Dream Finders Homes Inc.

10/30/2025 | Press release | Distributed by Public on 10/30/2025 12:08

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, as well as homes under built-for-rent contracts. To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer mortgage banking solutions and title insurance-inclusive of agency and underwriting services. Additionally, we offer homeowners insurance and adjacent products to homebuyers
The macroeconomic uncertainty has continued to impact the homebuilding industry over the last quarter. Homebuyers across our markets are still facing significant affordability challenges, especially in entry-level price points. Considering this backdrop, we remain focused on providing assistance through mortgage buydown commitments and compelling incentives, including flexible closing dollars. While we face intense competition, we are committed to our land-light strategy, our operational improvements and to building a high-quality, affordable product that meets our customers' needs and differentiates us in our markets. Our long-term outlook remains positive; we are optimistic about future housing demand and encouraged by the recent improvement in mortgage interest rates. We recognize that the first nine months of 2025 have been challenging and expect these conditions will persist through year end.
Recent Developments
Southwest Florida
Sales began in our southwest Florida division during the three months ended September 30, 2025, contributing to our organic growth in the Southeast segment.
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
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Income before taxes:
Homebuilding $ 52,881 $ 82,596 $ 176,681 $ 244,694
Financial services 9,268 8,365 28,334 20,250
Other(1)
(1,399) 1,463 964 4,312
Income before taxes 60,750 92,424 205,979 269,256
Income tax expense (13,694) (20,780) (47,374) (59,166)
Net income 47,056 71,644 158,605 210,090
Net income attributable to noncontrolling interests (59) (993) (125) (4,002)
Net income attributable to Dream Finders Homes, Inc. $ 46,997 $ 70,651 $ 158,480 $ 206,088
Other Financial Data:
Basic EPS(2)
$ 0.47 $ 0.72 $ 1.59 $ 2.10
Diluted EPS(2)
$ 0.47 $ 0.70 $ 1.56 $ 2.06
EBITDA (in thousands)(3)
$ 107,114 $ 132,950 $ 357,404 $ 388,128
EBITDA margin %(3)(4)
11.0 % 13.2 % 11.5 % 13.4 %
Return on participating equity(5)
22.0 % 30.4 %
Balance Sheet Data (as of period end):
Cash and cash equivalents $ 251,044 $ 204,906
Revolving credit facility and other borrowings 1,067,389 991,208
Senior unsecured notes, net 590,523 294,713
Mortgage warehouse facilities 108,222 170,167
Total mezzanine equity 178,039 169,951
Total Dream Finders Homes, Inc. stockholders' equity
1,373,334 1,115,073
Total equity 1,374,684 1,119,761
(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)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."
(4)Calculated as a percentage of total revenues.
(5)Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders' equity ("participating equity") for the trailing twelve months.
Results of Homebuilding Operations
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table sets forth our results of homebuilding operations,other financial data(in thousands, except for percentages) and other operating data for the periods indicated:
Three Months Ended
September 30,
2025 2024 Change % Change
Homebuilding revenues $ 916,671 $ 986,257 $ (69,586) (7) %
Homebuilding cost of sales 755,935 797,110 (41,175) (5) %
Selling, general and administrative expense
107,156 101,460 5,696 6 %
Income from unconsolidated entities
- 17 (17) (100) %
Contingent consideration revaluation 1,786 5,948 (4,162) (70) %
Other income, net (1,087) (874) (213) 24 %
Income before taxes of homebuilding operations
$ 52,881 $ 82,596 $ (29,715) (36) %
Other Financial and Operating Data:
Home closings 1,915 1,889 26 1 %
Average sales price of homes closed(1)
$ 476,962 $ 518,553 $ (41,591) (8) %
Net sales 2,021 1,680 341 20 %
Cancellation rate 12.5 % 13.8 % (1.3) % (9) %
Homebuilding gross margin(2)
$ 160,736 $ 189,147 $ (28,411) (15) %
Homebuilding gross margin %(2)(3)
17.5 % 19.2 % (1.7) % (9) %
Adjusted homebuilding gross margin(4)
$ 245,071 $ 272,117 $ (27,046) (10) %
Adjusted homebuilding gross margin %(3)(4)
26.7 % 27.6 % (0.9) % (3) %
Selling, general and administrative expense %(3)
11.7 % 10.3 % 1.4 % 14 %
Active communities as of period end(5)
283 235 48 20 %
Backlog as of period end - units 2,619 3,996 (1,377) (34) %
Backlog as of period end - value (in thousands) $ 1,171,041 $ 2,004,091 $ (833,050) (42) %
Net homebuilding debt to net capitalization(4)
47.3 % 45.6 % 1.7 % 4 %
(1)Average sales price of homes closed is calculated based on homebuilding revenues, adjusted for the impact of percentage of completion revenues, and excluding deposit forfeitures and land sales, over homes closed.
(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)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 September 30, 2025 and 2024, as well as active communities as of September 30, 2025 and 2024:
Three Months Ended
September 30, 2025 		As of
September 30, 2025
Segment Home Closings ASP Active Communities
Southeast 709 $ 448,352 90
Mid-Atlantic 570 419,911 71
Midwest 636 559,987 122
Total 1,915 $ 476,962 283
Three Months Ended
September 30, 2024 		As of
September 30, 2024
Segment Home Closings ASP Active Communities
Southeast 592 $ 494,163 56
Mid-Atlantic 603 461,320 62
Midwest 694 589,087 117
Total 1,889 $ 518,553 235
The following table presents income before taxes (in thousands) and homebuilding gross margin (or "gross margin") percentage by segment for the three months ended September 30, 2025 and 2024:
Three Months Ended
September 30,
2025 2024
Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin %
Southeast $ 20,921 18.8 % $ 22,762 19.6 %
Mid-Atlantic 10,803 17.1 30,355 20.3
Midwest 21,157 16.7 29,479 18.1
Total $ 52,881 17.5 % $ 82,596 19.2 %
Homebuilding Revenues. The decrease in homebuilding revenues was primarily attributable to the consolidated ASP of homes closed for the three months ended September 30, 2025, which decreased 8% when compared to the three months ended September 30, 2024. The decrease in ASP was mostly a result of changes in product mix and, to a lesser extent, the increased use of sales incentives of $7 million during the third quarter of 2025. The decrease in homebuilding revenues was partially offset by an increase in home closings of 26 homes for the three months ended September 30, 2025 to 1,915 from 1,889 home closings for the three months ended September 30, 2024. The Liberty Communities acquisition contributed 185 home closings with an ASP of $329,034.
Homebuilding Cost of Sales and Homebuilding Gross Margin. The lower homebuilding cost of sales was primarily due to the geographical changes in product mix, partially offset by the slight increase in home closings for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended September 30, 2025 and 2024 was primarily attributable to the increased use of sales incentives, as well as higher land and financing costs.
Southeast. Our Southeast segment homebuilding revenues for the three months ended September 30, 2025 were $317 million, an increase of $24 million, or 8%, from $293 million for the three months ended September 30, 2024. This revenue growth was primarily driven by an increase in home closings of 117, or 20%, which was partially offset by a 9% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 18.8% for the three months ended September 30, 2025, representing a decrease of 80 basis points ("bps"), or 4%, when compared to the three months ended September 30, 2024. The decrease in homebuilding gross margin percentage was mostly the result of increased sales incentives, as well as higher land and financing costs, partially offset by direct cost reductions. The Liberty Communities operations in Atlanta ("Liberty Atlanta") contributed $48 million in homebuilding revenues and 139 home closings with an ASP of $348,231. Liberty Atlanta had a gross margin percentage of 19.6% for the three months ended September 30, 2025.
Mid-Atlantic. Our Mid-Atlantic segment homebuilding revenues for the three months ended September 30, 2025 were $242 million, a decrease of $42 million, or 15%, from $284 million for the three months ended September 30, 2024. This decline in revenue was driven by a decrease in ASP of $41,409, or 9%, and lower home closings of 33, or 5%. Homebuilding gross margin percentage was 17.1% for the three months ended September 30, 2025, representing a decrease of 320 bps, or 16%, when compared to the three months ended September 30, 2024. The decrease in homebuilding gross margin percentage was mostly the result of increased sales incentives, as well as higher financing and closing costs.
Midwest. Our Midwest segment homebuilding revenues for the three months ended September 30, 2025 were $357 million, a decrease of $52 million, or 13%, from $409 million for the three months ended September 30, 2024. This decrease was primarily due to lower home closings of 58, or 8%, and a decrease of 5% in the ASP of homes closed. The reduction in ASP is mostly the result of a strategic change in product offerings. Homebuilding gross margin percentage was 16.7% for the three months ended September 30, 2025, representing a decrease of 140 bps, or 8%, when compared to the three months ended September 30, 2024. The decrease in homebuilding gross margin percentage was primarily due to changes in geographic product mix and higher sales incentives, as well as an increase in land costs, partially offset by direct cost reductions.
Selling, General and Administrative Expense. Selling, general and administrative expense for the homebuilding segments ("SG&A") as a percentage of homebuilding revenues was 11.7% for the three months ended September 30, 2025, an increase of 140 bps from 10.3% for the three months ended September 30, 2024, an increase of $6 million. The dollar and percentage increase in SG&A was primarily attributable to the $5 million increase in spend on forward mortgage commitment programs to allow our homebuyers to access lower mortgage interest rates on home loans during the three months ended September 30, 2025 compared to September 30, 2024.
Contingent Consideration Revaluation. Contingent consideration revaluation expense, which only relates to the MHI acquisition for 2025, decreased by $4 million when comparing the three months ended September 30, 2025 and 2024. The earnout period for the MHI acquisition concluded as of the end of the third quarter of 2025 and the final payment is due in December 2025.
Income Before Taxes of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily attributable to the reduction in homebuilding revenues and gross margin and, to a lesser extent, the increases in SG&A, all of which are explained above.
Results of Homebuilding Operations
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table sets forth our results of homebuilding operations,other financial data(in thousands, except for percentages) and other operating data for the periods indicated:
Nine Months Ended
September 30,
2025 2024 Change % Change
Homebuilding revenues $ 2,986,359 $ 2,863,714 $ 122,645 4 %
Homebuilding cost of sales 2,457,342 2,328,587 128,755 6 %
Selling, general and administrative expense
357,305 277,883 79,422 29 %
(Loss) income from unconsolidated entities
1 (286) 287 (100) %
Contingent consideration revaluation
(9,820) 13,793 (23,613) (171) %
Other expense (income), net
4,850 (957) 5,807 (607) %
Income before taxes of homebuilding operations
$ 176,681 $ 244,694 $ (68,013) (28) %
Other Financial and Operating Data:
Home closings 6,072 5,575 497 9 %
Average sales price of homes closed(1)
$ 485,216 $ 510,204 $ (24,988) (5) %
Net sales 5,991 5,116 875 17 %
Cancellation rate 12.7 % 15.8 % (3.1 %) (20) %
Homebuilding gross margin(2)
$ 529,017 $ 535,127 $ (6,110) (1) %
Homebuilding gross margin %(2)(3)
17.7 % 18.7 % (1.0) % (5) %
Adjusted homebuilding gross margin(4)
$ 800,333 $ 773,901 $ 26,432 3 %
Adjusted homebuilding gross margin %(3)(4)
26.8 % 27.0 % (0.2) % (1) %
Selling, general and administrative expense %(3)
12.0 % 9.7 % 2.3 % 24 %
See notes (1) to (4) under results of homebuilding operations for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
The following table summarizes home closings and ASP of homes closed by homebuilding segment for the nine months ended September 30, 2025 and 2024:
Nine Months Ended
September 30,
2025 2024
Segment Home Closings ASP Home Closings ASP
Southeast 2,238 $ 443,712 1,838 $ 492,913
Mid-Atlantic 1,691 439,612 1,704 441,184
Midwest 2,143 564,546 2,033 583,688
Total 6,072 $ 485,216 5,575 $ 510,204
The following table presents income before taxes (in thousands) and homebuilding gross margin percentage by segment for the nine months ended September 30, 2025 and 2024:
Nine Months Ended
September 30,
2025 2024
Segment Income Before Taxes Gross Margin % Income Before Taxes Gross Margin %
Southeast $ 63,319 18.7 % $ 82,329 19.5 %
Mid-Atlantic 40,387 18.8 69,822 18.9
Midwest 72,975 16.3 92,543 17.9
Total $ 176,681 17.7 % $ 244,694 18.7 %
Homebuilding Revenues. The increase in homebuilding revenues was primarily attributable to 6,072 home closings for the nine months ended September 30, 2025, an increase of 497 homes, or 9%, from the 5,575 home closings for the nine months ended September 30, 2024. The increase in homebuilding revenues was largely attributable to the additional 471 home closings with an ASP of $346,842 contributed by the Liberty Communities acquisition, 380 of which were included in the Southeast segment, which had a total increase in home closings of 400. Additionally, the Midwest segment had an increase of 110 closings with an ASP of $564,546, which was the highest ASP of our homebuilding segments. The higher homebuilding revenues were partially offset by the decrease in home closings and ASP from the Mid-Atlantic segment. The consolidated ASP of homes closed decreased 5% when comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024, primarily a result of the increased use of sales incentives by $62 million and changes in product mix during the period.
Homebuilding Cost of Sales and Homebuilding Gross Margin.The higher homebuilding cost of sales was primarily due to the increase in home closings for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. In addition to the lower ASP, the decrease in homebuilding gross margin as a percentage of homebuilding revenues, when comparing the nine months ended September 30, 2025 and 2024, was primarily attributable to higher land and financing costs, partially offset by direct cost reductions. In addition, the Liberty Communities homebuilding gross margin for the nine months ended September 30, 2025 included amortization of purchase accounting adjustments associated with home closings that negatively impacted the homebuilding gross margin percentage by approximately 6 bps.
Southeast. Our Southeast segment homebuilding revenues for the nine months ended September 30, 2025 were $992 million, an increase of $78 million, or 9%, from $914 million for the nine months ended September 30, 2024. This revenue growth was primarily driven by an increase in home closings of 400, or 22%, which was partially offset by a 10% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 18.7% for the nine months ended September 30, 2025, representing a decrease of 80 bps, or 4%, when compared to the nine months ended September 30, 2024. The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs and, to a lesser extent, a gross margin of 17.7% for the Liberty Communities operations, partially offset by direct cost reductions. Liberty Atlanta contributed $137 million in homebuilding revenues and 380 home closings with an ASP of $360,324 for the nine months ended September 30, 2025.
Mid-Atlantic. Our Mid-Atlantic segment homebuilding revenues for the nine months ended September 30, 2025 were $755 million, a decrease of $3 million, or less than 1%, from $758 million for the nine months ended September 30, 2024. This decline in revenue was primarily driven by a decrease in home closings of 13, or 1%, and ASP of $1,572, or less than 1%, for the nine months ended September 30, 2025 compared to the nine months September 30, 2024. Homebuilding gross margin percentage of 18.8% for the nine months ended September 30, 2025 remained relatively consistent when compared to the nine months ended September 30, 2024.
Midwest. Our Midwest segment homebuilding revenues for the nine months ended September 30, 2025 were $1,239 million, an increase of $48 million, or 4%, from $1,191 million for the nine months ended September 30, 2024. This increase was primarily due to higher home closings of 110, or 5%, partially offset by a decrease of 3% in the ASP of homes closed. Additionally, strategic lot sales within the segment, resulted in $16 million of additional homebuilding revenues during the nine months ended September 30, 2025 as compared to the previous period. Homebuilding gross margin percentage was 16.3% for the nine months ended September 30, 2025, representing a decrease of 160 bps, or 9%, when compared to nine months ended September 30, 2024. The reduction in homebuilding gross margin percentage was mainly due to an increase in land and financing costs, partially offset by direct cost reductions.
Selling, General and Administrative Expense. Selling, general and administrative expense for the homebuilding segments ("SG&A") as a percentage of homebuilding revenues was 12.0% for the nine months ended September 30, 2025, an increase of 230 bps from 9.7% for the nine months ended September 30, 2024, an increase of $79 million. The dollar and percentage increase in SG&A was primarily attributable to $72 million of spend on forward mortgage commitment programs to allow our homebuyers to access lower mortgage interest rates on home loans, representing a $41 million increase when compared to the nine months ended September 30, 2024. Additionally, for the nine months ended September 30, 2025, SG&A included higher compensation costs of $16 million, largely due to our continued growth, including acquisitions and operational expansions, as well as increased marketing and model home related expenses of $7 million due to increased active community count. As a result of the Liberty acquisition described above, there was SG&A of $18 million in the nine months ended September 30, 2025 that was not included in the nine months ended September 30, 2024.
Contingent Consideration Revaluation. $23 million of the change from contingent consideration expense to income for the nine months ended September 30, 2025 was attributable to lower actual results achieved during the nine months ended September 30, 2025 when compared to pre-tax income forecasts for the same period with regard to the MHI acquisition. The earnout period for the MHI acquisition concluded as of the end of the third quarter of 2025 and the final payment is due in December 2025. The earnout period related to the 2020 acquisition of H&H Constructors of Fayetteville, LLC concluded in the third quarter of 2024.
Other Expense (Income), Net. The increase in other expense, net for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 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. Refer to Note 2, Acquisitions to the condensed consolidated financial statements for additional information.
Income Before Taxes of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily attributable to the increases in SG&A as well as the reduction in ASP and homebuilding gross margin, partially offset by higher home closings volume and the change in contingent consideration from expense to income, all of which are explained above.
Land Acquisition and Development Process
We employ an asset-light and cost-effective 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 sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and in the case of land bank option contracts, our loss is limited to the related lot option fees paid to the land bank partner, and for certain land bank option contracts, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project. We provide lot deposits typically averaging 10% of the land purchase price.
As of September 30, 2025 and December 31, 2024, our lot deposits for finished lot option and land bank option contracts were $551 million and $458 million, respectively. As of September 30, 2025 and December 31, 2024, we controlled 64,341 and 54,698 lots, respectively, under finished lot option and land bank option contracts.
In the past, we have supplemented our lot option acquisition strategies by entering into joint venture agreements with external investors to acquire, develop and control lots. Due to the profit sharing requirements of the joint venture agreements, we have transitioned from these joint venture arrangements in favor of the option contract strategies described above.
Controlled Lots Pipeline
The following table presents our controlled lots through option contracts by homebuilding segment as of September 30, 2025 and December 31, 2024:
As of
September 30, 		As of
December 31,
Segment(1)
2025 2024 % Change
Southeast 25,524 21,362 19 %
Mid-Atlantic 23,068 17,099 35 %
Midwest 15,749 16,237 (3 %)
Total(2)
64,341 54,698 18 %
(1)See Note 8, Segment Reporting to the condensed consolidated financial statements for further explanation of our reportable segments.
(2)As of September 30, 2025 and December 31, 2024,we had 820 and 603 controlled lots under built-for-rent contracts, respectively.
Our 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.Active community count is an important metric to forecast future net sales for our business. As of September 30, 2025, we had 283 active communities, an increase of 48 communities, or 20%, as compared to 235 active communities as of September 30, 2024.
Our active community count excludes communities under the 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 September 30, 2025, we had 12 communities delivering closings under built-for-rent contracts, as compared to 13 communities as of September 30, 2024.
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, interest costs for construction loans, internal and external realtor commissions and other miscellaneous closing costs. Homesite costs range from 30-35% of the average cost of a home. Building materials range from 30-35% of the average cost to build the home, labor ranges from 20-25% of the average cost to build the home, and interest, commissions and closing costs range from 5-10% of the average cost to build the home.
Our materials are subject to price fluctuations. Once construction of a home begins, prices for the materials utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions. Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, international trade disputes and resulting tariffs, and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities. Significant price increases of these materials may negatively impact our homebuilding cost of sales and, in turn, our net income.
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 to third-party investors that intend to lease the homes ("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 sales contracts cancelled during the period, divided by the total number of new 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 and nine months ended September 30, 2025 and 2024:
Three Months Ended
September 30, 		Period Over Period
Percent Change
2025 2024
Segment Net Sales Starts Closings Net Sales Starts Closings Net Sales Starts Closings
Southeast(1)
854 786 709 514 589 592 66 % 33 % 20 %
Mid-Atlantic(2)
656 765 570 510 496 603 29 % 54 % (5) %
Midwest(3)
511 457 636 656 803 694 (22) % (43) % (8) %
Total 2,021 2,008 1,915 1,680 1,888 1,889 20 % 6 % 1 %
(1)Excluding built-for-rent activity, net sales in the Southeast segment increased 25% during the quarter ended September 30, 2025 when compared to the quarter ended September 30, 2024. This increase was due to net sales from the January 2025 Liberty Communities acquisition.
(2)Excluding built-for-rent activity, starts in the Mid-Atlantic segment increased 31% during the quarter ended September 30, 2025 when compared to the quarter ended September 30, 2024. This increase was primarily due to starts from the January 2025 Liberty Communities acquisition.
(3)The lower net sales and starts in the Midwest segment were primarily the result of weakening demand in the Texas markets.
Nine Months Ended
September 30, 		Period Over Period
Percent Change
2025 2024
Segment
Net Sales
Starts
Closings
Net Sales
Starts
Closings
Net Sales Starts Closings
Southeast(1)
2,149 2,223 2,238 1,249 2,253 1,838 72 % (1) % 22 %
Mid-Atlantic 1,892 2,322 1,691 1,737 2,091 1,704 9 % 11 % (1) %
Midwest(2)
1,950 2,386 2,143 2,130 2,610 2,033 (8) % (9) % 5 %
Total 5,991 6,931 6,072 5,116 6,954 5,575 17 % - % 9 %
(1)Excluding built-for-rent activity, net sales in the Southeast segment increased 32% during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. This increase was mostly due to net sales from the January 2025 Liberty Communities acquisition.
(2)The lower net sales and starts in the Midwest segment were primarily the result of weakening demand in the Texas markets.
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:
As of September 30,
2025 2024
Segment
Homes
ASP Value
Homes
ASP Value
Southeast
1,143 $ 415,613 $ 475,046 1,645 $ 409,100 $ 672,970
Mid-Atlantic 898 377,967 339,414 1,109 461,822 512,161
Midwest 578 616,922 356,581 1,242 659,389 818,961
Total 2,619 $ 447,133 $ 1,171,041 3,996 $ 501,524 $ 2,004,091
Backlog of sold homes as of September 30, 2025 was 2,619 homes valued at approximately $1.2 billion based on ASP, a decrease of 1,377 homes and $0.8 billion in value, or 34% and 42%, respectively, from 3,996 homes valued at approximately $2.0 billion as of September 30, 2024. The overall decrease in backlog was reflective of a constrained sales environment as well as a continued trend toward move-in ready spec homes relative to pre-order sales and, to a lesser extent, fewer built-for-rent contracts in backlog. Spec homes typically result in quicker closings and turnover of the backlog within the same reporting period. Approximately 1,179 of the homes in our backlog are expected to be delivered in 2026 and beyond.
Southeast. Backlog for the Southeast segment as of September 30, 2025 was 1,143 homes, a decrease of 502 from 1,645 homes as of September 30, 2024. The decrease from prior year was primarily attributable to a continued trend toward more sales of move-in-ready spec homes relative to pre-order sales and, to a lesser extent, fewer built-for-rent contracts in ending backlog.
Mid-Atlantic. Backlog for the Mid-Atlantic segment as of September 30, 2025 was 898 homes, a decrease of 211 from 1,109 homes as of September 30, 2024. The decrease in backlog from prior year was primarily attributable to the constrained sales environment and the continued trend toward more sales of move-in-ready spec homes relative to pre-order sales. The decline in backlog value was also due to an increase in built-for-rent contracts in backlog this period, which have lower ASPs relative to retail sales contracts in backlog.
Midwest. Backlog for the Midwest segment as of September 30, 2025 was 578 homes, a decrease of 664 from 1,242 homes as of September 30, 2024. The decrease from prior year was mostly a result of higher closings relative to net sales, as well as the continued trend toward more sales of move-in-ready spec homes relative to pre-order sales. Lower net sales in the Midwest segment were primarily the result of weakening Dallas and Austin, Texas markets.
The following table presents information concerning our cancellation rates for each of our homebuilding segments for the periods set forth below:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Segment
2025 2024 2025 2024
Southeast 11.6 % 13.6 % 12.6 % 26.6 %
Mid-Atlantic 10.4 % 13.9 % 11.6 % 10.8 %
Midwest 16.5 % 13.9 % 13.9 % 12.3 %
Total(1)
12.5 % 13.8 % 12.7 % 15.8 %
(1)Our cancellation rate for a given period is calculated as the total number of new sales contracts cancelled during the period, divided by the total number of new home sales contracts entered into during the period.
Our cancellation rate for the three months ended September 30, 2025 was 12.5%, an improvement of 130 bps when compared to the 13.8% cancellation rate for the three months ended September 30, 2024. Our cancellation rate for the nine months ended September 30, 2025 was 12.7% , an improvement when compared to the 15.8% for the nine months ended September 30, 2024. In the first quarter of 2024, we had one built-for-rent contract of 229 units that was terminated based on a strategic decision to convert the controlled lots into future retail sales. This termination contributed to the elevated cancellation rate in the Southeast segment for the nine months ended September 30, 2024 of 26.6%.
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 three and nine months ended September 30, 2025 and 2024 (dollars in thousands, unless otherwise indicated):
Three Months Ended
September 30,
2025 2024 Change % Change
Mortgage revenues $ 16,306 $ 16,079 $ 227 1 %
Title and other services revenues
36,827 4,089 32,738 801 %
Total financial services revenues 53,133 20,168 32,965 163 %
Financial services expense 44,623 11,903 32,720 275 %
Other income, net
860 - 860 100 %
(Loss) income from unconsolidated entities
(102) 100 (202) (202) %
Financial services income before taxes $ 9,268 $ 8,365 $ 903 11 %
Mortgage Financing Supplemental Data:
Total originations:
Number of loans 1,201 1,253 (52) (4) %
Principal (in millions) $ 498 $ 557 $ (59) (11) %
Capture rate 76.2 % 79.2 % (3) % (4) %
Average FICO score 736 744 (8) (1) %
Funded origination breakdown:
Government (FHA, VA, USDA) 53.3 % 36.2 % 17 % 47 %
Non-agency 46.7 % 63.5 % (17) % (27) %
Nine Months Ended
September 30,
2025 2024 Change % Change
Mortgage revenues $ 48,849 $ 16,079 $ 32,770 204 %
Title and other services revenues
74,972 10,179 $ 64,793 637 %
Total financial services revenues 123,821 26,258 97,563 372 %
Financial services expense 97,008 15,659 81,349 520 %
Other income, net
1,690 - 1,690 100 %
(Loss) income from unconsolidated entities
(169) 9,651 (9,820) (102) %
Financial services income before taxes $ 28,334 $ 20,250 $ 8,084 40 %
Mortgage Financing Supplemental Data(1):
Total originations:
Number of loans 3,926 3,282 644 20 %
Principal (in millions) $ 1,652 $ 1,460 $ 192 13 %
Capture rate 78.3 % 73.6 % 5 % 7 %
Average FICO score 738 744 (6) (1) %
Funded origination breakdown:
Government (FHA, VA, USDA) 53.4 % 39.2 % 14 % 36 %
Non-agency 46.6 % 60.6 % (14) % (23) %
(1)Supplemental data includes the operations of Jet HomeLoans prior to its consolidation in the Company's financial statements beginning on July 1, 2024. Refer to Note 2, Acquisitions to the condensed consolidated financial statements for additional information.
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Title and Other Services
$32 million of the increase in title and other services revenues, $31 million of the increase in financial services expense and $0.3 million of the increase in financial services income before taxes for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, respectively, were the result of the April 2025 acquisition of Alliant Title. To a lesser extent, DF Title's expansion of operations in our Tennessee market and overall cost management contributed to the increase in financial services income before taxes for the three months ended September 30, 2025.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Mortgage Banking
The $33 million, or 204%, increase in mortgage revenues, $20 million of the increase in financial services expense and $5 million of the increase in the financial services income before taxes for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 were all primarily due to the consolidation of Jet HomeLoans beginning July 1, 2024. The income before taxes of Jet HomeLoans prior to July 1, 2024 was included in income from unconsolidated entities in the Condensed Consolidated Statements of Operations.
Title and Other Services
$59 million of the increase in title and other services revenues, $58 million of the increase in financial services expense and $2 million of the increase in financial services income before taxes for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 were mostly the result of the April 2025 acquisition of Alliant Title. To a lesser extent, DF Title's expansion of operations into the Texas market also contributed to financial services income before taxes for the nine months ended September 30, 2025. Prior to the third quarter of 2024, our Texas market was serviced by our unconsolidated title joint ventures, which resulted in a partially offsetting impact to financial services income before taxes.
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):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Net income attributable to Dream Finders Homes, Inc. $ 46,997 $ 70,651 $ 158,480 $ 206,088
Interest income (727) (1,262) (2,526) (4,210)
Interest charged to homebuilding cost of sales(1)
43,060 41,818 141,062 114,222
Interest expense 470 - 599 -
Income tax expense 13,694 20,780 47,374 59,166
Depreciation and amortization(2)
3,620 963 12,415 12,862
EBITDA $ 107,114 $ 132,950 $ 357,404 $ 388,128
EBITDA margin %(3)
11.0 % 13.2 % 11.5 % 13.4 %
(1)Includes interest charged to homebuilding cost of sales related to our Senior Notes and Credit Agreement and other homebuilding notes payable included within revolving credit facility and other borrowings on the Condensed Consolidated Balance Sheets ("homebuilding debt"), 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):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Homebuilding gross margin(1)
$ 160,736 $ 189,147 $ 529,017 $ 535,127
Interest expense in homebuilding cost of sales(2)
43,060 41,818 141,062 114,222
Amortization in homebuilding cost of sales(3)
(66) (1,186) 1,659 5,914
Commission expense 41,341 42,338 128,595 118,638
Adjusted homebuilding gross margin $ 245,071 $ 272,117 $ 800,333 $ 773,901
Homebuilding gross margin %(4)
17.5 % 19.2 % 17.7 % 18.7 %
Adjusted homebuilding gross margin %(4)
26.7 % 27.6 % 26.8 % 27.0 %
(1)Homebuilding gross margin is homebuilding revenues less homebuilding cost of sales.
(2)Includes interest charged to homebuilding cost of sales related to our homebuilding debt, as well as lot option fees.
(3)Represents amortization of purchase accounting adjustments from our acquisitions.
(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, as well as to establish targets for performance-based compensation. We also use this ratio as a measure of 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):
As of
September 30,
2025 2024
Total debt $ 1,766,134 $ 1,456,088
Total mezzanine equity 178,039 169,951
Total equity 1,374,684 1,119,761
Total capitalization $ 3,318,857 $ 2,745,800
Total debt to total capitalization 53.2 % 53.0 %
Total debt $ 1,766,134 $ 1,456,088
Less: Mortgage warehouse facilities and other secured borrowings
121,712 170,167
Less: Cash and cash equivalents 251,044 204,906
Net homebuilding debt 1,393,378 1,081,015
Total mezzanine equity 178,039 169,951
Total equity 1,374,684 1,119,761
Net capitalization $ 2,946,101 $ 2,370,727
Net homebuilding debt to net capitalization 47.3 % 45.6 %
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. Total cash consideration as of September 30, 2025 and 2024 for business acquisitions closed during the nine months ended September 30, 2025 and 2024 was $191 million and $201 million, respectively. Refer to Note 2, Acquisitions to the condensed consolidated financial statements 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, entitlements and permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes. 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 these transactions, we also incur lot option fees on the outstanding capital balance held by the land banker. 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. 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 September 30, 2025 and December 31, 2024, our lot deposits related to finished lot option contracts and land bank option contracts were $551 million and $458 million, respectively.
As of September 30, 2025 and December 31, 2024, our cash and total liquidity were as follows (in thousands):
As of
September 30, 2025 		As of
December 31, 2024
Borrowing base(1)
$ 1,438,148 $ 1,254,094
Outstanding balance under Credit Agreement (1,052,000) (700,000)
Letters of credit outstanding(2)
(12,449) (12,449)
Availability under Credit Agreement 373,699 541,645
Cash and cash equivalents(3)
251,044 274,384
Total liquidity $ 624,743 $ 816,029
(1)As of September 30, 2025 and December 31, 2024, the borrowing base under the Credit Agreement is reduced by the principal amount of the Senior Notes of $600 million and $300 million, respectively. As of September 30, 2025, the borrowing base calculation included available cash and escrow receivables in excess of $25 million. Refer to Note 3, Debt 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.
On August 21, 2025, we amended the Credit Agreement to, among other things, (i) increase the aggregate commitments under the Credit Agreement to $1.5 billion, subject to a borrowing base; (ii) extend the maturity date from June 4, 2027 to August 21, 2028 for certain new and existing lenders comprising $1.2 billion of the $1.5 billion of aggregate commitments under the Credit Agreement, and; (iii) update the minimum tangible net worth covenant, which resulted in an increase to the base component of such covenant to $981 million.
On September 5, 2025, we issued $300 million in aggregate principal amount of 6.875% senior unsecured notes due September 15, 2030 (the "2030 Notes"). Interest on the 2030 Notes is payable in arrears semiannually on each March 15 and September 15, beginning March 15, 2026. The net proceeds from the 2030 Notes were used to repay a portion of the then outstanding balance under the Credit Agreement.
Certain of our subsidiaries guaranteed the Company's obligations under the Credit Agreement and the Senior Notes. As of September 30, 2025, we were in compliance with the covenants set forth for all of our debt obligations. Refer to Note 3, Debt, to the 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):
Nine Months Ended
September 30,
2025 2024
Net cash used in operating activities $ (244,180) $ (563,103)
Net cash used in investing activities (201,919) (197,537)
Net cash provided by financing activities 396,451 445,032
Net cash used in operating activities was $244 million for the nine months ended September 30, 2025, compared to $563 million of net cash used in operating activities for the nine months ended September 30, 2024. The change in net cash used in operating activities was primarily driven by a $189 million decrease of mortgage loans held for sale from the beginning of the current period and lower increases in inventories of $171 million when compared to the prior year period, mostly as a result of higher volume of closings and fewer home starts. The change in net cash used in operating activities are net of the effects of the Crescent Homes, Liberty Communities, Alliant Title and Green River Builders acquisitions.
Net cash used in investing activities was $202 million for the nine months ended September 30, 2025, compared to $198 million of net cash used in investing activities for the nine months ended September 30, 2024, mostly attributable to $10 million more in payments for acquisitions, net of cash acquired, partially offset by $3 million fewer furniture and fixture purchases, primarily for our model homes, during the nine months ended September 30, 2025 compared to similar purchases during the nine months ended September 30, 2024.
Net cash provided by financing activities was $396 million for the nine months ended September 30, 2025, compared to $445 million of net cash provided by financing activities for the nine months ended September 30, 2024. The change in net cash provided by financing activities was primarily attributable to net repayments of $181 million for our mortgage warehouse facilities during the nine months ended September 30, 2025 compared to $61 million in net proceeds during the prior year period, which represents a $242 million decrease in cash provided by financing activities. The mortgage warehouse facilities are associated with our third quarter of 2024 acquisition of Jet HomeLoans. In addition, there were higher repurchases of common stock of $26 million during the nine months ended September 30, 2025, relative to the comparative period. The decrease was partially offset by a net increase in borrowings of $206 million. Debt proceeds included the issuance of unsecured senior notes of $300 million (used to pay down a portion of the revolving credit facility) and net revolving credit facility borrowings of $366 million, compared to net borrowings of $461 million during the nine months ended September 30, 2024.
Redeemable Noncontrolling Interests
Based on the terms of the purchase agreement, at the time of an acquisition, we may issue redeemable noncontrolling interest. Redeemable noncontrolling interest is reported within mezzanine equity on the Company's 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 September 30, 2025, the redeemable noncontrolling interests totaled $30 million, of which no amount was redeemable within 12 months. Refer to Note 2, Acquisitions to our condensed consolidated financial statements for more information on redeemable noncontrolling interests related to current period business combinations.
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 accrued and unpaid dividends thereon.
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 12 to the consolidated financial statements within our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, for further details on the terms of the redeemable preferred stock.
Contractual Obligations
Except for the changes related to the August 21, 2025 amendments to our Credit Agreement and the issuance of the 2030 Senior Notes discussed in Note 3, Debt to the condensed consolidated financial statements, for the three and nine months ended September 30, 2025, 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 fiscal year ended December 31, 2024.
Critical Accounting Policies
We believe that there have been no significant changes to our critical accounting policies during the nine months ended September 30, 2025 as compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operationsincluded in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
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 September 30, 2025 and December 31, 2024, we had outstanding surety bonds of $343 million and $298 million, respectively, and outstanding letters of credit of $27 million and $21 million, respectively. We believe we will fulfill our obligations under the related arrangements and do not anticipate any material losses under these surety bonds and letters of credit.
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 opportunity and the potential growth of our 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; and
•our integration of companies that we have acquired into our operations.
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 fiscal year ended December 31, 2024, those indicated in Item 1A in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 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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