Dream Finders Homes, Inc. (DFH) acquired the core homebuilding assets, Crescent Homes, of a privately held homebuilder, Crescent Ventures, LLC.The buyout will enhance DFH’s geographic footprint and help expand into the Charleston and Greenville, SC, and Nashville, TN, markets. The deal includes 457 homesites in different stages of construction, a sales order backlog of approximately 460 homes (worth nearly $265 million) and about 6,200 lots under control.The company funded the transaction with cash on hand ...

JACKSONVILLE, Fla.--(BUSINESS WIRE)--Dream Finders Homes, Inc. (the “Company”, “Dream Finders Homes”, “Dream Finders” or “DFH”) (NYSE: DFH) announced today that it has acquired the core homebuilding assets of privately held homebuilder, Crescent Ventures, LLC (“Crescent Homes” or “Crescent”). The acquisition will meaningfully enhance Dream Finders’ geographic footprint and allow the Company to expand into the markets of Charleston and Greenville, South Carolina, and Nashville, Tennessee. Assets acquired in ...

Investors with an interest in Building Products - Home Builders stocks have likely encountered both PulteGroup (PHM) and Dream Finders Homes Inc. (DFH) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stoc ...

The homebuilding industry suffered the most over the past two years as multi-decade high inflation compelled the Federal Reserve to adopt a strict monetary tightening policy. High mortgage rates and rising raw material and labor costs prevented buyers from investing in new homes despite high demand.   However, the housing market is showing signs of a slow but steady rebound, as inflation continues to cool and mortgage rates are easing. Although inflation is still above the Fed’s 2% target, it kept its bench ...

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, 2023 OR 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. Indicate by ...

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 June 30, 2023 OR 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 re ...

PART I. FINANCIAL INFORMATION [Condensed Consolidated Financial Statements](index=3&type=section&id=ITEM%201.%20DREAM%20FINDERS%20HOMES%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Presents unaudited condensed consolidated financial statements for Dream Finders Homes, Inc., detailing financial position, performance, and cash flows for Q1 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20%28unaudited%29) Total assets decreased slightly to $2.31 billion as of March 31, 2023, while total liabilities decreased to $1.46 billion Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $266,569 | $364,531 | | Total inventories | $1,434,860 | $1,378,185 | | **Total assets** | **$2,308,797** | **$2,371,137** | | **Liabilities** | | | | Construction lines of credit | $915,992 | $966,248 | | **Total liabilities** | **$1,458,322** | **$1,570,444** | | **Total stockholders' equity** | $694,216 | $644,648 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20%28unaudited%29) Total revenues increased 16% to $769.4 million in Q1 2023, with net income growing 12% to $49.1 million and diluted EPS rising to $0.45 Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenues | $769,420 | $664,066 | | Homebuilding cost of sales | $637,344 | $538,868 | | Income before income taxes | $69,387 | $63,212 | | Net income attributable to DFH | $49,089 | $43,716 | | Diluted EPS | $0.45 | $0.42 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20%28unaudited%29) Net cash used in operating activities significantly improved to $35.6 million in Q1 2023, while financing activities used $60.7 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(35,589) | $(122,498) | | Net cash used in investing activities | $(1,360) | $(930) | | Net cash (used in)/provided by financing activities | $(60,730) | $3,121 | | **Net decrease in cash** | **$(97,679)** | **$(120,307)** | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%28unaudited%29) Details significant accounting policies, credit facilities, inventory, variable interest entities, segment reporting, and related party transactions - The company's **$1.1 billion** Amended and Restated Credit Agreement had an outstanding balance of **$915.0 million** as of March 31, 2023[27](index=27&type=chunk)[29](index=29&type=chunk) - In Q1 2023, the company recorded **$0.6 million** in inventory impairment charges and **$0.9 million** in lot deposit impairment charges, compared to none in Q1 2022[33](index=33&type=chunk) - The company utilizes an asset-light strategy through lot option contracts. The maximum risk of loss related to these off-balance sheet arrangements was **$367.4 million** as of March 31, 2023[44](index=44&type=chunk)[48](index=48&type=chunk) - The effective tax rate for Q1 2023 was **25.4%**, down from **27.9%** in Q1 2022, primarily due to the timing of estimating the 45L tax credit[49](index=49&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=17&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2023 performance, emphasizing revenue growth, the asset-light model, and declines in net new orders and backlog amid market challenges - The company believes there are indicators of market stabilization as homebuyers adjust to higher interest rates and inventory remains constrained. Sales incentives are being used to support demand[71](index=71&type=chunk) Key Results Comparison (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Revenues | $769M | $664M | +16% | | Home closings | 1,517 | 1,371 | +11% | | Net new orders | 1,448 | 2,402 | -40% | | Backlog of sold homes | 5,479 | 7,413 | -26% | | Gross margin % | 17.0% | 18.7% | -170 bps | | Adjusted gross margin % | 24.3% | 24.4% | -10 bps | | Diluted EPS | $0.45 | $0.42 | +7% | - The company's asset-light strategy is central to its operations, controlling **33,344** lots through option contracts with only **$262 million** in lot deposits as of March 31, 2023[82](index=82&type=chunk)[84](index=84&type=chunk) - Total liquidity was **$453 million** as of March 31, 2023, comprising **$267 million** in cash and **$187 million** available under the revolving credit facility[109](index=109&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Q1 2023 revenues increased 16% to $769 million, driven by higher home closings and average sales prices, while gross margin percentage decreased to 17.0% - The increase in revenues was primarily attributable to **1,517** home closings, up from **1,371** in Q1 2022, and a **4%** increase in the average sales price of homes closed[75](index=75&type=chunk) - The decrease in gross margin percentage to **17.0%** from **18.7%** was mainly due to increased costs of funds and proactive measures like sales incentives to assist homebuyers[76](index=76&type=chunk) - Adjusted gross margin (non-GAAP) remained consistent at **24.3%** compared to **24.4%** in the prior year, as price appreciation was offset by increased closing costs[77](index=77&type=chunk) [Backlog, Sales and Closings](index=21&type=section&id=Backlog%2C%20Sales%20and%20Closings) Net new orders decreased 40% to 1,448 in Q1 2023, with the cancellation rate increasing and quarter-end backlog declining 26% in units and value Sales and Backlog Metrics | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Net New Orders | 1,448 | 2,402 | -40% | | Cancellation Rate | 20.9% | 13.4% | +7.5% | | Ending Backlog (Homes) | 5,479 | 7,413 | -26% | | Ending Backlog (Value) | $2.53B | $3.44B | -26% | - The decline in net new orders is compared against an unprecedented level of sales in Q1 2022, which also included built-for-rent contracts that did not repeat in Q1 2023[94](index=94&type=chunk) [Non-GAAP Financial Measures](index=23&type=section&id=Non-GAAP%20Financial%20Measures) Provides reconciliations for non-GAAP Adjusted Gross Margin and Adjusted EBITDA, which were 24.3% and $94.1 million respectively in Q1 2023 Reconciliation of Adjusted Gross Margin (in thousands) | Line Item | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Gross margin (GAAP) | $130,132 | $123,605 | | Interest expense in cost of sales | $22,419 | $8,847 | | Commission expense | $33,642 | $25,274 | | **Adjusted gross margin (Non-GAAP)** | **$186,193** | **$161,556** | Reconciliation of Adjusted EBITDA (in thousands) | Line Item | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income (GAAP) | $49,089 | $43,716 | | Adjustments (Interest, Taxes, D&A) | $42,590 | $32,151 | | **EBITDA (Non-GAAP)** | **$91,679** | **$75,867** | | Stock-based compensation expense | $2,430 | $1,365 | | **Adjusted EBITDA (Non-GAAP)** | **$94,109** | **$77,232** | [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate sensitivity, impacting homebuyer affordability and financing costs, especially for its variable-rate credit facility - The company's operations are sensitive to interest rate changes, as higher rates can negatively impact housing demand and the ability of homebuyers to secure financing[137](index=137&type=chunk) - The company's credit facility loans bear interest at variable rates based on SOFR plus a credit spread, making financing costs subject to market rate changes[139](index=139&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2023[143](index=143&type=chunk) - No **material changes** to the company's internal control over financial reporting occurred during the first quarter of 2023[144](index=144&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=29&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, but management does not anticipate a material adverse effect on its financial condition or operations - The company does not expect current legal proceedings to have a **material adverse effect** on its business or financial condition[146](index=146&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) A new risk factor was added concerning potential adverse effects of developments affecting financial institutions on the company's liquidity and financial performance - A new risk factor was disclosed regarding adverse developments affecting financial institutions, including bank failures, which could negatively impact the company's **liquidity and financial performance**, particularly concerning undrawn credit lines and cash deposits exceeding FDIC limits[148](index=148&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not have any unregistered sales of equity securities during the reporting period - **None**[149](index=149&type=chunk) [Exhibits](index=30&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents for financial reporting - Filed exhibits include CEO and CFO certifications (Exhibits **31.1**, **31.2**, **32.1**, **32.2**) and Inline XBRL data files (Exhibits **101** and **104**)[151](index=151&type=chunk) [Signatures](index=31&type=section&id=SIGNATURES) - The report was duly signed on **May 4, 2023**, by **Patrick O. Zalupski**, President, CEO, and Chairman, and **L. Anabel Fernandez**, Senior Vice President and CFO[157](index=157&type=chunk)

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Dream Finders Homes designs, builds, and sells homes primarily in high-growth markets, employing an asset-light land acquisition strategy, and has been profitable since its 2009 inception, also offering title insurance and mortgage services - The company's business model involves designing, building, and selling homes in high-growth markets, utilizing an **asset-light land acquisition strategy**, and offering title insurance and mortgage solutions[14](index=14&type=chunk) - As of December 31, 2022, the company has delivered over **22,200 homes** and has been **profitable every year since its inception in 2009**[15](index=15&type=chunk) - Through organic growth and strategic acquisitions, such as the **2021 MHI acquisition**, the company has expanded into high-growth markets including Florida, Texas, Colorado, Georgia, the DC Metro area, South Carolina, and North Carolina[16](index=16&type=chunk)[65](index=65&type=chunk) - The asset-light strategy involves controlling a large number of lots with low upfront capital commitments through lot option and land banking option contracts, reducing balance sheet risk and improving inventory turnover and return on equity[20](index=20&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) Owned and Controlled Lots by Segment (2022 and 2021) | Segment | 2022 Owned | 2022 Controlled | 2022 Total | 2021 Owned | 2021 Controlled | 2021 Total | % Change (Total) | | :-------------- | :--------- | :-------------- | :--------- | :--------- | :-------------- | :--------- | :---------------- | | Jacksonville | 1,083 | 8,893 | 9,976 | 774 | 10,311 | 11,085 | -10 % | | Colorado | 366 | 7,555 | 7,921 | 152 | 4,883 | 5,035 | 57 % | | Orlando | 976 | 4,878 | 5,854 | 537 | 5,487 | 6,024 | -3 % | | The Carolinas | 1,003 | 4,849 | 5,852 | 1,452 | 5,196 | 6,648 | -12 % | | Texas | 1,282 | 6,835 | 8,117 | 1,569 | 6,304 | 7,873 | 3 % | | Other | 1,233 | 4,605 | 5,838 | 861 | 6,314 | 7,175 | -19 % | | **Grand Total** | **5,943** | **37,615** | **43,558** | **5,345** | **38,495** | **43,840** | **-1 %** | - The cancellation rate increased from **12.2% in 2021 to 21.5% in 2022**, primarily due to rising mortgage rates and deteriorating economic conditions[34](index=34&type=chunk)[39](index=39&type=chunk) Net New Orders, Starts, and Closings by Segment (2022 and 2021) | Segment | 2022 Sales | 2022 Starts | 2022 Closings | 2021 Sales | 2021 Starts | 2021 Closings | Sales % Change | Starts % Change | Closings % Change | | :-------------- | :--------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------- | :-------------- | :-------------- | | Jacksonville | 1,716 | 1,545 | 1,439 | 1,933 | 1,448 | 1,237 | -11 % | 7 % | 16 % | | Colorado | 191 | 355 | 285 | 296 | 313 | 230 | -35 % | 13 % | 24 % | | Orlando | 610 | 1,110 | 656 | 1,101 | 614 | 604 | -45 % | 81 % | 9 % | | The Carolinas | 951 | 999 | 1,433 | 1,859 | 1,751 | 1,233 | -49 % | -43 % | 16 % | | Texas | 1,566 | 1,884 | 2,229 | 579 | 512 | 689 | 170 % | 268 % | 224 % | | Other | 1,011 | 708 | 836 | 1,040 | 1,133 | 881 | -3 % | -38 % | -5 % | | **Grand Total** | **6,045** | **6,601** | **6,878** | **6,808** | **5,771** | **4,874** | **-11 %** | **14 %** | **41 %** | Backlog of Sold Homes (2022 and 2021) | Metric | 2022 | 2021 | % Change | | :-------------------------- | :--------- | :--------- | :--------- | | Homes | 5,548 | 6,381 | -13 % | | Value (in thousands) | $2,502,564 | $2,913,170 | -14 % | - Jet LLC originated **2,370 home loans** in 2022, totaling approximately **$879 million**, generating a net income of approximately **$12 million**[48](index=48&type=chunk) - In 2022, an ESG assessment was conducted, focusing on home energy efficiency, affordability, employee well-being, diversity, equity, and inclusion, and board ESG oversight[70](index=70&type=chunk) - As of December 31, 2022, the company had **1,170 full-time employees** and plans to implement a company-wide anti-harassment training program in 2023[74](index=74&type=chunk)[75](index=75&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks and uncertainties across industry, economic, operational, strategic, and organizational aspects that could materially impact the company's business, financial condition, operating results, and cash flows - The real estate industry is cyclical and vulnerable to adverse macroeconomic conditions, including rising interest rates, employment levels, mortgage availability, inflation, and natural disasters[79](index=79&type=chunk)[82](index=82&type=chunk)[88](index=88&type=chunk)[102](index=102&type=chunk) - The company's operations are concentrated in specific regions like Florida and Texas, where prolonged economic downturns or industry-specific declines (e.g., oil and gas in Texas) could disproportionately impact the company[91](index=91&type=chunk)[116](index=116&type=chunk) - Operational risks include inability to acquire sufficient and affordable land inventory, an **increased cancellation rate of 21.5% in 2022**, reliance on subcontractor availability and performance, potential warranty and liability claims, and shortages or increased costs of building materials and labor[125](index=125&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[136](index=136&type=chunk) - Strategic risks include the potential failure of growth and expansion strategies, including acquisitions, leading to integration challenges, diversion of management resources, and failure to achieve anticipated benefits[151](index=151&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Organizational and structural risks include reliance on key management, restrictive covenants in financing agreements, and founder Patrick Zalupski's control through a dual-class stock structure (**85% voting power**), potentially leading to conflicts of interest with other shareholders[157](index=157&type=chunk)[159](index=159&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Failure to maintain effective internal control systems could result in inaccurate financial reporting or fraud, undermining investor confidence[182](index=182&type=chunk) - Growing focus on Environmental, Social, and Governance (ESG) matters may impact business and stock price, while information system failures, cyber incidents, or security breaches could adversely affect the company[183](index=183&type=chunk)[185](index=185&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments as of the filing date of this report - No unresolved staff comments[206](index=206&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) The company leases approximately 45,000 square feet of office space in Jacksonville, Florida, as its corporate headquarters until 2033, and also leases multiple local offices while owning one in San Antonio, Texas - The company's headquarters is a leased office space of approximately **45,000 square feet** in Jacksonville, Florida, with a lease term extending to **2033**[207](index=207&type=chunk) - Local offices are leased in Austin, Bluffton, Chantilly, Charlotte, Dallas, Denver, Fayetteville, Houston, Leland, Myrtle Beach, Orlando, Pooler, and Raleigh[207](index=207&type=chunk) - The company owns one local office in San Antonio, Texas[208](index=208&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ongoing legal proceedings in the ordinary course of business, with details on certain pending matters provided in Note 6 to the consolidated financial statements - The company is involved in ongoing legal proceedings in the ordinary course of business[209](index=209&type=chunk) - Further details are available in Note 6 to the consolidated financial statements[209](index=209&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports that mine safety disclosures are not applicable - Not applicable[210](index=210&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock trades on the NYSE under 'DFH', with 26 registered shareholders as of February 28, 2023, and no cash dividends declared or paid to date, while a 2021 equity incentive plan is in place - **Class A common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol 'DFH'**[213](index=213&type=chunk) - As of February 28, 2023, there were **26 registered shareholders**[213](index=213&type=chunk) - The company has not declared or paid any cash dividends on its Class A common stock, and future dividend payments will be at the discretion of the Board of Directors[214](index=214&type=chunk) - The 2021 Equity Incentive Plan authorizes the grant of up to **9.1 million stock-based awards**[215](index=215&type=chunk) [Reserved](index=41&type=section&id=Item%206.%20Reserved) This item is reserved - This item is reserved[217](index=217&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results as of December 31, 2022, highlighting a **74% revenue growth to $3.3 billion** and a **104% net income increase to $274 million**, despite rising mortgage rates impacting housing demand - In Q3 and Q4 2022, rising mortgage rates negatively impacted housing demand due to affordability constraints, which the company addressed through mortgage rate buydown programs and renegotiating lot option contracts[220](index=220&type=chunk) Key Financial Performance (2022 and 2021) | Metric | 2022 | 2021 | Amount Change | % Change | | :-------------------------------------------------- | :--------- | :--------- | :------------ | :------- | | Revenues | $3.3B | $1.9B | $1.4B | 74 % | | Net new orders | 6,045 | 6,808 | (763) | -11 % | | Homes closed | 6,878 | 4,874 | 2,004 | 41 % | | Average sales price of homes closed | $474,292 | $389,094 | $85,198 | 22 % | | Gross margin % | 18.4 % | 16.0 % | 2.4 % | 15 % | | Adjusted gross margin % (non-GAAP) | 24.6 % | 21.7 % | 2.9 % | 13 % | | Net and comprehensive income | $274M | $135M | $139M | 104 % | | Net and comprehensive income attributable to DFH, Inc. | $262M | $121M | $141M | 117 % | | EBITDA % (non-GAAP) | 12.6 % | 10.1 % | 2.5 % | 25 % | | Backlog of sold homes | 5,548 | 6,381 | (833) | -13 % | | Active communities | 206 | 205 | 1 | — % | | Return on participating equity | 49.1 % | 44.3 % | 4.8 % | 11 % | | Basic EPS | $2.67 | $1.27 | $1.40 | 110 % | | Diluted EPS | $2.45 | $1.27 | $1.18 | 93 % | - On October 10, 2022, the company's Class A common stock transferred from the Nasdaq Global Select Market to the New York Stock Exchange[223](index=223&type=chunk) - Total revenues in 2022 increased by **74% to $3.3 billion**, driven by a **41% increase in homes closed** and a **22% rise in average sales price**[228](index=228&type=chunk) - The gross margin increased from **16.0% to 18.4% in 2022**, primarily because price increases outpaced cost inflation[229](index=229&type=chunk) Reconciliation of Adjusted Gross Margin (Non-GAAP) to Gross Margin (in thousands) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :--------- | :--------- | :--------- | | Gross margin | $612,420 | $306,969 | $165,048 | | Interest expense in homebuilding cost of sales | 60,595 | 32,508 | 32,044 | | Amortization in homebuilding cost of sales | 6,701 | 9,873 | 5,070 | | Commission expense | 140,442 | 67,032 | 50,533 | | **Adjusted gross margin** | **$820,158** | **$416,382** | **$252,695** | | Gross margin % | 18.4 % | 16.0 % | 14.6 % | | Adjusted gross margin % | 24.6 % | 21.7 % | 22.5 % | Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP) to Net Income (in thousands) | Metric | 2022 | 2021 | 2020 | | :-------------------------------------------------- | :--------- | :--------- | :--------- | | Net and comprehensive income attributable to DFH, Inc. | $262,313 | $121,133 | $79,093 | | Interest income | (169) | (6) | (45) | | Interest expensed in cost of sales | 60,595 | 32,508 | 32,044 | | Interest expense | 32 | 672 | 871 | | Income tax expense | 81,859 | 27,455 | — | | Depreciation and amortization | 17,952 | 13,205 | 8,922 | | **EBITDA** | **$422,582** | **$194,967** | **$120,885** | | Stock-based compensation expense | 6,796 | 5,233 | 947 | | **Adjusted EBITDA** | **$429,378** | **$200,200** | **$121,832** | | EBITDA margin % | 12.6 % | 10.1 % | 10.7 % | | Adjusted EBITDA margin % | 12.8 % | 10.4 % | 10.7 % | - As of December 31, 2022, liquidity included **$365 million in cash and cash equivalents**, **$122 million available under the credit agreement**, totaling **$487 million**[263](index=263&type=chunk) - In 2022, cash flow from operating activities was an **outflow of $27.6 million** (compared to an inflow of $65.1 million in 2021), investing activities resulted in an **outflow of $6 million** (compared to an outflow of $523 million in 2021), and financing activities generated an **inflow of $147 million** (compared to an inflow of $646 million in 2021)[282](index=282&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk) - Off-balance sheet arrangements primarily involve controlling lots through asset-light lot option and land banking option contracts, with the risk of loss limited to approximately **$277 million in lot deposits** as of December 31, 2022[314](index=314&type=chunk)[315](index=315&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discloses the company's market risks, primarily focusing on interest rate sensitivity, where rising rates can impact housing demand and financing costs, affecting both the company's floating-rate credit agreements and its mortgage joint venture, Jet LLC - The company's operations are sensitive to interest rate changes, where rising rates can negatively impact homebuyers' financing ability, consequently affecting revenue, gross margins, and net income[317](index=317&type=chunk) - The amended credit agreement features floating interest rates, comprising a 'Base Rate' and a 'Term SOFR Rate,' determined by the company's debt capitalization ratio[319](index=319&type=chunk) - Mortgage joint venture Jet LLC faces interest rate risk in its lending activities, as it underwrites and originates mortgages sold into the secondary market via forward delivery contracts[322](index=322&type=chunk) [Financial Statements and Supplementary Data](index=61&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's consolidated financial statements as of December 31, 2022, including the balance sheets, statements of comprehensive income, equity, and cash flows, along with notes, all audited with an unqualified opinion by PwC - PricewaterhouseCoopers LLP (PwC) issued an **unqualified opinion** on the company's consolidated financial statements for 2022 and 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2022[329](index=329&type=chunk) - Key audit matters include procedures for valuing contingent consideration, given management's significant judgment in estimating fair value, and the auditors' high degree of judgment, subjectivity, and effort in evaluating assumptions like revenue, gross margin, pre-tax income, and risk-adjusted discount rates[336](index=336&type=chunk)[337](index=337&type=chunk) Consolidated Balance Sheet Summary (in thousands) | Metric | 2022 | 2021 | | :------------------------------------ | :--------- | :--------- | | **Assets:** | | | | Cash and cash equivalents | $364,531 | $227,227 | | Total inventories | $1,378,185 | $1,066,662 | | Lot deposits | $277,258 | $241,406 | | Total assets | $2,371,137 | $1,894,248 | | **Liabilities:** | | | | Construction lines of credit | $966,248 | $763,292 | | Contingent consideration | $115,128 | $124,056 | | Total liabilities | $1,570,444 | $1,337,865 | | **Equity:** | | | | Total mezzanine and stockholders' equity | $800,693 | $556,383 | Consolidated Statements of Comprehensive Income Summary (in thousands, except per share amounts) | Metric | 2022 | 2021 | 2020 | | :-------------------------------------------------- | :--------- | :--------- | :--------- | | Total revenues | $3,342,335 | $1,923,910 | $1,133,807 | | Homebuilding cost of sales | $2,722,139 | $1,610,332 | $962,928 | | Selling, general and administrative expense | $271,040 | $154,405 | $90,359 | | Income before income taxes | $356,156 | $162,049 | $84,513 | | Income tax expense | $(81,859) | $(27,455) | — | | Net and comprehensive income | $274,297 | $134,594 | $84,513 | | Net and comprehensive income attributable to DFH, Inc. | $262,313 | $121,133 | $79,093 | | Basic EPS | $2.67 | $1.27 | — | | Diluted EPS | $2.45 | $1.27 | — | Consolidated Statements of Cash Flows Summary (in thousands) | Activity | 2022 | 2021 | 2020 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash (used in) provided by operating activities | $(27,623) | $65,108 | $96,911 | | Net cash used in investing activities | $(5,524) | $(523,043) | $(13,027) | | Net cash provided by (used in) financing activities | $146,955 | $645,884 | $(65,830) | | Net increase in cash, cash equivalents and restricted cash | $113,808 | $187,949 | $18,054 | | Cash, cash equivalents and restricted cash at end of period | $395,130 | $281,322 | $93,373 | [Note 1. Nature of Business and Significant Accounting Policies](index=69&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Significant%20Accounting%20Policies) This note outlines the company's formation, reorganization, IPO, and Class A common stock transfer to NYSE, detailing significant accounting policies under U.S. GAAP, including consolidation, revenue recognition, inventory, goodwill, leases, and income taxes - The company was incorporated in Delaware on September 11, 2020, and completed its IPO on January 25, 2021, becoming the controlling entity of Dream Finders Holdings LLC[355](index=355&type=chunk) - On October 10, 2022, the company's Class A common stock transferred from the Nasdaq Global Select Market to the New York Stock Exchange[358](index=358&type=chunk) - Revenue is primarily recognized upon completion of home sales when title and possession transfer to the buyer; for contracts where customers own the land, revenue is recognized over time based on the percentage of completion of home construction[366](index=366&type=chunk)[367](index=367&type=chunk) - Inventory is measured at the lower of cost or net realizable value, with an **inventory impairment charge of $1.8 million recognized in 2022**[373](index=373&type=chunk) - Goodwill is tested for impairment at least annually, with the most recent test on October 1, 2022, indicating **no impairment**[378](index=378&type=chunk) - Lot deposits incurred an **impairment charge of $3 million in 2022**[381](index=381&type=chunk) - Contingent consideration is measured at fair value on the acquisition date and remeasured at each reporting period end based on future expected earnings and risk-adjusted discount rates[384](index=384&type=chunk)[385](index=385&type=chunk) [Note 2. Business Combinations](index=75&type=section&id=Note%202.%20Business%20Combinations) This note details the company's two significant 2021 acquisitions, Century Homes and MHI, which were accounted for using the acquisition method, involving purchase price allocation, goodwill recognition, and subsequent contingent consideration adjustments - The Century Homes acquisition was completed on January 31, 2021, for a total purchase price of **$35.6 million**, resulting in **$1.8 million in goodwill**[401](index=401&type=chunk)[402](index=402&type=chunk) - The MHI acquisition, completed on October 1, 2021, had a total consideration of approximately **$582.8 million** (including **$488.2 million in cash** and **$94.6 million in contingent consideration**), recognizing **$141.1 million in goodwill**, significantly expanding the company's Texas market presence[403](index=403&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk)[408](index=408&type=chunk) - Contingent consideration liabilities related to the VPH, H&H, and MHI acquisitions are remeasured at fair value each reporting period based on revised pre-tax income projections and discount rates, with the MHI contingent consideration adjustment resulting in a **$12.4 million expense in 2022**[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk) [Note 3. Property and Equipment](index=77&type=section&id=Note%203.%20Property%20and%20Equipment) This note presents the company's property and equipment composition and accumulated depreciation as of December 31, 2022 and 2021, with **depreciation expense totaling $5 million in 2022** Property and Equipment Composition (in thousands) | Category | 2022 | 2021 | | :------------------------ | :--------- | :--------- | | Furniture and fixtures | $18,753 | $17,756 | | Buildings | $401 | $401 | | Land | $216 | $216 | | Vehicles | $64 | $21 | | Office equipment and software | $3,733 | $4,384 | | Total property and equipment | $23,167 | $22,778 | | Less: Accumulated depreciation | $(15,830) | $(15,989) | | **Property and equipment, net** | **$7,337** | **$6,789** | - Depreciation expense was **$5 million in 2022**, **$3.7 million in 2021**, and **$3.9 million in 2020**[413](index=413&type=chunk) [Note 4. Construction Lines of Credit](index=77&type=section&id=Note%204.%20Construction%20Lines%20of%20Credit) This note details the company's amended credit agreement, providing an **$1.1 billion senior unsecured revolving credit facility**, expandable to **$1.6 billion**, maturing June 2, 2025, with an **outstanding balance of $965 million** as of December 31, 2022, and all debt covenants met - The credit agreement, amended and restated on June 2, 2022, increased the total committed facility to **$1.1 billion**, with an incremental feature expandable to **$1.6 billion**, extended the maturity to June 2, 2025, and converted to a SOFR-based rate[415](index=415&type=chunk) - Outstanding balance as of December 31, 2022, was **$965 million** (compared to $760 million in 2021)[418](index=418&type=chunk) - Available liquidity under the credit agreement was **$122 million** as of December 31, 2022[418](index=418&type=chunk) - The company was in compliance with all debt covenants as of December 31, 2022 and 2021, and expects to remain in compliance for the next 12 months[420](index=420&type=chunk) [Note 5. Inventories](index=78&type=section&id=Note%205.%20Inventories) This note describes the company's inventory composition, including finished lots, construction in progress, completed homes, and capitalized interest, with a **capitalized interest balance of $94.6 million** as of December 31, 2022 - Inventory consists of finished lots, construction in progress (CIP), and completed homes, along with **capitalized interest**[421](index=421&type=chunk) Capitalized Interest Activity (in thousands) | Metric | 2022 | 2021 | | :------------------------------------ | :--------- | :--------- | | Capitalized interest at beginning of period | $33,266 | $21,091 | | Interest incurred | $121,964 | $45,355 | | Interest expensed | $(32) | $(672) | | Interest charged to homebuilding cost of sales | $(60,595) | $(32,508) | | **Capitalized interest at end of period** | **$94,603** | **$33,266** | [Note 6. Commitments and Contingencies](index=79&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note discloses the company's legal proceedings and lease commitments, including the **$12 million settlement of the Silver Meadows lawsuit in 2022** and the sale-leaseback of 93 model homes - The Colorado Supreme Court dismissed the Weyerhaeuser appeal on September 12, 2022, leading the company to record a **$0.9 million legal accrual**[423](index=423&type=chunk) - The Silver Meadows lawsuit was settled for **$12 million in March 2022**, with the company paying the amount less **$4 million in insurance proceeds** and pursuing recovery from subcontractors[424](index=424&type=chunk) - Leases primarily consist of operating leases for office space and model home sale-leasebacks; as of December 31, 2022, total future minimum lease payments were **$30 million**, with **$8 million due within 12 months**[425](index=425&type=chunk)[430](index=430&type=chunk) - On March 24, 2022, the company sold **93 completed model homes for $55.4 million** and simultaneously entered into 93 separate lease agreements, with the transaction accounted for as a sale and classified as an operating lease[428](index=428&type=chunk) [Note 7. Variable Interest Entities](index=81&type=section&id=Note%207.%20Variable%20Interest%20Entities) This note explains the company's investments in Variable Interest Entities (VIEs) for land acquisition, development, and mortgage operations, consolidating controlled VIEs while limiting maximum loss risk for unconsolidated entities to the investment amount - The company holds investments in VIEs for land acquisition, development, and its mortgage business (Jet LLC)[434](index=434&type=chunk) Assets and Liabilities of Consolidated VIEs (in thousands) | Consolidated | 2022 | 2021 | | :----------- | :--------- | :--------- | | Assets | $13,344 | $30,830 | | Liabilities | $4,787 | $10,203 | Investments in Unconsolidated VIEs (in thousands) | Unconsolidated | 2022 | 2021 | | :--------------- | :--------- | :--------- | | Jet Home Loans | $7,102 | $6,133 | | Other unconsolidated VIEs | $6,906 | $9,834 | | **Total investment in unconsolidated VIEs** | **$14,008** | **$15,967** | - The company employs an asset-light land financing strategy, controlling lots through lot option contracts and not consolidating these land banking entities due to lacking the ability to direct their economic performance; as of December 31, 2022, the risk of loss associated with lot option and land banking option deposits was **$461.6 million**[441](index=441&type=chunk)[445](index=445&type=chunk) [Note 8. Income Taxes](index=82&type=section&id=Note%208.%20Income%20Taxes) This note discloses the company's income tax expense as a corporate entity, including federal and state taxes, with a **total income tax expense of $81.86 million in 2022** and an **effective tax rate of 23.0%** - The company became a corporate entity after its 2021 IPO and began paying corporate income taxes[446](index=446&type=chunk) Income Tax Expense (in thousands) | Category | 2022 | 2021 | | :-------------------- | :--------- | :--------- | | Current expense | $82,153 | $31,424 | | Deferred (benefit) | $(294) | $(3,969) | | **Total income tax expense** | **$81,859** | **$27,455** | - The effective tax rate was **23.0% in 2022** (compared to 18.5% in 2021), influenced by factors such as federal statutory rates, state and local income taxes, federal tax credits, and non-deductible executive compensation[447](index=447&type=chunk) - As of December 31, 2022, net deferred income tax assets totaled **$4.5 million**, with no valuation allowance recorded[447](index=447&type=chunk)[448](index=448&type=chunk) [Note 9. Segment Reporting](index=84&type=section&id=Note%209.%20Segment%20Reporting) This note summarizes the company's revenue, net comprehensive income, total assets, and goodwill by segment, noting the **reclassification of the DC Metro segment to 'Other' in 2022** due to not meeting quantitative thresholds - The DC Metro segment was reclassified to the 'Other' category in 2022 as it no longer met the quantitative thresholds for segment reporting under ASC 280[449](index=449&type=chunk) Segment Revenues (in thousands) | Segment | 2022 | 2021 | 2020 | | :-------------- | :--------- | :--------- | :--------- | | Jacksonville | $679,321 | $452,891 | $430,811 | | Colorado | $169,378 | $114,260 | $122,275 | | Orlando | $304,767 | $244,143 | $124,769 | | The Carolinas | $482,646 | $370,477 | $89,324 | | Texas | $1,325,274 | $361,138 | — | | Jet Home Loans | $26,399 | $28,056 | $28,629 | | Other | $380,949 | $381,001 | $366,628 | | **Total segment revenues** | **$3,368,734** | **$1,951,966** | **$1,162,436** | Segment Net and Comprehensive Income (in thousands) | Segment | 2022 | 2021 | 2020 | | :-------------- | :--------- | :--------- | :--------- | | Jacksonville | $86,872 | $55,578 | $41,380 | | Colorado | $17,740 | $3,971 | $14,052 | | Orlando | $32,070 | $15,937 | $10,680 | | The Carolinas | $25,965 | $14,623 | $6,034 | | Texas | $112,855 | $21,797 | — | | Jet Home Loans | $3,655 | $10,630 | $15,921 | | Other | $1,004 | $18,679 | $4,376 | | **Total segment net and comprehensive income** | **$280,161** | **$141,215** | **$92,443** | Segment Assets and Goodwill (in thousands) | Segment | 2022 Assets | 2021 Assets | 2022 Goodwill | 2021 Goodwill | | :-------------- | :---------- | :---------- | :------------ | :------------ | | Jacksonville | $300,491 | $207,502 | — | — | | Colorado | $187,813 | $116,121 | — | — | | Orlando | $276,720 | $131,882 | $1,795 | $1,795 | | The Carolinas | $311,469 | $247,250 | $16,853 | $16,853 | | Texas | $793,219 | $743,306 | $141,071 | $141,070 | | Jet Home Loans | $96,108 | $77,074 | — | — | | Other | $494,150 | $441,910 | $12,488 | $12,209 | | **Total segments** | **$2,459,970** | **$1,965,045** | **$172,207** | **$171,927** | [Note 10. Fair Value Disclosures](index=85&type=section&id=Note%2010.%20Fair%20Value%20Disclosures) This note summarizes changes in the fair value measurement of contingent consideration, the company's sole asset or liability subject to recurring fair value measurement using Level 3 inputs Changes in Fair Value Measurement of Contingent Consideration (in thousands) | Metric | Amount | | :------------------------------------------ | :--------- | | Beginning balance, December 31, 2021 | $124,056 | | Fair value adjustments related to prior year acquisitions | $11,053 | | Contingent consideration payments | $(19,981) | | **Ending balance, December 31, 2022** | **$115,128** | - Fair value measurements are based on **Level 3 inputs** (unobservable and significant), utilizing a discounted cash flow method and estimated based on expected cash flows and risk-adjusted discount rates[336](index=336&type=chunk)[452](index=452&type=chunk) [Note 11. Related Party Transactions](index=85&type=section&id=Note%2011.%20Related%20Party%20Transactions) This note discloses related party transactions, primarily involving land acquisition and development through consolidated and unconsolidated VIEs, as well as land banking projects with DF Capital and Rockpoint Group - Company directors, officers, and management invested **23.8% ($8.7 million)** of the total committed capital in DF Residential I, LP (Fund I)[456](index=456&type=chunk)[457](index=457&type=chunk) - As of December 31, 2022, company directors, officers, and management invested **41.6% ($133.9 million)** of the total committed capital in DF Residential II, LP (Fund II)[461](index=461&type=chunk) - As of December 31, 2022, outstanding lot deposits related to DF Capital projects totaled **$58.6 million**[463](index=463&type=chunk) - The company entered into land banking option contracts with Rockpoint Group, LLC or its affiliates, where William H. Walton III, a founding partner of Rockpoint Group, is a company director; Rockpoint provided **$100 million in committed capital to Fund II in February 2022**[464](index=464&type=chunk)[465](index=465&type=chunk) - The company holds a **49.9% interest in Jet LLC** and accounts for it as an affiliate using the equity method[466](index=466&type=chunk) [Note 12. Equity](index=87&type=section&id=Note%2012.%20Equity) This note details the company's post-reorganization equity structure, including DFH LLC's Series B Preferred Units and the terms of the company's Series A Convertible Preferred Stock, which holds preference over Class A and B common stock in dividends and liquidation - Post-IPO, DFH LLC's non-voting common units and Series A preferred units converted into the company's Class A common stock, while common units converted into Class B common stock[467](index=467&type=chunk) - As of December 31, 2022, **7,143 Series B Preferred Units of DFH LLC** were outstanding, with a carrying value of **$7.9 million**, a **$1,000 per unit liquidation preference**, and an **8% annual cumulative preferred distribution**[468](index=468&type=chunk) - The company issued **150,000 shares of Series A Convertible Preferred Stock in September 2021** for a total purchase price of **$150 million**, which has preference over Class A and B common stock in dividends and liquidation, carries a **9% cumulative dividend**, and is convertible into Class A common stock after five years or earlier upon breach of protective covenants[470](index=470&type=chunk) [Note 13. Equity-Based Compensation](index=88&type=section&id=Note%2013.%20Equity-Based%20Compensation) This note describes the company's 2021 Equity Incentive Plan, authorizing stock awards, primarily restricted stock, to executives, directors, and management, with **equity-based compensation expense totaling $6.8 million in 2022** - The 2021 Equity Incentive Plan authorizes the grant of up to **9.1 million stock awards**, primarily restricted stock, to executives, directors, and management, typically vesting over three to five years[474](index=474&type=chunk) - Equity-based compensation expense was **$6.8 million in 2022** (compared to $5.2 million in 2021)[474](index=474&type=chunk) - As of December 31, 2022, total unrecognized compensation expense was **$11.3 million**, to be recognized over a weighted-average period of approximately two years[475](index=475&type=chunk) [Note 14. Earnings per Share](index=89&type=section&id=Note%2014.%20Earnings%20per%20Share) This note provides the company's basic and diluted earnings per share (EPS) calculations as of December 31, 2022 and 2021, with **diluted EPS at $2.45 in 2022** Earnings per Share Calculation (in thousands, except share amounts) | Metric | 2022 | 2021 | | :-------------------------------------------------- | :--------- | :--------- | | Net and comprehensive income attributable to Dream Finders Homes, Inc. | $262,313 | $121,133 | | Less: Preferred dividends | $(14,513) | $(4,845) | | Add: Loss prior to reorganization attributable to DFH LLC members | — | $1,244 | | **Net and comprehensive income available to common stockholders** | **$247,800** | **$117,532** | | Weighted-average number of common shares outstanding - basic | 92,745,781 | 92,521,482 | | Add: Common stock equivalent shares | 13,945,467 | 2,792,111 | | **Weighted-average number of shares outstanding - diluted** | **106,691,248** | **95,313,593** | | Basic EPS | $2.67 | $1.27 | | Diluted EPS | $2.45 | $1.27 | - Diluted shares are calculated using the treasury stock method for restricted stock awards and the if-converted method for convertible preferred stock and its associated preferred stock dividends[478](index=478&type=chunk) - The conversion price of convertible preferred stock is based on the 90-day average closing price of Class A common stock, which can significantly impact the assumed number of common shares for diluted EPS[479](index=479&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=90&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[480](index=480&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022, having successfully remediated previously reported material weaknesses in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective as of December 31, 2022**[481](index=481&type=chunk) - The company successfully remediated previously reported material weaknesses in internal control over financial reporting, including strengthening policies, procedures, IT general controls, segregation of duties, and risk assessment[483](index=483&type=chunk)[484](index=484&type=chunk)[485](index=485&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective as of December 31, 2022**, and this was audited by PwC[486](index=486&type=chunk)[487](index=487&type=chunk) - No material changes occurred in internal control over financial reporting during the fourth quarter of 2022[488](index=488&type=chunk) [Other Information](index=91&type=section&id=Item%209B.%20Other%20Information) The company reports no other information requiring disclosure - No other information[489](index=489&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=91&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company reports that disclosure regarding foreign jurisdictions that prevent inspections is not applicable - Not applicable[490](index=490&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=92&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders - The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders[492](index=492&type=chunk) [Executive Compensation](index=92&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders - The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders[493](index=493&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=92&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders - The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders[494](index=494&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=92&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders - The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders[495](index=495&type=chunk) [Principal Accounting Fees and Services](index=92&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders - The information required for this item is incorporated by reference into the definitive proxy statement for the 2023 Annual Meeting of Stockholders[496](index=496&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=92&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and exhibit index filed as part of the annual report, including the audit report, balance sheets, statements of comprehensive income, equity, cash flows, and related notes - The consolidated financial statements included in this report comprise the independent registered public accounting firm's report, consolidated balance sheets, statements of comprehensive income, equity, cash flows, and notes to consolidated financial statements[498](index=498&type=chunk) - The exhibit index includes merger agreements, equity purchase agreements, credit agreements, equity incentive plans, employment agreements, and various certification documents[499](index=499&type=chunk)[500](index=500&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk)[503](index=503&type=chunk) [Form 10-K Summary](index=96&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no Form 10-K Summary - No Form 10-K Summary[505](index=505&type=chunk) [Signatures](index=97&type=section&id=SIGNATURES) This report is signed by Patrick O. Zalupski, President, CEO, and Chairman of the Board, L. Anabel Fernandez, Senior Vice President and CFO, and other directors - This report was signed on March 2, 2023, by Patrick O. Zalupski, President, Chief Executive Officer, and Chairman of the Board, L. Anabel Fernandez, Senior Vice President and Chief Financial Officer, and other directors[510](index=510&type=chunk)[511](index=511&type=chunk)

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, 2022 OR 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 ______________________________________ ...

PART I. FINANCIAL INFORMATION [ITEM 1. DREAM FINDERS HOMES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20DREAM%20FINDERS%20HOMES%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Dream Finders Homes, Inc.'s unaudited condensed consolidated financial statements as of June 30, 2022, including balance sheets, comprehensive income statements, equity statements, and cash flow statements, along with related notes detailing business nature, accounting policies, acquisitions, debt, contingencies, and related party transactions [CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific reporting dates - As of June 30, 2022, total assets increased to **$2,112,786 thousand**, an 11.5% increase from December 31, 2021, while total liabilities rose to **$1,465,631 thousand**, a 9.6% increase[11](index=11&type=chunk) Condensed Consolidated Balance Sheets Key Data (Unit: Thousand US Dollars) | Indicator | June 30, 2022 | December 31, 2021 | | :------------------- | :------------ | :------------- | | **Assets** | | | | Cash and cash equivalents | 84,097 | 227,227 | | Restricted cash | 45,296 | 54,095 | | Total inventory | 1,356,017 | 1,066,662 | | Total assets | 2,112,786 | 1,894,248 | | **Liabilities** | | | | Accounts payable | 130,115 | 113,498 | | Customer deposits | 190,945 | 177,685 | | Construction revolving credit | 875,000 | 760,000 | | Total liabilities | 1,465,631 | 1,337,865 | | **Shareholders' Equity** | | | | Preferred mezzanine equity | 155,621 | 155,220 | | Retained earnings | 217,346 | 118,194 | | Total mezzanine and shareholders' equity | 647,155 | 556,383 | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This section presents the company's financial performance over specific periods, detailing revenues, costs, and net income - In Q2 2022, total revenue increased by **117% to $793 million** year-over-year, with net income attributable to Dream Finders Homes, Inc. growing by **119% to $62.624 million**; for the first half of 2022, total revenue increased by **106% to $1.457 billion**, and net income attributable to Dream Finders Homes, Inc. grew by **138% to $106 million**[14](index=14&type=chunk) Condensed Consolidated Statements of Comprehensive Income Key Data (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Total revenue | 793,134 | 365,276 | 1,457,200 | 708,836 | | Cost of homebuilding sales | 635,422 | 303,589 | 1,174,290 | 594,626 | | Selling, general and administrative expenses | 66,015 | 30,137 | 127,725 | 59,452 | | Earnings before interest and taxes | 89,698 | 36,538 | 152,910 | 58,950 | | Income tax expense | (23,327) | (4,479) | (40,205) | (9,295) | | Net income attributable to Dream Finders Homes, Inc. | 62,624 | 28,573 | 106,340 | 44,694 | | Basic earnings per share | 0.64 | 0.31 | 1.07 | 0.49 | | Diluted earnings per share | 0.60 | 0.31 | 1.02 | 0.49 | [CONDENSED CONSOLIDATED STATEMENTS OF EQUITY](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) This section outlines changes in the company's equity, including preferred mezzanine equity, additional paid-in capital, retained earnings, and non-controlling interests - As of June 30, 2022, total equity increased to **$647 million**, a 16.3% increase from December 31, 2021, driven by a significant rise in retained earnings from **$118 million to $217 million**, reflecting improved profitability[20](index=20&type=chunk) Condensed Consolidated Statements of Equity Key Data (Unit: Thousand US Dollars) | Indicator | June 30, 2022 | December 31, 2021 | | :------------------- | :------------ | :------------- | | Preferred mezzanine equity | 155,621 | 155,220 | | Additional paid-in capital | 261,207 | 257,963 | | Retained earnings | 217,346 | 118,194 | | Non-controlling interests | 12,056 | 24,081 | | Total equity | 647,155 | 556,383 | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section details the company's cash inflows and outflows from operating, investing, and financing activities over specific periods - In the first half of 2022, net cash outflow from operating activities significantly increased to **$223 million** from **$93.432 million** in the prior year, primarily due to a **$289 million** increase in inventory[25](index=25&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - Net cash outflow from investing activities significantly decreased from **$23.485 million** to **$1.474 million**, mainly due to the acquisition of Century Homes in 2021[25](index=25&type=chunk)[208](index=208&type=chunk) Condensed Consolidated Statements of Cash Flows Key Data (Unit: Thousand US Dollars) | Indicator | H1 2022 | H1 2021 | | :------------------- | :----------- | :----------- | | Net cash outflow from operating activities | (222,538) | (93,432) | | Net cash outflow from investing activities | (1,474) | (23,485) | | Net cash inflow from financing activities | 72,083 | 112,652 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | (151,929) | (4,265) | | Cash, cash equivalents, and restricted cash at period end | 129,393 | 80,946 | [NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Nature of Business and Significant Accounting Policies](index=9&type=section&id=1.%20Nature%20of%20Business%20and%20Significant%20Accounting%20Policies) This section outlines the company's formation, IPO, and subsequent reorganization, detailing the basis of financial statement preparation, consolidation principles, contingent consideration accounting, and a retrospective change in cash and cash equivalents accounting policy - The company completed its IPO and corporate reorganization on **January 25, 2021**, becoming the controlling entity of DFH LLC and its subsidiaries[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - Contingent consideration liabilities are measured based on the acquired entity's estimated pre-tax net income for future periods and re-measured at fair value at each reporting period end[34](index=34&type=chunk) - The company changed its accounting policy on **December 31, 2021**, to reclassify cash proceeds typically held for less than five days in escrow accounts to cash and cash equivalents, to more accurately reflect liquidity[40](index=40&type=chunk) Contingent Consideration Liability Adjustments (Unit: Thousand US Dollars) | Acquisition Project | Liability as of June 30, 2022 | Liability as of Dec 31, 2021 | Q2 2022 Expense | Q2 2021 Expense | H1 2022 Expense | H1 2021 Expense | | :---------------- | :-------------------------- | :------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Village Park Homes, LLC | 3,400 | 7,600 | 2,400 | 100 | 2,800 | 500 | | H&H Constructors of Fayetteville, LLC | 17,800 | 19,800 | 700 | 3,900 | 2,500 | 4,700 | | MHI | 94,400 | 96,700 | 1,900 | - | 3,900 | - | [2. Business Acquisitions](index=11&type=section&id=2.%20Business%20Acquisitions) This section details the company's two significant business acquisitions in 2021: Century Homes Florida, LLC and McGuyer Homebuilders, Inc. (MHI), which expanded the company's market presence in Florida and Texas and resulted in goodwill and contingent consideration liabilities - On **January 31, 2021**, the company acquired Century Homes Florida, LLC for **$35.6 million**, recognizing **$1.795 million** in goodwill[44](index=44&type=chunk)[45](index=45&type=chunk) - On **October 1, 2021**, the company acquired Texas homebuilder MHI for a total consideration of **$583 million**, including **$488 million** in cash and **$94.573 million** in contingent consideration, aiming to expand its Texas market share[46](index=46&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - The MHI acquisition generated **$141 million** in goodwill, primarily from business combination synergies, the acquired workforce, and growth opportunities[50](index=50&type=chunk)[52](index=52&type=chunk) MHI Acquisition Consideration Allocation (As of June 30, 2022, Unit: Thousand US Dollars) | Indicator | Amount | | :------------------- | :------- | | Cash consideration | 488,178 | | Contingent consideration based on future earnings | 94,573 | | **Total consideration** | **582,751** | [3. Construction Lines of Credit](index=13&type=section&id=3.%20Construction%20Lines%20of%20Credit) On June 2, 2022, the company amended and restated its revolving credit agreement, increasing the total committed facility from $817.5 million to $1.1 billion, with an accordion feature to expand to $1.6 billion, extending the maturity to June 2, 2025, and converting the applicable interest rate from Eurodollar to SOFR - The amended credit agreement increased the total committed facility from **$817.5 million to $1.1 billion**, with an accordion feature allowing expansion up to **$1.6 billion**[56](index=56&type=chunk) - The credit agreement's maturity date was extended from **January 25, 2024, to June 2, 2025**, and transitioned to a SOFR-based interest rate[56](index=56&type=chunk) - As of **June 30, 2022**, the company was in compliance with all debt covenants[61](index=61&type=chunk) Construction Revolving Credit Balance and Effective Interest Rate (Unit: Thousand US Dollars) | Indicator | June 30, 2022 | December 31, 2021 | | :----------- | :------------ | :------------- | | Loan balance | 875,000 | 760,000 | | Effective interest rate | 4.1% | 3.8% | [4. Inventories](index=13&type=section&id=4.%20Inventories) This section describes the composition of the company's inventory, including finished lots, homes under construction, and completed homes, and details capitalized interest activity - Inventory includes finished lots, homes under construction, completed homes, and capitalized interest[63](index=63&type=chunk) Capitalized Interest Activity (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Capitalized interest at beginning of period | 49,392 | 18,842 | 33,266 | 21,091 | | Interest incurred | 25,447 | 7,329 | 50,433 | 13,997 | | Interest charged to cost of homebuilding sales | (12,790) | (7,365) | (21,637) | (15,640) | | Capitalized interest at end of period | 62,036 | 18,791 | 62,036 | 18,791 | [5. Commitments and Contingencies](index=14&type=section&id=5.%20Commitments%20and%20Contingencies) The company is currently involved in an appeal stage civil lawsuit related to defective products from Weyerhaeuser Company and a construction defect lawsuit with Silver Meadows Townhome Owners Association, Inc., which was settled in April 2022 - The company's defective product lawsuit with Weyerhaeuser NR Company is still on appeal at the Colorado Supreme Court, with the company bearing all related costs but not recognizing damage recovery[65](index=65&type=chunk) - The construction defect lawsuit with Silver Meadows Townhome Owners Association, Inc. was settled for **$12 million** in March 2022, with the company's insurer paying **$4 million**, and the company seeking recovery from subcontractors[66](index=66&type=chunk)[68](index=68&type=chunk) [6. Equity](index=15&type=section&id=6.%20Equity) This section details the company's authorized Class A and Class B common stock following the corporate reorganization, and the Series A convertible preferred stock issued on September 29, 2021, which is classified as mezzanine equity due to its redeemability outside the company's control - The company is authorized to issue **350 million shares** of common stock, including **289 million shares** of Class A common stock and **61 million shares** of Class B common stock[69](index=69&type=chunk) - On **September 29, 2021**, the company issued **150 thousand shares** of Series A convertible preferred stock with a liquidation preference of **$1,000** per share, for a total purchase price of **$150 million**, used for the MHI acquisition and general corporate purposes[70](index=70&type=chunk)[217](index=217&type=chunk) - All issued preferred stock is classified as mezzanine equity because it can be considered redeemable outside the company's control upon liquidation[71](index=71&type=chunk) [7. Variable Interest Entities](index=15&type=section&id=7.%20Variable%20Interest%20Entities) The company holds investments in certain limited partnerships and similar entities engaged in land acquisition, development, and homebuilding activities, which are considered Variable Interest Entities (VIEs); the company's exposure to these VIEs is limited to its initial capital investment, and creditors have no recourse to the company's general credit - The company's maximum exposure to loss from VIEs is limited to its initial capital investment, and VIE creditors have no recourse to the company's general credit[73](index=73&type=chunk)[78](index=78&type=chunk) - As of **June 30, 2022**, the company controls a significant number of lots through lot option contracts, with related deposit and fee risk totaling **$355.2 million**[87](index=87&type=chunk) Assets and Liabilities of Consolidated VIEs (Unit: Thousand US Dollars) | Indicator | June 30, 2022 | December 31, 2021 | | :----- | :------------ | :------------- | | Assets | 15,796 | 30,830 | | Liabilities | 6,881 | 10,203 | Investments in Unconsolidated VIEs (Unit: Thousand US Dollars) | Indicator | June 30, 2022 | December 31, 2021 | | :------------------- | :------------ | :------------- | | Jet Home Loans | 6,331 | 6,133 | | Other unconsolidated VIEs | 7,857 | 9,834 | | **Total investment in unconsolidated VIEs** | **14,188** | **15,967** | [8. Income Taxes](index=17&type=section&id=8.%20Income%20Taxes) The company's effective tax rate for the first half of 2022 increased to 27.4%, primarily due to the exclusion of the Section 45L energy-efficient home tax credit, non-deductible executive compensation, and an increase in Florida's corporate tax rate - The effective tax rate increased by **10.4 percentage points**, primarily due to the exclusion of the Section 45L energy-efficient home tax credit, non-deductible executive compensation, and an increase in Florida's corporate tax rate from **3.5% in 2021 to 5.5% in 2022**[88](index=88&type=chunk) Effective Tax Rate Changes | Period | Effective Tax Rate | | :----------- | :------- | | H1 2022 | 27.4% | | H1 2021 | 17.0% | [9. Segment Reporting](index=17&type=section&id=9.%20Segment%20Reporting) The company primarily engages in homebuilding and is organized and reported across eight reportable segments: Jacksonville, Colorado, Orlando, Washington D.C., Carolinas, Texas, Jet LLC (mortgage business), and other segments, with MHI's operations constituting the Texas segment - The company operates with eight reportable segments: Jacksonville, Colorado, Orlando, Washington D.C., Carolinas, Texas, Jet LLC, and "Other," with MHI's operations included in the Texas segment[89](index=89&type=chunk) Segment Revenue (Unit: Thousand US Dollars) | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :----------- | :------- | :------- | :----------- | :----------- | | Jacksonville | 180,853 | 93,937 | 315,684 | 190,518 | | Texas | 305,068 | — | 580,492 | — | | Jet Home Loans | 6,695 | 5,826 | 13,653 | 12,845 | | **Total Segment Revenue** | **799,829** | **371,102** | **1,470,853** | **721,681** | Segment Net Income (Unit: Thousand US Dollars) | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :----------- | :------- | :------- | :----------- | :----------- | | Jacksonville | 27,548 | 11,277 | 45,007 | 19,486 | | Texas | 23,183 | — | 40,607 | — | | Jet Home Loans | 2,037 | 2,216 | 4,326 | 5,048 | | **Total Segment Net Income** | **67,828** | **33,230** | **115,791** | **52,629** | Segment Assets and Goodwill (Unit: Thousand US Dollars) | Segment | Assets as of June 30, 2022 | Assets as of Dec 31, 2021 | Goodwill as of June 30, 2022 | Goodwill as of Dec 31, 2021 | | :----------- | :----------------------- | :---------------------- | :----------------------- | :---------------------- | | Jacksonville | 283,657 | 207,502 | — | — | | Texas | 770,383 | 743,306 | 141,071 | 141,071 | | Jet Home Loans | 68,966 | 77,074 | — | — | | **Total Segment Assets** | **2,175,241** | **1,965,045** | **171,927** | **171,927** | [10. Fair Value Disclosures](index=18&type=section&id=10.%20Fair%20Value%20Disclosures) This section discloses the fair value measurement of the company's contingent consideration, which is based on Level 3 inputs, and details its beginning balance, fair value adjustments, and payments - Contingent consideration is the company's only asset or liability measured at fair value on a recurring basis, with its measurement based on Level 3 inputs[95](index=95&type=chunk) Contingent Consideration Fair Value Changes (Unit: Thousand US Dollars) | Indicator | Amount | | :--------------- | :------- | | Balance as of Dec 31, 2021 | 124,056 | | Fair value adjustments | 9,234 | | Contingent consideration payments | (17,735) | | Balance as of June 30, 2022 | 115,555 | [11. Related Party Transactions](index=19&type=section&id=11.%20Related%20Party%20Transactions) The company engages in various transactions with related parties, primarily involving the acquisition of finished lots through joint ventures and land banking arrangements, including funds invested by company directors, executives, and management, as well as Rockpoint Group, LLC - The company engaged in six joint venture projects and ten land banking projects with DF Residential I, LP (Fund I), where company directors, executives, and management invested **$8.7 million** in Fund I[98](index=98&type=chunk)[99](index=99&type=chunk) - DF Residential II, LP (Fund II) raised **$322.1 million** in total capital commitments, with the company indirectly owning a **72% interest** in its general partner and committing to invest **$3 million**[100](index=100&type=chunk)[101](index=101&type=chunk) - As of **June 30, 2022**, the company's outstanding lot deposits related to DF Capital projects totaled **$68.1 million**[106](index=106&type=chunk) - The company entered into a right of first offer memorandum with Rockpoint Group, LLC (whose founding partner is a company director), with Rockpoint committing to invest **$100 million** in Fund II[107](index=107&type=chunk)[109](index=109&type=chunk) - Jet Home Loans LLC is the company's mortgage joint venture, in which the company holds a **49.9% interest** and accounts for using the equity method[110](index=110&type=chunk) [12. Earnings per Share](index=21&type=section&id=12.%20Earnings%20per%20Share) This section details the calculation of the company's basic and diluted earnings per share, including the weighted-average common shares and common share equivalents used in the computation - Basic earnings per share is calculated by dividing net income attributable to DFH, Inc. by the weighted-average number of Class A and Class B common shares outstanding; diluted earnings per share considers the impact of potentially dilutive restricted stock grants and convertible preferred stock[113](index=113&type=chunk) Earnings per Share Calculation (Unit: Thousand US Dollars, Thousand Shares) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Net income attributable to Dream Finders Homes, Inc. | 62,624 | 28,573 | 106,340 | 44,694 | | Less: Preferred stock dividends | 3,616 | 188 | 7,195 | 1,003 | | Net income attributable to common shareholders | 59,008 | 28,385 | 99,145 | 44,935 | | Basic weighted-average common shares | 92,759 | 92,521 | 92,759 | 92,521 | | Diluted weighted-average shares | 104,566 | 92,671 | 103,532 | 92,641 | [13. Subsequent Events](index=21&type=section&id=13.%20Subsequent%20Events) The company has evaluated subsequent events up to the financial statement issuance date and found no other matters requiring recognition or disclosure, except for those described in Note 11 [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's detailed discussion and analysis of the company's financial condition and operating results as of June 30, 2022, covering business overview, recent developments, key financial and operational results, land acquisition strategy, mortgage business, building material costs, seasonality, and liquidity and capital resources [Business Overview](index=22&type=section&id=Business%20Overview) The company designs, builds, and sells homes in high-growth markets, employing an asset-light lot acquisition strategy focused on entry-level, first-move-up, and second-move-up single-family homes, and provides mortgage and title insurance solutions through its mortgage joint venture, Jet Home Loans - The company designs, builds, and sells homes in high-growth markets such as Charlotte, Raleigh, Jacksonville, Orlando, Denver, the Washington D.C. metropolitan area, Austin, Dallas, and Houston[117](index=117&type=chunk) - The company employs an asset-light lot acquisition strategy to reduce upfront capital commitments and improve inventory turnover and return on equity[118](index=118&type=chunk) Key Operating Data (As of June 30, 2022) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :----------- | :------- | :------- | :----------- | :----------- | | Net new orders | 1,426 | 1,521 | 3,828 | 3,531 | | Home closings | 1,649 | 996 | 3,020 | 1,998 | | Backlog homes | 7,190 | 4,137 | 7,190 | 4,137 | | Backlog value (Thousand US Dollars) | 3,334,945 | 1,646,725 | 3,334,945 | 1,646,725 | [Recent Developments](index=22&type=section&id=Recent%20Developments) On June 2, 2022, the company amended and restated its credit agreement, increasing the total committed facility to $1.1 billion, with an accordion feature to expand to $1.6 billion, extending the maturity to June 2, 2025, and converting the applicable interest rate from Eurodollar to SOFR - On **June 2, 2022**, the company amended and restated its credit agreement, increasing the total committed facility from **$818 million to $1.1 billion**, with an accordion feature to expand up to **$1.6 billion**[120](index=120&type=chunk) - The credit agreement's maturity date was extended from **January 25, 2024, to June 2, 2025**, and the applicable interest rate was converted from Eurodollar to SOFR[120](index=120&type=chunk) [Key Results](index=23&type=section&id=Key%20Results) The company achieved significant financial and operational growth in Q2 and H1 2022, with substantial increases in revenue and net income, strong average selling prices and gross margins, and continued growth in active communities and backlog value Key Financial Results for Q2 2022 (Year-over-Year) | Indicator | Q2 2022 | Q2 2021 | Change Rate | | :------------------- | :------- | :------- | :----- | | Revenue | $793 million | $365 million | +117% | | Net new orders | 1,426 | 1,521 | -6% | | Home closings | 1,649 | 996 | +66% | | Backlog homes | 7,190 | 4,137 | +74% | | Average selling price of homes closed | $463,447 | $358,604 | +29% | | Homebuilding gross margin | 19.7% | 16.5% | +3.2pp | | Net income attributable to Dream Finders Homes, Inc. | $63 million | $29 million | +119% | | Basic earnings per share | $0.64 | $0.31 | +106% | | Diluted earnings per share | $0.60 | $0.31 | +94% | | Number of active communities | 203 | 117 | +74% | Key Financial Results for H1 2022 (Year-over-Year) | Indicator | H1 2022 | H1 2021 | Change Rate | | :------------------- | :----------- | :----------- | :----- | | Revenue | $1.457 billion | $709 million | +106% | | Net new orders | 3,828 | 3,531 | +8% | | Home closings | 3,020 | 1,998 | +51% | | Backlog homes | 7,190 | 4,137 | +74% | | Average selling price of homes closed | $463,318 | $347,261 | +33% | | Homebuilding gross margin | 19.2% | 15.8% | +3.4pp | | Net income attributable to Dream Finders Homes, Inc. | $106 million | $45 million | +138% | | Basic earnings per share | $1.07 | $0.49 | +118% | | Diluted earnings per share | $1.02 | $0.49 | +108% | | Number of active communities | 203 | 117 | +74% | [Results of Operations (Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021)](index=25&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202021)) In Q2 2022, the company achieved substantial growth in both revenue and net income, primarily driven by increased home closings and higher average selling prices; gross margin improved due to price increases outpacing cost inflation, but selling, general, and administrative expenses also rose significantly due to increased closings and the MHI acquisition - Revenue growth was primarily attributed to a **66% increase** in home closings (653 units) and a **29% increase** in average selling price (to **$463,447**), with the MHI acquisition contributing **527 home closings** and **$305 million** in revenue[152](index=152&type=chunk) - Homebuilding gross margin increased from **16.5% to 19.7%** (a **320 basis point** increase), mainly due to price increases outpacing cost inflation[153](index=153&type=chunk) - Selling, general, and administrative expenses increased by **119% to $66 million**, primarily due to increased closings and MHI contributing **$27 million** in expenses, though remaining at **8% of homebuilding revenue**[154](index=154&type=chunk) - Other (income) expense, net, decreased by **104% ($8 million)**, primarily due to the inclusion of PPP loan forgiveness income in the prior year period[158](index=158&type=chunk) Q2 2022 Operating Results (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | Change Amount | Change Rate | | :------------------- | :------- | :------- | :------- | :----- | | Total revenue | 793,134 | 365,276 | 427,858 | 117% | | Cost of homebuilding sales | 635,422 | 303,589 | 331,833 | 109% | | Selling, general and administrative expenses | 66,015 | 30,137 | 35,878 | 119% | | Net income attributable to Dream Finders Homes, Inc. | 62,624 | 28,573 | 34,051 | 119% | | Basic earnings per share | 0.64 | 0.31 | 0.33 | 106% | | Diluted earnings per share | 0.60 | 0.31 | 0.29 | 94% | [Results of Operations (Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021)](index=28&type=section&id=Results%20of%20Operations%20(Six%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202021)) In the first half of 2022, the company achieved strong growth in both revenue and net income, primarily driven by increased home closings and higher average selling prices, with significant contributions from the MHI acquisition; gross margin improved due to price increases outpacing cost inflation, but selling, general, and administrative expenses also rose significantly due to increased closings and the MHI acquisition - Revenue growth was primarily attributed to a **51% increase** in home closings (1,022 units) and a **33% increase** in average selling price (to **$463,318**), with the MHI acquisition contributing **1,010 home closings** and **$580.5 million** in revenue[165](index=165&type=chunk) - Homebuilding gross margin increased from **15.8% to 19.2%** (a **340 basis point** increase), mainly due to price increases outpacing cost inflation[166](index=166&type=chunk) - Selling, general, and administrative expenses increased by **115% to $128 million**, primarily due to increased closings and MHI contributing **$52 million** in expenses, with the ratio to homebuilding revenue increasing from **8% to 9%**[167](index=167&type=chunk) - Other (income) expense, net, decreased by **90% ($6 million)**, primarily due to the inclusion of PPP loan forgiveness income in the prior year period[171](index=171&type=chunk) H1 2022 Operating Results (Unit: Thousand US Dollars) | Indicator | H1 2022 | H1 2021 | Change Amount | Change Rate | | :------------------- | :----------- | :----------- | :------- | :----- | | Total revenue | 1,457,200 | 708,836 | 748,364 | 106% | | Cost of homebuilding sales | 1,174,290 | 594,626 | 579,664 | 97% | | Selling, general and administrative expenses | 127,725 | 59,452 | 68,273 | 115% | | Net income attributable to Dream Finders Homes, Inc. | 106,340 | 44,694 | 61,646 | 138% | | Basic earnings per share | 1.07 | 0.49 | 0.58 | 118% | | Diluted earnings per share | 1.02 | 0.49 | 0.53 | 108% | [Non-GAAP Financial Measures](index=30&type=section&id=Non-GAAP%20Financial%20Measures) This section provides definitions and reconciliation tables for non-GAAP financial measures such as Adjusted Gross Margin, EBITDA, and Adjusted EBITDA, which management uses to evaluate operating performance - Adjusted Gross Margin is defined as gross margin less capitalized interest, amortization included in cost of homebuilding sales (including acquisition-related purchase accounting adjustments), and commission expenses[174](index=174&type=chunk) - EBITDA is defined as net income less interest income, capitalized interest expense in cost of homebuilding sales, interest expense, income tax expense, and depreciation and amortization; Adjusted EBITDA further deducts stock-based compensation expense from EBITDA[178](index=178&type=chunk) Adjusted Gross Margin Reconciliation (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Gross margin | 155,808 | 60,154 | 279,413 | 111,284 | | Interest expense in cost of homebuilding sales | 12,790 | 7,365 | 21,637 | 15,640 | | Amortization in cost of homebuilding sales | 1,991 | 2,072 | 5,821 | 1,624 | | Commission expenses | 33,142 | 15,861 | 58,416 | 31,135 | | **Adjusted Gross Margin** | **203,731** | **85,452** | **365,287** | **159,683** | EBITDA and Adjusted EBITDA Reconciliation (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Net income attributable to Dream Finders Homes, Inc. | 62,624 | 28,573 | 106,340 | 44,694 | | Interest income | (32) | — | (73) | (4) | | Interest expense in cost of homebuilding sales | 12,790 | 7,365 | 21,637 | 15,640 | | Interest expense | 13 | 16 | 26 | 658 | | Income tax expense | 23,327 | 4,479 | 40,205 | 9,295 | | Depreciation and amortization | 6,251 | 1,988 | 11,024 | 4,337 | | **EBITDA** | **104,974** | **42,421** | **179,160** | **74,621** | | Stock-based compensation expense | 1,792 | 1,452 | 3,244 | 3,800 | | **Adjusted EBITDA** | **106,766** | **43,873** | **182,404** | **78,421** | [Backlog, Sales and Closings](index=31&type=section&id=Backlog,%20Sales%20and%20Closings) In Q2 2022, the company's net new orders decreased by 6% year-over-year, but home closings and backlog value significantly increased; cancellation rates rose, reflecting market changes, with backlog orders being a key indicator of future revenue but subject to cancellation rates - In Q2 2022, net new orders were **1,426 units**, a **6% decrease** year-over-year, while home closings were **1,649 units**, a **66% increase** year-over-year[184](index=184&type=chunk) - In H1 2022, net new orders were **3,828 units**, an **8% increase** year-over-year, while home closings were **3,020 units**, a **51% increase** year-over-year[185](index=185&type=chunk) - The cancellation rate increased to **21.0%** in Q2 2022, a **660 basis point** increase from **14.4%** in the prior year period; the H1 cancellation rate increased to **16.4%**, a **550 basis point** increase from **10.9%** in the prior year period[182](index=182&type=chunk) Net New Orders, Cancellation Rate, and Period-End Backlog | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Net new orders | 1,426 | 1,521 | 3,828 | 3,531 | | Cancellation rate | 21.0% | 14.4% | 16.4% | 10.9% | | Period-end backlog (homes) | 7,190 | 4,137 | 7,190 | 4,137 | | Period-end backlog (value, Thousand US Dollars) | 3,334,945 | 1,646,725 | 3,334,945 | 1,646,725 | [Land Acquisition Strategy and Development Process](index=33&type=section&id=Land%20Acquisition%20Strategy%20and%20Development%20Process) The company employs an asset-light and capital-efficient land acquisition strategy, primarily controlling a large number of lots through finished lot option contracts and land banking option contracts, to avoid direct land ownership and the associated capital commitments and risks of land development - The company employs an asset-light and capital-efficient land acquisition strategy, controlling lots through lot option contracts and land banking option contracts to reduce upfront capital commitments and risks[189](index=189&type=chunk) - As of **June 30, 2022**, the company had lot deposits of **$288 million** in finished lot option and land banking option contracts[190](index=190&type=chunk) - As of **June 30, 2022**, the company controlled **37,983 lots** through lot option and land banking option contracts[190](index=190&type=chunk) [Owned and Controlled Lots](index=33&type=section&id=Owned%20and%20Controlled%20Lots) As of June 30, 2022, the company's total owned and controlled lots reached 44,248, a slight increase from December 31, 2021, with Texas and Jacksonville being the regions with the highest number of lots - As of **June 30, 2022**, the company owned **6,265 lots** and controlled **37,983 lots**, totaling **44,248 lots**, a **1% increase** from December 31, 2021[191](index=191&type=chunk) Owned and Controlled Lot Count (As of June 30, 2022 and December 31, 2021) | Segment | 2022 Owned | 2022 Controlled | 2022 Total | 2021 Owned | 2021 Controlled | 2021 Total | Change Rate | | :----------- | :--------- | :-------------- | :--------- | :--------- | :-------------- | :--------- | :---------- | | Jacksonville | 1,177 | 9,613 | 10,790 | 774 | 10,311 | 11,085 | -3% | | Texas | 1,624 | 5,701 | 7,325 | 1,569 | 6,304 | 7,873 | -7% | | **Total** | **6,265** | **37,983** | **44,248** | **5,345** | **38,495** | **43,840** | **1%** | [Owned Real Estate Inventory Status](index=34&type=section&id=Owned%20Real%20Estate%20Inventory%20Status) As of June 30, 2022, homes under construction and completed homes accounted for 93% of the company's owned real estate inventory, with company-owned land and lots making up 7%, indicating a focus on a fast-turnover construction model - As of **June 30, 2022**, **5,277** of the company's owned lots were either completed or under construction, with the remaining lots ready for construction[191](index=191&type=chunk) Owned Real Estate Inventory Status (As of June 30, 2022 and December 31, 2021) | Inventory Category | Percentage as of June 30, 2022 | Percentage as of Dec 31, 2021 | | :------------------- | :----------------------------- | :---------------------------- | | Homes under construction and completed homes | 93% | 92% | | Company-owned land and lots | 7% | 8% | | **Total** | **100%** | **100%** | [Our Active Communities](index=34&type=section&id=Our%20Active%20Communities) As of June 30, 2022, the company had 203 active communities, a 74% increase year-over-year, with 24 active communities dedicated to rental home contracts, accounting for approximately 26% of the company's backlog homes - As of **June 30, 2022**, the company had **203 active communities**, a **74% increase** from **117** on June 30, 2021[194](index=194&type=chunk) - An active community is defined as one with **five net new orders recorded** or a model home open[194](index=194&type=chunk) - As of **June 30, 2022**, the company had **24 active communities** dedicated to rental home contracts, with rental homes accounting for approximately **26%** of the company's backlog homes[194](index=194&type=chunk) [Our Mortgage Banking Business](index=34&type=section&id=Our%20Mortgage%20Banking%20Business) The company's mortgage joint venture, Jet LLC, achieved growth in loan originations and net income in both Q2 and H1 2022, providing mortgage services to both company and non-company customers - The investment in Jet LLC is accounted for using the equity method and is not consolidated in the company's condensed consolidated financial statements[195](index=195&type=chunk) Jet LLC Mortgage Banking Business Performance (Unit: Thousand US Dollars) | Indicator | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :------------------- | :------- | :------- | :----------- | :----------- | | Number of loans originated | 622 | 540 | 1,149 | 1,011 | | Total loans originated | 228,000 | 173,000 | 415,000 | 319,000 | | Net income | 3,000 | 2,000 | 6,000 | 6,000 | [Costs of Building Materials and Labor](index=34&type=section&id=Costs%20of%20Building%20Materials%20and%20Labor) The company's cost of sales includes lot acquisition and financing costs, municipal fees, building permits, material and labor costs, construction loan interest, real estate agent commissions, and other miscellaneous closing costs; building material costs fluctuate with raw material prices, and price increases may erode gross margins - Cost of sales components include lot costs (**20-25%**), building materials (**40-50%**), labor (**30-40%**), and interest, commissions, and closing costs (**4-10%**)[196](index=196&type=chunk) - Building material costs fluctuate with raw material prices, especially lumber and petroleum-based products; rising material costs may reduce gross margins if market conditions do not permit offsetting price increases[197](index=197&type=chunk)[199](index=199&type=chunk) [Seasonality](index=35&type=section&id=Seasonality) The company's operating results and capital requirements are subject to seasonal fluctuations, typically selling more homes in the first and second quarters and closing more homes in the third and fourth quarters, leading to quarterly revenue and capital demand variations - The company typically sells more homes in the **first and second quarters** and closes more homes in the **third and fourth quarters**[200](index=200&type=chunk) - Seasonal activities lead to fluctuations in quarterly operating results and financial condition, a pattern expected to continue long-term[200](index=200&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company generates cash from inventory sales and plans to reinvest net cash into land acquisition and business growth; as of June 30, 2022, the company had $84 million in cash and cash equivalents and $250 million in credit facility availability, totaling $334 million in liquidity - The company primarily generates cash from inventory sales and plans to reinvest net cash into land acquisition and business growth[201](index=201&type=chunk) - As of **June 30, 2022**, the company had **$84 million** in cash and cash equivalents (excluding **$45 million** in restricted cash) and **$250 million** in available capacity under its amended and restated credit agreement, totaling **$334 million** in liquidity[201](index=201&type=chunk) - The company's primary capital uses include lot deposits and purchases, vertical home construction, operating expenses, and payment of routine liabilities[202](index=202&type=chunk) - The company actively enters into finished lot option contracts and land development agreements, controlling lot supply by paying lot deposits (typically **10% or less** of the total purchase price) to support continued growth and profitability[204](index=204&type=chunk)[206](index=206&type=chunk) [Cash Flows](index=36&type=section&id=Cash%20Flows) In the first half of 2022, net cash outflow from operating activities significantly increased, primarily due to inventory growth; net cash outflow from investing activities substantially decreased, while net cash inflow from financing activities decreased due to the absence of 2021 IPO-related activities - Net cash outflow from operating activities increased by **$223 million**, driven primarily by a **$289 million** increase in inventory, partially offset by increased customer deposits and net income from home closings[207](index=207&type=chunk) - Net cash outflow from investing activities decreased to **$1.474 million**, primarily due to the absence of the Century Homes acquisition in Q1 2022 compared to Q1 2021[208](index=208&type=chunk) - Net cash inflow from financing activities decreased to **$72.083 million**, primarily due to non-recurring activities in Q1 2021, including **$130 million** in net IPO proceeds and **$26 million** in Series C preferred unit redemptions[209](index=209&type=chunk) Cash Flow Summary (Unit: Thousand US Dollars) | Indicator | H1 2022 | H1 2021 | | :------------------- | :----------- | :----------- | | Net cash outflow from operating activities | (222,538) | (93,432) | | Net cash outflow from investing activities | (1,474) | (23,485) | | Net cash inflow from financing activities | 72,083 | 112,652 | [Credit Facilities, Letters of Credit, Surety Bonds and Financial Guarantees](index=36&type=section&id=Credit%20Facilities,%20Letters%20of%20Credit,%20Surety%20Bonds%20and%20Financial%20Guarantees) As of June 30, 2022, the company had a maximum available capacity of $1.1 billion under its amended and restated credit agreement, with $875 million borrowed and $250 million remaining available; the company also held $1 million in letters of credit and $77 million in surety bonds - As of **June 30, 2022**, the company had a maximum available capacity of **$1.1 billion** under its amended and restated credit agreement, with **$875 million** borrowed and **$250 million** remaining available for borrowing[210](index=210&type=chunk) - As of **June 30, 2022**, the company held **$1 million** in letters of credit and **$77 million** in surety bonds[211](index=211&type=chunk) - The company was in compliance with all covenants in its amended and restated credit agreement[210](index=210&type=chunk) [Series B Preferred Units](index=37&type=section&id=Series%20B%20Preferred%20Units) MOF II DF Home LLC and MCC Investment Holdings LLC hold Series B preferred units of DFH LLC, which have preference upon liquidation or dissolution of DFH LLC, and DFH LLC has the right to redeem some or all Series B preferred units on or before September 30, 2022 - Series B preferred unit holders have preference upon liquidation or dissolution of DFH LLC[215](index=215&type=chunk) - DFH LLC has the right to redeem some or all Series B preferred units on or before **September 30, 2022**[214](index=214&type=chunk) [Series C Preferred Units](index=37&type=section&id=Series%20C%20Preferred%20Units) On January 27, 2021, the company redeemed all 26,000 outstanding Series C preferred units of DFH LLC for $26 million, including accrued and unpaid preferred distributions - On **January 27, 2021**, the company redeemed all **26,000** outstanding Series C preferred units of DFH LLC for **$26 million**[216](index=216&type=chunk) [Convertible Preferred Stock](index=37&type=section&id=Convertible%20Preferred%20Stock) On September 29, 2021, the company issued 150 thousand shares of newly designated convertible preferred stock for a total purchase price of $150 million, used for the MHI acquisition and general corporate purposes; this convertible preferred stock has preference over Class A and Class B common stock regarding dividends and liquidation distributions - On **September 29, 2021**, the company issued **150 thousand shares** of convertible preferred stock for a total purchase price of **$150 million**, used for the MHI acquisition and general corporate purposes[217](index=217&type=chunk) - Convertible preferred stock has preference over Class A and Class B common stock regarding dividends and distributions upon liquidation, dissolution, or winding up[217](index=217&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) The company employs an asset-light lot acquisition strategy, controlling lots through finished lot option contracts and land banking option contracts; as of June 30, 2022, the related lot deposit risk was $288 million, and the company also held $1 million in letters of credit and $77 million in surety bonds, totaling $78 million - The company controls lots through finished lot option contracts and land banking option contracts; as of **June 30, 2022**, the related lot deposit risk was **$288 million**[218](index=218&type=chunk)[219](index=219&type=chunk) - As of **June 30, 2022**, the company held **$1 million** in letters of credit and **$77 million** in surety bonds[221](index=221&type=chunk) [Contractual Obligations](index=38&type=section&id=Contractual%20Obligations) As of June 30, 2022, the company's contractual obligations have not significantly changed and remain consistent with those disclosed in the annual report for December 31, 2021 [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) For the six months ended June 30, 2022, the company's critical accounting policies have not significantly changed compared to those disclosed in the annual report for December 31, 2021 [Cautionary Statement about Forward-Looking Statements](index=38&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) This report contains forward-looking statements regarding the company's expectations for future events, performance, and potential risks; these statements are inherently subject to various business, economic, competitive, regulatory, and other risks and uncertainties, and actual results may differ materially from expectations - Forward-looking statements involve the company's expectations regarding market opportunities, interest rate trends, COVID-19 impact, strategy, profitability, liquidity, and acquisition integration[226](index=226&type=chunk) - Forward-looking statements are subject to significant business, economic, competitive, regulatory, and other risks and uncertainties that are difficult to predict and beyond the company's control[228](index=228&type=chunk) [COVID-19 Impact](index=39&type=section&id=COVID-19%20Impact) The extent and duration of business disruptions from the COVID-19 pandemic and its variants remain uncertain, as do the impacts on the U.S. economy, employment, consumer confidence, housing demand, and the mortgage market - The extent and duration of business disruptions from the COVID-19 pandemic and its variants remain uncertain[232](index=232&type=chunk) - The company cannot predict the pandemic's impact on its operations and financial performance, including effects on employees, customers, trade partners, and supply chains[232](index=232&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=38&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discloses the market risks faced by the company, primarily focusing on interest rate risk, as changes in interest rates can affect housing demand, mortgage financing availability, and the company's revenue, gross margin, and net income; the company does not use derivative financial instruments for speculation or hedging interest rate fluctuations [Quantitative and Qualitative Disclosures About Interest Rate Risk](index=39&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Interest%20Rate%20Risk) The company's operations are sensitive to interest rates, and rising rates may negatively impact homebuyers' ability to obtain financing, thereby affecting the company's revenue, gross margin, and net income; the amended credit agreement specifies SOFR-based floating rates, and the mortgage business, Jet LLC, also faces interest rate risk - The company's operations are sensitive to interest rates, and rising rates may negatively impact homebuyers' ability to obtain financing, thereby affecting the company's revenue, gross margin, and net income[234](index=234&type=chunk)[235](index=235&type=chunk) - The amended credit agreement specifies SOFR-based floating interest rates, with credit spreads determined by the company's debt-to-capital ratio[237](index=237&type=chunk) - The mortgage joint venture, Jet LLC, faces interest rate risk, as its loan portfolio is held for sale and subject to forward sale commitments[239](index=239&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=39&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's management assessed the effectiveness of disclosure controls and procedures as of June 30, 2022, and identified three material weaknesses in internal control over financial reporting, including control environment, segregation of duties, and IT general control deficiencies; the company has developed and implemented remediation plans to address these weaknesses [Disclosure Controls and Procedures](index=40&type=section&id=Disclosure%20Controls%20and%20Procedures) The company's management identified three material weaknesses in internal control over financial reporting, including the failure to establish an effective control environment commensurate with SEC registrant financial reporting requirements, insufficient segregation of duties within the financial reporting function, and IT general control deficiencies - The company identified **three material weaknesses** in internal control over financial reporting[240](index=240&type=chunk) - Deficiencies include failure to establish an effective control environment (lack of formal policies and procedures, insufficient segregation of duties, inadequate journal entry preparation and review controls) and IT general control deficiencies[240](index=240&type=chunk) [Remediation Plan for Material Weaknesses](index=41&type=section&id=Remediation%20Plan%20for%20Material%20Weaknesses) The company has developed and implemented remediation plans, including establishing corporate governance and accounting policies, IT general control policies, enhancing internal audit and SEC reporting teams, designing and implementing segregation of duties controls, and conducting financial statement risk assessments and control testing - The company has developed and implemented remediation plans, including establishing corporate governance and accounting policies and IT general control policies[243](index=243&type=chunk)[244](index=244&type=chunk) - The company has enhanced its internal audit and SEC reporting teams and designed and implemented segregation of duties controls for financial reporting and journal entry review[245](index=245&type=chunk)[246](index=246&type=chunk) - As of **June 30, 2022**, management has designed and implemented entity-level and financial reporting risk controls and initiated procedures for testing the design and operating effectiveness of key internal controls[246](index=246&type=chunk)[247](index=247&type=chunk) [Changes in Internal Controls](index=41&type=section&id=Changes%20in%20Internal%20Controls) Except for the material weaknesses and remediation measures disclosed above, there were no other changes in the company's internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the three months ended June 30, 2022 PART II. OTHER INFORMATION [ITEM 1.LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%201.LEGAL%20PROCEEDINGS) This section refers to the description of significant legal proceedings in Note 5 to the financial statements; the company does not believe that currently ongoing litigation, either individually or in aggregate, will have a material adverse effect on its business, financial condition, results of operations, or liquidity [ITEM 1A. RISK FACTORS](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the material risk factors disclosed in the company's annual report on Form 10-K for December 31, 2021; no significant changes to risk factors have occurred since the issuance of that report [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During this reporting period, there were no unregistered sales of equity securities or use of proceeds by the company [ITEM 6. EXHIBITS](index=41&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with this quarterly report, including the amended and restated credit agreement, CEO and CFO Sarbanes-Oxley Act certifications, and XBRL files [SIGNATURES](index=42&type=section&id=SIGNATURES) This quarterly report was signed by Patrick O. Zalupski, President, Chief Executive Officer, and Chairman of the Board, and L. Anabel Fernandez, Senior Vice President and Chief Financial Officer of Dream Finders Homes, Inc. on August 4, 2022