collaboration and growth for Mi'kmaq communities [2][3]. - This certification allows MDC to access various federal procurement programs, furthering its mission to support Mi'kmaq communities with essential services and infrastructure projects [6]. Strategic Expansion - MDC, in partnership with Captiva Verde, is expanding into the aerospace, defense, and space systems sectors, enhancing its role in these rapidly growing markets [4][5]. - The company specializes in areas such as Foreign Military Sales (FMS) and Maintenance, Repair, and Overhaul (MRO), positioning itself as a key player in the global defense and aerospace industries [4]. Leadership Insights - Leadership emphasizes that the CCIB certification is a significant milestone for MDC, validating its efforts in sustainable development and creating long-term procurement opportunities with the federal government [5]. - The certification is seen as a critical moment for advancing economic reconciliation and creating opportunities for Mi'kmaq communities in both traditional and emerging sectors [5].

Company Overview - Captiva Verde and Matnaggewinu Development Corp (MDC) have appointed Brandon Schilling to the Aviation and Military Advisory Board, enhancing MDC's capabilities in aerospace, defense, and space systems [1] - MDC is a Mi'kmaq-owned joint venture focused on innovation and growth in the aerospace, defense, and space systems sectors, with a mission to promote Indigenous leadership and create sustainable business opportunities [15] Brandon Schilling's Expertise - Brandon Schilling has extensive experience in aerospace, defense, space systems, Foreign Military Sales (FMS), and Maintenance, Repair, and Overhaul (MRO) industries, with a proven track record in business development and strategic market growth [2][4] - He has managed aircraft sales deals ranging from $3.5 million to $700 million and has developed key relationships with military and government personnel [2][3] Market Opportunities - The aerospace, defense, and space systems markets are experiencing significant growth, driven by increased government spending and technological advancements [8] - The civil aviation market is projected to reach $1.2 trillion by 2027, with MRO services expected to exceed $90 billion annually [14] - Global defense spending is valued at over $2 trillion, with U.S. defense spending surpassing $800 billion annually, and Canada earmarking $35 billion for military modernization [14] Indigenous Business Inclusion - The Canadian government is actively incorporating Indigenous businesses into its procurement processes, creating opportunities for companies like MDC in key markets [9][11] - MDC aims to leverage Indigenous procurement programs and set-aside opportunities in Canada and the U.S. to position itself as a key player in the aerospace and defense sectors [11]

Company Overview - Captiva Verde Wellness Corp. is a public company listed on the Canadian Securities Exchange under the symbol PWR and on the US OTC Market under CPIVF [1] - The company is dedicated to supporting innovative, community-based projects that drive sustainability, economic development, and cultural preservation across Canada [6] Advisory Board Appointment - Elder Sir Joe Michael has joined the Advisory Board of Matnaggewinu Development Corp (MDC), which is 49% owned by Captiva Verde [1][5] - His extensive leadership experience and cultural insights are expected to guide MDC in developing initiatives that honor Indigenous traditions while promoting economic reconciliation [4] Elder Joe Michael's Background - Elder Joe Michael is a respected leader within the Mi'kmaw Nation, with a history of advocacy for Indigenous communities [2] - He has received an Honorary Doctor of Humanities from Acadia University and served 25 years in the Royal Canadian Mounted Police, where he contributed to the Aboriginal Community Policing model [3] - Currently, he serves as a Captain in the Mi'kmaq Grand Council, focusing on community connections and Indigenous well-being [4] MDC's Mission - Matnaggewinu Development Corp aims to create sustainable economic opportunities for Mi'kmaw communities through strategic partnerships and community-driven initiatives [5] - The appointment of Elder Joe Michael is seen as a generational opportunity to enhance participation of First Nations communities in Canada's economy, including emerging sectors like aviation and military equipment [5]

Core Insights - Captiva Verde Wellness Corp. announced the appointment of Mark Rodd to the Advisory Board of Matnaggewinu Development Corporation (MDC) to lead the development of a 55-acre Indigenous-owned property into a tourism and hospitality destination rooted in Mi'kmaq culture [1][5] Company Overview - Captiva Verde is a public company listed on the Canadian Securities Exchange under the symbol PWR and on the US OTC Market as CPIVF, focusing on partnerships that support Indigenous development and economic growth in sectors like hospitality and tourism [1][9] - Matnaggewinu Development Corporation (MDC) is a Mi'kmaq-led organization aimed at advancing economic development for Mi'kmaq communities through sustainable projects while preserving Mi'kmaq culture [8] Leadership and Expertise - Mark Rodd is the CEO of Rodd Hotels and Resorts, recognized as Atlantic Canada's leading resort chain, with a strong background in destination development and luxury resort operations [2][3][6] - Rodd's experience is expected to significantly contribute to the long-term success of the project and its positive impact on the local economy [2][6] Project Details - The 55-acre development will feature a mix of cultural experiences, luxury accommodations, eco-tourism, and wellness retreats, all designed to immerse visitors in Mi'kmaq traditions [5][7] - The project aims to empower Indigenous communities through sustainable economic development while sharing Mi'kmaq culture with global visitors [5][8] Sustainability Commitment - Rodd Hotels and Resorts emphasizes sustainability and environmental respect as core principles, ensuring the protection of natural resources for future generations [4][7]

Home Sale Revenues - Home sale revenues for 2024 reached $5,285.4 million, a 17% increase from $4,520.3 million in 2023[109] - Home sale revenues for 2024 reached $5,285,366, an increase of 16.9% compared to $4,520,296 in 2023, but a decrease of 5.4% from $5,586,264 in 2022[223] Homebuilding Income and Expenses - Homebuilding pretax income for 2024 was $311.5 million, a decrease of 31% compared to $450.1 million in 2023, primarily due to increased selling, general and administrative expenses[114][118] - The company reported a net income of $323.2 million for 2024, a 19% decrease from $401.0 million in the previous year[114] - The gross margin from home sales decreased by 40 basis points year-over-year, from 17.8% to 17.4% for the year ended December 31, 2024[124] - General and administrative expenses increased to $344.975 million in 2024, a rise of $141.097 million compared to 2023, representing 6.5% of home sale revenues[128] - Total selling, general and administrative expenses reached $619.536 million in 2024, up by $189.642 million from 2023, representing 11.7% of home sale revenues[128] Homebuilding Assets and Inventory - Total homebuilding assets decreased by 8% to $4,679.8 million as of December 31, 2024, driven by a significant reduction in the Corporate segment[119] - The total number of unsold completed homes increased by 316% to 1,411, while homes under construction rose by 27% to 3,442, resulting in a total of 4,853 unsold started homes, a 59% increase[143] - The company owned and optioned a total of 25,993 lots as of December 31, 2024, marking a 16% increase from the previous year[144] - Total inventories increased to $3.75 billion in 2024, up from $3.30 billion in 2023, representing a growth of about 13.6%[221] - The company incurred impairment charges of $16.8 million against inventories of approximately $3.8 billion as of December 31, 2024[217] Financial Services Performance - Financial services pretax income increased by 24% to $93.9 million, driven by higher volume and capture rates in mortgage operations[114] - Financial services revenues for the year ended December 31, 2024, totaled $148.7 million, a 21% increase from $122.6 million in 2023[145] - Total mortgage loan originations increased by 35% to 7,317 loans, with principal amounting to $3.41 billion, a 39% increase from the previous year[147] - The capture rate for mortgage loans as a percentage of all homes delivered was 76%, up from 66% in 2023[147] Cash Flow and Liquidity - The company ended the quarter with total cash and cash equivalents of $837.9 million and total liquidity of $1.72 billion[113] - Cash and cash equivalents decreased to $605.7 million in 2024 from $1.48 billion in 2023, a decline of about 59%[221] - For the year ended December 31, 2024, net cash used in operating activities was $66.7 million, a significant decrease from cash provided by operating activities of $561.6 million in the prior year[169] - Net cash provided by investing activities decreased to $66.1 million in 2024 from $469.4 million in 2023, primarily due to a decrease in the beginning balance of marketable securities[170] - Net cash used in financing activities increased to $803.3 million in 2024 from $105.3 million in 2023, driven by an increase in distribution to Parent of $611.4 million related to the Merger[171] Market and Operational Changes - The company completed a merger on April 19, 2024, with SH Residential Holdings, LLC, which is expected to enhance operational capabilities and market reach[231] - The cancellation rate as a percentage of gross sales decreased to 17% in 2024, down from 25% in 2023[141] - The average active subdivisions decreased by 23% from 226 in 2023 to 173 in 2024[132] - The East segment experienced a 39% increase in net new orders, driven by an increase in spec home inventory[138] Tax and Compliance - The company recorded an income tax provision of $82.2 million for the year ended December 31, 2024, with an effective tax rate of 20.3%[148] - The company believes it was in compliance with all financial covenants included in the Revolving Credit Facility as of December 31, 2024[162] Insurance and Warranty Reserves - The company reported insurance reserves of $96.9 million for estimated construction defect claims as of December 31, 2024[213] - A 10% increase in claim frequency and average cost per claim would raise insurance reserves by approximately $20.3 million, while a 10% decrease would lower reserves by about $18.4 million[186] - The company has established reserves for construction defect claims based on actuarial studies, which may significantly impact financial results if payment experiences change[263] Debt and Financing - As of December 31, 2024, the company had outstanding senior notes totaling $1.50 billion, with future interest payments amounting to $1.19 billion[153] - The company entered into a new unsecured revolving credit agreement with a commitment of up to $900 million, which may increase to $1.40 billion upon request[159] - The total carrying amount of senior notes as of December 31, 2024, was $1,484,267 thousand, with a fair value of $1,340,119 thousand[307]

Financial Performance - Home sale revenues for Q3 2024 reached $1.39 billion, a 28% increase from $1.09 billion in Q3 2023[123] - Net income for Q3 2024 was $133.5 million, a 24% increase compared to $107.3 million in Q3 2023[128] - Financial services pretax income increased by 125% year-over-year to $27.9 million in Q3 2024[128] - Gross profit for Q3 2024 was $246.8 million, with a gross margin of 17.8%, down from 19.2% in Q3 2023[123] - For the three months ended September 30, 2024, total financial services revenues increased to $43.4 million, up 82% from $23.8 million in the same period in 2023[162] - The company reported net income of $254.5 million for the nine months ended September 30, 2024, compared to $281.5 million in the same period of 2023[193] Home Sales and Deliveries - The total number of new homes delivered for the nine months ended September 30, 2024, was 7,467, generating home sale revenues of $4,123,303,000, a 28% increase from $3,210,536,000 in 2023[138] - For the three months ended September 30, 2024, total home sale revenues increased by 29% to $1,386,655,000 compared to $1,087,050,000 in the same period of 2023[137] - The total dollar value of net new orders for the three months ended September 30, 2024, was $1,024,501,000, a 12% increase from $965,498,000 in the same period of 2023[148] Costs and Expenses - Selling, general, and administrative expenses for the three months ended September 30, 2024, increased to $129,096,000 from $101,311,000 in 2023, reflecting a change of $27,785,000[145] - Commissions expenses for the three months ended September 30, 2024, increased to $42,740,000 from $30,204,000, reflecting a rise in home sale revenues[146] - Cash used in financing activities increased to $762.3 million for the nine months ended September 30, 2024, primarily due to a distribution to Parent of $611.4 million related to the Merger[195] Inventory and Backlog - Total homes backlog decreased by 62% to 1,065 homes with a total value of $628.5 million as of September 30, 2024[158] - Total unsold started homes increased by 45% to 3,899 as of September 30, 2024[159] - The company ended Q3 2024 with 21.3 unsold homes under construction per active community, indicating a strategic pivot to meet consumer demand[126] Market Trends - The average selling price of homes delivered in the West segment increased by 18% to $804,561, while the Mountain segment saw a 23% increase to $340,034[137] - The average price of homes in the East segment decreased by 10% due to a shift towards more affordable products[137] - Monthly absorption rates increased across all segments for the three and nine months ended September 30, 2024, compared to the prior year[138] Liquidity and Capital Resources - Total liquidity at the end of Q3 2024 was $2.18 billion, with a debt-to-capital ratio of 33.7%[127] - The company expects to meet its short and long-term capital requirements through its current liquidity and capital resources, including cash, marketable securities, and credit facilities[175] - As of September 30, 2024, the company had $1.09 billion available under the Revolving Credit Facility, with outstanding letters of credit totaling $36.3 million[185] Mortgage Operations - Mortgage operations revenue for the three months ended September 30, 2024, was $26.4 million, a 118% increase compared to $12.1 million in the prior year[162] - The capture rate as a percentage of all homes delivered increased to 77% for the three months ended September 30, 2024, compared to 62% in the same period last year[164] - Total originations for loans reached 1,949 for the three months ended September 30, 2024, a 59% increase from 1,225 in the same quarter of 2023[164] Tax and Debt - The company reported an effective income tax rate of 14.2% for the three months ended September 30, 2024, down from 23.2% in the same period of 2023[166] - As of September 30, 2024, the company had outstanding senior notes totaling $1.50 billion, with future interest payments amounting to $1.19 billion[172] Construction and Development - The company reported a 26% increase in homes under construction, totaling 3,075 as of September 30, 2024[159] - The number of active subdivisions decreased by 22% to 183 as of September 30, 2024[151] - The average active subdivisions for the nine months ended September 30, 2024, decreased by 12% to 206[151]

Core Viewpoint - Richmond American Homes has launched the Seasons at Riverton community in Plumas Lake, California, offering a variety of ranch and two-story floor plans aimed at making homeownership more accessible for diverse buyers [1][3]. Group 1: Company Overview - M.D.C. Holdings, Inc. was founded in 1972 and operates as one of the largest homebuilders in the United States, with a commitment to quality and value in home construction [4]. - The company has assisted over 240,000 homebuyers in achieving homeownership since 1977, reflecting its significant presence in the housing market [4]. - Richmond American Homes operates in multiple states, including California, Texas, and Florida, and offers additional services such as mortgage lending and insurance through its subsidiaries [4]. Group 2: Product Offering - The Seasons at Riverton features seven floor plans from the Seasons™ Collection, including the Ammolite model, which is designed to maximize living space [2][3]. - Homes are priced from the $500,000s and can accommodate up to 6 bedrooms with a total area of approximately 3,040 square feet [3]. - The community includes options for 3-car and RV garages, and is strategically located near highways, schools, shops, and restaurants, enhancing its appeal to potential buyers [3].