10q10k10q10k.net

What changed in Dream Finders Homes, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Dream Finders Homes, Inc.'s 2023 and 2024 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 2024 report.

+380 added−417 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-29)

Top changes in Dream Finders Homes, Inc.'s 2024 10-K

380 paragraphs added · 417 removed · 297 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

72 edited+5 added−17 removed36 unchanged
Biggest change(“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”) 1 Table of Contents Markets We select the geographic markets in which we operate our homebuilding business through 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.
Biggest change(“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.
When 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 land development costs and sell the finished lots to us over a period of time. 2 Table of 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.
When 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.
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 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 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.
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 of 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”).
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”).
ITEM 1. BUSINESS Company Overview We design, build and sell homes 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 homes, 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. Our home offerings are marketed under various brands, including Dream Finders Homes, DF Luxury, Craft Homes, and Coventry Homes.
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 structural modifications.
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.
Closing, escrow and title insurance is primarily regulated at a state level, requiring that transactions be conducted by skilled attorneys and/or licensed title insurance agents. Expansion of title operations into our markets is ongoing and consideration of further expansion in our markets is driven by unit volume, average sales price for homes sold and state-level legal considerations.
Closing, escrow and title insurance is primarily regulated at a state level, requiring that transactions be conducted by skilled attorneys and/or licensed title insurance agents. Expansion of title operations into our markets is ongoing and consideration of further expansion in our markets is driven by unit volume, average sales price for homes sold, state-level legal considerations and acquisitions.
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 of 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. 6 Table Contents Competition and Market Factors The homebuilding industry is highly competitive and is characterized by relatively low barriers to entry.
Significant price increases of these materials may negatively impact our cost of sales and, in turn, our net income. 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.
Significant price increases of these materials may negatively impact our homebuilding cost of sales and, in turn, our net income. 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.
Available Information We make available, as soon as reasonably practicable, on our website, www.dreamfindershomes.com, all of our reports required to be filed with the Securities and Exchange Commission (“SEC”).
We make available, as soon as reasonably practicable, on our website, www.dreamfindershomes.com, all of our reports required to be filed with the Securities and Exchange Commission (“SEC”).
Fernandez served as the Vice President of Finance for the Americas region at Macquarie Group Limited, an Australian multinational independent investment bank and financial services company, from April 2016 to May 2018, overseeing financial and internal tax reporting for over 200 U.S. legal entities in the energy, capital and credit markets space and subsequently managing the financial audit process for Macquarie Group Limited’s aircraft leasing business.
Ramsay served as the Vice President of Finance for the Americas region at Macquarie Group Limited, an Australian multinational independent investment bank and financial services company, from April 2016 to May 2018, overseeing financial and internal tax reporting for over 200 U.S. legal entities in the energy, capital and credit markets space and subsequently managing the financial audit process for Macquarie Group Limited’s aircraft leasing business.
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 more profitable 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 requirements of the joint venture agreements, we have transitioned from these joint venture arrangements in favor of the option contract strategies described above.
Cancellations can occur for various reasons outside of our control, including customer credit issues or changes in other personal circumstances. Our backlog consists of homes under contract that have not yet been delivered to a homebuyer or third-party investor.
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.
In the United States, we rank among the top 14 homebuilders based on both homebuilding revenues and closings, as published in the 2023 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 2024 Builder 100 List reported by Builder Magazine. We compete for, among other things, homebuyers, desirable lots, financing, raw materials and skilled labor.
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, a North Carolina limited liability company (“H&H”) 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 metro 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 (“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.
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 are sales of homes during the period less cancellations of existing sales contracts during the period.
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.
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, utilizing feedback to enhance our standards. We maintain professional staff dedicated to delivering excellent customer experiences, including pre-sale, construction, closing, and after-sales service.
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.
We utilize customer feedback and comprehensive home tours before closing to improve quality and satisfaction. We highly value customers' willingness to refer us, which influences our team's compensation and quality control efforts.
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 are also the Official Homebuilder 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. We sell our homes through our own sales representatives and through independent real estate brokers.
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. Megha H.
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.
Prior to joining Macquarie Group Limited, Ms. Fernandez served as the Corporate Accounting Manager at Fidelity National Financial, a provider of title insurance and settlement services to the real estate and mortgage industries, in the title insurance business from 2014 to April 2016. Ms.
Prior to joining Macquarie Group Limited, Ms. Ramsay served as the Corporate Accounting Manager at Fidelity National Financial, a provider of title insurance and settlement services to the real estate and mortgage industries, in the title insurance business from November 2014 to April 2016. Ms.
The 401(k) plan includes matching safe harbor contributions equal to 100% of the first one percent of eligible compensation and 50% of the next five percent of eligible compensation. The Company may also make additional discretionary contributions. The health and safety of our employees and subcontractors is our top priority.
The 401(k) plan includes matching safe harbor contributions equal to 100% of the first two percent of eligible compensation and 50% of the next four percent of eligible compensation. The Company may also make additional discretionary contributions. The health and safety of our employees and subcontractors is our top priority.
Our materials are subject to price fluctuations. 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.
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.
Anabel Fernandez—Senior Vice President and Chief Financial Officer Anabel Fernandez joined us in 2 018, serving in the position of Treasurer and Vice President and as a member of the Asset Management Committee and was appointed Interim Chief Financial Officer on October 6, 2021 and promoted to Chief Financial Officer and Senior Vice President on April 1, 2022. Ms.
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.
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 mortgage banking joint venture, Jet HomeLoans, LP (“Jet HomeLoans”).
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”).
Refer to “Risk Factors” for further discussion on risks related to governmental regulation and environmental matters. Environmental, Social, and Corporate Governance (“ESG”) During 2023, under the oversight of our Nominating and Governance Committee, we continued to prioritize our ESG focus areas.
Refer to “Risk Factors” for further discussion on risks related to governmental regulation and environmental matters. Environmental, Social, and Corporate Governance (“ESG”) During 2024, under the oversight of our Nominating and Governance Committee, we continued to prioritize our ESG initiatives.
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 engaging in land development, which requires significant capital expenditures, and can take several years to realize returns on the investment.
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.
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, 2023, we had 221 active communities, an increase of 15 communities, or 7%, when compared to 206 active communities as of December 31, 2022.
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.
As of December 31, 2023, our lot deposits for finished lot option and land bank option contracts were $247 million. As of December 31, 2023, we controlled 29,748 lots under finished lot option and land bank option contracts.
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.
Model homes play a significant role in our marketing efforts by not only creating an attractive atmosphere, but by also displaying options and upgrades. As the Official Homebuilder of the Jacksonville Jaguars, we maintain a fully decorated model home at the team’s stadium, which attract s thousands of fans ea ch game day.
Model homes play a significant role in our marketing efforts by not only creating an attractive atmosphere, but also displaying options and upgrades. As the Official Home Builder of the Jacksonville Jaguars, we maintain a fully decorated model home at the team’s stadium, which attracts thousands of fans each NFL game day.
Fernandez started her career at Aeroflex Incorporated (NASDAQ: ARX INC), a publicly listed aerospace and defense electronics manufacturer, where she worked from 2002 to 2014. Ms. Fernandez is a Certified Public Accountant. Ms. Fernandez received a B.B.A in Accounting, Financial Economics and Economics from Lincoln Memorial University. 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 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.
Zalupski—President, Chief Executive Officer and Chairman of the Board of Directors Patrick Zalupski has served as our President, Chief Executive Officer and has served as Chairman of the Board of Directors since 2021.
Zalupski—President, Chief Executive Officer and Chairman of the Board of Directors Mr. Zalupski is our President and Chief Executive Officer and has served as Chairman of the Board of Directors since January 2021.
Refer to Note 11, Related Party Transactions to the consolidated financial statements for more information. 3 Table of 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, which generally averages approximatel y 9% of the purchase price of the home.
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.
Since breaking ground on our first home on January 1, 2009, we have closed over 29,500 homes through December 31, 2023 and have been profitable every year since inception.
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.
Our multilevel cooperation allows us to remain flexible to react quickly to changing markets or project-specific con ditions and maximize the potential of each new land opportunity.
Our multi-level cooperation allows us to remain flexible to react quickly to changing markets or project-specific conditions and maximize the potential of each new land opportunity.
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 state of Texas and the Southeast, Mid-Atlantic and Mountain Regions of the United States and closing over 29,500 homes since our inception through the end of 2023. 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 38,000 homes since our inception through the end of 2024 . Prior to founding DFH LLC, Mr.
As of December 31, 2023 and 2022, ending backlog was 3,978 homes and 5,548 homes, valued at approximately $2 billion and $3 billion, respectively, based on average sales price. Homes in ending backlog are typically converted to closings in the subsequent year.
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.
We also provide second-time move-up homes and homes in the active adult market. 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.
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.
Fernandez has been responsible for balance sheet management, capital allocation, cash forecasting and overall supervision of our accounting and treasury functions, including overall management of our debt, compliance, and reporting for lenders, investors and shareholders. Post-IPO, Ms. Fernandez developed the Company’s Investor Relations function. Prior to joining us, Ms.
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.
Our active community count excludes communities under the Company's 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.
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.
Our Financial Services segment consists of our mortgage banking and title services operations, which primarily consist of Jet Home Loans and Golden Dog Title and Trust. The homebuilding operations of Crescent Homes will be included in our Mid-Atlantic segment in 2024. Refer to Note 9, Segment Reporting to our consolidated financial statements for more information.
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.
Human Capital Resources As of December 31, 2023, we had 1,236 full-time employees. Of our full-time employees, 115 worked in our corporate office, 29 in divisional management and 283 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.
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.
We leverage our national presence and volume to secure better prices with manufacturers. Our 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.
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.
T he willingness of our customers t o refer friends and family to us as homebuyers is a direct result of customer satisfaction, and we strive to ensure that each of our customers will make such referrals.
The willingness of our customers to refer friends and family to us as homebuyers is a direct result of customer satisfaction, and we strive to ensure that each of our customers will make such referrals. While we utilize a diverse marketing mix, digital marketing is the primary component of our strategy.
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.
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.
Our Southeast segment consists of the homebuilding operations in Jacksonville, Orlando, and Tampa, 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; Savannah, Georgia; Hilton Head and Bluffton, South Carolina and our Active Adult and Custom Homes homebuilding operations in northeast Florida.
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 up-front capital outlay. Our land selection process begins with key economic drivers, such as demographic trends and employment growth.
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.
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.
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.
Ending backlog represents the number of homes in backlog from the previous period, plus sales of homes during the current period less cancellations of existing sales contracts during the period (“net sales”) , minus the number of home closings during the current period.
Backlog represents the number of homes in backlog from the previous period, plus net sales, minus the number of home closings during the period.
We believe our online marketing efforts have become a key strength of our business, allowing us to reach a broad range of potential homebuyers at a relatively low expense compared to traditional advertising platforms.
We have maximized the results of our digital marketing efforts in recent years through the development of a dedicated online sales team. We believe these efforts have become a key strength of our business, allowing us to reach a broad range of potential homebuyers at a relatively low cost compared to traditional advertising.
Our strategy is intended to avoid the financial commitments and risks associated with direct land ownership and land development by allowing us to increase optionality and control a significant number of lots for a relatively low capital cost.
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.
Among other things, this included collecting data from leadership within the Company regarding our home energy efficiency efforts, goals and achievements, providing increased incentives to promote home affordability, enhancing employee benefits and increasing communication with our Board of Directors regarding ESG initiatives. We are formalizing processes for measurement, mitigation, monitoring and reporting of our ESG efforts.
Among other things, this included continuing to collect data from leadership within the Company regarding our home energy efficiency efforts, goals and achievements, providing increased incentives to promote home affordability and communicating regularly with our Board of Directors regarding ESG initiatives.
He has served on the investment committee of DF Capital Management, LLC, a Florida limited liability company (“DF Capital”), 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 and on the board of directors for our mortgage banking joint venture, Jet HomeLoans, LLC, a Florida limited liability company, since December 2017.
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.
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.
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.
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. 5 Table of Contents Our mortgage banking joint venture, Jet HomeLoans, offers conforming and non-conforming mortgage financing to our homebuyers.
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.
Our Mid-Atlantic segment consists of our North Carolina homebuilding operations in Charlotte, Fayetteville, Raleigh, Wilmington and the Triad (consisting of Greensboro, High Point and Winston-Salem) (together, “The Carolinas”) and DC Metro. Our Midwest segment consists of our Texas homebuilding operations in Austin, Dallas, Houston and San Antonio, and our Colorado homebuilding operations in Denver.
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.
(4) As of December 31, 2023, the Company had 1,782 owned lots and 1,413 controlled lots under built-for-rent contracts (see “—Sales and Backlog” for a definition of built-for-rent contracts). DF Capital Management, LLC Controlling a sufficient supply of finished lots is an important component of our asset-light strategy.
(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.
Homesite costs range from 25-30% of the average cost of a home. Building materials range from 35-40% of the average cost to build the home, labor ranges from 25-30% of the average cost to build the hom e, and interest, co mmissions and closing costs range from 4-10% of the average cost to build the home.
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.
As of December 31, 2023 , the Company had 15 communities delivering closings under built-for-rent contracts. 4 Table of Contents Construction and Materials When constructing our homes, we are dependent upon building material suppliers to provide a continuous flow of raw materials. It typically tak es us between 150 and 240 days to construct a single-family home.
Construction and Materials When constructing our homes, we are dependent upon building material suppliers to provide a continuous flow of raw materials. It typically takes us between 150 and 240 days to construct a single-family home. The construction period for our custom homes is typically longer. 4 Table Contents We have extensive experience managing construction processes without employing subcontractors directly.
The construction period for our custom homes is 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 also eliminates the need for equipment investment, as we do not employ our own construction base.
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.
Each division is led by a construction director, manager, or vice president who oversees area managers. Communities have dedicated superintendents 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.
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.
Parekh– Senior Vice President and Chief Legal Officer of the Jacksonville Jaguars, a National Football League franchise. Leonard M. Sturm– Retired audit partner of KPMG LLP (“KPMG”) after a thirty-seven year career conducting financial statement audits of primarily public companies and audits of internal controls under Section 404 of the Sarbanes-Oxley Act.
Sturm– Retired audit partner of KPMG LLP after a thirty-seven year career conducting financial statement audits of primarily public companies and audits of internal controls under Section 404 of the Sarbanes-Oxley Act. William W. Weatherford– Managing partner of Weatherford Capital, which he co-founded in 2015.
The digital marketing methods that we employ include strategic e-marketing efforts to our current database of potential customers, internet advertising enhanced by search engine marketing and search engine optimization, and campaigns and promotions across an array of social media platforms. We also strategically open communities in high-visibility areas that allow us to take advantage of local traffic patterns.
We strategically select digital marketing methods that target our potential customers at various stages of the purchasing cycle. These include channels such as search engine optimization, pay-per-click advertising, social media marketing, email marketing and display advertising. We strategically open communities in high-visibility areas that allow us to take advantage of local traffic patterns.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Net Sales, Backlog and Closings ” for additional information. 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.
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.
Owned and Controlled Lots The following table presents our owned finished lots purchased just-in-time for production and controlled lots through option contracts by homebuilding segment as of December 31, 2023 and 2022: As of December 31, 2023 2022 Segment (1) Owned (2)(3) Controlled Total (4) Owned (3) Controlled Total % Change Southeast 3,057 13,063 16,120 2,939 16,255 19,194 -16 % Mid-Atlantic 1,802 4,795 6,597 1,766 14,891 16,657 -60 % Midwest 2,070 11,890 13,960 1,238 6,469 7,707 81 % Grand Total 6,929 29,748 36,677 5,943 37,615 43,558 -16 % (1) Refer to Note 9, Segment Reporting to the consolidated financial statements for further explanation of our reportable segments.
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.
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”). 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 interests in DF Capital.
Refer to N ote 1, Nature of Business and Significant Accounting Policies, to our consolidated financial statements for a discussion of accounting treatment of VIEs. 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 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.
Zalupski 43 President, Chief Executive Officer and Chairman of the Board of Directors Doug Moran 52 Senior Vice President and Chief Operations Officer L. Anabel Fernandez 42 Senior Vice President and Chief Financial Officer Executive Employees Patrick O.
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.
Our backlog at any given time will be affected by cancellations and the number of our active communities. Homes in backlog are generally closed within one to nine months. Sustained supply chain challenges during 2022 and early 2023 have contributed to temporarily elongated cycle times impacting the Company’s backlog turnover rate.
Our backlog at any given time will be affected by cancellations, the number of our active communities, and changes in the percentage of spec home sales versus pre-order sales and built-for-rent contracts, which are customarily delivered over a longer period of time. Homes in backlog are generally closed within one to nine months.
Our land team routinely underwrites potential lot acquisitions that meet our capital allocation criteria. Once our land acquisition committee approves a transaction that requires financing and meets our internal model, we will seek a land bank partner.
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”).
Justin Udelhofen– Private investor and former founder and Principal of Durant Partners, LLC, an investment fund that focuses on small-to-mid-capitalization equities. William W. Weatherford– Managing partner of Weatherford Capital, which he co-founded in 2015.
Udelhofen– Private investor and former founder and Principal of Durant Partners, LLC, an investment fund that focuses on small-to-mid-capitalization equities. Megha H. Parekh– Senior Vice President and Chief Legal Officer of the Jacksonville Jaguars, a National Football League franchise. Leonard M.
Our principal executive offices are located at 14701 Philips Highway, Suite 300, Jacksonville, Florida 32256, and our telephone number is (904)-644-7670. 8 Table of Contents Leadership Team and Board of Directors Executive Officers The following table sets forth information regarding our executive officers as of February 29, 2024: Name Age Position Patrick O.
Our SEC filings are also available to the public on the SEC’s website at www.sec.gov. Our principal executive offices are located at 14701 Philips Highway, Suite 300, Jacksonville, Florida 32256, and our telephone number is (904)-644-7670.
Removed
As a result of our acquisitive and organic growth, and our overall strategy to maintain agility, the management of our homebuilding operations changed from a divisional level to a regional level during the third quarter of 2023. Our operations are now organized into four reportable segments: Southeast, Mid-Atlantic, Midwest and Financial Services.
Added
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.
Removed
We believe our asset-light business model reduces our balance sheet risk relative to homebuilders that own a higher percentage of their land supply. Refer to “—Land Acquisition and Development Process” and Note 6, Variable Interest Entities to our consolidated financial statements for further information.
Added
Our wholly owned mortgage banking subsidiary, Jet HomeLoans, offers conforming and non-conforming mortgage financing to our homebuyers.
Removed
Refer to Note 6, Variable Interest Entities to our consolidated financial statements for the disclosure of our remaining equity interests in these joint ventures.
Added
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.
Removed
(2) As of December 31, 2023 , the Company had 6,929 owned lots, of which 4,133 were included in construction in process (“CIP”) and finished homes within the Consolidated Balance Sheet. Of the 4,133 owned lots included in CIP and finished homes, 3,632 were under construction, 391 were completed spec homes and 110 were model homes.
Added
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.

… 14 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

123 edited+16 added−34 removed212 unchanged
Biggest changeThe 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 closing, backlog and sales revenues as a result of rising interest rates and inflationary pressures; • a continued shortage of building materials or labor, or continued increases in costs that delay or increase the cost of home construction; • the impact from global economic and political instability and conflicts could adversely affect our business, financial condition or results of operations; • a slowdown in the homebuilding industry or changes in population growth rates in our markets; • volatility and uncertainty in the credit markets and broader financial markets; • our future operating results and financial condition; • adverse effects of major epidemics or pandemics, such as COVID-19, on the economy, our business, financial condition and results of operations; • 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; • our ability to identify potential acquisition targets and close such acquisitions; • our ability to successfully integrate acquired businesses with our existing operations; • availability of land to acquire and our ability to acquire such land on favorable terms, or at all; • availability, terms and deployment of capital and ability to meet our ongoing liquidity needs; • restrictions in our debt agreements that limit our flexibility in operating our business; • disruption in the terms or availability of mortgage financing or an increase in the number of foreclosures in our markets; • decline in the market value of our inventory or controlled lot positions; • 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; • uninsured losses in excess of insurance limits; • the cost and availability of insurance and surety bonds; 34 Table of Contents • changes in liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental laws and regulations; • the timing of receipt of regulatory approvals and the opening of projects; • the degree and nature of our competition; • decline in the financial performance of our interests, our lack of sole decision-making authority thereof and maintenance of relationships with our partners; • negative publicity or poor relations with the residents of our projects; • existing and future warranty and liability claims; • 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; • our ability to maintain an effective system of internal control and produce timely and accurate financial statements or comply with applicable regulations; • our leverage and future debt service obligations; • the impact on our business of any future government shutdown; • the impact on our business of acts of war or terrorism; • other risks and uncertainties inherent in our business; 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.
Biggest changeThe 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 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 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.
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.
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 future 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. Strategic and Financial Risks Our success depends upon our ability to successfully adapt our business strategy to changing home buying patterns and trends.
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, including planned communities, in Florida, Texas, Tennessee, North Carolina, South Carolina, Georgia, Colorado, and the Washington, D.C. metropolitan area, which comprises Northern Virginia and Maryland.
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, including planned communities, in Florida, Texas, Tennessee, North Carolina, South Carolina, Georgia, Colorado, Arizona, and the Washington, D.C. metropolitan area, which comprises Northern Virginia and Maryland.
There is no guarantee that a future outbreak of this or any other widespread epidemics or pandemics will not occur, or that the U.S. economy will fully recover, either of which could materially and adversely affect our business. Any future government shutdowns or slowdowns may materially adversely affect our business or financial results.
There is no guarantee that a future outbreak of this or any other widespread epidemics or pandemics will not occur, or that the U.S. economy will fully recover, either of which could materially adversely affect our business. Any future government shutdowns or slowdowns may materially adversely affect our business or financial results.
Subsequent to the fifth anniversary of its issuance (or earlier in the event of our non-compliance with a protective covenant), a holder can convert the convertible preferred stock into shares of Class A common stock at a conversion price that will be based on the average of the last reported sales price of the Company’s Class A common stock for the ninety trading days immediately preceding but not including the date of the Optional Conversion Notice (as defined in the certificate of designations for the convertible preferred stock), less 20% of the aforementioned average (increasing to 25% in the event of non-compliance with a protective covenant) and subject to a floor conversion price of $4.00.
Subsequent to the fifth anniversary of its issuance (or earlier in the event of our non-compliance with a protective covenant), a holder can convert the redeemable preferred stock into shares of Class A common stock at a conversion price that will be based on the average of the last reported sales price of the Company’s Class A common stock for the ninety trading days immediately preceding but not including the date of the Optional Conversion Notice (as defined in the certificate of designations for the redeemable preferred stock), less 20% of the aforementioned average (increasing to 25% in the event of non-compliance with a protective covenant) and subject to a floor conversion price of $4.00.
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. 24 Table of 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. 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.
If we undergo a Change of Control (as defined in the certificate of designations for the convertible preferred stock), we must redeem all of the shares of convertible preferred stock for cash consideration equal to the initial liquidation preference of $1,000 per share, subject to adjustment, plus all a ccrued and unpaid dividends thereon, plus if the Change of Control occurs before the fourth anniversary of the date of issuance, a premium equal to the dividends that would have accumulated on such share from and after the date of the Change of Control and through the fourth anniversary of the date of issuance of the convertible preferred stock.
If we undergo a Change of Control (as defined in the certificate of designations for the redeemable preferred stock), we must redeem all of the shares of redeemable preferred stock for cash consideration equal to the initial liquidation preference of $1,000 per share, subject to adjustment, plus all a ccrued and unpaid dividends thereon, plus if the Change of Control occurs before the fourth anniversary of the date of issuance, a premium equal to the dividends that would have accumulated on such share from and after the date of the Change of Control and through the fourth anniversary of the date of issuance of the redeemable preferred stock.
Shares of our convertible preferred stock are convertible into shares of our Class A common stock in certain circumstances and, upon conversion, will dilute common stock shareholders’ percentage of ownership.
Shares of our redeemable preferred stock are convertible into shares of our Class A common stock in certain circumstances and, upon conversion, will dilute common stock shareholders’ percentage of ownership.
Finally, our ability to begin new projects could be negatively impacted if we elect not to purchase land under our land banking option contracts. We intend to grow our operations in existing markets, and we may expand into new markets or pursue opportunistic purchases of other homebuilders on attractive terms as such opportunities arise.
Finally, our ability to begin new projects could be negatively impacted if we elect not to purchase land under our land banking option contracts. We intend to grow our operations in existing markets, and we intend to expand into new markets and pursue opportunistic purchases of other homebuilders on attractive terms as such opportunities arise.
Additionally, when making acquisitions, it may not be possible for us to conduct a detailed investigation of the nature of the business or assets being acquired, for instance, due to time constraints in making the decision and other factors. We may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition.
Additionally, when making acquisitions, it may not be possible for us to conduct a thorough investigation of the nature of the business or assets being acquired, for instance, due to time constraints in making the decision and other factors. We may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition.
Upon our liquidation, dissolution or winding up, each share of convertible preferred stock will be entitled to receive an amount per share equal to the initial liquidation preference of $1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon, which dividends accrue at a rate of 9% per annum.
Upon our liquidation, dissolution or winding up, each share of redeemable preferred stock will be entitled to receive an amount per share equal to the initial liquidation preference of $1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon, which dividends accrue at a rate of 9% per annum.
For the past decade, the domestic financial markets have experienced a high degree of volatility, uncertainty and, during certain periods, tightening of liquidity in both the high yield debt and equity capital markets, resulting in certain periods when new capital has been both more difficult and more expensive to access.
The domestic financial markets have in the past experienced a high degree of volatility, uncertainty and, during certain periods, tightening of liquidity in both the high yield debt and equity capital markets, resulting in certain periods when new capital has been both more difficult and more expensive to access.
Additionally, the Inflation Reduction Act of 2022 also 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, 2022, we claimed $11 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, 2023 , we claimed $3 million of Federal Energy Credits.
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.
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.
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. 16 Table of Contents 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.
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.
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. 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.
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.
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.
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 risk factors described below are those that we think may be material with regard to an investment in us, as well as certain risk factors that may be generally applicable to all business enterprises, but not all general risk factors.
The risk factors described below are those that we believe are material with regard to an investment in us, as well as certain risk factors that may be generally applicable to all business enterprises, but not all general risk factors.
Warranty and construction defect matters can also result in negative publicity, including on social media platforms, which could damage our reputation and negatively affect our ability to sell homes. 15 Table of Contents Further, the coverage offered by, and the availability of, general liability insurance for completed operations and construction defects are currently limited and costly.
Warranty and construction defect matters can also result in negative publicity, including on social media platforms, which could damage our reputation and negatively affect our ability to sell homes. Further, the coverage offered by, and the availability of, general liability insurance for completed operations and construction defects are currently limited and costly.
If securities or industry analysts do not publish research or reports about our business, they adversely change their recommendations regarding our Class A common stock or our operating results do not meet their expectations, our stock price could decline.
If securities or industry analysts do not continue to publish research or reports about our business, they adversely change their recommendations regarding our Class A common stock or our operating results do not meet their expectations, our stock price could decline.
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. The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our customers, our business could decline.
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. 12 Table Contents The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our customers, our business could decline.
Our Class A and B common stock rank junior to our convertible preferred stock, with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
Our Class A and B common stock rank junior to our redeemable preferred stock, with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
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.
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.
Our business can be substantially affected by adverse changes in general 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; housing demand from population growth, household formation and other demographic factors; 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 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; interest of financial institutions or other businesses in purchasing wholesale homes; and real estate taxes.
Our 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.
On September 29, 2021, we sold 150,000 shares of convertible preferred stock with an initial liquidation preference of $1,000 per share, for an aggregate purchase price of $150 million.
On September 29, 2021, we sold 150,000 shares of redeemable preferred stock with an initial liquidation preference of $1,000 per share, for an aggregate purchase price of $150 million.
No distribution of our assets may be made to holders of our Class A and B common stock until we have paid to holders of our convertible preferred stock such liquidation preference.
No distribution of our assets may be made to holders of our Class A and B common stock until we have paid to holders of our redeemable preferred stock such liquidation preference.
This could disrupt our ongoing operations and divert management resources that would otherwise focus on developing our existing business. 22 Table of Contents We may develop more communities in which we build townhomes in addition to single-family homes or sell homes to investors or portfolio management companies under built-for-rent or other purposes.
This could disrupt our ongoing operations and divert management resources that would otherwise focus on developing our existing business. We may develop more communities in which we build townhomes in addition to single-family homes or sell homes to investors or portfolio management companies under built-for-rent or other purposes.
As a result, the trading price and volume of our Class A common stock could be adversely affected. We have not declared or paid cash dividends on our Class A common stock and we cannot assure that cash dividends will be paid.
As a result, the trading price and volume of our Class A common stock could be adversely affected. 28 Table Contents We have not declared or paid cash dividends on our Class A common stock and we cannot assure that cash dividends will be paid.
Entry-level and first-time move-up homebuyers are the primary sources of demand for our new homes. Entry-level homebuyers are generally more affected by the availability of mortgage financing than other potential homebuyers and many of our potential move-up homebuyers must sell their existing homes in order to buy a home from us.
Entry-level and first-time move-up homebuyers are a significant source of demand for our new homes. Entry-level homebuyers are generally more affected by the availability of mortgage financing than other potential homebuyers and many of our potential move-up homebuyers must sell their existing homes in order to buy a home from us.
Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result.
Any failure in health and safety performance, whether by us or a subcontractor, may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result.
Certain of our directors hold positions of responsibility with other entities whose businesses are involved in certain aspects of the real estate industry, including in DF Capital, with which we partner for certain land banking opportunities.
Certain of our directors hold positions of responsibility with other entities whose businesses are involved in certain aspects of the real estate industry with which we partner for certain land banking opportunities.
Accordingly, the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements are not afforded to our Class A common stockholders. 28 Table of Contents 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. The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Mr. Zalupski, through his beneficial ownership of all of our outstanding Class B common stock as of December 31, 2023, controls approxima tely 85% 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, 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.
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 the drafting of disclosures subject to management review.
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.
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 85% of the total combined voting power of our Class A and Class B common stock as of December 31, 2023). 26 Table of 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 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.
Experienced employees in the homebuilding, land acquisition, development and construction industries are fundamental to our ability to generate, obtain and manage opportunities. In particular, local knowledge and relationships are critical to our ability to source attractive land acquisition opportunities. Experienced employees working in the homebuilding, development and construction industries are highly sought after.
In particular, local knowledge and relationships are critical to our ability to source attractive land acquisition opportunities. Experienced employees working in the homebuilding, development and construction industries are highly sought after.
We have expanded our business through selected investments in new geographic markets and by diversifying our products in certain markets. Investments in land, developed lots and home inventories can expose us to risks of economic loss and inventory impairments if housing conditions weaken or we are unsuccessful in implementing our growth strategies.
We continue to expand our business through selective investments in new geographic markets and by diversifying our products in certain markets. Investments in land, developed lots and home inventories can expose us to risks of economic loss and inventory impairments if housing conditions weaken or we are unsuccessful in implementing our growth strategies.
We may not be able to complete or successfully integrate our recent acquisitions or any potential future acquisitions or experience challenges in realizing the expected benefits of each such acquisition. From time-to-time, we acquire other businesses to expand our presence in new and existing geographic markets.
We may not be able to complete or successfully integrate our recent acquisitions or any potential future acquisitions or experience challenges in realizing the expected benefits of each such acquisition. From time-to-time, we acquire other businesses to expand our presence in new and existing geographic markets or to expand into opportunities to contribute to our long-term strategy.
The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our projects, reduce consumer demand for housing and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability.
The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our projects, reduce consumer demand for housing by making such regions less desirable and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability.
We do not have the ability to control what these parties pay their employees or the rules they impose on their employees. 21 Table of Contents However, various governmental agencies have taken actions to hold parties like us responsible for violations of wage and hour laws and other labor laws by subcontractors.
Our homes are constructed by employees of subcontractors and other third parties. We do not have the ability to control what these parties pay their employees or the rules they impose on their employees. However, various governmental agencies have taken actions to hold parties like us responsible for violations of wage and hour laws and other labor laws by subcontractors.
For the year ended December 31, 2023, we have estimated $3 million of Federal Energy Credits within our income tax provision.
For the year ended December 31, 2024 , we have estimated $12 million of Federal Energy Credits within our income tax provision.
Long-term restrictions on, or unavailability of, homeowners’ insurance in the Florida and Texas markets could have an adverse effect on the homebuilding industry in such markets in general, and on our business within such markets in particular.
Long-term restrictions on, or unavailability of, homeowners’ insurance in any of the markets in which we operate could have an adverse effect on the homebuilding industry in such markets in general, and on our business within such markets in particular.
As of December 31, 2023, we had outstanding letters of credit and surety bonds totalin g $1 million and $195 million, respectively. These letters of credit and surety bonds are generally subject to certain financial covenants and other limitations.
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.
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. 35 Table of Contents
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.
Such act extended the availability of the Code Section 45L credit for energy-efficient new homes (the “Federal Energy Credits”), which provides a tax credit of $2,000 per qualifying home ($1,600 after the benefit is deducted from cost of sales as required by the IRS) to eligible homebuilders, and made the Federal Energy Credits available for homes delivered through December 31, 2022.
Congress passed the Inflation Reduction Act of 2022, which extended the availability of the Code Section 45L credit for energy-efficient new homes (the “Federal Energy Credits”) and provided a tax credit of $2,000 per qualifying home ($1,600 after the benefit is deducted from cost of sales as required by the IRS) to eligible homebuilders for homes delivered through December 31, 2022.
We may not be able to successfully finance or integrate any businesses that we acquire. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations.
We may not be able to successfully integrate any businesses that we acquire into our operations and may not achieve the synergies we expected from an acquisition. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations.
Zalupski’s concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders. Sales of shares pledged for margin loans by our directors and officers could cause our stock price to decrease. Under the Dream Finders Homes, Inc.
Zalupski’s concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders. Sales of shares pledged for margin loans or prepaid variable forward sales contracts by our directors and officers could cause our stock price to decrease.
Government mandates, standards and regulations enacted in response to these projected climate change impacts and concerns could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs.
Government mandates, standards and regulations enacted in response to projected climate change impacts and concerns could result in restrictions on land development in certain areas, as well as increased costs for energy, transportation and raw materials.
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.
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.
Our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, including the continued conflicts between Israel and Hamas and Ukraine and Russia.
Our business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions and geopolitical conflicts, including the continued conflicts between Israel and Hamas and Ukraine and Russia or other armed conflicts, civil unrest or acts of terrorism.
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.
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.
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. 33 Table of Contents We have based these forward-looking statements on our current expectations and assumptions about future events based on information available to our management at the time the statements were made.
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 labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or a result of broader economic disruptions. We continue to experience labor shortages. It is uncertain whether these shortages will continue as is, improve or worsen.
These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or a result of broader economic disruptions.
They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and, as a result, they may elect not to present those opportunities to us. These conflicts of interest may not be resolved in our favor.
They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and, as a result, they may elect not to present those opportunities to us.
Disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business.
Disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. In addition, we may be liable for the actions of our joint venture partners in certain circumstances.
Our success depends to a significant degree upon the contributions of certain key management personnel, including, but not limited to, Patrick Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, our Senior Vice President and Chief Operating Officer, Doug Moran, and our Senior Vice President and Chief Financial Officer, Anabel Fernandez.
Our success depends to a significant degree upon the contributions of certain key management personnel, including, but not limited to, Patrick Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, National President, Doug Moran, and our Senior Vice President and Chief Financial Officer, Anabel Ramsay. Although we have entered into employment agreements with Mr.
A prolonged economic downturn in one or more of the areas in which we operate could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with larger scale and more diversified operations and geographic footprint. 14 Table of Contents Difficulties with appraisal valuations in relation to the proposed sales price of our homes could force us to reduce the price of our homes for sale.
A prolonged economic downturn or reduction in demand for homes in one or more of the areas in which we operate, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with larger scale and more diversified operations and geographic footprint.
In addition, we may be liable for the actions of our joint venture partners in certain circumstances. 23 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 directors 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.
These conflicts of interest may not be resolved in our favor. 26 Table 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 directors 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.
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 Industry, Economic and Regulatory Risks Inflation could adversely affect our business and financial results.
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.
Moreover, even if we were successful in integrating newly acquired businesses or assets, expected synergies or cost savings may not materialize, resulting in lower than expected benefits to us from such transactions. We may spend time and money on projects that do not increase our revenue.
Moreover, even if we were successful in integrating newly acquired businesses or assets, expected synergies or cost savings may not materialize, resulting in lower than expected benefits to us from such transactions.
Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection. As part of our normal business activities, we collect and store certain information, including information specific to homebuyers, customers, employees, vendors and suppliers. We may share some of this information with third parties who assist us with certain aspects of our business.
As part of our normal business activities, we collect and store certain information, including information specific to homebuyers, customers, employees, vendors and suppliers. We may share some of this information with third parties who assist us with certain aspects of our business. The regulatory environment surrounding data privacy and protection is constantly evolving and can be subject to significant change.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. Acts of war or terrorism may seriously harm our business.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. Negative publicity could adversely affect our reputation as well as our business, financial results and stock price.
Certain rights of the holders of the convertible preferred stock could delay or prevent an otherwise beneficial takeover or takeover attempt of us. Certain rights of the holders of the convertible 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 make it more difficult or more expensive for a third party to acquire us.
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; 25 Table of Contents • our current and expected future earnings; • our cash flow; and • the market price per share of our common stock.
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 long-term success and growth strategies depend in part upon continued availability of suitable land at acceptable prices. The availability of land, lots and home inventories for purchase at favorable prices depends on a number of factors outside of our control. We may compete for available land with entities that possess significantly greater financial, marketing and other resources.
Our long-term success and growth strategies depend in part upon continued availability of suitable land at acceptable prices. The availability of land, lots and home inventories for purchase at favorable prices depends on a number of factors outside of our control. We often face competition from other homebuilders and others for available land.
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, the price of our common stock would likely decline materially.
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.
Any land shortages or any decrease in the supply of suitable land at reasonable prices could limit our ability to develop new communities or result in increased lot deposit requirements or land costs. We may not be able to pass any increased land costs to our customers, which could adversely impact our revenues, earnings and margins.
Any land shortages or any decrease in the supply of suitable land at reasonable prices could limit our ability to develop new communities or result in increased lot deposit requirements or land costs.
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.
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.
Although we intend to call the shares of convertible preferred stock for redemption prior to their conversion, in the event the shares of convertible preferred stock are converted into shares of Class A common stock, such issuance will cause substantial dilution to the holders of our common stock.
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 when the fair market value of controlled lots deviates 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. 19 Table of Contents Increases in our can cellation rate could have a negative impact on our homebuilding revenues and gross margins.
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.
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.
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.
This choice of forum provision may limit a stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. 27 Table of Contents Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
For example, losses associated with 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 sizeable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.
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.
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.
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.
The regulatory environment surrounding data privacy and protection is constantly evolving and can be subject to significant change. Laws and regulations governing data privacy and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate our costs.
Laws and regulations governing data privacy and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate our costs.
Further, pricing for labor and raw materials could be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws and trends in labor migration and tariffs. For instance, in 2023, Florida enacted legislation that will impose more stringent immigration eligibility requirements that could cause our labor shortage to worsen.
Pricing for labor and raw materials could be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws and trends in labor migration and tariffs.
Our business could be materially and adversely disrupted by an epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that federal, state and local governments and other authorities implement to address it.
In addition, such events could cause higher interest rates, inflation or general economic uncertainty, which could negatively impact our business partners, employees or customers or otherwise adversely impact our business. 31 Table Contents Our business could be materially and adversely disrupted by an epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that federal, state and local governments and other authorities implement to address it.
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.
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.
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”), including (i) limitations on the ability of our homebuyers to deduct property taxes, (ii) limitations on the ability of our homebuyers to deduct mortgage interest and (iii) limitations on the ability of our homebuyers to deduct state and local income taxes.
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”).

… 93 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−0 removed10 unchanged
Biggest changeWe also maintain insurance coverage for cybersecurity incidents. The Company also engages third parties to perform periodic assessments of certain aspects of our cybersecurity measures, including vulnerability assessments and audits and independent reviews of our information security control environment and operating effectiveness.
Biggest changeWe also maintain insurance coverage for cybersecurity incidents. The Company engages third parties to perform periodic assessments of certain aspects of our cybersecurity measures, including vulnerability assessments, audits and independent reviews of our information security control environment and operating effectiveness.
The VP of IT and the NVP of Finance work in coordination with the Cybersecurity Response Committee, which also includes our Chief Financial Officer (“CFO”) 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, internal audit and SEC reporting functions.
The VP of IT has served in various roles in information technology and information security for over 24 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 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.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
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 owned or controlled as of December 31, 2023. 36 Table of Contents
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 .

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS Legal Proceedings From time to time, we are a party to ongoing legal proceedings in the ordinary course of business. Refer to Note 5, Commitments and Contingencies — Legal Proceedings to our consolidated financial statements for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 37 Table of Contents PART II
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−0 removed5 unchanged
Biggest changeThe Share Buyback Program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time. As of February 29, 2024, we have not executed any repurchases under the Share Buyback Program. ITEM 6. RESERVED
Biggest changeThe Share Buyback Program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time.
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. 38 Table of 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. 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.
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, 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, 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.
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 o f February 22, 2024 the closing price of our Class A common stock on the NYSE w as $34.41 , and we had 14 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 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.
Added
The 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.

Item 7. Management's Discussion & Analysis

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

85 edited+59 added−68 removed15 unchanged
Biggest changeThe following tables summarize homes closings, and ASP of homes closed by homebuilding segment for the years ended December 31, 2023 and 2022, as well as active communities as of December 31, 2023 and 2022: 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 Year Ended December 31, 2022 As of December 31, 2022 Segment Home Closings ASP Active Communities Southeast 2,722 $ 439,150 57 Mid-Atlantic 1,562 358,548 37 Midwest 2,594 580,865 112 Total 6,878 $ 474,292 206 The following table presents income before taxes (in thousands), and homebuilding gross margin percentage by segment for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin % Southeast $ 183,537 18.9 % $ 165,367 19.4 % Mid-Atlantic 54,646 17.9 % 40,028 14.1 % Midwest 168,115 20.6 % 164,377 19.1 % Total $ 406,298 19.4 % $ 369,772 18.4 % 42 Table of Contents Revenues .
Biggest changeA 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.
However, because adjusted gross margin information excludes capitalized interest, lot option fees, purchase accounting amortization and commission expense, which have real economic effects and could impact our results of operations, the utility of adjusted gross margin information as a measure of our operating performance may be limited.
However, because adjusted homebuilding gross margin information excludes capitalized interest, lot option fees, purchase accounting amortization and commission expense, which have real economic effects and could impact our results of operations, the utility of adjusted homebuilding gross margin information as a measure of our operating performance may be limited.
As a result, in order to provide a meaningful comparison to the public company homebuilders that include commission expense below the gross margin line in selling, general and administrative expense, we have excluded commission expense from adjusted gross margin.
As a result, in order to provide a meaningful comparison to the public company homebuilders that include commission expense below the homebuilding gross margin line in selling, general and administrative expense, we have excluded commission expense from adjusted homebuilding gross margin.
This includes revenues from home sales with respect to homes that we construct on homesites to which we own title that are recorded at the time each home sale is closed and title and possession are transferred to the buyer, or upon delivery of homes sold to third-party investors intending to lease the homes, as well as revenues from home sales in which the buyer retains title to the homesite while we build the home that are recognized based on the percentage of completion of the home construction, which is measured on a quarterly basis.
This includes revenues from home sales with respect to homes that we construct on homesites to which we own title that are recorded at the time each home sale is closed and title and possession are transferred to the buyer, or upon delivery of homes sold to third-party investors intending to lease the homes, as well as revenues from home sales in which the buyer or third-party investor retains title to the homesites while we build the homes that are recognized based on the percentage of completion of the home construction, which is measured on a quarterly basis.
We used the proceeds from the sale of the convertible preferred stock to partially fund the MHI acquisition and for general corporate purposes. Pursuant to the Certificate of Designations, the convertible preferred stock ranks senior to the Class A and B common stock with respect to dividends and distributions on liquidation, winding-up and dissolution.
We used the proceeds from the sale of the redeemable preferred stock to partially fund the MHI acquisition and for general corporate purposes. Pursuant to the Certificate of Designations, the redeemable preferred stock ranks senior to the Class A and B common stock with respect to dividends and distributions on liquidation, winding-up and dissolution.
Convertible Preferred Stock On September 29, 2021, we sold 150,000 shares of newly-created convertible 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.
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.
Accordingly, upon a liquidation, dissolution or winding up of the Company, each share of convertible 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 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.
Further information regarding our contingent consideration liability is provided in Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements. 50 Table of Contents 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.
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.
Early stages in our communities require material cash outflows relating to finished rolling option lot purchases, entitlements and permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes.
Early stages in our communities require material cash outflows relating to finished lot purchases from option contracts, entitlements and permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes.
As of December 31, 2023 , we had outstanding surety bonds and letters of credit totaling $195 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, 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.
The Company also has finance leases for corporate office furniture. As of December 31, 2023, the future minimum lease payments required under these leases totaled $25 million, with $7 million payable within 12 months. Further information regarding our leases is provided in Note 5, Commitments and Contingencies to our consolidated financial statements.
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.
Revenue Recognition We recognize revenue in two ways in accordance with Accounting Standards Codification (“ASC”) 606.
Revenue Recognition We recognize homebuilding revenue in two ways in accordance with Accounting Standards Codification (“ASC”) Topic 606.
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. We define adjusted EBITDA as EBITDA before stock-based compensation.
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 and adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computations of EBITDA and adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA of other companies.
EBITDA should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computations of EBITDA may not be comparable to EBITDA of other companies.
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.
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.
Management believes EBITDA and adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare our results of operations from period to period without regard to our financing methods or capital structure or other items that impact the comparability of financial results from period to period.
Management believes EBITDA is useful because it allows management to more effectively evaluate our operating performance and compare our results of operations from period to period without regard to our financing methods or capital structure or other items that impact the comparability of financial results from period to period.
Term SOFR Rate Loans bear interest based on Term SOFR rates for one, three or six-month interest periods, which include SOFR adjustments of 10, 15 and 25 basis points for each interest period, respectively. Daily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 basis points.
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.
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.
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.
(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 the Company’s prior acquisitions. (4) Calculated as a percentage of homebuilding revenues.
(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.
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. Any gain on a bargain purchase is recognized in profit or loss immediately.
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.
The majority of our projects begin at the land acquisition stage when we enter into finished lot option contracts by placing a deposit with a land seller, banker or developer. Our lot deposits are an asset on our balance sheets and these cash outflows are not recognized in our results of operations.
The majority of our projects begin at the land acquisition and development stage when we enter into finished lot option and land bank option contracts by placing a deposit with a land seller, developer or land banker. Our lot deposits are an asset on our Consolidated Balance Sheets.
Indirect overhead costs are charged to selling, general and administrative expense as incurred. Land and development costs are typically allocated to individual residential lots on a pro rata basis based on the number of lots in the development, and the costs of residential lots are transferred to construction work in progress when home construction begins.
Land and development costs are typically allocated to individual residential lots on a pro rata basis based on the number of lots in the development, and the costs of residential lots are transferred to construction work in progress when home construction begins.
This liability is remeasured to fair value quarterly and the adjustment is recorded in contingent consideration revaluation in the Consolidated Statements of Comprehensive Income. As of December 31, 2023, the contingent consideration liability totaled $117 million, with approximately $50 million payable within 12 months.
This liability is remeasured to fair value quarterly and the adjustment is recorded in contingent consideration revaluation in the Consolidated Statements of Comprehensive Income. As of December 31, 2024, the contingent consideration liability totaled $68 million, with the entire amount expected to be payable within 12 months.
Although currently there is economic uncertainty that is impacting the homebuilding industry, 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.
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.
Net cash used in financing activities was $216 million for the year ended December 31, 2023, as comp ared to $147 million of cash provided by financing activities for the year ended December 31, 2022.
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.
Except for furnishings of model homes, these costs are capitalized within our real estate inventory and are not recognized in our operating income until a home sale closes. As such, we incur significant cash outflows prior to the recognition of revenues.
Except for furnishings of model homes, these costs are capitalized within our inventories and are not recognized as an expense until a home sale closes. As such, we incur significant cash outflows prior to the recognition of revenues and the related cost of sales.
Homebuilding gross margin percentage was 20.6% for the year ended December 31, 2023, representing an increase of 150 bps, or 1.5%, when com pared to the year ended December 31, 2022 .
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.
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.
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.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by/(used in) operating activities $ 374,234 $ (27,623) $ 64,972 Net cash used in investing activities (4,484) (5,524) (523,043) Net cash (used in)/provided by financing activities (216,424) 146,955 646,020 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net cash provided by operating activitie s was $374 million for the year ended December 31, 2023, compared to $28 million of net cash used in operating activities for the year ended December 31, 2022.
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.
Refer to Note 15, Subsequent Events to our consolidated financial statements for more information. Expansion in the Southeast Segment In 2023, we expanded into the Tampa, Florida market. As of December 31, 2023, we owned 12 lots and controlled 623 lots in Tampa.
Refer to Note 15, Subsequent Events to our consolidated financial statements for more information. Expansion in the Southeast Segment In the fourth quarter of 2024, we expanded organically into southwest Florida. As of December 31, 2024, we controlled 42 lots in this market.
The Company had capitalized debt issuance costs, net of amortization, related to construction lines of credit totaling $7 million as of both December 31, 2023 and 2022, which were included in other assets on the Consolidated Balance Sheets. Debt issuance costs that are recorded to capitalized interest are expensed in cost of sales as the homes close.
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.
EBITDA and adjusted EBITDA information should be considered only as a supplement to net income information as a measure of our performance. 47 Table of Contents The following table presents a reconciliation of EBITDA and adjusted 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, 2023 2022 2021 Net and comprehensive income attributable to Dream Finders Homes, Inc. $ 295,900 $ 262,313 $ 121,133 Interest income (4,299) (169) (6) Interest charged to homebuilding cost of sales (1) 122,759 60,595 32,508 Interest expense 1 32 672 Income tax expense 96,483 81,859 27,455 Depreciation and amortization (2) 10,651 17,952 13,205 EBITDA $ 521,495 $ 422,582 $ 194,967 Stock-based compensation 14,098 6,796 5,233 Adjusted EBITDA $ 535,593 $ 429,378 $ 200,200 EBITDA margin % (3) 13.9% 12.6% 10.1% Adjusted EBITDA margin % (3) 14.3% 12.8% 10.4% (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, 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.
Backlog of sold homes as of December 31, 2023 was 3,978 homes valued at approximately $1.9 billion based on ASP, a decrease of 1,570 homes and $0.6 billion in value, or 28% and 25%, respectively, from 5,548 homes valued at approximately $2.5 billion as of December 31, 2022.
Backlog of sold homes as of December 31, 2024 was 2,599 homes valued at approximately $1.3 billion based on ASP, a decrease of 1,379 homes and $583 million in value, or 35% and 31%, respectively, from 3,978 homes valued at approximately $1.9 billion as of December 31, 2023.
Sold units are expensed on a specific identification basis as homebuilding cost of sales. 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.
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.
The modest increase was primarily attributable to the higher net sales relative to closings in 2023, when compared to 2022. 45 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 2023 2022 Southeast 21.5 % 16.0 % Mid-Atlantic 14.4 % 31.0 % Midwest 17.8 % 27.0 % Total (1) 18.3 % 21.5 % (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.
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.
We define adjusted gross margin as 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. Our management believes this information is meaningful because it isolates the impact that these excluded items have on gross margin.
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.
EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA are not measures of net income as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.
(4) Calculated as a percentage of homebuilding revenues. 46 Table Contents EBITDA EBITDA is not a measure of net income as determined by GAAP. 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.
When entering into these contracts, we also agree to purchase finished lots at predetermined prices, time frames, and quantities that match our expected selling pace in the community. We also enter into land development arrangements with land sellers, land developers and land bankers.
We actively enter into finished lot option contracts by placing deposits with land sellers or land bankers based on the aggregate purchase price of the finished lots. When entering into these contracts, we also agree to purchase finished lots at predetermined prices, time frames, and quantities that match our expected selling pace in the communities.
Our actual results may differ materially from those contained in or implied by any forward-looking statements." Business Overview and Outlook We design, build and sell homes 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 markets.
Our actual results may differ materially from those contained in or implied by any forward-looking statements." Business Overview and Outlook We design, build and sell homes primarily in high-growth markets using our asset-light lot acquisition strategy.
In later stages of the life cycle of a community, cash inflows could significantly exceed our results of operations, as the cash outflows associated with land purchase and home construction and other expenses were previously incurred. We actively enter into finished lot option contracts by placing deposits with land sellers based on the aggregate purchase price of the finished lots.
In later stages of the life cycle of a community, cash inflows could significantly exceed our results of operations, as the cash outflows associated with land purchase and home construction and other expenses were previously incurred.
Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance. 46 Table of Contents The following table presents a reconciliation of adjusted gross margin to the GAAP financial measure of gross margin for each of the periods indicated (unaudited and in thousands, except percentages): Year Ended December 31, 2023 2022 2021 Gross margin (1) $ 727,075 $ 612,420 $ 306,969 Interest charged to homebuilding cost of sales (2) 122,759 60,595 32,508 Amortization in homebuilding cost of sales (3) — 6,701 9,873 Commission expense 165,790 140,442 67,032 Adjusted gross margin $ 1,015,624 $ 820,158 $ 416,382 Gross margin % (4) 19.4 % 18.4 % 16.0 % Adjusted gross margin % (4) 27.2 % 24.6 % 21.7 % (1) 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, 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 information concerning our ending 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, 2023 2022 Segment Homes (1) ASP Value Homes (1) ASP Value Southeast 2,234 $ 393,356 $ 878,757 3,582 $ 398,246 $ 1,426,517 Mid-Atlantic 599 427,593 256,128 836 335,642 280,597 Midwest 1,145 657,190 752,483 1,130 703,938 795,450 Total 3,978 $ 474,451 $ 1,887,368 5,548 $ 451,075 $ 2,502,564 (1) Ending backlog 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, 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.
Refer to the Form 10-K for the year ended December 31, 2022 filed on March 2, 2023 for the results of operations and related discussion for December 31, 2022 compared to the year ended December 31, 2021.
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.
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 2.5% to 3.3%.
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.
(7) Calculated as a percentage of homebuilding revenues. (8) Adjusted gross margin, EBITDA and adjusted EBITDA are non-GAAP financial measures. For definitions of these non-GAAP financial measures and a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.” (9) Calculated as a percentage of total revenues.
For a definition of this non-GAAP financial measure and a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “— Non-GAAP Financial Measures. ” (4) Calculated as a percentage of total revenues.
The Company received net proceeds from the issuance and sale of the 2028 Notes of $294 million after unamortized debt issuance costs of $7 million, which reduce the carrying value of the 2028 Notes reported on the Consolidated Balance Sheets.
The 2028 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of the Company’s subsidiaries. 50 Table Contents The Company received net proceeds from the issuance and sale of the 2028 Notes of $294 million after unamortized debt issuance costs of $7 million, which reduce the carrying value of the 2028 Notes reported on the Consolidated Balance Sheets.
Under ASC 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 stock purchase.
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.
Backlog for the Midwest segment as of December 31, 2023 was 1,145 homes, an increase of 15 from 1,130 homes as of December 31, 2022.
Backlog for the Midwest segment as of December 31, 2024 was 771 homes, a decrease of 374 from 1,145 homes as of December 31, 2023.
Mid-Atlantic. Backlog for the Mid-Atlantic segment as of December 31, 2023 was 599 homes, a decrease of 237 from 836 homes as of December 31, 2022. The decrease in backlog was attributable to the increase in spec inventory sales relative to pre-order sales and to a lesser extent fewer sales under built-for-rent contracts in 2023 relative to 2022. Midwest.
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.
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 gross margin.
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.
(5) Net debt to net capitalization is defined as the sum of the senior unsecured notes, net, and construction lines of credit, less cash and cash equivalents (“net debt”), divided by the sum of net debt and total mezzanine and stockholders’ equity. (6) Gross margin is homebuilding revenues less homebuilding cost of sales.
(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”).
(3) 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.
Corporate amounts are included as they represent contingent consideration relating to our homebuilding business that the Company does not charge to the segments. (3) 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.
Furthermore, to satisfy performance-related obligations in connection with certain land option agreements, we enter into surety bonds and letters of credit arrangements. Refer to “—Off-Balance Sheet Arrangements ” for additional information. The above cash strategies allow us to maintain adequate lot supply in our existing markets and support ongoing growth and profitability.
We also enter into land development arrangements with land sellers, land developers and land bankers. Furthermore, to satisfy performance-related obligations in connection with certain land option agreements, we enter into surety bonds and letters of credit arrangements. Refer to “— Off-Balance Sheet Arrangements ” for additional information. Our lot deposits are generally 100% applicable to the lot purchase price.
The Company generally utilizes outside valuation experts to determine the amount of contingent consideration. Contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in other income or other expense in the Consolidated Statements of Comprehensive Income.
Contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in other income or other expense in the Consolidated Statements of Comprehensive Income. Recent Accounting Pronouncements Refer to Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements.
SG&A as a percentage of homebuilding revenues for the year ended December 31, 2023 increased 20 bps to 8.3% compared to 8.1% for the year ended December 31, 2022.
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.
Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses and the payment of routine liabilities. Cash flows generated by our projects can differ materially from our results of operations, as these depend upon the stage in the life cycle of each project.
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.
Transaction costs are expensed as incurred, except if related to the issuance of debt or equity securities. Any contingent consideration is measured at fair value at the date of acquisition and is based on expected cash flow of the acquisition target discounted over time using an observable market discount rate.
Any contingent consideration is measured at fair value at the date of acquisition and is based on expected cash flows of the acquisition target discounted over time using an observable market discount rate. The Company generally utilizes outside valuation experts to determine the amount of contingent consideration.
The Company was in compliance with all debt covenants as of December 31, 2023 and 2022. The Company expects to remain in compliance with all debt covenants over the next 12 months.
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.
Our Midwest segment total revenues for the year ended December 31, 2023 were $1.6 billion, an increase of $0.1 billion, or 4%, from $1.5 billion for the year ended December 31, 2022.
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.
We determine the percentage of completion based on the number of days of construction completed to the total estimated number of days to construct the home. 53 Table of Contents Real Estate Inventory 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.
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.
Following the redemption, no Series B preferred units remain outstanding. Refer to Note 12, Mezzanine and Stockholders’ Equity to the consolidated financial statements for disclosure related to the redemption.
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.
Our Southeast segment total revenues for the year ended December 31, 2023 were $1.5 billion , an increase of $0.3 billion, or 23%, from $1.2 billion for the year ended December 31, 2022. This revenue growth was primarily driven by an increase in home closings of 448, or 16%.
Our Southeast segment homebuilding revenues for the year ended December 31, 2024 were $1.4 billion, a decrease of $135 million, or 9%, from $1.5 billion for the year ended December 31, 2023. This decline in revenue was driven by a decrease in home closings of 332, or 10%, partially offset by a 3% increase in the ASP of homes closed.
Homebuilding gross margin for the year ended December 31, 2023 was $727 million, an increase of $115 million, or 19%, from $612 million for the year ended December 31, 2022. Homebuilding gross margin percentage was 19.4% for the year ended December 31, 2023, an increase of 100 bps, or 5%, from 18.4% for the year ended December 31, 2022.
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.
We believe that our sources of liquidity are sufficient to satisfy our current commitments. Our liquidity comes from a variety of sources, including cash, borrowings under a credit agreement (the “Credit Agreement”), and net proceeds from the senior unsecured notes (“2028 Notes”).
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.
The increase in revenues was attributable to home closings of 7,314 for the year ended December 31, 2023, an increase of 436 homes, or 6%, from 6,878 for the year ended December 31, 2022.
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.
Our cancellation rate for the year ended December 31, 2023 was 18.3%, an improvement of 320 basis points when compared to the 21.5% cancellation rate for the year ended December 31, 2022.
Our cancellation rate for the year ended December 31, 2024 was 16.6%, an improvement of 170 basis points when compared to the 18.3% cancellation rate for the year ended December 31, 2023. The overall improvement in cancellation rate was mostly a result of the trend toward higher spec sales relative to pre-order sales.
Net Sales, Backlog and Closings The following table presents information concerning our net new orders (“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 2023 2022 Segment Net Sales (1) Starts Closings Net Sales (1) Starts Closings Net Sales Starts Closings Southeast 1,822 2,693 3,170 3,113 3,034 2,722 -41 % -11 % 16 % Mid-Atlantic 1,360 1,627 1,597 1,151 1,224 1,562 18 % 33 % 2 % Midwest 2,562 2,551 2,547 1,781 2,343 2,594 44 % 9 % -2 % Total 5,744 6,871 7,314 6,045 6,601 6,878 -5 % 4 % 6 % (1) Net sales are sales of homes during the period, less cancellations of existing sales contracts during the period.
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.
Additionally, the ASP of homes closed of $470,405 for the year ended 2023, reflected an increase of 7% when compared to 2022, a result of price appreciation and product mix. Homebuilding gross margin percentage was 18.9% for the year ended December 31, 2023, representing a decrease of 50 bps, or 0.5%, when compared to the year ended December 31, 2022.
The decrease in ASP of homes closed was due to changes in the geographic mix of closings within the segment. Homebuilding gross margin percentage was 17.0% for the year ended December 31, 2024, representing a decrease of 360 bps, or 17%, when compared to year ended December 31, 2023.
This revenue growth was primarily driven by an increase in ASP of homes closed of 11% to $396,462. The increase in ASP of homes closed was largely influenced by changes in product mix. Additionally, there was an increase in home closings of 35, or 2%, for the year ended December 31, 2023 compared to 2022.
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 additional revenue was due to an ASP of homes closed of $618,306 for the year ended 2023, an increase of 6% when compared to 2022, partially offset by a decrease in home closings of 47, or 2%.
Our Midwest segment homebuilding revenues for the year ended December 31, 2024 were $1.8 billion, an increase of $264 million, or 17%, from $1.6 billion for the year ended December 31, 2023. This increase was due to higher home closings of 604, or 24%, partially offset by a decrease of 6% in the ASP of homes closed.
The growth in gross margin percentage year over year is due to effective cost management including impacts from overall cycle time reduction, partially offset by higher financing and closing costs. Selling, General and Administrative Expense .
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.
(3) Calculated as a percentage of total revenues. Liquidity and Capital Resources Overview We generate cash from the sale of our inventory and we intend to re-deploy the net cash generated from the sale of inventory to acquire and control land and further grow our operations year over year.
We intend to re-deploy our generated net cash to acquire and control land and further grow our operations year over year. We believe that our sources of liquidity are sufficient to satisfy our current commitments.
For the defin ition of adjusted gross margin and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.” Southeast.
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.
The Credit Agreement will mature on July 17, 2026. Certain of our subsidiaries guaranteed the Company’s obligations under the Credit Agreement and the 2028 Notes. As of December 31, 2023 , we were in compliance with the covenants set forth in our Credit Agreement and under the indenture related to the 2028 Notes.
As of December 31, 2024, the Credit Agreement had an aggregate commitment of up to $1.4 billion. The Credit Agreement will mature on June 4, 2027. Certain of our subsidiaries guaranteed the Company’s obligations under the Credit Agreement and the 2028 Notes.
For the year ended December 31, 2023, SG&A included $28 million of costs related to mortgage forward commitment programs, allowing our homebuyers to lock their interest rates on home loans at the point of sale, which were not incurred in 2022. We expense these costs as incurred. 43 Table of Contents Income from Unconsolidated Entities .
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 overall decrease in backlog is reflective of an increase in sales of move-in ready spec homes relative to pre-order sales. Spec homes typically result in quicker closings and turnover of the backlog. Approximately 704 of the homes in our backlog are expected to be delivered in 2025 and beyond. Southeast.
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.
Net cash used in investing activities was $4 million for the year e nded December 31, 2023, compared to $6 million of cash used in investing activities for the year ended December 31, 2022, primarily attributable to higher purchases of property and equipment during the year ended December 31, 2022 .
The change in net cash provided by/(used in) financing activities was primarily attributable to net proceeds from our homebuilding debt of $171 million during the year ended December 31, 2024 used to release housing starts and purchase lots for our homebuilding operations, compared to $136 million of net homebuilding debt repayments during the year ended December 31, 2023.
Homebuilding gross margin percentage was 17.9% for the year ended December 31, 2023, representing an increase of 380 bps, or 3.8%, when compared to the year ended December 31, 2022. The improvement in gross margin percentage was primarily due to cost management efforts, including cycle time reductions, partially offset by higher financing costs. Midwest.
The improvement in this homebuilding gross margin percentage was primarily a result of direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs. Midwest.
See below and refer to Note 2, Debt to our consolidated financial statements for more information on the Credit Agreement and the 2028 Notes. 48 Table of Contents We continue to evaluate our capital structure and explore options to strengthen our balance sheet. We will remain opportunistic while assessing available capital in the debt and equity markets.
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.
Recent Accounting Pronouncements Refer to Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements.
As of December 31, 2024, the redeemable noncontrolling interest totaled $21 million , of which no amount was redeemable within 12 months. Refer to Note 1, Nature of Business and Significant Accounting Policies to our consolidated financial statements for more information.

… 132 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−1 removed3 unchanged
Biggest changeInterest 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 2.5% to 3.3%. 54 Table of Contents Interest on Base Rate or Daily Simple SOFR Rate advances borrowed under the Credit Agreement are payable in arrears on a monthly basis.
Biggest changeDaily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 basis points. 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%.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our operations are interest-rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates could adversely affect our revenues, gross margins and net income.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our operations are interest-rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates would adversely affect our revenues, gross margins and net income.
The borrowing base availability is reduced dollar-for-dollar for any outstanding unsecured indebtedness permitted under the Credit Agreement. Our mortgage banking joint venture, 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 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 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 debt to capitalization ratio. 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. 54 Table Contents Outstanding borrowings under the Credit Agreement are subject to, among other things, a borrowing base.
Under the Credit Agreement, the Company has the option 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, three or six-month interest periods, which include SOFR adjustments of 10, 15 and 25 basis points for each interest period, respectively.
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.
Our market risk arises from interest rate risk inherent in our financial instruments and debt obligations. Interest rate risk results from the possibility that changes in interest rates will cause unfavorable changes in net income or in the value of interest rate sensitive assets, liabilities and commitments.
Interest rate risk results from the possibility that changes in interest rates will cause unfavorable changes in net income or in the value of interest rate sensitive assets, liabilities and commitments.
The loan portfolio of Jet HomeLoans is held for sale and subject to forward sale commitments. Jet HomeLoans also sells all of its mortgages held for sale on a servicing released basis. 55 Table of Contents
Jet HomeLoans also sells all of its mortgages held for sale on a servicing released basis. 55 Table Contents
We do not enter into, nor do we intend to enter into in the future, derivative financial instruments for trading or speculative purposes to hedge against interest rate fluctuations. Quantitative and Qualitative Disclosures About Interest Rate Risk Market risk is the risk of loss arising from adverse changes in market prices and interest rates.
Quantitative and Qualitative Disclosures About Interest Rate Risk Market risk is the risk of loss arising from adverse changes in market prices and interest rates. Our market risk arises from interest rate risk inherent in our financial instruments and debt obligations.
Removed
Daily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 basis points.
Added
Interest on Base Rate or Daily Simple SOFR Rate advances borrowed under the Credit Agreement are payable in arrears on a monthly basis.
Added
The 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.

Other DFH 10-K year-over-year comparisons