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

Demand for new homes is sensitive to economic changes driven by conditions such as employment levels, job and wage growth, and consumer confidence. If the economy suffers a downturn, our sales may decline which could have a material adverse effect on our profitability, stock performance, ability to service our debt obligations and future cash flows.

If our ability to sell mortgages to investors is impaired, we may be required to fund these commitments ourselves, or we may not be able to originate loans at all. Our mortgage banking business sells all of the loans it originates into the secondary market, usually within 30 days from the date of closing, and has up to $150 million available under a repurchase agreement to fund mortgage closings. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in Item 7 of this Form 10-K for more information about the repurchase agreement. In the event that disruptions to the secondary markets tighten or eliminate the available liquidity for mortgage loans in the secondary markets, or the underwriting requirements imposed by our secondary market investors and federal agencies become more stringent, our ability to sell future mortgages could declinebe andadversely impacted. In such circumstances, we could be required, among other things, to fund our commitments to our buyers with our own financial resources, which are limited, or require our home buyers to find another source of financing. The result of such secondary market disruption could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.

The homebuilding business has from time to time experienced building material and labor shortages, including fluctuating lumber prices and supply. In addition, strong construction market conditions could restrict the labor force available to our subcontractors and us in one or more of our markets. We may also be adversely impacted by governmental policy initiatives which could impact housinglabor demandavailability or construction costs. Significant increases in costs resulting from these market conditions, or delays in construction of homes, could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.

We engage subcontractors to perform the actual construction of our homes. Despite our quality control efforts, we may discover that our subcontractors have engaged in improper construction practices. The occurrence of such events could require us to repair the homes in accordance with our standards and as required by law.law, and/or could adversely affect our reputation with customers. The cost of satisfying our legal obligations in these instances may be significant, and we may be unable to recover the cost of repairs from subcontractors, suppliers and insurers.

Construction defect and home warranty claims are common and can represent a substantial risk for our homebuilding operations. The cost of insuring against construction defect and product liability claims, as well as the claims themselves, can be high. In addition, insurance companies limit coverage offered to protect against these claims. Further restrictions on coverage availability, or significanthigh.Significant increases in premium costs or claims,claims could have a material adverse effect on our financial results.

Privacy, security, and compliance concerns have continued to increase as technology has evolved. As part of our normal business activities, we collect and store certain confidential information, including personal information of homebuyers/borrowers and information about employees, vendors and suppliers, some of which is processed and stored on third partythird-party vendor platforms. This information is entitled to protection under a number of federal and state laws. We may share some of this information with vendors who assist us with certain aspects of our business, particularly our mortgage and title businesses.

We have implemented systems and processes intended to secure our information technology systems and prevent unauthorized access to or loss of sensitive, confidential and personal data, including through the use of encryption and authentication technologies. Additionally, we have continued to elevate our monitoring capabilities to enhance early detection and rapid response to potential security anomalies. Our management team regularly reviews our response readiness and completes tabletop exercises on potential cybersecurity incidents with the assistance of a third partythird-party cybersecurity consultant. We also require employees to complete training sessions regarding matters such as cybersecurity threats and data protection on a regular basis. These security measures may not be sufficient for all possible occurrences and our information technology systems may remain vulnerable to hacking, employee error, malfeasance, system error, faulty password management or other irregularities. Further, development and maintenance of these measures are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate.

Regulatory RiskRisks

We are subject to various local, state and federal statutes, ordinances, rules and regulations concerning zoning, building design, construction and similar matters, including local regulations that impose restrictive zoning and density requirements in order to limit the size and number of homes that can be built within the boundaries of a particular area. These regulations may further increase the cost to produce and market our products. In addition, we have from time to time been subject to, and may also be subject in the future to, periodic delays in our homebuilding projects due to building moratoriums in the areas in which we operate or delays in receiving the necessary governmental approvals. Changes in regulations that restrict homebuilding activities in one or more of our principal markets could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.

In recent years, an increasing number of state and federal regulations have been enacted or proposed to reduce the impact of greenhouse gas emissions and other human activities on climate change. Some of thisthese legislationregulations relatesrelate to matters such as restrictions and reporting on carbon dioxide emissions and higher building code energy efficiency standards. The impact of such restrictions and requirements on us and our suppliers could increase our operating and compliance costs, as well as the cost of raw materials used in the building process. Higher operating costs could result in us having to increase our home prices to a level that may adversely affect our sales or, if we are unable to increase prices, negatively impact our profitability.

The mortgage industry is subject to regulation at the federal, state and local level. Potential changes to federal laws and regulations could have the effect of limiting the activities of FNMA, GNMA and FHLMC, the entities that provide liquidity to the secondary mortgage market, which could lead to increases in mortgage interest rates. Tighter underwriting requirements and fee restrictions and the increasingly complex regulatory environment may negatively impact our mortgage loan origination business in the form of higher interest rates, lower demand, decreased revenue and increased operating costs.

Health epidemics, including the recent COVID-19 pandemic, have had, andepidemics could in the future have,have an adverse impact on our business and operations, and the markets, states and local communities in which we operate.

Our business and operations could be adversely affected by health epidemics, impacting the markets, states and local communities in which we operate. There is no guarantee that a future health epidemic will not occur, which could result in uncertainty regarding governmental actions that may occur, and the effects of economic relief efforts on the U.S. economy, either of which could be potential disruptors to our business. Over the long term, theseThese disruptions could lower demand for our products, impair our ability to sell and/or build homes in our normal manner, increase our losses on contract land deposits, and negatively impact our lending and secondary mortgage market activities. These developments and other consequences of an outbreak could materially and adversely affect our operations, profitability and cash flows.

Extreme weather or other events, such as significant hurricanes, tornadoes, earthquakes, forest fires, floods, snowfalls, terrorist attacks or war may affect our markets, our operations and our profitability. These events may impact our physical facilities or those of our suppliers or subcontractors and our housing inventories, causing us material increases in costs, or delays in construction of homes. In addition, severe weather conditions and natural disasters may increase the cost of homeowner's insurance or potentially reduce insurance availability which could negatively impact demand in certain of our markets perceived to be more vulnerable to increased severe weather events and other impacts of climate change.

DemandWe forexpect newthis homes weakened during the fourth quarter of 2024, due to rising mortgage interest rates and continued affordability issues attributable to high mortgage interest rates and home prices. New homeweak demand continues to be favorably impacted by a limited, but increasing, supply of homes in the resale market; however, we expect that affordability issues, inflationary pressures, interest rate volatility and economic uncertaintyenvironment may continue to weigh on futurehome demand.sales, Wehome also expect to continue to face cost pressures related to building materials, laborprices and land costs which we expect will impact profitgross margins basedduring on our ability to manage these costs while balancing sales pace and home prices.2026. Although we are unable to predict the extent to which this will impact our operational and financial performance, we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet and our disciplined lot acquisition strategy.

Our primary business is the construction and sale of single-family detached homes, townhomes and condominium buildings,condominiums, all of which are primarily constructed on a pre-sold basis. To fully serve customers of our homebuilding operations, we also operate a mortgage banking and title services business. We primarily conduct our operations in mature markets. Additionally, we generally grow our business through market share gains in our existing markets and by expanding into markets contiguous to our current active markets. Our four homebuilding reportable segments consist of the following regions:

Our lot acquisition strategy is predicated upon avoiding the financial risks associated with direct land ownership and development. We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished lots from various third partythird-party land developers pursuant to LPAs. These LPAs require deposits, typically ranging up to 10% of the aggregate purchase price of the finished lots, in the form of cash or letters of credit that may be forfeited if we fail to perform under the LPA. This strategy has allowed us to maximize inventory turnover, which we believe enables us to minimize market risk and to operate with less capital, thereby enhancing rates of return on equity and total capital.

In limitedcertain specific strategic circumstances, we deviate from our historical lot acquisition strategy and engage in joint venture arrangements with land developers or directly acquire raw ground already zoned for its intended use for development. Once we acquire control of raw ground, we determine whether to sell the raw parcel to a developer and enter into an LPA with the developer to purchase the finished lots or to hire a developer to develop the land on our behalf. While joint venture arrangements and direct land development activity are not our preferred method of acquiring finished building lots, we may enter into additional transactions in the future on a limited basis where there exists a compelling strategic or prudent financial reason to do so. We expect, however, to continue to acquire substantially all of our finished lot inventory using LPAs with forfeitable deposits.

As of December 31, 2024,2025, we controlled approximately 162,400180,100 lots as discusseddescribed below.

We had an aggregate investment totaling approximately $29,300$78,100 in threefive JVs, expected to produce approximately 5,1508,900 lots. Of the lots to be produced by the JVs, approximately 4,8008,550 lots were controlled by us and approximately 350 lots were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately $8,400$34,100 to onethree of the JVs as of December 31, 2024.2025.

Our consolidated revenues for the year ended December 31, 20242025 totaled $10,524,479,$10,323,959, ana increasedecrease of 11%2% from $9,518,202$10,524,479 in 2023.2024. Our net income for 20242025 was $1,681,928,$1,339,816, or $506.69$436.55 per diluted share, increasesdecreases of 6%20% and 9%14% compared to 20232024 net income and diluted earnings per share, respectively. Our homebuilding gross profit margin percentage was 23.7%21.2% in 20242025 compared to 24.3%23.7% in 2023.2024. Settlements for the year ended December 31, 20242025 totaled 22,83621,915 units, ana increasedecrease of 11%4% from 2023.2024. New orders, net of cancellations (“New Orders”) during 20242025 weretotaled 22,560,20,410 anunits, increasea decrease of 4%10% from 20232024 while our average New Order sales price increasedremained 2%relatively toflat $457.7year inover 2024.year. Our backlog of homes sold but not yet settled with the customer as of December 31, 20242025 decreased on a unit basis by 3%15% to 9,9538,448 units and increaseddecreased on a dollar basis by 1%16% to $4,791,870$4,008,043 when compared to December 31, 2023.2024. Income before tax from our mortgage banking segment totaled $154,935$152,049 in 2024,2025, ana increasedecrease of 17%2% when compared to $132,793$154,935 in 2023.2024.

Homebuilding revenues increaseddecreased 11%2% in 20242025 compared to 2023,2024, as a result of ana 11%4% increasedecrease in the number of units settled. The increasedecrease in the number of units settled was primarily attributable to a 12%3% higherlower backlog unit balance entering 20242025 compared to the same period in 2023,2024, coupled with aan higher11% backlogdecrease turnoverin rate.new Theorders grossin the first six months of 2025 compared to the same period in 2024. Gross profit margin percentage in 20242025 decreased to 23.7%21.2% from 24.3%23.7% in 2023.2024. Gross profit margins were negatively impacted by higher lot costscosts, pricing pressure due to continued affordability challenges and closingcontract costland assistance.deposit impairments totaling approximately $75,900 in 2025.

Our backlog represents homes sold but not yet settled with our customers. As of December 31, 2024,2025, our backlog decreased on a unit basis by 3%15% to 9,9538,448 units, butand increaseddecreased on a dollar basis by 1%16% to $4,791,870$4,008,043 when compared to 10,2299,953 units and $4,756,926,$4,791,870, respectively, as of December 31, 2023.2024. The decrease in backlog units was attributable to a higher10% backlogdecrease turnover rate year over year as the number of units settled exceededin New Orders year over year.year, coupled with a higher backlog turnover rate in 2025. Backlog dollars were higherlower primarily due to athe 4% increasedecrease in the average price ofbacklog units in backlog year over year, primarily attributable to a relative shift to higher priced markets and communities in certain of our reportable segments.2025.

Our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons. In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the beginningopening backlog for the current period. CalculatedOur cancellation rate was approximately 17%, 14% and 13% in 2025, 2024, and 2023, respectively, calculated as the total of all cancellations during the period as a percentage of gross sales during the period,same our cancellation rate was approximately 14%, 13% and 14% in 2024, 2023, and 2022, respectively.period. During the four quarters of each of 2025, 2024, 2023 and 2022,2023, approximately 6%, 5% in 2024, 4% in 2023 and 4% in 2022, of a reporting quarter’s opening backlogbacklog, respectively, cancelled during the quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur in future years. Other than those units that are cancelled, we expect to settle substantially all of our December 31, 20242025 backlog during 2025.2026. See “Risk Factors” in Item 1A of this Form 10-K.

We record impairment charges on contract land deposits when we determine that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA resulting in the forfeiture of the deposit. We evaluate our entire net contract land deposit portfolio for impairment each quarter. For presentation purposes below, the contract land deposit impairment allowance as of December 31, 20242025 and 20232024 has been allocated to the reportable segments for the respective years to show contract land deposits on a net basis. The net contract land deposit balances below also include approximately $8,700$4,600 and $7,700$8,700 as of December 31, 20242025 and 2023,2024, respectively, of letters of credit issued as deposits in lieu of cash.

Segment New Orders increaseddecreased 1%13% whileand the average sales price of New Orders increaseddecreased 2%1% in 20242025 compared to 2023.2024. New Orders were slightlylower higherprimarily despitedue to a 12%15% decrease in the average number of active communities year over year, due to a 14% higher sales absorption rate year over year. Sales demand remained favorable in certain markets within the segment due to a limited supply of homes in the resale market. The increase in the average sales price of New Orders was primarily attributable to a relative shift to higher priced communities in certain markets year over year.

The North East segment had an approximate $48,200,$3,700, or 29%,2%, increasedecrease in segment profit in 20242025 compared to 2023.2024, despite a 3% increase in segment revenues year over year. Segment profitsprofit werewas favorablynegatively impacted by a decrease in the segment's gross profit margin percentage to 25.5% in 2025 from 26.0% in 2024 due primarily to an increase in segmentcertain revenuematerial of approximately $217,600, or 23%.costs. Segment revenues were favorably impacted by a 13% increase in the number of units settled and an 8%9% increase in the average settlement price year over year.year, Theoffset increaseby a 5% decrease in settlementsthe wasnumber primarilyof attributableunits to a 16% higher backlog unit balance entering 2024 compared to backlog entering 2023.settled. The increase in the average settlement price was primarily attributable to a 9% higher average sales price of units in backlog entering 20242025 compared to backlog entering 2023.2024, coupled with a 9% increase in the average sales price of New Orders in the first six months of 2025 compared to the same period in 2024. The segment’sdecrease grossin profitthe marginnumber percentageof remainedunits relativelysettled flat.was primarily attributable to a decrease in the number of New Orders in the first six months of 2025 compared to the same period in 2024.

Segment New Orders anddecreased 11% while the average sales price of New Orders increased 6% and 9%,3%, respectively, in 20242025 compared to 2023.2024. DespiteNew Orders were lower primarily due to a 13%6% decrease in the average number of active communitiescommunities, yearcoupled over year, New Orders were favorably impacted bywith a 22%5% higherlower sales absorption rate year over year. Sales demand remained favorable in certain markets within the segmentyear due to aweaker limited supply of homes in the resale market.demand. The increase in the average sales price of New Orders was primarily attributable to a relative shift to higher priced communities in certain markets year over year.

Segment New Orders anddecreased 13% while the average sales price of New Orders each increased 3%5% in 20242025 compared to 2023.2024. DespiteNew anOrders 8%were negatively impacted by a 9% lower sales absorption rate due to weaker demand and a 4% decrease in the average number of active communities year over year, New Orders were favorably impacted by 12% higher absorption rates year over year. Sales demand remained favorable in certain markets within the segment due to a limited supply of homes in the resale market. The increase in the average sales price of New Orders was primarilyfavorably attributableimpacted toby a relative shift to higher priced communities withinin certain markets within the segments year over year.

The South East segment had an approximate $52,400,$186,100, or 12%,48%, decrease in segment profit in 20242025 compared to 20232024. The decrease in segment profit was primarily due primarily to a decrease in the segment's gross profit marginsmargin percentage, a decrease in segment revenues and increases in SG&A expenses and the corporate capital allocation charge. The segment's gross profit margin percentage decreased to 18.3% in 2025 from 22.3% in 2024 from 25.7% in 2023.2024. Gross profit margins were negatively impacted primarily by higher lot costscosts, an increase in certain operating costs, and closingan costincrease assistance.in lot deposit impairment charges year over year. Segment revenues in 20242025 were higherdecreased by approximately $388,200,$196,200, or 16%,7%, due primarily to a 19% increase in the number of units settled, offset by a 3%6% decrease in the average pricenumber of units settled year over year. The increasedecrease in settlementsthe wasnumber of units settled is primarily attributable primarily to aan 15%11% higherlower backlog unit balance entering 20242025 compared to the backlog entering 2023,2024, coupledoffset withpartially by a higher backlog turnover rate year over year. TheSG&A decreaseexpenses were 12% higher year over year, resulting primarily from higher personnel and marketing costs attributable to a 23% increase in the average settlement price was attributable primarily to a 7% lower average sales pricenumber of unitsactive incommunities backlogyear enteringover 2024 compared to backlog entering 2023.year.

Segment New Orders increaseddecreased 7%3% while the average sales price of New Orders remained flat year over year. The increasedecrease in New Orders was primarily attributable to a 28%21% lower absorption rate due to weaker demand, offset partially by the aforementioned increase in the average number of active communities year over year, offset partially by a 16% lower absorption rate within the segment year over year. AsAbsorption notedrates in the Consolidated Homebuilding section above, sales demand remained favorable through the first three quarters of 2024 comparedcontinue to the same period in 2023, due to a limited supply of homes in the resale market and stabilized mortgage interest rates. However, demand began to slow in the fourth quarter as affordability wasbe negatively impacted in part by rising mortgage interest rates and by an increase in the supply of homes in the resale and new home inventory in several of the markets within certain markets in the segment.

In addition to the corporate capital allocation and contract land deposit impairments discussed in Reportable Homebuilding Segments above, the other reconciling items between homebuilding segment profit and homebuilding consolidated profit before tax include unallocated corporate overhead (which includes all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense. Our overhead functions, such as accounting, treasury and human resources, are centrally performed and the costs are not allocated to our operating segments. Consolidation adjustments consist of such items to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments. External corporate interest expense is primarily comprised of interest charges on our 3.00% Senior Notes due 2030,Notes, and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

(1)This itemincrease representsin changesconsolidation adjustments and other in 2025 was primarily attributable to the increase in the contract land deposit impairment allowance, which are not allocated to our reportable segments.allowance. See further discussion of contract land deposit impairment charges in NoteReportable 3Homebuilding inSegments the accompanying consolidated financial statements.above.

(3)This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments. The corporate capital allocation charge is based on the segment’s monthly average asset balance and iswas as follows for the years presented:

Loan closing volume in 20242025 increaseddecreased by approximately $523,900,$220,800, or 9%,4%, from 2023.2024. The increasedecrease was primarily attributable to a 9%5% increasedecrease in the number of loans closed, resulting from ana 11%4% increasedecrease in the homebuilding segment’s number of homes settled in 20242025 as compared to 2023.2024.

(iii) Obligations under operating and finance leases related primarily to office spacecorporate and ourdivision offices, production facilities.facilities, model homes, and certain office and production equipment. See Note 1211 of this Form 10-K for additional discussion of our leases.

We have an unsecured revolving credit agreement (the "Credit Agreement") with a group of lenders which may be used for working capital and general corporate purposes. The Credit Agreement provides for aggregate revolving loan commitments of $300,000$300,000, (the "Facility"). Under the Credit Agreement, we may request increases of up to $300,000 to the Facility in the form of revolving loan commitments or term loans to the extent that new or existing lenders agree to provide additional revolving loan or term loan commitments. In addition, the Credit Agreement provides forand a $100,000 sublimit for the issuance of letters of credit of which there was approximately $14,600$9,700 outstanding as of December 31, 2024. The Credit Agreement termination date is February 12, 2026.2025. There were no borrowings outstanding under the Credit Agreement as of December 31, 2024.2025.

Our mortgage banking subsidiary, NVRM, has an unsecured revolving mortgage repurchase agreementfacility (the "Repurchase Agreement") which is non-recourse to NVR. The purpose of the Repurchase Agreement is to finance the origination of mortgage loans by NVRM. The Repurchase Agreement provides for aggregate borrowing capacity up to $150,000, subject to certain sublimits. The Repurchase Agreement expires on July 14, 2025.$150,000. As of December 31, 2024,2025, there waswere no debtborrowings outstanding under the Repurchase Agreement and there were no borrowing base limitations.Agreement.

See Note 87 of this Form 10-K for additional disclosuresinformation regarding our Senior Notes, Credit Agreement and Repurchase Agreement.

For the year ended December 31, 2024,2025, cash, restricted cash and cash equivalents decreased by $550,777.$707,786. Net cash provided by operating activities was $1,374,462,$1,121,320, due primarily to cash provided by earnings in 2024.2025, and a decrease in inventory of $335,147 attributable to a decrease in units under construction year over year. Cash was primarily used to fund the increase in contract land deposits of $157,291$200,657 attributable to an increase in the number of lots under control as of December 31, 20242025 compared to December 31, 2023,2024, and net mortgage loan activity of $105,790. Additional cash was used to fund the increase in inventory of $108,557 attributable to an increase in units under construction year over year.$238,260.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate the estimates we use to prepare the consolidated financial statements and update those estimates as necessary. In general, our estimates are based on historical experience, on information from third partythird-party professionals, and other various assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ materially from those estimates made by management.

We establish warranty and product liability reserves to provide for estimated future expenses as a result of construction and product defect claims, product recalls and litigation incidental to our homebuilding business. Liability estimates are determined based on our judgment considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third partythird-party experts such as engineers, and discussions with our General Counsel and outside counsel retained to handle specific product liability cases. Although we consider the warranty and product liability accrual reflected on the December 31, 20242025 consolidated balance sheet to be adequate (see Note 1312 to the accompanying consolidated financial statements included herein), there can be no assurance that this accrual will prove to be adequate over time to cover losses due to increased costs for material and labor, the inability or refusal of manufacturers or subcontractors to financially participate in corrective action, unanticipated adverse legal settlements, or other unanticipated changes to the assumptions used to estimate the warranty and product liability accrual.

Some of the statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases or other public communications, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “will,” “should,” "could," or “anticipates” or the negative thereof or other comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, our financial position and financial results, business strategy, the outcome of pending litigation, investigations or similar contingencies, and projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or performance to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by us and our customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by us in our homebuilding operations; shortages of labor; the economic impact of a major epidemic or pandemic; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which we have little or no control. We undertake no obligation to update such forward-looking statements except as required by law. For additional information regarding risk factors and uncertainties, see Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Results of Operations for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

During the firstsecond quarter of 2026, demand for new homes continued to be negatively impacted by affordability issues, high home inventory levels in certain markets, weak consumer sentiment and economic volatility. We expect that these issues may continue to weigh on demand and home prices. We also expect further margin pressure from higher land prices and from repositioning of communities as the housing market continues to adjust. Although we are unable to predict the extent to which this will impact our operational and financial performance, we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet and our disciplined lot acquisition strategy.

As of MarchJune 31,30, 2026, we controlled approximately 181,700184,400 lots as described below.

We controlled approximately 172,100174,900 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $1,004,400$1,012,300 and $5,500,$7,200, respectively. Included in the number of controlled lots are approximately 18,90020,950 lots for which we have recorded a contract land deposit impairment allowance of approximately $113,500$134,950 as of MarchJune 31,30, 2026.

We had an aggregate investment totaling approximately $68,900$73,300 in four JVs, expected to produce approximately 8,1508,000 lots. We had additional JV funding commitments totaling approximately $26,000$23,400 as of MarchJune 31,30, 2026.

In addition, we have certain properties under contract with land owners that are expected to yield approximately 37,00038,600 lots, which are not included in the number of total lots controlled. Some of these properties may require rezoning or other approvals to achieve the expected yield. As of MarchJune 31,30, 2026, these properties are controlled with deposits in cash totaling approximately $48,100,$50,000, of which approximately $12,900$12,800 is refundable if certain contractual conditions are not met. We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.

Our consolidated revenues for the firstsecond quarter of 2026 totaled $1,881,063,$2,326,356, a 22%decrease decreaseof 10% from the firstsecond quarter of 2025. Net income for the firstsecond quarter ended MarchJune 31,30, 2026 was $198,359,$236,458, or $67.76$83.96 per diluted share,share. decreasesFor ofthe 34%second quarter ended June 30, 2026, net income decreased 29% and 29%diluted earnings per share decreased 23% when compared to net income and diluted earnings per share for the firstsecond quarter of 2025, respectively. Our homebuilding gross profit margin percentage decreased to 19.6%19.2% in the firstsecond quarter of 2026 from 21.9%21.5% in the firstsecond quarter of 2025. New orders, net of cancellations (“New Orders”) increased by 7%9% in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The New Order cancellation rate for the second quarter of 2026 decreased to 14.9% from 16.5% in the same period in 2025. The average sales price for New Orders in the firstsecond quarter of 2026 was $440.1,$437.1, a decrease of 2%5% compared to the firstsame quarterperiod ofin 2025.the prior year.

Consolidated Homebuilding - Three Months Ended MarchJune 31,30, 2026 and 2025

Homebuilding revenues decreased 22%11% in the firstsecond quarter of 2026 compared to the same period in 2025, as a result of a 22%8% decrease in theunits numbersettled, coupled with a 3% decrease in average price of units settled. The decrease in the number of units settled was primarily attributable to a 15% lower backlog unit balance entering 2026 compared to 2025, coupled with a lower backlog turnover rate quarter over quarter. The grossGross profit margin percentage in the firstsecond quarter of 2026 decreased to 19.6%,19.2% comparedfrom to 21.9%21.5% in the firstsecond quarter of 2025. Gross profit margin was negatively impacted by continuedhigher lot costs, pricing pressure due to continued affordability challenges and higherweak lotconsumer costs.sentiment. In addition, margins were impacted by contract land deposit impairments totaling approximately $21,700, compared to $13,200 in the second quarter of 2025.

The number of New Orders increased 7%9% while the average sales price decreased 2%5% in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. New Orders were favorably impacted by ana 8%4% increase in the average number of active communities.communities quarter over quarter, coupled with a 5% higher sales absorption rate in the second quarter of 2026. The decrease in the average sales price of New Orders is primarily attributable to ourpricing Northpressure Eastand segment,a relative product mix shift in New Orders from single family detached homes to single family attached homes, which hadgenerally asell shift toat lower priced communities in certain markets year over year.prices.

Selling, general and administrative (“SG&A”) expense in the firstsecond quarter of 2026 decreasedwas byrelatively approximately $8,100 compared to the first quarter of 2025,flat, but increased as a percentage of revenue to 8.6%6.6% from 7.0%.5.9%. The decreaseincrease in SG&A expense as a percentage of revenue was primarily attributable to a decrease of approximately $4,700 in equity-based compensation and a decrease of approximately $3,500 in personnel costs due primarily to a decrease in headcountrevenues quarter over quarter.

Our backlog represents homes sold but not yet settled with our customers. As of MarchJune 31,30, 2026, our backlog increased on a unit basis remainedby flat9% atto 10,17110,998 units and on a dollar basis decreasedby 3%5% to $4,698,779$4,992,229, when compared to 10,16510,069 units and $4,837,847,$4,753,905, respectively, as of MarchJune 31,30, 2025. The increase in the number of backlog units was primarily attributable to an 8% increase in New Orders year over year. Backlog dollars were higher primarily due to the increase in backlog units in 2026, offset partially by a 4% decrease in the average price of backlog units year over year.

Our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons. In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period. Our first quarter cancellation rate was approximately 14% and 16% forin the first six months of 2026 and 2025, respectively, calculated as the total of all cancellations during the period as a percentage of gross sales during thatthe same period. During the most recent four quarters, approximately 6% of thea reporting quarter’s opening backlog cancelled during the fiscal quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur during the remainder of 2026 or future years. Other than those units that are cancelled, we expect to settle substantially all of our MarchJune 31,30, 2026 backlog within the next twelve months.

We record charges on contract land deposits when we determine that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA resulting in the forfeiture of the deposit. We evaluate our entire net contract land deposit portfolio for impairment each quarter. For presentation purposes below, the contract land deposit allowancereserve as of MarchJune 31,30, 2026 and December 31, 2025 has been allocated to the respective year’s reportable segments to show contract land deposits on a net basis. The net contract land deposit balances below also include approximately $5,500$7,200 and $4,600 as of MarchJune 31,30, 2026 and December 31, 2025, respectively, of letters of credit issued as deposits in lieu of cash.

The following tables summarize certain homebuilding operating activity by reportable segment for the three and six months ended MarchJune 31,30, 2026 and 2025.

Segment Operating Activity:

The Mid Atlantic segment had an approximate $95,500,$85,800, or 51%,45%, decrease in segment profit in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The decrease in segment profit was driven by a decrease in segment revenues of approximately $344,200,$249,300, or 32%,22%, coupled with a decrease in gross profit margin to 22.2%20.9% in the firstsecond quarter of 2026 from 24.1%23.5% in the same period of 2025. Segment revenues decreased due to aan 31%18% decrease in the number of units settled.settled, coupled with a 5% lower average settlement price quarter over quarter. The decrease in settlements was primarily attributable to a 22%6% lower backlog unit balance entering the second quarter of 2026 compared to backlog entering the second quarter of 2025, coupled with a lower backlog turnover raterate. The decrease in the average settlement price was primarily attributable to a 4% lower average price of units in backlog entering the second quarter overof quarter.2026 compared to the backlog entering the second quarter of 2025. Gross profit margins were negatively impacted by higher lot costs and by pricing pressure.pressure due to affordability challenges.

Segment New Orders increased 3%,8%, while the average sales price of New Orders decreased 3%6% in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The increase in New Orders were higherwas primarily dueattributable to aan 4%11% increase in the average number of active communities.communities quarter over quarter, offset by a 3% lower absorption rate. The average sales price of New Orders was negatively impacted by a shift to lower priced communities in certain markets within the segment.

The North East segment had an approximate $22,700,$19,000, or 41%,33%, decrease in segment profit in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The decrease in segment profit was driven by a decrease in segment revenues of approximately $48,300,$28,100, or 17%,9%, coupled with a decrease in gross profit margin to 22.4%22.0% in the firstsecond quarter of 2026 from 26.4%26.2% in the samesecond periodquarter of 2025. Segment revenues decreased due to a 22%5% decrease in the number of units settled, offsetcoupled partially bywith a 7%5% higherlower average settlement price quarter over quarter. The decrease in settlements was primarily attributable to an 8% lower backlog unit balance entering 2026 compared to the backlog entering 2025, coupled with a lower backlog turnover rate quarter over quarter. The increasedecrease in the average settlement price was primarily attributable to a relative10% shiftlower average price of units in settlementsbacklog entering the second quarter of 2026 compared to higherthe pricedbacklog communitiesentering inthe certainsecond markets.quarter of 2025. Gross profit margins were negatively impacted by higher lot costs and certainpricing materialpressure costs.due to affordability challenges.

Segment New Orders increased 24% whileand the average sales price of newNew ordersOrders decreased 12%,8% and 2%, respectively, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The increase in New Orders waswere lower primarily attributabledue to a 30%16% lower sales absorption rate, offset by a 9% increase in the average number of active communities quarter over quarter.communities. The averagedecrease in sales price of New Ordersabsorption was negatively impacted by a shiftattributable to lowerweak pricedconsumer communities in certain markets within the segment.sentiment.

The Mid East segment had an approximate $18,900,$2,800, or 35%,5%, decrease in segment profit in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025.2025, Thedue primarily to a decrease in segmentgross profit wasmargins, drivenwhich byoffset aan decreaseincrease in segment revenues of approximately $102,000,$3,500, or 25%.1%. SegmentThe segment's gross profit margin percentage decreased to 20.4% in the second quarter of 2026 from 21.0% in the second quarter of 2025. Gross profit margin was negatively impacted by higher lot costs. The segment's revenues decreasedwere higher primarily due to a 29% decrease in the number of units settled, offset partially by a 6%3% higher average settlement price. The decreaseprice in settlementsthe wassecond primarilyquarter of 2026, attributable to a 20%2% lower backlog unit balance entering 2026 compared to the backlog entering 2025, coupled with a lower backlog turnover rate quarter over quarter. The increase in thehigher average settlement price was attributable to a 5% higher average price of units in backlog entering the second quarter of 2026 compared to backlogthe enteringsame period in 2025.

Segment New Orders increased 8%,11% while the average sales price of New Orders increaseddecreased 1% in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The increase in New Orders waswere primarilyfavorably impacted by a 9% higher sales absorption rate attributable to abetter 6%product increasepositioning in certain markets in the averagecurrent number of active communities quarter over quarter.year.

The South East segment had an approximate $17,100,$3,400, or 37%,7%, decrease in segment profit in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The decrease in segment profit was primarily due to a decrease in segmentthe revenues of approximately $21,100, or 4%, coupled with a decrease insegment's gross profit margin percentage to 17.4%17.7% in the firstsecond quarter of 2026 from 19.7%18.7% in the samesecond periodquarter of 2025. The decrease in segment revenues was attributable primarily to a 6% decrease in the number of units settled. The decrease in settlements was attributable to a 4% lower backlog unit balance entering 2026 compared to the backlog entering 2025, coupled with a lower backlog turnover rate quarter over quarter. Gross profit margins were negatively impacted by higher lot costs and anpricing increasepressure indue lotto depositcontinued impairmentaffordability charges quarter over quarter.challenges.

Segment New Orders increased 8%14% while the average sales price of New Orders remaineddecreased flat2% in the firstsecond quarter of 2026 when compared to the firstsecond quarter of 2025. The increase in New Orders waswere primarilyfavorably impacted by a 14% higher sales absorption rate attributable to abetter 9%product increasepositioning in certain markets in the averagecurrent number of active communities quarter over quarter.year.

(1)This item represents changes to the contract land deposit impairment allowance,reserve, which are not allocated to the reportable segments. See further discussion of lot deposit impairment charges in Note 2 in the accompanying condensed consolidated financial statements.

We conduct our mortgage banking activity through NVRMNVR Mortgage Finance, Inc. ("“NVRM"”), a wholly owned subsidiary. NVRM focuses exclusively on serving the homebuilding segmentsegment's customer base.customers. NVRM sells almost all of the mortgage loans it originatescloses intoto investors in the secondary markets primarily on a servicing-released basis, typically within 30 days from the loan closing. The following table summarizes the results of our mortgage banking operations and certain statistical data for the three and six months ended MarchJune 31,30, 2026 and 2025:

Loan closing volume for the three and six months ended MarchJune 31,30, 2026 decreased by approximately $380,000,$200,600, or 27%,13%, and $580,500, or 19%, respectively, from the same periodperiods in 2025. TheThese decreasedecreases in loan closing volume during the three months ended March 31, 2026 was primarily due to a 26% decrease in the number of loans closed in the first quarter of 2026 compared to the first quarter of 2025,are consistent with the 22% decreasedecreases in settlements in our homebuilding operations.revenue of 11% and 16%, respectively.

Segment profit for the three months ended MarchJune 31,30, 2026 decreased by approximately $5,800,$4,400, or 17%,14%, from the same period in 2025. TheThis decrease was primarily attributable to a decrease of approximately $4,000, or 8%, in mortgage banking fees,fees partiallydue offset byto a decrease in general and administrative expenses. Mortgage banking fees decreased by approximately $6,400, or 12%, primarily due to lower gains on sales of loans. General and administrative expenses decreased by $1,100, or 5%, which was the result of decreased personnel costs.

We historically have experienced variability in our quarterly results, generally having higher New Order activity in the first half of the year and higher home settlements, revenue and net income in the second half of the year. However, in recent years our typical seasonal trends have been affected by significant changes in market conditions. As a result, our quarterly results of operations are not necessarily indicative of the results that may be expected for the full year.

Our effective tax rate during the three months ended March 31, 2026 was 21.2% compared to 25.5% for the three monthsand six month periods ended MarchJune 31,30, 2026 was 25.8% and 23.8%, respectively, compared to 25.4% in each respective period of 2025. The decrease in the effective tax rate infor the firstrespective quarter of 2026periods is primarily attributableimpacted toby a higherthe income tax benefit recognized for excess tax benefits from stock option exercises, which totaled approximately $12,600$900 and $2,700$13,500 for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to $3,500 and March$6,200 31,for the three and six months ended June 30, 2025, respectively.

We fund our operations primarily from our current cash holdings and cash flows generated by operating activities. In addition, we have available a short-term unsecured working capital revolving credit facility and revolving mortgage repurchase facility, as further described below. As of MarchJune 31,30, 2026, we had approximately $1,700,000$1,100,000 in cash and cash equivalents, approximately $288,800$287,200 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.

(i) Payments due to service our debt and interest on that debt. Our current outstanding Senior Notes totalhave an outstanding aggregate principal balance of $900,000 and mature in May 2030. Future interest payments on our outstanding Senior Notes total approximately $118,050,$104,550, with $27,000 due within the next twelve months.

(iii) Obligations under operating and finance leases related primarily to office space and our production facilitiesfacilities. (seeSee Note 1213 of this Quarterly Report on Form 10-Q for additional discussion of our leases).leases.

In addition to funding growth in our homebuilding and mortgage banking operations, we historically have used a substantial portion of our excess liquidity to repurchase outstanding shares of our common stock in open market and privately negotiated transactions. This ongoing repurchase program assists us in accomplishing our primary objective, creating increases in shareholder value. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this Quarterly Report on Form 10-Q for further discussion of repurchase activity during the firstsecond quarter of 2026. For the quartersix months ended MarchJune 31,30, 2026, we repurchased 90,180144,896 shares of our common stock at an aggregate purchase price of $631,956$989,733. As of MarchJune 31,30, 2026, we had approximately $667,600$1,059,864 available under a Board approved repurchase authorization.authorizations.

As of MarchJune 31,30, 2026, we had $900,000Senior Notes with an aggregate principal balance of unsecured 3% senior notes outstanding,$900,000, which mature in May 2030.

We have an unsecured revolving credit agreement (the "Credit Agreement") which provides for aggregate revolving loan commitments of $300,000, and a $100,000 sublimit for the issuance of letters of credit,credit of which there was approximately $11,200$12,800 outstanding as of MarchJune 31,30, 2026. There were no borrowings outstanding under the Credit Agreement as of MarchJune 31,30, 2026.

NVRM has an unsecured revolving mortgage repurchase facility (the “Repurchase Agreement”) which provides for aggregate borrowings up to $150,000. There were no borrowings outstanding under the Repurchase Agreement as of June 30, 2026, For additional information regarding the Senior Notes, Credit Agreement and Repurchase Agreement, see Note 1011 to the condensed consolidated financial statements included herein, and Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.

For the threesix months ended MarchJune 31,30, 2026, cash, restricted cash, and cash equivalents decreased by $227,194.$759,622. Net cash provided by operating activities was $339,686,$188,156, due primarily to cash provided by earnings for the threesix months ended MarchJune 31,30, 2026 and a $276,676$176,022 reduction in mortgage loans held for sale. In addition, $49,200 of cash was provided by an increase in accounts payable and accrued expenses attributable to an increase in inventory and $45,488 of cash was provided by an increase in customer deposits. Cash was primarily used to fund the increase in inventory of $214,950,$511,729, attributable to an increase in units under construction as of MarchJune 31,30, 2026 compared to December 31, 2025.2025, and an increase of $106,509 in contract land deposits.

Net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2026 was $12,465,$3,916, due primarily to cash provided by the sale of our interest in an unconsolidated joint venture of $21,559. Cash was used primarily for investments in unconsolidated joint ventures totaling $4,388$6,911 and purchases of property, plant and equipment of $4,871.$11,023.

Net cash used in financing activities was $579,345$951,694 for the threesix months ended MarchJune 31,30, 2026. Cash was used to repurchase 90,180144,896 shares of our common stock at an aggregate purchase price of $631,956$989,733 under our ongoing common stock repurchase program, discussed above. Cash was provided from stock option exercise proceeds totaling $54,087.$56,784.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.