FOR 10-K & 10-Q changes, risk factors and insider trading

Discussion of our business and operations included in this annual report on Form 10-K should be read together with the risk factors set forth below. They describe various risks and uncertainties we are or may become subject to, many of which are difficult to predict orand beyond our control. Although the risks are organized and described separately, many of the risks are interrelated. These risks and uncertainties, together with other factors described elsewhere in this report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

For so long as D.R. Horton and its controlled affiliates hold shares of our common stock representing at least 20% of the votes entitled to be cast by our stockholders at a stockholder meeting, D.R. Horton is able to designate a certain number of the members of our Board of Directors. Currently, D.R. Horton has the right to designate four out of sixseven members of our Board, subject to a requirement that we and D.R. Horton use reasonable best efforts to cause at least three directors to qualify as "independent directors," as such term is defined in the New York Stock Exchange ("NYSE") listing rules, and applicable law. The directors designated by D.R. Horton have the authority to make decisions affecting our capital structure, including the issuance of additional capital stock or options, the incurrence of additional indebtedness, the implementation of stock repurchase programs and the declaration of dividends. The interests of D.R. Horton may be materially different than the interests of our other stakeholders.

So long as D.R. Horton and its controlled affiliates hold shares of our common stock representing at least 20% of the votes entitled to be cast by our stockholders at a stockholders' meeting, D.R. Horton is able to designate a certain number of the members of our Board. Our Nominating and Governance Committee has the right to designate the remaining number of individuals to the Board, and in any event not less than one. Currently, D.R. Horton has the right to designate four out of sixseven members of our Board. Further, the interests of D.R. Horton and our other stockholders may diverge. Under these circumstances, persons who might otherwise accept an invitation to join our Board may decline.

Risks Related to Our Business Operationsand our Industry

The homebuilding and lot development industries are cyclical and significantly affected by changes in economic, real estate or other conditions that could adversely affect our business and financial results.

The federal government’s fiscal policies and the Federal Reserve's monetary policies may negatively impact the financial markets and consumer confidence and could hurt the U.S. economy and the real estate market, and in turn, could adversely affect the operating results of our business. In response to increasedrising inflation, the Federal Reserve has raised interest rates significantly in recent2022 years,and which,2023, notwithstandingwhich theled recentto reduction,an has resultedincrease in higher mortgage interest rates. While interest rates have since been lowered and may be lowered further, mortgage interest rates have remained elevated since 2022. The increase in mortgage interest rates has reduced the affordability of homes and thus affected the demand for finished lots, requiring us to use pricing adjustments and incentives to adapt to current market conditions. Prolonged periods of elevated mortgage interest rates or further increases in mortgage interest rates could have an adverse impact on our business and financial results.

During the past three years, the economy has experienced significant inflationary pressures. Inflation can adversely affect us by increasing costs of land, materials, labor and our cost of capital. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on housing affordability. In an effort to lower the current rate of inflation, the Federal Reserve has raised interest rates significantly, which has resulted in higher mortgage interest rates. The increase in mortgage interest rates has reduced the affordability of our lots and has required us to use pricing adjustments and incentives to adapt to current market conditions, which result in lower gross margins. If inflation and mortgage interest rates remain high or continue to increase, lot affordability may be further impacted, which could reduce our profit margins and have an adverse impact on our business and financial results.

DuringIn the lastrecent few years,past, we experienced multiple disruptions in our supply chain, which resulted in shortages of certain construction materials and tightness in the labor market. This caused our construction cycle times to lengthen and costs of construction materials to increase. Although our construction cycle times have decreased more recently, if shortages and cost increases in construction materials and tightness in the labor market increase, our construction cycle time and profit margins could be adversely impacted.

The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk. In the event of a widespread, prolonged actual or perceived outbreak of any contagious disease, such as COVID-19, our operations could be negatively impacted. Such events have had, and could in the future have, an effect on our operations, including a reduction in homebuilder traffic, a disruption in our supply chain, tightness in the labor market or other factors, all of which could reduce demand for our lots. These or other repercussions of a public health crisis that affect the global economy could have an adverse impact on our results of operations and financial condition.

Physical risks, including weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, volcanic activity, droughts, floods, hailstorms, heavy or prolonged precipitation, wildfires and others, can harm our business. Additionally, the physical impacts of climate change may cause these occurrences to increase in frequency, severity and duration. The climates and geology of many of the states in which we operate, including California, Florida, Texas and other coastal areas where we have some of our larger operations, present increased risks of adverse weather or natural disasters, such as wildfires and hurricanes. Any such events can temporarily delay our development work and lot sales, unfavorably affect the cost or availability of materials or labor, damage residential lots under construction, lead to changing customer preferences and/or negatively impact demand for residential lots in affected areas. We have experienced short-term impacts on our lot sales from weather events in recent years. However, there has been no material impact on our business from these events or material operational challenges resulting from these events, but they could adversely affect our business in the future. The climates and geology of many of the states in which we operate, including California, Florida, Texas and other coastal areas where we have some of our larger operations and which have experienced recent natural disasters, present increased risks of adverse weather or natural disasters.

Information technology failures, datacybersecurity security breaches,incidents, and the failure to satisfy privacy and data protection laws and regulations could harm our business.

We use information technology and other computer resourcesresources, including artificial intelligence, to carry out important operational and marketing activities and to maintain our business records. These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced cyber security breaches, cyber incidents, ransomware attacks, significant systems failures and service outages in the past. Additionally, phishing attacks, whereby perpetrators attempt to fraudulently induce employees, customers, vendors or other users of a company’s systems to disclose sensitivepersonal information to gain access to its data, have increased significantly in recent years. With the use of artificial intelligence, these phishing attacks may contain highly convincing language making them difficult to distinguish from legitimate messages. The use of remote work environments and virtual platforms may increase our risk of cyber incidents orthat datacould securitycompromise breaches.our data. Further, geopolitical tensions or conflicts may create a heightened risk of cyberthese incidents or other data security breaches.incidents. Our normal business activities involve collecting and storing information specific to our customers, employees, vendors and suppliers and maintaining operational and financial information related to our business, both in an office setting and remote locations as needed. A material breach in the security of our information technology systems or other data security controls, or those of the third parties we work with, could include the theft or release of this information. The unintended or unauthorized disclosure of personal identifying and confidential information as a result of a securitycybersecurity breachincident by any means could lead to litigation or other proceedings against us by the affected individuals or business partners, or by regulators. The outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business.

We may also be required to incur significant costs to protect against damages caused by information technology failures, securitycybersecurity breaches,incidents, and the failure to satisfy privacyprivacy, data protection, and dataartificial protectionintelligence laws and regulations in the future as legal requirements continue to increase. The European Union and other international regulators, as well as state governments, have enacted or enhanced privacy, data privacyprotection, and artificial intelligence regulations, such as the California Privacy Rights Act and the Colorado Privacy Act, and other governments are considering establishing similar or stronger protections. TheseAmong other things, these regulations impose certain obligations for handling specified personal information in our systems, including notifying individuals regarding information we have collected from them. We have incurred costs in an effort to comply with these requirements, but our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights. Any loss of sensitivepersonal information and failure to comply with these requirements or other applicable laws and regulations in this area could result in substantial penalties, reputational damage or litigation.

Although past cybersecurity incidents have not had a material effect on our business or operations to date, in the future, a data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could disrupt our business operations, damage our reputation and cause us to lose customers. Additionally, if a cybersecurity incident is determined to be material, we are subject to additional reporting requirements. We cannot provide assurances that a security breach, cyber incident, including data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.

Additionally, actual or perceived environmental, social, governance ("ESG") and other sustainability matters and our response to these matters could harm our business. Increasing governmental and societal attention to ESGsustainability matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor, cybersecurity and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report. In March 2024, the SEC adopted new rules regarding climate-related disclosures. Though theseThese rules arewere currently beingsubsequently challenged in legal proceedingsproceedings, and their effectiveness has beenwas stayed by the SEC,SEC thesepending rules,judicial review. In March 2025, the SEC terminated its defense of the rules; however, if they become effective, they would require public companies to make a wide range of climate-related disclosures. Similarly, the State of California has recently enacted its own legislation requiring extensive climate-related disclosures for companies deemed to be doing business in California, and other states are considering similar laws. Any of the above factors may alter the environment in which we do business and may increase the ongoing costs of compliance and adversely impact our results of operations and cash flows. If we are unable to adequately address such ESGsustainability matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.

The subcontractors we rely on to perform the actual development of our residential lots are also subject to a significant number of local, state and federal laws and regulations, including laws involving matters that are not within our control. If the subcontractors who develop our residential lots fail to comply with all applicable laws, we can suffer reputational damage and may be exposed to possible liability.

WeAs haveof September 30, 2025, we had a $410$640 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600$1 million,billion, subject to certain conditions and availability of additional bank commitments. The facility includes bank commitments of $575 million maturing on December 18, 2029 and $65 million maturing on October 28, 2026. On October 30, 2025, we exercised the accordion feature under our credit facility and increased the total commitments by $25 million, resulting in total commitments of $665 million, of which $600 million matures on December 18, 2029 and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. The maturity date of the facility is October 28, 2026. The revolving credit facility is guaranteed by our wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. We also have outstanding $400 million principal amount of 3.85% senior notes due 2026 and $300 million principal amount of 5.0% senior notes due 2028,2028 bothand $500 million principal amount of 6.5% senior notes due 2033, all of which may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreements. The notes represent senior unsecured obligations that rank equally in right of payment to all existing and future senior unsecured indebtedness and are guaranteed by each of our subsidiaries to the extent such subsidiaries guarantee our revolving credit facility.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations and support other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital. We hadhave an effective shelf registration statementstatement, filed with the SEC in OctoberSeptember 2021,2024, registering $750 million of equity securities, of which $300 million wasis reserved for sales under ourthe at-the-market equity offering program that we entered into in November 2024. In fiscal 2025, we did not issue any shares under its at-the-market equity offering program. In fiscal 2024, we issued 546,174 shares of common stock under our at-the-market equity offering program for proceeds of $19.7 million, net of commissions and other issuance costs totaling $0.4 million. InAt September 2024,30, we2025, filedthe a new shelf registration statement, which became effective in October 2024, registeringfull $750 million of equity securities. At the time of filing the new registration statement, $728.1 million of equity securities remained available for issuance under our priorshelf registration statement, whichwith has$300 sincemillion expired.reserved Ourfor at-the-marketsales programunder expired in October 2024, and we anticipate entering into a newthe at-the-market equity offering program under our September 2024 shelf registration statement.program.

Upon the occurrence of a change of control triggering event, as defined in the indentures governing ourthe senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any. Moreover, a change of control, as defined in our revolving credit facility, would constitute an event of default under our revolving credit facility that could result in the acceleration of the repayment of any borrowings outstanding under our revolving credit facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder. If the maturityany of our revolving credit facility and/or otherour restricted subsidiaries’ indebtedness together having an aggregate principal amount outstanding of $40 million or moremore, isin accelerated,the case of the indenture governing our 5.0% senior notes due 2028, or $75 million or more, in the case of our 6.5% senior notes due 2033, were accelerated and such acceleration were not rescinded or such indebtedness were not satisfied, in either case within 30 days, an event of default would result under the indentures governing the senior notes, entitling the trustee for the senior notes or holders of at least 25%25%, in the case of the 5.0% senior notes due 2028, or 30%, in the case of the 6.5% senior notes due 2033, in aggregate principal amount of the thenapplicable outstandingseries of the notes to declare all such notes to be due and payable immediately. If purchase offers were required under the indentures for the senior notes, repayment of the borrowings under our revolving credit facility were required, or if the notes were accelerated, we can give no assurance that we would have sufficient funds to pay the required amounts.

The covenants in the indentures governing ourthe senior notes and the credit agreement governing our revolving credit facility impose, and the terms of any future indebtedness may impose, operating and other restrictions on us and our subsidiaries. Such restrictions affect or will affect, and in many respects limit or prohibit, among other things, our ability and the ability of certain of our subsidiaries to:

The stock markets in general may experience extreme volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, makemaking it difficult to predict the market price of our common stock in the future and causecausing the value of our common stock to decline.

We manage our operations through our real estate segment, which is our core business and generates substantially all of our revenues. The real estate segment primarily acquires land and installs infrastructure for single-family residential communitiescommunities, and generatesits revenues generally come from sales of residential single-family finished lots to local, regional and national homebuilders. We have other business activities for which the related assets and operating results are immaterial and therefore are included within our real estate segment.

DemandIn forfiscal residentialyear lots,2025, particularlynew athome affordabledemand pricecontinued points,to remainedbe strongimpacted by ongoing affordability constraints and cautious consumer sentiment during fiscal 2024,2025. Homebuilders have continued to offer elevated levels of sales incentives, such as mortgage rate buydowns, to address affordability and spur the demand for new homes. Despite current market conditions, our revenues increased 5%10% from the prior year period. TheOur supplyongoing offocus newis andprimarily existingto develop lots for homes at affordable price points remains limited, and low resale supply continues to support the demand for new construction. Demographics supporting housing demand remain favorable despite elevated mortgage rates and inflationary pressures, and homebuilders have continued to adjust to current market conditions by using incentives and price adjustments.points. While the disruptions in the supply chain for certain construction materials and tightness in the labor market have largely subsided, delays in receiving the necessary approvals from municipalities are still extending development cycle times,times in certain markets, and development costs remain elevated. We attempt to offset cost increases in one component with savings in another, and we increase our land and lot sales prices when market conditions permit. However, if market conditions are challenging, we may have to reduce selling prices or may not be able to offset cost increases with higher selling prices.

We believe we are well-positioned to consolidate market share in the highly fragmented lot development industry because of our national footprint and strong local teams, our low net leverage and strong liquidity position, lowlower overhead model, geographically diverse lot portfolio that is focused on affordable price points and strategic relationship with D.R. Horton. We plan to remain disciplined when investing in land opportunities and to remain focused on managing our lot sales pace and lot pricing at each community to optimize the return on our investments.

Lots sold to customers other than D.R. Horton in fiscal 20242025 and 20232024 included 124927 and 252124 lotslots, respectively, that were sold for $15.1$83.4 million and $28.2$15.1 million, respectively, to a lot banker who expects to sell those lots to D.R. Horton at a future date.

Tract sales and other revenue in fiscal 20242025 primarily consisted of $19.0414 milliontract ofacres revenue recognized relatedsold to land banking contracts with D.R. Horton for $91.2 million as well as 6490 tract acres sold to customers other than D.R. Horton for $11.8$12.3 million. Tract sales and other revenue to D.R. Horton in fiscal 2025 includes a multifamily site representing 273 rental units which we developed and sold to D.R. Horton for $10.7 million of revenue. Tract sales and other revenue sold to customers other than D.R. Horton in fiscal 20242025 included 1242 tract acres sold for $5.1$5.3 million to a third party who expects to sell thefinished tractlots to D.R Horton at a later date. Tract sales and other revenue in fiscal 20232024 primarily consisted of 82032 tract acres sold to D.R. Horton for $114.1$15.2 million and 6864 tract acres sold to customers other than D.R. Horton for $12.8$11.8 million.

Cost of sales in fiscal 20242025 increased compared to fiscal 20232024 primarily due to the increase in the number of lots sold.revenues. Cost of sales related to tract sales and other revenues in fiscal 20242025 and 20232024 was $17.4$72.4 million and $95.1$17.4 million, respectively.

Each quarter, we review the performance and outlook for all of our real estate for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this process, no impairment charges were recorded during fiscal 2025 and 2024. During fiscal 2023 we recorded non-cash impairment charges of $19.4 million. During fiscal 2024,2025 and 2023,2024, land purchase contract deposit and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $4.1$7.2 million and $4.6$4.1 million.

The gain on sale of assets in fiscal 2025 and 2024 is the result of $4.5 million and $9.5 millionmillion, respectively, of excess hotel occupancy and sales and use tax revenues collected from the Cibolo Canyons Special Improvement District.

Our income tax expense was $66.7$51.4 million and $54.7$66.7 million in fiscal 20242025 and 2023,2024, respectively, and our effective tax rate was 23.4% and 24.7% for both2025 years.and 2024, respectively. Our effective tax rate for both years includes an expense for state income taxes and nondeductiblenon-deductible expenses.expenses and a benefit for stock-based compensation. Our fiscal 2025 effective tax rate has a benefit for nontaxable income.

WeAs haveof September 30, 2025, we had a $410$640 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600$1 million,billion, subject to certain conditions and availability of additional bank commitments. The facility includes bank commitments of $575 million maturing on December 18, 2029 and $65 million maturing on October 28, 2026. On October 30, 2025, we exercised the accordion feature under our credit facility and increased the total commitments by $25 million, resulting in total commitments of $665 million, of which $600 million matures on December 18, 2029 and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of our real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility is October 28, 2026. At September 30, 2024,2025, there were no outstanding borrowings outstanding and $32.8$51.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $377.2$588.9 million.

WeAt alsoany havetime $300prior millionto March 15, 2028, we may, on one or more occasions, redeem up to 40% of the aggregate principal amount of 5.0%the senior2033 notes (with the "2028net cash proceeds from certain equity offerings at a redemption price of 106.5% of the principal amount of the 2033 notes") outstanding,being whichredeemed. matureAt any time prior to March 1,15, 20282028, withwe interestmay payableredeem semi-annually.some Onor all of the 2033 notes at a redemption price of 100% of the principal amount thereof plus a specified "make whole" premium described in the indenture. We also have the option, at any time on or after March 1,15, 2023,2028 to redeem some or all of the 20282033 notes may be redeemed at 102.5%103.25% of their principal amount plus any accrued and unpaid interest. In accordance with the indenture, the redemption price decreases annually thereafter and the 20282033 notes can be redeemed at par on or after March 1,15, 20262030 through maturity. The annual effective interest rate of the 2028 notes after giving effect to the amortization of financing costs is 5.2%.

The indentures governing ourthe senior notes require that, upon the occurrence of both a change of control and a rating decline (as defined in each indenture), we offer to purchase the applicable series of notes at 101% of their principal amount.amount, Ifplus accrued and unpaid interest. Under the indenture governing the 2028 notes, if we or our restricted subsidiaries dispose of assets, under certain circumstances, we will be required to either invest the net cash proceeds from such asset sales in our business within a specified period of time, repay certain senior secured debt or debt of our non-guarantor subsidiaries, or make an offer to purchase a principal amount of such notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount. The indentures contain covenants that, among other things, restrict the ability of us and our restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt and make certain investments; incur additional debt or issue mandatorily redeemable equity; incur liens on assets; merge or consolidate with another company or sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments. At September 30, 2024, we were in compliance with all of the limitations and restrictions associated with our senior note obligations.

Effective April 30, 2020, our Board of Directors authorized the repurchase of up to $30 million of our debt securities. The authorization has no expiration date. All of the $30 million authorization was remainingremained at September 30, 2024.2025.

In December 2023, we issued a note payable of $9.9 million as part of a transaction to acquire real estate for development. The note is non-recourse,non-recourse and is secured by the underlying real estate, accrues interest at 4.0% per annum and matures in December 2025.

We hadhave an effective shelf registration statement filed with the Securities and Exchange Commission in OctoberSeptember 2021,2024, registering $750 million of equity securities, of which $300 million was reserved for sales under our at-the-market equity offering program.program that we entered into in November 2024. In fiscal 2024,2025, we issueddid 546,174not issue any shares of common stock issued under our at-the-market equity offering programprogram. for proceeds of $19.7 million, net of commissions and other issuance costs totaling $0.4 million. InAt September 2024,30, we2025, filedthe a new shelf registration statement, which became effective in October 2024, registeringfull $750 million of equity securities. At the time of filing the new registration statement, $728.1 million of equity securities remained available for issuance under ourthe priorshelf registration statement, whichwith has$300 sincemillion expired.reserved Ourfor at-the-marketsales programunder expired in October 2024, and we anticipate entering into a newour at-the-market equity offering program under our September 2024 shelf registration statement.program.

In fiscal 2024,2025, net cash provided by investing activities was $7.3$3.2 million compared to $0.3$7.3 million in fiscal 2023.2024. Cash provided by investing activities in fiscal 2025 and 2024 included $4.5 million and $9.5 millionmillion, respectively, of excess hotel occupancy and sales and use tax revenues collected from the Cibolo Canyons Special Improvement District.

In fiscal 2024,2025, net cash provided by financing activities was $16.3$92.5 million compared to $13.2$16.3 million ofin fiscal 2024. The cash usedprovided inby financing activities in fiscal 2023.2025 was primarily the result of proceeds from the issuance of $500 million principal amount of our 2033 notes and $280 million of borrowings under our senior unsecured revolving credit facility, partially offset by the repurchase of our $400 million principal amount of 2026 notes and $280 million in repayments under our senior unsecured revolving credit facility. The cash provided by financing activities in fiscal 2024 primarily consisted of the issuance of common stock under our at-the-market equity offering program for net proceeds of $19.7 million. The cash used in financing activities in fiscal 2023 primarily consisted of the repayment of our other note payable.

Revenue Recognition — Real estate revenue and related profit are generally recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the buyer. Our performance obligation, to deliver the agreed-upon land or lots, is generally satisfied at closing. However, there may be instances in which we have an unsatisfied remaining performance obligation at the time of closing. In these instances, we record contract liabilities and recognize those revenues over time as the performance obligations are completed. Generally, our remaining unsatisfied remaining performance obligations are expected to have an original duration of less than one year.

In December 2023, the FASB issued ASU 2023-09, “"Income Taxes - Improvements to Income Tax Disclosures,”" which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. The standard is effective for usannual periods beginning Octoberin 1,fiscal 2025, with early adoption permitted.2026. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

•the strengtheffects of our information technology systemsfailures, cybersecurity incidents, and the risk of cybersecurity breaches and our abilityfailure to satisfy privacy and data protection laws and regulations;

In October 2017, Forestar became a majority-owned subsidiary of D.R. Horton, Inc. ("D.R. Horton") by virtue of a merger with a wholly-owned subsidiary of D.R. Horton. Immediately following the merger, D.R. Horton owned 75% of our outstanding common stock. As of MarchJune 31,30, 2026, D.R. Horton owned approximately 62% of our outstanding common stock. As our controlling shareholder, D.R. Horton has significant influence in guiding our strategic direction and operations.

Our real estate segment conducts a wide range of project planning and management activities related to the entitlement, acquisition, community development and sale of residential lots. We generally secure entitlements while the land is under contract by creating plans that meet the needs of the markets where we operate, and we aim to have all entitlements secured before closing on the investment. Moving land through the entitlement and development process creates significant value. We primarily invest in entitled short-duration projects that can be developed in phases, enabling us to complete and sell lots at a pace that matches market demand, consistent with our focus on maximizing capital efficiency and returns. We occasionally make short-term strategic investments in finished lots (lot banking) and undeveloped land (land banking) with the intent to sell these assets within a short time period to utilize available capital prior to its deployment into longer-term lot development projects. For the sixnine months ended MarchJune 31,30, 2026, we sold 4,8828,541 lots with an average sales price of $116,000.$113,000. At MarchJune 31,30, 2026, our lot position consisted of 94,40091,700 residential lots, of which approximately 63,50062,200 were owned and 30,90029,500 were controlled through purchase contracts. Of our 63,50062,200 owned lots, approximately 24,10023,500 lots are under contract to be sold for an aggregate remaining sales price of approximately $2.2$2.3 billion.

During the sixnine months ended MarchJune 31,30, 2026, total residential lots sold decreased by 15%9% while the average sales price per lot increased 12%8% resulting in a 5%1% decrease in total residential lot sales revenues compared to the prior year period, and our consolidated revenues increased 8%6% to $647.3$1,054.3 million compared to $601.3$991.9 million which was primarily the result of the increase in tract sales and other revenues compared to the prior year period. Our pre-tax income was $64.8$113.5 million in the sixnine months ended MarchJune 31,30, 2026 compared to $62.6$106.2 million in the prior year period, and our pre-tax operating margin was 10.0%10.8% compared to 10.4%.10.7%. Net income attributable to Forestar was $47.5$83.5 million in the sixnine months ended MarchJune 31,30, 2026 compared to $48.1$81.0 million in the prior year period, and our diluted earnings per share was $0.93$1.63 compared to $0.94.$1.59.

During the secondthird quarter, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. Homebuilders have continued to offer elevated levels of sales incentives, such as mortgage interest rate buydowns, to address affordability and spur the demand for new homes. Despite current market conditions, secondthird quarter revenues increased 7%4% from the prior year quarter. Our ongoing focus is primarily to develop lots for homes at affordable price points. While disruptions in the supply chain for certain construction materials and tightness in the labor market have largely subsided, delays in receiving the necessary approvals from municipalities are still extending development cycle times in certain markets, and development costs remain elevated. We attempt to offset cost increases in one component with savings in another, and we increase our land and lot sales prices when market conditions permit. However, if market conditions are challenging, we may have to reduce selling prices or may not be able to offset cost increases with higher selling prices.

We believe we are well-positioned to consolidate market share in the highly fragmented lot development industry because of our national footprint and strong local teams, our low net leverage and strong liquidity position, lower overhead model, geographically diverse lot portfolio that is focused on affordable price points and our strategic relationship with D.R. Horton. We plan to remain disciplined when investing in land opportunities and to remain focused on managing our lot sales pace and lot pricing at each community to optimize the return on our investments.

The following tables and related discussion set forth key operating and financial data as of and for the three and sixnine months ended MarchJune 31,30, 2026 and 2025.

Residential lot revenues from lot sales to D.R. Horton and customers other than D.R. Horton, before deferred development projects and changes in contract liabilities, consisted of:

Residential lot sales revenues in the three months ended June 30, 2026 increased compared to the prior year period primarily due to the increase in lot sales volume and sixan increase in our average selling price per lot. Residential lot sales revenues in the nine months ended MarchJune 31,30, 2026 decreased compared to the prior year periodsperiod primarily due to the decrease in lot sales volume, which was partially offset by the increase in our average selling price per lot. The increase in our average sales price per lot was primarily due to changes in the regional mix of lot sales.

Lots sold to customers other than D.R. Horton in the sixnine months ended MarchJune 31,30, 2026 included 146 lots that were sold for $33.4 million to a lot banker who expects to sell those lots to D.R. Horton at a future date. Lots sold to customers other than D.R. Horton in the three and sixnine months ended MarchJune 31,30, 2025 included 362331 lots and 693 lots that were sold for $18.8$37.5 million and $56.3 million to a lot banker who expects to sell those lots to D.R. Horton at a future date.

Tract sales and other revenues in three months ended MarchJune 31,30, 2026 primarily consisted of 332184 tract acres sold to customers other than D.R. Horton for $24.1 million and 56 tract acres sold to D.R. Horton for $11.5$8.3 million. Tract sales and other revenues in sixnine months ended MarchJune 31,30, 2026 primarily consisted of 525709 tract acres sold to customers other than D.R. Horton for $53.4$61.7 million and 56 tract acres sold to D.R. Horton for $11.5 million. Tract sales and other revenue from sales to customers other than D.R. Horton in both the three and sixnine months ended MarchJune 31,30, 2026 includeincluded 182 tract acres sold for $8.2 million to a third party who expects to sell finished lots to D.R. Horton at a later date. Tract sales and other revenue from sales to D.R. Horton in the nine months ended June 30, 2026 included a multifamily site representing 295 rental units which we developed and sold to D.R. Horton for $9.1 million.

Cost of sales in the three and sixnine months ended MarchJune 31,30, 2026 increased compared to the prior year periods primarily due to the increase in revenues. Cost of sales related to tract sales and other revenues in the three and sixnine months ended MarchJune 31,30, 2026 was $30.6$6.7 million and $57.5$64.2 million.

Each quarter, we review the performance and outlook for all of our real estate for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this process, no impairment charges were recorded in the three and sixnine months ended MarchJune 31,30, 2026 and 2025. In the three and sixnine months ended MarchJune 31,30, 2026, land purchase contract deposit and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $6.3$0.8 million and $7.1$8.0 million, respectively, compared to $0.9$1.9 million and $2.0$3.9 million in the prior year periods.

We capitalize interest costs throughout the development period (active real estate). Capitalized interest is charged to cost of sales as the related real estate is sold to the buyer. Interest incurred was $12.5$12.4 million and $25.0$37.4 million in the three and sixnine months ended MarchJune 31,30, 2026 compared to $10.6$13.4 million and $18.8$32.3 million in the prior year periods. Interest charged to cost of sales in the three and sixnine months ended MarchJune 31,30, 2026 was 2.4% and 2.2%2.3% of total cost of sales for both periods (excluding impairments and land option charges) compared to 2.4%2.3% and 2.1%2.2% for the prior year periods.

SG&A expense in the three and sixnine months ended MarchJune 31,30, 2026 was $37.9$38.3 million and $74.3$112.6 million compared to $38.4$37.4 million and $74.3$111.8 million in the prior year periods. SG&A expense as a percentage of revenues was 10.1%9.4% and 11.5%10.7% in the three and sixnine months ended MarchJune 31,30, 2026 compared to 10.9%9.6% and 12.4%11.3% in the prior year periods. Our SG&A expense primarily consisted of employee compensation and related costs. Our business operations employed 406402 and 440443 employees at MarchJune 31,30, 2026 and 2025, respectively. We attempt to control our SG&A costs while ensuring that our infrastructure supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.

Income tax expense for the three and sixnine months ended MarchJune 31,30, 2026 was $11.7$12.7 million and $17.1$29.8 million compared to $9.1$10.7 million and $14.5$25.2 million in the prior year periods. Our effective tax rate was 26.7%26.1% and 26.4%26.3% for the three and sixnine months ended MarchJune 31,30, 2026 compared to 22.4%24.5% and 23.2%23.7% in the prior year periods. The effective tax rate for all periods included an expense for state income taxes and nondeductible expenses and a benefit for stock-basednontaxable compensationincome. The effective tax rate for the nine months ended June 30, 2026 and nontaxablethe income.three and nine months ended June 30, 2025 also included a benefit for stock-based compensation.

At MarchJune 31,30, 2026, we had deferred tax liabilities, net of deferred tax assets, of $83.7$92.2 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $84.3$92.8 million. At September 30, 2025, deferred tax liabilities, net of deferred tax assets, were $85.6 million. The deferred tax assets were partially offset by a valuation allowance of $0.6 million, resulting in a net deferred tax liability of $86.2 million. The valuation allowance for both periods was recorded because it is more likely than not that a portion of our state deferred tax assets, primarily net operating loss (NOL) carryforwards, will not be realized because we are no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on our deferred tax assets. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

Our land and lot position at MarchJune 31,30, 2026 and September 30, 2025 is summarized as follows:

At MarchJune 31,30, 2026, we had $362.2$394.9 million of cash and cash equivalents and $672.1$669.9 million of available borrowing capacity on our revolving credit facility. We have no senior note maturities until 2028. We believe we are well-positioned to operate effectively during changing economic conditions because of our low net leverage and strong liquidity position, our low overhead model and our strategic relationship with D.R. Horton.

At MarchJune 31,30, 2026, our ratio of debt to total capital (debt divided by stockholders’ equity plus debt) was 30.4%30.0% compared to 31.2% at September 30, 2025 and 34.7%34.2% at MarchJune 31,30, 2025. Our ratio of net debt to total capital (debt net of unrestricted cash divided by stockholders’ equity plus debt net of unrestricted cash) was 19.2%17.7% compared to 19.3% at September 30, 2025 and 29.8%28.9% at MarchJune 31,30, 2025. Over the long term, we intend to maintain our ratio of net debt to total capital at approximately 40% or less. We believe that the ratio of net debt to total capital is useful in understanding the leverage employed in our operations.

We have a $715 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1 billion, subject to certain conditions and availability of additional bank commitments. The current capacity of the facility reflects additional bank commitments of $25 million and $50 million obtained in October 2025 and March 2026, respectively. Of the total commitments, $650 million matures on December 18, 2029 and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of our real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At MarchJune 31,30, 2026, there were no borrowings outstanding and $42.9$45.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $672.1$669.9 million.

The revolving credit facility is guaranteed by our wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At MarchJune 31,30, 2026, we were in compliance with all of the covenants, limitations and restrictions of our revolving credit facility.

The indenture governing the 2028 notes contains covenants that, among other things, restrict the ability of us and our restricted subsidiaries to pay dividends or distributions, repurchase equity, prepay subordinated debt and make certain investments; incur additional debt or issue mandatorily redeemable equity; incur liens on assets; merge or consolidate with another company or sell or otherwise dispose of all or substantially all of the assets of us and our restricted subsidiaries (taken as a whole); enter into transactions with affiliates; and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments. The indenture governing the 2033 notes contains certain covenants that, among other things, restrict the ability of us and our restricted subsidiaries to create certain liens on assets; engage in certain sale and leaseback transactions; and merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of us and our restricted subsidiaries (taken as a whole). At MarchJune 31,30, 2026, we were in compliance with all of the limitations and restrictions associated with our senior note obligations.

Effective April 30, 2020, our Board of Directors authorized the repurchase of up to $30 million of our debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at MarchJune 31,30, 2026.

We have an effective shelf registration statement filed with the Securities and Exchange Commission in September 2024, registering $750 million of equity securities, of which $300 million was reserved for sales under our at-the-market equity offering program that we entered into in November 2024. In the sixnine months ended MarchJune 31,30, 2026, we did not issue any shares of common stock under our at-the-market equity offering program. At MarchJune 31,30, 2026, the full $750 million remained available for issuance under the shelf registration statement, with $300 million reserved for sales under our at-the-market equity offering program.

In the sixnine months ended MarchJune 31,30, 2026, net cash usedprovided inby operating activities was $5.1$27.6 million, which was primarily the result of the increase in real estate and the decreases in accrued development costs and accounts payable and other accrued liabilities, partially offset by net income generated in the period and the increase in earnest money deposits on sales contractscontracts, partially offset by the increase in real estate, and the decreasedecreases in accrued development costs and accounts payable and other assets.accrued liabilities. In the sixnine months ended MarchJune 31,30, 2025, net cash used in operating activities was $469.8$454.0 million, which was primarily the result of the increaseincreases in real estate and other assets and the decreases in accrued development costs and accounts payable and other accrued liabilities and accrued development costs,liabilities, partially offset by net income generated in the period and the increase in earnest money on sales contracts.

In the sixnine months ended MarchJune 31,30, 2026, net cash used in investing activities was $0.3 million compared to $0.2$0.6 million of cash provided by investing activities in the prior year period.

In the sixnine months ended MarchJune 31,30, 2026, net cash used in financing activities was $11.6 million which was primarily the result of the repayment of the $9.9 million principal amount of our other note payable. Cash provided by financing activities in the sixnine months ended MarchJune 31,30, 2025 was $162.7$162.6 million which was primarily the result of proceeds from the issuance of $500 million principal amount of our 2033 notes and $245$280 million ofin borrowings under our senior unsecured revolving credit facility, which were partially offset by the repurchase of $329.4 million of our $400 million principal amount of 2026 notes and $245$280 million in repayments under our senior unsecured revolving credit facility.

•the cyclical nature of the homebuilding and lot development industries and changes in economic, real estate andor other conditions;

•the impactseffects of weather conditions and natural disasters on our business and financial results;