Dream Finders Homes, Inc.: Form 10-Q for the period ended Mar 31, 2026

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.

Affordability remains the primary challenge for homebuyers across our markets, particularly within entry-level price points, as mortgage interest rates continue to remain elevated and macroeconomic uncertainty weighs on consumer confidence. In response, we continue to align pricing with current market conditions to promote sales activity, primarily through targeted incentives, including mortgage rate buydowns.

These actions have impacted margins and profitability, and may continue to do so in the near term as we balance pricing, incentives, and sales pace in a competitive and evolving environment. Demand has varied across our communities and remains highly sensitive to changes in mortgage interest rates and broader economic conditions.

We remain focused on executing our land-light strategy, improving operational efficiency and delivering homes that meet customer needs and differentiate us in our markets. While longer-term housing fundamentals, including supply constraints, remain positive, near-term performance may continue to be influenced by macroeconomic conditions and interest rate trends.

Recent Developments

Official Homebuilder of the Tampa Bay Rays

In the first quarter of 2026, the Company announced it will serve as the Official Homebuilder of the Tampa Bay Rays and Tampa Bay Rowdies. These partnerships are expected to provide opportunities in our new Tampa Bay market and other Florida communities, including expanding our marketing footprint.

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:

(1) Represents amounts within our corporate component (“Corporate”).

(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, in the first quarter of 2026, investing activities unrelated to our core homebuilding operations resulted in a net loss of approximately $1 million. Additionally, consolidated net income was negatively affected by approximately $1 million due to a higher effective tax rate primarily as a result of decreased tax benefits from stock-based compensation.

Results of Homebuilding Operations

The following table sets forth our results of homebuilding operations and other financial data (in thousands, except for percentages), as well as other operating data for the periods indicated:

(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.

The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment for the three months ended March 31, 2026 and 2025, as well as active communities as of March 31, 2026 and 2025:

The following table presents income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the three months ended March 31, 2026 and 2025:

Homebuilding Revenues. The decrease in homebuilding revenues was primarily attributable to a lower consolidated ASP of homes closed, which decreased 10% when comparing the three months ended March 31, 2026 to the three months ended March 31, 2025, largely due to the higher use of sales incentives as a percentage of homebuilding revenues, which increased by 120 basis points (“bps”), or 15%, when compared to the three months ended March 31, 2025. This reduction in homebuilding revenues was also due to a decrease in home closings of 55 homes for the three months ended March 31, 2026 to 1,870 from 1,925 home closings for the three months ended March 31, 2025.

Homebuilding Gross Margin. The lower homebuilding gross margin was primarily due to the decrease in consolidated ASP of homes closed, as well as the decrease in home closings, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. In addition to the increased use of sales incentives as a percentage of homebuilding revenues, the decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended March 31, 2026 and 2025 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and cycle-time improvements.

Southeast. Our Southeast segment homebuilding revenues for the three months ended March 31, 2026 were $273 million, a decrease of $35 million, or 11%, from $308 million for the three months ended March 31, 2025. This revenue contraction was primarily driven by a decrease in home closings of 73, or 11%, as well as a 2% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 15.8% for the three months ended March 31, 2026, representing a decrease of 370 bps, or 19%, when compared to the three months ended March 31, 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 March 31, 2026 were $232 million, a decrease of $6 million, or 3%, from $238 million for the three months ended March 31, 2025. This decline in revenue was primarily driven by a decrease in ASP of homes closed of $74,434, or 16%, and was largely offset by an increase in home closings of 105, or 20%. The reduction in ASP was mostly driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 240 bps, or 60%, when compared to the three months ended March 31, 2025, as well as a higher relative and absolute number of built-for-contract closings with lower ASPs. Homebuilding gross margin percentage was 15.6% for the three months ended March 31, 2026, representing a decrease of 600 bps, or 28%, when compared to the three months ended March 31, 2025. The reduction in homebuilding gross margin percentage was mainly due to increased sales incentives and land and financing costs.

Midwest. Our Midwest segment homebuilding revenues for the three months ended March 31, 2026 were $332 million, a decrease of $92 million, or 22%, from $424 million for the three months ended March 31, 2025. This decrease was primarily due to a decrease in ASP of homes closed of $55,539, or 10%, as well as lower home closings of 87, or 12%. The decline in ASP was mostly driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 160 bps, or 15%, when compared to the three months ended March 31, 2025. Additionally, ASP was impacted 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 March 31, 2025. Homebuilding gross margin percentage was 12.6% for the three months ended March 31, 2026, representing a decrease of 510 bps, or 29%, when compared to the three months ended March 31, 2025. The reduction in homebuilding gross margin percentage was primarily due to higher sales incentives and changes in product mix, as well as an increase in land and financing costs.

Selling, General and Administrative Expense. The dollar decrease in Homebuilding SG&A was primarily driven by lower compensation cost of $13 million mostly due to reductions commensurate with operational volume and financial results. In addition, the corporate allocation of SG&A attributable to the homebuilding operations decreased by $3 million. The decrease in Homebuilding SG&A was partially offset by a $4 million increase in spend on forward mortgage commitment programs to allow our homebuyers to access lower mortgage interest rates on home loans when compared to the three months ended March 31, 2025. $10 million of the decrease in compensation costs and $2 million of the increase in spend on forward mortgage commitment programs during the three months ended March 31, 2026 were included in our Midwest segment. Homebuilding SG&A as a percentage of homebuilding revenues was 12.5% for the three months ended March 31, 2026, an increase of 50 bps from 12.0% for the three months ended March 31, 2025. The percentage increase in Homebuilding SG&A was primarily attributable to reduced absorption.

Other Expense, Net. The decrease in other expense, net for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily due to $6.7 million of purchase price adjustments related to the February 2024 Crescent Ventures, LLC acquisition, which were recognized outside of the measurement period during the first quarter of 2025.

Income Before Taxes Of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily attributable to the reduction in homebuilding revenues, gross margin and Homebuilding SG&A as a percentage of homebuilding revenues, all of which are 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.

As of March 31, 2026 and December 31, 2025, our lot deposits for finished lot option and land bank option contracts were $534 million and $545 million, respectively. As of March 31, 2026 and December 31, 2025, we controlled 60,629 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 $792.6 million and $773.4 million as of March 31, 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 sheet, 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 March 31, 2026 and December 31, 2025:

(1) Refer to Note 8, Segment Reporting to our condensed consolidated financial statements for further explanation of our reportable segments.

(2) As of March 31, 2026 and December 31, 2025, we had 252 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 March 31, 2026, we had 332 active communities, an increase of 74 communities, or 29%, as compared to 258 active communities as of March 31, 2025. As of March 31, 2026, the Company had 1,347 completed quick move-in ready homes, which represents approximately 4 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 March 31, 2026, we had 12 communities delivering closings under built-for-rent contracts, as compared to 5 communities as of March 31, 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.

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 three months ended March 31, 2026 and 2025:

(1) Excluding built-for-rent contracts, net sales in the Mid-Atlantic segment increased by 14% when comparing the three months ended March 31, 2026 to the three months ended March 31, 2025.

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 dates set forth below:

Backlog of sold homes as of March 31, 2026 was 2,377 homes valued at approximately $1.1 billion based on ASP, a decrease of 425 homes and $0.3 billion in value, or 15% and 20%, respectively, from 2,802 homes valued at approximately $1.4 billion as of March 31, 2025. Approximately 106 of the homes in our backlog are expected to be delivered in 2027 and beyond. The overall decrease in backlog was reflective of a continued constrained sales environment, despite an increase in net sales in the current period, as well as a continued trend toward move-in ready spec homes relative to pre-order sales and, to a lesser extent, fewer built-for-rent contracts in backlog. 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 March 31, 2026 was 1,037 homes, a decrease of 193 from 1,230 homes as of March 31, 2025. The decrease from prior year was primarily attributable to fewer built-for-rent contracts in backlog, as existing contracts were delivered.

Mid-Atlantic. Backlog for the Mid-Atlantic segment as of March 31, 2026 was 778 homes, an increase of 60 from 718 homes as of March 31, 2025. The increase in backlog from prior year was primarily attributable to increased sales activity and a built-for-rent contract backlog of 145 homes.

Midwest. Backlog for the Midwest segment as of March 31, 2026 was 562 homes, a decrease of 292 from 854 homes as of March 31, 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.

The following table presents information concerning our cancellation rates for each of our homebuilding segments for the periods set forth below:

(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 March 31, 2026 was 7.5%, an improvement of 420 bps when compared to the 11.7% cancellation rate for the three months ended March 31, 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.

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 table presents selected financial information and supplemental data for our Financial Services segment for the three months ended March 31, 2026 and 2025 (dollars in thousands, unless otherwise indicated):

Mortgage Banking. Mortgage banking revenues for the three months ended March 31, 2026 were $18 million, an increase of $3 million or 22%, from $15 million for the three months ended March 31, 2025. Financial services income before taxes related to mortgage banking for the three months ended March 31, 2026 was $9 million, an increase of $4 million from $5 million for the three months ended March 31, 2025. These increases were primarily due to execution efficiency and hedging strategies implemented after the first quarter of 2025.

Title and Other Services. Title and other services revenues for the three months ended March 31, 2026 were $33 million, an increase of $28 million from $5 million for the three months ended March 31, 2025. Financial services income before taxes related to title and other services for the three months ended March 31, 2026 was less than $1 million, a decrease of $2 million from the three months ended March 31, 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 ongoing integration and restructuring initiatives intended to enhance operational efficiency and position the business for long-term growth.

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 each of the periods indicated (unaudited and in thousands, except percentages):

(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.

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 each of the periods indicated (unaudited and in thousands, except percentages):

(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.

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 each of the periods indicated (unaudited and in thousands, except percentages):

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 three months ended March 31, 2026, and there were cash payments of $112 million for business acquisitions during the three months ended March 31, 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.

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 revenues and the related 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 March 31, 2026 and December 31, 2025, our lot deposits related to finished lot option contracts and land bank option contracts were $534 million and $545 million, respectively.

As of March 31, 2026 and December 31, 2025, our total liquidity was as follows (in thousands):

(1) As of March 31, 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 March 31, 2026, 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.

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 March 31, 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):

Net cash used in operating activities was relatively consistent at $50 million for the three months ended March 31, 2026, compared to $45 million of net cash used in operating activities for the three months ended March 31, 2025. The slight change in net cash used in operating activities was mostly due to the decrease in net income of $41 million, increased spend on inventories of $54 million and the reduction of $58 million in mortgage loans held for sale from the beginning of the current period, compared to a reduction of $114 million in the prior year. These increases in net cash used in operating activities were mostly offset by $64 million from reduced expenditures on lot deposits, increased customer deposits of $39 million from increased sales activity and a smaller reduction in accounts payable and accrued expenses of $34 million. The change in net cash used in operating activities are net of the effects of the Liberty Communities acquisition.

Net cash used in investing activities was $11 million for the three months ended March 31, 2026, compared to $116 million of net cash used in investing activities for the three months ended March 31, 2025, mostly attributable to business acquisition related payments during the three months ended March 31, 2025, which did not recur during the current period.

Net cash provided by financing activities was $255 million for the three months ended March 31, 2026, compared to $169 million of net cash provided by financing activities for the three months ended March 31, 2025. The change in net cash provided by financing activities reflected a $38 million net increase in homebuilding related borrowings and a $54 million decrease in net repayments for our mortgage warehouse facilities during the period compared to the prior year period. The increased net cash provided by financing activities was partially offset by higher common stock repurchases of $12 million relative to the comparative period.

Redeemable Noncontrolling Interests

Based on the terms of the purchase agreement, at the time of an acquisition, we may issue 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 March 31, 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.

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. 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.

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 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

For the three months ended March 31, 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 three months ended March 31, 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 March 31, 2026 and December 31, 2025, we had outstanding surety bonds of $355 million and $359 million, respectively, and outstanding letters of credit of $28 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.

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.

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.

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

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 bps for each interest period. Daily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 bps. Interest under Term SOFR Rate Loans and Daily Simple SOFR Rate Loans also include an “applicable rate margin” determined based on the net debt to capitalization ratio defined in the Credit Agreement, equivalent to credit spreads of 2.00% to 2.95%.

Interest on Base Rate as defined within the Credit Agreement or Daily Simple SOFR Rate advances borrowed under the Credit Agreement are payable in arrears on a monthly basis. Interest on Term SOFR rate advances borrowed under the Credit Agreement are payable in arrears at the end of the interest period applicable to such advance, or, if less than such interest period, three months after the beginning of such interest period. 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 net debt to capitalization ratio defined in the Credit Agreement.

Outstanding borrowings under the Credit Agreement are subject to, among other things, a borrowing base. The borrowing base includes, among other things, (a) 90% of the net book value of presold housing units, (b) 85% of the net book value of model housing units, (c) 85% of the net book value of speculative housing units, (d) 70% of the net book value of finished lots, (e) 85% of the net book value of certain built-for-rent units, and (f) 75% of the net book value of other built-for-rent units, in each case subject to certain exceptions and limitations set forth in the Credit Agreement. The borrowing base availability is reduced dollar-for-dollar for any outstanding unsecured indebtedness permitted under the Credit Agreement.

Our mortgage banking business is exposed to interest rate risk as it relates to its lending activities. Jet HomeLoans underwrites and originates mortgage loans, which are sold through either optional or mandatory forward mortgage commitments into the secondary markets. The loan portfolio is held for sale and subject to forward sale commitments. The Company enters into interest rate lock commitments (“IRLC”) when originating mortgage loans with customers who have applied for a loan and meet certain credit and underwriting criteria. In addition to the IRLC, the Company uses forward sales of mortgage backed securities (“MBS”) contracts to hedge its mortgage-related interest rate exposure. The fair values of these derivative instruments change based on fluctuations in secondary market investor pricing and quoted MBS prices. Jet HomeLoans generally sells its mortgages held for sale on a servicing released basis.

Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934) as of March 31, 2026. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures as of March 31, 2026 were effective in providing reasonable assurance that information required to be disclosed in the reports the Company files, furnishes, submits or otherwise provides to the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in reports filed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, in such a manner as to allow timely decisions regarding the required disclosure.

Changes in Internal Control over Financial Reporting

Alliant Title

We completed the Alliant Title acquisition on April 18, 2025, which is discussed in detail in Note 2, Acquisitions to the condensed consolidated financial statements. Our assessment of the effectiveness of disclosure controls and procedures did not encompass the internal controls over financial reporting of Alliant Title. This decision aligns with the general guidance from the SEC Staff, allowing the exclusion of an assessment of a recently acquired business from management’s scope for an internal controls audit for up to one year post-acquisition. With the completion of the Alliant Title acquisition, we are in the process of implementing internal controls over significant processes, which we consider appropriate and necessary given the integration level. Alliant Title contributed approximately 3% to our total revenues for the quarter ended March 31, 2026. As of March 31, 2026, the total assets of the acquired business represented about 2% of total consolidated assets, mainly comprising investments and goodwill.

There have been no other changes in the internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting for the quarter ended March 31, 2026.

There are numerous factors that affect our business and results of operations, many of which are difficult to predict or are beyond our control. Refer to Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2025, which contains descriptions of significant risks that have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. There have been no material changes to risk factors previously disclosed in the reports cited above.