dfh-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024


o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to _________.

Commission file number 001-39916

___________________________________________________________

DREAM FINDERS HOMES, INC.

(Exact name of registrant as specified in its charter)


Delaware			85-2983036
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


14701 Philips Highway, Suite 300, Jacksonville, FL			32256
(Address of principal executive offices)			(Zip code)

(904) 644-7670

(Registrant’s Telephone Number, Including Area Code)

___________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share	DFH	New York Stock Exchange

___________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 24, 2024, there were 34,250,080 shares of the registrant’s Class A common stock, par value $0.01 per share, outstanding and 59,226,153 shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			3

ITEM 1. DREAM FINDERS HOMES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			3

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)			3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)			4

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)			6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)			7

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)			9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			40

ITEM 4. CONTROLS AND PROCEDURES			40

PART II. OTHER INFORMATION			42

ITEM 1. LEGAL PROCEEDINGS			42

ITEM 1A. RISK FACTORS			42

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			42

ITEM 5. OTHER INFORMATION			42

ITEM 6. EXHIBITS			43

SIGNATURES			44

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PART I. FINANCIAL INFORMATION

ITEM 1. DREAM FINDERS HOMES, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	204,906	$	494,145
Restricted cash	27,942		54,311
Accounts receivable	30,202		30,874
Inventories	2,060,168		1,440,249
Lot deposits	367,893		247,207
Other assets	105,578		80,759
Investments in unconsolidated entities	6,558		15,364
Mortgage loans held for sale	177,610		—
Property and equipment, net	24,898		7,043
Right-of-use assets	18,592		20,280
Goodwill	300,313		172,207
Total assets	$	3,324,660	$	2,562,439

Liabilities
Accounts payable	$	168,982	$	134,115
Accrued expenses	186,667		207,389
Customer deposits	130,199		172,574
Construction lines of credit	991,208		530,384
Senior unsecured notes, net	294,713		293,918
Mortgage warehouse facilities	170,167		—
Lease liabilities	19,515		21,114
Contingent consideration	73,497		116,795
Total liabilities	$	2,034,948	$	1,476,289
Commitments and contingencies (Note 5)
Mezzanine Equity
Redeemable preferred stock	148,500		148,500
Redeemable noncontrolling interest	21,451		—
Equity
Class A common stock, $0.01 per share, 289,000,000 authorized, 34,502,077 and 32,882,124 issued as of September 30, 2024 and December 31, 2023, respectively	345		329
Class B common stock, $0.01 per share, 61,000,000 authorized, 59,226,153 and 60,226,153 issued as of September 30, 2024 and December 31, 2023, respectively	592		602
Additional paid-in capital	276,431		275,241
Retained earnings	844,375		648,412
Treasury stock, at cost, 251,997 shares of Class A common stock as of September 30, 2024	(6,670)		—
Total Dream Finders Homes, Inc. stockholders’ equity	1,115,073		924,584
Noncontrolling interests	4,688		13,066
Total equity	1,119,761		937,650
Total liabilities, mezzanine equity and equity	$	3,324,660	$	2,562,439

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues:
Homebuilding	$	986,257	$	893,502	$	2,863,714	$	2,603,858
Financial services	20,612		2,328		27,140		6,731
Total revenues	1,006,869		895,830		2,890,854		2,610,589
Homebuilding cost of sales	797,110		709,286		2,328,587		2,109,485
Financial services expenses	12,156		1,449		16,254		3,885
Selling, general and administrative expense	101,886		78,514		278,945		210,548
Income from unconsolidated entities	(99)		(4,557)		(10,301)		(12,219)
Contingent consideration revaluation	5,948		9,026		13,793		32,608
Other income, net	(2,556)		(1,646)		(5,680)		(2,711)
Income before taxes	92,424		103,758		269,256		268,993
Income tax expense	(20,780)		(24,158)		(59,166)		(66,000)
Net and comprehensive income	71,644		79,600		210,090		202,993
Net and comprehensive income attributable to noncontrolling interests	(993)		(3,503)		(4,002)		(9,043)
Net and comprehensive income attributable to Dream Finders Homes, Inc.	$	70,651	$	76,097	$	206,088	$	193,950
Earnings per share
Basic	$	0.72	$	0.79	$	2.10	$	1.98
Diluted	$	0.70	$	0.75	$	2.06	$	1.83
Weighted-average number of shares
Basic	93,527,205		93,108,277		93,399,681		93,052,507
Diluted	100,736,148		102,052,181		100,140,134		105,819,964

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three and nine months ended September 30, 2024

(In thousands, except share amounts) (Unaudited)


	Dream Finders Homes, Inc. Stockholders' Equity
	Common Stock - Class A			Common Stock - Class B			Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Non-Controlling Interests		Total Equity		Redeemable Preferred Stock			Redeemable Noncontrolling Interest
	Shares Outstanding	Amount		Shares Outstanding	Amount												Shares	Amount
Balance as of June 30, 2024	34,430,244	$	345	59,226,153	$	592	$	271,296	$	777,099	$	(1,846)	$	4,095	$	1,051,581	150,000	$	148,500	$	21,451
Stock-based compensation	—	—		—	—		5,135		—		—		—		5,135		—	—		—
Vesting of stock-based compensation	—	—		—	—		—		—		—		—		—		—	—		—
Withholding of common stock for taxes	—	—		—	—		—		—		—		—		—		—	—		—
Repurchases of common stock	(180,164)	—		—	—		—		—		(4,824)		—		(4,824)		—	—		—
Distributions	—	—		—	—		—		—		—		(400)		(400)		—	—		—
Preferred stock dividends declared	—	—		—	—		—		(3,375)		—		—		(3,375)		—	—		—
Noncontrolling interest issued in business combination	—	—		—	—		—		—		—		—		—		—	—		—
Net and comprehensive income	—	—		—	—		—		70,651		—		993		71,644		—	—		—
Balance as of September 30, 2024	34,250,080	$	345	59,226,153	$	592	$	276,431	$	844,375	$	(6,670)	$	4,688	$	1,119,761	150,000	$	148,500	$	21,451


	Dream Finders Homes, Inc. Stockholders' Equity
	Common Stock - Class A			Common Stock - Class B			Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Non-Controlling Interests		Total Equity		Redeemable Preferred Stock			Redeemable Noncontrolling Interest
	Shares Outstanding	Amount		Shares Outstanding	Amount												Shares	Amount
Balance as of December 31, 2023	32,882,124	$	329	60,226,153	$	602	$	275,241	$	648,412	$	—	$	13,066	$	937,650	150,000	$	148,500	$	—
Stock-based compensation	—	—		—	—		13,660		—		—		—		13,660		—	—		—
Vesting of stock-based compensation	952,669	9		—	—		(9)		—		—		—		—		—	—		—
Withholding of common stock for taxes	(332,716)	(3)		—	—		(12,461)		—		—		—		(12,464)		—	—		—
Class B common stock exchanged for Class A common stock	1,000,000	10		(1,000,000)	(10)		—		—		—		—		—		—	—		—
Repurchases of common stock	(251,997)	—		—	—		—		—		(6,670)		—		(6,670)		—	—		—
Distributions	—	—		—	—		—		—		—		(12,380)		(12,380)		—	—		—
Preferred stock dividends declared	—	—		—	—		—		(10,125)		—		—		(10,125)		—	—		—
Noncontrolling interest issued in business combination	—	—		—	—		—		—		—		—		—		—	—		21,451
Net and comprehensive income	—	—		—	—		—		206,088		—		4,002		210,090		—	—		—
Balance as of September 30, 2024	34,250,080	$	345	59,226,153	$	592	$	276,431	$	844,375	$	(6,670)	$	4,688	$	1,119,761	150,000	$	148,500	$	21,451

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)

Three and nine months ended September 30, 2023

(In thousands, except share amounts) (Unaudited)


	Dream Finders Homes, Inc. Stockholders' Equity
	Common Stock - Class A			Common Stock - Class B			Additional Paid-in Capital		Retained Earnings		Total Non-Controlling Interests		Total Equity		Redeemable Preferred Stock
	Shares Outstanding	Amount		Shares Outstanding	Amount										Shares	Amount
Balance as of June 30, 2023	32,882,124	$	329	60,226,153	$	602	$	270,529	$	476,663	$	14,501	$	762,624	157,143	$	156,855
Stock-based compensation	—	—		—	—		3,812		—		—		3,812		—	—
Vesting of stock-based compensation	—	—		—	—		—		—		—		—		—	—
Withholding of common stock for taxes	—	—		—	—		—		—		—		—		—	—
Distributions	—	—		—	—		—		—		(2,629)		(2,629)		—	—
Redemption of Series B preferred units	—	—		—	—		(2,912)		343		—		(2,569)		(7,143)	(8,508)
Preferred stock dividends declared	—	—		—	—		—		(3,113)		—		(3,113)		—	—
Net and comprehensive income	—	—		—	—		—		75,944		3,503		79,447		—	153
Balance as of September 30, 2023	32,882,124	$	329	60,226,153	$	602	$	271,429	$	549,837	$	15,375	$	837,572	150,000	$	148,500


	Dream Finders Homes, Inc. Stockholders' Equity
	Common Stock - Class A			Common Stock - Class B			Additional Paid-in Capital		Retained Earnings		Total Non-Controlling Interests		Total Equity		Redeemable Preferred Stock
	Shares Outstanding	Amount		Shares Outstanding	Amount										Shares	Amount
Balance as of December 31, 2022	32,533,883	$	325	60,226,153	$	602	$	264,381	$	365,994	$	12,970	$	644,272	157,143	$	156,421
Stock-based compensation	—	—		—	—		10,286		—		—		10,286		—	—
Vesting of stock-based compensation	371,841	4		—	—		(4)		—		—		—		—	—
Withholding of common stock for taxes	(23,600)	—		—	—		(322)		—		—		(322)		—	—
Distributions	—	—		—	—		—		—		(6,638)		(6,638)		—	—
Redemption of Series B preferred units	—	—		—	—		(2,912)		343		—		(2,569)		(7,143)	(8,508)
Preferred stock dividends declared	—	—		—	—		—		(9,863)		—		(9,863)		—	—
Net and comprehensive income	—	—		—	—		—		193,363		9,043		202,406		—	587
Balance as of September 30, 2023	32,882,124	$	329	60,226,153	$	602	$	271,429	$	549,837	$	15,375	$	837,572	150,000	$	148,500

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net and comprehensive income	$	210,090	$	202,993
Adjustments to reconcile net and comprehensive income to net cash (used in)/provided by operating activities
Depreciation and amortization	6,948		7,983
Gain on sale of property and equipment	(120)		(44)
Amortization of lease right-of-use assets	5,270		5,438
Stock-based compensation	13,660		10,286
Deferred tax expense (benefit)	10,643		(5,248)
Return on investments, net of income from unconsolidated entities	(3,396)		11
Contingent consideration revaluation	13,793		32,608
Payments of contingent consideration	(29,259)		(12,331)
Changes in operating assets and liabilities, net of effects of acquisition
Accounts receivable	1,291		10,175
Inventories	(494,240)		(95,623)
Lot deposits	(119,077)		35,978
Other assets	(8,094)		8,587
Mortgage loans held for sale	(62,880)		—
Accounts payable and accrued expenses	(51,352)		(58,683)
Customer deposits	(51,179)		17,890
Lease liabilities	(5,201)		(5,258)
Net cash (used in)/provided by operating activities	(563,103)		154,762
Cash flows from investing activities
Purchase of property and equipment	(21,444)		(3,906)
Proceeds from disposal of property and equipment	88		201
Investments in unconsolidated entities	(2,351)		(300)
Return of investments from unconsolidated entities	573		—
Payments for acquisitions, net of cash acquired	(174,403)		—
Net cash used in investing activities	(197,537)		(4,005)
Cash flows from financing activities
Proceeds from senior unsecured notes	—		300,000
Proceeds from construction lines of credit	666,176		5,410,000
Repayments on construction lines of credit	(205,352)		(5,820,736)
Proceeds from mortgage warehouse facilities	544,784		—
Repayments on mortgage warehouse facilities	(483,761)		—
Payments of debt issuance costs	(7,344)		(11,358)
Redemption of Series B preferred units	—		(11,077)
Payments of preferred stock dividends	(10,125)		(9,863)
Payments for common stock withheld for taxes	(12,464)		(322)
Repurchases of common stock	(6,670)		—
Distributions to noncontrolling interests	(12,380)		(6,638)
Payments of contingent consideration	(27,832)		(32,592)
Net cash provided by/(used in) financing activities	445,032		(182,586)

Net decrease in cash, cash equivalents and restricted cash	(315,608)		(31,829)
Cash, cash equivalents and restricted cash at beginning of period	548,456		395,130
Cash, cash equivalents and restricted cash at end of period	$	232,848	$	363,301

The accompanying notes are an integral part of these condensed consolidated financial statements

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DREAM FINDERS HOMES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	204,906	$	330,129
Restricted cash	27,942		33,172
Total cash, cash equivalents and restricted cash	$	232,848	$	363,301

Supplemental disclosures of cash payments:
Cash paid for income taxes, net of refunds	$	113,419	$	79,299

Supplemental disclosures of noncash activities:
Noncash investing activities
Noncontrolling interest issued in business combination	$	21,451	$	—
Accrued cash consideration for business combination	26,126		—
Total noncash investing activities	$	47,577	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DREAM FINDERS HOMES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Significant Accounting Policies

Nature of Business

Dream Finders Homes, Inc. (together with its subsidiaries, “Dream Finders”, the “Company” or “DFH, Inc.”) designs, builds and sells homes in markets throughout the United States. The Company also provides title insurance and mortgage banking solutions through its wholly owned subsidiaries, Golden Dog Title & Trust (“DF Title”) and Jet HomeLoans, LP (“Jet HomeLoans”). The Company was incorporated in the State of Delaware on September 11, 2020.

Basis of Presentation and Consolidation

The accompanying unaudited, condensed consolidated financial statements include the accounts of DFH, Inc., its wholly owned subsidiaries and any investments that may qualify for consolidation treatment. The accompanying statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for a complete set of financial statements. As such, the accompanying statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The accompanying statements include all adjustments that are of a normal, recurring nature and necessary for the fair presentation of our results for the interim periods presented, which are not necessarily indicative of results to be expected for the full year due to seasonal variations in operating results and other factors. All intercompany accounts and transactions have been eliminated in consolidation. There are no other components of comprehensive income not already reflected in net and comprehensive income on our Condensed Consolidated Statements of Comprehensive Income.

On July 1, 2024, the Company acquired the remaining 40% equity interest in the previously unconsolidated mortgage joint venture, Jet HomeLoans, which is now consolidated as of that date on the Company’s condensed consolidated financial statements. Prior to the acquisition, Jet HomeLoans was accounted for as an equity method investment and, for segment reporting purposes, was presented in the Company’s Financial Services segment on a consolidated basis and reconciled to amounts reported within the Company’s condensed consolidated financial statements. Following the acquisition, Jet HomeLoans continues to be included in the Company’s Financial Services segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Mortgage Loans Held for Sale and Revenue Recognition

Mortgage loans held for sale are carried at fair value under the fair value option, with changes in fair value recorded in financial services revenues on the Condensed Consolidated Statement of Comprehensive Income. Management believes that carrying the mortgage loans held for sale at fair value and the derivative instruments used to economically hedge them enhances financial reporting by reducing volatility in reported earnings. The fair value of mortgage loans held for sale is determined by forward sale commitments with investors simultaneously when the loan is locked with the borrower. Mortgage loans held for sale are generally sold within 30-60 days of origination. Net gains and losses from the sale of mortgage loans held for sale are recognized based upon the difference between the sales proceeds and carrying value of the related loans and are recorded in financial services revenues on the Condensed Consolidated Statement of Comprehensive Income.

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The Company enters into interest rate lock commitments (“IRLCs”) when originating mortgage loans with customers who have applied for a loan and meet certain credit and underwriting criteria. The IRLCs, which may either be derivative assets or derivative liabilities based on changes in market and interest rate risk, are carried at fair value within other assets on the Company’s Condensed Consolidated Balance Sheet as of September 30, 2024. Changes in fair value of these instruments, as well as any gains or losses upon settlement, are reflected in financial services revenues on the Condensed Consolidated Statement of Comprehensive Income.

Reclassifications

Certain reclassifications have been made on the condensed consolidated financial statements for 2023 to conform to the classifications used in 2024.

Recent Accounting Pronouncements

In March 2024, the Securities and Exchange Commission (the “SEC”) issued its final rules aimed at standardizing climate-related disclosures. These rules require the disclosure of material climate-related risks, strategies to mitigate or adapt to these risks, governance practices overseeing such risks and the disclosure of substantial greenhouse gas emissions stemming from operations owned and controlled and/or indirectly influenced through purchased energy consumed in operations. Furthermore, the final rules require disclosures within financial statement notes concerning the impacts of severe weather events and other natural circumstances, contingent upon specified thresholds of materiality. Subsequent to the issuance of the final rules, on March 15, 2024, a federal appellate court imposed a temporary stay pending judicial review of these regulations, followed by a voluntary stay by the SEC on April 4, 2024, pending the conclusion of this review process. Assuming adoption, the initial annual disclosure requirements may require compliance as early as the year ending December 31, 2025 depending on filing status. The Company is currently evaluating the impact of these final rules on the condensed consolidated financial statements.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) Number 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires more disaggregated income tax disclosures, including additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 will become effective for the fiscal year ending December 31, 2025. Early adoption is permitted, and guidance should be applied prospectively, with an option to apply guidance retrospectively. The Company is currently evaluating the impact of the adoption of ASU 2023-09 and does not expect it to have a material effect on the condensed consolidated financial statements.

In November 2023, the FASB issued ASU Number 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker(s) that are included within each reported measure of segment profit or loss. The guidance also expands disclosure requirements for interim periods, as well as requires disclosure of other segment items, including the title and position of the entity’s chief operations decision maker(s). ASU 2023-07 will become effective for the fiscal year ending December 31, 2024, and for interim periods starting in our first quarter of 2025. Early adoption is permitted, and guidance is required to be applied retrospectively. The Company evaluated the impact of the adoption of ASU 2023-07 on the condensed consolidated financial statements and does not expect it to have a material effect on the condensed consolidated financial statements, but will result in additional disclosures in its Annual Report on Form 10-K for the year ending December 31, 2024.

2. Acquisitions

Crescent Homes

On February 1, 2024, the Company acquired certain assets and assumed certain liabilities, comprising the majority of the homebuilding business of Crescent Ventures, LLC (“Crescent Homes” or “Crescent”) through wholly-owned DFH subsidiaries, Dream Finders Holdings, LLC, and DFH Crescent, LLC (“DFH Crescent”). This acquisition allowed the Company to expand into the markets of Charleston and Greenville, South Carolina, and Nashville, Tennessee. The cash consideration for the Crescent acquisition was $210.4 million. Payments through September 30, 2024 were made with cash on hand and proceeds from borrowings under the Company’s revolving credit facility. Additionally, as part of the consideration, the former owner of Crescent Homes received a noncontrolling ownership in DFH Crescent and contractual rights to a portion of its future earnings upon exceeding a minimum earnings threshold.

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The purchase agreement includes certain put and call options available to the former owner and the Company upon the occurrence of certain events that are not solely in the control of the Company. As a result, the noncontrolling interest is redeemable and reported within mezzanine equity on the Company’s Condensed Consolidated Balance Sheet at the greater of the initial carrying amount adjusted for the noncontrolling interest’s share of net income (loss) or its redemption value. After achieving the minimum earnings threshold, the amount of net and comprehensive income that is attributable to the redeemable noncontrolling interest will be presented within net and comprehensive income attributable to noncontrolling interests on the Condensed Consolidated Statements of Comprehensive Income.

The acquisition was accounted for as a business combination under Accounting Standards Codification (“ASC”) Topic 805. In determining the purchase price allocation, we evaluated Crescent Homes’ assets acquired and liabilities assumed based on their estimated fair values as of February 1, 2024. Goodwill was recorded as the residual amount by which the purchase price plus the fair value of the noncontrolling interest exceeded the provisional fair value of the net assets acquired and is expected to be fully deductible for tax purposes. Goodwill consists primarily of expected synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets. The fair value of the redeemable noncontrolling interest, inclusive of the put and call options described above, was determined using an income-based approach, coupled with Monte Carlo simulations, which were impacted by various inputs including projected future cash flows, discount rates and market volatility.

The consideration for the total purchase price as of September 30, 2024 was follows (in thousands):


Cash consideration	$	210,449
Fair value of the redeemable noncontrolling interest as of the acquisition date	21,451
Total consideration	$	231,900

The purchase price allocation as of September 30, 2024 was as follows (in thousands):


	As Originally Reported on March 31, 2024		Measurement Period Adjustments(1)		Acquired Value
Inventories	$	120,682	$	1,371	$	122,053
Other assets	1,790		—		1,790
Property and equipment	418		37		455
Accounts payable	(9,311)		(232)		(9,543)
Customer deposits	(8,804)		—		(8,804)
Accrued expenses	(2,036)		(121)		(2,157)
Net assets acquired	$	102,739	$	1,055	$	103,794
Goodwill	132,861		(4,755)		128,106
Total purchase price	$	235,600	$	(3,700)	$	231,900

(1)The above measurement period adjustments were recorded during the three months ended June 30, 2024. These adjustments were related to and reflect the most current provisional valuation of the post-closing balances of the acquired net assets. The Company expects to finalize the purchase price allocation no later than one year from the acquisition date.

Jet HomeLoans

On July 1, 2024, the Company acquired the remaining 40% equity interest in the previously unconsolidated mortgage joint venture Jet HomeLoans, which is consolidated as of that date on the Company’s condensed consolidated financial statements. Cash consideration was $9.3 million, subject to customary post-closing adjustments. The acquisition was accounted for as an asset acquisition under ASC Topic 805.

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Unaudited Pro Forma Information

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes only and have been presented as if the Crescent and Jet HomeLoans acquisitions had occurred on January 1, 2023 (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
Unaudited Pro Forma(1)	2023		2024		2023
Total revenues	$	953,179	$	2,941,003	$	2,836,912
Net and comprehensive income attributable to Dream Finders Homes, Inc.	$	87,879	$	219,881	$	231,655

(1)This unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.

For the three and nine months ended September 30, 2024, Crescent Homes contributed $123.9 million and $251.6 million in homebuilding revenues, respectively, and $21.3 million and $28.0 million in net and comprehensive income, respectively, all of which is attributable to the Company. Crescent Homes operations are included in the Mid-Atlantic segment from the date of acquisition. Refer to Note 8, Segment Reporting for information.

For the three months ended September 30, 2024, Jet HomeLoans contributed $16.1 million in financial services revenues and $6.6 million in net and comprehensive income. Following the acquisition on July 1, 2024, Jet HomeLoans’ operations continue to be included within the Financial Services segment. Refer to Note 8, Segment Reporting for information.

Contingent Consideration from Previous Business Combinations

In connection with applicable business combinations, the Company records the fair value of contingent consideration as a liability as of the acquisition date as prescribed by the underlying agreement. The initial measurement of contingent consideration is based on projected cash flows such as revenues, homebuilding gross margin, overhead expenses and pre-tax income of the acquired business and is discounted to present value using the discounted cash flow method. The remaining estimated contingent consideration payments are subsequently remeasured to fair value as of each reporting date based on the estimated future earnings of the acquired entities and the re-assessment of risk-adjusted discount rates that reflect current market conditions. Maximum potential exposure for contingent consideration is not estimable based on the contractual terms of the contingent consideration agreements, which allow for a percentage payout based on a potentially unlimited range of pre-tax income amounts.

As of September 30, 2024 and December 31, 2023, the Company remeasured the fair value of contingent consideration related to the 2020 acquisition of H&H Constructors of Fayetteville, LLC and adjusted the liability to $5.6 million and $11.7 million, respectively, based on actual results achieved, revised pre-tax income forecasts and revised discount rates as of the balance sheet date and from accretion of the liability, as applicable. The Company recorded contingent consideration adjustments resulting in $0.1 million of income and $0.9 million of expense for the three and nine months ended September 30, 2024, respectively, and $0.6 million of expense and $3.8 million of expense for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, the earnout period concluded and final payment for the contingent consideration agreement is due in the fourth quarter of 2024.

As of September 30, 2024 and December 31, 2023, the Company remeasured the fair value of contingent consideration related to the 2021 acquisition of McGuyer Homebuilders, Inc. (“MHI”) and adjusted the liability to $67.9 million and $105.1 million, respectively, based on actual results achieved, revised pre-tax income forecasts and revised discount rates as of the balance sheet date and from accretion of the liability. The Company recorded contingent consideration adjustments resulting in $6.0 million and $12.9 million of expense for the three and nine months ended September 30, 2024, respectively, and $8.4 million and $28.4 million of expense for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, there were 12 months remaining under the contingent consideration agreement.

See Note 9, Fair Value Disclosures for the fair value measurement of contingent consideration.

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3. Debt

Senior Unsecured Notes

On August 22, 2023, the Company issued $300.0 million in aggregate principal amount of 8.25% senior unsecured notes due August 15, 2028 (the “2028 Notes”), which were issued pursuant to an indenture (the “Indenture”). Interest on the 2028 Notes is payable in arrears semiannually on each February 15 and August 15. The 2028 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by certain of the Company’s subsidiaries.

The Company received net proceeds from the issuance and sale of the 2028 Notes of $293.5 million after unamortized debt issuance costs of $6.5 million, which reduced the carrying value of the 2028 Notes reported on the Condensed Consolidated Balance Sheets within senior notes unsecured, net. The net proceeds from the 2028 Notes were used to repay a portion of the then outstanding balance under the Company’s revolving credit facility. See Note 9, Fair Value Disclosures for more information.

The 2028 Notes are redeemable by the Company prior to August 15, 2025 through the payment of the principal amount due, which can be accomplished through the issuance of certain restricted equity offerings for specified portions of principal notes outstanding, plus specified rates and accrued and unpaid interest, and a make-whole premium in the event 100.0% of the principal amount is redeemed. On or after August 15, 2025, the 2028 Notes are redeemable at specified rates equal to 104.1% of the principal balance, plus accrued and unpaid interest, and periodically decrease to 100.0% on August 15, 2027. Upon the occurrence of a Change of Control (as defined in the Indenture), the holders of the 2028 Notes will have the right to require the Company to repurchase all or a portion of the 2028 Notes at a price equal to 101.0% of the aggregate principal amount of the 2028 Notes, plus any accrued and unpaid interest. As of September 30, 2024 and December 31, 2023, unamortized debt issuance costs were $5.3 million and $6.1 million, respectively.

The Indenture includes customary events of default. Subject to specified exceptions, the Indenture contains certain restrictive covenants that, among other things, limit our ability to incur or guarantee certain indebtedness, issue certain equity interests or engage in certain capital stock or affiliate transactions. In addition, the Indenture contains certain limitations related to mergers, consolidations, and transfers of assets.

Credit Agreement

On June 6, 2024, the Company entered into an amendment to its existing revolving credit facility (as amended, the “Credit Agreement”). The amendment, among other things, (i) provides for an increase in the aggregate commitments under the revolving credit facility to $1.4 billion, subject to a borrowing base; (ii) extends the maturity date from July 17, 2026 to June 4, 2027 for certain new and existing lenders comprising $1.3 billion of the $1.4 billion of aggregate commitments under the Credit Agreement; and (iii) provides the Company with the ability to incur certain additional unsecured debt. Certain of our subsidiaries guaranteed the Company’s obligations under the Credit Agreement. The amendments also updated the Company’s minimum tangible net worth covenant, which resulted in an increase to the base component of such covenant from $607.0 million to $739.0 million. The Credit Agreement includes an accordion feature that allows the aggregate commitments to increase to up to $2.0 billion, subject to a borrowing base.

Under the Credit Agreement, the Company has the ability to draw “Term SOFR Rate Loans” or “Daily Simple SOFR Rate Loans”. Term SOFR Rate Loans bear interest based on Term SOFR rates for one or three-month interest periods and include a SOFR adjustment of 10 basis points for each interest period. Daily Simple SOFR Rate Loans bear interest based on Daily Simple SOFR rates and include a SOFR adjustment of 10 basis points. Interest under Term SOFR Rate Loans and Daily Simple SOFR Rate Loans also include an “applicable rate margin” determined based on the Company’s net debt to capitalization ratio, equivalent to credit spreads of 2.00% to 2.95%.

As of September 30, 2024 and December 31, 2023, the outstanding balance under the Credit Agreement was $990.0 million and $530.0 million, respectively. Under the Credit Agreement, the funds available are unsecured and availability under the borrowing base is calculated based on specific advance rates for finished lots, construction in process homes, and finished homes inventory on the Condensed Consolidated Balance Sheets, and reduced for any outstanding unsecured indebtedness permitted under the Credit Agreement, including the 2028 Notes. The Company had capitalized debt issuance costs related to construction lines of credit, net of amortization, of $11.3 million and $7.0 million as of September 30, 2024 and December 31, 2023, respectively, which were included in other assets on the Condensed Consolidated Balance Sheets.

Debt issuance costs related to the 2028 Notes and the Credit Agreement that are recorded to capitalized interest are expensed in cost of sales as the homes close.

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Mortgage Warehouse Facilities

As a result of the Jet HomeLoans acquisition discussed in Note 2, Acquisitions, the Company has the following mortgage warehouse lines of credit and repurchase agreements with various financial institutions as of September 30, 2024. Amounts outstanding under the mortgage warehouse facilities are not guaranteed by us or any of our other subsidiaries and the agreements contain various affirmative and negative covenants applicable solely to Jet HomeLoans that are customary for arrangements of this type. All of the outstanding balances for the borrowings as of September 30, 2024 below were collateralized by the mortgage loans held for sale reported on the Condensed Consolidated Balance Sheets (dollars presented in thousands):


Facility	Outstanding Balance		Facility Amount		Interest Rate		Expiration Date
Warehouse A	$	88,282	$	90,000	6.35	%	12/31/2024
Warehouse B	50,453		75,000		6.85	%	12/20/2024
Warehouse C	31,432		100,000		7.23	%	2/15/2025
Total	$	170,167	$	265,000

The Company was in compliance with all debt covenants as of September 30, 2024 and December 31, 2023. The Company expects to remain in compliance with all debt covenants over the next 12 months.

4. Inventories

Inventories consist of construction in process (“CIP”) and finished homes, including capitalized interest costs incurred under certain of our debt obligations discussed in Note 3, owned land and lots and pre-acquisition land costs. CIP represents homes under construction or completed, including sold, speculative (“spec”) and model homes. CIP includes the cost of finished lots and all direct costs incurred to build homes. The cost of homes is expensed on a specific identification basis when the home is delivered to the customer. Finished lots are generally purchased just-in-time for construction, whether for spec or sold homes, and are included within owned land and lots until construction begins when the finished lot cost is transferred to CIP. Costs related to finished lots or land under development held by third-party land bank partners incurred prior to the Company’s purchase of the land, including lot option fees, property taxes and due diligence costs are capitalized into pre-acquisition land costs.

Inventories consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):


	As of September 30, 2024		As of December 31, 2023
Construction in process and finished homes	$	1,849,736	$	1,251,767
Owned land and lots	130,674		119,675
Pre-acquisition land costs	79,758		68,807
Inventories	$	2,060,168	$	1,440,249

Capitalized interest activity related to our construction lines of credit and senior unsecured notes, net is summarized in the table below for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Capitalized interest as of beginning of the period	$	36,598	$	27,921	$	27,311	$	27,682
Interest incurred	28,520		19,425		75,696		57,809
Interest charged to homebuilding cost of sales	(20,719)		(19,337)		(58,608)		(57,482)
Capitalized interest as of end of the period	$	44,399	$	28,009	$	44,399	$	28,009

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The Company reviews the performance and outlook of its inventories for indicators of potential impairment on a quarterly basis at the community level. In addition to considering market and economic conditions, the Company assesses current sales absorption levels and recent profitability. The Company looks for instances where sales prices for a home in backlog or potential sales prices for a future sold home would be at a level at which the carrying value of the home may not be recoverable. There were no inventory impairment charges recorded for the three and nine months ended September 30, 2024, and $1.4 million and $2.0 million in inventory impairment charges recorded for the three and nine months ended September 30, 2023, respectively. The Company reviews lot deposits for impairment on a quarterly basis and will record an impairment charge if it believes it will forfeit its deposit on an individual or portfolio of lots. The Company recorded $1.0 million and $1.2 million of lot deposit impairments for the three and nine months ended September 30, 2024, respectively, and $1.5 million and $3.1 million of lot deposit impairments for the three and nine months ended September 30, 2023, respectively.

5. Commitments and Contingencies

Legal Proceedings

We are party to legal matters from time to time that typically are derived from the Company’s general business practices, primarily related to the construction of homes. The Company believes that if a claim has merit, parties other than the Company would be, at least in part, liable for the claim, and the eventual outcome of the claim would not have a material adverse effect upon our condensed consolidated financial statements. When we believe that a loss is probable and estimable, we record the estimated contingency loss on our Condensed Consolidated Statements of Comprehensive Income.

We do not believe that any future outcomes of any claims or lawsuits currently outstanding will have a material adverse effect upon our condensed consolidated financial statements.

6. Variable Interest Entities

The Company holds investments in certain limited partnerships and similar entities that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located, which are considered variable interests. The Company’s investments create a variable interest in a variable interest entity (“VIE”), depending on the contractual terms of the arrangement. Additionally, in the ordinary course of business, the Company enters into option contracts with third-party land bank entities and certain unconsolidated entities for the ability to acquire rights to finished lots for the construction of homes.

The carrying amounts of the Company’s investments in unconsolidated VIEs, other than the lot option contracts discussed below were $6.6 million and $15.4 million as of September 30, 2024 and December 31, 2023, respectively. The Company’s maximum exposure to loss is limited to its investment in the entities because the Company is not obligated to provide them with any additional capital and does not guarantee any of their debt or other liabilities. Jet HomeLoans, previously an investment in unconsolidated VIEs accounted for under the equity method, is consolidated on the Company’s condensed consolidated financial statements beginning July 1, 2024. Refer to Note 1, Nature of Business and Significant Accounting Policies for more information.

Under the aforementioned lot option contracts, the Company typically makes a specified earnest money deposit in consideration for the right to purchase finished lots in the future, usually at a predetermined price. The Company concluded that it is not the primary beneficiary of the land bank entities with which it enters into lot option contracts and therefore the Company does not consolidate any of these entities. The Company’s risk of loss related to finished lot option and land bank option deposits and related fees was $447.7 million and $328.0 million as of September 30, 2024 and December 31, 2023, respectively.

7. Income Taxes

The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 was estimated to be 22.0% and 24.5%, respectively. The effective tax rate decrease of 2.6% was primarily attributable to a higher number of our home closings expected to qualify for the energy efficiency tax credit under IRS §45L in the current year compared to the prior year, as well as increased tax benefits from stock-based compensation due to an overall higher Company stock price on the vesting date when compared to the grant date for certain awards.

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8. Segment Reporting

The Company primarily operates in the homebuilding business and is organized and reported primarily by region. Our four reportable segments include the Southeast, Mid-Atlantic, Midwest and Financial Services. Our four reportable segments are comprised of the following:

•Southeast (Jacksonville, Orlando and Tampa, Florida and operations in the southeast coast of Florida; Savannah, Georgia; Hilton Head and Bluffton, South Carolina; Active Adult, and Custom Homes operations in northeast Florida)

•Mid-Atlantic (DC Metro; Nashville, Tennessee; Charlotte, Fayetteville, Raleigh and Wilmington, North Carolina; Charleston, Myrtle Beach, and Greenville, South Carolina)

•Midwest (Austin, Dallas, Houston and San Antonio, Texas; Denver, Colorado, and Phoenix, Arizona)

•Financial Services (primarily Jet HomeLoans and Golden Dog Title and Trust)

The corporate component, which is not considered an operating segment, is reported separately as “Corporate”.

The following tables summarize revenues and income before taxes by segment for the three and nine months ended September 30, 2024 and 2023, as well as total assets and goodwill by segment as of September 30, 2024 and December 31, 2023 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenues:	2024		2023		2024		2023
Southeast	$	293,300	$	370,761	$	914,319	$	1,051,389
Mid-Atlantic	283,804		163,834		758,066		446,745
Midwest	409,153		358,907		1,191,329		1,105,725
Financial Services	20,612		12,120		54,484		33,584
Total segment revenues	1,006,869		905,622		2,918,198		2,637,443
Reconciling items from equity method investments(1)	—		(9,792)		(27,344)		(26,854)
Consolidated revenues	$	1,006,869	$	895,830	$	2,890,854	$	2,610,589


	Three Months Ended September 30,				Nine Months Ended September 30,
Income before taxes:	2024		2023		2024		2023
Southeast	$	25,744	$	46,646	$	89,852	$	119,807
Mid-Atlantic	32,668		16,300		75,602		31,466
Midwest	33,879		44,284		103,068		115,802
Financial Services	8,557		7,368		25,756		20,848
Corporate	(8,424)		(8,343)		(19,804)		(11,943)
Total segment income before taxes	92,424		106,255		274,474		275,980
Reconciling items from equity method investments(1)	—		(2,497)		(5,218)		(6,987)
Consolidated income before taxes	$	92,424	$	103,758	$	269,256	$	268,993

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	Assets:				Goodwill:
	As of September 30, 2024		As of December 31, 2023		As of September 30, 2024		As of December 31, 2023
Southeast	$	915,037	$	781,162	$	14,003	$	14,003
Mid-Atlantic(2)	806,307		404,657		144,959		16,853
Midwest	1,151,556		915,199		141,071		141,071
Financial Services	208,348		207,385		280		280
Corporate(3)	243,412		407,932		—		—
Total segments	3,324,660		2,716,335		300,313		172,207
Reconciling items from equity method investments(1)	—		(153,896)		—		—
Consolidated	$	3,324,660	$	2,562,439	$	300,313	$	172,207

(1)As a result of the July 1, 2024 acquisition, represents reconciling amounts related to Jet HomeLoans prior to its consolidation on the Company’s condensed consolidated financial statements. Refer to Note 2, Acquisitions for more information.

(2)As of September 30, 2024, includes $128.1 million in goodwill related to the Crescent Homes acquisition.

(3)Corporate assets are comprised of, but are not limited to, operating and restricted cash, deferred tax assets, and prepaids and other assets not directly attributable to a reportable segment. In September of 2024, we purchased an aircraft for corporate use with cash on hand at a purchase price of $13.5 million.

9. Fair Value Disclosures

Fair value represents the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values are determined using a fair value hierarchy based on the inputs used to measure fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 inputs are inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable and significant to the fair value. The Company applies the fair value hierarchy to certain assets and liabilities remeasured or disclosed at fair value on a recurring basis, including mortgage loans held for sale, derivative assets, senior unsecured notes, net and contingent consideration.

The fair value of mortgage loans held for sale are based on either investor commitments or quoted secondary-market prices. Derivative assets are associated with IRLCs, whose fair values are derived from forward sale commitment prices, as well as certain unobservable inputs such as estimated costs to originate the loans and the probability that the mortgage loan will fund within the terms of the IRLC (the “pull-through rate”). Mortgage loans in process for IRLCs totaled approximately $107.7 million as of September 30, 2024 and carried a weighted average interest rate of approximately 5.4%. The estimated fair value of the 2028 Notes is based on recent trades or quoted market prices for debt of similar terms, including maturity, to achieve comparable yields. Refer to Note 2, Acquisitions for discussion of contingent consideration remeasurement.

The fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, customer deposits and mortgage warehouse facilities, approximate their carrying amounts due to the short-term nature of these instruments. The fair value of the construction lines of credit approximates their carrying amounts since they are subject to short-term floating interest rates that reflect current market rates. Fair value measurements may also be utilized on a nonrecurring basis, such as for the accounting for acquisitions or the impairment of long-lived assets and inventory.

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The following table outlines the carrying value and fair value of certain of the Company’s financial instruments (in thousands) as of September 30, 2024 and December 31, 2023:


		As of September 30, 2024				As of December 31, 2023
	Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans held for sale	Level 2	$	177,610	$	177,610	$	—	$	—
IRLCs	Level 3	1,955		1,955		—		—
Senior unsecured notes, net	Level 2	294,713		317,469		293,918		318,240
Contingent consideration	Level 3	73,497		73,497		116,795		116,795

The following table presents a summary of the change in fair value measurement of contingent consideration (in thousands):


Beginning balance, December 31, 2023	$	116,795
Fair value adjustments related to prior year acquisitions	13,793
Contingent consideration payments	(57,091)
Ending balance, September 30, 2024	$	73,497

10. Related Party Transactions

The Company generally enters into related party transactions to secure finished lots for the construction of new homes.

DF Capital Management, LLC Funds

DF Capital Management, LLC (“DF Capital”) organizes real estate investment funds to acquire land and develop and sell finished lots. DF Capital is the investment manager of the funds. The Company owns a 49.0% membership interest in DF Capital and periodically enters into land bank arrangements with DF Capital. DF Capital and its funds are controlled by unaffiliated parties and the Company is not the primary beneficiary of DF Capital and its funds. The Company holds limited partnership interests in certain of the funds as well as indirect ownership through membership interests in the general partners of the respective funds. From time to time, executive officers and directors may invest as limited partners in the funds as well. Amounts due to and from the funds are based on the timing and amount of capital calls as well as distributions of capital and earnings, all of which, as applicable, are made on a periodic basis over several years consistent with the typical lifecycle of any land bank financing project.

DF Residential II, LP (DF Capital’s “Fund II”) has an exclusive right of first offer on any land bank financing projects that meet its investment criteria and are undertaken by the Company during Fund II’s investment period. The Company, our executive officers and certain directors have investments in Fund II. As of September 30, 2024 and December 31, 2023, the Company had $39.6 million and $48.5 million, respectively, in outstanding lot deposits related to Fund II, controlling 4,726 lots and 4,028 lots, respectively.

On July 30, 2024, DF Capital initiated its first close on DF Residential III, LP (“Fund III”), which included $54.0 million in investments from the Company’s executive officers and a director. The Company’s investment in Fund III will be determined as part of the final closing. As of September 30, 2024, the Company had $17.2 million in outstanding lot deposits related to Fund III, controlling 144 lots.

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11. Equity

Redeemable Noncontrolling Interest

On February 1, 2024, as part of the consideration for the Crescent Homes acquisition, the former owner of Crescent Homes received all of the series B units of DFH Crescent, representing a redeemable noncontrolling interest with contractual rights to a portion of DFH Crescent’s future earnings upon exceeding a minimum earnings threshold (see Note 2, Acquisitions). With the exception of certain acceleration clauses, the holder of the DFH Crescent series B units and the Company are entitled to a series of put and call options beginning on February 1, 2032. The DFH Crescent series B units have no liquidation preference, are not entitled to any dividends and have no voting rights.

Series B Preferred Units

On August 31, 2023, the Company redeemed the 7,143 previously outstanding Series B preferred units. The Company made an aggregate cash payment to the Series B holders of $11.1 million, which included $7.1 million in principal plus cumulative undistributed earnings, less a negotiated discount on that date. Following the redemption, no Series B preferred units remain outstanding.

Share Buyback Program

In June 2023, the Company’s Board of Directors (the “Board”) approved a share buyback program under which the Company can repurchase up to $25.0 million of its Class A common stock through June 30, 2026 in open market purchases, privately negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

The actual timing, number and value of shares repurchased under the share buyback program will depend on a number of factors, including constraints specified in any Rule 10b5-1 trading plans, price, general business and market conditions, and alternative investment opportunities. The share buyback program does not obligate the Company to acquire any specific number of shares in any period and may be expanded, extended, modified or discontinued at any time.

The Company accounts for share repurchases of Class A common stock as treasury stock. Treasury stock is recorded as a reduction of stockholders’ equity based on the amount paid to repurchase shares, including associated costs. Treasury stock is not considered outstanding.

During the three and nine months ended September 30, 2024, under the share buyback program, the Company repurchased 180,164 and 251,997 shares of Class A common stock for an aggregate purchase price of $4.8 million and $6.7 million, respectively. As of September 30, 2024, approximately $18.3 million in shares remain available for purchase under the share buyback program. There were no shares repurchases during the year ended December 31, 2023.

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12. Earnings Per Share

The following weighted-average shares and share equivalents were used to calculate basic and diluted earnings per share (“EPS”) for the three and nine months ended September 30, 2024 and 2023 (in thousands, except share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator
Net and comprehensive income attributable to Dream Finders Homes, Inc.	$	70,651	$	76,097	$	206,088	$	193,950
Less: Preferred dividends	3,375		2,923		10,125		10,107
Net and comprehensive income available to common stockholders(1)	$	67,276	$	73,174	$	195,963	$	183,843
Denominator
Weighted-average number of common shares outstanding - basic	93,527,205		93,108,277		93,399,681		93,052,507
Add: Common stock equivalent shares(2)	7,208,943		8,943,904		6,740,453		12,767,457
Weighted-average number of shares outstanding - diluted	100,736,148		102,052,181		100,140,134		105,819,964

(1)For the diluted earnings per share calculation, $3.4 million and $10.1 million in preferred dividends associated with redeemable preferred stock that are assumed to be converted have been added back to the numerator for the three and nine months ended September 30, 2024, respectively, and $3.1 million and $9.9 million for the three and nine months ended September 30, 2023, respectively.

(2)Since the conversion price of the Company’s redeemable preferred stock is based on an average of the closing price of Class A common stock for the 90 trading days immediately preceding the end of the current period, changes in the price of the Class A common stock may significantly affect the number of additional assumed common shares outstanding under the if-converted method for diluted EPS, while the number of redeemable preferred stock shares outstanding is unchanged. Stock-based compensation awards are excluded from the calculation of diluted EPS in the event they are antidilutive. There were 0.8 million and 0.6 million common stock equivalent shares excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023, there were no common stock equivalent shares and 0.8 million of common stock equivalent shares excluded from the diluted earnings per share calculation, respectively.

13. Subsequent Events

On October 18, 2024, the Company entered into a definitive agreement to acquire Colorado-based title insurance underwriter, Alliant National Title Insurance Company, Inc. and a related affiliate. The closing of this transaction is subject to closing conditions, including insurance regulatory approvals.

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ITEM 2. 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, “Dream Finders,” ”DFH,” the “Company,” “we,” “our” and “us” refer collectively to Dream Finders Homes, Inc. and its subsidiaries.

Business Overview and Outlook

We design, build and sell homes in high-growth markets using our asset-light lot acquisition strategy. Our primary focus is on constructing and selling single-family homes across entry-level, first-time move-up, second-time move-up, and active adult markets. To fully serve our homebuyers and capture ancillary business opportunities, we have financial services operations that offer title insurance and mortgage banking solutions.

Although ticking down since earlier this year, mortgage rates and inflationary pressures remain elevated. In September, the Federal Reserve made its first cut to the Federal Funds Rate in 2024. Despite the easing of certain economic conditions, variability in demand for homes and affordability challenges persist. Our asset-light strategy positions us to remain agile in any market conditions, allowing us to strategically renegotiate lot option takedowns to align with our sales pace.

We continued to see the positive effects of our commitment to future growth, whether through organic efforts, acquisitions, or a combination of both, all while keeping an asset-light approach. This strategy is reflected in our homebuilding revenues and closings, which grew by 10% and 8%, respectively, when comparing the first nine months of 2024 and 2023. Notably, our acquisition of Crescent Homes played a significant role in these improvements. We believe this success, coupled with our increased investments in our lot pipeline, inventories and construction starts, positions us well for the future. We remain optimistic and believe that the current environment will continue to support faster inventory turnover and reinforce our shift towards spec sales for the foreseeable future. Our strategy has also allowed us to continue to pursue opportunities that contribute to our long-term outlook, including acquiring Jet HomeLoans, discussed below.

Recent Developments

On July 1, 2024, we acquired the remaining equity interest in our mortgage joint venture Jet HomeLoans, which is consolidated on the Company’s condensed consolidated financial statements as of that date. Jet HomeLoans continues to be included in the Company’s Financial Services segment.

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Results of Consolidated Operations

The following table summarizes our results of operations and other financial data (in thousands, except per share amounts) for the periods indicated:


	Three Months Ended September 30, (unaudited)						Nine Months Ended September 30, (unaudited)
	2024			2023			2024			2023
Income before taxes:
Homebuilding	$	92,291		$	107,230		$	268,522		$	267,075
Financial services	8,557			4,871			20,538			13,861
Other(1)	(8,424)			(8,343)			(19,804)			(11,943)
Income before taxes	92,424			103,758			269,256			268,993
Income tax expense	(20,780)			(24,158)			(59,166)			(66,000)
Net and comprehensive income	71,644			79,600			210,090			202,993
Net and comprehensive income attributable to Dream Finders Homes, Inc.	$	70,651		$	76,097		$	206,088		$	193,950

Other Financial Data:
Basic EPS(2)	$	0.72		$	0.79		$	2.10		$	1.98
Diluted EPS(2)	$	0.70		$	0.75		$	2.06		$	1.83
EBITDA (in thousands)(3)	$	132,950		$	131,542		$	388,128		$	351,040
EBITDA margin %(3)(4)	13.2		%	14.7		%	13.4		%	13.4		%
Return on participating equity(5)							30.4		%	38.9		%

Condensed Consolidated Balance Sheet Data (as of period end):
Cash and cash equivalents							$	204,906		$	330,129
Construction lines of credit							991,208			555,512
Senior unsecured notes, net							294,713			293,604
Mortgage warehouse facilities							170,167			—
Total mezzanine equity							169,951			148,500
Total equity							1,119,761			837,572

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

(2)Refer to Note 12, Earnings Per Share to the condensed consolidated financial statements for disclosures related to the calculation of EPS. Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends.

(3)EBITDA is a non-GAAP financial measure. For 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.

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Results of Homebuilding Operations

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

The following table sets forth our results of homebuilding operations and balance sheet data (in thousands) for the periods indicated:


	Three Months Ended September 30, (unaudited)
	2024			2023			Change			% Change
Homebuilding revenues	$	986,257		$	893,502		$	92,755		10	%
Homebuilding cost of sales	797,110			709,286			87,824			12	%
Selling, general and administrative expense(1)	101,886			78,514			23,372			30	%
Contingent consideration revaluation(2)	5,948			9,026			(3,078)			(34)	%
Other income, net	(876)			84			(960)			(1143)	%
Total income before taxes related to homebuilding operations(1)(2)	$	82,189		$	96,592		$	(14,403)		(15)	%

Other Financial and Operating Data:
Home closings	1,889			1,798			91			5	%
Average sales price of homes closed(3)	$	518,553		$	501,536		$	17,017		3	%
Net new orders	1,680			1,535			145			9	%
Cancellation rate	13.8		%	14.9		%	(1.1)		%	(7)	%
Homebuilding gross margin (in thousands)(4)	$	189,147		$	184,216		$	4,931		3	%
Homebuilding gross margin %(4)(5)	19.2		%	20.6		%	(1.4)		%	(7)	%
Adjusted homebuilding gross margin (in thousands)(6)	$	272,117		$	254,172		$	17,945		7	%
Adjusted homebuilding gross margin %(5)(6)	27.6		%	28.4		%	(0.9)		%	(3)	%
Active communities as of period end(7)	235			219			16			7	%
Backlog - units	3,996			5,025			(1,029)			(20)	%
Backlog - value (in thousands)	$	2,004,091		$	2,410,182		$	(406,091)		(17)	%
Net homebuilding debt to net capitalization(6)	45.6		%	34.5		%	11.1		%	32	%

(1)Selling, general and administrative expense, which is comprised of expense from the homebuilding segments and Corporate, (“SG&A”) includes $9 million and $7 million of Corporate SG&A for the three months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they primarily relate to our homebuilding business.

(2)Contingent consideration revaluation, which is comprised of amounts from the homebuilding segments and Corporate, (“contingent consideration”) includes $1 million and $4 million of Corporate contingent consideration expense for the three months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they relate to our homebuilding business.

(3)Average sales price of homes closed is calculated based on homebuilding revenues, adjusted for the impact of percentage of completion revenues, and excluding deposit forfeitures and land sales, over homes closed.

(4)Gross margin is homebuilding revenues less homebuilding cost of sales.

(5)Calculated as a percentage of homebuilding revenues.

(6)Adjusted 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.”

(7)A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five homesites remaining to sell.

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The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment for the three months ended September 30, 2024 and 2023, as well as active communities as of September 30, 2024 and 2023:


	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


	Three Months Ended September 30, 2023			As of September 30, 2023
Segment	Home Closings	ASP		Active Communities
Southeast	828	$	467,896	58
Mid-Atlantic	388	407,798		41
Midwest	582	611,886		120
Total	1,798	$	501,536	219

The following tables present income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the three months ended September 30, 2024 and 2023:


	Three Months Ended September 30,
	2024				2023
Segment	Income Before Taxes		Gross Margin %		Income Before Taxes		Gross Margin %
Southeast	$	25,744	19.6	%	$	46,646	20.2	%
Mid-Atlantic	32,668		20.3		16,300		19.0
Midwest	33,879		18.1		44,284		21.8
Total	$	92,291	19.2	%	$	107,230	20.6	%

Homebuilding Revenues. The increase in homebuilding revenues was primarily attributable to 1,889 home closings for the three months ended September 30, 2024, an increase of 91 homes, or 5%, from 1,798 home closings for the three months ended September 30, 2023. 223 home closings with an ASP of $554,231 were contributed by the Crescent Homes acquisition. The consolidated ASP of homes closed increased 3% when comparing the three months ended September 30, 2024 to the three months ended September 30, 2023. Excluding Crescent Homes, 42% of our closings were in the Midwest segment with an ASP of $589,087, which is higher relative to our other homebuilding segments. The increased use of sales incentives during the third quarter of 2024 had a partially offsetting impact on the increase in homebuilding revenues.

Homebuilding Cost of Sales and Homebuilding Gross Margin. The higher homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended September 30, 2024 and 2023 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and, to a lesser extent, continued improvements in cycle times.