Taylor Morrison(TMHC) - 2025 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Taylor Morrison Home Corporation ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements of Taylor Morrison Home Corporation, including the balance sheets, statements of operations, stockholders' equity, and cash flows for the periods ended September 30, 2025, and December 31, 2024 (or September 30, 2024 for income/cash flow statements), along with detailed notes explaining significant accounting policies and specific financial line items Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | Sep 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $9,627,560 | $9,297,131 | | Total Liabilities | $3,430,045 | $3,418,951 | | Total Stockholders' Equity | $6,197,515 | $5,878,180 | | Cash and cash equivalents | $370,591 | $487,151 | | Total Real Estate Inventory | $6,403,084 | $6,234,084 | Condensed Consolidated Statements of Operations This section details the company's financial performance over specific periods, including revenue, net income, and earnings per share | Metric (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Total Revenue | $6,021,840 | $5,811,647 | 3.6% | | Net Income | $608,484 | $640,856 | (5.0%) | | Diluted EPS | $6.00 | $5.97 | 0.5% | | Gross Margin | $1,407,383 | $1,420,202 | (0.9%) | | Interest Expense, net | $35,092 | $7,423 | 372.8% | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, reflecting net income, stock repurchases, and other equity transactions | Metric (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Total Stockholders' Equity | $6,197,515 | $5,723,462 | | Net Income | $608,484 | $640,856 | | Repurchase of Common Stock | $(312,291) | $(260,368) | Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | | Net Cash Provided by Operating Activities | $170,914 | $(228,170) | | Net Cash Used in Investing Activities | $(83,906) | $(82,318) | | Net Cash Used in Financing Activities | $(203,257) | $(239,318) | | Net Decrease in Cash and Cash Equivalents | $(116,249) | $(549,806) | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and breakdowns of the figures presented in the financial statements, covering business description, significant accounting policies, earnings per share, real estate inventory, investments, liabilities, debt, fair value measurements, income taxes, stockholders' equity, stock-based compensation, operating segments, commitments, contingencies, and mortgage hedging activities Note 1. BUSINESS This note describes Taylor Morrison Home Corporation's core business operations, brands, financial services, and reporting segments - Taylor Morrison Home Corporation operates a residential homebuilding business and is a land developer across 12 states, offering single and multi-family homes for various consumer groups[24] - The Company's brands include Taylor Morrison and Esplanade for homebuilding, Yardly for 'Build-to-Rent', and Urban Form for multi-use properties[24] - Financial services are provided through wholly-owned subsidiaries: Taylor Morrison Home Funding (mortgage), Inspired Title (title and escrow), and Taylor Morrison Insurance Services (homeowner's insurance)[24] - The business is organized into four reportable segments: East, Central, West (homebuilding), and Financial Services[24] Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the accounting principles used in preparing the financial statements, including the basis of presentation, use of estimates, and specific policies for real estate inventory, assets held for sale, land banking arrangements, property and equipment, revenue recognition across different business lines, and recently issued accounting pronouncements Basis of Presentation and Consolidation This section outlines the basis for preparing the financial statements, including GAAP compliance and consolidation principles - The unaudited Condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC instructions, and should be read with the Annual Report on Form 10-K[25] Use of Estimates This section highlights the significant accounting estimates and judgments made in preparing the financial statements, acknowledging potential variations in actual results - Significant estimates include real estate development costs, valuation of real estate, goodwill, estimated development liabilities, equity awards, deferred tax assets, and warranty/self-insured risks, with actual results potentially differing from estimates[26] Real Estate Inventory This section details the accounting policies for real estate inventory, including valuation, capitalization of costs, and impairment reviews - Inventory, including raw land, land under development, and homes, is stated at cost, capitalizing interest, real estate taxes, and development costs[27] - Inventory is reviewed for impairment on a community-level basis, with charges recorded if carrying value exceeds estimated undiscounted cash flows[30] | Inventory Impairment Charges (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------------------ | :------------------ | :------------------ | | Total Inventory Impairment Charges | $28,821 | $2,325 | Assets Held for Sale This section describes the criteria and accounting treatment for assets classified as held for sale, including valuation at the lower of carrying value or fair value less costs to sell - Real estate or inventory assets are classified as held for sale when specific criteria are met, including commitment to a sale plan, immediate availability, and probable sale within one year[34] - Assets held for sale are reported at the lower of carrying value or estimated fair value less estimated costs to sell[34] | Fair Value Adjustments for Land Held for Sale (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------------------------------------------------- | :------------------ | :------------------ | | Fair Value Adjustments | $0 | $6,800 | - A purchase and sale agreement for one Build-to-Rent asset in Phoenix with a carrying amount of $43.9 million was executed in Q3 2025, with no fair value adjustment recorded as fair value exceeded carrying value[36] Land Banking Arrangements This section explains the company's use of land banking arrangements to manage land acquisition risks and capital deployment - Land banking arrangements are used to acquire land in staged takedowns, limiting risk and minimizing cash use by transferring rights to third-party entities that are not consolidated[37][39] | Land Banking Arrangement Metric | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------ | :----------- | :----------- | | Lots under agreement | 7,939 | 6,895 | | Aggregate purchase price | $1.5 billion | $1.2 billion | | Exposure to loss (deposits) | $198.3 million | $154.8 million | - A new Build-to-Rent land banking arrangement was entered in Q3 2025 for 3,562 lots with an aggregate purchase price of $769.6 million, and a deposit loss exposure of $34.1 million[41] Property and Equipment, net This section provides a breakdown of the company's property and equipment, net of accumulated depreciation | Property and Equipment, net (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :--------------------------------------- | :----------- | :----------- | | Urban Form | $86,246 | $105,906 | | Build-to-Rent | $118,019 | $46,696 | | Other | $79,153 | $80,107 | | Total Property and Equipment, net | $283,418 | $232,709 | Revenue Recognition This section outlines the company's policies for recognizing revenue from home and land closings, amenity sales, and financial services - Home and land closings revenue is recognized when the buyer has made the required down payment, obtained financing, risks and rewards of ownership are transferred, and the Company has no continuing involvement, typically upon close of escrow[47] - Amenity and other revenue includes club dues, golf club operations, and lease/sale revenue from Urban Form and Build-to-Rent operations[44] - The sale of an Urban Form asset in California during Q3 2025 generated $22.8 million in revenue[45] - Financial services revenue from loan origination fees is recognized at the completion of real estate transactions, and gains/losses from mortgage sales are recognized at the time of sale[48] Recently Issued Accounting Pronouncements This section discusses the potential impact of recently issued accounting standards on the company's financial statements and disclosures - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for the annual reporting period ending December 31, 2025, and is not expected to have a material impact[49] - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for the annual reporting period ending December 31, 2027, and is not expected to impact consolidated financial statements but its impact on footnote disclosures is under review[50] Note 3. EARNINGS PER SHARE This note presents the basic and diluted earnings per share calculations, along with the weighted average shares outstanding | EPS Metric (Nine Months Ended Sep 30) | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Basic EPS | $6.10 | $6.08 | | Diluted EPS | $6.00 | $5.97 | | Weighted Average Shares – Diluted | 101,377 | 107,361 | Note 4. REAL ESTATE INVENTORY This note provides a detailed breakdown of the Company's real estate inventory, including developed land, land held for development or sale, operating communities, and capitalized interest. It also summarizes owned and controlled lots, highlighting the contractual rights to acquire land through options and land banking arrangements | Inventory Category (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Total Real Estate Inventory | $6,403,084 | $6,234,084 | | Lot Type (Number of Lots) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------ | :----------- | :----------- | | Total Owned Lots | 33,996 | 36,718 | | Total Controlled Lots | 50,568 | 49,435 | | Total Owned and Controlled Lots | 84,564 | 86,153 | | Capitalized Interest (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | | :------------------------------------------------------------ | :------ | :------ | | Interest incurred and capitalized | $72,374 | $75,087 | Note 5. INVESTMENTS IN CONSOLIDATED AND UNCONSOLIDATED ENTITIES This note details the Company's investments in both unconsolidated and consolidated entities, primarily joint ventures. It provides summarized financial information for unconsolidated entities and outlines the assets and liabilities of consolidated joint ventures | Unconsolidated Entities (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------- | :----------- | :----------- | | Total Assets | $1,813,338 | $1,623,085 | | Net Income (Nine Months Ended Sep 30) | $10,573 | $15,777 | | TMHC's Share in Net Income | $3,554 | $6,086 | | Consolidated Joint Ventures (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :----------------------------------------- | :----------- | :----------- | | Total Assets | $104,700 | $98,600 | Note 6. ACCRUED EXPENSES AND OTHER LIABILITIES This note provides a breakdown of accrued expenses and other liabilities, including real estate development costs, compensation, self-insurance and warranty reserves, interest payable, and property/sales taxes. It also details changes in self-insurance and warranty reserves | Accrued Expenses and Other Liabilities (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :---------------------------------------------------- | :----------- | :----------- | | Total Accrued Expenses and Other Liabilities | $619,036 | $632,250 | | Self-Insurance and Warranty Reserves (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | | :---------------------------------------------------------------------------- | :------ | :------ | | Additions to reserves | $61,476 | $63,161 | | Claims paid | $(66,535) | $(68,329) | Note 7. DEBT This note details the Company's total debt, including senior notes, loans payable, revolving credit facility, and mortgage warehouse facilities. It also provides information on compliance with debt covenants and changes in specific debt instruments | Debt Category (in thousands) | Sep 30, 2025 (Carrying Value) | Dec 31, 2024 (Carrying Value) | | :--------------------------- | :---------------------------- | :---------------------------- | | Total Debt | $2,190,761 | $2,120,483 | | Senior Notes subtotal | $1,471,772 | $1,470,454 | | Loans payable and other borrowings | $568,813 | $475,569 | | Mortgage warehouse facilities borrowings | $150,176 | $174,460 | - The Company had no outstanding borrowings under its $1 billion Revolving Credit Facility as of September 30, 2025, with $954.8 million of availability[65][66] - The Company was in compliance with all debt covenants as of September 30, 2025[64][67] Note 8. FAIR VALUE DISCLOSURES This note explains the Company's fair value measurements for financial instruments, categorizing them into a three-level hierarchy based on observability of inputs. It provides carrying and fair values for mortgage loans held for sale, derivatives, debt, and inventories - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[71][72] | Financial Instrument (in thousands) | Level | Sep 30, 2025 (Carrying Value) | Sep 30, 2025 (Fair Value) | | :---------------------------------- | :---- | :---------------------------- | :------------------------ | | Mortgage loans held for sale | 2 | $198,548 | $198,548 | | IRLCs | 3 | $(8,716) | $(8,716) | | MBSs | 2 | $1,048 | $1,048 | | Mortgage warehouse facilities borrowings | 2 | $150,176 | $150,176 | | Loans payable and other borrowings | 2 | $568,813 | $568,813 | - The fair value of inventories on a nonrecurring basis was $19.5 million as of September 30, 2025, classified as Level 3 in the fair value hierarchy[74] Note 9. INCOME TAXES This note provides information on the company's effective tax rates and the impact of recent tax legislation | Effective Tax Rate | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :----------------- | :------------------------ | :----------------------- | | 2025 | 24.9% | 24.6% | | 2024 | 24.4% | 24.3% | - The higher effective tax rate for Q3 2025 compared to Q3 2024 was primarily due to a decrease in credits related to homebuilding activities[162] - The One Big Beautiful Bill Act (OBBB) enacted on July 4, 2025, is not expected to have a material impact on the Company's financial statements[77] Note 10. STOCKHOLDERS' EQUITY This note details the Company's capital stock structure and provides information on its stock repurchase program, including authorization, activity, and remaining capacity - The Company's authorized capital stock consists of 400 million shares of common stock and 50 million shares of preferred stock[79] - A stock repurchase program was renewed on October 23, 2024, authorizing up to $1.0 billion in common stock repurchases through December 31, 2026[80] | Stock Repurchase Activity (Nine Months Ended Sep 30) | 2025 (Shares) | 2024 (Shares) | | :--------------------------------------------------- | :------------ | :------------ | | Total amount repurchased | 5,250,964 | 4,238,767 | | Stock Repurchase Spend (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | | :-------------------------------------------------------------- | :-------- | :-------- | | Amount repurchased | $(309,646) | $(257,691) | | Amount available for repurchase — end of period | $600,447 | $236,798 | Note 11. STOCK BASED COMPENSATION This note provides information on the Company's equity-based compensation plan, including available shares for grants, outstanding awards, and the components of stock-based compensation expense - As of September 30, 2025, 4,565,206 shares of Common Stock were available for future grants under the 2013 Omnibus Equity Award Plan[83] | Stock Compensation Expense (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | | :------------------------------------------------------------------ | :------ | :------ | | Total stock compensation expense | $22,337 | $17,016 | - The aggregate unrecognized value of all outstanding stock-based compensation awards was approximately $39.8 million as of September 30, 2025[86] Note 12. OPERATING AND REPORTING SEGMENTS This note describes the Company's organizational structure into three homebuilding segments (East, Central, West) and a Financial Services segment, along with the Corporate and Unallocated segment for Build-to-Rent and Urban Form operations. It also outlines how the Chief Operating Decision Maker (CODM) assesses segment performance - The Company aggregates its homebuilding operations into three reporting segments: East (Atlanta, Charlotte, Jacksonville, Naples, Orlando, Raleigh, Sarasota, Tampa), Central (Austin, Dallas, Denver, Houston, Indianapolis), and West (Bay Area, Las Vegas, Pacific Northwest, Phoenix, Sacramento, Southern California)[89] - The Financial Services segment includes Taylor Morrison Home Funding, Inspired Title, and Taylor Morrison Insurance Services[89] - Activity from Build-to-Rent and Urban Form operations is included in the Corporate and Unallocated segment[87] - The Chief Operating Decision Maker (CODM) assesses segment performance using gross margin and income before income taxes[88] Note 13. COMMITMENTS AND CONTINGENCIES This note details the Company's various commitments and contingencies, including letters of credit, surety bonds, land purchase commitments, and legal proceedings. It provides updates on significant legal cases and the Company's accruals for potential liabilities | Commitment/Contingency (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :----------- | :----------- | | Outstanding Letters of Credit and Surety Bonds | $1,500,000 | $1,400,000 | | Aggregate Purchase Price for Land Commitments | $3,000,000 | $1,900,000 | | Legal Accruals | $50,900 | $49,100 | | Lease Obligations | $73,000 | $79,000 | - In the Solivita litigation, the Florida Supreme Court declined jurisdiction, and the Company paid $64.7 million in Q4 2023. In November 2024, the court awarded plaintiffs $22.5 million for attorneys' fees, $0.6 million for pre-judgment interest, and $0.6 million for taxable costs[101] - The Bellalago class action trial has been postponed, and an accrual for estimated liability has been recorded[104] Note 14. MORTGAGE HEDGING ACTIVITIES This note details the company's use of derivative instruments for mortgage hedging activities and their fair value | Derivative Instrument (in thousands) | Sep 30, 2025 (Fair Value) | Dec 31, 2024 (Fair Value) | | :----------------------------------- | :------------------------ | :------------------------ | | IRLCs | $(8,716) | $(5,917) | | MBSs | $1,048 | $4,174 | | Total (Net Liability) | $(7,668) | $(1,743) | | Commitments to Originate Loans (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------------------------- | :----------- | :----------- | | Total Commitments | $307,200 | $246,100 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a comprehensive discussion and analysis of the Company's financial condition and results of operations for the three and nine months ended September 30, 2025, compared to the same periods in 2024. It covers business overview, key highlights, detailed segment performance, non-GAAP financial measures, liquidity, capital resources, and critical accounting policies Business Overview This section provides an overview of the company's core homebuilding and financial services businesses, including its operational scope and workforce - The Company's principal business is residential homebuilding and the development of lifestyle communities across 12 states, operating under Taylor Morrison, Esplanade, Yardly (Build-to-Rent), and Urban Form brands[113] - Financial services are provided through Taylor Morrison Home Funding, Inspired Title, and Taylor Morrison Insurance Services[113] - As of September 30, 2025, the Company employed approximately 3,000 full-time equivalent persons[113] Factors Affecting Comparability of Results This section highlights specific financial items, such as inventory impairment charges and fair value adjustments, that impact the comparability of financial results between periods | Item (in thousands) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------ | :----------------------------- | :----------------------------- | | Inventory impairment charges | $28,800 | $2,300 | | Fair value adjustments for land held for sale | $0 | $6,800 | Third Quarter 2025 Highlights This section summarizes key operational and financial achievements for the third quarter of 2025, including home closings, gross margin, sales orders, and liquidity - Home closings revenue reached $2.0 billion from 3,324 closings at an average sales price of $602,000[118] - Home closings gross margin was 22.1%, with an adjusted gross margin of 22.4%[118] - SG&A expense leverage improved by 80 basis points to 9.0% of home closings revenue[118] - Net sales orders totaled 2,468, with a monthly absorption pace of 2.4 per community and 349 active selling communities[118] - The Company owned and controlled 84,564 homebuilding lots, with 60% controlled off balance sheet[118] - Repurchased 1.3 million common shares for $75 million, contributing to total liquidity of $1.3 billion[118] Results of Operations This section provides a detailed breakdown of the Company's financial performance, including revenue, cost of revenue, gross margin, operating expenses, and net income for the three and nine months ended September 30, 2025 and 2024. It also presents key financial ratios such as home closings gross margin and SG&A as a percentage of home closings revenue | Metric (Nine Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Total Revenue | $6,021,840 | $5,811,647 | 3.6% | | Net Income | $608,484 | $640,856 | (5.0%) | | Home closings gross margin | 22.8% | 24.2% | (1.4 pp) | | General and administrative expenses as % of home closings revenue | 3.4% | 4.2% | (0.8 pp) | Non-GAAP Measures This section defines and reconciles several non-GAAP financial measures used by management to evaluate performance and set compensation targets, including adjusted net income, adjusted EPS, adjusted income before income taxes, adjusted home closings gross margin, EBITDA, Adjusted EBITDA, and net homebuilding debt to capitalization ratio. These measures exclude items not considered characteristic of ongoing operations | Non-GAAP Metric (Three Months Ended Sep 30) | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Adjusted Net Income | $210,873 | $254,841 | | Adjusted Earnings Per Common Share - Diluted | $2.11 | $2.40 | | Adjusted Home Closings Gross Margin % | 22.4% | 25.0% | | Adjusted EBITDA | $333,147 | $379,178 | | Non-GAAP Metric (As of Sep 30) | 2025 | 2024 | | :----------------------------- | :---- | :---- | | Net Homebuilding Debt to Capitalization Ratio | 21.3% | 22.5% | Three and nine months ended September 30, 2025 compared to three and nine months ended September 30, 2024 This section provides a detailed comparative analysis of key operational and financial metrics for the three and nine months ended September 30, 2025, against the same periods in the prior year, covering active selling communities, sales orders, cancellations, backlog, home closings, segment gross margins, financial services performance, and various expense categories Ending Active Selling Communities This section provides a comparative analysis of the number of active selling communities across different regions | Segment | Sep 30, 2025 | Sep 30, 2024 | Change (%) | | :------ | :----------- | :----------- | :--------- | | East | 137 | 120 | 14.2% | | Central | 95 | 106 | (10.4%) | | West | 117 | 114 | 2.6% | | Total | 349 | 340 | 2.6% | Net Sales Orders This section analyzes changes in net sales orders and average selling prices, attributing fluctuations to market conditions and community dynamics | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Change (%) | | :----- | :------------------------------ | :------------------------------ | :--------- | | Net Sales Orders | 2,468 | 2,830 | (12.8%) | | Average Selling Price | $567 | $587 | (3.4%) | | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Change (%) | | :----- | :----------------------------- | :----------------------------- | :--------- | | Net Sales Orders | 8,575 | 9,627 | (10.9%) | | Average Selling Price | $576 | $599 | (3.8%) | - Decreases in net sales orders were primarily due to community close-outs in the Central region and declining sales pace, demand, and increased cancellations in the West and East regions[145] Sales Order Cancellations This section examines the company's sales order cancellation rates and the underlying factors influencing these trends | Period | 2025 Cancellation Rate | 2024 Cancellation Rate | | :----- | :--------------------- | :--------------------- | | Three Months Ended Sep 30 | 15.4% | 9.3% | | Nine Months Ended Sep 30 | 13.5% | 8.6% | - The higher cancellation rate was driven by market conditions, including homeowners' inability to sell their current homes and reduced customer deposits[147] Sold Homes in Backlog This section details the volume and value of homes in backlog, explaining changes based on sales orders and construction timelines | Metric (As of Sep 30) | 2025 (Units) | 2024 (Units) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | | Total Sold Homes in Backlog | 3,605 | 5,692 | (36.7%) | | Total Sales Value in Backlog (in thousands) | $2,337,564 | $3,830,004 | (39.0%) | - The decrease in backlog was primarily due to fewer net sales orders, improved construction cycle times, and more quick-move-in homes being sold and closed[148] Home Closings Revenue This section provides a comparative analysis of home closings, revenue, and average selling prices, highlighting regional performance and production efficiencies | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Change (%) | | :----- | :------------------------------ | :------------------------------ | :--------- | | Homes Closed | 3,324 | 3,394 | (2.1%) | | Home Closings Revenue, Net (in thousands) | $2,000,909 | $2,029,134 | (1.4%) | | Average Selling Price | $602 | $598 | 0.7% | | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Change (%) | | :----- | :----------------------------- | :----------------------------- | :--------- | | Homes Closed | 9,712 | 9,325 | 4.2% | | Home Closings Revenue, Net (in thousands) | $5,797,077 | $5,585,516 | 3.8% | | Average Selling Price | $597 | $599 | (0.3%) | - The increase in homes closed for the nine months ended September 30, 2025, was primarily due to improved production cycle times and more quick move-ins in the East and West regions[150] Amenity and Other Revenue This section analyzes the sources and changes in amenity and other revenue, including contributions from Urban Form asset sales | Metric (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Change (in thousands) | | :-------------------- | :------------------------------ | :------------------------------ | :-------------------- | | Total Amenity and Other Revenue | $33,191 | $14,234 | $18,957 | | Metric (in thousands) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Change (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total Amenity and Other Revenue | $54,308 | $32,323 | $21,985 | - The increase in Amenity and other revenue in the Corporate segment was due to the sale of an Urban Form asset, which generated $22.8 million in revenue[151] Segment Home Closings Gross Margins This section compares home closings gross margins across different operating segments, noting impacts from impairment charges and product mix | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :----- | :------------------------------ | :------------------------------ | | Consolidated Home Closings Gross Margin % | 22.1% | 24.8% | | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :----- | :----------------------------- | :----------------------------- | | Consolidated Home Closings Gross Margin % | 22.8% | 24.2% | - The East region was negatively impacted by inventory impairment charges and a warranty charge in 2025[153] - The West region's gross margin for the nine months ended September 30, 2025, increased due to closing product mix and reduced home discounts/incentives, partially offset by inventory impairment charges[153] Financial Services This section details the performance of the financial services segment, including revenue, income before taxes, and loan originations | Metric (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | Change (%) | | :---------------------------------------------- | :-------- | :-------- | :--------- | | Total financial services revenue | $160,040 | $145,529 | 10.0% | | Financial services income before income taxes | $89,138 | $72,212 | 23.4% | | Total originations - Principal | $3,053,871 | $2,958,946 | 3.2% | - The increases in financial services revenue were a result of increased revenue earned on the sale of loans, increased title production, and an increase in loan originations[155] Sales, Commissions and Other Marketing Costs This section analyzes sales, commissions, and other marketing costs as a percentage of home closings revenue, noting factors influencing consistency | Metric (% of home closings revenue) | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :---------------------------------- | :------------------------ | :----------------------- | | Sales, commissions and other marketing costs | 5.8% | 5.9% | - The relatively consistent results are primarily driven by leverage in controllable sales and marketing costs[156] General and Administrative Expenses This section examines general and administrative expenses as a percentage of home closings revenue, highlighting factors contributing to changes | Metric (% of home closings revenue) | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :---------------------------------- | :------------------------ | :----------------------- | | General and administrative expenses | 3.2% | 3.4% | - The decreases were primarily due to a decrease in variable compensation-related expenses[157] Net Income from Unconsolidated Entities This section reports the company's share of net income from unconsolidated entities, including impacts from Build-to-Rent joint ventures | Metric (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Net income from unconsolidated entities | $1,253 | $707 | | Metric (in thousands) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net income from unconsolidated entities | $3,554 | $6,086 | - Net income in 2025 was partially offset by losses from Build-to-Rent joint ventures in their lease ramp-up phase[158] Interest Expense, Net This section analyzes changes in net interest expense, attributing fluctuations to non-capitalizable interest and interest income from cash balances | Metric (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Interest expense, net | $12,774 | $3,379 | | Metric (in thousands) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Interest expense, net | $35,092 | $7,423 | - The increase in interest expense was primarily due to higher non-capitalizable interest from land banking arrangements and decreased interest income from cash balances[160] Other Expense/(Income), Net This section details the components of other expense or income, including changes in self-insurance reserves and project write-offs | Metric (in thousands) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Other expense/(income), net | $12,004 (expense) | $(3,635) (income) | | Metric (in thousands) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Other expense/(income), net | $21,249 (expense) | $3,837 (expense) | - The 2025 expense increase was driven by higher self-insurance reserves and write-offs of pre-acquisition costs for terminated projects[161] Income Tax Provision This section discusses the company's effective income tax rates and the factors influencing changes between periods | Effective Tax Rate | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :----------------- | :------------------------ | :----------------------- | | 2025 | 24.9% | 24.6% | | 2024 | 24.4% | 24.3% | - The effective tax rate for Q3 2025 was higher than the prior year due to a decrease in credits related to homebuilding activities[162] Net Income This section provides a comparative analysis of net income and diluted earnings per share, identifying key drivers of changes | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :----- | :------------------------------ | :------------------------------ | | Net income (in thousands) | $201,441 | $251,126 | | Diluted earnings per share | $2.01 | $2.37 | - The decreases in net income and diluted EPS were primarily attributable to a decrease in home closings gross margin and an increase in net interest expense[164] Liquidity and Capital Resources This section discusses how the Company finances its operations, its current liquidity position, and future funding needs. It analyzes cash flow activities from operating, investing, and financing perspectives, and outlines off-balance sheet arrangements, seasonality, and inflation impacts Liquidity This section assesses the company's current liquidity position, including cash, credit facility availability, and access to external financing | Liquidity Metric (in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------ | :----------- | :----------- | | Total cash, excluding restricted cash | $370,591 | $487,151 | | Revolving Credit Facility availability | $954,804 | $947,086 | | Total liquidity | $1,325,395 | $1,434,237 | - The Company believes it has adequate capital resources from operations and sufficient access to external financing for the next twelve months, with potential capital market access for long-term demands[167] Cash Flow Activities This section analyzes the company's cash flows from operating, investing, and financing activities, explaining significant changes between periods | Cash Flow Activity (Nine Months Ended Sep 30, in thousands) | 2025 | 2024 | | :---------------------------------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $170,914 | $(228,170) | | Net cash used in investing activities | $(83,906) | $(82,318) | | Net cash used in financing activities | $(203,257) | $(239,318) | - The change in operating cash flow was primarily due to decreased spend on real estate inventory and land deposits, offset by a decrease in accounts payable, accrued expenses, and other liabilities[168] Debt Instruments This section refers to detailed information on the company's debt instruments, including senior notes and revolving credit facilities - Information regarding debt instruments, including senior notes and the $1 billion Revolving Credit Facility, is detailed in Note 7[173] Off-Balance Sheet Arrangements This section describes the company's off-balance sheet arrangements, such as land option contracts and joint ventures, and their associated risks - The Company participates in strategic land development and homebuilding joint ventures to acquire land and leverage capital[174] - Aggregate purchase price for land under land option contracts and land banking agreements was $3.0 billion as of September 30, 2025, up from $1.9 billion at December 31, 2024[176] - The Company's exposure to these contracts is generally limited to the forfeiture of related non-refundable cash deposits and/or letters of credit[176] Seasonality This section explains the seasonal nature of the company's business and factors that can cause quarterly fluctuations in performance - The business is seasonal, with more homes under construction, closings, revenue, and operating income typically occurring in the third and fourth quarters[177] - Quarterly results can fluctuate significantly due to factors like project timing, sales, closings, market conditions, construction timetables, regulatory approvals, material/labor costs, and weather[181] Inflation This section discusses the potential adverse impacts of inflation on the company's costs and homebuyer affordability, and strategies to mitigate these effects - High inflation can adversely affect the Company through increased land, financing, labor, and construction material costs, and higher mortgage rates impacting homebuyer affordability[179] - The Company attempts to pass cost increases to buyers through higher sales prices, but this may be difficult in soft housing markets[179] Critical Accounting Policies and Estimates This section confirms the consistency of critical accounting policies and estimates with previous disclosures - There have been no significant changes to the Company's critical accounting policies and estimates during the nine months ended September 30, 2025, compared to those disclosed in the Annual Report[182] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the Company's exposure to market risks, primarily interest rate risk, and how it monitors and manages these exposures. It provides a breakdown of fixed and variable rate debt and their potential impact on earnings and cash flows Interest Rate Risk This section details the company's exposure to interest rate risk, distinguishing between fixed and variable rate debt and their impact on financial performance - As of September 30, 2025, approximately 93% of the Company's debt was fixed rate and 7% was variable rate[184] - Changes in interest rates affect the fair value of fixed rate debt but not earnings or cash flows, while for variable rate debt, they impact future earnings and cash flows[184] - Each 1% increase in interest rates would increase the interest incurred by approximately $1.5 million per year, based on the variable rate debt outstanding at September 30, 2025[188] - The use of SOFR for mortgage warehouse facilities and the $1 billion Revolving Credit Facility could lead to an increase in variable rate indebtedness costs[185] ITEM 4. CONTROLS AND PROCEDURES This section reports on the effectiveness of the Company's disclosure controls and procedures and any changes in internal control over financial reporting Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures as assessed by management - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2025[190] Changes in Internal Control Over Financial Reporting This section confirms that there have been no material changes in the company's internal control over financial reporting - There has been no material change in the Company's internal control over financial reporting during the quarter ended September 30, 2025[191] PART II — OTHER INFORMATION This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and other disclosures ITEM 1. LEGAL PROCEEDINGS This section refers to Note 13 for detailed information on legal proceedings, commitments, and contingencies - Information regarding legal proceedings is incorporated by reference from Note 13 - Commitments and Contingencies[193] ITEM 1A. RISK FACTORS This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in Part I, Item 1A of the Company's Annual Report[194] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section provides details on the Company's stock repurchase program, including the authorization, remaining capacity, and repurchase activity during the quarter ended September 30, 2025 - The Board of Directors authorized a renewal of the stock repurchase program on October 23, 2024, permitting repurchases of up to $1 billion of common stock through December 31, 2026[196] - As of September 30, 2025, approximately $600.4 million of available capacity remained under the repurchase program[196] | Period (Q3 2025) | Total Shares Purchased | Average Price Paid Per Share | | :--------------- | :--------------------- | :--------------------------- | | July 1 to July 31, 2025 | 291,372 | $60.05 | | August 1 to August 31, 2025 | 333,892 | $64.73 | | September 1 to September 30, 2025 | 652,269 | $67.34 | | Total | 1,277,533 | $64.99 | - Final settlement of an Accelerated Share Repurchase (ASR) agreement in July 2025 resulted in an additional 142,429 shares of Common Stock received[198] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section confirms the absence of any reported defaults on senior securities - No defaults upon senior securities were reported[199] ITEM 4. MINE SAFETY DISCLOSURES This section confirms the absence of any reported mine safety disclosures - No mine safety disclosures were reported[200] ITEM 5. OTHER INFORMATION This section covers other miscellaneous information, including Rule 10b5-1 trading plans and an amendment to the CEO's employment agreement Rule 10b5-1 Plans This section reports on the adoption or termination of Rule 10b5-1 trading plans by company directors or officers - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2025[201] Amended Employment Agreement With Chief Executive Officer This section details the amendment to the CEO's employment agreement, outlining specific retirement benefits - On October 20, 2025, an amendment to the employment agreement of Sheryl Palmer, President, CEO, and Chairman, was entered into[202] - The amendment provides specific retirement benefits for a 'Qualified Retirement,' including full vesting of certain time-based equity awards, continued eligibility for performance-based awards, access to an administrative assistant for five years, and continued health insurance benefits[202] ITEM 6. EXHIBITS This section lists the exhibits filed with the 10-Q report, including corporate documents, employment agreements, certifications, and XBRL documents - Key exhibits include the Second Amendment to Amended and Restated Employment Agreement (Exhibit 10.1), CEO/CFO Certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents[207] SIGNATURES This section contains the signatures of the Company's principal executive officer, principal financial officer, and chief accounting officer, certifying the report - The report is signed by Sheryl D. Palmer (Chairman of the Board of Directors and Chief Executive Officer), Curt VanHyfte (Executive Vice President and Chief Financial Officer), and Joseph Terracciano (Chief Accounting Officer)[211] - The report was dated October 22, 2025[211]