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Item 2 — Management's Discussion and Analysis
Dream Finders Homes, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying financial statements and related notes thereto. Unless the context otherwise requires, the terms “Dream Finders,” “DFH,” the “Company,” “we,” “us” and “our” refer to Dream Finders Homes, Inc. and its subsidiaries.
Business Overview and Outlook
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 markets, and we also sell homes to third-party investors that intend to lease the homes (“built-for-rent contracts”). To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer mortgage banking solutions and title insurance—inclusive of agency and underwriting services. Additionally, we offer homeowners insurance and adjacent products to homebuyers.
The most significant challenge facing homebuyers across our markets continues to be affordability, especially at entry-level price points, as persistently elevated mortgage interest rates and broader macroeconomic uncertainty pressure consumer confidence. To address this, we have continued to align our product offerings and pricing to current market conditions and drive sales activity through targeted incentives, including mortgage rate buydowns.
These measures have weighed on margins and profitability, and may continue to do so in the near term as we navigate the balance between pricing, incentives and sales pace in a competitive and evolving environment. Demand across our communities remains particularly sensitive to fluctuations in mortgage interest rates and broader economic conditions.
Our focus remains on advancing our land-light strategy, enhancing operational efficiencies and delivering homes that address customer needs and set us apart in our markets. Although longer-term housing fundamentals remain favorable, including constrained supply, near-term results may continue to be shaped by macroeconomic conditions and interest rate movements.
Recent Developments
Reincorporation to the State of Texas
The Company completed its reincorporation to the state of Texas by conversion from the state of Delaware on June 9, 2026 (the “Effective Date”). As a result of the reincorporation by conversion, the rights of holders of the Company’s Class A common stock are governed by the Texas Business Organizations Code and the Company’s certificate of formation and bylaws as of the Effective Date. The Company’s Class A common stock continues to be traded on the New York Stock Exchange under the symbol “DFH.”
Appointment of Chief Operating Officer
On June 1, 2026, Clint Szubinski was appointed as our Chief Operating Officer. Mr. Szubinski has assumed responsibility for directing the strategic vision and operational performance of the Company. Doug Moran, National President, will continue to provide guidance and support for the ongoing success and growth of Dream Finders Homes.
Appointment of Directors
Effective on July 13, 2026, the Board of Directors (the “Board”) of the Company appointed Richard Beckwitt and Steven Fischer to serve as directors on the Board. The Board appointed Mr. Beckwitt as Co-Chairman of the Board, sharing Board responsibilities with Patrick Zalupski, President and Chief Executive Officer, who serves as the other Co-Chairman. The Board appointed Mr. Fischer as a member of the Audit Committee.
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Results of Consolidated Operations
The following table summarizes our results of operations and other financial data (in thousands, except per share amounts and percentages) for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Income before taxes:
Homebuilding $ 18,057 $ 61,096 $ 33,345 $ 123,800
Financial services 11,986 11,949 21,055 18,527
Other(1) 6,803 1,019 1,252 2,902
Income before taxes 36,846 74,064 55,652 145,229
Income tax expense (9,002) (17,525) (14,248) (33,680)
Net income 27,844 56,539 41,404 111,549
Net (income) loss attributable to noncontrolling interests (123) 41 (427) (66)
Net income attributable to Dream Finders Homes, Inc. $ 27,721 $ 56,580 $ 40,977 $ 111,483
Other Financial Data:
Basic EPS(2) $ 0.27 $ 0.57 $ 0.37 $ 1.12
Diluted EPS(2) $ 0.27 $ 0.56 $ 0.37 $ 1.10
Selling, general and administrative expense %(3) 12.8 % 12.3 % 13.0 % 12.1 %
EBITDA (in thousands)(4) $ 100,377 $ 133,745 $ 171,189 $ 250,290
EBITDA margin %(4)(5) 9.4 % 11.6 % 8.8 % 11.7 %
Return on participating equity(6) 9.6 % 25.0 %
Balance Sheet Data (as of period end):
Cash and cash equivalents $ 203,494 $ 210,320
Revolving credit facility and other borrowings 1,037,986 1,140,353
Senior unsecured notes, net 592,342 295,712
Mortgage warehouse facilities 186,785 144,287
Total mezzanine equity 178,039 178,039
Total Dream Finders Homes, Inc. stockholders’ equity 1,431,903 1,334,095
Total equity 1,433,827 1,335,686
(1)Represents amounts within our corporate component.
(2)Refer to Note 13, Earnings Per Share to the condensed consolidated financial statements for disclosures related to the calculation of earnings per share (“EPS”). Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends.
(3)Selling, general and administrative expense (“SG&A”) of the consolidated Company calculated as a percentage of homebuilding revenues.
(4)EBITDA is a non-GAAP financial measure. 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.”
(5)Calculated as a percentage of total revenues.
(6)Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock dividends, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months.
Net Income. In addition to the operational results by segment discussed below, for the three and six months ended June 30, 2026, consolidated net income included $9 million and $8 million, respectively, of gains on equity securities, primarily attributable to unrealized gains from changes in fair value.
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Results of Homebuilding Operations
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
The following table sets forth our results of homebuilding operations and other financial data (in thousands, except for percentages), as well as other operating data for the periods indicated:
Three Months Ended June 30,
2026 2025 Change % Change
Homebuilding revenues $ 1,007,144 $ 1,099,580 $ (92,436) (8) %
Homebuilding cost of sales 863,782 917,871 (54,089) (6) %
Selling, general and administrative expense 124,642 133,853 (9,211) (7) %
Contingent consideration revaluation — (12,706) 12,706 (100) %
Other expense (income), net 663 (534) 1,197 (224) %
Income before taxes of homebuilding operations $ 18,057 $ 61,096 $ (43,039) (70) %
Other Financial and Operating Data:
Home closings 2,290 2,232 58 3 %
Average sales price of homes closed(1) $ 438,171 $ 481,027 $ (42,856) (9) %
Net sales 2,232 1,938 294 15 %
Cancellation rate 11.1 % 14.0 % (2.9) % (21) %
Homebuilding gross margin(2) $ 143,362 $ 181,709 $ (38,347) (21) %
Homebuilding gross margin %(2)(3) 14.2 % 16.5 % (2.3) % (14) %
Adjusted homebuilding gross margin(4) $ 243,735 $ 285,162 $ (41,427) (15) %
Adjusted homebuilding gross margin %(3)(4) 24.2 % 25.9 % (1.7) % (7) %
Homebuilding selling, general and administrative expense %(5) 12.4 % 12.2 % 0.2 % 2 %
Active communities as of period end(6) 353 271 82 30 %
Backlog - units 2,319 2,513 (194) (8) %
Backlog - value (in thousands) $ 1,154,203 $ 1,200,875 $ (46,672) (4) %
Net homebuilding debt to net capitalization(4) 46.5 % 44.5 % 2.0 % 4 %
(1)Average sales price of homes closed is calculated based on homebuilding revenues, adjusted for the impact of percentage of completion revenues, excluding deposit forfeitures and land sales, over homes closed.
(2)Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales.
(3)Calculated as a percentage of homebuilding revenues.
(4)Adjusted homebuilding gross margin and net homebuilding debt to net capitalization are non-GAAP financial measures. For definitions of these non-GAAP financial measures and reconciliations to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”
(5)Selling, general and administrative expense of homebuilding operations (“Homebuilding SG&A”) calculated as a percentage of homebuilding revenues.
(6)A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five homesites remaining to sell.
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The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment and active communities, for and as of the periods indicated, respectively:
Three Months Ended June 30, 2026 As of June 30, 2026
Segment Home Closings ASP Active Communities
Southeast 889 $ 431,960 115
Mid-Atlantic 715 372,812 90
Midwest 686 514,341 148
Total 2,290 $ 438,171 353
Three Months Ended June 30, 2025 As of June 30, 2025
Segment Home Closings ASP Active Communities
Southeast 842 $ 438,549 104
Mid-Atlantic 600 444,571 72
Midwest 790 553,989 95
Total 2,232 $ 481,027 271
The following table presents income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the periods indicated:
Three Months Ended June 30,
2026 2025
Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin %
Southeast $ 9,837 14.2 % $ 16,624 17.9 %
Mid-Atlantic 2,121 14.6 15,168 17.9
Midwest 6,099 14.0 29,304 14.6
Total $ 18,057 14.2 % $ 61,096 16.5 %
Homebuilding Revenues. The decrease in homebuilding revenues was primarily attributable to a lower consolidated ASP of homes closed, which decreased 9%, partially offset by lower sales incentives as a percentage of homebuilding revenues, which decreased by 77 basis points (“bps”), or 8%, when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025, as well as changes in geographic and product mix during the period. This reduction in homebuilding revenues was partially offset by an increase in home closings of 58 homes, or 3%, for the three months ended June 30, 2026 to 2,290 from 2,232 home closings for the three months ended June 30, 2025. The Mid-Atlantic segment had an increase of 115 closings with an ASP of homes closed of $372,812, which was the lowest homebuilding segment ASP of homes closed, and the Midwest segment had a decrease of 104 closings with an ASP of homes closed of $514,341, which was the highest homebuilding segment ASP of homes closed.
Homebuilding Gross Margin. The lower homebuilding gross margin was primarily due to the decrease in consolidated ASP of homes closed for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended June 30, 2026 and 2025 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and cycle-time improvements.
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Southeast. Our Southeast segment homebuilding revenues for the three months ended June 30, 2026 were $388 million, an increase of $20 million, or 6%, from $368 million for the three months ended June 30, 2025. This growth was primarily driven by an increase in home closings of 47, or 6%, and higher revenue from percentage of completion contracts where we build homes on buyer-owned land, partially offset by a 2% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 14.2% for the three months ended June 30, 2026, representing a decrease of 370 bps, or 21%, when compared to the three months ended June 30, 2025. The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs, partially offset by direct cost reductions.
Mid-Atlantic. Our Mid-Atlantic segment homebuilding revenues for the three months ended June 30, 2026 were $264 million, a decrease of $11 million, or 4%, from $275 million for the three months ended June 30, 2025. This decline in revenue was primarily driven by a decrease in ASP of homes closed of $71,759, or 16%, as well as lower revenue from percentage of completion contracts where we build homes on buyer-owned land, and was largely offset by an increase in home closings of 115, or 19%. The reduction in ASP was driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 133 bps, or 30%, when compared to the three months ended June 30, 2025, as well as a higher relative and absolute number of built-for-rent closings with lower ASPs. Homebuilding gross margin percentage was 14.6% for the three months ended June 30, 2026, representing a decrease of 330 bps, or 18%, when compared to the three months ended June 30, 2025. The reduction in homebuilding gross margin percentage was mainly due to increased sales incentives, as well as land and financing costs, partially offset by direct cost reductions and cycle time improvements.
Midwest. Our Midwest segment homebuilding revenues for the three months ended June 30, 2026 were $355 million, a decrease of $102 million, or 22%, from $457 million for the three months ended June 30, 2025. This decrease was primarily due to lower home closings of 104, or 13%, as well as a decrease in ASP of homes closed of $39,648, or 7%. The decline in ASP was mostly driven by changes in product mix, including the strategic introduction of lower-priced offerings in 2025, particularly in our Texas markets, which were not yet fully reflected in the results for the three months ended June 30, 2025. Additionally, strategic lot sales within the segment were lower by $17 million when compared to the three months ended June 30, 2025. Homebuilding gross margin percentage was 14.0% for the three months ended June 30, 2026, representing a decrease of 60 bps, or 4%, when compared to the three months ended June 30, 2025. The reduction in homebuilding gross margin percentage was primarily due to increased land and financing costs, largely offset by direct cost reductions.
Selling, General and Administrative Expense. The dollar decrease in Homebuilding SG&A was primarily driven by lower compensation cost of $9 million, mostly from reductions commensurate with financial results. $5 million of the decrease in compensation costs were attributable to our Midwest segment. Homebuilding SG&A as a percentage of homebuilding revenues was 12.4% for the three months ended June 30, 2026, an increase of 20 bps, or 2%, when compared to the three months ended June 30, 2025. The percentage increase in Homebuilding SG&A was primarily attributable to reduced absorption per active community, as well as increased investments in technology and growth initiatives.
Contingent Consideration Revaluation. Contingent consideration income of $13 million during the three months ended June 30, 2025 related to an acquisition earnout arrangement that concluded in 2025 and, therefore, did not impact income before taxes of homebuilding operations for the three months ended June 30, 2026.
Income Before Taxes Of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 was primarily attributable to the reduction in homebuilding revenues, the decrease in gross margin, the change in contingent consideration income and the increase in Homebuilding SG&A as a percentage of homebuilding revenues, all explained above.
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Results of Homebuilding Operations
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following table sets forth our results of homebuilding operations and other financial data (in thousands, except for percentages), as well as other operating data for the periods indicated:
Six Months Ended June 30,
2026 2025 Change % Change
Homebuilding revenues $ 1,843,803 $ 2,069,688 $ (225,885) (11) %
Homebuilding cost of sales 1,579,425 1,701,407 (121,982) (7) %
Selling, general and administrative expense 229,573 250,149 (20,576) (8) %
Loss from unconsolidated entities — 1 (1) (100) %
Contingent consideration revaluation — (11,606) 11,606 (100) %
Other expense, net 1,460 5,937 (4,477) (75) %
Income before taxes of homebuilding operations $ 33,345 $ 123,800 $ (90,455) (73) %
Other Financial and Operating Data:
Home closings 4,160 4,157 3 — %
Average sales price of homes closed(1) $ 442,478 $ 489,018 $ (46,540) (10) %
Net sales 4,640 3,970 670 17 %
Cancellation rate 9.3 % 12.8 % (3.5 %) (27) %
Homebuilding gross margin(2) $ 264,378 $ 368,281 $ (103,903) (28) %
Homebuilding gross margin %(2)(3) 14.3 % 17.8 % (3.5) % (20) %
Adjusted homebuilding gross margin(4) $ 447,057 $ 555,262 $ (108,205) (19) %
Adjusted homebuilding gross margin %(3)(4) 24.2 % 26.8 % (2.6) % (10) %
Homebuilding selling, general and administrative expense %(5) 12.5 % 12.1 % 0.4 % 3 %
See notes (1) to (5) above, under results of homebuilding operations for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
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The following table summarizes home closings and ASP of homes closed by homebuilding segment for the periods indicated:
Six Months Ended June 30,
2026 2025
Segment Home Closings ASP Home Closings ASP
Southeast 1,503 $ 434,324 1,529 $ 441,561
Mid-Atlantic 1,341 376,236 1,121 449,629
Midwest 1,316 519,292 1,507 566,470
Total 4,160 $ 442,478 4,157 $ 489,018
The following table presents income before taxes (in thousands) and homebuilding gross margin percentage by segment for the periods indicated:
Six Months Ended June 30,
2026 2025
Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin %
Southeast $ 19,569 14.9 % $ 42,398 18.6 %
Mid-Atlantic 7,338 15.0 29,584 19.6
Midwest 6,438 13.3 51,818 16.1
Total $ 33,345 14.3 % $ 123,800 17.8 %
Homebuilding Revenues. The decrease in homebuilding revenues was primarily attributable to a decrease of 10% in the consolidated ASP of homes closed when comparing the six months ended June 30, 2026 to the six months ended June 30, 2025, primarily a result of changes in geographic and product mix during the period and, to a much lesser extent, an increase in sales incentives. The Mid-Atlantic segment had an increase of 220 closings with an ASP of homes closed of $376,236, which was the lowest homebuilding segment ASP of homes closed, and the Midwest segment had a decrease of 191 closings with an ASP of homes closed of $519,292, which was the highest homebuilding segment ASP of homes closed.
Homebuilding Gross Margin. The lower homebuilding gross margin was primarily due to the lower consolidated ASP of homes closed. The decrease in homebuilding gross margin as a percentage of homebuilding revenues, when comparing the six months ended June 30, 2026 and 2025, was primarily attributable to higher land and financing costs, partially offset by direct cost reductions.
Southeast. Our Southeast segment homebuilding revenues for the six months ended June 30, 2026 were $662 million, a decrease of $13 million, or 2%, from $675 million for the six months ended June 30, 2025. This decline in revenue was driven by a decrease in home closings of 26, or 2% and a 2% decrease in the ASP of homes closed, partially offset by increased revenue from percentage of completion contracts where we build homes on buyer-owned land. Homebuilding gross margin percentage was 14.9% for the six months ended June 30, 2026, representing a decrease of 370 bps, or 20%, when compared to the six months ended June 30, 2025. The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs, partially offset by direct cost reductions.
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Mid-Atlantic. Our Mid-Atlantic segment homebuilding revenues for the six months ended June 30, 2026 were $495 million, a decrease of $18 million, or 3%, from $513 million for the six months ended June 30, 2025. This decline in revenue was primarily driven by a decrease in ASP of homes closed of $73,393, or 16%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, as well as lower revenue from percentage of completion contracts where we build homes on buyer-owned land and fewer strategic lot sales, which was mostly offset by an increase in home closings of 220, or 20%. The reduction in ASP was driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 183 bps, or 43%, when compared to the six months ended June 30, 2025, as well as a higher relative and absolute number of built-for-rent closings with lower ASPs. Homebuilding gross margin percentage of 15.0% for the six months ended June 30, 2026, representing a decrease of 460 bps, or 23%, when compared to the six months ended June 30, 2025. The decrease in homebuilding gross margin percentage was mainly the result of higher land and financing costs.
Midwest. Our Midwest segment homebuilding revenues for the six months ended June 30, 2026 were $687 million, a decrease of $195 million, or 22%, from $882 million for the six months ended June 30, 2025. This decrease was primarily due to lower home closings of 191, or 13%, as well as a decrease of 8% in the ASP of homes closed. The decline in ASP was mostly driven by changes in product mix, including the strategic introduction of lower-priced offerings in 2025, particularly in our Texas markets, which were not yet fully reflected in the results for the six months ended June 30, 2025. Additionally, strategic lot sales within the segment were lower by $25 million when compared to the six months ended June 30, 2025. Homebuilding gross margin percentage was 13.3% for the six months ended June 30, 2026, representing a decrease of 280 bps, or 17%, when compared to the six months ended June 30, 2025. The reduction in homebuilding gross margin percentage was mostly due to increased land and financing costs, partially offset by direct cost reductions.
Selling, General and Administrative Expense. The dollar decrease in Homebuilding SG&A was primarily driven by lower compensation cost of $23 million, mostly due to reductions commensurate with financial results. $15 million of the decrease in compensation costs were attributable to our Midwest segment. Homebuilding SG&A as a percentage of homebuilding revenues was 12.5% for the six months ended June 30, 2026, an increase of 40 bps, or 3%, when compared to the six months ended June 30, 2025. The percentage increase in Homebuilding SG&A was primarily attributable to reduced absorption per active community, as well as increased investments in technology and growth initiatives.
Other Expense, Net. The decrease in other expense, net for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily due to $7 million of purchase price adjustments related to the Crescent acquisition, which were recognized outside of the measurement period during the first quarter of 2025.
Contingent Consideration Revaluation. Contingent consideration income of $12 million during the six months ended June 30, 2025 related to an acquisition earnout arrangement that concluded in 2025 and, therefore, did not impact income before taxes of homebuilding operations for the six months ended June 30, 2026.
Income Before Taxes of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily attributable to the reduction in homebuilding revenues, the decrease in gross margin, the change in contingent consideration income and the increase in Homebuilding SG&A as a percentage of homebuilding revenue, all explained above.
Land Acquisition and Development Process
We employ an asset-light lot acquisition strategy to achieve our growth goals. This strategy involves two key approaches: finished lot option contracts and land bank option contracts. These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled for any reason, and our legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid and, where applicable, termination fees pursuant to such option contracts and, in the case of land bank option contracts, our loss is limited to the related lot option fees paid to the land bank partner and, for certain land bank option contracts, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project. We provide lot deposits typically averaging 10% of the land purchase price. Lot option fees are based on the outstanding capital balance held by the land banker, and as such, delays in land development and/or longer finished lot takedown periods result in additional costs.
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As of June 30, 2026 and December 31, 2025, our lot deposits for finished lot option and land bank option contracts were $502 million and $545 million, respectively. As of June 30, 2026 and December 31, 2025, we controlled 54,091 and 63,121 lots under finished lot option and land bank option contracts, respectively. The risk of loss related to finished lot and land bank option deposits and related fees was $812 million and $773 million as of June 30, 2026 and December 31, 2025, respectively. Risk of loss includes the lot deposits noted above, which are reported as such on the Condensed Consolidated Balance Sheets, pre-acquisition land costs, which include due diligence costs, lot option fees and property taxes, which are included in inventories on the condensed consolidated balance sheet, and any applicable termination fees.
Controlled Lots Pipeline
The following table presents our controlled lots through option contracts by homebuilding segment as of the periods indicated:
As of June 30, As of December 31,
Segment(1) 2026 2025 % Change
Southeast 18,913 23,616 (20 %)
Mid-Atlantic 21,875 23,517 (7 %)
Midwest 13,303 15,988 (17 %)
Total(2) 54,091 63,121 (14 %)
(1)Refer to Note 8, Segment Reporting to our condensed consolidated financial statements for further explanation of our reportable segments.
(2)As of June 30, 2026 and December 31, 2025, we had 320 and 731 controlled lots under built-for-rent contracts, respectively.
Active Communities
A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five units remaining to sell. Ending active community count is an important metric to forecast future net sales for our business. As of June 30, 2026, we had 353 active communities, an increase of 82 communities, or 30%, as compared to 271 active communities as of June 30, 2025. As of June 30, 2026, the Company had 1,004 completed quick move-in ready homes, which represents approximately 3 spec homes per ending active community.
Our active community count excludes communities under built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of June 30, 2026, we had 10 communities delivering closings under built-for-rent contracts, as compared to 7 communities as of June 30, 2025.
Costs of Building Materials and Labor
Our homebuilding cost of sales includes the acquisition and finance costs of homesites or lots, municipality fees, the costs associated with obtaining building permits, materials and labor to construct the home, financing costs on our homebuilding related debt, internal and external realtor commissions and other miscellaneous closing costs. Homesite costs typically range from 30-35% of the average cost of a home. Building materials typically range from 30-35% of the average cost to build the home, labor typically ranges from 20-25% of the average cost to build the home, and interest, commissions and closing costs typically range from 5-10% of the average cost to build the home.
Our materials are subject to price fluctuations. Once construction of a home begins, prices for the materials and labor utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions. Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, fluctuations in oil prices influencing transportation, energy and manufacturing costs, international trade disputes and resulting tariffs, and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities and labor availability.
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Net Sales, Closings and Backlog
A 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. These deposits are typically nonrefundable, but each customer situation is evaluated individually. Sales under built-for-rent contracts are reported when we have received a nonrefundable deposit.
Net sales are sales of homes during the period less cancellations of existing sales contracts during the period. Our cancellation rate for a given period is calculated as the total number of cancellations during the period, divided by the total number of gross sales contracts entered into during the period. Cancellations can occur for various reasons outside of our control, including customer credit issues or changes in other personal circumstances.
The following table presents information concerning our net sales, starts and closings in each of our homebuilding segments for the periods indicated:
Three Months Ended June 30, Period Over Period Percent Change
2026 2025
Segment Net Sales Starts Closings Net Sales Starts Closings Net Sales Starts Closings
Southeast(1) 868 1,082 889 605 877 842 43 % 23 % 6 %
Mid-Atlantic(2) 631 941 715 694 970 600 (9) % (3) % 19 %
Midwest 733 1,271 686 639 1,139 790 15 % 12 % (13) %
Total 2,232 3,294 2,290 1,938 2,986 2,232 15 % 10 % 3 %
(1)Excluding built-for-rent activity, net sales in the Southeast segment increased 36% when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025.
(2)Excluding built-for-rent activity, net sales in the Mid-Atlantic segment increased 17% when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025.
Six Months Ended June 30, Period Over Period Percent Change
2026 2025
Segment Net Sales Starts Closings Net Sales Starts Closings Net Sales Starts Closings
Southeast(1) 1,686 1,779 1,503 1,295 1,437 1,529 30 % 24 % (2) %
Mid-Atlantic 1,404 1,599 1,341 1,236 1,557 1,121 14 % 3 % 20 %
Midwest 1,550 2,192 1,316 1,439 1,929 1,507 8 % 14 % (13) %
Total 4,640 5,570 4,160 3,970 4,923 4,157 17 % 13 % — %
(1)Excluding built-for-rent activity, net sales and closings in the Southeast segment increased 27% and 7%, respectively during the six months ended June 30, 2026 when compared to the six months ended June 30, 2025.
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Our backlog of sold homes (“backlog”) consists of homes under contract that have not yet been delivered to a homebuyer or third-party investor. Backlog represents the number of homes in backlog from the previous period, plus net sales, minus the number of home closings during the period. 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.
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 periods indicated:
As of June 30,
2026 2025
Segment Homes ASP Value Homes ASP Value
Southeast 1,016 $ 481,400 $ 489,102 998 $ 438,465 $ 437,588
Mid-Atlantic 694 431,554 299,498 812 399,863 324,689
Midwest 609 600,333 365,603 703 623,893 438,597
Total 2,319 $ 497,716 $ 1,154,203 2,513 $ 477,865 $ 1,200,875
Backlog of sold homes as of June 30, 2026 was 2,319 homes valued at approximately $1.2 billion based on ASP, a decrease of 194 homes and $47 million in value, or 8% and 4%, respectively, from 2,513 homes valued at approximately $1.2 billion as of June 30, 2025. Approximately 213 of the homes in our backlog are expected to be delivered in 2027 and beyond. The overall decrease in backlog was reflective of the cumulative impact of constrained sales activity in prior periods, and, to a lesser extent, fewer built-for-rent contracts in backlog, which outpaced the increase in net sales during the current period. Our backlog is primarily comprised of spec homes. Spec homes typically result in quicker closings and turnover of the backlog within the same reporting period.
Southeast. Backlog for the Southeast segment as of June 30, 2026 was 1,016 homes, an increase of 18 from 998 homes as of June 30, 2025. The increase from prior year was primarily attributable to an increase in net sales in the current period and, to a lesser extent, the decrease in home closings, mostly due to built-for-rent activity.
Mid-Atlantic. Backlog for the Mid-Atlantic segment as of June 30, 2026 was 694 homes, a decrease of 118 from 812 homes as of June 30, 2025. The decrease in backlog from prior year was primarily attributable to the cumulative effect of constrained sales activity in prior periods, as well as increased built-for-rent closings.
Midwest. Backlog for the Midwest segment as of June 30, 2026 was 609 homes, a decrease of 94 from 703 homes as of June 30, 2025. The decrease from prior year was mostly a result of the continued constrained sales environment, slightly offset by higher net sales relative to closings.
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The following table presents information concerning our cancellation rates for each of our homebuilding segments for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
Segment 2026 2025 2026 2025
Southeast 9.7 % 15.6 % 9.5 % 13.3 %
Mid-Atlantic 13.1 % 10.8 % 9.7 % 12.2 %
Midwest 10.9 % 15.7 % 8.5 % 12.9 %
Total(1) 11.1 % 14.0 % 9.3 % 12.8 %
(1)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 home sales contracts entered into during the period.
Our cancellation rate for the three months ended June 30, 2026 was 11.1%, an improvement of 290 bps when compared to the 14.0% cancellation rate for the three months ended June 30, 2025. Our cancellation rate for the six months ended June 30, 2026 was 9.3%, an improvement of 350 bps when compared to the 12.8% cancellation rate for the six months ended June 30, 2025. The improvement is partly attributable to the higher number of spec sales contracts, which have shorter closing cycles, typically resulting in lower cancellations when compared to pre-sold home sales contracts.
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Financial Services
Our Financial Services segment provides mortgage banking solutions and title insurance services—inclusive of agency and underwriting services—through our wholly-owned subsidiaries Jet HomeLoans, LP (“Jet HomeLoans”), DF Title, LLC doing business as Golden Dog Title & Trust and Golden Dog Title (“DF Title”) and Alliant National Title Insurance Company, Inc. (“Alliant Title”). Additionally, the Financial Services segment offers homeowners insurance and ancillary products to homebuyers through our wholly-owned insurance broker.
The following tables present selected financial information and supplemental data for our Financial Services segment for the periods indicated (dollars in thousands, unless otherwise indicated):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change % Change 2026 2025 Change % Change
Mortgage revenues $ 20,493 $ 17,635 $ 2,858 16 % $ 38,681 $ 32,543 $ 6,138 19 %
Title and other services revenues 35,787 33,290 2,497 8 % 68,779 38,145 $ 30,634 80 %
Total financial services revenues 56,280 50,925 5,355 11 % 107,460 70,688 36,772 52 %
Financial services expense 45,239 40,058 5,181 13 % 87,950 52,924 35,026 66 %
Other income, net (912) (1,065) 153 (14) % (1,454) (830) (624) 75 %
(Income) loss from unconsolidated entities (33) (17) (16) 94 % (91) 67 (158) (236) %
Financial services income before taxes $ 11,986 $ 11,949 $ 37 — % $ 21,055 $ 18,527 $ 2,528 14 %
Mortgage Financing Supplemental Data:
Total originations:
Number of loans 1,549 1,538 11 1 % 2,795 2,725 70 3 %
Principal (in millions) $ 605 $ 641 $ (36) (6) % $ 1,101 $ 1,154 $ (53) (5) %
Capture rate 81.7 % 79.7 % 2.0 % 2.5 % 81.5 % 79.3 % 2.2 % 2.8 %
Average FICO score 734 740 (6) (1) % 735 740 (5) (1) %
Funded origination breakdown:
Government (FHA, VA, USDA) 45.8 % 54.2 % (8.4) % (15.5) % 45.3 % 53.5 % (8.2) % (15.3) %
Non-agency 54.2 % 45.8 % 8.4 % 18.3 % 54.7 % 46.5 % 8.2 % 17.6 %
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Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Mortgage Banking. Mortgage revenues for the three months ended June 30, 2026 increased to $20 million from $18 million for the three months ended June 30, 2025. Financial services income before taxes related to mortgage banking for the three months ended June 30, 2026 was $10 million, an increase of $3 million, or 43%, from $7 million for the three months ended June 30, 2025. These increases were primarily due to continued execution efficiency and benefits from implemented hedging strategies.
Title and Other Services. Title and other services revenues for the three months ended June 30, 2026 increased to $36 million from $33 million for the three months ended June 30, 2025. Financial services income before taxes related to title and other services for the three months ended June 30, 2026 was $2 million, a decrease of $3 million, or 60%, from $5 million for the three months ended June 30, 2025. The increase in revenues and decrease in income were mostly due to the April 2025 acquisition of Alliant Title, with the decline in income primarily a result of increased costs associated with growth initiatives.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Mortgage Banking. Mortgage revenues for the six months ended June 30, 2026 increased to $39 million from $33 million for the six months ended June 30, 2025. Financial services income before taxes related to mortgage banking for the six months ended June 30, 2026 was $19 million, an increase of $7 million, or 58%, from $12 million for the six months ended June 30, 2025. These increases were primarily due to continued execution efficiency and benefits from implemented hedging strategies.
Title and Other Services. Title and other services revenues for the six months ended June 30, 2026 increased to $69 million from $38 million for the six months ended June 30, 2025. Financial services income before taxes related to title and other services for the six months ended June 30, 2026 was $2 million, a decrease of $5 million, or 71%, from $7 million for the six months ended June 30, 2025. The increase in revenues and decrease in income were mostly due to the April 2025 acquisition of Alliant Title, with the decline in income reflecting higher integration and restructuring related costs incurred to improve operational efficiency and support long-term growth.
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Non-GAAP Financial Measures
Management utilizes specific non-GAAP financial measures as supplementary tools to evaluate operating performance. These include EBITDA, adjusted homebuilding gross margin and net homebuilding debt to net capitalization. Other companies may not calculate non-GAAP financial measures in the same manner that we do. Accordingly, these non-GAAP financial measures should be considered only as a supplement to relevant GAAP information, as reconciled for each measure below. In the future, we may incorporate additional adjustments to these non-GAAP financial measures as we find them relevant and beneficial for both management and investors.
EBITDA
EBITDA is not a measure of net income as determined by GAAP. EBITDA is a supplemental non-GAAP financial measure used by management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged in homebuilding cost of sales, (iii) interest expense, (iv) income tax expense and (v) depreciation and amortization. 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. 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.
The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for the periods indicated (unaudited and in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net income attributable to Dream Finders Homes, Inc. $ 27,721 $ 56,580 $ 40,977 $ 111,483
Interest income (661) (883) (1,502) (1,799)
Interest charged to homebuilding cost of sales(1) 58,269 56,197 105,055 98,002
Interest expense 984 129 2,222 129
Income tax expense 9,002 17,525 14,248 33,680
Depreciation and amortization(2) 5,062 4,197 10,189 8,795
EBITDA $ 100,377 $ 133,745 $ 171,189 $ 250,290
EBITDA margin %(3) 9.4 % 11.6 % 8.8 % 11.7 %
(1)Includes interest charged to homebuilding cost of sales related to our Senior Notes and Credit Agreement, as well as lot option fees.
(2)Includes amortization of purchase accounting adjustments from our acquisitions.
(3)Calculated as a percentage of total revenues.
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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. Our management believes this information is meaningful as it isolates the impact that these excluded items have on homebuilding gross margin. We include internal and external commission expense in homebuilding cost of sales, not in selling, general and administrative expense, and, therefore, commission expense is taken into account in homebuilding gross margin.
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. 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.
The following table presents a reconciliation of adjusted homebuilding gross margin to the GAAP financial measure of homebuilding gross margin for the periods indicated (unaudited and in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Homebuilding gross margin(1) $ 143,362 $ 181,709 $ 264,378 $ 368,281
Interest expense in homebuilding cost of sales(2) 58,269 56,197 105,055 98,002
Amortization in homebuilding cost of sales(3) (346) 396 (411) 1,725
Commission expense 42,450 46,860 78,035 87,254
Adjusted homebuilding gross margin $ 243,735 $ 285,162 $ 447,057 $ 555,262
Homebuilding gross margin %(4) 14.2 % 16.5 % 14.3 % 17.8 %
Adjusted homebuilding gross margin %(4) 24.2 % 25.9 % 24.2 % 26.8 %
(1)Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales.
(2)Includes interest charged to homebuilding cost of sales related to our senior unsecured notes, net, revolving credit facility and other homebuilding-related debt (“homebuilding debt”), as well as lot option fees.
(3)Represents amortization of purchase accounting adjustments from our acquisitions.
(4)Calculated as a percentage of homebuilding revenues.
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Net Homebuilding Debt to Net Capitalization
Net homebuilding debt to net capitalization is a non-GAAP financial measure calculated as homebuilding debt, less cash and cash equivalents (“net homebuilding debt”), divided by the sum of net homebuilding debt, total mezzanine equity and total equity (“net capitalization”). Net homebuilding debt excludes borrowings under our mortgage warehouse facilities, as well as any other non-homebuilding borrowings the Company may incur from time to time. Management believes the ratio of net homebuilding debt to net capitalization is meaningful as it is used to assess the performance of our homebuilding segments and is a relevant measure of our overall leverage.
The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization as of the periods indicated (unaudited and in thousands, except percentages):
As of June 30, As of December 31, As of June 30,
2026 2025 2025
Total debt $ 1,817,113 $ 1,606,193 $ 1,580,352
Total mezzanine equity 178,039 178,039 178,039
Total equity 1,433,827 1,426,072 1,335,686
Total capitalization $ 3,428,979 $ 3,210,304 $ 3,094,077
Total debt to total capitalization 53.0 % 50.0 % 51.1 %
Total debt $ 1,817,113 $ 1,606,193 $ 1,580,352
Less: Mortgage warehouse facilities and other secured borrowings 210,459 217,133 158,041
Less: Cash and cash equivalents 203,494 234,766 210,320
Net homebuilding debt 1,403,160 1,154,294 1,211,991
Total mezzanine equity 178,039 178,039 178,039
Total equity 1,433,827 1,426,072 1,335,686
Net capitalization $ 3,015,026 $ 2,758,405 $ 2,725,716
Net homebuilding debt to net capitalization 46.5 % 41.8 % 44.5 %
Liquidity and Capital Resources
Overview
We generate cash from the sale of our homes and from providing ancillary financial services. 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. We finance our operations through a variety of sources, including cash, borrowings under a revolving credit facility (the “Credit Agreement”), net proceeds from the senior unsecured notes (“Senior Notes”) and mortgage warehouse facilities used in our mortgage banking operations.
Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses, the payment of routine liabilities, business acquisitions and the origination of mortgage loans. There were no cash payments for business acquisitions during the six months ended June 30, 2026, and there were cash payments of $183 million for business acquisitions during the six months ended June 30, 2025. Refer to Note 1, Nature of Business and Significant Accounting Policies to the consolidated financial statements within our Annual Report on Form 10-K for the year ended December 31, 2025, for more information.
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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. 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 Condensed Consolidated Balance Sheets. Early stages in our communities require material cash outflows relating to finished lot purchases from option contracts, permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes. 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 homebuilding revenues and the related homebuilding cost of sales.
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 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. 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. In land bank transactions, we also incur lot option fees on the outstanding capital balance held by the land banker and may also incur termination fees, where applicable. The initial investment and lot option fees require us to have the ability to allocate liquidity resources to projects that will not generate cash inflows or operating income in the near term.
The above cash and land-light strategies allow us to maintain an adequate lot supply in our existing markets and support ongoing growth and profitability while significantly de-risking our balance sheet. 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. In addition, as the opportunity to purchase finished lots in desired locations becomes increasingly more limited and competitive, we are committed to allocating additional liquidity to land bank deposits on land development projects, as this strategy mitigates the risks associated with holding undeveloped land on our balance sheet, while allowing us to control adequate lot supply in our key markets to support forecasted growth. As of June 30, 2026 and December 31, 2025, our lot deposits related to finished lot option contracts and land bank option contracts were $502 million and $545 million, respectively.
Our total liquidity was as follows as of the periods indicated (in thousands):
As of June 30, As of December 31,
2026 2025
Borrowing base(1) $ 1,402,049 $ 1,475,000
Outstanding balance under Credit Agreement (999,000) (798,000)
Letters of credit outstanding(2) (1,926) (12,449)
Availability under Credit Agreement 401,123 664,551
Cash and cash equivalents(3) 203,494 234,766
Total liquidity $ 604,617 $ 899,317
(1)As of June 30, 2026 and December 31, 2025, the borrowing base under the Credit Agreement is reduced by the principal amount of the Senior Notes of $600 million. As of June 30, 2026 and December 31, 2025, the borrowing base calculation included available cash and escrow receivables in excess of $25 million. Refer to Note 3, Debt to our condensed consolidated financial statements for additional information.
(2)The availability under the Credit Agreement is reduced by outstanding letters of credit issued under the Credit Agreement, which are not cash collateralized.
(3)Represents cash and cash equivalents on the Condensed Consolidated Balance Sheets, which includes cash and cash equivalents related to financial services operations, which are not subject to restrictions and are regularly remitted to Corporate.
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Obligations under the Credit Agreement and Senior Notes are fully and unconditionally guaranteed on a joint and several basis by certain of the Company’s subsidiaries. As of June 30, 2026, we were in compliance with the covenants set forth for all of our debt obligations. Refer to Note 3, Debt to our condensed consolidated financial statements for more information on the Credit Agreement, Senior Notes and the mortgage warehouse facilities.
We continue to evaluate our overall capital structure and explore options to strengthen our balance sheet. We will remain opportunistic while assessing available capital in the debt and equity markets.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Six Months Ended June 30,
2026 2025
Net cash used in operating activities $ (151,071) $ (113,199)
Net cash used in investing activities (16,539) (197,255)
Net cash provided by financing activities 136,986 229,032
Net cash used in operating activities was $151 million for the six months ended June 30, 2026, compared to $113 million of net cash used in operating activities for the six months ended June 30, 2025. The change in net cash used in operating activities was mostly due to increased spend on inventories of $130 million, partly due to higher pre-acquisition land costs, as well as higher land and financing costs, a reduction of $7 million in mortgage loans held for the current period, compared to a reduction of $151 million in the prior year, and the decrease in net income of $70 million. These increases in net cash used in operating activities were partially offset by $110 million from reduced expenditures on lot deposits, an increase in accounts payable and accrued expenses of $16 million in the current period, compared to a reduction of $67 million in the prior year, increased customer deposits of $66 million from increased sales activity, and the impact of $32 million of contingent consideration revaluation and payments in the prior period related to an acquisition earnout arrangement that concluded in 2025 that did not repeat in the current period. The change in net cash used in operating activities are net of the effects of our acquisitions in 2025. Refer to Note 2, Acquisitions to our condensed consolidated financial statements for more information.
Net cash used in investing activities was $17 million for the six months ended June 30, 2026, compared to $197 million of net cash used in investing activities for the six months ended June 30, 2025, mostly attributable to business acquisition related payments during the six months ended June 30, 2025, which did not recur during the current period.
Net cash provided by financing activities was $137 million for the six months ended June 30, 2026, compared to $229 million of net cash provided by financing activities for the six months ended June 30, 2025. The change in net cash provided by financing activities reflected a $251 million decrease in homebuilding related net borrowings, partially offset by a decrease in net repayments of $139 million for our mortgage warehouse facilities during the period compared to the prior year period and $22 million of contingent consideration payments in the prior period related to an acquisition earnout arrangement that concluded in 2025 that did not repeat in the current period.
Redeemable Noncontrolling Interests
Based on the terms of the purchase agreement, at the time of an acquisition, we may issue a redeemable noncontrolling interest. A redeemable noncontrolling interest is reported within mezzanine equity on the Condensed Consolidated Balance Sheets at the greater of the initial carrying amount (its fair value on the acquisition date) adjusted for the noncontrolling interest’s share of net income (loss) less distributions or its redemption value. After achieving the minimum earnings threshold, the amount of net income that is attributable to the redeemable noncontrolling interest will be presented within net income attributable to noncontrolling interests on the Condensed Consolidated Statements of Operations. As of June 30, 2026, the redeemable noncontrolling interests totaled $30 million, of which no amount was redeemable within 12 months. Refer to Note 1, Nature of Business and Significant Accounting Policies to the consolidated financial statements within our Annual Report on Form 10-K for the year ended December 31, 2025, for more information.
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Redeemable Preferred Stock
On September 29, 2021, we sold 150,000 shares of redeemable preferred stock with an initial liquidation preference of $1,000 per share and a par value of $0.01 per share, for an aggregate purchase price of $150 million. We used the proceeds from the sale of the redeemable preferred stock to partially fund the MHI acquisition and for general corporate purposes. 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.
Accordingly, upon liquidation, dissolution or winding up of the Company, each share of redeemable preferred stock is entitled to receive the initial liquidation preference of $1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon.
Pursuant to the terms of the redeemable preferred stock, any time after September 29, 2026, a holder of shares of redeemable preferred stock can elect to convert their shares into shares of our Class A common stock at a conversion price based on the average of the immediately-preceding trailing 90 trading days’ closing price of Class A common stock prior to conversion, less 20% of the average and subject to a floor conversion price of $4.00 (the “Conversion Right”). We currently expect and plan to redeem and refinance all of the outstanding shares of redeemable preferred stock prior to September 29, 2026, after which the Conversion Right becomes effective.
The Board of Directors of the Company (the “Board of Directors”) has the authority to issue one or more series of preferred stock, par value $0.01 per share, without stockholder approval. Refer to Note 13, Equity to the consolidated financial statements within our Annual Report on Form 10-K for the year ended December 31, 2025, for further details on the terms of the redeemable preferred stock.
Contractual Obligations
During the six months ended June 30, 2026, there have been no material changes to our contractual obligations previously described under the “Liquidity and Capital Resources” section of our Annual Report on Form 10-K for the year ended December 31, 2025.
Critical Accounting Policies
We believe that there have been no significant changes to our critical accounting policies during the six months ended June 30, 2026 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
Refer to Note 1, Nature of Business and Significant Accounting Policies to our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
Asset-Light Lot Acquisition Strategy
We operate an asset-light and capital-efficient lot acquisition strategy primarily through finished lot option contracts and land bank option contracts. Refer to “—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.
As of June 30, 2026 and December 31, 2025, we had outstanding surety bonds of $343 million and $359 million, respectively, and outstanding letters of credit of $25 million and $27 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.
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Cautionary Statement about Forward-Looking Statements
The information in this Quarterly Report on Form 10-Q includes “forward-looking statements.” Many statements included in this Quarterly Report on Form 10-Q are not statements of historical fact, including statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “projection,” “should” or “will” or the negative thereof or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
•our market opportunities and the potential growth of those markets;
•trends with respect to interest rates, cancellation rates and demand for affordable housing;
•our strategy, expected outcomes and growth prospects;
•trends in our operations, industry and markets;
•our future profitability, indebtedness, liquidity, access to capital and financial condition;
•our integration of companies that we have acquired into our operations; and
•results of legal or regulatory proceedings or claims.
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. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
We caution you that these forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. These risks include, but are not limited to, the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. Should one or more of such risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. 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 Quarterly Report on Form 10-Q.
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