BEAZER HOMES USA INC

Previous wording

Although we expect uncertainty around mortgage interest rates in near-term market conditions to persist, we remain confident in the long-term outlook for the housing market, supported by favorable demographic trends and a multimillion unit housing deficit that has accumulated over the past decade. Our long-term strategic business objectives encompass expanding our active communities to over 200 by the end of fiscal 2026, reducing our net debt to net capitalization ratio below 30% by the end of fiscal 2026, and reaching our target of 100% of home starts as Zero Energy Ready by the end of the calendar year 2025.

Current wording

Looking ahead to fiscal 2025, our focus remains on positioning our business for durable long-term growth. Our long-term strategic business objectives encompass expanding our active communities to over 200 by the end of fiscal 2026, reducing our net debt to net capitalization ratio below 30% by the end of fiscal 2026, and reaching our target of 100% of home starts as Zero Energy Ready by the end of the calendar year 2025. We believe we are making progress to achieve all of the goals. With a strong balance sheet, ample liquidity, and a focused sales strategy, we believe we are well-equipped to navigate the evolving market dynamics as we continue to make strides in achieving our long-term strategic objectives.

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Overview of Results for Our Fiscal Second Quarter

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Overview of Results for Our Fiscal Third Quarter

Previous wording

•During the quarter ended March 31, 2024, our average active community count of 140 was up 13.8% from 123 in the prior year quarter. We ended the quarter with 145 active communities, up 19.8% from 121 a year ago. This marks the eighth consecutive quarter of year-over-year growth in community count as we work towardsour goal of reaching more than 200 active communities by the end of fiscal 2026. We invested $197.8 million in land acquisition and land development during the quarter ended March 31, 2024, representing an increase of 75.0% compared to $113.0 million in land spend during the quarter ended March 31, 2023.

Current wording

•During the quarter ended June 30, 2024, our average active community count of 146 was up 17.2% from 124 in the prior year quarter. This marks the ninth consecutive quarter of year-over-year growth in community count as we work towardsour goal of reaching more than 200 active communities by the end of fiscal 2026. We invested$201.1 million in land acquisition and land development during the quarter ended June 30, 2024, representing anincrease of 52.7% compared to$131.6 million in land spend during the quarter ended June 30, 2023.

Previous wording

•As of March 31, 2024, our land position included 26,887 controlled lots, up 12.9% from 23,820 as of March 31, 2023. Excluding land held for future development and land held for sale lots, we controlled 26,218 active lots, up 13.5% from a year ago. As of March 31, 2024, we had 13,527 lots, or 51.6% of our total active lots, under option agreements as compared to 12,460 lots, or 54.0% of our total active lots, under option agreements as of March 31, 2023.

Current wording

•As of June 30, 2024, our land position included 28,365 controlled lots, up 24.9% from 22,719 as of June 30, 2023. Excluding land held for future development and land held for sale lots, we controlled 27,822 active lots, up 26.1% from a year ago. The majority of the growth in controlled lots was through the usage of lot option agreements, which allow us to position for future growth while providing the flexibility to respond market conditions. As of June 30, 2024, we had 15,434 lots, or 55.5% of our total active lots, under option agreements as compared to 11,510 lots, or 52.2% of our total active lots, under option agreements as of June 30, 2023.

Previous wording

•Our Average Selling Price (ASP) for homes closed during the quarter ended March 31, 2024 was $515.9 thousand, up 1.2% from $509.9 thousand in the prior year quarter. Our backlog ASP of$525.5 thousand as of March 31, 2024 wasdown slightly from$531.3 thousand as of March 31, 2023. We are addressing new home affordability challenges by altering our product strategy in certain markets through reduction of homes sizes and/or features included in our base price.

Current wording

•Our Average Selling Price (ASP) for homes closed during the quarter ended June 30, 2024 was $505.3 thousand, down 1.1% from $510.8 thousand in the prior year quarter. The decrease in closing ASP was attributed to changes in product and community mix, as well as our effort to address new home affordability challenges by altering our product strategy in certain markets through reduction of homes sizes and/or features included in our base price.

Previous wording

•Homebuilding gross margin for the quarter ended March 31, 2024 remained consistent at 18.7% compared to the prior year quarter. Homebu ilding gross margin, excluding impairments, abandonments, and interest for the quarter ended March 31, 2024, was 21.7%, down from 22.0% in the prior year quarter. The decrease in homebuilding gross margin compared to the prior year quarter was primarily due to changes in product and community mix and an increase in closing cost incentives, partially offset by a decrease in build costs. If market conditions deteriorate due to unfavorable mortgage rate movements, gross margin may be compressed in the future.

Current wording

•Homebuilding gross margin for the quarter ended June 30, 2024 was 17.3%, down from 20.2% compared to the prior year quarter. Homebu ilding gross margin, excluding impairments, abandonments, and interest for the quarter ended June 30, 2024, was 20.3%, down from 23.4% in the prior year quarter. The decrease in homebuilding gross margin compared to the prior year quarter wasprimarily due to increased share of speculative home closings which generally have lower margins than "to be built" homes, changes in product and community mix, and an increase in closing cost incentives. If market conditions deteriorate due to unfavorable mortgage rate movements, gross margin may be compressed in the future.

Previous wording

•SG&A for the quarter ended March 31, 2024 was 11.5% of total revenue, up from 11.2% in the prior year quarter. The increase in SG&A as a percentage of total revenue compared to the prior year quarter was primarily due to higher sales and marketing costs as we prepare for new community activations and future growth, as well as a slight decrease in homebuilding revenues. We remain focused on prudently managing overhead costs.

Current wording

•SG&A for the quarter ended June 30, 2024 was 11.9% of total revenue, up from 11.5% in the prior year quarter. The increase in SG&A as a percentage of total revenue compared to the prior year quarter was primarily due to higher commissions expense and higher sales and marketing costs as we prepare for new community activations. We remain focused on prudently managing overhead costs.

Previous wording

Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted by a variety of factors, including periods of market volatility and changes in mortgage interest rates, which may result in increased or decreased new orders and/or revenues and closings that are outside of the normal ranges typically realized on account of seasonality. Accordingly, our financial results for the three and six months ended March 31, 2024 may not be indicative of our full year results.

Current wording

Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted by a variety of factors, including periods of market volatility and changes in mortgage interest rates, which may result in increased or decreased new orders and/or revenues and closings that are outside of the normal ranges typically realized on account of seasonality. Accordingly, our financial results for the three and nine months ended June 30, 2024 may not be indicative of our full year results.

Previous wording

(a)Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 21.7% and 22.0% for the three months ended March 31, 2024 and 2023, respectively, and 22.2% and 22.1% for the six months ended March 31, 2024 and 2023, respectively. Please see the "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized tocost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.

Current wording

(a)Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was 20.3% and 23.4% for the three months ended June 30, 2024 and 2023, respectively, and 21.4% and 22.6% for the nine months ended June 30, 2024 and 2023, respectively. Please see the "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized tocost of sales (non-GAAP measures) to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.

Previous wording

The following table reconciles our net income to Adjusted EBITDA for the periods presented:

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The following table reconciles our net income (GAAP) to Adjusted EBITDA (non-GAAP) for the periods presented:

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Reconciliation of Total Debt to Total Capitalization Ratio to Net Debt to Net Capitalization Ratio

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Reconciliation of Total Debt to Total Capitalization Ratio (GAAP) to Net Debt to Net Capitalization Ratio (Non-GAAP)

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Southeast Segment: New net orders for the quarter ended March 31, 2024 decreased to 176, down 30.7% from the quarter ended March 31, 2023. Thedecrease in new orders compared to the prior year quarter was driven by a 15.6% decrease in sales pace from 3.2 orders per community per month in the prior year quarter to 2.7 and a 15.4% decrease in average active community count from 26 in the prior year quarter to 22.

Current wording

Southeast Segment: Net new orders for the quarter ended June 30, 2024 decreased to 105, down 57.0% from the quarter ended June 30, 2023. The decrease in new orders compared to the prior year quarter was driven by a 40.6% decrease in sales pace from 3.2 orders per community per month in the prior year quarter to 1.9 and a 28.0% decrease in average active community count from 25 in the prior year quarter to 18. The decrease in sales pace was due to a softening in demand as well as higher cancellation rates in various sub-markets.

Previous wording

Southeast Segment: Net new orders for thesix months ended March 31, 2024 decreased to 294, down 20.1% from the six months ended March 31, 2023. Thedecrease in net new orders was driven by a 11.5% decrease in average active community count from 26 to 23 and an 8.7% decrease in sales pace from 2.3 orders per community per monthto 2.1.

Current wording

Southeast Segment: Net new orders for the nine months ended June 30, 2024 decreased to 399, down 34.8% from the nine months ended June 30, 2023. The decrease in net new orders was driven by a 19.2% decrease in average active community count from 26 to 21 and a 19.2% decrease in sales pace from 2.6 orders per community per month to 2.1.

Previous wording

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. The aggregate dollar value of homes in backlog as of March 31, 2024 increased 8.9% compared to March 31, 2023 due to a 10.1% increase in backlog units, partially offset by a 1.1% decrease in the ASP of homes in backlog. The increase in backlog units compared to the prior year quarter is primarily due to the increase in new net orders discussed above. The decrease in backlog ASP was partially due to our efforts inaddressing new home affordability challenges by altering our product strategy in certain markets through reduction of homes sizes and/or features included in our base price.

Current wording

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. The aggregate dollar value of homes in backlog as of June 30, 2024 increased 3.6% compared to June 30, 2023 due to a 3.2% increase in the ASP of homes in backlog and a 0.4% increase in backlog units. The increase in backlog ASP compared to prior year quarterwas primarily due to changes in product and community mix as well as price appreciation in a number of submarkets. The decrease in backlog units in the Southeast was primarily driven by a softening in sales pace and a decrease in average active community count.

Previous wording

West Segment: Homebuilding revenue increased by 4.8% for the three months ended March 31, 2024 compared to the prior year quarter due to a 5.7% increase in closings, partially offset by a 0.8% decrease in ASP. The increase in closings was primarily due to higher beginning backlog.

Current wording

West Segment: Homebuilding revenue increased by 11.9% for the three months ended June 30, 2024 compared to the prior year quarter due to a 14.8% increase in closings, partially offset by a 2.5% decrease in ASP. The increase in closings was primarily due to higher beginning backlog as well as improved construction cycle times compared to prior year quarter.

Previous wording

Southeast Segment: Homebuilding revenue decreased by 11.3% six months ended March 31, 2024 compared to the six months ended March 31, 2023 due to a 13.5% decrease in closings, partially offset by a 2.5% increase in ASP. The decrease in closings was primarily due to lower beginning backlog, partially offset by a higher backlog conversion rate as a result of improved construction cycle times compared to the prior year period.

Current wording

Southeast Segment: Homebuilding revenue decreased by 9.8% nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 due to a 13.5% decrease in closings, partially offset by a 4.2% increase in ASP. The decrease in closings was primarily due to lower beginning backlog, part ially offset by improved construction cycle times compared to the prior year period.

Previous wording

Our homebuilding gross profit decreased by $0.8 million to $100.8 million for the three months ended March 31, 2024, compared to $101.6 million in the prior year quarter. The decrease in homebuilding gross profit was primarily due to a decrease in homebuilding revenue of $3.4 million, while homebuilding gross margin remained flat compared to the prior year quarter at 18.7%. As shown in the tables above, the comparability of our gross profit and gross margin was slightly impacted by impairment and abandonment charges, which decreased by $0.1 million, and interest amortized to homebuilding cost of sales, which decreased by $1.2 million compared to the prior year quarter (refer to Note 4 and Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit decreased by$2.1 million compared to the prior year quarter, while homebuilding gross margin decreased by 30 basis points to 21.7%. The decrease in gross margin for the three months ended March 31, 2024 compared to the prior year quarter wasprimarily due to changes in product and community mix and an increase in closing cost incentives, partially offset by a decrease in build costs.

Current wording

Our homebuilding gross profit decreased by $13.5 million to $102.0 million for the three months ended June 30, 2024, compared to $115.5 million in the prior year quarter. The decrease in homebuilding gross profit compared to the prior year quarter was primarily due to a decrease in gross margin of 290 basis points to 17.3%, partially offset by an increase in homebuilding revenue of $19.1 million. As shown in the tables above, the comparability of our gross profit and gross margin was slightly impacted by impairment and abandonment charges, which decreased by $0.1 million, and interest amortized to homebuilding cost of sales, which decreased by $0.2 million compared to the prior year quarter (refer to Note 4 and Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit decreased by $13.9 million compared to the prior year quarter, while homebuilding gross margin decreased by 310 basis points to 20.3%. The decrease in gross margin for the three months ended June 30, 2024 compared to the prior year quarter was primarily due to increased share of speculative home closings which generally have lower margins than "to be built" homes, changes in product and community mix, and an increase in closing cost incentives.

Previous wording

East Segment: Compared to the prior year quarter, homebuilding gross profit decreased by $4.3 million due to lower gross margin as well as a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, decreased to 19.5%, down from 21.7% in the prior year quarter, primarily due to changes in product and community mix.

Current wording

East Segment: Compared to the prior year quarter, homebuilding gross profit decreased by $6.4 million due to lower gross margin as well as a decrease in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, decreased to 16.3%, down from 19.6% in the prior year quarter, primarily due to an increase in price concessions.

Previous wording

Our homebuilding gross profit decreased by $10.0 million to $176.7 million for the six months ended March 31, 2024, from $186.7 million in the prior year period. The decrease in homebuilding gross profit was primarily due to a decrease in homebuilding revenue of $66.5 million, partially offset by an increase in gross margin of 30 basis points to 19.2%. Similar to thethree-month period discussed above, the comparability of our gross profit and gross margin for the six-month period was slightly impacted by impairment and abandonment charges, which decreased by $0.3 million, and interest amortized to homebuilding cost of sales, which decreased by $3.8 million year-over-year (refer to Note 4 and Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit decreased by$14.1 million compared to the prior year period, while homebuilding gross margin increased by 10 basis points to 22.2%. The increase in gross margin for the six months ended March 31, 2024 compared to the prior year period wasprimarily driven by a decrease in build costs and lower amortization of capitalized indirect costs due to lower closings, partially offset by changes in product and community mix.

Current wording

Our homebuilding gross profit decreased by $23.5 million to $278.7 million for the nine months ended June 30, 2024, from $302.2 million in the prior year period. The decrease in homebuilding gross profit compared to the prior year period was primarily due to a decrease in homebuilding revenue of $47.4 million and a decrease in gross margin of 90 basis points to 18.5%. Similar to the three-month period discu ssed above, the comparability of our gross profit and gross margin for the nine-month period was slightly impacted by impairment and abandonment charges, which decreased by $0.4 million, and interest amortized to homebuilding cost of sales, which decreased by $4.0 million year-over-year (refer to Note 4 and Note 5 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit decreased by$28.0 million compared to the prior year period, while homebuilding gross margin decreased by 120 basis points to 21.4%. The decrease in gross margin for the nine months ended June 30, 2024 compared to the prior year period was primarily driven by changes in product and community mix, and an increase in closing cost incentives.

Previous wording

West Segment: Compared to the prior year period, homebuilding gross profit decreased by $5.7 million due to a decrease in homebuilding revenue as well as lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 21.6%, down from 21.7% in the prior year period, primarily driven by changes in product and community mix, partially offset by a decrease in build costs.

Current wording

East Segment: Compared to the prior year period, homebuilding gross profit decreased by $14.5 million due to a decrease in homebuilding revenue as well as lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 17.8%, down from 20.3% in the prior year period, primarily driven by changes in product and community mix, and an increase in closing close incentives, partially offset by a decrease in price concessions.

Previous wording

East Segment: Compared to the prior year period, homebuilding gross profit decreased by $8.1 million due to a decrease in homebuilding revenue as well as lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 18.8%, down from 20.8% in the prior year period, primarily driven by changes in product and community mix.

Current wording

Southeast Segment: Compared to the prior year period, homebuilding gross profit decreased by $7.3 million due to a decrease in homebuilding revenue as well as lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, decreased to 22.1%, down from 22.4% in the prior year period, primarily driven by changes in product and community mix and an increase in price concessions.

Previous wording

The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For the trailing 12-month period ended March 31, 2024, our homebuilding gross margin was 20.1%. Excluding interest amortized to cost of sales and inventory impairments and abandonments, our homebuilding gross margin for the trailing 12-month period ended March 31, 2024 was 23.1%. For the same trailing 12-month period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 79 homes and 1.9% of total closings during this period:

Current wording

The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For the trailing 12-month period ended June 30, 2024, our homebuilding gross margin was 19.3%. Excluding interest amortized to cost of sales and inventory impairments and abandonments, our homebuilding gross margin for the trailing 12-month period ended June 30, 2024 was 22.3%. For the same trailing 12-month period, homebuilding gross margin was as follows in those communities that have previously been impaired, which represented 89 homes and 2.1% of total closings during this period:

Previous wording

For the three months ended March 31, 2024, land sales and other revenue increased by $1.0 million to $2.9 million, and land sales and other gross profit decreased by $0.2 million to $1.1 million compared to the prior year quarter. For the six months ended March 31, 2024, land sales and other revenue increased by $6.1 million to $8.8 million, and land sales and other gross profit increased by $0.9 million to $2.9 million compared to the prior year period. Period-over-period fluctuations on land sales and other revenue are primarily driven by the timing and volume of land and lot sales closings. Land sales and other gross profit is primarily impacted by the profitability of individual land and lot sale transactions as well as the volume of our title examinations operations. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.

Current wording

For the three months ended June 30, 2024, land sales and other revenue increased by $4.0 million to $6.0 million, and land sales and other gross profit remained relatively flat at $1.3 million compared to the prior year quarter. For the nine months ended June 30, 2024, land sales and other revenue increased by $10.1 million to $14.8 million, and land sales and other gross profit increased by $1.0 million to $4.2 million compared to the prior year period. Period-over-period fluctuations on land sales and other revenue are primarily driven by the timing and volume of land and lot sales closings. Land sales and other gross profit are primarily impacted by the profitability of individual land and lot sale transactions as well as the volume of our title examinations operations. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.

Previous wording

Our operating income decreased by $2.8 million to $36.0 million for the three months ended March 31, 2024, compared to operating income of $38.8 million for the three months ended March 31, 2023. This decrease compared to the prior year quarter was primarily due to the previously discussed decrease in gross profit and higher sales and marketing costs, partially offset by lower commissions expense onlower homebuilding revenue and lower other G&A expenses. SG&A as a percentage of total revenue increased by 30 basis points compared to the prior year quarter, from 11.2% to 11.5%, primarily due to higher sales and marketing costs as we prepare for new community activations, and a decrease in homebuilding revenues.

Current wording

Our operating income decreased by $19.4 million to $28.5 million for the three months ended June 30, 2024, compared to operating income of $47.9 million for the three months ended June 30, 2023. This decrease compared to the prior year quarter was primarily due to the previously discussed decrease in gross profit, higher sales and marketing costs, and higher commissions expense on higher homebuilding revenue. SG&A as a percentage of total revenue increased by 40 basis points compared to the prior year quarter, from 11.5% to 11.9%, primarily due to higher commissions expense and higher sales and marketing costs as we prepare for new community activations.

Previous wording

Our operating income decreased by $11.0 million to $56.3 million for the six months ended March 31, 2024, compared to operating income of $67.3 million for the six months ended March 31, 2023. This decrease compared to the prior year periodwas primarily due to the previously discussed decrease in gross profit and higher sales and marketing costs, partially offset by lower commissions expense onlower homebuilding revenue and lower other G&A expenses. SG&A as a percentage of total revenue increased by 100 basis points compared to the prior year period, from 11.7% to 12.7%, primarily due to higher sales and marketing costs as we prepare for new community activations, and a decrease in homebuilding revenues.

Current wording

Our operating income decreased by $30.4 million to $84.8 million for the nine months ended June 30, 2024, compared to operating income of $115.2 million for the nine months ended June 30, 2023. This decrease compared to the prior year period was primarily due to the previously discussed decrease in gross profit and higher sales and marketing costs. SG&A as a percentage of total revenue increased by 80 basis points compared to the prior year period, from 11.6% to 12.4%, primarily due to slightly higher commissions expense as well as higher sales and marketing costs as we prepare for new community activations.

Previous wording

West Segment: The $0.5 million increase in operating income compared to the prior year quarter was primarily due to the higher gross profit previously discussed, partially offset by higher commissions expense onhigher homebuilding revenue in the segment, higher sales and marketing costs, and higher other G&A expenses.

Current wording

West Segment: The $10.0 million decrease in operating income compared to the prior year quarter was primarily due to the lower gross profit previously discussed, higher commissions expense on higher homebuilding revenue in the segment, higher sales and marketing costs, and higher other G&A expenses in the segment.

Previous wording

East Segment: The $4.0 million decrease in operating income compared to the prior year quarter was primarily due to the lower gross profit previously discussed and higher sales and marketing costs, partially offset by lower commissions expense onlower homebuilding revenue, and lower other G&A expenses in the segment.

Current wording

East Segment: The $7.3 million decrease in operating income compared to the prior year quarter was primarily due to the lower gross profit previously discussed, and higher sales and marketing costs in the segment.

Previous wording

Corporate and Unallocated: Our corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the three months ended March 31, 2024, corporate and unallocated net expenses decreased by $1.2 million from the prior year quarter primarily due to lower amortization of capitalized interest and capitalized indirect costs to cost of sales on lower closings and homebuilding revenue.

Current wording

Corporate and Unallocated: Our corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the three months ended June 30, 2024, corporate and unallocated net expenses decreased by $2.1 million from the prior year quarter primarily due to lower amortization of capitalized indirect costs to cost of sales.

Previous wording

West Segment: The $8.5 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed as well as higher sales and marketing expenses and higher other G&A expenses, partially offset by lower commissions expense on lower homebuilding revenue.

Current wording

West Segment: The $18.5 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed as well as higher sales and marketing expenses, higher other G&A expenses, and higher commissions expense on higher homebuilding revenue in the segment.

Previous wording

East Segment: The $6.9 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed as well as higher sales and marketing expenses, partially offset by lower commission expenses on lower homebuilding revenue andlower other G&A expenses.

Current wording

East Segment: The $14.1 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed, and higher sales and marketing expenses, partially offset by lower commission expenses on lower homebuilding revenue and lower other G&A expenses in the segment.

Previous wording

Southeast Segment: The $2.1 million decrease in operating income compared to the prior year period was primarily due to thedecrease in gross profit previously discussed as well as higher sales and marketing expenses, partially offset by lower commissions expense on lower homebuilding revenue andlower other G&A expenses.

Current wording

Southeast Segment: The $6.3 million decrease in operating income compared to the prior year period was primarily due to the decrease in gross profit previously discussed as well as higher sales and marketing expenses, partially offset by lower commissions expense on lower homebuilding revenue and lower other G&A expenses in the segment.

Previous wording

Corporate and Unallocated: For the six months ended March 31, 2024, corporate and unallocated net expenses decreased by$6.4 million over the prior year period. This decrease was primarilydue to lower amortization of capitalized interest and capitalized indirect costs to cost of sales on lower closings and homebuilding revenue.

Current wording

Corporate and Unallocated: For the nine months ended June 30, 2024, corporate and unallocated net expenses decreased by $8.5 million over the prior year period. This decrease was primarily due to lower amortization of capitalized interest and capitalized indirect costs to cost of sales on lower closings and homebuilding revenue.

Previous wording

Below operating income, we had three noteworthy fluctuations for thethree and six months ended March 31, 2024 compared to the prior periods. Specifically, (1) within other income, net, we recognized a gain on sale of investment of $8.6 million during the three and six months ended March 31, 2024 compared to no such transaction in the prior year periods (See the "EBITDA: Reconciliation of Net Income to Adjusted EBITDA" section above for further discussion on this transaction), (2) within other income, net, we experienced a year-over-year increase in interest income due to higher interest rateson cash balances, and (3) we recorded a loss on extinguishment of debt of $0.4 million during thethree and six months ended March 31, 2024 compared to no such loss and a loss of $0.5 million during thethree and six months ended March 31, 2023, respectively. See Note 6 of the notes to our condensed consolidated financial statements in this Form 10-Q for a further discussion of debt.

Current wording

Below operating income, we had three noteworthy fluctuations for thenine months ended June 30, 2024 compared to the prior periods. Specifically, (1) within other income, net, we recognized a gain on sale of investment of $8.6 million during thenine months ended June 30, 2024 compared to no such transaction in the prior year periods (See the "Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)" section above for further discussion on this transaction) and (2) within other income, net, we experienced a year-over-year increase in interest income due to higher interest rates on cash balances.

Previous wording

We recognized income tax expense from continuing operations of $6.7 million and$7.9 million for the three and six months ended March 31, 2024, compared to $5.1 million and$9.2 million for the three and six months ended March 31, 2023. Income tax expense for the six months ended March 31, 2024 was primarily driven by income tax expense on earnings from continuing operations and permanent differences, partially offset by both energy efficiency tax credits generated from expected closings during the current year and the discrete tax benefits related to the generation of additional energy efficiency tax credits from homes closed in prior periods, as well as stock-based compensation activity in the period. Income tax expense for the six months ended March 31, 2023 was primarily driven by income tax expense on earnings from continuing operations, permanent differences, and the discrete tax expense related to stock-based compensation activity in the period, partially offset by the discrete tax benefits related to the generation of additional energy efficiency tax credits for homes closed in prior periods and interest received with the refund of our alternative minimum tax credit. Refer to Note 10 of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion of our income taxes.

Current wording

We recognized income tax expense from continuing operations of $2.5 million and$10.4 million for the three and nine months ended June 30, 2024, respectively, compared to $6.2 million and$15.5 million for the three and nine months ended June 30, 2023, respectively. Income tax expense for the nine months ended June 30, 2024 was primarily driven by income tax expense on earnings from continuing operations and permanent differences, partially offset by energy efficiency tax credits generated from expected closings during the current year, the discrete tax benefits related to the generation of additional energy efficiency tax credits from homes closed in prior periods, and stock-based compensation activity in the period. Income tax expense for the nine months ended June 30, 2023 was primarily driven by income tax expense on earnings from continuing operations, permanent differences, and the discrete tax expense related to stock-based compensation activity in the period, partially offset by the discrete tax benefits related to the generation of additional energy efficiency tax credits for homes closed in prior periods and interest received with the refund of our alternative minimum tax credit. Refer to Note 10 of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion of our income taxes.

Previous wording

Net cash used in operating activities was $239.6 million for the six months ended March 31, 2024. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash used in operating activities during the period was primarily driven by an increase in inventory of $299.1 million resulting from land acquisition, land development and house construction spending, and a net increase in non-inventory working capital balances of $9.8 million. This was partially offset by cash inflows from income before income taxes of $68.8 million, which included $0.5 million of non-cash charges.

Current wording

Net cash used in operating activities was $323.0 million for the nine months ended June 30, 2024. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash used in operating activities during the period was primarily driven by an increase in inventory of $412.7 million resulting from land acquisition, land development and house construction spending, and a net increase in non-inventory working capital balances of $15.7 million. This was partially offset by cash inflows from income before income taxes of $98.5 million, which included $6.9 million of non-cash charges.

Previous wording

Net cash provided by operating activities was $40.3 million for the six months ended March 31, 2023, primarily driven by cash inflows from income before income taxes of $68.4 million, which included $10.8 million of non-cash charges. This was partially offset by a net increase in non-inventory working capital balances of $36.6 million and an increase in inventory of $2.3 million resulting from land acquisition, land development and house construction spending.

Current wording

Net cash provided by operating activities was $95.8 million for nine months ended June 30, 2023. Net cash provided by operating activities during the period was primarily driven by cash inflows from income before income taxes of $118.3 million, which included $16.0 million of non-cash charges. This was partially offset by a net increase in non-inventory working capital balances of $37.3 million and an increase in inventory of $1.2 million resulting from land acquisition, land development and house construction spending.

Previous wording

Net cash used in investing activitieswas $18.8 million for the six months ended March 31, 2024, primarily driven by capital expenditures for model homes and information systems infrastructure, and purchases of investment securities.

Current wording

Net cash used in investing activities was $23.9 million for the nine months ended June 30, 2024, primarily driven by capital expenditures for model homes and information systems infrastructure, and purchases of investment securities.

Previous wording

Net cash used in investing activities was $7.8 million for the six months ended March 31, 2023, primarily driven by capital expenditures for model homes and information systems infrastructure.

Current wording

Net cash used in investing activities was $21.8 million for the nine months ended June 30, 2023, primarily driven by capital expenditures for model homes and information systems infrastructure, and purchases of investment securities.

Previous wording

Net cash provided by financing activities was $37.4 million for the six months ended March 31, 2024, primarily driven by inflows from the issuance of the 2031 Notes, partially offset by outflows from redemption of our 2025 Notes, debt issuance costs related to the 2031 Notes and extension of the term of our Unsecured Facility (see Note 6), and tax payments for stock-based compensation awards vesting.

Current wording

Net cash provided by financing activities was $69.0 million for the nine months ended June 30, 2024, primarily driven by inflows from the issuance of the 2031 Notes and borrowings from our Unsecured Facility, partially offset by outflows from redemption of our 2025 Notes, debt issuance costs related to the 2031 Notes and extension of the term of our Unsecured Facility (see Note 6), repurchases of common stock, and tax payments for stock-based compensation awards vesting.

Previous wording

Net cash used in financing activities was $5.2 million for the six months ended March 31, 2023, primarily driven by debt issuance costs for the Unsecured Facility and tax payments for stock-based compensation awards vesting.

Current wording

Net cash used in financing activities was $10.2 million for the nine months ended June 30, 2023, primarily driven by the repurchase of a portion of our 2025 Notes, debt issuance costs for the Unsecured Facility, and tax payments for stock-based compensation awards vesting.