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What changed in Dream Finders Homes, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Dream Finders Homes, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+360 added−375 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-25)

Top changes in Dream Finders Homes, Inc.'s 2025 10-K

360 paragraphs added · 375 removed · 278 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

74 edited+19 added−9 removed30 unchanged
Biggest changeWhen a land seller desires to sell finished lots in bulk or does not wish to develop finished lots, we often enter into land bank option contracts with land bank partners who fund any required land acquisition and development costs and sell the finished lots to us over a period of time. 2 Table Contents These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled for any reason, and our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and, in the case of land bank option contracts, our loss is limited to the related lot option fees paid to the land bank partner, and for certain land bank option contracts, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project.
Biggest changeThese option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled for any reason, and our legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid and, where applicable, termination fees pursuant to such option contracts and, in the case of land bank option contracts, our loss is limited to the related lot option fees paid to the land bank partner and, for certain land bank option contracts, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project.
Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, international trade disputes and resulting tariffs, and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities.
Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, international trade disputes and resulting tariffs, and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities and labor availability.
Refer to “Risk Factors—Industry, Economic and Regulatory Risks” for additional information. We are dependent upon building material suppliers for a continuous flow of raw materials. Whenever possible, we attempt to utilize standard products available from multiple sources. Such raw materials have been generally available to us in adequate supply.
Refer to “Risk Factors—Homebuilding Industry, Economic and Regulatory Risks” for additional information. We are dependent upon building material suppliers for a continuous flow of raw materials. Whenever possible, we attempt to utilize standard products available from multiple sources. Such raw materials have been generally available to us in adequate supply.
The housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. Other factors that affect the housing industry and the demand for new homes include: the availability and the cost of land, labor and materials; changes in consumer preferences; demographic trends; inflation; and the availability and interest rates of mortgage finance programs.
The housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates. Other factors that affect the housing industry and the demand for new homes include: the availability and the cost of land, labor and materials; changes in consumer preferences; demographic trends; inflation; tariffs; and the availability and interest rates of mortgage finance programs.
Seasonality In all of our markets, we have historically experienced similar variability in our results of operations and capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry. We generally sell more homes in the first and second quarters and close more homes in our third and fourth quarters.
Seasonality In all of our markets, we have historically experienced similar variability in our results of operations and capital requirements from quarter to quarter due to the seasonal nature of the homebuilding and mortgage industry. We generally sell more homes in the first and second quarters and close more homes in our third and fourth quarters.
We primarily employ two variations of our asset-light strategy—finished lot option contracts and land bank option contracts—pursuant to which we secure the right to purchase finished lots at predetermined fixed contractual pricing from various land developers, land sellers and land bank partners.
We primarily employ two variations of our asset-light strategy—finished lot option contracts and land bank option contracts—pursuant to which we secure the right to purchase finished lots at predetermined contractual pricing from various land developers, land sellers and land bank partners.
On July 1, 2024, we acquired the remaining interest in Jet HomeLoans, which is consolidated in the Company’s financial statements as of that date. 5 Table Contents Our wholly owned subsidiary, DF Title, is a title insurance agency licensed in multiple states that provides closing, escrow and title insurance services.
On July 1, 2024, we acquired the remaining interest in Jet HomeLoans, which is consolidated in the Company’s consolidated financial statements as of that date. 6 Table of Contents Our wholly owned subsidiary, DF Title, is a title insurance agency licensed in multiple states that provides closing, escrow and title insurance services.
We provide each homeowner with product warranties covering workmanship and materials for one year from the time of home closing, and warranties covering structural systems for eight to ten years from the time of closing. Where possible, we utilize our subcontractors to repair the homes in accordance with our subcontractor agreements and as required by law.
We provide each homeowner with product warranties covering workmanship and materials for one year from the time of home closing, and warranties covering structural systems for up to ten years from the time of closing. Where possible, we utilize our subcontractors to repair the homes in accordance with our subcontractor agreements and as required by law.
Our asset-light lot acquisition strategy generally enables us to purchase land in a “just-in-time” manner in both new and existing markets with reduced up-front capital commitments, and, in turn, allows us to increase our inventory turnover rate, enhance our return on equity and contributes to our growth.
Our asset-light lot acquisition strategy generally enables us to purchase land in a “just-in-time” manner in both new and existing markets with reduced up-front capital commitments, and, in turn, allows us to increase our inventory turnover rate, enhance our return on equity and support our growth.
Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development.
Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted by unforeseen health, safety and welfare issues, which can further delay these projects or delay their development.
In the past, we have supplemented our lot option acquisition strategies by entering into joint venture agreements with external investors to acquire, develop and control lots. Due to the profit sharing requirements of the joint venture agreements, we have transitioned from these joint venture arrangements in favor of the option contract strategies described above.
In the past, we have supplemented our lot option acquisition strategies by entering into joint venture agreements with external investors to acquire, develop and control lots. Due to the profit sharing terms of the joint venture agreements, we have transitioned from these arrangements in favor of the option contract strategies described above.
Our operations in financial services generally compete with other lenders and title companies throughout the country, from small local operations to companies with nation-wide footprints, in the forms of banks, brokers, credit unions, title agencies, insurance agencies, underwriters and other financial institutions.
Our financial services operations generally compete with other lenders and title companies throughout the country, from small, local operations to companies with nation-wide footprints, in the form of the banks, brokers, credit unions, title agencies, insurance agencies, underwriters and other financial institutions.
The following is a summary of our history: 2009 – Began homebuilding operations in the Jacksonville, Florida market 2013 – Entered the Savannah, Georgia market 2014 – Entered the Denver, Colorado market 2015 – Entered the Austin, Texas and Orlando, Florida markets 2017 – Entered the Washington D.C. metropolitan area, with a particular focus on the Northern Virginia and Maryland markets (“DC Metro”) 2019 – Entered the Hilton Head and Bluffton, South Carolina markets with our acquisition of Village Park Homes, LLC 2020 – Entered the Charlotte, Fayetteville, Raleigh, Piedmont Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina), Wilmington, North Carolina and Myrtle Beach, South Carolina markets with our acquisition of the homebuilding business of H&H Constructors of Fayetteville, LLC January 2021 – Expanded our presence in the Orlando, Florida market with our acquisition of Century Homes Florida, LLC October 2021 – Significantly increased our operations in the Austin, Texas metropolitan area and expanded into the Houston, Dallas and San Antonio, Texas markets with our acquisition of McGuyer Homebuilders, Inc.
The following is a summary of our history: 2009 – Began homebuilding operations in the Jacksonville, Florida market 2013 – Entered the Savannah, Georgia market 2014 – Entered the Denver, Colorado market 2015 – Entered the Austin, Texas and Orlando, Florida markets 2017 – Entered the Washington D.C. metropolitan area, with a particular focus on the Northern Virginia and Maryland markets 2019 – Entered the Hilton Head and Bluffton, South Carolina markets with our acquisition of Village Park Homes, LLC 2020 – Entered the Charlotte, Fayetteville, Raleigh, Piedmont Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina), Wilmington, North Carolina and Myrtle Beach, South Carolina markets with our acquisition of the homebuilding business of H&H Constructors of Fayetteville, LLC January 2021 – Completed our initial public offering (“IPO”) and expanded our presence in the Orlando, Florida market with our acquisition of Century Homes Florida, LLC October 2021 – Significantly increased our operations in the Austin, Texas metropolitan area and expanded into the Houston, Dallas and San Antonio, Texas markets with our acquisition of McGuyer Homebuilders, Inc.
Our homebuilding operations are organized into four reportable segments: Southeast, Mid-Atlantic, Midwest and Financial Services. Our Southeast segment consists of the homebuilding operations in Jacksonville, Orlando and Tampa, Florida, the southeast coast of Florida and southwest Florida; Savannah, Georgia; Hilton Head and Bluffton, South Carolina and our Active Adult and Custom Homes homebuilding operations in northeast Florida.
Our homebuilding operations are organized into four reportable segments: Southeast, Mid-Atlantic, Midwest and Financial Services. Our Southeast segment consists of the homebuilding operations in Jacksonville, Orlando and Tampa, Florida, the southeast coast of Florida and southwest Florida; Atlanta and Savannah, Georgia; Hilton Head and Bluffton, South Carolina and custom homes homebuilding operations in northeast Florida.
The main competitive factors for our mortgage banking business are mortgage interest rates and efficiency in operations for our customers while the main factors for our title services include price and offered services.
The main competitive factors for our mortgage banking business are mortgage interest rates and efficiency in operations for our customers, while the main competitive factors for our title services include price and the variety of services offered.
He has served as the Chief Executive Officer of our primary operating subsidiary, Dream Finders Homes LLC, a Florida limited liability company (“DFH LLC”), since forming the company in December 2008, and as the Chief Executive Officer and a member of the board of managers of DFH LLC since its formation in 2014.
He has served as the Chief Executive Officer of our primary operating subsidiary, Dream Finders Homes LLC (“DFH LLC”), since forming the company in December 2008, and as the Chief Executive Officer and a member of the board of managers of DFH LLC since its formation in 2014.
Our title services’ practices regarding closing, escrow and issuance of title insurance are subject to rules established, in part, by state insurance regulators and underwriter guidelines.
Our title service practices regarding closing, escrow and issuance of title insurance are subject to rules established, in part, by state insurance regulators and underwriter guidelines.
Once our land acquisition committee approves a transaction that requires financing and meets our internal model, we will seek a land bank partner. Our primary operating subsidiary, Dream Finders Homes LLC, periodically enters into land bank arrangements with DF Capital Management, LLC, a Florida limited liability company (“DF Capital”).
Once our land acquisition committee approves a transaction that requires financing and meets our internal model, we will seek a land bank partner. Our primary operating subsidiary, Dream Finders Homes LLC, periodically enters into land bank arrangements with DF Capital Management, LLC (“DF Capital”).
Refer to “—Land Acquisition and Development Process” for additional information. Land Acquisition and Development Process Locating and analyzing attractive land positions is a critical challenge for any homebuilder. We remain focused on controlling as many quality land positions as possible while minimizing our up-front capital outlay.
Refer to “—Land Acquisition and Development Process” for additional information. Land Acquisition and Development Process Securing a pipeline of attractive land positions is a critical challenge for any homebuilder. We remain focused on controlling as many quality land positions as possible while minimizing our up-front capital outlay.
Zalupski’s leadership, we have grown from closing 27 homes in Jacksonville, Florida during our inaugural year in 2009 to establishing operations in markets across the Southeast, Mid-West and Mid-Atlantic regions of the United States, and have closed over 38,000 homes since our inception through the end of 2024 . Prior to founding DFH LLC, Mr.
Zalupski’s leadership, we have grown from closing 27 homes in Jacksonville, Florida during our inaugural year in 2009 to establishing operations in markets across the Southeast, Mid-West and Mid-Atlantic regions of the United States, and have closed over 46,500 homes since our inception through the end of 2025. Prior to founding DFH LLC, Mr.
We believe our experience, top-down emphasis on relationship building with land market participants and collaborative involvement of local, regional and corporate management in the land sourcing and acquisition process enable us to identify the ideal developers and efficiently source and secure options to control and close acquisitions of lots to meet our growth needs while mitigating risk.
We believe our experience, top-down emphasis on relationship building with land market participants and collaborative involvement of local, regional and corporate management in the land acquisition process enable us to identify the ideal opportunities and efficiently source and secure options to control and close acquisitions of lots to meet our growth goals, while minimizing risk.
Leadership Team and Board of Directors Executive Officers The following table sets forth information regarding our executive officers as of February 25, 2025: Name Age Position Patrick O. Zalupski 44 President, Chief Executive Officer and Chairman of the Board of Directors L. Anabel Ramsay 43 Senior Vice President and Chief Financial Officer Patrick O.
Leadership Team and Board of Directors Executive Officers The following table sets forth information regarding our executive officers as of February 23, 2026: Name Age Position Patrick O. Zalupski 45 President, Chief Executive Officer and Chairman of the Board of Directors L. Anabel Ramsay 44 Senior Vice President and Chief Financial Officer Patrick O.
(2) As of December 31, 2024 and 2023, the Company had 603 and 1,413 controlled lots under built-for-rent contracts, respectively. DF Capital Controlling a sufficient supply of finished lots is an important component of our asset-light strategy. Our land team routinely underwrites potential lot acquisitions that meet our capital allocation criteria.
(2) As of December 31, 2025 and 2024, the Company had 731 and 603 controlled lots under built-for-rent contracts, respectively. 3 Table of Contents DF Capital Controlling a sufficient supply of finished lots is an important component of our asset-light strategy. Our land team routinely underwrites potential lot acquisitions that meet our capital allocation criteria.
In the United States, we rank among the top 14 homebuilders based on both homebuilding revenues and closings, as published in the 2024 Builder 100 List reported by Builder Magazine. We compete for, among other things, homebuyers, desirable lots, financing, raw materials and skilled labor.
In the United States, we rank among the top 14 homebuilders based on both homebuilding revenues and closings, as published in the 2025 Builder 100 List reported by Builder Magazine. In 2025, we were named National Builder of the Year by Builder Magazine. We compete for, among other things, homebuyers, desirable lots, financing, raw materials and skilled labor.
As of December 31, 2024 and 2023, our backlog was 2,599 homes and 3,978 homes, valued at approximately $1.3 billion and $1.9 billion, respectively, based on average sales price. Homes in backlog are typically converted to closings in the subsequent year.
As of December 31, 2025 and 2024, our backlog was 1,839 homes and 2,599 homes, valued at approximately $0.8 billion and $1.3 billion, respectively, based on average sales price. Homes in backlog are typically converted to closings in the subsequent year.
Once construction of a home begins, prices for the materials utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions.
Our materials are subject to price fluctuations. Once construction of a home begins, prices for the materials and labor utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions.
Our strategy is intended to avoid the financial commitments and risks associated with direct land ownership by allowing us to increase optionality and control a significant number of lots for a relatively low capital cost. We believe our asset-light business model reduces our balance sheet risk relative to homebuilders that own a higher percentage of their land supply.
Our strategy is intended to avoid the financial commitments and risks associated with direct land ownership providing increased optionality and control of a significant lot pipeline for a relatively low capital cost. We believe our asset-light business model reduces our balance sheet risk relative to homebuilders that own a higher percentage of their land supply.
DF Title primarily closes residential real estate transactions, including new home construction, resale and refinance, and commercial real estate transactions. DF Title operates in Colorado, Florida, Georgia, North Carolina, South Carolina and Texas. DF Title’s staff includes attorneys, state licensed title agents, escrow officers and experienced support staff with hundreds of years of collective closing experience.
DF Title primarily closes residential real estate transactions, including new home construction, resale and refinance, and commercial real estate transactions. DF Title operates in Colorado, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas. DF Title’s staff includes attorneys, state licensed title agents, escrow officers and experienced support staff assisting buyers in their closing experience.
Ramsay has been responsible for balance sheet management, capital allocation, cash forecasting and overall supervision of our accounting, tax and treasury functions, including overall management of our debt, compliance, and reporting for lenders, investors and shareholders. Prior to joining the Company, Ms.
Ramsay has been responsible for balance sheet management, capital allocation, cash forecasting and overall supervision of our accounting, tax, treasury and investor relations functions, including overall management of our debt, compliance, and reporting for lenders, investors, sell-side analysts and shareholders. Prior to joining us, Ms.
As a result of seasonal activity, our quarterly financial positions and results of operations are not necessarily representative of the financial position or results of operations we expect as of and for the respective full year-end. We expect this seasonal pattern to continue in the long-term.
As a result of seasonal activity, our quarterly financial positions and results of operations are not necessarily representative of the financial position or results of operations we expect as of and for the respective full year-end.
We offer our employees compensation and an array of company-paid benefits, which we believe are competitive relative to others in our industry. Additionally, we offer retirement savings in the form of a 401(k) plan.
We value our network of subcontractors and tradespeople and believe our relationships with them are excellent. We offer our employees compensation and an array of company-paid benefits, which we believe are competitive relative to others in our industry. Additionally, we offer retirement savings in the form of a 401(k) plan.
Governmental Regulation and Environmental Matters We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction and similar matters, which impose restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular area.
We expect this seasonal pattern to continue in the long-term. 7 Table of Contents Governmental Regulation and Environmental Matters We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction and similar matters, which impose zoning and density requirements in order to regulate the number of homes that can eventually be built within the boundaries of a particular area.
A community becomes inactive when it has fewer than five units remaining to sell. Active community count is an important metric to forecast future net new orders for our business. As of December 31, 2024, we had 242 active communities, an increase of 21 communities, or 10%, as compared to 221 active communities as of December 31, 2023.
A community becomes inactive when it has fewer than five units remaining to sell. Active community count is an important metric to forecast future net sales for our business. As of December 31, 2025, we had 313 active communities, an increase of 71 communities, or 29%, as compared to 242 active communities as of December 31, 2024.
Products, Communities and Construction Homes, Homebuyers and Active Communities We offer a range of single-family homes in each of our markets, placing a primary emphasis on entry-level and first-time move-up homes. We also provide second-time move-up and active adult homes as well as homes under built-for-rent contracts, which are available for sale to investors.
Products, Communities and Construction Homes, Homebuyers and Active Communities We offer a range of single-family homes in each of our markets, placing a primary emphasis on entry-level and first-time move-up homes. We also provide second-time move-up and active adult homes as well as homes under built-for-rent contracts. Price points are tailored to each of these levels and the relevant market.
He has served on the investment committee of DF Capital Management, LLC, an investment manager focused on investments in land banks and land development joint ventures to deliver finished lots to us and other homebuilders for the construction of new homes, since April 2018. Mr. Zalupski received a B.A in Finance from Stetson University. L.
He has served on the investment committee of DF Capital Management, LLC, an investment manager focused on investments in land banks and land development joint ventures to deliver finished lots to us and other homebuilders for the construction of new homes, since April 2018. Mr. Zalupski currently serves as a member of the University of Florida’s board of trustees.
As of December 31, 2024 and 2023, our lot deposits for finished lot option and land bank option contracts were $458 million and $247 million, respectively. As of December 31, 2024 and 2023, we controlled 54,698 and 29,748 lots under finished lot option and land bank option contracts, respectively.
As of December 31, 2025 and 2024, our lot deposits for finished lot option and land bank option contracts were $545 million and $458 million, respectively. As of December 31, 2025 and 2024, we controlled 63,121 and 54,698 lots under finished lot option and land bank option contracts, respectively.
Building materials range from 30-35% of the average cost to build the home, labor ranges from 20-25% of the average cost to build the home, and interest, commissions and closing costs range from 5-10% of the average cost to build the home. Our materials are subject to price fluctuations.
Homesite costs typically range from 30-35% of the average cost of a home. Building materials typically range from 30-35% of the average cost to build the home, labor typically ranges from 20-25% of the average cost to build the home, and interest, commissions and closing costs typically range from 5-10% of the average cost to build the home.
Price points are tailored to each of these levels. Our homebuilding business is driven by our commitment to building high-quality homes at affordable prices in attractive locations while delivering excellent customer service.
Our homebuilding business is driven by our commitment to building high-quality homes at affordable prices in attractive locations, while delivering excellent customer service.
To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer title insurance primarily through DF Title, LLC, doing business as Golden Dog Title & Trust or Golden Dog Title (“DF Title”) and mortgage banking solutions primarily through our wholly owned mortgage banking business, Jet HomeLoans, LLC (“Jet HomeLoans” or “Jet”).
To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer mortgage banking solutions primarily through our wholly owned mortgage banking business, Jet HomeLoans, LP (“Jet HomeLoans”), as well as title insurance services—inclusive of agency services primarily through DF Title, LLC, doing business as Golden Dog Title & Trust and Golden Dog Title (“DF Title”), and residential and commercial underwriting services through Alliant National Title Insurance Company, Inc.
We believe our warranty program meets or exceeds terms customarily offered in the homebuilding industry. Financial Services By providing comprehensive mortgage and title services in markets where we operate, our Financial Services segment serves as a valuable resource to customers navigating the homebuying process and, in turn, enhances our efficiency in converting our backlog into home closings.
By providing these comprehensive mortgage and title services in markets where we operate, our Financial Services segment serves as a valuable resource to customers navigating the homebuying process and, in turn, enhances our efficiency in converting our backlog and spec sales into home closings.
Controlled Lot Pipeline The following table presents our controlled lots through option contracts by homebuilding segment as of December 31, 2024 and 2023 : As of December 31, Segment (1) 2024 2023 % Change Southeast 21,362 13,063 64 % Mid-Atlantic 17,099 4,795 257 % Midwest 16,237 11,890 37 % Total (2) 54,698 29,748 84 % (1) Refer to Note 9, Segment Reporting to the consolidated financial statements for further explanation of our reportable segments.
Controlled Lots Pipeline The following table presents our controlled lots through option contracts by homebuilding segment as of December 31, 2025 and 2024 : As of December 31, Segment (1) 2025 2024 % Change Southeast 23,616 21,362 11 % Mid-Atlantic 23,517 17,099 38 % Midwest 15,988 16,237 -2 % Total (2) 63,121 54,698 15 % (1) Refer to Note 9, Segment Reporting to our consolidated financial statements for further explanation of our reportable segments.
Asset-Light Business Strategy We operate an asset-light and capital-efficient lot acquisition strategy to meet our growth objectives. We generally seek to avoid owning land under development on our balance sheet, which requires significant capital expenditures, and can take several years to realize returns on the investment.
We generally seek to avoid owning land under development on our balance sheet, which requires significant capital expenditures, and can take several years to realize returns on the investment.
(“MHI”) October 2023 – Entered the Tampa, Florida market February 2024 – Entered the Charleston and Greenville, South Carolina and Nashville, Tennessee markets with our acquisition of the majority of the homebuilding assets of Crescent Ventures, LLC (“Crescent Homes”) March 2024 – Entered markets in the southeast coast of Florida June 2024 – Entered the Phoenix, Arizona market July 2024 – Acquired the remaining interest in our mortgage banking joint venture, Jet HomeLoans, resulting in a wholly owned subsidiary that is consolidated within our financial statements December 2024 – Entered the southwest Florida market January 2025 – Entered the Atlanta, Georgia market and expanded our operations in Greenville, South Carolina with our acquisition of the majority of the homebuilding assets of Liberty Communities, LLC (“Liberty Communities”) 1 Table Contents Markets We select the geographic markets in which we operate our homebuilding business through local relationships and a rigorous selection process based on our evaluation of positive population and employment growth trends, favorable migration patterns, attractive housing affordability, low state and local income taxes and desirable lifestyle and weather characteristics.
(“MHI”) October 2023 – Entered the Tampa, Florida market February 2024 – Entered the Charleston and Greenville, South Carolina and Nashville, Tennessee markets with our acquisition of the majority of the homebuilding assets of Crescent Ventures, LLC (“Crescent Homes”) March 2024 – Entered markets in the southeast coast of Florida June 2024 – Entered the Phoenix, Arizona market July 2024 – Acquired the remaining interest in our mortgage banking joint venture, Jet HomeLoans, resulting in a wholly owned subsidiary that is consolidated within our financial statements December 2024 – Entered the southwest Florida market 1 Table of Contents January 2025 – Entered the Atlanta, Georgia market and expanded our operations in Greenville, South Carolina with our acquisition of the majority of the homebuilding assets of Liberty Communities, LLC (“Liberty Communities”).
Our active community count excludes communities under built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of December 31, 2024, the Company had 10 communities delivering closings under built-for-rent contracts, as compared to 15 communities as of December 31, 2023.
As of December 31, 2025, the Company had 1,527 completed quick move-in ready homes, which represents approximately 5 spec homes per active community. Our active community count excludes communities under built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell.
We utilize customer feedback and comprehensive home tours before closing to improve quality and satisfaction, and enhance our standards. We highly value customers' willingness to refer us, which influences our team's compensation and quality control efforts.
We maintain professional staff dedicated to delivering excellent customer experiences, including pre-sale, construction, closing, and after-sales service. We utilize customer feedback and comprehensive home tours before closing to improve quality and satisfaction, and enhance our standards. We highly value customers' willingness to refer us, which influences our teams' compensation and quality control efforts.
Marketing and Sales We seek to ensure that each customer’s experience exceeds their expectations by focusing on customer satisfaction and providing a unique buying experience. We provide attentive one-on-one customer service throughout the home buying process, empowering our customers with flexibility to personalize their homes, and actively soliciting feedback from all of our customers.
We provide attentive one-on-one customer service throughout the home buying process, empowering our customers with flexibility to personalize their homes, and actively soliciting feedback from all of our customers.
Our customers enjoy the flexibility of personalizing our desirable open floor plans with a wide array of finishes and upgrades to best fit their distinctive tastes and unique needs. A community becomes active once the model is completed or the community has its fifth net new order.
Our customers enjoy the flexibility of personalizing our desirable open floor plans with a wide array of finishes and upgrades to best fit their needs when purchasing a home, and they are also able to choose from a robust selection of quick-move-in homes. A community becomes active once the model is completed or the community has its fifth net sale.
We continuously work to maintain good relationships with independent real estate brokers in our markets and offer competitive programs to reward these brokers for selling our homes. Our in-house sales force typically works from sales offices located in model homes close to or in each community.
We sell our homes through our own sales representatives and through independent real estate brokers. We continuously work to maintain good relationships with independent real estate brokers in our markets and offer competitive programs to reward these brokers for selling our homes.
ITEM 1. BUSINESS Company Overview We design, build and sell homes primarily in high-growth markets using our asset-light lot acquisition strategy. Our primary focus is on constructing and selling single-family homes across entry-level, first-time move-up, second-time move-up and active adult homes. Our home offerings are marketed under various brands, including Dream Finders Homes, DF Luxury, Craft Homes, and Coventry Homes.
ITEM 1. BUSINESS Company Overview We design, build and sell homes primarily in high-growth markets using our asset-light lot acquisition strategy. Our primary focus is on constructing and selling single-family homes across entry-level, first-time move-up, second-time move-up and active adult homes. We also sell homes to third-party investors that intend to lease the homes (“built-for-rent contracts”).
Since breaking ground on our first home on January 1, 2009, we have closed over 38,000 homes through December 31, 2024 and have been profitable every year since inception.
(“Alliant Title”). Additionally, we offer homeowners insurance and adjacent products to homebuyers. Since breaking ground on our first home on January 1, 2009, we have closed over 46,500 homes through December 31, 2025 and have been profitable every year since inception.
Environmental requirements that apply to any given homebuilding site vary according to the location, environmental conditions, the presence or absence of endangered plants or species or sensitive habitats and the present and former uses of the site, as well as nearby or adjoining properties. 7 Table Contents Our operations that provide mortgage and title services within our Financial Services segment are subject to various local, state and federal laws, statutes, ordinances, administrative rules and other regulations, including requirements for participants in programs offered by FHA, VA, USDA, Government National Mortgage Association, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”).
Our operations that provide mortgage and title services within our Financial Services segment are subject to various local, state and federal laws, statutes, ordinances, administrative rules and other regulations, including requirements for participants in programs offered by FHA, VA, USDA, Government National Mortgage Association, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”).
Our architectural design team continually adapts floor plans in response to customer buying trends in various markets and collaborates with our land team to secure suitable lots for these customized plans. 6 Table Contents Competition and Market Factors The homebuilding industry is highly competitive and is characterized by relatively low barriers to entry.
Our architectural design team continually adapts floor plans in response to customer buying trends in various markets and collaborates with our land team to secure suitable lots for these customized plans.
Our materials procurement strategy focuses on maximizing efficiency across local, regional, and national levels through established contracts and standard products from multiple suppliers, resulting in cost savings, streamlined offerings, and pre-negotiated rebates. We leverage our national presence and volume to secure better prices with manufacturers.
Our software also enables our superintendents to monitor the completion of work, which, in turn, expedites payments to the subcontractors. Our materials procurement strategy focuses on maximizing efficiency across local, regional, and national levels through established contracts and standard products from multiple suppliers, resulting in cost savings, streamlined offerings, and pre-negotiated rebates.
We enforce work quality standards through onboarding processes, require insurance from vendors, and conduct regular inspections. Our customer service team ensures quality assurance and positive experiences for customers from pre-sale to post-closing. We maintain professional staff dedicated to delivering excellent customer experiences, including pre-sale, construction, closing, and after-sales service.
Customer Relations, Quality Control and Warranty Program In our construction process, we prioritize product design, material quality, and subcontractor standards to minimize deficiencies and warranty costs. We enforce work quality standards through onboarding processes, require insurance from vendors, and conduct regular inspections. Our customer service team ensures quality assurance and positive experiences for customers from pre-sale to post-closing.
We are also the Official Home Builder of the PGA TOUR. This strategic alliance provides a national marketing footprint in regions where we operate and where high-profile, annual PGA TOUR golf tournaments are held. We sell our homes through our own sales representatives and through independent real estate brokers.
We are also the Official Home Builder of the PGA TOUR. This strategic alliance provides a national marketing footprint in regions where we operate and where high-profile, annual PGA TOUR golf tournaments are held. Additionally, we are the Official Home Builder of Minor League Baseball where we are featured nationally during games and for different marketing events.
We value our employees and believe that employee loyalty and enthusiasm are key elements of our operating performance. We utilize subcontractors and tradespeople to perform the construction of our homes. We value our network of subcontractors and tradespeople and believe our relationships with them are excellent.
We believe that investing in finding and retaining exceptional people is the most important part of our business. We believe that our connection with our employees is positive and well-regarded. We value our employees and believe that employee loyalty and enthusiasm are key elements of our operating performance. We utilize subcontractors and tradespeople to perform the construction of our homes.
Anabel Ramsay—Senior Vice President and Chief Financial Officer Ms. Ramsay joined us in 2018, serving in the position of Vice President and Treasurer, and as a member of the Asset Management Committee. Ms. Ramsay was appointed to Interim Chief Financial Officer on October 6, 2021, and promoted to Senior Vice President and Chief Financial Officer on April 1, 2022. Ms.
Ramsay was appointed to Interim Chief Financial Officer on October 6, 2021, and promoted to Senior Vice President and Chief Financial Officer on April 1, 2022. Ms.
The Company owns a 49% membership interest in DF Capital, and a non-affiliated third party owns the remaining 51% of the membership interests in DF Capital.
The Company owns a 49% membership interest in DF Capital, and a non-affiliated third party owns the remaining 51% of the membership interest in DF Capital. Refer to Note 12, Related Party Transactions to our consolidated financial statements for more information.
At present, our backlog turnover is closer to one to five months, due to a higher volume of speculative inventory sales. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Net Sales, Backlog and Closings ” for additional information.
At present, our backlog turnover is closer to one to five months, due to a higher volume of speculative inventory sales.
We believe that every home is as important as the next, regardless of price point, and that everyone deserves the ability to purchase a home that suits their needs. Accordingly, we are able to offer a range of optionality within the homebuilding process, from move-in-ready inventory homes to homes that can be tailored with additional features, including certain structural modifications.
Accordingly, we are able to offer a range of optionality within the homebuilding process, from move-in-ready inventory homes to homes that can be tailored with additional features.
Sales representatives assist potential homebuyers by providing them with floor plans, price information, development and construction timetables, tours of model homes and the home customization options that we offer. Sales representatives are trained by us and generally have prior experience selling new homes in the local market.
Our in-house sales force typically works from sales offices located in model homes close to or in each community. Sales representatives assist potential homebuyers by providing them with floor plans, price information, development and construction timetables, tours of model homes and the home customization options that we offer.
Our homebuilding cost of sales includes the acquisition and finance costs of homesites or lots, municipality fees, the costs associated with obtaining building permits, materials and labor to construct the home, interest costs for construction loans, internal and external realtor commissions and other miscellaneous closing costs. Homesite costs range from 30-35% of the average cost of a home.
We leverage our national presence and volume to secure better prices with manufacturers and all vendors. 4 Table of Contents Our homebuilding cost of sales includes the acquisition and finance costs of homesites or lots, municipality fees, the costs associated with obtaining building permits, materials and labor to construct the home, financing costs on our homebuilding related debt, internal and external realtor commissions and other miscellaneous closing costs.
Of our full-time employees, 138 worked in our corporate office, 116 in divisional management and 370 in sales. None of our employees are represented by a labor union or covered under a collective bargaining agreement, and we have not experienced any strikes or work stoppages.
None of our employees are represented by a labor union or covered under a collective bargaining agreement, and we have not experienced any strikes or work stoppages. Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
Instead, we rely on local and regional builder associations to identify and contract with reputable tradespeople. This approach also eliminates the need for equipment investment, as we do not employ our own construction base. Each division is led by a construction director, manager, or vice president who oversees area managers.
Cycle times for our custom homes are typically longer. We have extensive experience managing construction processes without employing subcontractors directly. Instead, we rely on local and regional builder associations to identify and contract with reputable tradespeople. This approach eliminates the need for equipment investment, as we do not employ our own construction base.
Backlog represents the number of homes in backlog from the previous period, plus net sales, minus the number of home closings during the period.
Our backlog of sold homes (“backlog”) consists of homes under contract that have not yet been delivered to a homebuyer or third-party investor. Backlog represents the number of homes in backlog from the previous period, plus net sales, minus the number of home closings during the period.
The Company has made an ethics hotline available to all associates of the Company where they are able to report any violations of the Standards of Conduct, including violations related to the harassment or discrimination of any associate. 8 Table Contents Available Information We are a Delaware corporation incorporated on September 11, 2020.
The Company has made an ethics hotline available to all associates of the Company where they are able to report any violations of the Standards of Conduct, including violations related to the harassment or discrimination of any associate. 8 Table of Contents Sustainability and Community Impact We are committed to constructing homes that are energy efficient and providing affordable housing in a variety of ways such as, but not limited to, the following: • Home features include solar panels, solar-conscious building, water-conscious landscaping, electric car outlets, energy-efficient appliances and fixtures • Focus on first-time homebuyers • Numerous homes built for low-income residents Available Information We are a Delaware corporation incorporated on September 11, 2020.
Ramsay started her career at Aeroflex Incorporated, a former publicly listed aerospace and defense electronics manufacturer, where she worked from 2002 to 2014. Ms. Ramsay is a Certified Public Accountant and received a B.B.A in Accounting, Financial Economics and Economics from Lincoln Memorial University. 9 Table Contents Board of Directors Patrick O.
Ramsay started her career at Aeroflex Incorporated, a former publicly listed aerospace and defense electronics manufacturer, where she worked from 2002 to 2014. Ms. Ramsay is an advisory member of the Florida Institute of CFOs, is a board member of Jet HomeLoans LP and is a member of Dream Finders’ Investment Committee. Ms.
Our Mid-Atlantic segment consists of our operations in DC Metro; Nashville, Tennessee; Charlotte, Fayetteville, Raleigh and Wilmington, North Carolina and Charleston, Myrtle Beach and Greenville, South Carolina. Our Midwest segment consists of our homebuilding operations in Austin, Dallas, Houston and San Antonio, Texas; Denver, Colorado and Phoenix, Arizona.
Our Mid-Atlantic segment consists of our operations in the Washington, D.C. metropolitan area, which comprises Washington D.C., Northern Virginia and Maryland (“DC Metro”); Nashville, Tennessee; Charlotte, Fayetteville, Raleigh and Wilmington, North Carolina and Charleston, Myrtle Beach and Greenville, South Carolina.
Our cancellation rate for a given period is calculated as the total number of sales contracts cancelled during the period, divided by the total number of new sales contracts entered into during the period. When a cancellation occurs, we generally retain the customer deposit and resell the home to a new customer.
Our cancellation rate for a given period is calculated as the total number of cancellations during the period, divided by the total number of gross sales contracts entered into during the period. Cancellations can occur for various reasons outside of our control, including customer credit issues or changes in other personal circumstances.
Communities have dedicated construction managers supervising the work performed by the subcontractors. We use enterprise resource planning and integrated scheduling software for close construction progress monitoring and timely issue identification. Our software also enables our superintendents to monitor the completion of work, which, in turn, expedites payments to the subcontractors.
Each division is led by a construction director, manager, or vice president who oversees area managers. Communities have dedicated construction managers supervising the work performed by the subcontractors. We use enterprise resource planning and integrated scheduling software to monitor and manage construction progress and identify related issues timely.
While our land selection process is driven mainly by the local division and regional leadership, the land sourcing process, including final approval to move forward with a project, is a collaboration involving corporate leadership, including our President and Chief Executive Officer.
We typically pursue opportunities more aggressively in our markets that generate the greatest returns, while proceeding more cautiously in our markets where operational performance can be improved. 2 Table of Contents While our land acquisition process is driven mainly by the divisional and regional leadership, the land acquisition process, including final approval to move forward with a project, is a collaboration involving corporate leadership.
These deposits are typically nonrefundable, but each customer situation is evaluated individually. Sales to third-party investors that intend to lease the homes (“built-for-rent contracts”) are reported when the Company has received a nonrefundable deposit. Net new orders (or “net sales”) are sales of homes during the period less cancellations of existing sales contracts during the period.
Sales under built-for-rent contracts are reported when we have received a nonrefundable deposit. Net sales are sales of homes during the period less cancellations of existing sales contracts during the period.
Zalupski– President and Chief Executive Officer of Dream Finders Homes, Inc. and serves as Chairman of the Board of Directors. W. Radford Lovett II– Founder, Chairman and Chief Executive Officer of TowerCom, Ltd, an owner and developer of broadcast communication towers, and TowerCom Development, LP, a developer of wireless communications infrastructure. Justin W.
Ramsay is a Certified Public Accountant and received a B.B.A in Accounting, Financial Economics and Economics from Lincoln Memorial University. Board of Directors Patrick O. Zalupski– President and Chief Executive Officer of Dream Finders Homes, Inc. and serves as Chairman of the Board of Directors. Justin W.
Our Financial Services segment consists of our mortgage banking and title services operations, which primarily consist of Jet HomeLoans and Golden Dog Title and Trust. The operations of Liberty Communities will be included in our Southeast segment as of the date of acquisition. Refer to Note 9, Segment Reporting to our consolidated financial statements for more information.
Liberty’s Atlanta operations are included in the Southeast segment and Liberty’s Greenville operations are included in the Mid-Atlantic segment from the acquisition date. Refer to Note 9, Segment Reporting to our consolidated financial statements for more information. Asset-Light Business Strategy We employ an asset-light lot acquisition strategy to achieve our growth goals.
Removed
Our land selection process begins with key economic drivers, such as demographic trends and employment growth. We typically pursue opportunities more aggressively in our markets that generate the greatest returns, while proceeding more cautiously in our markets where we have plans in process to improve our operational efficiencies.
Added
Our home offerings are marketed under various brands, including Dream Finders Homes, DF Luxury, Reverie Active Adult Lifestyle by Dream Finders Homes, Craft Homes and Coventry Homes.
Removed
Refer to Note 11, Related Party Transactions to the consolidated financial statements for more information. 3 Table Contents Sales and Backlog A new order (“new sale”) is reported when a customer has received preliminary mortgage approval and the sales contract has been signed by the customer, approved by us and secured by a deposit.
Added
Also launched an in-house customer insurance agency providing affordable homeowners insurance policies for homebuyers. This agency targets new-home construction from top-rated providers. March 2025 – Expanded Jet HomeLoans’ mortgage servicing capabilities through an acquired mortgage licensing platform with a Federal Home Loan Mortgage Corporation and Government National Mortgage Association-approved lender.
Removed
Cancellations can occur for various reasons outside of our control, including customer credit issues or changes in other personal circumstances. Our backlog of sold homes (“backlog”) consists of homes under contract that have not yet been delivered to a homebuyer or third-party investor.
Added
April 2025 – Acquired Colorado-based title insurance underwriter, Alliant Title and a related affiliate, expanding the Company’s financial service offerings. May 2025 – Further expanded our operations in the Atlanta, Georgia market with the acquisition of the majority of the homebuilding assets of Green River Builders, Inc.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business can be substantially affected by adverse changes in general and local economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; availability and pricing of mortgage financing for homebuyers; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes, the cost of homeowners insurance and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; and interest of financial institutions or other businesses in purchasing wholesale homes.
Biggest changeThe homebuilding industry can be substantially affected by adverse changes in general and local economic or business conditions that are outside of our control, including changes in interest rates; employment levels and personal income growth; availability and pricing of mortgage financing; consumer spending, as well as both consumer confidence generally and the confidence of potential homebuyers in particular; inflation; real estate taxes, the cost of homeowners insurance and other expenses; supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing; homebuyer interest in our current or new product designs and new home community locations; general consumer interest in purchasing a home compared to choosing other housing alternatives; and interest of financial institutions or other businesses in purchasing wholesale homes.
We may not be able to pass any increased land costs to our customers, which could adversely impact our revenues, earnings and margins. 18 Table Contents Although when the fair market value of controlled lots deviate from that of which the option contracts were originally executed, we attempt to renegotiate the terms of the option contracts to ensure that the yields are aligned with current market conditions, there is no guarantee our renegotiating efforts will be successful.
We may not be able to pass any increased land costs to our customers, which could adversely impact our revenues, earnings and margins. 18 Table of Contents Although when the fair market value of controlled lots deviate from that of which the option contracts were originally executed, we attempt to renegotiate the terms of the option contracts to ensure that the yields are aligned with current market conditions, there is no guarantee our renegotiating efforts will be successful.
Our success in recently entered markets or those we may choose to enter in the future depends substantially on our ability to source labor and local materials on terms that are favorable to us. Our markets may exhibit a reduced level of skilled labor relative to increased homebuilding demand in these markets.
Our success in recently entered markets or those we may choose to enter in the future depends substantially on our ability to source local labor and materials on terms that are favorable to us. Our markets may exhibit a reduced level of skilled labor relative to increased homebuilding demand in these markets.
The following summary risk factors, may cause actual results to differ materially from those expressed or implied in our forward-looking statements: • the negative impact of an increase in cancellation rates affecting our home closings, backlog and sales revenues as a result of rising interest rates, inflationary pressures or other factors; • a shortage of building materials or labor, or increases in costs that delay or increase the cost of home construction; 32 Table Contents • the impact from global economic or other factors that could adversely affect demand for new homes; • volatility and uncertainty in the credit markets and broader financial markets; • the success of our operations in new markets and our ability to expand into additional new markets; • our ability to continue to leverage our asset-light and capital-efficient lot acquisition strategy; • our ability to develop our projects successfully or within expected timeframes; • disruption in the terms or availability of mortgage financing or an increase in the number of foreclosures in our markets; • shortages of, or increased prices for, labor, land or raw materials used in land development and housing construction, including due to changes in trade policies; • delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control; • changes in liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental laws and regulations; • the degree and nature of our competition; • negative publicity or poor relations with the residents of our projects; • existing and future litigation, arbitration or other claims; • availability of qualified personnel and third-party contractors and subcontractors; • information system failures, cyber incidents or breaches in security; • our ability to retain our key personnel; and • other factors we discuss under the section entitled “Risk Factors.” We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of our business.
The following summary risk factors, may cause actual results to differ materially from those expressed or implied in our forward-looking statements: • the negative impact of an increase in cancellation rates affecting our home closings, backlog and sales revenues as a result of rising interest rates, inflationary pressures or other factors; • a shortage of building materials or labor, or increases in costs that delay or increase the cost of home construction; • the impact from global economic or other factors that could adversely affect demand for new homes; • volatility and uncertainty in the credit markets and broader financial markets; • the success of our operations in new markets and our ability to expand into additional new markets; • our ability to continue to leverage our asset-light and capital-efficient lot acquisition strategy; • our ability to develop our projects successfully or within expected timeframes; • disruption in the terms or availability of mortgage financing or an increase in the number of foreclosures in our markets; • shortages of, or increased prices for, labor, land or raw materials used in land development and housing construction, including due to changes in trade policies; • delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control; • changes in liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental laws and regulations; • the degree and nature of our competition; • negative publicity or poor relations with the residents of our projects; • existing and future litigation, arbitration or other claims; • availability of qualified personnel and third-party contractors and subcontractors; • information system failures, cyber incidents or breaches in security; • our ability to retain our key personnel; and • other factors we discuss under the section entitled “Risk Factors.” 32 Table of Contents We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of our business.
These risks include, but are not limited to, the risks described under “Risk Factors” in this Annual Report on Form 10-K. Should one or more of the risks or uncertainties described in this Annual Report on Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
These risks include, but are not limited to, the risks described under “Risk Factors” in this Annual Report on Form 10-K. Should one or more of such risks or uncertainties described in this Annual Report on Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
Some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: • providing that the Board of Directors is expressly authorized to determine the size of our Board of Directors; • limiting the ability of our stockholders to call special meetings; • establishing advance notice provisions for stockholder proposals and nominations for elections to the Board of Directors to be acted upon at meetings of stockholders; • providing that the Board of Directors is expressly authorized to adopt, or to alter or repeal, our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. 27 Table Contents Mr.
Some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: • providing that the Board of Directors is expressly authorized to determine the size of our Board of Directors; • limiting the ability of our stockholders to call special meetings; • establishing advance notice provisions for stockholder proposals and nominations for elections to the Board of Directors to be acted upon at meetings of stockholders; • providing that the Board of Directors is expressly authorized to adopt, or to alter or repeal, our bylaws; and • establishing advance notice and certain information requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. 29 Table of Contents Mr.
There is no guarantee that our endeavors, encompassing system consolidation, fortification, upgrades, and expansion, along with embedding security into the architecture of our information systems, and the development of new systems to match the pace of technological evolution, including generative AI platforms, will yield the desired outcomes or prevent the emergence of additional system-related challenges in the future. 30 Table Contents Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection.
There is no guarantee that our endeavors, encompassing system consolidation, fortification, upgrades, and expansion, along with embedding security into the architecture of our information systems, and the development of new systems to match the pace of technological evolution, including generative AI platforms, will yield the desired outcomes or prevent the emergence of additional system-related challenges in the future. 21 Table of Contents Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection.
The elimination or curtailment of state bonds to assist homebuyers could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations. 11 Table Contents In addition, certain current regulations impose, and future regulations may strengthen or impose new standards and requirements relating to the origination, securitization and servicing of residential consumer mortgage loans, which could further restrict the availability and affordability of mortgage loans and the demand for such loans by financial intermediaries and, as a result, adversely affect our home sales, financial condition and results of operations.
The elimination or curtailment of state bonds to assist homebuyers could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations. 12 Table of Contents In addition, certain current regulations impose, and future regulations may strengthen or impose new standards and requirements relating to the origination, securitization and servicing of residential consumer mortgage loans, which could further restrict the availability and affordability of mortgage loans and the demand for such loans by financial intermediaries and, as a result, adversely affect our home sales, financial condition and results of operations.
Zalupski, through his beneficial ownership of all of our outstanding Class B common stock as of December 31, 2024 , controls approxima tely 84% o f the total combined voting power of our outstanding Class A and Class B common stock, which gives him the ability to prevent a potential takeover of our company.
Zalupski, through his beneficial ownership of all of our outstanding Class B common stock as of December 31, 2025 , controls approxima tely 84% o f the total combined voting power of our outstanding Class A and Class B common stock, which gives him the ability to prevent a potential takeover of our company.
Additionally, the Inflation Reduction Act of 2022 expanded the credit to eligible homebuilders, resulting in an increase from $2,000 to either $2,500 or $5,000 per qualifying home, depending on which specified energy efficiency standards are achieved, effective January 1, 2023 through December 31, 2032. For the year ended December 31, 2023 , we claimed $3 million of Federal Energy Credits.
Additionally, the Inflation Reduction Act of 2022 expanded the credit to eligible homebuilders, resulting in an increase from $2,000 to either $2,500 or $5,000 per qualifying home, depending on which specified energy efficiency standards are achieved, effective January 1, 2023 through December 31, 2032. For the year ended December 31, 2024 , we claimed $12 million of Federal Energy Credits.
The forfeiture of land contract deposits or inventory impairments may result in a loss that could have a material adverse effect on our profitability, stock performance, ability to service our debt obligations and future cash flows. 14 Table Contents We are subject to warranty and liability claims arising in the ordinary course of business that can be significant.
The forfeiture of land contract deposits or inventory impairments may result in a loss that could have a material adverse effect on our profitability, stock performance, ability to service our debt obligations and future cash flows. We are subject to warranty and liability claims arising in the ordinary course of business that can be significant.
Further changes in income tax laws by the federal government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes. 15 Table Contents Federal income tax credits currently available to certain builders of energy-efficient new homes may not be extended by future legislation. In August 2022, the U.S.
Further changes in income tax laws by the federal government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes. Federal income tax credits currently available to certain builders of energy-efficient new homes may not be extended by future legislation. In August 2022, the U.S.
If we are unable to obtain letters of credit or surety bonds when required, or the conditions imposed by issuers increase significantly, our liquidity and results of operations could be adversely affected. Access to financing sources may not be available on favorable terms, or at all, which could adversely affect our ability to maximize our returns.
If we are unable to obtain letters of credit or surety bonds when required, or the conditions imposed by issuers increase significantly, our liquidity and results of operations could be adversely affected. 26 Table of Contents Access to financing sources may not be available on favorable terms, or at all, which could adversely affect our ability to maximize our returns.
We have obtained key man life insurance that would provide us with proceeds in the event of the death or disability of the Chief Executive Officer and/or the National President. Experienced employees in the homebuilding, land acquisition, development and construction industries are fundamental to our ability to generate, obtain and manage opportunities.
We have obtained key man life insurance that would provide us with proceeds in the event of the death or disability of the Chief Executive Officer and/or the National President. 27 Table of Contents Experienced employees in the homebuilding, land acquisition, development and construction industries are fundamental to our ability to generate, obtain and manage opportunities.
A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, particularly within Florida and Texas, our largest markets, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
A prolonged economic downturn in the future in one or more of the regions in which we operate, or a particular industry that is fundamental to one or more of these areas, particularly within Florida and Texas, our largest markets, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
In addition to customary events of default, the Indenture contains certain restrictive covenants that, among other things, limit our ability to incur or guarantee certain indebtedness, issue certain equity interests or engage in certain capital stock transactions, and impose constraints concerning mergers, consolidations, and asset transfers.
In addition to customary events of default, the Indentures contain certain restrictive covenants that, among other things, limit our ability to incur or guarantee certain indebtedness, issue certain equity interests or engage in certain capital stock transactions, and impose constraints concerning mergers, consolidations, and asset transfers.
Zalupski is able to control matters requiring stockholder approval, including the election and removal of directors, changes to our organizational documents and significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets.
As a result, Mr. Zalupski is able to control matters requiring stockholder approval, including the election and removal of directors, changes to our organizational documents and significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets.
Conflicts of interest may exist or could arise in the future with DF Capital and certain of its managed funds, including with certain of our executive officers and directors who are also investors in certain funds managed by DF Capital.
Conflicts of interest may exist or could arise in the future with DF Capital and certain of its managed funds, including with certain of our executive officers and a former director who are also investors in certain funds managed by DF Capital.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Annual Report on Form 10-K.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Annual Report on Form 10-K. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Almost all of our customers finance their home purchases through lenders that provide mortgage financing. Mortgage interest rates have generally trended downward for the last several decades and reached historic lows in 2021, which —during that period— made the homes we sell more affordable.
Almost all of our customers finance their home purchases through lenders that provide mortgage financing. Mortgage interest rates have generally trended downward for the last several decades and reached historic lows in 2021, which—during that period—made the homes we sell more affordable. Mortgage interest rates have increased substantially since their historic lows, which negatively impacted consumer affordability.
Cancellations negatively impact the number of closed homes, net new orders, homebuilding revenues and results of operations, as well as the backlog.
Cancellations negatively impact the number of closed homes, net sales, homebuilding revenues and results of operations, as well as the backlog.
These forward-looking statements include, but are not limited to, statements about: • our market opportunity and the potential growth of that market; • trends with respect to interest rates and cancellation rates; • our strategy, expected outcomes and growth prospects; • trends in our operations, industry and markets; • our future profitability, indebtedness, liquidity, access to capital and financial condition; and • our integration of companies that we have acquired into our operations.
These forward-looking statements include, but are not limited to, statements about: • our market opportunities and the potential growth of those markets; • trends with respect to interest rates, cancellation rates and demand for affordable housing; • our strategy, expected outcomes and growth prospects; 31 Table of Contents • trends in our operations, industry and markets; • our future profitability, indebtedness, liquidity, access to capital and financial condition; and • our integration of companies that we have acquired into our operations.
Our financial services segment originates mortgages primarily for our homebuilding clients. Almost all of these mortgages are promptly sold in the secondary mortgage market on a servicing released, nonrecourse basis, though we retain liability for certain limited representations, such as fraud, and warranties related to the sale of loans.
Almost all of these mortgages are promptly sold in the secondary mortgage market on a servicing released, nonrecourse basis, though we retain liability for certain limited representations, such as fraud, and warranties related to the sale of loans.
As of December 31, 2024 , we had outstanding letters of credit and surety bonds totalin g $21 million and $298 million, respectively. These letters of credit and surety bonds are generally subject to certain financial covenants and other limitations.
As of December 31, 2025 , we had outstanding letters of credit and surety bonds totalin g $27 million and $359 million, respectively. These letters of credit and surety bonds are generally subject to certain financial covenants and other limitations.
Higher interest rates could increase debt service requirements on our current floating rate indebtedness, and on any floating rate indebtedness we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes.
Our current indebtedness also includes, and any additional indebtedness we subsequently incur may have, a floating rate of interest. Higher interest rates could increase debt service requirements on our current floating rate indebtedness, and on any floating rate indebtedness we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes.
For instance, our c redit agreement requires the Company to meet certain financial ratios and comply with covenants, such as a maximum debt to capitalization ratio, minimum interest coverage ratios and minimum liquidity ratios. Furthermore, the Company issued senior unsecured notes in August 2023 which were issued pursuant to an indenture (the “Indenture”).
For instance, our c redit agreement requires the Company to meet certain financial ratios and comply with covenants, such as a maximum debt to capitalization ratio, minimum interest coverage ratios and minimum liquidity ratios. Furthermore, the Company issued senior unsecured notes in August 2023 and September 2025 pursuant to indentures (the “Indentures”).
These appraisal issues could have a material adverse effect on our business and results of operations. If the market value of our inventory or controlled lot position declines, our profits could decrease and we may incur losses. Inventory risk can be substantial for homebuilders.
These appraisal issues could have a material adverse effect on our business and results of operations. 14 Table of Contents If the market value of our inventory or controlled lot position declines, we may incur write-downs of our real estate assets and our profits could decrease. Inventory risk can be substantial for homebuilders.
Our information systems are subject to damage or interruption from power outages, computer and telecommunication failures, computer viruses, security breaches, including malware and phishing, cyberattacks, natural disasters, usage errors by our employees and other related risks.
We rely on accounting, financial, operational, management and other information systems to conduct our operations. Our information systems are subject to damage or interruption from power outages, computer and telecommunication failures, computer viruses, security breaches, including malware and phishing, cyberattacks, natural disasters, usage errors by our employees and other related risks.
Certain rights of the holders of the redeemable preferred stock could make it more difficult or more expensive for a third party to acquire us.
Certain rights of the holders of the redeemable preferred stock could delay or prevent an otherwise beneficial takeover or takeover attempt of us. Certain rights of the holders of the redeemable preferred stock could make it more difficult or more expensive for a third party to acquire us.
Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, owns, through personal holdings and an entity that he controls, 100% of our Class B common stock (representin g approximately 83% of the total combined voting power of our Class A and Class B common stock as of December 31, 2024 ). 25 Table Contents As a result, Mr.
Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, owns, through personal holdings and an entity that he controls, 100% of our Class B common stock (representin g ap proximately 84% of the total combined voting power of our Class A and Class B common stock as of December 31, 2025 ).
Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors. We do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will continue to be available at reasonable rates and in our markets.
We do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will continue to be available at reasonable rates and in our markets.
We compete with large national and regional homebuilding companies, some of which have greater financial and operational resources than us, and with smaller local homebuilders and land developers, some of which may have lower administrative costs than us.
Additionally, there are relatively low barriers to entry into our business. We compete with large national and regional homebuilding companies, some of which have greater financial and operational resources than us, and with smaller local homebuilders and land developers, some of which may have lower administrative costs than us.
Mortgage interest rates increased substantially through December 2024 since their historic lows, which negatively impacted consumer affordability. We cannot predict future mortgage interest rates, and should these rates continue to climb or stay elevated over an extended timeframe, the financing ability of prospective homebuyers could be adversely affected. As a result, our operating results may be significantly impacted.
We cannot predict future mortgage interest rates, and should these rates climb or stay elevated over an extended timeframe, the financing ability of prospective homebuyers could be adversely affected. As a result, our operating results may be significantly impacted.
Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the current interest rates; • the market’s perception of our growth potential; • with respect to land acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our current debt levels; • our current and expected future earnings; • our cash flow; and • the market price per share of our Class A common stock. 24 Table Contents The global credit and equity markets and the overall economy can be extremely volatile, which could have a number of adverse effects on our operations and capital requirements.
Our access to additional third-party sources of financing will depend, in part, on: • general market conditions; • the current interest rates; • the market’s perception of our growth potential; • with respect to land acquisition and/or development financing, the market’s perception of the value of the land parcels to be acquired and/or developed; • our current debt levels; • our current and expected future earnings; • our cash flow; and • the market price per share of our Class A common stock.
Although we have implemented systems and processes intended to secure our information systems, there can be no assurance that our efforts to maintain the security and integrity of our information systems will be effective or that future attempted security breaches or disruptions would not be successful or damaging.
Although we have implemented systems and processes intended to secure our information systems, including with respect to the use of AI, which are subject to oversight by the Cybersecurity Response Committee and the Nominating and Governance Committee, there can be no assurance that our efforts to maintain the security and integrity of our information systems will be effective or that future attempted security breaches or disruptions would not be successful or damaging.
Governmental rulings that hold us responsible for labor practices by our subcontractors could create substantial exposures for us under our subcontractor relationships, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.
Governmental rulings that hold us responsible for labor practices by our subcontractors could create substantial exposures for us under our subcontractor relationships, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations. 20 Table of Contents Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.
The results of our homebuilding operations depend in part upon our continuing ability to successfully identify, control and acquire an adequate number of homebuilding lots in desirable locations.
Homebuilding Operational Risks Our inability to successfully identify, secure and control an adequate inventory of lots at reasonable prices could adversely impact our operations. The results of our homebuilding operations depend in part upon our continuing ability to successfully identify, control and acquire an adequate number of homebuilding lots in desirable locations.
Although we intend to call the shares of redeemable preferred stock for redemption prior to their conversion, in the event the shares of redeemable preferred stock are converted into shares of Class A common stock, such issuance will cause substantial dilution to the holders of our common stock. 29 Table Contents Certain rights of the holders of the redeemable preferred stock could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
Although we intend to call the shares of redeemable preferred stock for redemption prior to their conversion, in the event the shares of redeemable preferred stock are converted into shares of Class A common stock, such issuance will cause substantial dilution to the holders of our common stock.
Labor and raw material shortages and price increases for labor and raw materials could cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. 19 Table Contents Investors in mortgages could require that we repurchase loans or compensate them for losses stemming from mortgages we have sold.
Labor and raw material shortages and price increases for labor and raw materials could cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
The elevated interest rate environment that persisted into late 2023 negatively impacted our construction loan financing costs, which in turn affected our gross margin. Additionally, the increased use of sales incentives to combat higher mortgage rates negatively impacted our SG&A expense. If inflationary conditions continue in future periods, it could materially adversely affect our business and financial results.
Additionally, the increased use of sales incentives to combat higher mortgage rates negatively impacted our SG&A expense. If inflationary conditions continue in future periods, it could continue to materially adversely affect our business and financial results.
For example, losses associated with floods, hurricanes, landslides, prolonged periods of precipitation, earthquakes and other weather-related and geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable.
For example, losses associated with floods, hurricanes, landslides, prolonged periods of precipitation, earthquakes and other weather-related and geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable. A sizable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.
The existence of a share buyback program could also cause our stock price to be higher than it would be in the absence of such a program.
Repurchases pursuant to the share buyback program could affect our stock price and increase its volatility and may reduce the market liquidity for our stock. The existence of a share buyback program could also cause our stock price to be higher than it would be in the absence of such a program.
Such trading conflicts and related escalating governmental actions that result in additional tariffs, duties and/or trade restrictions could increase our construction costs further, cause disruptions or shortages in our supply chains and/or negatively impact the U.S., regional or local economies, and, individually or in the aggregate, materially and adversely affect our business and our operating results. 16 Table Contents We and our subcontractors are subject to environmental, health and safety laws and regulations, which may increase our costs, result in liabilities, limit the areas in which we can build homes and delay completion of our projects.
Such trading conflicts and related escalating governmental actions that result in additional tariffs, duties and/or trade restrictions could increase our construction costs further, cause disruptions or shortages in our supply chains and/or negatively impact the U.S., regional or local economies, and, individually or in the aggregate, materially and adversely affect our business and our operating results.
Further, if legal standards for the classification of independent contractors change or appear to be changing, we may need to modify our compensation and benefits structure for such independent contractors, including by paying additional compensation or reimbursing expenses. 20 Table Contents There can be no assurance that legislative, judicial, administrative or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the independent contractor classification of any individual or vendor currently characterized as independent contractors doing business with us.
There can be no assurance that legislative, judicial, administrative or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the independent contractor classification of any individual or vendor currently characterized as independent contractors doing business with us.
Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents, and subsequent actions by these residents could adversely affect our sales or our reputation.
Residents of communities we develop rely on us to resolve issues or disputes that may arise in connection with the operation or development of their communities. Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents, and subsequent actions by these residents could adversely affect our sales or our reputation.
These types of financial instruments are designed to hedge or offset any decrease in the market value of the Company’s securities and can be speculative in nature and therefore can create the appearance that the transaction is based on material nonpublic information.
Further, our directors, officers and employees are prohibited from purchasing or using certain financial instruments (including equity swaps, collars and exchange-traded funds) designed to hedge or offset any decrease in the market value of the Company’s securities, which can be speculative in nature and, therefore, can create the appearance that the transaction is based on material nonpublic information.
Further, to the extent that a portion of the purchase price of an acquisition is paid in the form of an earn out on future financial results, the success of such an acquisition will not be fully realized by us for a period of time as it is shared with the sellers.
To the extent we pay the purchase price of an acquisition with proceeds from incurring debt, such an acquisition would increase our level of indebtedness and interest expense and could negatively affect our operating results, liquidity and restrict our operations. 24 Table of Contents Further, to the extent that a portion of the purchase price of an acquisition is paid in the form of an earn out on future financial results, the success of such an acquisition will not be fully realized by us for a period of time as it is shared with the sellers.
As a result of any of these statutes, ordinances, rules or regulations, the timing of our home sales could be delayed, the number of our home sales could decline and/or our costs could increase, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
As a result of any of these statutes, ordinances, rules or regulations, the timing of our home sales could be delayed, the number of our home sales could decline and/or our costs could increase, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. 16 Table of Contents Changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of building materials and products used in our homes.
The homebuilding industry is cyclical in nature and if we experience a significant or sustained downturn as a result of the economic factors described above or otherwise, it would materially adversely affect our business and results of operations. 10 Table Contents The risks described above can cause demand and prices for our homes to fall or cause us to take longer and incur more costs to develop the land and build our homes.
The homebuilding industry is cyclical in nature and if we experience a significant or sustained downturn as a result of the economic factors described above or otherwise, it would materially adversely affect our business and results of operations.
If our markets have an oversupply of homes relative to demand, we may be unable to offset any such increases in costs with corresponding higher sales prices for our homes. Inflation may continue to accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand.
Inflation may continue to accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our homes to offset the increasing costs of our operations, our margins could decrease.
All of the above risks could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. 22 Table Contents Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners.
Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners.
In the event that such margin loan (or any other margin loan by an officer or director) were to be called and the shares of common stock were sold on the open market by the lender or if we otherwise have a large number of shares being sold on the open market by the counterparties to variable forward sale contracts, the price of our common stock could decline materially.
In the event that such margin loans (or any other margin loan by an officer or director) were to be called and the shares of common stock were sold on the open market by the lender or if we otherwise have a large number of shares being sold on the open market by the counterparties to variable forward sale contracts, the price of our common stock could decline materially. 28 Table of Contents There are various potential conflicts of interest in our relationship with DF Capital and certain of its managed funds, including with certain of our executive officers and a former director who are investors in certain funds managed by DF Capital, which could result in decisions that are not in the best interest of our stockholders.
Building sites are inherently dangerous, and operating in the homebuilding and land development industry poses certain inherent health and safety risks. Due to health and safety regulatory requirements and the number of projects we work on, health and safety performance is critical to the success of all areas of our business.
Due to health and safety regulatory requirements and the number of projects we work on, health and safety performance is critical to the success of all areas of our business.
Changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of building materials and products used in our homes. The state of relationships between other countries and the U.S. with respect to trade policies, taxes, government relations and tariffs may impact our business.
The state of relationships between other countries and the U.S. with respect to trade policies, taxes, government relations and tariffs may impact our business.
These indemnities obligate us to reimburse the indemnified parties for damages related to environmental matters, and, generally, there is no term or damage limitations on these indemnities. 17 Table Contents Environmental laws and regulations relating to climate change and energy can have an adverse impact on our activities, operations and profitability and on the availability and price of certain raw materials, such as lumber, steel and concrete.
Environmental laws and regulations relating to climate change and energy can have an adverse impact on our activities, operations and profitability and on the availability and price of certain raw materials, such as lumber, steel and concrete.
Our share buyback program that was approved by the Board in June 2023 could affect our stock price and increase its volatility, and may reduce the market liquidity for our stock. The share buyback program may also materially impact the Company’s liquidity.
There is no guarantee that the price of the Class A common stock that will prevail in the market will ever exceed the price that was paid. Our share buyback program could affect our stock price and increase its volatility, and may reduce the market liquidity for our stock. The share buyback program may also materially impact the Company’s liquidity.
Our inability to continue to compete successfully in any of our markets could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. Natural disasters, severe weather and adverse geologic conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.
Furthermore, if buyer demand for new homes in these markets decreases, home prices could decline, which would have a material adverse effect on our business. 13 Table of Contents Natural disasters, severe weather and adverse geologic conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.
In addition, future indebtedness we obtain may contain financial covenants limiting our ability to, for example, incur additional indebtedness, make certain investments, reduce liquidity below certain levels and pay dividends to our stockholders and otherwise affect our operating policies. 23 Table Contents If we default on one or more of our debt agreements, it could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
In addition, future indebtedness we obtain may contain financial covenants limiting our ability to, for example, incur additional indebtedness, make certain investments, reduce liquidity below certain levels and pay dividends to our stockholders and otherwise affect our operating policies.
Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should decline. Our business strategy is focused on the design, construction and sale of single-family detached and attached homes. We do have some geographic concentration present in our operations.
Our geographic concentration and regional factors affecting the homebuilding industry in our current markets could materially and adversely affect us. Our business strategy is focused on the acquisition of suitable land and the design, construction and sale of primarily single-family homes in residential subdivisions.
Accordingly, the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements may not be afforded to our Class A common stockholders. The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Accordingly, the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements may not be afforded to our Class A common stockholders. We have not declared or paid cash dividends on our Class A common stock and we cannot assure that cash dividends will be paid.
These permits and other approvals may contain restrictions that are costly or difficult to comply with, or may be opposed or challenged by local governments, environmental advocacy groups, neighboring property owners or other interested parties, which may result in delays, additional costs and non-approval of our activities.
These permits and other approvals may contain restrictions that are costly or difficult to comply with, or may be opposed or challenged by local governments, environmental advocacy groups, neighboring property owners or other interested parties, which may result in delays, additional costs and non-approval of our activities. 17 Table of Contents From time to time, the EPA and similar federal, state or local agencies review land developers’ and homebuilders’ compliance with environmental, health and safety laws, statutes, ordinance, rules and regulations, including those relating to the control of storm water discharges during construction.
Our Class A and B common stock r ank junior to our redeemable preferred stock with respect to dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
Although share buyback programs are intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the effectiveness of these repurchases. 30 Table of Contents Our Class A and B common stock r ank junior to our redeemable preferred stock with respect to dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
We operate in a very competitive environment that is characterized by competition from a number of other homebuilders and land developers in each market in which we operate. Additionally, there are relatively low barriers to entry into our business.
The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our customers, our business could decline. We operate in a very competitive environment that is characterized by competition from a number of other homebuilders and land developers in each market in which we operate.
In addition, changes to the fair value of estimated earn out payments could significantly impact our results of operations.
In addition, changes to the fair value of estimated earn out payments could significantly impact our results of operations. All of the above risks could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
In addition, our land bank option contracts often include provisions under which delays in land development and/or longer land takedown periods cause us to incur additional cost. It can take several years from the time we acquire control of an undeveloped property to the time we make our first home sale on the site.
In addition, our land bank option contracts often include provisions under which delays in land development and/or longer land takedown periods cause us to incur additional cost.
For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”).
For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”). Further changes in income tax laws by the federal government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.
In addition, we could be required to make material expenditures related to the settlement of such issues or disputes or to modify our community development plans, which could adversely affect our results of operations. Strategic and Financial Risks Our success depends upon our ability to successfully adapt our business strategy to changing home buying patterns and trends.
In addition, we could be required to make material expenditures related to the settlement of such issues or disputes or to modify our community development plans, which could adversely affect our results of operations. Information system failures, cyber incidents or breaches in security could adversely affect us.
Such actions would result in our forfeiture of some or all of any deposits, fees or investments paid or made in respect of such arrangements.
Such actions would result in our forfeiture of some or all of any deposits, fees or investments paid or made in respect of such arrangements. Additionally, cross-default provisions in certain contracts, if triggered, could result in further forfeiture of these items in related arrangements with the same counterparty.
There can be no assurance that any future share repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although share buyback programs are intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the effectiveness of these repurchases.
There can be no assurance that any future share repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value.
Accordingly, a ny such financial instruments must be pre-cleared by the designated compliance officer and approved by the Board of Directors (without the vote of the requesting person). As of December 31, 2024 , Mr. Zalupski had 2,000,000 shares of our Class B common stock subject to prepaid variable forward sales contracts that are expected to settle starting in 2027.
Accordingly, any such financial instruments must be pre-cleared by the designated compliance officer and approved by the Board of Directors (without the vote of the requesting person). However, our directors, officers and employees may enter into prepaid variable forward sales contracts. As of December 31, 2025 , Mr.
If we are unable to successfully adapt our business strategy to shifts in consumer demands, our business will be materially adversely impacted. 21 Table Contents We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized.
Additionally, if we are unable to originate mortgages for any reason going forward, our customers may experience significant mortgage loan funding issues, which could have a material impact on our homebuilding business and our consolidated financial statements. 23 Table of Contents Strategic and Financial Risks We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized.
Industry, Economic and Regulatory Risks Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.
We are subject to the many risks that affect all or most business enterprises in the United States and our business or financial condition could be materially affected by those risks. 10 Table of Contents Homebuilding Industry, Economic and Regulatory Risks The homebuilding industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.
Presently, we employ a limited array of both traditional and generative artificial intelligence (“AI”) solutions for specific sales, administrative, and operational functions, including aiding in research used for disclosures subject to management review.
In addition, we presently employ a limited array of artificial intelligence (“AI”) solutions for specific sales, administrative, and operational functions, including aiding in research used for disclosures subject to management review. It is conceivable that we might integrate further AI solutions into our information systems in the future, potentially assuming a more critical role in our operations over time.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Business Overview and Outlook” for more information. Our business and results of operations are dependent on the availability, skill and performance of subcontractors. We engage subcontractors to perform the construction of our homes and, in many cases, to obtain the raw materials used in constructing our homes.
We engage subcontractors to perform the construction of our homes and, in many cases, to obtain the raw materials used in constructing our homes. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors.
While the Company records an estimate of warranty expense based on historical warranty costs, we cannot provide assurance that coverage will not become costlier and/or be further restricted, increasing our risks and financial exposure to claims. Competing effectively within the mortgage banking and title service sectors may be difficult.
While the Company records an estimate of warranty expense based on historical warranty costs, we cannot provide assurance that coverage will not become costlier and/or be further restricted, increasing our risks and financial exposure to claims. 15 Table of Contents Any limitation on, or reduction or elimination of, tax benefits associated with homeownership would have an adverse effect upon the demand for homes, which could be material to our business.
Insider Trading Policy (“our Insider Trading Policy”), our directors, officers and employees can pledge shares of our common stock as collateral for a loan or hold shares of our common stock in a margin account if the value of Company securities held in one or more margin accounts does not exceed 30% of the total value of all of the Company securities owned by the shareholder at the time such loan or loans (individually or in the aggregate) are originated and the director, officer or employee obtains pre-clearance from the designated compliance officer.
Insider Trading Policy (“our Insider Trading Policy”), our directors, officers and employees are generally prohibited from pledging shares of our common stock as collateral for a loan or hold shares of our common stock in a margin account unless the director, officer or employee obtains pre-clearance from the designated compliance officer and approval by the Board of Directors (without the vote of the requesting person).
If legislation to extend the Federal Energy Credits for periods after December 31, 2032 is not adopted, our effective income tax rates thereafter may increase and could potentially be material. New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects.
New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects.
The market's reaction to the interest rate environment negatively affected net new orders and continues to have a negative impact on the cancellation rate for the Company. Any continued increase in the level of our cancellations would have a negative impact on our business, prospects, liquidity, financial condition and results of operations.
Any increase in the level of our cancellations would have a negative impact on our business, prospects, liquidity, financial condition and results of operations. Our business and results of operations are dependent on the availability, skill and performance of subcontractors.
Delays in the development of communities, including delays associated with subcontractors performing the development activities or entitlements, expose us to the risk of changes in market conditions for homes.
It can take several years from the time we acquire control of an undeveloped property to the time we make our first home sale on the site. 19 Table of Contents Delays in the development of communities, including delays associated with subcontractors performing the development activities or entitlements, expose us to the risk of changes in market conditions for homes.
The occurrence of either such event or both could materially and adversely affect our cash flows and results of operations. Our ability to access and obtain capital in the future could be adversely affected as a result of a downgrade in any of our credit ratings.
Changes in prevailing interest rates may affect the cost of our debt service obligations 25 Table of Contents Our ability to access and obtain capital in the future could be adversely affected as a result of a downgrade in any of our credit ratings.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe NVP of Finance and the rest of the Cybersecurity Response Committee hold undergraduate and graduate degrees in their respective fields, and have over 50 years of collective experience managing enterprise risks at the Company and at similar companies, including risks arising from cybersecurity threats.
Biggest changeThe NVP of Finance and the rest of the Cybersecurity Response Committee hold undergraduate and graduate degrees in their respective fields, and have over 50 years of collective experience managing enterprise risks at the Company and at similar companies, including risks arising from cybersecurity threats. 33 Table of Contents Cybersecurity threats have not materially affected the Company, including our business strategy, results of operations or financial condition, to date.
The VP of IT has served in various roles in information technology and information security for over 25 years, including serving as the Chief Information Security Officer of a healthcare company and a member of the cyber emergency response team at several companies.
The VP of IT has served in various roles in information technology and information security for over 26 years, including serving as the Chief Information Security Officer of a healthcare company and a member of the cyber emergency response team at several companies.
The VP of IT and the NVP of Finance work in coordination with the Cybersecurity Response Committee, which also includes our Chief Financial Officer and representatives from legal, internal audit and SEC reporting functions.
The VP of IT and the NVP of Finance work in coordination with the Cybersecurity Response Committee, which also includes our Chief Financial Officer and representatives from legal and human resources, internal audit and SEC reporting functions.
Cybersecurity threats have not materially affected the Company, including our business strategy, results of operations or financial condition, to date. Risks relating to cybersecurity threats and potential impacts to our business strategy, results of operations or financial condition are discussed in “Risk Factors” herein.
Risks relating to cybersecurity threats and potential impacts to our business strategy, results of operations or financial condition are discussed in “Risk Factors” herein.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll facilities are in good condition, adequately utilized, and sufficient to meet our present operating needs. Refer to “Business—Land Acquisition and Development Process” for a summary of the other properties that we controlled as of December 31, 2024 .
Biggest changeAll facilities are in good condition, adequately utilized, and sufficient to meet our present operating needs. Refer to “Business—Land Acquisition and Development Process” for a summary of the other properties that we controlled as of December 31, 2025 .

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are a party to ongoing legal proceedings in the ordinary course of business. Refer to Note 7, Commitments and Contingencies — Legal Proceedings to our consolidated financial statements for additional information. 34 Table Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 35 Table Contents PART II
Biggest changeRefer to Note 7, Commitments and Contingencies — Legal Proceedings to our consolidated financial statements for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 Table of Contents PART II
Added
ITEM 3. LEGAL PROCEEDINGS From time to time, we are a party to ongoing legal proceedings in the ordinary course of business. We do not believe the results of currently pending proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or liquidity.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information with respect to repurchases of shares of Class A common stock by the Company during the three months ended December 31, 2024 : Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 10/1/2024 - 10/31/2024 — $ — — $ 18,330,034 11/1/2024 - 11/30/2024 39,232 29.46 39,232 17,174,229 12/1/2024 - 12/31/2024 — — — 17,174,229 Total 39,232 $ 29.46 39,232 ITEM 6.
Biggest changeThe following table provides information with respect to repurchases of shares of Class A common stock by the Company during the three months ended December 31, 2025 : Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 10/1/2025 - 10/31/2025 — $ — — $ 9,660,381 11/1/2025 - 11/30/2025 209,121 19.17 209,121 55,652,490 12/1/2025 - 12/31/2025 276,061 18.76 276,061 50,472,837 Total 485,182 $ 18.94 485,182 ITEM 6.
Stock Performance Graph The performance graph below compares the cumulative total return of our Class A common stock since our initial public offering on January 21, 2021 through December 31, 2024, with the Standard and Poor’s 500 Companies Stock Index (“S&P 500 Index”) and the Standard & Poor’s Homebuilders Select Industry Index (“S&P Homebuilders Index”) for the same period.
Stock Performance Graph The performance graph below compares the cumulative total return of our Class A common stock since our initial public offering on January 21, 2021 through December 31, 2025, with the Standard and Poor’s 500 Companies Stock Index (“S&P 500 Index”) and the Standard & Poor’s Homebuilders Select Industry Index (“S&P Homebuilders Index”) for the same period.
The stock performance graph should not be deemed filed or incorporated by reference into any other filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the stock performance graph by reference in another filing. 36 Table Contents Share Buyback Program In June 2023, the Company’s Board of Directors approved a share buyback program (the “Share Buyback Program”) under which the Company can repurchase up to $25.0 million of its Class A common stock through June 30, 2026 in open market purchases, privately negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.
The stock performance graph should not be deemed filed or incorporated by reference into any other filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the stock performance graph by reference in another filing. 35 Table of Contents Share Buyback Program In June 2023, the Company’s Board of Directors approved a share buyback program under which the Company could repurchase up to $25.0 million of Class A common stock through June 30, 2026 in open market purchases, privately negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.
Any future determination to pay dividends will be at the discretion of our Board of Directors (the “Board of Directors” or the “Company’s Board of Directors”) and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any of our financing arrangements and such other factors as our Board of Directors may deem relevant.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any of our financing arrangements and such other factors as our Board of Directors may deem relevant.
The actual timing, number and value of shares repurchased under the Share Buyback Program will depend on a number of factors, including constraints specified in any price, general business and market conditions, and alternative investment opportunities.
The actual timing, number, and value of shares repurchased under the share buyback program depend on a number of factors, including constraints specified in any Rule 10b5-1 trading plans, price, general business and market conditions, and alternative investment opportunities.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock is listed on the NYSE under the symbol “DFH.” As of February 19, 2025, the closing price of our Class A common stock on the NYSE was $21.98, and we had 10 stockholders of record, including Cede & Co. as nominee of The Depository Trust Company.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A common stock is listed on the NYSE under the symbol “DFH.” As of February 17, 2026, the closing price of our Class A common stock on the NYSE was $20.99, and we had 9 stockholders of record, including Cede & Co. as nominee of The Depository Trust Company.
Added
The repurchase limit under the share buyback program was increased to $50.0 million during the second quarter of 2025 and further increased to $100.0 million through June 30, 2027 during the fourth quarter of 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+32 added−35 removed28 unchanged
Biggest change(5) Return on participating equity is calculated as net and comprehensive income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months. 40 Table Contents Results of Homebuilding Operations The following table sets forth our results of homebuilding operations (in thousands) for the periods indicated: Year Ended December 31, 2024 2023 Change % Change Homebuilding revenues $ 4,397,877 $ 3,738,888 $ 658,989 18 % Homebuilding cost of sales 3,591,483 3,011,813 579,670 19 % Selling, general and administrative expense (1) 395,751 303,068 92,683 31 % (Income) loss from unconsolidated entities (433) 12 (445) (3708) % Contingent consideration revaluation (2) 13,939 46,590 (32,651) (70) % Other income, net (1,443) (635) (808) 127 % Total income before taxes related to homebuilding operations (1)(2) $ 398,580 $ 378,040 $ 20,540 5 % Other Financial and Operating Data: Home closings 8,583 7,314 1,269 17 % Average sales price of homes closed (3) $ 509,249 $ 505,764 $ 3,485 1 % Net sales 6,727 5,744 983 17 % Cancellation rate 16.6 % 18.3 % (1.7) % (9) % Homebuilding gross margin (in thousands) (4) $ 806,394 $ 727,075 $ 79,319 11 % Homebuilding gross margin % (4)(5) 18.3 % 19.4 % (1.1) % (6) % Adjusted homebuilding gross margin (in thousands) (6) $ 1,186,019 $ 1,015,624 $ 170,395 17 % Adjusted homebuilding gross margin % (5)(6) 27.0 % 27.2 % (0.2) % (1) % Active communities as of period end (7) 242 221 21 10 % Backlog - units 2,599 3,978 (1,379) (35) % Backlog - value (in thousands) $ 1,304,463 $ 1,887,368 $ (582,905) (31) % Net homebuilding debt to net capitalization (6) 33.7 % 23.3 % 10.4 % 45 % (1) Selling, general and administrative expense, which is comprised of homebuilding segments and Corporate expense (“SG&A”), includes $33 million and $19 million of Corporate SG&A for the year ended December 31, 2024 and 2023, respectively.
Biggest change(5) Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months. 39 Table of Contents Results of Homebuilding Operations The following table sets forth our results of homebuilding operations and other financial data (in thousands, except for percentages), as well as other operating data for the periods indicated: Year Ended December 31, 2025 2024 Change % Change Homebuilding revenues $ 4,145,347 $ 4,397,877 $ (252,530) (6) % Homebuilding cost of sales 3,423,354 3,591,483 (168,129) (5) % Selling, general and administrative expense 483,628 394,548 89,080 23 % Loss (income) from unconsolidated entities 1 (433) 434 (100) % Contingent consideration revaluation (9,820) 13,939 (23,759) (170) % Other expense (income), net 6,609 (1,443) 8,052 (558) % Income before taxes of homebuilding operations $ 241,575 $ 399,783 $ (158,208) (40) % Other Financial and Operating Data: Home closings 8,608 8,583 25 — % Average sales price of homes closed (1) $ 477,917 $ 509,249 $ (31,332) (6) % Net sales 7,747 6,727 1,020 15 % Cancellation rate 13.5 % 16.6 % (3.1) % (19) % Homebuilding gross margin (2) $ 721,993 $ 806,394 $ (84,401) (10) % Homebuilding gross margin % (2)(3) 17.4 % 18.3 % (0.9) % (5) % Adjusted homebuilding gross margin (4) $ 1,098,694 $ 1,186,019 $ (87,325) (7) % Adjusted homebuilding gross margin % (3)(4) 26.5 % 27.0 % (0.5) % (2) % Selling, general and administrative expense % (3) 11.7 % 9.0 % 2.7 % 30 % Active communities as of period end (5) 313 242 71 29 % Backlog - units 1,839 2,599 (760) (29) % Backlog - value (in thousands) $ 821,292 $ 1,304,463 $ (483,171) (37) % Net homebuilding debt to net capitalization (4) 41.8 % 33.7 % 8.1 % 24 % (1) Average sales price of homes closed is calculated based on homebuilding revenues, adjusted for the impact of percentage of completion revenues, and excluding deposit forfeitures and land sales, over homes closed.
Under the Credit Agreement, the funds available are unsecured and availability under the borrowing base is calculated based on specific advance rates for each of finished lots, construction in process homes, and finished homes inventory on the Consolidated Balance Sheets, and reduced for any outstanding unsecured indebtedness permitted under the Credit Agreement, including the 2028 Notes.
Under the Credit Agreement, the funds available are unsecured and availability under the borrowing base is calculated based on specific advance rates for each of finished lots, construction in process homes, and finished homes inventory on the Consolidated Balance Sheets, and reduced for any outstanding unsecured indebtedness permitted under the Credit Agreement, including the 2028 Notes and 2030 Notes.
Our management believes this information is meaningful because it isolates the impact that these excluded items have on homebuilding gross margin. We include internal and external commission expense in homebuilding cost of sales, not selling, general and administrative expense, and therefore commission expense is taken into account in homebuilding gross margin.
Our management believes this information is meaningful as it isolates the impact that these excluded items have on homebuilding gross margin. We include internal and external commission expense in homebuilding cost of sales, not in selling, general and administrative expense, and, therefore, commission expense is taken into account in homebuilding gross margin.
For definitions of these non-GAAP financial measures and reconciliations to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “— Non-GAAP Financial Measures .” (7) A community becomes active once the model is completed or the community has its fifth net sale.
For definitions of these non-GAAP financial measures and reconciliations to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.” (5) A community becomes active once the model is completed or the community has its fifth net sale.
Upon the occurrence of a Change of Control (as defined in the Indenture), the holders of the 2028 Notes will have the right to require the Company to repurchase all or a portion of the 2028 Notes at a price equal to 101% of the aggregate principal amount of the 2028 Notes, plus any accrued and unpaid interest.
Upon the occurrence of a Change of Control (as defined in the indenture governing the 2028 Notes), the holders of the 2028 Notes will have the right to require the Company to repurchase all or a portion of the 2028 Notes at a price equal to 101.0% of the aggregate principal amount of the 2028 Notes, plus any accrued and unpaid interest.
Redeemable noncontrolling interest is reported within m ezzanine equity on the Company’s Consolidated Balance Sheets at the greater of the initial carrying amount (its fair value on the acquisition date) adjusted for the noncontrolling interest’s share of net income (loss) or its redemption value.
Redeemable noncontrolling interest is reported within m ezzanine equity on the Company’s Consolidated Balance Sheets at the greater of the initial carrying amount (its fair value on the acquisition date) adjusted for the noncontrolling interest’s share of net income (loss) less distributions or its redemption value.
Inventories and Homebuilding Cost of Sales Inventories include the cost of direct land acquisition, land development, construction, capitalized interest, lot option fees, real estate taxes and direct overhead costs incurred related to land acquisition and development and home construction. Indirect overhead costs are charged to selling, general and administrative expense as incurred.
Inventories and Homebuilding Cost of Sales Inventories include the cost of direct land acquisition, land development, direct materials, labor, capitalized interest, lot option fees, real estate taxes and direct overhead costs incurred related to land acquisition, land development and home construction. Indirect overhead costs are charged to selling, general and administrative expense as incurred.
We finance our operations through a variety of sources, including cash, borrowings under a revolving credit facility (the “Credit Agreement”), net proceeds from the senior unsecured notes (“2028 Notes”) and mortgage warehouse facilities used in our mortgage banking operations.
We finance our operations through a variety of sources, including cash, borrowings under a revolving credit facility (the “Credit Agreement”), net proceeds from the senior unsecured notes (“Senior Notes”) and mortgage warehouse facilities used in our mortgage banking operations.
Our primary focus is on constructing and selling single-family homes across entry-level, first-time move-up, second-time move-up, and active adult markets as well as homes under built-for-rent contracts. To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer title insurance and mortgage banking solutions.
Our primary focus is on constructing and selling single-family homes across entry-level, first-time move-up, second-time move-up and active adult markets, as well as homes under built-for-rent contracts. To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer mortgage banking solutions and title insurance—inclusive of agency and underwriting services.
Following the redemption, no Series B preferred units remain outstanding. Refer to Note 12, Equity to the consolidated financial statements for disclosure related to the redemption. Redeemable Noncontrolling Interest Based on the terms of the purchase agreement, at the time of an acquisition, we may issue redeemable noncontrolling interest.
Following the redemption, no Series B preferred units remain outstanding. Refer to Note 13, Equity to our consolidated financial statements for disclosure related to the redemption. Redeemable Noncontrolling Interest Based on the terms of the purchase agreement, at the time of an acquisition, we may issue redeemable noncontrolling interest.
The carry cost for land and development, recognized in homebuilding cost of sales as homes close, is impacted by our ability to estimate the timing to completion for land development deals and expected sales pace. 53 Table Contents Sold units are expensed on a specific identification basis as homebuilding cost of sales.
The carry cost for land and development, recognized in homebuilding cost of sales as homes close, is impacted by our ability to estimate the timing to completion for land development deals and expected sales pace. Sold units are expensed on a specific identification basis as homebuilding cost of sales.
(2) Refer to Note 14, Earnings Per Share to the consolidated financial statements for disclosures related to the calculation of EPS. Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends. (3) EBITDA is a non-GAAP financial measure.
(2) Refer to Note 15, Earnings Per Share to our consolidated financial statements for disclosures related to the calculation of earnings per share (“EPS”). Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends. (3) EBITDA is a non-GAAP financial measure.
(4) Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales. (5) Calculated as a percentage of homebuilding revenues. (6) Adjusted homebuilding gross margin and net homebuilding debt to net capitalization are non-GAAP financial measures.
(2) Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales. (3) Calculated as a percentage of homebuilding revenues. (4) Adjusted homebuilding gross margin and net homebuilding debt to net capitalization are non-GAAP financial measures.
If they meet this criteria, the Company accounts for the transaction as a stock purchase. If they do not meet this criteria the transaction is accounted for as an asset purchase. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment.
If they do not meet this criteria the transaction is accounted for as an asset acquisition. The consideration transferred in a business combination is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises in a business combination is tested annually for impairment.
Interest under Term SOFR Rate Loans and Daily Simple SOFR Rate Loans also include an “applicable rate margin” determined based on the Company’s net debt to capitalization ratio, equivalent to credit spreads of 2.00% to 2.95%. As of December 31, 2024 and 2023, the outstanding balance under the Credit Agreement was $700 million and $530 million, respectively.
Interest under Term SOFR Rate Loans and Daily Simple SOFR Rate Loans also include an “applicable rate margin” determined based on the Company’s net debt to capitalization ratio, equivalent to credit spreads of 2.00% to 2.95%. 51 Table of Contents As of December 31, 2025 and 2024, the outstanding balance under the Credit Agreement was $798 million and $700 million, respectively.
As of December 31, 2024 and 2023, we had outstanding surety bonds of $298 million and $195 million, respectively, and outstanding letters of credit of $21 million and $1 million, respectively. We believe we will fulfill our obligations under the related arrangements and do not anticipate any material losses under these surety bonds and letters of credit.
As of December 31, 2025 and 2024, we had outstanding surety bonds of $359 million and $298 million, respectively, and outstanding letters of credit of $27 million and $21 million, respectively. We believe we will fulfill our obligations under the related arrangements and do not anticipate any material losses under these surety bonds and letters of credit.
The 2028 Notes are redeemable by the Company prior to August 15, 2025 through the payment of the principal amount due, which can be accomplished through the issuance of certain restricted equity offerings for specified portions of principal notes outstanding, plus specified rates and accrued and unpaid interest, and a make-whole premium in the event 100% of the principal amount is redeemed.
The 2030 Notes are redeemable by the Company prior to September 15, 2027 by the payment of the principal amount due, which can be accomplished through the issuance of certain restricted equity offerings for specified portions of the principal balance of notes outstanding, plus specified rates and accrued and unpaid interest, and a make-whole premium in the event 100.0% of the principal amount is redeemed.
Business— Land Acquisition and Development Process” for more information. Surety Bonds, Letters of Credit and Financial Guarantees We enter into surety bonds and letters of credit arrangements with local municipalities, government agencies and land developers. These arrangements relate to certain performance-related obligations and serve as security for certain land option agreements.
Surety Bonds, Letters of Credit and Financial Guarantees We enter into surety bonds and letters of credit arrangements with local municipalities, government agencies and land developers. These arrangements relate to certain performance-related obligations and serve as security for certain land option agreements.
Homebuilding cost of sales for homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs allocated to each residential lot. Inventories are carried at the lower of accumulated cost or net realizable value. We periodically review the performance and outlook of our inventories for indicators of potential impairment.
Homebuilding cost of sales for homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs allocated to each residential lot. Inventories are carried at the lower of accumulated cost or net realizable value.
On or after August 15, 2025, the 2028 Notes are redeemable at specified rates equal to 104.1% of the principal balance, plus accrued and unpaid interest, and periodically decrease to 100% on August 15, 2027.
The 2028 Notes are redeemable at specified rates, currently equal to 104.1% of the principal balance, plus accrued and unpaid interest, which will periodically decrease to 100.0% on August 15, 2027.
Adjusted Homebuilding Gross Margin We define adjusted homebuilding gross margin as homebuilding gross margin excluding the effects of capitalized interest, lot option fees, amortization included in homebuilding cost of sales (adjustments resulting from the application of purchase accounting in connection with acquisitions) and commission expense.
(3) Calculated as a percentage of total revenues. 46 Table of Contents Adjusted Homebuilding Gross Margin We define adjusted homebuilding gross margin as homebuilding gross margin excluding the effects of capitalized interest, lot option fees, amortization included in homebuilding cost of sales (adjustments resulting from the application of purchase accounting in connection with acquisitions) and commission expense.
(3) Calculated as a percentage of total revenues. 47 Table Contents Net Homebuilding Debt to Net Capitalization Net homebuilding debt to net capitalization is a non-GAAP financial measure that is the sum of construction lines of credit and senior unsecured notes, net less cash and cash equivalents (“net homebuilding debt”), divided by the sum of net homebuilding debt, total mezzanine equity and total equity (“net capitalization”).
(4) Calculated as a percentage of homebuilding revenues. 47 Table of Contents Net Homebuilding Debt to Net Capitalization Net homebuilding debt to net capitalization is a non-GAAP financial measure calculated as homebuilding debt, less cash and cash equivalents (“net homebuilding debt”), divided by the sum of net homebuilding debt, total mezzanine equity and total equity (“net capitalization”).
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Net cash (used in)/provided by operating activities $ (256,648) $ 374,234 $ (27,623) Net cash used in investing activities (221,672) (4,484) (5,524) Net cash provided by/(used in) financing activities 269,689 (216,424) 146,955 Net cash used in operating activities was $257 million for the year ended December 31, 2024, compared to $374 million of net cash provided by operating activities for the year ended December 31, 2023.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2025 2024 2023 Net cash (used in) provided by operating activities $ (100,574) $ (256,648) $ 374,234 Net cash used in investing activities (225,845) (221,672) (4,484) Net cash provided by (used in) financing activities 270,984 269,689 (216,424) Net cash used in operating activities was $101 million for the year ended December 31, 2025, compared to $257 million of net cash used in operating activities for the year ended December 31, 2024.
The net proceeds from the 2028 Notes were used to repay a portion of the then outstanding balance under the Company’s Credit Agreement.
The net proceeds from the 2030 Notes were used to repay a portion of the then outstanding balance under the revolving credit facility.
The Company also has finance leases for corporate office furniture. As of December 31, 2024 , the future minimum lease payments required under these leases totaled $21 million, with $6 million payable within 12 months. Further information regarding our leases is provided in Note 7, Commitments and Contingencies to our consolidated financial statements.
As of December 31, 2025 , the future minimum lease payments required under these leases totaled $31 million, with $13 million payable within 12 months. Further information regarding our leases is provided in Note 7, Commitments and Contingencies to our consolidated financial statements.
Accordingly, upon a liquidation, dissolution or winding up of the Company, each share of redeemable preferred stock is entitled to receive the initial liquidation preference of $1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon.
Accordingly, upon liquidation, dissolution or winding up of the Company, each share of redeemable preferred stock is entitled to receive the initial liquidation preference of $1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon. Refer to Note 13 , Equity to our consolidated financial statements for additional terms of the redeemable preferred stock.
The following table presents a reconciliation of adjusted homebuilding gross margin to the GAAP financial measure of homebuilding gross margin for each of the periods indicated (unaudited and in thousands, except percentages): Year Ended December 31, 2024 2023 2022 Homebuilding gross margin (1) $ 806,394 $ 727,075 $ 612,420 Interest expense in homebuilding cost of sales (2) 187,324 122,759 60,595 Amortization in homebuilding cost of sales (3) 5,087 — 6,701 Commission expense 187,214 165,790 140,442 Adjusted homebuilding gross margin $ 1,186,019 $ 1,015,624 $ 820,158 Homebuilding gross margin % (4) 18.3 % 19.4 % 18.4 % Adjusted homebuilding gross margin % (4) 27.0 % 27.2 % 24.6 % (1) Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales.
The following table presents a reconciliation of adjusted homebuilding gross margin to the GAAP financial measure of homebuilding gross margin for each of the periods indicated (unaudited and in thousands, except percentages): Year Ended December 31, 2025 2024 2023 Homebuilding gross margin (1) $ 721,993 $ 806,394 $ 727,075 Interest expense in homebuilding cost of sales (2) 196,728 187,324 122,759 Amortization in homebuilding cost of sales (3) 305 5,087 — Commission expense 179,668 187,214 165,790 Adjusted homebuilding gross margin $ 1,098,694 $ 1,186,019 $ 1,015,624 Homebuilding gross margin % (4) 17.4 % 18.3 % 19.4 % Adjusted homebuilding gross margin % (4) 26.5 % 27.0 % 27.2 % (1) Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales.
(2) Includes interest charged to homebuilding cost of sales related to our construction lines of credit and senior unsecured notes, net, as well as lot option fees. (3) Represents amortization of purchase accounting adjustments from our acquisitions.
(2) Includes interest charged to homebuilding cost of sales related to our homebuilding debt, as well as lot option fees. (3) Represents amortization of purchase accounting adjustments from our acquisitions.
The decrease from prior year was primarily attributable to a continued trend toward move-in ready spec homes relative to pre-order sales and a reduction in net sales under built-for-rent contracts. Mid-Atlantic. Backlog for the Mid-Atlantic segment as of December 31, 2024 was 678 homes, an increase of 79 from 599 homes as of December 31, 2023.
The decrease from prior year was primarily attributable to fewer built-for-rent contracts in ending backlog and a continued trend toward more sales of move-in-ready spec homes relative to pre-order sales. Mid-Atlantic. Backlog for the Mid-Atlantic segment as of December 31, 2025 was 631 homes, a decrease of 47 from 678 homes as of December 31, 2024.
The increase in homebuilding gross margin percentage was mostly the result of direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs. Mid-Atlantic.
The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs and, to a lesser extent, increased sales incentives, partially offset by direct cost reductions.
The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated (unaudited and in thousands, except percentages): Year Ended December 31, 2024 2023 2022 Net and comprehensive income attributable to Dream Finders Homes, Inc. $ 335,341 $ 295,900 $ 262,313 Interest income (5,501) (4,299) (169) Interest charged to homebuilding cost of sales (1) 187,324 122,759 60,595 Interest expense — 1 32 Income tax expense 97,272 96,483 81,859 Depreciation and amortization (2) 15,314 10,651 17,952 EBITDA $ 629,750 $ 521,495 $ 422,582 EBITDA margin % (3) 14.1% 13.9% 12.6% (1) Includes interest charged to homebuilding cost of sales related to our construction lines of credit and senior unsecured notes, net, as well as lot option fees.
The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated (unaudited and in thousands, except percentages): Year Ended December 31, 2025 2024 2023 Net income attributable to Dream Finders Homes, Inc. $ 217,197 $ 335,341 $ 295,900 Interest income (3,229) (5,501) (4,299) Interest charged to homebuilding cost of sales (1) 196,728 187,324 122,759 Interest expense 913 — 1 Income tax expense 66,698 97,272 96,483 Depreciation and amortization (2) 15,381 15,314 10,651 EBITDA $ 493,688 $ 629,750 $ 521,495 EBITDA margin % (3) 11.4% 14.2% 13.9% (1) Includes interest charged to homebuilding cost of sales related to our Senior Notes and Credit Agreement (“homebuilding debt”), as well as lot option fees.
The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the years ended December 31, 2024 and 2023 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and changes in product mix.
The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the years ended December 31, 2025 and 2024 was primarily attributable to the increased use of sales incentives, as well as higher land and financing costs and changes in geographical product mix, partially offset by direct cost reductions and cycle-time improvements. 41 Table of Contents Southeast.
The higher cancellation rate in the Southeast segment for the year ended December 31, 2024 was primarily attributable to a built-for-rent contract of 229 units that was terminated during the first quarter of 2024 based on a strategic decision to convert the controlled lots underlying the deal into future retail sales.
In the first quarter of 2024, we had one built-for-rent contract of 229 units that was terminated based on a strategic decision to convert the controlled lots into future retail sales. This termination contributed to the elevated cancellation rate in the Southeast segment for the year ended December 31, 2024 of 23.7%.
In the future, we may incorporate additional adjustments to these non-GAAP financial measures as we find them relevant and beneficial for both management and investors.
In the future, we may incorporate additional adjustments to these non-GAAP financial measures as we find them relevant and beneficial for both management and investors. EBITDA EBITDA is not a measure of net income as determined by GAAP.
Certain of our subsidiaries guaranteed the Company’s obligations under the Credit Agreement. The Credit Agreement includes an accordion feature that allows the aggregate commitments to increase to up to $2.0 billion, subject to a borrowing base. Under the Credit Agreement, the Company has the ability to draw “Term SOFR Rate Loans” or “Daily Simple SOFR Rate Loans”.
Certain of the Company’s subsidiaries guaranteed the Company’s obligations under the Credit Agreement. The Credit Agreement includes an accordion feature that allows the aggregate commitments to increase up to $2.0 billion, subject to the borrowing base.
Business Combinations and Valuation of Contingent Consideration The Company accounts for business combinations using the acquisition method. Under ASC Topic 805 a business combination occurs when an entity obtains control of a “business.” The Company determines whether or not the gross assets acquired meet the definition of a business.
Under ASC Topic 805 a business combination occurs when an entity obtains control of a “business.” The Company determines whether or not the gross assets acquired meet the definition of a business. If they meet this criteria, the Company accounts for the transaction as a business combination.
Refer to Note 3, Debt, to the consolidated financial statements for more information on covenants in the Credit Agreement. 51 Table Contents Contingent Consideration Based on the terms of the purchase agreement, at the time of an acquisition, the Company may record a contingent consideration liability based on the expected fair value of any future earn out payments due to the acquiree for a typical period of up to five years post-acquisition.
Contingent Consideration Based on the terms of the purchase agreement, at the time of an acquisition, the Company may record a contingent consideration liability based on the expected fair value of any future earn out payments due to the acquiree for a typical period of up to four years post-acquisition.
Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses, the payment of routine liabilities, business acquisitions and the origination of mortgage loans. Cash allocated to 2024 business acquisitions was approximately $220 million as of December 31, 2024 and none as of December 31, 2023.
Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses, the payment of routine liabilities, business acquisitions and the origination of mortgage loans. Total cash payments for business acquisitions for the years ended December 31, 2025 and 2024 were $184 million and $178 million, respectively.
While our significant accounting policies are more fully described in Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements, we believe the following topics reflect our critical accounting policies and our more significant judgment and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are more fully described in Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements, we believe the following topics reflect our critical accounting policies and our more significant judgment and estimates used in the preparation of our consolidated financial statements. 53 Table of Contents Revenue Recognition We recognize homebuilding revenue in two ways in accordance with Accounting Standards Codification (“ASC”) Topic 606.
The reduction in homebuilding gross margin percentage was due to an increase in land costs and, to a lesser extent, higher financing costs, partially offset by direct cost reductions. Selling, General and Administrative Expense.
The reduction in homebuilding gross margin percentage was primarily due to changes in product mix and higher sales incentives, as well as increased land and financing costs, partially offset by direct cost reductions. Selling, General and Administrative Expense.
Cash flows generated by our homebuilding projects can differ materially from our results of operations, as these depend upon the stage in the life cycle of each project.
Refer to Note 2, Acquisitions to our consolidated financial statements for more information. 48 Table of Contents Cash flows generated by our homebuilding projects can differ materially from our results of operations, as these depend upon the stage in the life cycle of each project.
Without Crescent, homebuilding gross margin percentage was 18.5% for the year ended December 31, 2024, representing an increase of 60 bps, or 3%, when compared to the year ended December 31, 2023.
Homebuilding gross margin percentage was 18.6% for the year ended December 31, 2025, representing a decrease of 50 bps, or 3%, when compared to the year ended December 31, 2024.
The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization for each of the periods indicated (unaudited and in thousands, except percentages): As of December 31, 2024 2023 Total debt $ 1,286,052 $ 824,302 Total mezzanine equity 169,951 148,500 Total equity 1,250,409 937,650 Total capitalization $ 2,706,412 $ 1,910,452 Total debt to total capitalization 47.5 % 43.1 % Total debt $ 1,286,052 $ 824,302 Less: Mortgage warehouse facilities 289,617 — Less: Cash and cash equivalents 274,384 494,145 Net homebuilding debt $ 722,051 $ 330,157 Total mezzanine equity 169,951 148,500 Total equity 1,250,409 937,650 Net capitalization $ 2,142,411 $ 1,416,307 Net homebuilding debt to net capitalization 33.7 % 23.3 % Liquidity and Capital Resources Overview We generate cash from the sale of our homes and from providing ancillary financial services.
The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization as of each of the periods indicated (unaudited and in thousands, except percentages): As of December 31, 2025 2024 Total debt $ 1,606,193 $ 1,286,052 Total mezzanine equity 178,039 169,951 Total equity 1,426,072 1,250,409 Total capitalization $ 3,210,304 $ 2,706,412 Total debt to total capitalization 50.0 % 47.5 % Total debt $ 1,606,193 $ 1,286,052 Less: Mortgage warehouse facilities and other secured borrowings 217,133 289,617 Less: Cash and cash equivalents 234,766 274,384 Net homebuilding debt 1,154,294 722,051 Total mezzanine equity 178,039 169,951 Total equity 1,426,072 1,250,409 Net capitalization $ 2,758,405 $ 2,142,411 Net homebuilding debt to net capitalization 41.8 % 33.7 % Liquidity and Capital Resources Overview We generate cash from the sale of our homes and from providing ancillary financial services.
Term SOFR Rate Loans bear interest based on Term SOFR rates for one or three-month interest periods and include a SOFR adjustment of 10 basis points for each interest period. Daily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 basis points.
Under the Credit Agreement, the Company has the ability to draw “Term SOFR Rate Loans” or “Daily Simple SOFR Rate Loans.” Term SOFR Rate Loans bear interest based on Term SOFR rates for one or three-month interest periods and include a SOFR adjustment of 10 basis points (“bps”) for each interest period.
Redeemable Preferred Stock On September 29, 2021, we sold 150,000 shares of newly-created redeemable preferred stock with an initial liquidation preference of $1,000 per share and a par value $0.01 per share, for an aggregate purchase price of $150 million.
Refer to Note 2, Acquisitions to our consolidated financial statements for more information on redeemable noncontrolling interests related to our acquisitions. 52 Table of Contents Redeemable Preferred Stock On September 29, 2021, we sold 150,000 shares of redeemable preferred stock with an initial liquidation preference of $1,000 per share and a par value of $0.01 per share, for an aggregate purchase price of $150 million.
Additionally, for the year ended December 31, 2024, SG&A included $50 million of spend on forward commitment programs to allow our homebuyers to access lower mortgage interest rates on home loans at the point of sale, representing a $22 million increase when compared to the year ended December 31, 2023.
The dollar and percentage increase in SG&A was primarily attributable to $105 million of spend on forward mortgage commitment programs to allow our homebuyers to access lower mortgage interest rates on home loans, representing a $54 million increase when compared to the year ended December 31, 2024.
Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issuance of debt or equity securities.
Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issuance of debt or equity securities. Recent Accounting Pronouncements Refer to Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements. 54 Table of Contents
Net homebuilding debt excludes borrowings under our mortgage warehouse facilities. Management believes the ratio of net homebuilding debt to net capitalization is meaningful as it is used to assess the performance of our homebuilding segments, as well as to establish targets for performance-based compensation. We also use this ratio as a measure of overall leverage.
Net homebuilding debt excludes borrowings under our mortgage warehouse facilities, as well as any other non-homebuilding borrowings the Company may incur from time to time. Management believes the ratio of net homebuilding debt to net capitalization is meaningful as it is used to assess the performance of our homebuilding segments and is a relevant measure of our overall leverage.
The Indenture includes customary events of default. Subject to specified exceptions, the Indenture contains certain restrictive covenants that, among other things, limit our ability to incur or guarantee certain indebtedness, issue certain equity interests or engage in certain capital stock transactions. In addition, the Indenture contains certain limitations related to mergers, consolidations, and transfers of assets.
The indentures for the Senior Notes include customary events of default. Subject to specified exceptions, the indentures contain certain restrictive covenants that, among other things, limit the Company’s ability to incur or guarantee certain indebtedness, issue certain equity interests or engage in certain capital stock transactions.
The increase in income before taxes related to homebuilding operations during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily attributable to the increase in home closing volume and the reduction in contingent consideration expense, partially offset by the increase in SG&A, all explained above.
The decrease in income before taxes of homebuilding operations for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily attributable to the increases in SG&A, as well as the reduction in ASP and homebuilding gross margin, partially offset by the change in contingent consideration from expense to income, all of which are explained above.
After achieving the minimum earnings threshold, the amount of net and comprehensive income that is attributable to the redeemable noncontrolling interest will be presented within net and comprehensive income attributable to noncontrolling interests on the Consolidated Statements of Comprehensive Income.
After achieving the minimum earnings threshold, the amount of net income that is attributable to the redeemable noncontrolling interests will be presented within net income attributable to noncontrolling interests on the Consolidated Statements of Operations. As of December 31, 2025, the redeemable noncontrolling interests totaled $30 million , of which no amount was redeemable within 12 months.
The Company had capitalized debt issuance costs related to construction lines of credit, net of amortization, of $10 million and $7 million as of December 31, 2024 and 2023, respectively, which were included in other assets on the Consolidated Balance Sheets.
The Company had unamortized debt issuance costs primarily related to the Credit Agreement of $11 million and $10 million as of December 31, 2025 and 2024, respectively. Unamortized debt issuance costs are included within other assets on the Consolidated Balance Sheets.
Homebuilding gross margin percentage was 19.1% for the year ended December 31, 2024, representing an increase of 20 bps, or 1%, when compared to the year ended December 31, 2023.
Homebuilding gross margin percentage was 15.8% for the year ended December 31, 2025, representing a decrease of 120 bps, or 7%, when compared to the year ended December 31, 2024.
Net cash provided by financing activities was $270 million for the year ended December 31, 2024, as compared to $216 million of net cash used in financing activities for the year ended December 31, 2023.
Net cash provided by financing activities was $271 million for the year ended December 31, 2025, remaining consistent with the $270 million of net cash provided by financing activities for the year ended December 31, 2024.
Additionally, the earnout period related to the 2020 acquisition of H&H Constructors of Fayetteville, LLC concluded in the third quarter of 2024 and the final payment for the contingent consideration agreement was made in the fourth quarter of 2024. Income Before Taxes Related to Homebuilding Operations.
The earnout period for the MHI acquisition concluded as of the end of the third quarter of 2025 and the final payment was made in December 2025. The earnout period related to the 2020 acquisition of H&H Constructors of Fayetteville, LLC concluded in the third quarter of 2024. Other Expense (Income), Net .
Refer to Note 2, Acquisitions to the consolidated financial statements for more information. 48 Table Contents As of December 31, 2024 and 2023, our cash and total liquidity were as follows (in thousands): As of December 31, 2024 2023 Borrowing base (1) $ 1,254,094 $ 864,272 Outstanding balance under Credit Agreement (700,000) (530,000) Letters of credit outstanding (2) (12,449) — Availability under Credit Agreement $ 541,645 $ 334,272 Cash and cash equivalents (3) 274,384 494,145 Total liquidity $ 816,029 $ 828,417 (1) As of December 31, 2024 and 2023, the borrowing base under the Credit Agreement was reduced by the principal amount of the senior unsecured notes of $300 million.
As of December 31, 2025 and 2024, our total liquidity was as follows (in thousands): As of December 31, 2025 2024 Borrowing base (1) $ 1,475,000 $ 1,254,094 Outstanding balance under Credit Agreement (798,000) (700,000) Letters of credit outstanding (2) (12,449) (12,449) Availability under Credit Agreement 664,551 541,645 Cash and cash equivalents (3) 234,766 274,384 Total liquidity $ 899,317 $ 816,029 (1) As of December 31, 2025 and 2024, the borrowing base under the Credit Agreement is reduced by the principal amount of the Senior Notes of $600 million and $300 million, respectively.
Refer to the Form 10-K for the year e nded December 31, 2023 filed on February 29, 2024 for the results of operations and related discussion for December 31, 2023 compared to the year ended December 31, 2022 . 43 Table Contents Net Sales, Backlog and Closings The following table presents information concerning our net sales, starts and c losings in each of our homebuilding segments for the periods set forth below: Year Ended December 31, Period Over Period Percent Change 2024 2023 Segment Net Sales Starts Closings Net Sales Starts Closings Net Sales Starts Closings Southeast (1)(2) 1,754 2,868 2,838 1,822 2,693 3,170 -4 % 6 % -10 % Mid-Atlantic 2,196 2,623 2,594 1,360 1,627 1,597 61 % 61 % 62 % Midwest 2,777 3,252 3,151 2,562 2,551 2,547 8 % 27 % 24 % Total 6,727 8,743 8,583 5,744 6,871 7,314 17 % 27 % 17 % (1) Excluding net sales under built-for-rent contracts, 2024 net sales in the Southeast segment increased 9% when compared to 2023.
Refer to the Form 10-K for the year e nded December 31, 2024 filed on February 25, 2025 for the results of operations and related discussion for December 31, 2024 compared to the year ended December 31, 2023 . 42 Table of Contents Net Sales, Closings and Backlog The following table presents information concerning our net sales, starts and c losings in each of our homebuilding segments for the year ended December 31, 2025 and 2024 : Year Ended December 31, Period Over Period Percent Change 2025 2024 Segment Net Sales Starts Closings Net Sales Starts Closings Net Sales Starts Closings Southeast (1) 2,727 2,810 3,126 1,754 2,868 2,838 55 % -2 % 10 % Mid-Atlantic 2,397 2,645 2,463 2,196 2,623 2,594 9 % 1 % -5 % Midwest (2) 2,623 2,742 3,019 2,777 3,252 3,151 -6 % -16 % -4 % Total 7,747 8,197 8,608 6,727 8,743 8,583 15 % -6 % 1 % (1) This increase was primarily due to net sales from the January 2025 Liberty Communities acquisition.
Our Mid-Atlantic segment homebuilding revenues for the year ended December 31, 2024 were $1.2 billion, an increase of $530 million, or 84%, from $633 million for the year ended December 31, 2023.
Our Southeast segment homebuilding revenues for the year ended December 31, 2025 were $1,390 million, an increase of $3 million from $1,387 million for the year ended December 31, 2024.
Refer to Note 12 , Equity to the consolidated financial statements for additional terms of the redeemable preferred stock. 52 Table Contents Off-Balance Sheet Arrangements Asset-Light Lot Acquisition Strategy We operate an asset-light and capital-efficient lot acquisition strategy primarily through finished lot option contracts and land bank option contracts. Refer to “Item 1.
Off-Balance Sheet Arrangements Asset-Light Lot Acquisition Strategy We operate an asset-light and capital-efficient lot acquisition strategy primarily through finished lot option contracts and land bank option contracts. Refer to “Item 1. Business— Land Acquisition and Development Process” for more information.
The following table presents selected financial information and supplemental data for our Financial Services segment for the year ended December 31, 2024 and 2023 (dollars in thousands, unless otherwise indicated): Year Ended December 31, 2024 2023 Mortgage revenues $ 34,786 $ — Title services revenues 18,943 9,698 Total financial services revenues 53,729 9,698 Financial services expense 31,540 5,727 Income from unconsolidated entities 9,770 15,770 Financial services income before taxes $ 31,959 $ 19,741 Supplemental data (1) : Total originations: Number of loans 4,977 3,189 Principal (in millions) $ 2,196 $ 1,318 Capture rate 71.9 % 65.5 % Average FICO score 744 741 Funded origination breakdown: Government (FHA, VA, USDA) 40 % 41 % Non-agency 60 % 59 % (1) Supplemental data reflects operations of Jet HomeLoans prior to its consolidation in the Company’s financial statements beginning on July 1, 2024.
The following table presents selected financial information and supplemental data for our Financial Services segment for the year ended December 31, 2025 and 2024 (dollars in thousands, unless otherwise indicated): Year Ended December 31, 2025 2024 Change % Change Mortgage revenues $ 68,536 $ 34,786 $ 33,750 97 % Title and other services revenues 108,965 17,189 91,776 534 % Total financial services revenues 177,501 51,975 125,526 242 % Financial services expense 144,727 30,437 114,290 375 % Other income, net (2,388) — (2,388) 100 % Loss (income) from unconsolidated entities 139 (9,770) 9,909 (101) % Financial services income before taxes $ 35,023 $ 31,308 $ 3,715 12 % Mortgage Financing Supplemental Data (1) : Total originations: Number of loans 5,458 4,977 481 10 % Principal (in millions) $ 2,277 $ 2,196 $ 81 4 % Capture rate 79.0 % 71.9 % 7 % 10 % Average FICO score 738 744 (6) (1) % Funded origination breakdown: Government (FHA, VA, USDA) 51.9 % 39.7 % 12 % 30 % Non-agency 48.1 % 60.3 % (12) % (20) % (1) Supplemental data includes the operations of Jet HomeLoans prior to its consolidation in the Company’s consolidated financial statements beginning on July 1, 2024.
Further information regarding our contingent consideration liability is provided in Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements. Leases The Company has operating leases primarily associated with office space that is used by divisions outside of the Jacksonville area, model home sale-leasebacks and a corporate office building sale-leaseback.
Leases The Company has operating leases primarily associated with office space that is used by divisions outside of the Jacksonville area, model home sale-leasebacks and a corporate office building sale-leaseback. The Company also has finance leases for corporate office furniture.
We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged in homebuilding cost of sales, (iii) interest expense, (iv) income tax expense and (v) depreciation and amortization.
EBITDA is a supplemental non-GAAP financial measure used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged in homebuilding cost of sales, (iii) interest expense, (iv) income tax expense and (v) depreciation and amortization.
The overall decrease in backlog was mostly reflective of a continued trend toward move-in ready spec homes relative to pre-order sales, and to a lesser extent, a reduction in built-for-rent contracts in backlog. Spec homes typically result in quicker closings and turnover of the backlog within the same reporting period.
Approximately 72 of the homes in our backlog are expected to be delivered in 2027 and beyond. The overall decrease in backlog was reflective of a constrained sales environment as well as a continued trend toward move-in ready spec homes relative to pre-order sales and, to a lesser extent, fewer built-for-rent contracts in backlog.
The higher homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Homebuilding Gross Margin. The lower homebuilding gross margin was primarily due to the decrease in consolidated ASP of homes closed, partially offset by the slight increase in home closings for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
The closing of this transaction is subject to customary closing conditions, including insurance regulatory approvals, which are currently ongoing. 39 Table Contents Results of Consolidated Operations The following table summarizes our res ults of operations and other financial data (in thousands, except per share amounts) for the periods indicated: Year Ended December 31, 2024 2023 Income before taxes: Homebuilding $ 434,308 $ 406,298 Financial services 31,959 19,741 Other (1) (28,413) (21,614) Income before taxes 437,854 404,425 Income tax expense (97,272) (96,483) Net and comprehensive income 340,582 307,942 Net and comprehensive income attributable to noncontrolling interests (5,241) (12,042) Net and comprehensive income attributable to Dream Finders Homes, Inc. $ 335,341 $ 295,900 Other Financial Data: Basic EPS (2) $ 3.44 $ 3.03 Diluted EPS (2) $ 3.34 $ 2.79 EBITDA (in thousands) (3) $ 629,750 $ 521,495 EBITDA margin % (3)(4) 14.1 % 13.9 % Return on participating equity (5) 29.7 % 36.3 % Consolidated Balance Sheets Data (as of period end): Cash and cash equivalents $ 274,384 $ 494,145 Construction lines of credit 701,386 530,384 Senior unsecured notes, net 295,049 293,918 Mortgage warehouse facilities 289,617 — Total mezzanine equity 169,951 148,500 Total Dream Finders Homes, Inc. stockholders’ equity 1,244,922 924,584 Total equity 1,250,409 937,650 (1) Represents amounts within our corporate component (“Corporate”).
This partnership provides opportunities to expand our lot pipeline and supports our future growth and profitability. 38 Table of Contents Results of Consolidated Operations The following table summarizes our res ults of operations and other financial data (in thousands, except per share amounts and percentages) for the periods indicated: Year Ended December 31, 2025 2024 Income before taxes: Homebuilding $ 241,575 $ 399,783 Financial services 35,023 31,308 Other (1) 7,504 6,763 Income before taxes 284,102 437,854 Income tax expense (66,698) (97,272) Net income 217,404 340,582 Net income attributable to noncontrolling interests (207) (5,241) Net income attributable to Dream Finders Homes, Inc. $ 217,197 $ 335,341 Other Financial Data: Basic EPS (2) $ 2.19 $ 3.44 Diluted EPS (2) $ 2.14 $ 3.34 EBITDA (in thousands) (3) $ 493,688 $ 629,750 EBITDA margin % (3)(4) 11.4 % 14.2 % Return on participating equity (5) 15.3 % 29.7 % Balance Sheet Data (as of period end): Cash and cash equivalents $ 234,766 $ 274,384 Revolving credit facility and other borrowings 822,296 701,386 Senior unsecured notes, net 591,060 295,049 Mortgage warehouse facilities 192,837 289,617 Total mezzanine equity 178,039 169,951 Total Dream Finders Homes, Inc. stockholders’ equity 1,424,575 1,244,922 Total equity 1,426,072 1,250,409 (1) Represents amounts within our corporate component (“Corporate”).
A community becomes inactive when it has fewer than five homesites remaining to sell. 41 Table Contents The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment for the year ended December 31, 2024 and 2023, as well as active communities as of December 31, 2024 and 2023: Year Ended December 31, 2024 As of December 31, 2024 Segment Home Closings ASP Active Communities Southeast 2,838 $ 484,345 67 Mid-Atlantic 2,594 446,667 59 Midwest 3,151 583,198 116 Total 8,583 $ 509,249 242 Year Ended December 31, 2023 As of December 31, 2023 Segment Home Closings ASP Active Communities Southeast 3,170 $ 470,405 57 Mid-Atlantic 1,597 396,462 44 Midwest 2,547 618,306 120 Total 7,314 $ 505,764 221 The following tables present income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the year ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin % Southeast $ 141,465 19.1 % $ 183,537 18.9 % Mid-Atlantic 130,067 19.6 % 54,646 17.9 % Midwest 162,776 17.0 % 168,115 20.6 % Total (1) $ 434,308 18.3 % $ 406,298 19.4 % (1) Total income before taxes by segment does not include $33 million and $19 million of Corporate SG&A, and $3 million and $9 million of Corporate contingent consideration expense for the years ended December 31, 2024 and 2023, respectively.
A community becomes inactive when it has fewer than five homesites remaining to sell. 40 Table of Contents The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment for the year ended December 31, 2025 and 2024, as well as active communities as of December 31, 2025 and 2024: Year Ended December 31, 2025 As of December 31, 2025 Segment Home Closings ASP Active Communities Southeast 3,126 $ 447,667 103 Mid-Atlantic 2,463 426,375 77 Midwest 3,019 551,290 133 Total 8,608 $ 477,917 313 Year Ended December 31, 2024 As of December 31, 2024 Segment Home Closings ASP Active Communities Southeast 2,838 $ 484,345 67 Mid-Atlantic 2,594 446,667 59 Midwest 3,151 583,198 116 Total 8,583 $ 509,249 242 The following table presents income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin % Southeast $ 93,177 18.6 % $ 130,776 19.1 % Mid-Atlantic 59,403 18.3 % 121,585 19.6 % Midwest 88,995 15.8 % 147,422 17.0 % Total $ 241,575 17.4 % $ 399,783 18.3 % Homebuilding Revenues.
SG&A as a percentage of homebuilding revenues was 9.0% for the year ended December 31, 2024, a slight increase of 90 bps from 8.1% for the year ended December 31, 2023.
Selling, general and administrative expense for the homebuilding segments (“SG&A”) as a percentage of homebuilding revenues was 11.7% for the year ended December 31, 2025, an increase of 270 bps from 9.0% for the year ended December 31, 2024.
The income before taxes of Jet HomeLoans prior to July 1, 2024 was included in income from unconsolidated entities in the Consolidated Statements of Comprehensive Income.
The income before taxes of Jet HomeLoans prior to July 1, 2024 was included in income from unconsolidated entities in the Consolidated Statements of Operations. Title and Other Services Title and other services revenues for the year ended December 31, 2025 were $109 million, an increase of $92 million from $17 million for the year ended December 31, 2024.
We continue to operate in geographic regions with consistent increases in demand for new homes and constrained lot and inventory supply compared to population and job growth trends. We intend to continue to reinvest our earnings into our business and focus on expanding our operations.
The above cash and land-light strategies allow us to maintain an adequate lot supply in our existing markets and support ongoing growth and profitability. We continue to operate in geographic regions with consistent increases in demand for new homes and constrained lot and inventory supply compared to population and job growth trends.
The increase in homebuilding revenues was primarily attributable to 8,583 home closings for the year ended December 31, 2024, an increase of 1,269 homes, or 17%, from 7,314 home closings for the year ended December 31, 2023. In 2024, 877 home closings with an ASP of $534,617 were contributed by the Crescent Homes acquisition.
This reduction in homebuilding revenues was partially offset by an increase in home closings of 25 homes for the year ended December 31, 2025 to 8,608 from 8,583 home closings for the year ended December 31, 2024. The January 2025 Liberty Communities acquisition contributed 744 home closings with an ASP of $335,446 during the year ended December 31, 2025.
Refer to the Form 10-K for the year ended December 31, 2023 filed on February 29, 2024 for the cash flows and related discussion for December 31, 2023 compared to year ended December 31, 2022.
Refer to the Form 10-K for the year ended December 31, 2024 filed on February 25, 2025 for the cash flows and related discussion for December 31, 2024 compared to year ended December 31, 2023. 50 Table of Contents Senior Unsecured Notes 2030 Notes The 2030 Notes in the aggregate principal amount of $300 million were issued pursuant to an indenture in September 2025.
This revenue growth was primarily driven by an increase in home closings of 997, or 62%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. Crescent Homes contributed $470 million in homebuilding revenues and 877 home closings with an ASP of $534,617 for the year ended December 31, 2024.
This decline in revenue was primarily driven by a decrease in home closings of 131, or 5%, and a decrease in the ASP of $20,292, or 5%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
The following table presents information concerning our backlog in number of homes, ASP and aggregate value (in thousands) for our homebuilding segments as of the dates set forth below: As of December 31, 2024 2023 Segment Homes (1) ASP Value Homes (1) ASP Value Southeast 1,150 $ 406,246 $ 467,183 2,234 $ 393,356 $ 878,757 Mid-Atlantic (2) 678 464,798 315,133 599 427,593 256,128 Midwest 771 677,234 522,147 1,145 657,190 752,483 Total 2,599 $ 501,910 $ 1,304,463 3,978 $ 474,451 $ 1,887,368 (1) Represents the number of homes in backlog from the previous period, plus net sales during the period, minus the number of home closings during the current period.
The following table presents information concerning our backlog in number of homes, ASP and aggregate value (in thousands) for our homebuilding segments as of the dates set forth below: As of December 31, 2025 2024 Segment Homes ASP Value Homes ASP Value Southeast 833 $ 412,422 $ 343,548 1,150 $ 406,246 $ 467,183 Mid-Atlantic 631 367,559 231,930 678 464,798 315,133 Midwest 375 655,505 245,814 771 677,234 522,147 Total 1,839 $ 446,597 $ 821,292 2,599 $ 501,910 $ 1,304,463 Backlog of sold homes as of December 31, 2025 was 1,839 homes valued at approximately $821 million based on ASP, a decrease of 760 homes and $483 million in value, or 29% and 37%, respectively, from 2,599 homes valued at approximately $1,304 million as of December 31, 2024.
The initial investment and lot option fees require us to have the ability to allocate liquidity resources to projects that will not generate cash inflows or operating income in the near term. 49 Table Contents The above cash and land-light strategies allow us to maintain an adequate lot supply in our existing markets and support ongoing growth and profitability.
In these transactions, we also incur lot option fees on the outstanding capital balance held by the land banker, and may also incur termination fees, where applicable. The initial investment and lot option fees require us to have the ability to allocate liquidity resources to projects that will not generate cash inflows or operating income in the near term.
Debt issuance costs related to the 2028 Notes and the Credit Agreement that are recorded to capitalized interest are expensed in cost of sales as the homes close. The Company was in compliance with all debt covenants as of December 31, 2024 and 2023. The Company expects to remain in compliance with all debt covenants over the next 12 months.
Amortization of debt issuance costs related to the Senior Notes and the Credit Agreement are recorded as capitalized interest within inventories on the Consolidated Balance Sheets and are expensed in cost of sales as the related homes close.
The decrease from prior year was mostly a result of higher closings relative to net sales, as well as the continued trend toward more sales of move-in-ready spec homes relative to pre-order sales. 44 Table Contents The following table presents information concerning our cancellation rates for each of our homebuilding segments for the periods set forth below: Year Ended December 31, Segment 2024 2023 Southeast 23.7 % 21.5 % Mid-Atlantic 12.9 % 14.4 % Midwest 14.4 % 17.8 % Total (1) 16.6 % 18.3 % (1) Our cancellation rate for a given period is calculated as the total number of new sales contracts cancelled during the period, divided by the total number of new home sales contracts entered into during the period.
Lower net sales in the Midwest segment were primarily the result of weakening Texas markets. 43 Table of Contents The following table presents information concerning our cancellation rates for each of our homebuilding segments for the periods set forth below: Year Ended December 31, Segment 2025 2024 Southeast 13.1 % 23.7 % Mid-Atlantic 12.2 % 12.9 % Midwest 15.1 % 14.4 % Total 13.5 % 16.6 % Our cancellation rate for the year ended December 31, 2025 was 13.5%, an improvement when compared to the 16.6% for the year ended December 31, 2024.
Refer to Note 2, Acquisitions to the consolidated financial statements for additional information. 45 Table Contents The $35 million, or 100%, increase in mortgage revenues, $21 million of the increase in financial services expense and $11 million of the increase in the financial services income before taxes for the year ended December 31, 2024 as compared to the year ended December 31, 2023, respectively, were all primarily due to the consolidation of Jet HomeLoans beginning July 1, 2024.
Refer to Note 2, Acquisitions to our consolidated financial statements for additional information. 44 Table of Contents Mortgage Banking Mortgage banking revenues for the year ended December 31, 2025 were $69 million, an increase of $34 million or 97%, from $35 million for the year ended December 31, 2024.
Senior Unsecured Notes On August 22, 2023, the Company issued $300 million in aggregate principal amount of 8.25% senior unsecured notes due August 15, 2028, which were issued pursuant to an indenture (the “Indenture”). Interest on the 2028 Notes is payable in arrears semiannually on each February 15 and August 15.
On September 5, 2025, we issued $300 million in aggregate principal amount of 6.875% senior unsecured notes due September 15, 2030 (the “2030 Notes”). Interest on the 2030 Notes is payable in arrears semiannually on each March 15 and September 15, beginning March 15, 2026.
Our Texas market was previously serviced by our unconsolidated title joint ventures, which resulted in a partially offsetting impact to financial services income before taxes of $2 million. Non-GAAP Financial Measures Management utilizes specific non-GAAP financial measures as supplementary tools to evaluate operating performance. These include adjusted homebuilding gross margin, EBITDA, and net homebuilding debt to net capitalization.
The changes in the results were mostly due to the April 2025 acquisition of Alliant Title. 45 Table of Contents Non-GAAP Financial Measures Management utilizes specific non-GAAP financial measures as supplementary tools to evaluate operating performance. These include EBITDA, adjusted homebuilding gross margin, and net homebuilding debt to net capitalization.
As of December 31, 2024 and 2023, our lot deposits related to finished lot option contracts and land bank option contracts were $458 million and $247 million, respectively. We continue to evaluate our overall capital structure and explore options to strengthen our balance sheet. We will remain opportunistic while assessing available capital in the debt and equity markets.
See below for more information on the Credit Agreement, Senior Notes and the mortgage warehouse facilities. We continue to evaluate our overall capital structure and explore options to strengthen our balance sheet. We will remain opportunistic while assessing available capital in the debt and equity markets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe loan portfolio of Jet HomeLoans is held for sale and subject to forward sale commitments. The Company enters into interest rate lock commitments (“IRLCs”) when originating mortgage loans with customers who have applied for a loan and meet certain credit and underwriting criteria. The fair value of IRLCs change based on changes in market and interest rate risk.
Biggest changeThe loan portfolio is held for sale and subject to forward sale commitments. The Company enters into interest rate lock commitments (“IRLC”) when originating mortgage loans with customers who have applied for a loan and meet certain credit and underwriting criteria.
Under the Credit Agreement, the Company has the ability to draw “Term SOFR Rate Loans” or “Daily Simple SOFR Rate Loans”. Term SOFR Rate Loans bear interest based on Term SOFR rates for one or three-month interest periods and include a SOFR adjustment of 10 basis points for each interest period.
Under the Credit Agreement, the Company has the ability to draw “Term SOFR Rate Loans” or “Daily Simple SOFR Rate Loans”. Term SOFR Rate Loans bear interest based on Term SOFR rates for one or three-month interest periods and include a SOFR adjustment of 10 basis points (“bps”) for each interest period.
The borrowing base availability is reduced dollar-for-dollar for any outstanding unsecured indebtedness permitted under the Credit Agreement. Our wholly owned mortgage banking business, Jet HomeLoans, is exposed to interest rate risk as it relates to its lending activities. Jet HomeLoans underwrites and originates mortgage loans, which are sold through either optional or mandatory forward delivery contracts into the secondary markets.
The borrowing base availability is reduced dollar-for-dollar for any outstanding unsecured indebtedness permitted under the Credit Agreement. Our mortgage banking business is exposed to interest rate risk as it relates to its lending activities. Jet HomeLoans underwrites and originates mortgage loans, which are sold through either optional or mandatory forward mortgage commitments into the secondary markets.
Interest on Base Rate or Daily Simple SOFR Rate advances borrowed under the Credit Agreement are payable in arrears on a monthly basis.
Interest on Base Rate as defined within the Credit Agreement or Daily Simple SOFR Rate advances borrowed under the Credit Agreement are payable in arrears on a monthly basis.
Jet HomeLoans also sells all of its mortgages held for sale on a servicing released basis. 55 Table Contents
Jet HomeLoans generally sells its mortgages held for sale on a servicing released basis. 55 Table of Contents
The Company pays the lenders a commitment fee on the amount of the unused commitments on a quarterly basis at a rate per annum that will vary from 0.20% to 0.30% depending on the Company’s net debt to capitalization ratio, as defined in the Credit Agreement. 54 Table Contents Outstanding borrowings under the Credit Agreement are subject to, among other things, a borrowing base.
The Company pays the lenders a commitment fee on the amount of the unused commitments on a quarterly basis at a rate per annum that will vary from 0.20% to 0.30% depending on the Company’s net debt to capitalization ratio, as defined in the Credit Agreement.
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Outstanding borrowings under the Credit Agreement are subject to, among other things, a borrowing base.
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In addition to the IRLC, the Company uses forward sales of mortgage backed securities (“MBS”) contracts to hedge its mortgage-related interest rate exposure. The fair values of these derivative instruments change based on fluctuations in secondary market investor pricing and quoted MBS prices.

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