NVR · Read the filing

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

(dollars in thousands, except per share data)

Results of Operations

This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Overview

Business Environment and Current Outlook

Demand for new 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 home 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 uncertainty may continue to weigh on future demand. We also expect to continue to face cost pressures related to building materials, labor and land costs which we expect will impact profit margins based on our ability to manage these costs while balancing sales pace and home prices. 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.

Business

Our primary business is the construction and sale of single-family detached homes, townhomes and condominium buildings, 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:

Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.

North East: New Jersey and Eastern Pennsylvania

Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois

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 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 addition to constructing homes primarily on a pre-sold basis and utilizing what we believe is a conservative lot acquisition strategy, we focus on obtaining and maintaining a leading market position in each market we serve. This strategy allows us to gain valuable efficiencies and competitive advantages in our markets, which we believe contributes to minimizing the adverse effects of regional economic cycles and provides growth opportunities within these markets. Our continued success is contingent upon our ability to control an adequate supply of finished lots on which to build.

In limited 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.

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As of December 31, 2024, we controlled approximately 162,400 lots as discussed below.

Lot Purchase Agreements ("LPAs")

We controlled approximately 155,000 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $764,900 and $8,700, respectively. Included in the number of controlled lots are approximately 10,700 lots for which we have recorded a contract land deposit impairment allowance of approximately $58,600 as of December 31, 2024.

Joint Venture Limited Liability Corporations (“JVs”)

We had an aggregate investment totaling approximately $29,300 in three JVs, expected to produce approximately 5,150 lots. Of the lots to be produced by the JVs, approximately 4,800 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 to one of the JVs as of December 31, 2024.

Land Under Development

We owned land with a carrying value of approximately $65,400 that we expect to be developed into approximately 2,600 finished lots.

See Notes 3, 4 and 5 to the consolidated financial statements included herein for additional information regarding LPAs, JVs and land under development, respectively.

Raw Land Purchase Agreements

In addition to the lots we currently control as discussed above, we have certain properties under contract with land owners that are expected to yield approximately 35,900 lots. Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with cash deposits totaling approximately $20,400 as of December 31, 2024, of which approximately $8,400 is refundable if we do not perform under the contract. 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.

Key Financial Results

Our consolidated revenues for the year ended December 31, 2024 totaled $10,524,479, an increase of 11% from $9,518,202 in 2023. Our net income for 2024 was $1,681,928, or $506.69 per diluted share, increases of 6% and 9% compared to 2023 net income and diluted earnings per share, respectively. Our homebuilding gross profit margin percentage was 23.7% in 2024 compared to 24.3% in 2023. Settlements for the year ended December 31, 2024 totaled 22,836 units, an increase of 11% from 2023. New orders, net of cancellations (“New Orders”) during 2024 were 22,560, an increase of 4% from 2023 while our average New Order sales price increased 2% to $457.7 in 2024. Our backlog of homes sold but not yet settled with the customer as of December 31, 2024 decreased on a unit basis by 3% to 9,953 units and increased on a dollar basis by 1% to $4,791,870 when compared to December 31, 2023. Income before tax from our mortgage banking segment totaled $154,935 in 2024, an increase of 17% when compared to $132,793 in 2023.

Homebuilding Operations

The following table summarizes the results of our consolidated homebuilding operations and certain operating activity for each of the last three years:

Year Ended December 31,

Financial data:

Gross profit margin percentage 23.7 % 24.3 % 25.8 %

Operating data:

New order cancellation rate 14.2 % 12.8 % 14.2 %

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Consolidated Homebuilding

Homebuilding revenues increased 11% in 2024 compared to 2023, as a result of an 11% increase in the number of units settled. The increase in the number of units settled was primarily attributable to a 12% higher backlog unit balance entering 2024 compared to the same period in 2023, coupled with a higher backlog turnover rate. The gross profit margin percentage in 2024 decreased to 23.7% from 24.3% in 2023. Gross profit margins were negatively impacted by higher lot costs and closing cost assistance.

New Orders and the average sales price of New Orders increased 4% and 2%, respectively, in 2024 when compared to 2023, despite the number of active communities remaining flat year over year. New Orders were higher year over year due to improved demand in the first three quarters of 2024 compared to the same period in 2023, attributable to a limited supply of homes in the resale market and stabilized mortgage interest rates. However, demand began to slow in the fourth quarter, primarily in our South East segment as affordability was negatively impacted in part by rising mortgage interest rates and by an increase in the supply of homes in the resale and new home markets within certain markets in our South East segment. The increase in the average sales price of New Orders is primarily attributable to a relative shift to higher priced markets and communities in certain of our reportable segments as discussed in the respective segments below.

Selling, general and administrative ("SG&A") expenses in 2024 increased by approximately $9,200 compared to 2023, and as a percentage of revenue decreased to 5.8% in 2024 from 6.3% in 2023. The increase in SG&A expense was due primarily to an increase of approximately $21,000 in personnel costs attributable to an increase in headcount year over year. Additionally, sales and marketing expenses were approximately $9,600 higher year over year due to an increase in model home related expenses. These increases were partially offset by a $24,000 decrease in equity-based compensation year over year due primarily to the non-qualified stock options to purchase shares of NVR common stock ("Options") and restricted stock units ("RSUs") issued as part of the 2018 four-year block grant being fully vested as of December 31, 2023.

Our backlog represents homes sold but not yet settled with our customers. As of December 31, 2024, our backlog decreased on a unit basis by 3% to 9,953 units, but increased on a dollar basis by 1% to $4,791,870 when compared to 10,229 units and $4,756,926, respectively, as of December 31, 2023. The decrease in backlog units was attributable to a higher backlog turnover rate year over year as the number of units settled exceeded New Orders year over year. Backlog dollars were higher primarily due to a 4% increase in the average price of units in backlog year over year, primarily attributable to a relative shift to higher priced markets and communities in certain of our reportable segments.

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 beginning backlog for the current period. Calculated as the total of all cancellations during the period as a percentage of gross sales during the period, our cancellation rate was approximately 14%, 13% and 14% in 2024, 2023, and 2022, respectively. During the four quarters of each of 2024, 2023 and 2022, approximately 5% in 2024, 4% in 2023 and 4% in 2022, of a reporting quarter’s opening backlog 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, 2024 backlog during 2025. See “Risk Factors” in Item 1A of this Form 10-K.

The rate at which we turn over our backlog is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material availability and other external factors over which we do not exercise control.

Reportable Homebuilding Segments

Homebuilding segment profit includes all revenues and income generated from the sale of homes, less the cost of homes sold, SG&A expenses, and a corporate capital allocation charge determined by corporate management. The corporate capital allocation charge eliminates in consolidation and is based on the segment’s average net assets employed. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment is providing the desired rate of return after covering our cost of capital.

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, 2024 and 2023 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 and $7,700 as of December 31, 2024 and 2023, respectively, of letters of credit issued as deposits in lieu of cash.

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The following tables summarize certain homebuilding operating activity by reportable segment for each of the last three years:

Selected Segment Financial Data:

Year Ended December 31,

Revenues:

Year Ended December 31,

Gross profit margin:

Year Ended December 31,

Gross profit margin percentage:

Year Ended December 31,

Segment profit:

Segment Operating Activity:

Year Ended December 31,

Units AveragePrice Units AveragePrice Units AveragePrice

New orders, net of cancellations:

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Year Ended December 31,

Units AveragePrice Units AveragePrice Units AveragePrice

Settlements:

Year Ended December 31,

Units AveragePrice Units AveragePrice Units AveragePrice

Backlog:

Operating Data:

Year Ended December 31,

New order cancellation rate:

Year Ended December 31,

Average active communities:

Homebuilding Inventory:

As of December 31,

Sold inventory:

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As of December 31,

Unsold lots and housing units inventory:

(1)Total segment inventory differs from consolidated inventory due to certain consolidation adjustments necessary 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. These consolidation adjustments are not allocated to our operating segments.

Lots Controlled and Land Deposits:

As of December 31,

Total lots controlled:

As of December 31,

Contract land deposits, net:

Mid Atlantic

The Mid Atlantic segment had an approximate $70,900, or 10%, increase in segment profit in 2024 compared to 2023, driven by an increase in segment revenues of approximately $233,800, or 6%, coupled with an increase in gross profit margins. Segment revenues increased due to a 6% increase in the number of units settled which was primarily attributable to an 11% higher backlog unit balance entering 2024 compared to backlog entering 2023. The Mid Atlantic segment’s gross profit margin percentage increased to 25.0% in 2024 from 24.4% in 2023. Gross profit margins were favorably impacted primarily by the improved leveraging of certain operating costs attributable to the increase in settlement activity, offset partially by higher lot costs and closing cost assistance year over year.

Segment New Orders increased 1% while the average sales price of New Orders increased 2% in 2024 compared to 2023. New Orders were slightly higher despite a 12% 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.

North East

The North East segment had an approximate $48,200, or 29%, increase in segment profit in 2024 compared to 2023. Segment profits were favorably impacted by an increase in segment revenue of approximately $217,600, or 23%. Segment revenues were favorably impacted by a 13% increase in the number of units settled and an 8% increase in the average settlement price year over year. The increase in settlements was primarily attributable to a 16% higher backlog unit balance entering 2024 compared to backlog entering 2023. The increase in the average settlement price was primarily attributable to a 9% higher average sales price of units in backlog entering 2024 compared to backlog entering 2023. The segment’s gross profit margin percentage remained relatively flat.

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Segment New Orders and the average sales price of New Orders increased 6% and 9%, respectively, in 2024 compared to 2023. Despite a 13% decrease in the average number of active communities year over year, New Orders were favorably impacted by a 22% 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.

Mid East

The Mid East segment had an approximate $33,000, or 13%, increase in segment profit in 2024 compared to 2023. The increase in segment profit was driven by an increase in segment revenues of approximately $138,200, or 8%, coupled with an increase in gross profit margins year over year. Segment revenues increased due to a 4% increase in settlements year over year, coupled with a 3% increase in the average settlement price. The increase in settlements resulted from a 7% higher backlog unit balance entering 2024 compared to backlog entering 2023, coupled with a higher backlog turnover rate year over year. The increase in the average settlement price is attributable to a 2% higher average price of units in backlog entering 2024 compared to backlog entering 2023, coupled with a 5% higher average price of New Orders for the first six months of 2024 compared to the same period of 2023. The segment’s gross profit margin percentage increased to 22.3% in 2024 from 21.6% in 2023. Gross profit margin was favorably impacted by the improved leveraging of certain operating costs as settlement activity increased, offset partially by higher lot costs and closing cost assistance year over year.

Segment New Orders and the average sales price of New Orders each increased 3% in 2024 compared to 2023. Despite an 8% 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 primarily attributable to a relative shift to higher priced communities within certain markets year over year.

South East

The South East segment had an approximate $52,400, or 12%, decrease in segment profit in 2024 compared to 2023 due primarily to a decrease in gross profit margins to 22.3% in 2024 from 25.7% in 2023. Gross profit margins were negatively impacted primarily by higher lot costs and closing cost assistance. Segment revenues in 2024 were higher by approximately $388,200, or 16%, due to a 19% increase in the number of units settled, offset by a 3% decrease in the average price of units settled year over year. The increase in settlements was attributable primarily to a 15% higher backlog balance entering 2024 compared to the backlog entering 2023, coupled with a higher backlog turnover rate year over year. The decrease in the average settlement price was attributable primarily to a 7% lower average sales price of units in backlog entering 2024 compared to backlog entering 2023.

Segment New Orders increased 7% while the average sales price of New Orders remained flat year over year. The increase in New Orders was primarily attributable to a 28% 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. As noted in the Consolidated Homebuilding section above, sales demand remained favorable through the first three quarters of 2024 compared 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 was negatively impacted in part by rising mortgage interest rates and by an increase in the supply of homes in the resale and new home markets within certain markets in the segment.

Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations

In addition to the corporate capital allocation and contract land deposit impairments discussed 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, and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

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Year Ended December 31,

Homebuilding consolidated gross profit:

Year Ended December 31,

Homebuilding consolidated profit before taxes:

Reconciling items:

(1)This item represents changes to the contract land deposit impairment allowance, which are not allocated to our reportable segments. See further discussion of contract land deposit impairment charges in Note 3 in the accompanying consolidated financial statements.

(2)The decrease in equity-based compensation expense in 2024 was primarily attributable to the Options and RSUs issued as part of the 2018 four-year block grant being fully vested as of December 31, 2023. The increase in 2023 from 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See further discussion of equity-based compensation in Note 11 in the accompanying consolidated financial statements.

(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 is as follows for the years presented:

Year Ended December 31,

Corporate capital allocation charge:

(4) The consolidation adjustments and other in each period are primarily attributable to changes in units under construction year over year, and any significant changes in material costs, primarily lumber. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to

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homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled.

Mortgage Banking Segment

We conduct our mortgage banking activity through NVRM, a wholly owned subsidiary. NVRM focuses exclusively on serving the homebuilding segment customer base. The following table summarizes the results of our mortgage banking operations and certain statistical data for each of the last three years:

Year Ended December 31,

Loan closing volume:

Loan volume mix:

Adjustable rate mortgages 2 % 2 % 8 %

Fixed-rate mortgages 98 % 98 % 92 %

Operating profit:

Mortgage banking fees:

Loan closing volume in 2024 increased by approximately $523,900, or 9%, from 2023. The increase was primarily attributable to a 9% increase in the number of loans closed, resulting from an 11% increase in the homebuilding segment’s number of homes settled in 2024 as compared to 2023.

Segment profit in 2024 increased by approximately $20,900, or 15%, from 2023, which was primarily attributable to an increase in mortgage banking fees, partially offset by an increase in general and administrative expenses. Mortgage banking fees increased by approximately $28,500, or 14%, due to higher gains on sales of loans. General and administrative expenses increased by $11,100, or 13%, which was the result of increased personnel costs.

Mortgage Banking – Other

We sell all of the loans we originate into the secondary mortgage market. To the extent we underwrite our originated loans to the standards and specifications of the ultimate investor, we have no further financial obligations from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur. Those underwriting standards are typically equal to or more stringent than the underwriting standards required by FNMA, GNMA, FHLMC, VA and FHA. Because we sell all of our loans (a small subset of such loans are serviced for a short period of time prior to sale), there is often a substantial delay between the time that a loan goes into default and the time that the investor requests us to reimburse them for losses incurred because of the default. We believe that all of the loans that we originate are underwritten to the standards and specifications of the ultimate investor to whom we sell our originated loans. We employ a quality control department to ensure that our underwriting controls are effective, and further assess the underwriting function as part of our assessment of internal controls over financial reporting.

We maintain a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure from the loans that we have originated and sold. As of December 31, 2024 and 2023, we had repurchase reserves of approximately $18,700 and $18,600, respectively.

NVRM is dependent on our homebuilding operation’s customers for business. If new orders and selling prices of the homebuilding segment decline, NVRM’s operations will also be adversely affected. In addition, NVRM’s operating results may be

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adversely affected in future periods due to tightening and volatility of the credit markets, changes in investor funding times, increased regulation of mortgage lending practices and increased competition in the mortgage market.

Seasonality

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.

Effective Tax Rate

Our consolidated effective tax rates in 2024 and 2023 were 20.50% and 17.46%, respectively. The increase in the effective tax rate is primarily attributable to a lower income tax benefit recognized for excess tax benefits from stock option exercises, which totaled approximately $95,100 and $153,600 for 2024 and 2023, respectively.

We expect continued tax rate volatility in future years attributable to the recognition of excess tax benefits from equity plan activity and distributions from the deferred compensation plans. Given the limited number of participants in our deferred compensation plan, the retirement of a participant could result in a significant distribution of the rabbi trust shares and corresponding tax deduction for the Company.

Recent Accounting Pronouncements Pending Adoption

See Note 1 to the accompanying consolidated financial statements for discussion of recently issued accounting pronouncements applicable to us.

Liquidity and Capital Resources

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 December 31, 2024, we had a strong liquidity position with approximately $2,500,000 in cash and cash equivalents, approximately $285,000 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility. We believe that our current cash holdings and our anticipated cash flows generated by operating activities, together with the amounts under our revolving credit facility and revolving mortgage repurchase facility will be sufficient to fund our anticipated operations for at least the next twelve months and beyond.

Material Cash Requirements

We believe that our current cash holdings, cash generated from operations, and cash available under our short-term unsecured credit agreement and revolving mortgage repurchase facility, as well as the public debt and equity markets, will be sufficient to satisfy both our short-term and long-term cash requirements for working capital to support our daily operations and meet commitments under our contractual obligations with third parties. Our material contractual obligations primarily consist of the following:

(i) Payments due to service our debt and interest on that debt. Our current outstanding Senior Notes total $900,000 and mature in May 2030. Future interest payments on our current outstanding Senior Notes total approximately $145,050, with $27,000 due within the next twelve months.

(ii) Payment obligations totaling approximately $584,500 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and we exercise our option to acquire finished lots under those LPAs. We expect to make the majority of these payments within the next three years.

(iii) Obligations under operating and finance leases related primarily to office space and our production facilities. See Note 12 of this Form 10-K for additional discussion of our leases.

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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 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Item 5 of this Form 10-K for disclosure of amounts repurchased during the fourth quarter of 2024. For the year ended December 31, 2024, we repurchased 256,871 shares of our common stock at an aggregate purchase price of $2,057,677. As of December 31, 2024, we had approximately $868,200 available under Board approved repurchase authorizations.

Capital Resources

Senior Notes

As of December 31, 2024, we had a total of $900,000 in outstanding Senior Notes which mature in May 2030. The Senior Notes are senior unsecured obligations and rank equally in right of payment with any of our existing and future unsecured senior indebtedness, will rank senior in right of payment to any of our future indebtedness that is by its terms expressly subordinated to the Senior Notes and will be effectively subordinated to any of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The indenture governing the Senior Notes does not contain any financial covenants; however, it does contain, among other items, and subject to certain exceptions, covenants that restrict our ability to create, incur, assume or guarantee secured debt, enter into sale and leaseback transactions and conditions related to mergers and/or the sale of assets. We were in compliance with all covenants under the Senior Notes as of December 31, 2024.

Credit Agreement

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 (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 for a $100,000 sublimit for the issuance of letters of credit of which there was approximately $14,600 outstanding as of December 31, 2024. The Credit Agreement termination date is February 12, 2026. There were no borrowings outstanding under the Credit Agreement as of December 31, 2024.

Repurchase Agreement

Our mortgage banking subsidiary, NVRM, has an unsecured revolving mortgage repurchase agreement (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 borrowing capacity up to $150,000, subject to certain sublimits. The Repurchase Agreement expires on July 14, 2025. As of December 31, 2024, there was no debt outstanding under the Repurchase Agreement and there were no borrowing base limitations.

See Note 8 of this Form 10-K for additional disclosures regarding our Senior Notes, Credit Agreement and Repurchase Agreement.

Cash Flows

For the year ended December 31, 2024, cash, restricted cash and cash equivalents decreased by $550,777. Net cash provided by operating activities was $1,374,462, due primarily to cash provided by earnings in 2024. Cash was primarily used to fund the increase in contract land deposits of $157,291 attributable to an increase in the number of lots under control as of December 31, 2024 compared to December 31, 2023, 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.

Net cash used in investing activities in 2024 was $26,553. Cash was used primarily for purchases of property, plant and equipment of $29,212.

Net cash used by financing activities in 2024 was $1,898,686. Cash was used primarily to repurchase 256,871 shares of our common stock at an aggregate purchase price of $2,057,677 under our ongoing common stock repurchase program, discussed above. Cash was provided from stock option exercise proceeds totaling $161,625.

For the year ended December 31, 2023, cash, restricted cash and cash equivalents increased by $640,926. Net cash provided by operating activities was $1,497,993, due primarily to cash provided by earnings in 2023 and net cash proceeds of $46,136 from mortgage loan activity. Cash was primarily used to fund the increase in inventory of $161,875 attributable to an increase in units under construction as of December 31, 2023 compared to December 31, 2022.

Net cash used in investing activities in 2023 was $24,100. Cash was used primarily for purchases of property, plant and equipment of $24,877.

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Net cash used by financing activities in 2023 was $832,967. Cash was used primarily to repurchase 181,499 shares of our common stock at an aggregate purchase price of $1,081,815 under our ongoing common stock repurchase program, discussed above. Cash was provided from stock option exercise proceeds totaling $250,509.

As of December 31, 2024 and 2023, restricted cash totaled $53,692 and $52,550, respectively. Restricted cash was attributable to customer deposits for certain home sales and cash collected from customers for loans in process and closed mortgage loans held for sale.

Critical Accounting Policies and Estimates

General

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 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.

Homebuilding Inventory

The carrying value of inventory is stated at the lower of cost or market value. Cost of lots and completed and uncompleted housing units represent the accumulated actual cost of the units. Field construction supervisors’ salaries and related direct overhead expenses are included in inventory costs. Interest costs are not capitalized into inventory, with the exception of land under development and joint venture investments, as applicable. Upon settlement, the cost of the unit is expensed on a specific identification basis. Cost of building materials is determined on a first-in, first-out basis.

Sold inventory is evaluated for impairment based on the contractual sales price compared to the total estimated cost to construct. Unsold inventory is evaluated for impairment by analyzing recent comparable sales prices within the applicable community compared to the costs incurred to date plus the expected costs to complete. Any calculated impairments are recorded immediately in cost of sales.

Contract Land Deposits

We purchase finished lots under LPAs that require deposits that may be forfeited if we fail to perform under the contract. The deposits are in the form of cash or letters of credit in varying amounts and represent a percentage of the aggregate purchase price of the finished lots.

We maintain an allowance for losses on contract land deposits that reflects our judgment of the present loss exposure in the existing contract land deposit portfolio at the end of the reporting period. To analyze contract land deposit impairments, we conduct a loss contingency analysis each quarter. In addition to considering market and economic conditions, we assess contract land deposit impairments on a community-by-community basis pursuant to the purchase contract terms, analyzing quantitative and qualitative information including, as applicable, current sales absorption levels, recent sales’ profit margin, the dollar differential between the contractual purchase price and the current market price for lots, a developer’s performance, a developer’s financial ability or willingness to reduce lot prices to current market prices, if necessary, and the contract’s default status by either us or the developer along with an analysis of the expected outcome of any such default.

Our analysis is focused on whether we can sell houses at an acceptable profit margin and sales pace in a particular community in the current market. Because we do not own the finished lots on which we had placed a contract land deposit, if the above analysis leads to a determination that we cannot sell homes at an acceptable profit margin and sales pace at the current contractual lot price, we then determine whether we will elect to default under the contract, forfeit our deposit and terminate the contract, or whether we will attempt to restructure the LPA, which may require us to forfeit the deposit to obtain contract concessions from a developer. We also assess whether an impairment is present due to collectability issues resulting from a developer’s non-performance because of financial or other conditions.

Although we consider the allowance for losses on contract land deposits reflected on the December 31, 2024 consolidated balance sheet to be adequate (see Note 1 to the accompanying consolidated financial statements included herein), there can be no assurance that this allowance will prove to be adequate over time to cover losses due to unanticipated adverse changes in the economy or other events adversely affecting specific markets or the homebuilding industry.

Warranty/Product Liability Reserves

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

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subcontractors’ participation in sharing the cost of corrective action, consultations with third 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, 2024 consolidated balance sheet to be adequate (see Note 13 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.

Equity-Based Compensation

We recognize equity-based compensation expense within our income statement for all share-based payment arrangements, which include Options and RSUs. Compensation expense is based on the grant-date fair value of the Options and RSUs granted, and is recognized on a straight-line basis over the requisite service period for the entire award (from the date of grant through the period of the last separately vesting portion of the grant). Options and RSUs which are subject to a performance condition are treated as a separate award from the “service-only” Options and RSUs, and compensation expense is recognized when it becomes probable that the stated performance target will be achieved. We calculate the fair value of our Options, which are not publicly traded, using the Black-Scholes option-pricing model. The grant date fair value of the RSUs is the closing price of our common stock on the day immediately preceding the date of grant. The reversal of compensation expense previously recognized for grants forfeited is recorded in the period in which the forfeiture occurs.

As noted above, we calculate the fair value of our Options using the Black-Scholes option-pricing model. While the Black-Scholes model is a widely accepted method to calculate the fair value of options, its results are dependent on input variables, two of which, expected term and expected volatility, are significantly dependent on management’s judgment. We have concluded that our historical exercise experience is the best estimate of future exercise patterns to determine an Option’s expected term. To estimate expected volatility, we analyze the historical volatility of our common stock over a period equal to the Option’s expected term. Changes in management’s judgment of the expected term and the expected volatility could have a material effect on the grant-date fair value calculated and expensed within the income statement.

In addition, when recognizing equity-based compensation cost related to “performance condition” Option and RSU grants, we are required to make a determination as to whether the performance conditions will be met prior to the completion of the actual performance period. The performance metric is based on our return on capital performance during a specified three year period based on the date of Option grant. While we currently believe that this performance condition will be satisfied at the target level and are recognizing compensation expense related to such Options and RSUs accordingly, our future expected activity levels could cause us to make a different determination, resulting in a change to the compensation expense to be recognized related to performance condition Option and RSU grants that would otherwise have been recognized to date.

Although we believe that the compensation costs recognized in 2024 are representative of the cumulative ratable amortization of the grant-date fair value of unvested Options and RSUs outstanding, changes to the estimated input values such as expected term and expected volatility and changes to the determination of whether performance condition grants will vest, could produce widely different expense valuations and recognition.

Mortgage Repurchase Reserve

We originate several different loan products for our customers to finance the purchase of their home. We sell all of the loans we originate into the secondary mortgage market, typically on a servicing released basis and within 30 days from closing. All of the loans that we originate are underwritten to the standards and specifications of the ultimate investor. Those underwriting standards are typically equal to or more stringent than the underwriting standards required by FNMA, GNMA, FHLMC, VA and FHA. To the extent we underwrite our originated loans to those standards, we bear no increased concentration of credit risk from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur. We employ a quality control department to ensure that our underwriting controls are effectively operating, and further assess the underwriting function as part of our assessment of internal controls over financial reporting. We maintain a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure in the loans that we have originated and sold. The reserve is calculated based on an analysis of historical experience and exposure. Although we consider the mortgage repurchase reserve reflected on the December 31, 2024 consolidated balance sheet to be adequate (see Note 15 to the accompanying consolidated financial statements included herein), there can be no assurance that this reserve will prove to be adequate over time to cover losses due to unanticipated changes to the assumptions used to estimate the mortgage repurchase reserve.

Impact of Inflation, Changing Prices and Economic Conditions

See “Risk Factors” included in Item 1A of this Form 10-K for a description of the impact of inflation, changing prices and economic conditions on our business and our financial results. See also the discussion of the current business environment in the Business Environment and Current Outlook section above.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

(dollars in thousands)

Market risk is the risk of loss arising from adverse changes in market prices and interest rates. Our market risk arises from interest rate risk inherent in our financial instruments and debt obligations. Interest rate risk results from the possibility that changes in interest rates will cause unfavorable changes in net income or in the value of interest rate-sensitive assets, liabilities and commitments. Lower interest rates tend to increase demand for mortgage loans for home purchasers, while higher interest rates make it more difficult for potential borrowers to purchase residential properties and to qualify for mortgage loans. We have no market rate sensitive instruments held for speculative or trading purposes.

We are exposed to interest rate risk as it relates to our fixed rate debt, primarily our Senior Notes and our variable rate credit facility and loan repurchase facility. Changes to interest rates generally affect the fair value of fixed-rate debt instruments, but not earnings or cash flows. For variable rate debt, interest rate changes generally will not affect the fair value of the variable debt instruments but will affect earnings and cash flow. As of December 31, 2024, there was no debt outstanding under our credit facility or loan repurchase facility. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8 to the accompanying consolidated financial statements included herein for further discussion of these debt instruments.

Our mortgage banking segment is exposed to interest rate risk as it relates to its lending activities, including originating mortgage loans and providing rate lock commitments to borrowers. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, we enter into optional or mandatory delivery forward sales contracts to sell whole loans and mortgage-backed securities to investors. The forward sales contracts lock-in a range of interest rates and prices for the sale of loans similar to the specific rate lock commitments. We do not engage in speculative derivative activities. All of the mortgage banking segment’s loan portfolio is held for sale and subject to forward sale commitments. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 14 to the accompanying consolidated financial statements included herein for further discussion of these items.

The following table represents the contractual balances of our on-balance sheet financial instruments at the expected maturity dates, as well as the fair values of those on-balance sheet financial instruments as of December 31, 2024. The expected maturity categories take into consideration the actual and anticipated amortization of principal and do not take into consideration the reinvestment of cash or the refinancing of existing indebtedness. Because we sell all of the mortgage loans we originate into the secondary markets, we have made the assumption that the portfolio of mortgage loans held for sale will mature in the first year.

Maturities (000's)

Mortgage banking segment

Interest rate sensitive assets:

Average interest rate 6.2 % — — — — — 6.2 %

Other:

Forward loan commitments (a) $ 9,196 — — — — — $ 9,196 $ 9,196

Homebuilding segment

Interest rate sensitive assets:

Average interest rate 4.4 % — — — — — 4.4 %

Interest rate sensitive liabilities:

Average interest rate — % — — — — 3.0 % 3.0 %

(a)Represents the fair value recorded pursuant to ASC 815, Derivatives and Hedging.

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Item 8. Financial Statements and Supplementary Data.

The financial statements listed in Item 15 are filed as part of this report and are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”).

Based on that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of these disclosure controls and procedures as of December 31, 2024 were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2024. There have been no changes in our internal control over financial reporting identified in connection with the evaluation referred to above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

Item 9B. Other Information.

During the three months ended December 31, 2024, none of our directors or officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" as such terms are defined under Item 408 of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

Our executive officers are:

Name Age Title

Paul C. Saville 69 Executive Chairman of the Board

Eugene J. Bredow 55 President and Chief Executive Officer

Matthew B. Kelpy 51 Vice President and Chief Accounting Officer

The remaining information required by this item will be included under the captions "Proposal No.1 - Election of Directors", "Executive Summary" within "Compensation Discussion and Analysis" and "Corporate Governance Principles and Board Matters" in our definitive Proxy Statement for the 2025 Annual Meeting of Shareholders ("2025 Proxy Statement") and is incorporated herein by reference. Our 2025 Proxy Statement is expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2025.

Item 11. Executive Compensation.

The information required by this item will be included under the caption "Compensation Discussion and Analysis" in our 2025 Proxy Statement and is incorporated herein by reference. In addition, the information from a portion of the 2025 Proxy Statement under "Report of the Compensation Committee" is incorporated herein by reference and furnished in this Form 10-K and shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933. Our 2025 Proxy Statement is expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2025.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Equity Compensation Plan Information

The following table summarizes our equity compensation plans as of December 31, 2024:

Equity compensation plans not approved by security holders — $ — —

(1)This category includes the restricted share units (“RSUs”) authorized to be issued under the 2010 and 2018 Equity Incentive Plans. As of December 31, 2024, there were 23,047 RSUs outstanding. Of the shares remaining available for future issuance under the shareholder approved plans, up to a total of 16,782 may be issued as RSUs. The weighted-average exercise price of outstanding options under security holder approved plans was $3,815.26.

The remaining information required by this item will be included under the caption "Security Ownership of Certain Beneficial Owners and Management" in our 2025 Proxy Statement and is incorporated herein by reference. Our 2025 Proxy Statement is expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2025.

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will be included under the caption "Corporate Governance Principles and Board Matters" in our 2025 Proxy Statement and is incorporated herein by reference. Our 2025 Proxy Statement is expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2025.

Item 14. Principal Accountant Fees and Services.

The information required by this item will be included under the caption "Proposal No. 2 - Ratification of Appointment of Independent Auditor" in our 2025 Proxy Statement and is incorporated herein by reference. Our 2025 Proxy Statement is expected to be filed with the Securities and Exchange Commission on or prior to April 30, 2025.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

The following documents are filed as part of this report:

1. Financial Statements

NVR, Inc. - Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm (KPMG LLP, McLean, VA, Auditor Firm ID: 185)

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Exhibits

Incorporated by Reference

Exhibit Number Exhibit Description Form FileNumber ExhibitNumber Filing Date

3.1 Restated Articles of Incorporation of NVR, Inc. 10-K 3.1 2/25/2011

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Incorporated by Reference

Exhibit Number Exhibit Description Form FileNumber ExhibitNumber Filing Date

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Incorporated by Reference

Exhibit Number Exhibit Description Form FileNumber ExhibitNumber Filing Date

19 Insider Trading Compliance Policy. Filed herewith.

21 NVR, Inc. Subsidiaries. Filed herewith.

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Incorporated by Reference

Exhibit Number Exhibit Description Form FileNumber ExhibitNumber Filing Date

97* Compensation Recovery Policy. Filed herewith.

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* Exhibit is a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NVR, Inc.

February 12, 2025 By: /s/ Eugene J. Bredow

Eugene J. Bredow

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Paul C. Saville Executive Chairman February 12, 2025

Paul C. Saville

/s/ C. E. Andrews Director February 12, 2025

C. E. Andrews

/s/ Sallie B. Bailey Director February 12, 2025

Sallie B. Bailey

/s/ Thomas D. Eckert Director February 12, 2025

Thomas D. Eckert

/s/ Alfred E. Festa Director February 12, 2025

Alfred E. Festa

/s/ Alexandra A. Jung Director February 12, 2025

Alexandra A. Jung

/s/ Mel Martinez Director February 12, 2025

Mel Martinez

/s/ David A. Preiser Director February 12, 2025

David A. Preiser

/s/ W. Grady Rosier Director February 12, 2025

W. Grady Rosier

/s/ Susan Williamson Ross Director February 12, 2025

Susan Williamson Ross

/s/ Eugene J. Bredow Principal Executive Officer February 12, 2025

Eugene J. Bredow

/s/ Daniel D. Malzahn Principal Financial Officer February 12, 2025

Daniel D. Malzahn

/s/ Matthew B. Kelpy Principal Accounting Officer February 12, 2025

Matthew B. Kelpy

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

NVR, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of NVR, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 12, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the allowance for losses on contract land deposits

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company’s allowance for losses on contract land deposits (“lot deposit allowance”) was $58,597,000 recorded against total contract land deposit assets of $785,272,000 as of December 31, 2024. The Company estimated the lot deposit allowance using a loss contingency analysis that assesses a combination of quantitative and qualitative information for each individual deposit associated with a community. As the Company does not own the lots on which they have placed a deposit, the loss contingency analysis assesses contracts on a community-by-community basis and records an estimated lot deposit allowance for communities which may result in forfeiture of the lot deposit. In estimating the lot deposit allowance, the Company evaluates whether it can sell houses at an acceptable profit margin and sales pace, and considers market and economic conditions.

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We identified the assessment of the lot deposit allowance as a critical audit matter. Such assessment involved measurement uncertainty that required subjective auditor judgment. Specifically, the assessment encompassed the evaluation of the loss contingency analysis, inclusive of (1) the method used to estimate the allowance assigned to a lot deposit, (2) the quantitative data metrics, as applicable, of profit margins and sales volumes, and (3) the qualitative factors, as applicable, of developer performance and community specific factors. In addition, it was challenging to obtain objective audit evidence, and evaluate the sufficiency of that audit evidence.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over (1) the development and approval of the loss contingency analysis, (2) the determination of the quantitative data metrics and qualitative factors used in the analysis, and (3) the preparation and measurement of the lot deposit allowance estimate. We evaluated the process to develop the quantitative and qualitative information used to assess the lot deposit allowance rates. Specifically, we assessed the consistency of data used in the process with its source, evaluated the reliability of data sources, and considered if all relevant data points were used in the analysis. We tested the lot deposit allowance balance by:

•assessing the recoverability of a sample of individual lot deposits and comparing our results to those of the Company

•analyzing the timing of changes for a sample of lot deposits for consistency with changes in quantitative or qualitative data

•evaluating the consistency of the loss contingency analysis by comparing the treatment of similar lot deposits and community positions between the current and prior years

•comparing prior lot deposit allowance estimates to subsequent lot deposit forfeiture activity.

We also evaluated the collective results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the Company’s lot deposit allowance.

/s/ KPMG LLP

We have served as the Company's auditor since 1987.

McLean, Virginia

February 12, 2025

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

NVR, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited NVR, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 12, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

McLean, Virginia

February 12, 2025

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NVR, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

ASSETS

Homebuilding:

Inventory:

Mortgage Banking:

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Balance Sheets (Continued)

(in thousands, except share and per share data)

LIABILITIES AND SHAREHOLDERS' EQUITY

Homebuilding:

Mortgage Banking:

Commitments and contingencies

Shareholders' equity:

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Statements of Income

(in thousands, except per share data)

Year Ended December 31,

Homebuilding:

Mortgage Banking:

Diluted weighted average shares outstanding 3,319 3,435 3,509

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Statements of Shareholders’ Equity

(in thousands)

Purchase of common stock for treasury — — — (1,500,358) — — (1,500,358)

Proceeds from stock options exercised — 196,717 — — — — 196,717

Purchase of common stock for treasury — — — (1,083,751) — — (1,083,751)

Proceeds from stock options exercised — 250,509 — — — — 250,509

Purchase of common stock for treasury — — — (2,072,131) — — (2,072,131)

Proceeds from stock options exercised — 161,625 — — — — 161,625

See notes to consolidated financial statements.

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NVR, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Distribution of earnings from unconsolidated joint ventures 1,500 2,000 9,000

Net change in assets and liabilities:

Cash flows from investing activities:

Distribution of capital from unconsolidated joint ventures 2,715 180 —

Proceeds from the sale of property, plant and equipment 3,044 2,373 732

Cash flows from financing activities:

Redemption of senior notes — — (600,000)

Principal payments on finance lease liabilities (2,634) (1,661) (1,495)

Supplemental disclosures of cash flow information:

See notes to consolidated financial statements.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of NVR, Inc. and its subsidiaries (“NVR”, the “Company”, "we", "us", or "our") and certain other entities in which the Company is deemed to be the primary beneficiary (see Notes 3 and 4 herein for additional information). All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management 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. Management continually evaluates the estimates used to prepare the consolidated financial statements and updates those estimates as necessary. In general, our estimates are based on historical experience, on information from third 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.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with maturities at acquisition of three months or less.

Restricted Cash

Homebuilding restricted cash is attributable to customer deposits for certain home sales. Mortgage banking restricted cash includes amounts collected from customers for loans in process and closed mortgage loans held for sale.

Homebuilding Inventory

The carrying value of inventory is stated at the lower of cost or market value. Cost of lots and completed and uncompleted housing units represent the accumulated actual cost of the units. Field construction supervisors’ salaries and related direct overhead expenses are included in inventory costs. Interest costs are not capitalized into inventory, with the exception of land under development and joint venture investments, as applicable (see below). Upon settlement, the cost of the unit is expensed on a specific identification basis. Cost of building materials is determined on a first-in, first-out basis.

Contract Land Deposits

We purchase finished lots under fixed price lot purchase agreements (“LPAs”) that require deposits that may be forfeited if we fail to perform under the contract. The deposits are in the form of cash or letters of credit in varying amounts and represent a percentage of the aggregate purchase price of the finished lots.

Our analysis is focused on whether we can sell houses at an acceptable profit margin and sales pace in a particular community in the current market. Because we do not own the finished lots on which we have placed a contract land deposit, if the above analysis leads to a determination that we cannot sell homes at an acceptable profit margin and sales pace at the current contractual lot price, we then determine whether we will elect to default under the contract, forfeit the deposit and terminate the contract, or whether we will attempt to restructure the LPA, which may require us to forfeit the deposit to obtain contract concessions from a developer. We also assess whether impairment is present due to collectability issues resulting from a developer’s non-performance because of financial or other conditions.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

For the year ended December 31, 2024, we incurred a net pre-tax charge of approximately $7,200 related to the impairment of contract land deposits. For the year ended December 31, 2023, we recognized a net pre-tax recovery of approximately $2,900 of contract land deposits previously determined to be unrecoverable. For the year ended December 31, 2022, we incurred a net pre-tax charge of approximately $27,500 related to the impairment of contract land deposits. The contract land deposit assets on the accompanying consolidated balance sheets are shown net of the allowance for losses of $58,597 and $53,397 as of December 31, 2024 and 2023, respectively.

Land Under Development

On a limited basis, we directly acquire raw parcels of land already zoned for their intended use to develop into finished lots. Land under development includes the land acquisition costs, direct improvement costs, capitalized interest, where applicable, and real estate taxes.

Land under development, including the land under development held by our unconsolidated joint ventures and the related joint venture investments, is reviewed for potential write-downs when impairment indicators are present. In addition to considering market and economic conditions, we assess land under development impairments on a community-by-community basis, analyzing, as applicable, current sales absorption levels, recent sales’ profit margin, and the dollar differential between the projected fully-developed cost of the lots and the current market price for lots. If indicators of impairment are present for a community, we perform an analysis to determine if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts, and if so, impairment charges are required to be recorded in an amount by which the carrying amount of the assets exceeds the fair value of such assets. Our determination of fair value is primarily based on discounting the estimated future cash flows at a rate commensurate with the inherent risks associated with the assets and related estimated cash flow streams. See Notes 4 and 5 for further discussion of joint venture investments and land under development, respectively.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is based on the estimated useful lives of the assets using the straight-line method. Model home furniture and fixtures are generally depreciated over a 2-year period, office facilities and other equipment are depreciated over a period of 3 to 10 years and production facilities are depreciated over periods of 5 to 40 years.

Leases

We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. Once determined that an arrangement is a lease, we then determine if the lease is an operating lease or a finance lease. Both operating and finance leases result in us recording a right-of-use ("ROU") asset and lease liability on our balance sheet. The ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term, discounted using our incremental borrowing rate at the commencement date of the lease. We estimate our incremental borrowing rate based on available published borrowing rates commensurate with our debt rating and the lease term, adjusted to infer collateralization. Specific lease terms may include options to extend or terminate the lease when we believe it is reasonably certain that we will exercise that option.

We recognize operating lease expense on a straight-line basis over the lease term. We have elected to use the portfolio approach for certain equipment leases which have similar lease terms and payment schedules. Additionally, for certain equipment we account for the lease and non-lease components as a single lease component. Our sublease income is de minimis. We have certain leases, primarily the leases of model homes, which have initial lease terms of twelve months or less ("Short-term leases"). As is allowed under GAAP, we have elected to exclude Short-term leases from the recognition requirements and they are not included in our recognized ROU assets and lease liabilities. Operating leases are reported in "Operating lease right-of-use assets" and "Operating lease liabilities" and finance leases are recorded in homebuilding "Property, plant and equipment, net" and "Accrued expenses and other liabilities" on the accompanying consolidated balance sheets. See Note 12 herein for further information.

Warranty/Product Liability Reserves

We establish warranty and product liability reserves ("Warranty Reserve") to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to our homebuilding business. Liability estimates are determined based on management’s 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 party experts such as engineers, and discussions with our General Counsel and outside counsel retained to handle specific product liability cases.

Mortgage Repurchase Reserve, Mortgage Loans Held for Sale and Derivatives and Hedging Activities

We originate several different loan products to our customers to finance the purchase of a home through our wholly-owned mortgage subsidiary, NVR Mortgage Finance, Inc. (“NVRM”). NVRM sells the loans it originates into the secondary market

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

primarily on a servicing released basis, typically within 30 days from closing. All of the loans that NVRM originates are underwritten to the standards and specifications of the ultimate investor. Those underwriting standards are typically equal to or more stringent than the underwriting standards required by Fannie Mae (“FNMA”), Ginnie Mae (“GNMA”), Freddie Mac ("FHLMC"), the Department of Veterans Affairs (“VA”) and the Federal Housing Administration (“FHA”). Insofar as NVRM underwrites its originated loans to those standards, NVRM bears no increased concentration of credit risk from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur. NVRM employs a quality control department to ensure that its underwriting controls are operating effectively, and further assesses the underwriting function as part of its assessment of internal controls over financial reporting. NVRM maintains a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure in the loans that NVRM has originated and sold. The reserve is calculated based on an analysis of historical experience and exposure (see Note 15 herein for further information).

Mortgage loans held for sale are recorded at fair value when closed, and thereafter are carried at the lower of cost or fair value, net of deferred origination costs, until sold.

In the normal course of business, NVRM enters into contractual commitments to extend credit to homebuyers with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within time frames established by NVRM. All borrowers are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the “lock-in” of rates by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, NVRM enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to investors. The forward sale contracts lock-in a range of interest rates and prices for the sale of loans similar to the specific rate lock commitments. NVRM does not engage in speculative derivative activities. Both the rate lock commitments to borrowers and the forward sale contracts to investors are undesignated derivatives, and, accordingly, are marked to fair value through earnings. As of December 31, 2024, there were contractual commitments to extend credit to borrowers aggregating $2,006,907, and open forward delivery sale contracts aggregating $2,140,042, which hedge both the rate lock loan commitments and closed loans held for sale (see Note 14 herein for a description of the Company’s fair value accounting).

Earnings per Share

The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

Dilutive securities:

The assumed proceeds used in the treasury method for calculating our diluted earnings per share includes the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services not yet recognized.

The following stock options and restricted share units issued under equity incentive plans were outstanding during the years ended December 31, 2024, 2023 and 2022, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

Year Ended December 31,

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Revenues – Homebuilding Operations

We build single-family detached homes, townhomes and condominium buildings, which generally are constructed on a pre-sold basis. Revenue is recognized on the settlement date at the contract sales price, when control is transferred to our customers. Our contract liabilities, consisting of deposits received from customers on homes not settled, were $322,926 and $334,441 as of December 31, 2024 and 2023, respectively. Substantially all customer deposits are recognized in revenue within twelve months of being received from customers. Our contract assets, consisting of prepaid sales compensation, totaled approximately $21,700 and $17,900 as of December 31, 2024 and 2023, respectively. These amounts are included in homebuilding “Other assets” on the accompanying consolidated balance sheets.

Mortgage Banking Fees

Mortgage banking fees include income earned by NVRM for originating mortgage loans, servicing mortgage loans held on an interim basis, title fees, gains and losses on the sale of mortgage loans and mortgage servicing and other activities incidental to mortgage banking. Mortgage banking fees are generally recognized after the loan has been sold to an unaffiliated, third party investor.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740-10, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not (defined as a likelihood of more than 50%) that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. If a tax position does not meet the more-likely-than-not recognition threshold, despite our belief that its filing position is supportable, the benefit of that tax position is not recognized in the statements of income. We recognize interest related to unrecognized tax benefits as a component of income tax expense. Based on our historical experience in dealing with various taxing authorities, we have found that it is the administrative practice of the taxing authorities to not seek penalties from us for the tax positions we have taken on our returns related to our unrecognized tax benefits. Therefore, we do not accrue penalties for the positions in which we have an unrecognized tax benefit. We recognize unrecognized tax benefits in the period that the uncertainty is eliminated by either affirmative agreement of the uncertain tax position by the applicable taxing authority, by expiration of the applicable statute of limitation, or by determination in accordance with certain states’ administrative practices that the uncertain tax position has been effectively settled (see Note 10 herein for further information).

Financial Instruments

Except as otherwise noted herein, we believe that the carrying value approximates the fair value of our financial instruments (see Note 14 herein for further information).

Equity-Based Compensation

We recognize equity-based compensation expense within our income statement for all share-based payment arrangements, which includes non-qualified stock options to purchase shares of NVR common stock ("Options") and restricted share units ("RSUs"). Compensation expense is based on grant-date fair value of the Options and RSUs granted, and is recognized on a straight-line basis over the requisite service period for the entire award (from the date of grant through the period of the last separately vesting portion of the grant). Options and RSUs which are subject to a performance condition are treated as a separate award from the “service-only” Options and RSUs, and compensation expense is recognized when it becomes probable that the stated performance target will be achieved. We calculate the fair value of our Options, which are not publicly traded, using the Black-Scholes option-pricing model. The grant date fair value of the RSUs is the closing price of our common stock on the day immediately preceding the date of grant. The reversal of compensation expense previously recognized for grants forfeited is recorded in the period in which the forfeiture occurs. Our equity-based compensation plans are accounted for as equity-classified awards (see Note 11 herein for further discussion of equity-based compensation plans).

Comprehensive Income

For the years ended December 31, 2024, 2023 and 2022, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying consolidated financial statements.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses", requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes - Improvements to Income Tax Disclosures." The amendments in the ASU require disclosure of specific categories in the rate reconciliation and for the entity to provide additional information for reconciling items that meet a quantitative threshold. The ASU will be effective for our fiscal year ending December 31, 2025. The amendments in the ASU are to be applied on a prospective basis and early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2023-09 will have on our consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting - Improvements to Reportable Segment Disclosures." The amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. Public entities are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. The Company adopted ASU 2023-07 during the year ended December 31, 2024. See Note 2 in the accompanying notes to the consolidated financial statements for further detail.

2. Segment Information, Nature of Operations, and Certain Concentrations

Our homebuilding operations primarily construct and sell single-family detached homes, townhomes and condominium buildings under three trade names: Ryan Homes, NVHomes and Heartland Homes. The Ryan Homes product is marketed primarily to first-time and first-time move-up buyers. Ryan Homes operates in thirty-six metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida, Tennessee and Kentucky. The NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers. NVHomes operates in Delaware, New Jersey, and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area.

Our mortgage banking operations primarily operate in the markets where we have homebuilding operations, as substantially all of our loan closing activity is for our homebuilding customers. Our mortgage banking business generates revenues primarily from origination fees, gains on sales of loans, and title fees.

The following disclosure includes four homebuilding operating and reportable segments that aggregate geographically our homebuilding divisions, and the mortgage banking operations presented as a single reportable segment. The homebuilding reportable segments are comprised of divisions in the following geographic areas:

Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.

North East: New Jersey and Eastern Pennsylvania

Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois

The Company's Chief Operating Decision Maker ("CODM"), identified as the Chief Executive Officer, utilizes segment profit to evaluate the performance of the Company's homebuilding and mortgage banking operating segments against the annual plan to make resource allocation decisions.

Homebuilding segment profit includes all revenues and income generated from the sale of homes, less the cost of homes sold, selling, general and administrative expenses, and a corporate capital allocation charge. The corporate capital allocation charge is eliminated in consolidation and is based on the segment’s average net assets employed. The corporate capital allocation charged to the operating segment allows the CODM to determine whether the operating segment’s results are providing the desired rate of return after covering our cost of capital.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Assets not allocated to the operating segments are not included in either the operating segment's corporate capital allocation charge or the CODM's evaluation of the operating segment's performance. We record charges on contract land deposits when it is determined that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are 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.

Mortgage banking segment profit consists of revenues generated from mortgage financing, title insurance and closing services, less the costs of such services and general and administrative costs, including certain corporate overhead functions. Mortgage banking operations are not charged a corporate capital allocation charge.

In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between segment profit and consolidated profit before taxes include unallocated corporate overhead (including all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest income and expense. Our overhead functions, such as accounting, treasury and human resources are centrally performed and the costs are not allocated to our homebuilding operating segments. Consolidation adjustments consist of such items necessary 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 primarily consists of interest charges on our 3.00% Senior Notes due 2030 (the “Senior Notes”), which are not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

The following tables present certain segment financial data, with reconciliations to the amounts reported for the consolidated company, where applicable:

Year Ended December 31,

Revenues:

Year Ended December 31,

Segment cost of sales:

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Year Ended December 31,

Segment selling, general & administrative expense:

Year Ended December 31,

Corporate capital allocation charge:

Year Ended December 31,

Other segment items, net:

(1)This item relates primarily to interest income received on mortgage loans closed and mortgage loans held for sale.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

Year Ended December 31,

Segment profit:

Reconciling items:

(2) This item represents changes to the contract land deposit impairment allowance, which are not allocated to our reportable segments. See further discussion of contract land deposit impairment charges in Note 3.

(3) This item represents compensation expense for all Option and RSU grants. See Note 11 for additional discussion of equity-based compensation.

(4) This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding segments. The corporate capital allocation charge is based on the segment's monthly average asset balance.

(5) The consolidation adjustments and other in each period are primarily attributable to changes in units under construction year over year, and any significant changes in material costs, primarily lumber. Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled.

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

As of December 31,

Assets:

Reconciling items:

3. Variable Interest Entities

Lot Purchase Agreements

We generally do not engage in land development. Instead, we typically acquire finished building lots at market prices from various third party land developers under LPAs. The LPAs require deposits that may be forfeited if we fail to perform under the LPAs. The deposits required under the LPAs are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots.

We believe this lot acquisition strategy reduces the financial risks associated with direct land ownership and land development. We may, at our option, choose for any reason and at any time not to perform under these LPAs by delivering notice of our intent not to acquire the finished lots under contract. Our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the LPAs. None of the creditors of any of the development entities with which we enter LPAs have recourse to our general credit. We generally do not have any specific performance obligations to purchase a certain number or any of the lots, nor do we guarantee completion of the development by the developer or guarantee any of the developers’ financial or other liabilities.

We are not involved in the design or creation of the development entities from which we purchase lots under LPAs. The developer’s equity holders have the power to direct 100% of the operating activities of the development entity. We have no voting rights in any of the development entities. The sole purpose of the development entity’s activities is to generate positive cash flow returns for the equity holders. Further, we do not share in any of the profit or loss generated by the project’s development. The profits and losses are passed directly to the developer’s equity holders.

The deposit placed by us pursuant to the LPA is deemed to be a variable interest in the respective development entities. Those development entities are deemed to be variable interest entities (“VIE”). Therefore, the development entities with which we enter into LPAs, including the joint venture limited liability corporations, discussed below, are evaluated for possible consolidation by us. An enterprise must consolidate a VIE when that enterprise has a controlling financial interest in the VIE. An enterprise is deemed to have a controlling financial interest if it has i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE.

We believe the activities that most significantly impact a development entity’s economic performance are the operating activities of the entity. Unless and until a development entity completes finished building lots through the development process to be

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NVR, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

able to sell, the process of which the development entity’s equity investors bear the full risk, the entity does not earn any revenues. The operating development activities are managed solely by the development entity’s equity investors.

The development entities with which we contract to buy finished lots typically select the respective projects, obtain the necessary zoning approvals, obtain the financing required with no support or guarantees from us, select who will purchase the finished lots and at what price, and manage the completion of the infrastructure improvements, all for the purpose of generating a cash flow return to the development entity’s equity holders and all independent of us. We possess no more than limited protective legal rights through the LPA in the specific finished lots that we are purchasing, and we possess no participative rights in the development entities. Accordingly, we do not have the power to direct the activities of a developer that most significantly impact the developer’s economic performance. For this reason, we concluded that we are not the primary beneficiary of the development entities with which we enter into LPAs, and therefore we do not consolidate any of these VIEs.

As of December 31, 2024, we controlled approximately 155,000 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $764,900 and $8,700, respectively. As noted above, our sole legal obligation and economic loss for failure to perform under these LPAs is limited to the amount of the deposit pursuant to the liquidated damage provisions contained in the LPAs and, in very limited circumstances, specific performance obligations. During 2024, we incurred pre-tax impairment charges on lot deposits of approximately $7,200. Our contract land deposit asset is shown net of a $58,597 and $53,397 impairment allowance as of December 31, 2024 and December 31, 2023, respectively.

In addition, we have certain properties under contract with land owners that are expected to yield approximately 35,900 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. These properties are controlled with cash deposits totaling approximately $20,400 as of December 31, 2024, of which approximately $8,400 is refundable if we do not perform under the contract. 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 total risk of loss related to contract land deposits as of December 31, 2024 and 2023 was as follows:

As of December 31,

Allowance for losses on contract land deposits (58,597) (53,397)

Contingent obligations in the form of letters of credit 8,722 7,769

4. Joint Ventures

On a limited basis, we acquire finished lots using joint venture limited liability corporations (“JVs”). The JVs are typically structured such that we are a non-controlling member and at risk only for the amount we have invested, or committed to invest, in addition to any deposits placed under LPAs with the joint venture. We are not a borrower, guarantor or obligor on any debt of the JVs, as applicable. We enter into LPAs to purchase lots from these JVs, and as a result have a variable interest in these JVs. We determined that we are not the primary beneficiary in any of the JVs because we and the JV partner either share power or the JV partner has the controlling financial interest.

As of December 31, 2024, we had an aggregate investment totaling approximately $29,300 in three JVs that are expected to produce approximately 5,150 lots, of which approximately 4,800 lots were controlled by us and the remaining approximately 350 lots were either under contract with unrelated parties or not currently under contract. We had additional funding commitments totaling approximately $8,400 in one of the JVs as of December 31, 2024. The investment in JVs is reported in the “Other assets” line item on the accompanying consolidated balance sheets. None of the JVs had any indicators of impairment as of December 31, 2024.

As of December 31, 2023, we had an aggregate investment totaling approximately $29,200 in four JVs that were expected to produce approximately 5,200 finished lots, of which approximately 4,850 lots were controlled by us and the remaining approximately 350 lots were either under contract with unrelated parties or not currently under contract. In addition, as of December 31, 2023, we had additional funding commitments in the aggregate totaling approximately $11,500 in one of the JVs.

NVR US Equity

NVR · 10-K · period ended 2024-12-31

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

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

NVR US Equity☆

NVR · 10-K · period ended 2024-12-31

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

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

NVR US Equity