MDC M.d.c. Holdings, Inc. - 10-K

Item 1A. Risk Factors.

Changes in general economic, real estate and other business conditions may have an adverse effect on the homebuilding and mortgage industries, which could have a negative impact on our business.

The homebuilding industry is cyclical and is significantly affected by changes in industry conditions, the national political environment and general economic conditions such as:

• employment levels;

• availability of financing for homebuyers;

• interest rates;

• consumer confidence and spending;

• wage growth;

• inflation;

• household formations;

• levels of new and existing homes for sale;

• cost of land, labor and construction materials;

• demographic trends; and

• housing demand.

These conditions may exist on a national level or may affect some of the regions or markets in which we operate more than others. When adverse conditions affect any of our larger markets, they could have a proportionately greater impact on us than on some other homebuilding companies.

Changes to monetary policy or other actions by the Federal Reserve or governmental agencies could have and have had an adverse effect on interest rates (including mortgage interest rates), equity markets and consumer confidence. Adverse effects could cause and have caused us to experience declines in the market value of our inventory and the demand for our homes, resulting in a negative impact to our financial position, results of operations and cash flows.

An oversupply of alternatives to new homes, including foreclosed homes, homes held for sale or rent by investors and speculators, other existing homes, and rental properties, can also reduce our ability to sell new homes, depress new home prices and reduce our margins on the sale of new homes. High levels of foreclosures and short-sales not only contribute to additional inventory available for sale, but also can reduce appraisal valuations for new homes, potentially resulting in lower sales prices.

Terrorist attacks, acts of war, other acts of violence or threats to national security, and any corresponding response by the United States or others, or related domestic or international instability, may adversely affect general economic conditions or cause a slowdown of the economy.

As a result of the foregoing matters, potential customers may be less willing or able to buy our homes. In the future, our pricing strategies may be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways. In addition, cancellations of home sales contracts in backlog may increase as homebuyers choose to not honor their contracts.

Additionally, the factors discussed above may increase our counterparty risk, which may include, among others, banks under our credit facilities and mortgage purchasers who may not be willing or able to perform on obligations to us. To the extent a third-party is unable or unwilling to meet its obligations, our financial position, results of operations and cash flows could be negatively impacted.

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Our mortgage operations are closely related to our homebuilding business, as HomeAmerican originates mortgage loans principally to purchasers of the homes we build. Therefore, a decrease in the demand for our homes because of the preceding matters may also adversely affect the financial results of this segment of our business. Furthermore, any adverse changes in the economic conditions discussed previously could increase the default rate on the mortgages we originate, which may adversely affect our ability to sell the mortgages, the pricing we receive upon the sale of mortgages, or our potential exposure to recourse regarding mortgage loan sales.

These challenging conditions are complex and interrelated. We cannot predict their occurrence or severity, nor can we provide assurance that our responses would be successful.

Increased competition levels in the homebuilding and mortgage lending industries could have a negative impact on our homebuilding and mortgage operations.

The homebuilding industry is fragmented and highly competitive. Our homebuilding subsidiaries compete with numerous public and private homebuilders, including a number that are substantially larger than us and may have greater financial resources than we do. Our homebuilding subsidiaries also compete with subdivision developers and land development companies, some of which are themselves homebuilders or affiliates of homebuilders. Homebuilders compete for customers, land, building materials, subcontractor labor and desirable financing. Competition for home orders is based primarily on home sales price, location of property, home style, financing available to prospective homebuyers, quality of homes built, customer service and general reputation in the community, and may vary market-by-market and/or submarket-by-submarket. Additionally, competition within the homebuilding industry can be impacted by an excess supply of new and existing homes available for sale resulting from a number of factors, including, among other things, increases in the number of new home communities, increases in speculative homes available for sale and increases in home foreclosures. Increased competition can result in a decrease in our net new home orders, a decrease in our home sales prices and/or an increase in our home sales incentives in an effort to generate new home sales and maintain homes in backlog until they close. These competitive pressures may negatively impact our financial position, results of operations and cash flows.

Our mortgage lending subsidiary, HomeAmerican, experiences competition from numerous banks and other mortgage bankers and brokers, many of which are larger and may have greater financial resources. As a result, these competitors may be able to offer better pricing and/or mortgage loan terms, more relaxed underwriting criteria and a greater range of products, which could negatively impact the financial position, results of operations and cash flows of our mortgage operations.

If land is not available at reasonable prices or terms, we could be required to scale back our operations in a given market and/or we may operate at lower levels of profitability.

Our operations depend on our homebuilding subsidiaries’ ability to obtain land for the development of our residential communities at reasonable prices and with terms that meet our underwriting criteria. Our ability to obtain land for new residential communities may be adversely affected by changes in the general availability of land, the willingness of land sellers to sell land at reasonable prices, competition for available land, availability of financing to acquire land, zoning, regulations that limit housing density, and other market conditions. If the supply of land appropriate for development of residential communities is limited because of these factors, or for any other reason, the number of homes that our homebuilding subsidiaries build and sell may decline. To the extent that we are unable to purchase land timely or enter into new contracts for the purchase of land at reasonable prices, due to the lag time between the time we acquire land and the time we begin selling homes, we may be required to scale back our operations in a given market and/or we may operate at lower levels of profitability. As a result, our financial position, results of operations and cash flows could be negatively impacted.

Supply shortages and other risks related to the demand for skilled labor and building materials could continue to increase costs and delay deliveries.

The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time. Shortages in labor can be due to: competition for labor, work stoppages, labor disputes, shortages in qualified trades people, lack of availability of adequate utility infrastructure and services, or our need to rely on local subcontractors who may not be adequately capitalized or insured. Labor and material shortages can be more severe during periods of strong demand for housing or during periods in which the markets where we operate experience natural disasters that have a significant impact on existing residential and commercial structures. Additionally, we could experience labor shortages as a result of subcontractors going out of business or leaving the residential construction market due to low levels of housing production and volumes. Pricing for labor and materials can be affected by the factors discussed above, changes in energy prices, and various other national, regional and local economic factors. In addition, environmental and other regulations and import tariffs and trade restrictions have had, and in the future could continue to have, an adverse impact on the cost of certain raw materials such as

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lumber. Recalls of materials driven by manufacturing defects can drive shortages in materials and delay the delivery of homes. Any of these circumstances could give rise to delays in the start or completion of our residential communities, increase the cost of developing one or more of our residential communities and/or increase the construction cost of our homes.

We generally are unable to pass on increases in construction costs on build-to-order homes to customers who have already entered into sales contracts, as those sales contracts fix the price of the homes at the time the contracts are signed, which generally is in advance of the construction of the home. With our increase in the number of spec homes due to spec construction starts, we may see an increase in our ability to pass on increases in construction costs to customers should market conditions permit. To the extent that market conditions prevent the recovery of increased costs, including, among other things, subcontracted labor, finished lots, building materials, and other resources, through higher selling prices, our financial position, cash flows and operating results, including our gross margin from home sales, could be negatively impacted.

If mortgage interest rates rise, if down payment requirements are increased, if loan limits are decreased, or if mortgage financing otherwise becomes less available, it could adversely affect our business.

Mortgage liquidity influenced by governmental entities like the FHA, VA, USDA and Ginnie Mae or government-sponsored enterprises (“GSEs”) like Fannie Mae and Freddie Mac continue to be an important factor in marketing our homes. Financial losses or other factors may limit, restrict or otherwise curtail their ability or willingness to insure mortgage loans, offer insurance at rates and on terms that are not prohibitive, or purchase mortgage loans. Should this occur, it may negatively impact the availability of mortgage financing and our sales of new homes.

We believe that the liquidity provided by Fannie Mae, Freddie Mac and Ginnie Mae to the mortgage industry has been very important to the housing market. Any reduction in the availability of the liquidity provided by these institutions could adversely affect interest rates, mortgage availability and our sales of new homes and mortgage loans.

Loans sold to or insured by the GSEs are subject to various loan limits. Decreases in these loan limits may require homebuyers to make larger down payments or obtain more restrictive non-conforming or “jumbo” mortgages, which could adversely impact on our financial position, results of operations and cash flows.

Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing.

If interest rates increase, the costs of owning a home may be affected and could result in further reductions in the demand for our homes. During fiscal 2022 and into 2023, the increase in mortgage interest rates had a significant impact on the demand for our homes.

Public health issues such as a pandemic or epidemic could harm business and results of operations of the Company.

Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, availability of financing for homebuyers, interest rates, consumer confidence and spending, wage growth and inflation, household formations, levels of new and existing homes for sale, cost of land, labor and construction materials, demographic trends and housing demand. These factors, in particular consumer confidence, can be significantly and adversely affected by a variety of factors beyond our control. Specifically, an epidemic, pandemic, or similar public health issue could significantly disrupt us from operating our business in the ordinary course for an extended period, and thereby, along with associated economic and/or consumer confidence instability, have a material adverse impact on our financial position, results of operations and cash flows.

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Changes to tax laws, incentives or credits currently available to our customers may negatively impact our business.

Many homeowners receive substantial tax benefits in the form of tax deductions against their personal taxable income for mortgage interest and property tax payments and the loss or reduction of these deductions could affect homeowners’ net cost of owning a home. Significant changes to existing tax laws, such as the ability to deduct mortgage interest and real property taxes, may result in an increase in the total cost of home ownership and may make the purchase of a home less attractive to buyers. This could adversely impact demand for and/or sales prices of new homes, which would have a negative impact on our business.

A decline in the market value of our homes or carrying value of our land could continue to have a negative impact on our business .

Our homebuilding subsidiaries acquire land for the replacement of land inventory and/or expansion within our current markets and may, from time to time, purchase land for expansion into new markets. The fair value of our land and land under development inventory and housing completed or under construction inventory depends on market conditions. Factors that can impact our determination of the fair value of our inventory primarily include home sale prices, levels of home sale incentives and home construction and land costs. Our home sale prices and/or levels of home sale incentives can be impacted by, among other things, uncertainty in the homebuilding and mortgage industries or the United States/global economy overall, decreased demand for new homes, decreased home prices offered by our competitors, increased levels of new or existing home inventory, home foreclosure and short-sale levels, decreased ability of our homebuyers to obtain suitable mortgage loan financing and high levels of home order cancellations. Under such circumstances, we may be required to record impairments of our inventory. Any such inventory impairments would have a negative impact on our financial position and results of operations. During fiscal 2025, increased levels of new and existing home inventory in certain markets and mortgage interest rates that have remained elevated in comparison to recent history had a significant impact on the homebuilding industry causing home sale prices to decrease and home sale incentives to increase across the industry. This has resulted in inventory impairments in certain of our communities due to the decline in the market value of our housing completed or under construction and land and land under development inventory.

Natural disasters could cause an increase in home construction costs, as well as delays, and could negatively impact our business.

The climates and geology of many of the markets in which we operate present increased risks of natural disasters. To the extent that hurricanes, severe storms, earthquakes, droughts, floods, heavy or prolonged precipitation, wildfires or other natural disasters or similar events occur, the financial position, results of operations and cash flows of our business may be negatively impacted.

Changes in energy prices or regulations may have an adverse effect on our cost of building homes.

Some of the markets in which we operate are impacted by regulations related to energy, such as setbacks required from oil / gas drilling operations or restrictions on the use of land. To the extent that these regulations are modified, the value of land we already own or the availability of land we are looking to purchase may decline, which may adversely impact the financial position, results of operations and cash flows of our business. Furthermore, pricing offered by our suppliers and subcontractors can be adversely affected by increases in various energy costs resulting in a negative impact to our financial position, results of operations and cash flows of our business.

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets, and disruptions in these markets could have an adverse impact on the results of our business.

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets. Our requirements for additional capital, whether to finance operations or to service or refinance our existing indebtedness, fluctuate as market conditions and our financial performance and operations change. We cannot provide assurance that we will maintain cash reserves and generate sufficient cash flow from operations in an amount to enable us to service our debt or to fund other liquidity needs.

The availability of additional capital, whether from private capital sources or the public capital markets, fluctuates as our financial condition and market conditions in general change. There may be times when the private capital markets and the public debt markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Additionally, any reduction in our credit ratings and/or a weakening of our

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financial condition, could adversely affect our ability to obtain necessary funds. Even if financing is available, it could be costly or have other adverse consequences.

In addition, the sources and terms and conditions of our mortgage repurchase facilities are subject to change. These changes may impact, among other things, availability of capital, cost of borrowings, collateral requirements and collateral advance rates.

Our business is subject to numerous federal, state and local laws and regulations concerning land development, construction of homes, sales, mortgage lending, environmental and other aspects of our business. These laws and regulations could give rise to additional liabilities or expenditures, or restrictions on our business.

Our operations are subject to continuing compliance requirements mandated by applicable federal, state and local statutes, ordinances, rules and regulations, including zoning and land use ordinances, building, plumbing and electrical codes, contractors’ licensing laws, state insurance laws, federal and state human resources laws and regulations, and health and safety laws and regulations. Various localities in which we operate have imposed (or may impose in the future) fees on developers to fund schools, road improvements and low and moderate-income housing.

Availability of and costs related to permit, water/sewer tap, and impact fees can impact our homebuilding operations. From time to time, various municipalities in which our homebuilding subsidiaries operate restrict or place moratoria on the availability of utilities, including water and sewer taps. Additionally, certain jurisdictions in which our homebuilding subsidiaries operate have proposed or enacted “slow growth” or “no growth” initiatives and other measures that may restrict the number of building permits available in any given year. These initiatives or other similar measures could reduce our ability to open new subdivisions and build and sell homes in the affected markets. The availability issues previously discussed and any increases in costs of these fees may negatively impact our financial position, results of operations and cash flows.

Our homebuilding operations also are affected by regulations pertaining to availability of water, municipal sewage treatment capacity, land use, dust controls, oil and gas operations, building materials, population density and preservation of endangered species, natural terrain and vegetation.

We are subject to local, state and federal statutes, ordinances, rules and regulations concerning the protection of public health and the environment. These include regulating the emission or discharge of materials into the environment such as greenhouse gas emissions, storm water runoff, the handling, use, storage and disposal of hazardous substances, and impacts to wetlands and other sensitive environments. These restrictions and requirements could increase our operating costs and require additional capital investment, which could negatively impact our financial position, results of operations and cash flows. Further, we have extensive operations in the western United States, where some of the most extensive environmental laws and building construction standards in the country have been enacted. We believe we are in compliance in all material respects with existing governmental environment restrictions, standards and regulations applicable to our business, and such compliance has not had a material impact on our business. Given the rapid changes to environmental laws and other matters that may arise that are not currently known, we cannot predict our future exposure, and our future costs to achieve compliance or remedy potential violations could be significant.

The particular environmental laws and regulations that apply to any given homebuilding project vary greatly according to a particular site’s location, the site’s environmental conditions and the present and former uses. These environmental laws may result in project delays, cause us to incur substantial compliance and other costs and/or prohibit or severely restrict homebuilding activity in certain environmentally sensitive locations. Environmental laws and regulations may also have a negative impact on the availability and price of certain raw materials, such as lumber.

Our revolving credit facility contains representations regarding anti-corruption and sanctions laws, a violation of which could result in an event of default.

We also are subject to rules and regulations with respect to originating, processing, selling and servicing mortgage loans, which, among other things: prohibit discrimination and establish underwriting guidelines; provide for audits and inspections; require appraisals and/or credit reports on prospective borrowers and disclosure of certain information concerning credit and settlement costs; establish maximum loan amounts; prohibit predatory lending practices; and regulate the referral of business to affiliated entities.

The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits and examinations in the industry. These examinations can include consumer lending practices, sales of mortgages to financial institutions and other investors and the practices in the financial services segments of homebuilding

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companies. New rules and regulations or revised interpretations of existing rules and regulations applicable to our mortgage lending operations could result in more stringent compliance standards, which may substantially increase costs of compliance.

In the ordinary course of business, we are required to obtain surety bonds, the unavailability of which could adversely affect our business.

As is customary in the homebuilding industry, we often are required to provide surety bonds to secure our performance under construction contracts, development agreements and other arrangements. Our ability to obtain surety bonds primarily depends upon our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue surety bonds. If we are unable to obtain surety bonds when required, our financial position, results of operations and cash flows could be adversely impacted.

Product liability litigation and warranty claims that arise in the ordinary course of business may be costly.

As a homebuilder, we are subject to construction defect and home warranty claims, as well as claims associated with the sale and financing of our homes arising in the ordinary course of business. These types of claims can be costly. The costs of insuring against or directly paying for construction defect and product liability claims can be high and the amount of coverage offered by insurance companies may be limited. If we are not able to obtain adequate insurance against these claims, we may incur additional expenses that would have a negative impact on our results of operations in future reporting periods. Additionally, changes in the facts and circumstances of our pending litigation matters could have a material impact on our financial position, results of operations and cash flows.

Repurchase requirements associated with HomeAmerican’s sale of mortgage loans, could negatively impact our business.

We are subject to risks associated with mortgage loans, including conventional mortgage loans, FHA and VA mortgage loans, second mortgage loans, high loan-to-value mortgage loans and jumbo mortgage loans (mortgage loans with principal balances that exceed various thresholds in our markets). These risks may include, among other things, compliance with mortgage loan underwriting criteria and the associated homebuyers’ performance, which could require HomeAmerican to repurchase certain of those mortgage loans or provide indemnification. Repurchased mortgage loans and/or the settlement of claims associated with such loans could have a negative impact on HomeAmerican’s financial position, results of operations and cash flows.

Because of the seasonal nature of our business, our quarterly operating results can fluctuate.

We may experience noticeable seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, the number of homes delivered and the associated home sale revenues increase during the third and fourth quarters compared with the first and second quarters. We believe that this type of seasonality reflects the historical tendency of homebuyers to purchase new homes in the spring and summer with deliveries scheduled in the fall or winter, as well as the scheduling of construction to accommodate the seasonal weather conditions in certain markets.

We are dependent on the services of key employees, and the loss of their services could hurt our business.

Although we believe that we have made provision for adequately staffing current operations, because of competition for experienced homebuilding industry personnel, retaining our skilled people is an important area of focus. Our future success depends, in part, on our ability to attract, train and retain skilled personnel. If we are unable to retain our key employees or attract, train and retain other skilled personnel in the future, it could have an adverse impact on our financial position, results of operations and cash flows.

Information technology failures and cybersecurity breaches could harm our business.

We use information technology and other computer resources to carry out important operational activities and to maintain our business records. These information technology systems are dependent upon electronic systems and other aspects of the internet infrastructure. A material breach in the security of our information technology systems or other data security controls could result in third parties obtaining or corrupting customer, employee or company data. To date, we have not had a material breach of data security, however such occurrences could have a material and adverse effect on our financial position, results of operations and cash flows.

Financial industry turmoil could materially and adversely affect our liquidity and consolidated financial statements.

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The banking industry experienced certain bank failures and other turmoil in 2023. The failure of other banks or financial institutions, if it occurs, could have a material adverse effect on our liquidity or consolidated financial statements if we have placed cash or other deposits at such banks or financial institutions, or if such banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Revolving Credit Facility. Under our Revolving Credit Facility, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit and may be unwilling to issue additional letters of credit if we do not enter into arrangements to address the risk with respect to the defaulting lender (which may include cash collateral). If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, we may not be able to access the Revolving Credit Facility’s full borrowing or letter of credit capacity to support our business needs. In addition, if a buyer under our Mortgage Repurchase Facilities, which are used to fund mortgage originations, fails or is unable or unwilling to fulfill its obligations, HomeAmerican may be limited in its ability to provide mortgage loans to our homebuyers, which may prevent them from closing on their homes at the time expected or at all.

Litigation challenging the completion of the Merger Agreement may be costly.

Lawsuits have and may continue to be filed against us, our Board of Directors or other parties to the Merger Agreement, challenging our acquisition by Parent or making other claims in connection therewith. These types of litigation can be costly. Additionally, changes in the facts and circumstances of our pending or future litigation matters or potential instigation of enforcement or other actions could have a material impact on our financial position, results of operations and cash flows.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in “Item 1A, Risk Factors.” This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

(Dollars in thousands, except per share amounts)

Homebuilding:

Home sale revenues

Land sale revenues

Other revenues

Total revenues

Home cost of sales

Inventory impairments

Total home cost of sales

Land cost of sales

Other cost of sales

Total cost of sales

Gross margin

Gross margin %

Selling, general and administrative expenses

Interest and other income

Transaction costs

Other income (expense), net

Homebuilding pretax income

Financial Services:

Revenues

Expenses

Other income (expense), net

Financial services pretax income

Income before income taxes

Provision for income taxes

Net income

Cash provided by (used in):

Operating Activities

Investing Activities

Financing Activities

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EXECUTIVE SUMMARY

Overview

Industry Conditions and Outlook for SHUS*

The homebuilding industry saw softened market conditions and affordability challenges during 2025. The macroeconomic backdrop remains challenging given consumers affordability concerns, continuing uncertainty related to geopolitical issues and mortgage interest rates that have remained elevated in comparison to recent history. As a result, we experienced a decrease in our sales absorption rate and our gross margin from home sales during the year ended December 31, 2025 compared to the same period in the prior year.

As part of the planned reorganization of the Sekisui House, Ltd. U.S. homebuilder business, SHUS completed the acquisition of Woodside on December 1, 2025. This acquisition increased the scale of SHUS homebuilding operations in Arizona, California, Idaho, Nevada and Utah by adding nearly $1.0 billion of homebuilding net assets. In connection with the planned reorganization, SHUS amended its revolving credit facility during the fourth quarter of 2025 to increase the aggregate commitment to $1.40 billion and extend the termination date of the majority of the facility commitments until October 2029. As further discussed in Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements, the consolidated financial statements, as well as management's discussion and analysis of financial condition and results of operations, incorporate Woodside financial results and financial information beginning on April 19, 2024.

We believe that we are well equipped to navigate the current market conditions given our strong financial position. We ended the year with total cash and cash equivalents of $330.6 million, total liquidity of $1.73 billion and no senior note maturities until 2030.

Results for the Twelve Months Ended December 31, 2025

For the year ended December 31, 2025, we reported net income of $151.9 million, a 62% decrease compared to net income of $394.5 million for the prior year period. This was driven by a decrease in pretax income of both our homebuilding business and financial services business. Our homebuilding pretax income decreased $266.7 million, or 66% year-over-year. Our financial services business pretax income decreased $40.3 million, or 43%, compared to the same period in the prior year. The decrease in homebuilding pretax income was primarily due to a 22% decrease in home sale revenues, a 340 basis point decrease in gross margins from home sales and a 40 basis point increase in our selling, general and administrative expenses as a percentage of home sale revenues. The decrease in gross margin from home sales was driven largely by $77.7 million in inventory impairments during the year ended December 31, 2025 compared to $18.3 million in the same period in the prior year, an increase in incentive levels year-over-year and to a lesser extent increased land costs. The decrease in financial services pretax income was driven by our Mortgage Operations. The decrease in pretax income for our Mortgage Operations was driven by decreased loan origination volume due to the decrease in homes closed as well as special financing programs offered on loans locked during the year. This was partially offset by an increase in loans originated as a percentage of total homes closed ("Capture Rate"). Our financial services and homebuilding businesses each saw a decrease in interest income due to decreases in cash and short-term investments year-over-year.

* See “Forward-Looking Statements”  above.

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Homebuilding

Pretax Income (Loss)

Year Ended December 31,

Change

Change

Amount

Amount

(Dollars in thousands)

West

Mountain

East

Corporate

Total homebuilding pretax income

Homebuilding pretax income for 2025 was $135.9 million, a decrease of $266.7 million from $402.6 million for the year ended December 31, 2024. The decrease was due to a 40 basis point increase in our selling, general and administrative expenses as a percentage of home sale revenues, a 340 basis point decrease in gross margins from homes sales driven by a $59.4 million increase in inventory impairments and a 22% decrease in home sale revenues. This was partially offset by a $44.2 million decrease in transaction costs related to the Merger.

Our West segment experienced a $284.6 million year-over-year decrease in pretax income, due to an decrease in gross margin from home sales and a 28% decrease in home sale revenues. Our Mountain segment experienced a $65.0 million decrease in pretax income from the prior year, as a result of a decrease in gross margin from home sales and a 4% decrease in home sale revenues. Our East segment experienced a $72.5 million decrease in pretax income from the prior year, due primarily to a decrease in gross margin from home sales and a 27% decrease in home sale revenues. Our Corporate segment experienced a $155.4 million increase in pretax income from the prior year, due to costs incurred in 2024 in connection with the Merger, including the accelerated vesting of equity awards, key executives' transaction bonuses and transaction costs.

Assets

December 31,

Change

Amount

(Dollars in thousands)

West

Mountain

East

Corporate

Total homebuilding assets

Total homebuilding assets increased 1% from December 31, 2024 to December 31, 2025, driven by our Homebuilding segments, partially offset by the Corporate segment. The increase in the homebuilding segments was driven by the West and East segments, due to increased inventory at period end, partially offset by the Mountain segment, which had decreased inventory at period end. The decrease in the Corporate segment was driven by a decrease in cash and cash equivalents as a result of cash used to purchase homebuilding inventory in 2025. This was partially offset by a decrease in the accounts receivable due from Parent.

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New Home Deliveries & Home Sale Revenues:

Changes in home sale revenues are impacted by changes in the number of new homes delivered and the average selling price of those delivered homes. Commentary for each of our segments on significant changes in these two metrics is provided below.

December 31,

% Change

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average

Price

(Dollars in thousands)

West

Mountain

East

Total

December 31,

% Change

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average

Price

(Dollars in thousands)

West

Mountain

East

Total

For the year ended December 31, 2025, each of the homebuilding segments decrease in new home deliveries was due to a decrease in beginning backlog at the beginning of the respective periods and a decrease in net home sales during the respective periods. This decrease in new home deliveries was partially offset by the increase in new home deliveries driven by the full year of Woodside new home deliveries during the year ended December 31, 2025 compared to new home deliveries post Merger during 2024. The increase in average selling price was due to a shift in mix to more higher priced communities.

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Gross Margin

Our gross margin from home sales for the year ended December 31, 2025 decreased 340 basis points year-over-year from 17.9% to 14.5%. The decrease in gross margin from home sales was primarily due to inventory impairments and increased incentive levels, and to a lesser extent increased land costs.

Our gross margin from home sales are impacted by our historical land buying strategy, where we have targeted an owned and optioned lot supply of approximately two to three years worth of home closings. As a result, our land associated with homes closed are represented by more recent market values.

Inventory Impairments

Inventory impairments recognized by segment for the years ended December 31, 2025, 2024 and 2023 are shown in the table below.

Year Ended December 31,

(Dollars in thousands)

Housing Completed or Under Construction:

West

Mountain

East

Subtotal

Land and Land Under Development:

West

Mountain

East

Subtotal

Total Inventory Impairments

The table below provides quantitative data, for the periods presented, where applicable, used in determining the fair value of the impaired inventory.

Impairment Data

Quantitative Data

Three Months Ended

Number of

Subdivisions

Impaired

Inventory

Impairments

Fair Value of

Inventory After Impairments

Discount Rate

(Dollars in thousands)

December 31, 2025

September 30, 2025

June 30, 2025

Total

September 30, 2024

June 30, 2024

March 31, 2024

Total

December 31, 2023

September 30, 2023

June 30, 2023

March 31, 2023

Total

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Selling, General and Administrative Expenses

Year Ended December 31,

Change

Change

(Dollars in thousands)

General and administrative expenses

General and administrative expenses as a percentage of home sale revenues

(60) bps

220 bps

Marketing expenses

Marketing expenses as a percentage of home sale revenues

80 bps

0 bps

Commissions expenses

Commissions expenses as a percentage of home sale revenues

30 bps

10 bps

Total selling, general and administrative expenses

Total selling, general and administrative expenses as a percentage of home sale revenues (SG&A Rate)

40 bps

230 bps

For the year ended December 31, 2025, the decrease in our general and administrative expenses was driven by a decrease in salary related expenses, as the year ended December 31, 2024 included the vesting of equity awards and key executives' transaction bonuses in connection with the closing of the Merger. This was partially offset by the increase in general and administrative expenses driven by the full year of Woodside general and administrative expenses during the year ended December 31, 2025 compared to having only recognized general and administrative expenses post Merger during 2024.

For the year ended December 31, 2025, marketing expenses increased compared to the previous year driven by the full year of Woodside marketing expenses during the year ended December 31, 2025 compared to having only recognized marketing expenses post Merger during 2024. To a lesser extent, the increase was due to spend for spec home maintenance and utilities as a result of higher levels of completed unsold homes.

For the year ended December 31, 2025, commissions expenses decreased due to decreases in home sale revenues partially offset by an increase in external broker commissions driven by higher participation.

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Other Homebuilding Operating Data

Net New Orders and Active Subdivisions:

Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the average selling price of those homes. Commentary for each of our segments on significant changes in these two metrics is provided below.

December 31,

% Change

Homes

Dollar

Value

Average

Price

Monthly

Absorption

Rate *

Homes

Dollar Value

Average Price

Monthly

Absorption Rate *

Homes

Dollar Value

Average Price

Monthly

Absorption

Rate *

(Dollars in thousands)

West

Mountain

East

Total

December 31,

% Change

Homes

Dollar

Value

Average

Price

Monthly

Absorption

Rate *

Homes

Dollar Value

Average Price

Monthly

Absorption Rate *

Homes

Dollar Value

Average Price

Monthly

Absorption

Rate *

(Dollars in thousands)

West

Mountain

East

Total

*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

Active Subdivisions

Average Active Subdivisions

December 31,

Year Ended December 31,

% Change

% Change

West

Mountain

East

Total

During 2025, the Company updated its methodology for determining active subdivisions. Previously, a community would become active after its first five net sales. Now, a community is active after its first sale. Prior period disclosures were updated for both active subdivisions, average active subdivisions, and monthly absorption rate to align with the new methodology.

The dollar value and average selling prices of net new orders do not include financing incentives, as these forward commitments are entered into prior to the home sales and are not specific to an individual home.

West Segment Commentary

For the year ended December 31, 2025, the decrease in the number of net new orders was driven by a decrease in the monthly sales absorption rate due to decreased demand as a result of current market conditions, offset partially by an increase in average active subdivisions. The increase in the number of average active subdivisions was the result of the full year of Woodside results for the year ended December 31, 2025 compared to just the post Merger period during 2024. The increase in the average selling price in our West segment was due to a change in mix to higher priced communities.

Mountain Segment Commentary

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For the year ended December 31, 2025, the increase in the number of net new orders was driven an increase in average active subdivisions. The increase in the number of average active subdivisions was the result of the full year of Woodside results for the year ended December 31, 2025 compared to just the post Merger period during 2024.

East Segment Commentary

For the year ended December 31, 2025, the decrease in the number of net new orders was driven by an decrease in the monthly sales absorption rate due to decreased demand as a result of current market conditions. The increase in the average selling price in our East segment was due to change in mix to higher priced communities.

Cancellation Rate:

Cancellations As a Percentage of Gross Sales

December 31,

Change

Change

West

Mountain

East

Total

Our cancellation rate as a percentage of gross sales decreased year-over-year during the year ended December 31, 2025 as a result of a decrease in beginning backlog, offset partially by a decrease in gross sales (before cancellations).

Backlog:

December 31,

% Change

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average

Price

Homes

Dollar

Value

Average Price

(Dollars in thousands)

West

Mountain

East

Total

At December 31, 2025, we had 800 homes in backlog with a total value of $541.4 million, representing decreases of 21% and 18%, respectively, from December 31, 2024. The decrease in the number of homes in backlog was primarily a result of a decrease in net new orders during the year ended December 31, 2025. The increase in average selling price in each of the homebuilding segments is due to a change in mix to higher priced communities. The dollar value and average selling prices of homes in backlog do not include financing incentives, as these forward commitments are entered into prior to the home sales and are not specific to an individual home.

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Homes Completed or Under Construction:

December 31,

% Change

Unsold:

Completed

Under construction

Total unsold started homes

Sold homes under construction or completed

Model homes under construction or completed

Total homes completed or under construction

The decrease in sold homes under construction or completed and increase in unsold homes completed is due to our pivot to build more spec homes and the slower sales pace during the year ended December 31, 2025 due to current market conditions. The decrease in unsold homes under construction is due to a decrease of home starts during the period.

Lots Owned and Optioned (including homes completed or under construction):

December 31, 2025

December 31, 2024

Lots

Owned

Lots

Optioned

Total

Lots

Owned

Lots

Optioned

Total

Total %

Change

West

Mountain

East

Total

Our total owned and optioned lots at December 31, 2025 were 35,216, a decrease of 8% from December 31, 2024. We believe that our total lot supply is sufficient to meet our operating needs, consistent with our philosophy of maintaining a two to three year supply of land. See "Forward-Looking Statements" above.

Financial Services

Year Ended December 31,

Change

Change

Amount

Amount

(Dollars in thousands)

Financial services revenues

Mortgage Operations

Other

Total financial services revenues

Financial services pretax income

Mortgage Operations

Other

Total financial services pretax income

For the year ended December 31, 2025, our financial services pretax income decreased $40.3 million or 43% from the same period in the prior year. The decrease in financial services pretax income was driven by our Mortgage Operations and other financial services segments. The decrease in Mortgage Operations was driven by decreased volume due to our homebuilding operations, partially offset by an increased Capture Rate. The decrease in other financial services was driven by our insurance operations which saw a decrease in revenue due to a decrease in homes closed as well as an unfavorable adjustment to insurance reserves.

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The table below sets forth information for our Mortgage Operations relating to mortgage loans originated and Capture Rate.

Year Ended December 31,

% or Percentage Change

% or Percentage Change

(Dollars in thousands)

Total Originations:

Loans

Principal

Capture Rate Data:

Capture rate as % of all homes delivered

Capture rate as % of all homes delivered (excludes cash sales)

Mortgage Loan Origination Product Mix:

FHA loans

Other government loans (VA & USDA)

Total government loans

Conventional loans

Loan Type:

Fixed rate

ARM

Credit Quality:

Average FICO Score

Other Data:

Average Combined LTV ratio

Full documentation loans

Loans Sold to Third Parties:

Loans

Principal

Income Taxes

We recorded an income tax provision of $37.6 million, $101.9 million and $125.1 million for the years ended December 31, 2025, 2024 and 2023, respectively, and our resulting effective income tax rates were 19.9%, 20.5% and 23.8%, respectively. Our tax provision and effective tax rate are driven by (i) pre-tax book income for the full year, adjusted for items that are deductible/non-deductible for tax purposes only (i.e., permanent items); (ii) benefits from federal energy credits; (iii) taxable income generated in state jurisdictions that varies from consolidated income and (iv) stock based compensation windfalls recorded as discrete items. The difference between our effective tax rate for the year ended December 31, 2025, and the federal statutory rate of 21% was due to a 5.6% decrease in the effective tax rate due to the benefit of federal energy credits, partially offset by a 3.3% increase in the effective tax rate for state taxes.

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LIQUIDITY AND CAPITAL RESOURCES

We use our liquidity and capital resources to (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, Revolving Credit Facility (as defined below) and Mortgage Repurchase Facilities (as defined below).

Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of December 31, 2025, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our Mortgage Repurchase Facilities, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which are secured by letters of credit or surety bonds) and operating leases. Other material cash requirements include land acquisition and development costs not yet contracted for, home construction costs, operating expenses, including our selling, general and administrative expenses, investments and funding of capital improvements and dividend payments.

At December 31, 2025, we had outstanding senior notes with varying maturities totaling an aggregate principal amount of $1.50 billion, with none payable within 12 months. Future interest payments associated with the notes total $1.12 billion, with $64.2 million payable within 12 months. As of December 31, 2025, we had $32.3 million of required operating lease future minimum payments.

At December 31, 2025, we had deposits of $32.9 million in the form of cash and $16.1 million in the form of letters of credit that secured option contracts to purchase 6,488 lots for a total estimated purchase price of $535.0 million.

At December 31, 2025, we had outstanding surety bonds and letters of credit totaling $677.5 million and $169.1 million, respectively, including $133.6 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately $343.5 million and $136.2 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit. We have made no material guarantees with respect to third-party obligations.

Capital Resources

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our 3.850% senior notes due 2030, 2.500% senior notes due 2031, 6.000% senior notes due 2043, and 3.966% senior notes due 2061; (3) our Revolving Credit Facility; and (4) our Mortgage Repurchase Facilities. Because of our current balance of cash and cash equivalents, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facilities, we believe that our capital resources are adequate to satisfy our short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See “Forward-Looking Statements” above.

We may from time to time seek to retire or purchase our outstanding senior notes through cash purchases, whether through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facilities

Senior Notes . Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.

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Revolving Credit Facility. On November 19, 2024 the Company entered into an amended and restated unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders, which may be used for general corporate purposes. On October 15, 2025, the Company entered into the First Amendment to Credit Agreement ("First Amendment") to its Revolving Credit Facility. The First Amendment increased the Aggregate Commitment to $1.40 billion (the "Commitment") and extended the Facility Termination Date of $1.36 billion of the facility commitments to October 15, 2029, with the remaining $40.0 million commitment continuing to terminate on November 17, 2028. The First Amendment also provides that the aggregate amount of the commitments may increase to an amount not to exceed $1.90 billion (the “accordion” feature) upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. The Revolving Credit Facility includes a $185.0 million sublimit for letters of credit.

Borrowings under the Revolving Credit Facility bear interest at a floating rate equal to Term SOFR or Daily Simple SOFR (in each case as defined in the Revolving Credit Facility), plus an applicable margin between 1.125% and 1.625% per annum, or if selected by the Company, a base rate plus an applicable margin between 0.125% and 0.625% per annum. The “applicable margins” described above are determined by a schedule based on the leverage ratio of the Company, as defined in the Revolving Credit Facility. The Revolving Credit Facility also provides for customary fees including commitment fees payable to each lender ranging from 0.15% to 0.30% per annum based on the Company’s leverage ratio.

The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The term of the guarantees is through the termination of the Revolving Credit Facility. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. In the case of a default, the guarantors would be required to perform under the agreement. The financial covenants include a consolidated leverage test and interest coverage test, along with a consolidated tangible net worth covenant, all as defined in the Revolving Credit Facility.

The Revolving Credit Facility also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any event of default, the Administrative Agent, with the consent or at the direction of the required lenders, may accelerate the payment of the obligations thereunder and exercise various other customary default remedies. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of December 31, 2025.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At December 31, 2025 and 2024, there were $25.8 million and $43.6 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. We had $0.0 million and $0.0 million outstanding under the Revolving Credit Facility as of December 31, 2025 and 2024, respectively. As of December 31, 2025, availability under the Revolving Credit Facility was approximately $1.37 billion.

Mortgage Repurchase Facilities. HomeAmerican enters into Mortgage Repurchase Facilities with various lenders, which provide liquidity by providing for the sale of eligible mortgage loans with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. HomeAmerican has entered into Mortgage Repurchase Facilities with two lenders, which provide HomeAmerican with committed repurchase facilities of up to an aggregate of $300.0 million as of December 31, 2025 (subject to increase by up to $150.0 million under certain conditions with respect to one of the lenders).

At December 31, 2025 and 2024, HomeAmerican had $106.3 million and $177.6 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facilities. Mortgage loans that HomeAmerican is obligated to repurchase under the mortgage repurchase facilities are accounted for as a debt financing arrangement and are reported as mortgage repurchase facilities in the consolidated balance sheets. Pricing under the mortgage repurchase facilities are based on SOFR.

The Mortgage Repurchase Facilities contain various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the mortgage repurchase facilities. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the mortgage repurchase facilities as of December 31, 2025.

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Effective April 16, 2025, HomeAmerican entered into a Waiver and Consent agreement with one of the Mortgage Repurchase Facilities lenders, in which the lender waived any events of default under the Mortgage Repurchase Facility arising with respect to an event of default as HomeAmerican was not in compliance by permitting the Adjusted Tangible Net Worth to be less than $21.0 million for the month ending February 28, 2025.

SHUS Common Stock Repurchase Program

Through April 19, 2024, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock under this repurchase program and the repurchase program ended upon the Merger.

Consolidated Cash Flow

Our operating cash flows are primarily impacted by: (1) land purchases and related development and construction of homes; (2) closing homes and the associated timing of collecting receivables from home closings; (3) the origination and subsequent sale of mortgage loans originated by HomeAmerican; (4) payments on accounts payables and accrued liabilities; and (5) funding for payroll. When we close on the sale of a house, our homebuilding subsidiaries will generally receive the proceeds from the sale of the homes within a few days of the home being closed. Therefore, our home sales receivable balance can increase or decrease from period to period based upon the timing of our home closings. Additionally, the amount of mortgage loans held-for-sale can be impacted period to period based upon the number of mortgage loans that were originated by HomeAmerican that have not been sold to third party purchasers and by the timing of fundings by third party mortgage purchasers. Accordingly, mortgage loans held-for-sale may increase if HomeAmerican originates more homes towards the end of one reporting period when compared with the same period in the previous year. HomeAmerican will generally sell mortgage loans it originates between 5 to 35 days after origination.

Operating Cash Flow Activities

During the year ended December 31, 2025, net cash used in operating activities was $368.8 million compared with cash provided by operating activities of $183.0 million in the prior year period. During the year ended December 31, 2025 and 2024, one of the most significant sources of cash provided by operating activities was net income of $151.9 million and $394.5 million, respectively. During the year ended December 31, 2025, included in net income was $77.7 million of inventory impairments, compared to $18.3 million during the prior year period. The most significant source of cash used by operating activities during the year ended December 31, 2025 was cash used to increase inventory of $747.0 million compared to $324.8 million during the prior year. The increase in 2025 was the result of an increase of finished homes at the end of the period. Cash provided by the decrease in trade and other receivables for the year ended December 31, 2025 was $17.1 million compared to $35.8 million for the year ended December 31, 2024. The decrease during the year ended December 31, 2025 was driven by a decrease of homes closed at the end of the period. Cash provided by the decrease in accounts receivable due from Parent was $23.5 million compared to the cash used in accounts receivable due from Parent of $34.5 million during the year ended December 31, 2024. This variance was driven by payments in connection with the Merger funded by the Company in 2024, which were repaid by Parent in 2025. Cash provided to decrease mortgage loans held-for-sale, net was $94.4 million compared to $21.4 million in the year ended December 31, 2025 and 2024, respectively. The decrease in mortgage loans held-for-sale was a result of a decrease in loan originations during 2025.

Investing Cash Flow Activities

During the year ended December 31, 2025, net cash provided by investing activities was $150.2 million compared to cash used in investing activities of $150.9 million. The primary driver of this increase is due to cash used in the increase in receivable from cash pooling arrangement with Parent of $211.9 million during the year ended December 31, 2024 compared to decrease in receivables from cash pooling arrangement with Parent of $179.6 million during the year ended December 31, 2025. This was partially offset by cash provided by the maturities of marketable securities, net of purchases, of $82.9 million during the year ended December 31, 2024 compared to none in 2025, driven by all outstanding marketable securities maturing during 2024.

Financing Cash Flow Activities

During the year ended December 31, 2025 and 2024, net cash used in financing activities was $301.8 million and $844.9 million respectively. The primary driver of this decrease was $611.4 million of cash used in distributions to Parent during the year ended December 31, 2024 compared to none in 2025. The distribution to Parent during the year ended December 31, 2024 was due to the Company's funding of a portion of the consideration of the Merger. Cash used to fund dividend payments increased during the year ended December 31, 2025 to $195.2 million compared to $155.5 million in the

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year ended December 31, 2024. This increase was primarily due to a one-time dividend declared by Woodside in 2025 prior to and in connection with the Woodside Merger. During the year ended December 31, 2025 and 2024, cash used in the payments on mortgage repurchase facilities, net was $71.4 million and $27.4 million, respectively. During the year ended December 31, 2025 and 2024 there was a higher level of loan sales compared to loan originations at period end. Cash used in issuance of shares under stock-based compensation programs, net was $25.6 million during the year ended December 31, 2024 compared to none during the year ended December 31, 2025. The change was driven by the merger and cancellation of stock during the year ended December 31, 2024. Cash used in the repayment of notes payable was $30.0 million during the year ended December 31, 2025 compared to none in the prior year. This was driven by the maturity and payment on the Company's third party note payable.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates if conditions are significantly different in the future. See “ Forward-Looking Statements ” above.

Listed below are those estimates and policies that we believe are critical and require the use of complex judgment in their application. Our critical accounting estimates and policies are as follows and should be read in conjunction with the Notes to our Consolidated Financial Statements.

Homebuilding Inventory Valuation . Refer to Note 1, Summary of Significant Accounting Policies , in the notes to the financial statements for information on the composition of the inventory balances.

In accordance with Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories, excluding those classified as held for sale, are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

• forecasted Operating Margin for homes in backlog;

• actual and trending net home orders;

• homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. We generally determine the estimated fair value of each subdivision by calculating the present value of the estimated future cash flows using discount rates, which are Level 3 inputs (see Note 6, Fair Value Measurements, in the notes to the financial statements for definitions of fair value inputs), that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level 3 inputs. These estimates of undiscounted future cash flows are dependent on specific market or sub-market conditions for each subdivision. While we consider available information to determine what we believe to be our best estimates as of the end of a reporting period, these estimates are subject to change in future reporting periods as facts and circumstances change. Local market-specific conditions that may impact these estimates for a subdivision include:

• historical subdivision results, and actual and trending Operating Margin, base selling prices and home sales incentives;

• forecasted Operating Margin for homes in backlog;

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• the intensity of competition within a market or sub-market, including publicly available home sales prices and home sales incentives offered by our competitors;

• increased levels of home foreclosures;

• the current sales pace for active subdivisions;

• subdivision specific attributes, such as location, availability and size of lots in the sub-market, desirability and uniqueness of subdivision location and the size and style of homes currently being offered;

• potential for alternative home styles to respond to local market conditions;

• changes by management in the sales strategy of a given subdivision; and

• current local market economic and demographic conditions and related trends and forecasts.

These and other local market-specific conditions that may be present are considered by personnel in our homebuilding divisions as they prepare or update the forecasted assumptions for each subdivision. Quantitative and qualitative factors other than home sales prices could significantly impact the potential for future impairments. The sales objectives can differ among subdivisions, even within a given sub-market. For example, facts and circumstances in a given subdivision may lead us to price our homes with the objective of yielding a higher sales absorption pace, while facts and circumstances in another subdivision may lead us to price our homes to minimize deterioration in our gross margins from home sales, even though this could result in a slower sales absorption pace. Furthermore, the key assumptions included in our estimated future undiscounted cash flows may be interrelated. For example, a decrease in estimated base sales price or an increase in home sales incentives may result in a corresponding increase in sales absorption pace. Additionally, a decrease in the average sales price of homes to be sold and closed in future reporting periods for one subdivision that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby subdivision. Changes in our key assumptions, including estimated construction and land development costs, absorption pace and selling strategies could materially impact future cash flow and fair value estimates. Due to the number of possible scenarios that would result from various changes in these factors, we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor.

If the undiscounted future cash flows of a subdivision are less than its carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We determine the estimated fair value of each subdivision either: (1) by determining the present value of the estimated future cash flows at discount rates that are commensurate with the risk of the subdivision under evaluation; or (2) assessing the market value of the land in its current condition by considering the estimated price a willing buyer would pay for the land (other than in a forced liquidation), and recent land purchase transactions that we believe are indicators of fair value. The estimated future cash flows are the same for both our recoverability and fair value assessments. Factors we consider when determining the discount rate to be used for each subdivision include, among others:

• the number of lots in a given subdivision;

• the amount of future land development costs to be incurred;

• risks associated with the home construction process, including the stage of completion for the entire subdivision and the number of owned lots under construction; and

• the estimated remaining lifespan of the subdivision.

We allocate the impairments recorded between housing completed or under construction and land and land under development for each impaired subdivision based upon the status of construction of a home on each lot (i.e., if the lot is in housing completed or under construction, the impairment for that lot is recorded against housing completed or under construction). The allocation of impairment is the same with respect to each lot in a given subdivision. Changes in management’s estimates, particularly the timing and amount of the estimated future cash inflows and outflows and forecasted average selling prices of homes to be sold and closed can materially affect any impairment calculation. Because our forecasted cash flows are impacted significantly by changes in market conditions, it is reasonably possible that actual results could differ significantly from those estimates. Please see the “Inventory Impairments” section for a detailed discussion and analysis of our asset impairments.

If land is classified as held for sale, we measure it at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Warranty Accrual. Our homes are sold with limited third-party warranties. We record expenses and warranty accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. A warranty

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accrual is recorded for each home closed based upon historical payment experience in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. The determination of the warranty accrual rate for closed homes and the evaluation of our warranty accrual balance at period end are based on an internally developed analysis that includes known facts and interpretations of circumstances, including, among other things, our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring. Actual future warranty costs could differ from currently estimated amounts. A 10% change in the historical warranty rates used to estimate our warranty accrual would not result in a material change in our accrual.

Insurance Reserves. The establishment of reserves for estimated losses associated with insurance policies issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. Historical trends in claim severity and frequency patterns have been inconsistent and we believe they may continue to fluctuate. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves. A 10% increase in both the claim frequency and the average cost per claim used to estimate the reserves would result in an increase in our insurance reserves and an associated increase in expense of approximately $21.2 million. A 10% decrease in both the claim frequency and the average cost per claim would result in a decrease in our insurance reserves and an associated reduction in expense of $19.2 million.

Litigation Accruals. In the normal course of business, we are a defendant in claims primarily relating to premises liability, product liability and personal injury claims. These claims seek relief from us under various theories, including breach of implied and express warranty, negligence, strict liability, misrepresentation and violation of consumer protection statutes. We have accrued for losses that may be incurred with respect to legal claims based upon information provided by our legal counsel, including counsel’s on-going evaluation of the merits of the claims and defenses and the level of estimated insurance coverage. Due to uncertainties in the estimation process, actual results could vary from those accruals and could have a material impact on our results of operations.

Home Sale Revenue Recognition for Homebuilding Segments. We recognize home sale revenues from home deliveries when we have satisfied the performance obligations within the sales agreement, which is generally when title to and possession of the home are transferred to the buyer at the home closing date. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

In certain states where we build, we are not always able to complete certain outdoor features (such as landscaping or pools) prior to closing the home. To the extent these separate deliverables are not complete upon the closing of a home, we defer home sale revenues related to incomplete outdoor features, and recognize that revenue upon completion of the outdoor features.

Land Sale Revenue Recognition for Homebuilding Segments: We recognize land sale revenues when title to the property has been transferred to the buyer, adequate consideration has been received, and the Company has no significant future performance obligations.

Revenue Recognition for HomeAmerican: Revenues recorded by HomeAmerican primarily reflect (1) origination fees and (2) the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights. Origination fees are recognized when a loan is originated. When an interest rate lock commitment is made to a customer, we record the expected gain or loss on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues. At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated based upon current market conditions and the remaining time until loan origination and, if there has been a change, revenues are adjusted as necessary. After origination, our mortgage loans, which could also include their servicing rights, are sold to third-party purchasers in accordance with sale agreements entered into by us with a third-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met: (1) fair consideration has been paid for transfer of the loan by a third party in an arms-length transaction, (2) all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the third party purchaser; and (3) we do not have a substantial continuing involvement with the mortgage loan.

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We carry interest rate lock commitments and mortgage loans held-for-sale at fair value.

Home Cost of Sales . Refer to the Note 1, Summary of Significant Accounting Policies , in the notes to the financial statements for information on the composition of home cost of sales. When a home is closed, we generally have not yet paid or incurred all costs necessary to complete the construction of the home and certain land development costs. At the time of a home closing, we compare the home construction budgets to actual recorded costs to determine the additional estimated costs remaining to be paid on each closed home. For amounts not incurred or paid as of the time of closing a home, we record an estimated accrual associated with certain home construction and land development costs. Generally, these accruals are established based upon contracted work which has yet to be paid, open work orders not paid at the time of home closing, as well as land completion costs more likely than not to be incurred, and represent estimates believed to be adequate to cover the expected remaining home construction and land development costs. We monitor the adequacy of these accruals on a house-by-house basis and in the aggregate on both a market-by-market and consolidated basis.

Goodwill. In accordance with ASC Topic 350, Intangibles–Goodwill and Other (“ASC 350” ) , we evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use a three-step process to assess the realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount then no further testing is required.

If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed to the second step where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If this step indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to the third step where the fair value of the reporting unit will be allocated to assets and liabilities as they would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in the third step.

Based on our analysis, we have concluded that as of December 31, 2025 and 2024, our goodwill was not impaired.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2, Recently Issued Accounting Standards , in our consolidated financial statements.

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